Monday, April 26, 2010

Fulfilling Prophecy

Gold and Silver performed admirably today in the face of tomorrows CRIMEX options expiration day. Gold largely held in check by the misguided bid under the Dollar on further Euro weakness, was resilient nonetheless in an environment that has been historically violent for the Chalice of TRUTH. Silver closed higher on the day, and outperformed Gold once again in the face of a gargantuan short position on the CRIMEX.

Roughly 190 million ounces of Silver remained short going into today's CRIMEX circus. With only 50 million ounces in the warehouse, the CRIMEX Silver shorts are in for a very rude awakening if just 20% of these shorts come through options expiration seeking delivery next month. And in light of the difficulty in meeting the demand for 25 million ounces of Silver in the March contract, May being a Silver delivery period, could result in some stellar fireworks on the CRIMEX next month. The CRIMEX goons have until the end of April to fill the March delivery demands. Many suspect that the 18 million ounces of Silver withdrawn from the SLV ETF since February 26th were used to cover the demand shortfall in March Silver.

25 million ounces of Gold remained short as the CRIMEX opened the doors today. The CRIMEX dealers only possessed around 2.5 million ounces in their now cavernous warehouse. May is not a delivery month for Gold, but open interest in the April contract stood at 1.4 million ounces going into options expiration. Options holders that hold through expiration are given contracts for Gold deliverable in June. The CRIMEX is in severe shortfall when it comes to potential demand for their goods.

Harvey Organ in his blog, Harvey Organ's - The Daily Gold, explains the significance of each trading day at the end of a delivery month:

4 days prior to the end of a comex month two things happen:

a. the front month goes off the board
b. the options expire at 4 pm .

Thus on April 26.2010 which is 4 days prior to expiry of the silver front month of May, all options expire for silver and these long holders are given silver contracts.
In gold, all options exercised stand for gold itself. Generally, these guys stand and wait for metal at the conclusion of the actual delivery month in the metal that they hold.
(In gold options these guys wait until June)

Even though the contract goes off the board, the front month can still trade as bankers try to goad the buyers of metal to roll or settle in cash so as to not supply the metal.

On the day prior to the end of the trading month, the long holders pluck their cash to pay for the entire amount of metal that they wish to purchase.
This is termed first day notice. The shorts get to see how many physical oz they must delivery.

On the last day of the month, the comex bankers issue delivery notices to the longs as long as they have verifiable bar numbers and exact weight of the bars, and thus starts the delivery process.

Deliveries then begin in earnest on the first day of the month. The cartel bankers have until the end of the month to deliver all metals standing.

In days of past folklore (3 years ago) most metals were served on the first few days as why would the sellers wish to pay insurance costs and storage fees
for the entire month? Once a delivery slip/notice is issued, costs are transferred to the buyers.

Now we see most of the delivery notices are given at the end of the month
and we are witnessing much shenanigans to deliver the said metal.

This is a brief understanding for the delivery process. Print this out for future reference as I always refer to it.

In light of revelations concerning leverage used in the Precious Metals markets at last months CFTC hearing, first notice this month could be quite threatening to the goons at the CRIMEX. Delivery demands that exceed warehouse stocks could potentially light a fire under these markets. The goons "claim" there is no "physical" shortage of either Gold or Silver. They may soon be forced to put up metal, or shut down their nefarious game of musical ingots.

We were greeted this morning by yet another volley of "Greek Debt Fears" boosting the Dollar, and pressuring Gold. This has become about as regular as the rising sun since early this year. Greece has finally asked to be bailed out, and this should quickly extinguish this smokescreen that has kept the Dollars glaring fundamental flaws hidden from view.

The REAL story as it pertains to the US Dollar is China and it's currency the Yuan, NOT THE FALL OF THE EURO. The Yuan's revaluation upwards remains stealthily imminent, and will have a profound effect on the US Dollar and the American economy.

The Fall of the Euro

What is happening in the world is that the various national paper currencies are all losing value, at greater or lesser rates, The solution is to be in gold. Gold is a real good, and no matter how rapidly a nation depreciates its currency, gold will retain its real value.

Unfortunately, even most traders in the financial markets cannot recognize that 2 + 2 = 4. 2010 has been an unusual year for gold. Instead of the previous autumn’s rally carrying into the winter or spring, it has been cut short and turned into a sideways move. Most interesting, even though gold has only been moving sideways an awful lot of gold bugs seen to think that it is going down. Boy are they in for a surprise.

All you need to do is to follow the daily news and you have the answer. A protest by the Greek demonstrators leads to a fall in the euro (in fear of what has just happened, a decision by the Europeans to print money to bail out Greece). This makes the U.S. dollar go up against the euro. So far, so good. But a rise in the dollar is then misinterpreted as a reason to sell gold. The printing of euros may cause the euro to decline against the dollar, but there is no way that it can cause the dollar to rise against gold. Neither is the dollar going up in any real sense. The various national currencies are all pieces of ballast being thrown out of a balloon. They are all declining, some faster than others, but none of them is going up. And the traders who think that the dollar is going up in any real sense are living in a fantasy world.

It is this fantasy which has interrupted the normal early year advance here in 2010. But we can be confident of a return to reality. That is a nice thing about markets. They can be thrown off their true value in the short term by any minor event. But then they resume their basic trend toward their true value. In fact, gold has been going up since Feb. 5 (although so many people keep trying to convince themselves that it is going down). This is disturbing the normal seasonal pattern and is one of the difficulties with which the astute speculator must deal in the short run.

The two basic forces on the gold market today are: 1) the 10 year bullish uptrend. It must always be kept in mind that the trend is your friend, and a large uptrend will telegraph its end by a dramatic bearish pattern (which so far has not appeared); 2) the gap of Feb. 5, 2010 between the point to which gold did pull back ($1050) and the point to which it normally would have pulled back ($1,000). Both of these are powerful bullish forces, and any interpretation of the markets has to take them into account.

Dollar Devaluation, Phase Two
by Larry Edelson
Why all this bullish action in the markets?

Is it really that the U.S. and global economy are picking back up? Or, is it some other
mysterious force at work?

Yes, there’s no doubt that there’s some bottom-bouncing going on in the U.S. economy. But that’s all it is, bottom-bouncing.

On the other side of the world, there are indeed explosive growth areas, namely China and India.
But there’s much more going on in the markets today. There’s another force driving many markets higher that almost no one understands.

What’s happening right now in the markets is a major turning point in the dollar and the world’s monetary system.

First, despite the massive debt problems in Portugal, Italy, Greece and Spain … despite the problems in Europe — the U.S. dollar’s rally against the euro has been feeble at best, and now, the dollar is turning back down in the foreign exchange markets.

Second, Singapore has just revalued its currency higher against the dollar, for the first time ever.

How does a country like Singapore push the value of its currency higher against the dollar?

Simple. It starts selling its U.S. dollar reserves and buying up more of its own currency.

Third, President Obama, Treasury Secretary Geithner, and most definitely, Fed Chairman Ben Bernanke — have all been pressuring China to push its currency higher. Which is the same thing as saying the dollar needs to go lower.

And that means that huge portions of China’s 2.4 trillion stash of U.S. dollars will soon have to be sold to boost the value of the yuan.

Phase Two of the Dollar Devaluation is Here

Consider the following …

In 1947, the official national debt was $247 billion. Each U.S. dollar was worth 1/35th of an ounce of gold.

In 1973, the official national debt was $469 billion. It then took $43.25 to buy an ounce of gold. Or put another way, the dollar was worth 1/43.25th of an ounce of gold.

In 1980, the national debt was $930 billion. The price of gold reached $850 an ounce. In other words, the dollar was worth 1/850th of an ounce of gold.

Today, our official national debt is a whopping $12.78 trillion. That’s …

Thirteen times greater than it was in 1980.

Twenty-seven times larger than our 1973 national debt.

And nearly FIFTY-TWO TIMES larger than our national debt in 1947.
So simple math tells you the following …

If gold were to match the growth in national debt since 1947, it would have to trade at $1,820 an ounce (gold’s price of $35 in 1947 times 52 = $1,820)

If gold were to match the growth in national debt since 1980, it would have to trade at $11,050 an ounce (gold’s price of $850 in 1980 times 13 = $11,050)

It’s hardly surprising when you look at those numbers that gold has much more to go on the upside. Even more so when you consider that the debt figures above do not include another approximately $122 trillion of unfunded liabilities.

To Peg or Not to Peg?
By: Peter Schiff, Euro Pacific Capital, Inc.
The effect of current Chinese currency policy (which, despite Beijing's protests to the contrary, is manipulation pure and simple) is to make the U.S. dollar more valuable and the yuan less valuable. As a result, the benefits of manipulation accrue to Americans, not the Chinese. We get pay raises; they get pay cuts. Americans use their stronger dollars to buy products they would otherwise not have been able to afford. On the flip side, the Chinese people do without products that they otherwise would have been able to afford had their government not transferred their purchasing power to us.

The same effect is experienced with interest rates. In order to manipulate the dollar's value higher, the Chinese government has gobbled up more than $1 trillion of them.The Chinese then loan the dollars back to the U.S. through purchases of government and mortgage-backed debt, which reduces the cost of servicing our massive liabilities.

By the same token, if China were to stop manipulating the dollar higher, it would remove the props currently supporting our dysfunctional economy. American interest rates and consumer prices would soar, and our economy would collapse. Meanwhile, China would experience the opposite effect. Chinese consumer prices would fall, immediately raising living standards for average Chinese workers, whose higher real wages would finally allow them to fully enjoy the fruits of their labor.

What strikes me as particularly dangerous is that no one, not even the Chinese, appear to understand these fundamental dynamics. All of the Shanghainese with whom I spoke last week were unaware that a stronger yuan would be in their own best interest. The way most people see it, a stronger currency is a bullet that China must be prepared to take in order to save the rest of the world from further pain.

And so we watch the strange spectacle of China stubbornly resisting actions from which it will immediately and substantially benefit. In reality, an appreciating yuan is the bitter medicine Americans must swallow if our sick economy is every to regain its health.

When Beijing finally comes to it senses, the transition will be unavoidably disruptive. For China, the long-term growth would far outweigh the short-term shock. America, however, would face a much less certain outcome. There is no question that, for Americans, the immediate effects would be very painful, with the gains only developing with time and prudent decision-making. Still, that does not mean we should resist the process, for the longer it is delayed, the more severe the pain and the longer the road back to prosperity.

Given this reality, why are our political leaders so adamant that China effectively pull the rug out from under our economy? Are they really that clueless? Perhaps they are - or perhaps they are a bit more devious. Perhaps they are using reverse psychology. Maybe they feel that the best way to get the Chinese to maintain the peg is to demand that they remove it. Historically, the Chinese have always resisted outside interference.

Financial reform was on the lips of EVERY talking head today as the Democrats remain determined to jam another piece of bad legislation down the country's throat. This "financial reform" is anything but reform. It is 1300 pages of nonsense aimed directly at perpetuating the fraud that Wall Street and Washington have become.

Gerald Celente, Obama's Financial Reforms Just a Show[MUST SEE VIDEO]

Wall Street regulation is the hot topic today; President Barack Obama gave a speech to the finance industry encouraging them to join him in reforming Wall Street. Gerald Celente says that there is a huge problem with Obamas Financial Reform bill because the same people that got us into this economic mess are the ones advising Obama.

America’s Economic Recovery Is a Rotten Sham
By: Justice_Litle

Maybe we're just fulfilling the old prophecy:

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship."

No comments:

Post a Comment