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

A big thanks to Dennis Oliver, who sent Café members a helpful recap:

Gold Jan.6, 05

- Gold now in oversold position as of today, Jan 6.

- Funds are selling on weakness and buying on strength. Redemptions come in as market declines.

- Gold and silver stocks corrected in 04 although gold rose 5% and silver 13%. Shares affected by currencies (Africa), increased costs, lower grades. Still in a long term bull market.

- Gold needed a decline stage in order to provide the necessary ingredients for the next power up phase and cause gold to rally in the face of all stronger currencies.

- Despite massive manipulation, (phantom supply and demand) gold and silver have appreciated for four straight years with gold going from $255 in 01 to $438 in 04. Oddly, during those years few analysts called for gold to do anything but move down every year.

- Gold will continue to benefit from the pressure on the US $ and its vulnerable status as the world’s reserve currency. Gold is rare; a store of value that is no one’s debt and it cannot printed. It is benchmark against which other things are valued, especially currencies.

- Several unnatural variables are in play which affect share prices because of the staggering contrast between the usual market dynamics and their charts, versus the dramatic changes caused by manipulation, i.e.: silver shares plunged long before the bullion takedown on Dec. 2nd. This reveals the two pronged attack method against shares and bullion.

- The evidence of the presence of the ETF (US Exchange Stabilization Fund created under Reagan, reports only to the Pres., Gov. of the Fed, Greenspin, and Sec. Of the Treasury, Snow, is obvious. Congress is out to lunch on this. Gols is sold, manipulated at will.

- The evidence of collusive manipulation for profit is unequivocal, but ignored. Government sanctioned lawlessness. (Selling short via bullion banks Goldman Sachs, JP Morgan, Deutsche Bank, Citicorp, Merrill Lynch since early 1990’s). With the US Gov. as a backstop, anyone could make money shorting gold.

- There are 13,000+ tonnes of gold loans/swaps still out there, other than those of the hedgers, which have not been called in. Most of those were put on with gold trading around $300, plus or minus. These loans, representing commercial interests, are enormous losers on someone’s books. (Murphy)

- Lawsuit filed by US bullion dealer Blanchard and Co. against JP Morgan and Barrick begins in April 05, attempting to prove and expose illegalities of the bullion bank covert operations.

- Recent gold bashing by the gold manipulators has most gold investors completely demoralized. Storng hands want the weak hands shares. End of limit for manipulators is at hand.

- Huge new short positions added on Jan. 4, plus long liquidation.

- John Brimelow reports on Jan. 4th that physical demand has gone crazy! Especially India, Turkey, China, Indonesia, Russia and mid east.

- Very little press/media coverage on gold fundamentals with drivel gold market commentary common. Inane noise about why it moves up and down as per cycles, technicals, US $, all without understanding, or wanting to understand, the true nature of demand, size of the bullion bank short positions, yearly supply/demand deficits, Gold Cartel price suppression.

- Gold mine supply is declining. Expect the present supply of 2,500 tons/year to decline to 2000 tons or less in 5 years. For every 100 tons taken out of the market, add $7.50 can be added to the price (Pierre Lassond).

- In Q3 supply contracted sharply by 22.4% at 828t versus 1066t in third Q of 03. (World Gold Council Nov. 25th)

- Current funding of exploration will not replace reserves. Production is relying on discoveries made many years ago. Many producers are reporting declining reserves (Anglogold, Ashanti, Harmony, SA, Aust., Peru, Barrick, Cambior) Even if gold was $1,000/ounce; it still takes 4 to 7 years to open a mine.

- Central banks scour for supply to suppress price, as world gold demand soars.

- Key point is not what the US $ does but what the real strong physical buying of gold does to the paper price suppression and derivative pressures on price.

- Dec 1 gold closed at $453.50, dollar at 81.56. Jan. 4 dollar at 81.34 and gold down $25? Totally out of whack.

- Expect short term price below $430 for several days. Turnaround soon and accelerating by end of month. Short-term dollar rally to end, see below.

- Goldman Sachs and World Gold Council GLD gold ETF were major short covering buying on Jan. 5. 15 tons sold out of the GLD on Dec. 7th now covered for a $10 million profit. (all backed by U.S. Gov. ETF)

- Urgent attempt now in force to keep gold down. The central banks (Germany, Italy) attitude is changing with respect to selling gold. This means less swapping and lending to sell into markets.

- No time table has been given for the renewed central bank gold sales agreement to proceed for 5 years.at made the big bucks between 1978 and 80 when gold went to $800 plus.

- Gold for years now capped at $6 constantly on the upside, allowed freefall on downside.

- Bank of Italy confirms manipulation of Gold Cartel and IMF gold deception. Swaps go back to 97. Reveals 13,000 tons not accounted for in official central bank statistics.

- Unprecedented takedown of $10 plus in four weeks reveals desperation to negate perception of mounting U.S. financial market problems. Attention must not gravitate away from markets to gold shares, bullion.

- Strong fundamentals for bullion: supply/demand deficit, US budget deficit, trade and current account deficits. Russia, China, Japan diversifying reserves away from US$, global geopolitical problems.

- Germany declares negative sentiment towards (Washington Agreement/04) gold bullion sales, reducing estimates of when and how much to sell into markets.

- India, China, Russia, Turkey, Middle East gold demand up, up and growing; Turkey up 129% Dec. 04 over Dec. 03 in spite of higher prices.

-The international investment banks will be the driving force for gold. They were responsible for the dramatic rise in gold from 1978 to 1980 at over $800.

- What is an ounce of gold worth?

A man’s suit, shoes and belt at $1,000?
At its previous high in 1980 of $850, in inflation-adjusted terms, today, it would be $2,000 plus/oz.
An ounce of gold used to by the DOW. $10, 500 today?
- Gold: a medium of exchange, a store of value, It is durable, homogeneous, divisible, a luxury always in demand, and portable.

It has been the international standard of exchange since before WWI. It was a tangible asset that could back debt.
Fiat dollars (debt) can be printed out of nothing, increasing the supply of a country’s claims far beyond it’s tangible assets
Gold stands in the way of deficit spending, which is a scheme for the hidden confiscation of wealth. "It stands as a protector of property rights." (Greenspan; Gold and Economic Freedom, 1966).
Sprott Report, John Embry and Andrew Hepburn. August 04.

Central Banks intervened surreptitiously in the gold market in the late nineties to prevent a gold derivatives crisis that threatened the global financial system. This appears to have started around the time of the Long-Term Capital Management crisis (bail out of huge short 300-400 ton short gold position by Fed. orchestration) and commenced in earnest after the post-Washington Agreement gold price explosion in 1999.
- So much gold was borrowed from the central banks at low interest rates and sold into the market that an uncoverable short position developed.
Price manipulation exists to this day. See report at Sprott Asset Management.

Gold Shares

- 20 year bear market over. 2004 consolidation. $17 billion in restructuring, refinancing and mergers in 04 versus $3B in 03, drew funds away from chasing prices up in a small market sector. Important factor in a secular bull market. Those who have already made profits have a nice head start.

- Tremendous leverage is now in juniors that have good resources/reserves, and management.

- A spectacular rise is expected as the nearly four-year bull market resumes its up trend.

Juniors have lost 30% to 50% of their value since last year. Secondary corrections can be brutal. Markets are thin, volatile and emotionally driven. Many stocks are acutely oversold.

- Shorting now has added insult to tax loss selling in 04. Also, some profits are being taken now in 05, as they are not taxable for 14 months.

- A number of stocks have had great gains due to positive advancement of their discoveries and should shortly emerge as leaders of the next price advance.

- Juniors make 75% of all discoveries. With the majors facing declining reserves, they will have to go after and bid up the juniors.

- New, strict, US SEC rules require all market makers to close out all naked short positions by Jan. 3/05. Starting Jan. 10th, the SEC will publicize all stocks where the market makers in each stock have not complied and where traded shares have not been accounted for, forcing them to buy shares of the Naked short, or just plain short the company’s shares.

Misc.

- Newmont CEO Pierre Lassonde, member of Pres. Bush’s economic advisory council, sold $40 million of his stock at much higher prices in Nov. Who knew what was coming?

-Intervention of US Gov. in oil, bonds, gold, gold stocks, dollar, silver, Dow, stats on CPI, PPI, inflation, etc. Time frame is growing rapidly shorter.

US $ Index at critical juncture
US T bond at critical supports of $111.5 and then $106,
DOW critical support at 1075, then 10430, and then 9800.
Crude oil must break above $46 then $50.
Gold must move above $433 then break above $446.
Expect strong downwards correction in bonds and equities.

U.S Economy

- War, Tsunami’s, debt crisis, credit crisis, pension crisis, dollar crisis, Fannie May mortgage crisis.

- DRAMATIC NEWS: Jan 4th, US treasury notes fell on release of news from Dec. 14th Fed. Reserve meeting re concerns on inflation. The US Fed is admitting that inflation is much worse than cooked up Gov. figures have reported over the last year. Bond bearish!

- Crude oil jumped to $43.91 a barrel. 18 months ago $43 was considered to be a disastrous price for the economy.

- Insider sales in 04 were highest since bursting of the Internet Bubble in 2000.

- Credit driven asset bubbles due for severe correction. Underwritten since 1996 by short selling of 17,000 tons of gold gone from central banks, but still on books as reserve. This debt has yet to be paid.

- Runaway asset inflation of stocks, bonds, homes, US $. Based on artificially low interest rates and rampant excess credit due to Greenspan.

- Moderate consumer and producer price inflation. Fuzzy stats. What exactly do "core" rates have to do with reality?

- Goldman Sachs forecasts growing deficit net foreign investment income 05.

US fiscal deficits will no longer be supported by foreigners buying US paper.

- The US must launch severe spending cuts or raise taxes or both. This will halt economic and employment growth. Dollar collapse or recession is inevitable.

- Debt levels are untenable and foreign central banks will not continue to support the US debt.

- On November 19th, congress raised the Treasury debt ceiling to over $8 trillion in order to continue to finance the deficits. Annual interest on that is over $320 billion per year. More income must be put aside to pay interest and dividends to foreigners, and US must pay higher interest rates to keep creditors lending.

- The US Gov. spends $400 billion more than it takes in, which is 4.2% of GDP.

- The current account deficit is the largest in history at 6% of GDP.

- With the US citizen nearly zero percent savings, the US sucks up 80% of the world’s savings.

- The aggregate current account deficit and budget shortfalls account for over 10% of GDP which is at a tipping point for the $ to collapse.

- Add to this the household debt and the growing corporate financial leverage.

- The structural damage done to the economy over the last 20 years is probably irreversible. It has been seriously harmed by the diversion of capital funds to frivolous expenditures on housing and faster ways to apply for mortgages.

- Fannie May is in serious trouble as we speak. The SEC ruled that their derivative accounting did not meet with FAS 133 accordance and that they restate earnings to the tune of $9 billion (loss).

- Private investors are less eager to finance America’s huge debt. America’s debt service payments will increase sharply if the deficit remains so large ($165 billion for the third quarter or 5.6% of GDP.) As interest rates rise, refinancing will become more difficult.

- Asian banks collectively hold over 2 trillion in American obligations and are suffering billion dollar losses in purchasing power. Investors in Russia, India and the Middle East are now selling dollar obligations.

- Globally, foreign banks hold $9 trillion of U.S. paper assets (treasuries, agencies and corporate bonds) and they are suffering losses as the dollar falls. How long will they continue to prop up the US?

- US bond markets have been defying the $ weakness and the 4 interest rate hikes.

- US consumer is tapped out after keeping the economy afloat via inordinate tax cuts and ultra cheap credit (ultra low interest rates) leading to sharply slower growth for this year. - Consumer spending accounts for 89% of real GDP. The economic recovery has been passed by. The stimulus is spent.

- Disposable personal income is down by 4.8% in the second half of 04. In the third quarter private household-spending rose by $139 billion while earnings went up only $81 billion.

- Taxes and inflation went up.

- New "net birth/death" computer generated employment statistics from the BLS (US Bureau of Labor Statistics) are suspect as compared to actual surveys.

- Continuous rate hikes will prick the housing bubble.

- Three credit bubbles existing in housing, carry trade and bonds will burst.

- Afghanistan and Iraq are huge, long term drains on the economy with no relief in sight.

- China is invading Canadian oil fields. Canada is the largest supplier to US. China is also active in Venezuela, Russia, Iran and mid east.

- News just out that Bush will change social security benefit payments as per inflation rates (CPI, PPI) rather than wage increases (as they tend to rise faster). Expect fudging of CPI and PPI stats to continue.

* Excerpt:

Consumers Begin to Feel Inflation's Pinch
Wednesday January 5, 3:19 pm ET
By Marc Levy, Associated Press Writer
Consumers Begin to Feel Pain of Inflation As Cost of Many Products and Services Marches Higher

"HARRISBURG, Pa. (AP) -- After a decade of relatively tame prices, consumers are starting to feel the "ouch" of inflation as the cost of everything from coffee, candy and home appliances is marching higher.

It's not a sharp pain yet, and some call it hardly noticeable. But with companies such as Procter & Gamble Co., Hershey Foods Corp. and Whirlpool Corp. passing along the higher prices they pay for raw materials to their customers, it's beginning to get attention from people who shop in grocery, appliance and department stores.

It's also getting noticed by officials of the Federal Reserve, and that could mean higher costs for everything from car loans to home mortgages.

Minutes of the Fed's Dec. 14 meeting released on Tuesday suggest that central bankers' worries about rising prices could prompt them to continue bumping up short-term interest rates -- which they raised five times in 2004 -- to keep inflation in check."

US Dollar

- The US Dollar is in a temporary counter trend correction to the upside after bouncing off .80 five times. Expect choppy action as it proceeds to a minimum of .84 and a max of .88 Estimate this wave up to last two to four weeks. Next wave will go down below .80. - - This trend is due to short covering. Could end sooner if other indicators kick in as currency traders are getting close to the areas where they start selling dollars again.

- Since early 2002 the dollar has lost 37% against the Euro and 24% against the yen.

- The US dollar crisis is not coming. It is here. Nobody on CNN speaks of it.

- The US $ is in a bear market rally but going down the drain. Below 80 within a month in an accelerating crisis. Short covering is preventing a break below USDX .80. Once .80 is broken convincingly, there could be a potential freefall of the $. There is no defense of the $ below .80. (Sinclair).

- Russia, China and Iran have much to do with the dollar bear. The horrible chart of the US $ is second only to the bankruptcy of Enron.

- US$ @1.40 against the Euro is the next target.

- Interest rates must rise to double digits or the dollar must fall.

Silver

- $1 Billion short position rumored.

- Why aren’t deliveries being asked for on contracts?

- China has secured 75% of the world’s 2005 silver production via various derivatives maneuvers. Silver price will explode. Look for $10 by April or sooner.

- Like gold, an engineered sell off has occurred so the shorts can cover their positions. A huge new short position has been added in addition to liquidation.

- The market has done everything to convince the retail investor never to be in silver again as per April and now. Investors and traders do not want to have to compete against any more than they will have to. Very Bullish!

- The most unreported silver story of the year…..The Mexican Bill. All 31 Mexican Governors want to monetize silver and urge approval of the Bill. Mexico is the world’s largest silver producer. This story has not been reported in the American financial press.

Oil

- Prices 30% higher than Jan 04.

- China oil imports up 21% over 03.

- Osama threat to Saudi Arabia to target oil fields. If one drop of crude burns oil will rocket to $60 to $70.

Charts Data

- 34 year gold chart shows breakout to the upside.

- S&P moving in opposite direction to CRB Index.

- Market value of Real Estate has moved higher and rate of disposable personal income has moved lower to in affordability.

- Asset value in homes at 29% of value of total assets.

- Gold solidly above 200 day moving average 1 year.

- Gold solidly positioned in up trend channel from 2000.

- Dollar solidly entrenched in downtrend channel established Feb/02.

- Price of gold has risen from $255 to $425 since Jul/99. Thirty year T Bond Yield has fallen from 6.6% in Nov/99 to 4.4% Nov/04

- S&P 500 up from 820 Sept/02 to 1180. Gold from $330 Sept/02 to $425.

Reference Sources

Dr. K. Richebacher, Doug Casey, Wistar Holt, Bill Murphy, M. de Charbert-Ostland, Derek K. Artsdalen, Dr. R Appel, Jim Sinclair, Richard Russel, John Embry, Bill Buckler, Sol Phala, John P Calverly, Eric Hommelberg, Lars Lindgren, Dave Morgan

ganz interessanter Artikel, der sich kritisch mit den Silberinvestoren auseinandersetzt:

http://www.gold-eagle.com/edit…_05/kanarowski010705.html

Quelle: News from The Globe and Mail

Silver could fly if China stops selling

By WENDY STUECK

00:00 EST Saturday, January 08, 2005

VANCOUVER -- It might be known as poor man's gold, but silver outpaced its more expensive cousin last year and analysts and producers say it has bright prospects for 2005.

One of the biggest factors behind that optimistic view is China, which has been selling excess silver -- amassed during decades when the only buyer for the country's mined silver output was the People's Bank of China -- on the open market, unloading millions of ounces a year each year since 1999.

But the amount sold each year has been gradually declining and there is now speculation that the Chinese stockpile may be gone.

"In the last five years, we reckon China has sold close to 300 million ounces of silver on the world market," says Ross Beaty, chairman of Vancouver-based Pan American Silver Corp. "The absolute amount of that stockpile is not known. But we know it is seriously depleted and we think it may be completely depleted."

The buzz around silver has been building for at least the past 12 months. Silver futures contracts took off early in the year, soaring to 17-year highs of more than $8 a pound in April on the Comex division of the New York Mercantile Exchange. Prices subsequently dropped, ending the year at $6.81, still substantially above the $5 mark where the metal has treaded water for most of the previous five years.

Silver closed yesterday at $6.43 on the Comex exchange.

In terms of price appreciation, silver outperformed gold last year, rising 13.6 per cent in U.S. dollar terms, compared with 4 per cent for gold, based on closing prices in London.

Over a five-year period, from 1999 to 2004, silver rose 27 per cent and gold 50 per cent.

Silver's biggest role is not as an investment but in the industrial, jewellery and silverware, and photographic sectors, which account respectively for about 40, 30 and 20 per cent of annual demand.

The photography sector, which accounted for 22 per cent of silver demand in 2003, is shifting to digital technology, which has reduced demand for silver.

But that drop, about 4.7 per cent in 2003, according to London-based consulting firm GFMS, has not been as dramatic as some had expected. And as the usage of silver in the film sector declines, it's picking up in the printing sector, as consumers seek out high-quality prints for their digital pictures.

Silver is also being used in a growing number of applications, such as anti-bacterial medical dressings.

An improving outlook for silver has companies gearing up for exploration, especially in Mexico, the world's biggest silver producer.

Vancouver-based First Majestic Resource Corp. has been snapping up silver projects in Mexico, and began producing the metal at its La Parilla mine in July.

Western Silver Corp., also based in Vancouver, announced Dec. 23 that it had wrapped up a $64.8-million (Canadian) financing to help develop its Penasquito project in Mexico.

There are relatively few pure silver plays and the handful that exist tend to trade at even loftier premiums than gold producers. The group includes Pan American, Idaho-based Coeur d'Alene Mines Corp. and Apex Silver Mines Ltd. of Denver.

Vancouver-based gold producer Wheaton River Minerals Ltd. last year announced plans to spin off its silver production into a separate company, a move that will create another pure silver play.

Silver Standard Resources Inc., also based in Vancouver, does not currently mine silver but has built up a portfolio of silver projects with an eye to profiting from the metal's future price increases.

© The Globe and Mail

Zusammenfassung der wichtigsten Punkte:

• Für Silber werden 2005 hervorragende Perspektiven vorausgesagt. Einer der größten Faktoren hinter diesem Optimismus ist China, die seit 1999 Mio. von Unzen Silber jedes Jahr verkauften.
• Insgesamt haben die Chinesen 300 Mio. Unzen Silber in den letzten 5 Jahren verkauft. Der Umfang, den die Chinesen verkaufen, ist jedes Jahr weniger geworden und es gibt Spekulationen, dass der chinesische Vorrat weg ist !

Dies würde auch die Gerüchte im Metropole Café bekräftigen, dass die Chinesen über Derivatgeschäfte sich Silberbestände für 2005 sichern wollen. Ihre Bestände gehen wohl zu Neige !

January 10 – Gold $418.60 up 20 cents – Silver $6.42 up 1 cent

Surprise Financial Market Tsunami As Real As The One In South Asia

Have great hopes and dare to go all out for them. Have great dreams and dare to live them. Have tremendous expectations and believe in them..Norman Vincent Peale

GO GATA!!!

There so much quality material to read in this MIDAS (which will require some time), I am keeping my comments to a minimum on yet another revolting Gold Cartel day. There is very little point to following the gold price around the world because it is always taken down in the US, following major capping by the cabal. This morning’s AM Fix was $421.25. That was all she wrote.

Was the gold news bearish in the US? Hardly. Not while gold was open anyway.

Oil not only took out $46 per barrel, but $47 too, before collapsing after the Comex close to $45.25 down 18 cents.

Some key oil news as per a friend of John MacKenzie:

Iraq has canceled its December Kirkuk crude term contract commitments with lifters because of ongoing sabotage-related disruptions to crude flows to the Turkish Mediterranean port of Ceyhan, shipping agents said Monday.

"All loadings have been canceled," a shipping agent said. "They [the vessels] have been told to go home." Iraq's Kirkuk crude exports to Ceyhan stopped more than three weeks ago after a string of attacks from Dec 17-18 hit key infrastructure sites along the northern pipeline network. Iraq's oil ministry has struggled to repair the damaged network but poor security conditions and extensive damage have hampered its efforts. Four tankers—Minerva Lisa, Butron, Astro Cassiopeia and Sea Magic--have been waiting from as early as Dec 18 to load 4.625-mil bbl of Kikruk crude for ExxonMobil, Spain's Repsol and Cepsa and Portugal's Petrogal, shipping agents said. "If there was any prospect to load, it would have been done," the agent said.

State Oil Marketing Organization officials declined to comment on the latest development, but it is likely that SOMO will have to pay a significant amount to compensate lifters for the cancellation. SOMO has carried heavy security-related costs for delays to loading since the US-led invasion of Iraq toppled Saddam Hussein in April 2003. With Kirkuk crude off line, it is now unlikely that SOMO will move to sign long-term contracts for Kirkuk crude for the first half of 2005 until there is better security along the pipeline network. Of the 147 attacks against the country's energy infrastructure recorded in 2004, the majority have occurred in the north, making it difficult for SOMO to guarantee its commitments. "Kirkuk will be sold when there are stocks in Ceyhan," an industry source said.

-END-

Reasons given for the stunning late turnaround:

Bearish API reports coming in.
Better oil flows coming out of Houston ports/channels.
Refineries pounded heating oil late.
Gold lost ground again versus foreign currencies:

The dollar lost .36 to 83.36.
The euro gained .30 to 130.92.
The pound rose .56 to 1.8688.
The yen leaped to 104.19.

The gold open interest fell sharply, down 10,131 contracts to 279,959, which is nearly 100,000 contracts off its high. The Gold Cartel’s blatant price bashing has achieved its objective of demoralizing spec longs and gold investors in general. The hedge and high tech funds are running for the hills, and doing so like crazy.

The cabal won this battle, however, the Gold Cartel’s problems are mounting significantly every month. One need only read the material presented in this MIDAS to understand why they are losing their war. As 2005 progresses, the price will reflect just how much so.

This commentary from a fellow Café member from Mexico sums up the gold market and where we are:

Bill.
Until the Cabal in taken out in a stretcher, Midas daily commentary may well be summed up in the following:

When the dollar goes up, gold is trashed down
When the dollar goes down, gold is stopped from going up
Gold will not move freely and allowed to be subjected to the forces of supply and demand, _not those of the Cabal, until the Cabal is taken away in a stretcher. When this finally happens the gold market will stop being monotonous and show some variety.

Then Midas will be able to report other than the above commentary.

It’s not the dollar - the one that moves gold, but the Cabal; and it moves it down in every opportunity. It’s not Midas the one that is boring, but the gold market itself.

Bill, keep high your spirits and your great efforts because it’s just a matter of time.
Gabriel.

While the gold open interest plummets, silver's remains steady. It rose 438 contracts to 97,728. Morgan Stanley remains aggressively bullish. The floor believes if March silver can take out $6.52, the price will fly.

The John Brimelow Report

Continued selling pressure imperative for Bears;

Monday, January 10, 2005

Indian ex-duty premiums:: AM $9.92, PM $ 7.92, with world gold at $419.80 and $421.10. High; very ample for legal imports. A regular pattern seems now to have established, with gold edging up during the Indian day in the absence of US sellers.

Japan was closed today. Premiums from the Shanghai Gold Exchange edged up from Friday; $3.39 -$3.96, with world gold at $419.70: also high.

Friday of course was notable for the ferocious storm of selling in NY surrounding the Treasury Secretary’s jawboning of the dollar. An estimated 34,000 contracts traded between 10 am and Noon, a volume which used to be common in a day. Gold plummeted $6. And in fact, since the day’s volume turned out to be 105,975 contracts, 20% higher than the estimate, the actual shock was probably greater. Open interest collapsed 10,131 contracts – 31.5 tonnes.

This means that open interest has now declined over 50,000 contracts or 157.9 tonnes since gold and open interest peaked on December 28. This is 15.4%. Quite possibly this understates the selling pressure, since presumably the woeful technical picture has brought in some short selling (which would bolster open interest).

If gold were a market primarily determined by the matching of Western opinions, this liquidation would only be mildly encouraging. The question would be: what will revive buying? As it is, however the selling is going into a price elastic off take, primarily India and the Middle East, which is supremely indifferent to the considerations which move the West - especially the US. In other words, to keep gold at this level, this selling pace will have to be continued. That might be difficult to orchestrate.

Perhaps sensing this, a number of professional observers were quite sanguine about Friday’s action. First amongst these were of course the gold shares themselves, which quite uncharacteristically went up. UBS was another, commenting:

"…on Friday gold traded down to $417/oz briefly before recovering. We suspect that this may mark the low point in gold in this sell-off…Interestingly, euro-denominated gold has remained stubbornly supported over the past couple of trading days despite the large-scale speculative selling. We suspect …fundamental buying has supported the metal. We estimate …speculators have reduced positions to levels not seen since September 2004... We continue to view this current sell-off in gold as a temporary phenomenon... We hold our one-month forecast of $440/oz and see this as an attractive level to buy gold."

Refco Research is a third, putting out a buy recommendation for the first time in many weeks:

"Buy 1 February gold on break of 421. Risk close under 417. Expect 432"which became active this morning.

Conspicuously not amongst this group is The Gartman Letter:

"The reason for golds' weakness is really quite simple: the dollar is strong and the demand for gold is lower as a result…We have said all along that gold might well trade back to the $395-405 level before the market is healthy again ."

As readers of these notes know, Gartman is quite wrong about gold demand – the extraordinary Turkish imports last month, the premium data, and a host of anecdotes and remarks from the dealers refute him. Strictly speaking, he is wrong about the $US too – gold began to buckle under waves of heavy selling before the turn of the year prior to the dollar surge getting under way. But considering him as a bulletin board/propaganda conduit for major hedge funds, which I believe to be appropriate, his view explains the dogged selling seen recently – especially after the Comex data was released this morning.

JB

CARTEL CAPITULATION WATCH

The DOW gave up sharp early gains again, went down on the day, but rallied modestly later on to finish at 10,621, up 17. The DOG went plus 8 to 2097.

US economic news:

10:00 Nov. Wholesale inventories reported 1.1% vs. consensus 0.7%
Prior reading unrevised at 1.1%.
* * * * *

The US employment picture is still not a rosy one:

GM to drop 7% of jobs in '05
CEO: Workforce will lose 8,000 through attrition and retirement
January 10, 2005
BY JEFFREY McCRACKEN
FREE PRESS BUSINESS WRITER

General Motors Corp. will again shrink its U.S. workforce by about 7 percent in 2005, its chairman and chief executive told the Free Press on Sunday.

That works out to about 8,000 hourly and salaried positions that will be lost through attrition and retirement at GM over the next 12 months.

This 7-percent cut of GM's overall workforce is in line with what the automaker has done every year since 2002 as it tries to trim costs amid rising health-care expenses and other concerns… - END-

Comments coming from Jean-Claude Trichet at the G-10 meeting are insidiously laughable. Because Charlie McCarthy Snow says the US is going to act to seriously to correct our deficits, Trichet’s remarks come across as practically giddy. One has to suspect his private utterances are far different in nature:

BASEL, Switzerland, Jan 10 (Reuters) - Central bankers from the world's most important economies welcomed on Monday a promise by the United States to tackle its budget deficit, which is plaguing the dollar.

Failure to correct the huge U.S. trade and budget deficits poses a risk to the world economy, which is expected to grow at about 4 percent or better this year, Group of 10 chairman Jean-Claude Trichet told a news conference.

"We were certainly aware of the declaration of (U.S. Treasury) Secretary (John) Snow as regards the will of the U.S. government to take into account the necessity of reducing the fiscal deficit," he said.

"It was said very, very clearly by Secretary Snow, and I take it that it is certainly very important ... and has been considered very important by all observers," he said.

In early February the Bush administration unveils its budget plan and on Friday Snow gave the first hint of budget discipline, saying he wants to "do things" and work with Congress to bring the budget deficit down.

Trichet, who chairs the G10 meeting of central bankers from top industrialised and emerging countries on the global economy, said correcting the lack of U.S. domestic savings is important to resolving global imbalances. "What Secretary Snow said is very important to advance this global consensus," he added.

The G10 comments follow a call for U.S. action by the head of the International Monetary Fund, Rodrigo Rato. "America must resolve the problems linked to its budget deficit, which is now truly excessive," he wrote in Italy's La Stampa newspaper on Sunday.

Investors are increasingly nervous about funding the huge U.S. trade and budget deficits, which pushed the current account deficit over 5 percent of GDP last year.

Accordingly, the U.S. dollar has shed 25 percent of its value in trade-weighted terms over the past two years, straining the euro and the yen. Rato, in an unusual move, attended Monday's G10 discussion on the global economy.

Trichet further embraced the significance for the euro zone, which has suffered the brunt of steep dollar declines, of Snow's remarks by swapping his hat as G10 chairman for that of European Central Bank President to say how much he appreciated them.

"Secretary Snow said something that is very important and very appreciated," he told the news conference.

Snow's comments that the U.S. wants to "do things" to sustain the dollar helped the dollar regain strength. It traded at $1.3094 to the euro at midday on Monday compared with a recent low beyond $1.36, and currency analysts said the remarks should further lift the dollar.

"It's the first thing that sounded remotely like coordination of comments across the Atlantic for God knows how long, so that may give the dollar a bit more support " said Adam Cole, senior currency strategist at the Royal Bank of Canada.

"They seem to agree on what lies at the root of the problem -- that may give the dollar more support."

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For the US to really correct our structural fiscal problems it will require some form of significant spending cuts, and or, tax increases. The result will be a US economic recession. If interest rates take off in a major league way, it could be worse.

While Trichet begs for US fiscal responsibility, we are going in the other direction:

http://www.courierjournal.com/…04/opin-bot0104-2947.html

..."The Medicare drug benefit the administration muscled through Congress, without even a pretense of funding and with deliberately misleading estimates, will add $6 trillion to $8 trillion to Medicare's shortfall over the next 75 years, the GAO determined.

That is nearly double the Social Security shortfall that President Bush is acting so alarmed about, and it "is one of the largest unfunded liabilities ever undertaken by the federal government," said Comptroller General David Walker, head of the GAO. "

Then, there is Iraq. For the US to achieve our own objectives in that country it is going to cost far more than budgeted at the moment. How can we bring our budget down when that aspect of the budget must be increased substantially?

I’m no economist, but to pull off these objectives the average American will probably have to accept a 20/25% reduction in our present standard of living. This is what the Bush Administration will have to level with us about. So will the incumbent politicians. Of course, this will not reconcile with President Bush’s campaign promises. What do you think the odds are of some honest rapport with the US public coming out of Washington, or Wall Street? How about zero and less than zero?

The alternative is for the dollar to plunge when foreigners refuse to accept our routine any longer. Interest rates will eventually soar anyway as they will have to be raised to stop the hemorrhaging. The economy will inevitably sink into recession in this scenario also. The only difference is the politicos will look for some other scapegoat to blame the economic contraction on.

It appears the US is going to have the elections in Iraq regardless and declare victory irrespective of their quality:

Citing Safety, Iraqi Electoral Board Resigns
By Jackie Spinner
The Washington Post
Monday 10 January 2005

Members of commission in volatile Anbar province report threats by insurgents.
BAGHDAD - In another significant blow to Iraq's upcoming elections, the entire 13-member electoral commission in the volatile province of Anbar, west of the capital, resigned after being threatened by insurgents, a regional newspaper reported Sunday.

Saad Abdul-Aziz Rawi, the head of the commission, told the newspaper that it was "impossible to hold elections" in the province, which is dominated by Sunni Muslims and where insurgent attacks already have prevented voter registration. The province includes the restive cities of Fallujah and Ramadi.

"They are kidding themselves," Rawi said about officials hopeful that the elections, set for Jan. 30, could take place in Anbar.

An Iraqi interviewed at the commission's office said the members had resigned and had gone into hiding….

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From the informative and entertaining King Report:

There are two important stories in the Employment Report that are largely, if not totally, being ignored. Most importantly, wages increased only 0.1% (0.2% exp). Whatever jobs that are being created in this recovery have been largely in low paying gigs like leisure & hospitality, retailing, health & social services and government ( for the election in 2004).

Secondly, the CES Business Birth/Death Rate contributed 16k more jobs this Dec (78k vs. 62k last year). What evidence is there for 26% job growth in small businesses in Dec 2004? We see none. And anecdotal evidence, namely the past few months of economic data, shows an ebbing economy globally. Now the real story – The Chicago Tribune on Saturday noted that for the first 47 months of Bush’s reign, the US has lost a net of 122k jobs. If less than 122k jobs were reported on Friday, Bush would’ve been the first president since Herbert Hoover to have less jobs at the end of a term. If Hoover had the benefit of BLS chicanery, namely the Biz B/D Rate, he too like Bush, would’ve avoided job loss ignominy.

Bush’ job creation is even worse when one considers, as the Trib points out, that during Bush’s term the US population has grown by 12 million.

NY Times: "3.6 million American workers who ran out of unemployment insurance benefits last year, the most in at least three decades, said Isaac Shapiro, a senior fellow at the Center on Budget and Policy Priorities…As of November, about 1.8 million, or one in five, unemployed workers were jobless for more than six months, compared with 1.1 million when the recession officially ended in November 2001…Since the start of the recession in March 2001, the average length of unemployment has risen to 20 weeks from 13." http://www.nytimes.com/2005/01…obless.html?oref=login&th

NY Times Magazine: "What makes China so troubling for American and other foreign companies is that the country is both a potential rival, with an alternative legal approach to intellectual property that limits their prospects in China and weakens their competitive strength globally, and a haven for pirates and counterfeiters." http://www.nytimes.com/2005/01…FEIT.html?pagewanted=2&th

The Chicago Tribune ran a fascinating economic story in its "Arts & Entertainment" section on Sunday.

The article asserts that ticket fees for events have increased sharply and now account for as much as 47.5% of ticket prices. The Trib cogently, but ignorantly [of BLS consequences], notes that though fees are increasing sharply; the amount of service is declining sharply as people must use computers. Where is this accounted for in CPI? There should be a double whammy – higher costs and a negative hedonic adjustment. But we all know that there are only positive hedonic adjustments when it comes to CPI.

Earnings reporting season commences this week. Though there could be some nano-term positive reactions for bang-out earnings, overall the reactions should not be sanguine because The Street expects 2005 earnings to recede and inflation to increase. Ergo, disappointments in earnings and guidance will be punished; good news will have only an ephemeral effect…

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