Thursday, February 18, 2010

The Fools On The Hill


Suddenly, at precisely 4:30PM est Wednesday, the bottom appeared to be falling out of the Gold market.

"WTF is going on?" could be heard in chours behind trading desks the world over.

"Ding-ding", Breaking News: IMF to sell another 191 tons of gold .

Anger quickly turned to laughter.

"Not another 'IMF is going to sell Gold story'..."

"The Gold Cartel just pushed the panic button!"

"Buy, buy, buy!"

How do I feel about the IMF gold sale news? Answer!

Well, it's not actually news. As a matter of fact, it's NOT NEWS AT ALL. Just consider the timing of it. At precisely 4:30PM est, AFTER the US equities markets have closed for the day, and "announcement" of IMF Gold sales hits the wires. Right in the midst of the thinnest trading on the CRIMEX. Oh, the desperation of these CRIMEX thugs. The price of Gold is beginning to get away from them, and they call in the aged war horse "IMF Gold Sales". How pathetic.

Why would the IMF "announce" the sale? Do they want to sell their Gold at a lower price? No likely. And unless I am mistaken, the IMF Gold must be sold at auction, and NOT on the open market. I can barely contain my laughter...

Has everybody forgotten what occurred immediately following the announced IMF sale of 200 tonnes of Gold to India at the price of $1049 an ounce? The price of Gold immediately went to $1226. Let them sell all the damn Gold they want, ...if it really exists. There are plenty of takers, and more where they came from. My guess JP Morgan will be first in line to buy the IMF Gold so that they can use it to cover their ridiculous naked short position in Gold on the CRIMEX.

This is NOT news, this is a joke...a total non-factor. If anything, this "announcement" will accelerate the Gold's climb in price towards $1500.

Trader Dan Comments On The IMF’s Supposed Gold Sales
Dan Norcini, [http://jsmineset.com/]
After the pit session trade had already closed for the day in New York, news came out that the IMF was planning on selling the remainder of 403.3 tons of gold, 191.3 to be exact, on the open market. Gold was immediately taken down hard in the thin trading conditions, dropping more than $14 on the day.

There are several things about this that should be noted. First is the timing – it comes on the heels of a resumption of the uptrend in gold with many technical indicators having moved into the buy mode. It also coincides with another brand new all time high in the price of Gold priced in Euro terms at the London PM Fix.

Those of us who have been around the gold market long enough know full well that the timing of this announcement is therefore no coincidence but was timed to attempt to derail the returning bullish sentiment in the yellow metal. Why announce the sale publicly which is guaranteed to receive a lower price for the metal than if the IMF had just quietly sold the metal into the market. This is reminiscent of then Prime Minister Gordon Brown’s announcement that England intended to sell its hoard of gold. That guaranteed that Britain would receive the lowest price possible.

Secondly, China was one-upped by India’s purchase of some 200 tons of gold late last year and got caught flat footed. The spin on this gold sale is that the IMF announcing that they would sell the gold into the open market means that Central Bank demand for gold is not as vibrant as the market was led to believe. That is an interesting tall tale. The simple truth is that Central Banks do not generally buy gold and announce their intentions to do so beforehand. Neither do they tend to buy when prices are moving higher as the momentum based hedge funds do. Time and time again we have seen that the CBs buy gold during episodes of price weakness. Once news hit the wire last year that India had bought 200 tons of gold, the price never looked back and shot straight to $1220+. Any Asian Central Bank that missed buying the gold as a result is certainly not going to panic and rush into the market to obtain it. They are waiting for lower prices where they will acquire the metal. To state therefore that Central Bank demand for gold must not be as robust as originally thought is quite shallow analysis.

My view is that this announcement means nothing in the longer term scheme but was rather a cheap trick to take the market lower. We have already seen this week how some noted elites were pooh-poohing gold and trash talking the metal all the while they were acquiring a position in it. Nothing ever changes in this gold market. It is still one of the least transparent markets on the planet and perhaps the most prone to official sector interference.

Do not be disturbed by the news. It is probably going to be a one or two day wonder and then that will be it. Gold will then go back to trading the currencies taking its cues from the action in the Dollar.

Incidentally, this sale is supposedly going to be phased in over an extended period of time. Rest assured, the IMF would love nothing better than to sell the whole 191 tons in one lump sum to another Asian Central Bank.

http://jsmineset.com/2010/02/17/trader-dan-comments-on-the-imfs-supposed-gold-sales/

In an email I received from GATA's Chris Powell:

Why the IMF's supposed gold sales don't mean much
Submitted by cpowell on 05:24PM ET Wednesday, February 17, 2010
Dear Friend of GATA and Gold:

Below is the press release issued this evening by the International Monetary Fund announcing that it "shortly" will sell 191 tonnes of gold on general markets, unlike the 212 tonnes it claimed to sell last year directly to India, Sri Lanka, and Mauritius. While the gold price quickly fell $7 or so on the news, there are a few things to remember.

1) The IMF really doesn't have any gold, just a tenuous claim on the national gold reserves of its members. Where the IMF's supposed gold is kept is a state secret. So is the location of the gold the IMF supposedly recently sold to India, Sri Lanka, and Mauritius. So are the gold bar numbers. There is no public evidence that the IMF's gold even exists, no public evidence that last year's supposed IMF gold sales were anything more than bookkeeping entries. Indeed, those sales may have been nothing more than a few press releases. See what is, as far as GATA knows, the only attempt to address these issues journalistically with the IMF:

http://www.gata.org/node/8052

2) In its announcement the IMF says again that its supposed gold sales will fit comfortably within the annual quotas set by the Central Bank Gold Agreement. That's because the signatories to that agreement -- the Western European central banks -- stopped selling gold last year. Since the Western European central banks are not selling, the IMF gold sales are a hint that any gold now being dishoarded is coming straight from U.S. gold reserves. The IMF is headquartered in Washington, the United States has a de-facto veto on its operations, and there can be little doubt anymore that the United States is operating surreptitiously in the gold market, the Federal Reserve having acknowledged last September that it has at least contemplated such intervention in the gold market via gold swap agreements with foreign banks:

http://www.gata.org/node/8192

3) The rationale for the IMF's supposed gold sales -- to raise cash for its operations helping (that is, expropriating) poor countries -- is ridiculous on its face. The IMF is the issuer and custodian of the world's supreme money, Special Drawing Rights (SDRs), and in just one afternoon last year the IMF conjured $250 billion of them into existence:

http://www.imf.org/external/np/sec/pr/2009/pr09264.htm

By comparison, the first 212 tonnes of gold supposedly sold by the IMF last year raised only $7 billion, or less than 3 percent of the money created by mere conjuring:

http://www.bloomberg.com/apps/news?pid=20601087&sid=alOoEXinykfo&pos=5

In such circumstances gold is not sold to "raise money"; it is sold to suppress the price of a currency that competes with fiat currencies and, when traded freely, is a measure of their debasement.

4) That is why, as Jim Sinclair and others have noted many times, official gold sales correspond with rising gold prices, not falling gold prices. Official sales are manifestations of central banking's controlled retreat when money and credit creation have gotten out of hand relative to the gold supply and gold's price is threatening to explode and make a scene very embarrassing to governments and central banks. The last decade has been a time of massive Western central bank gold dishoarding, probably a time of cash settlement of central bank gold leases that could not be settled by recovery of the borrowed metal without exploding the gold price, and during this time gold has risen from $250 to more than $1,000 per ounce:

http://www.kitco.com/charts/popup/au3650nyb.html

If central banks were not on the desperate defensive with gold, how, amid all that official gold selling, could the gold price have quadrupled?

No doubt some gold holders and traders will be duly frightened out of their gold by the IMF's latest announcement, and that will be discouraging for those who remain gold investors. But if this gold "sale" turns out like the others over the last 10 years, before long the gold price will be higher still.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


IMF to Begin On-Market Sales of Gold
International Monetary Fund Press Release
Wednesday, February 17, 2010
WASHINGTON -- The International Monetary Fund (IMF) today announced that it will shortly initiate the on-market phase of its gold sales program. This is the second phase of the total sale of 403.3 metric tons approved by the Executive Board in September 2009 (see Press Release No. 09/310). The first phase was set aside exclusively for off-market sales to official holders. A total of 212 metric tons was sold during this phase, comprising sales to the Reserve Bank of India (see Press Release No. 09/381), the Bank of Mauritius (see Press Release No. 09/413), and the Central Bank of Sri Lanka (see Press Release No. 09/431).

The total amount remaining to be sold is 191.3 metric tons. In accordance with the priority of avoiding disruption of the gold market, the on-market sales will be conducted in a phased manner over time. This follows the approach adopted successfully by the central banks participating in the Central Bank Gold Agreement. Participants in the agreement have noted that the fund's sales can be accommodated under the agreed ceilings of 400 tons annually and 2,000 tons in total during the five years starting on September 27, 2009. The initiation of on-market sales does not preclude further off-market gold sales directly to interested central banks or other official holders. Such sales would reduce the amount of gold to be sold on the market.

The IMF will continue to provide regular updates on progress with the gold sales through its normal reporting channels.

http://www.imf.org/external/np/sec/pr/2010/pr1044.htm

But "news" of pending IMF Gold sales lost out to the President Of The United States for FUNNIEST story of the day. The chours of laughter that rose up across the country as the Exalted One touted his bloated $787 BILLION Stimulus Package drowned all noise in the financial markets.

"One year later, it is largely thanks to the recovery act that a second depression is no longer a possibility," Obama said.

What makes him so sure about that? I hope he has a refreshing beverage handy to wash those words down as he eats them before the end of his term as President. How naive to think there is "no longer a possibility" of a second depression. I guess he'd be shocked to learn that we are already in a depression now, yet nobody wants to admit it.

Obama says stimulus bill saved troubled economy
http://finance.yahoo.com/news/Obama-says-stimulus-bill-apf-2626422001.html?x=0&sec=topStories&pos=1&asset=&ccode=

Federal deficit at $430.69 billion through January
WASHINGTON (AP) -- The federal deficit through the first four months of the budget year is running at a record-breaking pace even though the deficit in January was slightly smaller than expected.

The massive tide of red ink reflects the continued fallout from a deep recession and a severe financial crisis. It highlights the formidable challenges President Barack Obama will face in trying to get the deficit down to more manageable levels.

The Treasury Department said Wednesday that the deficit for January totaled $42.63 billion. That left the total of red ink so far this budget year at $430.69 billion, 8.8 percent higher than last year when the deficit soared to an unprecedented level of $1.42 trillion.

http://finance.yahoo.com/news/Federal-deficit-at-43069-apf-64628164.html?x=0&sec=topStories&pos=2&asset=&ccode=

Just a quick thought about "the recovery" the Fools On The Hill are waiting for. There will be NO recovery with a continued rise in the US Dollar. The US government has an out of control deficit spending problem, an almost non-existent manufacturing base, and real unemployment around 20%.

Fed thinking of selling debt to withdraw stimulus
WASHINGTON (Reuters) - Several Federal Reserve policy makers want to begin selling securities relatively soon to cut back the U.S. central bank's massive help to the financial system as the economy finds a footing, the Fed said on Wednesday.

The minutes offered a window into the Fed's thinking on how best to withdraw the extraordinary stimulus it has provided, but also revealed substantial disagreement among officials on the timing and sequencing of exit steps.

"Several thought it important to begin a program of asset sales in the near future to ensure that the Federal Reserve's balance sheet shrink more quickly," the minutes of the January 26-27 meeting said.

Other policy makers, however, appeared worried that dumping mortgage debt into a fragile market might drive up mortgage rates, compromising the housing sector's tentative stabilization. U.S. housing starts rose 2.8 percent in January but at an annual rate of 591,000 units still stood at barely a quarter of their boomtime peak.
http://finance.yahoo.com/news/Fed-thinking-of-selling-debt-rb-1361244313.html?x=0

If the Fed, as "buyer-of-last-resort" has purchased Trillions of dollars of worthless mortgage backed securities from banks to save those banks balance sheets, what make the Fed think anybody is sitting out there anxious to buy them from the Fed? Talk about blowing smoke up the nations creditors asses... This "revelation" is surely a billowing cloud of obfuscation. Yeah, I bet the Fed would like to unload this toxic waste. They have probably come to the realization that they severely overpaid for this mortgage backed garbage, and need to move it off their own balance sheet asap. This begs the question, "Who bails out the Fed?"

Fed carrying losses from Bear portfolio
The US Federal Reserve is sitting on significant paper losses on the real estate assets it acquired in the Bear Stearns rescue, with much of the red ink coming from debt used to back some of the most highprofile buy-out deals of the bubble years.

The Fed holds these and other real estate assets in a vehicle known as Maiden Lane I, which was set up to pave the way for JPMorgan Chase's purchase of Bear. At the time the deal was struck, in March 2008, JPMorgan feared that if it bought all of Bear's assets it would be left with too much exposure to the real estate market. Bear, for example, originally had $5.4bn of Hilton debt, a huge concentration.

The assets in Maiden Lane I - all of which came from Bear's mortgage desk - were originally valued at $30bn when a final agreement on the portfolio was reached in June 2008 by the New York Fed, its advisers at asset managers BlackRock and JPMorgan. At the end of 2009 the Fed said the assets were worth $27.1bn (€20bn, £17.4bn).

People familiar with the portfolio said Maiden Lane I's losses were concentrated in commercial real estate assets, which had a face value of $8.4bn and an estimated worth of $7.7bn when they were acquired by the Fed.

As of September they had been marked down to $4bn, filings show.

http://www.ft.com/cms/s/0/262840cc-1a9a-11df-bef7-00144feab49a.html

You gotta laugh...

And lastly we turn to this mornings 8:30AM economic data headlines:

Jobless claims rise unexpectedly- AP
The number of newly laid-off workers filing applications for unemployment benefits unexpectedly surged last week after having fallen sharply in the previous week. The gain dampened hopes about how quickly the labor market may improve this year.

January wholesale prices jump 1.4 percent- AP
Wholesale prices shot up at double the expected pace in January, propelled higher by big increases in energy costs. The surprisingly large jump was viewed as a temporary blip and not the start of inflation problems, however.

LOL! I can't stop laughing. Somebody roll the tape of the Exalted One's speech about the success of his stimulus package. http://edition.cnn.com/2010/POLITICS/02/17/obama.stimulus/?hpt=T2

Jobless claims ONCE AGAIN rise "unexpectedly". What more can we say? I know, ...do you think those folks that filed for unemployment last week, and all those still receiving unemployment benefits, will agree with President about the "success" of his Economic Recovery and Reinvestment Act?

Why are "surprising large" jumps in inflation always viewed as temporary blips? Does nobody understand that there can be NO recovery without inflation, a falling Dollar? The Fed has sworn to fight deflation, a rising Dollar. Inflation is the ONLY way out of this debt hole. Accept inflation with open arms. The Fed and your governemnt are doing everything they can to create inflation, despite all the smoke they blow to try and cover it up.

Oh look, at 9:45 AM est Gold and Silver have recovered ALL of their IMF Gold sales induced losses late yesterday afternoon. The TRUTH shall always prevail...

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