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Something stinks about the moves in gold and silver

 

By Bill Murphy          Printer Friendly Version
August 29, 2005

www.LeMetropoleCafe.com

August 26 - Gold $436.80 down $1.10 - Silver $6.67 down 13 cents

An Ominous Day For Planet Wall Street/Pathetic Gold Cartel Struggling To Prevent Disaster

I have enclosed a quote I got from my father back in the ‘60’s. It is my favorite and has always inspired me to try and do a little more.

Doug Schwartz
Ephraim WI

"On the plains of hesitation bleach the bones of countless millions who at the dawn of victory, sat down to rest and resting, died." Anonymous

What we saw today not only was disgusting, but extremely ominous. The US financial market system, after years of market manipulation, is about to become unhinged, unglued. The net worth of the average American will take hits like they haven’t seen since the 1987 crash and eventually could resemble something similar to what occurred in 1929. Most likely not that disastrous in fact, but will feel that way to many.

Much of what MIDAS and a number of other Café contributors have brought to you attention is now quickly coming to pass. At the center of the nightmare for Joe and Jane American is the rigging of the gold price. We all know about Reg Howe’s Gibson’s Paradox and the relationship between US interest rates and the price of gold. Had gold been allowed to trade freely, the price of gold would be hundreds of dollars higher, perhaps even $500 per ounce higher. US interest rates would be much, much higher too.

The US stock market would be much lower and the US real estate market would never have reached the bubble stages it has now. The major problem for US stock market/real estate investors is they have made investment decisions based on an illusion, based on enormous market manipulations which have created an atmosphere, or perception, that little can go wrong; one in which fear has been taken out of the market equation; and one which has encouraged the taking of investment risks they would not have taken had US financial markets (especially gold) been left to trade freely.

What we saw today in the US financial markets, along with the accompanying news, strongly suggests the "S" is quietly hitting the fan. The Orwellians, The Gold Cartel, the Washington power structure, and the bigwigs on Planet Wall Street are petrified by what they see on the horizon in the VERY near future. Surely, this is one of the reasons the Fed will be meeting with the largest 14 credit derivatives players on September 15.

What other explanation could there be for their manic defense of $440 gold? Gold came in steady this morning. When the cabal would not let gold rise along with a sinking dollar, the funds puked their longs, taking spot down to $435.20. The trade turned massive buyer and within 15 minutes gold was up 50 cents on the day, eventually rising to $440 bid on the bulliondesk. Gold would have never traded this way in years gone by. Something is different here. That’s when the crooks attacked again, taking gold right back down to up slightly on the day.

Meanwhile, the cabal forces continued working silver over, breaking it down completely from a technical viewpoint. It is one of the worst looking charts you will ever see. But, how strange. The silver fundamentals are as firm as ever and the prices of oil and copper are at all-time highs. The CRB is right off its multi-decade high. Don’t know how the cabal is engineering this silver take down, but they have inducing specs to load up on the short side in the process. Yesterday’s open interest rose a sizeable 3833 contracts to 121,671.

Once again the funds long gold, seeing the cap The Gold Cartel put on the price, began to dump their longs, especially after noticing how silver was crumbling. After all, if a market is not allowed to go up, then why be long? Thus, in typically inspired Gold Cartel fashion, gold sold off very late on a Friday afternoon after trading higher for 90% of the day. However, the price bent. It did not break, as the trade showed up on the buy side, as they have done for days on setbacks.

What does all this mean?

The powers mentioned above are scared to death to let gold rise above their defense point because they fear it could set off derivatives neutron bombs in both the gold and credit markets. At the same time, the trade shorts are very nervous to remain that way for much longer. The gold fundamentals become more positive by the day. The bad guys are having trouble coming up with enough physical gold to meet demand and it is having an impact on how they operate.

No sense repeating what MIDAS has presented all week. Gold remains in explosive mode. What the cabal is doing can be compared to a kid trying to keep a rubber ball under water. It won’t work for any length of time. There is too much pressure for the price to rise, and to do so substantially.

As mentioned yesterday, gold will not just blissfully rise above this $440 level, like a normal, free market would. It will either fail, or blow through it. A close near $439 today would have been ideal. The Gold Cartel knew that might lead to panic trade short-covering by Monday, so they called out reinforcements nearing the Comex bell to take gold down and make a gold price explosion through $440 less likely Monday morning.

Perhaps The Gold Cartel can blow out all the specs and take gold down to $420 like the mob thinks. I doubt it. My bet is sometime soon the dam breaks and the price of gold streaks towards $500 per ounce.

The gold open interest rose 4444 contracts to 330,070 as the cabal crowd increased its defense of $440.

Silver makes no sense. It probably is as good a value buy here, especially as to what other commodity related prices are doing, than at any time in history. My guess is that this is an engineered false breakdown that will not last long at all. Once silver takes out $6.85, it will streak for $8.

The dollar was weak most of the day until near the end. Oddly enough, perhaps predictably enough would be more appropriate, I could find no plausible reason for the dollar strength, as the news was bearish. The dollar closed at 87.83, up .27.

The John Brimelow Report

Could be time to buy silver

Friday, August 26, 2005

Indian ex-duty premiums: AM $3.40, PM $2.67, with world gold at $437.75 and $438.55. Ample, and quite adequate, for legal imports. The world’s largest bullion importer is a solid buyer at these prices. This is a problem for the Bears.

Perhaps even more so in silver. Ex-duty premiums in silver this morning were 9c and 20c, with world silver at $6.84 both times. Adequate and lavish, for legal imports. If silver trades in the low $6.70s on Monday (as it appears to be closing in NY), this will intensify. It may be recalled that when silver briefly traded in the $6.40s in early January, dealers were flying the metal into India, an event which happens less than once a decade. MarketVane’s Bullish Consensus for silver was 57% last night – presumably it will be down again today. The low in January was 51%. The technical situation is of course absolutely gruesome – that is of no interest to the Indian consumer. A useful trade may be developing: IN THE TWO MONTHS AFTER THE JANUARY LOW THIS YEAR, SILVER ROSE ALMOST 20%.

Japan was comatose. Volume slumped 47% to only 7,069 Comex equivalent and open interest was static – down 605 Comex equivalent to equal 97,449 NY contracts. Mitsubishi’s data implies only a 0.6 tonne (20 Comex) addition to the "General Public"’s long. The active contract was down 6 yen, although world gold went out $1.70 above the NY close – no doubt reflecting buying from further west in Asia as the day wore on.

On silver, though, Mitsubishi reports bargain- hunting by the public and implies the "General Public" added 32.8% to their long – 787 Comex lots.

On Thursday in NY of course an apparently half hearted attempt on $440 was promptly suppressed and reversed. In fact, this effort was more serious than met the eye: on volume of only 28,236 lots open interest soared 4,444 contracts – 13.8 tonnes – to 330,070, almost back to the recent high. Gold finished up 90c. Apparently a serious buyer met a serious seller in a quiet, but definitely not a thin market.

On Friday morning, an effort to drive gold down (including in Euros) around 10 AM NY time was decisively blocked. This kind of action, and India, bodes ill for the Bears.

JB

CARTEL CAPITULATION WATCH

The perfect storm hit the stock market this morning. With it becoming apparent to everyone that higher oil prices are beginning to affect the US consumer and economy in a material way, the following hit the tape simultaneously:

*09:47 Univ of Michigan consumer sentiment index 89.1 in August vs consensus 92.5
This is the final reading for August, and was significantly lower than the preliminary report of 92.7. July was 96.5.
* * * * *

*10:00 Greenspan says that the Fed is paying closer attention to asset prices
Greenspan is speaking at the Jackson Hole Fed conference.
* * * * *

Housing boom is an imbalance: Greenspan

JACKSON HOLE, Wyo. (MarketWatch) -- In his sharpest words to date about rising home prices, Fed chief Alan Greenspan described the housing boom as an economic imbalance that could end badly for the economy.

In prepared remarks to the Jackson Hole Fed policy conference, Greenspan said high home prices were due in part to low risk premiums demanded by investors. Such increases in asset values "are too often viewed by market participants as structural and permanent."

"History has not dealt kindly with the aftermath of protracted periods of low risk premiums." Read his remarks.Greenspan warned asset values could fall if investors grow cautious and demand higher interest rates. "What they perceive as newly abundant liquidity can readily disappear," Greenspan said.

"Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices," Greenspan said.

Greenspan said the flexibility of the economy is the most important policy asset in handling any shocks from a fall in asset values.

He expressed optimism that the adjustments could be made gradually and a recession could be avoided.

"If we can maintain an adequate degree of flexibility, some of America's economic imbalances, most notably the large current account deficit and the housing boom, can be rectified by adjustments in prices, interest rates, and exchange rates rather than through more-wrenching changes in output, incomes, and employment," Greenspan said.

Protectionism and the large U.S. fiscal deficit threaten flexibility, he said.

The Fed chairman, who is scheduled to leave his position by the end of January, said central bank forecasts and monetary policy are becoming increasingly driven by changes in asset prices, such as equities, bonds and real estate.

-END-

Thus, at the very moment Greenspan is warning of increased investor caution, the consumer sentiment number of the day drops far more than expected. Meanwhile, a soaring crude price refused to go down. Well, it refused until some weather report miraculously surfaced near the end of oil trading to save the shorts’ bacon. At 2, oil was staring at $68 per barrel and another all-time close. On the capricious weather news, it sank like a stone, closing at $66.13, down $1.36 per barrel. Still, this is very expensive oil.

The US stock market, weak all session long, moved up on the oil setback and then faded late. The DOW lost 53 to 10,397. The DOG gave up 14 to 2121, closing lower for the fourth week in a row.

This statement by Greenspan today is profoundly disturbing:

"In prepared remarks to the Jackson Hole Fed policy conference, Greenspan said high home prices were due in part to low risk premiums demanded by investors."

As mentioned earlier, the reason for low risk premiums out there is that Alan Greenspan and friends rigged the gold price. The average US investor will soon face a fiasco thanks to policies of Mr. Greenspan and The Gold Cartel. This has been one of the themes in my speeches over the last few years.

On China:

06:45 China C. Bank advisor Yu says big, one-off yuan revaluation "dangerous", China basket system "transitional" - Reuters
Headlines only. Advisor Yu says China forex reserves to grow sharply despiteyuan revaluation. China to let market forces play a bigger role insetting yuan exchange rate, according to Yu. Says yuan revaluation helps reduce China's over-reliance on exports. China's basket regime helps reduce speculation on yuan, according to an advisor. Yu says China must guard against economic slowdown, but no nedd to relax monetary policy. Currencies: euro/dollar $1.2319, +0.0018; dollar/yen Y109.62, (0.43).
* * * * *

The continuing margin squeeze on the banks is an extremely important financial market development. Thus, this story in its entirety (perhaps yet another reason for the Fed meeting on credit derivatives in mid-September):

US banks' margins fall to 15-year low, FDIC says

Thu Aug 25, 2005 04:11 PM ET By Jonathan Stempel

NEW YORK, Aug 25 (Reuters) - Perhaps banks should go back to giving away toasters.

http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh08690_2005-08-25_20-11-15_n25339356_newsml

Rising short-term interest rates, and the failure of long-term rates to rise with them, have caused margins at federally-insured banks and thrifts to shrink to their lowest level in 15 years, the Federal Deposit Insurance Corp. said on Thursday.

Ten Federal Reserve interest rate hikes since mid-2004 have forced banks to pay depositors more, and to pay more on their own borrowings.

But competition among lenders and a reticence of companies and individuals to borrow beyond their means keeps lending costs down, amid concerns the economy might slow, oil prices might spiral higher, and real estate prices might fall.

Less-than-ideal rate bets already cut into second-quarter profits at such giants as Citigroup Inc. and Bank of America Corp. and JPMorgan Chase & Co.

"Banks are trying to push out loans that fewer people may want as the economy slows, while their favorite user of money, corporations, still have tremendous amounts of cash on their balance sheets," said James Cusser, senior portfolio manager at Waddell & Reed Investment Management Co. "Bigger banks would like to do more commercial lending, and if there's not enough demand for it, they have to cut their prices."

The FDIC said net interest margin, the difference between what banks earn on loans and pay on deposits, fell to 3.49 percent from 3.53 percent in the first quarter.

Margins are now the lowest since the third quarter of 1990, when the U.S. economy was in recession. Overall second-quarter profit at the 8,868 institutions insured by the FDIC fell 3.3 percent from the first quarter to $33.1 billion.

Large institutions are feeling more pain because they rely more on short-term borrowings for funding, the FDIC said.

Banks with less than $100 million of assets on average saw margins rise to 4.22 percent from 4.14 percent. But the 114 institutions with more than $10 billion of assets -- which together hold nearly three-quarters of all industry assets -- saw it fall to 3.32 percent from 3.41 percent, the FDIC said.

WORSENING AHEAD?

For big banks, the problem could get worse, as the U.S. Treasury yield curve flattens.

The yield on two-year notes this week rose to within 0.15 percentage points of the yield on 10-year notes. That's the narrowest since early 2001, just before the last recession began. The gap was 1.15 percentage points at the end of 2004.

Consumer rates reflect much of this compression.

According to Bankrate.com, the average yield on one-year bank certificates of deposit has risen to 3.68 percent from about 2.25 percent a year earlier.

In contrast, the average rate on 30-year fixed mortgages actually fell slightly, to 5.31 percent.

Most economists expect short-term rates to keep rising, but there is less consensus about to the degree to which long rates might follow.

Cusser, for his part, has been adding two-year Treasury notes to the $1.4 billion he helps invest. That note yields about 4 percent.

"You can get more than 90 percent of the yield on a 30-year bond from an ultra-safe two-year note," he noted.

-END-

Raymond comments:

Bill,
A yield curve inversion is on the way, but what is missed in the financial press is why it is necessary.

With the problems of negative real-interest rates and rampant inflation, either an inverted yield curve, a decrease in the money supply or a combination of both are necessary to cure these negative growth problems.

Sustained positive real-economic growth (not fake-economic growth due to fiat money & credit creation) is impossible under these current conditions.

However, this time the yield curve inversion will be 'historic'.

With the Fed's new intervention paradigm, this inversion will be 'historic' because for the first time it will occur with long-term interest rates falling. According to my records, dating back to 1900, inversions have always occurred with long-term interest rates rising, ... not falling.

In the past, inversions have been sufficient enough to cure negative growth problems.

This attempt to get real-interest rates positive and tame inflation will severely test the Fed's new intervention paradigm. But with long-term interest rates falling instead of rising, this inversion will most likely not be sufficient enough to change conditions.

This attempt may be successful in the short-term, but in the long run it is doomed.

By the end of next summer, according to my analysis of long-term cycles, the next stage of inflation is expected to begin.

This next stage is anticipated to be historic in magnitude.

Finally, the coming yield curve inversion confirms everything that has been reporting over the past several years,which the mainstream financial press refuses to acknowledge.

Congratulations on the successful 'Gold Rush 21'.

All the best,
Raymond M. Green

From Ron Lutka on the coming credit derivatives meeting:

Hi Bill,

SPECULATION

The apparent Fed Sept 15 meeting with 14 financial institutions is very suspect to my mind. My understanding is a senior business executive and senior risk executive from each firm are asked to attend a meeting to address something as clerical and mechanical as unmatched trades. Who are the brain dead managing this part of the business? And the same problem apparently exists across 14 financial institutions? I would think phone calls and internal and external auditors could easily clean that up. If they can't, then which executives authorized personnel to trade in these non-standardized instruments without putting basic business controls in place prior to commencement of business? And who is managing the daily, weekly, monthly reconciliation? And who authorized the continuation of trades after it was discovered trades were out-of-control? 14 financial institutions who cannot balance their books? Something does not line up.

In my opinion, the meeting as publicly described could be cover for the true intentions of the meeting which might be different than the publicly stated intentions. The true intentions might be to give "friends" notice of an upcoming major potential or real financial event in person rather than over the internet or phone lines that can be tapped into and heard by others.

What could such a possible upcoming major financial event be? A planned stock market crash? A violent change in Fed interest rates? A sharp decline in the USD (as Saudi Arabia pulls out assets)? The end of the suppression of the price of gold (I understand Deutche Bank is invited)? Disclosure of the seriousness of the problems at fannie mae or General Motors? The disclosure of serious hedge fund problems? Other? A combination of these?

The meeting might be to discuss a risk issue, but I doubt the risk issue is soley in the form of unmatched trades. And if it is, there are surely much larger unseen problems lurking beneath the surface in these financial institutions.

RL

Nicely put, Ron.

From George Ure at www.urbansurvival.com:

Stockgate to Pop?

Some serious odors are developing around the financial industry's practice of doing naked puts and calls (as the mood suits them) with stock they don't own. And now, the Fed is calling a meeting on credit derivatives and pointing out how extreme the risk is. Some good reports are surfacing around the edges, but as we see if, the derivatives bubble, like it's kin the housing bubble, may be too big now for regulators to do anything about other than try - as Alan Greedspan is - to manage the problem so when it pops it will be after his watch is over. That way he will go into the history books without footnotes like mine that will point out that he and his cronies are the reason the second leg down of the Second Depression will be so much greater than the first - it's as usual a tale of lust and greed - and oh yeah, leverage to extremes.

Also worth seeing: The John Embry/Sprott Asset Management interview on gold.

-END-

On silver:

Hi Bill,
(Almost) unbelievable what is happening to silver today. Wish I had more spare fiat paper to get more of this criminally underpriced store of value. The brazen manipulators are handing the real thing to those wise enough to take it.

Like you, I believe the Sept. gathering of the banking vultures is presaging some event of large magnitude that may already be manifesting, albeit behind the scenes (the long expected derivative meltdown?). Market behavior is so constrained and obviously controlled, that when the dam finally breaks, at that time, it may be too late to position oneself safely. The flood waters have been held back for too long. Key words - sudden and drastic. Hopefully, the cabal will not close down markets altogether, blaming any meltdown on the pretext of some foreknown (or God forbid a false flag) exogenous, catastrophic event. Time will tell, but I sense the rats in the kitchen working overtime, cooking up some evil brew. What they have underestimated is how many of us are onto them and their wicked machinations.

best,
Tom K

Rhody:

Hello Bill:
I cut this paragraph out of yesterday's Midas. If I am reading this correctly, it is saying that the LBMA is a physical gold market. This I do not understand.

"The dog days of summer, for sure. Same Gold Cartel drill, for sure. Once again, the cash market took the gold price higher in London: AM Fix $439.00 PM Fix $438.85. As repeatedly noted by many Café members, as soon as the physical market pricing is over for the day, the cabal forces take gold lower on the Comex."

Here's why:

As you can see, 16 Moz of gold pass through the LBMA every DAY. There are 312 business days in a year and that means the total gold transferred through the London "physical market" would have to be 16 Moz X 312 = 5 billion ounces, with a "b". If one says that this trade is a physical gold exchange, then one is saying that all the gold that has ever been produced passes through the LBMA yearly. I think this is rather unlikely. As you are well aware, a minimum of 1 billion of this is in the form of jewelry and art objects, and about one quarter of all the world's gold has ended up in India, where it is never re-exported. I am not splitting hairs here. I just don't think London is a physical market. I know this market is not futures, but I have never been able to determine what form of "gold" trades occur on the LBMA. Perhaps you can find out. Could this trade be in the form of churning lease contracts?????

The situation in silver is even worse. As you can see from the graph, silver transfers are 100 Moz per day. Times 312 business days yields a total physical trade of 31 billion ounces per year. Since total world output is 600 Moz per year, I have difficulty believing this is physical metal exchange. It gets worse.

There are only about 400 Moz of BULLION stockpiles in the entire world, tops.

To make London a "physical" market, the entire world bullion stockpile would have to churn through London every four (4) days, and that includes COMEX stockpiles. Every day, 6 to 7 tractor trailers loaded with silver would have to be moving around in the London financial district. If you go there, you won't see even one. I know I have beaten this topic to death already, but I think it would be very interesting to know what form the LBMA "bullion" trade takes, because it looks like more paper metal to me, but what kind?


Regards, Rhody.

Rhody,
All I said was the gold deals around the world are almost all priced on the PM Fix. This is why it is important. It is where the large buyers and sellers congregate to do their business. When The Gold Cartel wants to hit the price, they often wait until this buying is concluded, thus making it easier to bring the price down on the Comex.
MIDASAdrian is back this morning:

Bill,
Bring on the Clowns!

Just like in a real bull fight there are always some clowns to distract the bull when the Matador is down. There are certainly some clowns this morning in this epic bullfight. The DOW takes a dump, the dollar can’t wait to tank, the world’s biggest gold producer just this week said they produced 18% less gold than last year, the biggest gold consumer in the world is about to enter the peak buying season….. and here come the Clowns, selling probably their last ozs of gold.

Bring them on! Let them dump their gold, we’ll take it all. Just like in the real bull fights they are a distraction, not the real show. Sometimes, though, the clowns are so stupid and careless they get gored to death! I have a feeling that August 26th could be very auspicious.

Cheers
Adrian

From Mark O’Byrne in Ireland:

Hi Bill,
Congrats Bill on Gold Rush 21. The message is definitely getting out there .

We posted all material on Gold Rush 21 on www.gold.ie and www.goldinvestments.org and in our weekly newsletter which goes out to many of the major investment analysts in major institutions in the world and to many financial journalists in Ireland and the UK.

Posted Embry's interview which was great. Embry is excellent - articulate and matter of fact and in our television age, people trust or believe TV to be more authoritative than the written word.

I have thought we were on the verge of the big breakout for a while and have been proved wrong but time is on our side and $500 and then the next stage of this multi year bull market is nigh.

The US Property Bubble appears to have already severely burst but while being reported it is being spun with misleading headlines by the sections of the media. Check out these stories posted on www.gold.ie

http://www.usatoday.com/news/opinion/editorials/2005-08-24-our-view_x.htm
US Commerce Department: Median Home Price down from $218K to $204
- Leonhardt, NYT via IHT, 26-08-05

http://www.iht.com/articles/2005/08/25/business/rent.php
Commerce Department Reports US Median House Prices down 7.2% in July - Fox News
http://www.foxnews.com/story/0,2933,166619,00.html
Dot.com bust echoes in nation's housing boom - USA Today, 26-08-05
Is The Housing Market About to Bubble Over? - Buckner, Fox News, 26-08-05
The Beginning to the End of the Housing Market? - Sjuggerud, Investment University, 26-08-05
http://www.investmentu.com/IUEL/2005/20050825.html

Sjugerrud sums it up and he has a frightening US property chart.

Well done again on Gold Rush 21 Bill,
Mark

On the markets:

I've been suspecting all week, given the overnite rallies in gold in the access market, and the blatant smack of gold using paper the instant that comex opens, that perhaps the character of the spec long in the COT report might be a bit different this time. Moreover, when they decided to attack silver the last few days after several days of trying to force gold down and failing, I figured the cabal was hoping to create a collateral sell-off effect in gold. It did not happen. The tick by tick trading action today in gold smells completely of someone out there trying to knock down gold and then covering shorts. I doubt this is your commercial signal failure, but I believe that the cartel has failed to use the obviously artificially contrived COT structure (thank you trader Dan for your brilliant COT articles) to flush out a large percentage of the large spec longs. Also, for what it's worth, I've finally discovered the CBOT silver contract. It suffers immensely from liquidity, but it trades electronically and only requires a $1620 entry margin. I'm now using it for my "core" silver contract holdings. Thanks for all you do Bill.
Dave in Denver

It didn’t take long for this new Aussie Café member to catch on. What is taking the dopes in the mainstream gold world so long to "get it?"

Hello Bill,
Something stinks about the moves in gold and silver over the last few days.

Despite oil hitting US$68, a weakening US dollar and a raft of horrible economic reports, 24 hour gold was unable to stay past US$440. It should have been soaring.

But every time gold went up a few dollars it immediately was met by heavy selling.

In a very bullish scenario for gold, this did not look like normal market action to me.

To me it looked like US$440 was being desperately defended, despite the fundamentals, and despite the buying demand, in an attempt to prevent an assault on US$450 and then higher prices.

I reckon you can bet your last dollar if it was just as easy to manipulate the oil futures market we’d have oil trading well under US$40 right now.

On bullish news for oil, oil effortlessly rises 1%, 2% and at times even more.

It doesn’t like gold have a huge battle to increase 1%, often being sold off on the same day after not even initially moving up 1%.

Something stinks.

What is happening now is so blatant. It doesn’t even appear to be hidden anymore. There are white collar crooks out there who think they have the right to decide what the "free" market price for gold is.

They should be prosecuted, fined and thrown into jail.

Best wishes,
Neil Davis

Thank you Peter Spina of www.Goldseek.com for posting:

How do we know central banks rig the gold market, and what can we do about it?

By: Chris Powell, Gold Anti-Trust Action Committee Inc.

Remarks by Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee Inc.
at Gold Rush 21
Dawson City, Yukon Territory, Canada

***

For those who have not read the commentary by my special colleague, please go to:

http://news.goldseek.com/GATA/1124990882.php

One of my favorite people in the gold world is Adam Fleming, former Harmony Gold chairman, and now chairman of Wits Gold in South Africa.

I will never forget the day when Reg Howe and I were at the FT Gold Conference in 2000. There was a lull in the speaker flow. Right before the GFMS person was about to present, Adam stood up during the break and turned to Reg and I, saying: "GO GATA." Adam has been a GATA supporter from the get-go.

Adam, who took time from his summer vacation to come to Dawson City, was one of the speakers at GR 21 and gave a splendid presentation. He touched on Wits and why it is worth a serious investor look. Here are some bullet points from Adam's Dawson City speech:

Got my attention, as I am already a shareholder, and will be participating in their coming IPO. Adam tells me they "hope to have an IPO in Johannesburg with a possibility of a secondary listing on the TSE in the first quarter of 2006." Their website is www.witsgold.com so people can keep in touch with their progress towards that listing. Anyone interested in participating in the offering should contact Wits through that medium.

I love how Michel Roy, CEO of ECU and another participant at GR 21, communicates with his shareholders:

Dear Shareholders,

The official numbers for the last Quarter show the significant progression made in recent months. We intend to maintain this growth curve for the rest of the year with extra production scheduled to come on stream in early September and pyrite concentrates to be produced on a regular basis in the fourth Quarter.

None of the other targets has been forgotten as shown by the data on densities which will result in a significant increase in resources at no cost. Also we are progressing in the drift to reach the San Mateo mine on the sixth level and have encountered several veins which will be evaluated over the next few weeks

If some people still doubt that we are a real producer, one has to only consider the revenues for the Second Quarter versus operating costs for the same period, keeping in mind that ONLY June was a normal month, May was about ¾ capacity while April was at 50% at the most to realize that real progress is being achieved on a month to month basis on the operations side. Since the end of June, we did another round of modifications and adjustments in July and WE ARE already reaping the rewards in August. As for September, a brilliant idea from our mining department will be implemented to raise the production level by 20%. This undertaking will only require one week to implement (7 weeks less then we originally thought) at a fraction of the initial planned cost (75% less then we originally thought). Needless to say, we are excited at the prospects these modifications will contribute to our bottom line for the full Q4 of this year.

Thank you for your continued support and we will continue to put our best efforts forward to create shareholder value.

Truly yours,
Michel

Chuck checks in:

Bill:
This is the only word that comes popping in my little head. The action of the past couple of weeks is too bizarre. We have had the golds opening higher each day and then selling off. The same with the stock market. We have now had a sharp drop in silver even though there is an obvious squeeze in copper and oil. The bond rates have dropped sharply in spite of these squeezes.

Obviously, something very strange and peculiar is afoot and it is not good. It appears as though the financial stocks could cave in here at any moment. We might limp through next week until the holiday but I wouldn't bet on it. Scary! Chuck

I think it’s scary too Chuck, and it’s how I picked the theme of today’s MIDAS. The financial landscape of US markets is likely to change radically in the months to come.

The gold shares were lower with the XAU finishing at 93.87, down .29. The HUI close was incorrect – not sure what the right number was.

Based on the emails I have been receiving, veteran Café members gold/silver shareholders are becoming very anxious over their gold/silver company investments. The fatigue factor of nearly a two-year bear market is beginning to take its toll.

Those feelings are only natural. Hang in there. Gold, silver and the shares remain THE historic investment opportunity of a lifetime. We have years and years of good times ahead of us.

GATA BE IN IT TO WIN IT!

MIDAS

Appendix

Mint Confiscates Double Eagle Gold Coins
from Dealer Seeking View on Authenticity

By The Associated Press
via Newsday, Garden City, L.I., New York
Thursday, August 25, 2005

http://www.newsday.com/news/politics/wire/sns-ap-rare-coins,0,2382641.story?coll=sns-ap-politics-headlines

PHILADELPHIA -- The U.S. Mint seized 10 Double Eagle gold coins from 1933, among the rarest and most valuable coins in the world, that a jeweler says she turned in to determine their authenticity.

Joan S. Langbord plans a federal court lawsuit to try to recover them, her attorney, Barry H. Berke, said Wednesday. Langbord found the coins among the possessions of her late father, longtime jeweler Israel Switt, who had acknowledged selling some of the coins decades ago. She now operates her father's business.

David Lebryk, acting director of the Mint, had announced in a news release that the rare coins, which were never put in circulation, had been taken from the Mint "in an unlawful manner" in the mid-1930s and now were "recovered."

The coins, which are so rare that their value is almost beyond calculation, are public property, he said.

Berke said Mint officials couldn't prove the coins had been stolen, or were subject to forfeiture. But Mint officials said Thursday the double eagles could not have legally been taken from the Mint.

In 2002, Sotheby's and numismatic firm Stack's auctioned off a 1933 Double Eagle coin for $7.59 million, the highest price ever paid for a coin. That Double Eagle, believed to have been part of a collection belonging to King Farouk of Egypt, surfaced when a coin dealer tried selling it to undercover Secret Service agents.

After a legal battle, the dealer was permitted to sell the coin at auction on the condition he split the proceeds with the Mint. One of the terms of the settlement was that it would set no precedent for any future double eagle that appeared.

In its statement, the Mint said officials were still deciding what they would do with the seized coins, which are being held at Fort Knox. They said they had no plans to auction them but would consider saving "these historical artifacts" for public exhibits. Other double eagle coins seized in the past were melted down.

Double Eagles were first minted in 1850 with a face value of $20. The 445,500 coins minted in 1933 were never put into circulation because the nation went off the gold standard. All the coins were ordered melted down, but a handful are believed to have survived, including two handed over to the Smithsonian Institution.

Langbord declined to discuss how the coins might have wound up with her father, who operated an antiques and jewelry shop for 70 years and died in 1990 at 95.

The Mint contends Switt obtained a cache of the gold coins from his connections at the Mint just before they were to be reduced to bullion in 1937.

Switt admitted in 1944 that he had sold nine Double Eagle coins, but he was not charged in connection with those transactions, according to the Mint.

The family attorney said the coins were found recently, and Langbord and her son, Roy, notified the Mint of the discovery in September. Mint officials asked to authenticate the coins, then confiscated them after doing so, Berke said.

He contended Langbord and her son never relinquished their right to the coins.

But Mint officials said Thursday that Berke was told from the beginning that the coins would not be returned because they were the government's property.

-END-

From www.financialsense.com:

IRANIAN OIL BOURSE COULD KILL THE US DOLLAR
by Toni Straka
August 23, 2005


Can the Iranian Oil Bourse become the catalyst for a significant blow to the position of worldwide power the US Dollar enjoys? Manifold supply fears have driven the price of crude oil near-wards its recent highs of $67.10 which are also only a notch below historical records in real dollar terms. With the world facing a daily bill of roughly $5.5 billion for crude oil at current price levels it becomes apparent that sellers and purchasers of the black gold are looking into all ways that could lead to a financial improvement on their respective side.

While the worldwide bottleneck of inadequate refining facilities and partly dramatic declines in production - for example in the North Sea - are two factors that cannot be eliminated in the short term there is one area left which could result in smiling faces of oil producers and (most) buyers likewise. Non US dollar thinkers are the victim of a transaction cost in the oil trade. The necessary conversion of local banks can be considered a hidden tax, charged and enjoyed by the banking sector.

Until now oil is solely priced, traded and paid for in the greenback on both markets in London and New York. The Treasury Inflow Capital data from mid-2005 show that OPEC members have parked only a skimpy $120 billion in direct dollar holdings which are almost equally split between equities and debt paper. This is a clear indication that oil producers are investing their windfalls elsewhere. The yield spread between US and EU debt papers in favor of the EU is clearly another hint where the petrodollars might flow after conversion.

The Iranian Oil Bourse (IOB) will become a factor that could further unsettle the dollar's dominant position.

Especially in the case of Iran it does not make sense to accept dollars only for its much desired commodity. Being seen as a hostile country by the USA for the intention to build its own nuclear reactors one wonders whether the new IOB will not try to attract other buyers than Americans who are particularly unwelcome in that corner of the globe. Iran has recently announced that the new oil exchange will start up its computers in early 2006.

The IOB can count on two sharp arrows in their holster. It can - and probably will - lure European buyers with oil prices quoted in Euros, saving them transaction costs. And it can strike barter deals with oil-hungry giants like China and India who have a lot of products and commodities to offer. I doubt that hamburgers and legal services will be considered adequate collateral for the world's most after-sought resource.

A Renunciation Of The $ Is Worse Than An Iranian Nuclear Attack

Steering away from the almighty commodity, currency and commodity currency - the US dollar - can have a deeper impact on the US economy than a direct nuclear attack by Iran. The permanent demand for dollar denominated paper stems to a good part from the fact that until now almost all resources of the world are quoted in it.

While this has led to the Eurodollar market in the 1970's new terms of trade could ring in the demise of the dollar as the premier reserve currency. With the world economy depending so much on oil, the black gold itself can be seen as a reserve currency that will be handed out only against the best collateral in the future. The Fed San Franciscos's recent paper about the progress of the diversification of international central bank's reserves shows that the dollar position is on the decline in many countries. NOTE: China has officially declared to diversify a part of its forex holdings into oil here .

Iran holds a strong hand as the #2 producer of crude behind Saudi Arabia. Politicians there will also keep in mind that dollar deposits might become a burden in the future when the US will step up its current war of words to the level of economic sanctions in the crusade against nuclear power plants. Money in the bank does not help when you have no access to it.

An abdication from the current status quo has only one real enemy: the USA, where less than five percent of the global population consume roughly one third of global production. Oil in Euros would benefit several million people more in the EU and its trading partners though.

And it would loosen the grip the USA has on OPEC members. Thinking of the rapid growth of hostilities between the USA and Arab nations in recent years a renunciation of the dollar appears to be more than just a wish in Arabic dreams.

As this development poses a very real and big danger to the superior status of the greenback and the interests of the USA the "president of war" can be expected to steer a close reach against the winds blowing from the Middle East. One may be reminded that the Iraqi despot Saddam Hussein had entered into discreet talks with the EU, proposing to sell his oil for Euros. That was in the year before the first oil war of this century.

In my conclusion the IOB this way could help the Euro to become the interim primary reserve currency before China and India will rise to the first two slots in the global economic ranking in the next few decades, an issue discussed in the post "What will be the next big reserve currency ."

A decline of the dollar's position in oil trading might also open the floodgates in other commodity markets where the dollar is the medium of exchange but where the USA has only a minority market share. A global economy driven by tough efficiency demands in the light of thin profit margins almost everywhere is a good primer for accounting changes in other commodity markets. This process could begin in resources like steel and energy and spread to all other resources that are marketed globally. The world outside the USA has a lot to gain and nothing to lose from it.

© 2005 Toni Straka
Editorial Archive <../../contributors.html>

CONTACT INFORMATION
Toni Straka
Vienna, Austria
Blogspot l Email <mailto:tos1010@yahoo.com>

About the author: Toni Straka, CEFA, aka The Prudent Investor, is a Vienna, Austria-based independent financial analyst and portfolio manager, who worked as a financial journalist for over 15 years and now evaluates global market trends. He runs a blog, The Prudent Investor - seeing too many bubbles that focuses on global macroeconomics and the global redistribution of wealth.

 

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