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

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April 21 - Gold $390.80 down $6.60 - Silver $6.14 down 76 cents

Bad Day At Black Rock

Zitat

Within each of us is a hidden store of energy. Energy we can release to compete in the marathon of life. Within each of us is a hidden store of courage. Courage to give us the strength to face any challenge. Within each of us is a hidden store of determination. Determination to keep us in the race when all seems lost
...Roger Dawson (The 13 Secrets of Power Performance)

GO GATA!!!!!

Sometimes I wish I paid more heed to what I am hearing from my sources. Our STALKER source informed us two weeks ago that The Gold Cartel was planning a major assault on gold and silver, and that’s just what has happened. Clearly, the planted newspaper articles and European central bank talk of selling gold was all part of an orchestrated plan to calm gold and silver down. It has worked thus far.

Gold was battered early, tried to rally by clawing its way back to $395, but the rally failed and it ended the day ten cents above its 200-day moving average of $390.70.

What has transpired over the past two weeks to give gold and silver such ulcers?

The reasons to own gold actually improved over the past couple of weeks, not deteriorated. However, as we have seen over the past years, the greater the reasons for the gold price to go higher, the greater the effort by the cabal to knock it down. Once again, The Gold Cartel has been true to form. They won this battle. The most powerful and richest people in the world have made their point, for the moment. In no way were they going to allow free market forces to defeat their collective wisdom and might.

The question which I cannot answer is whether this is an attempt to smash gold and silver so The Gold Cartel can cover part of their short positions, or do they intend to continue their scheme until it blows up? The same crowd doesn’t seem to have any sort of realistic strategy to exit Iraq, nor is there any end in sight to growing US deficits. Why should their gold scheme be any different? The answer lies in the amount of physical gold they have left to play their games. If GATA is correct about the size of the gold loans, they know their end game is in sight, like it or not! To some degree this has to have them troubled.

The gold open interest dropped 5026 contracts to 255,395 and is now down about 50,000 off its highs.

Silver has been a nightmare as it left its 5th gap to the upside (four of them HUGE) and has fallen far further than I ever thought it would. The big shorts and cabal members who have manipulated silver for so many years have cleaned up again by adding to their positions up to $8.46. What we have now is margin call selling and sheer panic liquidation that continues to pick up steam. Ironically, silver’s 200-day moving average is at $5.81, right above the breakaway gap it left at $5.80.

I know the silver demand input which was brought to your attention the past three months was right on, so what went wrong SO FAR? Don’t know. Like in gold, we are dealing with the most powerful people in the world. Who knows what they did to come up with enough silver to crush the price and take the pressure off the short side positions. Did they even come up with the silver, or did they just gamble they would win their Comex derivatives short play?

The real question now is where will the price of silver be in a month? If silver is not knocking on its recent highs by early summer, then the market is nowhere near as bullish as I think it is. However, if after this washout, silver is soaring again, then we will know this was a brutal technical raid designed to wipe out the specs.

Some factors to consider about what is going on out there relating to precious metals:

*Grudgingly the Bush Administration and the Fed are being forced to reveal prices in the US are taking off in many areas, thus the .5% CPI number. The delayed PPI comes out tomorrow now that the hedonic players have had time to make their adjustments.

*The dollar has moved somewhat higher in anticipation of higher US rates. The long rates have moved up, but not the key US Fed Funds rate. Meanwhile, other factors affecting the dollar continue to deteriorate. The US trade, budget and current account deficits continue to balloon. How can this be dollar friendly in the intermediate term?

*The geopolitical scene in Iraq and the Mid East is a mess. Iraq appears to be headed into complete anarchy. The US is going to have to send many more troops to have any chance of calming down the chaos. This will further exacperate US financial matters and cannot be good for the dollar either.

Now, there is talk of a draft to fight terrorism as a result of the US’s misguided effort to bring democracy to Iraq. What kind of democracy? The Shi'-ites are the majority. Will they be allowed to rule IF there are free elections? If not, what kind of democracy is that should they win free elections? What a horror show this is for the US, one which we will have to deal with in the months to come.

*Greenpsan speaks and says deflation is dead and only alludes that interest rates might rise. Should that have surprised one person in the investment world with what costs are doing in the US? Meanwhile, the Fed has actually done nothing. Today, Greenspan backed off even further from any kind of interest hike pitch, yet hedge funds and others began dumping commodities with a vengeance.

Platinum closed down $32 to $896.
Palladium closed down $20 to 304.
May Copper closed at $1.224 down 8.3 cents.
May Soybeans fell to $9.35 per bushel, down 17 ¾ cents.

The CRB was clobbered to 269.29, down 6.09.

The dollar closed at 91.42, up .67 and the euro lost .63 to 118.26. The bullish consensus on the euro has fallen all the way to 19, which is awfully low, especially considering the horrendous dollar fundamentals. The Canadian dollar bullish consensus of 17 is even worse.

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The John Brimelow Report

ACCESSing a selling climax?

Wednesday, April 21, 2004

Indian ex-duty premiums: AM $10.46, PM $13.14, with world gold at $390.40 and $389.90. Far above legal import point. An Indian correspondent informs me that some credit limits in the Indian bullion importing trade have maxed out, a measure of the steepness of acceleration in the pace of business. Holding gold below $400 is going to require a great deal of physical.

TOCOM on opening at 8PM NY time encountered world gold around $393, $4.60 below the NY close, and $6 below the previous Japanese close. Although this must have been an unpleasant development for leveraged futures players and has to have triggered liquidation, there were buyers around. In the end the active contract closed down 11 yen, virtually where it opened, and open interest slipped only 468 Comex lots, to equal 116,983 Comex. Volume surged 220% to the equivalent of 56,323 Comex lots, and world gold went out at $392.75. (NY yesterday traded 50,354 contracts; open interest fell 5,026 to 255,395.)

During the last hour of trading yesterday – long after the Comex close - gold shares staged one of their most dramatic declines in recent memory. Not coincidently, heavy selling via the ACCESS system then sent gold down very steeply, such that, as noted above, prices were far below the NY close by the time any market likely to be a net buyer had opened. Heavy activity on ACCESS, particularly selling, is always dubious. Belying its name, only a few large operators can use the system, and for much of the time the only global counterparty is the Pacific Ocean. Australia, the first overseas market to open, is of course a natural seller. Observation suggests that ACCESS is mainly used, when actively traded, to groom or guide the market in favor of pre-established positions. (An additional advantage is that European based commentators, for whom this is the middle of the night, frequently assume the prices they see in their morning are Asian, rather than US- motivated.) Most likely this was the case on Tuesday.

If the objective was create downward momentum, it failed. Gold has repeatedly bounced off $390, and looks inclined to trade above the ACCESS close. Considering the huge premiums being paid in the largest buying market, this is not a surprise.

Of course, there is a reasonable case to be made that commodities in general are seriously overbought, especially if a slow-down in China becomes pronounced. (There has been no evidence of heavy Chinese involvement in gold.) But gold tested its 200 – day moving average today, while most commodities are still way above. The huge selling which blocked the attempt to break into new high territory at the start of April also prevented a seriously over bought situation arising. Furthermore, open interest is down over 50,000 contracts from the recent high, being in fact not far from the 230-240,000 range at which it bottomed in February. These technical data support what studying the physical prices also suggest: gold is not to be lumped in as another commodity.

JB

John later reported today’s gold volume was enormous at 88,000 with 25,000 of that coming in the last half hour.

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CARTEL CAPITULATION WATCH

While gold and silver were pummeled, the US stock market yawned. The DOW gained 3 to 10,317 and the DOG leaped 17 to 1995.

GATA’s Mike Bolser:

Hi Bill:

The Fed took another holiday today April 21st 2004. This non action caused the repo pool to stay unchanged at $31.33 Billion and as expected, it's 30-day ma kept edging up. The DOW at this hour is weak at 10,280 as the Master of the Universe tours Capitol Hill with his newfound higher interest rate speech. The DOW will rebound towards the end of the month.

Interest rates aren't moved up because someone in the economics department at the Fed produces a study saying they ought to go up. The Fed has been FORCED to begin raising interest rates. They have been dragged kicking and screaming to this point. What has such power to move the Fed itself to a policy reversal? You guessed it....GOLD.

The 200-day moving average of the Dollar Index Value of Gold (DIVG) to be specific. In January the drainage of physical metal had become unsustainable and the gold-sellers defensive dam dam burst open and the retreat to a higher DIVG was sounded.

To be sure the day-to-day DIVG is carefully masked by the Fed to give the false impression of randomness and because it is the mixture of both gold and the major currency dollar index (MCDI) it is effectively impossible to predict the exact dollar price of gold beyond a trend direction. So those attempting to pick off a target price and deftly jump in and out are taking unnecessary risks.

We know where the DIVG is going and we know that now is the time to get into physical gold and silver because the 200-day ma of the DIVG is headed up on a straight line. That clean yellow line is doubtless the result of a pre-arranged agreement between central bankers to retreat to higher ground or to stay in a gold retreat mode altogether until interest rates are raised high enough to cause a slackening of physical gold demand.

Given the deteriorating geopolitical environment and feckless US leadership that date may be years away.
Mike

Chuck checks in late this afternoon:

Bill:

Obviously ready for something dramatic. The total lack of concern towards the market is increasingly amazing. It certainly appears that everything is in for a temporary bottom in the golds and even the silver stocks, although I think silver will break $6, perhaps tomorrow. Your sentiment figures on the Euro and Canadian dollar just confirms this. There was a lot of volume in the gold and silver stocks and throw in the near panic liquidation, and we should be ready to bounce well.

You know I am a very deflationary person so this type of action cannot be shocking. But if the commodities are behaving this way, what will happen to the stocks and housing.

It is a good time to take a shot at puts on stocks here.

Chuck

But, there is no inflation, unless you have to feed pets:

CL raises U.S. pet food prices by average of 3-4% -- Reuters
CL cites commodity costs.
(Colgate Palmolive)

From The King Report last evening:

Because there is so much opinion and hype these days, it’s incumbent on investors to arduously seek and carefully scrutinize evidence and facts about what is occurring in the economy.

The WSJ’s Jesse Eisinger in his column yesterday notes GM (1.3m) and Ford inventories at near all-time highs. He also notes what we reported several weeks ago: the average new car buyer rolls over negative equity of over $3k/new car. New buyers are stretching payment terms to 6 years to keep payments level. Now add in the growing inventory of new homes. Housing starts are almost double sales. The refi game is arrested, extended employment benefits are ending and the last dribbles of W’ tax rebates (and accelerated depreciation) will soon end. Automakers bought the hype and conventional wisdom that the first half of 2004 would be an economic boom due to the ‘momentum’ from the end of 2003. However as we wrote, for the first two months of 2004, income growth was at a historically low level (1%), not seen since the energy depression of 1986. When IRS data is available, a clearer picture will emerge.

The 2.2% decline auto production for March is now easy understood.n This recovery has been homes and autos. New home prices have been falling since November on the increasing inventories. PENT UP DEMAND IS NEGLIGIBLE GOING FORWARD.

In the titantic battle between global deflation and central bank/government inflation, it’s highly probable that deflation is re-emerging. A preponderance of investing/trading vehicles are falling and the dollar is up due to deleveraging by the over-leveraged propreitary trading community.

Easy Al says most banks are hedged, neutral on rate risks. That means everything is hedged at a risk-free (T-Bill) rate of return. Ergo they can’t make any money. Easy Al is either trying to downplay the likely carnage of an increase in short rates or he doesn’t understand banking and/or hedging.

Greenspan said labor costs are well-contained, a sign that he isn’t concerned about inflation. The financial media quickly noted that the biggest component of consumer price inflation is wages. This is totally, egregiously WRONG! The primary determinant of consumer price inflation or CPI is RENTS! And that is irrefutable. Rent is the single biggest component of CPI and it has little to do with wages.

-END-

Houston’s Dan Norcini:

Well Bill:

So much for that second home in Canada this month.

I am still amazed at the complete vertical disintegration in silver. Looks like we might need to head down to $6.00 and maybe even lower to $5.85 until this thing exhausts itself. One thing is sure - when the selling is finished, there will not be many fund longs left in there. I bet they got most of them today. Tomorrow will be margin calls for those who did not get out today. No doubt many of the little guys were wiped out today. Very, very tragic.

Gold held up a bit better but still got caught up by the silver downdraft. It was holding its own until then and had come back really nicely even showing signs of a potential bottom near 390. Now, it's anyone's guess. Next stop below $390 is $388 and then $385. I would say that I do not expect that $385 will be tested after seeing the buying emerge at $390, but after today, anything is possible.

Bad day all around for the gang. Unfortunately, it is going to take quite a bit to repair the technical damage that was done today especially in silver. It is considerable. One thing is certain, we are not going to head right back up again. It will take time for the players to get their courage and confidence back after today's shellacking. Buying is going to be tentative at best outside of the physical market. The Specs are reeling right now. A lot of this can be traced to the unwinding of those carry trades that the Fed's easy money policy facilitated. When these big hedge funds unwind positions that have been in place for such a long time, the sheer size and magnitude of their selling or buying is almost mind boggling to comprehend.

We will need to watch the volume and open interest figures to see when the liquidation and selling pressure has abated. Then we will stabilize; not necessarily head back up but at least stop going down.

Talk to you later,

Dan

A point of view to ponder after our licking:

Bill:

Too bad about the last couple of days, but I feel it is small potatoes in the long run. I’m keying in on Chinese gold buying. Do you remember how the Swiss Franc was viewed in the past? It was a hard currency, because it was backed by Gold. The stability of the Swiss Republic when their currency was hard is legendary. Now, think China.

Chinese don’t play for five minutes or five cents, whichever comes first. Their long term view is legendary.

What value is accrued to China if they are "THE" Industrialized nation of the world "AND" have a hard currency?

Having a hard currency in the midst of depreciating fiat currencies assures them that China will take over the de-facto economic leadership of the world. Raw resources tend to find themselves going to countries that have hard currencies instead of currencies backed by promises. Having lived overseas in the 50’s and 60’s, I am well aware that importers never want to receive their payment in soft currencies.

It makes sense therefore (if you are Chinese) and following this scenario to do several things:

Accumulate gold through surrogates.

Buy time by making promises that in the future you will de-peg the Chinese currency from the dollar, which until it is, will:

1. Assure that your exports will be cash positive allowing you to.

2. Accumulate more raw resources, to expand your economic infrastructure and clout, and

3. Gold

Having a hard currency greatly increases domestic stability, which China will need to be a world economic/industrial leader.
For the above reasons, I believe that the present down-trend in gold and shares will be viewed as a non-event in years to come, when we see how the migration of precious metals has gone from the West to the East.

Best,
Will

Down Under thinking:

Hi Bill:

Shocking day but not unexpected. Things are now unravelling as more and more people see that something is awfully wrong. There are those in the Gold community who tonight are congratulating themselves for moving into "cash" before the recent drop in Gold shares.

They are deluding themselves. They may have sold gold/gold shares for fiat Dollars but they are mistaken in now thinking they are SAFE. For US Dollars are no longer "cash". They are interest free loans to the FED and they are depreciating at an ever increasing rate against real goods and services.

What we are now witnessing was long predictable. The inflationary policies of Central Bankers have created VAST and ever INCREASING pools of currency in the control of Hedge Funds, Insurance firms, Pension funds and the Trading Banks. These pools are now moving back to the US Dollar as they flee Gold/Euro/Commodities. We cannot predict how long they will hold the Dollar but we can say with certainty that they will move again. This is guaranteed by negative real interest rates and ever greater fiat currency printing. And when they do move, the next swing in the pendulum will be even greater than this one. So far we have not heard from Wage Earners and Pensioners. But we soon will. They will demand Cost of Living increases. That is next. The demand for currency can only increase.

So the question tonight for those holding so called CASH (which is guaranteed to buy them a lot less next year) is how to TIME their exit. The next move away from the US Dollar will be even more shocking than the current move into it.[/b]

The only SAFE place to be in these uncertain times is GOLD.

The swinging of the pendulum is designed to shake you out of your gold holdings. Remember this: Gold was not chosen to be money by fiat. It has earned its reputation over 5000 years of human experience. And sad to say, it is at times of stress and turmoil that it has proven itself over and over.

Cheers from Auckland, Ed

More from Ed in Kiwi Territory:

Hi Bill:

To follow up my comments of yesterday concerning the movement of Hot Money around the world, I think we should look at the effects this will have on other countries besides the USA. The Euro, Aussie and New Zealand Dollars are all down approx 10% from their highs. These areas have been protected until now from rising energy prices.

Here in New Zealand we have seen our currency rise from 38.5 cents to 70c over the past few years. Imports have grown faster than exports and we now run a large trade deficit. The prices of a lot of goods have dropped significantly yet we still have inflation. Now with a falling currency (62c today) we will see rising inflation caused mainly by rising fuel prices. This will put pressure on the Reserve Bank to raise short term rates. Probably the same in Australia.

In other words the interest rate spread between the USA and other countries may not change. Hot Money will be tempted once again to flee the US Dollar with 1% yields compared to our 5%+ yields here or in Australia. So far Greenspan has only hinted (slightly) that US short term rates are going up and look at JPM-down $6 off its high. I don't think the Fed can raise
rates. The mountain of interest rate related derivatives would collapse.

What has shocked everyone is the size of the drops in gold/silver and the shares. This volatility can go both ways. Watch your $6 rule. We may soon see $10 a day jumps in Gold because there is no doubt Hot Money has been in Gold and the shares. They may want back in FAST. The HUI can go up 10+ points at the open.

Finally to add to my comment yesterday about holding so called US Dollar "cash". As Hot Money moves in and out of Gold the US Dollar price of Gold and Gold shares will change violently. Don't measure the change in your FORTUNE by the US Dollar valuation after each swing but rather by the number of Gold ounces or shares you hold. In the end you don't want to be left holding a bag of fast depreciating US Dollars.

You want Gold.

Cheers again from Auckland.
Ed

Mihaly on the Swiss central bank gold sales:

Hi bill,

Swiss National Bank(SNB) gold sales almost done!

Here some information from our Swiss friends. As we know, the Swiss are selling a big chunk of their reserves (1300 tonnes). At the end of 2003, they sold 956.9 tonnes which would leave them with 343.1 tonnes available for selling in the future(annual report 2003).

However, in a report from the GFMS (http://www.gfms.co.uk/Market%20Commentary/newcbga.pdf), the GFMS reacts to the new Gold Agreement from march 8th 2004 made by the central banks.

They say: "This time round, the Swiss will have a residual 130 tonnes to sell and the United Kingdom is out of the picture altogether (indeed the UK Treasury in not signing up to the second CBGA has explicitly ruled out any further sales)."

According to this statement, the Swiss sold 213.1 tonnes in the first 3 months of 2004. So the Swiss are with 130 tonnes left to sell…almost done! The Swiss have been providing large amounts of physical gold for the market in the last couple of years, in excess of 200 tonnes a year the last 3 years. This extra supply will stop, and stop soon.

Their gold reserves dropped from 2806.1 tonnes in 1997 to 1400.3 tonnes at the end of 2003. With the selling probably completed this year, it would leave the Swiss with 1057.2 tonnes of gold, a huge drop of 1750 tonnes in 8 years. The chances of further selling looks very small.

Another point of interest are the lending operations. The SNB lends gold in 2 forms, secured lending and unsecured lending. The secured lending was introduced in 1999, and increased from 73.3 in 1999 to 104 in 2003. The unsecured lending decreased from its high, from 238.8 tonnes(2000) to 128.9 tonnes in 2003.

2003: The lending was Secured by a deposit of first-class securities with a market value of CHF 1,887.9 million. The value of the gold lend was CHF 1762.5 million.

Concluding, the SNB can lend 328 tonnes(limit from CBGA in 1999), but they decreased its lending instead of keeping it at 328. It decreased from 325.6 tonnes in 2000 to 233 tonnes in 2003.

So they decreased lending & the amount still lend was increasingly backed up by collateral. They certainly reduced their credit risc.[/u]

Looks like the Swiss will be at the sidelines in a few months...

Greetz
Mihaly

Gold supply continues to wane on balance:

Business Day – April 21

[u]AngloGold warns on lower earnings, output

The world's second largest gold miner AngloGold (ANG) warned that its adjusted headline earnings for the three-month period ended 31 March 2004 would be materially below adjusted headline earnings for the three-month period ended 31 December 2003.

The adjusted headline earnings AngloGold was referring to are headline earnings before unrealised non-hedge derivatives and fair value gains or losses on interest rate swaps….

The group also announced that it is anticipated that gold production for the first quarter of 2004 will be 11% below that of the previous quarter, when the company produced 1.389 million ounces of gold.

The lower production is broadly in line with AngloGold's expectations, the company said in a statement.

The decline in quarterly gold production is due to the usual slow start to production during the first quarter of the year, following the Christmas break and the year-end shut down of mining operations in South Africa.

Lower grades at AngloGold's Geita operation in Tanzania, following the unusually high grades reported in the last quarter of 2003, also knocked total output during the quarter.

Another reason for the reduction in AngloGold's output was the fall in production at the Morila gold mine in Mali, as a result of lower ore throughput and grade.

However, ore throughput is expected to increase at Morila in the future once a new plant extension has been commissioned.

Finally, lower production at the Cerro Vanguardia mine in Argentina, due to a planned reduction in ore throughput, also lowered AngloGold's quarterly output….

-END-

Teil I

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Teil II

CARTEL CAPITULATION WATCH

JUST IN LATE from Greg Pickup, says it all:

The Wizard of Fed testified today that the US economy is in a "vigorous expansion" that has not yet produced "broad based" inflation pressure.

How can we be sure? According to Wayne Angel former Fed pooh bah and now resident insider at Bear Sterns it is because the price of gold has been "smashed." Speaking on bubblevision with head cheerleader Kudlow, Angel couldn't quit talking about gold. The price had been smashed he averred, with his trademark smirk, and even more importantly it had declined relative to a basket of other commodities for 15 weeks! This was proof postive that there was no inflation. Angel also stated that since China had pegged the yuan to the dollar it functioned in the same manner as if it was on a gold standard. Obviously obsessed with the success of their bear raid Angel was about to pontificate further on gold when Kudlow broke him off and turned to a shill from Business Week who had another positive point. Employees are willing to be happy with, or at least accept, salary increases of 2-3% becasue "they are happy to have a job." So no wage inflation.

Greg

GATA has linked Wayne Angel to the gold price rigging scheme for many years now.

If I could take back one headline put out over the last 5 ½ years, it would have been yesterday’s about mindless selling. It is always prudent to protect gains or equity. Today’s further sell-off proves that. It was written with my notion that gold, silver and the shares will be MUCH higher in prices in the months to come and, in retrospect, this selling will look to have been panicky.

The commodity gyrations of late remind me of the late 70’s. The action suggests we are going through a transition phase from the more docile moves of recent years into more violent ones. While prices have tanked the past few weeks, the supply/demand situations for many commodities remains very tight. The odds of the CRB going into new high ground is very high. Often before some of the grandest commodity moves of the 70’s, we would get a "killer shake out" to the downside before prices really began to soar. This is what the latest setback feels like.

The gold shares continued their slide with the XAU falling 1.30 to 87.96 and the HUI sinking 2.81 to 194.55.

This has been one ugly week so far – never easy to get used to – but something we have seen before over the last five years. This is the time to think where we are going again and not what we are going through. That sort of thinking has paid off over and over again.

Just as I finished the MIDAS, this email came in from a fellow Cafe member titled, "Grinning." It makes my point better than I did:
I love bargains, and Gold is returning to be one and Silver is at fire-sale prices. I know I should be upset, but I wasn't able to accumulate as much as I wanted on the last pullback.

And another reason is that I remember similar action in gold all the way up. Anyone who has been around LeMetropoleCafe for a while will remember that 285 had a hard time falling. The Bank of England dumped it all around 275. Then it moved up. 305, 318, then 330 looked like ceilings. It hit, then dropped. A few weeks later it mounted another assault. Then 350 was going to hold - oops 380. Then it was never going over 400.

The supply-demand imbalance is still there, the CBs cupboards are bare except for paper that won't be good to even protect shelves, mine supply isn't coming on that fast. Then there's the M3, the Inflation they can't manipulate out even with great efforts, the various derivative pyramids... Still a 10 +++++.

I was worried since things were getting frothy. I didn't like it that the hot money, momentum players, and the hedge funds were getting in BECAUSE they turn on a dime and all exit just as fast - they cause both the spike and the crash. That is what we've been seeing, along with the fact that the relatively small market cap works BOTH ways - when everyone wants to pile in, there are only so many gold shares. But when weak hands pile out all at once it makes things seem worse.

This may continue for a little while (until it gets despondent and everyone who knows nothing hates gold again). But it is still only a bearish correction still in the beginning of the bull market of the century. The gold bought under 300 is still nicely profitable, and I remember the HUI in double digits and the XAU in the tank (when they put Phelps Dodge in the index for a while). Corrections happen. And manipulation can happen, but they can't create gold or silver out of thin air. Supply and Demand always win in the end.

Your archives are there - Anyone worried should go back and read about the similar corrections to gold over the last few years. Just as scary. Just as clearly times to buy with both hands as you were suggesting. And when it reverses, if it is strong and fundamental, it won't give a clear signal. Just a 2% today, 3% tommorow, small pullback, up another 1%, so if you don't watch Gold will be at 450 before anyone notices. All on fundamentals and not hot money so it won't be reversed.

***
GATA BE IN IT TO WIN IT!

MIDAS

Appendix

Another good read from Down Under:

Good Morning Bill,

I suppose I should be depressed about the trashing of gold and silver that continues as I speak. But I'm not, as my latest piece outlines.

Stay strong GATA - our time is at hand!

The trouble with Alan Greenspan is that he's just too old. Oh I don't mean that he's got a touch of Ronnie Reagan disease, at least not in the accepted sense, and I don't doubt for a moment that he's always been a couple of kangaroos short in the top paddock. No, It's just that at his age, he can remember the Great Depression of the 1930's and for the past 4 years the memory of that terrible time has guided his action on monetary policy.

When the market crashed back in 1929 after a decade of easy credit and stock market speculation, the Federal Reserve did a classic 'shutting the door after the horse has bolted' routine by actually tightening monetary policy. That was intended to curb what Big Al would have called 'irrational exuberance', similar to the lunacy of the Nasdaq bubble in the second half of the last decade. The accepted economic wisdom is that because the Fed held rates too high for too long after the crash, America suffered its worst economic slump in history. Well Big Al wasn't going to fall into that trap.

So instead of letting America have the 'recession it had to have' as an erstwhile Australian Prime Minister once pronounced to his eternal chagrin, and allowing the US economy to have a good clean out, Greenspan embarked upon the greatest round of monetary stimulus ever. Rates were cut to below the inflation rate, and trillions and trillions of new dollars were printed - a process that continues to this day. Deflation was the bogeyman (and still is - but not yet) and Al and his buddies at the Fed weren't going to lie down and watch it develop. Fellow Fed Governor Ben Bernanke and his infamous 'printing press' speech were indicative of the prevailing mood - deflation will be stopped at all costs!

Well it looks like they've done just that, because last night Big Al said deflation was no longer a threat - and inflation now is the danger! A bit of classic 1984-speak there if ever I saw one. Of course everbody who has to meet their daily expenses knows that inflation has been around for quite a while, because they've had to dig deep to find the money to pay for everday things like fuel and food (too volatile to be included in the official inflation figures say the bean-counters) health care and schooling, not to mention soaring prices for building materials and just about every other commodity. But so far, the Government has stubbornly refused to acknowledge that the inflation beast is out of its cage. They do admit that commodity prices have risen, they couldn't do otherwise with the stats staring them in the face. But they say inflation is tame because labour costs haven't risen.

That beggars a very big question: if labour costs are under control, and they are because business can't afford to hire new permanent workers let alone give pay hikes to existing ones, then just how are people going to be able to meet the costs of increased mortgage payments and credit card bills? This week's Index of Leading Economic Indicators showed that hours worked had decreased, and so had real wages.Yet Big Al is clearly paving the way for a rate hike, maybe as soon as June.

Last night the greenback soared and the stock and bond markets fell. But hold on a minute - weren't we supposed to expect a fall in the dollar to correct that yawning current account deficit? Has everyone forgotten that markets will punish a currency that continually labours under the twin burdens of 5% plus deficits? While George Bush may be comfortable with the idea that inflation will increase sales tax revenue, and all those new jobs (?) will increase income tax revenue, hopefully reducing the Budget deficit, he has to contend with the burgeoning cost of the occupation in Iraq, an item that still hasn't been included fully in the Budget forecasts.

Last month US business capacity decreased again, so while Greenspan says that pricing power is 'slowly returning' it's hard to see how. And if prices of manafactured goods do rise, who can afford to pay? The average debt on a credit card in America is over $9000! Joe Six-pack can't fall back on refinancing his home any more to buy consumer goods, because bond yields are rising and so will his mortgage repayments.

There's another big question mark here too: if the bond market tanks, and it will, and the stockmarket continues to fall, which it well may, and the housing market stagnates, or worse still collapses, where will all this new money being created find a home? Commodities? Maybe. Gold and silver? Probably, but not just yet while the manic euphoria surrounding the US dollar continues. And what can we expect in the way of interest rates and inflation/deflation for the rest of the year? Who knows, but I return to the words of that Austrian economist Ludwig Von Mises "Credit driven booms always end badly." This has been a credit driven boom unparalled in US economic history. There's every reason to believe that its ultimate demise will

also have no peer.

The Idle Fellow.

PS:- Regular readers of my raves will know that I'm a longtime bull on gold and precious metals. The last 10 days has seen one of the biggest corrections in spot prices of gold and silver for many months. Some of you may feel I've got egg on my face after so much hype. Far from it. For once these falls really do fall into the category of a 'technical correction', because the fundamentals for PM's haven't changed one bit. In fact I'm more bullish on gold and silver than I've ever been, and there has never been a better time to buy. Once the market realises that America's debt isn't going to go away, that it has to be repaid, that Iraq isn't going to finish any time soon, that terrorism still threatens everyone on the planet, that America makes thousands more enemies with every passing day, and that pieces of paper, churned out by the trillion and backed with nothing but a promise of debt are intrinsically worthless, then gold will once again have its day in the sun. And it will gleam and glitter as never before.