EXCERPTS FROM 'MIDAS' COMMENTARY FOR FEBRUARY 3, 2003 Copyright 2003, www.LeMetropoleCafe.com
By BILL MURPHY
Gold $370.40, up $3 Silver $4.81 down 1 cent
The daily gold chart reveals that gold has gone straight up in controlled fashion. The deepest correction was only around $6:
http://futures.tradingcharts.com/chart/GD/23
Repeatedly, John Brimelow pointed out it was likely the Japanese would be buying gold again in a big way, due to their increasing financial market problems. That is just what happened last night as gold rose smartly, approaching the $372 mark. That technical resistance point has been a tough nut to crack, but it should fall prey any day now, to the ever-more-successful onslaught of bullish buying.
The Gold Cartel attempted to sell gold down again, but was thwarted as they have been for the last $57 in the up move. Gold popped nicely overseas as the dollar gained ground (especially against the yen). Later, the stock market moved higher in the U.S. and oil was hit hard, but the dollar closed mixed. None of it mattered to gold. It was the physical demand increase that mattered a great deal, as it put increasing pressure on a desperately short Gold Cartel -- which is slowly being carried out on GATA's stretcher.
We have to be getting closer and closer to our awaited Commercial Signal Failure. The commercial sellers continue to lose as the specs continue to win. I thought the market would move this way because many of the commercials are part of the Gold Cartel and they are going down. Some are so arrogant, they don't get it yet. That must be so because we have seen no signs of a real panic. They keep waiting for gold to correct. Look at the poor silver and gold share action, they point out.
The bottom line is gold has gone straight up since the Howe/Bolser report was posted on December 4 and Lawrence Lindsey and Paul O'Neill resigned on December 6.
The Comex open interest dropped on Friday's setback to the tune of 3,680 contracts. It now stands at 234,148 contracts. Technically, it has been textbook bullish action, as it generally expands on rallies and contracts on setbacks.
Once gold closes above $372, it ought to shoot for the $410/$420 area.
John Brimelow nails it:
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The John Brimelow Report
Monday, Feb. 3, 2003
As presaged on Friday, Japan exploded into action in gold today. Even before a report appeared that the new head of the BOJ would be an avowed inflation targeter (which was later denied), TOCOM was bidding the gold market up. On record volume equivalent to 81, 931 Comex contracts, the active contract rose 12 yen, pushing $US gold up $2.75 from the NY close. Open interest rose a huge 7,118 Comex lots (+5.2%).
"We're seeing some fresh buying from funds and individual speculators" Reuters quotes a Japanese dealer as saying.
Crucially, this was a widespread development. TOCOM as a whole traded a record volume, with kerosene and gasoline contracts being notably active. For once, the Tokyo stock market had a good day, with export shares being particularly strong. Clearly the Japanese investment community suspects its government of being about to engage upon a major weakening of the domestic and international value of the yen. This is a possibility which has been foreseen in an interesting discussion by AIG's Bernard Connolly. A confirmation of this suspicion will make what New York thinks about gold irrelevant, at least for a while.
Certainly, by traditional yardsticks, there is reason for concern. Although MarketVane's Bullish Consensus, falling on Friday to 85%, is at its lowest level for three weeks.) And it is clear from the Bullion Bank comments that serious resistance, probably Official, is forming in the $370s. Nevertheless, given the stresses they have been through, this is not the time to ignore Japan.
-- JB
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On the yen:
"Tokyo, Feb. 3 (Bloomberg) -- The yen may fall for a third day after Zembei Mizoguchi, vice minister for international affairs, said Japan could sell its currency in a 'massive' way to avoid 'rapid' movements.
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Australia's Nick Laird points out:
"Gold open interest for January was the sixth highest-ever; volume is the eighth-highest ever."
Yesterday I forwarded Chris Powell's GATA email alert about Dimitri Speck's commentary recently posted at:
www.gold-eagle.com/editorials_03/speck020303.html
It is titled, "FED: Musings on the Eve of the Gold Suppression."
Speck's wonderful effort is one more piece of the puzzle that solidifies GATA's claims that the gold price was rigged with great fervor by a Gold Cartel -- one that included the Fed and the Exchange Stabilization Fund.
This new piece of evidence is especially gratifying to me as it was the basis for a major point in my presentation last week at the Vancouver Resources Investment Conference and will be again when I go back to Vancouver to speak at the World Outlook Investment Conference this weekend.
We can now witness even more clearly how and why the price of gold was manipulated for a decade or more -- a manipulation that went into steroid-like high gear under the auspices of Treasury Secretary Robert Rubin in 1995. The rigging of the gold price formed the basis of his ''strong dollar policy.'' It always astonishes Chris Powell and me that no reporter ever articulates how that policy was carried out if not by suppressing the price of gold.
I thought I would go into this in some detail because once you understand what was done to gold, why and how the Gold Cartel carried out their scheme, you will know why the gold price is doing what it is doing today. It will also help to strengthen convictions that it MUST go far higher as a result of what the cabal put in motion.
Dimitri Speck's discovery in the Fed minutes solidifies GATA's contention regarding the reason JP Morgan Chase has such massive gold/interest rate derivatives on its books. At last count, they had something like $41.8 billion in gold derivatives and $24 trillion in total derivatives, much of which are interest-rate related. The GDP of the US is $10 trillion. It has been GATA's contention that the rigging of the price of gold was related to U.S. interest rates. It has been our contention that, as time goes by, a sharply rising gold price could set off a derivatives crisis and could harm financial markets.
This takes us right to former Treasury Secretary Lawrence Summers' paper, "Gibson's Paradox and The Gold Standard." GATA's Reg Howe noted that the bottom line of Summers' analysis is that "gold prices in a free market should move inversely to real interest rates."
Therefore, by capping gold and then tanking it, they constructed an abnormally strong dollar market situation, which is now blowing up on the Gold Cartel.
Is it a coincidence that the price of gold has gone straight up since the Howe/Bolser report was issued December 4? Is it a coincidence that gold has gone straight up since Treasury Secretary O'Neill and Presidential Economic Adviser Lawrence Lindsey resigned on December 6?
The price of gold is going to skyrocket because the Gold Cartel has been found out by GATA and they are being overpowered by surging demand for physical gold around the world. Half the central bank gold is gone. The current supply/demand deficit exceeds 1,500 tonnes per year. As such, the plight of the Gold Cartel is worsening daily and is moving into crisis mode. The situation is explosive. The bad guys have done themselves in. They are trapped and cannot exit their massive gold short positions gracefully, or without incurring enormous losses. Gold must rise hundreds per ounce to clear the market.
