This past week we saw gold trade 12 days over $700, the most momentous gold event since gold began its six-year journey from $252.00 an ounce. Soon phase one of the gold bull market will be completed at $850.00 and ounce.

The breakout was triggered by a collapsing dollar, triggered by a real estate and credit crisis that not only affected the US, but Europe and Asia as well. The ECB has dished out over $350 billion that we know of and the Bank of England is in for another $100 billion to go along with some $300 billion via the Fed. Then there are all the other miscellaneous countries. Thus, at least $850 billion has been pushed into the world monetary system.

This is a major gold breakout with nothing but blue-sky until we hit $850. That should take silver to $25-$30 as well. There is no real resistance at $850, it has been 27 years. There is no overhang. It’s just psychological. We also do not know how much gold the gold suppression cartel has left. It can’t be much.

This is a storybook layout. Eleven percent plus inflation driven by lower interest rates, M3 at 14%, and massive amounts of liquidity being driven into the system. This is even more powerful than 1978-81, because we already have a crisis in world credit that has only just begun. As a kicker the dollar is headed for 72-75 on the USDX, the dollar index, and more likely 40 to 55. Thus, after we break the psychological barriers of $850 and $1,000, it is probably $2,500 for gold.

Spain sold 150 tons of gold and the government says that there will be no more sales. 150 tons was enough – what fools. All of Asia and China and India are buyers as is all of the Middle East. Russian President Putin has told their central bank to raise the gold share of its $420 billion in reserves.

All nations are lying about inflation. England says 1.8% as food prices double and petrol prices continue to climb. Then we have the ECB that expects us to believe their inflation is 2%. China just jumped 6.5%. Then we have 18 of 20 major central banks with M3 of 14% plus on average. It doesn’t get anymore bullish.

Then we have England with 300 tons left, that may be going to be leased, which is not good delivery. That means they do not meet LGD standards and probably will have to be re-refined. Some gold is in bars, some in coins and some in ingots. The gold has been accumulated since around 1840 and over the years there was no standard. There has not been an external audit since 1954 for US gold, thus, it may not be good delivery or it may not be there.

Gold is again leading the way with silver in inflationary times. Gold is reasserting its monetary role and as the ultimate safe haven. Gold shares versus bullion are very undervalued. They are trading as if gold were at $600 an ounce due to suppression by our government. That is why we believe that there are spectacular gains ahead. The entire HUI is way undervalued versus gold. You have hitched your wagon to a star and don’t let go. Buy more gold and silver coins and shares.

We send the message out again, anyone who owns SLV, the silver ETF, should have sold it long ago. The GLD, gold ETF, is in the same sell spot. These positions should be liquidated and moved into gold and silver coins and shares. Barclay’s that has the silver ETF could go bankrupt due to derivatives, CDO, ABS and CP losses. Besides, if you read the contract you will see they do not have to take silver delivery, they can buy futures contracts. Where would you be if Barclay’s went under? You would be just another unsecured creditor. We cannot get access to an audit on GLD because their contract with the depository doesn’t allow for it. Have they been lending gold? We believe they have and we believe they are not taking delivery of some of the gold they purchase via futures contracts and derivatives.

It should be noted in reference to silver that recently the commercial shorts covered almost 20,000 contracts equal to 100 million ounces of silver. That was the turning signal for silver and since it has picked up steam to the upside. We believe that silver is a runaway locomotive. That, of course, gives great leverage to silver stocks.

When looking at shares of producing gold companies be sure to check their costs. Total cash costs in the first half of 2007 were $371 an ounce or 21% higher yoy, and there will be no let up in cost increases. We do expect that the difference between the cost to mine and sales will decrease. Costs will just go higher, so gold must go higher.

As you are well aware, China holds 18.3% of all US Treasuries. It is rumored that the Chinese have a deal with George and the neocons that they will buy US Treasuries with their surplus and in return George Bush will veto any fair trade legislation with tariffs on goods and services. The problem is the Chinese grew skeptical of the deal and its consequences and in July, August and September they have been sellers of some $14.7 billion of Treasuries. What tipped the balance and the agreement was the sale of AAA rated toxic junk, with fraudulent ratings. Central banks and other bankers are furious. Other currencies will be beneficiaries of this flight from the dollar, but in time gold will be the big winner. This means lower interest rates, massive monetization and money and credit creation. In Europe the ECB has held rates down. They nevertheless have increased M3 at 11.7% and England has increased theirs by 13%.

             Making matters worse for the US is rising oil prices that have to feed inflation. The Saudis and others in the oil producing business in the Middle East look like they are about to sell oil in currencies other than dollars. The Saudis could be large dollar sellers and if that happens the petro dollar will be dead and so will the dollar as the world’s reserve currency. The American elitists have again sold everyone out to save their own hides’ short term by lowering interest rates. The game is over and gold is again king of the currencies. There is $4.4 trillion in US securities out there and if just a small percentage were sold it would raise havoc with the value of the dollar and US securities. All these years foreigners have helped keep the dollar strong and inflation low and that is in the process of ending. There is every reason to sell the dollar. Not only financial ones but political ones as well. Foreigners despise this administration. They are well aware of the fiscal profligacy and the horrendous debt built up by this administration and the average American. The administration has been told by every international organization that their fiscal policies and debt accumulation on and off budget is unsustainable and would end up in economic disaster.

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Hyperinflation and the Weimar Republic are next as the most recent cuts, together with these future cuts, team up to fuel rampant speculation, profligacy and inflation which, when added to that which has already been created and built into the system, will send prices skyrocketing.  A stunning 15% rate of inflation has already been built into the system due to an out-of-control and hidden-from-the-public M3 money supply, which we have taken the liberty of publishing in lieu of the Fed or the government.  The September 18 cuts will add to this morass as will further cuts thereafter, until we are compelled to do our grocery shopping with very large wheelbarrows full of dollars.  What else could we expect from an academician whose solution to a potential recession and subsequent depression is to drop money out of helicopters (hence the name Helicopter Ben), thereby hoping to inflate his way out of trouble.  This is just another foolish Keynesian myth, the economists' equivalent of an old wives' tale, but Helicopter Ben actually thinks it can work and that it could have prevented the Great Depression.  As you all well know, sometimes in life you just have to shut up and take your medicine.  This is reality.  But of course impractical academicians deal in theory, not in reality, so purging the system and taking the economy immediately and unceremoniously to the woodshed was simply not palatable (and, in addition, was totally unacceptable to the Illuminists, at least for now, until their looting of the US public and their fractional reserve banking Ponzi scheme are completed).  So instead, we end up with an economy that is running around wildly, totally amok, like a spoiled child with ADD to boot.  As any parent would tell you, out-of-control children with little problems grow into out-of-control adolescents with much larger problems, and that is exactly where we are headed.

Mr. Bubbles beat the dollar into a bloody pulp, and now Helicopter Ben has administered the coupe de grace.  Greenspan's Folly has been followed by Bernanke's Gambit.  We and every other professional trader know that this gambit will not work, and that it is only a temporary Band-Aid that will be left flopping in the wind when the whole system collapses.  The Dow, after gaining about 336 points the day of the Fed's big cut, has struggled ever since, gaining only 39 points to close at 13,778.65 on Tuesday, one week later.  This is because the PPT is caught in yet another box and cannot get out.  Downward pressure on every US stock market is now so tremendous that without the carry trading hedge funds and a very weak yen, these markets will go nowhere but down until the credit crunch is resolved, and that will not happen until the dead bodies of the victims of the CDO/ABS/ABCP contagions are located, identified and buried.  Given the deregulation that has occurred and which has made the whole market system worldwide into an opaque, hazy cloud which no one can see through, the location of the bodies is virtually impossible to determine, and until they are found the credit crunch will continue.  If the PPT weakens the yen, the market will climb as the liquidity of carry traders greases the skids, but much of this liquidity will go into PM's which have been relentless and unstoppable, and could very well send gold to the moon in a mind-boggling short-covering rally that could cause the very vulnerable all-time high number of gold futures open interest of 427,545 contracts set on Tuesday to totally unwind, completely annihilating the commercial shorts.  If they try to strengthen the yen to put a yen-hit on gold that is at this point a nuclear option that could totally destroy financial markets worldwide as the support of hedge funds in the marketplace might be completely withdrawn by the unwinding of the carry trade.

This is why the yen has been in a fairly tight range lately with respect to the dollar and the euro.  A big move in the yen either way could be disastrous for the cartel.  The big push in the Dow last Tuesday did little more than provide the strength for professional traders to sell into as they try desperately to de-leverage and to cover the growing number of redemptions being demanded by hedge fund investors fleeing in terror as they wonder whether they will be the next victims of the ongoing CDO/ABS/ABCP contagion.

Gold has been unstoppable since the announcement of the Fed's cuts on the 18th despite the fact that the cartel has thrown everything but the kitchen sink at it.  Gold has closed above its previous 2006 record of 730 four trading days in a row now, vaulting from a low of 722 to close at 732 on the 20th, from a low of 727 to close at 731 on the 21st, from a low of 726 to close at 731 on the 24th and from a low of 722 to close at 731 yet again on the 24th.  The old record has now become a level of support instead of a level of resistance, which bodes well for gold.  The past week large central bank sales have been evident in the charts as the Washington Agreement completes another fiscal year and the wall of shorts in gold futures has grown to a breathtaking all-time record of 427,545 contracts as mentioned previously, so gold has risen despite the cartel's best efforts to stop it.  The cartel has not taken this lying down.  The cartel even tried a mini-yen-hit on gold on the 20th which was famously unsuccessful.  They tried the same again on the 24th-25th, and were just as unsuccessful.  Oil is now being hit to support stocks and to hit gold, having transitioned from the October to the November leading contract, closing yesterday at 79.53, down 1.42, having fallen below 80 for the first time on the leading contract since the 12th.  Meanwhile, during all of this diabolical manipulation, gold has already shattered all but the 1980 records.  The XAU and HUI have together simultaneously hit all-time highs, supporting gold by confirming its rise, and it is difficult to tell which is leading which, creating a very bullish situation.  The cartel's sales under the Washington Agreement end today, September 26, with the completion of its latest fiscal year, and gold sales are once again far short of the 500 ton goal.  This is because central banks are reluctant to unload their gold as liquidity has become a prime commodity in the ongoing credit crunch and gold has become enormously profitable.  The cartel has had to twist the arms of the Spanish and the Swiss only to come short of the total quota by what may prove to be 100 tons or more.  Silver continues to rise in the face of negative lease rates, and has dutifully followed gold on its way up, but has still not reached record levels as it continues to strive for the magical 14 handle, having already claimed about 13.67.

The real story is now the dollar.  This is the catalyst that will send gold into outer space.  Already future rate cuts are being built into the price of gold, and any effort to push gold down will bring relentless physical buying, as the Indian wedding season will surely take advantage of any dip.  On Tuesday, September 25, the USDX hit an all-time closing low on the spot contract of 78.313 and on the leading contract of 78.213, with intra day lows of 78.195 and 78.100, respectively.  Yet we hear nothing of this from the Illuminist-controlled media - what a surprise!!!  The previous low of 78.43 was set in September of 1992, exactly 15 years ago, so you can see the depths to which we as a nation have now plunged.  The dollar now joins the real estate market and SIV's on their way to financial hell.

Large specs should continue to add to their long-term protective derivatives (yen calls and stock index puts) as the PPT gives them a golden opportunity to protect their gold positions.  You should be buying these protective derivatives daily all the way up so that when the market comes all the way back down you will have daily profits to offset losses from your long positions and your gold and silver positions will remain inviolate.  Remember, physical off-take is the key.  Do not let up.  The cartel's back is now up against the wall and it is time to finish them off once and for all.

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-- Posted Wednesday, 26 September 2007 | Digg This Article