Sunday, November 28, 2010

The US Dollar Is A Con Game

Last week was an insult to the idea of "free markets", particularly the Precious Metals markets and by extension the world currency markets. News to support the continued rise in the Precious Metals was abundant. The rampant notion that the US Dollar and US Treasury debt are "safe-havens" was touted by every fool and anti-Gold curmudgeon the world over. Amusing is the only word that one could use to describe last weeks Precious Metals and currency markets.

Last week, China and Russia announce an agreement that they will begin settling trade between their two "growing economies" with their local currencies the Yuan and the Ruble, and discontinue using the US Dollar to settle trade between them. And the US Dollar rises in value?

Late last week Vladimir Putin not only gives the EURO a vote of confidence despite the western financial media's fanning of European debt fears, but he suggests that Russia may one day become part of the Euro currency itself. And the US Dollar rises in value?

Meanwhile the US municipal bond market continues it's implosion, and the US Dollar rises in value?

The prices of Gold and Silver remain resilient in the face of this bogus US Dollar strength, revealing the Truth about the "strong dollar": It is a lie perpetuated by a never ending attempt to manipulate the price of Gold and Silver lower than they would be in a Free Market. Look no further than Friday's thin market take down in the price of Silver for proof of the now exposed Precious Metals manipulation, and the CFTC's blatant negligence in policing this quarter century long-running crime against the World.

The desperation at the bullion banks, led by the nose by the US Federal Reserve, in the desire to cap the rise in Precious Metals prices is now obvious to ALL investors. Is it merely a coincidence that the BIG rise in the prices of Precious Metals began with the announcement that the Fed had ended QE1 this past June, and the present cap in the Metals was placed with the announcement of QE2? Hardly! The banks are clearly being funneled monies from QE2 to fight the rise in the Precious Metals, and commodities in general. How else could these bullion banks that are losing BILLIONS because of their massive naked short positions in Gold and Silver continue to sell bullion that they not only do NOT own, but that DOES NOT EXIST? Why is there only a "sell-off" in the Precious Metals when there is a CRIMEX margin increase? Don't the shorts have to pony up higher margins for the short contracts too? Or does the Fed just cover that added expense of an already losing position?

Isn't it odd that the soft commodities markets of Cotton, Corn, Coffee, and Sugar are currently EXTREMELY volatile and trading near ALL-TIME highs themselves, but there is no increase in their margin rates at the CRIMEX. Isn't the exclusion of these commodities from margin increases against ONLY increases in the margin rates of the Precious Metals proof that the CRIMEX is not only involved, but determined to suppress the prices of them.

The jig is up at the CRIMEX, and tomorrow's First Notice Day is going to reveal the truth of that. An explosion in the prices of Gold and Silver are imminent!

Silver (and Gold) May Be Set-Up To Launch and the HUI To Do A Moonshot
The Golden Truth
As it turns out, Monday is "first notice" day for December gold/silver. What this means is that anyone with a long position has to either sell their position by yesterday's access close OR have an account that can 1) to accept delivery (most online trading futures accounts to not allow this) and 2) if the account can take delivery, it has to be fully funded to accept a delivery notice as of Friday evening. What typically happens leading into the day before first notice is that the cartel will make an aggressive attempt to force the market lower knowing that many smaller traders will be natural sellers going into the day before first notice. Moreover, the thin volumn on Wed/Fri makes this task a lot easier - ergo yesterday's action.

With this as the context, a couple of data points in silver and gold could make next week very interesting - to the upside. First, as of Wednesday, there were 28,000 open silver contracts. Yesterday's ambush may have forced most of those to sell (see the previous paragraph). Preliminarily, and I do not put a lot of faith in the Comex "prelimary" open interest report, only about 7900 December silver contracts liquidated. That would mean about 105 million ounces are standing for potential delivery. The Comex would default if this were to play out like that. It is likely that the silver contract liquidation was closer 20,000 contracts. We'll find out Monday mid-morning. That would leave 8k contracts standing, or 40mm ounces. That is still about 80% of the silver reported to be available for delivery. If that scenario plays out, the price of silver is going to explode over the next couple of weeks.

The second interesting piece of data was reported yesterday evening by Right at the close of the afternoon electronic trading session, someone bought 2000 contracts of February gold. I don't think I've ever seen something like that in 9 years of doing this sector exclusively. That is an enormous purchase. It was either desperate short-covering ahead of news that could propel the metals higher next week or a very big player has decided to square off against the egregiously corrupt maneuvers of JPM/HSBC. You can read about that trade and some interesting volatility color here: LINK

QE2 & The Great Misdiagnosis
By: Jim Willie CB,
Increases to the silver margin requirement in futures contracts should be viewed as the final act of desperation. It is a device to control price within the paper silver arena. However, in a grand backfire, a higher margin produces a lower price for the physical buyers, who eagerly step up to place and fill orders. The margin maintenance hike on November 9th was six times greater for silver than for gold. The Big Four US banks are caught in an historically unprecedented short squeeze, bleeding $billions. Tuesday November 9th saw a powerful gold & silver price downdraft. The COMEX raised the silver margin requirement in a bland attempt to slow a raging bull market amidst a broken global monetary system. One week later they raised the margin again for both monetary metals. The price downdraft continued. But some calmer winds in Europe enabled precious metals prices to recover. Silver has snapped back much more than gold.

The Chicago Mercantile Exchange raised the margin requirements for silver on November 9th. It was highly motivated. They wanted to prevent a blowout upside move in silver past $30 before Christmas, and to relieve some of the pain to the Big Four US banks. Unlike gold & silver, no margin hikes were doled out for soybeans, corn, sugar, or cotton despite their concurrent price gains. The message is clear, that desperation has set in relative to precious metals, as conditions are breaking down badly. The CME sent out a memo raising the margin maintenance requirements for silver futures by up to 29%, from $5000 to $6500 per contract. Initial positions have a slightly higher margin. It is their right, being the market maker. Let not their fast disappearing silver inventory deter their path. Less than two weeks later, the CME raised the silver margin maintenance requirement another 11.5% to $7250 in a sign of desperation. They also raised the gold margin, but only by 6% from $4251 to $4500 in a symbolic gesture. The CME motive is less about risk mitigation concerns and more driven by the desire to restrain the bull market movement. The investment world will regroup long before Christmas, like in the next week or two. Just when the European woes focused on Ireland, and a rescue aid package seemed in the offing, the silver price jumped upward by $2.00 on a single day, November 18th, a strong telegraph across the paper-physical silver table. The Powerz cannot halt the silver juggernaut, which will see $30/oz by January. If a double hike in the silver margin is the best they have, then they are truly whistling in the grave yard.

The demand for gold is global, diverse, and motivated by the gradual disintegration of the monetary system. Sovereign bonds that support the major currencies are in deep trouble the world over. The consensus actions toward Quantitative Easing, also known as hyper monetary inflation, have boosted demand for gold & silver monumentally in a natural offset. Dozens of nations and billions of people around the world are slowly awakening to the grand deception of money itself and the crumbly foundation that make up fiat currencies. They are losing money in supposedly safe government bonds, a trend without precedent. Most of Southern European nations will declare debt default within two years. Foreign central banks are attempting to diversify their oversized US$-based reserves without causing a run on the USDollar. Gold is gradually being seen as part of the solution, at least in private wealth preservation. Gold is the new reserve safe haven asset, since it is true money.

Important changes have come to the precious metals market. Silver has taken a leadership role. It has broken out in Europe to new highs. Its snapback was impressive after the weak-kneed COMEX hike in margin requirements. Silver is no longer only seen as just an industrial metal, a commodity, but rather as a safe haven alternative, a monetary brother to gold. The European Union bond fracture has wrought great damage to the structural foundation of the global monetary system. It is exposed as having a debt backbone, a paper spine fashioned of weakness, vulnerable to central bank abuse. Money is fleeing the EU Govt bonds, and fleeing even to some extent the USTreasurys. Horrible publicity has befallen the Big Four US banks with class action lawsuits at a time when Asian buyers have targeted the silver market. The Asians of unidentified origin (probably China) have descended with waves of layered orders, exploiting the discount offered from the paper impact after the margin hikes by COMEX officials. Recall that the US & China are locked in a trade war. The louder the USGovt accuses China of currency manipulation, the more they bid up Gold & Silver on the quiet. The strongest months of the year for Gold & Silver are December and January. The margin hike seemed designed to interrupt momentum. It only delayed the next powerful upward thrusts in price.


The nature of the Gold & Silver markets is two-headed. The price discovery aspect is driven by the paper futures contracts. Intended as devices to aid in pricing, to protect from drawn out periods under which business is conducted with commitments made, the paper futures arena turned into a monster two decades ago. The paper tail has led the metal dog, a backwards condition. Some important developments have taken place in recent weeks and months. Secure allocated account holders at both the COMEX and LBMA have forced the situation, demanding physical delivery of futures contracts. They openly cite their distrust, as suspicion is aroused of improper lease of allocated accounts. Huge delivery demands have come from Chinese and Arab investors. The remarkable new wrinkle is that silver paper price ambushes have led to strong silver physical purchases. Stories abound of an Asian assault on the silver market underway. Interviews granted by those with direct information have appeared on reliable websites. The skirmishes result in backfires to the paper market mavens, as they offer repeated discounts to the Asian physical buyers, who grab at the discounts with layered orders, as reported. Therefore, the actions by the paper mavens works to accelerate their own destruction. Investors should hope for occasional ambushes, so that the physical side can reload and obtain more physical metal at lower prices. Also, with occasional bouts of consolidation, the price advances are more stable. A very bizarre pathogenesis of the silver paper market is evident, hidden from view.

The London contact source has shared details to the inner workings of the Asian silver market assault on New York and London with an update. The Asian buyers have been squeezing the shorts in the silver market, causing great pain as the silver price has risen 50% since late summer. After the drop in price from a brief touch of $29 down to the low $25's, the physical market has responded with strong demand. Keep in mind that the paper silver market is the opposite, a key point. The bizarre anomalous paper market results in more selling when the price drops, the opposite to normal. The ambush catches the leveraged players off guard, forcing paper position sales in sudden liquidations. So a collision is in progress. The paper arena cannot produce enough silver after the raids push down the paper price in order to relieve their tenuous short condition. By pushing down the paper price, they must bring to the table the discounted silver at the lower price, in physical deliveries. The paper market is playing directly into the hands of the physical participants who want to drain the exchanges of their bullion metal. The credibility of the London source was enhanced by the quick jump above $26 as he predicted earlier in interviews. He described lines being crossed between the paper and physical orders, stops, covers, and delivery demands. Details are provided in the November Hat Trick Letter. Great intrepid work by King World News for developing the valuable source.

A staggering rise in physical demand is noted from Chinese & Indian buyers. Physical demand growth more than offsets the miner de-hedging, a process almost wound down fully. Investment demand globally is skyrocketing. According to the World Gold Council, global demand for gold bars climbed by over 30% between 2Q2009 and the second quarter this year. De-regulation in China might permit much broader gold ownership. That would unleash huge demand and pressure the Anglo bankers. Chinese demand has been strong for years, soon to reach a higher gear. With domestic mine output not expected to grow much next year, China will tap the global market, pushing up the gold price. New rules in China have already enabled tremendous increases in private gold demand, whose volume surpasses and overwhelms European central bank sales. The Chinese gold demand in 2010 will be a mammoth consensus estimated 500 tonnes. It will rise by as much as 20% in the year 2011, enough to surpass India as the top consumer in the next three years. Demand is forecasted to rise to around 600 tonnes in 2011, according to a Reuters survey of five analysts. Recent Chinese Govt restrictions imposed on property investment and speculation in other markets have resulted in more money going into gold and jewelry, which seems a calculated policy by the crafty government officials in Beijing. Gold will not burn their citizens in a bubble bust. Jewelry demand has risen by an average of 7% annually in steady fashion.

Investment demand for gold in China has surged by 60% in 2009 to 150 tonnes. On an annualized basis, China is on course to import 118 tonnes of gold through Hong Kong. Domestic gold mine output is expected to be flat inside China for 2011, the first time in years. Couple strong demand and flat output, and big net import of gold bullion will result. The Peoples Bank of China announced in August a relaxation of gold rules, a prelude to broader reform of financial markets pertaining to bonds and currencies. Banks would be permitted to export and import more gold in a program to drive the development of their market in the precious metal. Regard this as a direct assault on the COMEX in New York and LBMA in London, since huge physical gold demand will ramp up to a staggering high level. The PBOC wants to draw gold tonnage into their country without disrupting market equilibrium unduly, as it diversifies more of its burgeoning $2.6 trillion in FOREX reserves.

Bernanke Is Making the Crisis Worse
By Bud Conrad, Chief Economist, Casey Research
The Fed is a corrupt and powerful institution, and Chairman Bernanke is making the global crisis worse. His new speech given last week in Europe was terribly misguided and will upset markets as the Chinese and Germans won't ignore his challenges. Bernanke’s interpretations of the markets have been wrong since before he was appointed to head the Fed, and his actions are doing nothing but aggravating the situation.

In this seminal speech, titled “Rebalancing the Global Recovery,” Bernanke not only defended QE II as the right policy, but also attacked the monetary policy of China, the biggest holder of U.S. debt, an action that must be understood for how misdirected it is.

Here are a few excerpts from the speech:

Driving the News Agenda: Jones and Keiser
By: Rob Kirby
How many of you have noticed the change in news? The flavor of the news has markedly “changed” in the past 4 or 5 months – have you noticed it? Who has picked up on the likes of Fox News’ Glen Beck and his ‘about face’ on many key issues. Over the past number of months personalities like Beck have completely reversed their positions on subjects like the existence of World Government and FEMA CAMPS – going from complete denial to admitting they exist and the fact that they are intended for the American people.

Beck is not alone. In recent weeks we’ve seen a similar reversal in position from none other than Geraldo Rivera – he’s flip-flopped on his public position on 9/11:

Geraldo Rivera, who in the past labeled 9/11 truthers as nutcases, seems to have gotten the message. Not only did Rivera give air time to two people on the front lines of the 9/11 Truth movement, he also aired Larry Silverstein telling the world that they had no choice but to “pull it.”

Without a doubt, these are MAJOR recent reversals of position by key mainstream commentators. So what’s behind the change?

The Hidden Truth About The Gold Price Suppression
By SOP newswire2
Despite suppression efforts, the gold price has risen about five-fold since 2001, to over $1,300 today. According to the renowned gold trader Jim Sinclair and others, much of the reason for gold`s ongoing strength comes from physical gold buying in the Asian gold markets. Gold, incidentally, trades around the world on an almost 24-hour basis, Monday to Friday.

But who and why would anyone want to suppress gold prices today? In my article, Manipulated Markets Can Cause Ruin, I wrote, gold is the `anti-dollar` and barometer of confidence in the dollar. "Therefore "and noting Mr. Speck`s observation that the most recent era of gold price suppression began with America`s declaration of a `strong dollar policy` "providing a possible clue as to who might be behind it. Also, such an entity would require incredible financial muscle.

The most likely candidate for leading a gold price suppression scheme is the US Treasury and various central banks who want to maintain the US dollar`s value. After all, US dollar denominated assets often form more than 60 per cent of most central bank assets and it is still the `global currency.` Therefore they have powerful, strategic reasons to want a strong dollar.

"Also, as recently as October 18, the US Treasury Secretary Tim Geithner reiterated the US strong dollar policy by saying, we`re going to work very hard to make sure that we preserve confidence in the strong dollar."

With the advent of investors and regulators acknowledging fraud in the silver markets, those behind the apparent gold price suppression must be incredibly worried as their scheming to suppress its price is no longer hidden.

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