Monday, November 16, 2009

She's Breaking Up

Gold rose higher AGAIN overnight in Asia as the President's trip to the region is scoffed at by the locals as the USA was widely criticized for inflating asset bubbles with their low interest rate policies and hammered on the lack of a free trade policy during the APEC Summit. Gold touched 1132.95 for an overnight high, and Silver reached 17.85.

Dollar Falls on APEC Pledge to Keep Stimulus; Gold Hits Record Bloomberg
Obama's Free-Trade Credentials Draw China, APEC Scrutiny Bloomberg

Of course, as the CRIMEX opens this morning both Gold and Silver are taken lower from the open. It is amusing that after the region of the world that holds the future of the global economy within it's borders buys Gold all night, the buffoons that pretend to manage our economy turn right around and sell it...believing they made a profit and tricking the Asians. This has been happening for weeks now. The Asians have to be laughing all the way to the bank. Every morning they walk into the office and see that the stupid Americans have marked down the price of Gold again. Too bad for the stupid Americans that are selling Gold they don't even possess, let alone own, the rest of the world is onto their scam. The Mother Of ALL Days Of Reckoning is creeping closer.

Silver is the Precious Metal to focus on this week. Silver appears to be on the cusp of a major break higher this morning. A close above 17.75 today could spell BIG trouble for the CRIMEX goons short millions of ounces of Silver they don't possess. $20 Silver is calling...

Major League Reckoning
By Dan Denning
Of course, a flaccid job market is not all that hinders the world’s largest economy. Far from it…

The supply of new US debt is growing even faster than the Congress makes plans to spend the money. The US Treasury is auctioning off $81 billion in new debt this week. It will sell $40 billion in three-year notes on Monday, $25 billion 10-year notes on Tuesday, and $16 billion in 30-year bonds on Thursday (which is pretty ambitious).

You have to wonder who is willing to loan money to the United States government – given the state of its fiscal and monetary policies – for thirty years at below 5%. But the Treasury is anxious to auction as much long-term debt now as it can, locking in what it believes are low rates. This is another way of saying the Treasury thinks rates will rise (creditors will ask for higher rates when lending to Uncle Sam).

In the report from the Treasury’s borrowing committee to the Secretary, the committee said it was getting a wee bit worried that the maturity schedule of the Treasury debt portfolio could be in trouble if rates go up. Specifically, it wrote that, “The potential for inflation, higher interest rates, and roll over risk should be of material concern.”

Perhaps this is why the Treasury and the Fed are considering whether to “move out on the interest rate” curve and try and set rates for longer-term debt. If the market is going to push them up, the Fed will have to push them down (as it has been doing anyway with its purchase plans). Rules are made to broken!

Take the statutory US debt ceiling for example. The Treasury’s borrowing committee writes that, “Based on current projections, Treasury expects to reach the debt ceiling in mid- to late- December. However, the government’s cash flows are volatile, and forecasting a precise date is difficult. Treasury is working closely with Congress to pass legislation to increase the debt ceiling. We will keep financial market participants apprised of developments as the debt outstanding approaches the statutory limit.”

In other words, the jackasses in the US Congress will have to pass a new law allowing the Treasury to borrow more. This would be comical if it weren’t so disgraceful. US monetary authorities continue to tell the world’s savers that the US standard of living is not negotiable, even if it means increasing public sector debt to over 100% of GDP.

But the world’s creditors may not be in the mood to negotiate anyway. We think the rise in gold is one example of creditors deciding there are better things to do with their money. And in the meantime, take a look at the graph below from the Quarterly Refunding Statement of the Treasury’s Office of Debt Management. It’s a doozy!

Normally, that debt is simply rolled over as a new (or often the same) buyer refinances it. But what do you think will happen in the next five years? The US will be borrowing more and more and probably at higher rates. Our guess? It won’t be good for the dollar.

U.S. Treasury Confident Congress Will Increase Debt Ceiling
Nov. 13 (Bloomberg) -- The Obama administration is confident Congress will raise the country’s debt limit by year end to avert a showdown similar to the one that shuttered parts of the government in 1995, administration officials said.

The White House wants an increase of at least $1 trillion to $1.5 trillion, according to a person familiar with the deliberations between lawmakers and the administration. Record budget deficits are pushing the national debt closer to the $12.1 trillion statutory limit.

The administration’s request, higher than a proposed increase already passed in the House of Representatives, would get the government through the November 2010 midterm congressional elections without needing another increase. Earlier this month, Treasury officials acknowledged they’ll need more borrowing room by year-end to avoid market disruptions.

“Market participants still remain on edge, especially since many have concerns over the rising debt loads that were kicked off this year,” said George Goncalves, chief fixed- income rates strategist in New York at primary dealer Cantor Fitzgerald LP.

The administration officials said the White House is open to any legislative vehicle that will raise the debt limit, by any amount. Although the Obama administration has pledged to bring deficits down to “sustainable” levels in the longer term, Treasury Secretary Timothy Geithner has focused recently on the need to keep up spending on economic assistance programs until the unemployment rate, which reached a 26-year high of 10.2 percent in October, comes down.

Eric Sprott: Gold Momentum's Picking Up Dramatically[Interview]
TGR: At The Gold Report we don't get a sense that the average investor is buying gold. Is that your sense as well?

ES: Yes, I agree that very few people have gone there. In fact, one of the funny things about the physical gold market and even mining stocks, for that matter, is that there is not a lot of room for everybody. Almost everything is spoken for. It's not as if gold is not owned by someone already. There is very little produced each year.

When I first got into gold, it was suggested there was a shortage of physical gold, and the only reason the price did not go up substantially then was because the central banks kept selling it. Now the central banks do not sell and you have all these new buyers. I have no idea where this gold is physically coming from. Even the array of gold stocks available to the world is not that large. We are very lucky to be based in Toronto, sort of the gold mining financing capital of the world. Everybody in the world of gold tends to come through here. There is not a big sense of gold mining in the United States for sure, but it's quite a topic in Toronto.

TGR: How likely are we to get into a gold mania if indeed people in some countries aren't even talking about it yet?

ES: You just have to watch the gold price. We are probably at a very significant level right now. Finance people looking at it have to be wondering what is going on. I do not think it is a secret now. You can hardly pick up a financial newspaper where they are not talking about the potential weakness of the U.S. dollar.

TGR: As you say here, we're trading around $1,100 as of this interview. What catalyst is going to come up? I clearly think that India stepping up to the plate, making that buy—frankly, I expected China to do it before India.

ES: If the Chinese come in now, we all have a story. I am sure they will, and/or somebody else will. It is not a lot of money—$6 billion or $7 billion is a drop in the bucket for the Chinese. That could happen. I have always believed there could end up being some problems in the physical market some day, regarding the settlement of contracts. We have these huge concentrated short positions in both the silver and gold on the Comex. There was a day when the price of gold went up $25; those shorts lost $1 billion dollars that day—serious dough now. So there could be things happening in the physical markets.

Audio interview with Jim Sinclair
Mining entrepreneur and longtime gold trader, Jim Sinclair, was interviewed for almost 40 minutes this week by Eric King of King World News... and discussed his life on Wall Street, the doom facing the gold price suppressors now that they are being challenged by governments taking delivery of metal, the stupidity of major mining companies, and the extraordinary potential of junior mining companies. The interview is a tour de force...
Martin A. Armstrong's latest essay is about Gold, it's history, political malfeasance, and the future of the price of Gold. It is a timely piece and well worth the read.

Gold $5000+ [must read]
The primary trend in gold remains bullish because it is the only hedge against global fiscal (political) mismanagement.

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