Oct. 7 (Bloomberg) -- Crude oil in New York rose to a record $53 a barrel after rising 14 of the last 16 sessions on concern that U.S. supplies will be inadequate to meet winter demand.

Hurricane Ivan has reduced production at platforms in the Gulf of Mexico, source of a quarter of U.S. output. U.S. inventories rose less than expected last week, and unions in Nigeria may strike, threatening shipments from the fifth biggest source of U.S. oil imports.

``The persistent shut-ins in the Gulf have been more severe and longer lasting than we thought at the time of the hurricane,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``The geopolitical concerns in Nigeria and elsewhere are just adding to the concern about supplies and the rise in prices.''

Commodities Index Rises to 23-Year High, Led by Oil and Metals

Oct. 7 (Bloomberg) -- Commodity prices measured by the Reuters CRB index rose to a 23-year high as oil and metal producers struggle to keep pace with increasing world demand for raw materials.

``We're seeing a restrained approach to adding new supply to the market by the companies, and demand is picking up significantly,'' Evy Hambro, who helps manage Merrill Lynch & Co.'s $6.3 billion World Mining Trust, said in an interview in London. Supply ``deficits are growing, and that's obviously very supportive for commodity prices.''

The Commodity Research Bureau index of 17 futures contracts rose as much as 0.46 to 286.22, the highest since May 1981. Crude oil rose to a record $53 a barrel in New York after U.S. inventories increased less than expected. Copper and aluminum reached nine-year highs in London on concern manufacturers will deplete shrinking metal inventories.

The world economy may expand by 5 percent this year, the fastest pace in three decades, according to the International Monetary Fund. The Group of Seven countries, which represents about two-thirds of the world's economic output, on Oct. 3 called for oil producers to pump more to curb the rally in prices, which may hurt growth.

-END-

Do I need to write a MIDAS these days with many of you knowing what I will comment on ahead of time? For instance, Houston’s Dan Norcini this morning:

Hey buddy.
Do you want me to write your daily Midas for you today??? I can already guess what you are going to say. Just kidding Bill but I can see the fumes coming up in Big D all the way from down the road here in Houston! I called the Dallas Fire Department and told them that the smoke they see is just Murphy again and that they can stand down and go back to playing some ping pong and shooting pool.

Crude at $53.00/bbl, the dollar down, the stock market down, the CRB moving up and gold ONCE AGAIN getting sat on by the plunderers and rapists at the gold cartel every time it dares poke its head above $420. You can really see the battle taking place by watching the intraday price action.

The jobs report is due out tomorrow morning and my guess is that the number will be a decent one judging from the recent ISM's. Besides, it is the last one before the election and I am certain that the pencil pushers have had their marching orders to deliver the goods. No doubt they have been told that they can issue the "CORRECTION" next month when they revise DOWNWARD the number.

That will give the goons the opportunity to try to give the dollar a pop and of course, flush some specs out of the gold market. They have pulled this same stunt every time we have had a decent jobs number for the last year. I would not expect anything different this time around. Only thing is that if the jobs number comes in at less that 140,000 or so for some reason, there is going to be a fly in their ointment. Not only that, as more and more people get wise to their schemes, the gold market is going to continue to find buyers on these orchestrated bear raids and subsequent price setbacks. The support line keeps moving up in gold.

We know that the ONLY major selling taking place is being done by the same bullion banks and of course, the local yokels who hitch a ride on their coattails (that would be the floor traders) who are going to get steamrolled one of these days very soon when someone looks across at them in the pit and calmly says, "Do you have any more you want to sell me?" That will be fun!
Dan

The gold open interest rose again, this time up 1549 contracts to 298,149.

Spoke to my STALKER source. First time in a week as I have been away, as you know. He has some goodies for us from his London silver dealer contact:

*The Russians were substantial buyers of silver in September, second only to the Saudis.

*The silver shortage is spreading outside of England to other countries.

*He is looking for $8.50 silver in the weeks and months to come, yet is now even more bullish. Price could EASILY go higher than that.

*He recently had trouble filling a $1 million order, which is not a large one for him.

*The market is getting tighter and tighter.

*The buyers want DELIVERY, not paper. They want the real goods. This is a more recent development.

*There are some willing sellers, which could put some volatility in the market, even taking silver below $7. This source believes this will be a real buying opportunity as the price will not stay down there for any length of time.

*Recent word in London has both Warren Buffet and Bill Gates active in silver.

The silver open interest rose 2361 contracts to 101,879. The Comex silver warehouse stocks were unchanged at 106,945,810. That is a new low since my last report to you on them.

On another note, our STALKER source says he recently went to a meeting of money manager types in Canada who are also involved in the gold arena in some way. The talk was of fierce inflation in the US for the next 18 months. After that, who knows, could get worse?

Indian ex-duty premiums: AM $6.23, PM $7.69, with world gold at $418.95 and $417.85. Adequate, and lavish for legal imports. India seems willing to tolerate gold in the high teens. Bad news for Bears.

Indian markets were cheered late in the day by news of the success of the country’s second biggest IPO, involving the privatization of National Thermal Power Corporation, and the rupee firmed. India looks poised to buy a lot of gold.

Superficially, TOCOM was not very convinced, with the active contract closing down 3 yen, and aggregate volume falling 21% to equal 23,105 Comex lots. But in fact world gold made another approach to $420, closing according to Reuters at $419.25, $1.25 above NY, open interest rose the equivalent of 845 Comex lots, while according to Mitsubishi’s estimates, the "Member’s Proprietary position" jumped 8.8 tonnes to a short of 16 tonnes. This implies the public has started to rebuild its long.

If true, this could be very important. As recently as early August, this was in the order of 80 tonnes; over 100 tonnes was normal earlier in the year. Levels of recent days, close to flat were the lowest since the post Washington Accord price spike in October ’99.

Comex yesterday traded 52,741 contracts, with open interest rising another 1,559 contracts to 298,151. (Much concern is heard about this being little less than the all-time high in April. In fact the run down of the Japanese spec position has appreciably offset the enthusiasm in NY.) Estimated volume today was 31,000.

Early this morning, TheBullionDesk.com commented:

"Despite strength in the white metals, gold meeting very stiff resistance at $420 – sellers said to be a Fund liquidation – a successful breach of $420 may give rise to $433 in next few days…"

Even the normally bearish Barclays commentary observes

"…should the dollar weaken tomorrow afternoon …a strong move higher in gold looks extremely likely"

Today, of course, the widely-noted defense of $420 has been successful.

The noted gold bear displays remarkable confidence that tomorrow’s employment number will be a big upside surprise, and that a commodity and gold rout will follow. It may be he knows something. However, given the behavior of the key physical markets, one doubts that the vulnerability of gold can very great.

JB

CARTEL CAPITULATION WATCH

US stock market investors finally woke up to what is going on in the energy pits. The DOW sank 114 to 10,125 and the DOG dropped 22 to 1948.

US economic news:

08:30 Jobless claims for w/e 10/2 reported 335K vs. consensus 355K
Prior week revised to 372K from 369K.
* * * * *

09:32 Nigerian labor union says strike at midnight Sunday is unavoidable unless gov't willing to hold talks -- Bloomberg
The strike has been set for midnight Sunday 10/10, and concern over disruption has provided the last leg up for oil prices. The government is currently not involved in any discussions, according to labor. Separately, Shell says Nigeria's oil unions have begun a 2 day strike, according to Bloomberg headlines, which do not elaborate, other than to say that oil output is not affected, citing Shell.
* * * * *

14:26 Fed Gov. Bernanke says if economic data indicate a slower economy, the Fed will "pause" -- Bloomberg
Bernanke, who is speaking in NYC, indicates the economic growth potential is between 3-3.5%.
* * * * *

Oct. 7 (Bloomberg) -- AT&T Corp. will cut at least 7,400 new jobs this year and will write down $11.4 billion in assets as it exits the residential-phone business it once monopolized.

The workforce reductions will result in a charge of $1.1 billion in the third quarter, Bedminster, New Jersey-based AT&T, the largest U.S. long-distance telephone company, said in a statement. The writedown will be recorded in the same quarter, AT&T said.

AT&T, which had 61,600 employees at the end of last year, had already eliminated 8 percent of its workforce this year…. – END-

The CRB sold off later with the meats, grains, OJ, and sugar closing lower. It finished at 285.54, down only .22. Meanwhile, from Bloomberg: "Copper futures for December delivery climbed 0.45 cent, or 0.3 percent, to $1.4275 a pound on the Comex division of the New York Mercantile Exchange after reaching $1.4385, the highest since April 1989."

The dollar fell .14 to 285.54 and the euro rose .18 to 122.89.

All of that and gold closes lower. What a farce!

What’s ahead for the US economy:

Silver:

Silver_10_07_04.pdf

US_Dollar_Index_10_07_04.pdf

EXTRAORDINARY! Pimco’s Bill Gross is generally regarded as the most visible and successful person in the US bond world. He is a money manager and firm owner who has earned the highest praise from the establishment. However, now that he has critiqued the interests of Washington and Wall Street, he has been lambasted by some of those who praised him in the past. Café members and GATA supporters know this sort of routine all too well (without the praise of course). Propaganda is King to Wall Street and Washington, not the truth. Good for Bill Gross and good for Bill King who diligently reports on the CPI intrigue:

CPI fraud is far worse than Bill Gross’s hedonic lament. Impugning Mr. Gross for questioning the BLS use of hedonic adjustments is like impugning someone for questioning Al Capone’s character because he evaded income taxes. The truth of the matter is the compilation process is extremely flawed but the vested interest of Wall Street, The Fed and US politicians is to understate CPI and attack foes.

The BLS’s substitution principal abrogates the logic of hedonic adjustments. BLS and permabulls believe it’s okay to not reflect higher steak costs in the CPI because people will substitute ground beef. And if grounded beef prices surge, people will substitute KenLRation. Where is the hedonic adjustment to the downside for the reduced pleasure of ingesting the inferior product?

Furthermore, where is the negative hedonic adjustment for food that contains pesticides, steroids and preservatives? They impact health and a healthcare cost…Anyone with a modicum of common sense understands the BLS’s claim of a 4.4% y/y in healthcare costs is a blatant fraud…Yesterday’s WSJ, hidden on its penultimate page (D-13), noted that a John Hopkins study showed 2/3 of nonprofit groups had at least an 11% increase in healthcare costs, while 9% reported unchanged or lower costs. PS -Accounts of double-digit healthcare cost increases appear regularly.

Housing is the largest (32%) CPI component, yet few people’s housing costs change per year and even less change monthly. 70% of the US own homes. Their housing costs change if their mortgage rates change. Those with ARMs will change more often. Rents change once or twice a year, unless there’s rent controls ala New York. And BLS uses imputed rents for housing prices. Why the heavy weighting?

The more important variable housing costs are maintenance (plumber, electrician and home service rates as well as the hedonic adjustment for the long wait for their appearance) and real estate taxes. Most elementary and secondary tuition costs are actually in real estate taxes, and those are absent in CPI.

The CPI scam gained critical mass with the explosive inflation of the late ‘70s. Carter’s chief economist, Al Kahn, devised ‘core’ CPI to obfuscate the continual price increases in the necessities of life.

Few people talk about the dubious BLS practices of substitution, hedonics and seasonal adjusting, but even fewer claim that there sampling and compilation methodology is absurd. BLS methodology to determine IBM’s price last month would entail sampling the various markets between the 10^th and 14^th of September. It tells you little about IBM’s actual price for September. There are means to ascertain an accurate IBM price for September, and that methodology can be utilized to determine goods prices in the economy. (We aren’t going to detail it here, because it’s something we intend to pursue.)

The current environment of soaring oil, industrial commodities, freight transportations, tuition and healthcare costs compels an increasingly number of people to realize just how bogus the CPI is.

We recently were forwarded a piece from an economist who is on his third decade of deflation warnings. He tried to support his contention that CPI should be lower because the hedonic adjustments aren’t large enough by stating people are oversensitive to purchases they made most recently. They forget how much water heaters have improved in price-quality. NO S^%# SHERLOCK! We’ve bought one new water heater in the past 26 years of home ownership, as well as 3 new washers and driers, a couple refrigerators, perhaps 3 dish washers. We pay for the necessities of life monthly and those costs have been increasing much faster than the CPI – energy, food, utilities, tuition, healthcare, real estate taxes, drugs, etc. And in any contest between under and over-stated CPI advocates the final arbiter is the checkbook, which is not hedonically, seasonally or chain-weight adjusted. Reality, what a concept!

Fed Gov Poole also felt threatened enough by Gross’s modest hind that CPI is not kosher that he had to inveigh against Mr. Gross…Understating CPI (and overstating GDP) has allowed the Fed to perpetuate the productivity fraud and to keep pumping money recklessly. That’s all the Fed’s can go now.

Some reporters are nothing more than conduits – political, financial, etc. And their biggest fear is getting cut out of a loop because they have little or no actual industry experience. Perhaps this accounts for some of the attacks on Mr. Gross. He has the stature to expose official misdeed or malfeasance; and those officials would be held responsible, even culpable. Ergo, they must debunk Gross’s claim.

-END-

Back to gold. What strikes me most these days after my trip to Toronto and reading the responses, or lack thereof, to the release of the Russian central banker's speech is REALLY how clueless the gold investing world is regarding any serious knowledge of the true situation of the gold market. As a result, it reaffirms to me the gold price action ahead of us will be astounding. And, as my colleague Chris Powell is fond of saying, GATA has stumbled into the secret of the investing universe, which is why The Gold Cartel/establishment does all they can to ignore us and keep our findings from being read.

There is no doubt in my mind (as evidenced by the presentation by Russian central banker Oleg V. Mozhaiskov in Moscow), the biggest money in the world has studied what GATA has uncovered and knows we are correct. However, most of the gold world refuses to deal with our findings to protect their own agendas and institutional interests. This includes those who comment on all the markets in general. Now, if these people are this clueless, disingenuous, or indifferent, think about the rest of the investing world who still have trouble spelling the word gold and have yet to do any investing in this arena. The implications are staggering when only a fraction of them learn what we already know. The tiny market cap goldshare market will not be able to handle the investor demand.

What is key is the central banks don’t have the gold they say they have. An extra 13,000+ tonnes have been used to surreptitiously suppress the price to advance the interest of The Gold Cartel. Certain bullion banks, who have lent the gold out, cannot get this gold back (when the market is already in a 1500+ tonne per year deficit) without driving the price hundreds of dollars per ounce higher. Whether a majority of the bullion banks are allowed to pay off the loan in cash is hard to say. However, what counts is the gold is gone, which means gold demand has been far higher than reported by officialdom, and two, not all the bullion banks will have their loans forgiven. The "S" is going to hit the fan some place. That you can count on.

The point is the investing/gold world is not taking this into account when assessing the price prospects for gold. Once bullion takes out some key points like $430 and starts to run, it is going to START to create great stress – a stress which most everyone is unprepared for or in denial of. This is why The Gold Cartel is so desperate to keep gold subdued and away from danger territory. The good news for us is it is a war the cabal will lose because of the fundamentals. Their days, weeks and, at most, months are numbered. When they are carried out, gold is likely to act far more violently than the world is prepared for. You will know what is coming and why. Relatively few others will. Fortunes will be made. Only a matter of a shrinking amount of time before our big days arrive.

A plugged-in colleague notes:

"This is written by Larry Jedeloh, who is widely followed in the institutional investor scene. Not doubt GATA is gaining attention."

Now contrast the MARKET INTELLIGENCE REPORT’s objective view of the Mozhaiskov speech versus that of the prejudiced Dennis Gartman, who can’t bear the notion GATA is correct:

Did Gartman read the same speech as Larry Jedeloh of the MARKET INTELLIGENCE REPORT? You would think someone like Gartman, who has an international following, would have developed some degree of "savoir faire." His lack of understanding of what happened here is more than astonishing. Why:

*What the Russians said and did is a big deal. The Russian Central Bank did not mention GATA in a major presentation because they did not believe we are right. What, are you kidding me? Look at how the Russians deferred to us compared to the way this Gartman character talks about us – the mundane conspiracy word taunt again – how original.

*The Russians went out of their way to send GATA a translation done specifically for us and at our request. Why, because we are a bunch of nuts?

*The gold derivatives situation is a key GATA point to the gold price manipulation and the Russians jumped all over it, as does Jedeloh. Gartman glosses over it.

*The Russians stated the fair price of gold today based on inflation ought to be $740 to $760 per ounce. The use of derivatives and lent/swapped gold is why gold is $400+ and not where it should be. This is the key to understanding the manipulation, which the unprejudiced MARKET INTELLIGENCE REPORT grasped, while Gartman goes brain-dead on this key issue.

I could go on and on. No sense in that so as not to overly repeat myself, but I think it is important to point out that the work of the GATA camp finds so much resistance because it ruins the multi-decade work of so many as far as dealing with the gold market is concerned. Or, as in Gartman’s case, it attacks the interests of his own clients and his blind, "reasoned" ways. Some examples of what I am referring to:

*Martin Murenbeeld, a US-based economic consultant, has made a name for himself in the gold world for his understanding of the gold market. In his supply/demand work, he uses the numbers of GFMS. GATA’s gold loan numbers and gold derivatives work throw his work completely out of kilter. Therefore, he won’t deal with our evidence of gold price manipulation and with the significance of the growth of gold derivatives at the BIS versus the dramatic decrease in gold producer hedging, etc. He goes SILENT.

*The chartists and cyclists use technical analysis to develop their own explanation of what is occurring in the gold market. Much of their work is based on historical analysis. There is no room in their work for taking price manipulation into account. Thus, it must be dismissed.

Even the esteemed Richard Russell can’t deal with gold price manipulation issue, even though he has been pounded with info from GATA supporters. His gold analysis last night almost leaves one speechless, as he accounts for the open interest increase in good part due to increasing selling by the hedgers. How wrong can you get? Every time gold runs up to these levels, the open interest has increased dramatically. However, ALL the reports show the hedgers reducing their positions over the past couple of years. It’s not the hedgers stopping the gold advance. It is THE GOLD CARTEL. How much more obvious can it get with oil going berserk? The RR man last evening:

After the gold rush
Gold, and gold stocks, have enjoyed a rapid run-up since May. Do they have more room to run?
October 6, 2004: 12:00 PM EDT
by Mark Gongloff, CNN/Money senior writer

http://money.cnn.com/2004/10/06/markets/gold/index.htm?cnn=yes

Four ex-El Paso traders indicted
False reports used to manipulate natural gas prices

By Stephanie I. Cohen, CBS MarketWatch
Last Update: 7:31 PM ET Oct. 6, 2004

WASHINGTON (CBS.MW) -- Four former El Paso Merchant Energy natural gas traders charged Wednesday will plead guilty as part of a deal to cooperate in a federal investigation of illegal market manipulations, federal officials said.

The disclosure came as the U.S. Attorney's Office for the Southern District of Texas announced charges against Christopher Bakkenist, Dallas Dean III, Donald Guilbault and William Ham.

Each was each charged with a single count of reporting false information with intent to manipulate the price of natural gas between July and December 2000, and faces a maximum punishment of five years in prison and a fine of $500,000. Terms of the plea agreements weren't disclosed….

-END-

Just in from the Netherlands' Eric Hommelberg, right up our alley: