Are You Kidding Me?

At 8PM est on Sunday, October 19, the Asian Gold Market opened for the week. Prices shot higher as if from a cannon aimed at the moon. Price gapped up from Friday's last late trade in NY of 782.55 to 788.18 at the open of Asian trading. Within one hour Gold was trading at 799.63. Gold continued to trade higher through the evening and into the early morning hitting a high of 809.80 at 1:54AM est. Coincidently, this high preceded the opening of the London Metals Exchange at 2AM est. This was the high of the day, as price began to collapse with the opening of the European markets. Price collapsed into the CRIMEX open at 8:20 AM est where prices opened at 795.50, and then collapsed further to the low of the day at 784.55. This low of the day occurred at 11:10AM, which by coincidence, is 10 minutes after the European markets closed in London.

Why the play-by-play? Isn't it odd that the Asians have an almost ravenous desire to buy Gold, and Westerners an almost leper-like disgust for it? Isn't it odd that there is not a banking crisis in Asia, but the is a banking holocaust in the Western World? Isn't it odd that it is the Asians who stand the most to lose from a default of the "world's reserve currency" as they hold Trillions of it in I.O.U.s and are buying Gold as if it is going out of style while the West gives it away?

Very odd indeed.

And if you look at the charts, this same scenario occurred last Sunday into Monday as well. Asians seeking refuge from the coming deluge of defaulting dollars seek financial salvation in Gold. Those in the West seeking financial immortality via the printing press, dispense their Gold as freely as their politicians do promises. Never forget that Dollars represent "promises to pay". How will the West be able to pay, when their promises are no longer accepted, and their Gold is all gone?

JS Kim Uncovers Four Parallel Markets for Gold: Asia Futures, NY Futures, Physical Bullion, Physical Coins
Today there have been four distinctly and differently priced markets established for gold: (1) Futures markets in Asia that consistently establish prices $20 an ounce to $60 an ounce higher than the prices established in (2) Futures markets in New York; (3) Physical bullion bars which dealers are starting to price at healthy premiums above both daily spot prices established in Asia and London/New York; and (4) Physical coins which dealers have always priced at premiums above bars and spot prices, but that are now selling at soaring premiums above spot prices.

Since the July 14th correction in gold and silver markets began, waterfall declines have occurred in gold prices in New York futures markets that trade paper gold where physical delivery of real gold occurs with less than 1% of all paper traded futures contracts. The differences in spot prices in Asian futures markets and in New York futures markets for gold have been staggering for the past 10-12 weeks, so much so that two distinct and separate future markets for gold have been established, one in which the gold price is significantly higher in Asia and another, where the gold price is significantly lower in New York. As they say, a picture can paint a thousand words...
http://www.theundergroundinvestor.com/2008/10/16/four-parallel-markets-for-gold-in-the-same-world-asia-futures-ny-futures-physical-bullion-physical-coins/


REAL METALS PRICES REPORT: (10/17/08)

closing GOLD price 0830 EST Ebay 10/17/08 - $1121.18
closing SILVER price 0830 EST Ebay 10/17/08 - $16.19

An explanation of price calculation:

Prices of the REAL METALS PRICES REPORT are derived each morning upon the latest sale of any denomination of gold between 1/10 and 10 ounces and silver between 10 and 100 ounces minus shipping charges. All efforts will be made to base prices off plain, non-coin bullion instruments (bars/rounds/etc). In the event these prices cannot be ascertained due to lack of a sale of a product in the previous 24 hours, the previous day's price will be used. In the event bullion coins must be used to calculate price, please read the following explanations for determined bullion price calculation:

In the event these sales are represented by American Silver Eagles, a $2.00 premium has been retracted to represent real bullion market prices for strictly the metal itself.

In the event these sales are represented by American Gold Eagles, a 5% premium has been retracted to represent real bullion market prices for strictly the metal itself.



The Link Betweeen Paper (futures) Silver and Gold Prices and the Physical Prices is Stretching Thinner and Thinner
As I've said so long, they have only two weapons, Inflation and Blarney. They've fired off the inflation cannon until the barrel has almost melted, so now they're working the blarney cannon overtime.


Let us therefore try to slice through this deception to the truth. The deflation scare stores are beginning to fly, which must tickle Ben Bernanke to death. Not to put too subtle a point on it, there's as much chance of a US Dollar deflation as there is of me marrying the Pope. It's not possible that the US Government and the Fed could pump US$2 trillion into the credit and financial system without producing inflation.


The dollar's days are numbered. Therefore, after the Nice Government Men get tired of kicking silver and gold in the teeth, they will begin their inexorable, ineluctable, inevitable, yea, fated drive for the moon, and the US Dollar will again begin sinking toward the center of the earth, which already holds all the missing rubber bands and paper clips and bobby pins.


US DOLLAR today, in the midst of history's worst financial panic, was flat. Odd, ain't that? Wouldn't you think that fear would send folks running for safety to US Dollars? Well, it isn't. So if the dollar rally is turning ratty already at 82.4, what will it look like in a couple of weeks when the other central banks stop supporting the dollar? Yes! You there in the front row! Right. The dollar will look like an anvil floating serenely upon the ocean waves.
http://goldprice.org/silver-and-gold-prices/2008/10/link-betweeen-paper-futures-silver-and.html


Deflation Scare... the Perfect Camouflage
It is said the market can sniff out prospective problems and price itself accordingly. If so, then someone needs to get this dog some nasal spray, lickedy-split!


The deflation scare currently hovering over the entire market, particularly in the metals and commodities sectors, has been brutal. But the key question today is whether this "scare" will evolve into a genuine deflation threat to the US and the world?


Inflation and deflation are monetary phenomena. Monetary inflation occurs when the supply of money increases faster than the supply of goods and services. This is different from the concept of price inflation, which, depending on several variables that may impact inputs along a given production chain, can cause an increase in the price level for certain goods and services at any given time. Otherwise said, monetary inflation causes price inflation, but a price rise isn't always a result of monetary inflation.


With monetary deflation you have the opposite effect, in that it relates to a contraction in the money supply. If the supply of money contracts, while the supply of goods and services either remains constant, increases, or contracts at a slower rate, then that can lead to price deflation. Otherwise said, a contraction in the supply of money will in most cases cause asset prices to fall, but falling asset prices are not always the result of a monetary deflation (the oil price can rise if the supply of oil is falling at a faster rate than a money supply contraction, for instance).


What we have today is falling asset prices in, specifically, real estate and stocks, and a rise in the value of the US dollar. This has led many to wrongfully conclude that we are not only experiencing a deflation scare, but that a depression brought on by a deflationary collapse is imminent.
http://www.321gold.com/editorials/galakoutis/galakoutis101808.html


Gold Straddles $800
I heard Mitt Romney, former Governor of Massachusetts and Republican presidential candidate, and co-founder of Bain Capital on the radio last week discussing the financial crisis. He said the following:


"There is blame to go all around. The excesses on Wall Street, packaging together garbage and selling it as good product was an enormous mistake on the part of Wall Street. And the rating agencies that approved the stuff and gave it great ratings. It was also a mistake of the regulators in Washington to look at banks that were filling up with this kind of garbage and considering it gold."


Since all of us taxpayers here in the United States are now the proud owners of what Mr. Romney so eloquently described as "garbage," don't you think it's high time to diversify against those new holdings that have been forced upon us with what he implied was the antithesis? Gold.
http://news.goldseek.com/GoldSeek/1224517203.php



Golden Opportunity
Barron's Roundtable member Mark Faber puts it more succinctly: "Gold will go up because everything else is in deep s--t."
http://online.barrons.com/article/SB122369643017225623.html?mod=yahoobarrons&ru=yahoo


When the Going Gets Tough…
And over at the Fed, Ben Bernanke is hoping to kick a field goal. He’s still got 150 basis points to go in this game. Then, the key Fed rate will be zero. He’ll use every one of those points, we guess. And he’ll continue lending money to whomever will take it. Want to see an ugly bank balance sheet? Just look at the Fed. The bank – a private bank, by the way – is selling off its safe U.S. government securities in order to take on board the kind of ‘assets’ that smell like a teenager’s gym locker.
http://www.dailyreckoning.com/


Freddie Mac secretly paid a Republican consulting firm $2 million
WASHINGTON (AP) -- Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.


In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb.


Freddie Mac's payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel's bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.


...Hagel's chief of staff, Mike Buttry, said Hagel's legislation "was the last best chance to bring greater oversight and tighter regulation to Freddie and Fannie, and they used every means they could to defeat Sen. Hagel's legislation every step of the way."


"It is outrageous that a congressionally chartered government-sponsored enterprise would lobby against a member of Congress's bill that would strengthen the regulation and oversight of that institution," Buttry said in a statement. "America has paid an extremely high price for the reckless, and possibly criminal, actions of the leadership at Freddie and Fannie."
http://biz.yahoo.com/ap/081019/the_influence_game_housing.html