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

CARTEL CAPITULATION WATCH

The stock market action continues to be horrendous and defies the reason for the weird dollar rally this morning. If the dollar were reacting to wonderful economic news, why did the stock market react so poorly to the same news? Especially, since this is such a seasonally strong period for it to run higher.

The DOW was hit for 89 points to 10,540, while the Dog yelped all day, down 32 to 2073:

http://futures.tradingcharts.com/chart/NA/X

I caught a couple of Wall Street pundits on CNBC who seemed befuddled by the crummy share price action. They seemed as bewildered as I was about the stock market running up to where it did up in the first place. While some of the micro news is OK, the big picture is frightening. That big picture was ignored in December. However, as I wrote back then, once in January the investing public would have to deal with the ramifications of the catastrophic situation for the US in Iraq and the demands of our foreign creditors that we get our fiscal situation in order. This means cutting spending, raising taxes, or a combination thereof. No matter how you slice it, this means some kind of economic slowdown ahead and lower corporate profits.

The investing public, or at least the real pros, are finally dealing with the handwriting on the wall. In another six months the American public will yearn for the gold old days of late 2004.

Once this market is hit with bad news, the momentum players are likely to lay into it ferociously.

US economic news:

07:02 MBA mortgage applications purchase index +14% in 1/14 week
The refi index rose 19.1%. Purchase index (5.8%), while refi index +1.1% in prior week.
* * * *

07:46 UBS chain store sales index (0.9%) in 1/15 week vs. (0.6%) in prior week
* * * * *

08:30 Dec. CPI reported (0.1%) vs. consensus 0.0%; ex-Food & Energy 0.2% vs. consensus 0.2%
No revision to prior 0.2% reports for both.
* * * * *

08:30 Jobless claims for week ended 1/15 reported 319K vs. consensus 345K

Prior week unrevised at 367K.
* * * * *

08:31 Dec. Housing Starts reported 2.004M vs. consensus 1.903M; Building Permits 2.021M vs. consensus 1.985M
Prior Housing Starts revised to 1.807M from 1.771M; prior Permits 2.028M, up from prior 1.988M.
* * * * *

14:01 Fed's Beige Book for Feb 1/2 meeting finds continued economic expansion
The Beige Book still found little evidence of inflationary pressures.
* * * * *

14:04 Follow-up: Fed's Beige Book summary
The Beige Book found that consumer spending was sluggish in a number of districts at the beginning of the period, but picked up appreciably by late December. Most districts reported that manufacturing activity firmed and many districts said that businesses planned to increase capital spending in 2005. Although several reports noted some slowingin residential real estate and construction activity, real estate markets remained generally strong. Labor markets firmed in a number of districts, but wage pressures generally remained modest. Note that theBeige Book is rarely mentioned in FOMC meeting transcripts; policymakers pay far more attention to the Green and Blue Books, which are not publicly available. * * * * *

17:01 DOE reports crude oil inventories +3.4M barrels vs. consensus +1.3M barrels
Gasolineinventories +1.7M barrels vs. consensus +1.125M. Distillate inventories +800K barrels vs. consensus +750K barrels. Feb. WTI crude is trading lower in initial reaction to the API and EIA data.
* * * * *

17:00 API reports crude oil inventories +6M barrels
Gasoline inventories reported +5.4M barrels; distillate inventories reported(448K) barrels. Feb. WTI crude little changed at $47.40 in initialreaction.
* * * * *

From The King Report:

The National Retail Federation said on Monday that US retail sales growth will fall sharply (to 3.5% from ‘04’s 6.7%) in 2005 due to slowing wage growth, a stagnant economy and higher energy costs. Wow! It’s highly unusual when a trade association turns from cheerleader to Cassandra.

The recent dollar rally has largely been against the euro. The dollar has fallen to a 5-year low versus the yen. Ergo the big macro trade that has been occurring is: buy yen, sell euros…Is Japan allowing the yen to appreciate in order to mitigate rising oil and energy costs?

Our friend Norm alerts us to an FT article by Dan Roberts that notes, "Actuaries at Towers Perrin estimate the average Fortune 100 company is now storing up more than $3bn in deferred pension costs that have yet to show up in published profit and loss figures." Towers "calculates that the deferred cost for the 81 largest defined benefit pension schemes in the United States grew approximately five percent in 2004 to $252bn." That’s why Bush deferred to business executives’ wish to keep accounting unreal

-END-

The latest Fed flap:

Bernanke-US immigration rules threat to productivity

NEW YORK, Jan 19 (Reuters) - Tightened U.S. immigration policies since the Sept. 11, 2001, terror attacks threaten America's ability to keep boosting productivity, Federal Reserve Governor Ben Bernanke said On Wednesday.

A relatively open immigration policy earlier had paid big dividends for the United States, Bernanke said in response to questions after addressing the Council on Foreign Relations.

"I think a very important part of the productivity gains in the past decade were associated with our open immigration policy," Bernanke said. "If we don't allow, if we don't make provision for bright people, whether they be graduate students or professional people to come...that's a loss to our society and a loss to our potential productivity."

On the question of U.S. economic prospects, Bernanke identified what he said were two major "risk factors" in the form of high oil prices and soft foreign demand for U.S.-made goods.

But he said that if oil prices stabilize, even at current relatively high levels, they should not be a drag on national output. "As long as they don't continue to rise at something like the pace of 2004, that too ought to be a net plus to aggregate demand growth in the U.S.," Bernanke said.

He acknowledged that big U.S. trade deficits, which he said represented a drain on aggregate U.S. demand because they stem from swelling imports, were a problem.

"For our growth (this year) to be what we hope it will be, that is, above trend, maybe 3-1/2 percent or even better, we need for the trade balance to be no worse of a drag than it has been recently," Bernanke said.

Stronger growth abroad would help because U.S. trade partners might be less reliant on exporting to the United States if their own consumers spent more.

"I think there's a reasonable expectation of a decent performance in Europe and in Japan and continued strength in China," Bernanke said.

"Our hope is that the trade balance will not worsen and become even more of a drag in 2005 than it was in 2004 and if that's the case, the prospects for reasonable (U.S.) growth are pretty good," he added.

In response to a question, Bernanke said it seemed as if the U.S. economy may have grown less vigorously in the fourth quarter than Fed policymakers had been anticipating, though he did not estimate the pace of growth in gross domestic product.

GDP expanded at a healthy 4 percent annual rate in the third quarter this year. Fourth-quarter GDP figures will be published by the government on Jan. 28.

-END-

Jesse the sleuth:

Treasury quietly restated its 'foreign ownership' numbers in the latest TIC report back to the beginning of 2003. One might have missed it if you had not loaded their numbers into your own spreadsheets for modeling purposes. It was annoying because generally they do a restatement at midyear and announce it.

Here is a link to an example of what the restatement did to foreign ownership of Treasuries only, not including stocks. As you can see, there is quite a shove forward from the early portion of the restatement to the later part of the restatement. The November numbers are two steps removed from these which end at September (only copy of old numbers I had before I realized what had been done). Meaning no disrespect to the analysts at the Treasury, what would one think if they saw this type of quiet adjustment in the revenue numbers of a private corporation going back two
years?

http://jessel.100megsfree3.com/TicRestatement.png

-END-

On the US stock market, Buffet and silver:

Hi Bill,
It looks like approximately $5,000,000 was burning a hole in someone's pocket and they decided to "invest" in January index options on the DJIA(DJX). On 1/18/05, 127,253 calls and 32,036 puts traded. I have never seen so many calls trade on the DJX and in such a wildly bullish put-call ratio. Could it be that this "investor" is so bullish due to a possible downgrade of GM bonds? Or is the "investor" bullish due to relentless corporate insider selling over the last 19 months, anticipation that FNM would cut its dividend in half, or that the Federal Reserve may raise interest rates more than 1/4 point at an upcoming meeting? This makes perfect sense in a town called "Upsidedownville".

On a side not, Warren Buffet was interviewed on CNBC this morning. Warren Buffet confirmed that he is still long term bearish on the dollar and that the costs for his operating businesses have increased significantly. The interview started to get real interesting when CNBC asked Mr. Buffett his thoughts on silver. Mr. Buffett looked like he had just been questioned regarding his past association with Dracula. He wasn't about to touch the silver question.
Regards,
Paul

This SA Daily News article gets into a couple of the reasons for my rant on South African finance minister Trevor Manuel. "Managed" gold prices at these very low levels are just not good enough for South African gold producers. He ought to be railing against central bank gold sales which are hurting many of the poor citizens of his country so badly.

Costs in SA to mine their gold are just too high vis-à-vis the present gold price. As a result, many gold producers are not only not expanding production, they reducing it. Therefore, fewer miners are needed, which means more unemployment.

Rand key to gold output stability

Production decline 33% over decade
January 19, 2005

By Eric Onstad

Johannesburg: Gold output in South Africa is expected to fall slightly this year, but a bigger slide is threatened if the rand extends its bull run, a government expert said yesterday.

SA gold production could nearly stabilise this year with a buoyant dollar gold price and a stable rand, Alex Conradie, chief mineral economist with the Department of Minerals and Energy, told Reuters.

The country has seen production tumble by over a third in the past decade as high-grade mines run out of ore and firms have to dig deeper to find new deposits.

This year output is forecast to slip only three tonnes to 363 tonnes, a decline of 0.8% after an estimated fall of six tonnes, or 1.6%, in 2004. Final figures for last year are not yet available. "But I think that there is definitely a danger that it could fall further (in 2005) with a stronger rand," Conradie added.

The main factor in knocking output over the past few years has been the rampaging rand, one of the world's best performing currencies, which has strengthened 127% against the dollar since late 2001.

A strong rand, which rallied by 18% versus the greenback in 2004, slashes local income from dollar sales of gold, making some mines unprofitable and vulnerable to closure.

Downscaling

Last year the largest domestic gold producer, Harmony Gold, announced downscaling at six unprofitable shafts that had been producing a total of 220 000 ounces (6.84 tonnes) of output per year.

But this year Conradie expects the rand to stabilise at an average of R6.00 against the dollar, not far from its midday level yesterday of R6.08.

He also projects the dollar gold price will average $447 per ounce in 2005, up from current levels just above $420 and near a peak achieved late last year.

"That is because of contin-uing instability, geopolitical reasons, especially the situ-ation in Iraq, and also the US economy with the dollar weakening," he said.

That would result in a domestic gold price of around R86 000 per kg, compared with just over R82 000 currently and a range of around R100 000-R75 000 last year. Gold production, however, could fall further if the rand extended its three-year march higher, but Conradie said no estimates were available under those scenarios.

Conradie sees the long-term downward trend continuing, with production down by 4.4% to 350 tonnes by 2008, when he projects the local gold price slipping to R80 000.

It would take a gold price of over R100 000 to significantly stem the decline, he added.

South Africa's share of global gold production has shrunk to under 15% from 27% in 1993, but the country still dominates the world in terms of reserves - underground deposits yet to be tapped - with 40%.

The bulk of those deposits, however, would only be economical if local gold prices doubled to R150 000 and above. - Reuters

GATA nemises Dennis Gartman doesn't like it when unseen forces prevent markets from going his way: Page 1
“As is rather evident from the chart of the EUR/dollar at fifteen minute intervals over the past day and one half, someone or something is defending the EUR at 1.3000 and thus far has been imminently successful in doing so. However, it is our "bet" that that support shall eventually prove ephemeral; shall eventually be smashed and that the EUR will fall rather swiftly toward 1.27-1.28 where real long term support shall have to prove itself.”

Historical silver/gold input is streaming the Café way these days. Yesterday Carter, today Kennedy. This is what is so disturbing about the mainstream’s disingenuous attitude towards GATA. We have come up with fact after fact about what is going on in the gold world in the present. Instead of having the integrity to deal with our evidence/findings on an intellectual level, they stoop to dismissing it by casting aspersions. The irony is it seems what we found is another, “nothing new under the sun:”

Thought you might find this old JFK letter interesting

http://www.jfklink.com/speeche…apers/1961/jfk484_61.html

Note the wording in the letter :

"Simultaneously with the publication of this letter, you are directed to suspend further sales of free silver, and to suspend use of free silver held by the Treasury for coinage. In this way, the remaining stock and any subsequently acquired can be used, at your discretion, to contribute to the maintenance of an orderly market in silver and for such other special purposes as you may determine."

Sounds like a guy trying to control the price of silver in the marketplace (like you might need to do if you were to fight an expensive war and running hot printing presses).

***

UBS Precious Metals Outlook 2005

Highlights:

The dollar denominated gold price will continue to be driven by dollar weakness. This relationship has increased over the past five years and we see nothing to change it in 2005. We forecast that EURUSD will end 2005 at 1.4000 and we expect that gold will average $460/oz in the fourth quarter of 2005. Normal intra-quarter volatility should mean that gold trades to a high of $500/oz in 2005, and we doubt that the metal will break $400/oz on the downside. We forecast an average of $440/oz for the year as a whole.

Platinum will fall as the market moves into surplus with SA producers mining more metal; broad commodity weakness will also trigger speculative selling and there are risks to a recovery in Chinese platinum demand. We expect market surpluses to drive down the platinum price from its multi-year highs in 2004 (average of $844/oz) to an average of $725/oz in 2005 and $600/oz in 2006.

Palladium remains in stubborn oversupply and is threatened by large speculative long positions and other stocks. If producers of palladium do not take steps to keep metal from the market while actively developing new applications, the price of palladium will inevitably fall. We forecast that palladium will average $190/oz in 2005 - and that it has the potential to fall further.

We have turned less negative on silver due to a slowdown in Chinese official sector sales. The other factor that has led us to become more positive about silver is a reexamination of the relationship between silver, gold and copper. Whilst the silver / copper relationship is undoubtedly more important than it was, the silver / gold relationship remains as, or more, important. Since we remain negative on the US dollar and positive towards gold, it is hard to be too negative on silver. In light of these factors we have upgraded our 2005 forecast for silver to 5.80/oz, from $5.35 previously.

-END-

Silver??? How bearish can you get. The UBS silver outlook doesn’t square with any of the fundamental input coming my way.

The gold shares continue to meander. The XAU lost .49 to 93.53, while the HUI gave up .50 to 204.30. The HUI bounced off its downtrend line and never seriously challenged taking it out..left for another day.

HUI
http://bigcharts.marketwatch.c…&o_symb=hui&freq=1&time=8

The cash gold market is on fire. The specs ought to be about done selling. The Cafe Sentiment Indicator is a 2 or 3. Hits have just dropped 30 to 40% off of recent highs. From emails I am receiving, a number of gold share investors who have been around for many years are exiting their positions and saying "good-bye." At the same time, the reasons to be long gold have never been better.

This is a time to be aggressively gold/silver bullish, not to put a tail between your legs and look the other way for greener pastures.

GATA BE IN IT TO WIN IT!

MIDAS

From a fellow Cafe member:
Here are some additional thoughts, by J. Kent Willis, strengthening my earlier comments, that eventually the government will seize Silver.

".... Playing devil's advocate, if we were truly going to run out of it in less than 30 years, and it was truly indispensable, you can imagine the outcry from the silver users and price managers about the rising price. They exist to guarantee a steady, cheap supply for the military-industry complex that produces finished products sold at high, whatever-the-market-will-bear prices. Can you imagine the behind the scenes arm-twisting and public propaganda spewed forth that "evil hoarders" are responsible for the shortage and they don't want to surrender what little is left for the "good" of the larger population?

Silver hoarders are a vanishingly small minority; as such, it is easy to vilify them in the eyes of the masses and blame them, however unfairly, for any even tangentially associated economic problems. This is the oldest trick in the book used by governments to effectively confiscate private property when it suits their objectives. They won't blowtorch Grandma's forks and spoons, but those nice little rounds and bars with no "sentimental" or "artistic" value will be the first into the crucible.

Silver is still listed as a strategic material in every US Government database. It is therefore critical, by simple extension, to national security. This was an inevitable conclusion long before Patriot Act I or II was even conceived. This is likely the trump card if (when) price capping through unlimited short selling proves ineffective. Since silver is so very useful in security, aerospace, defense and industrial applications to the United States, it is therefore, by the same analysis, strategically important to any nation whose interests are inimical to those of the United States. With such a premise firmly established, the US government can effectively argue, at the urging of the silver managers, that it is important to prevent our enemies from acquiring it in order to limit its use in enemy or "terrorist" applications. The US can't control the world "free market" in silver outside her territories, but she can surely at least attempt to control the purchase, sale, distribution, trading and "hoarding" of it by very, very few of her voting citizens. As they might say for all things that threaten the power or privilege of governments: "outlaw silver, and only outlaws will have silver".

Of course many of the same arguments can be made for gold confiscation, but the national security issue in a paper based fiat economy is more dubious. Not impossible, just a more ridiculous stretch of logic. Everyone knows that most of the gold ever discovered is still above ground, looking as fresh as the day it was refined, while silver is largely "consumed" through use. However, the main reason that silver speculators trumpet her virtues as a superior investment is a double-edged sword; her absolute criticality and impending "disappearance" almost guarantee adverse government action. Personally, I tend to view silver and gold bullion both as insurance and not an investment.

They may turn out to be superior vehicles for growing wealth. If they hold their value in a world awash in worthless fiat paper, that is enough for me. If I die, having never needed to convert precious metal back into fiat paper, I can pass it on to my children for the same "just in case" purpose. They will have it if they need it. Any net capital appreciation that multiplies effective purchasing power when the item is sold and "converted" back into the currency of the realm to purchase either necessities or luxuries of this world is icing on the cake.

It is without debate that silver can go from $7 dollars an ounce more easily or quickly than gold can catapult from $450 to $900 dollars per ounce, hence the reason for the investor leverage in terms of percentage price rise. This necessarily implies much greater volatility in silver which will make it more difficult to trade. I consider silver much more risky and therefore more speculative than gold. I do like it. I have traded it also since the late 70's. It scares me much more than gold. My approach is to take profit more regularly with price advances and sell on strength. I don't care if the price rise is fundamental or speculative frenzy driven; an exit point is an exit point, even if the cycle for capital deployment is repeated again and again.

I do very much like the prospects for silver because of all the uncertainty about continued cartel success at price suppression, coupled with her unknown but likely rapidly dwindling reserves. All of these things together guarantee a more volatile ride with silver and it will NOT be easy to play with it. So, like gold, just purchase coins or bullion and hold on for the ride. Get out from time to time and take money off the table. Keep the demons of greed fully leashed and heeled. Silver and gold have disappointed investors seeking quick home runs for millennia. They crucified legions in 1979-1981. However, over those same millennia, those seeking insurance and capital preservation have never been disappointed. Regardless of myriad adverse government actions over the course of history, the fact that precious metals are superior to every other item known to man as a store of value is mute testimony to their supremacy. Government action against them is PROOF of their superiority. Governments never try to stamp out or confiscate that which is worthless. Gold was, is, and shall be "King". Silver will be esteemed when all is said and done as "Queen" or "Prince".

With all of the manipulation past and present, silver even seems sometimes like "Court Jester". Good heavens, where in the world does that put paper currency? Trust God For Everything. Trust Governments For Nothing. Trust Gold Somewhere In Between."

J. Kent Willis
email: jkentw2@aol.com
January 19, 2005
AGAPI Financial

January 20 – Gold $421.70 down 70 cents – Silver $6.52 down 6 cents

Inauguration Push Fails / Gold Gathering Steam For Big Run Higher

That man is truly good who knows his own dark places...Beowulf

GO GATA!!!

Several Café members have noted the only plausible explanation for the financial market action of the last two days was a concerted effort by the PPT to steady up the markets for the Presidential Inauguration. Can’t have the stock market and dollar going into the tank, with gold on a surge - during the ceremonies which are to reflect on how all is so well in America. Can’t have the markets reflect the US is going broke to bring democracy to people in Iraq who have killed nearly 1400 of our brave soldiers and wounded another 10,000.

This sort of market intervention can work in the short-term as traders jump on the bandwagon to facilitate the market management. They do so to make money on the immediate trend in front of them, to fatten their pocketbooks. However, the big picture outlook remains very stock market and dollar bearish – and very gold bullish. The PPT can huff and puff all they want. The gold door is not going to be blown down. They had better save that huffing and puffing to keep the stock door from becoming unhinged (their efforts the past two days came up way short).

Following E-Bay’s trouncing last night, resulting from missing their expected quarterly profit number and lowering guidance, the US market came in lower with the DOG quickly dropping 20+ points. Wall Street bulls and the PPT kept defending DOW 10,500 and took the DOW up on the day at one point. However, there is too much bearish pressure building out there and the effort to take the DOW back up above 10,500 again even failed late in the day.

The stock market is playing out as it should. What lies ahead for the US economic scene based on big picture market factors is rather bleak. The good news, which puffed up our economy and stock markets the past couple of years, is behind us. The Administration and Fed are spent. It has been a good dance; now it is time to pay the fiddler.

The fact that the US stock market is failing so badly during January is significant this year because it signifies that Wall Street bulls have put their faith in what lies ahead in the wrong planet-type thinking. US fiscal measures necessary to get our financial house in order are critical to keep foreign creditors from fleeing in droves and sending our interest rates through the roof. The ramifications of those measures are negative for the US economy.

Technically the US market is in the process of completing a significant top. Should the DOW take out 10,400, it could get very ugly:

http://futures.tradingcharts.com/chart/DW/X

The dollar, on the other hand, continues to rally. It closed at 83.93, up .29. The euro fell .33 to 129.70, while the yen caved back to 103.33.

The reasons bandied about for the dollar strength is talk of foreign corporation profit/dollar repatriation to take advantage of the lower tax rate now available and that the euro is really no good. Another is talk of higher US interest rates due to action taken by a vigilant Fed. Meanwhile, none of the higher rate talk impresses the bond traders. March closed at 114 6/32 and is not that far from making new highs. This does not square with the dollar action (and predictions of much higher US interest rates) at all.

Something is not right. Whatever market manipulations are going on behind the scenes, we are seeing signs they are beginning to lose their effect – the most notable being the steady stock market plunge. What it is leading to is a scenario predicted for some time by a number of those who live on our planet:

*The stock market is in big trouble and is likely to go much lower. The fiscal/Iraq problems are too much to deal with now without some drastic reduction in living standards by the average American.

*The dollar could do anything short-term, but as Warren Buffet just stated again, it has nowhere to go but down. The US must deal with the Iraq/fiscal mess and the solutions won’t be pretty.

*Bonds could do anything. Foreigners could easily begin to dump, sending rates much higher. Yet, the economy could sink enough to keep rates low like they are now. Hard to say.

Naturally, this commentary leads me to gold which is going to be the go-to investment in 2005. As it is now, demand is surging in all parts of the word. Except in the West, thanks to the efforts of the heinous Gold Cartel whose intention to dampen any sort of gold investment enthusiasm has worked perfectly to-date. However, as the US stock market sinks and the real estate bubble bursts (for reasons oft-discussed in The Café), Western investors are going to take a much harder look at gold – for other reasons than the dollar weakening.

The bums have pounded Gold for 7 weeks now. While all rallying efforts have failed, it seems to want to hold around $420. Still think we have bottomed.

Can’t recall ever seeing this before. The physical market was strong enough this morning to take gold up to $422.90, 50 cents higher on the day. Yet, the most The Gold Cartel would let gold rise in the US was up 10 cents, or 40 cents BELOW where the cash market was trading in London. That is how bad they wanted to cap gold during the Inauguration festivities.

Of minor interest here is the different basis Kitco uses for the spot price versus thebulliondesk.com and another site I use. Kitco has been running 50 cents under both for some time now. Not sure why and if it has anything do to with a stronger physical market in Europe. In the end, it doesn’t matter.

The euro gold price began to break out today, climbing above 326 at one point, before settling back to 325.43.

The gold open interest rose 423 contracts to 276,043.

Silver continues to confound. The most successful trader on the floor over the past few years is very bullish. Our STALKER sources in London tell us word is out that some known big players plan to make a play for silver at the end of the second week of February. Got me as to the why of the timing. Meanwhile, it dorks around.

The silver open interest went up 511 contracts to 99,473.

The John Brimelow Report

Gold is rallying in Euros; Two important AS ideas

Thursday, January 20, 2005

Indian ex-duty premiums: AM $8.39, PM $8.29, with world gold at $422.70 and $421.55. Very ample for legal imports.

PM silver in India, by which time world silver was down to $6.53, had an ex-duty premium of 46c. Premiums in the upper 40s in the first week of this year triggered the air freighting of metal to India, a very rare event. Silver’s downside would seem to be limited.

Reuters comments from the Far East today diverged unusually widely from the subsequent market tone

"SINGAPORE, Jan 20 (Reuters) -Investor buying at lower levels helped gold defy a firming dollar on Thursday and could boost its chances of breaking free from the current $421 to $424 an ounce range, dealers said.

"I think there are physical buyers getting in at these levels...just under $423," said one dealer in Singapore.."

TOKYO, Jan 20 (Reuters) –"… prices were supported by bargain-hunting… "We saw a lot of buying when gold fell to near 1,380 yen so we are not too worried about seeing it fall sharply from the present level," said Hiroyuki Kikukawa, associate director at Nihon Unicom Corp.'s research section."

TOCOM is fact only traded the equivalent of 13,924 Comex lots (-5%). The active contract closed down 2 yen, but world gold went out 40c above NY. Open interest rose 768 Comex equivalent lots. Mitsubishi implies that the public increased their long by 2.1 tonnes. Quite possibly the key element in Japan at present is quiet buying of physical at 6-month low yen prices. (NY yesterday traded 46,054 lots. Open interest rose 414 lots.)

Yesterday, elements in NY tried to utilize a rally in the Euro to boost gold: running it up $2 in the first 30 minutes, $3.60 above the previous NY close. Whatever they encountered there completely demoralized them, and Refco Research too, which sold its’ 421 Feb gold long of the past week – bought with a $432 objective - on today’s opening. It appears the 100-day moving average has a formidable guardian in NY.

Nevertheless, gold in Euro terms has being resolutely edging up all week, in sharp contrast to the soggy performance since late November. Of course the primary physical buyer currencies are either fixed to the dollar – the Gulf – or independently firm (India) so were the Euro to soften this action would be to be expected, contrary perhaps to conventional commentary.

JB

CARTEL CAPITULATION WATCH

The DOW had no oomph at all, closing at 10,471, down 68. The DOG was hammered again, dropping 28 to 2046. A break below 2,000 would be psychologically devastating to Wall Street bulls. Efforts to keep the US stock market buoyant going into and out of Inauguration time failed.

US economic news:

10:00 Dec. LEI reported 0.2% vs. consensus 0.2%
Prior reading revised to 0.3% from 0.2%.
* * * * *

NEW YORK, Jan. 20 /PRNewswire/ -- The Conference Board reports today that the Composite Index of Leading Economic Indicators increased 0.2% in December, following a 0.3% increase in November and a 0.3% decline in October.
Says Conference Board Economist Ken Goldstein: "After five straight declines, the leading economic indicators turned around in November and December. The coincident index remained positive. So too has the so-called shadow index -- the ratio of coincident to lagging indicators. This reflects a positive shift in the balance of forces -- a more positive picture in the last two months than in the prior five months. Although retail sales were modest in December, investment in equipment and homebuilding remain strong segments of the economy."…

-END-

12:00 Philadelphia Fed Index reported 13.2 vs. consensus 25
Prior reading revised to 25.4 from 29.6.
* * * * *

12:01 Follow-up: Philadelphia Fed prices paid index 66.1 vs. 53.8
New orders index 9.8 vs. 20.9
* * * * *

Fed will move aggressively to guard inflation-Poole

TUPELO, Miss, Jan 20 (Reuters) - U.S. price pressures appear well controlled, but the Federal Reserve will move aggressively to protect low inflation if necessary, Fed Bank of St. Louis President William Poole said on Thursday.

Poole noted that core inflation had come in slightly below what the central bank's policy-setting Federal Open Market Committee (FOMC) had expected for the second half of 2004.

"Recent data, then, suggest that inflation is well controlled. The FOMC has emphasized that it is prepared, if necessary, to move more aggressively to protect the relatively low rates of core inflation that now exist," Poole said in a prepared speech to a Mississippi forecasting conference.

Poole said forecasts for economic growth -- as measured by gross domestic product (GDP) -- of 4 percent to 4.5 percent in 2005 were "pretty reasonable", but he warned high productivity and increased globalization may limit job creation.

"It seems likely that labor market conditions will continue to improve and that monthly employment gains will probably exceed by a comfortable margin the roughly 125,000 per month necessary to keep the unemployment rate constant," he said.

"It's an open question, though, whether we will return to the days when monthly employment gains of 200,000 per month or more were the norm, as they were during the last two business cycle expansions."

Job gains averaged about 186,000 a month in 2004, for total employment growth of 2.2 million, according to Labor Department figures.

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But, there is no inflation:

Food Prices in New York in Biggest Leap in 14 Years

January 20, 2005
By JENNIFER STEINHAUER

Higher food prices and rising fuel costs drove the largest year-to-year increase in the Consumer Price Index for the New York region since 1990.

http://www.nytimes.com/2005/01…&ei=1&en=2f56ac617f9e5958

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More goodies from:

The King Report
M. Ramsey King Securities, Inc.
Thursday Jan. 20, 2005 – Issue 3080 "Independent View of the News"

Wednesday was an ugly day for bulls – with technicals turning even uglier.

Bubblevision ‘experts’ were in a state of disbelief yesterday. They bemoaned that the stock market fell when the economic data was so wonderful.

Au contraire bubble boys & girls! The big drop in jobless claims has little to do with job growth. Data shows no wage or job growth. The drop in jobless is due to the exhaustion of unemployment benefits.

All day pundits extolled the wonderful housing start figures. Unfortunately, housing starts continue to soar (highest level in 7 years) even though mortgage applications and sales are faltering. Last year, we repeatedly warned that housing starts some months were about twice the pace of sales. Elementary math mandates a supply problem; and that’s what has unfolded. We also noted regularly that builders will continue to build as long as Easy Al remained promiscuous, no matter the inventory.

The Newtonian concept of inertia applies here. A trend will resist change until a requisite amount of force is imparted on it. Easy Al is now trying to gently tap the brakes on his speeding roadster.

Yesterday, Wall Street shills and fin media dolts heralded the absence of inflation as indicated in the CPI. As we have stated, 2004 was a seminal year in the perception of economic data. CPI and PPI were so askew with reality that an increasing number of people realized just how bogus government economic statistics have become. When we were screaming about Slick’s BLS venality, few people cared or heeded our warnings. We served as background amusement to soaring stock valuations. But after the bubble burst, the religion of bogus government economic accounting gained traction.

Ironically, if-when housing prices fall, the CPI will NOT reflect the decline even thought its depressing effect will impact the economy. About 1/3 of CPI is housing prices as reflected by imputed rent, not actual housing prices. Rents are not likely to fall as fast or as far as housing prices in a recession….

Warren Buffett, on CNBC yesterday, said that over the past year his businesses have seen "huge increases in raw material prices’; and he expects further inflation and a lower dollar.

These are the exact problems that vex Easy Al. Over a year ago, we warned that inflation and the lower dollar would force Easy Al to raise rates even though the US would be ebbing. It is now occurring.

If you’re looking for the real ‘new paradigm’, it’s exogenous forces to the US influencing commodity prices on a global basis. This means the US economy can contract while commodity prices increase. This cannot occur in many economic models. But then again, reality is a beach.

Fannie Mae cut its dividend in half in order to comply with new imposed capital requirements. The only thing keeping FNM and other financial stocks from tanking is investors are conditioned to believe that rallying bonds are good for financial stocks. They will soon learn that the forces(s) that can cause a bond rally can also cause economic & financial problems that become manifest in decimated financial assets.

Though most economists, traders and pundits are and have been negative on the bonds, Mr. Bond keeps rallying. Asian central bank buying, principally by the BoJ, kept bonds buoyant in 2004. In November, selling from perceived tax-haven countries, ergo hedge funds, hit a record $22.99B of US Treasuries according to recently released US Treasury data. The same month, Asian countries ex-Japan bought a record $15.78B of US Treasuries.

The past few months, softening global economic data impelled some investors into bonds. The January stock market swoon is also forcing bond buying. If the stock decline gathers momentum in the coming months, the bond market is likely to be the receptacle of the selling proceeds. This will further vex bond bears. But, after investors and traders flee to bonds solely because they’re not stocks, the conditions will be ripe for Mr. Bond to tumble. But by then most bond bears will be exhausted…

So far, 2005 is proceeding as we guessed with one major exception. There is little or no cash flowing into mutual funds to start the year. For the past decade or so, people and PMs learned to commit pension cash as quickly as possible in the new year to capture as much of the expected big Q1 rally as possible.

We figured that January would be bleak, at least in the first three weeks. But, other Januarys that started on the downside tended to have a good rally the final week when PMs committed the new cash. This might not occur because of the absence of new funds with cash levels already at record lows.

Furthermore, February could be a very telling and disturbing month. Forget about meager cash flowing into funds in February. The horror would be if redemptions occur. For the past two years, consumers either received or expected to receive tax refunds. With Bush safely elected and no refunds or rebates due, consumers might have to tap savings to pay for Christmas and other bills….

-END-