Tuesday, October 27, 2009


POW! POW! The reaction you've been waiting for has arrived, and right on schedule. 10AM the day of options expiration and "whoops" there go the Precious Metals. So much for the "Gold Cartel Surprise".

Silver has gotten whacked pretty good over the past two day's 10AM CRIMEX raids. Gold has stood up to the fiends admirably. Silver slipped into our first buy zone today at 16.61 and it was apparent that buyers were waiting at the reading to snap up Silver at markdown prices. We should know by late Thursday if answering opportunity's knock at 16.61 was a good plan.

Gold slipped below 1042 quickly just after the 10AM knock. Gold found solid support at the March 16, 2008 intraday high of 1032.20, stopping it's slide this morning at a 1032.50 low. Old resistance pops up as new support, and stumps the frumpy CRIMEX bears. Gold quickly rebounded to our friendly 1038.40 Fibonacci line and has hung out within it's vicinity for the balance of the day. Like Silver, we should know by late Thursday afternoon if Gold has weathered this recent Bear Raid intact and fueled to move higher in November.

Of significance in the currency markets today was the YEN. Note that as the EURO fell today, the YEN was rising. 91.75 on our YEN/DOLLAR chart is of major significance to the whole enchilada. The rising YEN will support Gold prices, it proved that today. Keep an eye on this line. Above it is bad for Gold, below it is good. The Euro needs to maintain support above 1.4773 to embolden Gold.

Gold Blast-Off Starts Friday?
By Patrick A. Heller
There are two significant events this week that could exert pressure for higher gold prices. Because of this, I expect to see major behind-the-scenes actions to try to suppress gold (and silver) prices until the middle of Thursday afternoon.

First, the U.S. government’s Treasury debt auctions will sell the greatest amount of debt ever sold in one week. The net debt increase of $153 billion is so high it will exceed the current authorized federal debt limit. Flooding the financial markets with so much debt is a sign of weakness for the U.S. dollar. As the dollars declines in value, the price of gold in U.S. dollars invariably rises.

Second, we will also see the expiration of options contracts in two days. If the spot price at the close of trading on the day that gold (and silver) options contracts expire is higher than the contract price on a call option, the owner will exercise the option to demand immediate delivery of physical gold. The higher the price of gold, the more call options that will be exercised. Conversely, a lower gold spot price will reduce the demand for gold for immediate delivery. There is a major block of call options at $1,050, so expect prices to stay below that level through Wednesday night.

As we have seen previously in 2009 with large Treasury debt auctions and options expirations, the price of gold was clobbered before these events, and not allowed to rise quickly until after the last Treasury auction closed on Thursday afternoon. I see no reason to expect a different pattern this week.


The cataclysm awaiting gold is just disclosure
By Adrian Douglas
Let's forget the discussion of inflation and deflation, because it seems that there can be no consensus on this. Let's imagine that some cataclysmic event suddenly reduced physical stocks of gold above ground from 210,000 tonnes to only 160,000 tonnes. In other words, 50,000 tonnes of gold just vanished in this cataclysmic event.

In such circumstances what would happen to the price of gold?

This would be equivalent to the imaginary cataclysmic event that we just considered that made 20 percent of world oil reserves suddenly unavailable. It would represent 21 percent of all above-ground gold stocks just disappearing.

Wouldn't you agree that from an economics standpoint the resulting stampede to redistribute 160,000 tonnes in a market that believed 210,000 tonnes was not only available but had actually been sold would drive the gold price to unimaginable levels?

What sort of cataclysmic event could trigger this?

Revealing the true condition of the gold market could trigger it.

From the most recent work of the Gold Anti-Trust Action Committee there are strong indications that the London bullion market operates on a fractional-reserve basis. It would appear that at least 64,000 tonnes of gold have been sold via unallocated accounts against a maximum reserve of only 15,000 tonnes.

The cataclysmic event in gold could be triggered by an audit or simply by purchasers asking for delivery of their gold.

Further, with this supply-and-demand problem in the gold market, inflation and deflation do not have to enter the discussion, because the adjustment in price could happen so quickly that the fiat money supply could remain totally static.

TARP chief: Banks possibly ‘in more danger now’
WASHINGTON (CNN) – The banking system today may be in a more precarious position than it was a year ago, the man charged with overseeing a $700 billion bailout program said Wednesday.

Neil Barofsky, the special inspector general managing the Troubled Asset Relief Program, told CNN’s Wolf Blitzer on Wednesday that the government’s decision to support bank mergers over the past year may have put the U.S. economy more at risk.

"These banks that were too big to fail are now bigger," Barofsky said. "Government has sponsored and supported several mergers that made them larger and that guarantee, that implicit guarantee of moral hazard, the idea that the government is not going to let these banks fail, which was implicit a year ago, is now explicit, we’ve said it. So if anything, not only have there not been any meaningful regulatory reform to make it less likely, in a lot of ways, the government has made such problems more likely.

"Potentially we could be in more danger now than we were a year ago," he added.

Earlier in the day, Barofsky issued a scathing report criticizing the Treasury Department for not being transparent enough about how bailout money was being spent. He warned that this could have lasting effects.


Anything Less Than Full Disclosure is Unacceptable
By: Dr. Ron Paul, U.S. Congressman
Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts.

With the economy in shambles, people are looking for answers - not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?

However, there is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.

The good news is that Washington is responding and the Federal Reserve has become the issue. Concerned Americans need to keep the pressure on by continuing to define what we want, and what we do not want.

One major concern is that HR 1207 constitutes some kind of power grab for Congress. Congress would not do a better job dictating interest rates or managing money supply growth than the Federal Reserve does for exactly the same reasons: Congress is not the free market. Any select group of people, no matter how wise and educated, simply cannot replace the wisdom of the market. HR 1207 does not seek to replace the wisdom of the Fed with the wisdom of Congress. That would be a giant step backwards. HR 1207 simply asks for full disclosure, and I am agreeable to allowing for a reasonable lag time to calm the fears that Congress intends to dictate monetary policy.

What we do want, what we insist upon, is that no longer will decisions that carry so much economic weight be made in absolute secrecy. We want to know what arrangements the Fed makes with other governments and central banks. We want to know who is benefiting from the actions of the Fed and what deals are being made. The Fed is already reacting to pressure by scaling back its liquidity facilities and returning to more traditional monetary policy through direct asset purchases. With nearly $800 billion in mortgage-backed securities on its books already, $800 billion in Treasury securities, and no real limit to what the Fed can acquire, there is a tremendous opportunity for malfeasance. We need to know who the Fed deals with, what they buy, how much they spend, and who benefits. As good as any step towards Federal Reserve transparency is, anything less than full disclosure at this point is unacceptable.


1 comment:

  1. buying some silver isn't a bad idea just incase i was looking up the prices and there only like 15$ for an American silver dollar, could be a good investment if our my dose go down the shutter.
    Thanks for the great reading, we buy buy gold in a recession. I will pass this on to our Ira clients to read.