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CARTEL CAPITULATION WATCH
GATA's Mike Bolser:
Hi Bill:
The Fed added $4 Billion in TOMOs and delivered $1.299 Billion in permanent open market operations. This action pushed the repo pool up to $39.88 Billion and , more importantly turned the DOW's 30-day ma back upwards--something that I have been predicting. There is no doubt whatsoever that the DOW will now regain its former trend line (depicted by the black line on the repos chart). Recall that that trend line has an upward slope aimed at 11,750 on or about Labor Day 2004.
If the Democrats were miffed at the Saudis claiming to hold oil prices down to get the president re-elected they ought to be really steamed that the Fed seems against them as well. However, sovereign intervention alone may still not be enough to win the day in November if Iraq continues to deteriorate.
At this hour (11AM) the DOW is flat as the effects of the repo action begin to take hold. Remember that permanent open market operations have a much greater weight than TOMOs because these "coupon passes" never have to be repaid to the Fed.
10,600 and 10,700 are in the cards for the DOW within a few weeks.
Gold is also moving up today and based only on the DIVG 200-day ma, gold will move sharply back up to the 430 range within a few weeks.
Mike
Houston’s Dan Norcini:
Hi Bill:
Hope your Calgary conference was a good one and the trip was refreshing.
The gold oi drop is indeed significant Bill. What I have been looking for is to see if the total fund long position is going to drop down near the level we had in early March this year when we last touched down near the 390 region. they got down to 84,000 or so total longs and then we took off. Right now we are sitting at 109,000 but that does not include the additional liquidation we have seen since Tuesday when the commitments data was released. I bet we are closer 101,000 or so. I am of the mind that if we can indeed hold above the $390 area for the next week or so, they will begin to gradually rebuild. Keep in mind that Barrick is doing some covering as is Anglogold and others who have expressly indicated that they are reducing their forward hedges. I cannot think of a better place for those guys to do so. If not here, certainly below $388 if we do go thru that on a closing basis. right now Bill, gold appears to have bottomed once again exactly on its 200DMA. A close over 398 is going to look positive for our gang.
Silver is a tougher call for me. It did get a washout of the funds of nearly 15,000 contracts from the peak fund long position back on March 9. We are now back at total Open Interest levels last seen in early December of last year when silver was trading near 545. The psychological 600 level looks to have held. After all, that is one helluva sell off (850-600 in about two weeks) . One needs to ask the question how much more money would any short in their right mind want to make? That kind of move does not come along all that often. Additionally, any long who has not bailed out of silver is going to need an additional close below 600 to even consider doing so right now. Once we start moving back up in there I would expect the region near 715-725 to give us some resistance since that is the 50% retracement level from the sell off.
Dan
More from Dan on Rising Prices:
As you know, I trade the livestock sector quite heavily and watch cattle, hogs, beef and pork prices very closely. I can tell you that the story from the Washington times below (see Appendix) is absolutely accurate as both beef and pork prices have been very strong this year at the wholesale level.
This is just one more instance of items being excluded when the Feds issue CPI numbers and how worthless that index has become. Strip out food and energy costs and you have stripped away the two biggest areas of domestic expenditures. Food costs are soaring for consumers as both grains and livestock prices are rising in tandem resulting in more of their disposable income going to put groceries on the table. I see nothing but trouble ahead for homeowners and consumers as interest rates rise further denting what is left of their take home wages.
there are also anecdotal stories of homeowners strapped for cash who are having trouble meeting local property taxes as appraisals are coming in at bloated levels due to escalating real estate prices. These inflated appraisal values then serve as new sources of funding for local politicians who cannot control their spending at that level any more than the Feds at the national level. Talk about a windfall profits tax (shades of Jimmy the Peanut Farmer Carter in the 70'). the point is each dollar spent in taxes to government, no matter what the level, is that much less to sustain any vigorous economic expansion. The current situation can only be sustained as the public goes deeper and deeper into debt.
Best regards,
Dan
Gold demand:
Korea Herald
April 25, 2004
Gold imports more than doubled in Q1
Korea's imports of gold more than doubled in the first quarter of the year, as importers and manufacturers took advantage of tax breaks and rising prices of the metal, a trade group said yesterday.
Gold imports reached a record-high $1.57 billion between January and March, a 229.7 percent increase from the same period last year, according to the Korea International Trade Association.
The amount surpasses the previous record of $14.2 billion registered in 1997. Gold became the nation's No. 4 import item following crude oil, semiconductors and natural gas, the trade group said.
The group attributes the increase to a two-year tax exemption on transactions of gold products which have been in effect since July last year. Also, domestic gold prices have risen about 13 percent over the past year.
Meanwhile, Korea's exports of gold products rose about 295 percent to reach $1.47 billion during the same period.
-END-
Bubble news:
Bill,
Talk about a bubble???
We live in the Santa Clarita Valley, NW of Los Angeles by about 35 minutes (let's not talk about if there's traffic).
Interest rates are going up...people seem to be scared they've missed the boat and are buying homes/condo's with reckless abandon.
3 years ago, our condo was worth $85K
One month ago, an identical condo below us sold for $183K
A couple weeks ago another identical condo three doors down, listed for $215K and sold for $220K.
Last weekend, another condo with no view but otherwise identical, listed for $220 and sold for $225K!
We're going to sell ours by owner in the next month or so...I can't even hazard a guess at where they'll be then...
$300K???
Hmmm, hoping an earthquake doesn't come before then. The last one tanked prices in the valley and neighboring communities.
Jon
Mihaly on gold in the Exchange Stabilization Fund:
Hi bill,
In the past we had a debate whether or not the Exchange Stabilization Fund(ESF) was active in the gold market(Reg Howe & Andrew Hepburn.
A bit from Andrew Hepburn's essay:
The U.S. Treasury explicitly denies that the ESF has been used for gold market interventions. On the "Frequently Asked Questions" section of their website, the following claim is made: "The ESF has not been used to manipulate gold prices. In fact, the ESF has not held gold since 1978."
As noted above, the Treasury claims that, "The ESF has not held gold since 1978." This is demonstrably false. The Federal Reserve's Statement of U.S. Reserve Assets for January 2001 contains the following line item: "Gold Stock, including Exchange Stabilization Fund."
Keep in mind that one month earlier, Reg Howe filed suit against (among others) the Secretary of the Treasury. That might explain why the above line item was altered for the February 2001 Statement of U.S. Reserve Assets to read: "Gold Stock."
As is apparent, the Federal Reserve removed the explanation, "including Exchange Stabilization Fund." No reason was provided when the line item was altered. More importantly perhaps, the Fed has stonewalled repeated inquiries asking why this change was made. While Fed officials have responded to letters on the subject, at no point have they explained the rationale behind the removal of the ESF reference.
http://www.gata.org/On%20The%20Record.html
End
So, the Federal Reserve altered the Statement of U.S. Reserve Assets. First the ESF was included, and then removed. My guess is they will have to remove some more, because I found the following on
http://minerals.usgs.gov/miner…odity/gold/goldmcs04.pdf.
Salient Statistics-United States: 2003e
Stocks, yearend, Treasury 38,140
And now watch the footnote:
3 Includes gold in Exchange Stabilization Fund. Stocks were valued at the official price of $42.22 per troy ounce.
So, how long will it be before they are gonna remove it from this site.
This url ( http://minerals.usgs.gov/miner…modity/gold/goldmyb02.pdf ) also has some other piece of information in table 1:
Net deliveries from foreign stocks in Federal Reserve Bank of New York
Combining some information from Fed NY with this data, shows the total amount of gold and withdrawals from the Fed NY.
In 1972 there was an amount of 10.313 tonnes of foreign gold stashed in the faults in NY. There has been an outflow of gold since 1972, and the amounts can be found on this site.
Since 1972 4.323,1 tonnes of gold left the Fed NY, which leave them with 5.990 tonnes.
Remarkable is the fact that the amount shipped from the NY fed in 2002 and 2003 were very small,
39,6 tonnes in 2002 and 59,8 tonnes in 2003. From 1998 till 2001 the total amount was 1.228 tonnes, almost 300 tonnes a year.
The IMF (3,217.0 tonnes) probably stashed its gold at the NY fed, so if we deduct it from 6.000 tonnes, there is still 2.800 tonnes of gold left in the NY Fed from foreign central banks.
So we see the same thing happening all over the place..declining physical gold stocks. and there is gold in the ESF!
Greetz
Mihaly
m.schroth2@chello.nl
Great work, as usual, Mihaly. The Gold Cartel gets caught again!
From one of the true leaders in the gold/silver world to Mike Hoy:
Right on!
From Mexico to New Zealand:
Bill:
This is IMPORTANT. On Wednesday, Goldcorp came out with better than expected earnings but they withheld 50,000 oz from the market. Goldcorp was soon downgraded. See partial list below.
National Bank Had Goldcorp Target At US$15 lowered to $12
UBS Cuts Goldcorp Tgt from US$18 From US$16
CREDIT SUISSE FIRST BOSTON GG from US$13 to $12
Canaccord downgrades Goldcorp from US$16.50 to $15.25
One very perceptive Goldbug wrote this today on the Kitco site.
Wooly (Pop_Eye.....GG Getting Spanked...) ID#102234:
Copyright © 2002 Wooly/Kitco Inc. All rights reserved by the market makers ( Wall St Working Group ) ... for throwing a wrench in their plans....the idea of holding back might catch on.....Sorry lot when they PUMP barricks and dump Goldcorp...check out the PE ratios...what a joke...
Cheers from Auckland, Ed
Is our long awaited gold/interest rate derivatives neutron bomb lurking in the weeds?
Bill,
Anybody who doubts the veracity of the need to rig the gold price as shown last week should look no further than Susan Lee's piece on today's op-ed page of the WSJ "Mortgages and Musical Chairs". This piece should frighten basically anyone living on the planet. I highly recommend reading it in its entirety. It will leave no doubt why JPM and the cabal consider gold a live grenade. It talks about what CSFB calls the "embedded accelerator effect", or when a rate adjustment requires an even larger adjustment in hedge derivative portfolios.
A snippet: "Scary sure, but two other aspects conspire to make the situation positively frightening. Over the past several years coupons in the mortgage market have been concentrated, as owners rushed to refinance at the same time. Instead of a wide array of interest rates, coupons have collapsed to a very narrow range. This concentration increases the amount of hedging necessary for even a small move in rates. Moreover, interest-rate options have become concentrated among a small number of dealers. Five to be exact. And three of those five hold more than two thirds of the options outstanding among the FDIC-insured banks: JPMorgan Chase, Bank of America, and Citigroup. ( Even scarier, JPMorgan alone holds a notional amount of $4.5 trillion- that's 40% of the options held by banks and 27% of the total interest-rate options market.) "
I am convinced TEOTWAWKI will begin with a Fannie/Freddie/JPM meltdown. Gold would go from its suppressed price to practically unobtainable at any price overnight. When I here the NAHB say housing could still do well with up to 10% interest rates I know what a steaming load that is. The Fed is boxed in and knows it. I wonder if the embedded accelerator effect was warming up last week. Usually gold gets a good thrashing just prior to some stunning pro-gold event. Could it be trillions of interest options going sour? I wouldn't be betting against it.
James McShirley
At post time the dollar is drifting of its lows and the US stock market is off somewhat, ignoring some healthy housing numbers. The gold shares, bolstered by the GS upgrade, are modestly higher. Still, there is little enthusiasm for gold stocks, even as many are now at bargain levels.
As oft-mentioned here, it is a rare occasion for gold and silver to run right back up after the technical beatings they just took. Thus, today’s quiet action is very normal. At the same time, the fundamentals could not be better. As has been the case for years, John Brimelow insightful work on the gold demand side continues to be of great value to Café members. It helps to take away the fear that gold will collapse from these levels, which won’t happen when the physical market is on fire.
The gold and silver prices should be on fire by week’s end too.
GATA BE IN IT TO WIN IT!
