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John Reade of UBS: "Gata are idiots"



By: Bill Murphy, Le Metropole Cafe, Inc., LemetropoleCafe.com


-- Posted Thursday, 26 April 2007 | Digg This ArticleDigg It!

April 25 – Gold $683 up 4 cents - Silver $13.74 down 2 cents

If the truth doesn't save us, what does that say about us? …Lois McMaster Bujold, writer (1949- )

GO GATA!!!

This morning our Comex floor source says the boys on the floor have been impressed how the market has absorbed enormous central bank selling. However, he felt they would attack again before the price slide would be halted.

The gold open interest rose AGAIN, up 6609 contracts to 403,338, more anecdotal evidence of significant shorting by The Gold Cartel on a day the dollar went lower.

The silver open interest was up sharply, rising 2673 contracts to 123,627. The cabal crowd was taking NO chance the price of silver would be up today, allowing the $14 silver calls to go into the money. Geez what a surprise! The Comex crooks not only managed to knock out 700 call holders, but the $675 ones too.

Neal Ryan of Blanchard and Company:

"UBS released a note this morning cutting back their silver price predictions over the short term citing a lack of investor follow through and general market disinterest. We would argue that silver has performed quite well over the last few months, especially in the face of a short position on the COMEX that dwarfs a corresponding short position in any other commodity (hard or soft). The silver market is continuing to tighten while the chance for a massive short squeeze is becoming more and more likely in the near future. Once the short squeeze in the silver market begins, all bets are off in our opinion as we expect price to potentially jump dollars at a time as the enormously outsized COMEX short position is closed out."

Reasons why gold was not allowed to rise today:

*The dollar fell again, dropping .11 to 81.25.

*At one point the euro made an all-time high against the dollar, finishing the day up .12 to 136.38.

June euro
http://futures.tradingcharts.com/chart/EC/67

Monthly euro
http://futures.tradingcharts.com/chart/EC/M

*Crude oil rose $1.17 to $65.75 per barrel, with gasoline RISING AGAIN, up another 6.6 cents to $2.2749 per gallon:

May gasoline
http://futures.tradingcharts.com/chart/RB/57

*Too much money put into the US financial system, see below.

*Corn, wheat and corn surged ... with both wheat and corn limit up when gold closed ...

May corn
http://futures.tradingcharts.com/chart/CN/57

May wheat
http://futures.tradingcharts.com/chart/CW/57

*May copper gained .0625 cents to $3.6265 per pound:

http://futures.tradingcharts.com/chart/CP/57

What is so sick is that the mainstream gold analysts are either the dumbest nerds in analysis history, or so disingenuous that it would make Pinocchio blush. The manipulation of the gold price, silver as well, is both absurdly obvious and an outrage.

From a fellow Café member:

Hi Bill, I pointed out the fact that GS is covering on TOCOM to John Reade of UBS and
this is what he had to say!

-----Original Message-----
From: m
Sent: 25 April 2007 08:11
To: Reade, John

Subject: RE: Hi John, Looks like Goldman Sachs is running for the hills

-----Original Message-----

Hi John, Looks like Goldman Sachs is running for the hills in Tokyo! They were short over 35'000 gold in the beginning of February and yesterday they covered 2'489 to be short only 20'726. In the last year and a half they have always increased their shorts in a rising market! They were short around 50'000 when gold was trading up above $700. Rgds
m

----- Original Message -----
From: John Reade
john.reade@ubs.com

At: 4/25 8:21:24

I would not read too much into these positions as they are almost innevitably Tocom / OTC arb positions and not directional bets

regards
John Reade
Head of Metals Strategy
UBS Investment Bank
+44 20 7567 6755 (w)
+44 7769 884 932 (m)

From: m
Sent: Sent: 25 April 2007 08:26

To: Reade, John
Subject: Hi John, Looks like Goldman Sachs is running for the hills in

Seems very significant to me. They have always increased their shorts in a rising market and now they are covering like crazy! Maybe the CBs are running out of physical gold and GS knows it. Would make sense in light of all the IMF gold sales talk. www.gata.org have done extensive research on this subject and even Peter Hambro suspects the CBs have loaned out huge amounts of gold which they can only get back by paying up!

From: John Reade john.reade@ubs.com

At: 4/25 8:28:02
Why do they increase shorts in a rising market. Simple. In a rising market the Tocom premium increases sharply so they sell Tocom (which you can see) and buy OTC. When the marekt then turns they reverse the position.

Gata are idiots

John Reade
Head of Metals Strategy
UBS Investment Bank
+44 20 7567 6755 (w)
+44 7769 884 932 (m)

Mr. Reade,
You are some coward. I called this morning to challenge you to a debate re GATA and all our findings, and you hang up the phone before I can get ten words in. I take back the nice things I have said about you personally over the years since our luncheon in Paris at the FT gold conference with Reg Howe.

Idiots? At least we can spell.
Bill Murphy (Head of the Idiot Squad)

Some feedback from some of the rest of our "idiots:"

Dear John,
Having spent 22 years with several Wall Street firms including Paine Webber, prior to founding
http://www.holtshapard.com/, I’ve always had great respect for the objective and thorough analysis of your metals research. And, as a member of the Board of Directors of GATA, we "idiots" would like to learn more regarding the peculiar, counter-intuitive moves in the gold price, such as the abrupt $8 decline yesterday in a span of minutes against a backdrop of (1) a new low in the dollar, (2) a disastrous housing resale report, and (3) a plunge in consumer confidence. Or, perhaps you can better explain the $24 decline on Feb. 27th, initiated in the illiquid access market (see below).

John, I’m sure you have all the answers we need. Several of us plan to be in London the latter part of May. What does you calendar look like? Or, if your travels take you to New York anytime soon, we’ll be happy to meet you there.
Sincerely,
Wistar Holt

From Rob Kirby:

The shorting that occurs on TOCOM [Reade calls this "shorting elevated or increasing premium"] is ALL done in the long dated contracts – as we discussed at the café a few days ago – namely, overwhelming amount of shorts concentrated in the Dec 07 and Feb 08 contracts.

So…….

It would appear that Mr. Reade is making the claim that Goldman "offsets" their TOCOM short by [now I’m guessing here] BUYING OTC ???? A calendar spread perhaps, ole Johnny???? B.S.!!!!

Mr. Reade OWES an explanation of exactly what OTC is.

My best guess is that his explanation will COMPLETELY and UTTERLY be exposed for shill crap IF and WHEN he ever does.

But I’m saying he won’t.

But my best guess is that he will invoke the GARTMAN defense – make outlandish and outrageous claims and refuse to debate the merits of his position.

We’ve seen this many times before
Best,
Rob Kirby

You see Bill, you can extrapolate from John Reade’s explanation that the growth in derivatives trade is ALL productive.

But looky here [attached]:

End User Demand.jpg

There is no REAL DEMAND for these derivatives. It’s right here in plain black and white!!!! End user demand is virtually NON EXISTENT!!!!

But look at the growth in "ponzi" dealer notionals!!!!

Ask John Reade to speak to this – IT IS DIRECTLY CONNECTED!!!!!

But like I said,

He won’t.

Any bets?
Best,
Rob Kirby

Bill;
You know, I’ve thought about my comments about John Reade a little bit more. Upon reconsidering – he’s no fool. What he is – he’s a cunning disinformation specialist.

We’re the fools – ONLY if we believe what he’s telling us. Too much anecdotal evidence refutes his claims – plain and simple.
Best,
Rob Kirby

Greetings all,
If one looks at Adrian's TOCOM shorts for GS, they were rising significantly during the winter of 2005 and spring of 2006 when gold had its big run to $720...but now in the rising gold price environment that we have today, GS is doing significant covering. If Reade is correct, then why wasn't GS covering on the big price run-up 18 months ago??? Something doesn't compute here. Is it Mr. Reade???
Ed Steer

Bill,
The GS TOCOM data is one piece in a whole puzzle. It is the whole puzzle that gives the picture of gold price suppression. It is easy to give a one liner to dismiss a very strange market pattern and claim we are all idiots. What I have just pointed out in today’s commentary is that the pattern has changed…GS were selling on the rise covering on the fall but NOW since October they have continued covering EVEN while the POG rises!!. I suppose I am just an idiot and GS have reversed the way they play the arbitrage!!

Furthermore GS used to have a short and a long position. They are now only short but decreasing it. To play arbitrage you would typically need a long and short leg.

I would like to point out that the same Goldman Sachs is LONG 234 contracts in silver with 1 contract short. I suppose they don’t want to arbitrage silver in the same way as John Reade suggests they want to in gold.

I don’t mind rational discussion, I don’t mind being wrong, but challenging our mental capacity is not productive!
Cheers
Adrian

Bill,
One further point is that I showed in my last article that GS is in the hole for 100 million dollars on their TOCOM position and have almost never been in a positive net profit for over one year. Perhaps I am an idiot but I thought the whole idea of arbitrage is to make money out differential pricing of one market to another. This position has nearly always been a loss maker, therefore, by definition it is not arbitrage unless GS are really bad at arbitrage…and from their ballooning profits we are led to believe they are the worlds’ best traders!!

A one liner that writes off this consistently loss making trade on the TOCOM trade as "arb" is about as good as the WMD excuse for the Iraq War!
Cheers
Adrian

Hi Adrian,
what if someone notes that what they are losing on TOCOM, they are making on the OTC market.

Course we know they are shorting in the US too, at least on the Comex. Geez, I guess they are short Comex, short TOCOM and long the OTC. That makes a lot of sense.
Bill

Bill,
Yes it is possible that they sold 50,000 contracts short on TOCOM and offset it with equivalent of 50,000 longs on OTC such their gain on OTC was bigger than their loss on TOCOM. But 50,000 contracts on TOCOM meant they held 15% of the TOTAL short position, 24% of the NET short position, and they were the second biggest short on TOCOM after only having been on the exchange for 6 months. If you are controlling 24% of the net short and 15% of the entire market and being the second biggest short position (traded entirely for your own account) this is NOT "arbitrage"…that is "manipulation".
Cheers
Adrian

I did a Café Search over the past many years on Mr. Reade, who has been wrong on the gold and silver prices most of the way up. Funny, the "idiots" have called this market correctly for 6 years now and said WHY it would go higher from the get-go. Thought you might like to go "blast from the past time":

June 14, 2001 - Gold $275.60 up $3.40 - Silver $4.47 up 7 cents
GOLD IS ON ITS WAY TO $600 PER OUNCE!

As far as the stock market goes, it looks in deep trouble to me - along with the Wall Street analysts that are now receiving incredible heat for peddling their dot.com stock mania nonsense.

The place to be will be gold and the gold shares. GOLD IS ON ITS WAY TO $600 PER OUNCE! John Reade of UBS Warburg notes that option dealers are stunned by the volatility. Good Grief. They have not seen anything yet. They also are going to pay a price for what The Gold Cartel has wrought. I repeat, if you do not understand that the gold market was not a free market for 6 or 7 years, but a RIGGED market, then you know little about what is going on or what is going to happen and why. Overly hedged gold producers and shareholders in those companies, BEWARE.

One day soon, gold will open $300 bid and never look back!

September 23, 2001 - Gold $290.65 up $4.35 - Silver $4.58 up 8 cents
The Tortoise (Gold) and the Hare (Nasdaq) - Part Two

John Reade of UBS Warburg Paine Webber told Paine Webber's stock brokerage executives on Friday that he has turned quite bullish. Interestingly enough, that does not come through in his daily bullion market commentary.

I met both John and Andy when Reg Howe and I went to the FT Gold Conference in Paris June of last year. Nice enough chaps, even if they have been on the wrong side of table as far as GATA is concerned.

There is no doubt in my mind that both fellows were fully aware of the gold games being played by The Gold Cartel. The fact that they are now so bullish ought to tell us something. Eh?

That does not mean that gold will soar sky high right away. It SHOULD, but The Gold Cartel is desperate beyond comprehension due to a myriad of problems. For years I have warned of this possibility in CARTEL CAPITULATION WATCH. The cabal will do whatever they can to hold down the price of gold as long as they can. All that means (if they stay at it) is more opportunity for us to buy more and more gold and the right gold shares at cheap prices.

July 21, 2002 - Gold $323.90 - Silver $5.08

The Significance of Understanding "Gibson's Paradox and the Gold Standard"
Global Investment Research
Barton M. Biggs

"It certainly is possible that gold can return to its long-term equilibrium inflation price of $500 an ounce, or even take a run at its all-time high of close to $1,000. What would cause such an explosion? A steep decline in the equities market, higher inflation, or competitive devaluation of the major currencies. In a bleak world, gold could beat almost everything else."

Biggs is one of the most respected men on Wall Street, although that is not saying much these days. For him to even mention $500/$1,000 gold is profoundly significant. A $375 call would have been a big deal. Men like him do not utter outrageous numbers like this, even in serious private conversations, much less put those kind of numbers up in writing.

Biggs is an icon in the Wall Street world. What is going on here? Gold Field Mineral Services, the flunky bullion dealer apologist organization, upped its forecast for gold a couple of months ago to a range of $285 to $315. Biggs' Wall Street colleagues in the bullion dealer houses partly fund this gold industry organization. Aside from the recent HSBC analyst gold forecast, the only other bullish bullion dealer gold forecast I know of is that of UBS Warburg's John Reade. He went out on a limb last week predicting gold could actually rally to $330. Officially, the other bullion dealer houses are either bearish or neutral.

-END-

(Barton Biggs spoke of $1,000 gold on CNBC. The VERY next day this sheepish looking soul was back on CNBC disavowing what he said. Clearly he was strong-armed to recant speaking of such nonsense by The Gold Cartel and his Morgan Stanley management)

September 3, 2004 - Gold $400 down $5.50 – Silver $6.54 down 19 cents
Very Bullish Gold News: "Central Banks May Sell Less Gold Than Planned," Says UBS

Now for the main gold event for the day. It comes from a UBS report out this morning by John Reade out of London:

John Reade
+44-20-7567-6755
john.reade@ubs.com

Central Banks may sell
less gold than planned

The entire report may be read by clicking below:

Gold020904.pdf

The essence of what John Reade (whom Reg Howe and I met at the FT Gold Conference in Paris in May of 2000) has to say is that the central banks covered by the Washington Agreement may sell as little as 250 tonnes of gold per year instead of an anticipated 500 tonnes.

While this report may be construed as modestly bullish by UBS, it is explosive the way GATA understands the gold market. Why:

*The gold establishment (probably including UBS) says the central banks have 32,000 tonnes of gold in their vaults, minus 2500 to 4,000 tonnes lent out for various hedging operations, etc. Their number used to be slightly higher, but since they do not account for lent/swapped gold other than to hedgers, this number has to be smaller today because the gold producers have cut back on their hedges so sharply over the past couple of years.

*The GATA camp, via the analysis of Turk, Howe and Veneroso, believes the central banks have less than 16,000 tonnes left. The difference is the CB gold which has been lent/swapped out surreptitiously to facilitate their nefarious gold price suppression scheme.

*It has been my long held opinion the price of gold would never really take off until The Gold Cartel is defeated. They would eventually be defeated because they would not have enough physical gold to meet demand. Thus, the price must rise to ration the excess demand when the cartel supply began running low, or ran out. In this regard the main determinant of the price of gold for the months and years ahead will be what happens to The Gold Cartel and their gold to meet surging demand. This is in contrast to many others who believe the dollar will be the main determinant of the gold price.

**The difference between the central banks having something like 29,000 tonnes of gold in their vaults versus less than 16,000 tonnes, as GATA believes, is enormous and extremely important. The yearly supply/demand deficit is running more than 1500 tonnes per year. This means The Gold Cartel needs to come up with 1500 tonnes per year to keep the price from rising.

*GATA knows our numbers are in the ballpark. We just don’t know where The Gold Cartel is getting their gold from. What this means is a number of central banks don’t have the gold they say they have, and have not let the investment world (and in some cases, the citizens of their own countries) in on this. Much of their gold is lent out and they cannot get it back without driving the price of gold to the moon. The Gold Cartel is like a heroin addict. It needs its fix of clandestine gold each week and month. Therefore, not only can it not stop selling gold, it must keep on getting its fix, or adding more gold. If they stop, MUCH LESS TRY AND GET THEIR GOLD BACK, the yearly supply demand deficit would balloon to 2500 tonnes+. The price would immediately go berserk.

*John Reade has a staff of 9 people. At least he did when he had lunch with Reg and I because that is how many were at the luncheon table. John is also very well connected and would not put out a report such as this without some INFORMED insight as to what is likely to transpire and what the quiet scuttlebutt really is in the central banking world.

*My guess is The Gold Cartel is finally hitting the wall as GATA long predicted they would. They are probably going around trying to figure out who is going to sell what and have learned that various central banks will not lend or swap any more out for any number of reasons. Or, they can’t because it is not there any longer.

*This is a VERY BIG DEAL. Yesterday I reported some of my sources said something big is up. This sort of news certainly qualifies, as once clearly understood, gold could move gold up $60, or more, in a matter of weeks.

March 3, 2005 – Gold $429.60 down $2.70 – Silver $7.19 down 10 cents
GATA Sends Press Release on Stunning GCC Gold Report To Middle East Business Editors in Both English and Arabic

"We believe that the rally in silver is getting rather long in the tooth. We forecast that silver will average $5.80 in 2005 and $5.60 in 2006," said John Reade, precious metals

***

More gold goodies:

Gold Jottings: UBS noticing India?

Indian ex-duty premiums: AM $4.68, PM $3.44, with world gold at $683.40 and $685.40. Lavish for legal imports. The rupee edged up to a new 9-year high, but both world gold and the rupee were comparatively steady today. Consequently these premiums –which are comparable at all the importing cities Reuters reports – command confidence.

Bloomberg notes today that the rupee is on track for its strongest month in 30 years. The world gold market has never had to deal with a situation like this. India only became as important (and visible) a factor as it now is in the gold trade after liberalization some ten years ago. UBS commented this morning:

“We saw very strong physical demand from India on Tuesday; double the amount on Monday although this was not enough to prevent gold falling. It should be an indication that underlying physical demand is strong at the moment and is a supportive factor. The very strong Indian rupee may be playing a role here, something we will write more about later today if we get the chance (and thanks to the client for the heads up one this: we knew the rupee was strong but had not realised quite how much it had moved until alerted).”

A telling admission by one of the best-placed commentators.

None of this aroused the least interest in Japan (which will be closed for 3 days next week). Volume did edge up 12.2% to the equivalent of 20,581 Comex lots, but open interest was static (down 4 Comex lots!) and Mitsubishi’s data implies the same: the public’s long was shaved by 0.4 tonnes. The active contract closed unchanged and world gold added 90c from the NY close.

As suspected, yesterday’s selling effort turned out to be formidable. Comex traded 94,221 contracts and combined CBOT volume was equivalent to 41,053 NY lots. NY added 6,609 lots of open interest and combined CBOT another 836, so that, overall, US futures added 23.15 tonnes on a down $6.50 day: this was not liquidation. This means that in seven business days NY gold lost $2.10 and added 103.53 tonnes of open interest (8.9%): a major effort on both sides.

Today despite gold friendly action by both the dollar and oil gold was under constant pressure in NY, beginning according to MKS with some serious selling on the PM fix. However, the Bears could not build downward momentum and gold closed down only 40c. NY traded some 42,000 lots by the regular close and combined CBOT just over 26,000 NY equivalent.

Most likely a significant part of the fresh selling in the past few days is commercially motivated shorting, seeking to trade off the glaring resistance around $690. Going short to the rupee-strength fortified Indian retail demand is likely to prove seriously unhealthy.

***

CARTEL CAPITULATION WATCH

The always rising DOW did it again, up 136 to 130.90. The DOG gained 23 to 2548.

Why the Fed eliminated the M-3 stats:

Bill;
Check out the "BLIZZARD" of fiat being added by Uncle Ben today:

Temporary Open Market Operations for April 25, 2007
Last Updated: April 25, 2007 10:27 AM
Number of Operations Today: 3

http://www.ny.frb.org/markets/omo/dmm/temp.cfm· At 10:20 a.m. – 18 billion in 3 day repos [5 billion of which were agency/mortgaged backed]

· At 9:40 a.m. – 2 billion in 1 day repos [all of which are agency/mortgaged backed]

· At 8:40 a.m. – 14.5 billion in 8 day repos [7 billion of which were agency/mortgaged backed]

I think what we are witnessing here – in almost real time - is a vain attempt to "sweep" the sub-prime mortgage debacle under an even larger pile of fanciful, fecal, fiat.

This "reeks" of desperate measures being undertaken by monetary authorities to right a ship that is listing BADLY.

All hands on deck [and don’t forget your golden life-preservers].


Best,

Rob Kirby

"Very Strange indeed ... more:

There was a REPO action today that I have not seen before. They added 18B in a 5 day forward auction. I have not seen that before.

Furthermore this is a double add on a Wednesday. That is very odd.

I just wonder if the two-year auction will see Foreign CB's not show up.
Sabre

US economic news:

07:05 MBA mortgage purchase applications index +3.7% in 20-Apr week
Compares to (4.2%) in prior week. The refi index +3.6% following (0.3%) in prio week, and marks the first positive weekly reading after 5 consecutive weeks of declines. Average 30-year rate (9bp) to 6.13%
* * * * *

08:30 Mar Durable Goods Orders reported 3.4% vs. consensus 2.5%; ex-Transportation 1.5% vs. consensus 1.1%
Prior Durables revised to 2.4% from 1.7%; ex-Transportation revised to (0.4%) from (1%).
* * * * *

10:00 Mar New Home Sales reported 858K vs. consensus 890K
Mar revised to 836K from 848K.
* * * * *

The spin is beyond belief! Homes sales gain in the headline (March over February) but fall 23.5% year over year buried in the text. Foreclosures were up 27% in the first quarter (not in the report). Until we see prices drop significantly, things will only get worse. Chuck.

10:30 DOE reports crude oil inventories +2.07M barrels vs. consensus (1.5M) barrels
Gasoline inventories reported (2.79M) barrels vs. consensus (500K) barrels. Distillate inventories reported +5K barrels vs. consensus +500K barrels.
* * * * *

0:30 API reports crude inventories +5.54M vs. prior (3.28M)
Gasoline inventories (82K) , Distillate inventories (1.786M).
* * * * *

14:00 Beige Book reports most districts report modest or moderate expansion
Most districts report continuing tight job market and that retail sales in most districts are "generally positive."
* * * * *

4:06 Follow-up: Beige Book reports most districts report modest or moderate expansion
NY and Minneapolis report steady and firm growth, respectively, while Dallas called growth moderately strong. Most districts reported manufacturing activity was slow. Residential real estate activity continue to weaken (note the New Home Sales Mar figure was below consensus this morning). Demand for residential loans was "flat or slowing." Most districts reported continued tight labor conditions,particularly skilled. Wage increases were reported in some districts,though were generally modest. Market reaction for stocks, bonds and the dollar has been muted. Dow +83.5 to 13037.1; 2-yr. (1/32) to 4.62%; 10-yr (5/32) to 4.64%; €/$ 1.364.
* * * * *

BIG TROUBLE for the White House:

Gonzales Aide Monica Goodling Gets Immunity
http://www.truthout.org/docs_2006/042507A.shtml
A House committee voted Wednesday to grant immunity to Monica Goodling, a key aide to Attorney General Alberto Gonzales during the firings of eight US attorneys. She had refused to testify, invoking her Fifth Amendment rights against self-incrimination. The 32-6 vote by the House Judiciary Committee surpassed the two-thirds majority required to grant a witness immunity from prosecution. A separate vote to authorize a subpoena for Goodling passed by voice vote.

-END-

Maybe now we will find out what the real story is and where the thousands of lost White House emails went to and why.

Iron Ore Price to Rise Next Two Years on China Demand, RBC Says
2007-04-24 20:46 (New York)


By Jesse Riseborough
April 25 (Bloomberg) -- The benchmark price of iron ore, a key steelmaking ingredient, may rise for a further two years, making it seven straight increases due to Chinese demand, RBC Capital Markets said.

The price may rise 10 percent next year and 5 percent in 2009 to a record, analysts Chris Lancaster and Michael Chandler said in an April 23 report. The analysts had earlier forecast a 25 percent and 20 percent fall respectively.

Baosteel Group Corp., China's biggest steelmaker, said yesterday it will increase annual purchases of the raw ingredient by 90 percent by 2012 as it expands mills to meet demand from auto and appliance makers. China overtook Japan as the world's largest buyer of ore in 2003.

-END-

TOCOM:

Ladies and Gentlemen:
On April 24th the seven large TOCOM gold shorts reduced their net short position by 1,378 contracts to 99,285 contracts.

http://www.tocom.or.jp/souba/gold/torikumi.html

In silver the same dealers reduced their net short position by 143 contracts to 5,219 contracts.

http://www.tocom.or.jp/souba/silver/torikumi.html
Have a good night,
Scott

Bill,
In the April 24 session on the TOCOM Goldman Sachs COVERED a very substantial 2,489 short contracts to bring their short position to 20,726 contracts. This is the LOWEST EVER short position they have held since I have been keeping daily data from Jan 13, 2006. I am not missing much data as they only joined the TOCOM in the last quarter of 2005. This beats the previous all time lowest net short position of 21, 676 reached only on 17th April, 2007. I have included an updated chart to demonstrate the dramatic change in position that is unfolding here

The importance of this development can not be overstated. It can be seen that the only previous time when such a large reduction in short position was made so quickly against a rising gold price was during the meteoric rise to $725/oz last year. The gold price is not rising as steeply but it must be frightening the living daylights out of the Cartel because despite all the gold that the ECB can throw at the market the gold price has just trundled onward and upward like a CARTEL TERMINATOR!

But there is another truly remarkable feature of the chart. Notice how from Jan to October 2006 the GS short position correlates perfectly with the gold price. As the gold price rises so does GS short position to try to slow down or stop the price rise. As the gold price breaks down the GS short position reduces as they cover on the downdraft. This is manipulation 101. But look what has happened since October 2006…the gold price and the GS short positions are trending in OPPOSITE directions. After covering shorts in the correction from POG $725 GS has CONTINUED reducing their short position even as the gold price turned around and started to rise in October 2006. This is a covering operation that has been on-going for 10 months, but it was only the covering of the last few days which made this downtrend channel the apparent dominant trend. This is GS RUNNING FOR THE EXITS.

GS certainly wants to get out of Dodge in a hurry. I wonder if recurring nightmares of Lihir showing up on the TOCOM with 1.2 Billion dollars in cash in large suitcases wanting to buy 1.7 million ozs of gold for immediate delivery has got them worried!
Cheers
Adrian

On Mr. Russell:

Bill,
Mr. Russell’s statement that most commercial shorts are gold mining companies is not correct if COMEX open interest data is studied. Current open interest on the COMEX represents days of mine production in the following amounts: copper = 20 days, gold = 180 days, and silver = 341 days. Why would gold miners sell their production in advance on COMEX at 9 times the rate of copper miners? There is no reason and if price was the motivator than copper sales should be above gold. It is my contention that about 20 days worth of gold mine production is sold by the miners and the other 160 days worth is the cartel sales for the purpose of price suppression. Thanks,
-Bryant

Hi Bill,
Did an interview yesterday with Greg McCoach on this very subject.
Your readers will find it interesting.
www.kereport.comAl Korelin

Al is correct .. Greg says gold and the dollar are "managed."

More from Al:

Featured on the Daily Korelin Economics Report: "Congressman Ron Paul Expresses Concern Over the Future of the U.S. Dollar"

When Congressman Ron Paul announced his candidacy for the presidency of the United States, we immediately expressed our support, as did many of our colleagues - Jay Taylor, Rick Rule, Doug Casey, Roger Weigand, Ben Johnson and a host of others. We began to discuss issues with the congressman and Jeff Deist, a senior member of his staff, each week on The Korelin Economics Report in order to make listeners aware of his views. We also posted a video of an interview with him which we did in San Francisco at the Gold Show on our website and on You Tube, which has been watched by thousands of people.

Why did we devote 20% of our program to the Congressman? Purely and simply because we believe that his views of the U.S. economy are spot on. For the past fifteen years we have presented all the economic views that we are aware of, both positive and negative. Each week we have guests who agree with the conventional financial press and those who disagree. We do this because we believe that people need to be aware of all sides of the issues so that they can effectively make up their own minds.

On our daily show of Tuesday, April 24th, we discussed with the Congressman his views of the U.S. dollar and the future interest or lack thereof of the Asian economies in purchasing our debt. His views are pessimistic and quite different from what you may read in your daily papers.

Why is all of this relevant to Kitco visitors?

Purely and simply because of the relationship between the price of gold and the value of the U.S. dollar. As you are aware when the U.S. dollar goes down in value the opposite usually occurs in the price of an ounce of gold.

Just last week, the U.S. dollar dropped rather significantly against the Euro and we saw an increase in gold’s value. Then, for whatever reason, on the following Monday the U.S. dollar firmed up and gold’s value decreased.

Prior to that weekend, Roger Weigand stated on our program that central bankers would buy dollars and sell Euros in order to increase the value of the dollar and reverse the trend. He said that this would happen because a "freefall" in the price of the dollar (as he put it) would be detrimental to our economy and to the world economy as a whole.

The interesting question here is, just how long will central bankers support the U.S. dollar. Or as Congressman Paul asked listeners of our show, "How long will China and Japan continue to purchase our debt?"

If you believe that inflation is under control; that unemployment in the U.S. is not a problem; that the current personal and governmental debt levels in the U.S. are not a problem; and, that the housing environment in the U.S. is just fine then I would suggest that you forget about buying gold and silver and the related investments. As long as people believe economic factors such as these are not a problem, the U.S. dollar will be just fine. If you believe, as Congressman Ron Paul does, that a problem does exist; however, than I suggest that gold and silver are a great investment.

If you did not hear my conversation with Congressman Ron Paul on one of the stations in the thirty markets where it airs, simply go to www.kereport.com and click on the date under his picture to listen.

-END-

A heads-up:

Hi Bill,
I've written something updating my article from last December. As you can see "they are all still sinking" despite the efforts of the cartel.

http://www.forsoundmoney.com/2007/04/24/they-are-all-sinking-part-ii/

All the best,
M

On the continually decreasing mine supply:

Harmony lifts earnings, production drops

Harmony reported lower production in the quarter, with tons milled from South African operations dropping by 6,2% to 3,15-million tons.

This was, however, countered by the 4,2% higher grades of 5 g/t from the local underground operations, which resulted in gold production only declining by 2,5% to 15 655 kg, the company said.

http://www.miningweekly.co.za/article.php?a_id=107881

-END-

From our man in Nigeria:

Morning Bill (from Lagos),

The Lagos election results were declared and yet all remains reasonably peaceful. Whether by design or bad management, many people were disenfranchised by the lack of ballot papers, but life will go on-and from all accounts things are not nearly as bad as in Zimbabwe.

Yesterday's 12.00 NY time manipulation was a classic, but please bear one thing in mind. It looks bad on the KITCO charts, but this is because the trading range of gold has contracted into a far tighter range than during many periods in the past. Who is winning the gold war? If you don't know about this facility, go to the chart page on KITCO.COM and scroll right down to the bottom, past the three month, six month, one year charts etc. The last bar line of the page allows recall of historic charts. Look at Jan 3rd 07 (POG down $20), Jan 7th (down $25), Feb 27th (down $27), March 3rd (down $23).Look at all this price action when POG at one point faced off against the $600 barrier-it only takes about two minutes to perform this review. Clearly GATA is winning this war hands down.

The action on the HUI in the last 48 hours suggests that the usual suspects knew in advance exactly what was going to happen at exactly the stroke of 12.00 in NY yesterday. Right now it is 9.05 am (both European and African time) and POG is at $685.5 this Wednesday morning. So the cartel actually got so little ''bang for their buck'' vis-a-vis the kind of spectacular manipulative results achieved only a couple of months ago. I read a leading article in the Financial Times of London last week that basically referred to the euphoric American markets as clearly being in a state of dementia. I have been in a hotel since the beginning of the year and so have not recently watched Bloomberg and CNBC . When I was watching regularly, even before the most recent dollar melt down, I could easily distinguish the superior, less biased content ,of these media channels when the program s came direct from Europe or Asia, as the USA slept. The rest of the world is not being fooled. It won't be long now.
Regards
Nicholas

Good news from GATA supporter Sur American:

http://biz.yahoo.com/ccn/070424/200704240386224001.html?.v=1

-END-

For those interested, Eric Hommelberg forwards us an ECU silver update:

Hi Bill,
Here you go:

http://www.golddrivers.com/a
rchive/ShowArticle.aspx?ArticleID=68c43e2f-a3c4-4544-b9
93-d423e942a5d5

All the best,
Eric

Sentiment
Good Morning Bill,
I spoke this morning to one of my most astute clients in Switzerland, a holder of physical bullion and the precious metals shares for the last 5 years. We were discussing the possible safe haven areas if the dollar does break down and when it came to gold his comments were along the line of 'not convinced of its action lately that it would act as a safe haven' The gold cartel I am convinced are trying to wear us down and if these thoughts are in the mind of someone that owns the metals you can be sure that this sector is yet again been put out of most peoples minds, only the physical buyers and true gold bugs with cash are around. Stay the course Rgds Viktor

On a lighter note:

There is hope. Spoke to Mom Murphy. Yesterday Mom, 86 years young in 45 days, a stroke survivor, and referred to the other day by Father Pat Murphy, was pumped about playing for the "C" level championship at her Rancho Bernardo Country Club. Then on the first two holes she shot a 7 and then 11. She told me tonight she was disgusted with her play at that point in time. Those "craps" numbers must have been good luck, for she won the "net" prize, scoring a 103 gross score at the end of the day, which means she was playing the course at around a 94 pace for the last 16 holes. How many of us Café golfers could do the same?

GO MOM!

FYI:

Howdy, Bill--
I just read the latest piece on gold/silver from one of the popular technical analysts on the internet. His analysis basically says we're at a critical juncture for gold and he painted a fairly bleak short-term picture in regards to the COT numbers.

I sent the article and charts over to our friend Dan Norcini for his comments. I've deleted the analyst's name so as not to make this personal, but I thought your readers might benefit from Dan's response. Dan, of course, makes his living as a trader in Houston and contributes almost daily to Jim Sinclair's site as well. Here's Dan's take on this particular analyst's interpretation of the gold/silver charts and the latest COT numbers...
Derek

Derek-
I totally disagree with [this analyst's] conclusions. For one thing, his chart goes back only to 2006.

My work is posted every week at Jim's site where I do a thorough analysis of this, both in gross terms and percentage terms. Neither one shows anything near a peak. When it does I will make some minor comments about it since I do not believe in being a Trojan horse for the gold cartel like this clown does. He is symptomatic of everything that is wrong with the gold community – they spend their tim e looking for re asons for gold to collapse rather than to go up and yet all claim to be friends of gold. The gold cartel could not as k for a better set of friends. A pox on the entire worthless lot of them.

The one thing holding gold back right now is ECB gold sales – that is the ONLY reason it cannot breach $700. If the ECB continues dishoarding its gold at this rate, it will exhaust its allotment of sales under the W as hington agreement long before it is tim e for another year of sales. I actually view gold's ability to hold up under this barrage of official sector gold selling as quite remarkable. It shows how strong demand is right now. We might see some price setbacks as some longs get impatient, but any dip down in price is going to find eager buyers with the dollar threatening a collapse through major support.

We will need to see what the monetary authorities attempt to do on the currency front with the dollar and the euro since things are getting dicey for the dollar. The die is cas t, however, and the dollar is not going to survive at these levels for long – I actually am saddened to see this since it is my childrens' legacy that we are talking about here.

Gold is going upward through $700, then through $750 and will breach its all time high and frankly, people like [this analyst] will have only made themselves look like fools when all is said and done with their constant, never-ending, self-aggrandizing top picking.

Who the hell cares if gold sets back in price from time to time? Nothing ever goes straight up. You buy it on weakness and sell it on strength and play the game over and over again. You can tell those who actually trade for a living and understand markets and those who write newsletters and run after diplomas .

When I learn things such as China announcing that they are planning on using some of their $1.2 TRILLION in reserves to purchas e other assets including gold, why the hell do I need top pickers in gold??? Does [this analyst] have the leas t idea of how much money that is and the possible ramifications to the gold market? That kind of financial firepower will utterly and completely overwhelm the bullion banks. China is smart, however, and will use the morons in the West who are trying to knock the gold price down to buy all they want at lower prices.

The floor in gold just got set another notch higher. Use trendlines and oscillators and ignore everything else.
Dan

More on sentiment:

Could sentiment be any lower than it is right now? Assets in the Rydex precious metals fund (investor class which is the big fund) has declined every day since April 12th and is about as low as it's been in 2007, despite gold rising 5% since Jan 1. and the HUI index up 13% ytd. Was wondering if you could provide a Cafe sentiment update.

And is it any wonder sentiment sucks? In the 5+ years that I've been trading gold and silver futures, I've have never seen a capping campaign as aggressive as the one going on right now. I woke up at 5 a.m. Denver time to see June gold at 689.50 and rebounding from lower levels where I reloaded a few hours earlier before getting some sleep, and I also saw 100 contracts sitting on the offer at 690 (ecbot system). $700 has been capped since February and 695 has been capped since very aggressively since 4/16 (as proof look at the open interest expansion AND the ECB system sales).

I have to believe that China and India and the Arab countries accumulating physical gold are sitting back and loving life - laughing at western fiat-based central bankers. I would encourage everyone to sit tight on positions, because my instinct tells me that May could be very profitable for those who can stand the pain of stomach acid from the agitation of watching this horror and knowing the truth...
Dave in Denver

The Cafe sentiment is lousy:

Chuck checked in late last night:

Bill:
I have never seen so many downticks and few upticks as in the past couple of weeks. I think that the note from Neal of Blanchard made sense. if so, we might have seen the final bottom in the shares. It is soooo freaky. Love ya. Chuck

The XAU rose 1.70, and the HUI gained 3.19 to 351.32.

Time to view the monthly gold chart again. It has been some run ... straight up and then a year of consolidation. Get ready for the next let to kick in ...

http://futures.tradingcharts.com/chart/GD/M

GATA BE IN IT TO WIN IT!

MIDAS

Appendix

ALoHa BiLL !!
Naked shorting is again coming to light and like Blanchard Coins did a few years ago with the BIG BANK crooks of the Cartel, now Overstock.com is trying to do ... mainly ... SHINE THE LIGHT on nefarious trading

practices that Wall Street has used for many years to fleece investors.

My orchid nursery is a partner with Overstock.com, where we sell our flowers. We have been with them for around five years now. I recall a time when their stock was trading below $6 when we first joined and then shortly after they were trading at $42. Today as we logged in we got an update on their latest lawsuits regarding "nakedshorting". As you know their CEO has been on CNBC a few times, Patrick Byrne.

Check out all the BIG HUGE HB&B BANKS they are suing, filed in Feb 2007. WOW ... they are taking on GOLIATH!

Looks like Overstock.com is leading a serious charge to take back these so called "free markets" ... This CEO

really puts his money where his mouth is! Looks as if the only crook they aren't suing is JP Morgan, but I guess the fat lady hasn't sung yet ... so ...

READ ON:

NEW UPDATE: 4.23.07 – NAKED SHORT SELLING UPDATE: PATRICK BYRNE

Dear Partners –

We wanted to take a moment to update you about two important law suits with which Overstock.com has been involved. We believe the outcome of these suits will change the landscape of American investing; they seek to hold Wall Street accountable for the predatory practice of Naked Short Selling which has contributed the collapse of many publicly traded companies.

Gradient Analytics and Rocker Partners, L.P. Litigation
In August 2005 we filed an unfair business practice lawsuit against Gradient Analytics, Rocker Partners, L.P. and others, alleging that the defendants have conspired to denigrate Overstock’s business for personal profit. In October 2005 we filed an amended complaint alleging additional causes of action and articulating in greater detail the allegations against the defendants.

Prime Broker Litigation
In February 2007, along with five shareholder plaintiffs, we filed a lawsuit in the Superior Court of California, County of San Francisco against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., and UBS Financial Services, Inc.

Overstock CEO, Patrick Byrne, was recently profiled in a Bloomberg TV special report covering the topic of Naked Short Selling. We encourage all of our partners to watch the piece in an effort to get a better understanding of why the topic is so important.
Please click here to watch the special report.

For additional information, see below for the press release issued by Overstock on April 20 and
read the April 12 Law.com article on the status of the Gradient/Rocker suit by Mike McKee of The Recorder.

Regards,
The Overstock.com Partner Team

This information contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, representations of how the litigation could impact investing in the United states and other benefits implied, as well as all such other risks as identified in Overstock.com’s Form 10-K for the year ended December 31, 2005, and all its subsequent filings with the Securities and Exchange Commission, which contain and identify important factors that could cause the actual results to differ materially from those contained in its projections or forward-looking statements.

*****************************

Best Regards,
Stephen Wellman

Bill,
Bryant's comment from today's Midas caught my eye:

"Effective today, the CBOT is significantly lowering margins on their gold, silver and bond futures contracts

http://www.cbot.com/cbot/pub/page/0,3181,136,00.html.

This change increases leverage on silver to 15 to 1 and on gold to 25 to 1. This makes no sense to lower margins when prices are at 11 month highs other than to get market share back from COMEX. This should be bullish for metal prices, but I can’t help thinking it is trap to crush margined longs. What’s the old saying about a gift horse? Thanks,
-Bryant"

I have been wondering for a while why the ultimate take- down weapon (increasing the gold- and silver margin requirements) has not been used recently (It was partly responsible for the massive down moves a few months ago). Perhaps it just reeks too much of desperation. Now I am shocked to see a LOWERING of the margins in the face of rising gold!

This has to be a trap! Sucker in some more longs, allow gold to break 700$/oz, make it look like the breakout is upon us, and then pull the breaks (increase margin requirements substantially). A large number of futures will be forced to be liquidated into a falling market, triggering more stops. It looks to me like we are being set up for a massive one day down move...(> 100$)? Then again the substantial recent CB selling, rising gold, and short covering by GS in Tokyo tell a different story. Either direction, fireworks are likely to be upon us soon. (There has to be a spread or straddle for that?)
Andreas.

-- Posted Thursday, 26 April 2007 | Digg This Article




 



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