Gold broke out decisively in mid-July from the $650-$670 area in which it had been somewhat range bound.

The Fundamentals and Technicals grow increasingly bullish for Gold (and Silver) with each passing week, as Deepcaster has noted in recent Letters and Alerts.

With the fundamentals and technicals both bullish for Gold the question was and is:  will The Cartel* attempt, and be able to smash Gold (and Silver) lower?  The July 26, 2007 Takedown of Gold and Silver would seem to suggest that that ability is unimpaired.

Or, are the fundamentals so screamingly bullish that Gold (and Silver) will catapult higher?

*[We encourage those who doubt the existence of Intervention by a Cartel of Central Bankers to read Deepcaster’s October, 2006 summary overview of the Manipulation entitled “Juiced Numbers IV:  How the Government Gets the Statistics It ‘Wants,’ Markets Get Manipulated, Citizens Get Deluded, and Worse” at www.deepcaster.com.  Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation.  Virtually all of the evidence for intervention and manipulation has been gleaned from publicly available records.]

The outcome of this Great Contest will be a strong indicator of the degree to which The Cartel still remains in control of Gold (and by inference other precious metals and strategic commodities) prices.  Deepcaster has for months described the fundamental (and more recently the technical) reasons for Gold to shoot higher.  Indeed, absent market manipulation, Deepcaster believes Gold and Silver, the monetary metals, would be much, much higher than they are today, certainly in the four-figures.

So will The Cartel be forced to retreat in face of the shrieking fundamentals which impel Gold to move higher?  Consider one very recently published view of The Cartel’s situation:

“And then there are all those Death-Stars looming over The Cartel’s collective heads like omens of doom:  The Subprime Derivatives Death-Star, the Real Estate Market Collapse Death-Star, the Adjustable Mortgage Reset Death-Star, the ABS/CDO Revaluation/Downgrading Death-Star, the Carry Trade Unwinding Death-Star, the Rising Bond Rate Death-Star, the Risk Reassessment Death-Star, the Diversification Out of the Dollar Death-Star, the Iran Nuclear Issue Death-Star, the Nuclear Terrorist Death-Star, the Middle East War/Skyrocketing Oil Death-Star, the Central Bank Gold Depletion Death-Star and the Collapsing Dollar Death-Star.

So it does not take a genius to see why The Cartel has now cleared their wall of shorts by a substantial margin three times in as many weeks!  The reason is stark, raving fear!”  (International Forecaster, 7/21/07)

Or is The Cartel still in control?  Is the recent Gold breakout merely a Great Lure (as Deepcaster described earlier this year) to entice longs into being fully committed on the upside in order to smash them?

Thus, consider (on the other side of this Great Contest) reasons for The Cartel wanting to do take down Gold and Silver prices.

The primary one is that Real Assets (and particularly Gold and Silver, the monetary metals, and strategic commodities like oil) are in an important sense The Mortal Enemies of The Central Bankers’ Treasury Securities and Fiat Currency Regimes.  If investors are long allowed to regard these Real Assets, and particularly the monetary metals, as viable alternatives to Treasury Paper and Fiat Currencies, the whole Treasury Paper Securities and Fiat Currency Regime is at risk of unraveling much to the Central Bankers’ great detriment and loss.

Therefore, above all, from The Cartel’s perspective, it must succeed in preventing the strategic commodities, and particularly the precious monetary metals from becoming seen as alternative stores and measures of value.

But that leads to The Question:  Does The Cartel still have the power to successfully suppress Gold and Silver prices for more than a few days?  Could The International Forecaster’s inference - - “So it does not take a genius to see why The Cartel has now cleared their wall of shorts by a substantial margin three times in as many weeks!  The reason is stark, raving fear!” - - be incorrect?

Is not this “clearing of shorts” subject to a different interpretation?  Suppose the “clearing of shorts” is being conducted in anticipation of rapidly putting on a flood of shorts to drive down the market?

Deepcaster has Forecast the Outcome of this Great Contest (and has recommended a trade for potential profit if Deepcaster’s Forecast is correct) in its most recent Alert posted at www.deepcaster.com.  And will Deepcaster’s Forecast (and trades recommended on the basis of that Forecast) of a specific ongoing linkage between Gold prices and the Equities Markets continue to be realized?

Will The Cartel prevail in the Great Contest over the next few weeks, or not?  The outcome of this Great Contest will do much to determine our investing, financial and economic futures.

Deepcaster

July 27, 2007

DEEPCASTER LLC

www.deepcaster.com

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-- Posted Friday, 27 July 2007 | Digg This Article