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

From Richard Russell this evening:

STOCKS -- My Most Active Stocks Index was down 5 to 395, and this Index is breaking down.

The five most active stocks on the NYSE today were -- LU down .06, PFE down .19, NT down .05, GE up .13, and MOT down.36. And Delta Air down 11.8% to 4.41.

VIX creeping up now -- up .29 to 14.17. The first inkling of concern among investors.

McClellan Oscillator was down 27 to minus 138 -- market staying oversold.

CONCLUSION -- I like this market action less and less. From its December 28 high of 10854.54, the Dow has now lost 486 points, and I don't hear any alarm bells ringing. For that matter, I don't sense any great concern. "Aw, it's just a correction; the market just got a bit overbought."

But I most definitely do not like this market action. I've seen markets like this dribble away and when investors finally become concerned the market finally falls apart (I believe they call that type of action "a crash").

My advice -- Be mostly in cash and golds, and for gold, mostly the actual metal. Hold stocks (such as utilities) that pay good dividends, but have stop losses under all your stocks. There appears to be a secret frenzy to buy income, as seen in the new highs in the long bond.

Frankly, it would not bother me to have almost all my liquid assets in cash and actual gold.

THERE'S SOMETHING VERY WEIRD ABOUT THIS MARKET. IT'S POSITIVELY CREEPY THE WAY THEY DIDDLE AROUND WITH IT ALL DAY -- AND THEN UNLOAD STOCKS AT THE CLOSE.

And every night, almost without fail, the S&P is higher. Who's trying to keep this market afloat? And why? And who's kidding who?

As I write this, half an hour after the close, the S&P is up 70 points. "Gosh, Mr. S&P, I feel so much better when I see that you're higher! Guess I'll hold my stocks for a little while longer."

And so we say good bye to Morbid Monday. Maybe Tuesday will look better.

-END-

Samex’s Los Zorros is heating up!

EXPLORATION DRILLING UPDATE – EXPLORATION AREA II - LOS ZORROS PROPERTY, CHILE

Follow the link for the full text; http://www.samex.com/news/aa-news-2005/NR1-January21-05.html

***.

The gold shares followed the general market lower with the XAU dropping .78 to 94.28. The HUI lost 2.02 to 207.88.

Short-term the gold/silver shares could do anything. However, what great buys out there. The risk/reward ratio is superb.

GATA BE IN IT TO WIN IT!

MIDAS

January 25 - Gold $421.90 down $4.70 - Silver $6.79 down 16 cents

A Disgusting Day

The really tough thing about humility is you can't brag about it... Gene Brown

GO GATA!!!!

After a day like today, it becomes so apparent why what GATA is doing is so important. As January fades into the history books, the PPT comes to the rescue to salvage what they can during the last week of the month. Yes, the stock market was due for a bounce. However, to see it soar on news the budget deficit is worsening, even as Treasury Secretary Snow continues to pontificate how the US is serious about reducing it, is a bit hard to take. Especially, since The Gold Cartel seemed determined to clobber gold.

What is particularly galling was to see gold trashed after the gold shares were hit hard yesterday for no apparent reason. We had many conversations in Vancouver the past several days on this sort of thing. The Gold Cartel plays the gold market like a fiddle. They know where they are going to take the market and when, cleaning up in the process. No wonder Goldman Sachs reports such wonderful profits. Not that hard to do when you know what kind of cards will be played and what sort of hand you are going to deal others in the game. Over the years the gold share action has telegraphed the action the next day in the bullion market time and time again.

Spent the last few days on our GOLD RUSH 21 conference, thus am still out of the loop as far as my normal gold due diligence routine. Out of here in an hour to head back to Dallas.

The AM Fix was $426.20. As happens so often, the damage to the gold price kicked in during the Comex trading hours.

The dollar was last at a tad over 84. Makes no sense for it to rally on this budget news.

Oil is over $49 and headed for $50. Who knows, maybe $60?

The John Brimelow Report

Blocked! A rescue from China?

Tuesday, January 25, 2005

Indian ex-duty premiums: AM $6.65, PM $$7.84, with world gold at $427.30 and $426.05. Adequate and ample for legal imports. The rupee was soft today.

TOCOM continued non-committal, and was clearly not the cause of gold’s slight firming in early Asian hours. Volume fell 19% to equal 15,705 Comex lots, the active contract closed down 1 yen, and world gold went out down 10c from the end in NY. Open interest inched up (by the equivalent of 323 Comex lots). Mitsubishi data implies that the public added 3.4 tonnes (1,093 Comex lots) to its long. (Gold in NY yesterday traded 81,706 lots -12% more than estimated – or about 48,000 net of switches. Open interest declined a modest 2,764 lots.)

Two ECB captive Central Banks sold 61Mm euros of gold last week, about 5.9 tonnes. This represents a slight acceleration. Yesterday, of course, the German Finance Minister made a point of not wishing to pressure the Bundesbank on the question of gold sales, but in the prevailing diplomatic/cultural climate, sale of the full WA quota from some source or other is to be expected.

Yesterday, with the startling news that speculators were much shorter than expected, and the physical market was tolerating Friday’s sharp rise in world gold, all the ingredients for a short squeeze were present. It did not happen, in Scotia Mocatta’s words:

“Dealers were happy to sell into the rally keeping the price from taking off to the upside.”

Effectively, a successful defense of the 100 day Feb gold MA was mounted. This resulted in the curious outcome, that, as Standard London put it,

“Gold had its narrowest trading range of the year to date with just 80 cents between the best bid of $427.80 and lowest offer of $427.00”

Very odd, given the news mix.

Today, China’s refusal to get off the Yuan undervaluation gravy train has triggered a $US/Financial Asset euphoria, not irrationally in view of the clear corollary benefit to the Bond market. Interestingly, this was presaged not only by a series of articles from the servants and groupies of benefiting financial institutions – HSBC, the “Economist” Bloomberg’s Caroline Baum, the Gartman letter – but also by the Shanghai Gold Exchange. There, gold traded at a discount to world gold from August to November, but then, with world gold moving to a 16 year high, started trading at a premium, which it retains. Clearly the local gold market knew that no local-gold price damaging revaluation would occur.

How severe the distortion caused by Washington’s connivance at this arrangement is appears from a remark in a column today by the FT’s Lex;

“China's reserves increased by 50 per cent in 2004 to reach $610bn and Beijing overtook Japan as last year's biggest buyer [of $US –JB]. This reserve accumulation, the vast bulk of which is held in dollars, equated to almost a third of the US current account deficit.”

When China fixed against the dollar, in 1993, it had reserves of some $50 billion.

This rate of change, and aggregate magnitude, means China’s apologists are essentially arguing that a Dow Jones constituent earning 200% on its equity is running a normal business.

Comforting to gold’s friends is that distortions of this type invariably end in shattering financial disruptions and confidence loss. My CBSMarketWatch discussion of the China problem is in the Appendix.

JB

CARTEL CAPITULATION WATCH

US economic news:

09:08 CBO sees f05 budget gap at $368B vs. prior forecast of $348B -- Reuters
* * * *

10:00 Dec. Existing Home Sales reported 6.69M vs. consensus 6.8M
Prior reading revised to 6.92M from 6.94M.
* * * * *

10:00 Jan. Consumer Confidence reported 103.4vs. consensus 101
Prior reading revised to 102.7 from 102.3.
* * * * *

WASHINGTON, Jan 25 (Reuters) - Factory activity in the U.S. Central Atlantic region edged higher in January as new orders saw a healthy gain, a survey showed on Tuesday.

The Richmond Federal Reserve Bank said its composite manufacturing index rose to 2 in January from 1 in December. This new index draws from the shipments, new orders and employment indices long published by the regional Fed bank.

The Richmond Fed said its shipment index came in at -7 for January after a flat reading in December, but its reading on its employment index gained to 4 from December's 2 and new orders rose to 7 from zero. It was the fastest pace of new orders growth since last September.

In addition, the survey found the backlog of orders at factories continued to shrink while the workweek lengthened, and the amount of manufacturing capacity being used increased for the first time in months….

-END-

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%.
* * * * *