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The John Brimelow Report

Was 2004 1986 re gold and gold shares?

Wednesday, January 05, 2005

Indian ex-duty premiums: AM $8.90, PM $8.15, with world gold at $425.95 and $425.60. Ample for legal imports. The Indian euphoria experienced a jolt today, with the Stock Market down 2.9% and the rupee down 0.7%; in this context domestic gold did quite well.

Back for the first full day since December 27, TOCOM traded a heavy 67,121 Comex equivalent. The active contract fell to the lowest since September 17 before rallying to close flat; world gold was 20c below NY at the close. Several commentators remark that these was public bargain hunting – the Reuters Tokyo gold headline speaks of "solid bids" – but in fact open interest dropped sharply, by the equivalent of 5,067 Comex lots, to 106,894 Comex. (NY yesterday traded 60,295 contracts; open interest plunged 8,694 contracts to 302,298.)

The Shanghai Gold Exchange continues to show high premiums to world gold. The ECB reports an E10 Mm gold sale last week – perhaps a tonne. According to Bloomberg, Virtual Metals says the public data indicated the French sold some 50 tonnes of gold in the last quarter of ’04, strongly implying they are the lead seller at present. Maybe this is their contribution to Operation Iraq Freedom.

UBS sensibly remarked

"Gold confirmed its reputation as a leading indicator of broader commodity weakness yesterday… We believe…that much of the hot money has now exited long gold trades and that the metal is poised to rally once the US dollar stabilises… we like to buy dips in gold down to $420/zo and EUR315/oz…. The fall in the gold price in both dollar and non-dollar terms have prompted very strong demand over the past two days with Indian demand especially strong."

While conventional wisdom as for instance expressed by the Gartman Letter is still talking gold down to $400, it is notable that the noted bullion dealer bear quietly raises an interesting qualification:

"last year was only the second in recent history when bullion rose [5.6%] while gold share indices fell [HUI gold bug – 11.4%, XAU -8.7%]…the last time this share fall/bullion rise combination happened [1986], both bullion and gold equities had a roaring year after."

JB

There is considerable technical support for gold between $420 and $425, which should hold. See:

February gold
http://futures.tradingcharts.com/chart/YG/25

Funds sold silver early with Morgan Stanley an aggressive buyer. From what we hear, Morgan is very bullish, yet does not expect silver to rally too quickly because of the technical damage done on the way down. Historically, this is ALWAYS the case. Yet, if the input we have on the Chinese tying up ¾ of the 2005 silver production is correct, there is no way silver is staying at these low prices for very long.

The dollar fell .05 to 82.65, as did the euro, dropping .12 to 136.29. However, the yen rose to 104.09.

*In 1998 and 1999, the commercials did nothing but win. However, in 1997 when gold collapsed, they were slaughtered as the specs were actually very bearish back then and won the day. This was before the rigging of the price became apparent to other commercials, other than the cabal, and to the trading world.

*At the same time there are 13,000+ tonnes of gold loans/swaps still out there, other than those of the hedgers, which have not been called in. Most of those were put on with gold trading around $300, plus or minus. These loans, representing commercial interests, are enormous losers on someone’s books.

*The Black Box large specs have been taken to the cleaners over the years. However, a number of other specs have done quite well by trading from the long side.

*What’s most important is the big spec winnings have not occurred yet. This will happen when The Gold Cartel loses control of their fraudulent scheme and we get our long-awaited Commercial Signal Failure."

A number of commentators continue to point out how right the commercials always are. My take on that:

*If you had the US Government as a backstop partner, you could make money in the short-term just as many of them do.

*Their short-term battle wins do not tell the entire story, as they are losing the war. My guess (sheer speculation) is that the commercials are not that far ahead over the years, especially during this new millennium. They have been short as a group since gold traded below $300. Yet, they have had many short-term wins over the years. My guess (sheer speculation) is that the commercials are not that far ahead over the years, especially during this new millennium. Let’s say they picked up a net $15 profit on this sell-off, as they continued to sell on the way up to $455, starting at the $435 level. Let us then say they have been successful doing this 3 times a year for four years. It adds up to $45 profit for three years x 4 or a total of $180 in profits. Meanwhile, gold has rallied $180 off its bottom.

*One must separate the trading activity of the crooks (Goldman "Hannibal Lecter" Sachs and friends) versus the run of the mill commercials. This is very simplistic commentary on a complicated subject, as the real thugs have cleaned up during this time. Goldman Sachs’ trading positions have made a fortune, for example. The "commercial short" position includes hedgers like Barrick, who have been short all the way up as they hedged heavily with gold below $300 years ago. Subsequently, the Barricks have billions of losses on their books with their shareholders left holding the bag.

January 5 – Gold $426.20 down $1.80 – Silver $6.48 up 7 cents

Silver Firms / Dennis Gartman: A Pompous Buffoon, Gold Cartel Lackey

A government that is big enough to give you all you want is big enough to take it all away....Barry Goldwater (former U.S. Senator from Arizona)

GO GATA!!!!

Right from the get-go, silver and the gold/silver shares showed immediate strength (only to fade as the day wore on, as usual). Gold was weak all night in Asia and into the early trading hours in London. This is completely in line with how gold has traded over the years. Spec liquidation continues, while the trade waits patiently to scoop up cheap gold.

Gold attempted to rally; however, like yesterday, the new shorts drooled whenever the price approached unchanged and they sold. This is also in line with the way gold has traded after major sell-offs.

Yesterday, MIDAS reported Goldman Sachs to be a substantial buyer covering their shorts, while the specs continue to give up the ghost. The release of today’s gold open interest revealed how true this was as it fell 8694 contracts to 302,298, which was in line with our expectations. Since it probably included a good number of new spec shorts, the COT numbers on Friday should reveal dramatic changes.

The gold shares continue to trek towards oblivion. The XAU lost 2.14 to 93.51 and the stinky HUI fell 4.39 to 202.15, closing not far from its lows. The scenario for sharp price rises in both gold and silver is staring us in the face. It appears more and more The Gold Cartel has struck to cover short positions before the "S" hits the fan during the weeks/months ahead.
Keep the Faith.

GATA BE IN IT TO WIN IT

MIDAS

Venezuelan president Hugo Chavez has offered China wide-ranging access to the country's oil reserves.

The offer, made as part of a trade deal between the two countries, will allow China to operate oil fields in Venezuela and invest in new refineries.

Venezuela has also offered to supply 120,000 barrels of fuel oil a month to China.

Venezuela - the world's fifth largest oil exporter - sells about 60% of its output to the United States.

Mr Chavez's administration, which has a strained relationship with the US, is trying to diversify sales to reduce its dependence on its largest export market.

Thirsty for oil

China's quick-growing economy's need for oil has contributed to record-high oil prices this year, along with political unrest in the Middle East and supply bottlenecks. Oil prices are finishing the year roughly 30% higher than they were in January 2004.

In 2004, according to forecasts from the Ministry of Commerce, China's oil imports will be 110m tons, up 21% on the previous year.

China has been a net importer of oil since the mid 1990's with more than a third of the oil and gas it consumes coming from abroad.

A lack of sufficient domestic production and the need to lessen its dependence on imports from the Middle East has meant that China is looking to invest in other potential markets such as Latin America.

Mr Chavez, who is visiting China, said his country would put its many of its oil facilities at the disposal of China.

Chinese firms would be allowed to operate 15 mature oil fields in the east of Venezuela, which could produce more than one billion barrels, he confirmed.

The two countries will also continue a joint venture agreement to produce stocks of the boiler fuel orimulsion.

Mr Chavez has also invited Chinese firms to bid for gas exploration contracts which his government will offer next year in the western Gulf of Venezuela.

The two countries also signed a number of other agreements covering other industries including mining. Story from BBC NEWS:

© BBC MMIV

http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/4123465.stm
-END-

For obvious reasons we will add this E-mail to http://www.sendereberl.com/ac.htm. The only good news is that the NWO appears now to be listening and thus we highlight the importance of the next E-mail entitled New Year's Day 2005: Part II.

The above article was posted December 28, 2004. Two days later, the following was posted on Rense.com (http://www.rense.com/general61/sign.htm
Venezuela And China
Sign Oil Deal
BBC News
12-30-4

It currently imports oil from Oman and Yemen, and China has explored deals with Saudi Arabia. Its imports of natural gas come from the Middle East as well as from Australia, and there is a possibility of China importing Caspian Sea gas through an extensive pipeline that would run all the way from Shanghai across the country into the rich Caspian finds of Central Asia.

As China's energy needs grow, emphasis shifts to protecting supply lines running through South Asia, some of them close to the always contentious straits between Taiwan and China.

For the U.S. military, protecting energy supply lines always has been a prime consideration of national security. And these economic shifts in Asia can only mean a further strain on U.S. military operations in that part of the world. More immediately, a diversion of Canadian petroleum resources to China is about the worst thing that could happen to the U.S.

Since the '70s energy crisis, we have been seeking to diversify supplies, trying to shed our dependence on the Middle East, and as a result the U.S. now relies increasingly on Canada and Mexico. We have always viewed Canadian energy resources as a backup-to be used when we are in need.

To say they are taken for granted is an understatement. We view them as our own. Free trade makes that condition even more explicit. If Canada actually begins to commit resources to the Chinese, that will lead to more direct U.S. manipulation of Canadian politics and economics; right-wing Republicans will use the China-Canada deals as one more argument for stepped-up drilling in Alaska, the eastern front of the Rockies, and on the outer continental shelf, all of them areas where remaining U.S. petroleum stocks are located.

End Extract

Date: Sat, 01 Jan 2005 21:24:36 -0500 (EST)

Happy New Year!

There are three very important messages I wish to relay to commence what could prove a historical year. This will be the first of three E-mails making the points. All the emphasis seen in the articles are ours.

1. The media has confirmed SenderBerl's long standing position regarding China all over Canada. Let the following extract make the point:
Source: http://www.villagevoice.com/issues/0452/ridgeway.php

WASHINGTON, D.C. Running below the surface of the year-end self-congratulatory assertions of American supremacy (as in Monday's Washington Times: "The world really is becoming more 'American' ") are warnings, often ignored, of our decline. The steady loss of the dollar against the euro is one. The spiraling trade deficit is another.

And in the past weeks, there were two serious economic signs signaling momentous change, if not outright decline.

The first concerns China's invasion of Canadian oil fields, heretofore a U.S. energy fiefdom. The second came in the form of an all-but-hidden report from the Department of Agriculture that America, the breadbasket of the world, is now a net importer of food.
OIL If the half-dozen planned projects worth $2 billion go through, Canada, our No. 1 energy supplier, could end up sending as much as one-third of its total oil exports to China.

One project would give the Chinese a 49 percent interest in a 720-mile-long pipeline running from Alberta to British Columbia. The Chinese are also eyeing an expansion of a second Canadian pipeline system, and they're discussing gaining an interest in companies with oil leases.

Much of this interest centers on extracting oil from oil sands. In the U.S., prospects for an oil sands development during the energy crisis of the early 1970s never got off the ground. It was discussed along with coal gasification as a possible alternative to what the industry at the time insisted were declining reserves. But when prices were deregulated and rose, along with profitability, all the talk about coal gas and oil sands died down. For the big international oil companies, oil sands historically have been dicey because of the high development cost, and hence reduced profitability.

However, as Kang Wu of the East-West Center in Honolulu told The New York Times last week, "For China, it is foremost about securing supply and secondly about profits." And that is one reason China is willing to go so far abroad. China's energy consumption is up some 40 percent in the past year, making it the second-biggest energy consumer in the world, ahead of Japan. Its booming economy depends on fossil fuels, especially oil imports. By 2020 China is expected to be importing two-thirds of its oil, some 80 percent of it from the Middle East.

Crude oil leaped up $1.78 per barrel to $43.91. Only 18 months ago, $43+ oil was considered to be a disastrous price for the US economy.

Veteran Café members will remember "Azteca de Oro" who sent us so much valuable input years back when he had the time to do so. He says hello to all from Mexico with some input on oil. While some of the news releases will be repetitive, I found it useful to see how an oil industry pro views it in toto:

Hi Bill:
Despite today's battering of metals and the shares, I feel that the cabal is finally reaching their manipulative limit. The light at the end of the tunnel is blindingly strong now. We know that they have their "hidden" hand in every market, and I am even strongly suspecting now that they are tinkering with the climate, but reality will soon catch up with them.....currently they are holding oil down desperately, as evidenced by the disappearing premium of WTI/Brent, not to mention the complete lack of new giant field discoveries in the last 2 decades and other very strong structural imbalances.

Soon, we will see oil going up again, despite all their efforts, and when it reaches $60 and it keeps going, we will see how the Gold-Oil relationship starts to kick in really strong again as Euroland will then have to bow to reality too ....
Best Regards,
"Azteca de Oro"....

Happy 2005......

Please see below oil analysis....the NWO Fed-oil-gold cabal got too smart for their own good.....

This is an example of present silver/gold sentiment among the "interested" public:

Today, I dumped the last of my gold and silver stocks.
I will never touch those pieces of garbage again.
Half of my proceeds will be used to buy physical gold and silver, on a dollar cost average basis during periods of weakness.
The other half will be used to buy the "Cult" Internet stocks like GOOG which sell for outrageous valuations, but never go down on a day like today………..
Good luck to all you guys at GATA.
I have finally had enough of the gold stocks.
New Years Resolution: NEM, PAAS, SSRI, etc. Never Again!!!!

This Gartman guy knows as much about gold as Chief Inspector Clouseau of Pink Panther fame. His latest bit of dingbat commentary:

Turning our attention to gold and the precious metals, we note two things. Firstly, we note that we were indeed inordinately fortunate to have stood down from a long held bullish position on gold several weeks ago when spot gold was trading between $453-455. We remain upon the sidelines, noting that spot gold is back to a very important interim uptrend line that simply must hold here at the $428-430 level. We fear it won't however, for the gold market bulls remain convinced of the efficacy and soundness of their position, and the GATA folks are again aflame as they blame the weakness upon various market machinations by governments and large Wall Street organisations. This is utter nonsense of course but we shall never be able to convince GATA of that fact... and even if it is not nonsense; even if GATA were truly on to something, we should care not a whit for the market will move where the market needs to move. The gold market had become far too heavily invested-in by the public, and those public investors have to be taken out. They are and they will be, with the job likely not finished until spot gold trades below $400/oz once again, at which point we shall likely return to our long term bullish positions. Until then, like Chance the Gardner in Peter Seller's last movie, "We like to watch."

-END-

We always receive solid input from this veteran GATA supporter:

Bill,
Manipulation exists when all logic is defied. Yesterday and today meet that criteria. Tsunamis, war, credit crisis, Fannie crisis, pension crisis, dollar crisis and a raft more crisis' - no matter. In addition to the blatant $6 upside cap/ limitless downside rule another rule is gold never gets a follow through rally day while there is always a follow through decline. Yesterdays WSJ year end review section only gave gold and the metals a few paragraphs on page R-11. The summary was basically "you missed the gold rally, it's too late, might as well stay away". If the WSJ were your broker you would fire them for incompetence. Banking and the media are powerful allies. On a new year when the world's stability (literally) gets shakier there are 2 or 3 BB's at the Comex with their finger on the short sell cannon button defying logic. Millions of people worldwide know otherwise. Logic doesn't like being defied for very long. Logic will prevail. It is illogical to think the more FRN's you print, the more valuable they become. In the meantime we sit through yet another day of criminal endeavor.
Best for the new year,
James McShirley

Clift Whiteman has a question for us:

3) Finally, it would help me if not others if you explained some evening how the COMEX works. For the life of me I can't figure out what your and Brimelow's comments on "open positions" really mean. In other words, I don't understand the moves that bulls and bears make which effect the open contract positions. It's like CNBC running the commodities prices every 15 minutes using symbols that I can find nowhere and then not even showing changes over the previous day's close. They mean something only to a tiny handful of viewers in my opinion.

In closing, you know I have been a supporter for several years and you are the best. You work so hard to dig out everything that might be of interest and keep us betting on $1000/oz gold in the not too distant future. Keep it going and good luck!

***

We all will win the day Clift. Just a matter of time.
Regarding open interest, it is really very simple. For every buyer on the Comex, there is a seller. These buyers and sellers are categorized by the CFTC and the brokerage houses into small specs, large specs and commercials. The nomenclature of each is self-explanatory. As a total, they make up the Open Interest. Market watchers watch the daily changes and make interpretations about what the changes mean. This is where it gets complicated as what seems right to the goose, might appear differently to the gander. To go into detail on that subject would take an entire MIDAS.

One simple analysis:

A market starts to rise and speculators pile in to take advantage of the price rise. They keep buying and the open interest shoots way up. The market gets too frothy (too many of them) and the market corrects lower. The specs then liquidate and the open interest falls. If it falls low enough, some observers will suggest the market is washed out.

Hope that helps.

From the King Report late last evening:

The NY Post’s Tim Arango: "Executives at United States companies sold stock last year at levels not seen since the bursting of the Internet bubble in 2000. Executive stock sales — known as insider sales — rose 20 percent in 2004 through Dec. 24, while purchases by insiders grew 13 percent to $2.11 billion, according to Washington Service, a company that tracks such transactions." http://www.nypost.com/business/37541.htm

Greenspan and Bush bet that by funneling billions of dollars into corporations via quick fix remedies the economy would rebound when corporations spent their orchestrated riches on capex and new jobs. That wish upon crony capitalism is an abject failure. Also, Easy Al thought that he could engineer another covert bailout like his carry trade for the Money Center Banks in 1991-1992. This funneled prudent peoples’ saving into banks and hedgies that leveraged up. Once again the average guy was sacrificed.

The WSJ’s survey of 56 economists has a consensus GDP of about +3.6% for 2005. When have you ever seen or heard main stream economists, especially on The Street, forecast a recession?

The Washington Post: "The Bush administration has signaled that it will propose changing the formula that sets initial Social Security benefit levels, cutting promised benefits by nearly a third in the coming decades, according to several Republicans close to the White House." http://www.washingtonpost.com/…26-2005Jan3.html?nav=rss_

-END-

Jan. 4 (Bloomberg) -- U.S. Treasury notes fell after minutes from the Federal Reserve's Dec. 14 meeting showed policy makers were more concerned about faster inflation.

The benchmark two-year note dropped the most in two months as the Fed concluded that interest rates were still below a level needed ``to keep inflation stable'' and that price increases were likely to become a risk to stable growth. Inflation erodes the value of a bond's fixed-payments. – END-

CARTEL CAPITULATION WATCH

The DOW flopped 99 to 10,671, while the DOG barked its way down 44 to 2108.

The March DOG chart is looking bowwowish again:
http://futures.tradingcharts.com/chart/NA/X

Been hard for me to understand why the DOW and DOG have done what they have considering what looms on the horizon. The good news is behind the market, not ahead. Trading in the weeks ahead could be very nasty on the downside.

The dollar rose 1.29 to 82.79. The euro lost 2.08 to 132.87, while the pound gave up two points to 187.16.

US economic news:

10:00 Nov. Factory Orders reported 1.2% vs. consensus 1%
Prior reading revised to 0.9% from 0.5%.
* * * * *

The big news of the day was the release of contents of the December FOMC minutes:

14:01 FOMC minutes reveal that committee still saw rates as too low to keep inflation stable
The minutes from the 12/14 meeting also noted "potentially excessive risk-taking" in markets.
* * * * *

14:04 Follow-up: FOMC minutes indicate the policy makers still believed rates were too low
The conclusion of the minutes from the 12/14 meeting state that "even with this action, the current level of the real funds rate target remained below the level it most likely would need to reach to keep inflation stable and output at its potential".
* * * * *

4:13 Follow-up x2: FOMC notes potentially excessive risk-taking in financial, housing mkts
The minutes show that "some participants" were concerned that "the prolonged period of policy accommodation had generated a significant degree of liquidity that might be contributing to signs of potentially excessive risk-taking in financial markets evidenced by quite narrow credit spreads, a pickup in initial public offerings, an upturn inmergers and acquisition activity, and anecdotal reports that speculative demands were becoming apparent in the markets for single-family homes and condominiums".
* * * * *

The John Brimelow Report

Physical demand has gone crazy" - Mitsui

Tuesday, Jan 4, 2004

Indian ex-duty premiums: AM $8.86, PM $9.32, with world gold at $429.30 and $426.50. Very high; suggestive of heavy Indian demand.

The Shanghai Gold Exchange prices imply premiums to world gold of $3.59 to $4.00, levels last seen in the late April/ early May downswing last year.

Mitsui-London remarks today

"Physical demand has gone crazy, and now everyone is looking for supplies for India, Turkey and the Mid East."

The second attachment is a bar chart of Turkish imports, courtesy Refco Research. While the magnitude of the off take acceleration is obvious, what is actually more impressive is the contrast with previous November/December periods. Usually this is a very weak phase of the year.

Japan re opened for a half day to find world gold down over $15 from the close on December 28th. Naturally this led to limit down moves. All contracts closed down the 40 yen limit, although the equivalent of 7,211 Comex lots did trade, with open interest up 1,335 Comex equivalent. Some anticipate Japanese buying.

NY yesterday traded a very heavy 93,540 lots, with open interest slipping 7,743 contracts (another 24 tonnes.) UBS judiciously remarks:

"Since last Tuesday…Comex open interest indicates that at least 1.23moz of long liquidation took place on Wednesday and Thursday; Friday’s price action implies more speculative selling …The net long gold position probably stands at about 15-16 million ounces, the smallest long position since the end of October."

Gold since Christmas has twice come in for very heavy bouts of selling in New York (today is possibly a third, with an estimated 71,000 contracts trading). This has had the effect of adversely altering the relationships the metal has been recently showing with older parameters. HSBC says

"it is difficult to explain the recent fall in gold prices from over USD450/oz to under USD430/oz simply by reference to currency moves alone…based on an exchange rate of 1.35 against the euro, and on the trading relationship which has been in place since August 2003, the gold price should be around USD445/oz."

Gold’s fall preceded and exceeded the fall in the Euro, and preceded, at least, the punishment base metals have taken today. Probably these developments are related. The fact remains premiums and anecdotes in the physical market resemble serious lows, not highs.

The noted bear points out that the standard measures of public involvement in gold were down year-on year, yet gold was up. He asserts this is puzzling, yet the explanation is obvious: strong off take by the consuming countries. He does not mention Turkey, about which in fact Mitsui is very well informed by direct involvement.

JB

Houston’s Dan Norcini smells what I do re what has transpired in gold and silver the past two days.

Hi Bill:
Did you catch the Open interest release this morning?

Silver showed very little reduction in yesterday's massive sell off indicating a HUGE amount of new shorts were put on in addition to the general liquidation. Gold showed a fair amount of liquidation but nothing like what I was expecting. I was looking for something in the range of 15,000+. Instead we got only around 8,000 or so. Same story there - apparently lots of fresh shorts were put on yesterday as well as long liquidation.
Dan

Gold and silver are both set up to move sharply higher in the weeks ahead.