Gold Harvest Under A Silver Moon

ISDA (International Swaps and Derivatives Assoc.): "Someone is broke"

2012-01-31T18:03:00.002-05:00

PAY ATTENTION HERE:

The Impending Undeclared Default Of 5 Major US Banks

January 30, 2012, at 10:05 pm
by Jim Sinclair

The following interview with Ellis Martin of www.EllisMartinReport.com covers in detail the impending undeclared default of 5 major US banks this week by the International Swaps and Derivatives Association.

This even has the potential to cause a second financial crisis that would require significant financial intervention. If you have time to spare, listen to this interview. If you don’t have time to spare, listen to it anyway.

So Be It
By Dave in Denver, The Golden Truth

"Fiat:" an arbitrary decree or pronouncement, especially by a person or group of persons having absolute authority to enforce it: The king ruled by fiat - dictionary.com

The big topic of discussion in the cyberworld today was an interview with Jim Sinclair, who discussed an imminent ruling by ISDA - the board of OTC derivatives rules and enforcement - which would pronounce that any massive haircut in value taken by Greek bondholders would not constitute an event of default. This is not new information, as it was reported as far back as October that ISDA would make this declaration once the a Greek restructuring occurred. And it will occur despite the poker game going on, because if Greece defaults, then ISDA will have its fiat powers stripped by market forces when Greek sovereign paper goes offered without any bid (i.e. worthless). You can hear Sinclair's interview at http://www.jsmineset.com/"

What bothered me was that Sinclair made ISDA sound like some dark, mysterious force out there that was largely hidden but imbued with supernatural powers. ISDA has been around forever. I used ISDA documents when we would engage in high yield bond swaps with funds like Harvard Investments in order to hide positions from the back office risk Nazis at year-end. It was de rigeur back then. It's rampant beyond control now.

The problem with ISDA is that it is governed by the same banks that stand to benefit the most from ISDA rule declarations: the big banks that have been declared by fiat as "too big to fail" by Team Bernanke/Obama (really, just Team Bernanke, but Obama reads the script off the teleprompter like a good circus animal).

So, in the Greek bond situation, what you have is a situation where big hedge funds and money market funds have loaded up the boat with short term Greek sovereign paper at high yields (and Italian/Spanish/Portuguese, etc), and bought OTC derivative credit default protection in the even of default. The way this works, if Greece is unable repay its bonds at a minimum of some small discount to face value, or if Greece defaults outright, the issuer of the credit derivative - the big bank in most cases - has to make the investor whole. On $10's of billions in Greek debt with credit protection issued, it can get expensive for the big banks.

To make matters even more interesting, there has been been outright speculation on Greek debt in which a hedge fund will bet on a Greek default by buying a fancy derivative from a big bank such that the hedge fund doesn't even have to own any bonds and it will still get paid. It's like buying a put option on a stock betting it will go down without actually owning the stock. Again, in the event that Greece has to "restructure" its debt at 30-50 cents on the dollar, or outright defaults, the big banks would have to cough up $10's of billions in "default insurance" payments.

But there's a way around this. It's called rule by fiat (see the above definition of "fiat"). Since the banks control the rules and procedures of ISDA, if they determine that a Greek restructuring which requires a 50-70% haircut on the debt held by investors is not really a "default" event, so be it. The Greek bond investor will be coerced into receiving a new bond that will be in the range of 30-50% of the face value of the original bond, thereby getting hammered on its investment, and the big bank who got paid a handsome premium to underwrite default insurance on that paper will get to keep the money it was paid and it will not have to make obligatory restorative payments to the investor. Isn't it good to be King in a completely fiat system?

The problem with the fiat currency and financial system is that eventually it turns into one giant Ponzi scheme. The politically/socially correct term for this would be "a fractional banking and financial system." It's a system based on "full faith and trust." When the trustworthiness of this system starts to fade, investors will start to move "fiat" money into hard asset currency - that is, gold and silver, the world's oldest and most trustworthy hard asset currency. It's happening now, only it's a lot more prevalent in the eastern hemisphere countries like China, Russia and India. In our own backyard, Venezuela demonstrated this movement by recalling nearly 100% of its sovereign gold that was being "safeguarded" by big banks in NY, London and Zurich: LINK Hugo Chavez, love him or hate him, is one smart hombre.

Gold and silver are on the cusp of another big explosive move higher. James Turk in his latest commentary on King World News said it best:

Regarding gold, I don’t think people realize that gold could explode from current levels. I think the potential for explosion is there and what you are going to see is not only silver on the move, but you will also see gold smash through the $2,000 level

Here's the LINK. If you don't understand why Turk makes these comments, re-read my commentary above. If you still don't understand why, so be it. Unfortunately, by the time the masses understand this, gold and silver will likely be too high in terms of fiat currency price for them to buy enough to matter. It is what it is...

Somebody is broke...do you know who? Does it really matter?
by Bill Holter, GATA, [lemetropolecafe.com] subscribe!

To all; Jim Sinclair did an interview yesterday with Ellis Martin http://www.jsmineset.com/2012/01/30/the-impending-undeclared-default-of-5-major-us-banks/

The subject of the interview is nothing new as we we were already aware that the big banks are broke, what IS news is that Mr. Sinclair believes that THIS week is "when" it happens. Well...not the bankruptcies of course but a "decision" by the ISDA (International Swaps and Derivatives Assoc.) will make regarding the "non default" or "trigger" of Greek debt.

This has been written and talked about for months on end, the 5 largest banks in the U.S. have written 97% of the CDS (credit default swaps) on the planet. Think about this for a moment, were one (which would lead to many) defaults occur at the same time, we would have another AIG situation. However, this time it would be "AIG cubed, times 5"! The banking system would then be ..."officially" bankrupt rather than bankrupt for all intents and purposes. It is this decision by the ISDA that Mr. Sinclair believes will be made this week that will (and has already) lead to more massive QE money printing to liquify the system in the hopes of putting enough cushion in ahead of time for whatever reaction comes about.

He is talking about 10 or more "MF Globals" in the near future where sovereign debt was purchased, then hedged, yet the "hedges" have been made worthless because ISDA refuses to "admit" that default occured. THIS really is a big problem! Someone, somewhere is broke. Will it be the "writers" of the insurance? Or the "buyers"? Well, let me clear this up for you, IT DOESN'T MATTER! This is like saying you went to an orgy with 20 people and 1 of them had AIDS. Does it really matter who it was? Actually, this is a great metaphor for Europe at present, no bank trusts any other bank and thus interbank lending has basically ceased to exist. Then, going one step further, if the European banks don't trust each other, why would any other non European bank trust them?

"Someone is broke" is a fact and because the global financial system truly is "global", this means they, (thus "we") are ALL broke! Period, end of story! Which leads us back to broken record time. Nothing paper has the true value as is perceived today. Either they allow bankruptcies to occur as Mother Nature demands or they print $ Trillions more and throw it on top of the already raging bonfire. We know which choice will be made, TPTB will not ever admit defeat nor give up "power" willingly, they will print until the cows come home and the currencies approach zero. What we do not know is how long investors will leave their heads in the sand. Do they wake up and panic or continue their oblivious ways while $1,000 is not enough to purchase a Happy Meal?

I have believed all along that a panic will happen first, then and only then we will get a revaluation of the currencies. Can we go down the Weimar road for 2,3, 4 more years? Yes but I still believe that the "structure" and leverage of the current system makes an "accident" along the way very, very likely. Again though, does it really matter? Matter how? How you will prepare and protect yourselves with "precious metals everything" of course! No, no matter how this plays out, in a currency/debt crisis such as this, REAL MONEY is your best safe haven. Whether it is this week as Mr. Sinclair says or 6 months from now, "they" will have to decide what road we will take. Deny everything, admit to nothing and print...or call reality for what it is and let bankruptcys roll around the planet like atom bombs. It doesn't matter "when or how", what really matters is what you have done and are doing to prepare for it! Regards, Bill H.

What happens if Greece defaults?

The International Swaps and Derivatives Association (ISDA), has the final say on whether a "credit event" has occurred, triggering the payment of default insurance taken out on Greek bonds via the credit default swap …Daily Telegraph · 1/21/2012

Red Alert: Credit Default Swaps Explained

by Ann Barnhardt

News out of Brussels last night was that a package is being put together that would haircut Greek bonds by 70%, thus only paying back 30 cents on the dollar to anyone holding Greek paper. This will set a precedent that will eventually be played out all over Europe.

Full AP story HERE.

This is extremely bad, and will spell the end of the big U.S. banks and the financial system in total. But EVERYONE needs to understand credit default swaps (CDS) first. CDS are insurance policies that investors have traded – very similar to OPTIONS for my old clients and cattle people out there. Buying a CDS is essentially like buying a put. The buyer pays a premium, or fee, to the writer, or seller of the CDS that says that the seller will guarantee and make whole the buyer’s position in a specific bond IF the entity behind the bond (such as Greece) defaults. In exchange for paying the premium and being made whole after a default, the buyer of the CDS surrenders the bond position to the seller of the CDS, and the seller gets to keep both the premium paid plus gets to keep any salvage value of the defaulted bond.

So the CDS buyer pays a premium or fee, and the seller guarantees against a default but gets to take ownership of the bonds and keep any salvage value if a default does happen.

Here is what I STRONGLY suspect is going to happen with this 70% haircut plan. The bondholders are going to take the full brunt of the 70% haircut, BUT the body that actually dictates whether or not a default has happened – the International Swaps and Derivatives Association (ISDA) – will declare that this credit event is NOT a default, and thus all of the banks and entities that THOUGHT that their European debt positions were hedged with CDS will find out that they have no protection at all. And then the excrement hits the fan. Big time.

The argument that the ISDA will make is that a 70% haircut isn’t a default. This is, of course, abject horse manure. Try paying only 30% of your mortgage and see how quickly the word “default” is used. They are using the 70% figure because a 30% payout is just enough to make the legalistic argument that a FULL default hasn’t occurred - which makes NO SENSE because salvage value is one of the core concepts in CDS contracts. The SELLER GET THE RIGHTS TO THE SALVAGE VALUE, which by definition implies that the default need not be 100% in order to execute the CDS. ARRGGHH!!!!

The obvious question is, WHO IS IT THAT HAS WRITTEN ALL OF THESE CREDIT DEFAULT SWAPS, because they are going to make off like bandits. They are going to have received all of the premium, the default event will have happened, and they won’t have to pay out. Like the old Dire Straits song says, “Money for nothin’ and chicks for free.” Fish in a barrel. Lambs to the slaughter. Candy from a baby.

I will venture a guess as to who two of the largest writers of Eurotrash CDS might be. How about . . . oh, I dunno, Goldman Sachs and J.P. Morgan? Guys, what MF Global was doing with customer funds – “hypothecating” and leveraging the customer money into European bond positions “hedged” with credit default swaps – THEY’RE ALL DOING IT. All of the brokerage houses. All of the investment firms. All of the retirement account custodians. ALL OF THE BANKS. I can almost promise you that Goldman Sachs and J.P. Morgan have been sitting on a net short position in Europe, quietly betting against European paper, all the while pimping and selling long European positions (It will be fine! The bailouts will come!) AND happily selling TRILLIONS of dollars worth of CDS to their customers to “guarantee” the customers’ long-Europe positions against default, knowing full well that Europe WOULD collapse. (Duh. Anyone who can do 2nd grade math knows that.) When the collapse happened they knew from the beginning they WOULD NEVER HAVE TO PAY OUT ON THE CREDIT DEFAULT SWAPS THAT THEY WROTE because the ISDA was populated BY THEIR OWN PEOPLE, and the ISDA would therefore never declare a default. They would therefore pocket the premium received, but most importantly would then swoop in and BUY UP ALL OF THE BANKS AND BROKERAGES DESTROYED BY THEIR UNHEDGED NET LONG-EUROPE POSITIONS.

Think about it. Why would a Goldman or a J.P. Morgan write trillions of dollars of CDS on Europe in the first place? CDS aren’t like regular options. CDS are binary in their outcome. Either there is no default, or there is, and the payout required would be massive. There is no middle ground. There is no “moderate” payout on a CDS. It is either all-or-nothing. Why would Goldman and J.P. Morgan write these CDS contracts knowing full well that Europe was mathematically impossible to save and thus guaranteed to default, and that the inevitable European default would then lead to demands for payout that were – again – mathematically impossible? We are talking tens if not hundreds of trillions of dollars. We are talking multiples of the size of the entire economy of the U.S. - and that is just the exposure of ONE BANK (i.e. JPM @ $78TTT). There is no possible way to payout on that. It seems to me that these CDS writers knew from the start that they would never have to payout. They knew that their people in the ISDA would never declare a default, but would always leave some trifling payout to “legally” skirt default. If it ever got to the point that there was a full default, World War 3 would be the result and thus the entire point would be moot. The bankster oligarchs would at that point be moving fully to declare a new totalitarian world government and abolish and seize all private property. Game over.

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Bottom line:

A declared NON-default is still a default to those that own the bonds that are given a "haircut"...much will be lost in the way of fiat money by many. The only way to make up what is lost, is to print more fiat to replace what is lost. This is bad for the Dollar...PERIOD!

...and great for the Precious Metals!

Got Gold you can hold?

Got Silver you can squeeze?

It is not too late to accumulate!

The Fed's 2% Inflation Target: The Real Personal Consumption Expenditure

2012-01-27T16:29:00.000-05:00

The Fed: What did they really say Wednesday?

They kept interest rates at ZERO...this really only benefits the banks. In fact, everything the Fed does is to benefit the banks. Their concerns about unemployment and "price stability" are empty at best.

The Fed also announced an "inflation target" of 2%. Ridiculous, I know... Everyone and their brother knows inflation is running FAR ABOVE 2%. Everybody but the Fed that is. But then they look at inflation differently than the rest of the world:

Federal Reserve Abandons Core Consumer Price Index

By David Shulman

Amidst all the hoopla surrounding the Federal Reserve's announcement yesterday of long term policy, the Fed statement was very clear that the relevant measure is the deflator for personal consumption expenditures, which is the broadest measure of prices in the economy. The Fed made a fundamental policy change in moving away from the concept of core Consumer Price Index which excludes food and energy, as its key inflation measure. Their exact words were,

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate targets.

[Read: Fed Opens Up on Interest Rate, Inflation Predictions]

The concept of core CPI was invented in the early 1970s by then-Fed Chairman Arthur Burns to allow for an easier monetary policy in the face of rapidly rising oil and food prices. The economic argument for this new concept of inflation was that it avoided transitory elements driving the inflation rate. However, as we all know energy prices have risen inexorably higher over the past four decades.

Thus the Fed's experiment with unusually low interest rates for a very long time could run aground if it triggers another commodity price bubble as it did last year. If the 2 percent target is for real, the Fed could very well be tested sooner than it would like.

The flip side of the policy change is that housing is weighted far lower in the consumption deflator than it is in the Consumer Price Index. Thus the incipient inflation in rents will be downplayed in the new measure. Perhaps the Fed is fearful that rising rents would make it difficult to maintain its zero interest rate policy going forward. Time will tell.
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So gone is the Fed's "core inflation" measurement where the cost of Food and Energy are not considered in measuring inflation. Note worthy since "core inflation" has been on the rise of late, rising 2.2% last year. And now they have a more esoteric metric by which to measure inflation.

What are Real Personal Consumption Expenditures?

The Real Personal Consumption Expenditure released by the US Bureau of Economic Analysis is an average of the amount of money the consumers spend in a month on durable goods, consumer products, and services.

Fancy, eh?

In fact the measure of personal consumption expenditures was released today along with this morning's weak 2.8% GDP growth number.

John Williams from ShadowStats.com has the latest stats you need to be aware of.
- Net of Involuntary Inventory Build-Up, GDP Growth Was 0.8% Instead of 2.8%
- Durable Goods Orders and New Home Sales Still Show Stagnation
- Fed’s New PCE Inflation Target Is Inconsistent with Plans for Ongoing Easing
No. 415: Fourth-Quarter GDP, December Durable Goods and Home Sales
http://www.shadowstats.com

Q4 GDP Misses Estimates, Inventory Stockpiling Accounts For 1.9% Of 2.8% Q4 US Economic Growth
From ZeroHedge
The US economy grew at a 2.8% annualized pace in the supposedly blistering fourth quarter, yet the number was a disappointment not only in that it missed estimates of 3.0% (and far higher whisper numbers) but when one looks at the components, where a whopping 1.94% of the upside was attributable to a rise in inventories as restocking took place. And as everyone knows in this day and age a spike in inventories only leads to sub-cost dumping a few months later. In other words, the economy grew at a 0.8% pace ex inventories. Yet for all intents and purposes, this is considered "growth." Personal consumption was also weaker than expected coming in at 2.0% on estimates of 2.4%. Perhaps the only silver lining was Core PCE which came at 1.1% on expectations of 0.9%, however as discussed extensively before, this was driven by an unsustainable surge in credit-binge spending, primarily for iStore trinkets, and is hardly sustainable especially as the US Savings Rate fell to 3.7% in the fourth quarter, the lowest since Q4 2007. In other words Joe Sixpack is living large, especially since Joe Sixpack no longer has to pay his mortgage. Unfortunately this is a collision course with every economic principle and the next taxpayer funded bank bailout is only a matter of time. Bottom line: the artificial economic pick up is over and Q1 will see inventories actually detract from GDP: as a reminder Q1 2011 GDP subtracted 1.8% points from the final 0.4% GDP, and that was following only a 0.9% inventory rise in the preceding quarter, Q4 2010. And that is not even mentioning the tight fiscal situation no longer being a benefit to growth. Oh yes, and gas is no longer falling. And not to even mention that the GDP deflator mysteriously imploded from 2.6% to 0.4%: that's odd - not even edible ipads seem to be coming down in price. Which means that using a reslitic deflator would have resulted in virtually no GDP growth. To paraphrase Lester Burnham, "It's all downhill from here."
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Real Personal Consumption Expenditure [PCE] printed this morning at 1.1%. It was expected to be 2.3%. 3rd qtr PCE was revised higher from 1.7% to 2.1%.

In the Fed's statement yesterday, they announced that: "Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable." We all know that is a load of baloney, but the PCE numbers released this morning allow the Fed to get away with "bending the truth" about inflation.

No doubt they will look to the 4th qtr drop in PCE and ratchet up their deflationary fear mongering so as to justify keeping interest rates and ZERO, and/or increasing their balance sheet by buying more toxic mortgage debt from the floundering banks here in the US.

Free money and inflation is just what the Dr. ordered for the Precious Metals as both Gold and Silver soared on the Fed announcement.

Jim Sinclair - Mainstream Entities Will Now Enter Gold Market

Eric King, KingWorldNews.com

With gold and silver exploding to the upside on the Fed announcement, today King World News interviewed legendary Jim Sinclair, to get his take on where things are headed. Sinclair told KWN he now expects mainstream entities to enter the gold market. Here is what Sinclair had to say: “Today is an important day. There are many days we talk but this is a mile-marker. What the Fed did today is they turned on the light of what will be QE to infinity. Today the light went on with regards to the intentions of the Fed. They did that for very specific reasons, we have troubles people can’t see and this is one of the ways out.”

“The announcement itself is a game-changer because of the way this game is going to change, Eric. I think you are going to see a very significant change amongst investors, corporations and companies with extra capital and people of the mainstream. You’re going to find gold being accepted as a hedge against what’s going on by entities, that up to now, you would think would be the last ones to be buying gold. How about someone like General Electric?

I used GE as an example because the principal of GE is a major advisor to the government. That would be the most unlikely thing (for GE to buy gold). But don’t count it out. You are going to see a lot of things this year you thought at one time impossible, becoming reality.

I’m going to predict you are going to see a new definition of investors in gold that, up to now, haven’t even been considered. Up to now there’s been the retail crowd and there’s been the international central bank crowd which have been the primary entities in gold....

“But you’ve never had mainstream investment, mainstream pensions, mainstream life insurance companies, mainstream health plans, which gather money looking to use a medium in order to maintain the buying power of what they’ve accomplished. This is a huge change, huge new demand, a total new definition.

You’re going to find out that public companies with significant resources, tech companies (as an example), are going to start to recognize that gold is an important part of protecting what they have. So I think you’ve identified a game-changer for corporate America and corporate global Western finance, to begin to look at gold as an alternative to the normal cash and debt instruments they would use to hedge themselves.”

Sinclair also added: “Last year was the year of discussion and confusion. I’ve labeled this year a year of action. Not necessarily a year of solution, but a year of action. Today you saw an action. The Fed’s swap line is an action. The IMF’s willingness to seek and to distribute loans, an action.

Actions have consequences. So this year is the year in which we are going to be experiencing the consequences. $1,700 to $2,100 gold is a conservative range. The reason why you got the breakout today is the light just went on. So any idea the accordion chop in gold we were in is still on is total nonsense.

Bear in mind that when gold breaks out above those ranges, it will do it based on a loss of confidence, primarily, in currencies. And it is the dollar, not the euro, that is the specie in danger as we are having this conversation.”

This interview with Sinclair is timely and important considering what the Fed did today. The KWN audio interview with Jim Sinclair is available now and you can listen to it by CLICKING HERE.

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Eric Sprott - Aggressive Chinese Buying Will Spike Gold Price

Eric King, KingWorldNews.com

Today billionaire Eric Sprott told King World News the Chinese cannot continue to buy gold as aggressively as they have been without there being a dramatic increase in the price. Eric Sprott, Chairman of Sprott Asset Management, had this to say about Chinese purchases of gold and the recent announcement that Iranian oil will be acquired using gold: “There are two things I think are important about that. One, it’s a statement that gold is a currency. That is by far the most important thing. I think the other thing is, if it actually transpires that way, what does it mean for the demand for gold? Because now it’s considered currency, it’s, in essence, your working capital. You have to have it. It’s like a store, you have to have money in the till.”

“So it’s obviously going to increase the demand for gold and we have seen some data that China has been a rather large buyer of gold. People will consider it a currency and it has to necessitate more buying. You know, Eric, I think one of the really interesting things that happened was the imports of gold into China, from Hong Kong, which always were less than 20 tons a month, all of the sudden, beginning about 5 months ago, went 20 (tons), 30, 40, 80 and in November 102 tons. 102 tons is a staggering number.

The world mines, excluding China, less than 200 tons a month. China cannot continue to buy 102 tons and not have the price escalate dramatically.”

Sprott had this to say about today’s Fed announcement that it will leave rates at zero until late 2014: “Obviously it’s dramatic what has happened. It would appear there will be no restraint whatsoever on the part of the Fed. Assuming this announcement causes gold to break its declining wedge, which I believe it has, I expect some serious fireworks to the upside.”

When asked about his latest PSLV offering, Sprott stated, “We closed on $349 million. The underwriters did exercise the over-allotment in rather short order. We have committed to purchase it (silver). I think the deal was very successful. Obviously the premium has come down here (on PSLV), but it’s typically traded at a 16% premium and right now it’s at 8%. It takes a little while to digest the stock that was issued, but I’m hopeful we will get back to where we were.

There’s been a big move since we did the issue....

“We’ve all heard the reports that it’s pretty tight (in terms of supply). Every data point I see suggests people and institutions want to buy silver in the same dollar amount as they are buying gold.

We see the US Mint has sold 5.6 million ounces so far in January and I’m sure they will have a record high month. We’re selling as many dollars of silver coins as we are gold coins by the mint, which means we are selling 50 times more physical volume of silver. The availability (of silver to gold) is 7 to 1 in physical, but people are buying it at like 50 to 1. So something has to give there.

I would love to share with your viewers I was speaking with a company, this is a gold company, who is trying to organize a dividend payment being made in gold or silver and/or cash. Apparently 60% of the people (asked) were opting for the precious metal and half of those agreed to take it in silver. Again, another confirmation of silver buying. Our last tranche (in PSLV) we raised $349 million. Our last tranche in gold we raised $312 million. Again, one to one buying, so I’m pretty upbeat about where silver should be going.

As you know I always thought we would go back to the 16 to 1 ratio to gold, which means based on today’s prices silver should be $100. I really do believe silver was going to blow through $50 back in April/May when, all of the sudden, margin rate increases came through and one billion ounces of paper silver was sold that day.

I’m of the feeling that it will go back through $50 this year. Once it goes through $50 I think it could take on a whole new life and really energize itself. Longer-term my target is 16 to 1 to gold and I’m very upbeat on gold. I’m sure gold is going north of $2,000 this year, so obviously silver can get up to $150 in due course.”

When asked if there has been traction with regards to his call to silver companies to hold physical silver instead of cash, Sprott replied, “There has been traction. One company, Endeavor Silver, only sold 1/3 of their output in the December quarter because they thought the price was being depressed. They decided to wait and sell it at a different time.

We did have one silver producer actually participate in the PSLV (offering), which was very encouraging to me. I think we’re making a little bit of momentum on that front. Of course, I’ve given lots of chats to silver producers about what I think has gone on in the silver market. I think we’re making some progress.”

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Per the chart below, Chinese gold imports were a staggering 102 tonnes in November alone, or HALF THE WORLD'S PRODUCTION, not including Chinese gold production, which is entirely consumed by its government.

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A chart from Dave in Denver at The Golden Truth:

Below is a 1-yr daily chart of the price of gold. Those of you who are familiar with doing technical analysis on stock charts will recognize this particular chart as being nothing less than bull market full-on chart pornography. When gold breaks above $1800, we will really be off to the races. I think gold is going to make some moves to the upside that will shock most gold bears and surprise many bulls.

(click on the chart to enlarge)

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Silver Price Forecast 2012:I Stand By $140 Silver Price In 2012

From: Hubert Moolman on SILVER and GOLD

Silver Price Forecast 2012:
There is a well-established relationship between how silver and gold trade. They often trade similar in the same time period, but also at similar milestones, although those milestones are sometimes reached at different times. This can cause silver or gold to be the leading indicator, depending on the particular milestone.
I have previously used this relationship to predict how silver will trade. Below, is an extract of that update:

Currently, there is another situation in the silver and gold market that provides an opportunity to predict how silver prices might trade over the coming months. I have pointed this out before, in a previous article. Here, I would just like to provide an update, and add a few more thoughts.

This situation or opportunity revolves around the 1980 all-time high for both metals. Gold passed its 1980 all-time high during 2008, while silver is yet to do so. By looking at the pattern of how gold passed its 1980 high, we can predict how silver might do it as well.

Below, is a comparison of silver and gold around their respective 1980 highs:

From the chart, you can see there is similarity in how gold and silver approached their 1980 high. Gold and silver made a triangle-type pattern (marked 1 -3) just before it reached the 1980 all-time high. When it came out of that triangle pattern, it rallied strongly to the 1980 high, which started the formation of a flag-type pattern (marked 3 – 9).

It appears that silver is now past point 9 (29 December 2011), and will now be eyeing that $50 level.

Market conditions often cause silver to fall behind gold, for quite some time, where after, silver normally catches-up in a big way. The fact that silver is still caught-up in a trading range lower than its 1980 high, at least four years longer than gold already, provides a classic opportunity for silver to follow that “catching-up pattern” and zoom to multiples of its 1980 high.

With gold having passed $1700 (twice the 1980 high of $850) already, given the above analysis, it stands to reason that $100 (twice the 1980 high of $50) silver is virtually guaranteed.

There are many indicators suggesting that we are close to a point where silver might catch –up with gold, relative to its 1980 high, in a big way. My recent analysis of the gold/silver ratio also seems to suggest this. So, as things stand, I expect silver to outperform gold for most of this year, and I stand by my target of at least $140 silver by the end of 2012.

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Bill Holter with GATA (www.LeMetropoleCafe.com) sums up the Wednesday Fed announcement and it's effect of Gold and Silver prices:

The "mania" stage.

To all; the action in the precious metals yesterday was very very significant and after pondering on it overnight I truly believe the 3rd and final "mania stage" has been kicked off. Let's first look at the fundamentals. The Fed told you yesterday that they will foster a policy of negative (if they could create negative nominal rates I'm sure they would) real interest rates for at least 2 more years. We have also watched reported (probably fake) inventories of precious metals continue to drop. Central banks have become buyers of Gold while in the U.S. and Canada, sales of 1 oz. Eagles and Maples are now running at a faster pace than TOTAL production of all mines combined. Since Silver inventories in the U.S. and Canadian mints are nonexistent, if these coins are to be minted in the future, the mints must become buyers. Nevermind industrial demand, jewelry demand, investment demand of bullion bars or anything else, the sales of 1oz. coins are eating up all supply.

Then of course we have "rehypothecation" to the tune of over 100-1 in all sorts of scam paper products from ETF's to futures, options, pool accounts etc. To add to the "perfectness" of this storm, Sprott Asset Management pulled the trigger on a 10 million ounce order with another $1.2 Billion remaining shelfed for future purchases. Let's not forget the biggest "fundamental" of all, good 'ole common sense itself. Common sense tells you that while governments are getting stuck in the quicksand of bankruptcy (Portuguese 10 yr. bonds are now trading over 15%), the natural action of "protect oneself" has the demand of precious metals exploding. Please remember that 5 years ago, nearly no one differentiated between the fraudulent paper Gold and Silver products and the real thing. This siphoned real demand away from the real thing, this is changing rapidly and enough "big money" finally "gets it"!

So fundamentally, the perfect storm has arrived, technically or "psychologically" the set up is equally bullish. Just one month ago the average investor in PM's were suicidal to put it mildly. Short positions (many naked and illegal) in the mining shares ballooned and COT numbers show the commercials less short and the specs less long than in many a moon. Bullish consensus numbers got as low or lower than the bottom days in 2008 while "cash for Gold" shops spring up like lemonade stands (back in the 60's before 7 year olds needed "permits") . I must say that I did not understand the mental malaise or funk but it did exist and shook many investors off of the bull. If you hung in there (I hope you did), you deserve to pat yourself on the back because NOW it looks like you are going to really get paid for your pain!

Jim Sinclair put a piece out last night http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/1/25_Jim_Sinclair_-_Mainstream_Entities_Will_Now_Enter_Gold_Market.html where he says that "mainstream entities will enter the Gold market" and in my opinion is absolutely correct and will be joined by "John and Jane Q. Public". The public will have a much larger impact on the Silver market (poor man's Gold) while institutions will devour Gold itself. Let's not forget India's "Gold for oil" deal and other major countries like China, Russia, France etc. setting up trade deals without using the Dollar for settlement. The Sun is finally setting on the Dollar!

ALL of this has come together at the same time to create a perfect storm that just happened to kick off the day before an options expiration that surely has the shorts licking their wounds! The fabled "$6 Dollar rule" that in reality was simply a "2% rule" was soundly broken yesterday with an outside reversal day, the size of which I don't believe we have seen throughout the last 11 year bull market. Yesterday saw a bottom to top move of well over $60. We are also getting upside follow through today which has NEVER happened (or been "allowed" to happen) in the past so something is really really different now. Whether "they" have lost control or "allowed" yesterdays movement is a moot point because it "happened" and the genie cannot be put back into the bottle!

Bill Murphy's "price action makes market commentary" will now begin to work in favor of precious metals as opposed to against. If my opinion is correct, the 3rd and final "mania stage " has kicked off. In the words of Richard Russell, "there is no fever like Gold fever" and that is in "normal times". These are not even close to normal times. We are living through the end of an era where governments are going broke including the issuer of "the money". "The money" has gone bad at the same time investors own no or very little "real money" because of years of brainwashing. Capital has been concentrated at one side of the ship and has very slowly been moving back to the empty side.

It has taken 11 years to get where we are today, it could very well only take one more year (10% the time of what we have already been through) to clean up "all the marbles". What lies ahead of us price wise is anyone's guess. We could very well see a double, a ten fold, a 100 fold OR an "infinite move" in Dollar terms if the Dollar is lost. All I know is that a "re valuation" of paper money vs. real money is mandatory and been necessary for a very long, long time. THIS is it, the "revaluation" that has been working it's way through for the last 11 years has changed gears and with today's abilities of information (speed through computers) and leverage (options, futures and OTC crap) has an additional power boost! The computerized turbos and leveraged nitrous buttons will make what is to come in Gold and Silver legendary stories that will make the Dot Com/housing booms look like 2 pimples on an elephant's arse.

The biggest "difference" is that there will be no crashto follow the boom. When a currency dies (in this case ALL paper currencies), real money steps in and is "valued" to whatever new currency" that is introduced. Or at least this is the way they would like you to perceive it, the reality is that the new currencies are valued by how much Gold or Silver they can "buy". The important thing is that whenever a new currency is introduced, anyone sitting at the table with real money, ALREADY has "all the marbles". You will be entering the "next monetary system" wealth intact AND enhanced! "Payday" is much closer timewise than many true believers expect in my opinion. This is the start. Regards, Bill H.

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Got Gold you can hold?

Got Silver you can squeeze?

It's still not too late to accumulate!

QE3: "The last duty of a central banker is to tell the public the truth."

2012-01-24T17:09:00.000-05:00

Tomorrow afternoon [Wednesday, Jan 25] at 12:30PM est, the great and all powerful Oz will speak...

O wait a minute... I meant to say that the US Federal Reserve will step forth from behind their curtain and blow smoke up our ass.

Opps...

Tomorrow the US Federal Reserve, at the conclusion of their two-day meeting, are expected by countless financial market talking heads to announce QE3 [Quantitative Easing - Round Three]. The headlines of the past couple weeks say it will be so:

Fed to Weigh Further Easing Amid Doubts About Recovery

Fed's Latest Easing Could Cost $1 Trillion: Economists

The Fed Heads certainly "want you to believe" that they are going to ride to the rescue of the economy with more money:

Fed's Dudley: Fed Must Continue To Evaluate Need For Stimulus

Fed's Rosengren Urges Fed Purchases to Aid Housing

Fed may need to buy more bonds: Williams

Fed's Lockhart does not rule out more easing

Stocks have been rising since the first of the year in anticipation of a new round of Federal Reserve stimulus for the economy. Commodities have been rising for no "fundamental reason" since the first of the year...in anticipation of the inflationary impact of new Federal Reserve stimulus. The US Dollar has stopped rising on the belief that a new round of Quantitative Easing will debase the currency further, and launch the American economy into a hyperinflation. Gold and Silver have "risen from the ashes" as every assurance has been given by the financial news media that QE3 will be announced by the Bumbling Bernanke & Co. Wednesday afternoon.

BUT WHAT IF THERE IS NO QE3 ANNOUNCEMENT FROM THE FED?

Why Would the Fed Launch QE 3?

By Graham Summers, via ZeroHedge

I continue to see commentators claiming QE 3 is just around the corner. I don’t see how this is possible because all of the Fed’s excuses for more QE are no longer valid.

First off, interest rates are already at or near record lows. So the Fed cannot argue that it needs to lower rates. Moreover, it’s not like lowering rates via QE 1, QE lite, QE 2, and Operation Twist 2 did much to help the US housing market. So QE 3 can’t be presented as a solution to housing.

Secondly, the economic data coming out of the US has been massaged to the point of not looking so bad. So the Fed cannot use the “economy is collapsing” argument this time either. And it’s not as though the public isn’t totally aware that QE 2 did next to nothing for the economy.

Indeed, the Fed spent $600 billion on QE 2 and had at most three months’ of improved economic data as a result (QE 2 was announced in November and the US economy rolled over in February 2011). The public is well aware of this as well as the fact that QE 2 saw inflation exploding higher.

Despite end-of-year decline, 2011 food prices highest on record – UN

Global food prices declined in December, but the overall annual average was the highest ever on record, the United Nations Food and Agriculture Organization (FAO) reported today.

Last month, FAO’s Food Price Index level was 211 points – 27 points below its peak in February. The decline was driven by sharp falls in the international prices of cereals, sugar and oils due to a productive harvest coupled with a slowing demand and a stronger United States dollar.

However, despite the steady decline in prices during the second half of the year, the Index overall averaged 228 points in 2011 – the highest average since FAO started measuring international food prices in 1990. The second highest average occurred in 2008 at 200 points.

http://www.un.org/apps/news/story.asp?NewsID=40925&Cr=food&Cr1=prices

Food prices hit all time highs in 2011, resulting in numerous revolutions and riots throughout the world. The increased cost of living also drew a lot of negative attention to the Fed from the US populace. So it’s not like the Fed can use the “QE will stimulate the economy” argument anymore.

The final argument for QE is that Obama needs the economy to recover to win the 2012 election. This argument completely overlooks the fact that Bernanke and the Fed are now politically toxic.

If the Fed were not in trouble politically, why would it:

1) Stage town hall meetings

2) Open up to Q&A sessions

3) Have “humanizing’ articles written about Bernanke in major media publications.

4) Moving towards more transparency on its forecasts and projections

These are all defensive moves. And the Fed wouldn’t be making them if it wasn’t under pressure. Which makes it all the more unlikely that QE 3 would help Obama. The public is already outraged at the Fed moves. And QE 3 would send inflation through the roof. How exactly would this benefit Obama’s Presidential campaign?

In the end, the bar for QE 3 is much, much higher than most people think. The days in which the Fed could do whatever it wanted are over. And there simply isn’t a decent argument for QE 3 at this time.

It’s not as though QE 3 would do much for the market anyway. Look at the recent coordinated Central Bank intervention in November… the benefits lasted less than a month.

And somehow QE 3 is going to send stocks through the roof? Give me a break. Look at earnings. They’ve been a disaster, and investors are pulling their funds from the market en masse.

On that note, I truly believe we’re on the verge of the next round of the Great Crisis. The credit and bond markets are already starting to predict another 2008 event. Only this time things will be even worse because the Fed has already used up its tools into combating the First Round of the Crisis.

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Things could get really ugly tomorrow if the Fed fails to deliver QE3. Remember what happened after the Fed settled for "Operation Twist" instead of the "anticipated" QE3 last Fall? That wasn't pretty! Silver FELL $14 an ounce in three weeks...Gold fell $250 an ounce in the same three weeks...and the S&P lost 10%!

The Fed doesn't need to "deliver" QE3 tomorrow, they are already engaged in it covertly, behind the scenes. Seriously, who do you think is going to buy the $1.2 TRILLION worth of debt Obama and friends are going to tack on to the "debt ceiling" later this month? Who do you think has been buying US Debt since Operation Twist was announced September 21, 2011?

Foreigners Sell Record $85 Billion In Treasurys In 6 Consecutive Weeks - Time To Get Concerned?

Don't expect an overt, public QE3 announcement from the Fed Wednesday, and prepare accordingly..look for the opportunity to accumulate more physical Precious Metals at discount prices.

Do expect the Fed to try and jawbone the markets into believing that the Fed is doing something constructive by "targeting inflation", or announcing an "interest rate forecast". Count on the Fed telling us everything but the TRUTH about QE3.

"The last duty of a central banker is to tell the public the truth."

Silver & Gold: The TRUTH IS - There Just Ain't Enough To Go Around

2012-01-19T15:24:00.000-05:00

The US Dollar began rolling over this morning at 3:10AM est. from an over night high of 80.58 in Asia. By 4AM est, the US Dollar was clearly beginning to trend down, and Gold exploded to the upside. At 4:05AM est, Gold hit $1670...and promptly had it's legs kicked out from under it.

Strangely, as the slide in the Dollar gained momentum, the price of Gold began to fall along with it...by 1PM est the price of Gold had fallen $20 an ounce from it's overnight high to $1650. The Dollar fell 40 ticks by 12PM est to reach a low of 80.18.

Ah, the wonders of the Western Banking Gold Cartel..."can't have the price of Gold rising on our watch."

The lengths to which the Western Banking Gold Cartel are going to, to suppress the price of Gold [and Silver], have breached the threshold of absurd. The TRUTH is out there, and the prices of Gold and Silver WILL BE going higher no matter what the clowns in the financial news media offer as comment on the subject:

Why gold could lose its glitter in 2012

Gold may hit $2,000, as it ends long bull-run

Everyone is entitled to their opinion...and I am entitled to laugh at it!

Let's focus on some of the TRUTH that the mainstream financial news media flat out ignores when making their claims that the bull run in the Precious Metals is over:

GFMS reports substantial offtake of Gold by Central Banks
By Trader Dan Norcini

Dow Jones news is carrying a report this morning from GFMS (formerly Gold Fields Mineral Services)detailing the amount of gold purchased last year by the world's Central Banks. It was indeed a formidable number.

The net purchases of the yellow metal came in near 430 tons, a more than 5-fold increase on the previous year. It was also the highest level recorded since 1964.

To give you a sense of the significance of these purchases - the amount of NET purchases by Central Banks in 2010 was a mere 77 tons!

Surprising to me was the fact that Mexico was the largest buyer as far as the official monetary sector goes. GFMS reports that they added almost 100 tons of gold to their reserves. I would have thought it would have been China to lead the pack.

The other surprising fact was that signatories to the Central Bank Gold Agreement ( this was set up to limit the amount of gold sold by European Central Banks ) sold less than 10 tons for 2011.

The summary - Central Banks are now absorbing a significant amount of world gold production. This should continue to provide very good downside support for the metal on price retracements lower as these banks do NOT CHASE PRICES HIGHER but are there to buy at levels they consider gold to have "value".

London Trader - Staggering Gold Demand Creating Shortages

By Eric King, KingWorldNews.com

With many global investors still concerned about the price of gold and silver, today King World News interviewed the “London Trader” to get his take on these markets. The source stated, “We’ve still got a very, very compressed spring because the shorts are still trying to defend their positions, their naked short positions in both the gold and silver markets. As an example, in the silver market, you saw that type of activity in the silver ETF (SLV). Shorts borrowed another 3 million ounces to cover immediate delivery concerns. There are 25 million ounces now borrowed from SLV. It is getting worse and worse for them.”

“They are naked short on the COMEX and to meet immediate delivery demand they are having to borrow it from the SLV. It is still unwinding and it’s still got a long way to go. Yes, you will still see games being played and yes you can create paper gold out of thin air. But there comes a point where each time you do that the physical buyers are taking it and it has a lagging effect that will catch up, and eventually it gets reflected in the price.

The demand for euro gold here in London is so intense it’s shocking to some of the players. This is what has left some market participants in the US wondering why the price of gold has risen along with the dollar. It’s because demand in the eurozone is unimaginably strong. The euro physical gold demand is off the charts and it is creating shortages for metal, in size, here in London.

The physical gold market is actually being drained by euro gold buyers. People are converting their euros to gold and there is only a finite amount of physical gold available. Again, that’s why you are seeing the dollar and gold rallying together.

We are also seeing very strong markets in Asia with solid premiums. Silver is in backwardation. There are huge premiums for size (large tonnage orders) in silver and you are going to wait 3, 4 or 5 weeks for delivery. There is constant backwardation into the March futures contract. For the most part, the bid on silver spot has been higher than the ask on March futures.

These paper markets are a joke. Nobody who is seriously in the business of taking physical delivery is trading on the COMEX anymore. That is big news. The COMEX is no longer a credible marketplace...

“You now have international funds, whose compliance departments are saying to them, ‘You can no longer trade on the Comex because the CME did not back client accounts.’ There are a tremendous number of international funds and hedge funds that can no longer trade on the COMEX as of the first of this year because of compliance reasons and no one is talking about this. This is huge news.

Back to gold, if we get a pit close above $1,650 you could see a lot of scared shorts begin to cover. This could create a very quick move higher in the gold price. Also, if we get a pit close above $1,650, we are going to see a very large tranche of unfilled wholesale orders moving a lot higher with their bids, and that will become a base. There are massive orders for sovereign entities under the market here.

The Chinese are long-term thinkers and they really don’t care whether they are paying $1,600 or $1,700 for gold. What they do is get the best price they can. When the new floor eventually becomes $1,700, they will buy everything available at that price. When it becomes $1,800 they will buy at that price. They are just looking to accumulate gold and they are never sellers, never.

There are two things here. Yes, China wants a cheap gold price and they’ve been enjoying the fact the gold market was taken down. They have recently taken another roughly 150 tons away from the Western central banks. The Western central banks essentially donated that gold in an attempt to prop up their paper currencies. Yet again these traitorous Western central bankers have given away more power.

I see gold as power and once again they have given it away to the Eastern Hemisphere. The Chinese continue to laugh. As much as the Chinese would like to have a cheap gold price and have this manipulation keep going, they also want to bring the renminbi to the center stage.

To them, it’s more important the Chinese currency becomes the world’s currency. The dollar, despite the latest rally, is dying, we all know it’s dying. So, the Chinese are moving to become the international currency of the world and the best way to do that is through gold. It’s a very clever tactic. Every time more gold arrives in China, the more their currency is backed, the closer they move technically to becoming the world’s reserve currency.”

The flow of gold from Western vaults to Eastern vaults is the most important symbol of the decline of the West. As the East rises, the West falls. “So goes the gold, so goes the power.” Remember to be your own central bank by owning physical gold. Many in Europe have apparently figured this out as gold demand is, “off the charts.”

__________________________

If central banks are now net buyers of Gold, in amounts not seen since 1964, [the London Gold Pool collapsed in 1967] and demand for Euro gold is "shocking", how can the price of Gold be falling in Europe...not to mention New York?

S & P, the bastion of late to the party credit ratings, downgraded several European nations sovereign debt last Friday, and the price of Gold has been under pressure ever since. Huh? The balance of Europe receives a debt downgrade, and the price of Gold is held in check? And nobody in the financial news media questions this?

Central banks are buying Gold, and Europe is bankrupt, investor demand for physical bullion is off the charts and the US is about to raise it's debt ceiling by $1.2 TRILLION...and the price of Gold is predicted to be flat to down in 2012?

Yeah right...

Bill Holter from GATA chimes in:

The new normal?

To all; as you know, S+P downgraded various sovereign debt last Friday. They also downgraded the EFSF one notch over the weekend, thus stripping their pristinely stupid "AAA" rating. But just one notch? This is ridiculous because we could wake up on any given day facing an outright "run" and the EFSF would be exposed as the Ponzi engine that it is. How could it have been rated AAA in the first place? Various sovereign debt from Greece, Italy and today Portugal (which if (when) were to fail will take the Spanish banking system down) could not issue new debt OR survive without EFSF purchases of said debt. But what happens... if the EFSF were to have problems issuing debt of their own? Do you see where this all leads to?

A buyers strike, all owners selling and outright panic, that's where. This has actually already started to some extent and has been covered over here in the States and in Europe by clandestine purchases with "newly created" money. THIS sadly is the "new normal". ...And the worst part? The markets are just begging for more more more of it! Monetization has ALWAYS lead to ruinous hyperinflation, always. This try will be no different, but what amazes me is how many "smart people" they trot out in Wahington and on CNBC to tell us that this time will be different. It won't be. ...Well...maybe a little different.

THIS time the monetization is not in one country or one region, it is everywhere! We now face the prospects where even the ratings agencies are telling us that "risk" of non payment is rising everywhere (way after the obvious fact) and even IF investors went totally mad and decided to invest ALL new monies into sovereign debt, well, there just wouldn't be enough money! The debt "appetite" (actually , debt addiction that is now mandatory just to roll over old debt and pay interest) has gotten so large that the system is no longer generating (nor has the ability to) enough cash flow to sustain the debt necessary for the sovereign's to continue. No problem though, central banks will magically create what is needed!

I wrote back in the early fall of 2008 that "debt saturation" levels had been reached as individuals and corporations needed to deliver, I did not think that sovereign governments would bankrupt themselves to prolong the fantasy. Well, here we are and "they" have bankrupted themselves. Now, we have reached debt levels that are no longer sustainable on a "payback" basis by the sovereign's, NOR sustainable in amounts that the financial system can even provide. The wall has been hit and THE only thing left is for central banks to magically create credits to provide to various treasuries. This "new normal" that exists is not sustainable. Just because no one wants to acknowledge it doesn't mean it does not exist. Math is math and the amounts of debt necessary to continue cannot be funded "internally", the money is just not there. T We have arrived at Jim Sinclair's "QE to infinity" not out of desire, no, it is now out of necessity!

I say the above because the numbers are just getting beyond stupid! Our president has asked for another $1.2 Trillion increased debt ceiling to get us through the year (probably only August) and the ECB has just run through 250 Billion Euros since Dec. 21 (less than 3 weeks) and rumored to be announcing another 1 Trillion LTRO (long term refinancing operation) very soon. The whole thing is toast beyond toast mathematically while CNBC parades the goatheads to tell us "tech is cheap" or "Pharmaceuticals are a buy". I have news for you all, the entire system is 100%, completely and totally bankrupt! The governments are bankrupt which means their currencies are worthless and thus, everything saved in those currencies are worthless! Period! When all is said and done, history will remember this "new normal" as more infamous than when Fisher said back in 1929 that "we have reached a new and permanent higher plateau".

How could a "tulip bulb" be worth 30 houses? How could a tech stock with no earnings have a larger market cap than Exxon in 1999? ... How could "no one" (in the mainstream) not see this one coming? It will all be so obvious after the fact...as it always is! Regards, Bill H.

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The Fed and the ECB are printing money as fast as they can [despite their official denials] in the hopes of papering over the insolvency of the western world, and the price of Gold is locked down?

Demand for Precious Metals is rising to ever higher levels by the month, and yet the prices are flat or falling?

Global Gold Coin & Bar Demand Surges in 2011 - Thomson Reuters GFMS Annual Gold Survey

From ZeroHedge

Gold coin purchases gained 13% last year and will increase 2.7% in the first half. Purchases of gold bars increased by 36% to nearly 2,000 (1,194) metric tonnes, concentrated in China, Germany, Switzerland and Austria. East Asia demand for gold bars rose 53% to 456 metric tonnes. India rose 9% to 297 metric tonnes and western markets demand for gold bars rose 41% to 335 metric tonnes. Central banks increased net purchases by a massive fivefold to 430 tons last year, and may buy another 90 tons in the first half, GFMS said. Combined official holdings stand at 30,788.9 tons, data from the London-based World Gold Council show. “Attitudes among central banks haven’t really changed,” Thomson Reuters GFMS annual survey said. “There’s still that desire to come into the gold market to diversify some of the assets away from foreign exchange and to boost gold holdings.” The Thomson Reuters GFMS annual gold survey also predicts that gold will struggle in the first half of the year, increasing in the later half towards $2,000. It also says the gold bull market is losing steam and predicts an end to the run as economies recover next year and interest rates begin to rise.
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...And what about the demand for Silver? Surely demand for Silver must have plummeted along with its price since September:

HOT OFF THE PRESS: Sprott Asset Management doing an overnight issue of the PSLV, which will be a minimum of $300 million, and hopefully will get even larger.

Sprott Physical Silver Trust Announces Follow-on Offering of Trust Units

TORONTO, ONTARIO--(Marketwire - Jan. 17, 2012) - Sprott Physical Silver Trust (the "Trust") (TSX:PHS.U)(NYSE:PSLV), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP, announced today that it has launched a follow-on offering (the "Offering") of transferable, redeemable units of the Trust ("Units").

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering. Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering.

The Units are listed on the NYSE Arca and the Toronto Stock Exchange under the symbols "PSLV" and "PHS.U", respectively. The Offering will be made simultaneously in the United States and Canada by underwriters led by Morgan Stanley and RBC Capital Markets in the United States and RBC Capital Markets and Morgan Stanley in Canada.

Copies of the U.S. prospectus related to the Offering may be obtained by contacting Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, New York 10014 Attention: Prospectus Department (telephone 866-718-1649 (toll free) or 917-606-8474) or by e-mailing prospectus@morganstanley.com, or RBC Capital Markets Corporation, Attention: Prospectus Department, Three World Financial Center, 200 Vesey Street, 8th floor, New York, New York 10281-8098 (telephone: 212-428-6670, fax: 212-428-6260). Copies of the Canadian prospectus related to this Offering may be obtained by contacting RBC Capital Markets, Attention: Distribution Centre, 277 Front St. W., 5th Floor, Toronto, Ontario M5V 2X4 (fax: 416-313-6066) or Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, New York 10014 Attention: Prospectus Department (telephone 866-718-1649 (toll free) or 917-606-8474) or by e-mailing prospectus@morganstanley.com. The Offering in Canada is only being made by the Canadian prospectus, which includes important detailed information about the Units being offered.

This news release does not constitute an offer to sell or a solicitation of an offer to buy the Units, nor shall there be any sale of the Units in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

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Bill Holter from GATA comments on the Sprott Silver purchase:

PSLV announced what with overallotment will amount to a $300 Million add on offering! Notice the "exclamation point"? Yes I for one am excited for several reasons. One being that the physical market will be "tested" as to real supply. How long will it take this time for Mr. Sprott to receive his metal? Will it take 4 months like last year? Surely it should take less time now because supply (you know, the actual real metal) should be in abundance since the price is down nearly 40% from the May 2011 peak? Surely mining companies came in with massive new supply because the price was so high? Surely investors ran down to their local dealers with heavy bags full of Silver to "cash in" on their gains and "flushed" the physical markets? Right?

Well... this is not what happened. Actually mining supply moved up less than 5% and it was physical demand that skyrocketed, NOT supply! Yet the price is down 30-40%? The only new supply that hit the market were new and freshly (printed) offered paper contracts with even less backing than the existing fraudulent contracts. THESE hit the market like a sledgehammer! Please keep in mind that this offering is only about 10 million ounces and with what Jeff Christian and Jon Nadler tell us should be less of a problem than a pimple on an elephant's ass. My next thought is this, what if it doesn't take less time to fill the order? What if it takes even more than 4 months for the metal to be delivered?

Please remember that Mr. Sprott "filed" for a total of $1.5 Billion, which I for one believe is not even doable in today's physical market. Is he just "testing" the market? Does he not want to be "the one" who craters the whole system by unmasking just how TIGHT this market really is? Another question (comical as it may be) is "where" will this order be placed? The COMEX? This size order would deplete their deliverable inventory (if it really exists) by 25-30% and still not make much of a dent in the total $1.5 Billion filing. If the total filing were used and placed as an order on the COMEX, it could not be filled...hmmm?

I applaud Mr. Sprott's "guts" here, I know he is only doing a small (VERY small order in the scheme of "paper" things) order but risks exposing the whole "fractional metal" scheme. This should in a "perfect world" not even be a topic to write about or discuss but the truth is...we haven't been told the truth for a long time and this is a perfectly legal and logical way to get at it. We will find out just "how tight" the Silver market really is and very soon would be my guess. As a side note and I usually don't discuss much in the way of politics, I really question just how well Ron Paul's heart would hold out were he to actually take an obvious lead in even the most crooked polls? Do you see where I'm going with this...? Hopefully the guardian angel union up there in Canada doesn't offer vacation days to its employees!

Please recall that when Eric Sprott purchased $500 MILLION of Silver last year, the price of Silver doubled. $300 MILLION equates to 10 million ounces of Silver at $30 an ounce. The COMEX only has 32 million ounces of Silver available to meet delivery demands [or so they claim to].

The US Mint sold 40 million ounces of US Silver Eagles in just 2011! The Silver industry produces less that 700 million ounces of Silver annually. Am I to believe that a 10 million ounce purchase of Silver is not going to affect Silver supply and "force" the price of Silver higher? Eric Sprott and the US Mint have Silver supply needs that are 18 million ounces more than the COMEX has to offer. Simple math tells me that the Silver market is in for a "boom" in prices in 2012.

Ted Butler (www.butlerresearch.com)

The second week of 2012 repeated the pattern of the first week with gold and silver rising (although ending the week somewhat sloppily). Gold rose $23 (1.4%) for the week, while silver climbed $1 (3.5%). As a result of silver's outperformance, the gold/silver ratio tightened in by a point to just over 55 to1. Despite the slight tightening in the ratio, silver still appears to be cheap relative to gold in many respects and also looks cheap relative to its closest base metal counterpart, copper.

Once again, this is not to suggest that gold looks expensive, particularly on a Commitment of Traders (COT) market structure basis. But the total dollar value of the world's three billion ounces of gold bullion has reached ridiculous levels relative to the dollar value of the world's one billion ounces of silver bullion. At current prices, the dollar value of gold is 165 times greater than the value of the world's silver. That's way too much for two items so closely similar. Here's another way of looking at it. Last week's $23 rise in the gold price increased the value of the world's gold bullion by almost $70 billion. That's more than twice as much as the total value of what all of the world's silver bullion is worth. I'm talking about the change for one week in gold being twice the total value of all the silver in the world. That's crazy and is due to silver being artificially manipulated in price.

_______________________

In a post at GATA's LemtropoleCafe James Joyce Table:

The scrap silver myth Hi Bill!

The market sentiment is so easy to manipulate in the great propaganda machine that is our mainstream media. The bearish spin on the metals is beyond belief. And when the metals WERE making new highs week after week, the 'bullish' commentary that was circulating was often left-handed nonsense. Flat out, there is no hint of a legitimate market press coverage to report on the precious metals.

Case in point, I read commentary today that states silver will underperform in 2012 due to over supply. Right off the bat I had to wonder where this was coming from. Well, the article stated it was added scrap silver that would tip the market into surplus this year. Now lets just consider that assumption...

Last year I know for a fact that any silver not nailed down was being dumped in the junk bullion craze. We all know of these shops opening all over North America in shopping mall kiosks, pawn shops, mail-in promos, and even road shows that travel from one hotel to another with a heavy marketing blitz to suck in the stupid. I have seen scavenger silver buyers showing up in auctions to bid up the price of any sterling silver items and then sell them for scrap bullion.

As silver made its highs in 2011 the temptation to sell scrap silver was drawing in a lot of bullion. These people got paid a fraction of the value for their jewellry, cuttlery, candlesticks, and whatever else they were unloading. And now its mostly gone. There are only so many suckers that will fall for that kind of scam and most of them now hold no silver trinkets to unload on the next price surge. Also, with silver now priced much lower and therefore the prices these scrap vultures are willing to pay have also come down, the incentive to hang out at auctions buying junk silver items is also fading. Suffice to say that less scrap silver will find its way to market in 2012. That is not the story that you will be hearing elsewhere.

The flipside to this loss of scrap supply is that refined bullion demand continues to rise. I read an article earlier this month that suggested India may import an additional 100 tons of silver bullion in 2012. Think about that in a market that is already in short supply. Also, the loss of production from the Lucky Friday Mine for this year will probably reduce the bullion produced by 2.5 million ounces from mine supply. Lets also consider that producers like Endeavour Silver have been holding back some of their production in inventory, which also reduces supply. And former bullion exporting nations like China are now net importers of silver bullion, putting further stress on the demand side of the equation.

There are a handful of emerging silver producers that are setting new production records, adding a million ounces here, half a million ounces there to mine supply. I doubt that we will see any increase in scrap silver this year at all, and probably a sharp decline is coming. Meanwhile, demand continues to increase from a variety of retail investors,institutional money, national buying, and industrial consumers.

I think the game plan now for the bullion banks is to continue to encourage bearish articles about the metals in the major media, while they play games to rig the market and discourage investors from getting back on board. Meanwhile, I think they are winding in the short exposure and getting ready to go long. The failure of so many 'analysts' to mention or even recognize this scam is shameful but I think there are many good people now putting the word out and I think some investors are getting the message. I still see regular reports that inventory is low in the bullion shops and the premiums are high, which suggests a tight market and retail buyers are still active (no matter what the media presents...).

The days to run the spot price and bag a bunch of clueless specs on a short raid are nearly over. The next big scam will happen when the big banks are on the long side and then get their media buddies to report incredible bullish stories on the metals. Right about when a real squeeze has developed in terms of physical bullion inventory we will have the light turned on for the retail herd to thunder into bullion shops looking to pay any price for whatever metal they can get. I think that will be the mania that ends with a blowoff top and I hope it is still a year or two away.

So I am not overly concerned that the same hack writers are quoting the same bearish 'experts' to put out their hit pieces on the metal and projected prices for 2012. It just tells me the big banks are still looking to close out shorts cheaply and buy while the rest of the market is looking elsewhere. In time the sentiment is going off the charts. Good hell! I will feel sorry for those who wait until the mania stage to get interested in buying silver.
Cheers!
Mexico Mike

___________________________

If the prices of the Precious Metals are indeed tied to the inverse of the US Dollar, one looks at the markets this morning in dismay, wonder, or possibly anger. Take heart wise Precious Metals investor, the days of the Western Banking Gold Cartel's manipulation of these prices may be numbered.

Not only is the "value of the US Dollar" questionable, its viability as the Worlds Reserve Currency may be in doubt as well.

Consider that recent "strength" in the Dollar is purely the result of weakness in the Euro, and a shortage of Dollars to meet debt obligations to be settled in Dollars primarily in Europe. What if this phenomenon was to suddenly reverse itself?

Say, a short squeeze in the Euro?

Everyone Hates The Euro - EUR Shorts Hit New Record High

...anyone who has euro shorts on here has their balls on the chopping block ...

GOLD/SILVER

Thoughts on the Metals/USD/Euro:

I have a feeling that the large artillery guns are being quietly turned toward the USD versus the Euro. Let us not forget that the largest debtor nation on the planet is the U.S.A. and were it not for the Ponzi-gifted Fed buying bonds for which there are no real buyers, the U.S. banks and Government would be dead.

The Russians and the Chinese and the Japanese are not terribly pleased with the Euro situation because Euroland is a very important market for them and is far closer to them than are U.S. markets. In fact only 7% of Chinese exports hit American soil so the hypocrisy of Tim Geithner wagging his finger at the Euro pols is not going unnoticed.

So before one gets too excited about the prospect for a huge dollar rally that will torpedo the metals (AND the CRB as well), remember that the paper "markets" (translate: "interventions" (Thanks Chris Powell)) are USD-denominated and if you believe that contrarian investing is a useful tool, the sheer enormity of the open interest in the short Euro/long USD trade is enough to send you scurrying into a cave.

The short Euro/long USD is one of the most one-sided, over crowded, taxi-cab-driver, shoeshine boy dominated trades of the past two decades and somewhat analogous to the one-sided-ness of the masses all being simultaneously long Petfood.com in 1999 being launched at 2,000 times 2007 earnings with zero assets and zero revenue.

Being short the Euro and by default bearish on the precious metals is like tightrope-walking the Niagara gorge in February in a blizzard blindfolded. It is not a wise action unless you like safety in numbers because short Euro is one very, very crowded trade.

Michael J. Ballanger B.Sc., B.A.

Or maybe a decision by a number of Global sovereigns to eliminate the US Dollar from trade settlement between nations?

A new Reserve currency to challenge the dollar – What’s really going on in The Straits of Hormuz.
By Golem XIV on January 9, 2012 in latest

A little over a year ago on 1st November 2010 I wrote what I called “…a little bit of scurrilous speculation.” In it I speculated that an unintended consequence of QE had been to spur several countries to think very seriously of how they could replace the dollar as their settlement currency for international deals. The Settlement Currency just means the currency both parties agree is stable, internationally trusted and accepted, and in plentiful supply. Which may not be the case for their own currencies . I wondered if doubts about the longer term stability of the dollar and of US debt levels, was combining with a political desire in China and perhaps other countries as well to challenge the US via the dollar with the eventual goal of creating an alternative reserve currency backed by gold rather than, as the dollar now is, by debt.

Various countries have been buying gold. Russia, China, India have all bought a lot….Which brings me to my speculation. The list of countries accumulating gold is similar to the list of countries that were reported to be talking about the need for a new reserve currency to replace the dollar.

I wonder if those who are seriously thinking of trying to unseat the dollar and create a currency which is backed by something other than debt and is not under the control of America’s corrupt banks and even more corrupt government, are investing in gold as a precursor to making a real bid for a new currency.

Later, in Making the New Sub Prime Part 2 I looked at the growing network of bilateral agreements in major trade deals gradually replacing the dollar as a settlement currency.

Being a ‘Settlement’ currency is not quite the same as being a ‘Reserve Currency’ like the dollar, but it a major step in that direction. It is, in fact, a very large step. Which currency large international trades are done in matters. It is a fact that in 2000, Iraq signed an agreement to sell its oil, all its oil, in Euros. Iran was contemplating doing the same at around the same time. The Iraq decision involved the large French bank PNB-Paribas. France was not one of those who supported the war and Washington led a hate campaign vilifying the French. The worry was that a switch from dollar to Euro settlement might gain momentum. Any major move away from dollar settlement would cripple the US.

In January of this year the India Times reported that India was talking to Iran about moving out of dollar settlements so as to be able to buy Iranian oil despite a US embargo. India said it was discussing settling in Gold. Remember, India has just signed a settlement agreement with China to use the Yuan.

A very good summary of recent news by ZeroHedge suggests I may have been on the right track. And recently the pace has picked up.

China and Russia have been trading directly in their own currencies and using them both interchangeably for settlement for over a year. As the The China Daily article reports,

China is allowing greater use of its currency for cross-border transactions to reduce reliance on the US dollar, after Premier Wen Jiabao said in March he was “worried” about holdings of assets denominated in the greenback.

Then on 26th December 2011 Bloomberg reported,

Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.

China is Japan’s largest trading partner. Japan will also start in 2012 buying Chinese debts. How much Dollar debt will either of them buy? They have both already been buying less.

Two days later (Dec.28th) the Iranain news service reported,

Iran and China on Wednesday signed two agreements on expansion of trade ties and joint investments.

These trades too will not be settled in Dollars or in Euros.

Three days after that The China Post reported that on the last day of 2011, US President Obama had signed a new law in which

U.S. imposes sanctions on banks dealing with Iran….Sanctioned institutions would be frozen out of U.S. financial markets.

Sounds tough. A bit like sending an aircraft carrier to the Straits of Hormuz. But as the article went on to report, with only barely concealed delight, the threat may be as hollow as the dollar itself. The law comes with exemptions which may eventually highlight America’s plight rather than its might.

The sanctions target both private and government-controlled banks – including central banks – and would take hold after a two- to six-month warning period, depending on the transactions, a senior Obama administration official said.

Under the law, the president can move to exempt institutions in a country that has significantly reduced its dealings with Iran and in situations where a waiver is in the U.S. national security interest or otherwise necessary for energy market stability. He would need to notify Congress and waivers would be temporary, but could be extended.

And as if to make the point, only a couple of days after this on Jan 7th, came the news that,

Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow.

So now almost none of Iran’s oil will be traded in Dollars.

India and Japan have also recently agreed a 15 billion dollar currency exchange. This will tie their two currencies closer together.

The list of countries and trades no longer using the dollar for settlement for their trade is now considerable. How close are we to reaching the tipping-point where it no longer makes sense for nations to use dollars and makes more sense for them, both economically and politically, to use the network of currencies tied to the Yuan? When we reach that point the Yuan becomes in reserve currency in all but name.

China, India, Russia and Iran are all large holders of physical gold and most of them are also large producers of it. None of them are firm allies of the US. They all have long term relations with each other. All of them have expressed oncercern over US debts and printing. None of them will like QE3, nor Euro printing, when they both arrive later this year.

I think the stand-off with Iran in the Straits of Hormuz over sanctions is as much to do with the moves to replace the dollar as anything else. The stand off is as much with China and its allies as it is specifically with Iran. The US is testing China’s nerve and the solidity of its network of bilateral currency settlement agreements. We are seeing military power deployed to counter economic power. I think the US will lose. Depending on the nature of its loss we could see a precipitate decline in the standing of the dollar as global reserve currency.

2012 could see the beginning of large scale defections from the dollar settlement currency. Which would in turn have massive, perhaps even catastrophic consequences for how the world perceives what is an acceptable level of debt for the US. What is acceptable when you have the global reserve currency is quite different from what is acceptable when you don’t.

And the reverse is also true. If China can transform the netwrok of bilateral agreements which centre upon China and the Yuan, in to becoming accepted as a de facto reserve currency, then for those, like me, who wonder how China can possibly avoid a hard landing as its bad bank and property bubble deflates faster and faster, look no further.

There is no denying China has an absolutely massive bad debt crisis fermenting. Every one of its banks is gagging on bad loans made to every one of China’s regional governments. Trillions of Yuan worth of loans which will not be repaid, on property and land valued at hugely inflated but now defaulting prices. But if China can become a rival and rising reserve currency at the centre of a new and growing collection of trading partners then China can and will bury the debts in a a mass unmarked grave somewhere in its hinterland.

At the moment when America is seen as being no longer the pre-eminant reserve currency and its debt load is re-considered accordingly, China and its debt load will go the other way. America and its currency risk being seen as too rotted by debt to be trusted and it’s claims of economic growth seen as fake, empty, paper-based, accountancy-conjured growth. The Dollar and America itself risk being seen as the fiat currency and fiat nation par excellence .While China and the Yuan will be seen as backed by sold gold and real growth.

One more question to ask in all this is – how far have the big banks and brokerages managed to turn even gold and silver (at least gold and silver held in the West) in to another fiat currency? Gold and bullion bugs amoung you might argue the question makes no sense. But consider re-hypothecation. How much gold and silver has been pledged and re-pledged, hypothecated and re-hypothecated? How many more paper contracts for and claims upon gold and silver exist above and beyond the amount of actual physical gold and silver? After all gold and silver are the ultimate in ‘good’ assets which counterparties will happily accept. So it seems likely to me that gold and silver (or contracts for them) will have been in demand in those repo and hypothecation markets. If so then I wonder how many conflicting and contesting claims will surround every ounce of gold and silver in the West when investors start demanding to see their ‘investment’.

I think the big old sterling silver coin may already have dropped for some investors. That is why prices for physical silver are surging above the price for paper claims on silver. I think some traders are getting nervous about buying paper claims on silver and now want only the metal itself. They suspect that in the end, if you have only a paper claim or contract for, silver that is exaclty all you will ever have – the paper. Only those with the actual metal in their hands, will get what they paid for. I think there is a fiat, paper currency version of gold and silver floating around and parasitising the metals themselves. Those who own that paper stuff may get…well … stuffed.

___________________________

Day to day, the prices of both Gold and Silver may lead to frustration and anger, but fundamentally, in the big picture and over the course of weeks and months, the ONLY path for the Precious Metals is higher...no matter what the boobs in the mainstream financial news media have to say about them. These financial news journalists [hacks] write only what their sources ask them to write. Few if any of them even understand the topic of which they comment on, let alone research their stories before writing them.

IGNORE THEM!

Got Gold you can hold?

Got Silver you can squeeze?

It is not too late to accumulate!

IMAGINE: A Gold Market Without The Western Banking Gold Cartel

2012-01-17T18:44:00.000-05:00

It should be pretty obvious to ANYBODY that watches, attempts to trade, or is even remotely aware of the Precious Metals markets that these markets are blatantly suppressed by a western banking cartel.

How many times during the bull market in Gold and Silver that began in 2001 have we witnessed a powerful rise in these Precious Metals overnight in Asia, only to see these over night gains evaporate during the day in London and New York?

Countless times!

Why just today in fact, this phenomenon was in full display for the whole world to witness:

Last night [Jan 16] at 7:30PM est the Asian markets opened in Hong Kong for Precious Metals trading. The opening Gold price in Hong Kong was $1645.45 [the red line on the right side of the chart]. Within 30 minutes of the Hong Kong open, Gold prices exploded higher. Gold prices rose overnight throughout the Asian trading hours, rising to a high of $1667.60 by 2:30AM est [the green line on the left side of the chart], a full $25 above the close of electronic trading in New York Monday evening at 5:15PM est.

This would prove to be the High of the Day [Jan 17] as the western markets opened for Precious Metals trading at 3AM est in London, and the daily suppression of the prices of Gold and Silver begins...

Gold is stopped dead in its tracks at the London Market open. Gold is capped solidly at $1662 with the London AM Gold Fix at 5:30 AM est. Gold trades sideways until The Kingpins of the Western Banking Gold Cartel show up for work at 8:20 AM est. [the green line on the chart]

As the Precious Metals markets open for trading in New York at the CRIMEX, the first of the day's THREE waterfall declines is set in motion. How many times have we seen this before? [A better question might be, how many times have we NOT seen this at the CRIMEX open?]

This first waterfall decline beats down the price of Gold for the London PM Gold Fix at 10:30AM est to settle at $1659.15, down $8 from the overnight high set in Asia.

Following the close of the financial markets in London at 11:30AM est, the second waterfall decline in the price of Gold occurs at 12PM est at the CRIMEX. [YES, this does occur almost every day!]

By the close of CRIMEX trading, the price of Gold has fallen to $1654.79. A full $13 below the overnight High of the Day in Asia.

Our third waterfall decline of the day [par for the course on the daily CRIMEX] commences at 2PM est following the close of Precious Metals trading during the NY GLOBEX "electronic trading" session. [CRIMEX Lite]. [Yes, this too happens most days at the CRIMEX...we've all seen it countless times.] This decline in Gold takes the price down to our Low of the Day [Jan 17] at $1649.80.

I have just walked you through the virtual evaporation of a $25 rise in the price of Gold during Asian trading care of the Western Banking Gold Cartel. What was a $25 increase in the price of Gold at 2:30AM est was reduced to a $7 gain during Precious Metals trading in London and New York between 3:00AM and 3PM est.

Seems criminal doesn't it? And this isn't just a one day event folks. This brand of "free market" trading has been going on for the entirety of the Precious Metals Bull Market that began in 2001.

"Ranting Andy" Hoffman, in countless missives over the past four years has documented just this sort of western banking suppression and manipulation of the Gold price. I suggest you consult his work linked below to understand just how pervasive The Western Banking Gold Cartel is in it's efforts to suppress and manipulate the prices of the Precious Metals Gold and Silver:

5/29/11 Cartel Secrets Revealed, Pt. I

6/01/11 Cartel Secrets Revealed, Pt. II

6/08/11 2010 COMEX Gold Manipulation Pictorial

6/06/11 2011 COMEX Gold Manipulation Pictorial #1

11/28/11 2011 COMEX Gold Manipulation Pictorial #2
There are few as thorough at documenting the The Gold Price Suppression Playbook of The Western Banking Gold Cartel than "Ranting Andy" Hoffman. After pouring through Andy's documentation, it is difficult to believe that the price of Gold has been in an 11-year bull market when considering the efforts of the Gold Cartel to stop the price of Gold [and Silver] from rising.

Yet Gold HAS BEEN in an 11-year bull market, having risen now over 650% since 2001. A rather remarkable feat considering the stonewalling by The Western Banking Cartel.

Now imagine the potential for gains in the 11-year Gold bull market if there was no Western Banking Gold Cartel and their LBMA and CRIMEX playgrounds:

Overnight Long/Intraday Short Gold Fund More Than Doubles In Just Over A Year: Generates 43% Annualized Return
From ZeroHedge, and SK Options trading

Back in August 2010, we presented an idea proposed by our friends at SK Options trading for a very simple trading strategy: being long gold in the overnight session, and shorting it during the day. At the time of writing, such a strategy would have returned $2.16 billion from a $100 million initial investment in 10 years, a 37.46% annualized return. Today, we provide a much needed follow up to this quite stunning divergence. As SK notes: "we have revisited the article and written an update. Not only does the discrepancy still exist but it has been actually increasing. That fund would now be worth $5.26B, way up from $2.16B when we last wrote about it - in other words an increase of 143% in just over a year. When we wrote about this in August 2010, the annualized return of the Long Overnight/Short Intraday gold index was 37.46% since the start of 2001. However if we measure from now the annualized return since 2001 is 43.24%, with the annualized return of the Long Overnight/Short Intraday gold index standing at roughly 64.4% since 2009." So for those who wish to layer on an additional alpha buffer on top of what is already the best performing asset of the past decade, the SK Options way just may be the strategy. As for the reasons for this gross arbitrage - who cares. Is it manipulation? is it the early Asian buying offset by London pool selling? It is largely irrelvant - the point is that this is "the divergence that keeps on giving" - kinda like a Stolper trade, or an inverse Tilson ETF, and until it doesn't, or until something dramatically changes in the precious metal market, it is likely that this trading pattern will continue for a long time.

From SK Options trading

Revisiting Our Proposal For An Overnight Gold Fund

In August 2010 we wrote an article entitled “Proposing An Overnight Gold Fund” in which we explored the potential for launching a fund that held long positions in gold overnight and was short gold during the day. We pointed out that “a hedge fund starting in 2001 with $100m, with the strategy of being long gold from the PM to AM fix, and short gold from the AM to PM fix...would be worth $2.16billion today, before any fees and expenses.” We have been monitoring this trading strategy since then and therefore would like to take this opportunity to update readers on its astonishing progress.

Firstly we will introduce the thinking that led us to investigate this trading strategy. There is much debate within the precious metals industry regarding the alleged suppression, or at least manipulation to an extent, by either central banks or the proprietary trading divisions of large banks, or a combination of the two.

In April 2010 the US Commodity Futures Trading Commission CFTC fined Hedge Fund Moore Capital for manipulation of the New York platinum and palladium futures market, as the firm was found to be “banging the close”, which involves entering orders in a manner designed to inflate the closing price, which other various derivatives contracts could be based on. So that is irrefutable evidence that the precious metals futures market is, at least to some extent, being manipulated. However a large concentration of this debate is based not on platinum and palladium, but on gold and silver, and particularly gold.

There are other theories that could explain this discrepancy that do not involve manipulation. For example one could take the view that Eastern market participants are perhaps more bullish on gold than their Western trading counterparts. Therefore gold is perhaps more likely to rise during Asian trading and fall when the west takes over.

Numerous hypothesises have been put forward as to the motive behind alleged suppression of the gold, ranging from a central bank conspiracy to keep gold prices low, to large trading banks simply exploiting their market dominance for easy profits, or even a combination of the two with the central banks and large bullion trading operations working together in some kind for cartel to keep gold prices low. This article does not intend to discuss the merits of these theories, however plausible or implausible various parties believe them to be. Instead we will focus on finding out if a discrepancy exists and if it does, can one take advantage of it and use it for profitable trading strategies.

We would like to recommend an excellent article by Adrian Douglas, editor of Market Force Analysis and a GATA board member entitled “Gold Market is not “Fixed”, it’s Rigged” which goes into great detail on the statistics behind the difference between how gold trades between the AM and PM fix, and how it trades from the PM to AM fix. The very fact that there appears to be a significance difference sets our alarm bells ringing. Whether gold trades in New York, London, Tokyo or Timbuktu, gold is still gold and so one would expect that it would trade in a similar fashion across these timeframes over a long period of time.

If we take the change in the gold price from the London AM to PM fix (intraday gold) compare it to the change in the gold price from the PM to AM fix (overnight gold), we can see the startling difference between the two periods of trading. We will demonstrate this by showing what would have happened if one had theoretically invested in the intraday gold market from 2001 to present.

Starting in 2001 with an indexed based at 100, the chart below shows what would have happened to that investment of 100 if it had been used to purchase gold at the AM fix and sell gold at the PM fix, replicating the daily percentage performance of gold in the intraday market.

As the chart above shows, the performance is dismal. For example a hypothetical gold investment fund starting with $100m in 2001, and using it to buy gold at the AM fix and sell it at the PM fix would now be left with just $31 million, almost a 70% loss in just under ten years. Over the same time period gold prices have risen over 590%.

From this we can infer that in fact it was possible to make money shorting gold everyday for the last decade or so. If a hedge fund or even an individual trader were to have sold gold at the AM fix and covered that short position at the PM fix, for each day of this terrific bull market run in gold, that fund would have almost tripled their starting capital.

This appears to be a remarkable result, as one would presume that shorting gold everyday during a period where the yellow metal has risen 590% would have devastated any portfolio, not caused a 178.7% increase. Those who do not believe in theories of gold price suppression, often cite the fact that gold prices are at an all time high as a major piece of evidence to discredit any suggestions of price suppression. After all how can the price be being suppressed if prices are sky rocketing?

Well the answer to that question is that if the gold traders at the large banks accused of such manipulation are just trading during the intraday market between the AM to PM fix, they may not be too concerned about how gold trades overnight (provided they are not holding positions overnight of course). What matters is how gold trades during this intraday period, and if more often than not gold is falling during this time, and more often than not the banks are short gold during this period, then they are making money regardless of the overnight price action.

It would appear that subtle manipulation is more likely that blatant price suppression.

So the question on the mind of many gold bulls might be; how do I remove this downward manipulation during the intraday period? Even if I do not believe in manipulation, suppression or any other conspiracy theories, how do I eliminate this statistical fact that gold is underperforming during the intraday period?

The answer is to buy gold at the PM fix and sell it the following day at the AM fix, or more simply put, just be long gold overnight.

The graph above shows how rewarding this strategy would have been, with a return of 1797% in eleven years, a return 3.2 times greater than the 590% that would have been made simply buying gold in 2001 holding until now. With many investors and traders looking for the best way to lever their gold returns, from pouring over drill results to identify the best gold stocks to experimenting with leveraged gold ETFs and ETNs, a more simple solution could be simply to only have long exposure to gold overnight.

For the more cavalier traders, going long gold overnight and then short gold for the intraday period, makes for an even more profitable strategy.

Consider a hedge fund starting in 2001 with $100m, with the strategy of being long gold from the PM to AM fix, and short gold from the AM to PM fix. That hedge fund would be worth $5.26billion today, before any fees and expenses. This should be enough to catch any investor’s attention. Even without shorting gold during the intraday period, limiting exposure to gold to just the overnight period enhances returns enough to justify using this as a basis for a trading strategy.

As stated at the beginning of this article, our focus is not what or who is causing this discrepancy nor any potential motives for such a discrepancy, but what action to take in order to profit from it.

What has surprised us most in our ongoing investigation into this area is that not only is the discrepancy persisting, but it is arguably increasing. When we first wrote about this in August 2010, the annualized return of the Long Overnight/Short Intraday gold index was 37.46% since the start of 2001. However if we measure from now the annualized return since 2001 is 43.24%. the chart below demonstrates this point, with the annualized return of the Long Overnight/Short Intraday gold index standing at roughly 64.4% since 2009.

Another point of interest is when this outperformance is concentrated. The performance around the September 2011 correction is particularly remarkable. Whilst gold prices plummeted, the Long Overnight/Short Intraday gold index increased dramatically, having already been increasing whilst gold rallied over the previous couple of months.

From this we can infer that the majority of gold’s declines in the recent major correction occurred during the intraday trading session, not the overnight trading session.

However in practice we must keep in mind that reversing one’s position each day is not free. One would have to cross the bid/ask spread. Taking a $0.10 spread into account the short intraday and long overnight index would have increased from 100 to 1827.34 since 2001. This increase of 1727.4% outperforms the 593% increase in gold prices over the same period by almost 3 times. If a $0.20 spread is used on a short intraday and long overnight index, there is an increase of 530.4%, which slightly underperforms a buy and hold strategy. Therefore one would need to be able to reverse one’s position at the AM and PM fix for $0.10 spread for the strategy to work in practice.

Nonetheless we still think that this is an important discrepancy that should be taken into account when trading gold. Even if one does not explicitly execute this exact trading strategy, one can still benefit from the trading patterns it is based on. For example if one was nervous about a correction in gold prices but did not want to be short gold, it would perhaps be preferable to close any long position prior to the intraday trading period and reopen them after the PM fix.

In addition to incorporating these patterns into our trading strategy at SK Options Trading, we are also looking into the feasibility of launching some form of investment fund to take advantage of the opportunities discussed in this article. As part of this feasibility study we are looking to gauge investor interest and so would welcome any comments, suggestions or ideas that people may wish to contribute, simply email info@skoptionstrading.com.
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IMAGINE: THE GOLD MARKET WITHOUT THE WESTERN BANKING GOLD CARTEL

The Western Banking Gold Cartel not withstanding, the price of Gold has moved higher for 11 straight years. That most of the "gains", so far, have mostly come from gains made during Asian trading in the Precious Metals is now obvious to all but the ignorant.

Now, imagine if you will, the potential for gains in the price of Gold [and Silver] once the Western Banking Gold Cartel and its paper CRIMEX game is overwhelmed by the demand for physical bullion by global investors.

Gold & Silver Banker-Cartel Prolonged Price Suppression Has Set the Foundation for an Explosive Move Higher in 2012
From ZeroHedge, and smartknowledgeu

At the end of last year, there was a lot of chatter on the Internet, due to the end-of-the year slam down effected on gold and silver futures by the global banking cartel, that silver prices were going go collapse to $20 an ounce and gold prices were going to collapse well below $1000 an ounce by the first quarter of 2012. We felt that these discussions and the consequent, induced panic selling out of gold/silver mining stocks and physical gold/silver at the end of 2011 was highly unwarranted and the result of people falling for the global banking cartel price suppression tricks.

Sometimes one knows that great moves higher are coming, but one’s timing may be off by a mere six to nine months. Patience will allow one to still reap the bulk of the rewards from these great moves higher as long as one isn’t shaken out of the markets by the banking cartel induced price volatility in gold/silver assets. To this end, I leave you with 10-year charts of gold and silver. Sometimes, it really is necessary to step back and take a deep breath to see the forest from the trees.

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Got Gold you can hold?

Got Silver you can squeeze?

It's not too late to accumulate!

Were The Precious Metals Smashed Down to Hide A US Debt/GDP of 100?

2012-01-12T12:36:00.000-05:00

"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by a deluge of bank paper, as we were formerly by the old Continental paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who instead of employing their capital, if any they have, in manufactures commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs. Prudent men must be on their guard in this game of Robin's alive, and take care that the spark does not extinguish in their hands. I am an enemy to all banks discounting bills or notes for anything but coin. But our whole country is so fascinated by this Jack o' lantern wealth, that they will not stop short of its total and fatal explosion."
- Thomas Jefferson

Why were the prices of the Precious Metals smashed going into the end of the year when there was ZERO fundamental data to support the free-fall?

Lost in the Holiday Headlines, along with the blatant destruction of the prices of Gold and Silver, a very ominous statistic broke the surface of denial shrouding the financial news media on December 21:

It's Official: US Debt-To-GDP Passes 100%

Yet nobody seemed to notice or care. The Eurozone has a debt crisis, NOT the USA! How can the USA have a debt crisis, they just print money to pay their bills [buy their own debt].

Or they simply raise the "debt ceiling".

Obama to Seek $1.2 Trillion Increase in Debt Limit Dec. 30
Dec. 27 (Bloomberg) -- The Obama administration will ask Congress to increase federal borrowing authority by $1.2 trillion as the nation approaches the debt limit set by law, according to a Treasury Department official.

The White House will send the request to Congress on Dec. 30, the day the debt is projected to rise to within $100 billion of the $15.194 trillion limit, the Treasury official told reporters today on condition of anonymity.

Congress will be notified under the terms of a deal to raise the limit worked out on Aug. 2 after a more than two-month standoff between the administration and Republican lawmakers that was followed by a cut in the U.S. debt rating by Standard & Poor’s. The Budget Control Act of 2011 gives Congress 15 days to pass a joint resolution disapproving the increase in the limit. The president can veto such a measure.

The limit has already been raised twice since the act was approved, by a total of $900 billion. It would rise to $16.394 trillion after the latest increase.

Under the Budget Control law, the debt limit will be increased on Jan. 14, 2012, unless Congress acts.

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The Eurozone has a debt crisis? The US would appear addicted to debt. The US has a mushrooming debt crisis, though everyone from the President on down denies it.

Just who is going to buy all this new debt? The Europeans can't afford to buy their own debt. The Japanese need all their cash [and any they can raise by selling US Treasuies] to pay for the reconstruction of their radioactive nation. The Chinese have more US debt than they want.

What's this? It would appear that "demand" for US Treasury debt is rolling over as of December 30:

Foreigners Dump Record Amount Of US Treasuies In Past Month

From Zero Hedge
As the Fed's critical H.4.1 weekly update shows (which is leaps and bounds more accurate than the Treasury's TIC international fund flow data), in the week ended December 28, foreign investors sold the second highest amount of US bonds in history, or $23 billion, bringing total UST custodial holdings to $2.67 trillion, a level first crossed to the upside back in April. This number peaked at $2.75 trillion in mid-August, and as the chart below shows the foreign holdings of US paper have been virtually flat in all of 2011, something which is in stark contrast with what the price of the 10 Year would indicate vis-a-vis investor demand. And going back further, the last week is merely the latest in a series of Custodial account outflows. In fact, in the last month (trailing 4 weeks), foreigners have sold a record $69 billion in US paper, a monthly outflow that was approached only once - in the aftermath of the US downgrade (when erroneously it is said that a surge in demand for US paper pushed rates lower - obviously as the chart shows nothing could be further from the truth).
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If "foreigners" are dumping US debt at a now record clip, who is going to be buying the new debt allowed by yet another increase in the Debt Ceiling?

It is starting to become clear why the prices of the Precious Metals had to be smashed in late December. There is nobody left to buy the US Treasury's debt but the Fed. If that is in fact the case, the Fed must print money to buy the debt and debase the Dollar forcing Precious Metals prices higher.

Oh! I get it, ...if Gold rises from a lower price on a falling Dollar, maybe no one will notice that the Fed is buying up US debt to keep interest rates low. If countries keep selling their US Treasury holdings, and stop buying new US debt, interest rates will rise...JUST LIKE IN EUROPE!

US Closes 2011 With Record $15.22 Trillion In Debt, Officially At 100.3% Debt/GDP, $14 Billion From Breaching Debt Ceiling

From Zero Hedge

...it is now official: according to the US Treasury, America has closed the books on 2011 with debt at an all time record $15,222,940,045,451.09. And, as was observed here first in all of the press, US debt to GDP is now officially over 100%, or 100.3% to be specific, a fact which the US government decided to delay exposing until the very end of the calendar year. We wonder, rhetorically, just how prominent of a talking point this historic event will be in any upcoming GOP primary debates. And yes, technically this number is greater than the debt ceiling but it excludes various accounting gimmicks. When accounting for those, the US has a debt ceiling buffer of... $14 billion, or one third the size of a typical bond auction.

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There is one confounding aspect of all of the above: How have US Treasury prices risen relentlessly since the Debt Ceiling was first raised last September and the nation's credit rating was dropped? Is American debt "safe" just because we can print the money to pay you back? Absurd!

The US has a Debt/GDP of 100, the Debt Ceiling is going to rise by $1.2 TRILLION, and foreigners are dumping our debt...and the cost of our debt is rising and not falling?

By any measure of Economics 101, US debt prices should be falling, and interest rates should be rising. Why is this not happening?

Maximum Fraud in U.S. Treasuries Market

by Jeff Nielson

Spending as much time as I do writing about the Land of Fraud, I never thought I would see myself using the phrase “maximum fraud” to describe any U.S. market. Each time I thought I had witnessed the apex of human fraud, within a matter of weeks or perhaps months I would witness some even more extreme outrage.

One should never underestimate Federal Reserve Chairman B.S. Bernanke, however, when the subject turns to fraud and deceit. This is the same man who told the world (day after day) that the U.S. had a “Goldilocks economy”, where U.S. markets and house prices would keep going up forever – at the very peak of the made-in-Wall-Street U.S. housing bubble. This is the same man who then promised the world (again and again) that the U.S. economy would experience a “soft landing” after that gigantic bubble had already burst. This is the same man who has announced more “exit strategies” than Harry Houdini – with not one of them ever materializing.

Yet even the infamous “Helicopter Ben” Bernanke has outdone himself with his latest operations in the U.S. Treasuries market. For those who missed the news, foreign central banks (the largest holders of U.S. Treasuries) have been frantically dumping more Treasuries onto the market over the past four weeks than at any other time in U.S. history.

Those with even the tiniest understanding of supply/demand fundamentals understand how markets operate in such situations. When there is a sudden explosion of supply, the price buyers are willing to pay for that good plummets until enough new buyers enter the market to soak-up all of that excess supply.

So how far have U.S. Treasuries prices fallen during this “panic” in the U.S. Treasuries market? Zero. To comprehend the absolute absurdity of this situation requires adding one more piece of data to our scenario: U.S. Treasuries prices are currently at their highest level in history – despite the fact that the United States has never been less solvent.

Readers need to realize how a bond market works. Prices and yields (i.e. interest rates) move in a precisely opposite/inverse manner to each other. As yield goes up, bond prices decline in a precisely proportional manner (and vice versa). Given that yield is (supposedly) a function of risk, with the U.S. economy being less solvent than at any other time in history, this implies record-low prices for U.S. Treasuries – not all-time highs.

Realizing that many ordinary investors don’t understand the dynamics of the bond market, let me equate this situation to the world of equities with an analogy. Picture a hypothetical company with the world’s largest market-cap, which we’ll call “U.S. Treasuries Inc.”

The share price of U.S. Treasuries Inc. is sitting at an all-time high (and has been there for many months), despite the fact the company is teetering on bankruptcy. Suddenly, the largest shareholders of U.S. Treasuries Inc. all start simultaneously dumping more shares than at any other time in history. Anyone with even a modicum of market experience knows the inevitable consequence of such an event: the share-price would crash.

Understand what is directly implied here. For maximum supply to be dumped onto this market, while prices didn’t even budge slightly from all-time highs does not merely imply “high demand”. It necessarily implies infinite demand. Only where demand was literally “infinite” would we see sufficient buyers instantly materialize (at the highest prices in history) irrespective of how much new supply hit the market. And this did not simply occur over some anomalous one- or two-day period, but rather consistently for (at least) four solid weeks.

However, even if it was mathematically plausible for there to be infinite demand for U.S. Treasuries (which it is not), “infinite demand” is not a plausible explanation for what has transpired in the U.S. Treasuries market, since it is directly contradicted by other price data.

As a matter of unequivocal arithmetic, if there was infinite demand for U.S. Treasuries, yields for all maturities of U.S. Treasuries would be compressed to 0%. The fact that (even at the highest prices in history) these yields are not at 0% is absolute proof that there has never been anything close to infinite demand for U.S. Treasuries.

With that fact conclusively established, we can return to the mechanics of this market. U.S. Treasuries have plateaued at the highest prices in history. Indeed, with the yields for shorter-term maturities essentially at 0%, those Treasuries are already at their maximum theoretical price. Thus when we ask ourselves what would suddenly cause large numbers of new buyers to enter this market, we can answer that question with absolute certainty: significantly lower prices.

With much/most trading now assigned to the abominable trading algorithms, there is no possible scenario where near-infinite numbers of buyers for U.S. Treasuries could surface with zero decline in prices. To make these impossible parameters even more ludicrous, in the real world there are effectively zero buyers for U.S. dollar instruments – and infinite sellers.

China and Japan (two of the world’s top-5 economies) just announced they are phasing-out U.S. dollars from their bilateral trade. This is merely the latest in an endless series of bilateral and multilateral deals which are incrementally (but relentlessly) removing the U.S. dollar as the world’s “reserve currency”.

To date, these deals have already reduced the demand for U.S. dollars by $trillions per year. To focus on just the China/Japan deal, as an elementary reality of their new commercial arrangement, both of these nations need to hold more of each other’s currency – and less U.S. dollars. And this scenario is being repeated in one economy after another, all over the world.

Even beyond the fact that no other nations want any U.S. dollar instruments, we are confronted with the fact that there are no other (visible) buyers able to soak-up all these unwanted U.S. dollar instruments (including Treasuries). Most of the world’s largest economies are located in Europe, and what just finished happening there? The ECB conjured roughly $1 trillion out of thin air – to “lend” all that funny-money to various EU governments (to buy-up their own bonds) so that they were not immediately bankrupted by the economic terrorism being perpetrated in their debt markets by the Wall Street Vampires.

China, the world’s new economic juggernaut, has been dumping their Treasuries for over a year now. Japan’s economy requires every spare yen it can muster for economic reconstruction following the horrific disasters it suffered. And in most of the rest of the world’s economies governments are more likely to use extra dollars to subsidize exploding food prices (to prevent riots in the streets) rather than squandering their precious currency reserves buying worthless U.S. paper.

We have a seemingly intractable paradox here. In the real world there is essentially zero demand for U.S. Treasuries, while we have the recent transactions in the Treasuries market directly implying infinite demand. Fortunately we have the wisdom of the legendary Sherlock Holmes to guide us in resolving such intellectual quandries:

“When you eliminate the impossible, whatever remains (no matter how improbable) must be the answer.”

We have no visible buyers for U.S. Treasuries, yet seemingly infinite demand. More specifically, we have no visible sources of capital to even finance the purchase of all of those Treasuries. Thus the phantom-buyer of all of these Treasuries must be an entity capable of “manufacturing capital” – directly implying that this phantom-buyer has a printing-press at his/her disposal.

At the same time, we have B.S. Bernanke getting in front of microphones day-after-day insisting that he has ended all of his bond-buying – i.e. the latest episode of “quantitative easing”. The obvious question is: can we trust anything that B.S. Bernanke says?

Could we trust him when he assured us about the U.S.’s “Goldilocks economy”? Could we trust him when he insisted again and again that the detonation of the largest asset-bubble in human history would lead to a “soft landing”? Could we trust him when (every six months or so) he announced another “exit strategy” from the serial money-printing and massive expansion of the Fed’s “balance sheet”? Indeed, placing one’s faith in the words of Ben Bernanke implies the same level of naivety as trusting a Goldman Sachs banker when he says “Have I got a good deal for you!”

Given that there is no other plausible buyer for U.S. Treasuries (in the entire world) than the Fed itself, and given that B.S. Bernanke is an individual whose personal credibility is somewhere below zero, what does this imply? Very simply, the Federal Reserve (and its Chairman) are secretly counterfeiting vast numbers of U.S. dollars, and then using that fraudulent “currency” to buy all these unwanted bonds and thus prop-up the Treasuries market.

Regular readers will note that this is in no way a “new accusation” which I am leveling at the Fed. Rather, this massive market fraud has been plainly visible on several other occasions – and I have identified those occasions in previous commentaries. Thus at this point it is necessary to explain “motive”.

Why does the Fed sometimes tell the truth about its bond-buying, while most of the time it covers it up? To understand that we need to refer to the words of someone who claims to understand bankers better than most, former Goldman Sachs employee and head of the CPM Group, Jeffrey Christian.

In “The Great Gold Debate”, it was Christian who revealed one of the banksters’ fundamental Market Principles:

“One of the first things you know about intervention in [i.e. manipulation of] the currency markets…is that it’s much more effective if people don’t know what you’re doing. They only see the effects you know, I mean there are reasons why people [i.e. bankers] don’t want the market to see them coming…”

The motive for the Federal Reserve to secretly counterfeit $trillions of U.S. dollars in order to buy U.S. Treasuries and prop-up the market is obvious: it allows Bernanke and the Fed to engage in the ludicrous charade that both demand for U.S. Treasuries and the market itself are “strong” – when nothing could possibly be further from the truth. Given that the Fed has never been audited in its near-100 year history means that we can add “means” and “opportunity” along side the extremely obvious motive.

Indeed, there is no mystery at all as to why B.S. Bernanke would want to counterfeit U.S. currency in order to secretly buy-up Treasuries. Rather, given the Market Principle by which the bankers operate, the real question here is why would Bernanke ever actually admit what he was secretly doing – i.e. “announce” some of his quantitative easing?

Fortunately this is a question which has been answered on countless occasions, by numerous commentators. If we refer back to media literature at the time of “QE I”, and even more so when “QE II” was announced, we see a plethora of commentaries which were almost identical.

These commentators were quite clear that they did not expect quantitative easing to accomplish must positive “good” – but yet they proclaimed themselves to be in favor of this policy despite its dubious potential. Why? Because they considered it absolutely crucial for “the market” to see the Fed and/or U.S. government “doing something” – and so the Fed simply announced the same manipulation of the U.S. bond market in which it had already been secretly engaging.

We thus have the one-and-only “exception” to the bankers’ Market Principle that it’s always best to hide their manipulation of markets: when the sheep are spooked so badly that they are reassured to be told that a market is being manipulated.

There is yet one more reason to find this latest episode of Treasuries-fraud to be especially alarming. Generally anyone engaging in such a massive, serial fraud would make efforts to disguise their actions. Yet here we have absolutely no attempt to do so.

Had the Fed’s fraudsters allowed Treasuries prices to decline at least modestly during this latest panic in the U.S. bond market, then at least they could have made a semi-plausible claim that (somehow) a herd of new sheep had suddenly and miraculously shown up to buy that massive amount of unwanted bonds (at near-record prices). Instead we have a farce so utterly absurd that it should not fool anyone with the brain-power to be able to count their fingers and toes (with only a minimal number of mistakes): infinite buyers lining-up to buy worthless U.S. Treasuries at the highest prices in history – despite there being zero visible buyers in this market.

I would suggest that it is impossible to construct a more outrageous scenario, even in totally hypothetical terms. On that basis it seems entirely reasonable to dub these latest events “maximum fraud”.

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NO WAY! Fraud in the US financial markets?

This can not end well. The US is in the midst of a debt crisis of their own, yet the focus remains solely on Europe.

"Crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought."

- late MIT economist Rudiger Dornbusch

"When you look at the current situation, you can only come away thinking that 2012 is the year where the house of cards finally collapses. Sovereign governments alone (just the G-7) will need to rollover and refinance nearly $8 Trillion of maturing debt. This is on top of probably $4-5 Trillion of "new" debt appetite. Where does this type of money come from? What about corporate debt? Personal debt? As you know, a fiat system cannot survive if debt in aggregate actually declines for any length of time and here we are where the system itself is not generating the cash flows nor profits sufficient to increase debt.

We have hit the wall pure and simple. The wall being "debt saturation". This is why mathematically, central banks have now, and will, have NO other choice than to print, print and then continue to print. It really is simple, the "capital" does not exist to increase debt and the capital can no longer be generated from the system through work, production nor taxation to create this necessary capital. Though the Austrian economists have been laughed at and mocked year after year, this, is exactly where they predicted it would all end up. It has and 2012 is the year that the truth according to Mother Nature can no longer be hidden."
-Bill Holter, GATA

Debt saturation. We have all heard of Peak Oil. Have we now reached Peak Credit?

“A funny thing happens when you depend on expanding debt to fund your consumption: eventually the cost of servicing your rising debt reaches the limit of your income, and you can’t borrow any more, unless interest rates decline so you can leverage your income into higher debt. . . .Lowering interest rates extends the era of debt-based consumption, but it only puts off the inevitable crash when the ability to borrow runs out. Eventually the cost of servicing this lower-interest debt absorbs all your disposable income, and the borrowing skids to an abrupt stop.”
-Charles Hugh Smith

Europe has obviously reached Peak Credit, only a fool would believe that the US will not meet the same fate...it's only a matter of time.

And only a fool believes that a bubble in Precious Metals has burst. It's painfully obvious that the smashdown in the Precious Metals in late December was contrived to allow for the forthcoming fiscal shenanigans by the Fed and the Treasury to commence.

There is not, and has not been, a bubble in Gold. The price of Gold is still playing catch up with the greatest bubble of all time: The Debt Bubble.

Why Rising Debt Will Lead to $10,000 Gold
By Nick Barisheff

As presented at the 18th Annual Empire Club Outlook Luncheon Jan. 5, 2012, in Toronto, Canada

Good afternoon, it’s a pleasure to speak about gold at this Outlook for 2012.

Today, I’d like to focus on one important idea: the direct relationship between the rising price of gold and the rising levels of government debt that result in currency debasement. Since we measure investment performance in currencies a clear understanding of the outlook for currencies is critical.

In order to understand gold’s relationship, it’s important to understand that gold is money. It is not simply an industrial commodity like copper, or zinc. It trades on the currency desks of most major banks – not on their commodities desks. The turnover at the London Bullion Market Association is over $37 billion per day, and volume is estimated at five to seven times that amount – clearly, this is not jewelry demand.

The world’s central banks know gold is money: after decades of modest sales they have become net buyers since 2009. This trend strengthened in 2010 and gained momentum in 2011. They are buying gold as a counterbalance to their devaluing currencies.

As money, gold has provided the most stable form of wealth preservation for over three thousand years – it still does today. Gold has outperformed all other asset classes since 2002.

This chart clearly shows that US federal debt (purple) and the price of gold (gold) are now moving in lockstep. This correlation will likely continue for the foreseeable future. The red line represents the repeatedly violated government debt ceilings.

Based on official estimates, America’s debt is projected to reach $23 trillion in 2015 and, if the correlation remains the same, the indicated gold price would be $2,600 per ounce. However, if history is any example, it’s a safe bet that government expenditure estimates will be greatly exceeded, and the gold price will therefore be much higher.

And it’s not just the US. Most Western economies have reached unsustainable levels of debt that will be impossible to pay off. It’s worth noting that the US Federal Reserve, unlike the European Central Bank, can create currency without restriction. The US dollar has been the de facto world reserve currency for over half a century; the rest of the world’s currencies are essentially its derivatives. Whether global debt is in euros or Special Drawing Rights issued by the IMF, the Fed, and thus indirectly the US taxpayer, may become the lender of last resort.

There are four possible ways to reduce government debt:

One: Grow out of it through increased productivity and increased exports. This is highly unlikely, as Western economies, and even China, are poised for recession.

Two: Introduce strict austerity measures to reduce spending. This has the unwanted short-term effect of increasing unemployment and reducing GDP, resulting in even higher deficits.

Three: Default on the debt. This will make it difficult to raise future bond issues.

Four: Issue even more debt, and have the central bank in question simply create whatever amount of currency is needed.

Most politicians will select option four, since few have the political will to choose austerity, cutbacks and full economic accountability over simply creating more and more currency. Almost inevitably, they will choose to postpone the problem and leave it for someone else to deal with in the future.

Last August, the world watched as the US government struggled to come to an agreement on raising the debt ceiling, and was forced to compromise and delegate the final solution to a “super committee.” Its lack of political will earned the country an immediate downgrade from the S&P. Then, the hastily convened “super-committee” failed to reach a solution.

In Europe, matters were even worse. Greece did try to write off half its debt, but Germany and France reminded the Greeks that, if they did, no one would buy their bonds. The British and Irish implemented austerity measures that raised unemployment and reduced GDP, resulting in even higher deficits. The Italians watched their bond yields rise to 7%. While the tsunami and related nuclear incident deflected attention from Japan’s financial problems, it is a temporary lull, because Japan has the highest debt to GDP ratio of any of the developed countries.

In order to compensate for slowing growth, governments attempt to devalue their currencies and thus improve export competitiveness. This can lead to a global currency war that author and Wall Street/Washington insider James Rickards discusses in his bestselling new book, Currency Wars. This process is now well underway.

A recent Congressional Budget Office report predicted the US federal government’s publicly held debt would top an unsustainable 101% of GDP by 2021. Currently, the official US debt is an astronomical $15 trillion. Yet this is only the current debt. If the US government used the same accrual accounting principles that public companies must use, unfunded liabilities like Social Security and Medicare make the real debt more than $120 trillion. This represents over $1 million per taxpayer. Obviously, this amount is impossible to repay.

It’s interesting to note that in almost every recorded case of hyperinflation, the point where inflation exceeds 50% a month was caused by governments trying to compensate for slowing growth through full-throttle currency creation. This is exactly what we are seeing today.

These events gave me the confidence to title my new book $10,000 Gold. The book connects the many trends that will be directly and indirectly responsible for both the rising debt and the rising gold price over the next five years. It will be published this year.

To make matters worse, the irreversible macro trends I discussed in last year’s Empire Club speech are still very much in place today. These include the added costs of retiring baby boomers, systemic unemployment due to outsourcing of Western jobs through globalization and rising oil prices due to peak oil. These irreversible trends will increase unemployment, lower GDP, reduce tax revenues, increase deficits further and force governments to borrow even greater amounts.

Governments find themselves between the proverbial rock and a hard place, as even austerity measures tend to negatively impact GDP. As GDP falls and debt increases, credit downgrades are likely to follow, resulting in higher bond yields followed by even greater deficits. This becomes an unstoppable descending spiral.

Loss of purchasing power against gold continued unabated last year. The US dollar and the British pound have lost over 80% of their purchasing power against gold over the past decade, and the yen, the euro and the Canadian dollar have lost over 70%.

As we remind our clients this is not a typical bull market. Gold is not rising in value, currencies are losing purchasing power against gold, and therefore gold can rise as high as currencies can fall. Since currencies are falling because of increasing debt, gold can rise as high as government debt can grow.

The sovereign wealth funds as well as the more conservative central banks will have little choice but to re-allocating to gold in order to outpace currency depreciation. This is why some central banks, particularly those of China and India, accelerated their gold buying in 2011, for a third year in a row, to nearly 500 tonnes – about one-fifth of annual mine production.

While central banks have been net purchasers of gold since 2009, the real game changers will be the pension funds and insurance funds, which at this point hold only 0.3% of their vast assets in gold and mining shares. Continuing losses and growing pension deficits will make it mandatory for them to eventually include gold – the one asset class that is negatively correlated to financial assets such as stocks and bonds. When this happens, there will be a massive shift from over $200-trillion of global financial assets to the less than $2 trillion of privately held bullion.

In considering where gold will be at the end of 2012, I looked back to my first Empire Club talk of 2005. I said then that it didn’t really matter whether gold closed the year at $400 or $500 an ounce – the trends were in place to ensure it had much further to rise. Seven years later, we can say the same thing. It doesn’t matter whether gold ends 2012 at $2,000 or $2,500, because gold’s final destination will make today’s price seem insignificant.

These can be frightening times, but gold always offers hope. We may not be able to heal the global economic problems of government debt, but individuals can protect and even increase their wealth through gold ownership. Gold bullion ownership, not mining shares, ETFs or other paper proxy forms of ownership, is an insurance policy against accelerating currency debasement. We use the analogy that – In the case of fire, would you rather have a real fire extinguisher or a picture of one?

A number of people have approached me recently and said they wished they had listened five years ago. They feel they have missed the boat, that it’s too late to buy gold. For those who feel that way, let me close with a Chinese proverb I discovered last year:

The best time to plant a tree is 20 years ago.
The second best time is today.

Infograhic: All the world’s gold

The fascinating infographic below come courtesy of NumberSleuth.org (via The Big Picture).

Click the image for a larger graphic.

Got Gold you can hold?

Got Silver you can squeeze?

It's not too late to accumulate!

Non-Farm Payrolls: The TRUTH And The CON In Confidence

2012-01-08T21:56:00.001-05:00

As 2012 begins...so does the inglorious "race for the White House". Woe is the year of nonsense we are about to be forced to endure. And, why not begin the year with a VERY heavy dose of bullshit care of the monthly non-farm payrolls report!

Before looking at the December "jobs report", let us do a little math with some of the recent "jobs data" that is being reported by the ever vigilant mainstream media as "good for the economy", and a "sign of growth".

Every Thursday, the Employment and Training Administration of the Department of Labor reports "initial jobless claims" for the nation. An "initial jobless claim" is when somebody applies for unemployment benefits for the first time. Initial jobless claims measure the number of filings for state jobless benefits. This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signalling slowing (accelerating) job growth. On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four week moving average to get a better sense of the underlying trend.

According to the Jan5, 2012 UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT, the 4-week moving average was 373,250. Using the back of a napkin and just this US Department of Labor reported 4-week moving average of "first time claims for unemployment", 1,493,000 Americans filed for unemployment benefits the past month.

This sorry statistic was broadly portrayed by the news media as being hugely positive:

US Initial Jobless Claims Fell 15000 to 372000 -Washington Post

Initial jobless claims fall to lowest level since 2008 -Chicago Tribune

Jobless Claims Lowest Since '08 as Growth Picks Up: Economy -BusinessWeek

Initial jobless claims lowest since April 2008 -MarketWatch

Lowest level since 2008? What wonderful news! After almost four years, there has been virtually no improvement in first time claims for unemployment...not to mention the fact that 1.5 MILLION Americans filed a claim for unemployment in the last four weeks alone. Oh yes, what wonderful news!

On the first Friday of every month, the U.S. Bureau of Labor Statistics releases the "non-farm payroll" report: A statistic researched, recorded and reportedly representing the total number of paid U.S. workers of any business, excluding the following employees:

- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees

According to Investopedia, The total non-farm payroll report accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States, and is used to assist government policy makers and economists determine the current state of the economy and predict future levels of economic activity.

On Friday January 6, 2012 we were treated to the latest US non-farm payrolls as reported, and portrayed "positively", by the the US news media:

U.S. gains 200,000 jobs in December
Unemployment rate falls for fourth month in a row to 8.5%

US Non-farm Payrolls Sharply Surpass Market Expectations ...

US Non-farm payrolls and private payrolls have sharply surpassed market expectations, with the US unemployment rate hitting its lowest level ...

US Dollar Gains As Nonfarm Payrolls Show 200K Jobs Gain In December

Wow! 200,000 "new" jobs! Joy, Joy, Joy for those looking for jobs... Hey wait a minute! 1.5 MILLION Americans filed first time unemployment claims in the past four weeks according to statistics released by the US Department of Labor on Thursday Jan 5. Sounds to me like 1.3 MILLION Americans got a rock in their Christmas stocking. Why all the joy in mainstream mediaville?

Thankfully the reporting on the nonfarm payroll numbers from Zero Hedge was a bit more levelheaded and honest...because the TRUTH hurts:

NFP Payrolls At 200K, Expected At 155K; Unemployment Rate Drops To 8.5%, Labor Force Participation At Lowest Since 1984

The nonfarm payroll number prints at 200K on expectations of 155K. The Unemployment rate comes at 8.5% - lowest since February 2009, and down from an upward revised 8.7%. U-6 15.2% down from 15.6% in November. Average hourly earnings rose at 0.2%, in line with expectations, previous revised to -0.1% from unchanged. Private payrolls +212L vs Expectations of 178K. Manufacturing payrolls rose 23K vs Expectations of 155K. Yet the unemployment rate trickery still continues, with labor force participation (prior revised), now at a 27 year low of 64%, and the labor force itself declined by 50K from 153,937 to 153,887. In fact, persons not in the labor force have increased by 7.5 million since January 2007! Bottom line - dropping out of labor statistics is the new killing it.

Average Duration Of Unemployment: Second Highest Ever At 40.8 Week

The NFP report confirms the picture we have all known to grow and love - the people "entering" the labor force are temp workers, those with marginal job skills, and making the lowest wages. For everyone else: better luck elsewhere: the number of people not in the labor force has soared by 7.5 million since January 2007, and the average duration of unemployment is 40.8 weeks - essentially in line with last month's record 40.9. Bottom line - if you are out of a job, you are out of a job unless you are willing to trade down to an entry level "temp-like" position with virtually no benefits or job security.

Massive Beat? Not So Fast - Morgan Stanley Warns 42,000 "Jobs" Bogus Due To Seasonal Quirk

Enamored with the 200,000 number? Don't be - the reason why the market has basically yawned at this BLS data is that as Morgan Stanley's David Greenlaw reports, 42,000 of the 200,000 is basically a seasonal quirk, which will be given back next month, meaning the true adjusted number is 158,000, essentially right on top of the expectation. From David Greenlaw: "some of the strength in this report should be discounted because of an seasonal quirk in the courier category of payrolls (Fed-ex, UPS, etc). Jobs in this sector jumped 42,000 in December, repeating a pattern seen in 2009 and 2010 (see attached figure). We should see a payback in next month's report."

Real Jobless Rate Is 11.4% With Realistic Labor Force Participation Rate

One does not need to be a rocket scientist to grasp the fudging the BLS has been doing every month for years now in order to bring the unemployment rate lower: the BLS constantly lowers the labor force participation rate as more and more people "drop out" of the labor force for one reason or another. While there is some floating speculation that this is due to early retirement, this is completely counterfactual when one also considers the overall rise in the general civilian non institutional population. In order to back out this fudge we are redoing an analysis we did first back in August 2010, which shows what the real unemployment rate would be using a realistic labor force participation rate. To get that we used the average rate since 1980, or ever since the great moderation began. As it happens, this long-term average is 65.8% (chart 1). We then apply this participation rate to the civilian noninstitutional population to get what an "implied" labor force number is, and additionally calculate the implied unemployed using this more realistic labor force. We then show the difference between the reported and implied unemployed (chart 2). Finally, we calculate the jobless rate using this new implied data. It won't surprise anyone that as of December, the real implied unemployment rate was 11.4% (final chart) - basically where it has been ever since 2009 - and at 2.9% delta to reported, represents the widest divergence to reported data since the early 1980s. And because we know this will be the next question, extending this lunacy, America will officially have no unemployed, when the Labor Force Participation rate hits 58.5%, which should be just before the presidential election.

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WOW! Just like magic the unemployed will disappear just in time for a presidential election...amazing. What I find truly fascinating is that, in America, you can be unemployed, but not counted as unemployed because you are not looking for work OR collecting an unemployment check. Seriously...ONLY IN AMERICA!

Labor participation rate?

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Definition of Labor Force Participation Rate

According to the U.S. Bureau of Labor Statistics, the labor force participation rate is the "share of the population 16 years and older working or seeking work."

According to the site, the formula for determining the "labor force participation rate" is:

(Civilian Labor Force / Total Non-institutionalized Civilian Population) x 100

Ok - this may be a bit confusing, so let's explain these terms a bit.

First off, what is the "total non-institutionalized civilian population"?

This is the total population minus a few key groups, including:

-kids under the age of 16
-people in prisons or other institutions
-military personnel

Ok - now what is the "civilian labor force"?

This group consists of people who are classified as being either employed or unemployed.

A key item to note - you have to be actively looking for a job in order to be considered "unemployed".

So, for instance, a woman who stays at home with her kids is not considered as being employed or unemployed.

Or, students or people who have retired early are not considered to be employed or unemployed as well.

So, again, in order to get the "labor force participation rate", we have to divide:

The Civilian Labor Force by The Total Non-Institutionalized Population and then multiply by 100.

The labor force participation rate has hovered around 65-67 over the past decade or so. It is currently sitting at 65.5.

The rate has increased dramatically over the past 50 years or so due to more women entering the workforce.

For comparison's sake, the labor force participation rate was around 58-59 in the late '40s.

Source: Bureau of Labor Statistics

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So by not counting the unemployed who are not actively looking for work [maybe because there are no jobs to look for] the US Government can create the illusion that the unemployment rate is falling, and boost the "confidence" of those actually looking for work. Is this brilliant or what?

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Jim Sinclair’s Commentary
This is the real story behind today’s job gains report. For additional details see: www.shadowstats.com
- Seasonal-Adjustment Problems Spiked Jobs Growth, Seasonal- Adjustment Revisions Artificially Lowered Unemployment Rates
- December Jobs Reading Remained Well Below Pre-2007 and Pre-2001 Recession Levels
- December Unemployment: 8.5% (U.3), 15.2% (U.6), 22.4% (SGS)
- Money Supply M3 Annual Growth Tops 3.0% for First Time in 28 Months
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U.S. Non-Farm Payrolls: The Statistical Illusion Of Jobs

By Daryl Montgomery

The Employment Report for December 2011 was released today with a glowing press release from the BLS (Bureau of Labor Statistics). The highlight of the report was the 42,000 courier and messengers jobs created last month and the claim that the unemployment rate fell to 8.5%.

Statistics can easily be manipulated and it is not unknown for political regimes to do so in order to hold on to power (and 2012 is an election year in the U.S.). After all, it is much easier to change a number than to fix the underlying problem the number represents. Fortunately, the BLS publishes a number of statistical tables with each monthly report that can be used to check its calculations.

When the Great Recession began in December 2007, the civilian non-institutional population of the United States was 189,993,000. At that time, the number of people in the U.S. labor force was 125,588,000. As of December 2011, the BLS states that the employment population ratio for the U.S. is 58.5% (0.585). The non-institutional population of the U.S. was reported at 193,682,000 or 3,689,000 higher than it was in December 2007. The labor force in December 2007 was 125,334,000 and multiplying the increase in the U.S. population in the intervening four years by the employment population ratio indicates that the labor force should have increased by 2,158,000 to 127,492,000. However, the BLS reports the U.S. labor force last month was 124,114,000. More than three million people are missing from its figures.

The smaller the labor force is, the better the headline unemployment rate becomes. The BLS claims these 3 million plus people left the labor force and this justifies purging them from the statistics. There is a problem with their line of reasoning, however. Large numbers of people only leave a labor force during periods of severe economic distress. It does not happen during economic recovery. It does not indicate an employment situation that is improving. Yet, the BLS produces numbers showing things are getting better when this happens. This violates the first rule of statistics - the results must reflect reality. The BLS numbers do not.

Dividing the number of employed in December 2011 by the size of the labor force that should exist based on the population numbers produces an unemployment rate of 9.6%, not 8.5%. This is the headline number that should be reported. If the BLS wants to insist however that more than three million people have indeed left the labor force (and this has continued in the last year - the size of the labor force in December 2011 is smaller than it was in December 2010), it should also make it clear that this indicates that there has been an ongoing recession and no economic recovery has taken place. Both can't happen at the same time, except for a brief period. Either the economic recovery story is a lie or there hasn't been a shrinking labor force.

While mainstream economists will insist that employment is a lagging indicator (more than two years is some lag), this has only been the case in the U.S. years after statistical "improvements" were introduced in the 1980s and 1990s in how government economic numbers were determined. Before that, employment recovered with improving GDP as should be the case. If you think about it, the term jobless recovery makes as much sense as tall midget or genius moron.

The improvement in the weekly unemployment claims is also being cited as evidence of an improving jobs picture. It would be more accurate to say that it is evidence of a jobs picture that can't continue to get worse. As I have stated since at least mid-2010, the weekly claims number will regress toward the mean (move to its long-term average) because eventually there will be few workers who remain to be laid off. After being elevated for several years, the only way that weekly claims can now increase is with a big jump in bankruptcies. This will be avoided as long as the economy holds steady.

What is keeping the U.S. economy from getting worse is the unprecedented budget deficits that the U.S. is running. If you spend an extra $1.3 trillion dollars that you don't have as the U.S. did in 2011, this will certainly stimulate the economy in the short-term since much of this money winds up in consumer pockets and they spend it. According to the non-farm payrolls report for December, the U.S. is not exactly getting good value for this money. Unless of course, you think low-paying courier and messenger jobs should be the cornerstone of the economy.

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Thank you Daryl Montgomery for that excellent summation of the farce behind the weekly "initial claims for unemployment" and the monthly "non-farm payrolls" reports. These reports are pure BULLSHIT regurgitated by the US Labor Department and the US Bureau of Labor Statistics for consumption by the mainstream news media in their never ending effort to dismiss the TRUTH.

Because Americans can't handle the TRUTH.

There's lies, and then their is believing your own lies:

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Strong data damps Fed need to buy bonds: Bullard

By Mark Felsenthal

(Reuters) - Signs the recovery is gaining strength suggest the Federal Reserve may not need to buy any more bonds to spur growth, a top policymaker said on Saturday.

"I don't think it's very likely right now because the tone of the data has been pretty strong" through the end of 2011 and up to now, St. Louis Fed President James Bullard told reporters after a speech at an economics conference. "We can probably wait and see for now."

The Federal Reserve cut benchmark rates to near zero more than three years ago and has bought $2.3 trillion in bonds to boost growth.

While the Fed has left the door open to further accommodation, the U.S. economy has shown signs of accelerating growth in recent months, leaving many to wonder whether the central bank needs to do any more.

Adding to a sense of pickup, the government said on Friday that employers added 200,000 jobs in December and the unemployment rate eased to 8.5 percent, near a three-year low.

Bullard's comments show a Fed still divided over the need for more accommodation to ensure a soft recovery does not dissipate or wilt due to an outside shock such as an intensification of the European debt crisis. Several Fed officials have urged another round of buying mortgage-backed securities to shore up the depressed housing market, including Boston Fed President Eric Rosengren in a speech on Friday.

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I, personally, am completely fed up with the steady stream of lies and the "confidence" building that spews forth daily from the US Government data vendors. Aren't you?

NEVER FORGET: The fist three letters of the word confidence spell "CON".

Today's politicians and mainstream media talking heads are little more than confidence men. You know what I mean?

They're are bunch of CON MEN!

Gold And Silver: The TRUTH Is...

2012-01-03T11:09:00.000-05:00

I have spent the better part of the past two weeks ignoring "silly season". NOTHING that occurred in the financial markets the the last two weeks of 2011 was representative of anything outside of blatant manipulation of not only the Precious Metals markets, but of all commodities in general, global currencies, AND most definitely the equity markets.

Blatant manipulation is all that remains of our once "free market" financial system. The Free Market went buh-bye on August 15, 1971 when President Richard Nixon closed the Gold window at the US Treasury, and halted the redemption of US Dollars for Gold.

"There are no markets anymore, just interventions."

-Chris Powell, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.

Upon reflection, the greatest accomplishment of the 2011 "global" market manipulation was the spinning up of a cocoon of denial to shroud the truth about the United States sovereign insolvency. America has been in denial regarding it's insolvency since that fateful day in August 1971 when President Nixon defaulted on America's debt by closing the US Treasury's Gold window, and thus backed the US Dollar with nothing more than the "full faith and credit" of the us government.

There were no winners in 2011...except the St. Louis Cardinals. 2011 was a year for losers. Homes lost to foreclosure, jobs lost to a "jobless recovery", and wealth lost to crooks like Jon Corzine at MF Global. But the biggest loser of all in 2011 was TRUST...and folks, once you lose "trust", it is damn near impossible to regain that trust. And with the loss of trust, TRUTH took a beating.

TRUTH, with regards to the global financial system, is simple.

GOLD AND SILVER ARE THE TRUTH

"The truth will set you free, but first it will make you miserable."

~Attributed to James A. Garfield

"Every truth passes through three stages before it is recognized. In the first, it is ridiculed, in the second it is opposed, in the third it is regarded as self-evident."

~Arthur Schopenhauer

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Conspiracy VS Reality

"Ranting" Andy Hoffman, Miles Franklin Precious Metals Investments

For those of you trying to convince difficult-to-budge people who are turned off by flowery language and aggressive accusations, I submit the following, brief summary of Precious Metals fundamentals and the nefarious forces aiming to undermine the natural forces of economic Mother Nature by suppressing their prices.

For the past 6,000 years, gold has been universally utilized as money, while all fiat currency systems have since failed. Few people realize the U.S. itself has already lost two currencies to hyperinflation: the Continental during the Revolutionary War and the Confederate dollar during the Civil War. Moreover, Abraham Lincoln’s “Greenback” dollar was on its way to hyperinflation when the Civil War ended – in other words, with another year or two of war, it, too, likely would have been destroyed.

If the Federal Reserve, ECB, BOE, BOJ, and PBOC were constrained by gold standards, as was the case with all successful currency regimes throughout history, none would have been able to print trillions of un-backed dollars, Euros, Pounds, Yen, or Yuan, respectively, thus avoiding the catastrophic global debt contagion seen today. When Nixon abandoned the U.S. gold standard in August 1971, it represented the first time in history that not a single nation had a gold-backed currency. In my view, this global “fiat standard” is the direct cause of the current financial crisis, which I expect will continue for many years to come.

Since 2002, I have advocated the purchase of gold and silver as protection against the inflationary monetary policies of the world’s Central Banks. Understandably, my message is not always well-received, as it suggests further devaluation of the dollar. However, based on the lessons of history and the conclusions of my research, gold and silver are the best hedges against inflationary monetary policies. Consequently, it is no coincidence the current gold bull market commenced in 2000, simultaneous with the end of the dollar’s multi-decade bull market, in terms of both PAPER currencies, as depicted by the “U.S. dollar index…

…and REAL money, i.e. PHYSICAL gold…

Despite propaganda to the contrary, created by bankers and politicians seeking to control your lives, and assets, via immoral, mathematical impossible confidence-based currency systems, an immutable fact of human existence is that gold is money. This is the dark secret of Central Bankers, who utilize all available means to hinder the public from realizing this time-tested truth. J.P. Morgan himself, testifying to Congress in 1912, stated “Gold is money, everything else is credit,” while Alan Greenspan, the most notorious monetary inflationist in history, at one point vociferously advocated these same principles, particularly in his 1966 treatise “Gold and Economic Freedom.” Here are some of the more famous quotes from this piece:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.

Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

Central bankers and politicians thrive in a system where they control the power to print money, as opposed to a gold standard, in which the money supply, by definition, is constrained by the amount of government-owned gold. As evidenced by the inexorable rise of consumer prices since the gold standard was abandoned in 1971, and consequently the gargantuan global increase in all categories of debt, clearly the current fiat standard is miserably failing.

This is why “The Powers That Be” (said central bankers and politicians) surreptitiously manipulate financial markets, particularly Precious Metals as they are widely viewed as “inflation barometers.” Due to such actions, including the suppression of gold prices and support of the stock, bond, and U.S. dollar currency markets, they have been successful in quelling mass opinion, enabling the monetarist charade to continue despite its obvious deleterious effects on the global financial system.

It is truly amazing, in my view, that the population-at-large still believes the gold market to be immune from government intervention, when all other markets are regularly intervened in, both overtly and covertly. To wit:

In March 1988, directly following the October 1987 stock market crash, the “President’s Working Group on Financial Markets” (i.e. the PPT) was created to support the stock market in times of crisis, or, in its own words, to “enhance the…orderliness… of… markets and maintain investor confidence…” As you can see below, it is a real U.S. government entity, consisting of the Secretary of the Treasury and Chairmen of the Federal Reserve, SEC, and CFTC. Yet, most believe it does not exist.

Working Group on Financial Markets – Wikipedia

Moreover, it has been admitted to exist publicly by no less than George Stephanoupolos, speaking of his time working as White House Communications Director with Bill Clinton, and Hank Paulson, while acting as George W. Bush’s Treasury Secretary.

George Stephanoupolos – TheCenterLane.com

Monday view: Paulson re-activates secretive support team to prevent markets meltdown

In the bond market, not only does the Federal Reserve manipulate markets by determining official interest rates (enjoyed only by primary dealers), but executes “open market operations” to precisely peg interest rates every business day. In fact, “Quantitative Easing” by definition refers to direct Federal Reserve intervention to support the U.S. government and mortgage bond markets.

Moreover, in the currency markets, the dollar’s exchange rate is openly manipulated in concert with numerous nations worldwide, via the “Exchange Stabilization Fund”, a U.S.-government committee established in 1934 with the intent of intervening in both the foreign exchange and gold markets.

Exchange Stabilization Fund

Additionally, the shadowy Bank of International Settlements, or BIS, known commonly as the “central bank’s Central Bank,” is mandated to intervene in global currency and gold markets, per this quote from William White of the BIS in 2005:

Among the five objectives of central bank cooperation is the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.

…a mandate validated by the following newswire published on December 7th, 2011, just minutes after gold surged above $1,750/oz following an ECB rate cut to 1.00% from 1.25%, which was subsequently retracted by the (German) newswire service but never denied, despite the fact that the “official market footprint” was quite visible in gold’s trading activity on the New York COMEX futures market.

MNI NEWS via BLOOMBERG – MARKET SOURCES REPORT BIS, BOE & FEDERAL RESERVE WERE SELLING GOLD AFTER IT POPPED TO SESSION HIGH AT GMT 1335

Regarding gold itself, in the 1960s an overt manipulation organization existed, attempting to peg the price at $35/ounce in much the same manner which the Fed pegs interest rates. The “London Gold Pool”, also led by the U.S. government, failed in 1968 when demand overwhelmed their manipulative selling, a game that recommenced at the onset of the current gold bull market in 2000. Only this time around, the suppression is executed covertly to prevent erosion of confidence in the now global fiat standard.

London Gold Pool

For people like myself who research this topic in detail, there are countless admissions of gold market suppression over the years. I could supply numerous such statements, but these two alone are all one needs to understand how black and white the issue really is:

We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.
-Sir Eddie George, Governor, Bank of England (1999)

Central banks stand ready to lease gold in increasing quantities should the price rise.
-Alan Greenspan; Chairman, Federal Reserve (1998)

Regarding Real Estate, the government has done everything in its power to promote an “Ownership Society” in which everybody owns a large mortgage and by association, limited equity. Deregulation of the mortgage industry, quasi- and then full ownership of Freddie Mac and Fannie Mae (the largest mortgage holders in the country), and government decree such as the 2003 American Dream Downpayment Act have lured millions to bankruptcy via ill-advised purchases or management of Real Estate investments.

Finally, the U.S. “Strong Dollar Policy” has been promoted by every President and Treasury Secretary for the past 15 years, proved by inaction to be more of a propaganda tool than an actual policy. During this period, the U.S. dollar index has fallen 35% in value while the CRB Commodity Index has risen 35%, depicting just how weak the dollar’s fundamentals are in the face of concerted government efforts (including the surreptitious sale of gold) to boost the perception of its value.

Of course, the “U.S. dollar index” is just a gauge of the dollar’s value against its main competitor, the equally un-backed, debt-infested Euro. Compared to the value of real money, however, the dollar has fallen much further. Gold has risen from $250/oz in 2000 to $1,900/ounce during the past decade, and silver from $4/oz to $50/ounce.

In countless missives over the past four years, I have written about Precious Metals market manipulation. However, the gist of my work is documented in the five supporting documents below, which I view as “primers” on the topic:

5/29/11 Cartel Secrets Revealed, Pt. I

6/01/11 Cartel Secrets Revealed, Pt. II

6/08/11 2010 COMEX Gold Manipulation Pictorial

6/06/11 2011 COMEX Gold Manipulation Pictorial #1

11/28/11 2011 COMEX Gold Manipulation Pictorial #2

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Is It Too Late To Buy Gold and Silver? - Mike Maloney & The Elevation Group [VIDEO]

Uploaded by ElevationGroupTV on Dec 20, 2011

http://TheElevationGroup.net - With the recent price drop around the precious metals over the past month, many people are wondering if the precious metals bull market is coming to an end... If they should sell now at a loss before the price dives even more...

So... Are they right? Should you sell your metals, or buy more? Is the price going to increase or decrease from here?

Michael Maloney joins us via video with the answer...

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It should come as NO SURPRISE to anybody the extent to which the financial markets are manipulated by The Powers That Be. That "trust" in the financial markets has only now been called into question, if not completely lost, is the real surprise here.

Ron Paul, candidate for President of the United States, way back in 2006 addressed the US House of Representatives and exposed the lie that is our financial system today: US DOLLAR HEGEMONY.

Ron Paul knows the TRUTH, and he is making every effort to share that truth today with a nation in denial.
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The End of Dollar Hegemony
by Ron Paul

Before the US House of Representatives, February 15, 2006

A hundred years ago it was called “dollar diplomacy.” After World War II, and especially after the fall of the Soviet Union in 1989, that policy evolved into “dollar hegemony.” But after all these many years of great success, our dollar dominance is coming to an end.

It has been said, rightly, that he who holds the gold makes the rules. In earlier times it was readily accepted that fair and honest trade required an exchange for something of real value.

First it was simply barter of goods. Then it was discovered that gold held a universal attraction, and was a convenient substitute for more cumbersome barter transactions. Not only did gold facilitate exchange of goods and services, it served as a store of value for those who wanted to save for a rainy day.

Though money developed naturally in the marketplace, as governments grew in power they assumed monopoly control over money. Sometimes governments succeeded in guaranteeing the quality and purity of gold, but in time governments learned to outspend their revenues. New or higher taxes always incurred the disapproval of the people, so it wasn't long before Kings and Caesars learned how to inflate their currencies by reducing the amount of gold in each coin — always hoping their subjects wouldn't discover the fraud. But the people always did, and they strenuously objected.

This helped pressure leaders to seek more gold by conquering other nations. The people became accustomed to living beyond their means, and enjoyed the circuses and bread. Financing extravagances by conquering foreign lands seemed a logical alternative to working harder and producing more. Besides, conquering nations not only brought home gold, they brought home slaves as well. Taxing the people in conquered territories also provided an incentive to build empires. This system of government worked well for a while, but the moral decline of the people led to an unwillingness to produce for themselves. There was a limit to the number of countries that could be sacked for their wealth, and this always brought empires to an end. When gold no longer could be obtained, their military might crumbled. In those days those who held the gold truly wrote the rules and lived well.

That general rule has held fast throughout the ages. When gold was used, and the rules protected honest commerce, productive nations thrived. Whenever wealthy nations — those with powerful armies and gold — strived only for empire and easy fortunes to support welfare at home, those nations failed.

Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: “He who prints the money makes the rules” — at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.

Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation's people — just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.

The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one's actions is rejected.

When paper money is rejected, or when gold runs out, wealth and political stability are lost. The country then must go from living beyond its means to living beneath its means, until the economic and political systems adjust to the new rules — rules no longer written by those who ran the now defunct printing press.

“Dollar Diplomacy,” a policy instituted by William Howard Taft and his Secretary of State Philander C. Knox, was designed to enhance U.S. commercial investments in Latin America and the Far East. McKinley concocted a war against Spain in 1898, and (Teddy) Roosevelt's corollary to the Monroe Doctrine preceded Taft's aggressive approach to using the U.S. dollar and diplomatic influence to secure U.S. investments abroad. This earned the popular title of “Dollar Diplomacy.” The significance of Roosevelt's change was that our intervention now could be justified by the mere “appearance” that a country of interest to us was politically or fiscally vulnerable to European control. Not only did we claim a right, but even an official U.S. government “obligation” to protect our commercial interests from Europeans.

This new policy came on the heels of the “gunboat” diplomacy of the late 19th century, and it meant we could buy influence before resorting to the threat of force. By the time the “dollar diplomacy” of William Howard Taft was clearly articulated, the seeds of American empire were planted. And they were destined to grow in the fertile political soil of a country that lost its love and respect for the republic bequeathed to us by the authors of the Constitution. And indeed they did. It wasn't too long before dollar “diplomacy” became dollar “hegemony” in the second half of the 20th century.

This transition only could have occurred with a dramatic change in monetary policy and the nature of the dollar itself.

Congress created the Federal Reserve System in 1913. Between then and 1971 the principle of sound money was systematically undermined. Between 1913 and 1971, the Federal Reserve found it much easier to expand the money supply at will for financing war or manipulating the economy with little resistance from Congress — while benefiting the special interests that influence government.

Dollar dominance got a huge boost after World War II. We were spared the destruction that so many other nations suffered, and our coffers were filled with the world's gold. But the world chose not to return to the discipline of the gold standard, and the politicians applauded. Printing money to pay the bills was a lot more popular than taxing or restraining unnecessary spending. In spite of the short-term benefits, imbalances were institutionalized for decades to come.

The 1944 Bretton Woods agreement solidified the dollar as the preeminent world reserve currency, replacing the British pound. Due to our political and military muscle, and because we had a huge amount of physical gold, the world readily accepted our dollar (defined as 1/35th of an ounce of gold) as the world's reserve currency. The dollar was said to be “as good as gold,” and convertible to all foreign central banks at that rate. For American citizens, however, it remained illegal to own. This was a gold-exchange standard that from inception was doomed to fail.

The U.S. did exactly what many predicted she would do. She printed more dollars for which there was no gold backing. But the world was content to accept those dollars for more than 25 years with little question — until the French and others in the late 1960s demanded we fulfill our promise to pay one ounce of gold for each $35 they delivered to the U.S. Treasury. This resulted in a huge gold drain that brought an end to a very poorly devised pseudo-gold standard.

It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.

Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it — not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.

Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.

This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo—gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.

During the 1970s the dollar nearly collapsed, as oil prices surged and gold skyrocketed to $800 an ounce. By 1979 interest rates of 21% were required to rescue the system. The pressure on the dollar in the 1970s, in spite of the benefits accrued to it, reflected reckless budget deficits and monetary inflation during the 1960s. The markets were not fooled by LBJ's claim that we could afford both “guns and butter.”

Once again the dollar was rescued, and this ushered in the age of true dollar hegemony lasting from the early 1980s to the present. With tremendous cooperation coming from the central banks and international commercial banks, the dollar was accepted as if it were gold.

Fed Chair Alan Greenspan, on several occasions before the House Banking Committee, answered my challenges to him about his previously held favorable views on gold by claiming that he and other central bankers had gotten paper money — i.e. the dollar system — to respond as if it were gold. Each time I strongly disagreed, and pointed out that if they had achieved such a feat they would have defied centuries of economic history regarding the need for money to be something of real value. He smugly and confidently concurred with this.

In recent years central banks and various financial institutions, all with vested interests in maintaining a workable fiat dollar standard, were not secretive about selling and loaning large amounts of gold to the market even while decreasing gold prices raised serious questions about the wisdom of such a policy. They never admitted to gold price fixing, but the evidence is abundant that they believed if the gold price fell it would convey a sense of confidence to the market, confidence that they indeed had achieved amazing success in turning paper into gold.

Increasing gold prices historically are viewed as an indicator of distrust in paper currency. This recent effort was not a whole lot different than the U.S. Treasury selling gold at $35 an ounce in the 1960s, in an attempt to convince the world the dollar was sound and as good as gold. Even during the Depression, one of Roosevelt's first acts was to remove free market gold pricing as an indication of a flawed monetary system by making it illegal for American citizens to own gold. Economic law eventually limited that effort, as it did in the early 1970s when our Treasury and the IMF tried to fix the price of gold by dumping tons into the market to dampen the enthusiasm of those seeking a safe haven for a falling dollar after gold ownership was re-legalized.

Once again the effort between 1980 and 2000 to fool the market as to the true value of the dollar proved unsuccessful. In the past 5 years the dollar has been devalued in terms of gold by more than 50%. You just can't fool all the people all the time, even with the power of the mighty printing press and money creating system of the Federal Reserve.

Even with all the shortcomings of the fiat monetary system, dollar influence thrived. The results seemed beneficial, but gross distortions built into the system remained. And true to form, Washington politicians are only too anxious to solve the problems cropping up with window dressing, while failing to understand and deal with the underlying flawed policy. Protectionism, fixing exchange rates, punitive tariffs, politically motivated sanctions, corporate subsidies, international trade management, price controls, interest rate and wage controls, super-nationalist sentiments, threats of force, and even war are resorted to — all to solve the problems artificially created by deeply flawed monetary and economic systems.

In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that's the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.

It sounds like a great deal for everyone, except the time will come when our dollars — due to their depreciation — will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.

The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.

The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can't last.

Price inflation is raising its ugly head, and the NASDAQ bubble — generated by easy money — has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and federal spending is out of sight with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world's rejection of the dollar. It's bound to come and create conditions worse than 1979—1980, which required 21% interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.

Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism, and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF surely will do everything conceivable to soak up the dollars in hope of restoring stability. Eventually they will fail.

Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged — as it already has been.

In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O'Neill, the major topic was how we would get rid of Saddam Hussein — though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O'Neill.

It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

In 2001, Venezuela's ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.

After these attempts to nudge the Euro toward replacing the dollar as the world's reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.

It's become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez, and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported.

Now, a new attempt is being made against the petrodollar system. Iran, another member of the “axis of evil,” has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.

Most Americans forget how our policies have systematically and needlessly antagonized the Iranians over the years. In 1953 the CIA helped overthrow a democratically elected president, Mohammed Mossadeqh, and install the authoritarian Shah, who was friendly to the U.S. The Iranians were still fuming over this when the hostages were seized in 1979. Our alliance with Saddam Hussein in his invasion of Iran in the early 1980s did not help matters, and obviously did not do much for our relationship with Saddam Hussein. The administration announcement in 2001 that Iran was part of the axis of evil didn't do much to improve the diplomatic relationship between our two countries. Recent threats over nuclear power, while ignoring the fact that they are surrounded by countries with nuclear weapons, doesn't seem to register with those who continue to provoke Iran. With what most Muslims perceive as our war against Islam, and this recent history, there's little wonder why Iran might choose to harm America by undermining the dollar. Iran, like Iraq, has zero capability to attack us. But that didn't stop us from turning Saddam Hussein into a modern day Hitler ready to take over the world. Now Iran, especially since she's made plans for pricing oil in Euros, has been on the receiving end of a propaganda war not unlike that waged against Iraq before our invasion.

It's not likely that maintaining dollar supremacy was the only motivating factor for the war against Iraq, nor for agitating against Iran. Though the real reasons for going to war are complex, we now know the reasons given before the war started, like the presence of weapons of mass destruction and Saddam Hussein's connection to 9/11, were false. The dollar's importance is obvious, but this does not diminish the influence of the distinct plans laid out years ago by the neo-conservatives to remake the Middle East. Israel's influence, as well as that of the Christian Zionists, likewise played a role in prosecuting this war. Protecting “our” oil supplies has influenced our Middle East policy for decades.

But the truth is that paying the bills for this aggressive intervention is impossible the old-fashioned way, with more taxes, more savings, and more production by the American people. Much of the expense of the Persian Gulf War in 1991 was shouldered by many of our willing allies. That's not so today. Now, more than ever, the dollar hegemony — it's dominance as the world reserve currency — is required to finance our huge war expenditures. This $2 trillion never-ending war must be paid for, one way or another. Dollar hegemony provides the vehicle to do just that.

For the most part the true victims aren't aware of how they pay the bills. The license to create money out of thin air allows the bills to be paid through price inflation. American citizens, as well as average citizens of Japan, China, and other countries suffer from price inflation, which represents the “tax” that pays the bills for our military adventures. That is, until the fraud is discovered, and the foreign producers decide not to take dollars nor hold them very long in payment for their goods. Everything possible is done to prevent the fraud of the monetary system from being exposed to the masses who suffer from it. If oil markets replace dollars with Euros, it would in time curtail our ability to continue to print, without restraint, the world's reserve currency.

It is an unbelievable benefit to us to import valuable goods and export depreciating dollars. The exporting countries have become addicted to our purchases for their economic growth. This dependency makes them allies in continuing the fraud, and their participation keeps the dollar's value artificially high. If this system were workable long term, American citizens would never have to work again. We too could enjoy “bread and circuses” just as the Romans did, but their gold finally ran out and the inability of Rome to continue to plunder conquered nations brought an end to her empire.

The same thing will happen to us if we don't change our ways. Though we don't occupy foreign countries to directly plunder, we nevertheless have spread our troops across 130 nations of the world. Our intense effort to spread our power in the oil-rich Middle East is not a coincidence. But unlike the old days, we don't declare direct ownership of the natural resources — we just insist that we can buy what we want and pay for it with our paper money. Any country that challenges our authority does so at great risk.

Once again Congress has bought into the war propaganda against Iran, just as it did against Iraq. Arguments are now made for attacking Iran economically, and militarily if necessary. These arguments are all based on the same false reasons given for the ill-fated and costly occupation of Iraq.

Our whole economic system depends on continuing the current monetary arrangement, which means recycling the dollar is crucial. Currently, we borrow over $700 billion every year from our gracious benefactors, who work hard and take our paper for their goods. Then we borrow all the money we need to secure the empire (DOD budget $450 billion) plus more. The military might we enjoy becomes the “backing” of our currency. There are no other countries that can challenge our military superiority, and therefore they have little choice but to accept the dollars we declare are today's “gold.” This is why countries that challenge the system — like Iraq, Iran and Venezuela — become targets of our plans for regime change.

Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become.

But real threats come from our political adversaries who are incapable of confronting us militarily, yet are not bashful about confronting us economically. That's why we see the new challenge from Iran being taken so seriously. The urgent arguments about Iran posing a military threat to the security of the United States are no more plausible than the false charges levied against Iraq. Yet there is no effort to resist this march to confrontation by those who grandstand for political reasons against the Iraq war.

It seems that the people and Congress are easily persuaded by the jingoism of the preemptive war promoters. It's only after the cost in human life and dollars are tallied up that the people object to unwise militarism.

The strange thing is that the failure in Iraq is now apparent to a large majority of American people, yet they and Congress are acquiescing to the call for a needless and dangerous confrontation with Iran.

But then again, our failure to find Osama bin Laden and destroy his network did not dissuade us from taking on the Iraqis in a war totally unrelated to 9/11.

Concern for pricing oil only in dollars helps explain our willingness to drop everything and teach Saddam Hussein a lesson for his defiance in demanding Euros for oil.

And once again there's this urgent call for sanctions and threats of force against Iran at the precise time Iran is opening a new oil exchange with all transactions in Euros.

Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.

The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or Euros. The sooner the better.

Watch Ron Paul's speech on video.

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Criminals Determine Gold's Future

By James West

According to faulty interpretations of Mayan calendars, 2012 is supposed to bring with it the demise of humanity. Fortunately for us, this apocalyptic myth, like so many, is based on a superficial interpretation of the Mayan calendar. Like many stories based on a lie, this one nonetheless gains traction in the popular imagination thanks to our fascination with anything apocalyptic.

Besides Mayan disinformation, there are many commentators who advise selling all gold, while acknowledging that gold is going higher in 2012. The lunacy of such advice is self-evident to me, and I presume, to the vast majority of readers. But lets not dwell on mainstream financial media: the credibility of that institution is non-existent going into 2012, and most intelligent people understand that story assignments originate in board room conversations and on golf courses, and filter down through editorial management. Thus, whose who sit on the boards of directors of banks and media conglomerates are easily able to transmit their requirement for negative sentiment towards precious metals easily and without public scrutiny.

There is no point in arguing whether gold and silver price manipulation exist – even Bart Chilton acknowledges that it does. But we are forced now to consider that manipulation as a “fundamental” influence on the future price of gold. The problem is that as a fundamental factor, is not quantifiable like supply and demand metrics, because its intensity is arbitrarily (at least, to public view) decided, and so all we can say for sure is that supply and demand drivers are, in the futures market, seconded to the fundamental influence of futures market manipulation. And since the futures market is exponentially greater than the spot markets, the spot price is determined by such manipulative shenanigans.

I often wonder when I hear people like Dennis Gartman, Jon Nadler and others for whom it would seem that it should be within their interest to be bullish on gold, are bearish because they have factored in that fundamental and participate on the short side more so than the long. How else to justify the main commentator on a site that sells gold being uniformly and relentlessly negative in his comments about it?

Thus, despite the fact that Europe’s Quantitative Easing ship has been launched, and the U.S. QE3 stands by in a hidden harbour, those fundamental facts that are intensely gold price positive must considered in the light of certain facts pertaining to the futures market. These are:

1. Oversight of the futures and derivatives market, presently the domain of the Commodities Futures Trading Commission, is in reality a collusive accomplice in the exploitation of futures markets along with the major financial institutions who represent that vast majority of futures contacts each month. In the future, this criminal activity will be identified and exposed publicly, and properly categorized as criminal manipulation. Nobody will be indicted, however, as the United States government is also an accomplice in shielding the perpetrators from prosecution.

2. Whereas the original purpose of the continued downward manipulation of the gold price was to induce a general perception that the U.S. dollar was and is a sound currency, the major banks who are regularly short silver and gold in significant volume have since understood that through the control of markets and associated volatility, they can regularly reap huge profits, but continuously rolling over losing contracts in their “dark” market, while waiting until the price can be driven downward sufficiently to put short contracts in the red into the black.

3. There is no intention nor interest in curbing the manipulative schemes on the part of the CFTC, because while they have been tasked with oversight, their powers of investigation, and most importantly, their ability to indict or even investigate such criminal activity is limited.

Europe is already printing money technically, in that it is purchasing weak sister bonds where no private entity dare wade in for less than 7% risk premium. While the line item accounting might trace the cash for the purchase of the bonds from a pre-existing balance, following the money leads to a quagmire of murky road forks that wear obscurity as a mark of intention. That the ECB has already decided to yoke its last resort bank backstop to the most larcenous countries’ bad loans is, to some, proof positive that solving the problem is not the priority: keeping the game going is the number one goal of current Eurozone management.

As the European Central Bank prepares to launch a program to replace frozen bank lending with thinly and delusionally configured quantitative easing as a last-option defense against the seizing up of the European banking system, markets rally, alebeit temporarily, lending the impression that there is a solution to the problem available. Quite the opposite is true. Succumbing to the last ditch fabrication and distribution of capital in a system that is choking on an excess of capital is merely deferring the inevitable while amplifying the severity of future market implosion on the near horizon.

The blinking red light on this latest ham-fisted implementation of perception management was the absence of confirmation that systemic risk appetite was back in the form of anemic bond market activity. If there was a real rise in confidence unfolding, then interest rates should arguably be dropping and private appetite for sovereign bonds materializing. Neither is the case.

If it were possible to stimulate real economic growth (as opposed to nominal economic growth that appears as profit on bank and financial sector-related companies as a direct result of free government money), then stimulus and government lending might be considered advisable.

Consider the effect of TARP, Bailouts, and the various QE’s that started in 2008 in the U.S. in repsonse to the freeze-up of credit markets. At the onset of the stimulus, stocks rallied and the “recovery” was declared officially underway.

But after injecting a total of $1.5 trillion into bank bailouts and stimulus, we are three years down that road with zero economic growth, banks who used the funds mostly for proprietary transactions that have created the illusion of market stability through reported earnings, and a fabulously expanded Fed balance sheet. The debt crisis in Europe is on a par with the debt crisis in the United States, and the value of money is in terminal decline. The lesson is that while QE and other forms of stimulus are superficially satisfactory treatments for the symptoms, they are far from a cure, and at the end of the day, have only compounded the problem. The effectiveness of stimulus and easing, most importantly, exponentially increasing the quantity of currency in the system, is now known to have a finite window of influence, and, once exhausted, begins to affect the economy negatively. That’s because the emergent perception is that stimulus only benefits the top layer of the financial system, and benefits the broader economy negligibly.

Extending credit facilities and replacing private sector capital sources with public ones, while at the same time inflicting austerity measures on the general population, is a recipe for absolute disaster in the long term, for the weaker economies. A population that finds itself expected to work harder, pay higher taxes, amid diminished infrastructure, services, and opportunities is going to respond with outrage, and will not work harder, or pay higher taxes, or tolerate social safety net destruction. They are going to take to the streets, and further paralyze economic activity.

We’ve seen riots in France, Spain and Greece, and as economies continue to deteriorate in 2012, violence and protests will escalate, and at some point, it may pass the threshold of public protest into civil war.

If the Occupy Wall Street movement were to seek some relevance, targeting the causes of economic disparity – primarily the protection of predatory financial institutions who control governments in North America and Europe through corrupt and collusive political systems – would yield a far more effective dividend than protesting against the outcome of such activity.

Maybe that’s what we can look forward to in 2012…an end to the corrupt governments of the United States and Europe, and a dismantling of the largest financial institutions, whose boots rest on all of our throats.

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GOLD & SILVER SALE: WHILE SUPPLIES LAST

2011-12-28T20:59:00.000-05:00

GOT GOLD YOU CAN HOLD?

GOT SILVER YOU CAN SQUEEZE?

IT'S NOT TOO LATE TOO ACCUMULATE!

The NY COMEX: SENTENCED TO DEATH

2011-12-21T21:20:00.000-05:00

If Silver Goes Down All Hell Will Break Loose In The Physical Market: Silver Investment Update

by VictoryIndependence on Dec 11, 2011

There simply isn't enough physical silver to deal with the demand of a fiat currency crisis. As the paper silver market pushes prices down, all hell will break loose in the physical market.

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London Trader - There are Tremendous Silver Shortages

By Eric King

KingWorldNews.com

King World News is receiving reports of significant waits for delivery of silver. Today King World News interviewed the "London Trader" to get his take on the situation. The source stated, "It is so tight, the silver market is so tight that we’ve been waiting three weeks plus, before this takedown, for deliveries of size to arrive. I’m talking about tonnage orders. This is also key, most of the silver being delivered was refined after the orders had been placed, and again, that was before the takedown. You can just imagine how long the wait times will be going forward."

"This game is getting so stretched that it’s going to break. You don’t think the Chinese know this stuff. If we get a close above the 200 day moving average in the mid 30’s on silver, watch silver immediately pop $2 or $3. Silver is totally incredible. There is nobody in COMEX silver contracts anymore, other than casino players. The only way they have been able to keep silver depressed is by borrowing silver from SLV to meet immediate demand. That’s the only reason silver isn’t trading $10 to $15 higher right now.

There isn’t enough silver for investors to buy (in large amounts) so they have been using SLV as a flywheel. SLV is over 20 million ounces short on the silver they are supposed to have in the vaults to back the shares which have been issued. The silver isn’t there. So there are people who purchased SLV to own physical silver, but all they have is shares that aren’t backed by the physical silver.

Part of managing the price of silver recently has been for the central banks to attack the gold market. But what is interesting is how this manipulation of the gold price was effected. Obviously, the bullion banks, which are working with the central banks, have inside knowledge as to the timing and just how much gold is going to be available to them.

So, in order for the bullion banks to maximize the effect of the physical gold they get from leasing, they add high scale paper leverage. They then short-sell just enough tranches of COMEX contracts to surgically take out three important support pivots....

"Each of those important support pivots that everyone is watching, like the 50 day moving average and so on, each one of those are taken out in the access market in the quiet trading, overnight, on three successive days. In other words, they take out these three important pivots, which turns the momentum buyers into sellers. It also gets a bunch of funds to start selling as well.

So using as little ammunition (physical gold) as possible, and in thinly traded markets, they take out these pivots. They smash the price, but leave just enough physical gold for going into the fixes because the smart buyers are saying, ‘I’ll take it at this price.’ So, as we go into the fix, they’ve provided just enough physical to satisfy as many of those buyers as they can. They then smash it right after the fix, again, with paper.

That’s what’s happened with gold and it’s the reason it has been manipulated down to these levels. It’s the only way they could do it, and it’s a sign of absolute desperation when central banks are willing to risk giving bullion banks gold they will never, ever receive back.

You don’t think the Chinese aren’t sitting here taking every single ounce of that leased gold? Of course they are. There were actually three enormous physical buy areas that they pierced, where, literally, there was tonnage ordered. I estimate well over 100 tons of physical gold was taken between the first pivot they broke, where these guys loaded up with discounted gold, and this stuff disappears from the West to the East.

These central banks had to be in desperation to allow this borrowed gold to be absorbed by foreign entities. They needed to raise dollars in a hurry and they are extremely afraid of gold going through the roof. I was very, very surprised they got as far as they did (driving gold lower). They had to use an awful lot of gold to do it."

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Silver Wars – Attack On The COMEX, SLV And MF Global
by horse237, Video Rebel's Blog

It will be a long and twisted path in the silver and gold fields from where we are to where the bankers want to take us for still another fleecing. Hopefully, we can avoid the snare traps the Bilderbergers set for us.

First I want to highlight the recent attack and counterattack on the New York based COMEX metals exchange. Jim Willie said he believes JP Morgan ordered Goldman Sachs and Jon Corzine to take down MF Global because they feared the COMEX would collapse due to a shortage of silver bullion. The MF Global bankruptcy receiver took money from segregated accounts at subsidiaries but gave 1.2 billion dollars to Morgan for unsecured loans. They took money away from the people who had cash and wanted to take delivery of silver and gold bullion.

Jim Willie also says that the bankers on Wall Street and in Europe will be just flat out stealing money from your accounts and pensions. Governments in Europe have been taking money out of private pensions and giving it to Bilderberg owned banks. That is why the Senate and the House legalized warrantless arrest without judicial review. They need to shut you up when the fraud gets exponentially worse than it is now.

Bix Weir is a gold bug but has issued a call to investors to sell their gold and buy silver to break the manipulation of the bullion markets. Silver is a much smaller market and will be easier to break. Ten tons of gold is inconsequential but that could buy 500 tons of silver which could break the COMEX when combined with the other big buyers.

John Embry of Sprott Asset Management launched two attacks on the COMEX. First he filed with the Canadian government to buy 1.5 billion dollars in silver. The last time he did this he sent silver from $18 to over $30. More recently he asked large silver miners to store silver rather than to sell silver and hold cash. It is clear he wants to break the COMEX. If silver is withheld from the market by the miners, then a concerted demand for delivery of silver bullion will in my opinion push the price well past $50 an ounce. This will break the COMEX and the LBMA (London Bullion Market Association.) There is a lot a paper silver and gold out there. The fraud on Wall Street and the City of London is beyond the ability of a normal person to comprehend.

A surge in physical silver purchases will also break the ETFs GLD and SLV which use paper derivatives to simulate the spot price of silver and gold. A deep analysis of SLV reveals that their operating costs are covered from the sale of silver bullion.

I want to present some facts investors need to know.

UBS and Morgan Stanley have been sued for selling paper silver and representing it as bullion to customers even charging them storage for silver bars that never existed.

The COMEX trades paper silver on some days as much as the total amount of physical silver that is mined every year.

James Turk of Gold Money has said that half of the new money invested in bullion goes into silver and the other half into gold. For every ounce of gold mined only ten ounces of silver is mined. But silver has industrial uses that gold does not have. The above ground supply of silver has diminished 93% in the past 40 years. But the ratio of the price of gold to silver is 50 to 1. If gold and silver break free of the current manipulation, the price of silver should rise anywhere from 50 to 100% faster than gold.

Central banks have NO physical Silver to assist in the manipulation of the Silver market but they still have a lot of physical Gold (although much less than they claim).

The Italian government has been taken over by Bilderbergers and Goldman Sachs operatives. They just recently have been leasing out Italian and Spanish gold. As you know, leased gold is not bullion and can be sold five times in order to drive down prices. That is why gold has been going down of late.

When To Sell Silver And Gold

I see no near term sell signals as I do not advise anyone to trade gold and silver daily. Bullion should be held until a gold standard is set up. Walter Burien at www.CAFR1.com has a paper called ‘The Fifty Year Plan’ which is similar to an essay I wrote: A Fractional Reserve Gold Standard: The Next Big Fraud.

If a gold standard does come into existence, gold will have to at least double in price to make it work. That is when you need to sell. What you should buy is yet to be determined.

I do not personally favor a gold standard. But I have suggested that Russia, China, Venezuela and Iran open a network of oil bourses where all purchases are to be made in gold, rubles or yuan. The Chinese would have to revalue their currency upwards and fix it to the ruble. I wrote that essay as a strategic move to stop WW III.

I would prefer a debt free currency like the Greenback and a ban on fractional reserve banking.

My regular readers know that I do not expect the New York or the European Bilderberg banks to go bankrupt. They will be bailed out by Ben Bernanke. The money supply will grow so fast that I expect hyperinflation within 16 months. I define hyperinflation for an international reserve currency like the dollar as beginning at 25%. I do not expect the dollar to collapse until after the 2012 American elections. I think Bernanke will paper the world between now and then.

As I said yesterday, I expect prices to go so high that for a lot of Europeans and Americans food will only be a distant memory.

I should warn you that I am led to believe that the Bilderberg crowd or at least a faction within it wants the COMEX and the LBMA to fail right along with the dollar, the pound and the euro. Running house prices up and down by selling fraudulent mortgages ruins tens of millions of families but it gives bankers more power. Just as running stock prices up and down has done. Or running your national currency down to zero value. Running gold and silver up and down is just one more swindle.

Bilderbergers enjoy inflicting pain and ruin on the common folk as much as they do stealing their money.

Warning: There is a lot of money out there yet to be stolen so don’t expect a collapse next week. And there is a lot of money to be made for the bankers if markets swing wildly between highs and lows.

CAUTION: I am not a financial adviser. I an not qualified to give you advice. And I do not know your situation. Please consult a professional.
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SLV Short Position Update
By Theodore Butler|
December 19, 2011 - 8:02am

The latest short position report for stocks was released earlier in the week for positions held as of Nov 30. This was the report that I had speculated would show a decline in the short position of SLV, the big silver Exchange Traded Fund (ETF). Contrary to my expectations, the short position for SLV increased by more than 2.2 million shares to 25.2 million shares. This represents almost 25 million ounces of silver. http://www.shortsqueeze.com/?symbol=slv&submit=Short+Quote%99

I had originally speculated that the short position in SLV would be lower in this report because the price of silver had experienced a fairly significant decline of roughly 10% ($34 to $31) within the reporting period. Most often, similar to what occurs on the COMEX, short positions expand on price increases and decline on price sell-offs. This is at the heart of the silver manipulation. To illustrate that point, the headline number in the CFTC’s Commitment of Traders Reports (COTs), the total net commercial short position, declined by 5,500 contracts from Nov 15 to Nov 29. The total COMEX commercial net position reduction was the equivalent of 27.5 million ounces, representing a 21% reduction over the two weeks. The reduction in the COMEX commercial short position was ten times greater than was the increase in the SLV short position in equivalent silver ounces, just to keep this in proper perspective. To be sure, had the COMEX commercial short position increased during that silver price decline as did the SLV, then I would have really been surprised; but that didn’t happen. Overall, the commercials were able to rig lower prices and speculative long liquidation as is their custom.

Still, I find the increase in the short position of SLV to be odd. During the reporting period, the price of gold also declined as much as $100. In contrast to the increase in SLV, the short position in GLD, the big gold ETF declined by 30% in the period from 22 million shares held short to just more than 15 million shares. The much smaller gold ETF, IAU, run by BlackRock (which is also the sponsor of SLV) witnessed a decline in its short position of 75%. (You can verify the specific numbers in the above link by inserting the stock symbols).

The decline in the GLD short position reduced its percentage of total shares outstanding to 3.5%. The increase in the SLV short position increased its percentage share of total outstanding shares to 7.8%. Due to the nature of hard metal ETFs, I believe there should be little or no short position allowed in these highly-unique securities, say of no more than 0.5% to 1% of total shares outstanding. To every shareholder of hard-metal ETFs, like SLV, GLD and IAU and others, the prospectus promises that there will be a fixed amount of metal behind every share issued. The existence of a short position effectively increases the shares outstanding (on an unauthorized basis) and the shorted shares have no metal backing.

The essence of my criticism of SLV shorting involves two things. An allegation of fraud and misrepresentation to SLV shareholders because metal can’t possibly back the shorted shares and that the short position is manipulative to the price of silver. That’s because the short sellers are shorting SLV shares because they won’t or can’t buy the physical silver as that would cause the price of silver to rise. Even though it was higher earlier in the year, the 25.2 million share short position in SLV is still outrageously excessive by any reasonable standard. I believe that BlackRock, the SLV sponsor, is negligent in not protecting the interests of shareholders and is violating its fiduciary responsibility for allowing such an excessive short position to exist. (Yes, I will be sending this to BlackRock’s chairman and president).

The issue of short selling in silver can be confusing, so let me try to make it clearer. In derivatives, like COMEX silver futures or options contracts, shorting is required. There must be a long and a short in order to create a contract. If there were no shorting, there would be no market; period. I’m not opposed to shorting in futures in general. My allegation of manipulation in COMEX silver revolves around the unusual concentration on the short side by a few commercial players, most notably JPMorgan. Concentration is the point in futures, not the act of shorting.

In the stock market, there is a different set up. Short selling is not required in securities for the market to exist, as it is in derivatives. Companies issue shares to investors and those securities trade on exchanges and over the counter. It is not necessary for there to be a short for every long in stocks, as it is in futures and derivatives trading. While legal, short selling in securities is restricted by share borrowing requirements and other measures. I’m not interested in discussing the merits of stock short selling or lack thereof; my intent is to show that shorting in futures is different mechanically than shorting in stocks. Why I am so opposed to short selling in hard-metal ETFs, like SLV, is for completely separate considerations.

The hard-metal ETFs are incredibly unique securities in the universe of stocks. I believe that this uniqueness accounts for much of the negative commentary about SLV and GLD, in particular. Of the total universe of tens of thousands of different stocks in existence, only a very few are hard-metal ETFs. Even expressing it in an actual percentage is hard. In addition, the hard-metal ETFs are relatively so new to the investment scene that their short history makes them difficult to put in proper perspective. GLD has been around for seven years, SLV for less than six years. Yet in that fairly limited time, each has become the largest publicly owned stockpile of gold and silver on earth. It seems clear that the idea of owning gold or silver by means of owning a stock appealed to a great number of investors. This has nothing to do with whether you should own these securities; that’s up to you. But you can’t objectively analyze silver or gold by ignoring the two 800 lbs gorillas in the room.

Because the hard metal ETFs are so new, so big and so unique when compared to all other securities, it is easy to overlook other facts unique to them. What accounts for their success is the convenience they offer of holding metal. Every shareholder of every hard-metal ETF believes in the representation of the prospectuses promising a fixed amount of metal for each share issued. Quite simply, every hard-metal shareholder believes metal backs the shares they own and the sponsors foster this belief. But the short selling of hard-metal ETFs completely negates the premise that metal exists behind all shares. Short sellers of hard-metal ETFs do not deposit metal and this results in the creation of shares with no metal backing.

Nowhere is the situation more critical than in SLV. Starting this year the short position in SLV has grown dramatically, from around 13 million shares to a peak of 37 million shares in the spring. Not only is the percentage of shorted shares of total outstanding shares higher in SLV than in any other hard-metal ETF, it is higher for a very unique reason – there is not enough physical silver available to allow for the normal issuance of shares as dictated by the prospectus. Aside from the harm short sellers are having on SLV shareholders, these short sellers are also manipulating the price of silver. If they had to go out and buy 25 or 37 million ounces of silver to issue shares as dictated by the prospectus, the price of silver would have soared. Instead, the SLV short sellers are helping to manipulate the price of the metal itself by defeating the intent of how shares should be issued.

This is not the first time I have raised this issue. Back in the summer of 2008, when silver was near the $20 mark, I wrote how the short position in SLV had grown to 25 to 50 million equivalent silver ounces, which was unprecedented at that time. This was back when Barclays still owned SLV and naked unreported short selling was prevalent. This naked SLV short selling played a big role in the collapse of silver from $20 to under $9 back then, just like the SLV short selling this year has contributed mightily to the collapse in silver from $49 to under $30. Certainly, the percentage decline in prices is strikingly similar between 2008 and this year. It is no coincidence that the price collapsed in 2008 and 2011 when the short selling in SLV was at an extreme. http://www.investmentrarities.com/ted_butler_comentary/06-16-08.html

In 2008, there were no good records to verify my claims that SLV had such a large short position; it was my own proprietary research. At the time, many doubted my premise because of the lack of verification. Short selling data reporting has improved immeasurably since then and today I can provide links to back up my numbers (see above). But the story was the same then and now. I believe the big COMEX short seller JPMorgan had a major role in the SLV short selling back then and this year as well. I can’t prove that, but the regulators can easily do so and I have complained to the CFTC and the SEC about this coordinated short selling in silver, both on the COMEX and in shares of SLV. I don’t think this should be too complex for them to grasp. I’ll create a paint-by-the-numbers coloring book if necessary.

That an unusual and extreme amount of short selling should appear in the two most important silver trading entities is beyond coincidence. The concentration on the COMEX and the amount of short selling in SLV is stark, verifiable and visible to all. Both will tell you all you need to know about the unusual behavior of the price of silver when analyzed with a common sense filter. But the greatest lesson of all is what all this short selling should tell you about the future behavior of silver prices.

More than anything else, this need by a few commercial crooks to have to resort to excessive and manipulative short selling should tell you about the real condition of the physical silver market. It is because the silver market is so tight and that large quantities of real silver are unavailable that the commercial crooks have to sell short so blatantly. If you can’t sell the real thing, you sell the next best substitute. Without the COMEX and SLV short selling, the price of silver would be dramatically higher. Since there has never been a legitimate explanation for the concentration on the COMEX or the excessive short selling in SLV, I am convinced both forms of manipulation and fraud are coming to an end, as the scrutiny increases. You should not let up in complaining about these crooked shorting mechanisms or in acquiring the cheap silver they have created.

To write to the chairman and president of BlackRock, sponsor and owner of SLV, and ask them to protect the best interests of shareholders by eliminating the excessive short selling in shares of SLV, please use these addresses –

Laurence.fink@blackrock.com Laurence Fink, Chairman and CEO

Robert.kapito@blackrock.com Robert Kapito, President

Ted Butler
December 16, 2011
For subscription info please go to www.butlerresearch.com
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The Comex Exposed
From Dave In Denver, The Golden Truth

just saw another "worse than 2008" post linked on Zerohedge.com. I don't know about anyone else, but I just don't find that commentary helpful. That's old news. It's no-value-added to comment on that.

I was going to post on the ECB Long Term Refinancing Operation (LTRO) today and explain why it's just another "back door" QE operation, but I'm too busy to get into that at the moment. I'll try to post something on it tomorrow. I explained in a comment response under yesterday's post what the basics are.

At any rate, celebrity hedge fund manager Kyle Bass has been commenting lately on the reasons to be diversifying heavily into physical gold and silver and why it is important to avoid using Comex futures contracts and ETFs for this purpose. The bottom line is that they are derivatives of owning real gold, not valid substitutes. In fact, they are fraudulent substitutes and we have seen from the MF Global abortion that even owning warehouse receipts entitling you to delivery of bars is no longer a valid claim on Comex gold.

Bass' firm apparently went to do an informal audit of the Comex: The Comex had $80 billion of open interest vs. $2.7 billion of actual gold inventory. That means that actual gold at the Comex is less than 4% of the potential outstanding claims. It will only take one big delivery month 4% of the open interest decides to stand for delivery and the Comex is busted. You'll see he also comments that the bars that were owned and supposedly allocated for Bass' firm were scattered all over the vaults. This is bad.

If this concept doesnt' horrify you, then carry on watching reality TV and worry about Kate Middleton's pregnancy. Those are the important topics anyway, right? Who cares about the fact that bankers and politicians are openly stealing your wealth.

Here's the video and it's well worth taking a 2-minute break from MTV to watch:

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Buy Silver…Now!
By Matt Badiali, for The Daily Reckoning

12/08/11

Silver is an amazing metal…which is why it’s likely to soar over the coming years…

You see, silver has more than 10,000 uses. It’s one of the world’s best conductors of heat and electricity. Inventors filed more patents on silver uses than any other precious metal in the world. And when silver is used for most industrial and technological purposes, it is used up forever… It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.

I’m not saying industry is going to use up all the world’s silver. That simply can’t happen. But scarcity is a real issue.

Our rapid consumption of silver leaves very little to meet any uptick in demand from investors. A spike in interest will send prices spiraling higher…

Here’s a breakdown of the silver market. The table below shows the percentage of the total amount of silver consumed by each category over the past four years…

As you can see from the table above, only 12% of the silver supplied to the market made it to bullion in 2010. That means only a little more than 100 million ounces of silver became bullion for the entire investing world.

That’s a tiny fraction to sop up all the investment interest in the world.

Of that silver, about 43 million ounces went to exchange-traded funds like the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSLV).

That means you could buy all the extra silver bullion for about $2 billion. We could buy all the surplus silver bullion from the last four years for about $10 billion.

That’s the same as the market value of the iShares Silver Trust today. If you wanted to build another silver fund, you couldn’t. There just isn’t enough silver bullion out there to fill the order.

Even trying to amass that much physical silver would send the silver price soaring. It’s a simple market fact… When there is more demand than supply, it drives the price up.

And the economic problems confronting Europe and the United States have increased interest in precious metals… Silver gained a colossal 174% from August 2010 to April 2011.

In May 2011, however, the price collapsed 31% in just four weeks. The bull market simply ran up too far, too fast… and the decline wiped out many highly leveraged silver traders.

The big money is tiptoeing back into silver.

Last month, commodity trading advisors, pool operators, and hedge funds — the “big money” — weren’t interested in silver AT ALL…

But as they move back into the market, silver prices could soar. Let me show you what I’m talking about…

Jason Goepfert created SentimenTrader, a service that tracks investor sentiment toward various asset classes. According to Jason, silver just bounced off its most pessimistic reading in four years.

The so-called “commitment of non-commercial traders” hit 10,352. That’s incredibly low. The last time sentiment numbers were that low was in August 2007. Six months later, the price of silver was 59% higher. It rose from $12 per ounce to $19 per ounce.

I went all the way back to 2002 and found that silver sentiment bottomed near 10,000 six times… On average, the price of silver rose 33% in the next six months and 54% over the next year. This chart shows the last four times it bottomed…

Here’s how the silver price performed after each of the last four times silver sentiment bottomed out…

The best return came after Bottom No. 2, which coincided with the US banking/credit crisis. Silver soared an eye-popping 405%, including its parabolic rise in 2010.

As those numbers indicate, silver is one of the most volatile assets in the world. Over the last year, silver has seen massive price swings, including an 81% rally and two 30% drops. That forced many traders to liquidate their silver holdings in order to meet emergency short-term requirements. (Plus, the debacle at commodity broker MF Global has scared many folks out of the market.)

But the long-term drivers of gold and silver’s uptrends are still in place. Enormous and growing Asian economies like China and India are getting richer…and they have deep cultural affinities for precious metals. Plus, the Western world has lived way beyond its means for a long time…the debts and liabilities it has taken on can only be paid back with devalued, debased money. This is bullish for “real money” assets like gold and silver.

With sentiment so negative toward silver (and just beginning to turn back up), it’s a great time to take a position in this long-term bull market.

If gold and silver prices are nearly certain to rise over the next few years (and probably rise dramatically), the simplest way to play that trend is to buy bullion…real, hold-in-your-hand silver coins.

And I recommend everyone do just that… Buy some silver and store it away.

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COMEX: The March to Irrelevance

By: Jim Willie CB, GoldenJackass.com

Divergence between paper gold and physical gold price is happening, the process begun. Actual physical shortages have kept the price up. The naked shorting of futures has kept the paper price down. The fraud cases and lawsuits, with no hint of prosecution, provide the levered force to create much wider divergence, as traders and entire firms depart the tainted crime scene that is the COMEX. Trust has vanished along with private accounts. At the center of the backdrop for the divergence, apart from the criminal events, is the economic deterioration and asset market downdraft. It leads to margin calls, loan payment obligations, fading investor confidence, negative sentiment, and a desire to avoid loss. Hence the huge liquidity concerns, selling of good assets that command a strong price, and central bank encouragement of gold sales even with lease. These forces conspire to push down the gold futures price from the discovery process, called the paper gold price. These forces, although real, are exaggerated by the Syndicate to explain all. On the other side is the desperation among central bankers to cover debt securities up for sale or rollover funding. They resort to utter hyper inflation by monetizing the many types of government bonds. They are obligated to aid their banker cohorts, and thus purchase truckloads of badly impaired sovereign bonds and other collateralized bonds. Over time these sovereign bonds have proved toxic. The compelling need to stimulate economies, to redeem toxic bonds, and to recapitalize and nationalize the big banks adds to the monetary inflation outcome. Therefore, two sides are in opposition in a battle to the death of one or the other. No middle ground can be achieved, not any longer. It is the quintessential battle between monetary hyper inflation and restoring bank system integrity to avert collapse. The insolvency has recently met illiquidity. The battle features strong forces on each side. The divergence between physical and paper gold price is widening.

The incurable speculator junkies committed to the addictive leveraged game rigged by the Forces of Evil seem stuck at the casino tables, where fingers are lost, finally entire hands and arms. If their practice was to purchase physical, they could benefit from the paper price swoon, and join the Forces of Good team, rather than fighting the evil side on their dominated turf. To be sure, many aware analysts in the news maintain a small gold position in COMEX that is rolled over constantly. Many have physical positions but keep with the paper trades as a hobby, better described as an addition to the juice. Leverage cuts both ways. Their continued activity has left them exposed to theft, while knowing the criminality was widespread within the arena. So many players and firms are departing the arena altogether like Ann Barnhardt of BCM Capital. The divergence between physical and paper gold price is widening.

The desperation of the bad team is growing. The gold cartel has benefited significantly from the fresh Libyan gold supply (144 metric tons) and Greek gold supply (111 metric tons), not to mention the ample Dollar Swap Facility. It is the bankers New Gold, as reported by intrepid Jeff Neilson. In a fresh sign of bankster desperation, the lease rates for gold have been pushed down to net negative levels. The fresh supply from the two broken nations has greatly aided the COMEX, providing new cannon fodder. Perhaps more wars to liberate the oppressed can be conjured up, to release more tyrant wealth. It is not a coincidence that negative gold lease rates came when Libyan gold was made available (heisted) and when Italian sovereign bonds went into critical DEFCON mode. The gold supply helped to aid the lack of bond demand. The gold lease story is analyzed more fully in the December Hat Trick Letter.

INELASTICITY BLEMISH

A preface is warranted. The paper Gold market is very different in its internal dynamics from the physical. The paper Gold market shows signs of inelasticity that borders on comical. Witness the low demand in 2001 and 2002 when Gold had a paper price tag at $300 or less per ounce. Witness nowadays the amplified selling when the paper price declines. The leverage from the corrupted paper mechanisms forces margin pressures and sales. The leveraged game goes opposite to the real world of price mechanisms. On the upside, global demand rises with a rising physical price, called the gold fever. The inelasticity on the supply side is prevalent in the paper market, while the inelasticity on the demand side is prevalent on the physical market. To confuse the mix, mining firms realize some inelasticity as price falls, they are stuck with a liquidity crunch on their forward sales ruin. A huge amount of money is required to cover their losses, urged on by Wall Street advisors. Their mining operations suffer from lack of funds, and projects are curtailed. The paradoxical differences in dynamics help to push the gap between the paper and physical Gold price. The incompatible forces work to rip apart the COMEX. The divergence between physical and paper gold price is widening.

ILLICIT USAGE OF CLIENT FUNDS AS COLLATERAL

The hypothecation battle will bring sufficient publicity to help the divergence along. As more assets are seen as committed, involved, and tainted in the process of grabbing, snatching, and securing collateral, even by illegal means, the physical assets will be removed from the system. Parties will remove accounts and metal from the COMEX in response from basic self-preservation. On the investment and speculation side, harm has been rendered to managed risk. The client funds have begun to flee. The protection and security of money in private accounts has been under siege in recent weeks since the MF Global crime scene was established and the yellow tape cordon has been put in place. Investors are pulling money out of hedge funds at a rapid rate. The COMEX will be increasingly isolated. Clients funds were redeemed to the tune of $9 billion in October, almost four times as much as they pulled in September, according to Barclay Hedge and TrimTabs Investment Research. Investors in October yanked more from hedge funds, setting a single month high over the last two years.

The redemptions are the largest for the hedge fund industry since July 2009, when $17.8 billion was returned. The Barclay Hedge office put lipstick on the corrupt pig by commenting on how investors have lost patience with lackluster investor returns. To be sure, the average hedge fund is down by about 4% this year. The global hedge fund industry size has been reduced to $1.66 trillion, still sizeable. It is always interesting, if not amusing, to read the spin from the isolated corners. Hedge funds are seeing capital depart for the simple reason of moving away from crime centers. In the process the COMEX is being isolated. With increased isolation comes the easily recognized fraud. Look for some major stories soon about the raids to the GLD and SLV inventories by their custodians engaged in naked shorting. The Exchange Traded Fund fraud story is analyzed more fully in the December Hat Trick Letter. The divergence between physical and paper gold price is widening.

DYNAMICS OF PAPER VERSUS PHYSICAL BASIS

Grand divergence dynamics are becoming clear. Ann Barnhardt explained in detail how the COMEX will go away. It will not default, but rather fall into irrelevance. She laid it out in credible detailed form with numerous factors coming to play. The COMEX might still suffer the shame and spotlight of criminal prosecution. It will more certainly suffer from being ignored and shunned. The physical basis market will not respond to the declines in the paper futures market. The current dominant market will go away due to lost integrity and eroded trust. The consequences and implications of the recent major scandal and coverup are enormous, staggering, and sweeping. The changes from the MF Global failure and theft of private segregated accounts will come in time, perhaps accelerated by another similar event to slam the message home. The Syndicate has turned desperate, resorting to theft in the open daylight, which has resulted in direct consequences. Hundreds of COMEX clients waited in line for delivery of gold, and had their wallets stolen by JPMorgan. Their Gold & Silver set for delivery found its way into JPMorgan accounts at the COMEX. The details of the missing silver then reappearing silver is discussed in the December Hat Trick Letter. The slow mentally overlook this fact. The alert who point to fraud consider it a smoking gun. On its face, evidence mounts that JPMorgan simply converted 614k ounces of MF Global client silver into JPM licensed vaults. Big hats off to the Silver Doctors for excellent financial fraud forensic analysis. Do not expect prosecution over the crime, for MF Global, for JPMorgan, or for the accomplices in London, not even Jon Corzine. The Fascist Business Model in the Untied States does not permit prosecution. The bigger the crime, the more likely the perpetrator is in control of the government high offices, the financial ministry, the printing press, or the regulators.

Ann Barnhardt explained how the COMEX will fade away into oblivion. Its final chapter will be marred by a grand price divergence, where the futures market price declines from shunned avoidance, while the cash physical market price holds steady then rises. Many including the Jackass had thought that a slew of delivery demands would force a drain in their gold & silver inventory, eventually leading to a slew of lawsuits, together to shut them down as a corrupt enterprise arena. The MF Global theft reveals the alternative route that seems more clear. The gold cartel led by JPMorgan and secretly by the USFed will not go quietly. They have resorted to theft of private accounts on the open stage. The money is not missing. That is the lie. It is held in JPMorgan accounts in London, where fraud laws are more relaxed. We have seen this Madoff movie before, but it will be shown on the silver screen again. The divergence between physical and paper gold price is widening.

The backlash has begun and will gain strength. Barnhardt offered many cogent arguments with detail on how the COMEX will be ignored from distrust and suspicion of further thefts, as clients remove funds and close accounts. Here are her main points. They apply to Gold & Silver. She has the Barnhardt weblog: http://barnhardt.biz/

Arbitrage is set to kick in. Players will buy at the cheaper corrupt paper market in COMEX and sell in the higher honest physical market, wherever brokers can match to make deals. (It is the same phenomenon that ripped the Euro sovereign bond market apart, as the German Govt Bond yields remained much lower than the Spanish and Greek.) They will take advantage of a strong basis, buy at the discount offered by COMEX, and sell into the cash spot physical market.
A linchpin holds the market together. Keeping the futures markets tied to the underlying cash physical market is the fact that the futures contracts permit taking delivery. That delivery mechanism just broke as linchpin in full view. The futures market has lost viability and trustworthiness because of the MFG collapse and theft.
The entire delivery mechanism has been corrupted and undermined. Taking delivery has meant a holding of physical metal bars is stored in a certified vault with your name attached. No longer are such holdings considered safe. Thefts occurred, and lawsuits have occurred to decided upon ownership of bars in dispute.
The de-coupling process comes when arbitrageurs finally lose all confidence in market interaction dynamics, as the cash market will lose connection on price from the futures market. Players will not be willing to take the risk of having their money, positions, and physical metals stolen or confiscated.
As players flee the futures market, the paper futures prices will decline. The cash physical market will hold steady. The divergence will come and be noticed, then be widely publicized. The players will realize that the physical market is the only remaining game to be played with honest rules in effect. The cash dealers will ignore the futures prices, no longer a valid price discovery, seeing that market demand for their physical inventory is robust, and maintain their prices steady. Later, they will even raise the physical prices. Then later still, the parabolic spike comes for physical Gold & Silver.

THE GREAT SHUN BY MINERS

Asset management funds are appealing to mining firms for direct metal supply. They are bypassing the COMEX in a new trend. It is a natural development, as miners seek a fair price and the funds seek a reliable supply. The COMEX is cut out of the process. The Sprott Funds have revealed how they sourced their precious metal from mining firms last year. The official exchanges are being cut off, a form of isolation as a result. The divergence between physical and paper gold price is widening.

See the Ashanti story as typical. The COMEX is seeing reduced supply lines, reduced operations, more criminal implications, horrible publicity, and fewer clients. Criminal fraud does that, as lawsuits will follow like cold rain. The trend shapes up well for higher gold & silver prices. Mark Cutifani is CEO of AngloGold Ashanti, a $16 billion mining firm. He said, "Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding its hard to get physical gold." The clear message is that the COMEX has no spare available metal at all. Cutifani has good insights into the commodities and precious metals markets, and describes a fascination new trend regarding the global picture. He pointed out that major gold buyers are emerging from the Middle East and Asia. See the Bull Market Thinking article (CLICK HERE).

NEW MARKETS FLOWERING

New gold centers are forming, where the safety is most assured. Hong kong and Dubai have emerged as reliable honest brokers, and will continue to provide valid safe haven. Switzerland, London, and other locations are fading fast. They are the corrupt centers where fascism has become prevalent, laced through the financial system.Takahiro Morita, the Japan director of the World Gold Council, reported that Japan's gold exports in the 10 months ended October totaled 95.6 metric tonnes, their highest level since 2008, when it registered at 95.5 metric tonnes. People who bought gold and jewelry in the 1980 and 1990 decades are selling back what they purchased, according to precious metals traders. Japan has turned into a big exporter. Contrast to the official side. Central bank purchases have risen by 114% over the previous quarter. Purchases by central banks could hit 450 metric tonnes this year, concludes the investment research at the council. The volume represents the highest level of central bank buying since at least 1970, perhaps the greatest in recent history. A veteran gold trader with actual experience in these locations pitched in to explain. He said, "These are not sales in Japan. They are exports, an important distinction. Many investors are busily relocating their precious metal bullion to Hong Kong and Dubai UAE. Look for Dubai to be the HK of the Middle East. The Chinese have made that decision, and it is being implemented with lightning speed." Most of the relocation from Japan shows up as exports, which require payments.

October imports into China from Hong Kong rose 50% over September, and up 40-fold from last year. The more attractive fair price paid in Shanghai reached $50 above the corrupt controlled London price. The arbitrage has been very active. Chinese gold imports from Hong Kong hit a record. The Financial Times reported Chinese gold imports from Hong Kong hit a record high in October and astoundingly, they accounted for more than one quarter of the entire global demand. Data showed that China imported 85.7 tonnes of gold from Hong Kong in October, up 50% from the previous month and up more than 40 times from October of last year. It marks the fourth consecutive month that China's gold flows from Hong Kong have hit new highs. The article noted that the price arbitrage between London and Shanghai was favorable for Chinese imports during late September and early October, giving astute clever traders an edge. Gold on the Shanghai Exchange traded up to $50 per ounce above the main global market based in London, a record price difference. Purchases from China have fallen since October, as the recent strength in the USDollar has made gold more expensive. Also, considerable new strain has been felt inside China in recent weeks. Conclude that price arbitrage has begun to show itself across international boundaries. The divergence between physical and paper gold price is widening.

ONE GOLD EVENT, THE BIG SQUEEZE

No gold chart will be shown in this article, out of disrespect deserved for the COMEX criminal activity. A story was recounted in recent days from my best source of solid reliable gold information. The aware gold community has overlooked a phenomenon that might be more profound in action here and now. A major squeeze is on that capitalizes on the artificially low COMEX price and the higher honest physical price. The Barnhardt effect can be seen, or at least recounted. A gold trader informed that some multi-$billion purchase Gold orders have been in the process of filling at or near the $1600 price per ounce. The price must remain near $1600 to complete the orders and permit them to clear. Call it Agent2000 who seeks the massive amount of Gold, one of the Good Guyz. The name fits since their goal is to force the Gold price back over $2000/oz after the sale transaction clears. Since so large, the orders take time to fill completely. The low-ball buy orders have been filling for over two weeks. At the same time, the Agent2000 buyer has enlisted the aid of numerous assistants to push down the paper Gold price by putting extreme pressure on some bad players, some nasty types from the usual list of suspects in the Western banking sector. These bankers are being squeezed out of their gold, as they contend with deep insolvency, reserves requirements, falling sovereign bond values, depositors exiting, and more. They are players in what has been widely called the Gold Cartel. The Jackass term has been applied in a wider sense, as they have been part of the Syndicate that reaches into the Wall Street banks, the defense contractors, news media, and big pharma.

The other side of Agent2000 is where additional intrigue lies. He (they) have buyers lined up on the physical side some deals ready to close at $1900 per ounce. Later the price will push over the $2000 mark. The buyers are ready. One must infer that the buyers have a great deal of money ready to devote to the battle. Maybe some is piled up to escape the clutches of the cartel, removed from the system. Maybe some is piled up at a major new slush fund to do battle with the cartel at their own game. Maybe some is piled up and kept out of sight from greedy hands in government officials, like off-shore in the Caribbean or sequestered in the Persian Gulf. This story might be perplexing to many in the gold community since the Good Guyz are pushing down the Gold price in order to facilitate a gigantic order that will work toward crushing the cartel by draining their gold. Their gold cannot be drained without the completion of a great many orders. It is only natural to attempt to achieve the lowest possible price. If the gold cartel insists on pushing the price down, then they open the door for major volume sales at the artificially low and very much bargain price. It is happening, but the gold community does not enjoy the symptoms of the process.

So a huge huge huge buyer of gold is busy, and a multi-$billion order is working through. The buyer demands a $1600 price, while on the other side of the table Agent2000 has a sale lined up for the same metal at a $1900 price on physical. The trade will take gold bullion from the Bad Boyz hands and put it into the Good Guyz hands. In the process, the COMEX supply lines will be drained more. This is consistent with mining firms removing supply lines to the COMEX. The Agent2000 buyer is pushing price down, squeezing some evil parties hard, crushing testicalia along the way. He (they) describe to the distressed seller at $1600 that pressures will continue until the deal is closed. The seller is in tremendous pain with open distress showing. So many assume the Bad Powerz are pushing down the Gold price. Not so!! This event and transaction displays how some pain comes in many isolated cases of Good Guyz pushing the Gold price down to empty the Bad Powerz vaults. My source would not reveal the identity of Agent2000 or the location of the squeeze. It seemed like London. The money is not exclusively coming from China. Word has it that Russia is also applying the pressure, with some Chinese teamwork. The Competing Currency War has a new major flank. The divergence between physical and paper gold price is widening.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

home: Golden Jackass website

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Jim Willie CB, editor of the “HAT TRICK LETTER”

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GOT GOLD YOU CAN HOLD?

GOT SILVER YOU CAN SQUEEZE?

IT'S NOT TO LATE TO ACCUMULATE!

The Reasons To Own Both Silver And Gold Continue To Accelerate

2011-12-20T22:20:00.000-05:00

Morgan Stanley Deconstructs The Funding Crisis At The Heart Of The Recent Gold Sell Off, And Why The Gold Surge Can Resume

From ZeroHedge

A week ago, we touched upon the likelihood that the recent gold sell-off was driven primarily due to a quirk in liquidity provisioning in which gold plays a key role via its "forward lease rates", or the Libor-GOFO differential. Specifically, in "As Negative Gold Lease Rates Collapse, The Gold Sell Off Is Likely Coming To An End" we said, "In a nutshell, negative lease rates mean one has to pay for the "privilege" of lending out one's gold as collateral - a prima facie collateral crunch. The lower the lease rate, the greater the use of gold as a source of liquidity - and since the indicator is public - it is all too easy for entities that do have liquidity to game the spread and force sell offs by those who are telegraphing they are in dire straits and will sell their gold at any price if forced, to prevent a liquidity collapse." Said otherwise, the lower lease rates drop, and they recently hit a record low for the 3M varietal, the likelier it is that gold may see substantial moves lower. Today, Morgan Stanley's Peter Richardson recaps precisely what was said here, in a note titled "Recent fall in gold prices points to bank funding costs." Granted, MS only looks at the first part of the equation - the dropping lease rates, and ignores the re-normalization in gold, aka the tightening in lease rates. Well, with the 3M forward lease rate now almost back to unchanged, it appears our speculation that the gold sell off, with spot at $1575 on the 15th, is over were correct, and gold is now $40 higher, and just below the critical 200 DMA that everyone saw as the catalyst of gold going to $0. So what does MS have to add to our analysis? Well, much more optimism for one, because not only does the bank think we are right that the collapse in negative lease rates (i,e., the flattening to practically unchanged) mean the sell off is over, but such a normalization of the gold lease market has "the makings of a renewed upward assault on the recent all-time high.... Our current gold price forecast for 2012 of US$2,200/oz remains in place under these circumstances." Qed.
The key highlight of Morgan Stanley's hypothesis of what negative gold lease rates imply for gold:

Firstly, we think negative lease rates are highlighting a sharp increase in the demand for gold as collateral for US dollar loans at a time of reduced liquidity in the traditional US dollar interbank funding market. The more negative the lease rates the higher the cost of funding using gold as security.

Secondly, access to this collateral on a scale indicated by the rise in GOFO can only emerge if the providers of liquidity to the leasing market are prepared to increase the stock of lent gold in circulation. This development points to the central banks, the largest custodians of above-ground stocks and the traditional providers of liquidity to the gold-leasing market. Aware of acute funding pressures in the traditional interbank market, it seems increasingly likely to us that central banks have increased the quantum of gold available for use in a non-traditional funding market, at least until the measures to alleviate bank-funding stress in the US dollar swaps market have been successful. The recent easing in the scale of negative gold lease rates, suggests that demand for this source of short-term funding might be easing, but has not disappeared, even after the raft of measures announced by the ECB and the earlier coordinated intervention by the six central banks.

Said otherwise: we likely have smooth sailing for now, as banks will not proceed to cannibalize each other for a bit. But keep a very close eye on on that LIBOR-GOFO spread: the second it collapses, it may be time to step away from the market…

more
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London Trader - We are Witnessing a Historic Bottom in Gold

From Eric King

KingWorldNews.com

With many investors worried the price of gold could head lower, today King World News interviewed the “London Trader” to get his take on the gold market. The source stated, “The Chinese have continued to take delivery of both physical gold and silver directly from the ETF’s GLD and SLV. They are also going directly to producers. Entities are bypassing the COMEX altogether and going straight to gold mining companies. Every single month producers have a certain amount of gold and silver they sell. Normally they sell it to the bullion banks and the bullion banks, of course, leverage this gold and sell up to 100 times that in paper markets to control prices.”

The London Trader continues:

“They (bullion banks) hold that little bit of physical gold and claim they are backed up on their position to the CFTC. I have all my large buyers now going to producers and saying to them, ‘Look, don’t sell it to the bullion banks, we’ll buy it from you.’ So we are buying directly from the producers and this includes some sovereign entities which are doing the same thing.

We’re struggling to get the physical out of these guys (producers) because they have so many people banging on their door, saying, ‘Sell it to us direct.’ What these buyers are doing is essentially taking gold out of the system, which means the bullion banks can’t leverage that gold anymore.

So this is a huge, dynamic shift that wasn’t there before. Now we are working on one other thing. We’re beginning to offer them forward contracts. If you are a sovereign entity, what you are saying to these producers, especially on new projects, is, ‘Why don’t you sell the gold to me in 12 months? Here’s the cash, just provide it to me 12 months from now.’

These buyers are now cutting off future gold supply from the bullion banks....

“This is a huge, tectonic shift in price dynamics going forward because it is taking price discovery away from the bullion banks. These large Chinese buyers and sovereign entities which are doing this are going to have a massive impact on the market.

Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold. They don’t understand what is happening in the physical market. The bullish fundamentals I just described to you have enormous implications.

We are making a historic bottom right now. The paper gold, or virtual gold market, has diverged so far from the physical market that it’s no longer a credible marketplace. That’s the key thing that came out of a very important meeting I was in yesterday where we had some serious players. The people I was meeting with are all on the buy side and have been since the lows last week.

There are massive physical orders, sitting, waiting for any more discounts, and yet everyone else seems to be short. So you have huge fuel for a rally here.

You have to keep in mind this recent plunge was orchestrated with borrowed gold and that borrowed gold is now gone. That’s why gold can’t go much lower. Any dips in price will be aggressively purchased. As I said earlier, right now we are witnessing a historic bottom.”

The London Trader previously told KWN on October 21st that China had purchased a massive amount of physical gold at the lows of the October 20th session. That marked the dead low for the price of gold in October and gold rallied roughly 10% in the following 8 trading sessions.

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THIS HEADLINE IS A BLATANT LIE:

DJ US Nov Housing Starts Surge 9.3%
Tue Dec 20 08:30:23 2011 EST WASHINGTON (Dow Jones)--U.S. home building surged to the highest level in 19 months during November and construction permits grew, encouraging signs for a part of the economy struggling to get back on its feet.

Home construction last month increased 9.3% to a seasonally adjusted annual rate of 685,000 from October, the Commerce Department said Tuesday. The results were better than forecast. Economists surveyed by Dow Jones Newswires expected housing starts would rise by 0.3% to an annual rate of 630,000.

The increase in November was driven by a 25.3% increase in multi-family homes with at least two units, a volatile part of the market. Construction of single-family homes, which made up about 65% percent of the market, rose only 2.3%.

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Time To Jump On Board The Gold Train - It's Warming Up To Leave The Station

From Dave in Denver, The Golden Truth

After an 8 month price correction that has been mistakenly taken to be a new bear market by those who are clueless, like Dennis Gartman, it appears that the gold bull is kicking at the gate:

Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold. They don’t understand what is happening in the physical market. The bullish fundamentals I just described to you have enormous implications - London bullion trader

Here's the short interview which is the source of that quote: LINK It is a must-read and the report of large "entities" going directly to gold producers in order to source large quantities of bullion is consistent with other industry insider accounts of this. I linked one a couple weeks ago.

"Interesting" from my viewpoint because I have pointed to some indicators that likely signal that we are near or at a bottom and that the next extended move higher in gold will likely take us to a new record nominal high in gold.

One of these signals as discussed yesterday is gold breaking its 200 dma to the downside. Currently the 200 dma is around $1618 using the Comex continuous futures contract (this would correlate to around $1615 on a spot price basis).

Another signal would be the current long/short Commitment of Traders (COT) structure of the hedge funds (large specs) and the big banks (commercials). For the duration of the gold bull market, market bottoms have been associated with a low relative net long position being taken by the large specs and a low relative net short position being taken by the price manipulating bullion banks. That this is the case is indisputable. Currently the large specs have a very low net long position and the banks have low net short position. I rehypothecated Ted Butler's latest remark on the COT structure from Ed Steer's Gold & Silver Daily:

I think the gold COT structure is back to a bullish set up, especially if the improvements after the cut-off are what I think them to be. As such, gold may also be at a price bottom, especially considering the bullish signals (or lack of bearish signals) coming from the gold physical market (ETF holdings, etc.). But to be fair, while gold is near bullish COT readings over the past year or so, on a much longer historical basis there may still be room for further liquidation. My personal sense is that we probably shouldn’t see big further speculative long liquidation in gold and may, in fact, be good to go to the upside. But if the COT structure in gold is bullish (as I think), then silver’s structure is screamingly, super-duper bullish.

Combined, the 200 dma plus the COT signals are quite bullish for gold.

One indicator that I have not seen commentary on is the COT set-up in the euro, and tautologically, the inverse set-up in the dollar. Currently, the large spec hedge funds are record short the euro, which means they also are very long the dollar vs. the euro. Conversely, the big banks are primarily the entities which would take the other side of the hedge fund bet, meaning the big banks are very long the euro and very short the dollar. This is very very bullish for gold.

Take a look at this chart rehypothecated from http://www.barchart.com/

(click on chart to enlarge)

The green line that goes below zero starting in May is the short position of the large specs. You can see how the hedge fund position has shifted from long to short this year. The red line is the long position of the big banks. Why would the euro begin to move higher again rather than collapse, like everyone seems to think will happen? Because I have said all along that I wouldn't be surprised if the EU figures out a way to save itself from extinction. Hell the U.S. is already printing money to bail out Europe via the up to $1 trillion currency swap facility arranged by the Fed. This is a de facto QE because it increases the size of the Fed balance sheet until the swap unwinds, if it ever does. This is printing and this dollar bearish. Just wait until the Fed has to start printing to fund 2012 Government spending programs...Don't forget, what's bearish for the dollar is bullish for gold...

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Wednesday, December 7, 2011

Will A Euro Short Squeeze Launch Gold And Silver Higher?

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Net EUR Short Position Soars To All Time Record, Implies "Fair Value" Of EURUSD Below 1.20, Or Epic Short Squeeze

From ZeroHedge

It was only a matter of time before the bearish sentiment in the European currency surpassed the previous record of -113,890 net non-commercial short contracts. Sure enough, the CFTC's COT report just announced that EUR shorts just soared by over 20% in the week ended December 13 to -116,457. This is an all time record, which means that speculators have never been more bearish on the European currency. Yet, the last time we hit this level, the EURUSD was below 1.20. Now we are over 1.30. In other words, the fair value of the EURUSD is about 1000 pips lower, and has been kept artificially high only due to massive repatriation of USD-denominated assets by French banks (as can be seen in the weekly update in custodial Treasury holdings, which just dropped by another $21 billion after a drop of $13 billion the week before). This means that the spec onslaught will sooner or later destroy the Maginot line of the French banks, leading to a waterfall collapse in the EURUSD, which due to another record high in implied correlation will send everything plunging, or if somehow there is a bazooka settlement, one which may well include the dilution of European paper, the shock and awe as shorts rush to cover will more than offset the natural drop in the EUR, potentially sending it as high as the previous cycle high of 1.50. If only briefly.
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Fed May Inject Over $1 Trillion To Bail Out Europe

From ZeroHedge

As first reported here, two weeks ago European banks saw the amount of USD-loans from the Fed, via the ECB's revised swap line, surge to over $50 billion - a total first hit in the aftermath of the Bear Stearns failure prompting us to ask "When is Lehman coming?" However, according to little noted prepared remarks by Anthony Sanders in his Friday testimony to the Congress Oversight Committee, "What the Euro Crisis Means for Taxpayers and the U.S. Economy, Pt. 1", we may have been optimistic, because the end result will be not when is Lehman coming, but when are the next two Lehmans coming, as according to Sanders, the relaunch of the Fed's swaps program may "get to the $1 trillion level, or perhaps even higher." As a reference, FX swap line usage peaked at $583 billion in the Lehman aftermath (see chart). Needless to say, this estimate is rather ironic because as Bloomberg's Bradely Keoun reports, "Fed Chairman Ben S.

Bernanke yesterday told a closed-door gathering of Republican senators that the Fed won’t provide more aid to European banks beyond the swap lines and the discount window -- another Fed program that provides emergency funds to U.S. banks, including U.S. branches of foreign banks." Well, between a trillion plus in FX swap lines, and a surge in discount window usage which only Zero Hedge has noted so far, there really is nothing else that the Fed can possibly do, as these actions along amount to a QE equivalent liquidity injection, only denominated in US Dollars. Aside of course to shower Europe with dollars from the ChairsatanCopter. Then again, before this is all over, we are certain that paradollardop will be part of the vernacular.

Historical ECB swap line usage with the Fed, and projected assuming $1+ trillion in use. Just to put it all into perspective.

For all those lamenting the ECB's lack of willingness to print, fear not: the almighty Chairsatan has vowed to valiantly take his place when needed. As in 2 weeks ago. From Bloomberg:

European financial companies led by Royal Bank of Scotland Plc were borrowing about $538 billion directly from the Fed when the central bank’s emergency loans to all banks peaked at $1.2 trillion on December 2008, according to a Bloomberg News examination of data released by the Fed under last year’s Dodd- Frank Act and earlier this year under court-upheld Freedom of Information Act requests.

The Fed hasn’t provided any estimates of how large the swap lines might get, said David Skidmore, a Fed spokesman. He declined to elaborate.

“To get above $600 billion wouldn’t be a stretch,” said Desmond Lachman, a former International Monetary Fund deputy director who’s now a resident fellow at the American Enterprise Institute, a conservative public-policy center in Washington. “You’re talking about a European banking system that is huge in relation to that of the United States.”

Josh Rosner, a banking analyst with New York-based Graham Fisher & Co., said the Fed’s swap lines may end up helping Europe support banks that might not deserve emergency loans.

“As a result of this commitment of financial support, we’re now supporting undemocratic approaches implemented largely by authorities who have demonstrated an ongoing inability to either recognize the scope and scale of the problems or come to a consensus on the proper approach,” Rosner said.

The ultimate size of the swap lines is “unknowable at this point,” he said.

For those wondering what all this means, we remind you that there was a roughly $6.5 trillion synthetic (duration mismatch) USD short as of 4 years ago, as we reported at the time. That short has gotten substantially larger following a 4 year regime of the USD as a funding currency courtesy of ZIRP. Which means that any time the liquidity shortage threatens to collapse the system, the first thing to go stratospheric will be the USD as the global financial system scrambles to cover its short. It also means that anything the Fe and/or ECB can do from a pure printing standpoint will be peanuts compared to the utter carnage unless the dollar short is not preserved. Which naturally means that it is up to the Fed to continue drowning the world in either nominal dollars, or swapped ones, such as under the form of a USD-EUR swap, which is nothing but a forward operations. In essence, with the FX swap lines, the Fed engages in the ultimate currency warfare tool: it sells dollars to the entities most needy. And it does so, because if it doesn't, said needy entities will implode, and the hollow financial dominoes will topple, leading to a mess that not even infinite synthetic or real printing of binary of paper dollars, euros, or anything else will do to fix.

Which is why all those wondering if gold should be bought now or the second after the ECB starts printing, we have one piece of advice: just look at the chart above. It says all one needs to know.
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Jim Rickards - This Will Send the Price of Gold to the Moon
From Eric King

KingWorldNews.com

With investors concerned about the recent plunge in gold and silver and continued uncertainty regarding the European situation, today King World News has released part II of the eagerly anticipated interview with KWN resident expert Jim Rickards. KWN expert, Rickards, has gained international recognition for his deadly accurate predictions regarding moves by central planners. Here is a small portion of what Rickards had to say about gold, QE3 and more: “Well, you see the Treasury shorting the dollar in the form of taking SDR notes. You see printing in order to get the dollar back down against the euro. You see more printing to break the peg if China chooses to repeg, which I believe they will. And, of course, the IMF has its own printing press to print SDRs.”

Jim Rickards continues:

“By the way the European Central Bank will start printing as soon as they see deflation, which we can expect in the first quarter based on the fact that Europe seems to be slipping back into a recession. So with printing from the ECB, printing from the Fed, printing from the IMF, the Treasury shorting the dollar and the currency wars in full swing, how can this mean anything other than the price of gold going up a lot.

So it looks like we are going to get flooded with dollars. One other thing I would add to that, which I think is extremely bullish for the price of gold, I’ve been talking about QE3, but there is something even more insidious than that which we may see. It’s called NGDP targeting.

NGDP stands for Notional Gross Domestic Product. Targeting just means that the Fed is going to pick a target for growth in NGDP and then print as much as it takes to hit that target.

Now notional GDP is not the same as real GDP. In other words, notional GDP is real GDP plus inflation. If the Fed targets NGDP, what they are really saying is they don’t care about inflation anymore, they’ve given up. I’ve said all along the Fed wants inflation and this is a way of getting it. It’s also a way of destroying the debt by cheapening the dollar.

...Targeting notional GDP, it’s just a fancy way of saying printing or QE forever. I’m using the phrase QE3 to mean more printing, but I actually think what the Fed is going to do is target NGDP....

“That means no limits, no time limit, no quantity limit, just a target. And since real growth is not great, the target is going to be mostly comprised of inflation. That’s going to send the price of gold to the moon.”

In part I of Rickards blockbuster KWN interview he let King World News listeners globally know what would trigger QE3: “I was one of the ones going back to March of 2011 saying that QE3 was not coming in the summer. When QE2 was over in June, a lot of voices were saying things are desperate, the Fed’s got to print, they’ve got to monetize the debt and you are going to see QE3. I said no you are not going to see it and that turned out to be the case.

But here we are six months later and what I’ve said is that the key to QE3 is not economic conditions in the United States, it’s the cross rates. Look at the euro/dollar cross rate and look at the Chinese Yuan cross rate and that’s your green light (for QE3).

It’s a little bit of an estimate, but to me the key level is 1.30 (on the euro). With the euro 1.30 or higher, that is going to accomplish the Fed’s purpose of a cheap dollar, so we will not see QE3.

But now that the euro has breached 1.30 and if you see it at that level or going lower, 1.28, 1.27, trading in there, then you are going to see QE3. That’s going to cheapen the dollar and get the euro back up again. So, yes, it (the euro) has traded down, but I view that as a temporary phenomena and something that is going to be a trigger for QE3 from the Fed.

As for Europe, they will get this done over the next couple of months. There has been a lot of talk asking why doesn’t the ECB monetize the debt? That’s not their job, but they will print money when the time comes. The signal for that is deflation. You’ve got to see deflation in Europe in the price indices and that’s the signal for the ECB to print.”

In part II of his King World News interview, Rickards has more to say about exactly what the central planners are up to and how it will impact the gold market as well as global markets. Part II of the KWN Jim Rickards interview is available now and you can listen to it by CLICKING HERE.

Jim Rickards’ new book Currency Wars: The Making of the Next Global Crisis has just officially launched and has made the New York Times Best Seller list for the second week in a row! Make sure to order your copy today!

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Beware the Coming Bailouts of Europe

Ron Paul
Prison Planet.com
Tuesday, December 20, 2011

The economic establishment in this country has come to the conclusion that it is not a matter of “if” the United States must intervene in the bailout of the euro, but simply a question of “when” and “how”. Newspaper articles and editorials are full of assertions that the breakup of the euro would result in a worldwide depression, and that economic assistance to Europe is the only way to stave off this calamity. These assertions are yet again more scare-mongering, just as we witnessed during the depths of the 2008 financial crisis. After just a decade of the euro, people have forgotten that Europe functioned for centuries without a common currency.

The real cause of economic depression is loose monetary policy: the creation of money and credit out of thin air and the monetization of government debt by a central bank. This inflationary monetary policy is the cause of every boom and bust, yet it is precisely what political and economic elites both in Europe and the United States are prescribing as a resolution for the present crisis. The drastic next step being discussed is a multi-trillion dollar bailout of Europe by the European Central Bank, aided by the IMF and the Federal Reserve.

The euro was built on an unstable foundation. Its creators attempted to establish a dollar-like currency for Europe, while forgetting that it took nearly two centuries for the dollar to devolve from a defined unit of silver to a completely unbacked fiat currency note. The euro had no such history and from the outset was a purely fiat system, thus it is not surprising to followers of Austrian economics that it barely survived a decade and is now completely collapsing. Europe’s economic depression is the result of the euro’s very structure, a fiat money system that allowed member governments to spend themselves into oblivion and expect that someone else would pick up the tab.

A bailout of European banks by the European Central Bank and the Federal Reserve will exacerbate the crisis rather than alleviate it. What is needed is for bad debts to be liquidated. Banks that invested in sovereign debt need to take their losses rather than socializing those losses and prolonging the process of adjusting their balance sheets to reflect reality. If this was done, the correction would be painful, but quick, like tearing off a large band-aid, but this is necessary to get back on solid economic footing. Until the correction takes place there can be no recovery. Bailing out profligate European governments will only ensure that no correction will take place.

A multi-trillion dollar European aid package cannot be undertaken by Europe alone, and will require IMF and Federal Reserve involvement. The Federal Reserve already has pumped trillions of dollars into the US economy with nothing to show for it. Just considering Fed involvement in Europe is ludicrous. The US economy is in horrible shape precisely because of too much government debt and too much money creation and the European economy is destined to flounder for the same reasons. We have an unsustainable amount of debt here at home; it is hardly fair to US taxpayers to take on Europe’s debt as well. That will only ensure an accelerated erosion of the dollar and a lower standard of living for all Americans.

Originally appeared at http://paul.house.gov/

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Oblivious Because of Mainstream Media

By Greg Hunter’s USAWatchdog.com

I think most people are simply oblivious to the enormous dangers the world economy faces. Oh, I think we will all get through Christmas and New Years without a meltdown, but all bets are off in 2012. A new acquaintance of mine told me last Friday, “Isn’t the economy getting better?” I just looked at her and shook my head in the negative. Then she said, “I guess if it was getting bad, the media wouldn’t tell us the truth.” I shook my head in the affirmative. My new friend is 75 years old and gets a Social Security check every month. She’s pretty sharp, but I don’t blame her for being misinformed. She gets her news the old fashioned way—from the mainstream media (MSM).

There is no wonder so many are in the dark and completely unprepared for the next crash. The front page of USA TODAY, last week, touted a headline that read: “Are We There Yet?” The article said, “The economic signs are encouraging, but we’re a long way from a comeback.” It covered recent upticks in auto and home sales. It also said the unemployment rate recently fell to “8.6%.” The USA TODAY story went on to say, “Although the decline was partly due to a 315,000 drop in the labor force as discouraged job seekers simply gave up, employment is up an average 321,000 a month since August, according to the Labor Department’s household survey. Most encouraging: Much of the hiring appears to be by small businesses, which typically fuel job growth in a recovery.” Wow, the fact that 315,000 people “simply gave up” seemed completely glossed over. Why did more than 300,000 people give up? Maybe it’s because there are precious few jobs. And what about the 400,000 people every week filing unemployment claims? Never let the facts get in the way of positive spin to please the advertisers. The USA TODAY story closes with a business professor who said, “I have a lot of confidence in the future.” (Click here for the complete USA TODAY story.)

I am happy for him, but for a little balance and more accurate reporting, maybe the newspaper could have also quoted an economist who wasn’t so optimistic? John Williams of Shadowstats.com can provide that balance. In his latest report, Williams calls the recent unemployment numbers “nonsensical hype,” and “. . . help-wanted advertising has been in monthly decline since May of this year.” The report goes on to say, “November retail sales and industrial production both showed renewed faltering in the U.S. economy, reflecting the impact of the structural impairment of consumer liquidity. Although the headline CPI inflation number was flat for November, underlying detail showed the still spreading impact of high oil prices. Inflationary pressures continue to be from Federal Reserve polices, not from strong economic activity. As the Fed increasingly is pushed to support the banking system, the central bank’s actions should accelerate the pace of U.S. dollar debasement, as well as the pace of rising U.S. inflation and precious metals prices.” (Click here for the Shadowstats.com home page.) Inflation, by the way, is running at 11% annually. (According to Williams, that would be the true inflation rate if it were calculated the way Bureau of Labor Statistics did it in 1980 or earlier.)

The economy is so weak, the Fed is going to be “pushed to support the banking system!” That means the Fed will print money to continue bailing out the banks, and not just the banks here, but overseas as well. The Fed recently opened up a new round of bailouts for European banks with what are called dollar swaps. The head of the International Monetary Fund (IMF), Christine Lagarde, warned last week of the global damage that could happen if the sovereign debt crisis in the Eurozone spun out of control. FT.com reported, “There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating.” (Click here for the FT.com story.)

One escalation could be the long rumored credit rating cut of French sovereign debt. The Guardian UK reported over the weekend, “France could be stripped of its triple-A credit rating before Christmas, raising new doubts about the survival of the euro, analysts have predicted. Standard & Poor’s – one of the three top rating agencies – is expected to cut France’s rating within days, in a move that would weaken its ability to raise funds on financial markets.” (Click here for the Guardian UK story.) A rating cut to Europe’s second largest economy is not a sign of a turnaround—quite the opposite.

Finally, the USA TODAY story mentioned housing making a significant comeback next year. The story said, “After adding virtually nothing to — or subtracting from — economic growth in recent years, “You’re talking about housing finally being a meaningful contributor to the overall economy” in 2012, Mesirow Financial’s (Diane) Swonk says.” I guess the editors didn’t think it was important to mention the gigantic ongoing foreclosure crisis in the U.S. On the same day as the USA TODAY story was published, CNBC reported, “Despite a seasonal slowdown in overall foreclosure activity, and a process still bogged down and backed up by the “robo-signing” processing scandal, the U.S real estate market is about to be hit by another surge of bank repossessions, according to a new report from the online foreclosure sale site RealtyTrac. As banks resubmit millions of documents and courts begin hearing cases again, the backlog of over four million delinquent loans will start surging through the pipeline again.” (Click here for the complete CNBC story.) What effect will these foreclosures have on home prices and retail sales? I’ll bet it will not be positive for new home sales.

Listen, there is nothing wrong with putting positive facts or quotes in a story, but when you ignore something as big as a foreclosure crisis with “more than four million delinquent loans,” you are not writing an unbiased story. You are creating propaganda that gives a completely false picture of the economy. If you are reporting the news, your job is not to make people feel good. It is to give them the facts and analysis that delivers a clear picture of what is truly going on. The MSM is simply not doing its job. In the next meltdown, the excuse “Nobody saw this coming,” will not be credible and neither will the MSM. After all, that was what they said in 2008.

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The Federal Reserve Has been CHECKMATED! QE to Infinity

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GOT GOLD YOU CAN HOLD?

GOT SILVER YOU CAN SQUEEZE?

IT'S NOT TOO LATE TO ACCUMULATE!

The Great Christmas 2011 Gold Sale

2011-12-16T12:54:00.000-05:00

"A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men ... [W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world; no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men."
-Woodrow Wilson
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From Bill Murphy on Planet GATA at The Lemtropole Cafe [subscribe!]

Europe and the US are going into mega money printing mode as the only perceived way out to stave off economic disaster … not that it won’t lead to the same anyway, but they are desperate and have NO other solutions which the politicians can handle and that the public on both continents can handle.

To deflect attention and assuage financial market concerns the leadership/bankers in Europe and the US made a joint command decision to bury the price of gold to take it off the inflation radar screen. To accomplish this objective and demoralize the sector they have used all of The Gold Cartel’s operational procedures and have succeeded in terrorizing the investment community. It has worked for the moment.

*By trashing gold The Gold Cartel and allies have created an illusion that gold is no longer a safe haven and not the place to be investment-wise. The fact the price has been up 11 years in a row and is still up nicely for the year has been discarded. This orchestrated attack has the Dennis Gartmans of the world proclaiming the so-called gold bubble is over.

He could not be more wrong about gold (what else is new)? While The Gold Cartel has arranged for physical gold to hit the markets via leased gold/official sector selling, and bombed the derivatives markets, some major players behind the scenes are buying heavily, according to my sources. They KNOW about The Gold Cartel. They know what they are doing and why. And they know this takedown will not stand, just like all the other ones have failed too.

This is very important to appreciate because the latest kill gold maneuver is much more desperate/revealing than ones in the past. The reason is not only are they are running out of available central bank gold to do their dirty, but they have been forced to mobilize leased gold, which will have to be bought back at some point. This is different, if I am correct, than in the past when The Gold Cartel leased gold which they never expected to get back, and probably have not … which is why the central banks only have half of the gold reserves they say they have in their vaults.

So, not only do we have major players accumulating gold on this break, we have future demand increased dramatically down the road. The lease sellers will be competing in the future to get their gold back vis-à-vis the buying of certain central banks, Indians, Chinese, and follow the trend western buyers when gold recovers.

For 11 years gold buyers in India, Asia and elsewhere have waited for opportunities to accumulate bullion on dips such as this one. It has worked every time and there is no reason for them to believe this dip will be any different. They are unlike western buyers who tend to be momentum and trend oriented.

These traditional, eastern dip buyers will be there, for the reasons to own gold are more powerful today than ever before. The Gold Cartel sellers are going to be forced to step back, and a VACUUM will gradually be in place. This is when gold steadies and begins to recover. At some point in the first quarter of next year, and it being a pivotal election year, western investors will see what the European/US bankers are really up to. There will be no denying it then and it will set off a gold buying binge like rarely seen before.

As this spree takes hold, the price of gold is likely to go into explosive mode. The move higher will be much more dramatic and faster than in years past.

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By now we have all seen and considered the record negative lease rates on Gold as playing a big part in the recent take down in the price of Gold, despite no underlying fundamentals to support such a fall in price.

Whether this "take down" by the banking cabal was to aid the central banks wish to make "things appear better than they are" in the financial system by pushing down Gold prices, is really irrelevant. In fact, after just two weeks of Dollar swaps, European banks have again run out of Dollars. In effect, the "demand" for Dollars is exceeding the "supply" of Dollars. As rising Dollar equals a falling Gold price.

The European banks have run out of "quality" collateral to swap for Dollars, and the only "good" asset they have left to sell is Gold. By selling leased Gold, the European banks are able to raise the needed Dollars.

But from where are they getting this Gold to lease, and subsequently sell to raise cash [Dollars]?

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The Bankers’ New Gold

By Jeff Nielsen

In a fresh sign of bankster desperation, we recently learned that they have pushed lease rates for gold to the lowest, negative level in history – i.e. they are paying people more money to “borrow” their gold than at any other time. We know this is a sign of desperation, because back in the real world, buyers are paying premiums near record-highs to buy their (real) gold.

There are numerous implications regarding this latest bankster tactic to suppress the gold market, but before getting into those let’s explore all of the reasons why bankers like “leasing gold” in the first place. The starting point is to note that it is with gold-leasing that we see the beginnings of the banksters’ 100:1 leverage in the gold market.

A banker is holding a quantity of gold in his vault. He “lends” the gold to a trader, and suddenly you have two parties both pretending to be the “owners” of that gold. Naturally, the banksters also like the fact that this is a totally opaque, unregulated/unreported transaction. The banksters can secretly lend out their gold, and since the transactions are never reported, we lack the absolute proof that none of this “loaned gold” is ever repaid.

There is certainly plenty of circumstantial evidence on which to base such a conclusion, however. In order to review this evidence, we first need to know what is being done with the bankers’ leased gold. A detailed analysis by veteran precious metals commentator Frank Veneroso explains how and why “The ultimate borrowers in the gold lending operation are these shorts in the gold futures and forward market.”

We immediately see a second reason the bankers love gold-leasing: all of the “leased” gold ends up being shorted onto the market. What this directly implies then is that in order for these gold leases to ever be repaid the short positions must be closed out so that the gold (supposedly) backing the trade can be repatriated to the bank. However, what we see in the gold market is a huge, permanent short position in the gold market – which has swelled enormously since Veneroso wrote the article above nearly a decade ago.

We now know that at least some of these gold leases have never been repaid, since the gold that was loaned out remains on the market. However, as a matter of simple arithmetic we can deduce that few if any of these leases are ever repaid. As I noted above, each gold lease creates “paper gold” (i.e. a “fractional reserve” gold market) and increases the bankers’ leverage in the gold market.

We know from Jeffrey “I can’t keep a secret” Christian of the CPM Group that the gold market is leveraged by approximately 100:1. Yet just as every new lease increases leverage in the gold market, closing out any lease would reduce leverage by a corresponding amount. The combination of the permanently rising leverage, and the permanently rising short position provide irrefutable empirical evidence that little if any of this “leased gold” is ever repaid.

We can reinforce this conclusion further through common sense, and a basic observation of bankster behavior. Specifically, bankers never reduce their leverage voluntarily – the exception being short-term panic reactions each time their reckless gambling (again) pushes them to the verge of their own bankruptcy. However, as noted above there is zero empirical evidence that the banksters ever reduce their leverage in the gold market on even a semi-permanent basis.

Having supplied several powerful reasons as to why the bullion banks love to “lease” their gold (i.e. sell it to multiple buyers) begs the question: why aren’t the bankers always “leasing” vast amounts of gold to suppress the price? Hopefully that answer is obvious to regular readers. If you want to loan ton after ton of gold onto the market, you must have some original bullion to lend into the market in the first place.

Here is where we come upon a seeming paradox with respect to the recent explosion of gold leasing. We know that the banksters have virtually run out of their own bullion, as the evidence is absolutely conclusive. The same Western central banks which were openly selling 500 tons of gold per year onto the market every year have now all totally ceased their gold sales. They have no more gold…or at least they had no more gold.

Yet here we have the same bankers directly implying that suddenly they have lots of gold. It makes no sense to announce “the greatest sale on gold in history” – only to run out of inventory after the few first customers have bought their fill. Clearly the bankers have some new gold. This begs an even more obvious question: where did they get it?

Here, unfortunately, we must descend into speculation. However it is speculation which we can back up with yet more circumstantial evidence. As I noted in a previous commentary, as part of the “economic rape” of European economies, the bankers announced that they would be “willing to accept gold as collateral” for some of their (fraudulent) paper debts. How magnanimous of them!

As we all know, when Greece (finally) forced the bond parasites to absorb 50% “haircuts” on their holdings that was a default event. What happens when a debtor defaults on a debt? Collateral is seized. The latest statistics from the World Gold Council on official government reserves show Greece sitting with over 111 tons of gold. And as victims of the MF Global collapse have learned the hard way, our criminal governments (and the bankers who pull their strings) no longer see it as necessary to even report when they have taken something from people. Thus the bankers could have looted every ounce of Greece’s gold from its people and it could be months, years, or never before we finally find out about it.

One hundred and eleven tons is a lot of gold to lease, but it’s certainly not the only gold hoard onto which the bankers could have recently latched their talons. Those who followed the “Libyan revolution” will have recalled a remarkable flip-flop by the West.

At one moment, we had the vastly superior military forces of Muammar Gaddafi steamrolling the rag-tag, disorganized rabble we knew as the “Libyan rebels”. They were on the verge of collapsing. All hope was lost. Western leaders lamented that the lack of “UN authorization” prevented these upstanding citizens of the global community from doing anything to assist the rebels – and there was absolutely no sign of any “movement” in those negotiations.

The next moment, the same disorganized rabble which didn’t even have a military command structure (let alone a nation to command) announced they had created a “central bank”. About ten seconds after that announcement, Western leaders announce a “sudden breakthrough” at the UN, and a drafted-and-approved resolution instantly materialized. And before the ink was even dry on that document, war-planes from several Western nations were on the way to Libya to enforce a “no-fly zone”.

At that point we witnessed how much regard these Western nations had for international law. When following the UN mandate and merely enforcing the “no-fly zone” was not producing the result these nations desired, they simply tore up the resolution and threw it away. Instead, they began carpet-bombing any/all areas under the control of Gaddafi, slaughtering his ground forces (and large numbers of civilians) in what is a textbook example of “war crimes”.

This brings us back to the pivotal moment when Libya’s central bank was created. What possible purpose could there have been for the rebels to create a central bank before they had even created a real army to take control of the country? There was no “banking” to be done. And yet it was the creation of that symbol which was the obvious catalyst for a massive military commitment by the West.

One thing we do know about central banks is that they are the official receptacles for a nation’s gold reserves. Turning again to WGC statistics on national gold reserves, we see that Libya had even more gold than Greece, 143.8 tons to be precise – and more than enough for a group of gold-hungry bankers to instruct their lackeys in government to mobilize their war-machines.

Let’s summarize the facts. We had Western central banks totally running out of any gold to sell onto the market, with all gold sales having ceased for more than a year. Suddenly, we have the bullion banks announcing they have so much gold on their hands that they are doing more than just giving it away, they are literally paying people to “borrow” it – in the greatest “gold sale” in all of history.

We have the same bankers announcing that the gold of Greece was now “collateral” for its sovereign debts. We then had the Greek government defaulting on those debts, directly implying the seizure of that collateral.

We had the”rebels” of Libya on the verge of total annihilation, while Western governments claimed they were helpless to intervene because it was “against international law”. We suddenly saw the rebels create an official receptacle for their nations gold, and then had those same Western nations instantly launching a massive military intervention into Libya, where Western governments flagrantly disregarded international law while committing their war crimes.

You be the judge.

For newer or more timid investors in the gold market who fear that this latest operation is somehow an indication of bankster omnipotence, relax. It was less than two years ago that the scheming banksters thought they could torpedo the gold market through getting the IMF to dump 400 tons of gold onto the market (50% more gold than that of Greece and Libya combined).

What happened then? As soon as that gold hit the market, India swallowed-up half of it in one gulp. The price of gold was permanently launched above the $1000/oz mark – and the gold market has never looked back since.

We know that the banksters are capable of depressing the price of gold over the short-term. We also know from the six-fold increase in the price of gold over the past decade that they are losing this “war”. Meanwhile, it is only a matter of time until the masses realize that the worthless paper in their wallets is worthless. Sounds like a great time to buy gold – on sale.

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Something quite curious is going on in the Precious Metals with regards to the Open Interest in the futures market...particularly in the front month of December.

Harvey Organ in his Daily Gold And Silver Report makes the call:

The total gold comex OI mysteriously rose by 8299 contracts despite the massive whacking these past two days. The bankers were not amused that no gold leaves left the gold tree. The front delivery month of December rose for the sixth straight day as we saw its OI rise from 1810 to 2317 for a gain of over 500 contracts. Generally when this happens you get a whopper of a delivery and sure enough last night we received notice that 1823 notices for 182300 oz of gold were served upon our longs. The next front month of February saw its OI rise from 259,454 to 261,629. The estimated volume at the gold comex today was 197,979 which is pretty high considering no rollovers. The confirmed volume yesterday was also an astronomical 307,663 and to have no contraction of OI with the raid is simply amazing. The CFTC commissioners should have a close look at this data.

The total silver comex OI rose by over 4000 contracts which is just as amazing as gold. The price of silver fell by over 2 dollars per oz and yet the OI rises??? The front delivery month of December saw its OI fall from 369 to 269 for a loss of 100 contracts. We had 66 notices filed yesterday so we lost 34 contracts to cash settlements. The next front month for silver is March and here the OI rose by over 3000 contracts to 57,037 from yesterday's level of 53,771. The estimated volume today was tame at 47,325. The confirmed volume yesterday, with the huge raid came in at 86,375. Many of those trades were HFT trades.

The mysterious rise in Open Interest as the prices of the Precious Metals falls is a bit confounding. Clearly, with this observation, we can be relatively certain that the recent price drops in Gold and Silver are NOT due to speculative long liquidations. We can speculate that the rising Open Interest, while prices are falling, could be a sign that the speculators in the Precious Metals have been emboldened to go much more short Gold as price fell below the 200 day moving average at $1621. This would be ideal, and set up the possibility that any move to the upside could be quite explosive given the need by the banks to repurchase the leased Gold they have sold into the markets if indeed all that Gold was hoovered up during The Great Christmas 2011 Gold Sale by gold buyers in India, Asia and elsewhere that have waited for opportunities to accumulate bullion on dips such as this one we are currently witnessing.

If speculators are taking or adding to short positions in Gold just because Gold has breached its 200-day moving average, be forewarned...this has proven to be a very bad idea over the past 11 years:

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About Gold And The 200 DMA

From ZeroHedge

Many are doing their damnedest Ph.D.-best to somehow fuse economic theory and technical charting, and state that a breach of the 200 DMA in gold is indicative of imminent price collapse. And then there are facts. Such as this nugget from Stone McCarthy which looks at previous episodes of the 200 DMA breach and concludes based on severity of trendline penetration compared to average, that "this is just one reason we see strong potential for a rebound as participants reduce short exposure." So much for technicals.
Full note from SMRA:

For the first time since January 2009, gold closed below its 200-day moving average on Wednesday. Today's Chart of the Day puts Wednesday's -2.8% violation of this long-term smoothing line into perspective, by comparing it to the average violation of both the general and upward sloping 200-day average since 1999.

The slope of a moving average is something that many analysts fail to address when trying to determine potential turning points on a chart. Although gold has been working lower for more than 3 months now, the current upward slope of the 200-day line reinforces the fact that gold's long-term trend is still to the upside.

If we simply consider the general direction of the 200-day moving average since the start of the yellow metal's secular bull move in late 1999, gold's average distance below this line is -3.70%, with a maximum undercut of -19.2%. On the other hand, if we only consider gold's performance when the slope of the 200-day line is higher, the average violation is -2.19%, with a maximum undercut of -10.8%.

And SMRA's short-term preice implication conclusion:

On its own, gold's -2.8% violation of the 200-day line on Wednesday has already surpassed the average violation dating back to 1999. Short-term, this is just one reason we see strong potential for a rebound as participants reduce short exposure.

Lastly, absolutely none of this matters one iota when the central banking cartel resumes printing.
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Adam Hamilton in 2004 wrote a wonderful essay with regards to Gold and it's 200 day moving average. He devised a technical indicator called Relative Gold [rGold] to determine when to buy or sell Gold based on it's price relative to its 200-day moving average:

I call this indicator Relative Gold, or rGold for short. Like the majority of technical indicators it is simple in concept and easy to calculate, but it offers many additional insights not readily apparent on a standard gold price chart alone. Relative Gold is computed by dividing the closing gold price by gold’s 200-day moving average.

The idea behind rGold is that gold’s price relative to its 200dma can help speculators discern when the probability for a short-term turn in the gold price is high or low. The 200dma is one of the most important lines in all of technical analysis and forms the foundation for rGold. 200dmas are extremely crucial technical levels for several reasons.

In any major trend, bull or bear, countertrend pullbacks to the 200dma of the primary long-term trend are expected and normal. Due to its very mathematical nature, the slow 200dma is the baseline off of which most secular trends flow and ebb. If you are in a bull market and long-term fundamentals are still in your favor, any close convergence of a price with its 200dma usually marks a fantastic buying opportunity.

You can read more about Adam Hamilton's Relative Gold Indicator here. It would be well worth your time, and after doing so, I think you would agree that we are staring at a tremendous opportunity to load the boat with Gold [and Silver] right here and now.

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Rgold Is Golden: Sit Tight And Be Right (Or Add To Your Positions)

From Dave in Denver, The Golden Truth

"This is my favorite time of the year and I'm in a great mood for receiving this year" - Mike Greenberg, Mike and Mike in the Morning on ESPN.

I'm in a great mood right now to receive any news whatsoever that the CFTC is going to crack down on the illegal manipulation that has been going on in gold and silver futures trading on the Comex for a couple decades now. But I know that won't happen - just ask the customers of MF Global what they think about the willingness of the CFTC to enforce the law. And so the saga of the United States of Banana Republic continues. I'm really excited to receive the eventual newscast that shows Jon Corzine walking away from his MF Global crime with little or no consequences.

I don't want this post to be a rant about the Government's complicity with the massive manipulation of the markets, especially gold and silver, but anyone who does not understand that this plays a big factor in the short term movements of gold and silver is unequivocally a complete idiot. The golden truth is that on a longer term basis, the manipulation doesn't work other than to scare the shit out of most people and keep them from taking advantage of the enormous wealth-building opportunities it presents. Here's a quick comment from Ted Butler on the matter - I've included a chart below that shows the technical aspect of the market Butler describes:

What I didn’t explain in my weekend commentary on Saturday was that the next logical downside trigger point in gold for selling by the technical funds and traders was the 200 day moving average ($1610). This particular moving average had not been broken in gold for almost three years, back to when gold was under $900. The longer a moving average remains unbroken, the more significance it holds to technical traders. This level has now been broken as well, encouraging those holding gold on technical or price movement grounds to sell. This selling begets other selling as fear of further losses resonates through the market as prices plunge. The price declines step up demands for more margin, prompting further long liquidation.

Given human nature and our collective demand for easy to understand explanations for why prices are falling there will be, for sure, all manner of supply/demand explanations given to justify the price rout. But there have been scant signals from the real world of supply and demand to account for the decline in gold and silver prices. At the core, this is strictly another COMEX-commercial rig job. That it has been highly successful for the commercial crooks is unfortunate in many ways, but encouraging in other ways. The proof that it is another COMEX rig job is fairly easy to demonstrate in past and future Commitment of Traders Reports (COT), as the commercials are always big buyers on these price smashes. We have only gone down in price so that the commercial could buy. It’s not possible that the commercials can always be big buyers on such declines for any other plausible explanation. That the CFTC sits by, even though it has been armed with new anti-manipulative regulations is as shameful as it gets.

Here's a 6-year daily chart of the Comex gold futures continuous contract:

(click on chart to enlarge)

THAT, my friends, is a snapshot of one of the most perfect bull market charts that you will ever see. You really couldn't make one up that was better. The red line is the 200 day moving average (200 dma) to which Butler refers. You'll note that the corrections in 2006 and 2008 on a percentage basis were much worse than what we are in right now. That's not to say that I'm calling a definitive bottom here, but the data suggests that IF gold does break the 200 dma to the downside, it doesn't stay there very long. I have been lucky enough to start adding to my positions every time this happens in the last 11 years and feel that it's a bit more than luck that it's worked out for me.

Now we've all heard the Dennis Gartmans and CNBC retards and others proclaim the end of the gold bull market. I can't tell you have many times I've heard that in the last 11 years. I remember vividly when gold ran thru $350 in early 2003 and started to correct. Robert Prechter of Elliot Wave fame issued a definitive warning that the gold bull market was over and gold was going to fall back to $50. Hmmm...The common theme between Prechter and Gartman is that NEITHER of them manage a fund or commit their own money. They make a lot of money selling newsletters with shitty advice in them to ignorant financial advisers and frightened, lemming investors. Neither of them has any skin the game.

Here's a "technical" chart that you won't find in Gartman's letter but I will give it to you for free. Unfortunately Eric Hommelberg does not freely publish his work anymore but he follows a metric known as Rgold. This is the spot price of gold divided by the 200 dma of gold. The chart I have only shows 2004-2008, but you'll note that whenever the Rgold metric goes above 1.20 it is a definitive "sell" signal AND whenever it goes below 1.00 it is a definitive "buy" signal. Right now that measurement is .93. .93 = BUY with both hands. Here's the chart:

(click on chart to enlarge)

I have several articles to cite in my argument that gold is likely close to reaching a bottom in this price correction, which actually began at the end of April. To keep this post reasonably short, I'm going link the articles with very little commentary.

The highly respected Peter Grandich has issued a $1mm bet challenge to Dennis Gartman, Jon Nadler and Jeffrey Christian - three morons who routinely issue doom warnings about gold and yet who are always wrong in their market calls. None of them have skin in the game but Grandich is giving them an easy opportunity. Please read this link in its entirety - Grandich has arranged for a law firm to set up an escrow account if any of these three dopes decide to show some conviction behind their drool: LINK

Zerohedge has posted an excerpt from a Citicorp market research report that explains why they see gold going anywhere from $3400 to $6000 over the next two years. They cite technical as well as the usual fundamental reasons for this. This is very significant because it is the first time in 11 years that a large, Too Big To Fail Wall Street bank has issued a bullish call like this on gold: LINK (no, this isn't the end of a bubble because Citi has become bullish - there's still 10 other Too Big Big To Fails that are extremely bearish on gold).

This could be one of the best signals yet that gold is getting ready to form a bottom and turn around:   the sentiment index as measured by Marketwatch's Mark Hulbert is registering very high levels of negativity. Please note that Hulbert points out this contrarian indicator is right more often than it's wrong, which means that the negativity of investors toward gold is actually very bullish: LINK I can confirm this measurement because there's been an usually high number of commentors lately on this blog who are thinking about dumping their holdings. I will buy what they sell.

Whenever I need a little "conviction-check" - some "couch time" - with regard to my fear levels, I like to spend time reading what Jim Sinclair has to say. Eric King made it easy with this interview of Sinclair. Please note that he thinks this high volatility in gold right now indicates that gold will go higher than he expects. This quick interview is well worth reading: LINK

Finally, please keep in mind that ALL the fundamental variables that are driving the gold bull market keep getting stronger by the day.   Congress and Obama are getting ready to pass a huge spending bill which extends the payroll tax cuts and extends jobless claims. This means that the spending deficit for 2012 will be much larger than projected back in September and the amount of debt the U.S. Treasury has to issue will be even greater than projected when the debt ceiling was lifted. Expect another debt limit ceiling extension fight before the November 2012 elections or just after. This means that Fed will be forced to roll the printing presses or the Government will not be able to fund all of this new debt issuance. Hell, we didn't even have debt ceiling limits and massive deficit spending and high unemployment as problems when the gold bull market began. As these problems get worse, the case for gold going several multiples higher from here gets better.

One more thing to think about: how many of you have financial advisers calling you to tell you that it's time to sell your gold? How many of you have advisers calling you and telling you it's time to buy or add? I would bet my last nickel that over 90% of all advisers are calling and telling their clients to sell. I would also bet that those are the very same advisers who advised their clients to stay away from gold for the last 11 years. If I had an adviser like that, I would hang up the phone and find a new one.

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The moral of our Christmas story today then is: Be vary wary of going short in a manipulated market when price crosses below a rising 200-day moving average.

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As Gold Rebounds Over $1600, Some Thoughts On Why The Liquidation Snapback Is Here

From ZeroHedge

Yesterday when gold was trading in the $1570 we suggested that based on the very volatile shifts in the funding environment for gold, whereby the gold lease rate had moved from record negative to borderline flat, the plunge in the yellow metal is likely coming to an end. Less than 24 hours later, gold has just passed $1600 yet again. And as the following note from Sandeep Jaitly of First International Group (whose interview with Max Keiser exposing economics for fraud back in June was quite the hit) observes, by analyzing the continued funding unwind pressure, the recent liquidation move in gold is one that has to be taken advantage of. To wit: "The movements in the bases confirm that the recent downward move in gold against Dollars was as a result of Dollar funding pressures. Gold was lent on the swap against United States Dollars. This swap must be unwound and where a bid for gold was sought to raise Dollar liquidity, an offer of gold will be sought to unwind the swaps. The co-bases for Feb-12 and Apr-12 gold contracts are starting to advance – an exceptionally bullish signal following the selloff and a sign that physical buying is being prompted by these lower prices. It would be very prudent to accumulate gold against United States Dollars aggressively over the next fortnight."

From First International Group, Gold Basis Service

LONDON, Thursday 15th December, 13:43 HRS BST. Spot gold is currently $1,584.25/45, and the gold/silver ratio is currently 54.56/54.63. The conclusion from the last missive sent on 23rd November read:

“The movements in the December gold bases are still pointing to further upside for the gold price in fiat currencies – especially the Dollar, Euro and Pound Sterling (note the drop of just referring to the United States Dollar.) The ratio of the December gold/silver bases is pointing to downside for the gold/silver ratio.”

Gold was $1,687.15 bid at the time. Subsequent to that, it rallied to a high of $1,763.01 on 2nd December, before falling back to its current $1,584. The movements of the basis and co-basis during this time told all.

The chart to the left displays the normalised co-bases for The Dec-11, Feb-12 and Apr-12 COMEX gold contracts (left hand scale), as well as the gold price on the right hand scale.

Point 1 on the chart shows the December contract going into backwardation (a high of +0.7% was reached on 30th November), just as the price of gold began to escalate. Point 2 shows the backwardation in the December contract starting to decrease and fall rapidly – a few days ahead of the contraction in the price from 2nd December’s high. Point 3 shows the co-bases for Feb-12 and Apr-12 advancing higher towards a possible backwardation (likely to occur by the beginning of January by historical standards.)

A lot of reasons have been given for the correction in the gold price – futures liquidation being a prime candidate. However, this is not the case as movements in the bases tell otherwise. There has been continued Dollar-based funding pressure in the money markets of late (witness the escalation in LIBOR which has doubled over the past few months.) The escalation in the gold lease rates – that prompted gold to go into backwardation – was caused by gold being borrowed with the intention of providing Dollar liquidity (by selling the gold in a ‘sale and repurchase’ transaction.) The fall in the gold price being accompanied by a fall in the co-basis points to signs of physical gold being liquidated not futures. Massive futures’ liquidation would see the co-basis rise and basis fall – the complete opposite of what actually occurred.

The salient points to remember here are: that the borrowing of gold caused lease rates to escalate above money market rates and that gold was borrowed ‘on the swap.’ The former point can only be explained by the fact that the physical gold market is very tight (in terms of both supply, and loanable gold.) With the latter point, one must remember that swapped (and sold) gold must be returned (and therefore bought.)

The Feb-12 and Apr-12 COMEX gold contracts are already advancing towards backwardation with the co-bases for each having bottomed on 9th December (Point 3 on the chart above.) This is an exceptionally bullish sign for gold priced against fiat currencies. As the gold price has been correcting, physical interest is dominating the gold market.

The amount of gold stored at COMEX warehouses remained static over the past quarter as can be seen in the chart on the left.

However, there was an important mix shift at the end of November into December: around 1m ounces of gold (around 10% of total inventory) was shifted from the ‘eligible’ category to the ‘registered’ category. That is ‘registration’ for sale. This again points to gold on the swap being the cause of the price decline.

The gold/silver ratio has remained range bound, currently at 54.56 bid v. 53.16 bid at the last missive. There is insufficient data for 2012 contracts to provide a change in this stance.

The fourth quarter’s Course of The Exchange will be published soon. As patrons of this service have known since the beginning of the year, the Dollar’s resurgence against other fiat currencies was expected. We will be reiterating the (unchanged) reasons for the continuance of this trend going forward. Issues surrounding the Eurozone will be covered from a multi-century historical perspective. United States equities, bonds or both for 2012? This will be a central issue to be discussed as well.

CONCLUSION…The movements in the bases confirm that the recent downward move in gold against Dollars was as a result of Dollar funding pressures. Gold was lent on the swap against United States Dollars. This swap must be unwound and where a bid for gold was sought to raise Dollar liquidity, an offer of gold will be sought to unwind the swaps. The co-bases for Feb-12 and Apr-12 gold contracts are starting to advance – an exceptionally bullish signal following the selloff and a sign that physical buying is being prompted by these lower prices. It would be very prudent to accumulate gold against United States Dollars aggressively over the next fortnight.