Outside vanilla derivative products their sole function is to flog off hidden risk. The western banks mentioned monitised their cred and died, end of story.
BEIJING -- A senior Chinese official who oversees the country's largest state-owned enterprises has publicly slammed Western investment banks for "maliciously" peddling complicated derivative products that caused huge losses for Chinese companies over the last year.
In Beijing's strongest criticism on the matter to date, Li Wei, vice director of the state-owned Assets Supervision and Administration Commission, singled out Goldman Sachs, Morgan Stanley, Merrill Lynch, and Citigroup in a long and highly critical article in the latest issue of an official Communist party newspaper.
The large losses suffered by Chinese state companies were "closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions," Mr Li asserted. "To a certain extent some international investment banks were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo."
In his article, Mr Li said 68 of the 130-odd state companies controlled directly by Sasac had been buying derivatives to speculate or hedge against rising commodity prices and fluctuating currencies and interest rates, even though some of them were not authorised to do so.
These 68 companies had booked total combined net losses of Rmb11.4 billion on the Rmb125 billion worth of financial derivatives products they had bought by the end of October 2008, Mr Li said.
The government has not previously revealed the full extent of losses suffered by Chinese companies that made ill-fated bets on over-the-counter, mostly offshore derivatives.
In September, Sasac warned that some of the contracts were illegal and might be invalidated, a move that prompted some Western banks to agree quietly to renegotiate contracts behind closed doors.
Air China, China Eastern Airlines, Cosco, China Railway Engineering Corp., China Railway Construction Corp., and Citic Pacific were among the companies that lost the most from buying complex derivatives.
Some of the biggest losses came from the airlines and shipping companies' purchases of options to hedge against rising oil prices between June and August last year, when oil hit a historic peak of more than $140 a barrel.
When prices fell during the financial crisis, these companies were saddled with large losses, partly because they had chosen riskier -- and cheaper -- derivatives products to hedge against rising prices.
Mr Li said the most important reason for the derivatives losses was unnecessary speculation and attempts at arbitrage by these state companies.
He also cited weak risk management procedures, a lack of expertise, and intentional breaking of rules that restrict most kinds of financial derivatives in China.
But he said China should "not give up eating for fear of choking" and that it was imperative for Chinese companies to keep using financial derivatives.
Showing posts with label gata. Show all posts
Showing posts with label gata. Show all posts
8 November 2009
Gold suppression is public policy and public record, not 'conspiracy theory' ~ GATA
Gold suppression is public policy and public record, not 'conspiracy theory'
Submitted by cpowell on Sat, 2009-11-07 18:16. Section: Essays
Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
International Precious Metals and Commodities Show
Olympia Park, Munich, Germany
Saturday, November 7, 2009
Thank you for coming to listen to me today. Please forgive my inability to speak German. I'll be discussing many documents, some of them fairly complicated, but don't worry if you miss something about them. They'll be posted at GATA's Internet site with these remarks.
On Friday, September 25, Jim Rickards, director of market intelligence for the Omnis consulting firm in McLean, Virginia., was interviewed on the cable television network CNBC in the United States. Talking about the currency markets, Rickards remarked: "When you own gold you're fighting every central bank in the world."
That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the price of government bonds. And that's why central banks long have tried to suppress the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power.
As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.
Of course what Jim Rickards said about gold was no surprise to my organization, the Gold Anti-Trust Action Committee. To the contrary, what Rickards said has been our premise for most of our 10 years, and we have documented it extensively. Rickards' assertion was spectacular simply because he was allowed to make it in the mainstream financial news media and was allowed to keep talking. While the gold price suppression scheme is a hard fact of history, it is seldom mentioned in polite company in the financial world. I have been asked to talk about it here. I am grateful for this invitation and I will try to be polite.
How have central banks tried to suppress the price of gold?
The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971.
That's what the gold standard was about -- governments fixing the price of gold to a precise value in their currencies, a price at which governments would exchange their currencies for gold, currencies that were backed by gold.
Though the gold standard was abandoned during World War I, restored briefly in the 1920s, and then abandoned again during the Great Depression, that was not the end of government efforts to control the gold price. Throughout the 1960s the United States and Great Britain attempted to hold the price at $35 in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement came to be known as the London Gold Pool.
As monetary inflation rose sharply, the London Gold Pool was overwhelmed by demand and was shut down abruptly in April 1968. Three years later, in 1971, the United States repudiated the remaining convertibility of the dollar into gold -- convertibility for government treasuries that wanted to exchange dollars for gold. At that moment currencies began to float against each other and against gold -- or so the world was told.
For since 1971 the gold price suppression scheme has been undertaken largely surreptitiously, seldom acknowledged officially. But sometimes it has been acknowledged officially, and with a little detective work, more about it can be discovered.
You may have heard GATA derided as a "conspiracy theory" organization. We are not that at all. To the contrary, we examine the public record, produce documentation, question public officials, and publicize their most interesting answers, or their most interesting refusals to answer. I'd like to review some of the public record with you.
The gold price suppression scheme became a matter of public record in January 1995, when the general counsel of the U.S. Federal Reserve Board, J. Virgil Mattingly, told the Federal Open Market Committee, according to the committee's minutes, that the U.S. Treasury Department's Exchange Stabilization Fund had undertaken gold swaps. Gold swaps are exchanges of gold allowing one central bank to intervene in the gold market on behalf of another central bank, potentially giving anonymity to the central bank that wants to undertake the intervention. The 1995 Federal Open Market Committee minutes in which Mattingly acknowledges gold swaps are still posted at the Fed's Internet site:
http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p...
The gold price suppression scheme was a matter of public record in July 1998, six months before GATA was formed, when Federal Reserve Chairman Alan Greenspan told Congress: "Central banks stand ready to lease gold in increasing quantities should the price rise." That is, Greenspan himself, supposedly the greatest among the central bankers, contradicted the usual central bank explanation for leasing gold -- which was supposedly to earn a little interest on a dead asset -- and admitted that gold leasing is all about suppressing the price. Greenspan's admission is still posted at the Fed's Internet site:
http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm
Incidentally, while we gold bugs love to cite Greenspan's testimony from 1998 because of its reference to gold leasing, that testimony was mainly about something else, for which it is far more important today. For with that testimony Greenspan persuaded Congress not to regulate the sort of financial derivatives that lately have devastated the world financial system.
The Washington Agreement on Gold, made by the European central banks in 1999, was another admission -- no, a proclamation that central banks were working together to control the gold price. The central banks making the Washington Agreement claimed that, by restricting their gold sales and leasing, they meant to prevent the gold price from falling too hard. But even if you believed that explanation, it was still collusive intervention in the gold market. You can find the Washington Agreement at the World Gold Council's Internet site:
http://www.reserveasset.gold.org/central_bank_agreements/cbga1/
Barrick Gold, then the largest gold-mining company in the world, confessed to the gold price suppression scheme in U.S. District Court in New Orleans on February 28, 2003. That is when Barrick filed a motion to dismiss Blanchard & Co.'s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase, for rigging the gold market.
Barrick's motion claimed that in borrowing gold from central banks and selling it, the mining company had become the agent of the central banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be exempt from suit. Barrick's confession to the gold price suppression scheme is posted at GATA's Internet site:
http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf
The Reserve Bank of Australia confessed to the gold price suppression scheme in its annual report for 2003. "Foreign currency reserve assets and gold," the Reserve Bank's report said, "are held primarily to support intervention in the foreign exchange market." The bank's report is still posted at its Internet site:
http://www.rba.gov.au/PublicationsAndResearch/RBAAnnualReports/2003/Pdf/...
Maybe the most brazen admission of the Western central bank scheme to suppress the gold price was made by the head of the monetary and economic department of the Bank for International Settlements, William S. White, in a speech to a BIS conference in Basel, Switzerland, in June 2005.
There are five main purposes of central bank cooperation, White announced, and one of them is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." White's speech is posted at GATA's Internet site:
http://www.gata.org/node/4279
In January this year a remarkable 16-page memorandum was discovered in the archive of the late Federal Reserve Chairman William McChesney Martin. The memorandum is dated April 5, 1961, and is titled "U.S. Foreign Exchange Operations: Needs and Methods." It is a detailed plan of surreptitious intervention to rig the currency and gold markets to support the dollar and to conceal, obscure, or falsify U.S. government records and reports so that the rigging might not be discovered. This document remains on the Internet site of the Federal Reserve Bank of St. Louis:
http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf
In August this year the international journalist Max Keiser reported an interview he had with the Bundesbank, Germany's central bank, in which he was told that all of Germany's gold reserves were held in New York. That interview is posted at the YouTube Internet site:
http://www.youtube.com/watch?v=EzVhzoAqMhU
Some people saw the Bundesbank's admission as a suggestion that Germany's gold had become the tool of the U.S. government. GATA consultant Rob Kirby of Kirby Analytics in Toronto then pressed the Bundesbank for clarification. On August 24 the Bundesbank replied to Kirby by e-mail with a denial of Keiser's report, but the denial was actually pretty much a confirmation:
http://www.gata.org/node/7713
"The Deutsche Bundesbank," the reply said, "keeps a large part of its gold holdings in its own vaults in Germany, while some of its gold is also stored with the central banks located at major gold trading centers. This," the Bundesbank continued, "has historical and market-related reasons, the gold having been transferred to the Bundesbank at these trading centers. Moreover, the Bundesbank needs to hold gold at the various trading centers in order to conduct its gold activities."
The Bundesbank did not specify those "gold activities" and those "trading centers." But those "activities" can mean only that the Bundesbank is or recently has been surreptitiously active in the gold market, perhaps at the behest of others -- like the United States, the custodian of German gold.
In September this year a New York financial market professional and student of history named Geoffrey Batt posted at the Zero Hedge Internet site three declassified U.S. government documents involving the gold market.
The first was a long cable dated March 6, 1968, from someone named Deming at the U.S. Embassy in Paris to the State Department in Washington. It is posted at the Zero Hedge Internet site:
http://www.zerohedge.com/article/declassified-state-dept-data-highlights...
The cable described the strains on the London Gold Pool, the
gold-dishoarding mechanism established by the U.S. Treasury and the Bank of England to hold the gold price to the official price of $35 per ounce. The London Gold Pool was to last only six months longer.
The cable is a detailed speculation on what would have to be done to control the gold price and particularly to convince investors "that there is no point any more in speculating on an increase in the price of gold" and "to establish beyond doubt" that the world financial system "is immune to gold losses" by central banks.
The cable recommends creation of a "new reserve asset" with "gold-like qualities" to replace gold and prevent gold from gaining value. To accomplish this, the cable proposes "monthly or quarterly reshuffles" of gold reserves among central banks -- what the cable calls a "reshuffle club" that would apply gold where market intervention seemed most necessary.
These "reshuffles" sound like the central bank gold swaps of recent years.
The idea, the cable says, is for the central banks "to remain the masters of gold."
Also in September this year Zero Hedge's Geoffrey Batt disclosed a memorandum from the Central Intelligence Agency dated December 4, 1968, several months after the collapse of the London Gold Pool. This too is posted at the Zero Hedge Internet site:
http://www.zerohedge.com/article/cia-chimes-gold-control-highlights-hist...
The CIA memo said that to keep the dollar strong and prevent "a major outflow of gold," U.S. strategy would be:
" -- To isolate official from private gold markets by obtaining a pledge from central banks that they will neither buy nor sell gold except to each other."
And:
"-- To bring South Africa to sell its current production of gold in the private market, and thus keep the private price down."
The third declassified U.S. government document published by Geoffrey Batt at Zero Hedge, also in September this year, may be the most interesting, because it was written on June 3, 1975, four years after the last bit of official fixed convertibility of the dollar and gold had been eliminated and the world had been told that currencies henceforth would float against each other and gold and gold would be free trading.
The document is a seven-page memorandum from Federal Reserve Board Chairman Arthur Burns to President Gerald Ford. It is all about controlling the gold price through foreign policy and defeating any free market for gold. It is posted at the Zero Hedge Internet site as well:
http://www.zerohedge.com/article/smoking-gun-fed-controlling-gold
Burns tells the president: "I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt" -- that's Helmut Schmidt, West Germany's chancellor at the time -- "that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce."
Burns adds, "I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price."
While the Burns memo is consistent with the long-established interest of central banks in controlling the gold price, it was still 34 years ago. But now at last there has been a contemporaneous admission of U.S. government intervention in the gold market. It has come out of GATA's long Freedom of Information Act struggle with the U.S. Treasury Department and Federal Reserve for information about the U.S. gold reserves and gold swaps, information that has been denied to GATA on the grounds that it would compromise certain private proprietary interests. (Of course such a
denial, a denial based on proprietary interests, is in itself a suggestion that the U.S. gold reserve has been placed, at least partly, in private hands.)
Responding to President Obama's declaration, soon after his inauguration, that the federal government would be more open, GATA renewed its informational requests to the Fed and the Treasury. These requests concentrated on gold swaps. Of course both requests were denied again. But through its Washington lawyer, William J. Olson --
http://www.lawandfreedom.com -- GATA brought an appeal of the Fed's denial, and this appeal was directed to a full member of the Fed's Board of Governors, Kevin M. Warsh, formerly a member of the President's Working Group on Financial Markets, nicknamed the Plunge Protection Team. Warsh denied GATA's appeal but in his letter to our lawyer he let slip some stunning information:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
Warsh wrote: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4" -- that's Exemption 4 of the Freedom of Information Act -- "consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."
So there it is: The Federal Reserve today -- right now -- has gold swap arrangements with "foreign banks."
Eight years ago Fed Chairman Alan Greenspan and the general counsel of the Federal Open Market Committee, Virgil Mattingly, vigorously denied to GATA, through two U.S. senators who had inquired of the Fed on our behalf, that the Fed had gold swap arrangements, even though FOMC minutes from 1995 quote Mattingly as saying the U.S. has engaged in gold swaps:
http://www.gata.org/node/1181
But now the Fed admits such arrangements.
Of course Fed Governor Warsh did not say that the Fed has actually swapped any gold lately, only that it has arrangements to do so -- and, just as important, that the Fed does not want the public and the markets to know about those arrangements, does not want the public and the markets to know about the disposition of United States gold reserves.
GATA is preparing to sue the Fed in federal court to compel disclosure of these gold swap arrangements.
There is a reason for the Fed's insistence that the public and the markets must not know what the Fed is doing in the gold market.
It is because, as the documents compiled and publicized by GATA suggest, suppressing the gold price is part of the general surreptitious rigging of the currency, bond, and commodity markets by the U.S. and allied governments, because this market rigging is the foremost objective of U.S. foreign and economic policy, and because this rigging cannot work if it is exposed and the markets realize that they are not really markets at all.
And the rigging increasingly is being exposed and understood.
In complaining about the manipulation of the gold market, GATA has not been called "conspiracy nuts" by everyone. We have gained a good deal of institutional support over the years.
First came Sprott Asset Management in Toronto, which in 2004 issued a
comprehensive report supporting GATA. The report was written by Sprott's chief investment strategist, John Embry, and his assistant, Andrew Hepburn, and was titled "Not Free, Not Fair -- the Long-Term Manipulation of the Gold Price." It remains available at the Sprott Internet site:
http://www.sprott.com/docs/PressReleases/20_not_free_not_fair.pdf
Then in 2006 the Cheuvreux brokerage house of Credit Agricole, the major French bank, issued its own report confirming GATA's findings of manipulation in the gold market. The Cheuvreux report was titled "Remonetization of Gold: Start Hoarding," and you can find it at GATA's Internet site:
http://www.gata.org/files/CheuvreuxGoldReport.pdf
And in 2007 Citigroup -- yes, Citigroup, a pillar of the American financial establishment -- joined the supposed conspiracy nuts. It published a report titled "Gold: Riding the Reflationary Rescue," written by its analysts John H. Hill and Graham Wark, declaring: "Gold undoubtedly faced headwinds this year from resurgent central bank selling, which was clearly timed to cap the gold price." You can find the Citigroup report at GATA's Internet site:
http://www.gata.org/files/CitigroupGoldReport092107.pdf
Even those authorities who do not want to run afoul of government institutions that with a few computer keystrokes can create virtually infinite amounts of money may have to admit the opportunity for central banks to manipulate the gold market. For it is widely acknowledged that annual world gold production is about 2,400 tonnes, that annual net world gold demand is about 3,400 tonnes, that gold production has been falling as demand has been rising, and that the thousand-tonne gap between production and net demand has been filled mainly by central bank dishoarding and leasing.
What do you suppose the gold price would be if central banks were not supplying more than a quarter of annual demand?
That dishoarding was not all innocent management of a foreign exchange reserve portfolio. Much of it was meant as market intervention -- and after all, market intervention is exactly why central banking was invented.
Intervening in markets is what central banks do. They have no other purpose.
Central banks admit intervening often in the currency markets, buying and selling their own currencies and those of other governments to maintain exchange rates at what they consider politically desirable levels. Central banks admit doing the same in the government bond markets. There is even evidence that the Federal Reserve and Treasury Department have been intervening frequently in the U.S. stock markets since the crash of 1987.
You do not have to settle for rumors about the "Plunge Protection Team," also known as the President's Working Group on Financial Markets. Again you can just look at the public record.
The Federal Reserve injects billions of dollars into the stock and bond markets every week, on the public record, through the major New York financial houses, its so-called primary dealers in federal government bonds, using what are called repurchase agreements and the Fed's Primary Dealer Credit Facility. The financial houses thus have become the Fed's agents in directing that money into the markets. The recent rise in the U.S. stock market matches almost exactly the money funneled by the Fed to the New York financial houses through repurchase agreements and the Primary Dealer Credit Facility.
Meanwhile, for years the International Monetary Fund, the central bank of the central banks, has been openly intervening in the gold market by threatening to sell gold. The IMF said its intent in selling gold was to raise money to lend to poor nations. This explanation was ridiculous on its face, though the IMF has never been challenged about it in the financial press. No, the financial press has been happy to tell the world that central banks that lately have effortlessly conjured into existence fantastic amounts of money in many currencies could find a little money to help poor countries only by selling gold.
Of course the intent of the IMF and its member central banks was not to help poor countries but to intimidate the gold market and control the gold price.
That the IMF intimidated the gold market so long with this threat of gold sales was all the more remarkable because the IMF probably has never had any gold to sell in the first place.
In April 2008 I wrote to the managing director of the IMF, Dominque Strauss-Kahn, with five questions about the IMF's gold. I copied the letter to the IMF's press office by e-mail, and quickly began to get some answers from one of its press officers, Conny Lotze.
My first question to the IMF was: "Your Internet site says the IMF holds 3,217 metric tons of gold 'at designated depositories.' Which depositories are these?"
Conny Lotze of the IMF replied, but not specifically. She wrote: "The fund's gold is distributed across a number of official depositories." She noted that the IMF's rules designate the United States, Britain, France, and India as IMF depositories.
My second question was: "If you would prefer not to identify the depositories for security reasons, could you at least identify the national and private custodians of the IMF's gold and the amounts of IMF gold held by each?"
Conny Lotze replied, again not very specifically: "All of the designated depositories are official."
My third question was: "Is the IMF's gold at these depositories allocated -- that is, specifically identified as belonging to the IMF -- or is it merged with other gold in storage at these depositories?"
Conny Lotze replied, still not very specifically: "The fund's gold is properly accounted for at all its depositories."
My fourth question was: "Do the IMF's member countries count the IMF's gold as part of their own national reserves, or do they count and identify the IMF's gold separately?"
Conny Lotze replied a bit ambiguously: "Members do not include IMF gold within their reserves because it is an asset of the IMF. Members include their reserve position in the fund in their international reserves."
This sounded to me as if the IMF members were still counting as their own the gold that supposedly belongs to the IMF -- that the IMF members were just listing the gold assets in another column on their own books.
My fifth question to the IMF was: "Does the IMF have assurances from the depositories that its gold is not leased or swapped or otherwise encumbered? If so, what are these assurances?"
Conny Lotze replied: "Under the fund's Articles of Agreement it is not authorized to engage in these transactions in gold."
But I had not asked if the IMF itself was swapping or leasing gold. I had asked whether the custodians of the IMF's gold were swapping or leasing it.
This prompted me to raise one more question for Conny Lotze. I wrote her: "Is there any audit of the IMF's gold that is available to the public? I ask because, if the amount of IMF gold held by each depository nation is not public information, there does not seem to be much documentation for the IMF's gold, nor any documentation for the assurance that its custody is just fine. Without any details or documentation, the IMF's answer seems to be simply that it should be trusted -- that it has the gold it says it has, somewhere."
And that was the last I heard from Conny Lotze. She didn't answer me again. I had spoken a word that is increasingly unspeakable in the gold section of central banking: audit.
This week the IMF at last announced the disposal of some of the 400 tonnes of gold it long had been threatening to sell. Two hundred tonnes have been purchased by the Reserve Bank of India. This may or may not be a real transaction, a real transfer of gold from an IMF vault to a vault of the Reserve Bank of India. More likely this transaction is only a bookkeeping entry among IMF member central banks. But in any case it seems likely that the gold with which the IMF has been threatening the market for years is never going to hit the market, if it even exists. Rather, this gold will remain in the mysterious possession of central banks.
Lately central bankers often have complained about what they call "imbalances" in the world financial system. That is, certain countries, particularly in Asia, run big trade surpluses, while other countries, especially the United States, run big trade deficits and consume far more than they produce, living off the rest of the world. These complaints by the central bankers about "imbalances" are brazenly hypocritical, since these imbalances have been caused by the central banks themselves, caused by their constant interventions in the currency, bond, and commodity markets to prevent those markets from coming into balance through ordinary market action lest certain political interests be disturbed.
Yes, when markets balance themselves they often do it brutally, causing great damage to many of their participants. The United States enacted a central banking system in 1913 because for the almost 150 years before then the country went through a catastrophic deflation every decade or so. Central banking was created in the name of preventing those catastrophic deflations.
The problem with central banking has been mainly the old problem of power --- it corrupts.
Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest -- to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.
And so we have come to an era of daily market interventions by central banks -- so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all.
By manipulating the value of money, central banking controls the value of all labor, services, and real goods, and yet it is conducted almost entirely in secret -- because, in choosing winners and losers in the economy, advancing infinite amounts of money to some participants in the markets but not to others, administering the ultimate patronage, central banking cannot survive scrutiny.
Yet the secrecy of central banking now is taken for granted even in nominally democratic countries.
Maybe the Federal Reserve's intervention to rescue Bear Stearns through the Fed's de-facto subsidiary, JPMorganChase, will cause some devastating public inquiries by Congress and the news media. But what a hundred years ago in the United States was called the Money Power is so ascendant today that it sometimes even boasts of its privilege. What other agency of a democratic government could get away with the principle that was articulated on national television in the United States in 1994 by the vice chairman of the Federal Reserve, Alan Blinder? Blinder declared: "The last duty of a central banker is to tell the public the truth."
The truth as GATA sees it is this:
First, gold is the secret knowledge of the financial universe, but it is becoming an open secret. That is GATA's work -- to break the secret open, to show how the gold price has been suppressed by central bank creation of imaginary gold in amounts to match and thus help conceal the vast inflation of the world's money supply. We will continue to use freedom-of-information law against the Fed and the Treasury Department about their policies toward gold and the disposition of the U.S. gold reserve. Of course central banks can no more afford to account fully for their gold reserves than the Fed and JPMorganChase can afford to disclose details of their negotiations for the rescue of Bear Stearns. Indeed, as my correspondence with the IMF suggests, the disposition of Western central bank gold reserves is a secret more closely guarded than the blueprints for the manufacture of nuclear weapons.
Why can't the public and the markets be permitted to know exactly where central bank gold reserves are? Because in the hands of governments gold is a deadly weapon -- as the Reserve Bank of Australia acknowledges, the main weapon of currency market intervention.
Second, all technical analysis of markets now is faulty if it fails to account for pervasive government intervention.
And third, the intervention against gold is failing because of overuse, exposure, exhaustion of Western central bank gold reserves -- we estimate that the Western central banks have in their vaults only about half the 32,000 tonnes they claim to have -- and the resentment of the developing world, which is starting to figure out how it has been expropriated by the dollar system, a system in which people do real work and create real goods and send them to the United States in exchange for mere colored paper and electrons.
For years now the Western central banks have been attempting a controlled retreat with gold, bleeding out their reserves with sales, leases, and derivatives so that gold's ascent and the dollar's inevitable decline may be less shocking. Central bankers often convey part of this strategy in code; they warn against what they call a "disorderly decline" in the dollar, as if an "orderly" decline is all right.
The rise in the gold price over the last decade is just the other side of that coin -- an "orderly" rise, 15 percent or so per year, a rise carefully modulated by surreptitious central bank intervention.
But GATA believes that the central banks may have to retreat farther with gold than anyone dreams, and far more abruptly than they have retreated so far. We believe that when the central banks are overrun in the gold market, as they were overrun in 1968, and the market begins to reflect the ratio between, on one hand, the supply of real gold, actual metal, not the voluminous paper promises of metal, and, on the other hand, the explosion of the world money supply of the last few decades -- as the market begins to perceive the difference between the real and the unreal -- there may not be enough zeroes to put behind the gold price.
A century ago Rudyard Kipling wrote a poem that foresaw the decline of the empire of his country, Great Britain. Kipling's poem attributed this decline to the loss of the old virtues, the virtues that were listed at the top of the pages in the special notebooks, called "copybooks," that were given to British schoolchildren at that time -- virtues like honesty, fair dealing, Ten Commandments stuff. The title of Kipling's poem is "The Gods of the Copybook Headings," and its conclusion is a warning to the empire that succeeded the one he was living in:
Then the Gods of the Market tumbled,
And their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled
And began to believe it was true
That All is not Gold that Glitters,
And Two and Two make Four,
And the Gods of the Copybook Headings
Limped up to explain it once more.
As it will be in the future,
It was at the birth of Man.
There are only four things certain
Since Social Progress began:
That the Dog returns to his Vomit
And the Sow returns to her Mire,
And the burnt Fool's bandaged finger
Goes wabbling back to the Fire;
And that after this is accomplished,
And the brave new world begins,
When all men are paid for existing
And no man must pay for his sins,
As surely as Water will wet us,
As surely as Fire will burn,
The Gods of the Copybook Headings
With terror and slaughter return.
The gold price suppression story is important despite this week's dramatic rise in the gold price. For even as the price of gold has been rising, we really don't yet know what a fair price, a free-market price, for gold is, since gold has not traded in a free market for many years and is not trading in a free market now.
Indeed, since central bank intervention in the currency, bond, equities, and commodity markets has exploded over the last year, we don't really know what the market price of anything is anymore. Thus the gold price suppression story is a story about the valuation of all capital and labor in the world -- and whether those values will be set openly in free markets, the democratic way, or secretly by governments, the totalitarian way.
The specifics of the gold price suppression operation are complicated, but you don't have to remember them all if you know what they mean.
They mean that there is a currency war going on between countries and their central banks. There has been such a war for many years, only the victims were not really fighting back. Now some of them are. Signs of this war are now everywhere -- like the story published a month ago by the British newspaper The Independent that described an international plan to replace the dollar in oil trading:
http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar...
Gold and silver have been and remain currencies and will be remonetized by markets eventually if not by central banks as well, because gold and silver are the only neutral currencies, the only currencies that are not the liabilities of any particular country.
But when you invest in currencies like gold and silver, you risk getting caught in the crossfire of the currency war. As in any war, truth is the first casualty in the currency war, even as secrecy is always the first principle of central banking.
http://www.gata.org/node/7997
Submitted by cpowell on Sat, 2009-11-07 18:16. Section: Essays
Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
International Precious Metals and Commodities Show
Olympia Park, Munich, Germany
Saturday, November 7, 2009
Thank you for coming to listen to me today. Please forgive my inability to speak German. I'll be discussing many documents, some of them fairly complicated, but don't worry if you miss something about them. They'll be posted at GATA's Internet site with these remarks.
On Friday, September 25, Jim Rickards, director of market intelligence for the Omnis consulting firm in McLean, Virginia., was interviewed on the cable television network CNBC in the United States. Talking about the currency markets, Rickards remarked: "When you own gold you're fighting every central bank in the world."
That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the price of government bonds. And that's why central banks long have tried to suppress the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power.
As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.
Of course what Jim Rickards said about gold was no surprise to my organization, the Gold Anti-Trust Action Committee. To the contrary, what Rickards said has been our premise for most of our 10 years, and we have documented it extensively. Rickards' assertion was spectacular simply because he was allowed to make it in the mainstream financial news media and was allowed to keep talking. While the gold price suppression scheme is a hard fact of history, it is seldom mentioned in polite company in the financial world. I have been asked to talk about it here. I am grateful for this invitation and I will try to be polite.
How have central banks tried to suppress the price of gold?
The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971.
That's what the gold standard was about -- governments fixing the price of gold to a precise value in their currencies, a price at which governments would exchange their currencies for gold, currencies that were backed by gold.
Though the gold standard was abandoned during World War I, restored briefly in the 1920s, and then abandoned again during the Great Depression, that was not the end of government efforts to control the gold price. Throughout the 1960s the United States and Great Britain attempted to hold the price at $35 in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement came to be known as the London Gold Pool.
As monetary inflation rose sharply, the London Gold Pool was overwhelmed by demand and was shut down abruptly in April 1968. Three years later, in 1971, the United States repudiated the remaining convertibility of the dollar into gold -- convertibility for government treasuries that wanted to exchange dollars for gold. At that moment currencies began to float against each other and against gold -- or so the world was told.
For since 1971 the gold price suppression scheme has been undertaken largely surreptitiously, seldom acknowledged officially. But sometimes it has been acknowledged officially, and with a little detective work, more about it can be discovered.
You may have heard GATA derided as a "conspiracy theory" organization. We are not that at all. To the contrary, we examine the public record, produce documentation, question public officials, and publicize their most interesting answers, or their most interesting refusals to answer. I'd like to review some of the public record with you.
The gold price suppression scheme became a matter of public record in January 1995, when the general counsel of the U.S. Federal Reserve Board, J. Virgil Mattingly, told the Federal Open Market Committee, according to the committee's minutes, that the U.S. Treasury Department's Exchange Stabilization Fund had undertaken gold swaps. Gold swaps are exchanges of gold allowing one central bank to intervene in the gold market on behalf of another central bank, potentially giving anonymity to the central bank that wants to undertake the intervention. The 1995 Federal Open Market Committee minutes in which Mattingly acknowledges gold swaps are still posted at the Fed's Internet site:
http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.p...
The gold price suppression scheme was a matter of public record in July 1998, six months before GATA was formed, when Federal Reserve Chairman Alan Greenspan told Congress: "Central banks stand ready to lease gold in increasing quantities should the price rise." That is, Greenspan himself, supposedly the greatest among the central bankers, contradicted the usual central bank explanation for leasing gold -- which was supposedly to earn a little interest on a dead asset -- and admitted that gold leasing is all about suppressing the price. Greenspan's admission is still posted at the Fed's Internet site:
http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm
Incidentally, while we gold bugs love to cite Greenspan's testimony from 1998 because of its reference to gold leasing, that testimony was mainly about something else, for which it is far more important today. For with that testimony Greenspan persuaded Congress not to regulate the sort of financial derivatives that lately have devastated the world financial system.
The Washington Agreement on Gold, made by the European central banks in 1999, was another admission -- no, a proclamation that central banks were working together to control the gold price. The central banks making the Washington Agreement claimed that, by restricting their gold sales and leasing, they meant to prevent the gold price from falling too hard. But even if you believed that explanation, it was still collusive intervention in the gold market. You can find the Washington Agreement at the World Gold Council's Internet site:
http://www.reserveasset.gold.org/central_bank_agreements/cbga1/
Barrick Gold, then the largest gold-mining company in the world, confessed to the gold price suppression scheme in U.S. District Court in New Orleans on February 28, 2003. That is when Barrick filed a motion to dismiss Blanchard & Co.'s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase, for rigging the gold market.
Barrick's motion claimed that in borrowing gold from central banks and selling it, the mining company had become the agent of the central banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be exempt from suit. Barrick's confession to the gold price suppression scheme is posted at GATA's Internet site:
http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf
The Reserve Bank of Australia confessed to the gold price suppression scheme in its annual report for 2003. "Foreign currency reserve assets and gold," the Reserve Bank's report said, "are held primarily to support intervention in the foreign exchange market." The bank's report is still posted at its Internet site:
http://www.rba.gov.au/PublicationsAndResearch/RBAAnnualReports/2003/Pdf/...
Maybe the most brazen admission of the Western central bank scheme to suppress the gold price was made by the head of the monetary and economic department of the Bank for International Settlements, William S. White, in a speech to a BIS conference in Basel, Switzerland, in June 2005.
There are five main purposes of central bank cooperation, White announced, and one of them is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." White's speech is posted at GATA's Internet site:
http://www.gata.org/node/4279
In January this year a remarkable 16-page memorandum was discovered in the archive of the late Federal Reserve Chairman William McChesney Martin. The memorandum is dated April 5, 1961, and is titled "U.S. Foreign Exchange Operations: Needs and Methods." It is a detailed plan of surreptitious intervention to rig the currency and gold markets to support the dollar and to conceal, obscure, or falsify U.S. government records and reports so that the rigging might not be discovered. This document remains on the Internet site of the Federal Reserve Bank of St. Louis:
http://fraser.stlouisfed.org/docs/historical/martin/23_06_19610405.pdf
In August this year the international journalist Max Keiser reported an interview he had with the Bundesbank, Germany's central bank, in which he was told that all of Germany's gold reserves were held in New York. That interview is posted at the YouTube Internet site:
http://www.youtube.com/watch?v=EzVhzoAqMhU
Some people saw the Bundesbank's admission as a suggestion that Germany's gold had become the tool of the U.S. government. GATA consultant Rob Kirby of Kirby Analytics in Toronto then pressed the Bundesbank for clarification. On August 24 the Bundesbank replied to Kirby by e-mail with a denial of Keiser's report, but the denial was actually pretty much a confirmation:
http://www.gata.org/node/7713
"The Deutsche Bundesbank," the reply said, "keeps a large part of its gold holdings in its own vaults in Germany, while some of its gold is also stored with the central banks located at major gold trading centers. This," the Bundesbank continued, "has historical and market-related reasons, the gold having been transferred to the Bundesbank at these trading centers. Moreover, the Bundesbank needs to hold gold at the various trading centers in order to conduct its gold activities."
The Bundesbank did not specify those "gold activities" and those "trading centers." But those "activities" can mean only that the Bundesbank is or recently has been surreptitiously active in the gold market, perhaps at the behest of others -- like the United States, the custodian of German gold.
In September this year a New York financial market professional and student of history named Geoffrey Batt posted at the Zero Hedge Internet site three declassified U.S. government documents involving the gold market.
The first was a long cable dated March 6, 1968, from someone named Deming at the U.S. Embassy in Paris to the State Department in Washington. It is posted at the Zero Hedge Internet site:
http://www.zerohedge.com/article/declassified-state-dept-data-highlights...
The cable described the strains on the London Gold Pool, the
gold-dishoarding mechanism established by the U.S. Treasury and the Bank of England to hold the gold price to the official price of $35 per ounce. The London Gold Pool was to last only six months longer.
The cable is a detailed speculation on what would have to be done to control the gold price and particularly to convince investors "that there is no point any more in speculating on an increase in the price of gold" and "to establish beyond doubt" that the world financial system "is immune to gold losses" by central banks.
The cable recommends creation of a "new reserve asset" with "gold-like qualities" to replace gold and prevent gold from gaining value. To accomplish this, the cable proposes "monthly or quarterly reshuffles" of gold reserves among central banks -- what the cable calls a "reshuffle club" that would apply gold where market intervention seemed most necessary.
These "reshuffles" sound like the central bank gold swaps of recent years.
The idea, the cable says, is for the central banks "to remain the masters of gold."
Also in September this year Zero Hedge's Geoffrey Batt disclosed a memorandum from the Central Intelligence Agency dated December 4, 1968, several months after the collapse of the London Gold Pool. This too is posted at the Zero Hedge Internet site:
http://www.zerohedge.com/article/cia-chimes-gold-control-highlights-hist...
The CIA memo said that to keep the dollar strong and prevent "a major outflow of gold," U.S. strategy would be:
" -- To isolate official from private gold markets by obtaining a pledge from central banks that they will neither buy nor sell gold except to each other."
And:
"-- To bring South Africa to sell its current production of gold in the private market, and thus keep the private price down."
The third declassified U.S. government document published by Geoffrey Batt at Zero Hedge, also in September this year, may be the most interesting, because it was written on June 3, 1975, four years after the last bit of official fixed convertibility of the dollar and gold had been eliminated and the world had been told that currencies henceforth would float against each other and gold and gold would be free trading.
The document is a seven-page memorandum from Federal Reserve Board Chairman Arthur Burns to President Gerald Ford. It is all about controlling the gold price through foreign policy and defeating any free market for gold. It is posted at the Zero Hedge Internet site as well:
http://www.zerohedge.com/article/smoking-gun-fed-controlling-gold
Burns tells the president: "I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt" -- that's Helmut Schmidt, West Germany's chancellor at the time -- "that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce."
Burns adds, "I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price."
While the Burns memo is consistent with the long-established interest of central banks in controlling the gold price, it was still 34 years ago. But now at last there has been a contemporaneous admission of U.S. government intervention in the gold market. It has come out of GATA's long Freedom of Information Act struggle with the U.S. Treasury Department and Federal Reserve for information about the U.S. gold reserves and gold swaps, information that has been denied to GATA on the grounds that it would compromise certain private proprietary interests. (Of course such a
denial, a denial based on proprietary interests, is in itself a suggestion that the U.S. gold reserve has been placed, at least partly, in private hands.)
Responding to President Obama's declaration, soon after his inauguration, that the federal government would be more open, GATA renewed its informational requests to the Fed and the Treasury. These requests concentrated on gold swaps. Of course both requests were denied again. But through its Washington lawyer, William J. Olson --
http://www.lawandfreedom.com -- GATA brought an appeal of the Fed's denial, and this appeal was directed to a full member of the Fed's Board of Governors, Kevin M. Warsh, formerly a member of the President's Working Group on Financial Markets, nicknamed the Plunge Protection Team. Warsh denied GATA's appeal but in his letter to our lawyer he let slip some stunning information:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
Warsh wrote: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4" -- that's Exemption 4 of the Freedom of Information Act -- "consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."
So there it is: The Federal Reserve today -- right now -- has gold swap arrangements with "foreign banks."
Eight years ago Fed Chairman Alan Greenspan and the general counsel of the Federal Open Market Committee, Virgil Mattingly, vigorously denied to GATA, through two U.S. senators who had inquired of the Fed on our behalf, that the Fed had gold swap arrangements, even though FOMC minutes from 1995 quote Mattingly as saying the U.S. has engaged in gold swaps:
http://www.gata.org/node/1181
But now the Fed admits such arrangements.
Of course Fed Governor Warsh did not say that the Fed has actually swapped any gold lately, only that it has arrangements to do so -- and, just as important, that the Fed does not want the public and the markets to know about those arrangements, does not want the public and the markets to know about the disposition of United States gold reserves.
GATA is preparing to sue the Fed in federal court to compel disclosure of these gold swap arrangements.
There is a reason for the Fed's insistence that the public and the markets must not know what the Fed is doing in the gold market.
It is because, as the documents compiled and publicized by GATA suggest, suppressing the gold price is part of the general surreptitious rigging of the currency, bond, and commodity markets by the U.S. and allied governments, because this market rigging is the foremost objective of U.S. foreign and economic policy, and because this rigging cannot work if it is exposed and the markets realize that they are not really markets at all.
And the rigging increasingly is being exposed and understood.
In complaining about the manipulation of the gold market, GATA has not been called "conspiracy nuts" by everyone. We have gained a good deal of institutional support over the years.
First came Sprott Asset Management in Toronto, which in 2004 issued a
comprehensive report supporting GATA. The report was written by Sprott's chief investment strategist, John Embry, and his assistant, Andrew Hepburn, and was titled "Not Free, Not Fair -- the Long-Term Manipulation of the Gold Price." It remains available at the Sprott Internet site:
http://www.sprott.com/docs/PressReleases/20_not_free_not_fair.pdf
Then in 2006 the Cheuvreux brokerage house of Credit Agricole, the major French bank, issued its own report confirming GATA's findings of manipulation in the gold market. The Cheuvreux report was titled "Remonetization of Gold: Start Hoarding," and you can find it at GATA's Internet site:
http://www.gata.org/files/CheuvreuxGoldReport.pdf
And in 2007 Citigroup -- yes, Citigroup, a pillar of the American financial establishment -- joined the supposed conspiracy nuts. It published a report titled "Gold: Riding the Reflationary Rescue," written by its analysts John H. Hill and Graham Wark, declaring: "Gold undoubtedly faced headwinds this year from resurgent central bank selling, which was clearly timed to cap the gold price." You can find the Citigroup report at GATA's Internet site:
http://www.gata.org/files/CitigroupGoldReport092107.pdf
Even those authorities who do not want to run afoul of government institutions that with a few computer keystrokes can create virtually infinite amounts of money may have to admit the opportunity for central banks to manipulate the gold market. For it is widely acknowledged that annual world gold production is about 2,400 tonnes, that annual net world gold demand is about 3,400 tonnes, that gold production has been falling as demand has been rising, and that the thousand-tonne gap between production and net demand has been filled mainly by central bank dishoarding and leasing.
What do you suppose the gold price would be if central banks were not supplying more than a quarter of annual demand?
That dishoarding was not all innocent management of a foreign exchange reserve portfolio. Much of it was meant as market intervention -- and after all, market intervention is exactly why central banking was invented.
Intervening in markets is what central banks do. They have no other purpose.
Central banks admit intervening often in the currency markets, buying and selling their own currencies and those of other governments to maintain exchange rates at what they consider politically desirable levels. Central banks admit doing the same in the government bond markets. There is even evidence that the Federal Reserve and Treasury Department have been intervening frequently in the U.S. stock markets since the crash of 1987.
You do not have to settle for rumors about the "Plunge Protection Team," also known as the President's Working Group on Financial Markets. Again you can just look at the public record.
The Federal Reserve injects billions of dollars into the stock and bond markets every week, on the public record, through the major New York financial houses, its so-called primary dealers in federal government bonds, using what are called repurchase agreements and the Fed's Primary Dealer Credit Facility. The financial houses thus have become the Fed's agents in directing that money into the markets. The recent rise in the U.S. stock market matches almost exactly the money funneled by the Fed to the New York financial houses through repurchase agreements and the Primary Dealer Credit Facility.
Meanwhile, for years the International Monetary Fund, the central bank of the central banks, has been openly intervening in the gold market by threatening to sell gold. The IMF said its intent in selling gold was to raise money to lend to poor nations. This explanation was ridiculous on its face, though the IMF has never been challenged about it in the financial press. No, the financial press has been happy to tell the world that central banks that lately have effortlessly conjured into existence fantastic amounts of money in many currencies could find a little money to help poor countries only by selling gold.
Of course the intent of the IMF and its member central banks was not to help poor countries but to intimidate the gold market and control the gold price.
That the IMF intimidated the gold market so long with this threat of gold sales was all the more remarkable because the IMF probably has never had any gold to sell in the first place.
In April 2008 I wrote to the managing director of the IMF, Dominque Strauss-Kahn, with five questions about the IMF's gold. I copied the letter to the IMF's press office by e-mail, and quickly began to get some answers from one of its press officers, Conny Lotze.
My first question to the IMF was: "Your Internet site says the IMF holds 3,217 metric tons of gold 'at designated depositories.' Which depositories are these?"
Conny Lotze of the IMF replied, but not specifically. She wrote: "The fund's gold is distributed across a number of official depositories." She noted that the IMF's rules designate the United States, Britain, France, and India as IMF depositories.
My second question was: "If you would prefer not to identify the depositories for security reasons, could you at least identify the national and private custodians of the IMF's gold and the amounts of IMF gold held by each?"
Conny Lotze replied, again not very specifically: "All of the designated depositories are official."
My third question was: "Is the IMF's gold at these depositories allocated -- that is, specifically identified as belonging to the IMF -- or is it merged with other gold in storage at these depositories?"
Conny Lotze replied, still not very specifically: "The fund's gold is properly accounted for at all its depositories."
My fourth question was: "Do the IMF's member countries count the IMF's gold as part of their own national reserves, or do they count and identify the IMF's gold separately?"
Conny Lotze replied a bit ambiguously: "Members do not include IMF gold within their reserves because it is an asset of the IMF. Members include their reserve position in the fund in their international reserves."
This sounded to me as if the IMF members were still counting as their own the gold that supposedly belongs to the IMF -- that the IMF members were just listing the gold assets in another column on their own books.
My fifth question to the IMF was: "Does the IMF have assurances from the depositories that its gold is not leased or swapped or otherwise encumbered? If so, what are these assurances?"
Conny Lotze replied: "Under the fund's Articles of Agreement it is not authorized to engage in these transactions in gold."
But I had not asked if the IMF itself was swapping or leasing gold. I had asked whether the custodians of the IMF's gold were swapping or leasing it.
This prompted me to raise one more question for Conny Lotze. I wrote her: "Is there any audit of the IMF's gold that is available to the public? I ask because, if the amount of IMF gold held by each depository nation is not public information, there does not seem to be much documentation for the IMF's gold, nor any documentation for the assurance that its custody is just fine. Without any details or documentation, the IMF's answer seems to be simply that it should be trusted -- that it has the gold it says it has, somewhere."
And that was the last I heard from Conny Lotze. She didn't answer me again. I had spoken a word that is increasingly unspeakable in the gold section of central banking: audit.
This week the IMF at last announced the disposal of some of the 400 tonnes of gold it long had been threatening to sell. Two hundred tonnes have been purchased by the Reserve Bank of India. This may or may not be a real transaction, a real transfer of gold from an IMF vault to a vault of the Reserve Bank of India. More likely this transaction is only a bookkeeping entry among IMF member central banks. But in any case it seems likely that the gold with which the IMF has been threatening the market for years is never going to hit the market, if it even exists. Rather, this gold will remain in the mysterious possession of central banks.
Lately central bankers often have complained about what they call "imbalances" in the world financial system. That is, certain countries, particularly in Asia, run big trade surpluses, while other countries, especially the United States, run big trade deficits and consume far more than they produce, living off the rest of the world. These complaints by the central bankers about "imbalances" are brazenly hypocritical, since these imbalances have been caused by the central banks themselves, caused by their constant interventions in the currency, bond, and commodity markets to prevent those markets from coming into balance through ordinary market action lest certain political interests be disturbed.
Yes, when markets balance themselves they often do it brutally, causing great damage to many of their participants. The United States enacted a central banking system in 1913 because for the almost 150 years before then the country went through a catastrophic deflation every decade or so. Central banking was created in the name of preventing those catastrophic deflations.
The problem with central banking has been mainly the old problem of power --- it corrupts.
Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest -- to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.
And so we have come to an era of daily market interventions by central banks -- so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all.
By manipulating the value of money, central banking controls the value of all labor, services, and real goods, and yet it is conducted almost entirely in secret -- because, in choosing winners and losers in the economy, advancing infinite amounts of money to some participants in the markets but not to others, administering the ultimate patronage, central banking cannot survive scrutiny.
Yet the secrecy of central banking now is taken for granted even in nominally democratic countries.
Maybe the Federal Reserve's intervention to rescue Bear Stearns through the Fed's de-facto subsidiary, JPMorganChase, will cause some devastating public inquiries by Congress and the news media. But what a hundred years ago in the United States was called the Money Power is so ascendant today that it sometimes even boasts of its privilege. What other agency of a democratic government could get away with the principle that was articulated on national television in the United States in 1994 by the vice chairman of the Federal Reserve, Alan Blinder? Blinder declared: "The last duty of a central banker is to tell the public the truth."
The truth as GATA sees it is this:
First, gold is the secret knowledge of the financial universe, but it is becoming an open secret. That is GATA's work -- to break the secret open, to show how the gold price has been suppressed by central bank creation of imaginary gold in amounts to match and thus help conceal the vast inflation of the world's money supply. We will continue to use freedom-of-information law against the Fed and the Treasury Department about their policies toward gold and the disposition of the U.S. gold reserve. Of course central banks can no more afford to account fully for their gold reserves than the Fed and JPMorganChase can afford to disclose details of their negotiations for the rescue of Bear Stearns. Indeed, as my correspondence with the IMF suggests, the disposition of Western central bank gold reserves is a secret more closely guarded than the blueprints for the manufacture of nuclear weapons.
Why can't the public and the markets be permitted to know exactly where central bank gold reserves are? Because in the hands of governments gold is a deadly weapon -- as the Reserve Bank of Australia acknowledges, the main weapon of currency market intervention.
Second, all technical analysis of markets now is faulty if it fails to account for pervasive government intervention.
And third, the intervention against gold is failing because of overuse, exposure, exhaustion of Western central bank gold reserves -- we estimate that the Western central banks have in their vaults only about half the 32,000 tonnes they claim to have -- and the resentment of the developing world, which is starting to figure out how it has been expropriated by the dollar system, a system in which people do real work and create real goods and send them to the United States in exchange for mere colored paper and electrons.
For years now the Western central banks have been attempting a controlled retreat with gold, bleeding out their reserves with sales, leases, and derivatives so that gold's ascent and the dollar's inevitable decline may be less shocking. Central bankers often convey part of this strategy in code; they warn against what they call a "disorderly decline" in the dollar, as if an "orderly" decline is all right.
The rise in the gold price over the last decade is just the other side of that coin -- an "orderly" rise, 15 percent or so per year, a rise carefully modulated by surreptitious central bank intervention.
But GATA believes that the central banks may have to retreat farther with gold than anyone dreams, and far more abruptly than they have retreated so far. We believe that when the central banks are overrun in the gold market, as they were overrun in 1968, and the market begins to reflect the ratio between, on one hand, the supply of real gold, actual metal, not the voluminous paper promises of metal, and, on the other hand, the explosion of the world money supply of the last few decades -- as the market begins to perceive the difference between the real and the unreal -- there may not be enough zeroes to put behind the gold price.
A century ago Rudyard Kipling wrote a poem that foresaw the decline of the empire of his country, Great Britain. Kipling's poem attributed this decline to the loss of the old virtues, the virtues that were listed at the top of the pages in the special notebooks, called "copybooks," that were given to British schoolchildren at that time -- virtues like honesty, fair dealing, Ten Commandments stuff. The title of Kipling's poem is "The Gods of the Copybook Headings," and its conclusion is a warning to the empire that succeeded the one he was living in:
Then the Gods of the Market tumbled,
And their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled
And began to believe it was true
That All is not Gold that Glitters,
And Two and Two make Four,
And the Gods of the Copybook Headings
Limped up to explain it once more.
As it will be in the future,
It was at the birth of Man.
There are only four things certain
Since Social Progress began:
That the Dog returns to his Vomit
And the Sow returns to her Mire,
And the burnt Fool's bandaged finger
Goes wabbling back to the Fire;
And that after this is accomplished,
And the brave new world begins,
When all men are paid for existing
And no man must pay for his sins,
As surely as Water will wet us,
As surely as Fire will burn,
The Gods of the Copybook Headings
With terror and slaughter return.
The gold price suppression story is important despite this week's dramatic rise in the gold price. For even as the price of gold has been rising, we really don't yet know what a fair price, a free-market price, for gold is, since gold has not traded in a free market for many years and is not trading in a free market now.
Indeed, since central bank intervention in the currency, bond, equities, and commodity markets has exploded over the last year, we don't really know what the market price of anything is anymore. Thus the gold price suppression story is a story about the valuation of all capital and labor in the world -- and whether those values will be set openly in free markets, the democratic way, or secretly by governments, the totalitarian way.
The specifics of the gold price suppression operation are complicated, but you don't have to remember them all if you know what they mean.
They mean that there is a currency war going on between countries and their central banks. There has been such a war for many years, only the victims were not really fighting back. Now some of them are. Signs of this war are now everywhere -- like the story published a month ago by the British newspaper The Independent that described an international plan to replace the dollar in oil trading:
http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar...
Gold and silver have been and remain currencies and will be remonetized by markets eventually if not by central banks as well, because gold and silver are the only neutral currencies, the only currencies that are not the liabilities of any particular country.
But when you invest in currencies like gold and silver, you risk getting caught in the crossfire of the currency war. As in any war, truth is the first casualty in the currency war, even as secrecy is always the first principle of central banking.
http://www.gata.org/node/7997
24 September 2009
Federal Reserve Admits Hiding Gold Swap Arrangements, GATA Says
Federal Reserve Admits Hiding Gold Swap Arrangements, GATA Says
MANCHESTER, Conn.--(BUSINESS WIRE)--The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.
The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.
The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)
The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.
Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."
When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)
The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
While the letter, GATA says, is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242 and http://www.gata.org/node/7096), it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.
GATA will seek to bring a lawsuit in federal court to appeal the Fed's denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed's admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.
In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for financial support from the public and from all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:
http://www.gata.org/node/16
People also can help GATA by bringing this information to the attention of financial news organizations and urging them to investigate the Fed's involvement in gold swaps particularly and the gold (and silver) price suppression generally.
MANCHESTER, Conn.--(BUSINESS WIRE)--The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.
The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.
The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)
The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.
Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."
When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)
The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
While the letter, GATA says, is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242 and http://www.gata.org/node/7096), it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.
GATA will seek to bring a lawsuit in federal court to appeal the Fed's denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed's admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.
In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for financial support from the public and from all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:
http://www.gata.org/node/16
People also can help GATA by bringing this information to the attention of financial news organizations and urging them to investigate the Fed's involvement in gold swaps particularly and the gold (and silver) price suppression generally.
12 July 2009
Fraud in the Gold Pits of the Comex revealed...
Commodity exchanges can dump gold debts on ETFs
Submitted by cpowell on 10:11AM ET Saturday, July 11, 2009. Section: Daily Dispatches
1p ET Saturday, July 11, 2009
Dear Friend of GATA and Gold:
GATA board member Adrian Douglas discloses in the report below, titled "The Alchemists," that the New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold.
Thus it is likely that the paper claims to the world's supply of gold are greater than even GATA has suspected -- that the gold supply is even more oversubscribed and that "paper gold" is being created at an ever more frantic rate to suppress gold's price.
The ability to offload futures contract gold obligations to the ETFs could become the principal mechanism of the gold price suppression scheme. GATA asks its supporters to call Douglas' report to the attention of financial journalists, market regulators, and elected officials everywhere.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
The Alchemists
By Adrian Douglas
Saturday, July 11, 2009
In the Middle Ages alchemists toiled in vain to transmute lead into gold. One wonders why they used such an expensive starting material, such as lead, when modern alchemists in the gold world have succeeded in transmuting paper into gold. This article reveals the anatomy of a scam that has been perpetrated on investors and goes a long way to explain and tie together developments in the precious metals markets in recent years.
As many readers may know, I have recently been reporting on how delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the "flow" of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?
The COMEX states:
- - - -
Delivery:
Gold delivered against the futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository licensed by the Exchange."
This seems unequivocal until you find this exception:
Exchange of Futures for Physicals (EFP)
The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.
- - - -
The COMEX trading rulebook clarifies further:
- - - -
104.36 Exchange of Futures for, or in Connection with, Product (Physical)
(A) An exchange of futures for, or in connection with, product (EFP) consists of two discrete, but related, transactions; a cash transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be the seller and the buyer of a quantity of the physical product covered by this Section. The quantity of physical product must be approximately equivalent to the quantity covered by the futures contract.
- - - -
So what this means is that contracts can essentially be settled without going through the COMEX warehouse. Futures contracts and a physical commodity equivalent can be exchanged outside of the exchange and an EFP form can be filed to the clearing department at the COMEX. What's more, the physical commodity doesn't have to meet the specification of the COMEX Gold Contract of being a 100 troy ounce bar or three 1Kg bars of .995 fineness.
So what can be delivered as the physical gold commodity?
This is where it gets very interesting. On February 18, 2005, the NYMEX, parent of the COMEX, issued this announcement:
- - - -
http://www.cftc.gov/files/submissions/rules/selfcertifications/2005/rul0...
Exchange Rule 104.36, which governs exchange of futures for physicals ('EFP') transactions on the COMEX Division, refers to a 'physical commodity' as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.
The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds ('ETF') shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.
Thus, acceptable gold-backed and exchange-traded ETF funds include, but are not limited to, the iSharesCOMEX Gold Trust (ticker: IAU), which began trading on the American Stock Exchange on January 28, 2005.
The trust is an exchange-traded fund that provides a means of obtaining a level of participation in the gold market through the securities market. The trust shares are intended to constitute a means of making an investment similar to an investment in gold. Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold held by a custodian on behalf of the trust. The shares of that trust are expected to reflect the price of gold less the trust's expenses and liabilities.
- - - -
So the gold ETF with the symbol IAU started trading on January 28, 2005, and three short weeks later the shares of IAU became equivalent to real physical gold in the eyes of the COMEX for delivery against futures contracts in an EFP transaction! I
If that doesn't blow your socks off, I don't know what will.
Also note that the ETF mentioned is a COMEX product! How convenient!
Where are the regulators? This ETF is not equivalent to gold. Note the description: "Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold."
All that is being guaranteed is that each share is a fraction of the ETF assets. The net assets could be 1 oz of gold while the face value of the total shares sold could be 100 million ounces!
The notice does not restrict which gold ETFs are eligible, so clearly the infamous GLD is also eligible to be considered as good as physical gold in an EFP transaction.
Right from the inception of the gold ETFs GLD and SLV, the Gold Anti-Trust Action Committee has deduced from studies of the ETF prospectuses that these funds very likely do not hold gold and silver to fully back the issued shares because the prospectuses don't categorically require it. (See footnotes 1 and 2.) In fact, the ETFs may have no gold or silver at all.
What seemed bizarre to GATA at the time was that the two mega-short anti-gold investment banks, JPMorgan and HSBC, would be involved in the launch and operation of precious metal investments that, on the face of it, would create huge investor demand for the very metals in which the banks hold massive and clearly manipulative concentrated short positions.
Now all becomes clear. The system is the ultimate alchemy. If ETF shares are NOT backed by gold but are accepted by the COMEX as equivalent to physical gold ... presto! You have turned paper into gold -- and paper is a lot cheaper than lead.
A futures market is supposed to provide price discovery for a commodity. In the gold market this notion has been hijacked because settlement can be made with a derivative instrument, such as an unbacked or partially backed ETF share. If that derivative instrument is not backed by gold on a 1:1 basis the scheme allows an artificial apparent increase in the supply of gold and so distorting price discovery toward lower prices.
Such a scam would be in grave danger of becoming exposed if anyone knew the true inventory condition of the vaults of the ETFs. That problem is easily solved by having HSBC be the custodian of GLD and JPMorgan be the custodian of SLV.
I have not found anywhere that COMEX accepts ETFs as an equivalent to physical silver for an EFP transaction, which probably explains why silver warehouse movements are much larger than those of gold, and perhaps may indicate that physical silver is the cartel's Achilles heel.
We have all wondered how GLD could have amassed a stunning 1,100 tons of gold in less than five years without the gold price exploding. This represents buying 10 percent of all global gold output each year. What's more, in the last nine months the ETF holdings almost doubled, adding approximately 500 tonnes or 23 percent of annual global production. And this when the signatories to the second Washington Agreement on Gold have reduced their gold sales to a trickle, from 500 tonnes per year. If the GLD shares are unbacked or only partially backed by gold, the alleged 1,100-tonnes gold holding would be easy to achieve with just the use of a printing press for the share certificates.
In looking at COMEX reports the EFP transactions are reported under "Other Volume." This category is huge compared to delivery notices. For example, on July 8, 2009, the gold price fell by $20. Looking at the relevant COMEX report --
http://www.cmegroup.com/trading/energy-metals/files/cmxopint070809.pdf
-- on Page 4 "Other Volume" is 9,540 contracts or 954,000 ounces, while the much more visible delivery notices were only 17 contracts or 1,700 ounces! Judging from many reports the "Other Volume" category is orders of magnitude larger than the delivery notices.
What I don't know is how many of these trades are settled with the COMEX-approved gold equivalent ETFs or even if any are. I have sent an email to the COMEX to ask them. I won't hold my breath for a reply. My guess is that a lot of EFPs are settled this way, which would account in part for the meteoric issue of GLD shares. But the COMEX should be transparent; it should be required to publish exactly what is being traded as "Other Volume." In fact if the COMEX wants to be above suspicion it should insist in its rules that EFPs must be settled with gold that meets exactly the COMEX gold contract specification. The EFP then would facilitate delivery instead of facilitating a change in delivery obligations.
Why was it necessary to introduce a mechanism to exchange ETF shares in lieu of physical gold? Where there is smoke there is fire.
What I don't know is how many of these trades are settled with the COMEX-approved gold equivalent ETFs. I have sent an email to the COMEX to ask them. I won't hold my breath for a reply. My guess is that a lot of EFPs are settled this way, which would account in part for the meteoric issue of GLD shares.
Adding credence to this supposition is that GLD has gained wide acceptance with mutual funds, pension funds, and university endowment funds. Many sophisticated investors believe ETFs to be equivalent to investing in bullion. This makes this fiat paper bullion scam easy to perpetrate.
It would appear that the COMEX gold warehouse is merely a window dressing displaying an almost static 2.5 million ounces of dealer-owned gold inventory. But it would appear the vast majority of settlement occurs out of the average investor's view AND, therefore, out of the view of the regulators.
This means that the COMEX is not what it seems. Delivery for an EFP only needs to be "substantially the economic equivalent" of the deliverable commodity! A default could occur at any time if this sorcery of swapping paper for paper suffered a serious setback.
The members of the Gold Cartel must be very proud of themselves for succeeding where the ancient alchemists failed. In fact, they are so proud they decided they didn't need to limit the scam to the COMEX. They have implemented it on the Tokyo Commodity Exchange too.
On October 29, 2008, the TOCOM made the following announcement:
- - - -
Based on the Memorandum of Understanding signed in January this year, The Tokyo Commodity Exchange (TOCOM) and Tokyo Stock Exchange (TSE) have launched 'Inter-market Cooperation Workshop' in efforts to improve convenience for participants of both markets, and studied to reinforce cooperation between the commodity market and the stock market.
In light of the study at the workshop, TOCOM has added a 'physically backed commodity ETF' as a possible physical for EFP (Exchange of Futures for Physicals) transactions at the exchange, which allows seller and the buyer, who holds agreement for physical transactions, to conclude the contracts in the commodity futures market without continuous trading of physicals.
Therefore, the SPDR Gold Shares, physically backed commodity ETF listed on the TSE, which has a correlation with the gold spot price, can now be used as a physical for EFP transaction on TOCOM's gold market.
Thanks to this new arrangement, it is expected that the link between TSE's SPDR Gold Shares market and the TOCOM gold market will be strengthened and that the price reliability, as well as the liquidity of both markets, will be enhanced.
For inquiries about this news release, please contact:
Planning Department, The Tokyo Commodity Exchange
http://www.tocom.or.jp/news/2008/20081105-1.html
- - - -
Notice the comment that the "liquidity of both markets will be enhanced." There can be little doubt about that! They can print as many ETF shares as they want and they can then settle as many EFPs as they want ... and guess what happens to the price of gold with such an apparent increase in liquidity. Yes, it will be suppressed. As they said in the release, "the price reliability will be enhanced."
Now that reminds me of Alan Greenspan, who said, "Central Banks stand ready to lease gold in increasing quantities should the price rise." But why get the central banks to lease the real stuff when an ETF can print up an IOU that the unsuspecting investor will accept to be as good as gold?
Does this mean that the alchemists of the Gold Cartel have discovered the Elixir of Life for their gold suppression scheme so that it will go on forever?
No, absolutely not. Faith in anything paper is going out of fashion. California is shortly going to discover that people don't like IOUs. Central banks outside of the G7 countries are buying gold, and I am sure they know about this alchemy. I doubt that the Chinese will accept GLD shares for settlement of futures contracts.
If you want an investment in bullion, then make sure you have an investment in bullion. In my opinion what I have presented here, and what other analysts have written, indicate that GLD and SLV are not investments in bullion. They are mere IOUs in bullion. Take physical delivery of gold and silver from the COMEX. They have only 2.5 million ounces of the real stuff in the gold inventory. That is a paltry $2.3 billion at today's price.
The Gold Cartel is desperate to suppress gold and keep the dream of a "strong dollar" alive along with maintaining low interest rates by using a mechanism described by Professors Summers and Barsky in their research paper "Gibson's Paradox and the Gold Standard." The London Gold Pool used real gold to try to suppress the gold market, and it failed. The paper IOU is going to be even less successful. Imagine what will happen to the gold price when the holders of the paper IOUs go looking for physical gold instead. The Gold Cartel has built a dam on the river of physical gold demand, thinking that it is clever enough to defy the laws of supply and demand. Wait until the dam bursts to experience gold fever such has never been seen before.
Buy real gold and silver before the dam bursts!
* * *
References
[1] "The Paper Game" by James Turk
http://www.financialsense.com/editorials/turk/2007/0305.html
[2] "Unanswered Questions about the Silver ETF" by James Turk
http://goldismoney.info/forums/showthread.php?t=125607
-----
Adrian Douglas is a market analyst and CEO of the Market Force Analysis newsletter (http://www.marketforceanalysis.com). He graduated in 1980 from Cambridge University, England, in natural sciences. For 20 years he worked in the oil and gas industry, where he held senior management positions in marketing and sales. He now runs his own consultancy and has been contracted by the largest companies in the oilfield services sector. His study of enterprise pricing and commercial markets led to his interest in the market pricing mechanisms of financial assets. As a result he developed a unique algorithm and methodology for analyzing financial futures markets and in particular for identifying appropriate entry and exit points. The technique has been named "market force analysis" and two patents have been filed on his techniques. He has a particular interest in the precious metals markets and serves on the Board of Directors of the Gold Anti-Trust Action Committee.
Submitted by cpowell on 10:11AM ET Saturday, July 11, 2009. Section: Daily Dispatches
1p ET Saturday, July 11, 2009
Dear Friend of GATA and Gold:
GATA board member Adrian Douglas discloses in the report below, titled "The Alchemists," that the New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold.
Thus it is likely that the paper claims to the world's supply of gold are greater than even GATA has suspected -- that the gold supply is even more oversubscribed and that "paper gold" is being created at an ever more frantic rate to suppress gold's price.
The ability to offload futures contract gold obligations to the ETFs could become the principal mechanism of the gold price suppression scheme. GATA asks its supporters to call Douglas' report to the attention of financial journalists, market regulators, and elected officials everywhere.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
The Alchemists
By Adrian Douglas
Saturday, July 11, 2009
In the Middle Ages alchemists toiled in vain to transmute lead into gold. One wonders why they used such an expensive starting material, such as lead, when modern alchemists in the gold world have succeeded in transmuting paper into gold. This article reveals the anatomy of a scam that has been perpetrated on investors and goes a long way to explain and tie together developments in the precious metals markets in recent years.
As many readers may know, I have recently been reporting on how delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the "flow" of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?
The COMEX states:
- - - -
Delivery:
Gold delivered against the futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository licensed by the Exchange."
This seems unequivocal until you find this exception:
Exchange of Futures for Physicals (EFP)
The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.
- - - -
The COMEX trading rulebook clarifies further:
- - - -
104.36 Exchange of Futures for, or in Connection with, Product (Physical)
(A) An exchange of futures for, or in connection with, product (EFP) consists of two discrete, but related, transactions; a cash transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be the seller and the buyer of a quantity of the physical product covered by this Section. The quantity of physical product must be approximately equivalent to the quantity covered by the futures contract.
- - - -
So what this means is that contracts can essentially be settled without going through the COMEX warehouse. Futures contracts and a physical commodity equivalent can be exchanged outside of the exchange and an EFP form can be filed to the clearing department at the COMEX. What's more, the physical commodity doesn't have to meet the specification of the COMEX Gold Contract of being a 100 troy ounce bar or three 1Kg bars of .995 fineness.
So what can be delivered as the physical gold commodity?
This is where it gets very interesting. On February 18, 2005, the NYMEX, parent of the COMEX, issued this announcement:
- - - -
http://www.cftc.gov/files/submissions/rules/selfcertifications/2005/rul0...
Exchange Rule 104.36, which governs exchange of futures for physicals ('EFP') transactions on the COMEX Division, refers to a 'physical commodity' as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.
The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds ('ETF') shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.
Thus, acceptable gold-backed and exchange-traded ETF funds include, but are not limited to, the iSharesCOMEX Gold Trust (ticker: IAU), which began trading on the American Stock Exchange on January 28, 2005.
The trust is an exchange-traded fund that provides a means of obtaining a level of participation in the gold market through the securities market. The trust shares are intended to constitute a means of making an investment similar to an investment in gold. Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold held by a custodian on behalf of the trust. The shares of that trust are expected to reflect the price of gold less the trust's expenses and liabilities.
- - - -
So the gold ETF with the symbol IAU started trading on January 28, 2005, and three short weeks later the shares of IAU became equivalent to real physical gold in the eyes of the COMEX for delivery against futures contracts in an EFP transaction! I
If that doesn't blow your socks off, I don't know what will.
Also note that the ETF mentioned is a COMEX product! How convenient!
Where are the regulators? This ETF is not equivalent to gold. Note the description: "Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold."
All that is being guaranteed is that each share is a fraction of the ETF assets. The net assets could be 1 oz of gold while the face value of the total shares sold could be 100 million ounces!
The notice does not restrict which gold ETFs are eligible, so clearly the infamous GLD is also eligible to be considered as good as physical gold in an EFP transaction.
Right from the inception of the gold ETFs GLD and SLV, the Gold Anti-Trust Action Committee has deduced from studies of the ETF prospectuses that these funds very likely do not hold gold and silver to fully back the issued shares because the prospectuses don't categorically require it. (See footnotes 1 and 2.) In fact, the ETFs may have no gold or silver at all.
What seemed bizarre to GATA at the time was that the two mega-short anti-gold investment banks, JPMorgan and HSBC, would be involved in the launch and operation of precious metal investments that, on the face of it, would create huge investor demand for the very metals in which the banks hold massive and clearly manipulative concentrated short positions.
Now all becomes clear. The system is the ultimate alchemy. If ETF shares are NOT backed by gold but are accepted by the COMEX as equivalent to physical gold ... presto! You have turned paper into gold -- and paper is a lot cheaper than lead.
A futures market is supposed to provide price discovery for a commodity. In the gold market this notion has been hijacked because settlement can be made with a derivative instrument, such as an unbacked or partially backed ETF share. If that derivative instrument is not backed by gold on a 1:1 basis the scheme allows an artificial apparent increase in the supply of gold and so distorting price discovery toward lower prices.
Such a scam would be in grave danger of becoming exposed if anyone knew the true inventory condition of the vaults of the ETFs. That problem is easily solved by having HSBC be the custodian of GLD and JPMorgan be the custodian of SLV.
I have not found anywhere that COMEX accepts ETFs as an equivalent to physical silver for an EFP transaction, which probably explains why silver warehouse movements are much larger than those of gold, and perhaps may indicate that physical silver is the cartel's Achilles heel.
We have all wondered how GLD could have amassed a stunning 1,100 tons of gold in less than five years without the gold price exploding. This represents buying 10 percent of all global gold output each year. What's more, in the last nine months the ETF holdings almost doubled, adding approximately 500 tonnes or 23 percent of annual global production. And this when the signatories to the second Washington Agreement on Gold have reduced their gold sales to a trickle, from 500 tonnes per year. If the GLD shares are unbacked or only partially backed by gold, the alleged 1,100-tonnes gold holding would be easy to achieve with just the use of a printing press for the share certificates.
In looking at COMEX reports the EFP transactions are reported under "Other Volume." This category is huge compared to delivery notices. For example, on July 8, 2009, the gold price fell by $20. Looking at the relevant COMEX report --
http://www.cmegroup.com/trading/energy-metals/files/cmxopint070809.pdf
-- on Page 4 "Other Volume" is 9,540 contracts or 954,000 ounces, while the much more visible delivery notices were only 17 contracts or 1,700 ounces! Judging from many reports the "Other Volume" category is orders of magnitude larger than the delivery notices.
What I don't know is how many of these trades are settled with the COMEX-approved gold equivalent ETFs or even if any are. I have sent an email to the COMEX to ask them. I won't hold my breath for a reply. My guess is that a lot of EFPs are settled this way, which would account in part for the meteoric issue of GLD shares. But the COMEX should be transparent; it should be required to publish exactly what is being traded as "Other Volume." In fact if the COMEX wants to be above suspicion it should insist in its rules that EFPs must be settled with gold that meets exactly the COMEX gold contract specification. The EFP then would facilitate delivery instead of facilitating a change in delivery obligations.
Why was it necessary to introduce a mechanism to exchange ETF shares in lieu of physical gold? Where there is smoke there is fire.
What I don't know is how many of these trades are settled with the COMEX-approved gold equivalent ETFs. I have sent an email to the COMEX to ask them. I won't hold my breath for a reply. My guess is that a lot of EFPs are settled this way, which would account in part for the meteoric issue of GLD shares.
Adding credence to this supposition is that GLD has gained wide acceptance with mutual funds, pension funds, and university endowment funds. Many sophisticated investors believe ETFs to be equivalent to investing in bullion. This makes this fiat paper bullion scam easy to perpetrate.
It would appear that the COMEX gold warehouse is merely a window dressing displaying an almost static 2.5 million ounces of dealer-owned gold inventory. But it would appear the vast majority of settlement occurs out of the average investor's view AND, therefore, out of the view of the regulators.
This means that the COMEX is not what it seems. Delivery for an EFP only needs to be "substantially the economic equivalent" of the deliverable commodity! A default could occur at any time if this sorcery of swapping paper for paper suffered a serious setback.
The members of the Gold Cartel must be very proud of themselves for succeeding where the ancient alchemists failed. In fact, they are so proud they decided they didn't need to limit the scam to the COMEX. They have implemented it on the Tokyo Commodity Exchange too.
On October 29, 2008, the TOCOM made the following announcement:
- - - -
Based on the Memorandum of Understanding signed in January this year, The Tokyo Commodity Exchange (TOCOM) and Tokyo Stock Exchange (TSE) have launched 'Inter-market Cooperation Workshop' in efforts to improve convenience for participants of both markets, and studied to reinforce cooperation between the commodity market and the stock market.
In light of the study at the workshop, TOCOM has added a 'physically backed commodity ETF' as a possible physical for EFP (Exchange of Futures for Physicals) transactions at the exchange, which allows seller and the buyer, who holds agreement for physical transactions, to conclude the contracts in the commodity futures market without continuous trading of physicals.
Therefore, the SPDR Gold Shares, physically backed commodity ETF listed on the TSE, which has a correlation with the gold spot price, can now be used as a physical for EFP transaction on TOCOM's gold market.
Thanks to this new arrangement, it is expected that the link between TSE's SPDR Gold Shares market and the TOCOM gold market will be strengthened and that the price reliability, as well as the liquidity of both markets, will be enhanced.
For inquiries about this news release, please contact:
Planning Department, The Tokyo Commodity Exchange
http://www.tocom.or.jp/news/2008/20081105-1.html
- - - -
Notice the comment that the "liquidity of both markets will be enhanced." There can be little doubt about that! They can print as many ETF shares as they want and they can then settle as many EFPs as they want ... and guess what happens to the price of gold with such an apparent increase in liquidity. Yes, it will be suppressed. As they said in the release, "the price reliability will be enhanced."
Now that reminds me of Alan Greenspan, who said, "Central Banks stand ready to lease gold in increasing quantities should the price rise." But why get the central banks to lease the real stuff when an ETF can print up an IOU that the unsuspecting investor will accept to be as good as gold?
Does this mean that the alchemists of the Gold Cartel have discovered the Elixir of Life for their gold suppression scheme so that it will go on forever?
No, absolutely not. Faith in anything paper is going out of fashion. California is shortly going to discover that people don't like IOUs. Central banks outside of the G7 countries are buying gold, and I am sure they know about this alchemy. I doubt that the Chinese will accept GLD shares for settlement of futures contracts.
If you want an investment in bullion, then make sure you have an investment in bullion. In my opinion what I have presented here, and what other analysts have written, indicate that GLD and SLV are not investments in bullion. They are mere IOUs in bullion. Take physical delivery of gold and silver from the COMEX. They have only 2.5 million ounces of the real stuff in the gold inventory. That is a paltry $2.3 billion at today's price.
The Gold Cartel is desperate to suppress gold and keep the dream of a "strong dollar" alive along with maintaining low interest rates by using a mechanism described by Professors Summers and Barsky in their research paper "Gibson's Paradox and the Gold Standard." The London Gold Pool used real gold to try to suppress the gold market, and it failed. The paper IOU is going to be even less successful. Imagine what will happen to the gold price when the holders of the paper IOUs go looking for physical gold instead. The Gold Cartel has built a dam on the river of physical gold demand, thinking that it is clever enough to defy the laws of supply and demand. Wait until the dam bursts to experience gold fever such has never been seen before.
Buy real gold and silver before the dam bursts!
* * *
References
[1] "The Paper Game" by James Turk
http://www.financialsense.com/editorials/turk/2007/0305.html
[2] "Unanswered Questions about the Silver ETF" by James Turk
http://goldismoney.info/forums/showthread.php?t=125607
-----
Adrian Douglas is a market analyst and CEO of the Market Force Analysis newsletter (http://www.marketforceanalysis.com). He graduated in 1980 from Cambridge University, England, in natural sciences. For 20 years he worked in the oil and gas industry, where he held senior management positions in marketing and sales. He now runs his own consultancy and has been contracted by the largest companies in the oilfield services sector. His study of enterprise pricing and commercial markets led to his interest in the market pricing mechanisms of financial assets. As a result he developed a unique algorithm and methodology for analyzing financial futures markets and in particular for identifying appropriate entry and exit points. The technique has been named "market force analysis" and two patents have been filed on his techniques. He has a particular interest in the precious metals markets and serves on the Board of Directors of the Gold Anti-Trust Action Committee.
11 May 2009
Murray Pollitt: The gold monetization scheme is ending ~ GATA
Submitted by cpowell on 02:43AM ET Sunday, May 10, 2009. Section: Daily Dispatches
By Murray Pollitt
Pollitt & Co., Toronto
Thursday, April 30, 2009
The G8 appears finished but their policymakers continue to try to bend the G20, and the world, to their will. The establishment, the Fed, the Bank of England, the Bank for International Settlements, the same gang that has been setting policy for decades, is still at it. They appear to remain in charge (with nary a whimper of criticism about the trillions of dollars' worth of damage their policies have caused) but, when it comes to gold, they are slowly losing their grip.
Besides setting the stage decades ago for sub-prime paper, CDSs, and so on, it appears policymakers embarked on a scheme, at more or less the same time, to monetize the hundreds of billions of dollars' worth of gold lying sterile in central bank vaults. The temptation was too much. One-percent income on gold for a central bank was better than nothing, so the argument ran, and for the Lehman types borrowing gold (and selling it) provided lots of money (capital) to play games with.
It was so easy. Besides, the gold carry trade involved selling lots of gold into the market and this helped keep the price down (and hopefully the dollar up), a subject near and dear to policymakers.
It also led to: a) huge mine hedging with the two biggest miners, each with a link to Morgan, together short over 30 million ounces ("making money on gold in the ground" was the argument) and b) significant outright central bank sales, which may have been interventionist or may have been for portfolio diversification, however ill-advised.
And if banks and markets didn't always follow the script, there was always high-level intervention. To illustrate the mindset, in 2004 one William White, advisor to the BIS, talked about the need for "international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." The idea of rigging markets is as old as the hills, and if the government is on your side. ...
Anyway, the great gold monetization (mobilization?) scheme appears to have started in the 1980s and the following events that, in part, characterize it are not necessarily in sequence.
1) Goldman bought gold dealer J. Aron.
2) In an early gold carry trade, Drexel borrowed hundreds of tonnes of gold from Portugal.
3) All the big swinging banks sought to get into the gold game and they bought all the London gold dealers except Rothschild, which was definitely in on the game on its own.
4) Mine hedging was pushed very hard, to a peak of about 120 million ounces.
5) Greenspan and others dropped broad hints that central Banks stood "ready" to supply gold to the market.
6) Drexel went broke and it apparently took Portugal five years to recover its gold.
7) Two long-term gold players, Republic and Safra, each with a somewhat checkered past, had a shotgun wedding. Later Mr. Safra was fried to death in his Monte Carlo apartment, presumably for nonrepayment of gold.
8) Two of the largest American players, JP Morgan and Chase, also had a shotgun wedding and now carry more gold derivatives than can be imagined.
9) Much of the Drexel brain trust apparently went to work for AIG, which promptly started boasting about mine hedging.
10) HSBC (often advised by Paul Volcker) bought Midland Bank (which had earlier bought bullion dealer Samuel Montagu) and, in another shotgun wedding, bought Republic, transactions that made HSBC one of the major gold players. HSBC's U.S. subsidiary is now the custodian for the SPDR ETF.
11) When the gold price started to move up, Rothschild said enough and sold its "book" (at a loss?) to Barclays.
12) Finally there was recently a shotgun wedding between Dresdner bank and Commerzbank.
Crisp details are rare, but the past generation has seen hundreds of millions of ounces of gold bled into the market. Canadian and Australian gold reserves are gone; Britain, Switzerland, and many others are down by two-thirds.
But this doesn't count the gold that has been lent. In general it seems that the same sort of banks that got into trouble investing in high-yield, low-quality sub- prime paper have also taken short positions in low-yield, high-quality gold. Too many favorite-son banks are on the wrong side of the market for policymakers to be rational. Given the option between common sense and helping a bank, well, the record is clear. This is probably the main reason the establishment remains anti-gold today -- the old ideological reasons are not that relevant.
So once again they trot out the idea of International Monetary Fund gold sales. What rubbish. The IMF hasn't sold gold since the 1970s, but every year the idea is advanced to frighten the gold market. Why would the IMF sell $10 billion of gold when central banks are printing $10 billion of new money every day? Gold is the only IMF asset worth 100 cents on the dollar -- everything else is junk.
As well the establishment hammers on the idea that the gold price is high, and GFMS continues its weird forecasts.
Well, the gold price is not high. Oil and several other commodities have outperformed gold since World War II. A good underground gold mine may grade 5 parts per million (ppm) while a good open pit may grade 1 ppm.
Nobody who has said the gold price is high has ever spent a nine-hour shift drilling rock -- it's a tough business. God only knows the blood-to-gold ratio for old Roman mines in Spain or Spanish mines in Peru, and getting the gold from mine to home base was often not easy. Much Victorian gold went from Ashanti by caravan through Timbuktu, the Sahara, and on to Europe -- the Brits were hardly keen to auction it off then.
Gold mine production is down about 12 percent from the 2001 peak (and still falling) and Barrick shares have barely moved in a decade. Much of the industry's cash flow is attributable to accounting magic, and the long years, even decades, of gold price suppression have taken their toll. There are few major new mines on the horizon, and lots of old ones on the way out.
Notwithstanding, GFMS has consistently forecast rising production for the past eight years (even though it has consistently fallen), raising the question: Why?
Our guess is that GFMS' big clients are the very banks we refer to above, the ones on the wrong side of the market, and for them Ms. Rosy Scenario needs the healthy, and expanding, industry model that GFMS gives them.
What are companies like Commerzbank and Societe Generale doing sponsoring GFMS anyway? Neither Germany nor France has any gold mining industry at all.
One would have to be barking mad not to see the benefits a higher gold price would have on vast chunks of the global economy. Even long-suffering Zimbabwe would be a huge beneficiary, and more wealth in Africa and Latin America would mean more exports of Fords and Cats from the United States. The establishment may not care, but that won't stop G20 members (and others) from connecting the dots and following China's lead in increasing gold weighting in monetary reserves.
Gold is again becoming a preferred central bank asset and the great monetization scheme is coming to an end. Western policymakers and banks have pushed their game too far for too long and the combination of the shift of power from G8 to G20, plus the reduced availability of gold, will turn the tide. You can sell gold only once, although, in the new wondrous world of derivatives, maybe somebody has actually sold it twice.
----
Murry Pollitt is president of Pollitt & Co., a brokerage firm in Toronto, and a veteran of mining industry finance. This essay is excerpted from his latest letter client letter and reprinted by permission.
http://www.gata.org/node/7415
By Murray Pollitt
Pollitt & Co., Toronto
Thursday, April 30, 2009
The G8 appears finished but their policymakers continue to try to bend the G20, and the world, to their will. The establishment, the Fed, the Bank of England, the Bank for International Settlements, the same gang that has been setting policy for decades, is still at it. They appear to remain in charge (with nary a whimper of criticism about the trillions of dollars' worth of damage their policies have caused) but, when it comes to gold, they are slowly losing their grip.
Besides setting the stage decades ago for sub-prime paper, CDSs, and so on, it appears policymakers embarked on a scheme, at more or less the same time, to monetize the hundreds of billions of dollars' worth of gold lying sterile in central bank vaults. The temptation was too much. One-percent income on gold for a central bank was better than nothing, so the argument ran, and for the Lehman types borrowing gold (and selling it) provided lots of money (capital) to play games with.
It was so easy. Besides, the gold carry trade involved selling lots of gold into the market and this helped keep the price down (and hopefully the dollar up), a subject near and dear to policymakers.
It also led to: a) huge mine hedging with the two biggest miners, each with a link to Morgan, together short over 30 million ounces ("making money on gold in the ground" was the argument) and b) significant outright central bank sales, which may have been interventionist or may have been for portfolio diversification, however ill-advised.
And if banks and markets didn't always follow the script, there was always high-level intervention. To illustrate the mindset, in 2004 one William White, advisor to the BIS, talked about the need for "international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." The idea of rigging markets is as old as the hills, and if the government is on your side. ...
Anyway, the great gold monetization (mobilization?) scheme appears to have started in the 1980s and the following events that, in part, characterize it are not necessarily in sequence.
1) Goldman bought gold dealer J. Aron.
2) In an early gold carry trade, Drexel borrowed hundreds of tonnes of gold from Portugal.
3) All the big swinging banks sought to get into the gold game and they bought all the London gold dealers except Rothschild, which was definitely in on the game on its own.
4) Mine hedging was pushed very hard, to a peak of about 120 million ounces.
5) Greenspan and others dropped broad hints that central Banks stood "ready" to supply gold to the market.
6) Drexel went broke and it apparently took Portugal five years to recover its gold.
7) Two long-term gold players, Republic and Safra, each with a somewhat checkered past, had a shotgun wedding. Later Mr. Safra was fried to death in his Monte Carlo apartment, presumably for nonrepayment of gold.
8) Two of the largest American players, JP Morgan and Chase, also had a shotgun wedding and now carry more gold derivatives than can be imagined.
9) Much of the Drexel brain trust apparently went to work for AIG, which promptly started boasting about mine hedging.
10) HSBC (often advised by Paul Volcker) bought Midland Bank (which had earlier bought bullion dealer Samuel Montagu) and, in another shotgun wedding, bought Republic, transactions that made HSBC one of the major gold players. HSBC's U.S. subsidiary is now the custodian for the SPDR ETF.
11) When the gold price started to move up, Rothschild said enough and sold its "book" (at a loss?) to Barclays.
12) Finally there was recently a shotgun wedding between Dresdner bank and Commerzbank.
Crisp details are rare, but the past generation has seen hundreds of millions of ounces of gold bled into the market. Canadian and Australian gold reserves are gone; Britain, Switzerland, and many others are down by two-thirds.
But this doesn't count the gold that has been lent. In general it seems that the same sort of banks that got into trouble investing in high-yield, low-quality sub- prime paper have also taken short positions in low-yield, high-quality gold. Too many favorite-son banks are on the wrong side of the market for policymakers to be rational. Given the option between common sense and helping a bank, well, the record is clear. This is probably the main reason the establishment remains anti-gold today -- the old ideological reasons are not that relevant.
So once again they trot out the idea of International Monetary Fund gold sales. What rubbish. The IMF hasn't sold gold since the 1970s, but every year the idea is advanced to frighten the gold market. Why would the IMF sell $10 billion of gold when central banks are printing $10 billion of new money every day? Gold is the only IMF asset worth 100 cents on the dollar -- everything else is junk.
As well the establishment hammers on the idea that the gold price is high, and GFMS continues its weird forecasts.
Well, the gold price is not high. Oil and several other commodities have outperformed gold since World War II. A good underground gold mine may grade 5 parts per million (ppm) while a good open pit may grade 1 ppm.
Nobody who has said the gold price is high has ever spent a nine-hour shift drilling rock -- it's a tough business. God only knows the blood-to-gold ratio for old Roman mines in Spain or Spanish mines in Peru, and getting the gold from mine to home base was often not easy. Much Victorian gold went from Ashanti by caravan through Timbuktu, the Sahara, and on to Europe -- the Brits were hardly keen to auction it off then.
Gold mine production is down about 12 percent from the 2001 peak (and still falling) and Barrick shares have barely moved in a decade. Much of the industry's cash flow is attributable to accounting magic, and the long years, even decades, of gold price suppression have taken their toll. There are few major new mines on the horizon, and lots of old ones on the way out.
Notwithstanding, GFMS has consistently forecast rising production for the past eight years (even though it has consistently fallen), raising the question: Why?
Our guess is that GFMS' big clients are the very banks we refer to above, the ones on the wrong side of the market, and for them Ms. Rosy Scenario needs the healthy, and expanding, industry model that GFMS gives them.
What are companies like Commerzbank and Societe Generale doing sponsoring GFMS anyway? Neither Germany nor France has any gold mining industry at all.
One would have to be barking mad not to see the benefits a higher gold price would have on vast chunks of the global economy. Even long-suffering Zimbabwe would be a huge beneficiary, and more wealth in Africa and Latin America would mean more exports of Fords and Cats from the United States. The establishment may not care, but that won't stop G20 members (and others) from connecting the dots and following China's lead in increasing gold weighting in monetary reserves.
Gold is again becoming a preferred central bank asset and the great monetization scheme is coming to an end. Western policymakers and banks have pushed their game too far for too long and the combination of the shift of power from G8 to G20, plus the reduced availability of gold, will turn the tide. You can sell gold only once, although, in the new wondrous world of derivatives, maybe somebody has actually sold it twice.
----
Murry Pollitt is president of Pollitt & Co., a brokerage firm in Toronto, and a veteran of mining industry finance. This essay is excerpted from his latest letter client letter and reprinted by permission.
http://www.gata.org/node/7415
26 April 2009
China stalker leaves his footprints in the Gold Market ~ GATA
Many men fail because they quit too soon. They lose faith when the signs are against them. They do not have the courage to hold on, to keep fighting in spite of that which seems insurmountable. If more of us would strike out and attempt the 'impossible,' we very soon would find the truth of that old saying that nothing is impossible... abolish fear and you can accomplish anything you wish. ...Dr. C. E. Welch
GO GATA!!!
GATA’s credibility took another leap forward this morning when China announced it has increased its gold reserves to 1,054 tonnes from 600 tonnes. For years and years and years GATA has claimed that the gold world establishment has failed to account for surreptitious gold lending operations by The Gold Cartel to suppress the price. For there to be greater gold supply hitting the market, there had to be greater demand to satisfy this undisclosed supply. As a result of Frank Veneroso’s brilliant supply/demand work in years past, we mentioned that one of the demand areas, that the likes of a GFMS was not accounting for, was China, and that someday their stealth buying would be reported. Voila…
China gold reserves apparently doubled
HONG KONG (MarketWatch) -- China has added to its gold reserves and now holds 1,054 metric tons of the yellow metal, according to a Friday report by the Xinhua News Agency, which cited comment by Hu Xiaolian, head of the State Administration of Foreign Exchange.
Hu said that China's gold reserves had risen by 454 metric tons since 2003 and that the total was being reported to the International Monetary Fund as per the organization's rules.
A Dow Jones Newswire report said the figure cited was nearly double China's reported gold reserves as of the end of last month, but noted that it wasn't clear which gold reserves Hu was referring to.
She said China's gold reserves now rank fifth in the world among nations which publicly disclose their holdings.
Analysts said China bullion buying reflects efforts to diversify their nearly $2 trillion stockpile of foreign exchange reserves.
"Chinese officials have been increasingly vocal about their concern on the U.S. dollar and the U.S. bailout policies of late, and have actively been seeking to diversify into other assets, especially commodities," said Martin Hennecke, an associate director with Tyche Group in Hong Kong…
-END-
To say that this revelation is a big deal is an understatement … for a number of reasons…
*It is more evidence that various central banks are increasing their gold holdings, in contrast to a number of western banks which have been selling for more than a decade.
*China’s move debunks Planet Wall Street and other western central bankers that gold is a barren asset and not worth owning.
*And it enhances the notion that gold is a valuable reserve which will encourage other central banks to follow China’s lead.
*It surely will spook some of the sheeple central bankers who have foolishly dumped their country’s gold reserves at bargain basement prices … especially at a time when the West is looking at one financial crisis after another and the world’s major currency reserve, the dollar, is looking very suspect. A number of them are unlikely to press for further bullion sales from their countries’ reduced reserves.
*The likelihood of China continuing to build its reserves is extremely high. They were secretly building their gold reserves BEFORE the latest financial crises. If this was the Chinese mindset then, what must it be now? As is, their percentage of gold reserves is still on the very low side.
*Because of what the US is doing with our bailouts and fiscal deficits, the US dollar is surely on a precipice, thus China must be looking to accumulate more gold. Therefore, this is not a sell the news market announcement. It is just the opposite. It is a clarion call to buy physical gold.
*That clarion call will not go unheeded by the sophisticated big money in the world.
*This is a major new headache for The Gold Cartel.
Derrick sends us some retro on China/gold which was brought to your attention years ago…
China's forex watchdog faces dilemma on expanding gold reserves
From Xinhua News Agency
Monday, December 26, 2005
http://news.xinhuanet.com/english/200512/26/content_3971982.htm
SHENZHEN, China -- To buy or not buy? That's a question for Chinese foreign exchange authorities. They have been urged to expand gold reserve since the Renminbi appreciation, but the decision is hard to make since the gold prices are rocketing.
Some economists have been appealing to the State Administration of Foreign Exchange to expand China's gold reserve after the Renminbi appreciation in a bid to reduce the country's reliance on the greenback....
***
GATA has been all over the Chinese gold buying case and we can account for it in our understanding of the true supply/demand picture. GFMS and the World Gold Council CANNOT!
And then to shed light on the MIDAS analysis and what lies ahead…
Bill,
I reproduce the following from a Financial Times article this morning declaring that China's gold reserves have officially been revised to 1,054 tons from 600. You have long held the view that China was buying gold through intermediaries and would eventually disclose part or all of these activities. It is the end quote I append that caught my eye:
"Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.
"It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said. "The financial crisis means the US dollar’s value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage." (emphasis added)
Thought you might be interested.
All my best to you and your health, Brad
And here’s a big tip o’ the hat to our STALKER source who nailed this one, beginning back in 2003, which just happens to be the year the Chinese now admit they started buying.
Doing a Café search, I have yet to find the initial presentation to The Café ... but the bottom line is our source went to Phoenix for a meeting with six others in 2003. Our source was there to act as a gold buyer in the future. The person who held the meeting spoke FROM BEHIND A SCREEN, as he did not want to disclose his identity. While speaking perfect English, our source thought at the time he might be Chinese and did not wish that to be known.
Our STALKER source called today and I could almost see the smile on his face through the phone. He reminded me of another tip, i.e. it was Chinese doing the buying, and he reported it was going through Australian banks, which have a longstanding relationship with the Chinese.
It is with great pleasure to bring MIDAS commentary to you re the Chinese/STALKER from more than half a decade ago…
September 10, 2003 - Gold $379.70 down $1.80 - Silver $5.22 unchanged
The Stalker
…Could any market trade more predictably than gold has the past month? Every time gold rallies sharply and early in a given day, it is capped by The Gold Cartel, sold off later in the trading session, brought down early that evening in overseas trading, and then is pressured all the next day by the same cabal. Over and over we see the same trading pattern.
You see it, I see it, and SO MUST the $4.6 billion buyer, which MIDAS characterized in general as being around some $40 ago. It seems to me this "gold buying group" is playing with The Gold Cartel. They know the cabal’s drill as well as we do and probably devised a trading plan to take them on, not fight them too hard on given days, and then overpower them.
This "gold buying group" must know what GATA knows, in that the cabal has a serious vulnerability, or Achilles Heel, when it comes to the physical gold market:…
-END-
September 11, 2003 - Gold $379.30 down 40 cents - Silver $5.30 up cents
Dramatic Gold Day / Silver On The Move / Both Have Fireworks Potential
…Today's action was very supportive of MIDAS' notion there is a Stalker ("gold buying group") out there taking on the corrupt Gold Cartel. They waited for Goldman Sachs to strike, then attacked, sending gold $7 off its lows. Dramatic it was. This is a big deal. Other traders will see how easily gold came back after filling the gap and will encourage them to get long, especially since the gap was filled. The huge open interest also suggests a significant move is coming. Gold’s startling comeback suggests that move is going to be one which takes the price MUCH higher….
-END-
September 19, 2003 - Gold $381.10 up $4.80 - Silver $5.25 up 2 cents
The Stalker Strikes With Another Huge Gold Buy Order!
…Gold came in stronger than expected on the Comex opening, which is almost always a very constructive development. It left a $1 gap and quickly shot up all morning, topping $383 at one point. Then the requisite Gold Cartel $6 price-capping rule went into play. That was all she wrote. The cabal regrouped and held gold in check the rest of the trading session and then did their requisite slam, knocking gold down a buck ON THE BELL. These no-good low-lifes are pitiful. Ah for the day when we can get our stretchers out, pick them off the mat, and then dump them in the sewer!
The big news is for Café members only. I received a call from London about The Stalker and learned a bit more about this "gold buying group." Two goodies for you:
*In addition to the $4.6 billion order, The Stalker is buying well in excess of another billion dollars worth of bullion and gold coins. The MIDAS analysis over these past months of huge new buying interests entering the gold arena looks better by the day.
*The orders are emanating out of New Zealand and Australia. My source believes it is Asian money and most likely CHINESE!
This is wonderful news as it would mean the Asian (Chinese) gold buy program is competing with Indian, Turk and Arab buying. Put them all together and it is easy to comprehend why The Gold Cartel has not been able to flush out the massively long specs. The Eastern buyers are always there on dips competing against one another for a diminishing supply of gold.
It also explains why gold has been moving up in price with a corresponding, but lagging, move in the dollar. Gold is leading the way and doing so for the reason John Brimelow and I have articulated for so long. The key to the gold price is the surging physical gold market taking on the corrupt and devious Gold Cartel…
-END-
December 23, 2003 - Gold $410.65 up 55 cents - Silver $5.71 up 2 cents
A STALKER Of A Gold/Silver Tale For Christmas Time
…As Café members have been made aware, the Eastern gold buyers have additional competition due to the enormous physical market buying by THE STALKER ("gold buying group"). Without getting into many details, I want to stress THE STALKER is real. My source’s good friend has attended a meeting with this "gold buying group," or his agent. I say "or" because THE STALKER is very secretive and does not want to be known publicly, even to the sellers from whom he is buying.
Both my source and I strongly believe the gold buying is of Chinese origin…
-END-
January 5, 2004 - Gold $423.80 up $8.60 - Silver $6.19 up 27 cents
Gold ($423.80) And Silver ($6.19) SOAR!
…*THE STALKER input has been incredible. Every time I get word this "gold buying group" is in the market, gold moves higher. Just as I was writing this, I received a phone call from "Mike," my STALKER source. He tells me THE STALKER was in the market today and they are going after $1.4 to $1.6 billion worth of gold in the near term…
-END-
January 15, 2004 - Gold $408.30 down $13.10 - Silver $6.19 down 21 cents
Ouch! Gold Cartel Wins A Battle
…Good news! Just got off the phone with my STALKER source. There was an unscheduled phone conference this afternoon with THE STALKER’S US buyers. They have a NEW order for $800 million to $1.2 billion to be completed between now and March. 72 tonnes of new gold buying is nothing to sniff at! The orders are still coming out of Australia and my source continues to believe they are for mainland China…
-END-
January 28, 2004 - Gold $414.60 up $4.90 - Silver $6.60 up 7 cents
Silver Closes At Six-Year High/Gold Charges Up $5/Gold Share Massacre Orchestrated
..In my various presentations and public commentary at the Vancouver conference I stressed the importance of what was going on in the physical gold/silver market and laid out what has been presented to Café members, including John Brimelow’s unique and extremely valuable work. There was no one else at the conference doing so. While most conference presenters stressed the weak dollar as the most important gold factor, I stressed it was the surging physical market.
In that regard, I learned this morning THE STALKER (probably China) just completed the last bit of its $6.8 billion order. NOW, THE STALKER is working on its additional 800 million to $1.2 billion dollar gold order (brought to your attention recently). I might know more on this on Friday.
To give you some idea of how significant this is, Norway just reported they sold 16 tonnes of gold in January (see below) and plan to dump another 17 tonnes of bullion, which will clean them out. The Gold Cartel and friends jump up and down about more central banks selling their gold and make a big deal how negative it is. What The Gold Cartel fails to tell the press and their clients is who is BUYING gold and to what extent. Can they all be so uninformed?…
-END-
February 24, 2004 - Gold $403.90 up $5.70 - Silver $6.59 up 13 cents
Silver and Gold Pop Very Nicely / $6 Rule AGAIN
…Some input from a bullion/coin dealer who has been in the business for 40 years. He has not seen the physical gold market this tight in two decades. The physical market is in a bit of a disconnect with the price-rigged Comex. Silver is also extremely tight according to my source and only trades in size at a PREMIUM. You cannot buy a decent amount of physical silver without paying up. Wait until next month!
Some STALKER feedback. We have confirmed the buyer is from the Far East, in all probability Chinese, and they still have $1.5 billion of gold to buy. We also know why they are buying. This is a big picture trade, not a short-term speculation. The gold they are accumulating is going into deep storage and not coming back into the market on rallies. The reason is these "Chinese" fear a complete debacle in fiat currencies in the next couple of years…
-END-
That’s enough for now. You get the picture. The GATA camp was right on the money about Chinese gold buying while there was nary a peep about it from the mainstream gold world, or from the big shot bullion dealers on Planet Wall Street.
Meanwhile, back at the gold ranch, it was Gold Cartel business as usual. The Chinese gold news threw a monkey wrench into their plans to keep gold suppressed today and the DOW propped up going into the stress test (criteria) that was released this afternoon … which is why gold was hit in the Access Market yesterday afternoon and the DOW was goosed on the close by the PPT.
Gold popped to $913 during Asian trading hours last night. Then it was Plan A for the cabal. The price rise was stopped cold when they reported to work at the usual 3 Am EDT…
These guys make me sick to my stomach, as do the lightweight people in the gold industry who refuse to deal with the manipulation truth. The Chinese gold news was enough on its own to send the gold price sharply higher. Yet, there were even more bullish market factors for the gold price, which should have sent it much higher on their own…
*The dollar began to break down. It closed off .74 to 84.74 and broke below the neckline of a head and shoulders formation...
June dollar
http://futures.tradingcharts.com/chart/US/69The euro rose .0119 to 1.3245. The pound was flat at 1.4675, but the yen rose .73 to 97.13.
*With short term US Treasury rates near zero at .06%, the yield of the 10 year T note rose to 3%, negating the entire move after the "quantitative easing" announcement and threatened to make multi-month highs. Clearly the inflationary effects of US policy, and what those implications are for the dollar, are having their effect in the marketplace.
June T note
http://futures.tradingcharts.com/chart/NO/69
Should the yield on the 10 yr T note take out 3.05%, we are likely to get an avalanche of Treasury note/bond selling.
*Crude oil blew through $50 again on the upside, ending the day up $1.93 to $51.55 per barrel.
Put all of that together, the price of gold should be screaming higher. Guy notes…
Can there be a more bullish story than the China gold story last night? And, yet again, gold can’t go up much on this news? You have to be kidding me! If China announced they were buying a big bunch of soybeans you can bet your last dollar that the bean market would be limit up today!! All this and the dollar getting hammered again???? When will it end!!!!
***
Don’t get bummed out here cause this is what THE BUMS do. Remember the past couple of days I reviewed the fact that gold almost never goes way up on very bullish news. The modus operandi of the cretin Gold Cartel is to SHOOT THE MESSENGER when there is positive news for gold. This is just par for the course ... with the dopey gold pundits making mention of how poorly gold reacted to such bullish news. Meanwhile, misguided sad sack souls, Geithner and Summers, continue to lead the country to disasterville.
Clearly The Gold Cartel wanted the price of gold down today. However, the news from all fronts was SO BULLISH, and the direction of the future price of gold so clear, they had all they could handle to keep gold from exploding, as it should have.
In the end, today was TERRIFIC for us, as the die is cast for the price of gold in the months ahead. The Chinese news will reverberate all over the word and attract more and buy SUBSTANTIAL buyers.
As The Gold Cartel had their hands full with gold, they sat on silver, which should have rocketed also. One day in the near future it will. In the meantime, oh well, that’s what JP Morgan & GANG does.
Ironically, our STALKER source called yesterday and re-affirmed that this brilliant London trader is still calling for $940 gold and hung in there on the brief dip. In addition he had some insight to some of the silver weakness besides the manipulation by JP Morgan & Co. You might recall that he told us some time ago that a large amount of silver was shipped from London to Dubai. The price at the time was about $17. Not good because after the oil price debacle, Dubai went into the tank and investors over there shied away from precious metals, including silver. Thus, these dealers were stuck with a huge amount of inventory which was doing them no good, so some of them have been dumping their silver and want some of sent back to London.
Will let you know if I receive any further updates on that silver score.
The gold and silver charts look better and better…
June gold
http://futures.tradingcharts.com/chart/GD/49May silver
http://futures.tradingcharts.com/chart/SV/59The gold open interest rose 8224 contracts to 344,626. The specs are on their way back in on the long side as they like gold’s performance following its test of its 200-day moving average.
The silver open interest went up 1334 contracts to 97,077, which is a recent high. The silver spec longs are emboldened.
The Cafe Sentiment Indicator remains BLAH. As is so often the case, just when gold/silver investors ought to be paying the most attention, they go to sleep as a whole. Some things never change.
The CRB went up 3.73 to 223.27.
More gold goodies:
Is the China game over?
Indian ex-duty premiums: AM $5.50, PM (12c) with world gold at $908.10 and $911. This is basis Ahmedabad, and the AM reading is probably anomalous. Most of the conduit cities seem to have finished the day slightly below import point, which fits with a Reuters story today. See:
http://in.reuters.com/article/businessNews/idI
NIndia-39224220090424
However, the rupee was firm, closing at $1=R49.81 (Thursday R49.92) and the stock market closed up 1.74%. This is the 7th up week in a row; the market has risen 41% since its early March low and is attracting substantial foreign investment. If the Reserve Bank permits the rupee to rise, this will improve the Indian bid for world gold.
On Reuters data, the Vietnam physical market stood at a $5 discount to world gold (which at the time was at $912.50, virtually its high of the day.) Noting the story at
http://uk.reuters.com/article/oilRpt/idUK
HAI00004120090424
UBS guesstimates that Vietnam exported 80-100 tonnes of gold in the first quarter, but that the flow has subsequently stopped. A wider discount than $5 would be needed to make the trade worthwhile; but obviously the situation merits attention
TOCOM’s active contract gained 15 yen last night; aggregate volume was the equivalent of 10,530 Comex lots; open interest unfortunately is not available. World gold added $6 from the Comex floor close: thanks to China, not Japan.
As noted yesterday, Wednesday’s $9.80 Comex gain saw a 2,824 contract 8.78 tonne decline in open interest. MarketVane’s Bullish Consensus added 2 points to 74% yesterday; the HGNSI jumped 13.3 points to 16.8% Bulls. The GLD ETF marked the June Comex $14.10 gain by shedding 0.53 tonnes (260 Comex lots).
China’s announcement overnight that it has raised its gold reserves by 75% since 2003 raises a number of points. Firstly of course, it further demonstrates the CB gold holding statistics are close to worthless. Secondly, from a broad economic perspective, it calls into question Chinese FX policy. This puts them directly at odds with the Americans, who have clearly been hostile to CB gold accumulation for more than a generation. Optimists might think the Chinese are planning to forgo the undervaluation privilege which has been central to their US relationship the rule of Robert Rubin. This could help reflate their economy. More likely, in my view, the risibly cosmetic revaluation charade will be abandoned, triggering competitive devaluations across the Far East.
Not directly helpful to gold – except in as far as stress and antagonism are.
***
CARTEL CAPITULATION WATCH
Dave from Denver…
Hmmm....market being forced higher
in anticipation that Geithner's Private Public Investment Partnership will do a belly flop? Today is the deadline for applications and apparently interest in the scam is lukewarm at best:
http://www.marketwatch.com/news/story/private-investors-
skeptical-toxic-bank/story.aspx?guid=%7B567A0888%2D37E0%2D4F
9F%2D81F9%2D62025CFEB7FB%7D&dist=msr_5Investors also are unlikely to be interested in buying packaged subprime mortgages that were based on misrepresentation and fraud, Lashley noted.
Investors believe bank toxic assets can be divided into three categories:
Attractive securities that can and are being sold without any government help.
Assets that may be attractive but banks want more than they investors will pay.
Bank-owned assets that, no matter what their price, investors won't buy.
***
Talk about a no surprise. The DOW ended the day up 119 to 8076 and the DOG leaped 42 to 1694. "Everything is fine," The Stepford Wives.
Meanwhile...
April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.
U.S. economic news:
The stress test methodology release was mundane and as expected…
14:00 Fed says large banks should hold additional capital to serve as a buffer against higher losses than normally expected through 2011
The comments come in context of the release of the parameters of the stress test.
* * * * *
14:05 Fed releases white paper regarding stress tests
The following is the opening paragraph from the white paper, which is available via the Fed link attached:
"Most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized. However, losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks. Lower overall levels of capital—especially common equity—along with the uncertain economic environment have eroded public confidence in the amount and quality of capital held by some firms, which is impairing the ability of the banking system overall to perform its critical role of credit intermediation. Given the heightened uncertainty around the future course of the U.S. economy and potential losses in the banking system, supervisors believe it prudent for large bank holding companies (BHCs) to hold additional capital to provide a buffer against higher losses than generally expected, and still remain sufficiently capitalized at over the next two years and able to lend to creditworthy borrowers should such losses materialize."
Reference Link
* * * * *
Top U.S. banks must hold sizable capital buffer: Fed
WASHINGTON (Reuters) - The top 19 U.S. banks need to hold a "substantial" amount of capital above regulatory requirements to weather a potential worsening of the economic recession, the U.S. Federal Reserve said on Friday.
Supervisors said "stress tests" regulators conducted at major banks were aimed at ensuring the institutions have enough capital in reserve to continue to lend in potentially bleaker conditions, and are not to be considered a measure of banks' current solvency.
"It is important to recognize that the assessment is a 'what if?' exercise intended to help supervisors gauge the extent of capital needs across a range of potential economic outcomes," the Fed said in a white paper outlining the methodologies regulators employed.
-END-
08:30 Mar Durable Goods Orders (0.8%) vs. consensus (1.5%); ex-Transportation (0.6%) vs. consensus (1.2%)
Feb Durables revised to 2.1% from 3.4%; ex-Transportation revised to 2.0% from 3.9%.
* * * * *
U.S. durable goods orders fall 0.8 percent in March
WASHINGTON (Reuters) - New U.S. orders for durable goods slipped 0.8 percent in March, far less than Wall Street expected, Commerce Department data showed on Friday.
Analysts polled by Reuters had forecast orders for long-lasting manufactured goods to drop 1.5 percent.
Durable goods orders have now fallen for seven months out of the last eight, the Commerce Department said. The sole rise in that period, in February, has been revised to 2.1 percent from the 3.5 percent previously reported.
New orders excluding transportation slid 0.6 percent last month, compared to February when they rose 2.0 percent. Orders excluding defense also fell 0.6 percent, after rising 0.2 percent in February.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, gained 1.5 percent in March after rising 4.3 percent in February.
-END-
10:00 Mar New Home Sales 356K vs. consensus 337K
Feb figure revised to 358K from 337K.
* * * * *
U.S. home sales drop in March
WASHINGTON (Reuters) - Sales of newly built U.S. single-family homes dropped 0.6 percent in March, but the stock of homes for sale at the end of the month still plummeted at a record pace, Commerce Department data showed on Friday.
The inventory of new homes shrank in March, to 311,000 from 328,000 in February. That left the supply of homes available for sale at 10.7 months' worth, compared to February's 11.2 months.
The Commerce Department said that the monthly change in inventories, of 5.2 percent, was the largest drop in more than 45 years and the year-on-year plunge of 33.7 percent was the largest on record.
February sales were much stronger than originally thought, with the report showing they rose 8.2 percent, compared to the 4.7 percent gain previously reported.
The March drop brought home sales to a 356,000 annual pace. Analysts polled by Reuters had forecast sales at 340,000.
The median sales price for a new home fell to $201,400 from $208,700 in February. The average price, however, rose slightly to $258,000 from $255,100.
-END-
The worst may be yet to come
Is the worst over? Investors seem to think it is. Confidence that the crisis is winding down has been mounting.But the right answer to the question depends on what "worst" is meant. Appropriate replies include: probably, yes but so what, not yet, probably not, and let's hope so.
By Edward Hadas, breakingviews.com
Last Updated: 3:28PM BST 22 Apr 2009
The worst of the credit squeeze is probably over. True, loan losses are still increasing. But the official aid is massive: minimal policy interest rates, ample liquidity supplies, capital injections and implicit loan guarantees.
The aid from above has helped push dollar interbank borrowing rates down in the last six weeks. The cost of insuring against corporate failure in the credit default swap market has also fallen by 0.5-0.7 percentage points to about 1.9 and 1.6 percent annually for the main US and European investment grade CDS indexes. Improving bank credit has contributed to this trend. Better credit all round means more loans will be refinanced, so fewer companies will go under than would otherwise be the case.
The big official liquidity push also gives investors more cash to put into the markets. The additional buying power may account for some of the sharp increase in oil and equity prices. There have also been tentative signs of revival in the junk bond and IPO markets. To some extent, the mood is following the money.
It may be due to government help or it may just be the passage of time, but another worst that has probably passed is in the pace of economic decline. The huge sudden drop in activity after the collapse of Lehman Brothers last September has already become something of a business legend. If the decline had continued at that pace, economies would be back to the Stone Age in a few decades.
It's not going to be that bad. Globally, exports are down 30pc since last July, according to Lombard Street Research. But the pace of decline is moderating. Similarly, US housing starts, which have declined by 75pc since the 2006 peak, may have reached their low.
The balance of indicators still suggests GDP is falling in most developed economies, but at a much less dramatic rate than a few months ago. When the economy is only declining at a moderate pace, some measures typically suggest that growth is returning - the much talked-about "green shoots" - but more show further decline. That seems to the case now.
Inventories complicate the picture. A sharp decline in global demand led to an even sharper reduction of inventories as retailers and manufacturers cut back. As the inventories are rebuilt, production will most likely pick up faster than consumption.
So yes, all in all the economy isn't shrinking as rapidly as it was. But so what? It's still shrinking. On that yardstick, therefore, the worst isn't yet over.
Now look at another measure of "worst": unemployment. Even when growth does return, recovery is likely to be anaemic. It will take time to absorb the excesses built up during the credit boom, from houses in the US to too many Chinese factories making cheap goods.
What's more, it's not as if all that private-sector debt has gone away.
The rise in savings rates in the US and elsewhere isn't going to be a one-quarter wonder. This means that the peak in unemployment could easily be two years away.
And will that then be the end of the pain? Probably not. The crisis will leave government balance sheets shot to pieces. The best case scenario is that the authorities manage to suck all their fiscal and monetary stimulus out of the economy safely once economic growth has bottomed out. Then all that the world will suffer is high taxes and slow growth.
But there is a risk that this outcome proves too unpopular and that the authorities instead take the current fad for "quantitative easing" to the extreme - and just print money to finance their deficits. The outcome would then be inflation.
An inflationary outburst might even lead to another sort of financial crisis - a loss of confidence in key currencies. That could be worse than anything seen up to now.
Can such a dire outcome be avoided? Let's hope so.
-END-
BofA
Dear Bill,
You've been saying for a while that you smelled something big and awful coming around the corner, and that's why the PMs were getting smashed. Clearly the rapidly unfolding Bank of America scandal was it. I can't say I'm surprised by the revelation that Ken Lewis cared more about his job than the interests of shareholders. There have been so many instances of lying and cheating that it's hard to be shocked anymore.
The fact that the U.S. is not considered as corrupt as a banana republic is simply a result of human conservatism. Human nature won't let us change our minds about deeply held beliefs so quickly.
Despite Andrew Cuomo's investigation, I don't have any illusions that he will be the American people's white knight. As Catherine Austin Fitts points out, Cuomo was largely responsible for the subprime mess at Fannie and Freddie when he was in charge of HUD under President Clinton. (http://www.dunwalke.com/sidebars/andrew_cuomo.htm) Sadly, too many actors in this drama are recycled from the Clinton Administration - Schapiro, Gensler, Summers, Emanuel, and now Cuomo - and all of them are deeply compromised.
The spark of hope I see is the fact that Americans are starting to wake up to the severity of the crisis. Sure, it's still a small number but events like the recent Tea Parties show that a vocal minority is angry about the irresponsible policies of the government. Mainstream intellectuals like Simon Johnson of MIT and William K. Black of the University of Missouri are openly talking about fraud and the takeover of government by financial oligarchs. In effect, the media is moving over to covering GATA's point of view without acknowledging that GATA said it first!
All the best,
Jennifer Barry
http://www.globalassetstrategist.com/
Incredibly, there was barely a mention today about the Bernanke, Paulson, Lewis mess. Unreal! ... Planet Wall Street at its worst.
TOCOM
Good Evening All:
During the April 23rd TOCOM sessions the seven past largest paper gold shorts increased their net short position by 467 contracts to 20,497 contracts. STDJ also increased theirs by 90 contracts to 10,515 contracts.
http://www.tocom.or.jp/souba/gold/torikumi.htmlThe same seven members added 27.50 contracts to their silver net short position leaving them net short 294.50 contracts (60kg deliverable equivalent).
http://www.tocom.or.jp/souba/silver/torikumi.htmlTOCOM posted their "Margin for May 2009" and compared with their "Price Limit and Margin for April 2009" there are clearly differences:
http://www.tocom.or.jp/news/2008/20090421_1.htmlOne of the first differences that stand out when comparing the two is that no price limits will be imposed on and after April 27th for many items including gold and silver. Furthermore, spot month additional clearing margins will be increased for certain items including gold and silver (based on type of position) on and after April 27th. For more details please see the bottom of the "Price Limit and Margin for April 2009" release below:
http://www.tocom.or.jp/news/2008/20090325.htmlBest wishes,
Scott
Large Scale Conspiracies - The Evidence
Bill,
There is a longtime argument that sophisticated investors like Jim Rogers use to dismiss the idea that a gold cartel, or conspiracy, exists. They claim that nothing that involves so many people can be kept quiet. The fact that no banker has come forward to publicly acknowledge a coordinated effort to suppress the price of gold is proof that no such effort exists. Without a smoking gun, or at least a smoking banker, the notion of a large-scale conspiracy is dismissed as impossible.
Well, if you base your position on a false premise, it’s pretty likely you will get a false answer. Garbage in, garbage out, as they say. There is now published evidence that proves that large-scale governmental conspiracies to defraud the public can be quietly maintained over decades. Who has printed this ground-breaking work? The Federal Reserve, thank you!
A study1 by researchers found, "that when government revenues dry up, police write more speeding tickets. After analyzing 14 years of data in North Carolina, the pair found that for every 1 percent drop in government revenue, the number of traffic tickets issued per capita increases by 30 percent the following year.
"It's significant," said University of Arkansas-Little Rock economics professor Gary Wagner, who co-authored Red Ink in the Rearview Mirror: Local Fiscal Conditions and the Issuance of Traffic Tickets. "If there was no revenue for issuing tickets, I wouldn't expect the unemployment rate and revenue to be related."
The study, which analyzed data from 1989 to 2003, found the lowest number of tickets issued in North Carolina was in 2000, after nearly a decade of economic growth. There were roughly 645,000 tickets written that year. The highest number of tickets came two years later, when governments were trying to recover from the post 9-11 recession, and issued roughly 768,000.
Wagner said the study reinforced a theory held universally by economists: Incentives matter.
"If local governments are somehow involved in the revenue that gets generated, there's an incentive to get more revenue," Wagner said.
Wagner said there are numerous anecdotes nationwide of such practices, such as the mayor of Nashville, Tenn., proposing two years ago a 33 percent increase in ticket revenue in his budget.
Wagner's co-author, Thomas Garrett, is an assistant vice president at the St. Louis Federal Reserve. North Carolina was chosen as a case study because the state had good data."
So here we have an effort to covertly defraud and damage the public. The "conspiracy" is widespread and crosses state lines. There is plentiful circumstantial evidence to confirm its existence…AND NOT ONE OFFICER, SWORN TO UPHOLD THE LAW, OR ADMINISTRATOR HAS COME FORWARD TO COMPLAIN! How can that be? Well, it’s obvious. Police officers, and administrators, understand that any whistleblower who speaks out will shortly be looking for a new line of employment.
The same principle works in finance. Why would a banker give up a life of privilege, to protect a public that mostly isn’t even interested enough to listen? Employees intuitively understand who pays their salaries and bonuses. They’ve also been brought up through a system that teaches them that gold is a barbarous relic, that it cused the Depression and that its proponents wear tinfoil hats and are mentally unstable. Who would make a public stand to fight for this? Thousands of people can know the truth, and yet not one person will speak it. Anyone who scoffs at this reality should just ask the Federal Reserve. As long as the "system" approves, a conspiracy can exist practically in public view, and no one on the inside will lift a finger to counter it.
Best wishes,
Peter R.
http://www.news-record.com/content/2009/01/12/article/study_links_economy_to_traffic_tickets
***
Gold availability
From: Michael Wright
Friday, 24 April 2009 7:23 AM
Subject: There is no gold (well very little anyway)
You might want to pass on to your GATA mates that it took me over a month following payment to get my 50 oz gold bar.
I purchased it on the 20 March and as you know they still didn't have it whenI tried to collect it on 3 April. When I went in (again) yesterday, they finally had it ready;
I said why didn't you ring me like you promised? They said sorry, but they only got it last night.
Hmmmmmm.
Michael Wright
West Perth WA 6872
Another bright light for the day was the way the gold/silver shares acted when The Gold Cartel pressured the price of gold back to the unchanged mark. They were firm as could be and failed to react on the downside to the pressure on bullion. As the day wore on they gained traction and closed superbly.
The XAU and the HUI rose 20.15 to 310.81.
It appears the HUI is in the process of completing a massive base … one which can support a move to new highs and beyond…
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=HUI&sid=16794&time=8
From Kiwi Land...
Gold stocks
Hi Bill:
From Midas one year ago
"April 24 (2008) – Gold $886.80 down $19.40 – Silver $16.66 down 50 cents
The XAU dropped 6.77 to 172.61 and the HUI gave up 17.93 to 407.28.
The HUI is one of the worst looking charts I have ever seen, as it has broken through massive support at 425 and broken down after completing a huge top. If I didn’t know the extent to which gold, silver and the shares have been managed, this would petrify me:"
You certainly got the call on the HUI right!
I've been watching for year on year Gold price. Yesterday we moved above the Gold Price of last year and with today's move higher combined with the $19.40 loss of April 24, 2008 we are solidly above it. However look at the silver price, still a good $3.75 below last year.
Today the HUI is up 20 to 310.81. Last year it was down 17.93 to 407.28 but still 30% higher than where we are today. The Gold stocks can move a lot higher from here and still be underpriced.
Cheers from Auckland, Ed Wener
The dollar is breaking down technically, yields on US Treasury notes and bonds are close to busting out, and US short term rates remain right above zero. That alone is one heckuva bullish stew recipe.
Meanwhile, the China gold buying news puts this MIDAS in our Hall of Fame collection. This revelation will act as anchor for gold for many months to come and send the price well beyond $1,000 per ounce.
Spread the word, Thunderbird!
GATA BE IN IT TO WIN IT!
MIDAS
http://news.goldseek.com/LemetropoleCafe/1240765200.php
GO GATA!!!
GATA’s credibility took another leap forward this morning when China announced it has increased its gold reserves to 1,054 tonnes from 600 tonnes. For years and years and years GATA has claimed that the gold world establishment has failed to account for surreptitious gold lending operations by The Gold Cartel to suppress the price. For there to be greater gold supply hitting the market, there had to be greater demand to satisfy this undisclosed supply. As a result of Frank Veneroso’s brilliant supply/demand work in years past, we mentioned that one of the demand areas, that the likes of a GFMS was not accounting for, was China, and that someday their stealth buying would be reported. Voila…
China gold reserves apparently doubled
HONG KONG (MarketWatch) -- China has added to its gold reserves and now holds 1,054 metric tons of the yellow metal, according to a Friday report by the Xinhua News Agency, which cited comment by Hu Xiaolian, head of the State Administration of Foreign Exchange.
Hu said that China's gold reserves had risen by 454 metric tons since 2003 and that the total was being reported to the International Monetary Fund as per the organization's rules.
A Dow Jones Newswire report said the figure cited was nearly double China's reported gold reserves as of the end of last month, but noted that it wasn't clear which gold reserves Hu was referring to.
She said China's gold reserves now rank fifth in the world among nations which publicly disclose their holdings.
Analysts said China bullion buying reflects efforts to diversify their nearly $2 trillion stockpile of foreign exchange reserves.
"Chinese officials have been increasingly vocal about their concern on the U.S. dollar and the U.S. bailout policies of late, and have actively been seeking to diversify into other assets, especially commodities," said Martin Hennecke, an associate director with Tyche Group in Hong Kong…
-END-
To say that this revelation is a big deal is an understatement … for a number of reasons…
*It is more evidence that various central banks are increasing their gold holdings, in contrast to a number of western banks which have been selling for more than a decade.
*China’s move debunks Planet Wall Street and other western central bankers that gold is a barren asset and not worth owning.
*And it enhances the notion that gold is a valuable reserve which will encourage other central banks to follow China’s lead.
*It surely will spook some of the sheeple central bankers who have foolishly dumped their country’s gold reserves at bargain basement prices … especially at a time when the West is looking at one financial crisis after another and the world’s major currency reserve, the dollar, is looking very suspect. A number of them are unlikely to press for further bullion sales from their countries’ reduced reserves.
*The likelihood of China continuing to build its reserves is extremely high. They were secretly building their gold reserves BEFORE the latest financial crises. If this was the Chinese mindset then, what must it be now? As is, their percentage of gold reserves is still on the very low side.
*Because of what the US is doing with our bailouts and fiscal deficits, the US dollar is surely on a precipice, thus China must be looking to accumulate more gold. Therefore, this is not a sell the news market announcement. It is just the opposite. It is a clarion call to buy physical gold.
*That clarion call will not go unheeded by the sophisticated big money in the world.
*This is a major new headache for The Gold Cartel.
Derrick sends us some retro on China/gold which was brought to your attention years ago…
China's forex watchdog faces dilemma on expanding gold reserves
From Xinhua News Agency
Monday, December 26, 2005
http://news.xinhuanet.com/english/200512/26/content_3971982.htm
SHENZHEN, China -- To buy or not buy? That's a question for Chinese foreign exchange authorities. They have been urged to expand gold reserve since the Renminbi appreciation, but the decision is hard to make since the gold prices are rocketing.
Some economists have been appealing to the State Administration of Foreign Exchange to expand China's gold reserve after the Renminbi appreciation in a bid to reduce the country's reliance on the greenback....
***
GATA has been all over the Chinese gold buying case and we can account for it in our understanding of the true supply/demand picture. GFMS and the World Gold Council CANNOT!
And then to shed light on the MIDAS analysis and what lies ahead…
Bill,
I reproduce the following from a Financial Times article this morning declaring that China's gold reserves have officially been revised to 1,054 tons from 600. You have long held the view that China was buying gold through intermediaries and would eventually disclose part or all of these activities. It is the end quote I append that caught my eye:
"Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.
"It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said. "The financial crisis means the US dollar’s value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage." (emphasis added)
Thought you might be interested.
All my best to you and your health, Brad
And here’s a big tip o’ the hat to our STALKER source who nailed this one, beginning back in 2003, which just happens to be the year the Chinese now admit they started buying.
Doing a Café search, I have yet to find the initial presentation to The Café ... but the bottom line is our source went to Phoenix for a meeting with six others in 2003. Our source was there to act as a gold buyer in the future. The person who held the meeting spoke FROM BEHIND A SCREEN, as he did not want to disclose his identity. While speaking perfect English, our source thought at the time he might be Chinese and did not wish that to be known.
Our STALKER source called today and I could almost see the smile on his face through the phone. He reminded me of another tip, i.e. it was Chinese doing the buying, and he reported it was going through Australian banks, which have a longstanding relationship with the Chinese.
It is with great pleasure to bring MIDAS commentary to you re the Chinese/STALKER from more than half a decade ago…
September 10, 2003 - Gold $379.70 down $1.80 - Silver $5.22 unchanged
The Stalker
…Could any market trade more predictably than gold has the past month? Every time gold rallies sharply and early in a given day, it is capped by The Gold Cartel, sold off later in the trading session, brought down early that evening in overseas trading, and then is pressured all the next day by the same cabal. Over and over we see the same trading pattern.
You see it, I see it, and SO MUST the $4.6 billion buyer, which MIDAS characterized in general as being around some $40 ago. It seems to me this "gold buying group" is playing with The Gold Cartel. They know the cabal’s drill as well as we do and probably devised a trading plan to take them on, not fight them too hard on given days, and then overpower them.
This "gold buying group" must know what GATA knows, in that the cabal has a serious vulnerability, or Achilles Heel, when it comes to the physical gold market:…
-END-
September 11, 2003 - Gold $379.30 down 40 cents - Silver $5.30 up cents
Dramatic Gold Day / Silver On The Move / Both Have Fireworks Potential
…Today's action was very supportive of MIDAS' notion there is a Stalker ("gold buying group") out there taking on the corrupt Gold Cartel. They waited for Goldman Sachs to strike, then attacked, sending gold $7 off its lows. Dramatic it was. This is a big deal. Other traders will see how easily gold came back after filling the gap and will encourage them to get long, especially since the gap was filled. The huge open interest also suggests a significant move is coming. Gold’s startling comeback suggests that move is going to be one which takes the price MUCH higher….
-END-
September 19, 2003 - Gold $381.10 up $4.80 - Silver $5.25 up 2 cents
The Stalker Strikes With Another Huge Gold Buy Order!
…Gold came in stronger than expected on the Comex opening, which is almost always a very constructive development. It left a $1 gap and quickly shot up all morning, topping $383 at one point. Then the requisite Gold Cartel $6 price-capping rule went into play. That was all she wrote. The cabal regrouped and held gold in check the rest of the trading session and then did their requisite slam, knocking gold down a buck ON THE BELL. These no-good low-lifes are pitiful. Ah for the day when we can get our stretchers out, pick them off the mat, and then dump them in the sewer!
The big news is for Café members only. I received a call from London about The Stalker and learned a bit more about this "gold buying group." Two goodies for you:
*In addition to the $4.6 billion order, The Stalker is buying well in excess of another billion dollars worth of bullion and gold coins. The MIDAS analysis over these past months of huge new buying interests entering the gold arena looks better by the day.
*The orders are emanating out of New Zealand and Australia. My source believes it is Asian money and most likely CHINESE!
This is wonderful news as it would mean the Asian (Chinese) gold buy program is competing with Indian, Turk and Arab buying. Put them all together and it is easy to comprehend why The Gold Cartel has not been able to flush out the massively long specs. The Eastern buyers are always there on dips competing against one another for a diminishing supply of gold.
It also explains why gold has been moving up in price with a corresponding, but lagging, move in the dollar. Gold is leading the way and doing so for the reason John Brimelow and I have articulated for so long. The key to the gold price is the surging physical gold market taking on the corrupt and devious Gold Cartel…
-END-
December 23, 2003 - Gold $410.65 up 55 cents - Silver $5.71 up 2 cents
A STALKER Of A Gold/Silver Tale For Christmas Time
…As Café members have been made aware, the Eastern gold buyers have additional competition due to the enormous physical market buying by THE STALKER ("gold buying group"). Without getting into many details, I want to stress THE STALKER is real. My source’s good friend has attended a meeting with this "gold buying group," or his agent. I say "or" because THE STALKER is very secretive and does not want to be known publicly, even to the sellers from whom he is buying.
Both my source and I strongly believe the gold buying is of Chinese origin…
-END-
January 5, 2004 - Gold $423.80 up $8.60 - Silver $6.19 up 27 cents
Gold ($423.80) And Silver ($6.19) SOAR!
…*THE STALKER input has been incredible. Every time I get word this "gold buying group" is in the market, gold moves higher. Just as I was writing this, I received a phone call from "Mike," my STALKER source. He tells me THE STALKER was in the market today and they are going after $1.4 to $1.6 billion worth of gold in the near term…
-END-
January 15, 2004 - Gold $408.30 down $13.10 - Silver $6.19 down 21 cents
Ouch! Gold Cartel Wins A Battle
…Good news! Just got off the phone with my STALKER source. There was an unscheduled phone conference this afternoon with THE STALKER’S US buyers. They have a NEW order for $800 million to $1.2 billion to be completed between now and March. 72 tonnes of new gold buying is nothing to sniff at! The orders are still coming out of Australia and my source continues to believe they are for mainland China…
-END-
January 28, 2004 - Gold $414.60 up $4.90 - Silver $6.60 up 7 cents
Silver Closes At Six-Year High/Gold Charges Up $5/Gold Share Massacre Orchestrated
..In my various presentations and public commentary at the Vancouver conference I stressed the importance of what was going on in the physical gold/silver market and laid out what has been presented to Café members, including John Brimelow’s unique and extremely valuable work. There was no one else at the conference doing so. While most conference presenters stressed the weak dollar as the most important gold factor, I stressed it was the surging physical market.
In that regard, I learned this morning THE STALKER (probably China) just completed the last bit of its $6.8 billion order. NOW, THE STALKER is working on its additional 800 million to $1.2 billion dollar gold order (brought to your attention recently). I might know more on this on Friday.
To give you some idea of how significant this is, Norway just reported they sold 16 tonnes of gold in January (see below) and plan to dump another 17 tonnes of bullion, which will clean them out. The Gold Cartel and friends jump up and down about more central banks selling their gold and make a big deal how negative it is. What The Gold Cartel fails to tell the press and their clients is who is BUYING gold and to what extent. Can they all be so uninformed?…
-END-
February 24, 2004 - Gold $403.90 up $5.70 - Silver $6.59 up 13 cents
Silver and Gold Pop Very Nicely / $6 Rule AGAIN
…Some input from a bullion/coin dealer who has been in the business for 40 years. He has not seen the physical gold market this tight in two decades. The physical market is in a bit of a disconnect with the price-rigged Comex. Silver is also extremely tight according to my source and only trades in size at a PREMIUM. You cannot buy a decent amount of physical silver without paying up. Wait until next month!
Some STALKER feedback. We have confirmed the buyer is from the Far East, in all probability Chinese, and they still have $1.5 billion of gold to buy. We also know why they are buying. This is a big picture trade, not a short-term speculation. The gold they are accumulating is going into deep storage and not coming back into the market on rallies. The reason is these "Chinese" fear a complete debacle in fiat currencies in the next couple of years…
-END-
That’s enough for now. You get the picture. The GATA camp was right on the money about Chinese gold buying while there was nary a peep about it from the mainstream gold world, or from the big shot bullion dealers on Planet Wall Street.
Meanwhile, back at the gold ranch, it was Gold Cartel business as usual. The Chinese gold news threw a monkey wrench into their plans to keep gold suppressed today and the DOW propped up going into the stress test (criteria) that was released this afternoon … which is why gold was hit in the Access Market yesterday afternoon and the DOW was goosed on the close by the PPT.
Gold popped to $913 during Asian trading hours last night. Then it was Plan A for the cabal. The price rise was stopped cold when they reported to work at the usual 3 Am EDT…
These guys make me sick to my stomach, as do the lightweight people in the gold industry who refuse to deal with the manipulation truth. The Chinese gold news was enough on its own to send the gold price sharply higher. Yet, there were even more bullish market factors for the gold price, which should have sent it much higher on their own…
*The dollar began to break down. It closed off .74 to 84.74 and broke below the neckline of a head and shoulders formation...
June dollar
http://futures.tradingcharts.com/chart/US/69The euro rose .0119 to 1.3245. The pound was flat at 1.4675, but the yen rose .73 to 97.13.
*With short term US Treasury rates near zero at .06%, the yield of the 10 year T note rose to 3%, negating the entire move after the "quantitative easing" announcement and threatened to make multi-month highs. Clearly the inflationary effects of US policy, and what those implications are for the dollar, are having their effect in the marketplace.
June T note
http://futures.tradingcharts.com/chart/NO/69
Should the yield on the 10 yr T note take out 3.05%, we are likely to get an avalanche of Treasury note/bond selling.
*Crude oil blew through $50 again on the upside, ending the day up $1.93 to $51.55 per barrel.
Put all of that together, the price of gold should be screaming higher. Guy notes…
Can there be a more bullish story than the China gold story last night? And, yet again, gold can’t go up much on this news? You have to be kidding me! If China announced they were buying a big bunch of soybeans you can bet your last dollar that the bean market would be limit up today!! All this and the dollar getting hammered again???? When will it end!!!!
***
Don’t get bummed out here cause this is what THE BUMS do. Remember the past couple of days I reviewed the fact that gold almost never goes way up on very bullish news. The modus operandi of the cretin Gold Cartel is to SHOOT THE MESSENGER when there is positive news for gold. This is just par for the course ... with the dopey gold pundits making mention of how poorly gold reacted to such bullish news. Meanwhile, misguided sad sack souls, Geithner and Summers, continue to lead the country to disasterville.
Clearly The Gold Cartel wanted the price of gold down today. However, the news from all fronts was SO BULLISH, and the direction of the future price of gold so clear, they had all they could handle to keep gold from exploding, as it should have.
In the end, today was TERRIFIC for us, as the die is cast for the price of gold in the months ahead. The Chinese news will reverberate all over the word and attract more and buy SUBSTANTIAL buyers.
As The Gold Cartel had their hands full with gold, they sat on silver, which should have rocketed also. One day in the near future it will. In the meantime, oh well, that’s what JP Morgan & GANG does.
Ironically, our STALKER source called yesterday and re-affirmed that this brilliant London trader is still calling for $940 gold and hung in there on the brief dip. In addition he had some insight to some of the silver weakness besides the manipulation by JP Morgan & Co. You might recall that he told us some time ago that a large amount of silver was shipped from London to Dubai. The price at the time was about $17. Not good because after the oil price debacle, Dubai went into the tank and investors over there shied away from precious metals, including silver. Thus, these dealers were stuck with a huge amount of inventory which was doing them no good, so some of them have been dumping their silver and want some of sent back to London.
Will let you know if I receive any further updates on that silver score.
The gold and silver charts look better and better…
June gold
http://futures.tradingcharts.com/chart/GD/49May silver
http://futures.tradingcharts.com/chart/SV/59The gold open interest rose 8224 contracts to 344,626. The specs are on their way back in on the long side as they like gold’s performance following its test of its 200-day moving average.
The silver open interest went up 1334 contracts to 97,077, which is a recent high. The silver spec longs are emboldened.
The Cafe Sentiment Indicator remains BLAH. As is so often the case, just when gold/silver investors ought to be paying the most attention, they go to sleep as a whole. Some things never change.
The CRB went up 3.73 to 223.27.
More gold goodies:
Is the China game over?
Indian ex-duty premiums: AM $5.50, PM (12c) with world gold at $908.10 and $911. This is basis Ahmedabad, and the AM reading is probably anomalous. Most of the conduit cities seem to have finished the day slightly below import point, which fits with a Reuters story today. See:
http://in.reuters.com/article/businessNews/idI
NIndia-39224220090424
However, the rupee was firm, closing at $1=R49.81 (Thursday R49.92) and the stock market closed up 1.74%. This is the 7th up week in a row; the market has risen 41% since its early March low and is attracting substantial foreign investment. If the Reserve Bank permits the rupee to rise, this will improve the Indian bid for world gold.
On Reuters data, the Vietnam physical market stood at a $5 discount to world gold (which at the time was at $912.50, virtually its high of the day.) Noting the story at
http://uk.reuters.com/article/oilRpt/idUK
HAI00004120090424
UBS guesstimates that Vietnam exported 80-100 tonnes of gold in the first quarter, but that the flow has subsequently stopped. A wider discount than $5 would be needed to make the trade worthwhile; but obviously the situation merits attention
TOCOM’s active contract gained 15 yen last night; aggregate volume was the equivalent of 10,530 Comex lots; open interest unfortunately is not available. World gold added $6 from the Comex floor close: thanks to China, not Japan.
As noted yesterday, Wednesday’s $9.80 Comex gain saw a 2,824 contract 8.78 tonne decline in open interest. MarketVane’s Bullish Consensus added 2 points to 74% yesterday; the HGNSI jumped 13.3 points to 16.8% Bulls. The GLD ETF marked the June Comex $14.10 gain by shedding 0.53 tonnes (260 Comex lots).
China’s announcement overnight that it has raised its gold reserves by 75% since 2003 raises a number of points. Firstly of course, it further demonstrates the CB gold holding statistics are close to worthless. Secondly, from a broad economic perspective, it calls into question Chinese FX policy. This puts them directly at odds with the Americans, who have clearly been hostile to CB gold accumulation for more than a generation. Optimists might think the Chinese are planning to forgo the undervaluation privilege which has been central to their US relationship the rule of Robert Rubin. This could help reflate their economy. More likely, in my view, the risibly cosmetic revaluation charade will be abandoned, triggering competitive devaluations across the Far East.
Not directly helpful to gold – except in as far as stress and antagonism are.
***
CARTEL CAPITULATION WATCH
Dave from Denver…
Hmmm....market being forced higher
in anticipation that Geithner's Private Public Investment Partnership will do a belly flop? Today is the deadline for applications and apparently interest in the scam is lukewarm at best:
http://www.marketwatch.com/news/story/private-investors-
skeptical-toxic-bank/story.aspx?guid=%7B567A0888%2D37E0%2D4F
9F%2D81F9%2D62025CFEB7FB%7D&dist=msr_5Investors also are unlikely to be interested in buying packaged subprime mortgages that were based on misrepresentation and fraud, Lashley noted.
Investors believe bank toxic assets can be divided into three categories:
Attractive securities that can and are being sold without any government help.
Assets that may be attractive but banks want more than they investors will pay.
Bank-owned assets that, no matter what their price, investors won't buy.
***
Talk about a no surprise. The DOW ended the day up 119 to 8076 and the DOG leaped 42 to 1694. "Everything is fine," The Stepford Wives.
Meanwhile...
April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.
U.S. economic news:
The stress test methodology release was mundane and as expected…
14:00 Fed says large banks should hold additional capital to serve as a buffer against higher losses than normally expected through 2011
The comments come in context of the release of the parameters of the stress test.
* * * * *
14:05 Fed releases white paper regarding stress tests
The following is the opening paragraph from the white paper, which is available via the Fed link attached:
"Most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized. However, losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks. Lower overall levels of capital—especially common equity—along with the uncertain economic environment have eroded public confidence in the amount and quality of capital held by some firms, which is impairing the ability of the banking system overall to perform its critical role of credit intermediation. Given the heightened uncertainty around the future course of the U.S. economy and potential losses in the banking system, supervisors believe it prudent for large bank holding companies (BHCs) to hold additional capital to provide a buffer against higher losses than generally expected, and still remain sufficiently capitalized at over the next two years and able to lend to creditworthy borrowers should such losses materialize."
Reference Link
* * * * *
Top U.S. banks must hold sizable capital buffer: Fed
WASHINGTON (Reuters) - The top 19 U.S. banks need to hold a "substantial" amount of capital above regulatory requirements to weather a potential worsening of the economic recession, the U.S. Federal Reserve said on Friday.
Supervisors said "stress tests" regulators conducted at major banks were aimed at ensuring the institutions have enough capital in reserve to continue to lend in potentially bleaker conditions, and are not to be considered a measure of banks' current solvency.
"It is important to recognize that the assessment is a 'what if?' exercise intended to help supervisors gauge the extent of capital needs across a range of potential economic outcomes," the Fed said in a white paper outlining the methodologies regulators employed.
-END-
08:30 Mar Durable Goods Orders (0.8%) vs. consensus (1.5%); ex-Transportation (0.6%) vs. consensus (1.2%)
Feb Durables revised to 2.1% from 3.4%; ex-Transportation revised to 2.0% from 3.9%.
* * * * *
U.S. durable goods orders fall 0.8 percent in March
WASHINGTON (Reuters) - New U.S. orders for durable goods slipped 0.8 percent in March, far less than Wall Street expected, Commerce Department data showed on Friday.
Analysts polled by Reuters had forecast orders for long-lasting manufactured goods to drop 1.5 percent.
Durable goods orders have now fallen for seven months out of the last eight, the Commerce Department said. The sole rise in that period, in February, has been revised to 2.1 percent from the 3.5 percent previously reported.
New orders excluding transportation slid 0.6 percent last month, compared to February when they rose 2.0 percent. Orders excluding defense also fell 0.6 percent, after rising 0.2 percent in February.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, gained 1.5 percent in March after rising 4.3 percent in February.
-END-
10:00 Mar New Home Sales 356K vs. consensus 337K
Feb figure revised to 358K from 337K.
* * * * *
U.S. home sales drop in March
WASHINGTON (Reuters) - Sales of newly built U.S. single-family homes dropped 0.6 percent in March, but the stock of homes for sale at the end of the month still plummeted at a record pace, Commerce Department data showed on Friday.
The inventory of new homes shrank in March, to 311,000 from 328,000 in February. That left the supply of homes available for sale at 10.7 months' worth, compared to February's 11.2 months.
The Commerce Department said that the monthly change in inventories, of 5.2 percent, was the largest drop in more than 45 years and the year-on-year plunge of 33.7 percent was the largest on record.
February sales were much stronger than originally thought, with the report showing they rose 8.2 percent, compared to the 4.7 percent gain previously reported.
The March drop brought home sales to a 356,000 annual pace. Analysts polled by Reuters had forecast sales at 340,000.
The median sales price for a new home fell to $201,400 from $208,700 in February. The average price, however, rose slightly to $258,000 from $255,100.
-END-
The worst may be yet to come
Is the worst over? Investors seem to think it is. Confidence that the crisis is winding down has been mounting.But the right answer to the question depends on what "worst" is meant. Appropriate replies include: probably, yes but so what, not yet, probably not, and let's hope so.
By Edward Hadas, breakingviews.com
Last Updated: 3:28PM BST 22 Apr 2009
The worst of the credit squeeze is probably over. True, loan losses are still increasing. But the official aid is massive: minimal policy interest rates, ample liquidity supplies, capital injections and implicit loan guarantees.
The aid from above has helped push dollar interbank borrowing rates down in the last six weeks. The cost of insuring against corporate failure in the credit default swap market has also fallen by 0.5-0.7 percentage points to about 1.9 and 1.6 percent annually for the main US and European investment grade CDS indexes. Improving bank credit has contributed to this trend. Better credit all round means more loans will be refinanced, so fewer companies will go under than would otherwise be the case.
The big official liquidity push also gives investors more cash to put into the markets. The additional buying power may account for some of the sharp increase in oil and equity prices. There have also been tentative signs of revival in the junk bond and IPO markets. To some extent, the mood is following the money.
It may be due to government help or it may just be the passage of time, but another worst that has probably passed is in the pace of economic decline. The huge sudden drop in activity after the collapse of Lehman Brothers last September has already become something of a business legend. If the decline had continued at that pace, economies would be back to the Stone Age in a few decades.
It's not going to be that bad. Globally, exports are down 30pc since last July, according to Lombard Street Research. But the pace of decline is moderating. Similarly, US housing starts, which have declined by 75pc since the 2006 peak, may have reached their low.
The balance of indicators still suggests GDP is falling in most developed economies, but at a much less dramatic rate than a few months ago. When the economy is only declining at a moderate pace, some measures typically suggest that growth is returning - the much talked-about "green shoots" - but more show further decline. That seems to the case now.
Inventories complicate the picture. A sharp decline in global demand led to an even sharper reduction of inventories as retailers and manufacturers cut back. As the inventories are rebuilt, production will most likely pick up faster than consumption.
So yes, all in all the economy isn't shrinking as rapidly as it was. But so what? It's still shrinking. On that yardstick, therefore, the worst isn't yet over.
Now look at another measure of "worst": unemployment. Even when growth does return, recovery is likely to be anaemic. It will take time to absorb the excesses built up during the credit boom, from houses in the US to too many Chinese factories making cheap goods.
What's more, it's not as if all that private-sector debt has gone away.
The rise in savings rates in the US and elsewhere isn't going to be a one-quarter wonder. This means that the peak in unemployment could easily be two years away.
And will that then be the end of the pain? Probably not. The crisis will leave government balance sheets shot to pieces. The best case scenario is that the authorities manage to suck all their fiscal and monetary stimulus out of the economy safely once economic growth has bottomed out. Then all that the world will suffer is high taxes and slow growth.
But there is a risk that this outcome proves too unpopular and that the authorities instead take the current fad for "quantitative easing" to the extreme - and just print money to finance their deficits. The outcome would then be inflation.
An inflationary outburst might even lead to another sort of financial crisis - a loss of confidence in key currencies. That could be worse than anything seen up to now.
Can such a dire outcome be avoided? Let's hope so.
-END-
BofA
Dear Bill,
You've been saying for a while that you smelled something big and awful coming around the corner, and that's why the PMs were getting smashed. Clearly the rapidly unfolding Bank of America scandal was it. I can't say I'm surprised by the revelation that Ken Lewis cared more about his job than the interests of shareholders. There have been so many instances of lying and cheating that it's hard to be shocked anymore.
The fact that the U.S. is not considered as corrupt as a banana republic is simply a result of human conservatism. Human nature won't let us change our minds about deeply held beliefs so quickly.
Despite Andrew Cuomo's investigation, I don't have any illusions that he will be the American people's white knight. As Catherine Austin Fitts points out, Cuomo was largely responsible for the subprime mess at Fannie and Freddie when he was in charge of HUD under President Clinton. (http://www.dunwalke.com/sidebars/andrew_cuomo.htm) Sadly, too many actors in this drama are recycled from the Clinton Administration - Schapiro, Gensler, Summers, Emanuel, and now Cuomo - and all of them are deeply compromised.
The spark of hope I see is the fact that Americans are starting to wake up to the severity of the crisis. Sure, it's still a small number but events like the recent Tea Parties show that a vocal minority is angry about the irresponsible policies of the government. Mainstream intellectuals like Simon Johnson of MIT and William K. Black of the University of Missouri are openly talking about fraud and the takeover of government by financial oligarchs. In effect, the media is moving over to covering GATA's point of view without acknowledging that GATA said it first!
All the best,
Jennifer Barry
http://www.globalassetstrategist.com/
Incredibly, there was barely a mention today about the Bernanke, Paulson, Lewis mess. Unreal! ... Planet Wall Street at its worst.
TOCOM
Good Evening All:
During the April 23rd TOCOM sessions the seven past largest paper gold shorts increased their net short position by 467 contracts to 20,497 contracts. STDJ also increased theirs by 90 contracts to 10,515 contracts.
http://www.tocom.or.jp/souba/gold/torikumi.htmlThe same seven members added 27.50 contracts to their silver net short position leaving them net short 294.50 contracts (60kg deliverable equivalent).
http://www.tocom.or.jp/souba/silver/torikumi.htmlTOCOM posted their "Margin for May 2009" and compared with their "Price Limit and Margin for April 2009" there are clearly differences:
http://www.tocom.or.jp/news/2008/20090421_1.htmlOne of the first differences that stand out when comparing the two is that no price limits will be imposed on and after April 27th for many items including gold and silver. Furthermore, spot month additional clearing margins will be increased for certain items including gold and silver (based on type of position) on and after April 27th. For more details please see the bottom of the "Price Limit and Margin for April 2009" release below:
http://www.tocom.or.jp/news/2008/20090325.htmlBest wishes,
Scott
Large Scale Conspiracies - The Evidence
Bill,
There is a longtime argument that sophisticated investors like Jim Rogers use to dismiss the idea that a gold cartel, or conspiracy, exists. They claim that nothing that involves so many people can be kept quiet. The fact that no banker has come forward to publicly acknowledge a coordinated effort to suppress the price of gold is proof that no such effort exists. Without a smoking gun, or at least a smoking banker, the notion of a large-scale conspiracy is dismissed as impossible.
Well, if you base your position on a false premise, it’s pretty likely you will get a false answer. Garbage in, garbage out, as they say. There is now published evidence that proves that large-scale governmental conspiracies to defraud the public can be quietly maintained over decades. Who has printed this ground-breaking work? The Federal Reserve, thank you!
A study1 by researchers found, "that when government revenues dry up, police write more speeding tickets. After analyzing 14 years of data in North Carolina, the pair found that for every 1 percent drop in government revenue, the number of traffic tickets issued per capita increases by 30 percent the following year.
"It's significant," said University of Arkansas-Little Rock economics professor Gary Wagner, who co-authored Red Ink in the Rearview Mirror: Local Fiscal Conditions and the Issuance of Traffic Tickets. "If there was no revenue for issuing tickets, I wouldn't expect the unemployment rate and revenue to be related."
The study, which analyzed data from 1989 to 2003, found the lowest number of tickets issued in North Carolina was in 2000, after nearly a decade of economic growth. There were roughly 645,000 tickets written that year. The highest number of tickets came two years later, when governments were trying to recover from the post 9-11 recession, and issued roughly 768,000.
Wagner said the study reinforced a theory held universally by economists: Incentives matter.
"If local governments are somehow involved in the revenue that gets generated, there's an incentive to get more revenue," Wagner said.
Wagner said there are numerous anecdotes nationwide of such practices, such as the mayor of Nashville, Tenn., proposing two years ago a 33 percent increase in ticket revenue in his budget.
Wagner's co-author, Thomas Garrett, is an assistant vice president at the St. Louis Federal Reserve. North Carolina was chosen as a case study because the state had good data."
So here we have an effort to covertly defraud and damage the public. The "conspiracy" is widespread and crosses state lines. There is plentiful circumstantial evidence to confirm its existence…AND NOT ONE OFFICER, SWORN TO UPHOLD THE LAW, OR ADMINISTRATOR HAS COME FORWARD TO COMPLAIN! How can that be? Well, it’s obvious. Police officers, and administrators, understand that any whistleblower who speaks out will shortly be looking for a new line of employment.
The same principle works in finance. Why would a banker give up a life of privilege, to protect a public that mostly isn’t even interested enough to listen? Employees intuitively understand who pays their salaries and bonuses. They’ve also been brought up through a system that teaches them that gold is a barbarous relic, that it cused the Depression and that its proponents wear tinfoil hats and are mentally unstable. Who would make a public stand to fight for this? Thousands of people can know the truth, and yet not one person will speak it. Anyone who scoffs at this reality should just ask the Federal Reserve. As long as the "system" approves, a conspiracy can exist practically in public view, and no one on the inside will lift a finger to counter it.
Best wishes,
Peter R.
http://www.news-record.com/content/2009/01/12/article/study_links_economy_to_traffic_tickets
***
Gold availability
From: Michael Wright
Friday, 24 April 2009 7:23 AM
Subject: There is no gold (well very little anyway)
You might want to pass on to your GATA mates that it took me over a month following payment to get my 50 oz gold bar.
I purchased it on the 20 March and as you know they still didn't have it whenI tried to collect it on 3 April. When I went in (again) yesterday, they finally had it ready;
I said why didn't you ring me like you promised? They said sorry, but they only got it last night.
Hmmmmmm.
Michael Wright
West Perth WA 6872
Another bright light for the day was the way the gold/silver shares acted when The Gold Cartel pressured the price of gold back to the unchanged mark. They were firm as could be and failed to react on the downside to the pressure on bullion. As the day wore on they gained traction and closed superbly.
The XAU and the HUI rose 20.15 to 310.81.
It appears the HUI is in the process of completing a massive base … one which can support a move to new highs and beyond…
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=HUI&sid=16794&time=8
From Kiwi Land...
Gold stocks
Hi Bill:
From Midas one year ago
"April 24 (2008) – Gold $886.80 down $19.40 – Silver $16.66 down 50 cents
The XAU dropped 6.77 to 172.61 and the HUI gave up 17.93 to 407.28.
The HUI is one of the worst looking charts I have ever seen, as it has broken through massive support at 425 and broken down after completing a huge top. If I didn’t know the extent to which gold, silver and the shares have been managed, this would petrify me:"
You certainly got the call on the HUI right!
I've been watching for year on year Gold price. Yesterday we moved above the Gold Price of last year and with today's move higher combined with the $19.40 loss of April 24, 2008 we are solidly above it. However look at the silver price, still a good $3.75 below last year.
Today the HUI is up 20 to 310.81. Last year it was down 17.93 to 407.28 but still 30% higher than where we are today. The Gold stocks can move a lot higher from here and still be underpriced.
Cheers from Auckland, Ed Wener
The dollar is breaking down technically, yields on US Treasury notes and bonds are close to busting out, and US short term rates remain right above zero. That alone is one heckuva bullish stew recipe.
Meanwhile, the China gold buying news puts this MIDAS in our Hall of Fame collection. This revelation will act as anchor for gold for many months to come and send the price well beyond $1,000 per ounce.
Spread the word, Thunderbird!
GATA BE IN IT TO WIN IT!
MIDAS
http://news.goldseek.com/LemetropoleCafe/1240765200.php
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