Jan. 9th, 2004 .. Silver SOARS/Gold Climbs To Another 15 Year...

Jan. 9th, 2004 .. Silver SOARS/Gold Climbs To Another 15 Year High Close


January 9, 2004 - Gold $426.20 up $2.70 - Silver $6.46 up 25 cents

Silver SOARS/Gold Climbs To Another 15 Year High Close

Many men fail because they quit too soon. They lose faith when the signs are against them. They do not have the courage to hold on, to keep fighting in spite of that which seems insurmountable. If more of us would strike out and attempt the 'impossible,' we very soon would find the truth of that old saying that nothing is impossible... abolish fear and you can accomplish anything you wish. ...Dr. C. E. Welch

GO GATA!!!

Some day again and a tale of two differently timed daily commentaries from me for this MIDAS. Some early notes after the first hour or so of Comex trading:

Every time I think the manipulation of the gold price by the heinous Gold Cartel cannot get any more obvious, it does.

Going into the opening on the Comex and the announcement of the employment report, gold was slightly lower. The dollar was a bit stronger, but oil was flying at $34.50 per barrel. Besides, gold didn’t follow the weak dollar yesterday as the price-cappers went into action when gold approached $425, knocking it lower.

As we neared the Comex opening, gold began to weaken from down 50 cents to a call of $1.30 lower. Then, it opened a whopping $2.70 lower thanks to Goldman Sachs. My first thought was, "Uh, Oh – something’s up – the Gold Cartel is petrified of gold shooting past $425." The Working Group on Financial Markets/Gold Cartel surely knew what the jobs report would reveal and probably was going into pre-emptive mode to prevent a gold price explosion. They wanted to set the tone for the gold price as far as traders were concerned. $2.70 is a big hole to crawl out of. Traders saw what happened yesterday when gold did crawl out of a big hole on the Trichet news, only to be slammed $3 off its rallying high of $426 per ounce.

Sure enough, the jobs report was horrendous. Bonds flew, stocks sank, the dollar was crushed against the euro. Gold? It managed to struggle back to unchanged/plus 30 cents.

Before you knew it, Goldman Sachs and Morgan Stanley went after bullion in a mega way knocking it back down $3, even though the dollar was battered vis-à-vis the euro.

Silver dipped briefly, but then began to rise steadily. Gold gradually began to poke its head up and was dragged along for the ride to the consternation of The Gold Cartel. What did I mention yesterday about "the best laid plans?"….

That commentary was written before I left my abode for 45 minutes in total disgust. By day’s end I had lightened up, but was still perturbed by the blatant illegal gold price-capping by Goldman Sachs, Morgan Stanley and the rest of the cabal.

I also mentioned yesterday that it doesn’t get much better than this as far as the gold fundamentals are concerned. But they did so today. Commodity prices moved higher, led by crude oil ($34.31, up 33 cents). The CRB closed at 267.83, up another 1.62 – a new 15 year high. The dollar was belted against most currencies, finishing the day down .49 to 83.59. The euro rose .84 to 128.23. The DOW was hit hard late. And, the pitiful US jobs growth number means the Fed is not going to raise short-term US interest rates anytime soon.

The incredible gold set-up not withstanding, The Gold Cartel clearly has a mandate to do all they can to keep gold from blowing through the $425/$430 level, regardless of what outside market action would normally dictate.

The essential question we need answered is the same question MIDAS/GATA has posed for years. Will they get blown out of the water? Are they running out of enough physical gold to keep the price from exploding? My answer to both questions is yes (as it has been for a long time), but the exact timing is extremely difficult. We are talking about the most powerful financial market people in the history of the world getting their butts kicked, their clocks cleaned. The good news is this is exactly what is happening (and has been all year), just VERY gradually.

What has happened these past many months is the corrupt ones keep making a stand at various price levels. However, the physical market is so strong, they are continually forced to retreat. Meanwhile, The Gold Cartel losses continue to mount to staggering levels.

While we know The Gold Cartel was instrumental in rigging the price of silver for many years, mostly to deflect attention from their rigging of the gold price, we never had the goods on them for the silver price manipulation like we did in bullion. Today was a good example of why they did what they did to silver the past 7 years. As silver took off, the gold traders became more aggressive. Without silver today, gold might have closed down $3.

This recent stunning move in silver is a sign the cabal has lost control of this aspect of their fraudulent operations. It may mean losing control of the gold price is right around the corner. Ever since I reported to Café members that the entire "feel" of silver trading had changed, silver has moved almost straight up. Every since I reported the "Buffet buying" and "squeeze talk," silver has moved sharply higher. From 25 years worth of experience at this game, RARELY, if ever, is one privy to incredible information like this. Not BEFORE a move!

The same is true with my "STALKER" information. With gold about $340/$350, I mentioned the gold trading had an entirely different feel, just like silver has had more recently. Then I heard about THE STALKER buying $6.8 billion worth of gold and bullion has never looked back since. Between this buying and that of the Indians, foreign governments, etc., The Gold Cartel continues to backpedal. They are being quietly overpowered as the physical market gains strength and competing bids rise.

The gold open interest rose a staggering 17,327 contracts yesterday to 302,077, a new record. This is stunning and tells you how much selling firepower was used by The Gold Cartel to keep gold from soaring as the dollar was rocked on the Trichet news. It also tells us how much buying firepower has entered the gold arena.

Supposedly it was all fund buying today. It may be, but I am sure it is much more than just your usual funds. There is large non-US money buying gold. We are talking about countries, hedge funds, etc.,- probably various bullion dealers too who need to price cash orders in the futures market. Some of the so-called fund buying is just a front for this more substantial buying. I say more substantial because this gold is not coming back on a price dip. It is not black-box selling which will easily emerge on an unraveling technical signal. Many of these buyers want the gold. This has been going on for some time, which is why The Gold Cartel has not been able to turn other large tech specs into sellers for eons.

By day’s end, silver soared, falling two cents shy of pivotal $6.50 and notched a new 5 ½ year high. Gold managed to close above key $425 resistance and at a new 15-year high close.

Once again gold support held at $420 as $420.30 was today’s low.

The silver open interest rose 3195 contracts to 110,752. The floor is talking about $8 silver, especially since March silver printed $6.50 today. While Morgan Stanley was bombing gold all day, they were nowhere to be seen in the silver pit.
GATA's Ed Steer appears to have nailed the reason why silver soared today and why the Comex suddenly raised the margin requirements:

Bill, here it is again (resend from last night). I checked the NYMEX inventories tonight, and it is now officially correct. No 'ifs' attached to this at all. It's a done deal.

http://www.nymex.com/jsp/markets/sil_fut_wareho.jsp
I wonder if this could be the reason that the margin requirements were changed on silver. If this figure from NYMEX is correct, then there were 12.4 million ounces switched from the 'registered' category to the 'eligible' category....i.e. from the 'for sale' pile to the bought and paid for 'not for sale' pile. This is a huge 20% shift in both categories...one up, one down.

It looks to me like someone made a grab for a big chunk of what little remained of the dwindling NYMEX silver stock pile, and 'the boys' changed the margin requirements in anticipation of what might follow this event once it became public knowledge.

If these figures are true...and not revised today (they were not) ...then things might get real interesting real quick in the silver market...as I now notice that the silver price headed north the moment the Far East closed (early this morning).
Ed

This fits right into the MIDAS information sent your way recently about Buffet, or someone using his name as cover, who is getting ready to squeeze silver.

It is not hard to realize why investors all over the world would not want to pour into gold and silver:

*Our dollar is headed for oblivion.
*Commodity prices are soaring.
*The Iraq War is a mess.
*The US economy is not doing well as depicted by the very disappointing job numbers.
*The US budget and trade deficits are horror shows.
*The US stock market is WAY overpriced.

I could go on and on. While we have roaring bull markets in the US, silver and gold have gone nowhere in many other currency terms. They are still cheap and great bargains. Many investors don’t like what they see in the world financial arena and don’t believe stock prices will advance much further, nor do they think interest rates will stay low down the road. Bonds could be hit very hard as the year goes on. These big league investors see a rush into gold and silver coming and want in, realizing both silver and gold will take off in their own currency terms as 2004 progresses.

Then, of course, is the most important issue of all. The price of gold/silver has been artificially suppressed for many years. As we know, The Gold Cartel is still throwing money away at gold in attempts to keep it from exploding. Many foreigners also realize half the central bank gold is GONE, used up in the fraudulent price-capping scheme. This means only 16,000 tonnes is left, not the 32,000 commonly quoted. Much of that 16,000 tonnes is unavailable. Throw in a 1400/1700 yearly supply/demand deficit, which means what little is still available is consistently being eaten up.

GATA’s revelations are heeded all over the world, except in the United States because we have no free press. The prices of gold and silver are going to go bonkers as a result of the short-sighted stupidity of The Gold Cartel and friends. GATA’s findings are circulating and this is helping to propel the price of gold to the upside. These new significant players realize the cabal doesn’t have the ammo to stop a big price rise.

Gold daily
http://futures.tradingcharts.com/chart/GD/24
Gold weekly
http://futures.tradingcharts.com/chart/GD/W

Silver
http://futures.tradingcharts.com/chart/SV/34

CRB
http://futures.tradingcharts.com/chart/RB/14

Fun MIDAS flashback:

December 19 - Gold $408.70 down $1.20 - Silver $5.70 up 2 cents

Silver Makes Multi-Year New High Close, Geared to Rocket
...Silver and gold have diverged the past couple of days. While gold has drifted down, silver has come back from a couple of bashings to close higher. It looks to me like both are getting to really ROAR in the weeks ahead.

-END-

The battle for $425/$430 should be resolved shortly with Thursday’s and Friday’s substantial build-up in gold's open interest. Gold is a rumbling volcano which The Gold Cartel is trying to contain. I suspect Murphy’s Law will come into play and give the cabal fits next week. More and more of the investing world is willing to take them on.


The John Brimelow Report

$425: line drawn. Is this 1980?

Friday, January 09, 2004

India ex-duty premiums: AM $1.86, PM $2.26, with world gold at $422.50 and $422.75. Below legal import point. The Indians would clearly prefer world gold to be below $420. On the other hand, the rupee closed at an import-facilitating 8 week high today, the stock market at an all-time high, and the Government announced a package of tax cuts. The demand schedule for gold in the biggest consuming market in the world continues to be moved positively.

Gold market action in Japan today was much confused by heavy intervention by the BOJ in the yen. On aggregate volume equal to 45,799 Comex contracts (+42%) the active contract rose 22 yen, but this meant that world gold went out $1.60 lower than the NY close, at $421.25. Open interest slipped the equivalent of 598 Comex lots. Japan is closed on Monday. (NY yesterday traded 73,551 lots. Open interest is said to have jumped a huge 17,327 contracts.)

While gold’s spirited recovery yesterday impressed many observers, they were equally impressed by the tenacity of the resistance around $425 spot.

"Funds and locals were able to bid gold to the 424.40 level before aggressive dealer selling capped the rally."

Says ScotiaMocatta of yesterday morning’s NY trade

"…another hectic trading day. Funds buying … reportedly done in big chunks, coupled with the ECB decision to leave key rates unchanged caused gold to fly off the handle from the opening…towards key resistance found around $425 and the day’s high of $425.10…A wall of resistance was founded there…even a surging EUR could not coax gold to continue its rally…"

is Standard London’s version. As noted above volume was heavy. On this perspective, this morning’s renewed assault on $425 is critical.

Some commentators are changing already to give gold’s rally the benefit of the doubt. JP Morgan’s "Technical Strategist" publication is one:

"We suggested that a slightly deeper correction into the 417.50/413.50 support zone would be seen before a turn around. It was not the case, with the USD setting new lows, Gold rallied as well. We expect at least a re-test of the highs, if not a move to new highs in the coming week, so we prefer being long at this stage…."

"Buy Gold at 422 risking 417 targeting $427.50/435."

Another is the Chartist Martin Pring:

"…the gold price rallied back above its MA this week meaning that the recent mild reversal was a whipsaw…Even though the Gold Bugs Index (HUI) failed to confirm the latest high in the metal, we are remaining bullish. However, if gold experiences a daily close below the trendline at $410 and the HUI violates its line at 230 this would probably signal the start of an intermediate correction."

Gold rose 59% in 1980. Those who remember that geopolitically weird year, conspicuously featuring a Middle Eastern morass, may not be much persuaded by alleged differences between Presidents Carter and Bush.

JB

John observed later: "38% of the gold volume transacted in last 1/2 hr. - as gold hovered above 426 - 16,000 contracts traded."

The Gold Cartel looks increasingly desperate.

CARTEL CAPITULATION WATCH
The DOW was finally hit for a decent loss and it came late in the session. The DOW closed on its lows at 10,459, down 134. The DOG was surprisingly firm all day considering the horrendous job news. It succumbed late too, falling 13 to 2087. If the stock market corrects sharply, as it should, it will make life miserable for the corrupt cabal.

The bad job news:

Jan. 9 (Bloomberg) -- The U.S. economy gained 1,000 jobs in December, fewer than the 150,000 that economists had forecast, as companies relied on productivity gains to meet increased demand, a government report showed.
The unemployment rate fell to 5.7 percent last month from 5.9 percent, the Labor Department said in Washington. In November, companies added 43,000 jobs, fewer than the 57,000 estimated last month. Factory employment in December fell for a 41st straight month and retailers cut jobs even as holiday sales accelerated….
Employment in service-producing industries, which include retailers, banks and government agencies, rose by 13,000 last month after gaining 55,000 the previous month. Retail employment declined 38,000 after a 28,000 decrease. Factory employment, which the median forecast predicted would show no change in December, instead declined by 26,000 in December. –END-

The October new jobs number was also revised down by over 30,000. Thus, the employment picture is even worse than portrayed in the Bloomberg Report.

Jesse saw it this way:

Several times on Bloomberg today I heard stock touts referring to the drop in the unemployment rate to 5.7% as 'good news' and signs of continuing recovery.

If only this was true. The only thing the unemployment rate decline has to do with is the fact that they kicked another 300,000+ people out of the workforce calculation when their benefits ran out.

If one looks at the job creation numbers, they clearly peaked in October, and have been declining ever since. While today's number was still 'positive' in fact on the next revision it will be negative. Last month was 'revised' from +57,000 to +43,000.

This, despite the fact that they are still using a type of statistical subterfuge in counting unemployed people as 'temps' and 'consultants.'

Of course, this has nothing to do with the stock market in the short run, which is running on pure emotion and econo-prop now, but at this stage in a 'recovery' we should be adding a substantial number of jobs in the 200,000+ range. We're not.

This is not a recovery. It is the 'appearance' of a recovery being bought almost 9 to 1 by future claims on our wealth, i.e. 'debt'. Its just that simple. For further details on the 'bigger picture' read "American Dynasty" by Kevin Phillips.

-END-

Wall Street has been clamoring the US stock market was predicting an increasingly healthy US economy. GATA’s Mike Bolser has showed us the US stock market has been all about "management." These lousy job numbers suggest Mike was on target.

The other day Mike called for the DOW to set back based on his repo work and down it goes:

GATA’s Mike Bolser:

Hi Bill:
The Fed added $2.25 Billion in temporary repurchase agreements which caused the repo pool to rise a tad to $31.39 Billion. With the pool falling back, however, the DOW has now commenced its own fall back to near its 30-day moving average of 10,150 to perhaps 10,200.

This action in the DOW is now very easy to predict using the repo pool as one's only guide. Indeed, each morning I no longer check the DOW's level before I examine the Fed's repo actions. I don't want to be biased in my estimates.

Disappearing Fundamentals

Fundamentals no longer matter in assessing the DOW or its progeny. As we progress further into the Fed's interventional universe, the departure form fundamentals will become even greater which will precipitate even more outlandish Wall Street propaganda which will (in its own manner) cause more and more thinking investors to exit the false rallies in paper investments and enter the real commodities bull markets. Even though the average investor cheers the rising DOW because it artificially helps their 401K portfolios, he or she must know in their hearts that something is drastically wrong because the "market" has disconnected from its historical tethers.

In the Fed's paper universe there is only UP and it is likely the Fed's walnut offices are full of increasingly delusional planners these days. They may be ignoring the pesky and stubborn investors who are moving to sound, inflation fighting instruments in commodities. But these people are the first wave of a gathering squadron of folks who sense danger and are taking action.

The Fed's cunning trick of offering a fake DOW as proof that things are all OK in the Land of the Master of the Universe will work only so long.
Mike

Chuck checks in:

I can tell that the lethargy and the disinterest in the smaller golds is about over. US Gold which I mentioned yesterday hadn’t traded is up about 30% today. Kimber is up about the same. The time to get positioned in these is almost over.

The Rydex flow was lower again last night. There is no mention or interest in this sector-a perfect set up for an explosion. All we need is Prechter's pronouncement. It will be interesting to see how they spin it, honestly and frankly or self-serving….

This sets up next week for a move up, or if Hoye is right, a sharp quick correction. I still haven't seen anything that looks like a topping action. Even today, the golds came off again as they have every single day this week. There is such a lack of conviction and fear that gold may react by 10 dollars.

In the meantime, a couple of the juniors have started to perk up and are going to leave those who have sold them and are looking to get back in, at the altar. IMA which hit $1.40 a few weeks ago on good results that somehow disappointed some, closed at $2.30.

It still looks to me as though the next hot group will be coming out of South Africa as the Rand sells off.

There are times to be cautious and not chase stocks and there are times when you should sit tight for the move up is going to be startling, and if one is wrong about buying lower, there is going to be a lot of chagrin.

Let's see if this was the top of the stock market today. I have been wrong for a good while trying to predict its demise, but the time for a top is very compelling here. Remember January of 1973 and 2000 as the tops.

Tune in next week for more excitement. Chuck

This commentary re the US money supply from the CapitalStool site caught my attention:

As Mark already mentioned, Japan officially reported that it purchased $28 billion US$ this last few days. Those purchases didn’t show up in the Fed reports yet. Per the latest Fed release of treasuries under their custody, central bank purchases of the US dollar were up about $71 billion the last eight weeks, or about an annualized rate near $500 billion. The massive $ purchases have only succeeded in slowing the fall of the overall trade weighted value of the US$.

Money supply measures continued their accelerating drop last week. M-2 money supply dropped by $11 billion and M-3 dropped $11 (as mentioned by Agsnightmare). Over the last 12 weeks, M-2 dropped $80 billion (5.7% annual rate), M-3 dropped $134 billion (6.5% annual rate). Inflation adjusted money supply is an official component of the leading indicators because of its correlation to economic activity. Even using the heavily manipulated and deflating CPI, the inflation-adjusted money supply shows an alarming drop. The Fed members recently said it was not worried about the continued stagnation in the money supply, and so far they have not taken any unusual official actions in reaction to the money drop.

The dynamics of credit bubble implosion are operative. The problem the Fed has is that by itself, it is no longer is able to promote credit growth along the hyperbolic curve needed to offset the mounting interest and principal repayments, plus credit losses from the debtors (i.e Scamalot and money losing companies). The Fed appears to be relying on a previously untested theory that the inflation of the world money supply (outside of the US) will support US markets and the US economy.

Continuous heavy intervention on behalf of the US$ (from Japan) expands the world money supply pool outside the US - and has seeped back into US markets directly (in bonds) and indirectly (stocks). This temporarily offsets the impact of the steadily falling domestic money supply. Japan has been funding recent purchases by the issuance of new fiat money (well actually through yen repos, which has almost the same effect). Recently Japan has set aside its plans to become more active in the process of sterilization, which is the process of offsetting the huge increases in the supply of yen sold by purchasing them back through – for instance – special yen bill/bond sales. When Japanese interest rates start rising again after those proposed sales, which they have not done lately, it may be a signal to look for less liquidity in financial markets.

On the bright side for gold bulls, the falling US$ and increasing supply of world money has continued to support gold – as well as other internationally traded commodities (excluding some tainted farm goods).

If the money supply figures are in any way reliable, which should see distinctive signs of economic weakness show up fairly soon. On the other hand since economic statistics include so many estimates and hedonic adjustments, it might be hard to know just when the economy is turning down.
http://www.federalreserve.gov/releases/h6/Current/

http://www.federalreserve.gov/releases/H41/Current/

http://research.stlouisfed.org/fred2/series/M2

-END-

A wonderful piece from www.prudentbear.com on why the low money growth is occurring:


Guest Commentary, by Richard Benson




Exporting Inflation: The Paradox of Low Money Growth




January 8, 2004


When a currency is falling, it makes sense to get your money out of that currency and into another. George Soros and Warren Buffet aren’t the only ones that have gotten a big pile of cash out of the dollar and into other currencies, commodities, or gold. Most international companies can easily decide how to hold their cash and whether they want it held in Dollars, Euros, Yen, Pounds, etc.

Moreover, with the Dollar being the World Reserve Currency (and for many years the currency for the international underground economy), it has been estimated that two-thirds of US paper currency has been held abroad. (Most of this currency is in $20 bills.) Now that the US has a new pink $20 bill, it is a perfect time for foreigners to swap them before the old $20 bills are no longer accepted. With the dollar continuing to fall, the foreign holders of paper dollars would need to be "pretty dense" not to be exchanging them for better currencies.

The critical point to realize is that just because the demand for dollar money looks weak, it doesn’t mean that the US and world participants’ demand for money is weak. It simply means that more and more people just don’t want to hold their money in dollars.

The Paradox is solved! Money growth in the US is low because as the Fed prints dollars more people are running from the dollar. Indeed, the smartest money managers are borrowing in the US at 1%, taking their money out of the US, and swapping it out of the dollar. No wonder money growth in the US is so low!

Because interest rates have been kept at 46-year lows, our credit system is creating massive amounts of cash. The falling dollar is encouraging individuals and companies to take these dollars and turn them into foreign cash which, in turn, is forcing money into countries and their financial markets regardless of whether they want it or not. The US is pushing money growth and reflation on the world…..

***

For the entire piece, go to:

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=29434

Houston’s Dan Norcini pondered in last night’s MIDAS the Comex might be in a panic about a coming silver squeeze (as per my source’s input) and that might have been the reason for raising the margin requirement. The raising of the rates could actually show how scared they are because they know what could happen. Today’s dramatic move up suggests that could be the case. Dan had more to say on this subject later last evening:

HI Bill:
I have been getting quite a few emails from folks out there who are concerned about this recent stunt by the Comex officials. Here is a sample and my answer:

Dear Dan,
Do you think the increase in Silver margins late today will have any kind of effect on the Silver market ? Regards,
Chuck N.

Honestly, not all that much Chuck as it is too early in the game for any kind of forced liquidation due to margin hikes in my opinion. We might get some short term setback in price but those are par for the course in any upmove and are to be expected anyway. But we simply have not seen enough of any kind of fireworks in silver yet to see some sort of massive sell off as specs are forced out due to insufficient. We do not have a huge imbalance of specs on one side of silver nor do we have any kind of mania going on nor do we have some sort of increased news coverage with every talking head speaking about silver.

I honestly do not know what the Comex is trying to pull with this stunt. Margin hikes typically accompany expected increases in volatility or runaway bull moves. They are obviously anticipating some increased volatility in silver which leads me to believe that something is afoot out there in the silver world. We have not had all that big a move in silver in relative terms. WE had a couple of big days back to back and things have calmed down again. Hardly the type of price action that would justify a margin price hike of +50%. I am actually viewing this as a bullish development simply because it makes no sense whatsoever given the CURRENT market conditions. Something is coming down the pike.

Silver is just barely beginning a long term bull market as all the charts indicate and my recent essays have detailed. Comex used to wait until near the end of the bull markets to hike margins sufficiently to flush all the little specs out in order to save the bacon of the damned perma bears who manage do get themselves trapped in losing short positions and then go crying to the Comex directors to bail them out. It is funny that the trapped commercials in cattle this year who were caught short in front of a runaway bull market went squealing like stuck pigs to the CME to hike margins to let them get out. We never heard a peep out of the trapped longs these last couple of weeks after the mad cow scare developed who were caught on the wrong side of the same cattle market however. Typical exchange play - save the butts of the big commercials but let the specs fry. There wouldn't be any damned exchange if it were not for us speculators but these officials treat specs like they are door mats on which to wipe their feet.
Best, Dan

Then on the big bond move today:

I have been catching more than a few emails today after today's bond market move. Here is my response to them:

Bonds are trading in another galaxy right now and bond traders have yet to even faintly realize the repercussions that the sinking dollar is going to have. Bond traders are looking at the jobs situation and the CRB is not even on their radar screen. A sinking dollar is inflationary and anyone in their right mind understands that who has a lick of economic sense. Bond traders are still playing the deflation scenario which is preposterous. The true scenario they should be realizing is a stagflation scenario in which wages remain flat while commodities soar. Consumers paying through the nose for heating oil, gasoline, natural gas and hence electricity to heat and cool their homes and drive their cars are not going to be impressed with "no inflation" double speak from the Fed or from bond pitsters. Neither are they going to believe that costs are contained when they visit the local grocery store. Throw rising medical costs, local and state taxes, fees, etc; into the mix while wages stay flat due to outsourcing and increases in productivity (read that - work the grunts until they drop and squeeze more out of them) and one has to wonder if sanity has left this nation in regards to financial knowledge. I wonder how many airlines and trucking outfits are going to see profits increase and hire more workers or increase wages with spiraling input costs and no way to regroup except by raising prices which leaves them at a competitive disadvantage. As the dollar falls further and the cost of imported goods from abroad increases, consumers are going to feel the squeeze in their pocketbooks. No wonder credit card delinquency rates and bankruptcy rates are at all time highs. The average consumer out there instinctively realizes that his or her paycheck is not going as far as it used to but does not really understand why especially when their financial authorities are lying between the teeth to them. One of these days, bond traders will wake up out of their stupor and interest rates will begin to move up. When they do, Katy bar the door - that is what has the Fed terrified.

The U.S. current account deficit and federal budget deficit requires foreign investment to sustain it and investment minded foreigners are NOT going to put their savings into an instrument that is losing value at the clip the dollar is while getting a measly 5% on a thirty year. The only thing propping up the bond market and keeping it from falling is

(1.) the stupidity of this generation of bond traders and their ignorance of economics

(2.) BOJ and Fed collusion. The Fed is the bankrupt master and the BOJ is the rich slave that does its bidding. BOJ's constant meddling into the markets all over the globe has completely distorted normal relationships between the various markets in my opinion.
Dan Norcini
[email protected]

What The Gold Cartel is fighting against:

RUSSIAN GOLD AND CURRENCY RESERVES GREW IN 2003 BY 60%

MOSCOW, January 8 (RIA Novosti) - Russia's gold and hard currency reserves grew for 2003 by 60.1 per cent to amount as of January 1, 2004, to $76,938 million against $47,793 million as of January 1, 2003, the Bank of Russia's official web site says.

The amount of currency reserves as of Jan.1, 2004 was $73,175 mln ($44,054 mln as of Jan.1, 2003). Foreign currency funds, making part of currency reserves, stood as of Jan.1, 2004, at $73,172mln ($44,051mln as of Jan.1, 2003); the amount of funds in gold was $3,763mln ($3,739mln as of Jan.1, 2003). –END-

Lithuanian gold, currency reserves up 19.3%

Vilnius. (Interfax) - Lithuania's gold and currency reserves increased 19.3%, or by 1.539 billion litai, in 2003 to amount to 9.528 billion litai at the end of December, the press secretary of the Lithuanian Central Bank told Interfax.

Reserves increased by 597.5 million litai or 6.7% month- on-month in December.

The press service said that growth in gold and currency reserves last year was due to operations carried out by the Central Bank with the central government, which increased reserves by 804.8 million litai. Reserves also increased due to the fact that commercial banks sold 669.7 million litai more foreign currency to the Central Bank than they bought. In addition, gold and currency reserves increased in 2003 due to growth in the reserves of commercial banks in foreign currency and the receipt by the Lithuanian Central Bank of revenue from the investment of foreign currency. However, growth in reserves was restrained by the early payment by the Central Bank of part of its debt to the International Monetary Fund in January 2003, the press service said.

Lithuania's gold and currency reserves increased 20% in 2002. –END-

All we hear about from the US financial media is about central banks selling gold. They rarely highlight the fact that a decent number of central banks, including China, are buyers. Once again, The World Gold Council has dropped the ball. Instead of delving into these substantive issues, they are still jumping up and down about jewelry promotions. The WGC is a retarded operation and completely dysfunctional.

Perhaps the Japanese will enter the gold fray in a serious way soon and help propel gold to $500:

Japan gold rush seen ahead of bank deposit reform
Fri January 9, 2004 03:48 AM ET

By Miho Yoshikawa

TOKYO, Jan 9 (Reuters) - All that glitters is gold.

From cuff links to a bonsai tree with finely crafted spiky leaves, virtually everything on display at the store in Tokyo's ritzy Ginza district is made of the shiny metal.

The store, run by Japan's top bullion house Tanaka Kikinzoku, was doing a brisk business at the start of the year with more than a dozen customers filling the room, most queuing at a counter to buy or sell gold bars and coins.

Osamu Ikeda, general manager of the bullion house, said private investors continue to see gold as a way to diversify their investments.

"There is more buying than selling taking place...because most private investors see gold as a long-term asset rather than a way to make a quick profit," Ikeda said.

As evidence of how good business has been, he said Tanaka Kikinzoku has sold about 300 wooden chests filled with 10 kg of gold bars, at a price tag of about 15 million yen ($141,300), in the three months since it began offering them.

Though few might buy a miniature potted pine tree or a statue of Buddha -- both of which cost several times the market value of their weight in gold -- as an investment, Ikeda said gold coins and bars continue to sell well.

Other Japanese bullion houses and industry officials also testify to private investors' appetite for gold, which many expect to intensify this year.

INVESTMENT TOOL

Against the background of worries over Japan's economy and sagging real estate values, the idea of buying gold as an investment tool has taken root, industry officials say.

They say buying this year will be fuelled by the planned end of a full state guarantee on bank deposits in April 2005.

-END-

Rhody on silver:

Although face values on bullion coins are meaningless, the ratio of gold to silver is interesting here. It is 16.66:1 which is very close to the old ratio used back in the early 20th century before the Federal Reserve perverted the financial system. You might be interested to know that for that ratio to exist on COMEX spot, the present spot silver would have to be $34/oz CAD or about US$26/oz. This displays how undervalued silver still is relative to gold.

Mind you, this is all futures price. The business news announcers are beginning to quote gold prices as "the futures price of gold" on the evening news. Could it be that the system is preparing the public for the great default??? Could it be that there is now a subtle recognition that the futures price is not actually the real price of gold? Could it be that GATA's message that the gold market is rigged and that the paper derived price is not real is finally getting through, at least as far to make the conventional sources cover their collective asses by putting in that little disclaimer: "futures price of ___________"? If the above is true, then we truly are in the end phase of the US dollar empire.
Regards, Rhody

I am still waiting for the gold derivatives neutron bomb to go off. Do we have some smoke here which could be leading to the fire?

Hi Bill,
Maybe connected people in the USA do not talk, but outside the USA they sure do. I am off the continent and ran in to someone very connected on three continents. He strongly suggested I keep doing what I am doing, buying unhedged gold and silver mining companies and gold and silver bullion and coins, because he said I am more right in my thinking than I probably am aware. This person gave me lots of good data. Here are two things he said that are gold related:

1) An executive at one of the bullion banks you keep mentioning signed a certificate certifying tens of thousands of ounces of physical gold backed up the certificate (I do not know what the certificate was used for. Did the COMEX request certification of physical gold by the shorts?) [I ask, how many more fraudulent gold, and probably silver, certificates have been signed and what are they being used for?].

2) The USA is moving to some form of gold standard and they are combing the planet trying to buy gold. But the Americans are having a tough time finding gold for sale.

Please keep bearing that torch and the insane will be found out. Then we can put a civilization on this planet...for the first time.
Take care!
RL

Then a little birdie flew by today and chirped/whispered:

"Hearing about a major gold specific "problem" in Europe. It is likely a bullion bank or a division of a US or European commercial bank. I'm told it will rear its head in a couple of week's time."

First oil, then gold?
Bill,
As an oil industry professional of many years what has been revealed about Shell I can tell you will become a widespread issue with many oil companies. We have seen the long parade of of accounting scandals of CEO's who were motivated by stock incentives to fiddle their books. Oil company executives have also been keen to see their stock rise. Accounting for oil in the ground is obviously a lot more subjective than counting income and expenses on a balance sheet so much of what has been going on will never be considered as fraudulent but just downright over-optimistic.

The consequences are not just a drop in oil company shares but a huge energy crisis because everyone has been lulled into a deep sense of security because there is supposedly plenty of oil around. Not so! I penned some essays for the cafe in the past..notably "Crisis, What Crisis?" under the pen name of Dr X as I worked for a major oilfield company and was not able to use my real name. A major crisis is coming due to a shortfall of what is considered as reserves and what actually is reserves. Just like in the gold industry it takes many years to explore, develop and produce new supplies even when the price goes through the roof.

Shell Cuts Reserves, Finds Less Oil Than It Pumped

http://quote.bloomberg.com/apps/news?pid=email&refer=home&sid=aoiaA6cSv2zU

Cheers
Adrian

Speaking of Adrian:

Bill,
I really enjoyed Adrian's short piece yesterday regarding gold's $200 move in 16 days back in 1979. What could cause a repeat move of this magnitude in today's environment? Perhaps a macro-scale derivatives blow-up?

The big derivatives disasters of the past decade all were very sudden events of short duration. Consider Barings Bank, Enron and LCTM. They all seemed so rock solid, but then they all suddenly blew-up from catastrophic losses from derivatives. These companies just disappeared over a weekend.

We now witness a derivatives-led manipulation of the financial markets on a massive scale, seemingly to preserve the appearance of normalcy. But these are hardly normal times. Perhaps troubles will appear suddenly and quickly take down this manipulation game in the wake of a colossal derivatives blow-up? Adrian's 16-day scenario could quickly become reality, or worse. If you do not have a position in bullion or gold shares, it may be nearly impossible to enter the market should Adrian's scenario come to pass.

With bullion breaking out to 15-year highs, the utter lack of interest in the gold equity sectors is truly remarkable. The juniors barely trade and investors seem so anxious to get out. Perhaps the Hulbert index at 11% says it all. I cannot imagine a healthier bull market environment.

Nick Ferris
J-Pacific Gold Inc.
[email protected]
www.jpgold.com
1-888-236-5200
TSXV Symbol: JPN
OTC BB Symbol: JPNJF

The trading in the gold shares is bizarre. They always sell off late no matter how gold and silver close. The HUI settled at 248.74, up 4.71, while the XAU gained 1.57 to 110.54.

The HUI did hold substantial support at 240:

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hui&sid=0&o_symb=hui&freq=1&time=8

What is just as bizarre is almost all the professional gold traders out there cannot wait to dump their gold shares. With gold and silver making new high after new high, it is another one of those psychologies I have rarely ever encountered. One of the most prominent precious fund managers in all of Canada said today he did not know one person who did not think gold was going to correct lower this week, including himself. Combine that with the Hubert 11% bullish gold timer number and you won’t have to stretch to understand why the gold shares aren’t going anywhere. There are few buyers.

All I can say is there is almost no understanding in the gold/investment world of what this gold market is, and has been, all about. I will bet not one of the money managers or market timers who is cautious to bearish here (and taking money off the gold share table) talks about what GATA has uncovered and mentions it publicly or in writing. This is mind-boggling as this has been the most dominant factor in the gold price for more than 7 years. Those who fail to do their homework on the critical material GATA has uncovered are doing clients and themselves a big disservice. Such ignorance will leave many out of the big gold move, or leave them way under-positioned.

Something else which may be going on:

Bill,
I thought you might be interested in this observation regarding the trading of Golden Star in Canada, as I’m pretty sure that this is where much of the resistance is coming from. I’ve actually reported the evidence of short box trading on this stock and have had ongoing correspondence with the Toronto Stock Exchange about this matter.

The short position in GSC continues to increase each month as you can see by this chart: (NA)

This shows the trading for the today.(NA)

And this screenshot shows the final minute of trading:(NA)

So what all of this demonstrates is that there are probably some short sellers colluding to keep the price of GSC down for the moment. Of course this also opens the door to explosive short covering as we’ve seen before on this stock.

The game is certainly fixed against the small trader who tries to time trades in these gold stocks. Your "buy and hold" strategy is probably the best way for most to invest in this modern stock market that is corrupt to its very core.
Congratulations on your continued success,
best regards,
Bill Christie

Golden Star closed at $6.77, down 4 cents.

I cannot help but think we have the greatest gold/silver share buying panic of all time looming on the near horizon. The public can’t spell gold share yet and many of the pros are under-positioned. The HUI is going 30 points higher in a single session!!!

GATA BE IN IT TO WIN IT!

MIDAS

Appendix

After former Treasury Secretary O’Neill was fired last year, he was quoted by the AP about how he felt about Washington:

"It’s all about sound bites, deluding the people, pandering to the lowest common denominator," he said. "I didn’t adjust (in Washington) and I’m not going to start now."

Sounds like MIDAS and GATA. Now this:

Former Treasury Sec. Paints Bush as 'Blind Man'
Fri January 09, 2004 10:41 AM ET

WASHINGTON (Reuters) - Former U.S. Treasury Secretary Paul O'Neill likened President Bush at Cabinet meetings to "a blind man in a room full of deaf people," according to excerpts on Friday from a CBS interview.

O'Neill, who was fired by Bush in December 2002, also said the president did not ask him a single question during their first one-on-one meeting, which lasted an hour.

"As I recall it was just a monologue," he told CBS' "60 Minutes," which will broadcast the entire interview on Sunday.

In making the blind man analogy, O'Neill told CBS his ex-boss did not encourage a free flow of ideas or open debate.

"There is no discernible connection," CBS quoted O'Neill as saying. The president's lack of engagement left his advisers with "little more than hunches about what the president might think," O'Neill said, according to the program.

CBS said much of O'Neill's criticisms of Bush are included in "The Price of Loyalty," an upcoming book by former Wall Street Journal reporter Ron Suskind.

-END-

Discouraged job-seekers mask true US jobless rate
Friday January 9, 1:45 pm ET
By Andrea Hopkins

WASHINGTON, Jan 9 (Reuters) - For U.S. President George W. Bush and his economic team, Friday's news that the U.S. jobless rate fell to its lowest level in more than a year must have looked heartening -- at first.

But a closer look at the Labor Department report told a far bleaker story, with 433,000 Americans categorized as "discouraged workers" -- those who have given up looking for a job because they have abandoned hope of finding one (or merely run out of unemployment benefits and choose not to call themselves a temp or a consultant. This is a classic Bush maneuver.- ed. note.)

In December alone, Labor statisticians dropped 309,000 Americans from the labor force, no longer counting them as unemployed because they have stopped looking for work. That cut the participation rate to just 66 percent, a level not plumbed since recession-plagued 1991.

Economists believe the drop in the labor force masks a much higher jobless rate -- perhaps as high as 9 percent, according to Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio.

"The decline in the unemployment rate is the most misleading aspect of this employment report," said Chan. "It's a sham because of how we got there -- the labor force dropped precisely because more people became discouraged."

Usually, out-of-work Americans rejoin the job hunt as the economy strengthens, believing growth will spur hiring. But despite more than two years of expansion since the end of the 2001 recession, America remains locked in a jobless recovery and the labor force is falling, not rising.

NOT BUYING THE HYPE

Wells Fargo chief economist Sung Won Sohn said all the talk lately about the booming economy and rising stock market did little to persuade employers or job-seekers that their prospects were picking up as 2003 drew to a close.

"Despite all the hoopla, neither businesses nor potential employees have confidence in the economy. They're not believing all the stories about a strong and healthy economy given by the economists and the government," Sohn said.

"Economic growth is great, but the job market is lousy."

While the economy raced ahead at an annual rate of 8.2 percent in the third quarter of 2003 on the back of Bush's summer tax cuts and a booming housing market, job growth remains tepid. Since July, 278,000 nonfarm jobs have been created -- paling in comparison to the 2.3 million lost since Bush took office.

Sohn said many of the discouraged workers are likely refugees from the factory sector, where 2.8 million jobs have been cut in 41 straight months since the industry's last peak in July 2000. With many jobs gone forever to cheap-labor countries like China or India, workers have little hope of finding work that can compare with the $20-an-hour jobs they lost, Sohn said.

"People who lost jobs in manufacturing, especially some of the older workers, they look at the landscape and say, 'why should I waste my time?' And they simply drop out of the labor force," Sohn said.