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Gustav Rides Louisana's Energy Highway

The good news is that Hurricane Gustav slowed, levies held, and, with any luck, New Orleans won't get drowned again.

The bad news: Gustav made landfall at 10:30 a.m. local time at Cocodrie, La., near a narrow, two-lane road called Louisiana Highway 1, about 50 miles south of New Orleans. Eighteen percent of the entire nation's energy supply flows through nearby Port Fourchon, which is located at the intersection of the Bayou Lafourche and the Gulf of Mexico. The seaport also provides supplies and services to more than half of all offshore drilling operations. The largest pipeline in the area, the Louisiana Offshore Oil Port, runs alongside the road and handles roughly 12% of U.S. oil imports.

Officials said it is too early to confirm the extent of damage, but computer models developed by Kinetic Analysis Corporation, a Silver Spring, Md.-based company estimate that LOOP will be out of service for two or three weeks. In addition, the models predict that 40% of Gulf of Mexico oil will be offline for 30 days and about 30% of natural gas will be offline for 30 days with marginal improvements after that.
http://www.forbes.com/business/2008/09/01/gustav-louisiana-highway-biz-energy-cx_wp_0901highway1.html

World's Largest Gold Refiner Runs Out of Krugerrands
Rand Refinery Ltd., the world's largest gold refinery, ran out of South African Krugerrands after an ``unusually large'' order from a buyer in Switzerland.

The order was for 5,000 ounces and it will take until Sept. 3 for inventories to be replenished, said Johan Botha, a spokesman for Rand Refinery in Germiston, east of Johannesburg. He declined to identify the buyer.

Coins and bars of precious metals are attracting investors as a haven against a sliding dollar and conflict between Russia and its neighbor Georgia. The U.S. Mint suspended sales of one- ounce ``American Eagle'' gold coins, Johnson Matthey Plc stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery and Heraeus Holding GmbH has a delivery waiting list of as long as two weeks for orders of gold bars in Europe.
http://www.bloomberg.com/apps/news?pid=20601012&sid=acH4WhPh1WJ0&refer=commodities

Australian Gold Production Slumps 13% Last Quarter
Sept. 1 (Bloomberg) -- Gold production in Australia, the world's third-largest producer, slumped 13 percent in the June quarter as rising costs for gas, oil and diesel constrained output at the nation's mines.

Output from mines including those owned by Newmont Mining Corp. and Newcrest Mining Ltd. in the three months ended June 30 was 55 metric tons, Melbourne-based research group Surbiton Associates Pty said in an e-mailed statement. Output in the year to June 30 dropped 7 percent to its lowest in 19 years, it said.
http://www.bloomberg.com/apps/news?pid=20601080&sid=aOygw.iW9YXw&refer=asia

Bush points to signs that economy is on upswing
WASHINGTON (AP) -- President Bush said Saturday that Americans may have cause this Labor Day weekend to start worrying less about the nation's -- and their families' -- economic health.

"There have been some recent signs that our economy is beginning to improve," Bush said in his weekly radio address.

Among the positive signs that Bush referenced was a report Thursday that the overall economy, as measured by the gross domestic product, rose by 3.3 percent in the April-June quarter. This surprised analysts and was a significant rebound from growth of just 0.9 percent in the first quarter of the year. Most credit was given to the $93 billion in economic stimulus payments the federal government has sent to households since May.

However, other economic news this week showed that right after that second quarter, in July, consumer spending slowed to a crawl and personal incomes plunged.

"The economic stimulus package that I signed earlier this year is having its intended effect," the president said. "Many Americans who received tax rebates are spending them. Businesses are taking advantage of tax incentives to purchase new equipment this year. And there are signs that the stimulus package will continue to have a beneficial impact on the economy in the second half of the year."
http://biz.yahoo.com/ap/080830/bush.html

Yeah, right...

Gold Is Nocturnal Too: Daytime vs Overnight Performance
From mid-1987 through 1992 the overnight market put huge downward pressure on gold. Despite very good returns in the daytime market, the overall market was net flat.

Compare that to the huge gold run up we’ve been having since 2000. Almost the entire current bull run in gold is a result of the overnight market. Over that same period, it’s been the daytime market that has been putting downward pressure on the index.
http://seekingalpha.com/article/93413-gold-is-nocturnal-too-daytime-vs-overnight-performance

Firestorm Erupts Over U.S. Banks' Gold, Silver Shorting
Speculation in the metals community since the issue was first raised by silver analyst Ted Butler on August 22 has centered around whether the few banks acted principally to profit by their own downward trading pressure after taking the extremely large short positions, or if those very large net short positions could have been legitimate positions put on as offsetting hedges to other over-the-counter trading positions, swaps and derivatives held by the very large banks.

Subsequent work done by independent analysts point to specific banks as the most likely actors responsible for the immense short positions. As examples, (and there are more), Rob Kirby of Kirby Analytics in Toronto opined that the action is likely the work of the U.S. Federal Reserve in concert with J. P. Morgan Chase in an August 25 piece on FinancialSense.com. Tom Szabo of Silveraxis.com researched FDIC Quarterly Banking Profiles and Call Reports and concluded the most likely “usual suspects” were J.P. Morgan Chase and HSBC. Investors keenly interested in this subject will want to read Rob and Tom’s comments carefully.

Again, according to the CFTC, between July 1 and August 5, 2005 three U.S. banks went from being 5,381 contracts net long COMEX gold futures to being 82,228 contracts net short. During the exact same period the total collective commercial net short positioning reported in the CFTC Commitments of Traders Reports (COT) went from 227,027 contracts on July 1 to 198,917 contracts net short on August 5. So, if we are to believe the COT reports, these three U.S. banks were layering on 82,228 net short positions in gold futures at the very same time that the commercial net short positioning was going DOWN 28,110 contracts.

From July 1 to August 5, 2008 these unnamed three U.S. banks went from being net long gold futures to overwhelmingly net short and over 41.34% of all the commercial net short positions. What did they know and when did they know it? (And, did they also put out special “market short calls” to their most valued customers at the time?)

A few questions for those looking at this in depth: Why did three U.S. banks suddenly switch from being long gold to so overwhelmingly short gold (and silver) in one month? Where do these bank’s short positions show up in the regular commitments of traders reports? (Hint: They apparently don’t.) If these U.S. bank’s net short positions are not contained in the commercial category, then where are they? Which banks have the ability to sell that many contracts short on the COMEX without running afoul of the position limits and anti-manipulation checks put in place by the CFTC and enforced by the SEC?

Gold closed on July 1 at $939.68. During the month that followed gold began its precipitous decline and by August 5 it was down to $874.35, a drop of $65.33 or 7%. Normally as gold declines we tend to see a reduction in commercial net short positioning on the COMEX. As the price of gold gets cheaper, there is usually less motivation for commercials to take the short side of gold contracts. But in this case, as gold was plunging the LCNS was merely easing lower. (It has fallen sharply since August 12, though.)

Is it a coincidence that these two or three U.S. banks took such huge short positions in gold and silver not very long after Federal Reserve Chairman Ben S. Bernanke spoke publicly about the weak dollar? (A very rare event, but it occurred in the same week in June that Treasury Secretary Paulson and President Bush both came out and jawboned the dollar higher.)

Did J. P. Morgan Chase, the same bank that the Federal Reserve turned to in the “rescue” of Bear Stearns, act on behalf of the Fed to knock the legs out from under the gold and silver markets while simultaneously supporting the U.S. dollar? If so, is that a legitimate function of a U.S. bank to perform on behalf of its central bank?

One school of thought holds that propping up a fiat currency in order to maintain public confidence is indeed a legitimate function of the Department of Treasury from time to time. Indeed, Mr. Bernanke’s predecessor in office is widely credited for having said so in the past.

The jury is still out as to exactly who did what and how much, largely because the evidence is still murky and difficult to obtain and analyze, but nevertheless a body of evidence is building which supports those who think that’s what just happened. What is not yet crystal clear is whether or not it’s over. For now.
http://www.resourceinvestor.com/pebble.asp?relid=45789

Early Signs Show Gulf's Energy Facilities Held Up
The weakened Hurricane Gustav hit energy-producing facilities that were more rugged and better prepared to resume operations than they were three years ago during Hurricane Katrina.

Turbulent weather prevented a damage assessment Monday, and industry officials cautioned that in previous hurricanes, initial optimism soured when operators began to test equipment.

It is unlikely that offshore facilities completely avoided damage. The storm packed 120-mile-per hour winds during the weekend. It later passed directly over the Louisiana Offshore Oil Port, a facility that unloads tankers carrying 10% of U.S. oil imports. The potential that LOOP could remain closed for several days raised the likelihood the federal government would tap the Strategic Petroleum Reserve to make up for lost crude imports.

About 40% of U.S. refining capacity is located in a band along the coast from Mississippi to Texas. Louisiana is crisscrossed by 75,000 miles of pipelines, enough to circle the earth three times. The Gulf Coast also is the nation's front door for foreign oil. Of the 10 busiest crude oil ports in the country, seven are between New Orleans and Houston. And while oil and gas production in the Gulf of Mexico has been dropping, it still remains the single-largest U.S. source of crude oil and a major source of natural gas.
http://online.wsj.com/article/SB122029139076287643.html?mod=googlenews_wsj

Yen Rises on Speculation Stock Declines to Crimp Carry Trades
Sept. 1 (Bloomberg) -- The yen rose to the highest level in five months against the euro and rallied versus the dollar as a decline in stocks prompted traders to pare holdings of higher- yielding assets funded in the Japanese currency.

The yen stayed higher after Japanese Prime Minister Yasuo Fukuda resigned. The pound fell to a record low against the euro after Chancellor of the Exchequer Alistair Darling said the British economy faces the worst slump in 60 years.

``What we're seeing with regard to the yen is a reinterpretation of the value of carry trades as we have those continued concerns in credit markets,'' said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. ``There are still issues regarding risk aversion. Under those circumstances the yen crosses tend to head lower.''

``Everything points to further yen strength over the rest of the year,'' a Barclays Capital Inc. team of currency strategists headed by New York-based Jordan Kotick wrote in a report today. ``Yen moves are rarely straightforward but we are changing our strategic bias to sell rallies.''
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNoIzROuCtW0&refer=home

A Yen rally is just what the Doctor ordered...wither the US Dollar. The Gold Sale of the New Century has been extended...Last Days.