"To the extent the United States was governed by anyone during the decades after World War II, it was governed by the President acting with the support and cooperation of key individuals and groups in the executive office, the federal bureaucracy, Congress, and the more important businesses, banks, law firms, foundations, and media, which constitute the private sector’s ‘Establishment’."
Samuel Huntington, Harvard professor
GO GATA!
Most of the MIDAS was written very early this morning. However, none of this commentary on the day’s action was written until after the close … on this wild day.
The gold market continues to be the worst reported-on one in history. There is one dorky comment after another to explain what is really going on. Course, then you have The Gold Cartel crowd who either say nothing, or let their bearish price forecasts stand to completely befuddle the public.
The latest Iranian nuclear development caught the fancy of those searching to explain gold’s early drop:
NEW YORK (MarketWatch) - After logging a 25-year peak overnight, gold futures fell early Monday as concerns about Iran's nuclear standoff with the West were eased by what seems like an attempt at compromise by President Mahmoud Ahmadinejad…
-END-
That fact that AM Fix in London was $682, or only 40 cents below the Comex close and almost 24 hours after the Iranian story broke in the press, seemed to be of little consequence to the gold press.
Gold was bombed early, pressed down to $670.80, as the funds dumped. However, while silver was nailed, falling to $13.44, it actually upticked when gold was bashed for the last $5 of its sharp drop. This was an obvious divergence … one which stood out like a sore thumb. From that point forward silver began to make one recovery high after another, which strongly suggested the precious metals downdraft will not last too long. Gold then began to follow silver’s lead back up.
The gold open interest rose 4566 contracts to 357,941, while the silver open interest contracted further, off 1119 contracts to 110,685.
Gold rose every day last week and 10 out of the last 11 days, prior to today’s normal setback. It changes nothing regarding the building squeeze, nor where gold is likely to head in the near future. It could easily trade $700 per ounce before the week is out.
June gold
http://futures.tradingcharts.com/chart/GD/66The weekly chart is more dramatic, as it reveals the steep rise in the price of gold since GOLD RUSH 21!
Weekly gold
http://futures.tradingcharts.com/chart/GD/W
What is remarkable, and part of the public record, is how few bulls there have been on the way up and how few bulls there are now. I mean look at the chart. The reason is obvious … most everyone refuses to deal with what GATA knows. I believe I have made that comment almost every week since GR 21 … or for the last $250 of the move!
With all the hysteria about a gold market correction, today will barely register on the charts. If I were short, I would be VERY nervous. No doubt The Gold Cartel and the rest of them ARE.
***
As it has been more than 7 years since the mainstream US financial market press has mentioned GATA, you will have to indulge me a bit as I go over over a few points mentioned in the New York Times article on Sunday, which is in the Appendix for Café posterity’s sake. (The only other time GATA received mainstream financial market coverage was a Ron Insana CNBC interview in February 1999 … once Planet Wall Street heard what GATA had to say, we were blackballed.)
New York Times journalist Landon Thomas called me two weeks ago this coming Wednesday for the article and we spoke at length. Another phone call and a couple of emails followed, along with my MIDAS commentary going his way from last Monday through Thursday. Landon was very cordial, however, you have to wonder if these journalists have much of their story already done in their own heads and then look for information from interviewees to confirm their own notions. Some poignant quotes in the article to cover:
"GATA for the most part is a one-man show …he is generally thought to exist on the outer fringe of the gold-bug movement."
How Landon Thomas could say the one-man show bit is incomprehensible. He knew of both of our conferences, Andrey Bykov attending GR 21, the credentials of the speakers at GR 21, etc. Naturally, the first thing I suggested was that he call Chris Powell, then John Embry. LT had the links to the Cheuvreux report, the BIS quote on gold price management, Reg Howe’s lawsuit, and on and on. He ignored it all.
"Indeed, his central thesis -- that Goldman Sachs and other banks have conspired to keep a cap on the price via short sales to back the government's strong-dollar policy, especially while a former Goldman senior partner, Robert E. Rubin, was Treasury secretary in the late 1990s -- is far-fetched."
What is so far-fetched about it? I suggested LT ask others what was the essence of the strong-dollar policy. If you have a "policy," there must be something in that agenda to advance the policy. I explained no one has ever given me ANY explanation outside of GATA. Besides, "Gibson’s Paradox" at www.Goldensextant.com co-authored by Rubin’s successor at the US Treasury, Lawrence Summers, says it all.
"With the price of gold surging, Mr. Murphy is convinced that Goldman Sachs, J. P. Morgan, and others are frantically buying now to cover for the gold they sold short over the years. Goldman Sachs and J. P. Morgan declined to comment about their gold trading positions or strategies."
This was the most fun for me. From a MIDAS right after initially speaking with Landon Thomas:
April 28 – Gold $651.60 up $17.70 - Silver $13.51 up $1.04
GATA FORCES ANNIHILATE RETREATING GOLD CARTEL BULLIES!
*There may be a development next week which is spooking Morgan and Goldman. I am not at liberty at this time to discuss what that is.
***
From the time I first spoke with LT through the publication of the article, gold rallied a whopping $50 per ounce. I stressed to LT in advance that, IMO, the reason for the coming sharp move up in the price of gold could be ascribed to the shorts trying to cover an impossibly large position … and that covering would be led by Gold Cartel honcho Goldman Sachs.
Sure enough, that is what happened last week. Goldman Sachs was the featured buyer almost every day and I sent him the daily MIDAS to point this out. We covered how I knew as such and I also pointed to Goldman Sachs’s sizeable short position on the TOCOM (sent the link), which is of public record.
Since I was all over Goldman Sachs, it behooved LT to call them up to rebuke my allegations. It was clear to me that they would know what was coming after all these years of getting a free pass by Planet Wall Street. Thus, it was NO SURPRISE to me to see Goldman Sachs buy all last week. Once a story like GATA’s sees the light of day, it is like the proverbial leak in the dam . The more the journalistic world probes into what GATA has on The Gold Cartel, the more compelling our story becomes. The more the investment world knows we are correct, the more they will want to own gold because the end result is ordained. Goldman Sachs is way too smart not to know that, which is where these lines came from:
"These guys are short, and they are panicking to get out of their positions," he said. "They are sweating bullets, and it couldn't happen to a nicer bunch of guys."
*I also suggested he review GATA’s price predictions versus those of Goldman Sachs, JP Morgan Chase and the rest of Planet Wall Street … how could GATA get it so right and they get it so wrong? "Just ask them," I implored. He did and then wrote a contradiction:
"J.P. Morgan and Goldman Sachs are putting out bullish research notes…"
"Goldman's forecast for a year-end price is $625 an ounce; J. P. Morgan's target, which is currently under review, is $560, and Morgan Stanley's is $550."
At least he did acknowledge, "their price targets seem oddly out of sync with its relentless rise."
What is important here is that GATA has finally broken the ice. While this veteran Planet Wall Street journalist could not bring himself to deal with GATA (and our ARMY) for the sophisticated group it is, someone else (who wants the epitome of the real story) will. We can take the NY Times story itself, along with this recap, and get it around to more of the mainstream press. Now is the time to make the effort. NOW is the time for the journalistic world to watch our DVD (www.GoldRush21.com ).
Last week Deutsche Bank acknowledged GATA for the first time. The analyst who did so had just watched that very same DVD. It is time to make an effort to win the day.
***
The big story over the weekend was the news Warren Buffet had sold all his silver, the status of which has been the subject of much conjecture over the years. Along with this revelation came a great deal of chatter, initiated by Buffet at this yearly shareholder meeting, over the "commodities" bubble.
While this talk had little impact on Eastern gold/silver longs, it appeared to have spooked many longs in the West. As per the usual Comex drill, gold went from a call of less than $2 lower this morning to trading $7 lower soon after the Comex opened. The early take on silver was if Buffet doesn’t want it, I don’t want it … as the price of silver plunged 45 cents very quickly.
The Buffet revelation with some pertinent comment from fellow Café members over the weekend:
http://today.reuters.com/investing/financeArticle.aspx?type=mergersNews&story
ID=2006-05-06T215336Z_01_N06222878_RTRIDST_0_FINANCIAL-BUFFETT-COMMODITIES.XML
Bill,
The Barclays ETF was launched with 13 million shares for sale which means 130 million ozs of silver. How much did Buffett own? 129.7 million ozs. That’s a big coincidence considering he now says Berkshire "doesn’t have it now" but doesn’t say they sold it.
We know from the known amount of silver in the world that Barclays could not have just bought their silver on any exchange. You can’t buy 25% of the world’s above ground stocks and only see a few dollars gain per oz. As Sherlock Holmes said "once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth"
Cheers
Adrian
Bill,
I have been looking at the reports on Buffett’s comments about the Berkshire silver. He said QUOTE- "We had a lot of silver at one time but we don't have it now," Buffett said, speaking at Berkshire Hathaway's Annual Meeting" – END
That’s a strange statement! Why doesn’t he say "but we sold it all"? Why is it that he says "we don’t have it now"? I suspect because it hasn’t been sold, otherwise he would have said so. Is he talking about "physically" they don’t have it? In other words it has been leased out. Buffett follows strict accounting, unlike the Central Banks who loan gold and then still report that they have it in their vaults. So is he referring to strict accounting that "they don’t have it" but it is leased out? The most likely recipient of this leased metal would be the Barclays ETF.
This is just speculation but his choice of words is plain enough to suggest that it wasn’t disposed of by a sale.
Cheers
Adrian
Good Morning Bill,
A posting on the Café Chat Board reported the Warren Buffet announced that Berkshire Hathaway sold their silver hoard, believed to be 130 million ounces.
http://yahoo.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?storyID=urn:newsml:reuters.com:20060506:MTFH42180_2006-05-06_21-53-36_N06222878&symbol=BRKa.N&rpc=44. This information is long term bullish when combined with Jeffery Christian’s reporting that India sold ½ of their 60 million ounces last year and is selling the remainder this year. The silver cupboard is getting empty pretty fast. With the silver price rocketing in spite of these sales, what do you think will happen when this easy silver dries up? Regards,
-Bryant BlakeBill,
Warren Buffett is undoubtedly the great stock market investor of our era, and a superlative businessman to boot. I cannot help but note, however, that in fields where he is not as experienced – like forex and commodities – his results have been pedestrian. Today we have learned that in a time frame during which silver tripled, he made nothing ("We had a lot of silver at one time but we don't have it now," and, "bought it very early and sold it very early. Other than that, everything I did was perfect."*).
On top of that, during a dollar bear market, he has, on balance, lost his company $700 million by selling dollars shortly before they began a counter trend rally. To compound the pain, he closed out most of his short dollar position just before the dollar resumed its decline.
It just goes to show that we should all stick to investing in areas we know and understand well, even if your name is Warren Buffett.
Best wishes,
Peter R.
Dear Bill:
Dave Morgan reported today (Sun 5/7) that Warren Buffett reported at the Berkshire meeting that "they sold all their silver" and that "they got in early and got out early".
This sale could answer many silver mysteries. What if Barclay’s allied with key silver shorts and bought out Berkshire a few weeks ago…say that they paid $2 over the then current price of $8 or $9. What if the shorts saw that foreigners were losing faith in fiat money in general and the dollar in particular and quickly paid off Buffett?
What if the shorts used the silver ETF as a smokescreen to explain higher silver prices (which could never totally make sense since gold was surging at the same time)?
What if the shorts are planning to use the news of the Berkshire sale to cover even more shorts now? What if the shorts underestimated the popularity of the silver ETF?
Now it makes sense why our government approved the ETF when experts such as Butler and Morgan questioned how it could be approved because the physical was not there. Now it also makes sense why no physical was moving to satisfy the ETF (both Berkshire silver and ETF silver are in London).
It seems to me that what we have here is an explosive combination of:
1) Silver shorts trying to get out on the cheap.
2) Camouflage of the extent of foreigners loss of confidence.
3) Shorts underestimating silver ETF’s popularity.
4) No change in silver’s long term awesome potential.
This could make for a very wild silver ride this week.
Bob Kaiser CPA
Bill,
So it is confirmed from the Berkshire meeting that Buffett sold his silver and so is probably the source of the Barclays ETF silver and not George Soros. I would suspect he has been leaned on AGAIN by the establishment. He knows what a precious metals bull market looks like and it is totally implausible he would sell out so early on his own accord.
Cheers
Adrian
http://msnbc.msn.com/id/12665304/
Bill,
Amazingly it seems Buffett didn’t hang on long enough to make any money in silver!
QUOTE -He added that Berkshire had not benefited from the particularly steep rise in silver prices, despite at one time owning a lot of the metal.
"I bought it very early, I sold it very early. Other than that it was perfect," he joked. –END
He didn’t spend much time talking about it. It is very strange that someone who so correctly called the decline in the dollar would sell out 138 million ozs of silver before it had appreciated! There must be some skeletons in the closet on this one.
Cheers
Adrian
There is something about Buffet and his silver/dollar boffos that doesn’t pass the smell test, as per what Adrian is alluding to. From MIDAS commentary at two points last year:
August 30 - Gold $430.10 down $6.10 - Silver $6.69 down 3 cents
Let me go retro to a MIDAS of 4 1/2 months ago:
April 15 – Gold $424.30 up $1.10 – Silver $7 down 4 cents The John Brimelow Report
... Seeing the stories yesterday of Warren Buffet allegedly cutting his dollar short positions brought back memories of the Phibro/Salomon silver position, suddenly taken on Easter Monday 1994, shocking the market, and then mysteriously liquidated. There was a story (which I believe to be true) that Buffet, then influential at the firm, ordered it sold on the grounds it was attracting hostile attention from Washington. Possibly the AIG/General Re situation is more of a problem than most assume. JB
Two notes on JB’s always superb input:
- The open interest reduction was a result of The Gold Cartel covering and in line with my earlier comments.
- Buffett’s firm was Salomon Bros. Jimmy DePiazza of Phibro, a Salomon subsidiary, had the silver market cornered. Salomon was going through a bond scandal because of a huge guru bond trader named Meriwether. The government suggested Phibro dump their silver position or Salomon would have US agents all over their operation and books for years to come. Buffett caved.
***
Buffet caved in 1994 and he very well could have caved again this year for a very similar reason. Help us Mr. Buffet or the government will be all over your companies.
http://www.lemetropolecafe.com/Pfv1.cfm?pfvID=4838&SearchParam=Phibro
-END-
Fascinating, to say the least.
As for me, 130 million ounces of silver is no longer an overhang. MIDAS remarked the obvious over and over again about how poorly silver acted last year relative to gold. Something was bogging the market down. We just did not know what. Once Buffet was done selling, silver took off and doubled in price. Now that the world knows his selling is out of the way, the price of silver should continue its newfound move higher.
Whether the silver was handed over to Barclays, or Buffet dumped it just prior to the price doubling, it is out of his hands … and Buffet’s public commodity/dollar trading acumen has been sorely tarnished.
More gold goodies: Indian ex-duty premiums: AM $$4.69, PM $(2.63) with world gold at $681.05 and $680.40. Above, and fairly deeply below, legal import point. The afternoon reading, basis Ahmedabad, was not borne out by readings from the other importing cities, and may be noise.
TOCOM was open today for the first time since last Tuesday. On volume equal to 60,690 NY contracts (+55%) open interest slipped 2.66 tonnes (855 Comex lots); Mitsubishi’s data implies the public liquidated 4.5 tonnes of its long. The active contract closed up 55 yen, and world gold went out $2.50 above the NY close. Since world gold opened $25 higher than last seen on Tuesday, and the firmer yen added a further inimical influence, this was actually a rather gold friendly performance.
Shanghai also re opened. At the close local gold was quoted 95c -$1.30 below world prices, a modest discount considering world gold was over $40 higher.
On Friday in NY, gold managed to throw off attempts to sell it down and closed up $8. But open interest rose 4,566 lots (14.2 tonnes) on volume of 69,354, suggesting once again that there is some resistance mustered in the $680s.
***
CARTEL CAPITULATION WATCH
The DOW rose 7 to 11,585, while the DOG gained 2 to 2345. Crude oil, down $1.50 early, recovered to only close down .42 to $69.77 per barrel.
The dollar gained .10 to 85.18.
From The King Report:
Though the April nonfarm jobs (138k) are far fewer than we expected, the BLS’s Business Birth/Death Model created 271,000 phantom jobs. Without the BLS’s manufacturing of 271,000 phantom jobs, the US economy would’ve lost 133,000 jobs, subject to the SA. http://www.bls.gov/web/cesbd.htm
The 271,000 phantom jobs are 66,000 more jobs than the model created in April 2005. Last year 228,000 nonfarm jobs were created in April without Easter. Retail lost 36,000 jobs yet retail sales jumped 6.5% in April…PS - 36,000 nonfarm jobs from February and January were eradicated via revisions.
BUT, wages increased 0.5%, the highest pace in 5 years. STAGFLATION So Ben (I’m not that dovish!) Bernanke can exacerbate the STAGFLATION by pausing or continuing to ape Easy Al by replicating the ‘70s policy of gradually increase rates but pump credit like crazy. This is what creates STAGFLTION. The odds of Bernanke doing a Volcker are slim and none.
The Washington Post on the April Employment Report: "We've got wage inflation the highest it's been in five years," said Richard Yamarone, director of economic research at Argus Research Co. ‘That's the yellow caution flag the Fed is going to be concerned with.’" http://www.washingtonpost.com/wp-dyn/content/article/2006/05/05/AR2006050500451.html?referrer=email&referrer=email-END-
Somebody just covered their butts, or so they think.
US Treasury Snow warns on GSE-related risks
Fri May 5, 2006 10:08 AM ET
WASHINGTON, May 5 (Reuters) - U.S. Treasury Secretary John Snow said on Friday "excessive" portfolio holdings at government-sponsored enterprises Fannie Mae and Freddie Mac pose a systemic risk to the financial system
"We've said many times that the GSEs should reduce their holdings of mortgage-backed securities and equities. They hold more than seems to us to make sense," Snow said in an interview with Bloomberg television. "Excessive holdings of those securities puts systemic risk into the system."
Snow also said that the United States continues to urge China to move toward greater currency flexibility. "Flexibility is healthy for them and good for the world economy," he said…
-END-
Dollar talk stays in the forefront:
22:23 Barron's Up and Down Wall Street discusses the dollar
Canadians are suddenly having to deal with the issue of a strong currency vs the U.S. dollar as the loonie appears headed towards parity. Few if any countries actually desire a strong currency since it places them at a competitive disadvantage, most want a 'competitive currency.' For Canada, the strong Canadian dollar has resulted in a 'dramatic shift in competitiveness in favor of U.S. producers and away from Canadian ones' while BCA Research of Montreal says 'the [Canadian dollar] may have reached a pain threshold.' In the U.S. B of A's chief market strategist argues there are four reasons to root for a weaker dollar: it gives a boost to exports, gooses earnings of U.S. corporations' foreign affiliates since about half of U.S. foreign income comes from Europe and a quarter from Japan, reduces U.S. cost disadvantages with foreign competitors and will shift the burden for global growth from the voracious American consumer. It is unlikely, however, that other nations will stand by and let the U.S. debase its currency, since it is the one most used for commercial and financial transactions and used for reserves by official institutions. Other countries will resist the virtue of a strong currency being forced on hem which leaves only one currency that can't be compromised: gold.
Reference Link (subscription required)
* * * * *
Rhody:
Hello all:
There were another million ounces of silver delivered this morning to bring the May totals to 35.8 Moz. I was just about finished my lease rate article to Midas (20 minutes typing) when my system suffered a fatal exception and I lost the lot. Rather than retype the whole thing, suffice to say gold is very little changed in rates, (too cheap too flat, and too manipulative) while silver rates are surging above platinum's. The rate increases are highest in the near terms, which implies that either there is a delivery crunch on COMEX, or leased silver was used to sell down the spot market this morning, both in London and NY. Actually, they had silver down over 3% at one time, but it came back and so did gold. Somebody leased a pile of metal for nothing.....
Regards, Rhody
http://www.nymex.com/media/delivery.pdfA flurry of good-to-knows:
http://www.financialexpress.com/fe_full_story.php?content_id=126153
Bill,
Gold traded above 10,000 Rupees/gram for the first time ever. That should give it a boost next week in India.
Cheers
Adrian
Bill:
For silver traders being punished by the Crimex[Comex] due to the margin being increased to $8100, they can trade at the CBOT for $5400.
Regards,
Jerry Hug
Exposure is what GATA has needed for so long. The NY Times article was in the International Herald Tribune in Paris, which the Times owns:
http://www.iht.com/articles/2006/05/07/business/GOLD.php
And even made into the Tuscaloosa, Alabama, newspaper:
http://www.tuscaloosanews.com/apps/pbcs.dll/article?AID=/20060507/ZNYT01/605070415By Peter Brimelow, MarketWatch
Last Update: 12:01 AM ET May 8, 2006
Good as gold - but for how long?
… And Mark Hulbert interpreted even that as bullish from a contrary opinion standpoint, because HGNSI was still not quite two-thirds of its all-time high of 89.6%, and actually sharply lower than the 73.2% recorded April 19-20, when gold first stabbed above $600 …
http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%
7B246E9E72-E453-43F6-BD94-09B127C90642%7D&keyword=
-END-
High Local Gold Price Prompts Rethink
From Vietnam News Agency, Hanoi
Sunday, May 6, 2006
HANOI -- In the face of rising domestic gold prices that exceed world gold prices, the country's banks are planning to sell gold under a new system, according to the deputy director of the Vietnam Export and Import Bank, Dao Hong Chau.
Under the plan, buyers will buy gold through banks under a pricing system that is in line with the world market. The plan aims to gain control of escalating domestic gold prices.
http://vietnamnews.vnagency.com.vn/showarticle.php?num=01BUS060506
-END-
Yuan set to break eight to the dollar
The yuan may rally next week through eight to the US dollar, according to forwards contracts in Hong Kong, a level unseen since the Communist Party Central Committee first documented plans in 1993 to move to a floating exchange rate.
By Jake Lee
The Standard, Hong Kong
Saturday, May 6, 2006
The yuan may rally next week through eight to the US dollar, according to forwards contracts in Hong Kong, a level unseen since the Communist Party Central Committee first documented plans in 1993 to move to a floating exchange rate.
Traders in Hong Kong increased bets the yuan will climb in Shanghai as it catches up with gains in Asian currencies during the past week's five-day holiday in China.
The Singapore dollar and Korean won reached their highest since the 1997 Asian financial crisis as Group of Seven nations said the region, and particularly China, should rely less on weak currencies to propel growth.
"With the dollar sliding that's going to put more pressure on the yuan to gain when it reopens next week," Jan Lambregts, head of research at Rabobank Groep, said in an interview in Singapore. "We could drop below the eight level very soon."
http://www.thestandard
.com.hk/news_detail.asp?pp_cat=5&art_id=18159&sid=7833061&con_type=1
-END-
22:03 SLV Barron's Commodities Corner says the SLV proves that scads of investors want silver (139.95)
The shares of the ETF are backed by silver put into storage, thus increasing the physical demand for the metal in a market that has had asupply deficit for over a decade and a half. David Morgan of Silver-Investor.com says $18 to $20 silver is possible by year end. Todd Stein and Steven McIntyre of the Texas Hedge Report newsletter say that in the first day of trading, the ETF accumulated nearly 21M ounces,which they estimated was about 2.4% of annual global demand. The analysts initially projected the ETF would account for 11% of annual demand over the next 18 months but have now concluded this "looks way too low."
Reference Link (subscription required)
* * * * *
AFX News Limited
China State Reserve Bureau closes out remaining copper short positions -report
05.07.2006, 11:29 PM
BEIJING (AFX) - China's State Reserve Bureau is believed to have closed out the remainder of its short positions on copper in the last few weeks, contributing to sharp rises in the base metal's price, the Financial Times said.
http://www.forbes.com/markets/feeds/afx/2006/05/07/afx2726955.html
-END-
Perhaps the most common man thinking of the day is that we are in a COMMODITIES BUBBLE. Warren Buffet, Dennis Gartman (on CBNC this morning), etc., are all talking of the great commodities market bubble.
I will dissent for the following reasons, including my thoughts:
*Samex’s Jeff Dahl has been reporting for a very long time now about the Chinese scouring Chile and South America to tie up copper supply for the future. The South Koreans are not far behind, according to Jeff.
*Our STALKER source has reported Chinese buying of gold for years. MIDAS reported the Chinese canvassing South Africa five years ago to tie up supply.
*We know of the Chinese interest tying up zinc supply.
*The common man thinking is unwarranted hedge fund speculation is driving up commodity prices. Maybe that is so with oil, but I suspect much of the run up in the metals sector is due to Chinese accumulation of those metals … BUYING through intermediaries, which are THOUGHT to be hedge funds. If so, it is the shorts in these markets who have been had by the Chinese.
*Bubbles are made of excessive public accumulation by people who are only along for the move, without knowing what is behind it. I see none of that. Matter of fact, it is more of the opposite. The Café Sentiment Indicator, with all this is going on gold-wise, was only a FOUR this weekend. A stinking lousy 4. What we have is the exact opposite of a bubble … general ennui by the general public.
*Regarding the story of the rogue Chinese trader above. The common thinking is this guy is a bonehead, who risked execution Chinese style to do his own thing. I don’t buy it. My guess is this guy was trotted out there to disinform the investment world as to what the Chinese are really doing: BUYING. Yes, his short trading position was no doubt real. However, my guess is there were other Chinese traders on the long side hidden from view, maybe with double his short position. Those long traders will never be heard from.
*And finally, there is little talk about the astounding gold short position outside of the GATA camp. The reality re gold is the REVERSE of a bubble. It is about a position which cannot be covered at these price levels.
TOCOM:
Good Evening Gentlemen,
On May 2 the seven large TOCOM gold shorts increased their net short position by a tiny 230 contracts to a total of 178,864 contracts.
In silver, the same dealers reduced their net short position by 207 contracts to a total of 6,969 contracts.
Tomorrow's data could be interesting.
Take care,
Scott
Bill,
On May 2 (the last trading session in Japan before their holiday last week) Goldman Sachs decreased their short position by 116 contracts. This was achieved by covering 1,495 contracts in DEC 06 and 721 contracts in FEB 07 and going short 2100 contracts in APR 07. They continue to try to move out their short position to the latest available contract, which is entirely consistent with a trapped bear scenario. They will be hoping for a major correction to attempt at least a partial cover. Despite today’s downdraft a correction is not in the cards just yet.
Cheers
Adrian
Keeping the pressure on the mainstream gold world sycophants:
Hola Bill,
I’m writing to you from Lima Peru, we were attending the 7 Gold Simposium that finished yesterday.
I asked Stewart Murray LBMA, in front of all the press what he thinks about what GATA was saying about the manipulation of the Gold Market, and if its true :-))) that the gold holdings were only the half central banks say.........
answer
:" its an absolute nonsense and pure gossip what the Gata people say......." he got really nervous, and the day after he came to me to ask who we were and who was financing us....I told him with a big smile that myself!!! :-)))
The day after I did the same question again in front of the press to John Hathaway and he said that he thought that GATA was probably right!
Tomorrow I'm flying back to Spain,
many regards
marion
I must have seen this very same headline three times over the last three days:
Beware a correction in gold
Fri, 05 May 2006
The gold price had surged to a new quarter-century high on Friday, but eased back slightly by late afternoon trade.
The price had hit a long-term high of $684.70 a troy ounce — on the weaker US dollar against the euro — when the market staged a correction and took profits, analysts said.
By late afternoon, gold was quoted at $680.20 a troy ounce from an overnight close of $679.45/oz. In October 1980, gold fixed at a high of $690/oz.
"After the strong gains seen from precious metals over the past two months we believe that some profits should be booked here," UBS analyst John Reade wrote…
http://business.iafrica.com/news/295245.htm
-END-
They just don’t get it … the mainstream gold world and the investing public have little, to no idea, why gold has done what it has and why it is going MUCH higher in price … like many hundreds of dollars per ounce … thousands of dollars per ounce. Perhaps some of the curious will follow up on the NY Times article to comprehend what and why the GATA camp says what we do.
Meanwhile, The Gold Cartel continues to get deeper and deeper in trouble re SUPPLY. Just as the sheeple central bankers are pulling back from their leasing and selling of their gold stash, mine supply continues to hit the wall:
Drought affects gold production at Geita Mine
2006-05-06 09:09:10
By Guardian Reporter
Gold production at Geita Gold Mine has declined, South Africa’s largest gold miner AngloGold Ashanti, operators of the mine reported yesterday
(Anglogold's production down 140,000 ounces in the first quarter...)
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Harmony gold production stumbles
Fri, 05 May 2006
South African gold miner Harmony on Friday said its gold produced fell by 14 percent for the quarter to end March.
Harmony reported a headline loss of 50 cents per share for the quarter ended March from a loss of 75 cents in the December quarter.
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Output cut at Barrick mine after accident
Barrick Gold Corp. said a container used to hoist rock from below ground plunged more than a kilometre into a main shaft at South Africa's South Deep mine, cutting output at the continent's largest gold deposit. "The shaft will require significant repairs before normal hoisting operations can be resumed," Barrick said yesterday.
http://www.theglobeandmail
.com/servlet/story/LAC.20060506.RTICKER06-3/TPStory/TPBusiness/?page=rss&id=GAM.20060506.RTICKER06-3
The Gold Cartel and other major gold shorts are in deep doo-doo, as they still are looking at exiting from a MASSIVE short gold position. With mine supply on the wane, probably sinking to as little as 2,000 tonnes per annum in the years ahead (according to Sprott Asset Management’s John Embry), they are going to have to cover, and cover, and cover … to keep their losses from growing, and growing, and growing.
Now that the NY Times has inadvertently let the cat out of the bag, they will have to be more aggressive than they had planned as little as a few months ago. In the meantime, The Gold Cartel will do whatever it can to flush fund shorts out on short-term dips so they can cover. Those will be sharp at times, but they will not last. The Gold Cartel has no time for that. GATA knows it. You know it. They know it.
ECU Silver was halted this morning at $2.79 Cdn. The news is SPECTACULAR. My most succinct description of what we have here is to compare it drama-wise to a Bre-X sort of discovery because it keeps getting bigger and bigger and better and better. The difference is this ECU discovery is for real. Bre-X was a fraud, but excitement over its discovery was unending until it blew up (for those who don't know of this incredible moment in gold market history, do a Google Search). From my May 2 MIDAS:
"Meanwhile, one of the most significant precious metals discoveries in some time has not registered on the investment radar screen ... ECU Silver. I am only pounding the table so that you "get it" before "the asleep street" does. As it is my largest position, I am surely prejudiced. But no present Cafe member will be able to come back in the months ahead and say they were not aware of what this discovery was all about."
The ECU press release ... out this afternoon:
June gold
http://finance.
canada.com/bin/story?StoryId=Crf7cqaCgmti4DtaXodC&Topic=Canadian_Corporate_News&Type=&Heading=
News%20from%20CCNMatthews&BC=Canadian%20Corporate%20News
This is what one of the major shareholders, who knows his rock stuff, has to say: Bill
Every time I think ECU results can't get much better, BAM we get hit with even better news. The news that just came out today to me is a WHOPPER and is the best PR the company has made public since the beginning of the drilling program.
Normally, it takes me days to understand and try to quantify the numbers behind each PR, but I found today's PR to be much easier to understand and quantify.
These are truly impressive numbers, no matter how one evaluates them and here is why:
1)" The entire section has a true width of 28.0 meters, is opened both to the east and west horizontally and up and down vertically and grades 2.19 g/t Au, 55 g/t Ag, 0.20% Pb and 0.41% Zn, despite the fact that a 7.42 meters section was given a grade value of nil since assays on that part are still pending."
These grades are already excellent and could even improve as 26.5% of the entire section was given a grade NIL since assays were still pending.
2) "A further positive development is that the cross-cut will have to be continued as some veinlets were observed in the wall on the other side of the A4 vein. Thus there are solid preliminary indications that this whole stockwork section could continue on the other side of the "A4"vein and increase the overall width of the stockwork"
As impressive as the width already is, they are telling us they can already see that the width could even get better once they carry out the work on the "other" side of the "A4" vein. WOW!!!
3)" Being accessible immediately by the Company's actual underground workings as they exist without requiring significant new investment to develop it."
Not only are we talking about excellent high grade material here, but the company would have to spend very little money in the mine to actually produce it.
This to me is extremely significant as most people do not realize how expensive and time consuming underground preparations can be before major ore extractions can take place. In this case, the infrastructure is already in place, thus the company will be able to exploit and gain from this ore much rapidly and with little capital expenditures as normally would be required.
From my perspective, the real question left is:
HOW BIG does the NEW mill have to be? 3000tpd, 5000tpd 10000tpd!!!!!
4) "….and the fact we have only completed about twenty percent of our planned program, the Company would like to take this opportunity to provide a brief summary of the most…"
Amazing that the company has accomplished all these results and WE ARE NOT EVEN 20% into this program. And the real scary part is that they just started drilling a hole directly underneath this section
" We are currently drilling in this section as all necessary preparation work to start the hole was completed in the first week of May."
I am telling you my frined, this new discovery is massive on its own with what they know they already have, but should this current hole they just started drilling prove vertical extension of significance, this thing will go beyond parabolic!!!
Even scarier is the fact that they have yet to uncover the real source of all these veins they keep finding
A few backs when the stock was around $2.00, i wrote to you and "stated that $3.00 is a lay-up from here with this skarn discovery and $5.00 a little later as they better define the property".Well looks like i have to adjust my targets upwards shortly.
Good golly miss molly, I can't take this anymore!!!!!!!!!!!!!!!
*** The gold/silver shares were battered early, but came back late to finish off only modestly. The XAU gave up 1.46 to 160.43 and the HUI lost 3.97 to 376.12.
Gold, silver and the shares remain THE historic investment opportunity of a lifetime. Be there and remember:
GATA BE IN IT TO WIN IT!
MIDAS
Appendix
Finding Comfort (and New Friends) in Gold
By Landon Thomas Jr.
The New York Times
Sunday, May 7, 2006
http://www.nytimes.com/2006/05/07/business/yourmoney/07gold.html?_r=1&oref=
SHARON, Connecticut -- It's splendid spring day in Connecticut's horse country and James E. Sinclair, perhaps the best-known gold speculator of his era, is sitting before his trading terminal, contemplating the upward thrust of gold on his trader's chart.
The sun, bursting through the bay windows, catches the glint of gold that is everywhere in Mr. Sinclair's home office: on the coins near his computer, on his chunky Rolex watch, on the rings on three of his fingers, on the cuff links on his monogrammed shirt, and -- could it be? --a hint of it in his one working eye.
"I love gold, OK?" he said, his voice rising in excitement. "Gold has made me wealthy. It feels nice. It's exchangeable. It's money."
On his television set, which is tuned to CNBC, news breaks of a terrorist attack in Egypt, the price of oil pushes higher, and traders continue to sell the dollar, which is approaching a one-year low against the euro.
With gold trading at $683.80 an ounce, a 25-year high, it's a good time to be a gold bug like Mr. Sinclair, especially if, like him, you own a gold exploration company (his is in Tanzania) and were a buyer when the metal sank as low as $250 an ounce in 2001. Now Wall Street, traditionally a laggard when it comes to making the investment case for gold, has jumped on Mr. Sinclair's bandwagon.
Investment banks like J.P. Morgan and Goldman Sachs are putting out bullish research notes, retail investors are heavy buyers through exchange-traded funds, and hedge funds; and the trading desks of investment banks have been piling into the market, especially in the last week.
For Mr. Sinclair, who rode the last bull market in gold to its peak, in 1980, the surging price of his beloved metal is sending out clear signals that take him back to the 1970s, when inflation, a weak dollar, and an oil spike driven by turmoil in the Middle East propelled gold to a high of $875 an ounce, or more than $1,800 in current dollars after adjusting for inflation. His ultimate price target now is not far from that: $1,650 an ounce, assuming that things become really bad.
"Gold is a barometer of the common stock of a country, and right now gold is sniffing out weakness in the management of the United States as a business," said Mr. Sinclair, 65, a lifelong Republican who twice voted for President Bush. "Iran is becoming a nuclear power. The chairman of the Federal Reserve is on a puppet string controlled by the White House, and there is no such thing as a strong-dollar policy when the dollar is heading south."
For more than two decades, the apocalyptic lament of Mr. Sinclair and other gold bugs has been largely dismissed as the United States has experienced -- aside from a few hiccups -- a 25-year bull market in a range of assets, from stocks and bonds to real estate and art.
Sustained by a continuing flood of liquidity, these assets have continued their mighty climb, even as crucial gauges of economic health in the United States -- the budget and current account deficits -- have continued to worsen. But now, with gold making a run for $700, dedicated gold investors are getting a wider hearing.
Their passion notwithstanding, gold bugs tend to be small-time investors. Gold's recent surge has instead been underpinned by a rush of mainstream investors, including hedge funds, commodity-based mutual funds, and exchange-traded funds.
For these investors, gold is less a way of life than it is hedge against inflation and a prudent measure of diversification during an increasingly worrisome time. The extent to which this new wave of capital remains invested in gold will determine if the recent spike is just another anomaly or the onset of the second coming of the great gold bull market that the true believers have been calling for since the price of gold crashed a quarter-century ago.
Of course, many investors say that given gold's sharp recent climb, a correction would not be surprising. It's another asset bubble, they say, the latest investment fad. But for Mr. Sinclair and a small clutch of other self-exiled Wall Streeters, the metal's recent climb is just deserts for their unwavering if not mystical devotion to gold as an investment, an adornment, a means of exchange, and, more than anything else, a moral bulwark in a corrupting sea of paper money, credit, and what they see as insidious financial instruments.
Mr. Sinclair, who in the 1970s ran his own trading firm, achieved his renown by selling 900,000 ounces of gold at an average price of $810 in early 1980. That was when the metal was capping a decade-long bull market that commenced in 1971, when President Richard M. Nixon severed once and for all the dollar's link to gold.
In addition to selling his hoard, Mr. Sinclair sold his trading business, took his total net gain of $18 million, and retreated here to the Connecticut countryside, where he built his own private Shangri-La. It is indeed, as Mr. Sinclair likes to call it, "the house that gold built."
On the outskirts of Sharon, a village at the foot of the Berkshires, the sprawling 38-acre estate includes an indoor swimming pool and pistol range, horse stables, and a specially equipped garage that once housed his collection of racing cars. It's a lot of property for a solitary man -- his wife of 40 years died in a car crash in India two years ago. Now, he uses his Web site (jsmineset.com), books, DVD lectures, and cartoons that he commissions to proselytize about the virtues of gold and the depredations of central bankers.
"This will be my last great ride," he said of the current spike in gold prices. "Everybody loves to be right."
In Spain they call the obsession of some people to dig large holes in the ground to search for the elusive ounce of gold "mal de piedra," or the sickness of rocks -- one way, perhaps, to describe the condition that affects Mr. Sinclair and his coterie of gold investors.
With their missionary zeal and weakness for conspiracy theories, gold lovers can seem a touch afflicted. They also collect and pass around offbeat, brain-teasing findings. One is that the dollar has lost 98 percent of its value since 1913, when the Federal Reserve System was established. Another is an assertion by the American Institute for Economic Research, an obscure research outfit in Great Barrington, Mass., that since 1945 inflation has eroded $15.8 trillion from the savings accounts of United States citizens.
Both findings underscore their benchmark precept: that a currency not tied to gold becomes debased when central banks print money and governments spend freely. Perhaps Alan Greenspan, who before his run as chairman of the Federal Reserve was highly regarded in gold-bug circles, captured this point best. "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation," he wrote in 1966, when he was an economic consultant. "Gold stands in the way of this insidious process."
The great liquidity explosion that occurred under Mr. Greenspan has made him a turncoat in the eyes of the gold-bug crowd. But his successor, Ben. S. Bernanke, or "Helicopter Ben" as they call him, inflames its passions all the more. To this group, Mr. Bernanke's passing allusion -- before he became Fed chairman -- to a helicopter dropping money over a recession-bound economy confirmed its deepest fears that a monetary system not anchored by gold was essentially inflationary if not downright immoral.
All the same, most mainstream economists accept that a return to the gold standard and its restrictive covenants would be not only unfeasible but also deflationary. Gold bugs may cry, and be correct, about the creeping impact of inflation, but it is also true that the same climb in prices, aided by the great liquidity boom, has made some of them millionaires, as houses they bought for less than $100,000 in the 1960s are now worth millions.
Like Mr. Sinclair, William J. Murphy III is also a Wall Street refugee. After a one-year stint in 1968 as a wide receiver for the New England Patriots, he began a career as a commodities trader, working for a number of firms, including Shearson and Drexel Burnham. Convinced that the price of gold was being suppressed by an unholy alliance between the central banks and major investment banks, he formed the Gold Anti-Trust Action Committee, known as GATA, that seeks to publicize facts and assertions that support his point -- namely that the gold reserves in central banks are significantly overstated.
GATA for the most part is a one-man show -- Mr. Murphy, dressed in his sweatsuit, perched in front of the computer in his home in suburban Dallas. With his excitable manner and his outré theories about gold, he is generally thought to exist on the outer fringe of the gold-bug movement.
Indeed, his central thesis -- that Goldman Sachs and other banks have conspired to keep a cap on the price via short sales to back the government's strong-dollar policy, especially while a former Goldman senior partner, Robert E. Rubin, was Treasury secretary in the late 1990s -- is far-fetched.
With the price of gold surging, Mr. Murphy is convinced that Goldman Sachs, J. P. Morgan, and others are frantically buying now to cover for the gold they sold short over the years. Goldman Sachs and J. P. Morgan declined to comment about their gold trading positions or strategies.
"What a day," Mr. Murphy said one day last week as gold broke through $670. Goldman Sachs and J. P. Morgan were big buyers that day on Comex, the division of the New York Mercantile Exchange where gold contracts trade. Sputtering at the joy of it all, Mr. Murphy could well have been a prospector hitting the Mother Lode. "These guys are short, and they are panicking to get out of their positions," he said. "They are sweating bullets, and it couldn't happen to a nicer bunch of guys."
There is a kernel of truth to what Mr. Murphy says. Central banks have been aggressive sellers of gold, especially in the late 1990s, when gold was touching record lows. But most economists say that there was no grand design involved, just a badly timed attempt to shift into higher-yielding assets like bonds.
As for investment banks, they are sellers and buyers of any given asset at any given time. But it is also true that they have hardly been enthusiastic advocates for gold as an investment, especially when the stock market was king. Even now, as they have issued positive reports about the metal, their price targets seem oddly out of sync with its relentless rise.
Goldman's forecast for a year-end price is $625 an ounce; J. P. Morgan's target, which is currently under review, is $560, and Morgan Stanley's is $550.
Compared with Mr. Murphy and his boylike excitability, James Turk speaks with an assured gravity consistent with his background as a commercial banker at Chase Manhattan. But his views about gold as the ultimate store of value in a financial world on the verge of collapse are no less doctrinaire.
Indeed, Mr. Turk has established his own online payment system, GoldMoney.com, through which he and his fellow gold bugs may enjoy the thrill of buying goods and services via gold, not cash.
In some ways it is a symbolic exercise. While the payment system is supported by $100 million worth of gold, no merchants have agreed to take bullion as payment, although Mr. Turk hopes that day may come. More than anything else, the site demonstrates his disdain for the dollar and all other forms of paper money -- a view that he often heard from his parents, who experienced the ravages of hyperinflation in Austria in the 1920s.
"It's not gold going up; it's the dollar going down," Mr. Turk said by phone from Australia, where he was speaking at an investment conference. Gold has held its value much better than the dollar against commodities like oil, he said.
With oil hitting new highs -- it has hovered around $70 a barrel for weeks -- Mr. Turk foresees a return to the 1970s, when high inflation and a volatile Middle East drove gold to its peak. "If we get close to $850 this year, it's most probable that we will see a four-digit gold price in 2007," he said. Four-digit gold -- an ounce of bullion selling for $1,000 or more -- is the gold bugs' equivalent of a visit from the Messiah.
But for the growing number of hedge funds that are piling into the commodity, gold is less a virtuous investment than it is a mercenary one.
China and India are buying more gold. Iran is becoming more bellicose in its stand toward the West. And, most important, liquidity is making a broad shift to commodities and out of stocks.
"Do I think that gold is God? No," said Monty Guild, who runs Guild Investment Management, a hedge fund in Malibu, Calif. "I'm a gold opportunist. When it's good, we like it; when it's not, we stay away. Gold does well during wars, and we believe there will be more wars."
And for those not in gold, or any other highflying commodity, for that matter, the feeling can be lonely. William H. Miller III, portfolio manager of the $19 billion Legg Mason Value Trust, which has beaten the Standard & Poor's 500-stock index for 15 consecutive years, has no gold in the fund. His view is that inflationary expectations, if not prices themselves, remain quiescent, and that gold -- like oil, emerging markets, and small-cap stocks before it -- has become the latest investment craze, propelled upward by a wave of hot money, a term for speculative short-term capital.
"Gold certainly looks extended from here," said Mr. Miller, whose fund is currently trailing the S.& P. 500 for the year. "It's easy to make money when you are trend-following," he added. "But if you are worried that the end is near, the last thing I want is gold because of all the hot money."
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