Thai Guru's Gold und Silber ... (Informationen und Vermutungen)

How long can spin rule the day in the US? Over and over again foreign US creditors are demanding American fiscal responsibility in order for them to remain at the table. Meanwhile, Treasury Secretary Snow continues to reiterate the US is serious about reducing our deficit. Yet the reality is we are going the other way:

CBO sees 2005 U.S. budget deficit at $368 billion

WASHINGTON, Jan 25 (Reuters) - The U.S. budget deficit will reach $368 billion this year, the Congressional Budget Office said in new forecasts on Tuesday, a source familiar with the numbers said.

The number is worse than the CBO's previous $348 billion forecast for the 2005 fiscal year that began on Oct. 1. Due to a technical quirk, the latest number does not include billions of dollars in expected war costs and analysts said these must be added in to get a true picture of the red ink.

-END-

A technical glitch? How about bogus reporting?

The truth counts for nothing with the Bush Administration. Remember when Lawrence Lindsay was fired for having the audacity to speak the truth about what the war would really cost?

Updated: 04:47 AM EST

Bush to Seek About $80 Billion for Military Operations

By Adam Entous, Reuters

WASHINGTON (Jan. 24) - The Bush administration will announce as early as Tuesday that it will seek about $80 billion in new funding for military operations this year in Iraq and Afghanistan, pushing the total for both conflicts to almost $300 billion so far.

Administration and congressional officials said on Monday that the new request would come on top of the $25 billion in emergency spending already approved for this fiscal year. That means funding for military operations in Iraq and Afghanistan will total nearly $105 billion in fiscal 2005 alone -- a record amount that shatters initial estimates of the cost.

In addition to money for troops in Iraq and Afghanistan and for new Army equipment, up to $650 million is expected to be earmarked for humanitarian, reconstruction and military operations in Asian nations devastated by last month's tsunami, congressional aides said. The administration is considering debt relief for Indonesia, the hardest-hit country, they said.

The funding request comes as the U.S. Army said it is now planning to keep at least 120,000 troops in Iraq for the next two years to train and fight alongside Iraqi forces against insurgents. The Army total is part of a force of 150,000 American soldiers, Marines and other troops now in Iraq.

John Pike, a defense analyst, said the Pentagon might need even more money later this year ''because we just don't know the rate at which the insurgency will grow or subside, and we don't know the rate at which the Iraqi security forces can be stood up.''

White House officials declined to comment on the size of the package or when it would be unveiled. But administration and congressional sources said they expected a White House announcement on Tuesday.

The funding request is expected to be formally submitted to Congress after President Bush sends up his fiscal 2006 budget on Feb. 7.

Democrats have accused Bush of excluding Iraq-related costs from previous budgets to meet his deficit reduction goals, a charge the White House denies.

But congressional sources said they expected the White House this year to incorporate the spending request into its budget deficit projections.

The White House is bracing for a backlash from Democrats and some Republicans. At nearly $105 billion, total funding for military operations in 2005 would be more than 13 times larger than Bush's budget for the Environmental Protection Agency and would be nearly as big as the state of California's annual budget.

In addition to money for military operations, at least $780 million in the package would go to combat the drug trade in Afghanistan…..

Administration and congressional officials had initially expected this year's supplemental spending to total closer to $50 billion. But cost estimates skyrocketed to as much as $100 billion as the Iraq insurgency intensified.

Critics have long accused Bush and his advisers of understating the costs. Before the invasion, then-budget director Mitch Daniels predicted Iraq would be ''an affordable endeavor,'' and Deputy Defense Secretary Paul Wolfowitz assured Congress: ''We are dealing with a country that can really finance its own reconstruction and relatively soon.''

Not including the new funding request, Congress has so far approved $120 billion for Iraq and another $60 billion for Afghanistan. Last year it also approved a $25 billion contingency fund for the Pentagon.

Yet only a fraction of the $18.4 billion set aside for rebuilding Iraq has been spent. The White House blames the insurgency for the slow pace of reconstruction.

-END-

The latest on The Gold Cartel:

Hi Bill:

Don’t know if you’ve seen this. It’s a wake up call for all those morons out there who still insist that the markets aren’t manipulated. At least the German’s have the pluck to call some of these bond manipulators to task. When the manipulation of the gold market gets the same kind of exposure, the guys who called you a crazy conspiracy theorist will be calling you a prophet. Wouldn’t that be fun?
Meg

Paper: Citigroup Said to Manipulate Market
1/24/2005 10:32:00 PM

NEW YORK, Jan 24, 2005 (AP Online via COMTEX) -- German regulators say they've found evidence that a large bond trade last year by Citigroup Inc., the world's largest financial institution, resulted in market manipulation, according to a published report.

The regulatory agency, BaFin, has turned the case over to criminal prosecutors in Frankfurt, The Wall Street Journal reported Monday night on its Web site.

BaFin opened an investigation in October of the early August transaction. Citigroup Global Markets sold some 11.8 billion euros ($15.67 billion) in European government bonds on 13 different trading platforms in 11 different markets, causing prices to fall across the board.

The bank then bought back roughly 4 billion euros ($5.31 billion) in bonds at lower prices an hour later.

"There are indications that market manipulation took place in connection with Citigroup's bond trade," BaFin spokeswoman Sabine Reimer told the newspaper.

In a statement e-mailed Monday to the Associated Press, Citigroup said it would continue to cooperate with regulatory authorities.

"We are disappointed that the BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved in the ... matter," the statement said.

In October, Citigroup CEO Charles Prince told the newspaper the trading by the company's London desk wasn't illegal "as far as we can tell." But Prince called the trade "a completely knuckleheaded thing to do," the Journal reported.

-END-

Gold coin news:

Hello,
I went to the Kitco office today ( January 24 ) and I bought 2 gold maple and 100 silver maple and you know what ????? They have been made in 2005 ..... What does it mean ?????? Old coins ( 2004 ) are already gone ....
Go GATA
Mario Tousignant

What a disgusting day! The gold shares are trounced while the general market soars. Meanwhile the news out of Iraq continues to be catastrophic. This is one to get behind us.

GATA BE IN IT TO WIN IT!

MIDAS

OUTSIDE THE BOX

The end of Bretton Woods II is near
Commentary: The problem is China, not the dollar

By John Brimelow
Last Update: 12:01 AM ET Nov. 22, 2004

Editor's note: John Brimelow follows gold and international equities for Aegis Capital Corporation in New York. He is the brother of Peter Brimelow, a CBS MarketWatch columnist.

NEW YORK (CBS.MW) -- The bad news: the world is drifting into a major currency crisis like the collapse of the Bretton Woods agreement and the subsequent inflationary upheavals of the 1970s. The good news: it can be handled -- if the market is allowed to work.

According to the deluge of commentary on the dollar, America has a balance of payments problem and the world has a dollar problem: a major dollar decline will have to be accommodated.

This is quite wrong. What everyone has is a massive Chinese undervaluation problem. Any exchange rate discussion that fails to start with this fact is fatuous.

In 1993, China fixed its currency, the yuan, at $1 = Y8.28.

Since then, capital and technology have poured into China. It has built up foreign exchange reserves more than ten-fold, to almost $500 billion, an expansion almost unmatched in history.

Yet the decline of the dollar in the past two years has effectively dragged down the pegged yuan another 35 percent against the major currencies -- exactly the reverse of what should have happened, given China's exporting success.

"Economic Miracles" like China's are actually not unprecedented. Germany had one in the 1950s. But accommodating "Economic Miracles" in a fixed exchange rate system invariably causes problems. This is what eventually destroyed the Bretton Woods system of fixed rates, negotiated after World War II that lasted almost 30 years.

China has been allowed to operate on a covert Bretton Woods system since 1993. By keeping its currency artificially low, it has been practicing "exchange rate mercantilism" -- concentrating productive capacity in its own hands to the detriment of the world economy (and ultimately its own consumers).

It is time to recognize that this must be ended.

Otherwise, any decline in the U.S. dollar simply gives further advantages to Chinese exports. This is now causing serious problems for other countries, particularly in the Third World.

Under the various types of gold standard, of course, this distortion could not have happened. The huge inflow of resources would have inflated the Chinese economy and eroded its competitive advantage.

Under Bretton Woods, distortion didn't happen either. When a "fundamental disequilibrium" developed, vigilant statesmen in the other counties took action to force adjustment.

Why this has not happened this time in the case of China is an interesting question.

Partly, it is because most economic theory in the English-speaking world developed under fixed rates. Furthermore, the English speaking countries did not generally practice predatory currency policies.

Some countries did, of course -- Japan spectacularly undervalued its way out of the 1930s slump. But they were minor cases, not on the policy radar screen.

My pet conspiracy theory: the Chinese have been extremely successful in co-opting elements of the American economic establishment.

The Treasury likes a reliable buyer of U.S. paper. So does Wall Street. Importers of Chinese goods are happy. American businessmen with plants in China resist change. Buyers of Chinese consumer goods do not complain. American diplomats dislike offending this powerful and notoriously touchy country.

But now, China's policy is harming countries, in Europe and elsewhere, where the leadership really cares about the overall national interest.

These foreign leaders will provide the political will that U.S. leaders have not. The Chinese perpetual motion machine will be confronted and contained.

The beneficiaries of the Chinese undervaluation free lunch had better prepare for change. That means importers and distributors of Chinese goods (think Wal-Mart (WMT: news, chart, profile)), sellers of paper (think U.S. Treasury) and anyone who likes stability (relative prices will shift -- possibly triggering inflation, depending on the Fed's reaction.)

The collapse of the Second Bretton Woods system will be sweeping and disruptive.

But ultimately it will be beneficial for the world at large -- and U.S. manufacturers in particular.

Wall Street advice: Get heavy on metal

JEFF D. OPDYKE, and JANE J. KIM

Wednesday, January 26, 2005
01-26) 06:08 PST (AP) --

The Wall Street Journal

Forget plastics. The word on Wall Street these days is metals.

Amid the voracious global demand for precious and industrial metals, the investment industry is creating a host of new vehicles designed to profit from them. Some strategists are also recommending that individual investors move a portion of their assets into metals.

Last week, Merrill Lynch & Co. resurrected its Metals & Mining Weekly research report after three years of silence. Earlier this month, Byron Wien, Morgan Stanley's senior investment strategist, said that silver, now at $6.71 an ounce, has the potential to trade above $10 this year; gold, he said, may rise above $500. (It's currently trading at $422.) A new gold exchange-traded fund, or ETF, launched last year to track movements in that precious metal, and the Comex division of the New York Mercantile Exchange, where metals trading occurs, is soon to release its own ETFs that will act as metal index funds.

The flurry of activity comes in response to rising global demand for precious metals, such as gold and platinum, and base metals, such as copper and nickel. Economies depend on them for everything from stainless steel (made with nickel) to electrical switches (made with silver) to new homes (loaded with copper wiring). Depressed metals prices in prior years, though, meant that mining companies didn't invest in increasing supplies. As such, nickel demand, for instance, has outstripped supply for the last four years, and is expected to continue doing so for another year or two.

Deutsche Bank AG last year began encouraging some investors to include in their asset allocation decisions a 3 percent stake in commodities, including metals. Morgan Stanley's Individual Investor Group also recommends investors increase their short-term position in alternative investments, which includes, among others, metals and managed futures funds, in which a manager actively trades commodity and financial futures, including metals contracts.

In many cases, Wall Street's interest in metals is coming after the easy money already has been made. Metals prices have moved higher, and many metals-related stocks have soared recently. As copper prices essentially doubled during the past two years, shares of Phelps Dodge Corp., the Phoenix-based copper giant, have tripled.

Nickel in December averaged $6.30 a pound, up from $1.89 a pound in 1998. That's the highest price the metal has seen in 15 years. Silver is up about 40 percent for the past two years, and gold is up more than 50 percent since Sept. 11, 2001.

But some are betting that the bull market in metal prices isn't over. For one thing, China's growth continues to absorb vast amounts of the world's metal production, particularly steel, copper and aluminum.

There are several ways for individuals to invest in metals, including stocks, mutual funds and ETFs, direct and indirect ownership of the metal, or futures contracts.

The most obvious route is buying stocks of companies that mine for and produce various metals. This is often a leveraged play, since a small price movement in, say, copper is magnified on a company's earnings line.

While many metals and mining stocks have roared ahead, some are just now primed to move, such as aluminum stocks, which have spent the past year generally flat to down. Aluminum tends to move later in a metals-price recovery, and as such, Daniel Roling, the senior metals and mining analyst at Merrill Lynch, predicts that 2005 "will be the year for aluminum."

He is particularly bullish about Alcoa Inc., Alcan Inc. and Century Aluminum Co., expecting aluminum prices will move toward 90 cents a pound from 78 cents a pound in 2004 and fatten these companies' bottom lines.

Zinc, which hit a seven-year high last week, will also help companies such as Lundin Mining Corp., which trades on the Toronto Stock Exchange, given China's demand for the metal and the lack of zinc mining production on the horizon. Investors looking for pure silver plays should consider Silver Wheaton Corp., a unit of Wheaton River Minerals Ltd. that also trades on the Toronto Stock Exchange, and Pan American Silver Corp., says Frank Holmes, chief investment officer of U.S. Global Investors Inc., a San Antonio firm that runs natural-resources mutual funds. He also likes FNX Mining Co. for exposure to nickel and Anooraq Resources Corp. as a way to play the growing demand for platinum.

With stocks, though, investors take on corporate risks that can send share prices slumping even as metals prices surge. Moreover, some stocks have already been played out for now. Bear Stearns Cos. in December cut its ratings on shares of copper and nickel producers like Phelps Dodge, Freeport-McMoRan Copper & Gold Inc., Inco Ltd. and Falconbridge Ltd., a unit of Toronto mining company Noranda Inc. The firm cited valuations and the likelihood that 2005 will be the peak year for the underlying commodities.

Various precious-metals mutual funds exist, though many focus largely on gold, which tends to act more like a currency, while other metals are much more industrial. One exception: the Vanguard Precious Metals and Mining Fund. It reopened its doors last year and broadened its strategy to include metals such as platinum, nickel and copper. The fund gained 8 percent last year, according to Chicago investment research firm Morningstar.

The World Gold Council in November launched the streetTRACKS Gold Shares, an ETF in which investors own shares backed by actual gold. Each share, listed on the New York Stock Exchange under the symbol GLD, represents one-tenth of an ounce of bullion. Barclays Global Investors is working on its own version of a gold ETF, and the Nymex says it will very soon unveil its own metals-tracking ETFs. (ETFs resemble index-tracking mutual funds, but trade on exchanges like stocks.)

Owning the metal directly is another option. Investors can buy gold, silver, platinum and palladium ingots from precious-metals dealers and online trading firms, such as http://www.kitco.com, http://www.apmex.com and http://www.bulliondirect.com. Sizes generally range from less than an ounce to 1,000-ounce bricks. Prices are based on whatever the so-called spot price is at the moment, plus a markup of between 2 percent and 15 percent or more, depending on the size of the trade.

Kitco.com also offers pool accounts, in which investors own a nonspecific portion of a large pool of precious metals held by Kitco. Pools are available in the four key major precious metals as well as rhodium. The benefit: Prices per ounce are much closer to spot metal prices. With silver recently at $6.69 an ounce, Kitco offered an ounce of pooled silver for $6.79, while other dealers were selling one-ounce bars for as much as $7.92.

Finally, there are futures contracts, which obligate a buyer or seller to purchase or deliver a set amount of some commodity at a pre-established price on a specific date in the future. Metals contracts trade on the Nymex, the London Metals Exchange and Chicago Board of Trade.

Investors use these as speculative tools to bet on a rise or fall in a metal's price. Futures allows investors to own large sizes of a particular metal for a relatively small investment. With gold, for instance, investors can control a 100-ounce contract -- roughly worth an underlying $42,230 -- for a minimal $2,025.

The leverage means the potential for huge profits if gold prices move higher, since every $1 gain in the price of gold translates into a $100 change in the contract's value. Of course, it also means that if gold tumbles, you can lose your entire investment and possibly more.

Metals Choices

Some ways to gain exposure to metals:

* Stocks: Owning companies that mine for and produce various metals.

* Mutual funds and exchange-traded funds: Most focus on gold, which tends to be influenced by currency and geopolitical issues.

* Direct ownership: Precious- metals dealers and online trading firms sell silver, gold, platinum and palladium.

* Futures contracts: Potentially the riskiest -- and most lucrative -- way to play metals.

What s Ahead for Metals

Many metals and mining stocks have already had a strong run. Here's the outlook for some key metals.

METAL: Aluminum

OUTLOOK: Still room for appreciation, as prices tend to rise later in a metals recovery. Will benefit from tight supply and strong demand from China.

POTENTIAL WINNERS: Alcoa Inc.,Alcan Inc. and Century Aluminum Co.

METAL: Copper

OUTLOOK: Prices are expected to remain firm in the first half of 2005, although additional production could boost supply next year.

POTENTIAL WINNERS: Phelps Dodge Corp., Freeport-McMoRan Copper & Gold Inc.

METAL: Gold

OUTLOOK: Given its role as an inflation hedge and a store of value, the outlook for a return of inflation may benefit the precious metal, as will a weak dollar.

POTENTIAL WINNERS: Precious-metals mutual funds, such as American Century Global Gold, or an exchange-traded fund such as streetTracks Gold Shares.

METAL: Nickel

OUTLOOK: Although prices are likely to peak this year, demand should still continue to outstrip supply over the next year or two.

POTENTIAL WINNERS: Inco Ltd., Falconbridge Ltd., a unit of Noranda Inc. and FNX Mining Co.

METAL: Silver/Platinum/Palladium

OUTLOOK: New uses for silver will help bolster demand, while China needs platinum and palladium to develop clean-air technologies.

POTENTIAL WINNERS: SilverWheaton Corp., a unit of Wheaton River Minerals Ltd., Pan American Silver Corp. and Anooraq Resources Corp.

Source: Bear Stearns research; U.S. Global Investors Inc
http://www.sfgate.com/cgi-bin/…/financial0908EST0054.DTL

Turnaround bei der südafikanischen Minenindustrie ?

http://news.goldseek.com/ClifDroke/1106751601.php

Die canadische Regierung ist besorgt, dass die Chinesen ihre Ressourcen kaufen:

http://yahoo.reuters.com/finan…20-27-40_n26504465_newsml

Diese sehr gute Nachricht geht beinahe unter. Das Silber Institut gibt einen Überblick über neue Anwendungsgebiete von Silber:

http://www.silverinstitute.org/

unter News / 1. Quartal 2005 zum downloaden

• Argentium Silver Co. hat ein neues Silberprodukt kreiert, dass seinen Schein ohne Polieren für Jahre behält. Ideal für die Schmuckindustrie !
  

  
  

• Der Einsatz von Silber bei der Wasseraufbereitung ist in vielfältiger Form zu finden, u.a. bei Eis-, Gefriermaschinen, Swimming Pools, Trinkwasser, ...
  

  
  

• Ein neues Athletic Shirt mit Silberinonen wurde eingeführt.

Der Einsatz von Silber verbreitet sich immer mehr. Dies wird die physische Nachfrage begünstigen.

January 26 – Gold $426.90 up $4.80 – Silver $6.77 up 10 cents

Gold Pops Right Back, Set To Challenge $430, "China Loses Faith in Dollar"

Prosperity is not without many fears and distastes; and adversity is not without comforts and hopes...Francis Bacon, essayist, philosopher, and statesman (1561-1626)

GO GATA!!!

What a difference a day makes. Yesterday made no sense. Along with Iraq, the concern of US's foreign creditors over our fiscal deficits is the main issue on the front burner when it comes to the financial markets. At least you would think it would be.

These creditors have been demanding we begin reducing the deficits in order that they continue to send money our way. Charlie McCarthy Snow has insisted this is just what the US intends to accomplish. Yet:

1/26 WASHINGTON (AP) - The White House says its drive to halve federal deficits by 2009 remains on track, though it projects that the cost of wars in Iraq and Afghanistan will help drive this year's shortfall to a record $427 billion.

The figure, provided by a senior Bush administration official who briefed reporters on condition of anonymity, was among a flood of numbers released Tuesday that underscored a gloomy budget picture.

The nonpartisan Congressional Budget Office said projected deficits for the decade ending in 2014 had grown $503 billion worse than it calculated in September, excluding war costs. The deterioration was chiefly due to tax cuts and hurricane aid enacted since then…

-END-

This is horrendous. What seems most egregious are the efforts by the Administration to exclude the costs of the Iraq War as part of the acknowledged budget – as if that money is spent differently than what is spent in other areas. Then again what can we expect? What we have here is another par for the course maneuver – like not counting energy costs in the real (so-called core) US inflation numbers because they are too volatile. Denial and spin rules the day. Anything to keep the public focus off of what is actually transpiring in the US economic/financial scene.

Certainly the budget news is dollar bearish/gold bullish, which is what made yesterday’s market action so perplexing, unless you take the PPT into account. Thus it was no surprise to me to see the dollar and gold reverse course today. Once the market works through the fact the US will do nothing to deal with our serious financial issues, foreigners are likely to run for the hills.

The US dollar closed at 83.38, down .69. The euro rose .94 to 130.38, while the yen jumped to 103.04.

One other item the dollar players are watching is what China might do. Yesterday they weren’t going to discuss the yuan at the upcoming G-7 meeting. Today it was partially back on the table. For months yuan watching has been a tedious and time-wasting exercise.

The CRB weekly is a fine looking chart. Seems commodity prices have built a substantial base and are gathering to make a surge through CRB 300. If the grains come to life, that prediction is a done deal.

Weekly CRB (287.83 close today, up 1.31)
http://futures.tradingcharts.com/chart/CR/W

Gold rose to right below its downtrend line formed at its highs set late last year. As usual, most of the gains were made early in the day with the $6 Rule coming into play later on. The activity of The Gold Cartel is so obvious most traders stop buying after gold climbs above $5 on the session. Certainly that is the case with the bigger locals. Why buy for a trade when your proven upside is negligible?

The gold open interest rose 2663 yesterday. After the initial cabal capping, funds were seen on the sell side. The floor thought it was longs exiting rather than rolling over into April. If it’s new spec shorts, it is a positive.

Feb gold
http://futures.tradingcharts.com/chart/YG/25

Not much to bring your way on silver except the fundamentals remain very positive.

March silver
http://futures.tradingcharts.com/chart/SV/35

The John Brimelow Report

Dramatic volume, price swings: an End Game?

Wednesday, January 26, 2005

Both India and Australia were closed today.

TOCOM continued bland, as usual. The active contract closed down 8 yen, but this mainly reflected the previous day in the West: world gold was 5c below the NY close at the end. Volume rose 16% to equal 18,237 Comex lots; open interest edged up 592 Comex contracts, but Mitsubishi’s data implies the public’s long fell by 0.4 tonne.

Japan reported 6.2 tonnes of gold imports for December, virtually the same as November’s 6.27: distinctly unexciting. The gold ‘scene" is elsewhere.

On the other hand, Reuters Singapore filed an upbeat story on South East Asian demand:

"SINGAPORE, Jan 26 (Reuters) - Premiums for gold bars have increased by two-thirds in Singapore, a centre for bullion trading in Southeast Asia…Gold bars fetch a premium of 50 U.S. cents an ounce to London spot prices, up from 30 U.S. cents …last week because of strong demand from manufacturers in neighbouring Indonesia and Malaysia. "Apparently a lot of refiners have jacked up the premiums. There's a lot of demand," said Beh Hsia Wah, a dealer at United Overseas Bank in Singapore. "It's been a while (since premiums last hit 50 cents)," she said."

In New York yesterday, gold traded a remarkable 128,161 contracts, or 100,661 net of the switch effect (calculated as 2x reported switch quantum). Open interest rose 2,663 contracts – on a $5 drop in Feb gold! The Euro slump was the occasion for the drop in gold, but gold slipped significantly in Euro too: as the open interest data confirms, this was a major short selling foray.

Several commentators stipulate that fund selling triggered the slide (always "long liquidation" of course – no dealer will disclose a short selling client). And they acknowledge the physical market stopped the decline.

Today, of course has been even more remarkable. The abrupt rally in NY screams short covering: unfortunately the subsequent sideways sidle – in heavy volume (72,466 contracts by 1PM net of switches) – around $427 suggests the seller at that level is unwavering. A glance at a recent chart shows this has been the case all this month.

Gold’s friends can take comfort that very serious bear raids, clearly relying on this seller as a backstop, have failed rather badly. Today Comex options expired; tomorrow OTC: but the concentration at $420 did not draw in the spot price as it usually does. Apparently the professional element in gold has less power than usual.

JB

CARTEL CAPITULATION WATCH

37 US soldiers killed today, making it the deadliest day of the war thus far.

The US stock market gapped open again. While it remained firm, it failed to advance on early gains for the second session in a row. The DOW gained 37 to 10,499. The DOG leaped 26 to 2046.

German economic news:

26th January 2005
Strong German business confidence data today has kept the currencies and in turn precious metals in an active mood. Business confidence in Germany unexpectedly rose to an 11-month high in January as a softer Euro created a more optimistic mood amongst German business’s. The Ifo index rose to 96.4 from 96.2 in December. –END-

US economic news:

01:18 Suppliers to steel makers are seeking sharp price increases reports the WSJ
The suppliers of iron ore and coking coal are negotiating higher contract prices. Iron Ore is expected to rise 30-50%. RIO has confirmed it is seeking a 90% rise from some customers. Arcelor SA has called the request absurd. Coking coal may double in price. Steel companies in North AMerica have long term contracts and are expected to be less impacted.
* * * * *

10:31 API reports crude oil (3.7M) barrels
Gasoline reported (5.4M) barrels, while distillates (4.2M) barrels. March
* * * * *

10:30 DOE reports crude oil inventories +3.4M barrels vs. consensus +1.0M barrels
Gasoline inventories (2.3M) barrels vs. consensus +1.0M. Distillate inventories(2.3M) barrels vs. consensus (2.0M) barrels.
* * * * *

More on the US deficit:

White House Forecasts Record $427 Bln Budget Deficit

Jan. 25 (Bloomberg) -- The Bush administration predicted the federal budget deficit will reach $427 billion this fiscal year, bigger than the record shortfall of last year and almost $100 billion higher than the gap it anticipated six months ago.

The deficit estimate includes added spending for military operations in Iraq and Afghanistan, an administration official told a briefing today. The forecast, due in the budget President George W. Bush sends Congress on Feb. 7, was released early to head off pressure to increase spending, another administration aide said. Both officials spoke on condition of anonymity.

If today's forecast proves accurate the deficit would be the biggest ever in dollars, topping last year's $412 billion shortfall. The new prediction is also greater than the $331 billion the administration anticipated for fiscal year 2005 last July and the $364 billion it projected in last year's budget.

``The financial affairs of this country are in very bad shape,'' Senate Minority Leader Harry Reid said. ``We have red ink as far as you can see, and there's no way to get around that,'' said Reid, a Nevada Democrat.

Earlier today, the Congressional Budget Office said this year's budget deficit would reach $368 billion and would total $855 billion over the next 10 years. The CBO didn't include war costs in its estimate.

Bush has pledged to cut the deficit in half in five years, while calling on Congress to prevent his income, dividend and estate tax cuts from expiring, beginning in 2008. ``We've got a revenue shortage,'' Senator Dianne Feinstein, a California Democrat, said after the CBO released its numbers. ``They effectively kill making tax cuts permanent.''

If you add in Social Security and extending tax provisions ``you are looking at deficits in the $400 billion to $500 billion range every year into the next decade rather than the deficit being cut in half,'' said Stanley Collender, an author on budget issues and senior vice president at Financial Dynamics Inc., a Washington consulting firm.

-END-

3:06 2-year note auction draws 3.245%, with 53.69% allotted at the high
Bid/cover was 2.01 vs. average of last 10 auctions 2.21. 29.7% of competitive bids awarded to indirect bidders. 5-yr +1/32 to 3.7%; 10-yr. +4/32 to4.17%; 30-yr. +15/32 to 4.65%.
* * * * *

Times are changing:

TOKYO, Jan 26 (Reuters) - Japan's trade with China and Hong Kong exceeded its trade with the United States -- its biggest trading partner for decades -- for the first time in 2004, reflecting China's growing clout in the global economy.

The share of China plus Hong Kong in Japan's overall trade stood at 20.1 percent, while that with the United States stood at 18.6 percent, Japanese government data showed on Wednesday.

"It reflects lower customs duties due to China's entry into the WTO (World Trade Organisation), and more importantly the shift of Japanese firms moving production to China," said Osamu Tanaka, an economist at Morgan Stanley.

The share of trade with China without Hong Kong stood at 16.5 percent in 2004, up from 15.5 percent in 2003.

China's rapid economic growth -- 9.5 percent in 2004 -- has created huge demand for imported goods, which has fueled the strong export growth at Japanese companies that has sustained Japan's recovery.

-END-

What’s going on with GLD? Their supposed gold ownership has gone from 109.14 tonnes on 1/5/2005 to 153.03 as of last night. It was 91.75 tonnes on 12/27/2004.

Fifty tonnes of new buying and yet the gold price did nothing?? Something is not right here. All this buying is coming in while specs are selling for the most part. After gold takes off again (with the specs going long in a major way), we will have to see what happens with this gold. Should it disappear in the early part of a major price break like it did in December, the jig will be up. In that case there will be no doubt in my mind this GLD is a trading vehicle for The Gold Cartel to assist in managing their gold price retreat scheme.

Chuck checks in last evening:

Although I am a mite disappointed in the gold shares, but I believe that we are ready for a big move up here. The most obvious take is that the stock market is ready for some heavy selling here. Today, in spite of the attempt to rally, to me, was very ugly. You had only a few more stocks up than down. The Nasdaq continues to perform poorly. The bottom fishers were still trying to buy a rally rather than be concerned, and the leading spec stocks are really breaking down here. I am going to attach a few of then that Russell mentioned and you'll know what I mean. It's possible that a sharp drop in stocks may hold down the listed golds until a near-term bottom is reached, but I wouldn't bet on it. Chuck

http://bigcharts.marketwatch.c…b=GOOG&sid=1795093&time=8

http://bigcharts.marketwatch.c…sp?symb=HUI&time=8&freq=1

Ebay is particularly scary. I consider this stock the heart of America right now. http://bigcharts.marketwatch.c…y&freq=1&time=8&x=33&y=18

-END-

Rhody on the lease rates:

Good morning Bill:

I include the lease rate charts from yesterday. As you can see, gold lease rates are rising into backwardation, all the way out to the 3 month term. In fact, all terms are rising, with the bulk of leasing occurring in the near terms.

http://www.kitco.com/market/lfrate.html

This implies leasing to manipulate the spot price, not industrial consumption.

I had a look at the leasing patterns for gold back 6 or 7 years, and the pattern is that gold lease rates spike up PRIOR to rallies in the spot price. This implies a pro-active attempt to lease down gold into a new bottom. In other words, gold may be declining, and leased gold in used to pile on the trend in an attempt to completely break down the price. Once gold breaks out of the down pressure, leasing subsides instantly.

Silver is different. Surges in the lease rates only occur when silver is rising and peak at the same time as silver spot prices, and then subside gradually afterwards. In other words, leasing in silver is re-active. Leased metal is used to cap a rally in silver that is already at hand. The implications are obvious. There is plenty of gold out there available for leasing and it is being used to aggressively manage the spot price, to accentuate bear trends and to manage chart patterns into bearish TA goals. Silver, on the other hand is so tight, lease ammunition must be husbanded to cap only the rallies.

Lease rates are becoming more volatile. For example, silver rates on Monday collapsed down to .12% in the one month terms, and yesterday rose back up to .30% This is an oscillation of over 50% and it happened across all terms.

Lease rate behavior is signaling stress in financials, as both metals are being attacked. Gold is being repeatedly hammered to suppress it to the $421 level (the old $35 level in 1960 dollars) while silver is lease capped every time it attempts to break $6.80/oz. Rhody

10:30p ET Wednesday, January 26, 2005

Dear Friend of GATA and Gold:

Despite recent assurances to the contrary from the U.S. Treasury Department, U.S. law still appears to empower the president to seize gold and silver coins, bullion, and shares in mining companies from private citizens.

While the law may violate the U.S. Constitution's prohibition against the government's taking private property for public use without paying fair compensation, it puts precious metals investors in some jeopardy. So GATA has written to the Treasury Department seeking clarification and a meeting with department officials.

The text of GATA's letter is appended.

Protecting precious metals investors and the mining industry against threats like this would seem to come within the province of the World Gold Council.

But the council does no advocacy of precious metals when governments may get in the way, and little advocacy in any case, so this work has fallen to GATA.

The Treasury Department is not likely to respond to GATA's letter without some prodding from the congressmen who represent metals investors and mining companies, so U.S. citizens are asked to share the letter with their congressmen and the mining companies in which they are invested and to ask the congressmen and mining companies to get involved with the issues the letter raises.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

GATA LETTER TO TREASURY DEPARTMENT

January 20, 2005

Roberta K. McInerney
Assistant General Counsel / Banking and Finance
Department of the Treasury
Washington, D.C. 20220

Dear Ms. McInerney:

Michael Kirk of U.S. Rep. John B. Larson's office has forwarded to me your letter to him of December 17, which answered my e-mailed inquiry to him about forcible redemption by the Treasury Department of gold and silver coins held by private citizens. You replied that a statute empowering the Treasury Department to do that, 12 U.S.C. Section 248(n), had been repealed.

But since reading your letter I have learned of a similar statute: Title 12, Chapter 2, Subchapter IV, Section 95a, which provides in part:

"During the time of war, the president may, through any agency that he may designate, and under such rules and regulations as he may prescribe, by means of instructions, licenses, or otherwise -- (A) investigate, regulate, or prohibit, any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution, and the importing, exporting, hoarding, melting, or earmarking of gold or silver coin or bullion, currency or securities. ..."

Section 95a further authorizes the president to "prevent" the "use" by U.S. citizens of any property "in which a foreign country or a national thereof has any interest."

These provisions are of the greatest concern to investors in gold and silver bullion, coins, and shares of gold and silver mining companies, and to those companies themselves. So the Gold Anti-Trust Action Committee urgently requests that the Treasury Department explain how it construes these provisions. Particularly, we'd like to know:

* How does the Treasury Department construe "the time of war"? How can gold and silver investors know when the powers described in Section 95a are in operation or likely to come into operation? Are formal declarations of war by Congress required here, or lesser declarations, or none at all, but rather declarations made only by the president?

* How does the Treasury Department construe "hoarding"? Does it include the ordinary collection of gold and silver coins, numismatic or not, and bullion by U.S. citizens, businesses, and corporations, absent any collaboration with enemies of the United States?

* Does the Treasury Department construe Section 95a to empower the president to interfere with the ownership of shares in gold and silver mining companies merely because shares of such companies also might be owned by foreign nationals or foreign governments, at war with the United States or not? Under what circumstances would the president be so empowered?

In essence, we need to know whether Section 95a contemplates the instant destruction of gold and silver investors and the precious metals mining industry in the United States. So the Gold Anti-Trust Action Committee asks the Treasury Department for a meeting with the officials who might become responsible for implementing Section 95a, at which we might discuss the concerns of precious metals investors and mining companies. Would you kindly forward our request to the appropriate people?

Thanks for your help.

Sincerely,

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Ich glaube, dass man diese Entwicklung sehr aufmerksam sich anschauen muß. Sollte es zum großen Knall kommen, wäre dies ein Hintertürchen für die USA, um auf die Gold-/Silberbestände und auf die Gold-/Silberminenaktien (!) zuzugreifen.

Haben wir in Deutschland ein ähnliches Gesetz ?