The nightmare rolls on and the patsies in the gold industry maintain their Tweedledee Tweedledum silence over the glaring manipulation of the price. (Emphasis on dum).

From yesterday’s MIDAS:

"Once again, gold broke first, followed later by an UP move in the dollar. The Gold Cartel traders get their heads-up before the rest of the market participants and get in their money-making licks ahead of time. Let’s hear it for democracy and our free markets."

Well, the Orwellians swung into action for the second day in a row with even more blatant price managing today. First, firm physical demand supported the gold price in London with the AM Fix coming in at $416.50, up from the Thursday Comex close. However, by the open this morning, gold (as usual) came off that Fix to come in $1 lower. All eyes were on the pivotal US jobs number.

As has been the case for months for US economic statistics, the number came in weak with the previous month’s job number revised lower to boot:

08:30 Jan. Nonfarm payrolls reported 146K vs. consensus 200K; unemployment rate reported 5.2% vs. consensus 5.4%
* * * * *

08:30 Jan. average hourly earnings 0.2% vs. consensus 0.2%; average weekly hours 33.7 vs. consensus 33.8
* * * * *

08:30 Dec. Nonfarm payrolls revised to 133K from 157K
* * * * *

This very disappointing payroll number sent the dollar reeling. The euro rose .8 and the pound and yen took off. Yet, an oversold gold could only go up 20 or 30 cents. The gold action was beyond terrible. I sat there starting at the screen uttering, "Uh-oh, something is up and it’s not good….gold should have popped $3 easily on the news."

No sooner had those words come out of my mouth when the dollar made a sharp u-turn. The March euro went from 130.42 to 129.13, rallied, then plummeted to 128.83, down .92. Gold dropped $3. Obviously, for the second day in a row, The Gold Cartel traders knew intervention was soon to hit the market, so they sat on the gold price, waiting to rip off the unsuspecting public who went long on the lousy jobs news. What was it, I wondered, that could move the dollar so much, so fast? When I found out it was a big fat zip nothing, I almost fell off my chair:

08:46 Greenspan says that market pressures may reduce the current account deficit
Greenspan notes that US exports are increasing, and a drop in imports may be approaching as import prices have been rising. The Fed Chairman's comments were made at a speech in London.
* * * * *

LONDON, Feb 4 (Reuters) - Federal Reserve Board Chairman Alan Greenspan said on Friday market forces and likely action by Washington to cut its budget deficit "appear poised" to stabilize, and perhaps cut, the record U.S. trade gap.

"Besides market pressures, which appear poised to stabilize and over the longer run possibly to decrease the U.S. current account deficit and its attendant financing requirements, some forces in the domestic U.S. economy seem about to head in the same direction," Greenspan said in remarks prepared for delivery at a conference hosted by the British Treasury.

"The voice of fiscal restraint, barely audible a year ago, has a least partially regained volume," the influential Fed chief said in an apparent nod to the Bush administration's pledges to hold down government spending.

Analysts have said a fall in the value of the dollar over the past 3 years had partially reflected nervousness over record U.S. budget and trade gaps.

Greenspan said the willingness of overseas businesses that export to the United States to accept lower profits, which has helped hold down U.S. import prices, may wane if the dollar falls further.

"We may be approaching a point, if we are not already there, at which exporters to the United States, should the dollar decline further, would no longer choose to absorb a further reduction in profit margins," he said.

Greenspan said higher U.S. import prices would cut the volume of imports "but leave the resulting value of imports uncertain."

-END-

Huh? What a joke! He said nothing. There is zero evidence of any improvement in anything on the US scene to alleviate our growing fiscal problems. As a matter of fact, there is actually evidence the situation is worsening:

NEW YORK, Feb 4 (Reuters) - U.S. inflation pressures rose in January as a result of faster growth in loans, but that was offset by slower growth in input prices, a report said on Friday.

The Economic Cycle Research Institute's Future Inflation Gauge, which is designed to anticipate cyclical swings in the rate of inflation, rose to 120.0 in January from an upwardly revised 118.7 in December, the research group said.

The index's annualized growth rate, which smooths out monthly fluctuations, rose to 4.5 percent in January from an upwardly revised 3.4 percent in December.

"The index is designed to signal the future direction of inflation, and it is clearly telling us that there is no downturn or easing of inflation in sight. This is at odds with the market's initial response to today's weaker-than-expected jobs report," said Lakshman Achuthan, Managing Director of ECRI.

-END-

No matter. The Orwellians were ready to turn the jobs report lemon into lemonade via dollar intervention. They would use Greenspan’s comments to turn the dollar around and get the currency traders onside. It worked. Since PRICE ACTION MAKES MARKET COMMENTARY, the spin by the pundits would focus on how right Greenspan is.

This has become The Twilight Zone, worsening from The Stepford Wives/Matrix Syndrome. Facts mean little anymore. Spin and market manipulation rule the day.

As anecdotal evidence of how trumped up today’s dollar action was, we need only see what the 30-year bond did:

Good grief. Taken by itself, the bond market move to new low yields suggests a massive recession coming down the road. Some will say it portends deflation and rightfully so.

That will be open to various interpretations. Yet, was does not jibe is the action of the dollar (euro) vis-à-vis the bond move. Had the bonds collapsed signaling much higher interest rates, one could understand the dollar going much higher. However, that is not the case at all.

Oh wait, just in – here is a reason for the dollar to take off against the euro this morning:

Russia's central bank said on Friday it had begun targeting the ruble's nominal exchange rate against the euro as well as the dollar, the Reuters news agency reports. The shift is meant to bring currency policy more in line with trade flows.

The Bank of Russia said in a statement it had begun targeting a dual currency basket -- made up of 90 U.S. cents and 10 euro cents -- as of Feb. 1 and would gradually raise the weighting of euros.

"Increases of the weighting of the euro in the twin currency basket, to a level appropriate for the task of exchange rate policy, will take place step-by-step as market players adapt," the statement said….

-END-

Back to the market. The Gold Cartel (trade) capped the price early, sold a little more when the dollar reversed… then watched the funds unload as the euro collapsed. When gold dipped $2/$3 on the day, they turned heavy buyers. Same drill as yesterday. More profits for the crooks (Goldman Sachs, JP Morgan Chase, etc.) and more losses for the bewildered little guy investor.

This is not sour grapes. It is fury over what is going on here. Day after day we receive commentary from all over on how solid gold demand is. We hear from veteran gold investors how pleased they are with the new gold EFT’s and what a significant plus it is for the gold market. Some say the biggest deal in 20 years. Horse Manure. The only thing that counts is whether The Gold Cartel can be beat. Until they are carried out on stretchers, nothing will matter.

This is why GATA is going through an extraordinary effort to host GOLD RUSH 21 (http://www.goldrush21.com/ ) in the Yukon. Enough is enough. As long as we are focused on the gold sector, we might as well do what we can to stop being pushed around by a bunch of arrogant bullies. On that note we have begun to send out our invitations.

This is not sour grapes either…from Jesse this morning:

First, I will be putting something on this out later, to show what happened, but the BLS went back and revised the jobs to MARCH 2004 to dig up enough jobs to make January look 'good' enough to pass, and keep December from dropping too much to make things look bad and keep Bush from being the first president to lose jobs in his first term since Hoover.

So bonds are up and stocks are up and the dollar is holding its own.

Does anyone care what is 'real' anymore? Does anyone actually concern themselves with anything except the last trade and next one, whether they are based on anything but falsehoods anymore.

I can honestly say this is the FIRST time I have ever really been discouraged about things. The sheer hypocrisy and willingness of the financial press to accept these falsehoods is just .... almost too much to bear.

***

Jesse later on after doing some serious homework:

Just going back to April 2003 which is as far as I have accurate records of my own, the BLS added a net 209,000 jobs into December in this revision.

This gives them the plus 146,000 that they achieved in January. It basically allowed them to overcome the adjustment in the Birth Death model which was 280,000 and even that was a bit light because they revised that back to April 2003 as well.

The bottom line is that we had a loss of jobs in January, and the non seasonal number was a shocking loss, but those numbers tend to vary quite a bit. However, just comparing january 2005 to january 2004 non seasonals we lost an additional 430,000 jobs in January 2005.

***

The gold open interest rose 1121 contacts to 254,051.

Silver continues to hold up well. I have been so wrong in the short-term lately, I hesitate to jinx silver. However, it is trading like it wants to climb over $7 fairly soon, once gold gets its bullish act back together.

The silver open interest dropped 32 contracts to 96,721.

The March dollar finished the day at 84.45, up .42. The yen rose to 103.93 and would have closed much higher if not for the euro rout.

Indian ex-duty premiums: AM $7.86, PM $8.67, with world gold at $415.65 and $416.20. High: ample for legal imports. The rupee weakened slightly today and the Reuters wrap up unprecedentedly attributed this to increased gold demand:

"The rupee ended weaker on Friday as …demand for dollars from gold importers weighed the Indian currency down…(a senior dealer at a foreign bank said): "There was some gold-related dollar demand as gold prices have fallen quite a bit and this also dragged the rupee (down)."

This is quite plausible – gold is India’s second import item after oil – but I have never seen it said before.

Gold’s fall in NY yesterday did elicit some response from TOCOM, albeit not very decisive. Volume jumped 52% to the equivalent of 18,219 Comex lots, and open interest rose the equivalent of 1,083 Comex (to the equivalent of 109,988 Comex). But Mitsubishi says the public was a seller and reports their long slipped very slightly (279 Comex lot equivalent). The active contract was down 11 yen and world gold stood 70c below the NY close at the end. (NY yesterday traded 59,831 contracts – 42% above the estimate. Open interest rose 1,121 lots.)

At the Shanghai Gold Exchange, premiums over world gold have now reached $4.04 -$4.47, with world gold at $415.65 this morning. This could be seen as a comment on the cheapness of $US gold; or as a statement of mounting confidence amongst the Chinese business community that G-7 efforts to curtail the Yuan undervaluation gravy train will fail. (The latter is my interpretation.) Premiums were last here at the bottom of gold’s downswing in May of last year.

The open interest data suggests that at least part of yesterday’s persistent selling pressure was shorting; although stop-loss selling was also detected. Gold’s weakness yesterday was not just a case of the market automatically adjusting to the flow of malign Official Sector comments: there was significant selling, especially in Europe.

This IMF gold sales saga has created an unusual situation amongst commentators. Three significant bullion banks, UBS, Royal Bank of Canada, and HSBC have now published analyses concluding that IMF gold sales (as opposed to market-benign revaluation) are impractical for reasons derived from the IMF Constitution and irrational from the point of view of debt relief. All three are making bullish noises:

UBS:
"We believe that selling gold for debt relief of poor countries makes no sense, as it is neither practicable nor necessary…we expect the market to snap back once revaluation and its implications are accepted by the market."

HSBC:
"…we doubt that anything material has changed in the bullion market to justify such huge swings in the long gold/short dollar positions and look at current price levels as an increasingly attractive buying opportunity"

(HSBC says of this afternoon’s CFTC report:
"had the data been collected at the close of yesterday’s trading rather than Tuesday’s the market could show a net short position for the first time since December 2001."
Remarkable!)

RBC:
"We feel the market has overreacted to Brown’s comments, and that gold is oversold… gold’s current weakness presents a good buying opportunity."

The problem with all this is, as remarked yesterday, extremely painful experience ’96-’98 taught that if the Official Sector is involved, being rational is very dangerous. This is because their objectives may simply not be what a business-oriented mind assumes.

In this respect it is ominous that the apparently casual remarks by US Treasury Under Secretary Taylor that the US was "not convinced of need for IMF Gold Sales" (as the Reuters news flash put it) was countered within half an hour by a UK briefing asserting "UK has G7 majority backing on debt relief".

Something is clearly stirring here.

If it involves gold, the physical market is behaving like summer ’99 (e.g. at the bottom) the noted gold bear, and for that matter the Gartman Letter with its Hedge Fund informants, while enjoying the spectacle, seem disinclined to go short.

JB

CARTEL CAPITULATION

The US stock market took off with the DOW gaining 123 to 10,716, while the DOG leaped 29 to 2087. Bad news is good news I guess.

US economic news:

09:47 Jan. final Univ. of Michigan Confidence reported 95.5 vs. consensus 96
Prior reading was 95.8. S&P futures currently at 1192.5.
* * * * *

WASHINGTON (Reuters) - U.S. employers added just 146,000 new jobs in January and hiring in the previous three months was revised lower, the government said on Friday in an unexpectedly weak report on the job market, but a drop in job-seekers pushed the unemployment rate to its lowest level in three years.

The gain in nonfarm payrolls in January came in below market expectations for 190,000 new jobs but was enough to return the nation's employment to where it was before the 2001 recession began. It also erased the jobs lost during President Bush's first term.

January's increase in hiring came after a downwardly revised 133,000 gain in December. The Labor Department also cut its estimate of jobs created in October and November, trimming a total of 59,000 jobs over the fourth quarter of 2004.

Still, the unemployment rate fell to 5.2 percent, the lowest level since a 5.0 percent reading in September 2001. The drop came amid a fall in the number of people in the labor force, which includes both those with jobs and those looking for work.

As expected, the Labor Department also said it had revised up its measure of jobs created in the year to March 2004. In its annual benchmark revision, the government statisticians said 203,000 more jobs were created in the March 2003-March 2004 period. The revision was expected and does not change the general outlook for employment.

-END-

Goodies from:

The King Report
M. Ramsey King Securities, Inc.
Friday Feb. 4, 2005 – Issue 3091 "Independent View of the News"

Q4 productivity rose 0.8%, a tad more than half of the expected 1.5%. Unit labor costs increases 2.3%, 2% exp. Y/y productivity growth fell to 2.5%, a sharp drop from the 5.7% peak of Q4 2003.

The sharp decline in productivity suggests that companies no longer can squeeze the workforce to produce profits and/or economic growth is slowing and/or inflation is increasing. Of course as we have been maintaining for the past several years, productivity is grossly overstated because inflation is grossly understated, which overstated GDP.

Higher CPI = lower real GDP = lower productivity = lower corporate profits

This implies that corporations, which have been jettisoning jobs, outsourcing etc, have reached the limits of that exercise. So in order to reload the supply of jobs available that can be cut, outsourced, ‘part-timed’ or ‘independent contracted’ corporations are engaging in merger activity. Soon, these mergers will yield another heaping dose of job cuts, outsourcing, etc.

Somewhat buried in Thursday’s FT (page 4): "BoJ’s bills flop fuels liquidity concerns." For the first time in about 2.5 years, the BoJ failed to attract enough offers to fulfill its Y1 trillion bill-buying operation, even though it was an "all offices" transaction that included regional branches. If the BoJ has to lower its liquidity target, it will be a major turning point in monetary policy. The BoJ is blaming technical issues for the shortfall…The article notes that bank loans continue to fall because Japanese companies are reluctant to borrow or hire workers; and wages are still declining.

If the BoJ becomes encumbered in its liquidity operations in Japan, what would be the consequences of its dollar rigging policies in the US? We can’t fathom anything benign. After all the analysis and financial jabberwocky, the bottom line is the US has been living off the kindness of the stranger AKA the BoJ.

The main factor that kept Thursday’s market from a bigger decline is the perception that today’s Employment Report will show wonderful job growth, which suggests a jiggy economy. Of course The Street has been spewing this hokum for months.

Several research pieces note the gap between core and headline inflation, or the crude and final sales levels, must narrow. The feeling, which is reflected in the Fed’s newfound concern about inflation, is that core inflation will be pushed higher on that front and final sales inflation will be pushed higher as companies pass on cost increases to consumers. That sounds reasonable, but who has been eating the increased costs from the crude and intermediate production levels? After all, corporate profits and cash flow last year were wonderful.

Some economists still assert that ‘slack in the labor force’ will mitigate inflation. How’s that working out in Latam? In the ‘80s and ‘90s US jobs boomed while inflation tanked. In the late ‘70s, inflation and unemployment soared. We thought the Phillips Curve inflation-employment tradeoff was thoroughly debunked during Carter’s reign’ and then again under Reagan. If these economists didn’t experience those periods, what did they study in economics? Apparently IS-LM graphs and Phillips Curve sophistry.

The IMF has cut its forecast for Euro Region GDP growth in 2005 to 1.9%; that’s down from the 2.2% forecast last September…The IMF slashed its G-7 growth forecast to 2.7% (from 2.9%) for 2005…..

-END-

Bill King’s work is outstanding – written well, unique and very informative.

Wonder what the real story is behind the scenes on this one. Good cop, bad cop pitch?

-END-

Hi Bill:
COT is a bit of a shocker to me personally.

I have no idea why the trading funds would be covering shorts. I had fully expected them to be adding shorts and abandoning longs. They ditched the longs but the shorts as well? the market headed straight down since Thursday , Jan 27 of last week and broke back under the 10 DMA and the 20 DMA. From a technical standpoint, that should have encouraged the short spec category. Instead they covered and ran to the hills right alongside of the spec longs. Very strange... the specs, both longs and shorts are fleeing the gold market as if it has the plague.... If the cartel was attempting to remove the excitement from the gold market and not draw any attention to it, they have succeeded brilliantly.

Problem with this COT data is that by the time we get it, three days of price action have passed and a whole lot of stuff can happen. We did break out of that sideways trading range we were in between $420 and $430 to the downside yesterday and open interest picked up a bit, so maybe that was enough to entice some more of the specs to the short side. We simply have no way of knowing until next week.

About the only good thing I can say is that at least the trading funds have not moved to a Net Short position. That is not something any of us want to see at this point.

It is quite remarkable reading Greenspan's babble these days. Just a few months ago he is making noises about the unsustainablility of the U.S. current account deficit and the real risk of increased difficulty in attracting sufficient foreign capital to fund it. That was enough to send the dollar crashing down the 80 level. Here he is a couple of months later pontificating about the relative insignificance of the CA deficit. as a result, it looks like the dollar is going to try to head up to test the 86 level barring any surprises out of the G7.

In effect we have the following:

Greenspan late last year: "Be AFRAID. BE VERY AFRAID"

Greenspan today: "DON'T WORRY; BE HAPPY".

Geesh, and to think this guy gets paid to do this!
Later,
Dan

Rhody with a leasing update:

Good morning Bill:
Backwardation eased again in gold lease rates this morning. Now we have a flattened rate curve. To put this in perspective, the difference between the one month lease rate and the one year rate is .075%. The similar figure for silver is .76%. That means silver's rate curve is ten times steeper than that of gold, and that means gold is being leased in the near term for capping purposes at many times the volume of silver. If you compare gold and platinum's rate curve, platinum has a .6% difference between the one month and the one year rate and it's rate curve is similarly flattened as gold, but at a far higher level of over 3%. Platinum has been like this for years. It is only gold and silver that show huge changes in the steepness of the rate curve.

I think this is because of leasing for capping rather than leasing for commercial purposes. It is the difference between leasing for politics and leasing for business purposes.
Regards, Rhody.

http://www.imf.org/external/np/sta/ir/colist.htm

and is called Data Template on International Reserves and Foreign Currency Liquidity

So you would think that the central banks fill out this form....well:

They dont have to: Countries participating in this endeavor do so on a voluntary basis.

Snd even worse, in the book "How countries manage reserve assets''(central banking publications), on page 259 it is stated that there are several shortcomings with the SDDS and the data template. The 3 auteurs (from the Safeguards Assessments Division, IMF), see the biggest shortcoming as (quote):

"Finally, and most important, the data contained in the SDDS are NOT audited by an independent third party."

So no wonder that the United States has a lot of zeros in the data template....Another point, I asked the Central Bank of Belgium to comment on their data in the IMF sheet. As I said in the past, at an annual shareholders meeting, it was said by the central bank that there is no more gold in the Belgium vaults (not on print!). This can also be seen in the sheet. I emailed the Bank 14th of december 2004, and I am still waiting for an answer.

According to the sheet, the goldswap position would be 1,134.87 and goldloans would be 2,142.36 with a total gold value of 3,529.42...which would mean almost everything is gone(everything in Millions of US Dollars).

No answer...voluntary data....data not audited by independent party......yeah.....isn't central bank accounting great? There is not much to find, if they dont have to tell. And that's why i am pissed...

Although central banks are becoming more and more transparent....it seems like they can still lie about the interest rate.....and gold.
greetz (from the Netherlands)
mihaly

Mihaly sent me the above email right BEFORE I served up the following in last night’s MIDAS:

This USAGold posting will surprise no one in the GATA camp:

Copperfield (2/3/05; 05:28:52MT - usagold.com msg#: 128814) Wellink

Heard this from a reliable source: Nout Wellink, president Dutch CB, stated off the record: Central banks must lie about interest rates and gold. He also stated that this monetary system one day will implode..

***

As each month goes by, the GATA ARMY comes up with more evidence of what the real gold story is, AKA the gold truth.

Speaking of the gold truth with the MIDAS commentary ranting on Greenspan...here is a treat after some fine sleuthing work by the GATA ARMY:

Hi Bill:
In the 2/2/05 Midas, a GATA soldier referenced a 1981 WSJ article. Enclosed is a copy of the 9/1/81 WSJ article, " Can the U.S. Return to a Gold Standard?" by Alan Greenspan. Alan "goldbug" Greenspan indicates that the major roadblock to restoring the gold standard is the problem of re-entry. Alan proposes that convertibility be instituted gradually by issuing gold notes. Alan needs to exorcise his fiat currency demons, work with Antal Fekete and GATA, and get the parallel gold-coin standard rolling.
Regards,
Paul

Greenspan Article 09-01-1981.pdf
(Easy to read once enlarged)

Nice work Paul.

Chuck checks in:

At the end of such a week, one would think that it would be impossible to write an upbeat assessment of our market. But I believe I can and with conviction. Each day this week seem to bring polarized moves in stocks and gold. The stock market that is reeking with optimism and complacency moved higher and higher culminating on Friday which to me is a historically turn day. The VIX now has sunk to a little over 11. Each day the market either gapped up or was up after 20 minutes and then never looked back. A 10 point set back has been a rarity.

Contrast that with a gold market that gapped down almost every day irregardless of the condition of the dollar. That meant to me that there was a concerted selling by the central banks in front of a political event, the G7. These are the kind of conditions that precede a turn. It is as though if you ask why the players are buying stocks, they would say, "I don't know but everyone else is." And why everyone is selling gold stocks, they would respond just the opposite. Please read Adam Hamilton's excellent essay today on the true condition of the HUI for a healthy perspective of the gold market.

The bottom line is that the personality of the stock market, except for that period when stocks declined sharply off of their 2000 highs, has not changed. A blind faith and optimism relentlessly continues. The only difference is that this time it has been joined by an unreal real estate bubble that is enchanting our nation even more than the high tech mania ever did. The wolf is at the door. Chuck

The gold shares held their own with the XAU up .07 to 91.09 and the HUI only down 1.03 to 197.73.

My island reversal hope trade went out the window, which is how they got their name. Veteran traders know when you are counting on a hope trade, you are in trouble. Maybe Monday?

Well, the real estate on our planet got cheaper this week, even though the fundamentals went our way on almost all counts. With the Orwellians doing their thing out there, analysis doesn’t count for much, especially mine.

Still, gold and silver should take off in the months to come and the stock market ought to be clobbered. Patience has taken on a new meaning.

At least I can root for my old team, the Patriots, this weekend. Go Pats!

GATA BE IN IT TO WIN IT!