The quote by Sir Walter Scott comes to mind: "Oh, the tangled webs we weave when we practice to deceive." We have been warning for some time now that most of the cartel's gold suppression weapons are also lethal for stock and bond markets and Thursday's and Friday's market action gave you but a small taste of what can happen when the cartel tries to cover up their past financial machinations and ongoing stupidity by suppressing gold. They are taking some terrible chances in their desperation to contain gold, and it is only a matter of time before the detonator button on any one of a myriad of Death-Stars is pushed which causes a thermonuclear explosion that will wipe out the entire world financial system.
Despite the Fed's decision to keep the Fed funds rate at 5.25%, the credit crunch had elevated rates that banks charge each other for overnight loans to over 6% before the Fed stepped in. Banks are now in fear that on any given day a financial institution they have loaned money to could disintegrate as another subprime casualty occurs or a large customer defaults, and they want a greater return on their money for increased risk as well as a commensurate share of interest earned on loans which are being made at quickly elevating rates from the money borrowed to fund these loans.
They could care less what the Fed says they should charge. In essence, the banking community said to the Fed: "You've got to be kidding. It's time for a reality check. Financial companies are crashing and burning all around us and you expect us to take a lousy 5.25%, as inflation, which we know is now over 10%, eats away at any profits, and as risk escalates everywhere? Don't forget, we know how the system really works." The truth is, they are cutting their own throats by elevating the rates, because this will exacerbate the liquidity-crunch debacle, the real estate debacle, the CDO debacle and the adjustable rate reset debacle, not to mention the killing off of ongoing buyouts, M&A's and stock buy-backs, which will in turn make the markets crash and burn. They are trapped and they cannot get out.
Gold closed Wednesday up $3.90 at $674.80 and silver rose $0.06 to $13.11. It wasn't a good day or a bad day. The producer gold shares did well with Agnico Eagle up $2.26 to $44.66 and Silver Standard up $0.72 at $37.64. The XAU rose 2.56 to 145.41 and the HUI leaped 11.84 to 347.26. Assisting gold and silver related assets were the foreign currencies. The yen fell $0.58 to $1.19945, the euro gained .0043 to $1.3796, the pound rose .0123, the Canadian dollar rose .45 to 93.37 and the USDX, dollar index fell .15 to 80.23. In spite of Wednesday's gains the gold suppression cartel was busy at work capping the price. Gold and silver producer shares want desperately to break out and they will do so soon. Gold open interest rose 1,816 contracts to 352,908 and silver OI rose 1,512 to 122,787 contracts to a new recent high.
As the nuclear conflagration in the stock markets continued on Friday, the gold bulls decided to send a message to everyone with the wisdom to hear. Totally disgusted and fed up with the cartel and its central banks' ongoing gold suppression which had just brought gold down about $6 per ounce from 664 to 658 in the early going, the gold bulls sent gold on an $18 per ounce rocket ride from 658 to 676 over a very short span in three dramatic upward moves on Friday, before gold settled at about 670. The message is: "Hey mo/rons, look at gold! While everything is crashing and burning everywhere, gold is on its way up. The dollar is toast, so cash and treasuries are no longer safe havens, but gold is and always will be a safe haven from all this turmoil. Get a freaking clue!" We also note that much of the credit pumped into the market by the Fed in three bursts seemed to somewhat coincide with the three bursts in gold. The cartel must have been livid as the credit they injected was used to lift gold. Ah, the irony of it all! Now the cartel is faced with a rising gold price each time they inject credit and liquidity. Their weapon against the credit crunch is gold10 friendly, and therefore, from their point of view, counterproductive. The situation for them is hopeless, and they know it. PM stocks also moved up as the general markets tanked. The XAU climbed 1.69 to 144.23 and the HUI climbed an impressive 6.64 to 346.02, very remarkable considering the condition of the stock markets generally.
Gold futures open interest has remained at surprisingly low levels in the 351,000 to 356,000 range for the past 8 trading days. This shows you just how fearful the cartel is of getting caught overextended in shorts by some out-of-the-blue debacle like we saw this Thursday and Friday, especially when they are playing Russian roulette with financial markets in order to suppress gold. The dollar is tanking once again on a second and even weaker dead-cat bounce, and open interest in USDX futures has dropped a significant 3951 contracts on Friday as the USDX dropped from 80.744 to 80.679 per NYBOT. If this terrifying stock action continues, eventually people will stop using the dollar as a safe haven and start looking at gold. If this happens the dollar will descend into fiat money hell as gold rockets past the moon into interplanetary space. This may already be happening as the dollar faired rather poorly while everyone was bailing out of the stock markets and gold was rising by leaps and bounds.
Things are looking mighty shaky in the United Goldilocks Matrix!!!
The Swiss have been busy as the Swiss National Bank sold about 35 tons of gold in July, which is far more than the traditional one-ton a day. We cannot help but think they have to be accommodating the central banks, the Fed and the US Treasury.
The big Tocom shorts cut their short position by 3,500 contracts to 118,206 as Goldman covered 2,022 contracts to be net short 22,353. The same group reduced their silver shorts by 77 to 4,853. The Swiss having sold 48.9 tons of gold have sold quickly 25% of their 250 tons scheduled for sale by September 2009. As you can again see the market suppression is coordinated.
South African gold production fell 3.1% in June yoy, while overall minerals production fell 1%.
The cartel ravaged gold and silver again just to show you they can still do so. Gold fell $14.00 to $660.80 and silver fell $0.44 to $12.67. As we said elsewhere in this issue the ECB and the Fed are adding financial liquidity to the system. This, of course, is mega monetary inflation to the tune of $154.2 billion in one day. That brings price inflation. All they have done is pour gasoline on the fire. They will do anything to keep the system afloat, so expect lots more of this madness. Credit derivatives have collapsed, and that disaster is not containable. Incidentally, that makes the euro as big a fiat currency as the dollar is. We call it an orgy of liquidity. The pros in the currency and interest rate markets just do not get it and maybe they never will. They see a 100% chance of a September rate reduction to 5% - only in your wildest dreams. The Fed is in a box and cannot get out so just be patient. Gold open interest rose 3,111 contracts to 355,919 and silver OI fell 2,702 to 120,085. The big Tocom shorts increased their net shorts by 178 to 118,384 contracts, as Goldman did nothing. The same gang reduced their silver shorts by 202 contracts to 4,651. The HUI fell 7.88 to 339.38 and the XAU fell 4.26 to 142.65.
Goldcorp reports $0.14 in earnings, cash costs were only $133 and that is all the money they can make, what management.
Another hedger bites the dust. Apex Silver (SOROS) had to hedge silver and the result is a 2nd quarter $2.45 loss per share. What id/iots. Sell while you can.
Again we see a correction in the DOW to 11,200 to 12,000. Then a correction to 10,300. Then to 8,800 to 9,500 and then to 7,286. Earnings will increase only 4-8% this year and next year they will be lower. The machinations of the central banks will be counterproductive, only worsening the ultimate outcome. Gold and silver will fly.
at http://www.silverbearcafe.com/private/tangledweb.html
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ASX Price at posting:
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