Tuesday, June 5, 2007

Don't Give Up Your Seat

The Bank of Spain updated May sales figures this morning and no surprise, Spain sold another 28 tonnes of gold in May after having sold 40 tonnes in March and another 40 tonnes in April. In three months and via an unannounced sales program, Spain has sold over 25% of their total gold reserves into the market. The interesting point to keep in mind is that this might not necessarily being done to grab the best price…no, this "sales program" which has merited no public comment from the bank could be forecasting a much larger problem on the horizon in the fiat currency of Spain. While we are no expert on the Spanish economy, this fire sale of gold reserves looks much more like an attempt to raise quick cash to solve banking and housing issues rather than a program of diversification.

Neil Ryan from Blanchard and Co. makes an astute observation above about Spain and her Gold sales. These voluminous Spanish Gold sales are less about trying to "cap" the price of Gold, and more about a desperate act by a desperate national government in dire financial straits. According to an article in London's Daily Telegraph, the Spanish government is running out of money. The Banco de Espana now has less than $17 billion in foreign currency and gold reserves left. This is enough for just 12 days of imports. The only nation in the world with a worse current account deficit is the United States.

Ryan went on to say:

The 133 tonnes in total sales over the past 3 months has not included the 37 tonnes in sales from the ECB umbrella organization as of yet. Looking at updated figures this morning showing less than 2 tonnes of sales last week by ECB captive banks, that 37 tonne figure has yet to show up in reports. So all told, the gold market in the last 3 months actually digested 170 tonnes of gold sales from ECB banks. We have no updated figures yet on banks outside of the ECB system because they report on a 3-6 month lag.

For a point of reference, even during the Bank of England and Bank of Switzerland gold purge from 1999-2004, no three month tally during the CBGA has been as high as 170 tonnes of sales into the market. The fact that the price has held up during this sharp increase is nothing short of remarkable and should highlight for even the market novice the underlying strength in the market.

In other words, recent news of more gold sales by Spain should not be spooking the Gold market. And the fact that the market has been able to absorb this huge supply should give the Gold Bulls some confidence going forward from here.


I recently referenced the record highs in the Dow Index and that at break of $67 in Oil could be the catalyst that crushes the Dow. A piece by the venerable James Turk posted on Kitco.com yesterday exposes these "new highs" in stocks for what they are...an illusion.

"...when measured in (Gold) the S&P 500 (today) is 71.19 goldgrams, well below the July 16, 1999 peak of 173.53 goldgrams. In other words, if you held the S&P 500 during this period instead of gold, you would be 59% worse off. Even allowing for dividends received, you would still be almost 50% worse off had you held the S&P 500 instead of gold.

More importantly, the real reason for the so-called ‘record high’ in the Dow and S&P is being ignored. A flight from the dollar into safer stores of wealth has been underway for years, but is now palpably gaining momentum.

What does the US have in common with Argentina in 1999, Russia in 1998 and Weimar Germany in 1923? They all had rising stock market prices when measured in terms of these countries’ domestic currency before the currencies of those countries collapsed.

Federal Reserve Chairman Ben Bernanke Expects Economy Will Rebound in Months Ahead

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke predicted Tuesday the economy will rebound from its anemic start of the year even if the housing slump persists. Wall Street slid, taking the news as a sign the Fed won't lower interest rates.

LOL! Like he's going to come out in front of the world and tell everybody that the US Economy is about to go down the toilet. A snowball has better chance in hell, than the world has a chance that this clown will ever tell it the truth about the US Economy. And these jokers on Wall Street continually pandering for a rate cut. FOOLS! The Dow is going to go down regardless of what Capt. Bernanke and his cronies do with interest rates. In fact, historically, a rate cut by the Fed usually signals a recession is at hand. And in today's world, a recession and rampant inflation equals STAGFLATION. A slower economy with rising costs equals LOWER corporate profit. And LOWER corporate profits equals LOWER stock prices. So Fools on Wall Street...be careful what you wish for.

Gold and Silver bugs, there is but one word for you to pay attention to "ACCUMULATE". As in buy all the Gold and Silver you can afford...A "perfect storm" of economic chaos fast approaches.



Briefly, silver has run into some "overhead supply" here as we close the gap from the April 26 dump in Silver that lead to our recent bottom at the 200 day moving average. The overhead supply is made up of buyers around 14 that got stuck holding the bag when Silver tanked. As you can see by the volume leading up to the gap down, supply looks thin and should only pose modest resistance here at 13.75. Every move thru 13.75 the past two days has been met by selling. Those weak bulls in Silver that are just happy to get out near even are dumping their metal just when they should be buying it. A solid close above resistance here should propel Silver towards another cage match with dem Rat Bastids at 14.04.

Please click on the chart above to enlarge.

Silver Resistance: 13.75 / 13.83 / 14.04

Silver Support: 13.69 / 13.55 / 13.49

____________________________________All prices SPOT

Gold Resistance: 672 / 675 / 681

Gold Support: 667 / 664 / 662

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