Sunday, June 14, 2009

Stand Firm

International Forecaster
By: Bob Chapman
As we get closer to June Comex delivery there is great concern that gold delivery of physical contracts cannot be met due to what can be called naked shorting.

Commercials have sold gold they cannot deliver. It looks like the US government, which is behind these positions, will again have to call in help for delivery like they did recently from the ECB and Deutsche Bank. All of this, of course, is illegal, but your government has its own set of rules. What could end in a classic debacle are the June gold options if enough are in the money and are called for delivery. It is our guess that if this happens and the government doesn’t come up with the gold again, that the gold pit could collapse. What we will witness over the next two weeks could be a gold explosion, especially if gold were to breakout above $1,000. Massive demands for delivery could take place. The forces of darkness again attacked gold last week as well as the shares and both have rebounded. The elitists are unable to keep the gold price down for any period of time. If the Comex collapse doesn’t come this month it most certainly will come in September. This is why we use a long-term buy and hold strategy and buying each time there is a dip in prices. Government is terrified and has put up every roadblock imaginable to inhibit and retard delivery. In the course of all this the elitists who have a revolving door between Wall Street, Washington and the Fed refuse to fix the system and they continue to add massive debt to the system, which only makes the situation worse. The system has to be restructured – purged – via bankruptcy and an exchange of equity for debt. We know the elitists won’t do that. If they do their power will be broken. This is why those who understand the problem are taking delivery of gold and in the case of most small investors taking delivery of coins and bullion and buying gold and silver shares.

Both Germany, from the US, and Dubai from London, cannot get delivery of their gold. This is why Ms. Merkel, German Chancellor, spoke out on debt last week; to force delivery of their gold, which the US cannot deliver. The same is true in London just as it is on Comex. One day you will turn on the news in the morning and you will learn that gold has jumped $500 to $1,000 overnight. Get ready for it because those kinds of events are in our future.

John Embry Expects $1,500 Gold and Early Stage Hyperinflation by Year End
The Gold Report: Quite a bit's happened since the last time we spoke with you back in September of '08. Gold was $874 at that point, and then dropped considerably in Q4. It has come back in '09, trading in the range of $850 to $950. Is gold still tethered to the dollar?

John Embry: I don't know that it's tethered to the dollar per se. Basically, there's a major problem with the dollar. I believe it is absolutely fated to fall dramatically against everything, but more against real assets than against other currencies. When I look at the other currencies, they don't look very good either, particularly the Euro and the Japanese yen.

They're trying to create the impression that paper currency is still good; so they go out of their way to try to pound gold at every opportunity. A week ago, clearly gold was tethered to the dollar on the downside, but on the other hand, for the prior few weeks when the dollar was under enormous pressure, there was still restraint in the gold price. It went up, but it should have gone up a lot more. They put pressure on to keep it from going up too much, and with an opportunity for a stronger dollar, they knock gold down. It's been the same format for a long time. But we're getting close to the end of that.

TGR: Why's that? What's going to push it over?

JE: There's no question what's going to push it—the realization that the U.S. is broke.

TGR: Who doesn't realize that already?

JE: Well, 90% of the people don't. Ask the average citizen. They don't have a clue what's going on.

TGR: So we need the public to figure this out.

JE: Absolutely. The U.S. budget deficit is going to be 13% of GDP. That's unheard of for the world’s reserve currency. There's no way you get out of that easily.

TGR: But most people aren't in the market anyway, so why would their realization affect the price of gold?

JE: Oh, it's not them; it's the people with the money—the people in the Far East and the Middle East. They will just want out of currency and as quickly as possible.

TGR: Why aren't they buying gold now?

JE: They are. They've already started.

TGR: So why hasn't the price gone up?

JE: It has gone up. But the fact is that, with the paper gold market, if you look at the short positions that the commercials, that the bullion banks, which are the agents of the U.S. government are running, it's a complete fraud.

TGR: How so?

JE: Because they couldn't possibly deliver on their paper promises if they were called by the people on the other side of the trade. The gold isn't there to deliver. They've cleaned out most of the western central banks. So we're real close. I think gold will be $1,500 before the end of the year.

Dollar likely to extend drop on unimpressive US recovery data
The United States dollar is likely to extend last week's drop in the trading week ahead as economic data fails to convince investors the US economy is recovering fast enough to warrant demand for the greenback.

Despite a rally on Friday, this week's record auction of $65 billion (Dh238bn) of Treasury debt and burgeoning fears of inflation are also prompting investor caution on the dollar as they feel they are in uncharted waters regarding US fiscal policy.

Rhetoric about finding a new global reserve currency to challenge the greenback is another slight weight on the dollar before a meeting in Russia of Bric nations (Brazil, Russia, India and China).

The dollar got a one-day boost a week ago with the non-farm payrolls report for May showing sharply lower-than-expected job losses. But there was no follow through last week with the dollar losing 0.4 per cent against the yen and the euro climbing 0.3 per cent against the dollar on electronic trading platform EBS.

"The numbers, while they were somewhat stronger than expected, weren't really strong enough to be a game changer with respect to the US economic outlook," said Steven Englander, chief foreign exchange strategist at Barclays Capital. "It didn't change the view on risks of where monetary and fiscal policy was headed."

By Warren Bevan
The US Federal Reserve of all people is hiring lobbyists to counter skepticism in Congress about their growing power over the financial system. That’s great. Wine and dine them until they sell their souls and the taxpayers future. To make it even more comical the head lobbyist is a former head lobbyist for Enron...we all know how that one ended. I’ll try and be more optimistic. Maybe she learned something from her past failures. Nope, she would have found a new career path rather than continue to lobby for fraudulent organizations if she had. Sorry, I tried.

China has announced they have further increased their gold reserve by about 4.5 tons at the end of April to about 1,059 tons. This is significant in several ways. The more important reason being the continued increase in gold reserves is another shot across the bow of the US. They are very worried about their US paper assets and are signalling this to the world as a whole by announcing the increases in gold reserves.

China quietly accumulated gold for years without a peep. Now they are openly saying they are increasing gold reserves. If you know how the Chinese work, they never talk their book, so they can continue to buy at the lowest price. However they do talk their book as a warning. Rather than saying something outright, their culture likes to mask their threats. This is the biggest threat to date. The Chinese could unravel the gold market themselves and in turn bring down the US currency. I hope US authorities are paying attention and you are paying attention. Gold is the place to be since it always has and always will represent money, silver even more so. Mark my words, this is a threat equal to nuclear war. Chances of an all out war today are slim and would result in near total annihilation of the entire world. A monetary war is taking place and gold is at it’s centre.

A senior executive at the World Gold Counsel says that justification is warranted in central banks having up to a 40% to 50% weighting in gold of total reserves. This was said at a conference organized by ETF securities. The fact is that this is impossible. At $937.90 USD per oz all the gold in the world is worth roughly $1.646 quadrillion. But when you consider that all the privately held jewellery coin and bullion in the world accounts for 71% of the total that only leaves $476 trillion in USD terms, most of which is already held by central banks and ETF’s etc.

The fact is that the gold is encumbered. If even a few large countries increased their gold reserves that much it would drive the price to levels not imagined by anyone. It can’t happen. There simply is not much gold available in the world for sale today. The only way that would be possible is through an ETF which doesn’t actually hold gold. It’s bad enough every currency is fiat, now gold is becoming fiat as well.

El-Erian Says Summit Shows `Rebalancing' as BRICS Buy IMF Bonds
June 12 (Bloomberg) -- Leaders of Brazil, Russia, India and China will probably use their first summit next week to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more clout.

For U.S. President Barack Obama and Federal Reserve Chairman Ben S. Bernanke, that’s a warning. For investors, it may be an opportunity.

Brazil and Russia joined China this week in saying they would shift some $70 billion of reserves into multicurrency bonds issued by the International Monetary Fund. While the moves aren’t an effort to “topple the dollar,” according to Mark Mobius, executive chairman of Templeton Asset Management Ltd., they increase the relevance of the four largest emerging economies, which account for only 6 percent of the MSCI AC World Index.

“The rebalancing of relative economic power is not only alive but gaining momentum,” said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., adviser to the world’s largest bond fund. “Average investors need to make sure that they are not hostage to an outdated conventional wisdom that underexposes them to this phenomenon.”

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