[Blockierte Grafik: http://www.goldseek.com/news/LemetropoleCafe/lmpc.jpg]
http://www.lemetropolecafe.com
CARTEL CAPITULATION WATCH
GATA’s Mike Bolser:
Hi Bill:
The Federal Reserve added today, March 25th 2004, $16.5 Billion in temporary repurchase agreements. This action elevated the repo pool to $31.8 Billion and moved the pool's 30-day moving average up nicely into a firm, DOW-supporting pattern. At this hour the DOW tracks up a bit at 10,100.
Zoom in for clarity
Look back at the first week in December 2003 and we will see the repo pool's 30-day ma suddenly drop (red trace). Look also at the DOWs 30-day ma (green trace) and we see just BEFORE the repo pool's ma fall, the DOWs ma moved upward from its long (June 2003) trend line. This is an excellent example of how the repo pool's moving average can view into the Fed's market interventional war room.
[Blockierte Grafik: http://www.lemetropolecafe.com/img2004/repos032504.jpg]
Unlike preemptive selling of gold where the players can move offshore to hide their selling, the controlled size of the repo pool can't be altered or hidden so we have (For the moment) a durable tool to predict not only the DOWs coming direction but also the DEGREE of Fed pressure to support it. We will know when the Fed begins to panic because a sharply rising repo pool will tell us. Meanwhile the DOW will head back up shortly, under the whip of the Fed.
Nothing on silver from the LBMA
A thoughtful GATA stalwart Ed Steer suggested last night that the LBMA may be waiting for options expiry today before releasing what may be dreadful (for them) February silver volume numbers. A spike above 200 million ounces per day in volume (should it be that high) will be the death knell for the gold cartel's metals manipulation scheme as it will most certainly bleed into gold and possibly...oil. China has been on an oil buying tear of late and the public exhaustion of any major commodities market inventory will only spur them on.
Those who cautiously wait for the last bar to be sold simply won't get any.
Mike
Gold demand:
TOKYO, March 25 (Reuters) - Japan's gold imports surged 319 percent in February from a year earlier to 6,086 kg, posting sharp gains for a third consecutive month, preliminary data from the Ministry of Finance showed on Thursday. A ministry official said the reason for the rise was unclear, but it was partly a reflection of import volume being smaller than usual in the comparable month last year. Gold imports have risen more than 200 percent year-on-year since December.
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From a Café member on silver:
Author: Solomon Weaver
Subject: Silver Catalyst facts.
Number: 2302 :: Date/Time: 03-23-2004 :: 20:05
This week, Ted Butler highlighted an interview with the President of a silver processor in New York State called Ames Goldsmith, which claims to process about 50 million ounces of silver per year.
At that site, they indicate that they recover silver from about 2000 tons per year of silver catalyst used in the manufacture of ethylene oxide ..EO.. (mainly a precursor to ethylene glycol used in anti-freeze).
I have done some quick patent hunting and web searching tonight and come up with the expectation that such catalysts will probably have an average of 5% silver content, so Ames might recover about 3 million ounces of silver from this material.
Given that Ames seems to handle silver quantities comprising about 5% of total global silver usage, and probably close to 10% of all industrial usage, it is possible they almost have a monopoly on the recovery of silver from EO catalysts in the USA.
The USA annual production (capacity) of EO is about 9 BILLION pounds and the general market value of EO is about $0.50 per pound. This would imply that the family of EO and EO downstream products add up to about $5 billion per year.
http://www.marketresearch.com/researchindex/835234.html
"World consumption of ethylene oxide is 14 million tonnes (US$11 billion) and is growing over 3% a year. The USA is the largest producer of ethylene oxide, with production of almost 4 million tonnes a year. Asia is the largest consuming region of ethylene oxide, accounting for 37% of world consumption, while demand is growing fastest in Europe, which is experiencing, on average, a 4% growth per year. Germany and the Netherlands are the major exporters."
As a very uneducated ballpark estimate, I might expect that the global EO catalyst (standing in reactors and in recycling) might be in the range of about 15-20 million silver ounces, with the average life of the catalyst being about 2 years. It is also noteworthy that since most of the silver can be recovered, this use of silver should only have a very small NET NEW DEMAND on silver....perhaps about 2 million ounces.
I think this is a very interesting example of how about $10 million of new silver might be consumed each year to support a very solid global EO industry producing about $10 billion worth of revenue.
If silver went to $100, then it might begin to make up about 1% of the costs in global EO.......still far under the other major costs of capital for such huge plants.
On the other hand, it might increase the "capital allocation of silver value in the reactor" to a global value of about $2 billion...now....imagine how painful it would be for companies who have been creative and are "leasing" the silver in their reactors....rather than "owning it".
We all know how much managers of the last couple decades have been forced to "work their capital" and that "leasing" of capital assets has been a good trick to take assets off the book....and goose "ROI". I suspect that there are many uses of silver (chemical catalysis, electrical generation, etc. which have large amounts (several hundred million ounces) of silver essentially in place. As these components wear out, they may often be replaced with components having equal amounts of silver. But, if silver rises in a grand way, the "owners" of these assets will experience a capital value increase concordant with the number of silver ounces in the object....but are obligated to show return on that capital....especially if they are a leasing agency themselves.
By the way.....the names of the companies producing EO look like some of the who's who in the Silver Users Association.
http://www.the-innovation-grou…iles/Ethylene%20Oxide.htm
Ethylene Oxide
PRODUCER CAPACITY*
BASF, Geismar, La. 630 thousands of pounds per annum
Dow, Seadrift, Tex. 930
Dow, Taft, La. 1,460
Dow, Plaquemine, La. 620
Eastman, Longview, Tex. 230
Equistar, Bayport, Tex. 750
Formosa, Point Comfort, Tex. 550
Huntsman, Port Neches, Tex. 1,200
Old World Industries, Clear Lake, Tex. 700
PD Glycol, Beaumont, Tex. 640
Shell, Geismar, La. 1,260
Sunoco, Brandenburg, Ky. 110
Sunoco, Claymont, Del. 110
-END-
Ted Butler’s latest entitled "Testing Your Brain" can be read at:
http://www.investmentrarities.com
-END-
My friend Marshall Auerbach commenting at http://www.PrudentBear.com:
So what has become the safe haven of choice? One week does not a bull market make, but it is noteworthy that during a time when the paper currencies essentially treaded water, spot future Comex Gold has had its best weekly rise for five months, rising from $US 395.60 to $412.70. Although we expect further central bank action to discourage its rise, gold still looks set to challenge its recent peak of $433.
Until recently, the yellow metal was seen as nothing more than a variant of the "anti-dollar" – i.e., its strength was seen as nothing more than a corollary of dollar weakness.
More recently, this has changed. In fact, the persistent strength of commodities, including gold, in the face of recent dollar strength has been one of the unremarked features of the markets in recent weeks. If one looks particularly at the "barbarous relic", it has been strong as the bond market has crashed. It has done well when the bond market has recovered. Recently, it has even been strong whilst the dollar has recovered marginally.
What message is this conveying? The U.S. has a massive net external debt and an unsustainable current account deficit. Why has the dollar not crashed?
The usual answer is that the world’s other major currencies – the euro and yen- have their own very serious drawbacks, to which recent events, such as those in Spain, Kosovo or Taiwan, have drawn greater attention. Many have remarked that, if all of the world’s currencies are unattractive, gold might regain some luster as a reserve currency and a store of value. It helps that nominal interest rates everywhere are negligible. It also helps that, in a world of ubiquitous excessive debt, gold is the one asset that is no one’s liability. Could gold’s recent strength finally be signaling its re-emergence as a viable safe haven of choice? The next few weeks in the markets could be very telling indeed.
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But, there is no inflation, from Sarge:
Also!! I don’t know how much you watch pork bellies or OSB lumber etc., but lumber has been limit up for two days now (at $371 today). But there’s NO inflation.
And bellies!! I made $65,000 on one bellies trade back in 1998. In modern history, I have RARELY seen bellies over 95. They are limit up today at 110!! Sheesh! No inflation coming to your breakfast table huh?? NOT!
–END-
Can’t miss this great read:
Storm Watch Update from Jim Puplava
March 22, 2004
http://www.kitco.com/ind/Puplava/mar242004.html
-END-
For newer Café members it is important to keep in mind the advantage Café members/GATA supporters have over everyone else following the gold and silver markets. We know what was done to the gold and silver prices over the past many years and why. We also know the central banks are out of half of their reported reserves and only have about 16,000 tonnes left. The silver price managers are fast running out of any sort of supply to continue their fraud, which is the main reason silver is finally taking off.
This is why we have cleaned up the past couple of years with our gold/silver and share investments. We understand the big picture and what is going to happen to prices and why. Therefore, we don’t get bumped out of the game on setbacks which are only natural in any bull market. Our focus and vision, supported by over 5 years worth of facts, is an incredible bolster for us. The more you do your homework about what the GATA ARMY has uncovered over the years, the more excited you will be about what is to come.
At Post Time (2 hours left to go for US stock market trading), the gold shares are finally catching a bid and appear to have a small wind at their back. The XAU is up over a point and the HUI is up over 2 1/2 points. MUCH MORE OF THAT TO COME.
GATA BE IN IT TO WIN IT!
MIDAS
Appendix
Businesses Urged to Plan For Higher Interest Rates Fed Bank Chiefs Raise Issue in Speeches
By Nell Henderson
Washington Post Staff Writer
Thursday, March 25, 2004; Page E04
With the U.S. economic recovery gaining steam, businesses should start planning for the day when the Federal Reserve will have to start raising short-term interest rates from their current low levels, Jack Guynn, president of the Federal Reserve Bank of Atlanta, warned yesterday.
Businesses should not assume "in their long-term plans that this extraordinary period will continue indefinitely," Guynn said, according to the text of a speech he delivered in Johnson City, Tenn.
Several Fed officials, including Chairman Alan Greenspan, have noted in recent speeches that they do not plan to leave their target for a key overnight interest rate, the Federal funds rate, at a 46-year low of 1 percent forever. But they also have repeatedly stressed that they can be "patient" in deciding when to start raising rates because inflation is so low, businesses have ample unused production capacity and hiring remains sluggish.
Guynn, however, went further than others have publicly in warning businesses about the potential dangers of low interest rates, which can encourage speculative investments or temporary booms in certain pockets of the economy. Some Fed critics have said rock-bottom rates have already pumped up the prices of houses, stocks, bonds and other assets to possibly unsustainable levels.
Guynn said he had warned his son, who works in residential real estate, "about the seductive lures of such an extraordinary period," particularly that "some part of his business may be vulnerable -- that part induced by temporarily low rates alone."
He compared the Fed's policy of very low rates to "a strong dose of medication" prescribed for a sick economy, but he warned that "as the patient begins to recover, however, there is a need to recalibrate the dosage or to stop prescribing it entirely to avoid potential side effects."
Guynn is a non-voting member of the Fed committee that decides where to set the overnight rate target, which influences many other interest rates throughout the economy. The 12 voting members unanimously decided last week to leave the target at 1 percent to encourage continued growth in household and business spending, and they repeated their promise to be "patient" about deciding when to raise it. But Guynn's remarks hint that some participants in the policymaking debate may be less patient than others.
Michael H. Moskow, president of the Federal Reserve Bank of Chicago, said in a speech Monday that the Fed cannot keep rates so low "indefinitely," but he echoed others in emphasizing that "inflation is still extremely low" because the economy is producing less than it can, as is evident in the weak labor market and excess production capacity.
Guynn's speech was delivered as the Commerce Department reported that new orders for manufactured durable goods rose 2.5 percent in February after falling 2.7 percent in January. The February gain reflected a surge in the volatile transportation equipment category, which includes autos and aircraft. However, after excluding transportation equipment, new orders dropped 0.3 percent.
"Today's durable goods report indicates a tentative softening in the pace of business equipment spending in [the first quarter of this year] following rapid growth in the second half of 2003," Peter E. Kretzmer, senior economist with Bank of America Corp., wrote in a note to clients yesterday.
In his speech, Guynn agreed that the Fed has "good reason" to leave the rate so low "at least for now," adding, "But if my forecast for more robust economic growth materializes, then at some point a Fed funds rate of 1 percent will no longer be the best policy."
He added,
Zitat
"It is indeed a luxury to have an inflation environment in which policymakers can be patient. . . . That said, luxury comes with a price tag, and patience is not unlimited."
-END-
NY Fed Warns of Potential Deficit Fallout
By Pedro Nicolaci da Costa
NEW YORK (Reuters) - A ballooning budget deficit and low
savings rate pose risks to the U.S. economy and the financial
system, New York Federal Reserve President Timothy Geithner
said on Thursday.
Zitat
"The current deterioration in the U.S. fiscal position and
the acute decline in the net national savings rate represent
risks to the financial system and the economy as a whole,"
Geithner told the New York Banker's Association.
Geithner said such looming risks were made all the more
worrying by the size of the U.S. current account deficit and
the unprecedented scale of financing needed to fund it.
The central banker urged the United States to strengthen
risk management in an increasingly complex financial
environment to guard against any eventualities.
He also noted that U.S. inflation was very low and the
outlook was for only very modest prices rises ahead, but
offered little in the way of hints on monetary policy in his
first major speech since becoming NY Fed President.
GREENSPAN ON FARMS
Fed Chairman Alan Greenspan also refrained from using any
language that might suggest the future direction of interest
rates.
In a separate speech on Thursday, Greenspan said open
global markets are needed to ensure that consumers worldwide
enjoy the benefits of rapid gains in agricultural productivity.
Greenspan noted advances in farm productivity had brought
wrenching changes over the years in the U.S. economy, as
workers first migrated to manufacturing and more recently into
service industries.
But he told the conference, sponsored by the Kansas City
Federal Reserve Bank and the Organization for Economic
Cooperation and Development, that such "dislocations" were a
worthwhile price to pay for the increases in living standards
productivity brings.
Financial markets are awaiting speeches from Fed Board
Governor Donald Kohn and St Louis Fed President William Poole
for any clues regarding the timing of an eventual interest rate
hike from the central bank.
On Wednesday, two Federal Reserve officials warned investors that loose monetary policy conditions will not last
forever, particularly in light of robust U.S. economic growth.
Job creation has been the missing component in the U.S.
economic recovery, and until it picks up in breadth and speed,
the Fed has suggested, borrowing costs are likely to remain at
1 percent, their lowest level in 46 years.
"Wir brauchen nur einen Teil dessen, was wir momentan vorhalten", sagte Zimmermann. "Ich würde die Mittel wegen der langfristigen Wirkung aber eher für den Schuldenabau verwenden",hob er hervor. "Man verpulvert nicht Tafelsilber, um einmal Essen zu gehen",meinte der DIW-Präsident und zeigte sich skeptisch über die tatsächliche Verwendung der Mittel im Rahmen des vorgeschlagenen Planes. Invesitionen in die Bildung seien zwar schon Investitionen in die Zukunft, und man könne auch Infrastrukturmaßnahmen als solche ansehen.