Government Spending: Just Like Magic, Everything Gets Paid For

Dow Falls 1% on Euro Zone Concerns- Reuters
U.S. stocks fell at the open Monday as fears of a credit rating downgrade of French banks and the lack of a solution to Greece's debt problem heightened concerns about the euro zone's debt crisis.

Why is it lately, that every down tick in US equities is blamed on "Euro Zone Concerns"?  It's as if America's astounding $14.6 TRILLION debt is irrelevant.  Did anybody stop to consider that the latest increase in the US debt ceiling may have something to do with the weak equity markets?  After all, the last debt ceiling increase in early August was hardly met with huge rally in US stocks.

What do you mean the latest increase in the US debt ceiling?  The US Congress raised the debt ceiling again?  Raised the debt ceiling again, without a media driven fiasco regarding debt default?

YES, the US Senate, following President Obama's Thursday night $477 BILLION call to arms to fight unemployment in America, approved a $500 BILLION increase in the US Government Debt Limit.  And you thought these guys were serious about cutting spending and controlling the growth of America's WORLD LEADING DEBT...

"How in the hell did that happen?" you might ask.  Well like a magician working his magic, political sleight of hand makes things happen "over here" while you may be prompted to "look over there". 

Government Spending: Just Like Magic, Everything Gets Paid For.

Follow the time line:

On Wednesday September 7 the White House tells us that a package of job-creation and economic growth proposals that President Barack Obama will put before Congress will be paid for and will not breach the legal U.S. borrowing limit.

"We're not going to bust the debt ceiling," White House press secretary Jay Carney told a news briefing.

Obama "will put forward, both in his speech and supporting material, a very detailed set of proposals to grow the economy and create jobs," Carney said. "They will be specific, they will be measurable, they will be paid for," he said.

On Thursday evening, September 8, and much to the dismay of NFL Football fans from coast to coast, Houdini [I'm sorry, I meant to say "President Obama"] steps in front of a joint session of Congress to make a campaign speech [I'm sorry, I meant to say "present a jobs proposal"] that not only will create much needed jobs for Americans, but put more money into the pockets of even Americans that still have jobs...and it won't cost the taxpayers a penny!

Please take note here, that on September 2, 2011, the US government went over the new debt ceiling limit it had been granted by the Congress on August 2, 2011. Yes, even before the President gave his jobs speech, AND the White House promised his jobs program would not "bust the debt ceiling", the US Government, having borrowed and spent $400 BILLION in JUST ONE MONTH, was already over the new debt ceiling and had no more "credits" available to pay for the President's jobs plan.

Now watch how the magic works.  While the President buffaloes Americans with his Jobs Recovery Act, the Senate sneaks off, and uses a little rule that was included in the August debt ceiling agreement, to raise the US Government's credit line by $500 BILLION, merely agreeing to do so by a simple majority vote.  Conveniently, the US Senate is controlled by the President's Democratic Party.

Senate Approves $500 Billion Increase in Borrowing Authority
By Corey Boles
The U.S. Senate, in an unusual procedure, cleared the way Thursday for the U.S. to lift its borrowing authority by $500 billion to $15.19 trillion, enough to keep the support federal government borrowing through late January or early February.

The action came under an unusual legislative procedure spelled out under the August agreement to raise the U.S. debt ceiling and avoid a U.S. credit default. In a 52-45 vote, the Senate blocked an attempt by Republicans to slow down the process that will result in the $500 billion debt-ceiling increase.

The increase stems from a deal between Congress and the White House, finalized last month, that spells out how the borrowing limit would be increased by $500 billion. Under the process, lawmakers in both the House and Senate must vote on a resolution of disapproval against the increase in the borrowing limit. President Barack Obama would then have to veto the resolution of disapproval, and Congress would then vote to try and override that veto.

The complicated procedure, designed by Senate Minority Leader Mitch McConnell (R., Ky.), would allow an increase of the borrowing limit while allowing most Republicans to vote against such an increase.

There was a twist in this scenario Thursday evening, however. Democrats held firm, rejecting the resolution of disapproval, thereby speeding the process and increasing the borrowing limit immediately.

Just like Magic.

Was this latest debt ceiling increase mentioned by anybody on the "nightly news"?

And these politicians are now supposed to be "concerned" about government spending?  They are concerned alright.  They are concerned ONLY about their chances for re-election. They are determined to spend as much borrowed money as they can, to give the public the "perception" that they are doing something to fix things, and hopefully buy enough votes to get them re-elected in the next election.

The Euro Zone debt crisis is certainly a global problem, and it warrants the weak equity market's reaction, but it pales in comparison the the US Debt addiction.  The global debt bubble is about to burst because nothing is being done by global governments to address the cause of the debt crisis.  All efforts are an attempt to kick the can down the road in the hopes of buying time to "fix the problem" later.  Sadly, the future is NOW.

Are US stocks down because of the Euro Zone debt crisis, or are they down as a vote of "no confidence" in the President's Jobs Recovery Act, OR are they down because the US Government is simply spending MORE borrowed money in the hopes of getting re-elected to do even MORE damage to the US Financial system?

According to Ron Hera, government efforts to buy the "confidence" of their citizens are nothing more than campaign promises by the politicians charged to their tax paying citizens:

The financial news media and the statements of monetary authorities and government officials inevitably and grossly oversimplify the scope and magnitude of the still unfolding global crisis that began in 2008. The overall global economic situation is rife with conflicts and is dynamically unstable. A new global financial crisis, for example, is entirely possible. Political and social tensions are additional wildcards. The eventual breakup of the Euro is by no means off the table.

The American Jobs Act, proposed yesterday by U.S. President Barrack Obama, is similar to the 2009 American Recovery and Reinvestment Act, which generated artificial GDP growth staving off further declines. Obviously, temporary measures are intended to buy time so that root causes can be addressed. Unfortunately, that has not been the case. The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, for example, failed to address regulation of OTC derivatives and the restoration of key Glass–Steagall Act provisions put in place during the Great Depression.

As a result, the American Jobs Act is pure politics and little more than a new government economic stimulus, the intentions of which are as follows:

1.Delay public servant layoffs, e.g., teachers, police, etc.

2.Fund or continue to fund infrastructure projects, i.e., Recovery and Reinvestment Act and similar projects

3.Extend unemployment insurance and fund or continue to fund job training programs and the
Innovation Fund for Training

4.Increase welfare spending, e.g., Temporary Assistance for Needy Families (TANF)

5.Establish a government infrastructure bank to fund public or private (stimulus) projects

All of the above stem from a single, temporary goal: support key economic indicators (employment, consumer spending, consumer confidence and GDP) until after the 2012 U.S. presidential elections. The price tag to buy that time is $447 billion. What is important is that supporting the inputs of headline economic measures is unrelated to the root causes—the structural causes—of the current U.S. economic decline.

Once again, instead of a legitimate effort to address the "root causes" of the ongoing financial crisis, the government opts instead to throw more money at the problem in the hopes that it will go away until "after the election".  It should be pretty clear why equity markets are going down, simply blaming the Euro Zone is a petty cop out.  In short order, that which is dragging the Euro into the abyss of failed funny money will soon enough be dragging the US Dollar down as well...and then who is the US financial media going to blame?  What goes around comes around. 

The US banks are at the root of the collapse of the global financial system.  It may be convenient to blame Europe for the problem today, but the TRUTH will only hurt more tomorrow by continually spending borrowed money to cover it up.

Surprisingly, Gold prices are weak as threats of a Greek debt default reach deafening levels.  Surprising?  No, not really.  Every effort is presently being made by the western central banks to prevent the price of Gold from exposing the TRUTH about the demise of their fiat money system now staring them squarely in the face.

Financial news headlines this morning are being written to persuade the financial markets that Gold is being sold to cover "equity losses", or because the Dollar is up.  Yeah, right.  There is NO GOLD BEING SOLD.  There may be "gold derivatives" being sold, but no REAL Gold is being sold.  The price of Gold can not be allowed to rise in such a potentially explosive global banking crisis environment.  Gold's TRUTH could crush these banks in a flash.

Gold futures lower as dollar strengthens

MarketWatch
12-Sep-Mon

Gold eases as investors sell to plug other losses
Reuters
12-Sep-Mon

Gold Retreats as Some Investors Sell to Cover Losses in Equity Markets
Bloomberg
12-Sep-Mon

Gold may be down today in terms of US Dollars, but is anybody paying attention to the price of Gold in the other fiat currencies?

Gold New Record High In Euros (€1,375/oz) On Greek Default And Eurozone Contagion Risk

Funny how Gold hits a new All-time high in Euros at the same time US equity market weakness is blamed on Euro Zone debt risks.  This is all I need to see to know that Gold's weakness "due to strength in the US Dollar" is pure illusion.  The US Dollar Index is up ONLY because the Euro makes up 57% of the Index.  The US Dollar is not any "stronger" today than it was yesterday, except on paper.  And "paper gold" is the only thing being sold today.

Dan Norcini discusses the "global price" of Gold in a recent commentary posted on his blog:

“US based analysts continue to approach the gold market with blinders on as they focus exclusively on the US Dollar price of Gold and draw all their views of the market from that perspective. An apt comparison would be looking at the Dollar price of RICE and extrapolating future price action for the global price of this international food without even considering its price in Japan or Malaysia for example. This is shortsighted at least and foolish at worst as it betrays a flawed understanding of the role of gold in the international arena and its function as the currency of last resort.

With the vast majority of Central Banks around the world embarking on policies and practices designed to deliberately debase their respective currencies, those investors around the globe seeking to protect their wealth from such depredations are buying gold. That is why it continues to make one new high after another across a variety of global currencies.

Consider the price of Gold in Swiss Francs or "Swissie Gold". Ever since the SNB decided to debauch their currency and kill its historic safe haven status, gold has been soaring in terms of the Franc. Do you think that those Swiss who are financially savvy were going to sit idly by while their Central Bank plundered and looted their wealth?

Or consider the chart of Euro Gold, Gold priced in terms of the Euro. It too is making one new all time high after another. It is responding to the circus in Europe as the monetary authorities and political leaders there provide living testimony why one should not "put their trust in princes". The resignation of the ECB's Stark is yet another straw on that camel's back.

Think citizens in Britain have any more confidence in their leaders than the rest of the Euro Zone? Guess again!

Judging from the price action of the US equity markets this morning, the investing community has as much confidence in the Obama Administration's efforts to create jobs and turn the economy around as the passengers and crew of the Titanic had in their captain to save them from their collision with that enormous iceberg. This is the reason that while the Central Bank attack on gold continues, they have not been successful in derailing it. No one trusts the hapless clods to fix anything.

Do you get the distinct impression that there seems to be a rising lack of confidence across most of the globe in their respective governments? Personally I shudder to think where the S&P 500 would be without the surreptitious buying of the Exchange Stabilization Fund.

Considering the debacle unfolding in the equity markets today, the HUI or mining shares index, is once again holding remarkably firm as this sector continues to outperform the rest of the broad market.

Not surprisingly, the US Dollar has become the safe haven currency for the time being not based on any merits of its own, but only because the alternatives are even worse. It is attempting an upside breakout above a key chart level in today's session would which confirm a bottom is in for the intermediate term as it flirts with the 25% Fibonacci retracement level from the decline that began last May. It still looks like a rally in an ongoing bear market however. It could push as high as 79 - 80 on this leg if it sees some follow through gains next week but I frankly would dismiss any long term sustained strength unless it could convincingly clear the 81 level.

In the meantime this Dollar strength is engendering selling in the commodity complex by the hedgie algorithms once again. This is where some of the pressure in SILVER is coming from today. For the time being, the slowing global economic growth theme is currently outweighing the fears of currency debauchment when it comes to commodity pricing.”

Again I ask, Do the Western Central Banks Really Believe A Lower Gold Price Will Cut Demand For The Precious Metal?

If the price of Gold is dropping for any reason, it is because the banks want to buy at the lowest price possible ahead of the inevitable global failure of fiat money now staring them down.  NOBODY is selling any REAL GOLD today to cover their losses in stocks...that is pure mainstream financial news media bullshit. 

The banks are in deep do-do in their Gold suppression scheme.  The Gold they borrowed, and sold, from the central banks in a coordinated effort to suppress the price of Gold globally is now being called in by those same central banks.  Venezuela is the first to go public with this demand, more are soon to follow.

Gold is on the cusp of a global explosion in price, physical Gold is disappearing at an alarming rate.  And loathe to admit it, the western central banks are scared they may never see their Gold again.

RANTING ANDY: THE LAST REFUGE OF CENTRAL BANKERS...PRAYER
By Andy Hoffman
Quantitative Easing has accelerated GLOBALLY for the past THREE YEARS, yet somehow we are led to believe an OFFICIAL commencement of QE3 in America will somehow matter. Two weeks ago, the Pollyana media espoused the market was ‘waiting with baited breath’ for Bernanke’s Jackson Hole speech, as if he could somehow reverse decades of decay by announcing QE3, but he disappointed by essentially saying he’ll announced it on September 21st, a whopping three weeks hence. Yesterday, we were told the G-7 would SAVE THE DAY by announcing “GLOBAL QUANTITATIVE EASING” at their tax-payer funded boondoggle in Marseilles this weekend, but all they wound up stating were these UNBACKED platitudes:

Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets.

We reaffirm our shared interest in a strong and stable international financial system, and our support for market- determined exchange rates.

Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability, and we will consult closely in regard to actions in exchange markets and cooperate as appropriate.

Ah, what a beaut! They agreed on absolutely NOTHING, other than to put out a CHEERLEADING STATEMENT! Moreover, if you want to see just how STUPID these “leading bankers” are, look at the blatant contradiction of the last two sentences, first stating the G7 supports market-determined exchange rates, and directly afterwards stating that market-determined exchange rates can be dangerous, and thus they will blatantly, in a coordinated manner, MANIPULATE them further. As if the Japanese and Swiss Central Bank devaluations of the past two weeks weren’t enough!

Even better, after reading this article about the G7 proceedings (http://english.irib.ir/news/political/item/79311-g7-meeting-held-in-marseilles), it appears it was nothing more than a giant arguing session. The ministers admitted the problems were much broader than 2008, that the individual nations’ had dramatically different aims, and that further meetings were required due to deep concerns regarding the economic viability of the Eurozone.

Furthermore, according to ZeroHedge, LATE FRIDAY NIGHT the IMF activated a $580 billion bailout fund (all PRINTED MONEY, by the way) which, via their own bylaws, is only to be activated to "forestall or cope with a threat to the international monetary system."

So you tell me readers, what ammo is left to the bankers except PRAYER?

The answer, of course, is NOTHING, and that is exactly what the GLOBAL FINANCIAL MARKETS are about to realize, perhaps as early as this week. Regarding my aforementioned “Eureka moment”, I believe global markets will start to reflect, in VERY SHORT ORDER, the HOPELESSNESS of the Eurozone’s financial situation, particularly in its weakest link Greece, the invetible all-out collapse of the U.S. economy, the insolvent nature of essentially ALL the Western money-center banks, and the utter WORTHLESSNESS of the fiat currencies behind them.

Conversely, they will realize, perhaps simultaneously, what I and other “goldbugs” have been stating for the past decade, that ONLY GOLD AND SILVER ARE MONEY. When this happens, the parabolic stage will officially commence (to the chagrin of top callers everywhere), and don’t be surprised if gold and silver coins and bars go “no offer” a lot sooner than you think.

Gold Technical Outlook: Looks Set for Upside Break
by Chris Capre of 2ndSkiesForex
Three weeks of selling and three weeks of strong rejections off the lows clearly communicating to us anytime the shiny metal is sold off, buyers are eager to come back in. And each time, they are doing so with more confidence because every time, they are buying at a higher price suggesting they are happy to take any dips as an opportunity to buy (or invest/hold) more gold.

This clearly communicates the underlying buyers are not afraid of the short term effects CME margin hikes may have on it or their futile (and puerile for that matter) attempts to manipulate something the market clearly wants to have and to hold. If they were afraid, they'd simply wait for a longer or deeper correction but the elevated buying rejections/levels suggests traders and holders appetite has not been satiated and continues to be part of their desired palette.

As a trader and quantitative technician, this all communicates continued upside pressure and a likely breakout (and close) above the $1900 barrier is coming soon to a market near you. We feel whoever is attempting to depress the prices (albeit sovereigns or manipulators alike) will soon have to yield the $1900 barrier and a close above it.

It is still NOT TO LATE to accumulate the Precious Metals.

Do the Western Central Banks Really Believe A Lower Gold Price Will Cut Demand For The Precious Metal?

Let's see now,...  Dollar down, Oil up, copper up, CRB Index up.  Gold and Silver down?  Gold down 3%?!  How can Gold be down 3%?  Who would be dumb enough to sell their Gold?  Western Central Banks?  Of course!  We can't have Gold going up and hit new ALL-time highs day after day if the financial system is collapsing...  That TRUTH would just hurt WAY to much!

RANTING ANDY: DEATH STAR ATTACK! HAVE NO FEAR, REBEL ALLIANCE!
By Andy Hoffman
I want to recap what has “happened” in the past few DAYS:


1. Collapsing stock markets, led by Major banks across the entire Western world

2. Rising credit default swap spreads, in many cases to record highs, for the aforementioned banks and  
essentially all Western sovereigns

3. Shockingly horrible economic data in both the U.S. and Europe, including the catastrophic U.S. jobs report on Friday

4. The U.S. government AGAIN breaching its debt ceiling, to NO FANFARE AT ALL!

5. Obama preparing a speech where he will propose additional, MASSIVE SPENDING with printed dollars on non-productive infrastructure jobs (word is it will be $300 billion)

6. The lordly Swiss National Bank PEGGING ITS SUPER-STRONG CURRENCY to the COLLAPSING EURO, eliminating one of gold’s ONLY “competitors” as a safe haven

7. Wikileaks disclosures that the Chinese are well aware of the U.S./European policy of surreptitiously (and illegally) suppressing gold prices, and that the U.S. government KNOWS the Chinese know this!

8. The commencement of September, with just two weeks until the Fed meeting where a QE3 announcement is nearly certain, and three weeks until Europe likely approves creation of the ESFS, a €4 trillion fund printed out of thin air to bail out PIIGS

9. News that China is now planning to end its policy of monetary tightening, and go back to EASING again (http://www.bloomberg.com/news/2011-09-07/china-likely-to-ease-money-policy-journal-says-correct-.html)!

Yes folks, this list, which is far from complete, lists just what has happened since FRIDAY! On its own, EACH item on this list would yield a SOARING gold price if the market were freely-traded, and combined this is an even more potent brew with the potential to COLLAPSE THE ENTIRE FINANCIAL SYSTEM ITSELF, let alone the gold Cartel. So if anyone is “worried” about today’s MOB HIT ON GOLD AND SILVER, put yourself at ease and use yet another government-engineered “flash crash” to LOAD UP on Precious Metals, as much as you possibly can!

Gotta love Ranting Andy for putting the Gold markets behavior the last couple of days into perspective so succinctly.

Don't you find it a bit odd, that despite a continuing surge in the fundamental reasons to own Gold, the price seems to collapse every time it hits new ALL-time highs.  Do people that own Gold really say to themselves, "Oh my, Gold is at a new All-time high, I better sell my stash!"?  The chart below would certainly prove that to be a stupid decision:

Only a Western Central Bank, intent on offering the Chinese, the Russians, the Indians, and the Arabs a discount price at which to steal the "wealth of the west" would do such a blatantly stupid thing as sell Gold at a new All-time high. 

Seriously:

This chart definitely looks like a loser...SELL that Gold ASAP!

Silver has risen 800%, better sell that Silver ASAP!

Yes definetly, sell those Bubble Metals and buy, buy, buy those "cheap" American stocks!

It should be clear by now to anybody watching the Precious Metals that the efforts by the Western Central Banks to suppress Gold and Silver prices has been futile.  At best, they have only slowed their accent.  Now, they only offer those that seek the Precious Metals as a safe haven in a global currency war, an opportunity to purchase their insurance at discounted prices.  It should be no surprise that Western Central Bank Gold "interventions" last only hours now, instead of days and weeks as they have in the past.

Like the Japanese Yen interventions in March, and again in August, the Swiss Franc intervention will fail given time.  The Japanese Yen interventions were quickly followed by huge spikes in the price of Gold.  Only a fool would believe that a huge spike in Gold will not follow yesterday's Swiss Franc intervention...despite the organized take down of Gold as the Swiss Franc intervention was announced.

Dan Norcini explains below in a blog post today:

“If it is not obvious by now, it should be -an attempt by the Central Banks of the West to derail the rise in the gold price is currently underway.

I mentioned in my midday comments that an effort would take place to prevent gold from moving beyond $1900 in an attempt to paint a double top on the daily price chart and induce a round of technically related selling from speculators on the long side.

This effort can clearly be seen in the following ONE MINUTE BAR CHART which reveals an enormous spike of 4,000+ contracts in the middle of the evening during a time period in the gold trading not normally known for this sort of volume. The question must now be raised - if this was a hedge fund blowing out of a long gold position, why wait for such a low liquidity environment in which to execute to trade knowing full well that by so doing, one would be guaranteed the worst possible exit price for the trade. Also, since the price of gold has been RISING and NOT FALLING, why would any gold long be forced to unload a position. It certainly is not under any duress from price action.

We can probably eliminate this as the cause therefore since only the rankest of fools would attempt such a thing.

The next question that must then be raised is if this were a hedge fund doing the selling to establish a fresh short position, why would they sell in such size at such an hour guaranteeing themselves to be filled with a fresh short position at the worst possible price by selling into a hole? The logical answer is that they would not do such a thing.

By the process of elimination and due to the fact that a major attempt by a Western Central Bank (the Swiss National Bank) to deliberately debase their currency occurred less than 24 hours previous to this selling barrage, added to the fact that an obvious raid took place on gold knocking it down below $1900 during the time frame in which the Swiss Franc devaluation was announced, this huge sell order must be therefore traced back to the Western Central Banks which are now going after the gold price in an attempt to cloak their utterly incompetent, impotent and predictable response to the current economic woes of the West.

To assume that the ECB, the Federal Reserve, the Bank of England, the Bank of Canada, and any other major Central Bank of the West did not have previous knowledge of the plans by the Swiss National Bank to debase the Franc is to live in a fantasy land and be devoid of all sound wisdom. Of course they knew beforehand as something of this importance would not be done unilaterally by the Swiss.

The attack on Gold is therefore an effort by these modern day alchemists who are attempting to achieve prosperity by magically altering slips of paper into something that might constitute value in the eyes of the beholder to discredit the yellow metal and send it careening lower.

China must be watching this with both disgust and delight. Disgust in seeing the depths of corruption that ails the Western monetary system and delight in the fact that the machinations of these conjurers is providing a discount in the price of the metal which they will be more than pleased to accept.

Take a look at the following chart and tell me with a straight face that this is NORMAL trading action. Any trader worth his salt knows this chart looks amazingly like a chart of a currency facing INTERVENTION PRESSURE from a Central Bank.”

Central banks smashed gold ahead of Swiss devaluation, Davies says
Submitted by cpowell
Hinde Capital CEO Ben Davies today remarks to King World News about the suspicious pounding of gold in the minutes just prior to the announcement of the Swiss franc's devaluation, which would have seemed hugely supportive of gold as the only remaining safe-haven currency.

In regard to gold, Davies says: "Why was it selling off just ahead of a really bullish announcement? You have to believe that there was some coordinated action. ... The central banks will all have been in on knowing ahead of time that the Swiss were going to announce this. So there was central bank selling because they really didn't want the price of gold to skyrocket on what is incredibly bullish news for gold."

Or perhaps, much of the recent decline in the price of Gold may also simply be related to the fear that yet another CME margin increase in Gold may be imminent. 

China’s largest Gold exchange, The Shanghai Gold Exchange will raise trading limits and margin requirements on its Gold and Silver forward contracts on Sept. 9 to prevent excessive volatility.

This is noteworthy because the CME followed the last two Shanghai Gold Exchange margin increase with increase of their own with in 2-3 trading days, blaming "market volatility" for their decision.  Volatility created solely by the margin increases themselves.  A pending CME margin increase in Gold is something to be wary of through the balance of the week.

The hit in Gold is a boon for Silver investors...BUY THE DIP!

As Swiss devalue their franc, gold may be last currency standing
By Jeff Cox, CNBC.com
Just as talk had begun to intensify about a gold bubble building, the metal got another boost today when the Swiss National Bank announced measures to decrease the value of the franc.

The SNB's move was widely viewed as positive for gold because the metal will gain even more popularity as a safe-haven investment of choice.

For the past 14 months -- and, in fact, since Lehman Brothers failed in September 2008 -- the franc has experienced a parabolic rise as financial instability beset many of its neighbors as well as the US.

But the Swiss central bank, faced with worries that the ever-strengthening currency would jeopardize the country's export-based economy, announced an aggressive cap for the franc's value against the euro.

Consequently, the currency tumbled more than 8 percent in Tuesday trade. Gold, while down narrowly amid a global asset selloff, is expected to fare well in the days ahead.

"With Japan massively intervening in the (currency) market and the Swiss effectively curbing the safe-haven status of the Swiss franc today, we only really have gold as the last-standing safe-haven currency around," David Rosenberg, senior economist and strategist at Gluskin Sheff in Toronto, wrote in his daily note. "While the US dollar has liquidity, it unfortunately has a debt burden alongside it that gold does not."

FLASH: China knows about gold price suppression, and U.S. knows China knows
China knows that the U.S. government and its allies in Western Europe strive to suppress the price of gold, and the U.S. government knows that China knows, according to a 2009 cable from the U.S. Embassy in Beijing to the State Department in Washington.

More Beijing embassy cables show China sees gold as central in currency war
More news media-monitoring cables from the U.S. Embassy in Beijing to the State Department in Washington show that both China's government and the nation's financial press, tightly controlled by the government, consider gold to be the main weapon in a world currency war that is under way.

The Jump Gate To "Infinity And Beyond" Is Now Open To The Precious Metals

Early this morning , shortly after the "other" crooked Precious Metals market, the LBMA, opened, BOTH Gold and Silver mysteriously go "no bid' and plummet like stones in the ocean.  How can the two monetary metals go into a free fall in the midst of today's global financial seizure?

The LBMA opens in London at 3AM est.  At 3:30AM est Silver suddenly begins an unexplained free fall.  By 4AM est, Silver had lost $1.04 in 30 minutes.

Gold reached a new ALL-time high of $1920.50 at 2:25AM est.  As the LBMA approached it's 3AM est open, Gold began to roll over as bids began disappearing.  As Silver hits it's first low of the morning, Gold just as suddenly goes "no bid" and plummets $29 in just FIVE minutes to it's overnight low of $1872.55, down $50 in just over ONE hour.

We then learn that Gold has fallen from a new record price on news of a Swiss currency debasement.  The Swiss franc, one of the last "paper" safe havens left to Europeans fleeing the destruction of the Euro, was capped today by their central bank.

Gold Falls From Record Price as Swiss Central Bank Imposes Franc Ceiling
By Nicholas Larkin
Gold fell from a record in London as some investors sold metal to cover losses in the Swiss franc after the country’s central bank imposed a ceiling to the exchange rate.

The Swiss franc tumbled after the bank set a minimum exchange rate of 1.20 per euro and said it will defend the target with the “utmost determination” if needed. Ministers from Germany, Finland and the Netherlands will meet today to discuss a Finnish demand for collateral in a bailout for Greece, while the Italian Senate will debate an austerity plan amid a strike.

The Swiss National Bank said it’s “aiming for a substantial and sustained weakening of the franc,” and “is prepared to buy foreign currency in unlimited quantities.”

Gold and Silver's reaction to this shocking news is somewhat baffling.  I doubt many investors "sold Gold to cover losses in the Swiss Franc".  This looks more like a coordinated Precious Metals take down by the Banking Cartel to halt, at least temporarily, the explosion in their price as the Swiss central bank abandons it's economic sovereignty and joins the global race to the bottom of the fiat currency barrel.

The Swiss central bank has effectively given the Euro zone the finger, and left them with only the Precious Metals as a monetary safe haven.  Silver and Gold are now all alone as the only forms of sound money that are truly safe havens.  The Swiss franc has cast into the wind the last hopes for fiat currency.  If you sold your Precious Metals on this news, you will very shortly be proven a fool.  Ignore this bump in the road.

The Jump Gate to "infinity and beyond" is now open to the Precious Metals.  Climb aboard, and enjoy the ride.

Dan Norcini, in a blog post Friday, summed up the "global race to debase" as well as any have:

“By now you have all learned about the abysmal payrolls number. What more can be said at this point except for the fact that the current Administration seems intent on gutting the American economy.


Remember at the last FOMC statement when the Fed announced that short term interest rates were going nowhere for the next two years? They then went on to say that there is only so much a Central Bank can do and if the economy is going to grow, it is going to require policy changes that reduce structural impediments to growth. That was a not so subtle dig at the current clueless occupants of the Executive Branch to get off their Marxist redistribution wagon and start putting forth some business friendly policies (not to mention spending us all into the toilet). Well guess what? After today's jobs number, the markets have given up waiting for anything coming from that quarter and are now practically begging the Fed to save them.


This is being evidenced by the fact that the long bond is rallying as traders now are fully expecting the Fed to roll the proceeds from maturing short term Treasuries into longer term Treasuries. In other words, exchanging short term debt holdings for long term ones with the idea that the Fed will now engage completely in focusing on keeping those long term rates low for an extended period of time as well. My thinking is that were it not for this thinking, the equity market would have utterly imploded today.


What has been occurring is that the more bad news we get, the more stocks refuse to break down, in some instances actually rallying in the hope, wish, prayer, etc, that the Fed will be FORCED to act. Personally I find this sort of activity repugnant. The greatest nation on the face of the Earth, its entire economic hopes are now hanging on whether or not a group of monetary authorities are going to buy US government debt. Am I the only one out there who shakes my head in dismay and disgust at what we have all been reduced to? Instead of being able to witness the unleashing of American ingenuity, drive, ambition, know how and hard work, we sit around and buy stocks because we think the dispensers of slips of paper known as Federal Reserve officials will inject us easy money addicts with more of the same worthlessly ineffective stimulus? This is America early in the 21th century! Sigh....


Anyway, gold is reacting to this nonsense as it rightfully could be expected to do - it is moving sharply higher because it instinctively realizes that the only "solutions" going to be offered for the current economic disease is going to be additional currency debasement. Whether it is Europe, the US, Japan or even Switzerland, all are going down the debasement path. That is why gold is either making new all time highs in terms of these various major currencies, or just shy of those record high levels.


Silver too is now catching a safe haven bid as many investors are viewing it as undervalued in relation to gold and as offering the potential for better gains on a percentage basis than Ol' Yeller.


I will kick some of this around on today's Weekly Metals Wrap with Eric King over at King World News but wanted to note that those who keep insisting that gold is in some sort of bubble are utterly clueless as to what is driving this market higher. It is going up because a steadily growing number of investors are wising up to the game that is being played by the monetary authorities at the expense of the wealth that they have spent a lifetime accruing by the sweat of their brow and the labor of their hands. As more and more of these investors and average folks learn the role of gold in protecting that wealth from the depredations of Central Banks and spendthrift politicians, gold demand (and silver demand) is going to grow.


It basically comes down to this - whom or what do you trust more - monetary authorities and Central Bankers who have a distinct bias towards problem solving in the most painless manner possible or gold, which cannot be conjured into existence and which has stood the test of time and history. The market always votes with its feet and the voting is obvious."

We begin the week looking forward to the Community Organizer In Chief's grand speech and plans to solve the Nation's haunting unemployment, and sustain the "non-existent" economic recovery.  Unless he plans to announce his resignation, I seriously doubt any drivel that fall from his lips will be very inspiring...unless of course you are a Gold and Silver investor.  The TRUTH is becoming clearer by the day:  The US Economy is a LIE.

"If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State."
 -Joseph Goebbels

It was sadly amusing that a US Government PR campaign convinced the American public that not raising the debt ceiling would create a financial crisis...WHEN IN FACT IT IS THE DEBT itself that is perpetuating the financial crisis!

Here is why S&P downgraded the US credit rating.

• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000

Now let’s remove 8 zeros and pretend it’s a household budget.

• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385

The US Government is fiscally irresponsible...end of story. Pointing fingers across the aisle in Washington will not make this FACT go away.

NOW...this is FUNNY:

Deja Vu All Over Again: Total US Debt Passes Debt Ceiling... In Under One Month Since Extension
From Zero Hedge
Remember when one month ago the US, to much pomp and circumstance, not to mention one downgrade, announced a grand bargain raising the debt ceiling from $14.294 trillion to something much higher, with a stop gap intermediate ceiling of $14.694 trillion, or $400 billion more. Well, as of today, or less than a month since the expansion, total US debt is at $14.697 trillion. Yep - the total debt is again over the ceiling, which means the US debt increased by $400 billion in one month. Score one for fiscal prudence. And while the total debt subject to the limit is still slightly less, at $14.652, one week of Treasury auctions and will be time for Moody's to justify again why the US is a quadruple A credit.

It's the dollar, not S&P
By Chris Powell
What's relevant here is only the value of the dollar. No one in authority -- not the president, the treasury secretary, or the chairman of the Fed -- will speak candidly on the point, but the record is plain enough. Devaluation of the dollar is and always has been government policy; indeed, the capacity for strategic devaluation, what is called a "flexible currency," has always been the very point of central banking.

Some people think this is good, as it provides a "lender of last resort" to stave off financial disasters. Some people think it is bad, since it hasn't always worked well and lately has hardly worked at all; since it has been perverted into a system of infinite patronage for the crooked financial elite; and since it has deprived the world of any stable measure of value, and thus has expropriated savers, sometimes overnight.

But the value of the currency and, more so, the location of the power to determine that value are what the argument should be about, not whether a ratings agency exceeded its competence.

The Last Haven Standing
by Peter Schiff
The markets are going through another sell-off phase, yet the traditional notions of a ‘safe haven’ are changing. No longer is the US dollar the default shelter; instead, gold, the Swiss franc, and the Japanese yen are the preferred assets.

All three of these havens – gold, francs, and yen – have been surging upward this month. Two of them, however, are being actively devalued by central banks desperately (and foolishly) trying to curtail appreciation. The Swiss and Japanese are enlisting both policy measures and all the banker-speak they can muster to stem the tide of investment flows into their currencies.

The game is Last Haven Standing, and Spielberg has already acquired the movie rights.

My brother, Andrew Schiff, wrote an article for my brokerage firm this month reviewing the market turmoil and how it compares to previous crises since ’07. He found a steady shift in what investors perceive as a safe haven.

During the depths of the credit crunch, from October 2008 to March 2009, the S&P lost over a
quarter of its value, as investors flocked to the US dollar, driving it up 8%. Foreign stock markets sold off and most foreign currencies fell substantially. The Swiss franc fell over 3%. Gold rose some 6.5% and the yen rose 5.75%, but neither kept pace with the US dollar, which rose 13.5%.

Then, during the dip between April 23, 2010 and July 2, 2010, the S&P dropped again by almost 15%. The dollar rallied barely more than 3%. The Swiss franc gained slightly instead of falling. And this time, both the yen and gold beat the dollar, gaining 4% and 5.5% respectively.

Now here we are in August, and what’s happening?

In extreme volatility, the S&P fell over 13% before rebounding to its starting place. The dollar has remained essentially flat even with intensified fears in the euro zone. The yen is also flat, despite heavy intervention to push it down. The Swiss franc rose 8% before Switzerland’s central bank threatened to peg the currency to the euro, and gold has surged almost 12%!

See the pattern? On each step of this multi-year downward spiral, global investors are slowly but coherently altering their preferred safe haven. Alternatives are being desperately sought, though actions first by the Japanese central bank and more recently by the Swiss have prevented their currencies from fully realizing potential gains as dollar-alternatives.

Fortunately, gold doesn’t have a central bank, so it can rise as fast as the dollar falls.

‘Unsinkable’ Gold
Written by Jeff Nielson
...the appropriate way to demonstrate the “unsinkable” status of gold is through fundamentals-based analysis...

Naturally the most important of these fundamentals is currency dilution. The equation is very simple. We have one form of currency (beautiful, durable, and precious) whose supply is increasing by roughly 2% per year. Stacked against that we have an assortment of paper currencies being diluted by double-digit amounts every year. Worse still, there is absolutely nothing “backing” this paper, and most of the nations issuing these currencies are rapidly progressing from mere insolvency to outright bankruptcy.

As I have pointed out on several previous occasions, un-backed paper currencies are literally nothing more than unsecured “IOU’s” of the governments issuing these currencies. It is a tautology that the “value” of an (unsecured) IOU from an insolvent debtor is zero – or nearly so. Conversely, gold is a currency which is not only free from any claims of debt but possesses its own intrinsic value (as a superior form of “money”).

Such a comparison is no comparison at all. We have more than a thousand years of history of “fiat currencies” (i.e. money backed by nothing) being inflicted upon various populations again and again – always with the same result: the paper currency system collapses. Meanwhile, gold has not only “stood the test of time” in being universally regarded as “good money” for nearly 5,000 years, but it has perfectly preserved its value over those millennia.

This is but one of gold’s impressive fundamentals. Also very important is that gold continues to become relatively more “precious” every year. What do I mean by this? Putting aside the reckless money-printing of bankers (which in no way represents “wealth”), the world is getting “wealthier” each year. While the industrialized West rots in its own decay, the more populous East is experiencing a genuine economic Renaissance.

Total global wealth is rising, and we can calculate that changing wealth by multiplying the percentage increase in the global population by the percentage increase in per capita income. With the global population increasing by nearly the same rate as the supply of gold, this means that any/every year that there is any significant increase in per capita incomes that gold is becoming relatively more scarce in relation to total global wealth. In short, gold becomes relatively “more valuable” almost every year.

These two fundamentals are conclusive demonstrations of both gold’s obvious superiority as money/currency and its scarcity/value. However, day after day we watch the market lemmings stampede in one direction one day only to stampede in the opposite direction the next day. Clearly (at least over the short term) “rationality” has little to do with investor sentiment. Rather, the lemming-stampede in one direction is based upon greed, while their stampedes in the opposite direction are based upon fear. In the jargon of the mainstream media, greed is referred to as “the risk trade”, or simply “worries over inflation”. Conversely, fear is continually mischaracterized as a “fear of deflation”.

As we have already seen throughout this 10+ year bull market, gold’s relative scarcity has made it the superior asset class (second only to silver?) with respect to “worries over inflation”. Despite this, we cannot forget the “psychological” aspect of markets and rely completely upon arithmetic-based arguments. What we have now also seen in recent years, however, is that gold has once again asserted itself as the “go-to” asset class in the fear-trade – often referred to as “a safe haven”.

Here is where the mainstream media (either deliberately or negligently) continually engages in its most shoddy analysis. It regularly refers to other “deflationary periods” and then claims that our current (massive) fiscal woes are somehow comparable to those previous periods. They aren’t.

For the first time in the entire economic history of our civilization we see most of the world’s major economies simultaneously insolvent (or close to it). There are absolutely no similarities between a mere deflation and a “solvency crisis”. In an ordinary deflation, an economy sinks (i.e. contracts) as a minority of over-extended asset-holders default on their debts. This “purges” the economy of this unhealthy debt, and allows the economy to bounce-back (generally stronger than ever).

A solvency crisis is an economic nightmare several orders of magnitude worse than a mere deflation. In a solvency crisis, “deflation” implies nothing less than bankruptcy. This is why our intellectually-bankrupt central bankers have refused to allow deflation to take hold in our economies. Our economies are saturated with “bad debt”, and when this bad debt is eventually purged from our economies our economies will default on their debts. Period.

In this scenario, deflation directly implies default (i.e. bankruptcy). And as I already discussed previously, the value of un-backed paper currencies in a default scenario is zero (or near-zero) just like the bonds issued by these deadbeat debtors. This is what makes our “default scenario” of today entirely different from any deflationary episode in our prior history.

In an ordinary deflation, “cash is king” (even arguably worthless paper currencies). However, in a solvency crisis “cash is trash” unless that cash is directly backed with precious metals.

Silver Is "Go For Launch"

I recently suggested that Silver would be the beneficiary of the recent CME margin increases in Gold on the CRIMEX.  We may find out very soon if this is to be true.

The September CRIMEX Silver contract goes into delivery tomorrow.  Our criminal Banking Cartel finds themselves with their backs up against the wall heading into delivery.  I will let Harvey Organ give you the details:

The total number of notices that wish to be served for silver metal stands tonight at 3194 or15,970,000 oz.
The total number of notices served on first day notice was only a tiny 173 for 865,000 oz.
The total number of notices to be served remains extremely high at 3021 or 15,105,000.

It seems that Blythe will have her hands full trying to satisfy all of our longs.

Thus the total number of silver standing this delivery month of September is

865,000 (oz served) + 15,105,000 (oz to be served) = 15,970,000.

Also remember that we have close to 4 million oz of silver from last month's option expiry.

Thus almost 20 million oz must be eventually served and settled upon.

Total registered (dealer) inventory is 32.146 million oz.  The Banking Cartel has this small pile of Silver to meet delivery demand with.  The month of September should be filled with volatility as the Banking Cartel seeks to meet delivery demands.  Recall that registered Silver is available for meeting delivery demands, but the banks being served delivery notices my not own a sufficient portion of the pie to meet demands on them.  This will result in a short squeeze unless contract holders can be convinced to settle for a cash premium instead of physical Silver bullion.

In the just completed  CRIMEX August Gold delivery, 12,124 contract holders representing 1.212 million ounces of Gold stood for delivery at First Notice.  By the end of August, ONLY 8220 contracts representing 822,000 ounces of Gold were actually given physical bullion.  3904 August Gold contract holders accepted cash premiums to fore go delivery of physical Gold in August.  The short squeeze in August, because of a lack of physical bullion to members of the Banking Cartel, was massive.  Gold rose $300 from August first to August 23.  Could a similar fate be awaiting the CRIMEX Banking Cartel this September Silver delivery month that began today?

Silver Ready To Breakout - Technicals And Fundamentals Suggest $50/oz In Early Autumn

From Zero Hedge

Gold has stolen the limelight from silver in recent weeks with gold reaching a series of new record nominal highs.

But silver has been quietly consolidating after the sharp falls seen at the end of April and in early May when many claimed the silver ‘bubble’ had burst.

Media coverage of silver remains nearly nonexistent which is bullish from a contrarian perspective.

Technically silver is looking better by the day and is now trading not far above its 50 and 100 day moving averages (see chart above).

Today the 50 day moving average is trading at $38.70/oz and the 100 day moving average is trading at $38.74/oz. The 50 DMA is rising after recent price gains and looks set to cross the 100 DMA in the coming days. This will be a bullish technical signal.

Silver’s sell off was very sharp but volatility and a correction was expected and warned of once silver reached the nominal inflation adjusted high of $50 per ounce.

There are many factors that strongly suggest that silver remains a prudent buy and diversification today.

But there are three key metrics which strongly suggest that silver remains far from a bubble if not undervalued.

The first is silver’s real price today adjusted for the inflation of the last 31 years. Silver’s real high in 1980 was $130 per ounce – more than double the price today.

The second is the gold silver ratio which has averaged 15 to 1 throughout history due to geology and the fact that there are 15 parts of silver to every 1 part of gold in the earth’s crust.

Silver, unlike gold, is an industrial metal and a very significant amount of all the silver that has even been mined has been consumed, like oil, since the dawn of the industrial revolution in the 19th century.

Most analysts with a long term view believe that the ratio is likely to revert to the mean of 15 to 1 in the coming years.

The third metric is comparing silver’s current bull market to that of the 1970’s.

Silver has risen by a factor of 10 in the last 9 years – from near $4 in 2001 to over $41 today.

In its bull market from 1971 to 1980, silver rose by over 3,199% or by a factor of more than 32 in just 9 years culminating in the blow off top in 1979.

Today, the physical supply of silver bullion is much less than in the 1970’s. Also there is the ‘Asian factor’ and 3 billion people with growing incomes, many of whom see silver as a store of value against currency depreciation.

Demand for silver in Asia has been increasing and in China alone silver demand is increasing from a near zero base. The demand was not present in the 1970’s.

Were silver to replicate the performance of the 1970’s it would have to rise 32 times or to $130/oz (32 X $4.05).

Interestingly, $130/oz is also silver’s real high from 1980.

The charts below show a Silver price consolidating following the May assault by the CME and the CRIMEX Banking Cartel.  In the future this will be looked back upon as the banking Cartel's "Last Hurrah" in the suppression of Silver and their defense of today's crumbling global fiat monetary system.

Silver has been marking time, and fueling up for a major thrust higher.  A large Ascending Triangle has formed below the $43.58 opening price of the May 1, 2011 drive by shooting of Silver.  This top on the Ascending Triangle is the launch trigger for Silver to lift off to new ALL-Time highs above $50.  The fuse on this Silver Rocket will be lit on a close above 42.

It is not too late to begin accumulating physical Silver bullion.  As each day now passes, it is becoming less likely that the opportunity to purchase Silver below $40 an ounce will present itself.  With the MACD on the weekly Silver chart now Bullish, it is highly recommended that all dips in the price of Silver be bought going forward into the Fall.

Physical Gold And The GLD: Just What Is Going On Here?

Friday afternoon Hurricane Irene hits.  Saturday morning power goes out.  Saturday evening power comes on.  Sunday clean up the mess.  Monday go back to work.  Monday evening Internet goes down.  Tuesday morning eye glasses break in half.

Life's A Beach!

Over the past week the mainstream financial news media has been all a twitter about the "Gold Bubble Bursting".  Unfortunately for the top callers, Gold has to be in a bubble before it can burst.  In my post on August 23rd, the morning of the Gold take down from it's recent ALL-Time high, I tried to make a clear case that Gold was nowhere near being in a bubble.

It's amusing how the mainstream media determines a market is "in a bubble".  It rises quickly to a new high, therefore it must be "in a bubble".  What simpletons.  Gold rose over $400 from it's July first low because of a massive short squeeze of the Banking Cartel.  Gold bubbles are not created on the back of a short squeeze.

Yes, Gold did fall dramatically from it's early morning August 23nd high above $1900, and why or what caused it to fall is irrelevant.  Gold is not in a bubble, and it's bubble did not burst.  On August 23rd, Gold fell $67 an ounce.  On August 24th, Gold fell $79 an ounce.  At one point on August 25th, gold had fallen ANOTHER $49 an ounce.  Over the course of two and a half trading days, Gold fell $195 an ounce..over 10%.  A minor, overdue correction.

What if I told you Gold's drop in price August 23-25 was designed by the banking cartel to get their hands on much needed physical gold to make deliveries on the August Gold contract before they were wiped out in the short squeeze that began July 5th, and accelerated on news of Hugo Chavez's demand that Venezuela's Gold be repatriated?  What if I told you that the 10% correction in Gold is a signal that Gold is about to rocket higher in the coming weeks towards yet ANOTHER new ALL-Time high?

Lance Lewis, a newsletter writer, has developed an indicator he calls "the GLD puke indicator".  This indicator tracks the fall in physical ounces of Gold held by this ETF.  Of particular interest are daily drops in the Gold holdings of GLD in excess of 1%.

One-day declines in the holdings of this ETF of over 1% have tended to be capitulatory in nature and have typically occurred near important lows in the Gold price during Gold’s secular bull market.

When one goes back and looks at where these 1% declines in bullion holdings have occurred, virtually all of them occurred “at” or were “clustered at” important lows in the gold price.

On August 23rd, GLD's Gold Bullion holdings dropped 1.93%.

On August 24th, GLD's Gold bullion holdings dropped 2.16%.

Note that the last significant "puke" of Gold bullion from the GLD was on January 25th, 2011.  The GLD coughed up 2.48% of it's bullion holdings.  Gold bottomed on January 27th, 2011 at $1318, and then went on a run three month rally that peaked on May 1st at $1577 an ounce.

The GLD also puked up 1.82% of its Gold bullion holdings on August 11, 2011.  COINCIDENTALLY the day of the first CME margin hike.  Gold prices bottomed on August 12th at $1725...the early morning of August 23rd saw Gold at $1917, up a full 11% in eleven days after the GLD puked.

Geezo-beezo, is it just another coincidence that the GLD pukes up 4.09% of it's Gold bullion holdings between August 23 and 24 just in time for the second CME margin increase in Gold on August 24th?

Just what is going on here?  Could the GLD puke indicator be telling us that physical Gold bullion is in far tighter supply than any of us has imagined?  Is the Banking Cartel so desperate for physical metal to meet delivery demands that they must force a sell-off in the Gold price so that they may then buy discounted shares of GLD and then redeem them for physical Gold from the GLD trustee?  Could the GLD puke indicator be signaling traders that the banking cartel are ripe for a short squeeze due to their lack of physical bullion to meet delivery demands?

On January 29, 2011, FOFOA posted on their blog site an essay Who is Draining GLD?  This is where I first learned of the "GLD puke indicator".  In this essay FOFOA considers that "buyers of size" may be behind the take downs in the price of Gold, and the subsequent puking of bullion by the GLD.

What was relevant then, relative to "buyers of size" in the market at a Gold price of $1318, is probably even more relevant today with a Gold price of $1900.  I'll let FOFOA explain:

What we appear to have here is a severely tight noose around the supply of Bullion Bank deliverable physical gold at a time when the Giants are chomping it up! Bullion Banks have many means at their disposal to shuffle around a globally limited quantity of gold reserves and get it to where it needs to go. Especially when "important clients," like those in the East or Middle East, come calling for physical delivery or allocation.

Upon getting requests from unallocated depositors for either outright withdrawal, or more simply for transfer into allocated accounts, any Bullion Bank has options. Yes, it can seek to acquire (through borrowing or purchase) the requisite ETF shares for redemption of a "basket" in its special capacity as an Authorized Participant of GLD

But what if those other options are disappearing faster than a sack of currency left on the COMEX trading floor? If gold (in size) on the open market is scarce, the unallocated pool is spoken for (in other words, undergoing allocation) and the fraternity brothers are all suffering the same noose, what do you think becomes the most efficient and cost-effective option? Raiding the GLD reservoir perhaps?

Did you even know that you could take physical delivery from GLD?

I highly recommend reading the entire essay.  It is very insightful.

A basket of GLD shares is 100,000 shares.  Each basket equals 10,000 ounces of Gold.  This is the minimum that can be redeemed for physical Gold.

A basket of GLD shares can ONLY be redeemed through an "Authorized Participant"...

Authorized Participants are: BMO Capital Markets Corp., CIBC World Markets Corp., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., EWT, LLC, Goldman, Sachs & Co., Goldman Sachs Execution & Clearing, L.P., HSBC Securities (USA) Inc., J.P. Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Co. Incorporated, Newedge USA LLC, RBC Capital Markets Corporation, Scotia Capital (USA) Inc., and UBS Securities LLC

The bullion banks, aka the Banking Cartel. 

Is the GLD a front, a Gold reservoir for the CRIMEX?  Was the GLD created specifically for the purose of supporting the CRIMEX Gold price suppression...perhaps as a safety valve?

The GLD puke indicator would seem to suggest the GLD's existence is twofold.  One to give the impression that physical Gold supply is greater than that which actually exists in the hopes of suppressing price with "supply", and two, to give the Banking Cartel a reserve from which to meet demand that exceeds CRIMEX supply.  Is the markets management of the physical Gold supply nothing more than a shell game, with price being the victim?

More questions I struggle to answer, but find ever easier to ask.  Clearly however, the data shows that when the GLD pukes up physical gold bullion, a rise in the price of Gold is soon to follow.

Gold has since risen $132 from the August 25th low following the two-day GLD puke of 4.09% on August 23-24.  The GLD puke indicator's accuracy is proven once again.  It would pay to pay close attention to the GLD physical Gold holdings in the event of another CME margin hike as another major short squeeze of our banking Cartel appears to have been initiated.  At this time, $1705 would appear to be a major low in the ongoing secular Bull Market in Gold.

Gold Bubble blowers be damned...don't fight the Fed.

Gold At $1,950 Within The Month Reaffirm UBS; JP Morgan $2,500 Year End Call Remains

From Zero Hedge

The UBS daily note reports that “the mood among gold investors appears to be to buy the dip rather than chase the market, which is understandable given last week's volatility.” UBS conclude that the “violent sell-off hasn't done any lasting damage to gold, and the reasons investors bought gold in recent months remain valid. Our one-month forecast of $1950 remains in place.” UBS three month price view is $2,100 per ounce. Very significant demand being seen for bullion internationally and especially in Asia means that gold’s correction is likely to again be of short duration. Indeed, the scale of demand suggests that gold may not need a long period of consolidation and could again surprise to the upside.  Bank of America-Merrill Lynch said in a research note it was revising its 12-month gold target to $2,000 an ounce. JPMorgan said that gold could reach over $2,500 per ounce prior to year end. The recent sell off has not seen banks and analysts revise down their price forecasts.

A Dispirited Fed Chairman Emerges From Jackson Hole

From Zero hedge

A thoroughly chastened and discouraged Fed Chairman Ben Bernanke gave his annual speech last Friday at the Fed conference in Jackson Hole, Wyoming. After reading this year's speech, and then re-reading last year's speech, I found his tone gloomy and dispirited. This is a far cry from the younger, more confident Ben Bernanke who in 2002 told Milton Friedman at his 90th birthday party that Milton was right about the Fed causing the Great Depression and "we won't do it again." Of course Milton was right about the Fed but for the wrong reasons, which could be part of our problem.

If you have followed Bernanke's speeches over the years, at least since the Crash of '08, you will get a flavor of the man. Like all Chairman his tone has to be sober, reservedly confident, and in control. Unlike The Oracle, Chairman Alan Greenspan, who gave little clarity or direction at all, Dr. Bernanke has tried to be more "transparent" in communicating Fed policies. It is my impression that while he has tried to exude confidence, he is now clearly discouraged. As well he should, since none of the Fed's "suite of tools" have worked as intended and almost every forecast the Fed has given since the Crash has been wrong.

Fed Dove Evans Open Mouth, Demands More QE, Sends Gold Soaring

From Zero Hedge

Who would think that all it takes for gold to surge by $40 in under an hour is for the Fed to resume the old song and dance. Yet that is precisely what happened: ever since Chicago Fed president Evans sat down with Steve Liesman to discuss that he would be in favor of more easing, and saying he believes in "room for accommodation" and that we "still need to do more on monetary policy", gold soared from under $1790 to over $1830. And confirming that gold will go far higher is his statement that "Fed policy was not a driver of the commodity price surge." In other words, these buffoons have not learned anything, and the commodity price shock is coming. However, as usual, it will be blamed on speculators. Luckily the CME can hold them in their tracks with a relentless series of margin hikes. Or not. When will the CME finally hike margins on printer toner cartridges?

A Few Fed Policy Makers Favored Stronger Move

By Jeannine Aversa and Scott Lanman

A few Federal Reserve policy makers this month favored more aggressive action to stimulate the economy and lower unemployment, minutes of their meeting released today showed.

Those members, who weren’t identified, “felt that recent economic developments justified a more substantial move” beyond the pledge adopted at the Aug. 9 meeting of the Federal Open Market Committee to hold its key interest rate at a record low until mid-2013.

Fed officials discussed a range of tools, including buying more government bonds, to bolster the economy, without coming to an agreement on what they might do next should the economy weaken further. They will more fully debate their options when they gather next month for a two-day meeting that was originally scheduled to last one day.

At the August meeting, the Fed staff cut its estimate for gross domestic product in the second half of 2011. That was the fourth consecutive downward revision to its near-term outlook, the longest series of downward revisions since the recovery began two years ago. The staff also cut its 2012 outlook and lowered its appraisal of the economy’s potential growth rate.

Besides buying government bonds, the Fed could cut the 0.25 percent interest rate it pays bank on the $1.6 trillion in excess reserves parked at the Fed. It also could replace shorter-term securities with longer maturities, which may help lower interest rates on mortgages and other long-term debt. The Fed also could pledge to keep its balance sheet near a record $2.86 trillion for an “extended period” or for a specific time period.

In contrast, some Fed officials “judged that none of the tools available” to the Fed “would likely do much to promote a faster economic recovery,” the minutes said. These officials were concerned that providing additional stimulus would risk boosting inflation without providing a “significant benefit” to bolstering economic growth or lowering unemployment.

Stocks Extend Gains on Hopes for More Economic Stimulus- AP

The mere discussion of more economic stimulus from the Federal Reserve was enough to send stocks higher Tuesday. The Dow Jones industrial average rose 20 points, and the Nasdaq added about 0.5%.

This Is The Way The Hopium Ends: Not With A Bang, But With The Biggest Collapse In Future Consumer Expectations... Ever

From Zero Hedge

The charts below demonstrate the 6 month change in the 6 month forward looking Consumer Confidence outlook: in other words, this chart measure just how deceived US consumers have been by hopium consumption 6 months ago compared to reality now. In short: 2011 has been the most disappointing year for Americans in history. Whether it is due to excess hopium consumption or not... well, it is not irrelevant.