Thursday, September 30, 2010
If you are being honest with yourself, you KNOW that no market goes straight up. Gold and Silver are looking a little tired here as the month of September draws to a close. Momentum in these markets has begun to wane, and drift lower as prices have continued higher. The sure signs of an end to a short squeeze. Rest appears to be at hand. Rest is a good thing.
Martin Armstrong has a new essay available online entitled:
Gold an 11 Year High for 2010?
This essay is right on time. I highly recommend reading it in its entirety over the weekend. Just click on the linked essay title. By no means is Martin suggesting that Gold has "peaked" here. In this essay he explains where Gold is going, and the route it is most likely to take getting there. We are far from Gold's "peak" at this level, but we shouldn't be surprised, or alarmed, by any downdrafts that may occur as we mover higher going forwards.
Could the Precious Metals continue higher from here without a rest? Certainly! But too many "technical observations" are beginning to align themselves here, and block a move higher at this time.
Seasonally, Gold and Silver tend to "retrace" gains made in September. 100% in Silver and 50% in Gold. The precious markets are hardly "normal" right now, but seasonals have to be respected.
For the past month the US Dollar has been falling swiftly, and the Chinese Yuan rising, as rhetoric over US Government legislation to "force" China to raise the value of it's currency, or face stiff penalties on their exports to the US. The House passed this legislation late yesterday, and the Chinese Yuan moved significantly lower for the first time in 15 days today. Could the passing of this bill by the house signal a "sell the news" reaction to the news? And conversely a "buy the news" Dollar reaction? If so, this could negatively effect the precious Metals here.
House backs tariffs on China in dispute over currency policy
By Howard Schneider
The House of Representatives voted Wednesday to punish China for policies that unfairly favor its exports at the expense of the United States and other countries, the latest volley in what is developing as a global battle over jobs and commerce.
The vote, ahead of congressional elections in which economic issues will figure prominently, reflects growing international anxiety over China's policies - and particularly the management of its currency. By keeping the value of the renminbi artificially low against the dollar, China makes its goods cheaper on world markets, encouraging consumers to buy and underpricing competitors from other countries.
The Dollar has recently broken down from a "Head & Shoulders" top. Typically these breakdowns are followed by a dead cat bounce that kisses the broken "neckline" in the formation before "falling off the cliff" a second time for good. The neckline is around 80.25 on the US Dollar Index. The Dollar is also at support right here on that index going back to January of this year. A bounce here in the Dollar, dead cat or otherwise, would be negative for the Precious Metals here.
Two weeks ago, Japan intervened in the currency markets in an effort to "bring down the soaring Yen", and prop up the US Dollar. It worked to great effect. However, in the ensuing two weeks, the Yen has risen back to the point at which the Bank Of Japan deemed in necessary to intervene. Will they now intervene again? If so this would be negative for the Precious Metals here.
1300 resistance in Gold, a faltering short squeeze in Silver, waning momentum in all Precious Metals, rumor becoming news, US Dollar technicals, further Japanese currency intervention...and seasonals. The roadblocks to a further rise in price of Gold, and Silver, are popping up in tandem now. A temporary setback appears imminent.
This setback could be an excellent opportunity for Precious Metals traders. Martin Armstrong suggests that a setback here could last 4-5 weeks...the entire month of October. It might also prove very beneficial to investors looking to add to their Precious Metals portfolios at "sale prices". If anything, volatility in the Precious Metals is about to ramp up. And volatility means trading opportunities. The rise in Precious Metals prices in September was VERY orderly. You just hung on and enjoyed the ride. Now, it looks like the ride might get a bit bumpy for a stretch.
Wall Street Wraps Up Best September in 7 Decades- AP
Let's see now, I can't think of a single reason why the markets were "up" in September at all, let alone "the best in seven decades".
Oh wait, yes I can...it's called government intervention. How can investors be fleeing the stock markets, as statistics show, and the markets keep going up. 70% of market volume lately has been the result of "high frequency trading", not investment money. Easy answer, the banks use money from the Fed to buy stocks to make it "look like" everything is rosy. It's part of the Fed's "stealth monetization" program.
It's really that simple.
When Meredith Speaks, You Should Listen[important viewing]
Whitney also predicts 80,000 financial sector layoffs coming for Wall Street. She also predicts puny profits and more real estate trouble coming in fourth quarter for the banks. There was one bright spot in Whitney’s predictions–Bonuses for Wall Street Bankers are going to be “really, really bad at year end.” If you want a road map of what is going to happen between now and the end of the year, you should listen to Meredith. Below is Whitney’s complete CNBC interview
The financial sector makes up over 40% of the S&P 500. There is trouble ahead...
How to Start a Trade War
by Andrew Peaple
When it comes to the debate over China's currency, the voices of moderation are getting edged out.
Now that the House of Representatives has voted, with strong backing, in favor of legislation that would allow the U.S. to levy tariffs on Chinese goods, a trade war is one step closer. Much depends on whether China can stay measured in its response.
Calmer heads in Beijing will see that the House's latest move has much to do with political posturing ahead of U.S. mid-term elections. The bill seems unlikely to make it through the Senate, let alone past President Obama's desk, this year. That it has already been watered down so that the Department of Commerce isn't required to impose tariffs on countries with "unfair" currency practices is another important subtlety.
The best response China can provide now to cool the situation is to accelerate the pace of yuan appreciation against the dollar in the coming months, giving moderates in the U.S. government an argument against further action. China has in recent times responded to external pressure on its currency by allowing the yuan to rise.
Certainly, there are progressives among those making yuan policy. Hu Xiaolian, deputy governor of the People's Bank of China, recently outlined the benefits to China of a more flexible currency regime in a series of essays published on the central bank's website.
But there will be strong voices in Beijing keen not to give the impression it's being pushed around by U.S. politicians. As a recent diplomatic spat with Japan shows, Chinese leaders are in a somewhat forthright mood.
This is not to mention that the collective international pressure on China has weakened substantially in recent weeks. With Asian countries, most notably Japan, also stepping into currency markets, China's policy stance is looking ever less exceptional. Hawks in Beijing will note, too, that recent yuan appreciation has been dismissed in Washington as being just for show.
Damned if it does, damned if it doesn't, Beijing may feel it has nothing to lose in standing up to U.S. pressure. Unfortunately, it is from such attitudes that trade wars are hewn.
China Warns About The Dollar
By Dave Kranzler
When China speaks, the U.S. should listen:
Any appreciation of the dollar is “really temporary” and a devaluation of the currency is inevitable as U.S. debt rises, Yu said in a speech in Singapore today...Such a huge amount of debt is terrible,” Yu said. “The situation will be worsening day by day. I think we are one step nearer to a U.S.-dollar crisis.
Here's the link if you have not seen the article by now: LINK
This guy also goes on to say that "China should reduce its holdings of U.S.-dollar assets to diversify risks of 'sharp depreciation...'” Essentially this is a statement telling the world that continued support of the U.S. dollar by China will be limited at best. Translation: the dollar is going a lot lower.
Make no mistake about it, even though the comment above came from "a former advisor to China's central bank," when the Chinese Government wants to make a policy statement, it's usually done through "representatives" like this.
To be sure, the dollar is technically a bit "oversold" and can bounce at any time. But the weekly chart is not reflecting an oversold condition, which means any corrective "bounce" will be brief. Of course, this also means that gold and silver will going much higher.
I hope to have some month ending charts up over the weekend.
Wednesday, September 29, 2010
Stocks Mixed Amid Europe Worries- AP
Stocks are fluctuating in early trade Wednesday amid deepening worries about European countries' ability to cut their heavy debt loads.
Anti-austerity protests sweep across Europe- AP
Ireland under pressure to speed up budget plans- Reuters
It is amusing, and disturbing, that just as the CRIMEX pits were about to open this morning the news wires were lit up with stories about European debt worries. Strange that the European markets had been open for almost five hours prior, and there were few if any worries about European debt on the wires.
The cunning and deceit of the American financial news media at the behest of the Fed and US Treasury is appalling. No doubt yesterday's collapse in the Dollar, after some early morning heavy lifting by the Plunge Protection Team failed, scorched these crooks fannies as the Precious Metals soared to new highs yet again. The curtain has been pulled back on the US Financial System for the whole World to see. They are running as fast as they can lest they be crushed in the crash as Humpty Dumpty Dollar crumbles into the dustbin of failed fiat currencies.
So just as the US blames China for its fiscal failings, they now attack the European block [again] in the hopes of derailing the Euro and putting a bid under the US Dollar as a safe haven from sovereign debt default. LMFAO! The US Dollar is THE poster child for sovereign debt default. The Fed at the inglorious Fed meeting two weeks ago assured its status as just that...the lead pony in a currency race to the bottom of the fiat currency barrel. No nation on Earth is as determined to debase it's currency faster than the United States of America.
The Fed has gotten away with their "stealth quantitative easing" by fostering the impression that inflation and inflation expectations are benign. Unfortunately, rising commodity prices, particularly in food, tell an entirely different story. The Fed has actually stated that inflation is "too low" and they must work to raise it. The Fed has lost control of the Dollar, Gold, and the currency markets in general. Attack the Euro if you must, attack China at our nations peril Bumbling Ben, but don't expect anything other than financial disaster here on American shores. In time, Americans will be screaming for your incarceration, if not your head.
The World Monetary Earthquake
By Ben Davies, CEO of Hinde Capital
September 28 (King World News) - Tinker, Tailor, Soldier, Sailor, Rich Man, Poor Man, Beggar Man........Thief
Globally GDP has been anaemic since the crisis first arose in 2007. The inevitable conclusion of most countries today is that the best way to extricate themselves from the current mess is to shift effective demand away from imports onto domestically produced goods. The preferred method is competitive currency devaluations.
Unfortunately this is not possible for all, and leads to friction as countries effectively steal other nations output to bolster their own. Plato and Aristotle referred to this as 'overgrazing', the ‘tragedy of the commons’. Nothing changes. This always leads to heightened tensions and conditions of capital controls and other protectionist behaviour such as punitive tariffs and quotas on imports often prevail. Friedman's flat world aside - it is already happening.
To maintain the last decade of prosperity (illusion) countries are systematically hell bent on exporting themselves to economic health. This is a zero sum game. Not all countries can export at the same time by definition that the global balance of payments will not then balance. For one winner there is a loser. The implication on import prices is dramatic. Inflation is imported or exported depending on your view point around the world. Let's rephrase 'inflation' - global citizens will experience a rise in the value of goods due to creation of more money used to devalue their currency.
The pursuit of mercantilist traditions may help alleviate the collapse in output for some, and the ensuing rise in goods prices may help government reduce the value of their debts; but at what costs? Increased international tensions and let's not forget the internal social unrest that is accompanied by citizens whose wages have not kept abreast of these rising prices.
As the traditional English folk tune rhymes Tinker, Tailor, Soldier, Sailor, Rich Man, Poor Man, Beggar Man........Thief. Rich or poor, you beg from your neighbour there is no two ways about it in the world of current accounts - you are a thief.
It is politically more savoury to expropriate the output from another country, unfortunately this will be at the loss of the majority.
Within a single week 25 nations have deliberately slashed the values of their currencies. Nothing quite comparable with this has ever happened before in the history of the world. This world monetary earthquake will carry many lessons.
Henry Hazlitt 1948 wrote this in a book "From Bretton Woods to World Inflation", which predicted the inevitable collapse of this fixed exchange rate mechanism. It was a compilation of his editorials from both his time at the New York Times and Newsweek, which ridiculed the prevailing economic Keynesian thinking to great effect. A brilliant journalist, economists and liberal philosopher, this man intuitively understood the pernicious nature of the Bretton Woods fixed exchange rate arranged in 1944.
Murmurings of such 'beggar-thy-neighbour' currency devaluations have once again sprung up amongst the financial literati and rightly so. Better late than never. The truth be told is that we have been living in a highly unstable world even more so than under BW I. The dollar pegs, primarily the Asian renminbi dollar semi-fixed exchange rate, what most refer to as Bretton Woods II, have (arguably) been responsible for the financial friction we observe today.
The RMB and US dollar are constantly colliding into each other. The clashing of these two tectonic currency plates has just begun to accelerate at an alarming rate. Ironically the move to greater currency flexibility on the part of the RMB against the dollar stands ready to produce the almighty mother of seismic monetary events - the collapse of the fiat currency system. The implications for government bonds, equities and real assets are profound. Are we being overly sensational? We don't think so.
Gold is the final refuge against universal currency debasement[MUST READ]
By Ambrose Evans-Pritchard
States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.
The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar.
If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.
Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.
This is not to say that gold has any particular "intrinsic value"’. It is subject to supply and demand like everything else. It crashed after the gold discoveries of Spain’s Conquistadores in the New World, and slid further after finds in Australia and South Africa. It ultimately lost 90pc of its value – hitting rock-bottom a decade ago when central banks succumbed to fiat hubris and began to sell their bullion. Gold hit a millennium-low on the day that Gordon Brown auctioned the first tranche of Britain’s gold. It has risen five-fold since then.
We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.
The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of “unsterilized” intervention.
Of course, gold can go higher.
Shut Down the Fed
By Ambrose Evans-Pritchard
The dangers of tipping into a debt compound trap – as described by Irving Fisher in Debt-Deflation Theory of Great Depresssions in 1933 – outweigh the risk of an expanded money stock catching fire and setting off an inflation surge later. Debt deflation is a toxic process that can and does destroy societies as well as economies. You do not trifle with it.
But deliberately creating inflation “consistent” with the Fed’s mandate – implicitly to erode debt – is another matter. Nor can this be justified at this particular juncture. M3 has been leveling out. M2 has begun to rise briskly. The velocity of money has picked up. The M1 monetary mulitplier has jumped.
We have a very odd world. The IMF has doubled its global growth forecast to 4.5pc this year, and authorities everywhere have ruled out a serious risk of a double dip recession.
Yet at the same time the Bank of Japan has embarked on unsterilised currency intervention, which amounts to stimulus, and both the Fed and the Bank of England are signalling fresh QE.
You can’t have it both ways. If the US is not in deep trouble, the Fed should not be thinking of extra QE. It should step back and let the economy heal itself, if necessary enduring several years of poor growth to purge excess leverage.
Yes, U6 unemployment is 16.7pc. But as dissenters at the Minneapolis Fed remind us, you cannot solve a structural unemployment crisis with loose money.
Fed is trying to conjure away the hangover from the last binge (which Greenspan/Bernanke caused, let us not forget), as if to vindicate its prior claim that you can always clean up painlessly after asset bubbles.
Are the Chinese right? Are the Americans and the British now so decadent that they will refuse to take their punishment, opting to default on their debts by stealth?
James Turk - Big Money Continues Buying Dips
“There’s no doubt about it that the buying power that we have seen the past couple of months is still there waiting to buy the dips. This shows there is still a lot of money waiting on the sidelines to enter the market.”
September 23, 2010
“If the silver market can take out $21.34 on volume that will pull the money off the sidelines and ignite the explosion that we’ve been talking about. Every day we spend above $21 is positive. You are building a platform and it’s this kind of thing that is going to take silver a lot higher.”
“This is one of the times when silver is leading, so a higher silver price means good things for gold as well. Another positive for gold is the fact that there really is no overhead resistance, and this means it’s unchartered territory and smooth sailing to the upside.”
When asked about the gold/silver ratio Turk responded, “One interesting thing to look at longer-term Eric with regards to the gold silver ratio, is that a big breakout will occur when the ratio breaks 40 to 1. This goes back to 1988 when Buffett acquired his silver.”
“The ratio has been in this huge trading range from the mid 40’s to the low 80’s for twelve years. When we take out that level, investors should expect a move to at least 20 to 1 on the ratio. But again, that will be much later on in this bull market.”
The big money continues to enter these markets, it is no longer a time for amateurs. As we have said all along, continue to accumulate, but do not try to time these markets. -Eric King KingWorldNews.com
Surge in the Price of Gold: The Inner Workings of the International Gold Market
by Bob Chapman
There is no question that more and more buyers of gold and silver contracts are opting to take delivery in spite of being offered 25% to 30% premiums to roll or curtail their contracts. In time, due to the leverage, and the fact that sellers have little or no inventory, a two-tier market will develop. There would be two different prices, one for the paper gold play and the other for delivery. This has already been rejected in the market from time to time, as gold has gone into backwardation. In time we could see continual backwardation as gold for delivery goes to permanent premiums, of $50.00 to $100.00 an ounce. That also means non-delivery contracts could fall to a discount and perhaps not participate in the move to the upside in the way that physical contracts will. The sale of leveraged contracts, or naked sales, are really tantamount to fraud if not identified as such. Once no gold is available for delivery, and that is possible, the Comex and LBMA contracts could collapse. Then to be death with is the naked sellers of derivatives. This is what we believe GLD and SLV have been involved in and if they call for delivery they may well find out they cannot get delivery and that could end in failure for the ETFs. As we look down the road we can see some real problems looming. It should be noted that naked short sellers are playing a very dangerous game in the midst of a ten-year bull market in gold and silver. All the gold in the world is only valued at 1% of all assets and what is still in the ground only equals another 1%. Historically that figure has been higher than 20%. What do the naked shorts do when that gap begins to close? They will default of course putting more upward pressure on prices. Dealers are about to find out that gold is not a barbaric relic but the only real money. The game of creating unlimited paper money is coming to a close because people will stop accepting it, or as in Weimer Germany, spend it as quickly as possible creating hyperinflation. The foundation of the world’s financial system will prove to be bogus and irredeemable. That ends in bankruptcy leaving gold and silver as the mediums of exchange.
Eventually the Ponzi scheme will be exposed and you do not want to be left holding only dollar assets. People will then ask where are the regulators? They will then be told they are there to protect the government, not the investor. Anyone who has been paying any attention at all has known this for years. The CFTC may as well not even exist.
The reason for concern is that there simply is not enough gold and silver to satisfy buyers and thus we have a paper-market based on the premise that 98% of those participating in the gold and silver markets just want to gamble and have no intention of taking delivery. Historically that has been true, but changes are taking place, because buyers fear if they want delivery they won’t be able to get it. As a result, more investors are demanding delivery, in spite of a 30% premium not to do so. The result is tremendous pressure on existing supplies for physical delivery. These conditions in time, will lead to the closure of Comex and the LBMA and cause a scandal at GLD and SLV. As we have seen previously on the LBMA the exchanges will appeal to government to bail them out. That has happened before in England as government delivered melt gold of about 88% purity, which could only have come from the US government. All of these events will happen. Just be patient and prepare yourself.
The same thing is occurring in the naked shorting of producing gold and silver mining companies, which has also spread to juniors and even exploration companies. We have been involved in these shares for over 50 years and we see very unusual things going on. You have all the important things going on that would make these shares move up strongly, but yet they hardly move to the upside. We ask how does a stock trade at $83.00 two and a half years ago with gold at $850.00 an ounce, trade today at $69.00 when gold is $1,300 an ounce. The only thing that can cause that is government naked shorting. As you know government can do anything it wants and that includes stealing from its citizens.
The media is totally unwilling to report the manipulative affects of government intervention in all of these precious metals and share markets. Never are the real fundamentals reported. The same is true regarding the general stock market and in the Forex market, both of which are in perfect head and shoulders formations on long-term charts. This is called lying by omission. This avoidance of the facts will come to an end as gold and silver bullion become harder to locate and prices move ever higher. The flight to quality, gold, silver and shares, has been underway for ten years, and nothing can stop it. That movement just ended its first phase and has three or more phases yet to be completed.
The gold and silver shares are an explosion waiting to happen. They have been suppressed for 2-1/2 years and as gold and silver finally break out higher you can anticipate a doubling of prices. They’ll be lots of short covering going on. The producing shares are now going to offer exponential earnings. It doesn’t cost a mine much more to produce gold whether it’s at $750 or $1,500 an ounce, so earnings can rise every quickly. Many mines are currently in that position. It should also be remembered that in the early 1930s in a deflationary environment gold and silver mining shares rose 500% and in the inflationary environment of 1978 to 1981, gold and silver shares appreciated an average 40 times more than gold bullion. In the latter there were ten times more mining companies then there are today.
Gold a Bubble? [INSIGHTFUL READING]
NOT - EVEN - CLOSE - With the number of financial bubbles inflating and bursting over the past decade and a half, it isn’t surprising that financial analysts have their “bubble-dar” honed and active. What is surprising though is the large number who have resoundingly dubbed the gold market as “the next big bubble.” But is it? Most gold owners reject claims that gold is in a bubble, but they might not be sure exactly why. The most concrete and convincing evidence against gold being in a bubble, though, is right in front of us.
Tuesday, September 28, 2010
With Warning, Obama Presses China on Currency
By DAVID E. SANGER
UNITED NATIONS — President Obama increased pressure on China to immediately revalue its currency on Thursday, devoting most of a two-hour meeting with China’s prime minister to the issue and sending the message, according to one of his top aides, that if “the Chinese don’t take actions, we have other means of protecting U.S. interests.”
But Prime Minister Wen Jiabao barely budged beyond his familiar talking points about gradual “reform” of China’s currency policy, leaving it unclear whether Mr. Obama’s message would change Beijing’s economic or political calculus.
The unusual focus on this single issue at such a high level was clearly an effort by the White House to make the case that Mr. Obama was putting American jobs and competitiveness at the top of the agenda in a relationship that has endured strains in recent weeks on everything from territorial disputes to sanctions against Iran and North Korea.
Democrats in Congress are threatening to pass legislation before the midterm elections that would slap huge tariffs on Chinese goods to undermine the advantages Beijing has enjoyed from a currency, the renminbi, that experts say is artificially weakened by 20 to 25 percent.
Mr. Obama’s aides said he was embracing the threat of tariffs and new trade actions against China at the World Trade Organization to gain some leverage over the Chinese, but was also trying to head off any action that would lead to a destructive trade war.
The donkey in the China shop[MUST READ]
By Antal E Fekete
United States President Barack Obama has issued a blackmail to Prime Minister Wen Jiabao of China: "You immediately revalue the yuan or else ... " According to an article by David E Senger in The New York Times on September 23, the two leaders met at the United Nations in New York and spent most of their two-hour session in a spare conference room, usually used by members of the Security Council, to discuss the currency issue.
The session ended by Obama issuing an ultimatum that is bound to be followed by trade war. Surely, this is a most unseemly use to which the sacred grounds of the Security Council, dedicated as it is to the maintenance of peace and prevention of war, have ever been put.
It is most undiplomatic, not to say arrogant, for a head of government to engage another in a tete-a-tete confrontation, to discuss technical currency problems that should first properly be sorted out at a lower level by experts. In a total lack of courtesy to be shown to a guest, Obama is threatening him with action on the part of congressional Democrats, to railroad legislation through before the midterm elections in November that would put huge punitive tariffs on Chinese goods, thus plunging the world into trade war.
Congressional Democrats seem at sea over complex currency issues and the only thing they can do is parrot Keynesian and Friedmanite bunk.
The reason given for Obama’s most unusual procedure is that he and his congressional cohorts are "protecting US interests: American jobs and American competitiveness". Obama would never pay the blackmail if China wanted to force on the US an unpalatable dollar-policy, eg, demand that the dollar be immediately put back on a gold standard on the theory that the present dispute would not have arisen if the dollar were gold redeemable as it had been before Richard Nixon’s default.
Obama has grossly overplayed a very weak hand. The US has never been in a weaker bargaining position - all the trump cards are in the Chinese hand.
This currency war between the US and China is the big log on the Gold fire. Despite the US' "official" desire for a strong Dollar, they must devalue it to resolve the debt crisis here in America. And because it is the "global reserve currency", they must find a way to devalue it without defaulting on their sovereign debt to the world. China is the scapegoat for a half century of failed economic policy in the US. It is doubtful that China will bow to a desperate Obama's demands.
China controls the economic fate of the US. She is America's biggest creditor. Obama is a fool to bite the hand that feeds. Gold senses this currency crisis between the "old world" economy and the "new world economy". America is not going to win this war. America must prepare for a very bitter defeat.
China can be none too happy with the Fed's recent decision to unleash a second round of Quantitative Easing upon the US Economy. If the US is hellbent on debasing it's own currency by printing more of it, why should the Chinese be in a hurry to raise the value of the Yuan? A falling Dollar should help raise the Yuan plenty...
How does China keep it's currency low versus the Dollar? It buys Dollars to spend on US Treasuries. Now if China were to follow orders and let it's currency rise, it would have to STOP buying Dollars AND STOP buying US Treasuries. Given the Fed's recent intention to print money and buy US Treasuries themselves, why would China continue to buy the damn garbage themselves? The US doesn't need to pressure China to raise their currency, they are doing a fine job of forcing the Yuan higher all on their own via the Fed.
Fed confirms: QE2 on tap ... despite dismal failure of QE1! Have these guys gone nuts??
by Mike Larson
This week, Federal Reserve officials did it. They jumped the shark. Crossed the Rubicon. Bought a ticket on the express train to financial Never Never Land. Whatever you want to call it.
I say that because Fed Chairman Ben Bernanke and the rest of the members of the Federal Open Market Committee opened the door to a new round of quantitative easing, or “QE2.” Specifically, they said (with the important passages bolded by me):
“Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate …
“The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”
In plain English, the Fed is explicitly saying it wants to create inflation. This from the central bank that has spent decades FIGHTING it! And if rates near zero percent aren’t going to get things done, they’re just going to print money and buy any old asset they come across as part of a QE2 program.
Definition of Insanity: Doing the Same Thing and Expecting a Different Result
Recklessly throwing money around didn’t help with QE1, and it won’t help in QE2.
The Fed seems to think that just flooding the markets with cheap money will drive all assets up. That will magically cause the economy to ramp higher, and lead to the kind of job creation we need for a healthy recovery.
But just look at what happened in the housing and mortgage arena, the prime focus of the “QE1″ plan …
The Fed bought $175 billion in debt sold by Fannie Mae and Freddie Mac. It also bought $300 billion in U.S. Treasuries, and $1.25 TRILLION in mortgage backed securities — bonds made up of bundles of home loans.
The stated goal was to juice the housing market and spur a massive bout of mortgage refinancing, which would theoretically unleash a gargantuan new wave of consumer spending.
Were the Fed’s efforts successful? Let’s look at the evidence …
The Fed rolled out the first stage of its mortgage manipulation scheme in November 2008, then added to it in the months afterward. Here’s what has happened to key housing indicators since then:
In November 2008, housing starts were running at a seasonally adjusted annual rate (SAAR) of 652,000 units. In August of this year, the comparable figure was 598,000. Net change? Down 8.3 percent.
In November 2008, builders were selling homes at an annualized rate of 389,000. In July 2010, they sold 276,000 homes. Net change? Down 29 percent.
In November 2008, 4.53 million existing homes changed hands (again, this is an annualized rate). That compared to 4.13 million in August. Net change? Down 8.8 percent.
In November 2008, the S&P Case-Shiller 20-city home price index came in at 154.50. The most recent reading — for June 2010 — was 147.97. Net change? Down 4.2 percent.
Despite all the government intervention, housing numbers continue to plunge.
So there you have it folks. Four key housing market indicators are ALL WORSE than they were before the Fed conjured up and spent almost $2 TRILLION to drive mortgage rates lower.
So naturally, given the dismal failure of QE1, we should do more of the same? Pardon my French, but just what the heck are they smoking in Washington? The only real, concrete impact of the Fed’s latest move was a collapse in the U.S. dollar. The Dollar Index plunged 79 points in the hours after the Fed’s announcement, then tanked another 76 points on Wednesday.
That lit an even bigger fire under gold …
And Obama is tossing logs on it...
U.S. Money Printing Presses at Warp Speed, Stealth Monetization of U.S. Debt
A collapse in the currency is why the government and the central bank are kept separate from one another – the fear of monetization, and what could happen, keeps the two apart.
However, now, in the good ol’ U.S. of A., monetization is taking place – and it is happening right before our eyes, even though no one is realizing it. This monetization is invisible to sophisticated analyses, but obvious to anyone looking at the situation. Like one of those stealth fighter jets that are visible to the naked eye of a goat herder, but invisible to the radar and infrared and other sophisticated equipment of the professional military? Same thing:
It’s what I call stealth monetization.
What happened in the Fall of 2008? Essentially, banks found themselves holding debts that would never be repaid – which meant the banks could never pay back the money that they in turn owed to depositors and other creditors.
The bad debts the banks owned – the so-called “toxic assets” – were bonds made from the real-estate and commercial real-estate mortgages, as well as other collateralized debt obligations. Since the properties underlying these bonds had fallen in price – because their prices had been a speculative bubble to begin with – the bonds made from these bundles of loans would never be fully paid off.
In other words, they were bad loans. Therefore, the banks which had made the loans – the banks which owned these toxic assets – would lose so much money that they would go bankrupt. If they did go broke, the U.S. and world economies would take a massive hit.
So in order to avert this fate, the Federal Reserve bought these toxic assets from the banks – but the Fed didn’t pay the market value for these toxic assets, which were pennies on the dollar: Instead, the Federal Reserve paid full nominal value for the toxic assets – 100¢ on the dollar. The banks the Fed bought these toxic assets from became known as the Too Big To Fail banks – for obvious reasons.
How did the Fed buy these dodgy assets? Simple: In 2008 and ‘09, the Fed “expanded its balance sheet.” That’s fancy-speak for, “The Federal Reserve created about $1.5 trillion out of thin air.” That’s essentially what they did. The Fed just decided, “We’re going to create $1.5 trillion” – and lo and behold, $1.5 trillion came to be.
What did the Fed do with this $1.5 trillion it conjured out of thin air? Why, it used it to buy up all the toxic assets and other dodgy assets from the TBTF banks.
What did the TBTF banks do with all this cash? Why, they turned around and bought U.S. Treasury bonds.
U.S. Treasury bonds are called “assets” by sophisticated finance types – in fact, sophisticated finance types call all bonds “assets.” But they’re really just debt – including Treasuries. U.S. Treasury bonds are certificates of debt that the U.S. Federal government issues, in order to finance its shortfall, the deficit.
The U.S. Federal government has been running monster deficits for a number of years now – but lately, it’s gotten pretty bad. In 2009 as well as 2010, the Federal government shortfall was over $1.4 trillion. This is roughly 10% of total U.S. gross domestic product – both in 2009 and 2010: A staggering sum of money. And it is likely that for 2011, the deficit will be another $1.5 trillion or so.
The Federal government has so much outstanding debt that it is unlikely to ever be able to pay it back.
A lot of people think this. A lot of sensible people think that a day will come when the markets no longer believe in the Federal government’s promise to pay back its debt. A lot of sensible, smart people think that, one day, no one will buy any more Treasuries – yet every week, Treasury bonds get sold with numbing regularity. The U.S. Federal government has never put Treasuries up for auction which did not get bid on.
Who are the people who buy these Treasury bonds? The primary dealers – that is, the Too Big To Fail banks.
In other words, the TBTF banks are financing the Federal government’s massive deficits. How are they doing it? With money the Federal Reserve gave them for their toxic assets.
This is one leg of stealth monetization.
Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame
From a purely structural perspective, suddenly the entire UST curve, and not just the "belly", will be offerless, as the Fed will now have a mandate of buying up virtually every single bond available in the open market, and then some! What this means is that rates will promptly plunge, and while many have noted the possibility that the 10 Year drops below 1% upon the formal announcement of QE2, we believe there is a very high probability that even the long-end can see rates drop substantially below 1%, while the 10 Year approaches 0%. Keep in mind that this move will not be predicated upon inflation expectations whatsoever (and in fact we believe this is merely the first step to an outright monetary collapse also known in some textbooks as hyperinflation), but merely as a means of frontrunning Ben Bernanke, as the entire bond market goes offerless, knowing full well that the Fed will buy any bond below its theoretical minimum price of 0% implied yield (we leave it to our readers to determine what this means price-wise on the curve). It also means that the Fed will finally cross the boundary into outright monetization, as Bernanke will be forced to directly bid for any new paper emitted by the US Treasury, to maintain the tempo of its purchases.
As we have noted above, the immediate implication of the vicious (or virtuous if you are Ben Bernanke) feedback loop of collapsing rates, prepayments, and accelerating UST purchases, is that mid-and long-term rates will likely promptly approach zero, as every UST holder realizes they are now the marginal price setter in a market in which there is a bid for any price. The Fed will merely render the traditional supply/demand curve meaningless, and any bonds offered for sale at any price will be bid up by Brian Sack. The implication on stock prices is comparably obvious: to readers who have been confounded by the impact on stocks when there is $10 billion worth of POMOs in a week, we leave to their imagination what the impact on 4x beta stocks will be once the Fed floods the market with $90 billion worth of weekly liquidity, which is what we calculate to be the peak repurchase activity between the months of January and March, as QE2 ramps up to its full potential. In this vein, analysts such as Deutsche's Joe LaVorgna who this Friday came out with a note advising clients not to "Fight the Fed" (link) may take the message to heart. After all, if this last attempt by the Fed to spur asset price inflation, in which Bernanke is effectively telling the consumer that a house can be had for no money down, and for no interest ever, thereby eliminating the risk of price deprecitation, fails, it is game over.
China will most likely, and rightfully, give Obama the finger with regards to raising the value of the Yuan. But then Obama doesn't need any help screwing the country. With the Fed and Wall Street's assistance, the Dollar is certain to collapse all on its own, and the Chinese Yuan will rise to new heights. A nice parting gift as Obama leaves office in disgrace in January 2013.
Monday, September 27, 2010
-Antal E. Fekete
US Congress committee approves China sanctions bill
A US Congress committee has approved a bill that would place retaliatory trade sanctions on China.
It means the House of Representatives - the lower chamber of Congress - will vote on the bill next week.
The bill would allow the US to impose import duties on countries who have fundamentally undervalued currencies.
To become law, the bill would also need support in the Senate, which is less certain ahead of mid-term Congressional elections due in November.
The US accuses China of holding down the value of its currency, the yuan, in order to give its exports an unfair price advantage.
"China's persistent manipulation is a major distortion in the international marketplace," said Sander Levin, chairman of the House Ways and Means committee.
"[The yuan] has a major impact on American workers and therefore American jobs. That's what this is really all about."
Ignoring for the moment that China is the United States LARGEST creditor, Congressman Levin's "belief" that an undervalued Chinese currency is the cause of a weak jobs market here in the US is misguided. It is a cop out as well, and a typically American excuse for problems with the economy, "it's always somebody else's fault".
Blaming China for the financial crisis and high unemployment here in America is like blaming your neighbor when you hit your thumb pounding nails with the hammer you borrowed from him. It's absurd.
Several days ago, Japan intervened in the currency markets to "lower" the currency, the Yen, so that it's exports would be more competitive versus the US Dollar. Where is the uproar in Congress? Columbia, Brazil, and Peru did the same with their local currencies, and the US Congress was mute on the issue. Blaming China for all that ails the US economy is completely ignorant of the truth about the US Economy.
The US Economy is in the toilet because of the US Congress sanctioned US Federal Reserve and it's manipulation of the US Dollar. US government regulations have made it increasingly unprofitable to operate a business here in the USA, that is why many businesses have "shipped jobs overseas". If the US Government is so"determined to create jobs" in America, why do they continue to pile on new taxes and regulations onto American business owners? Obamacare has done much more to halt job growth in this country than the Chinese Yuan has.
The Economic crisis Americans are in the midst of enduring is rooted in Washington and Wall Street arrogance and greed, not the value of the Chinese Yuan. Where was all this Yuan rhetoric when American officials were running around the World touting the "strong Dollar policy" that was a direct result of a weak Chinese Yuan. China has sold Yuan and bought Dollars to purchase US Treasuries for the past 15 years, and financed the US Government's global hegemony, wars, and welfare state. The "strong Dollar policy" has become an absolute failure, and now the US Government wants to blame China for the mess?
How typically American...blame somebody else. Obviously there are too many lawyers in the US Government.
China: U.S. move on yuan bill "redundant"
TAIPEI (Reuters) - A U.S. congressional panel's approval of a bill on China's currency is "redundant," China's vice commerce minister said on Monday, the latest salvo from China in the face of U.S. pressure on its currency policy.
Vice Commerce Minister Chen Jian also told a media briefing during a visit to Taiwan that China would set policy on its currency according to its own needs.
"We'll make a decision based on our own economic development levels and the world economic situation. If it takes the yuan to appreciate for our economy to develop, we will do it even though it would have negative impact," Chen said. "But it is redundant for the U.S. congress to pass the proposal."
The U.S. House of Representatives Ways and Means Committee approved a bill on Friday, expected to be voted on this week, that would let the United States apply duties on goods from countries with undervalued currencies.
The vote is a first step to fulfilling long-standing threats to penalize Beijing for keeping its currency artificially weak, which critics claim creates an unfair trade advantage for China.
The United States is the World's chief currency manipulator. Currency manipulation would be a complete non issue if global currencies were backed by something more than a "promise to pay". The US Dollar is presently the World's reserve currency, the US can print as much of it as they want. Once again the Chinese Yuan is not the problem, the US Federal Reserve is. The US Federal Reserve is THE BIGGEST PROBLEM in the whole world. Blaming China for the US' near 40 year currency fraud is NOT going to fix the global economy. Gold is sensing that now.
Yuan rises help ease China's inflation: Analysts
September 14, 2010
In a concerted measure to rein in rising inflation, the policy-makers in China have allowed substantive currency appreciations since the beginning of September, market analysts say.
Following a marked gain in the value of the yuan, or RMB, on Monday, the People's Bank of China, the central bank, set the official medium reference rate of its currency at 6.7378 per U.S. dollar on Tuesday, rising 131 basic points, the highest rate since July 2005 when China abolished the system of pegging the yuan to the greenback.
Consumer inflation in China rose at the fastest pace in nearly two years in August, when the National Bureau of Statistics said the nation's consumer price index rose 3.5 percent year-on-year, higher than the 3.0 percent annual target set by Beijing.
Chinese economists have suggested the central bank raise the value of its currency in a bid to blunt imported inflation. China's imports from other countries and regions in August rose unexpectedly by 45.5 percent year-on-year, the bureau reported.
Experts believe the recent streak of the yuan gains is expected as it helps the government combat domestic inflationary pressure. Analysts however have thrown cold water on the chances of an imminent interest rate hike by the central bank, saying the recent spike in consumer prices would be temporary and China's inflation will ease by year-end.
The Chinese currency is going to rise whether or not the US Government demands it. The Yuan will rise to protect the Chinese economy from a global inflation caused by a flood of US Dollars printed by the US Federal Reserve. US politicians must realize that a rising Chinese Yuan will result in a falling US Dollar. If US politicians are so desperate to "manipulate" the Dollar lower, why don't they just do an outright devaluation of it? What's the deal? China can't manipulate it's currency lower, but the US can? In effect that is what is going on here. Does the US think that it is all powerful, and just, because it "controls the World's currency"? Well, not for long it won't be. Gold is sensing that now.
Remobilize Gold To Save The World Economy! Open Letter To Paul Volcker
By Antal Fekete
Published: September 24, 2010
Let me explain. Gold is the only ultimate extinguisher of debt. Other extinguishers do, of course, exist but they are not ultimate in that they have a counterpart in the liability column of the balance sheet of someone else. Gold has no such liability attached. Gold is where the buck stops. It is this property that makes gold unique as a financial asset. Historically, gold discharged its function as the ultimate extinguisher of debt through the gold clauses written into the bonds of the U.S. government before 1933. Gold could also discharge this function, albeit rather imperfectly, under the gold exchange standard of 1934 with gold redeemability limited to foreign holders. It could still work under the system of fluctuating gold price introduced in 1971, thanks to the availability of paper gold. Imperfect as though these stratagems were, they served as a pacifier to the bond market. But as the threat of permanent backwardation indicates, all offers to put monetary gold at the disposal of the international monetary system could be abruptly withdrawn. In that event there would be no ultimate extinguisher of debt. The world is totally unprepared for such a momentuous development. I ask: are there contingency plans in the U.S. Treasury and in the Federal Reserve what to do if backwardation makes monetary gold unavailable for the indirect retirement of debt?
3 Government Warnings of Financial Fiascos!
by Martin D. Weiss, Ph.D.
Warning #1 Fed: Consumers Shunning Credit
For the first time since the Great Depression, consumers are not only borrowing LESS, but they are also cutting back on prior borrowings — either because they’re defaulting and being FORCED out of the debt market or because they’re voluntarily trying to AVOID that outcome.
Warning #2 NCUA Seizes Biggest Credit Unions
This warning comes in the form of stern action: On Friday, the National Credit Union Administration (NCUA) seized three wholesale credit unions that provide financing and investment services to more than 7,000 retail credit unions around the country.
The problem: Like the bailed-out banks and failed mortgage giants of recent years, these giant credit unions made big bets on commercial and residential mortgages. Their mortgages collapsed in value. They ran out of cash to cover the losses. And on Friday, regulators decided they were too far gone to save.
Result: All three will be shuttered … their executives will be fired … and their toxic assets will be scooped up by the government.
Warning #3 CBO: Deficit Armageddon!
The nonpartisan Congressional Budget Office (CBO), serving all of Congress regardless of party affiliation, is now raising the exact same alarms Dad raised years ago.
The CBO has announced that this year’s federal deficit will be the second largest in history.
It has disclosed data showing that, had it not been for some fancy accounting, this year’s deficit would actually be the LARGEST in history.
Central Banks Gold Disposals Drop 40% in Accord, World Gold Council Says
By Stuart Wallace
Central banks and the International Monetary Fund sold about 94.5 metric tons of gold in the year that ended yesterday, the lowest amount under an agreement that began in 1999, according to data from the World Gold Council.
Eurozone banks disposed of 6.2 tons, led by Germany, Greece and Malta, while the International Monetary Fund sold 88.3 tons. The figure for the eurozone banks was 96 percent below last year’s 142 tons. The data run through Sept. 14 and the first year of the third five-year agreement ended yesterday.
Gold is heading for a 10th consecutive annual advance, the longest winning streak since at least 1920, spurring central banks globally to add the metal to reserves. Combined central bank holdings rose in every quarter since the second quarter of last year, data from the council show.
The Central Bank Gold Agreement was announced more than a decade ago because of concern that uncoordinated selling was destabilizing the gold market and driving down prices. Gold fell from a then-record $850 an ounce in 1980 to $253.83 in February 2001. It reached a record $1,300.07 on Sept. 24.
Signatories to the latest accord are limited to combined annual sales of 400 tons, down from 500 tons in the previous agreement. Sales under the previous agreement had dwindled to 157 tons by its final year, ending in 2009. Sales by eurozone banks have declined every year since 2006.
As they have for the past 10 years, the bullion banks at the NY CRIMEX and the London LBMA
are again this morning attempting to further slow the inevitable rise of the Precious Metals. With options on futures contracts expiring tonight, all efforts are being put forth to keep Gold below $1300. It looks as though the Rat Bastids will take a HUGE loss in their paper Silver contracts this month, however, October is not a delivery month for Silver, so the losses may not be compounded quickly, but they will be eventually in December. The CRIMEX goons are still scouring the globe for metal to meet delivery demands for Silver on the September contract. They have until the close of trading Wednesday to fulfill the 1.115 million ounces of September Silver still standing for delivery. This delivery shortfall has buoyed Silver prices all of this month, and driven them to 30 year highs. Our predicted September Silver default has not come to pass, but the month long short squeeze has been almost as delightful to watch.
A continued rise in the Chinese Yuan will only bring higher Gold and Silver prices going forward as this will increase the pressure on an already weakened US Dollar. The chart below clearly shows how a rise in the Yuan positively effects the Dollar price of Gold. A renewed rise in the Yuan should further steepen the rise in Gold as the US Dollar is crushed for it's past 40 years of monkey business in the global economy.
Continued insistence by the US Government that China allow it's currency to move higher will only guarantee a higher price of Gold, Silver, and ALL Commodities. Continue to buy Gold and Silver aggressively at support. Investors, continue to be right and sit tight...and add to you positions during periods of significant weakness.
Thursday, September 23, 2010
Open interest levels are now above 600,000 in Gold and 145,000 in Silver. Options expiration at the CRIMEX is coming up early next week on the 29th of September. The goons are poised to raid, but can they successfully? Gold hit my target of $1296, and Silver $21.08 yesterday. A take down could occur at anytime over the next three trading days. The difficulty for these CRIMEX Rat Bastids, however, is the simple fact that demand for the Precious Metals remains robust, and dips are being bought hard in India and the rest of Asia. Global demand for the Precious Metals is rising swiftly.
Metals Action Leaves The Ignorant Scratching Their Head...
By Dave Kranzler, The Golden Truth
UBS has an important comment: “When gold pulled back to $1270.75 on Tuesday, Indian buying interest returned: flows noted by our Swiss sales desk were the strongest since late July, and twice the year-to-date average. Given current lofty prices, demand is understandably inconsistent - but the Indian market has sent a clear signal that it is prepared to raise its price threshold…Importantly for gold, scrap supply has not risen to significant levels, ensuring that this potential rally dampener is not playing a major role right now.”
That tells a big part of the story. India has become a lot less price sensitive than in the past and is aggressively buying gold on every pullback. That we know of, and the caveat is that we have no idea what China is really doing other than buying hand-over-fist, India is the largest importer/consumer of gold in the world. Turkey has resumed its importing in the last several months. Russia accumulates several tonnes every month. And the southeast Asian countries are voraciously accumulating (Bangladesh just bought 10 tonnes from the IMF).
JB's report also references that India's second largest gold importer sees the Oct-Dec imports potentially being 37% above that of last year's levels. Not only are the Indians hoovering up gold, they have acquired an avaricious desire for silver. Here's the article, worth reading India's Gold/Silver Vaccum
Also note that another aspect that distinguishes this year's market from the past is the dearth of scrap gold/silver flowing into the market as the price rises. JB has reported on this several times over the course of the last 6 months.
Another indicator which is followed closely by my friend and colleague, "Ranting" Andy, is the premiums being paid on Ebay for rolls of 1 oz silver eagles. Yesterday he commented on the fact that there are very few sell listings on Ebay right now compared to the past. And just today he reported that silver eagle rolls were being sold for $25-28/oz. That's a $4-7 premium over spot. Premiums like this on Ebay are indicative of growing scarcity of supply in the small-lot/retail market and the coin dealer network. This market is defined as the buyers who can only afford to buy silver in small amounts.
The point of all of this is that it would appear that the demand globally for physical gold and silver is such that, at this current moment, the price manipulators are struggling to keep the metals from grinding higher. Technically this is readily apparent in the action on the "tape." Every sell-off is met with buying and a subsequent high-volumn move higher. Higher lows and higher highs. Classic indication of a market that wants to go higher.
The charts of both Silver and Gold offer the telltale signs of a major short squeeze in progress. The constant dip buying and the continuous rise in price in an "overbought market" indicate that weak handed bears are cutting their loses and running on any dip in price that becomes available. This was VERY evident in Silver today...as well as on the 17th and 15th of September as prices continue to grind higher despite the charts signal that these metal are overbought.
Short squeezes can reverse quickly. And with the open interest in these metals now approaching previous record highs traders must be on their guard for the usual collusive CRIMEX bid rigging that occurs monthly near options expiration... October is a Gold delivery month, and the Goons are far underwater. We can expect monumental efforts to "pull all bids" to force a price retreat.
Fundamentals are however making these bid rigging's by the CRIMEX goons much more difficult to pull off, let alone be successful. Supply is drying up fast in both Metals. The Dollar is flirting with disaster at the 80 level on the US Dollar Index. And investors are finally waking up to the need to have Precious Metals in the portfolios to protect their wealth.
The stresses now building in the CRIMEX, and the LBMA in London, are going to lead to one helluva an explosion upwards in Precious Metals prices. It is inevitable. When that is going to actually occur is antibody's guess, but there is no more "if" related to the possibility anymore...it is going to happen.
Traders be prepared to act quickly. Any take down forthcoming will be swift, and possibly brutal. But the buying opportunity that will result will be glorious. My take down targets, should they occur:
Investors, sit tight and be right...add to your portfolios.
More Forensic Evidence of Gold & Silver Price Manipulation[EXCELLENT]
By: Adrian Douglas
This is simply an outrage. The bad news is that for the last seven years those who have been expecting silver to outperform gold or to march to its own drum have been sorely disappointed and it was hard wired into the trading that they were not going to see a freely traded silver market. The good news is that from the way silver has traded in recent days it is decoupling from gold. It is breaking the algorithmic shackles placed on it by the manipulators. There is not enough data to see this definitively in the cross-plots yet but it should be evident very soon. The artificially low price that has resulted from the creation of false supply through the sale of paper silver via unallocated accounts as a substitute for real bullion has led to a growing shortage. This monumental scam is in the process of becoming unraveled as investors insist on taking delivery of real silver.
Forward sales of silver through the LBMA OTC London market are approximately 8.5 Billion ozs. This is almost all the entire global reserves of silver that are yet to be mined! But the silver miners who own the remaining reserves are unhedged, so who ever has sold 8.5 billion ozs of silver forward by inference does not own 8.5 billion ozs of silver. It is a naked short position of 11 years of global production.
The interesting question is what will the free market price of silver be? Gold itself is suppressed by many multiples of the current price and the false silver price is just a derivative of a false gold price. I have previously estimated that there is only one ounce of gold for every 45 ozs that have been sold. If a similar relationship exists in silver than the eventual long term free market price target could be more than $900/oz. This is just a wild estimate but I think it is safe to say it will be many multiples of the current outrageously suppressed price of $20.9/oz.
The Real Reason Behind Japan's Yen Intervention
What is really behind Japan's decision to prop up the yen? This is the most important question now, which, for some strange reason, no one seems to be asking!
Some question whether or not the Japanese intervention was successful, whether it's the amount needed to prevent the yen from appreciating again, what the euro will do in this context and the consequences for the different asset classes. But no one has proposed a serious analysis of the reasons that pushed Japan to defend the ceiling of Y82/USD.
And yet, that is precisely the most important question because, as I will try to show, this intervention is no more than a monetary sock-puppet which aims to attack, without necessarily being conscious of it, the deflationary plague that has infected the Land of the Rising Sun for over a decade now.
[In conclusion, Japan's intervention on the dollar market will have one major consequence: it will increase the probability that the Fed will launch a QE2.]
Foreign Currency Wars Fuel Gold’s Rally to $1,300
Speculation that the Fed would unleash QE-2 has already spearheaded a new round of currency wars across the globe. Central bankers in Brazil, China, Chile, Japan, Russia, South Korea, and Thailand have all stepped up their interventions by injecting large sums of paper into the currency markets while trying to prevent a precipitous decline in the value of the US-dollar versus their own currencies.
Anyone Notice Gold's Record?
By Patrick A. Heller, Numismatic News
On Sept. 20, the price of gold closed on the U.S. COMEX at $1,279 a troy ounce. Ignoring inflation, this is the highest gold close ever, as measured in U.S. dollars. Silver reached a 30-year high late last week.
Yet, if you were to conduct a poll on the street asking adults if they were aware that gold and silver recently traded at record prices, I would be surprised if more than 1 percent admitted knowing this information.
Gold and silver have been among the top performing financial assets over the past decade. Both have more than quadrupled in value during that time. If precious metals had been the stock of a major corporation, you can be sure that this news would be known far and wide.
Now, the relative lack of coverage of record gold and silver prices is a strong indicator that neither metal is anywhere near to reaching a peak. I don’t know the actual prices where gold and silver may someday top out, but I can give you a clue to the public behavior when this occurs. If the day comes when almost everyone you meet wants to talk about rising precious metals prices and people like taxi drivers, barbers and hairdressers, shoe shiners and strangers standing next to you in lines say that it’s a good time to buy gold and silver, that is when it will be time to sell. This is exactly the gold frenzy we saw in the January 1980 peak, and it signaled the top of that market cycle.
So, even though gold and silver are at record prices (if you ignore inflation) the public is not behaving anywhere close to a frenzy over precious metals. That is a sign that prices will shoot much higher before they hit their peak. It also means that, even though gold and silver prices have more than quadrupled in the past decade, it is not yet too late to jump into the market.
Tuesday, September 21, 2010
Gold rose from a pre-Fed low of 1271 to touch 1290 in a matter of minutes. Silver did likewise, rising from day-long support at 20.55 to briefly breach $21 an ounce within an hour of the Fed announcement. The US Dollar precipitated these powerful moves in the precious metals by jumping off the cliff at 81 on the US Dollar Index and rapidly descending towards the tissue paper net at 80.
Should the US Dollar fall below 80 overnight, we could see complete chaos erupt in the currency markets tomorrow.
Fed signals it will take further steps if needed
Jeannine Aversa, AP Economics Writer
WASHINGTON (AP) -- The Federal Reserve signaled Tuesday that it's worried about the weakness of the recovery and is ready to take further steps to boost the economy if needed.
Fed officials said they are also concerned that sluggish economic growth could prevent prices from rising at a healthy rate.
But at the end of its meeting, the Fed announced no new steps to try to rejuvenate the economy and drive down unemployment. Instead, it hinted that it's prepared to see if the economy can heal on its own.
Stock prices, which had been relatively flat before the Fed's statement, fluctuated before returning to about the same level in late-afternoon trading.
The meeting is the last for the Fed's chief policymaking group before the Nov. 2 midterm elections. It comes as voters are focused on the economy and the jobs crisis. Polls show they are likely to punish Democrats in Washington for the sluggish economy.
In its statement, the Fed used the same language it did in August to sketch a downbeat view of the economy. It concluded that economic activity has slowed in recent months. And it warned that the pace of growth is likely to be "modest in the near term" -- almost identical to the assessment it made a month ago.
But the Fed delivered a stronger signal that it would take new steps to lift the economy. The Fed said it is "prepared to provide additional accommodation." In its previous policy statements, the Fed didn't go that far. Instead, it had said it would "employ its policy tools as necessary."
The Fed made clear that given the economy's weakness, it's more concerned about prices falling than rising.
The Fed is concerned that prices may not be rising at a healthy rate? Do you need any more proof that our "great economic powerhouse" is nothing more than a perpetual inflation bubble machine? The Fed has guaranteed rising prices for years to give Americans, and the World, the illusion of a growing economy when in fact our economy is really nothing more than rising prices.
There has never been real growth in the economy since the Fed was created in 1913. The only real growth has been debt! The US Dollar never anything more than a promise to repay debt since 1971. The lie has been exposed. The TRUTH, Precious Metals, shall prevail and lay the lie that is fiat currency to rest. The Fed is dead...
Dollar Falls to Six-Week Low Versus Euro as Federal Reserve Offers to Ease Bloomberg
The dollar declined to a six-week low against the euro and slumped against the yen after the Federal Reserve said it's willing to ease monetary policy further to bolster the US economy.
Dollar Slides After Fed Statement Wall Street Journal
FOREX-Dollar sells off on Fed statement; euro at 6-wk high Reuters
Summers to Leave White House After Election
By Hans Nichols
Lawrence Summers plans to leave his job as director of the president’s National Economic Council and return to Harvard University at the end of the year, the administration announced.
“I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team,” President Barack Obama said in a statement. “He has helped guide us from the depths of the worst recession since the 1930s to renewed growth.”
Summers said in the White House statement that, while he will miss working in the administration, “I’m looking forward to returning to Harvard to teach and write about the economic fundamentals of job creation and stable finance as well as the integration of rising and developing countries into the global system.”
Since the end of July, Peter Orszag, director of the Office of Management and Budget, and Christina Romer, head of the Council of Economic Advisers, left the administration.
And good riddance! Larry Summers is in large part responsible for today's global economic crisis. His tenure in the Clinton Administration laid the groundwork for today's crisis. It is also a fact that it is Larry Summers who is responsible for, and the director of, the US Government's Gold Price Suppression Scheme. Larry did little to guide us from the depths of recession as The Obama claims. If anything, he played a large part in plunging the country into the depths it now finds itself. The thought of him "teaching the fundamentals of job creation and stable finance" is ludicrous. The man is an absolute f*cking idiot. He should be put to death for his crimes against our country...perhaps in time, he will be arrested and brought to trial in front of an Economic War Crimes Tribunal...we can only hope. Larry Summer's resignation most likely signals that financial Armageddon has not been avoided, and is right now coming over the horizon. The fattest Rat Bastid has jumped ship.
The prospect of a marked deterioration in government finances can be expected to accelerate demand for gold, and indeed, as we approach the inflection point for government finances, gold is making new dollar highs on cue. It may have much catching up to do, since gold has barely reflected the monetary and credit inflation of fiat currencies since Bretton Woods, and arguably longer. But to simplistically link fiat-money inflation to the gold price is a side issue, since the gold price has been manipulated by governments seemingly for ever.
Modern gold manipulation and currency intervention have had a simple purpose: to facilitate the management of economies and their internal prices. Manipulation of gold prices has become a way of life for the central banks of the US, Europe and UK, together with the Bank of International Settlements and the IMF, who we can refer to collectively as the Cartel.
Over the years the Cartel has sold and leased large amounts of its gold. Some of this has been declared through official sales, but the quantity of leased gold can only be guessed at. There have been credible estimates of 5,000 to 10,000 tonnes of gold leased out by the Cartel since the 1980s, positions which are presumably still being rolled over when they become due. Analysts usually compare these figures to the 30,000 tonnes officially held by all central banks, but it is more relevant to compare them with the 21,000 tonnes declared by the Cartel, and the 2,500 tonnes mined annually.
However, the quantum is not as important as the likelihood that the Cartel is now ineffective. It is up against three basic factors: other powerful central banks have emerged as buyers of gold, such as China, Russia and India; free mine supply is contracting (especially when you take out Chinese and Russian production which is not made available to capitalist markets); and hoarding demand from virtually everywhere is accelerating, driven by pure fear. This is another inflection point, and the Cartel is now virtually powerless to stop it.
The bullion banks have worked with the Cartel for the last thirty years to feed leased gold into the markets in order to suppress prices. These actions have led to the development and maintenance of huge short positions in London and on the Comex futures market. In the past, the ready availability of leased gold from the central banks, coupled with newly mined supply, much of which was accelerated through forward sales, encouraged the bullion banks to run these large short positions. Those easy days are now gone, though market-makers and traders have not reduced their short positions to reflect this reality.
New leasing by the central banks, as opposed to roll-overs, can only be at nominal levels. The miners have unwound most of their forward sales and China and Russia are withholding their production from the markets. The short position in London through unallocated accounts[i] can only be guessed at, but judging by daily settlement volumes running at 530 tonnes per day, it could easily be several thousand tonnes[ii]. The short position on Comex has accumulated to about 900 tonnes. There is no possibility these positions can be covered easily at current prices, which means they have to be maintained.
This is suddenly important, give the deteriorating economic outlook. The inevitable and rapid deterioration in government finances will almost certainly trigger a new wave of demand for gold. This demand is not yet understood by those market professionals who assume that rising prices will generate sufficient supply from profit-takers. This is usually true in other markets, but the buyers of gold today are mostly hoarders, and hoarders tend to buy more on rising prices as their earlier fears appear to be vindicated. So the difficulty for those that want to put a lid on this market is that rising prices will lead to accelerating demand. Since government finances are close to an inflection point, so is the price of gold. As gold prices take off, those short positions in London and on Comex will bankrupt the bullion banks, and in the public mind at least, confirm the worthlessness of fiat currencies and the bankrupt state of governments themselves.
So gold’s move into new high ground is an extremely important event, and we are about to discover how much power this weakened Cartel actually possesses.
The Last Price Standing Of "True Money"[ABSOLUTE MUST READ]
By Bill Buckler
Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971!
Ninety-three percent of it has been created since Mr Volcker “saved” the paper Dollar in late 1979!
Treasury debt is the ONLY backing the US Dollar has. Every bit of that debt rise is pure INFLATION.
Since 1982, the inflation has been reflected in serial credit-induced bubble markets. In the US, the last of the “market” bubbles, the real estate bubble, imploded more than three years ago. All that is left is the last of ALL the bubbles, the one in Treasury debt itself. That one is the very end of the road.
The Morbid Fear Of Falling Prices:
If there is anything that keeps central bankers all over the world awake at night, it is their fear of falling prices. This is taken for granted right across the spectrum of those who administer or rely upon the global fiat money economy with the paper US Dollar at its centre. It is a most interesting phenomenon, given the fact that ALL rational economic action since human beings descended from the trees has been aimed at LOWERING the cost of producing economic goods. It is surely an easily grasped FACT that in an economy based on indirect exchange through the use of money, all eras of true prosperity have been eras in which the purchasing power of money was GROWING and prices were therefore falling.
It really is a rather simple proposition, if one actually thinks it through. If a unit of money is to be viable over the longer term, the term essential for the build up of new wealth through new and improved means of production, that unit of money must retain or INCREASE its purchasing power. If it retains its purchasing power, it will allow people to save. If it increases its purchasing power, it will encourage them to save. From the simplest economic endeavour to the most complex one, savings must PRECEDE production which must in turn PRECEDE consumption. The only form of money which has ever been found to maintain and increase its purchasing power is the precious metals. The only form of money which has always been found to lose purchasing power to the end point of extinction is paper.
One of the distinguishing features of every productive economic era in history is that prices FELL throughout the era. Even in eras of capital consumption like the one which began in earnest in 1971, the most successful products were the ones which FELL in price despite the galloping depreciation of the money. The best example of that in the modern era has been the prices of computers and electronics. In the face of all these economic FACTS, why are central bankers so worried about falling prices?
Real Money Needs No “Collateral”:
Sound money needs nothing behind it to perform perfectly all the functions of money. Unsound money, especially paper money backed by nothing but debt to be paid by future generations, is TOTALLY dependent on the prices of the collateral being held against the debt which “backs” it. For forty years, the world has operated on a debt-based monetary system which is fuelled by means of credit creation. It stands or falls on the assumption that the debt upon which it is based will, someday, be repaid.
The only means to assess the worth of the (paper) collateral which is the underpinning to the monetary and financial system today is to look at the PRICE commanded by that collateral on the secondary markets. Any reduction in the price affects confidence in the future viability of the money. The bigger the price reduction, the more adversely confidence is affected. When central bankers and politicians talk about “deflation”, they are talking about a fall in the market value of the paper which underpins the money they issue. Any fall in that market value literally undermines the foundations of the system. They know it, most of their victims do not. All they know is that what used to “work” no longer does.
The US central bank, the Fed, prints the reserve currency. The US Treasury prints the debt paper which is the only “reserve” behind the US Dollar. That being so, the global demand for Treasury debt greatly exceeds the demand for any other type of “collateral”. That has allowed the US to go on living beyond its means for far longer than it otherwise would have found possible. The limits to this situation were revealed in March 2009 when the Fed began monetising Treasury debt and were underlined in August 2010 when the Fed resumed their task. No matter what, the “collateral” value must be maintained.
Home construction jumps 10.5 pct in August- AP
Home construction increased last month and applications for building permits also grew. The gains were driven mainly by apartment and condominium construction, not the much larger single-family homes sector.
Clearly the headline is used to deceive. Actual "home" construction grew by only 4%.
Paul Dales, U.S. economist with Capital Economics, said the high number of vacant homes, mounting expectations of renewed price falls and economic constraints on households will continue to weigh on the industry.
"Homebuilding activity remains at an astoundingly weak level," Dales said, adding that construction has to be more than double current levels for the market to be considered healthy.
Nothing has changed...
Ah, the wonders of the rigged Precious Metals markets continues. The Dollar is again weaker today, struggling to keep it's head above 81 on the US Dollar Index. The Euro is up big on the news of successful bond sales in Ireland, the Japanese Yen is up, and the Chinese Yuan is up. Yet the Precious Metals flounder as the LMBA and the CRIMEX print more paper to stifle their rise in price, and protect the Fed ahead of their meaningless interest rate announcement this afternoon.
Certainly Silver is overbought on it's daily chart, but in very short supply. Gold is somewhat less overbought, but in equally short supply... A pause in their advance in price is warranted, but unlikely to result in a "correction". Some consolidation in price appears evident, before prices move higher.
Support in Gold kicks in first at $1268, and $1260 and $1245 below that. Silver is testing support at $20.55 this morning, and has support below here at $20.30 and $20. Both of these precious Metals are in strong bullish posture on their weekly charts and should be bought aggressively at support.
Recession Officially Ended in June 2009- AP
The longest recession the country has endured since World War II ended in June 2009, a group that dates the beginning and end of recessions declared Monday.
Yeah, right... And Santa Claus is real. More bunk released into the headlines in the hopes that voters will bite on President Obama's plea yesterday to follow his path to economic recovery.
Obama defends econ effort, pleads for voters' help
JULIE PACELIZ SIDOTI Associated Press
"Something that took ten years to create is going to take a little more time to solve," Obama said.
"Even though economists may say that the recession officially ended last year, obviously for the millions of people who are still out of work, people who have seen their home values decline, people who are struggling to pay the bills day to day, it's still very real for them," Obama said.
The group assembled for the session included large and small business owners, teachers, students and unemployed people.
A woman who said she was the chief financial officer for a veterans' service organization told Obama, "I'm exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are right now."
"Is this my new reality?" she asked.
Obama told her, "My goal is not to convince you that everything is where it ought to be. It's not." Still, Obama said that things were "moving in the right direction" under policies he has put in place.
Republican Party chief Michael Steele panned Obama's TV performance. "Once again, President Obama trotted out the same old worn-out reassurances on the economy, but Americans are still waiting for the promised recovery that never arrived," Steele said.
A 30-year old law school graduate who said he couldn't find a job and couldn't even make interest payments on his student loans told Obama he was inspired by Obama's 2008 campaign but "that inspiration is dying away."
"The most important thing we can do right now is grow our economy," Obama said. "What we can't do is go back to the same old things we were doing."
The same old song and dance from a President unqualified to lead a horse to water, let alone a country drying up and blowing away under his stewardship. November can't get here soon enough.
Gold and Silver Are Sounding The Alarm
The Battle for $21 Silver Begins
By James Turk
September 18, 2010 – There is a battle beginning as silver approaches $21, its highest price in 30-years. There is a lot at stake.
Those who are short silver don’t want their losses to become any bigger than they already are. On the other side of the trade, everyone who is long silver wants to see silver appreciate to a fair market value.
This new battle beginning as silver nears $21 is no different than those that have been fought many times over the past decade. When a resistance level is reached, the shorts have repeatedly ‘circled the wagons’ in an attempt to keep silver from climbing higher. They will probably do it again.
Nevertheless, given that silver has risen from $4.03 early this decade to Friday’s close of $20.79, it is obvious that the shorts have not been successful over the long-term. But market battles are fought day-to-day and even hour-to-hour. Plenty can happen in the short-term to cause one to take their eye off-the-ball, but don’t let it happen. Instead always focus on the long-term...
Gold Market Update[SMART READ]
By: Clive Maund
In recent days many commentators proclaimed that gold and silver have "broken out", but THIS IS NOT TRUE, so what is the current situation?
In the last update we looked at both the bullish and bearish case for gold and silver, what you might otherwise call the best and worst case scenarios. Some interpreted this as fence sitting, but it was no such thing - it was dispassionate pragmatic analysis the result of which is that we won't get caught by surprise whatever happens. However, whilst we have defined what will constitute a breakdown and know in advance what action to take should breakdown occur, we are now in the bullish camp and have been buying a range of selected stocks in expectation of an upside breakout which should lead to a powerful broad based advance.
We require 3 conditions to be be met to be sure that we have an upside sector breakout, which are expected to be synchronously fulfilled. First gold has to break out upside from its current potentially bearish Rising Wedge - new highs are NOT GOOD ENOUGH and to claim they are is amateurish. Second, while silver has undeniably broken out upside from a Triangle, IT HAS NOT BROKEN OUT YET TO CLEAR NEW HIGHS. Thirdly, as more ordinary investors are well aware, Precious Metals stocks indices HAVE NOT YET BROKEN OUT to new highs, although there is strong evidence is that they will do before long.
Let's be clear - we are not trying to "rain on anyone's parade" by making the above observations, we are simply "keeping one foot on the ground". Our outlook for the sector is now strongly bullish for the reasons which we will now set out. Fundamentally the outlook for gold and silver is rosy. There is an unstoppable global trend of competitive currency devaluation underway which is driven by balance of trade considerations and given that governments have this powerful core motivation to devalue their currencies, what better way to do it than simply to print more of the stuff, which means that you can avoid liquidity problems within your economy and placate grumbling workers unsettled by rising inflation by giving them pay rises, using massaged statistics to make sure that their pay rises don't keep up with inflation. The US is the "maestro" of both money creation, which is now absolutely necessary to service runaway debt and government spending, and fiddling statistics, like the CPI and the unemployment figures, the former to cheat people on fixed incomes out of fair cost of living increases and the latter to make things look better than they really are.
Jim Sinclair’s Commentary
Three solid fellows present their view on the future of the price of Gold.
Alf Field: $4,250 – $10,000 Click here to read the article…
Harry Schultz: $6,000 Click here to read the article…
Martin Armstrong: $5,000 Click here to read the article…