Beiträge von Schwabenpfeil

CARTEL CAPITULATION WATCH

Only another Hail Mary rally saved the DOW from a big hit. Down 70 with an hour to go, it shot up 50 points before settling back to 10,647, down 31. The DOG was firmer most of the day and closed up 1 at 2047.
The dollar rose .08 to 83.45, along with the British pound, up .0066 to 1.8827, and the yen which rose to 103.14. The euro fell .35 to 130.43.

08:30 Dec. Durable Goods Orders reported 0.6% vs. consensus 0.7%; ex-Transportation 2.1% vs. consensus 1.3%
Prior Durable Goods revised to 1.8% from 1.4%; prior ex-Trans. revised to (0.9%) from (1.4%).
* * * * *

08:30 Jobless claims reported 325K vs. consensus 332K
Prior week revised to 318K from 319K.
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10:00 Dec. Help Wanted Index reported 38 vs. consensus 37
Prior reading 36.
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The John Brimelow Report

Something happening in China?
Thursday, January 27, 2005

Indian ex-duty premiums: AM $8.45, PM $7.89, with world gold at $426.20 and $426.05. Very ample for legal imports.

TOCOM opened to find world gold $5 higher than their previous close: and it went higher. Based in the open interest there was liquidation: open interest fell 2,009 Comex contracts, with the active contact closing up 16 yen and world gold going out $1.35 above the NY close. Volume was up 5.6% to the equivalent of 19,257 Comex lots. But the Mitsubishi data implies the public added 1.5 tonnes to their long.

NY yesterday traded 146,501 contracts: 90,000 net of switches – huge. Open interest slumped 10,909 lots (33.9 tonnes!) to 262,521 – indicating that the Tuesday break was most likely raw short selling. Considering the resolution with which the 100 day moving average has subsequently been defended, such a foray must have seemed a reasonable risk/reward move.

Early this morning several news stories on Reuters trumpeted a reduction in duty on Chinese gold jewelry imports. This turns out to be a cut from 40.3% to 38.3%, considering VAT!!!! This would appear to be another stroke in the Chinese cosmetic process to disguise their refusal to get off their undervaluation gravy train.

However, Shanghai Gold Exchange premiums suddenly slumped today to a 50c – 58c discount – a $4 fall. Since mid November it has resolutely held a premium. This could be an aberration. It could also be part of the Chinese Government’s PR campaign – I believe the Chinese authorities closely manage the Shanghai price – although very abstruse. Or it could reflect the opinion of sophisticated locals that the Chinese will actually revalue the yuan a little – in which case it is a very important piece of information.

JB

*The US is propping up the dollar.
*The yuan will be the currency of choice vis-à-vis the euro and our dollar.
*A US economic crisis will kick in some time this year.
*Silver remains very tight in Europe. There a good many $100,000 to $500,000 buyers out there and a number of even larger buyers prowling around. It seems most are waiting for either a breakdown in the price to buy, or getting ready to pay up should silver take off. The majority are looking for much higher silver prices and are feeling out how they should make their entry.
*The paper silver traders are still ruling the day. At some point in the future, "they" will get "theirs."

The silver open interest fell 1287 contracts to 98,178.

The Café Sentiment number remains very low, around a 3. Hits are off 40% from a year ago. New trial memberships are no better than they were 6 years ago, yet gold has rallied $150. Only The Gold Cartel, with their executed plan to keep gold excitement to a minimum (it has worked), is keeping the price of gold from rising hundreds of dollars per ounce. Only a matter of time before the bad guys are blown out of the water.

Denial around the world re what is coming is quickly disappearing. Spin will no longer work in the weeks to come. The Gold Cartel knows this and is doing all they can to suppress the truth barometer, that being the gold price. Soon they are going to be overpowered. Thus, I believe NOW IS THE TIME TO LOAD THE BOAT. The downside for gold is limited and the upside from here on it is unlimited. $420 should hold and the upside is HUNDREDS of dollars per ounce higher from here.

On that score, I have included in the Appendix an extremely troubling interview in Democracy Now by Seymour Hersh. It is a bit rambling, yet hits on many of the points brought to your attention by MIDAS over the past couple of years. What is key is the chickens have finally come home to roost.

From my standpoint as chairman of GATA this piece really hits home as Mr. Hersh speaks of a "CULT" running the US and how even our generals are afraid of this group. This is exactly what has happened to the gold market. The Gold Cartel is running the gold market and the industry is so afraid of them, they refuse to deal with what the truth is and what they are doing.

What is intriguing is how Hersh ends his interview by focusing on the ramifications of what has occurred and what is to come for our financial markets:

"Another salvation may be the economy. It's going to go very bad, folks. You know, if you have not sold your stocks and bought property in Italy, you better do it quick. And the third thing is Europe -- Europe is not going to tolerate us much longer. The rage there is enormous. I'm talking about our old-fashioned allies. We could see something there, collective action against us……….We're going to see enormous panic here. But he could get through that. That will be another year, and the damage he's going to do between then and now is enormous. We're going to have some very bad months ahead."

Right or wrong, this has been the MIDAS lament for months. "Buying property in Italy" might just as well be a euphemism for buying gold. What is critical to keep in mind is what Hersh talks about is likely to hit like a tsunami. If you are not on the high ground and long gold when it hits, entry is likely to be very expensive. If you are not out of the general stock market, it will cost a bundle.

No equivocation on my part. That is the way I see it.

The gold open interest dropped an enormous 10,909 contracts to 262,521, which means we are now 113,000 contracts off the high set on the run-up to $456. The floor says the drop of the OI was option related.

Swirl of near-term events may hit dollar hard

By Kevin Plumberg

NEW YORK, Jan 27 (Reuters) - The dollar could get battered next week after riding on a collision course with high-risk events, including Iraqi elections and U.S. President George W. Bush's State of the Union speech, analysts said.

After the White House said Tuesday it expects a record U.S. budget deficit this year of $427 billion and as violence in Iraq intensified before the weekend's election, traders said sentiment has already grown more bearish on the dollar.

Analysts said the most important events next week will be a meeting of finance ministers from the Group of Seven richest countries, President Bush's speech and the Iraqi vote.

"We think the dollar is going to trade pretty badly through all of this," said Daniel Katzive, currency strategist with UBS in Stamford, Connecticut……

Kathy Lien, chief strategist with Forex Capital Markets, a New York broker, anticipates the market will zero in on myriad reasons to sell dollars and buy euros following the meeting of the G7: rising oil prices, central banks' reserve shifts out of dollars into euros, incremental U.S. interest rate hikes by the Federal Reserve and a higher U.S. budget deficit.

Since last month Bush and Treasury Secretary John Snow have been emphasizing the importance of cutting the budget gap and have tied the health of the dollar to shrinking the deficit.

In a television interview this month, Snow said "We want to do things to sustain the strength of the dollar, among them is going to Congress to work on the deficit, to bring (it) down."

But the White House, having forecast shortly before the G7 meeting a record budget shortfall this year, has effectively set the dollar up to fall, argued David Gilmore, senior analyst with Foreign Exchange Analytics based in Essex, Connecticut.

"By making credible deficit reduction the metric for valuing the dollar, G7 has exposed the underbelly of the currency and invited new selling," said Gilmore.
(Additional reporting by John Parry)

-END-

At the same time, the comments coming out of the major conference in Davos re the dollar are both ghastly and predictable. Our foreign creditors have demanded the US take action on our fiscal front for them to keep taking down our debt. The recently submitted US budget revealed the US intends to do nothing of the sort. The continuing commentary from responsible dignitaries around the world is, "this is not good." AND, this is what we are hearing for public consumption. Have to wonder what they are really saying in private?

Back to the ranch. Even with all of this early price orchestration, strong demand for physical gold took the AM Fix up to $426.30. Then, per their standard drill, The Gold Cartel went into action taking gold right back down to $423.70 on the Comex. Even when the dollar weakened during the day, gold failed to budge. The Gold Cartel was all over the price (confirmed by a disinterested bullion dealer). That was the case until late in the Comex trading session when it became apparent the cabal raid had failed. Gold slowly crept up and closed on the high of the afternoon with the locals scurrying to cover their day trading shorts.

In my MIDAS yesterday, I had gold ready to challenge key resistance at $430. More often than not, gold has gone the other way in the very short-term whenever I have laid out such a scenario. The reason is simple. The Gold Cartel knows it is so and therefore goes into pre-emptive mode to dissuade buyers from entering the long side. The other reason for taking gold down is to take it away from a trigger point which would bring in buyers, such as breaking through a major downtrend line.

That said, it seems to me we are near a seminal period when it comes to gold and the US stock market. Iraq and US fiscal problems are about to overwhelm The Gold Cartel’s holding down the gold price and other micro market factors keeping our market from tanking. There are just too many stories like this one emanating from influential centers and people:

DAVOS-Turkey's Erdogan says Iraq vote undemocratic

DAVOS, Switzerland, Jan 27 (Reuters) - Turkish Prime Minister Tayyip Erdogan said on Thursday that this weekend's Iraqi election would not be fully democratic and would not stem violence or help stabilise the country.

"It would not be possible to characterise this election as a fully democratic election," Erdogan told reporters at the annual meeting of the World Economic Forum, noting that one major ethnic group, Sunni Arabs, had decided not to participate.

"This is the signal of some more negative developments in the future of Iraq," he said. He predicted the vote would not diminish widespread violence. Turkey neighbours Iraq.

-END-

January 27 – Gold $426.10 down 80 cents – Silver $6.79 up 2 cents

The Ramifications Of The Gold Cartel And "The Cult" / Load The Boat

"As riches increase and accumulate in few hands, as luxury prevails in society, virtue will be in a greater degree considered as only a graceful appendage of wealth, and the tendency of things will be to depart from the republican standard. ... It is a common misfortunate that awaits our State constitution, as well as all others." --Alexander Hamilton

The gold market has become more sickeningly rigged lately than ever. It is easy to make this observation because The Gold Cartel has been at it so long their routines have become that much more obvious to anyone with half a brain.

Yesterday and today is a perfect example. On Wednesday gold shot up early and basically was capped for the rest of the trading session, a maneuver we have seen so often over the years. This price-capping is accompanied by a gradual sell-off of the senior gold shares, or a lackluster performance of those shares all day long, like we saw yesterday. Then, gold is taken down immediately in the Access trading session and hit further when Asia begins to trade. Last night gold went down 60 cents in that Access session and then down $1.40 later on. During this time, the dollar had barely budged.

Meanwhile, the two major factors which will affect the markets in the months to come worsened for the US – those being the outlook for the dollar and the horror show in Iraq. Iraq is obvious despite the spin coming out of Washington re the elections:

This Business Day article reveals how the cabal’s gold price manipulation is hurting South African gold producers so badly, and is also holding down employment in that country. The artificially low gold price is preventing them from expanding, and is limiting badly needed earnings for expansion:

1/26 No new mines while rand is so strong: Gold Fields

--------------------------------------------------------------------------------

Gold Fields CE Ian Cockerill says South African gold producers are struggling to benefit from record gold prices because the rand's rally against the dollar is wiping out earnings needed to invest in new mines.

The value of the rand against the dollar has more than doubled in the past three years, raising costs for Gold Fields, AngloGold Ashanti, and Harmony, SA's biggest gold miners.

The companies pay most costs at local mines in rands and get dollars for the metal, whose price jumped 8,1% to an average $435/oz in the latest quarter, a 16-year high.

"The challenge for all of us is not only to make profit at an operating level, but to make enough to reinvest," Cockerill said last week. Gold output in SA, the world's largest producer, has plunged about 60% since 1971 to 376 tons in 2003, the Chamber of Mines said.

Costs are rising as companies dig deeper for gold and unions push for higher wages, which make up about half of mining costs.

The gold industry accounts for 13% of SA's export earnings and employs 195 000 people, government statistics show.

Mineworkers' pay rose 7% in July after a 10% increase in 2003, exceeding SA's inflation rate of 4,4% a year.

Mining gold in SA cost $349/oz in the third quarter, 40% more than the global average, says Bruce Alway, an analyst at GFMS in London.

Gold Fields may report next week that earnings before items and goodwill have risen to R157,5m in the three months through December, from R102m the previous quarter, according to a survey of four analysts.

AngloGold may report on Thursday this week that profit has increased to R309,4m from R274m, while Harmony, early next month, may report a loss of 83c a share, its sixth consecutive loss on that basis.

The rand price of gold has declined about 25% in the past three years. The rand gained 5,1% in the most recent quarter.

"The situation is a lot worse than is immediately apparent," Neal Froneman, CE of Afrikander Lease, said last month.

The uranium explorer closed its only operating gold mine a year ago after the rising rand made the site unprofitable.

"Repercussions will come in 5-10 years, when it will be difficult to justify mine expansions that should have taken place now," he said.

The FTSE/JSE Securities Exchange SA Africa gold index, which tracks gold companies traded in SA, slumped 26% in the three months until December 31, the ninth-worst performance among indices tracked.

Harmony's shares were the worst-performing during that period, losing 42%.

Harmony is pursuing a hostile bid for Gold Fields.

"This industry has taken a huge knock," DRDGOLD CE Ian Murray, said last month.

"If the rand stays strong for another two years, there will be massive job cuts."

DRDGOLD fired 7000 employees last year, a third of its workforce.

Job losses in SA's gold industry might reach 20000 this year, Harmony CE Bernard Swanepoel said in September last year.
Business Day

The gold shares continue to perform in lackluster fashion. Gold went up today as much as it went down yesterday. Yet, the shares recovered less than one third of yesterday’s losses. The XAU went up .74 to 92.50 and the HUI gained 2.01 to 203.10.

Still believe there is a good shot gold takes out key resistance at $430 by week’s end and the HUI breaks through its resistance at 210.

GATA BE IN IT TO WIN IT!

MIDAS

Time will tell how Vancouver was for GATA, however, the initial feedback was overwhelmingly positive about our GOLD RUSH 21 conference in The Yukon’s Dawson City. As mentioned in our releases, it is time to take GATA to a different level and we are using this event to make that effort. If it works as we expect, we will attract mining executives and gold money managers from all over the world to participate in what could be a historic gathering. Certainly it is time for the gold industry to address the real issues affecting participants and to stop this Mickey Mouse dance around what is really going on. GATA expects to attract some of the best from all over in a think tank sort of environment with some new agendas and objectives to surface from the meetings.

Chris Powell and I had a great time in Vancouver and met up with many friends. On Sunday we had lunch with Alan Marter, Golden Star Resources Treasurer. GSS is solidly back on the upside, although you would never know it by the share action. Monday we had lunch with Gary Medford, a Director of International PBX Ventures. GATA very much appreciates their support. PBX has outstanding gold/silver properties in Chile and a small outstanding float on their stock. PBX at 61 cents Cdn has doubled in price over the last 7 weeks. Nice move when most gold stocks have been blah.

Joe Martin, the conference promoter, put on a terrific benefit show for the Canadian Alpine Olympic team on Saturday night. Tremendous performers and music. Sitting at the GATA Table was James Turk, Frank Holmes of Global Investors, Kathleen and Ed Steer, Jay Taylor, Charles Pace and Kate Bower of Dallas, Jeff Dahl (Samex CEO), and Chris and I.

On Monday evening John Johnston, Jeff Dahl, Chris and I went over to a Yukon function to meet some of their Ministers. From there we went on to dinner to brainstorm the best ways to make our conference work. JP Shumacher of the Top Gold Fund in Switzerland was there along with my friends John Anderson of Key Gold and Nick Ferris of J-Pacific Gold, Ed and Kathleen Steer and Lori Bonvicini who came up from Washington to assist Kathleen at GATA’s booth.

Lori is an honest and very able stockbroker and co-owner of her own firm. She has access to every market in the world including, of course, Canada and with no restrictions on buying the mining penny stocks on an unsolicited basis. She is registered for now in Washington, Oregon, California, Colorado and Texas, and it doesn't take much to get registered in other states. Her toll free number is 800-988-2113.

We thank both Lori and Kathleen for their superb effort in Vancouver.

JUST IN – more from Davos:

http://biz.yahoo.com/ap/050126/world_forum_china_5.html

Associated Press
Economist: China Loses Faith in Dollar
Wednesday January 26, 4:37 pm ET
By Edith M. Lederer, Associated Press Writer

China Has Lost Faith in Stability of U.S. Dollar, Top Chinese Economist Says at World Forum

DAVOS, Switzerland (AP) -- China has lost faith in the stability of the U.S. dollar and its first priority is to broaden the exchange rate for its currency from the dollar to a more flexible basket of currencies, a top Chinese economist said Wednesday at the World Economic Forum.

At a standing-room only session focusing on the world's fastest-growing economy, Fan Gang, director of the National Economic Research Institute at the China Reform Foundation, said the issue for China isn't whether to devalue the yuan but "to limit it from the U.S. dollar."

But he stressed that the Chinese government is under no pressure to revalue its currency.

China's exchange rate policies restrict the value of the yuan to a narrow band around 8.28 yuan, pegged to $1. Critics argue that the yuan is undervalued, making China's exports cheaper overseas and giving its manufacturers an unfair advantage. Beijing has been under pressure from its trading partners, especially the United States, to relax controls on its currency.

"The U.S. dollar is no longer -- in our opinion is no longer -- (seen) as a stable currency, and is devaluating all the time, and that's putting troubles all the time," Fan said, speaking in English.

"So the real issue is how to change the regime from a U.S. dollar pegging ... to a more manageable ... reference ... say Euros, yen, dollars -- those kind of more diversified systems," he said.

"If you do this, in the beginning you have some kind of initial shock," Fan said. "You have to deal with some devaluation pressures."..

-END-

DAVOS-World economy seen threatened by U.S. deficits

By Stella Dawson

DAVOS, Switzerland, Jan 26 (Reuters) - Massive U.S. deficits pose a major risk to the world economy, which is enjoying its best peformance in decades, and correcting them will prove tricky, top economists and business leaders said on Wednesday.

As the World Economic Forum kicked off in the Swiss mountain resort of Davos, there was a sense of wary optimism about a global economy that has absorbed higher oil prices and a weaker U.S. dollar without major hiccups in growth or inflation….

Laura Tyson, dean of London Business School and former top economist to the Clinton administration, said the U.S. administration has developed no credible programme to stimulate domestic savings and bring down its deficits.

Stephen Roach, chief economist at Morgan Stanley USA, said: "It would take an unacceptably huge degree of dollar depreciation to achieve (a correction)". And that, he added, could cause the U.S. and even global economies to crash.

"It's very risky," said Mexican Economy Minister Fernando Canales of a U.S. dollar crash. "It's not a scenario we would like to have."

MENU OF ACTIONS

Group of Seven policymakers have laid out a list of reforms for world economies -- Europe must boost its productivity, loosen government regulations and revive consumer and business demand; markets must be opened to free trade; and the U.S. raise its savings rate to pay for its deficits.

All are difficult, but the last may prove the trickiest and most treacherous act to pull off.

The Federal Reserve must proceed with credit tightening to raise U.S. rates that are "unconscionably low" because they have inflated real estate prices and encouraged U.S. consumers to borrow huge amounts against homes, Morgan Stanley's Roach said.

"They have turned their homes into massive ATM machines, sucking out dollars to buy DVD players made in China."

The Fed has pushed up the official interest rate by 1.25 percentage points to 2.25 percent in the past seven months and says rate hikes may well accelerate. But the hikes have really just brought real U.S. rates, adjusted for inflation, to zero.

"I am increasingly concerned that the overly leveraged, savings-short, asset-dependent American consumer is the weak link in the chain as the Fed raises rates," said Roach.

Moreover, higher U.S. rates could disrupt bond markets where yield spreads between safe government issues and riskier emerging nation and corporate debt are historically tight, Frenkel and Roach both said.

Analysts agreed Fed tightening was a key part of solving the U.S. addiction to foreign borrowing, especially if over-reliance on too sharp and too-fast currency moves are to be avoided.

"Currency restructuring will be needed in a year or two to rebalance the global economy," said Takatoshi Ito, formerly Japan's vice minister of international finance and now a university professor.

Already the dollar has dropped nearly 20 percent on a trade weighted basis (.DXY) in the past two years while Europe and the U.S. are pressuring China to float its currency -- a call that is heightening ahead of the Group of Seven meetings next week.

But Ito said not to expect China to float its currency this year.

Not until the pressure of currency speculation comes off China's central banks will they consider revaluing, said Victor Chu, chairm of First Eastern Investment Corp. in Hong Kong.

-END-

My friend Marshall Auerback in London:

Jan 25, 2005
Giant in decline
By Marshall Auerback

In his 1849 novel Les Guepes, Alphonse Karr penned the classic line: "The more things change, the more they stay the same." In the case of the United States in 2005, however, the opposite might be true: The more things stay the same, the more they are likely to change ... for the worse. In that regard, compiling a list of potential threats to the US this year has a strangely deja-vu-all-over-again feeling. After all, such a list would represent nothing more than a longstanding catalogue of economic policymaking run amok. Virtually the same list could have been drawn up in 2004, or 2003, or previous years.

Such threats would include: a persistent and increasing resort to debt-financed growth and a concomitant, growing imbalance in the trade deficit, leading the US ever further into financial dependency and so leaving it dangerously indebted to rival nations, which could (at least theoretically) pull the plug at any time. This, in turn, is occurring against the backdrop of an increasingly problematic, Vietnam-style quagmire in Iraq, against imperial overstretch, and against a related ongoing crisis in energy prices, itself spurring an ever more frantic competition for energy security, which will surely intensify existing global and regional rivalries.

Just as a haystack soaked in kerosene will appear relatively benign until somebody strikes a match, so too, although America's long-standing economic problems have not yet led to financial Armageddon, this in no way invalidates the threat ultimately posed. For economy watchers in 2005, the key, of course, is to imagine which event (or combination of them) might represent the match that could set this "haystack" alight - if there is indeed one "event" which has the capability of precipitating the bursting of a historically unprecedented credit bubble….

http://www.atimes.com/atimes/Global_Economy/GA25Dj01.html

-END-

Rhody on the lease rates:

Good morning Bill:

I include the lease rate charts from yesterday. As you can see, gold lease rates are rising into backwardation, all the way out to the 3 month term. In fact, all terms are rising, with the bulk of leasing occurring in the near terms.

http://www.kitco.com/market/lfrate.html

This implies leasing to manipulate the spot price, not industrial consumption.

I had a look at the leasing patterns for gold back 6 or 7 years, and the pattern is that gold lease rates spike up PRIOR to rallies in the spot price. This implies a pro-active attempt to lease down gold into a new bottom. In other words, gold may be declining, and leased gold in used to pile on the trend in an attempt to completely break down the price. Once gold breaks out of the down pressure, leasing subsides instantly.

Silver is different. Surges in the lease rates only occur when silver is rising and peak at the same time as silver spot prices, and then subside gradually afterwards. In other words, leasing in silver is re-active. Leased metal is used to cap a rally in silver that is already at hand. The implications are obvious. There is plenty of gold out there available for leasing and it is being used to aggressively manage the spot price, to accentuate bear trends and to manage chart patterns into bearish TA goals. Silver, on the other hand is so tight, lease ammunition must be husbanded to cap only the rallies.

Lease rates are becoming more volatile. For example, silver rates on Monday collapsed down to .12% in the one month terms, and yesterday rose back up to .30% This is an oscillation of over 50% and it happened across all terms.

Lease rate behavior is signaling stress in financials, as both metals are being attacked. Gold is being repeatedly hammered to suppress it to the $421 level (the old $35 level in 1960 dollars) while silver is lease capped every time it attempts to break $6.80/oz. Rhody

Chuck checks in last evening:

Although I am a mite disappointed in the gold shares, but I believe that we are ready for a big move up here. The most obvious take is that the stock market is ready for some heavy selling here. Today, in spite of the attempt to rally, to me, was very ugly. You had only a few more stocks up than down. The Nasdaq continues to perform poorly. The bottom fishers were still trying to buy a rally rather than be concerned, and the leading spec stocks are really breaking down here. I am going to attach a few of then that Russell mentioned and you'll know what I mean. It's possible that a sharp drop in stocks may hold down the listed golds until a near-term bottom is reached, but I wouldn't bet on it. Chuck

http://bigcharts.marketwatch.c…b=GOOG&sid=1795093&time=8

http://bigcharts.marketwatch.c…sp?symb=HUI&time=8&freq=1

Ebay is particularly scary. I consider this stock the heart of America right now. http://bigcharts.marketwatch.c…y&freq=1&time=8&x=33&y=18

-END-

What’s going on with GLD? Their supposed gold ownership has gone from 109.14 tonnes on 1/5/2005 to 153.03 as of last night. It was 91.75 tonnes on 12/27/2004.

Fifty tonnes of new buying and yet the gold price did nothing?? Something is not right here. All this buying is coming in while specs are selling for the most part. After gold takes off again (with the specs going long in a major way), we will have to see what happens with this gold. Should it disappear in the early part of a major price break like it did in December, the jig will be up. In that case there will be no doubt in my mind this GLD is a trading vehicle for The Gold Cartel to assist in managing their gold price retreat scheme.

Times are changing:

TOKYO, Jan 26 (Reuters) - Japan's trade with China and Hong Kong exceeded its trade with the United States -- its biggest trading partner for decades -- for the first time in 2004, reflecting China's growing clout in the global economy.

The share of China plus Hong Kong in Japan's overall trade stood at 20.1 percent, while that with the United States stood at 18.6 percent, Japanese government data showed on Wednesday.

"It reflects lower customs duties due to China's entry into the WTO (World Trade Organisation), and more importantly the shift of Japanese firms moving production to China," said Osamu Tanaka, an economist at Morgan Stanley.

The share of trade with China without Hong Kong stood at 16.5 percent in 2004, up from 15.5 percent in 2003.

China's rapid economic growth -- 9.5 percent in 2004 -- has created huge demand for imported goods, which has fueled the strong export growth at Japanese companies that has sustained Japan's recovery.

-END-

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%.
* * * * *

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
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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.
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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