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New era for gold as trust in fiat currencies diminishesGold sentiment remains positive despite a recent setback with a new era in sight as trust in today's fiat currencies continues to diminish.Author: David LevensteinPosted: Monday , 01 Nov 2010 Johannesburg - Gold prices bounced back firmly on Friday and were close to testing the $1360 an ounce level - which was then breached again this morning. Recently, the price of the yellow metal made a new historical level of $1387 an ounce. While the amount is not yet known, it seems certain that the US Federal Reserve will implement its program of further quantitative easing citing high unemployment and low inflation as the cause. In order to prevent any further deterioration in unemployment in the US, the economy needs to have a steady GDP growth of at least 2%. Personally, I doubt that this new round of monetary expansion is going to have any major effect on the high unemployment rate in the US, but I am certain that this action will lead to the further debasement of the world's reserve currency. And, as this happens, we can expect to see further dollar weakness which will certainly be highly supportive for gold.Gold is an international currency and it is among the most liquid assets in the world. It can be readily bought or sold 24 hours a day in one or more markets around the world. And, the price is very transparent and can be seen anytime no matter where you are.We are now entering a golden era as people begin to lose faith in their own currencies. When this happens, they turn to gold as well as silver because these precious metals are the only currencies with an intrinsic value. This mistrust of these fiat currencies is the first sign that the global currency system is faltering and if the current currency system collapses, no matter how much "paper" money you have in your bank, it can all become worthless. But, gold has an intrinsic value, and in the last 5000 years, it has never become worthless. While I sincerely hope we do not see such a collapse, I think it wise to take some precautionary measures such as owning gold. When individuals become disdainful of their own currencies and everyone else's they turn to gold.We live in times of tumultuous change. We have seen huge financial institutions collapse, equity markets soar and plummet, oil prices sky-rocket and fall, geo political instability, sovereign debt, government budget deficits as well as government invasion into the privacy of individuals. As I have stated on numerous occasions, a quarter century of uninterrupted and unprecedented credit expansion begun by the US in the 1980s, came to an abrupt halt years later in August 2007 when global credit markets froze, precipitating an economic crisis the severity of which surprised all except those who expected it. And, in order to prevent a collapse of our financial system, central banks were forced to bail out numerous financial institutions. The consequence of this is going to be further monetary expansion on behalf of many central banks and this in turn will lead to more currency turmoil.In a fiat monetary system, as long as the balance between credit and debt is properly maintained, the system has a good chance of survival. As long as you can service the debt on outstanding credit, you can extend even more credit. But, when the accrued debt becomes so large that it overwhelms the capacity of credit to contain and service it, then the system will falter and if the problem is not addressed, the system could even collapse. We are at that time now.The problem is particularly serious for the USA simply because the size of their national debt has become so huge the US now owes so much money that only by borrowing more can it pay what it owes. But, not only does the US owe so much money, it is suffering from low GDP growth, and high unemployment. Perhaps a new round of "quantitative easing" will give the economy a very small boost but, the problem of sovereign debt will not be resolved. So, while one problem is temporarily resolved, another old problem re-emerges. I expect to see further debasement of the US dollar as this is a strategy available to the US regarding its unpayable debt. The US could pay down its massive debt obligations by debasing their currency, a strategy wherein the US would pay its creditors with increasingly worthless US dollars. And, as the reserve currency of the world continues to lose value, gold as well as a range of other commodities are going to become more expensive. Former Fed chief Alan Greenspan said the U.S. fiscal deficit is "scary" and the federal government needs to cut spending on entitlements. "We're involved in a dangerous game," Greenspan said Oct. 6. "We're increasing the debt held by the public at a pace that is closing" the gap between our debt and "any measure of borrowing capacity," Greenspan said. "That cushion is growing very narrow."At the beginning of the year when I predicted that gold would to would go to $1350 by year end many industry players including certain well known precious metals consultancies and major financial institutions thought my analysis was very bold, but now I see they are all revising their outlook for the gold price. Many of them are now scrambling to revise their price forecasts upward and suddenly are talking about gold going to $1400 an ounce.With two months left in this year, there is a good chance of gold going to $1400 an ounce. But, this is not the point. The price of gold is set to go much higher over the coming years and right now while it is relatively easy to buy gold, I strongly urge all individuals to have some in their investment portfolios. If the dollar does collapse you could find yourself standing in a very long line at your local coin shop or bullion dealer. I have seen this happen before and in 2008 there were serious shortages and unexpected delays of bullion products in the US which led to soaring premiums. And, this happened again earlier this year in Greece.When this happens there are certain dealers who use this scenario to persuade you to buy limited edition medallions that they sell at ridiculous premiums. Their claim is that these limited edition medallions have greater potential than bullion coins because these medallions have been minted with the face of some famous personality. And, they will also tell you that the mintages are going to be limited. Usually these "limited edition" medallions come in fancy boxes with a "certificate of authenticity." One important lesson here is that you cannot create rarity and no matter how many of these medallions they mint, they are not rare coins in any manner whatsoever. Rarity is determined by a coin's surviving population from the original mintage. And, the other thing to realise is that these items are not numismatic coins. If a dealer claims these "rare coins" are a better investment than bullion, I suggest you find another dealer. All they are trying to do is sell you a more expensive product which has a huge mark-up leading to an inflated price. But they want you to buy these items because this is how they make more money for themselves. It is important not to be beguiled by these dealers and stick to bullion or bullion coins.
Gold Tumbles Most in Two Weeks on Bets Fed's Stimulus May Trail ForecastsBy Pham-Duy Nguyen - Nov 3, 2010 8:35 AM PT Tweet (4)LinkedIn Share Business ExchangeBuzz up!DiggPrint Email .Gold fell the most in two weeks on bets that the Federal Reserve will announce a U.S. stimulus below estimates by economists, boosting the dollar and eroding the appeal of the metal as an alternative investment. Before today, gold gained 8.7 percent since Sept. 1, while the dollar dropped 7 percent against a basket of major currencies amid speculation that policy makers will announce another round of so-called quantitative easing to bolster the economy. The metal reached a record $1,388.10 an ounce on Oct. 14. “You’ve got nervous longs exiting this market,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “If the Fed disappoints with a smaller amount of quantitative easing, you might start to see the dollar gain, and gold is going to go down.” Gold futures for December delivery dropped $25.20, or 1.9 percent, to $1,331.70 at 11:31 a.m. on the Comex in New York. A close at the price would mark the biggest decline for a most- active contract since Oct. 19. Earlier, the metal climbed as much as 0.6 percent. The Fed has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and purchased $1.7 trillion in Treasuries and mortgage-backed assets to spur growth. Estimates for the size of the Fed’s next round of asset purchases range from $1 trillion at Bank of America-Merrill Lynch to $2 trillion at Goldman Sachs Group Inc. Economists at both firms agree the Fed may start by announcing a $500 billion plan. An announcement is expected at 2:15 p.m. in Washington. Silver futures for December delivery dropped 74.1 cents, or 3 percent, to $24.095 an ounce. Platinum futures for January delivery fell $17.10, or 1 percent, to $1,702 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery declined $8.80, or 1.4 percent, to $636.65 an ounce.
Ruinous Inflation, Stunned Stupefaction - 3rd November 2010 EFT she needs to SHB, the MSOI rings loud and clear. But who's listening...?SO WHEN I got back to the office, the place was abuzz, all stemming from how my boss wanted to "see me" as soon as I got back from wherever the hell I was, writes the Mogambo Guru from Tampa, Florida for The Daily Reckoning.I knew what it was about. It was about old man Sanderson and the stupid Sanderson account.The problem was that I had just seen the Britebart.tv video of the megalomaniacal and totally incompetent Harry Reid, Congressional Representative from Nevada and doofus extraordinaire, saying, "But for me, we'd be in a worldwide depression."So, inspired, I told Sanderson to stick his problems, and that, "But for me, you would be sued into bankruptcy after using all the defective parts we sold you, ya moron!"Seeing how she'd found out, I grudgingly went up to the boss's office, and the first thing I see is her stupid secretary, who hates my guts because I once told her to Buy Gold, silver and oil against the terrible inflation that will result from the traitorous neo-Keynesian econometric nitwits at the Federal Reserve creating so much excess money, especially when the corrupt federal government was monstrously deficit-spending us into bankruptcy.A few days later, I saw the secretary in the hallway, and being a friendly, collegial type of guy, I casually asked her if she had bought any gold, Silver Bullion, or oil so that she could Save Her Butt (SHB) when the devastating inflation and economic collapse hits, which has happened to every lowlife, dirtbag deficit-spending government who tried this stupid crap Every Freaking Time (EFT) in the last 4,500 years.She admitted that she hadn't, so I said to her, in a delicate way, like a kindly uncle gently instructing a wayward and ignorant child:"Then you're a moron! Instead of gold, silver and oil saving your butt, which, by the way, looks big in those pants, it is going to get chewed up by ruinous inflation and economic collapse!"Well, I figured that she would say, "Thanks for the important information!" since she has beneficially learned – at absolutely no cost to her! – that she is a moron, plus she now knows that those pants make her butt look big. A two-fer!But the secretary had not, as I supposed she would, thanked me. Instead, she's hated me ever since, and every time I get summoned to my boss's office, I always ask her stupid secretary, "Have you bought any gold, silver or oil to save that big butt of yours from the raging inflation in prices that will be caused by the Federal Reserve creating so much money?" and she says, "No," and I say, "Then you're a moron!" and she replies, "No, YOU'RE the moron!" and I will cleverly reply, "No, YOU'RE the moron!" and she's yelling back at me, "No, YOU'RE the moron!" which is about when my boss usually comes out of her office and tells us to immediately stop acting like children.I say, "It's her that is acting like a child with a big butt! I tell her to Buy Gold, silver and oil, which is the only intelligent, time-tested, guaranteed thing to do when the loathsome Federal Reserve is creating so much money, but she never does! So she's the childish idiot, not me!"Well, my boss, with an angry look on her face, hisses at me through clenched teeth to "Get into my office this instant!"Anyhow, it turns out that she had found out that somebody (meaning me) had screwed up the big order from old man Sanderson, and now the Sanderson account was in danger, because he was really angry.She says, "What did you do to him to make him angrily cancel his account, threaten to have his lawyers sue us, and make a lot of vague death threats against you personally?"I tell her that the problem was caused by the Washington Post breaking the story that the Commodity Futures Trading Commission is, as was always suspected, corrupt. The headline was "Commodity Futures Trading Commission judge says colleague biased against complainants." It turns out that George H. Painter is "one of two administrative law judges presiding over investor complaints at the Commodity Futures Trading Commission," and he writes that the other CFTC judge, Judge Bruce Levine, had "a secret agreement with a former Republican chairwoman of the agency to stand in the way of investors filing complaints with the agency."The seamy corruption was a permanent bias against investors in disputes "as a favor to Wendy Gramm, then Chairwoman of the Commission" to "never rule in a complainant's favor."Damningly, Mr. Painter wrote, "A review of his rulings will confirm that he fulfilled his vow," and that in the last 10 years, "Levine had never ruled in favor of an investor." Never!The important part, for me, was when her husband, the laughable former senator from Texas, Phil Gramm, said he would "pass along a message" but added, "I doubt she's going to want to get involved in this."My boss, by this time, is looking at me with this look of unbelieving incredulousness on her stupid face, her mouth actually falling open in stunned stupefaction. Then she says to me, "What has that got to do with the Sanderson account?"So, I says – as will probably Ms.Gramm – "I don't want to get involved in this!"Then I gets up, leave her office in a huff, and go out to have a few drinks to steady my nerves, figuring that by the time I get to work tomorrow, she will have smoothed things over with Sanderson and we can all start some crapola "healing process" of forgiving and forgetting.And her secretary? She's still a moron who has not bought any gold, silver or oil. Just between you and me, maybe that explains her fat butt! Hahaha! If so, then my new Mogambo Slogan Of Inspiration (MSOI) is, "Whee! Buying Gold, silver and oil is an easy investment, and in doing so, I got a great-looking butt for free, too!"
Gold to heading for $2,000+ on U.S. political and economic uncertaintyRepublican control of Congress, plus more QE adds further uncertainty for the road ahead - and gold thrives on uncertainty.Author: Jeffrey NicholsPosted: Thursday , 04 Nov 2010 NEW YORK (Rosland Capital) - Gold thrives on political and economic uncertainty . . . and we've got plenty of that following the Republican victories this week and the Fed's Wednesday afternoon announcement that it is embarking on another large dose of monetary stimulus. We reiterate our long-term forecast that gold prices will rise to $2,000 an ounce, then $3,000, and possibly higher over the next few years. Certainly, this week's U.S. Congressional election and the policy decisions just announced by the Fed only reinforce our confidence in gold's bullish prospects. ECONOMIC POLICY STUMBLES ON CAPITOL HILLNow that the Republicans have overwhelmingly seized control over the U.S. House of Representatives, there will be plenty of rhetoric from Congressional leadership and the Obama Administration about "working together" to solve America's economic problems. But, in the end, unbridgeable philosophic differences on the role of government suggest that the ship of state will remain rudderless -- at least with respect to fiscal policy -- until the next federal elections in two year. Not only will the new Republican majority in the House confront a liberal Administration, but there could also be a titanic struggle for control within the Republican Party between its now-more-powerful conservative wing and party moderates and within the conservative wing between the traditionalists and the unconventional Tea Party bloc that has now won a seat at the head table.It's hard to imagine we won't be faced with more gridlock and more acrimony on Capitol Hill -- in short, a dysfunctional government that is incapable of dealing effectively with America's serious economic problems. FISCAL INDICATORSOne of the first big indicators of future fiscal policy -- or lack thereof -- will be the decision taken to extend or let expire the Bush tax cuts that run through the end of this calendar year -- or just possibly accept some sensible compromise that would extend the cuts another year or two for all but the wealthiest few percent of tax payers. Rather than pursue what some consider appropriate counter-cyclical fiscal policy, failure to extend the Bush tax cuts will raise taxes at just the wrong time, taking money and spending power out of the household and small-business sectors. Others argue the expiration of the Bush tax cuts is just the right medicine to reign in our outsized Federal budget deficit and borrowing requirement, a first step toward restoring confidence in the U.S. dollar both at home and overseas -- but fiscal restraint at this juncture could easily backfire, reversing or slowing the hoped-for economic recovery. In any event, neither course -- raising taxes enough to achieve a quick and significant reduction in the Federal budget deficit, nor cutting taxes enough to greatly stimulate a sluggish economy is politically feasible given the deep divisions in Washington DC. How this controversial fiscal-policy issue unfolds and its long-term effect on the health of our economy -- will be one of the big issues affecting gold and other world financial markets, not only in the weeks ahead but possibly for years to come. Another important fiscal policy issue that will soon capture more attention on Capitol Hill and in the financial press is the insolvency of many state and local government entities across the nation. With the new, more conservative, majority in the House of Representatives the hoped-for bailouts from Washington may not be forthcoming. Many states operating in the red (including California, Texas, New York, Michigan and others) must balance their budgets -- meaning further belt-tightening, service cuts, more layoffs of public employees (including teachers, policy, firefighters and office workers) and higher local taxes, all of which will be a further drag on the national economy. THE FED TO THE RESCUE . . . OR NOTWith the Obama Administration and a more conservative Congress at loggerheads, it is likely that America's central bank will, by necessity, be the only agency capable of acting forcefully in the face of a continuing recession-like economic performance. And, all the Fed can do is print more money -- what economists and financial journalists call "quantitative easing" or simply "QE." The Fed accomplishes this magic trick by purchasing securities, usually Treasury notes or bonds, in the open market but pays via an electronic debit entry on its balance sheet. Indeed, perhaps more important than this week's election outcome for the short-term direction of gold and other financial markets will be the decisions taken at this week's meeting of the Federal Open Market Committee (FOMC), the Fed's policy-setting forum. In its policy statement released following Wednesday's FOMC meeting, the Fed stated it will buy $600 billion more in longer-term Treasury securities over the next two quarters -- or about $75 billion each month -- but the Fed has left the door open to make adjustments up or down in response to the unfolding economic indicators. Fed Chairman Ben Bernanke may be doing the right thing by adopting more aggressive monetary stimulus. Without more action now, the economy will sink further, new job creation will slow or grind to a halt, and unemployment will surely rise. Even with this new commitment to more aggressive monetary stimulus, I believe recession-like conditions with persistently high unemployment will continue for another few years -- and that additional tranches of quantitative easing by the central bank could raise the cumulative size of the Fed's monetary stimulus to two or three trillion dollars. INFLATION INTENTIONSPrinting more money may raise the hackles of sound-money advocates and surely won't be appreciated by foreigners holding U.S. debt -- but inflation may be just the potion that could ultimately restore economic equilibrium by devaluing our debt in real terms and reducing its burden the economy expands more quickly in nominal terms, reflecting not only real growth but also inflation. And, if wages rise with prices, a few years of moderate inflation here at home could be politically palatable. Although the Fed is actually targeting a small rise in consumer price inflation, I believe they are well aware of the much greater inflationary potential arising from their program of quantitative easing. The stagflation of the 1970s -- a period of sluggish economic growth and high unemployment -- demonstrates that inflation, led by a falling dollar and rising commodity prices, can take hold even with a high degree of economic slack and low rates of capacity utilization. It's especially relevant to today's investors to remember that this was also a period of rapidly rising gold prices! Jeffrey Nichols, Managing Director of American Precious Metals Advisors and Senior Economic Advisor to Rosland Capital, has been a leading precious metals economist for over 25 years. See www.nicholsongold.com and www.roslandcapital.com
The Silver AlphaBy: Jim Willie CB -- Posted 4 November, 2010 | Share this article| Discuss This Article - Comments: 2 Source: SilverSeek.com A love affair with silver is so natural. The fundamentals are astoundingly positive and bullish in price prospects. My basic argument has been repeated many times. Industry has countless uses for silver, significant demand. But industry has only miniscule isolated uses for gold, in trivial demand. So silver wins on the Demand side of the equation. Central banks own a huge amount of gold. They frequently sell it, even through their slippery surrogate the Intl Monetary Fund. Central banks own zero silver. So silver wins on the Supply side of the equation. My motto is that gold fights the major political and financial war, but silver will ride in on a shiny white horse and take much larger spoils. That effect has already begun. Since the significant game changing FOMC meeting on September 21st, where the telegraph message delivered to the world financial markets was made by megaphone, the impact has been clear and stark. Compared to closing prices on September 21st versus October 29th, just five weeks, the silver price had risen from $20.64 to $24.56, up 19.0%. During the same timespan, the gold price had risen from $1274.30 to $1357.60, up 6.5%. My claim, a loose forecast often repeated, has been that the silver breakout gains would be at least double and possible triple the gold gains. We have seen exactly that in recent weeks. An extremely fuzzy factor is the CFTC attention. The Commodity Futures Trading Commission is supposedly investigating the Big Four Banks for gigantic concentrated short positions in the silver market, for naked shorting of silver, and for collusion with other banks. Commissioner Bart Chilton has made a lot of noise, but has done next to nothing. Some find encouragement, an absurd notion in my view. Let me know when court injunctions are slapped at JPMorgan. Several class action lawsuits against JPMorgan have begun, also encouraging, but unclear on substance. They crop up every couple weeks, the latest citing a RICO aspect. Let me know when the full force of the USGovt regulatory bodies order JPMorgan, Goldman Sachs, Citigroup, and Bank of America to liquidate even 10-20% of their short positions. Unless and until such action occurs, the CFTC chirping is just that, noise from the managerie of obedient pets who work on short leashes at the behest of bankers. Mail room clerks do not give orders or make demands to the executive suites, not now, not ever. The regulatory chiefs are mere squires to the bankers, and will follow orders, not give them. By the way, the Big Four positions are naked short positions in all likelihood. They are immune from posting collateral, as required by the metals exchanges. So they routinely sell a stack of silver whenever the price moves have been made, like in the wee hours this Wednesday and very early at the New York open. Good Morning New York resulted in almost a full $1.00 drop in the silver price, undoubtedly another naked short raid before the QE decision by the US Federal Reserve and its statement. The full impact of the ambush decline was reversed by afternoon. Right before important events deemed negative nasty to the USDollar, the Big Four go wild with naked shorts, called ambushes. The evidence, the trails, the fingerprints are easily seen except by blind men, official gold industry wonks, and USGovt regulators. SUPPLY & DEMAND BASICSSilver total demand was essentially flat in 2009 versus 2008, as the world adjusted to a mammoth meltdown late in 2008. During the extraordinary disruptions, disturbances, and sudden insolvencies, JPMorgan liquidated much of the inherited (commandeered) precious metals accounts from Bear Stearns and Lehman Brothers. In the case of Bear Stearns, a solid argument can be made that they were targeted for kill due to their long gold account. In the case of Lehman, they were targeted fro kill in order to consolidate the power structure in the twin monoliths at JPMorgan and Goldman Sachs. On silver demand, the bulk of the 11.9% decline in the 2009 fabrication demand was primarily driven by the global financial crises. The reduced drop in industrial requirements was the lowest level since 2003. Total fabrication demand totaled 729.8 million oz and industrial demand was 352.2 moz in consumption. Much of the decline in factory demand was attributed to the car industry. Implied net silver investment increased by a staggering 184% to 136.9 million oz last year, reaching its highest level in 20 years. Overall jewelry demand fell slightly by 1.1% in 2009 to 156.6 moz, a testament to the historical norm. It falls with a bull market, not to contradict it, but to confirm it!! That is the opposite message, contrary to what the official gold industry propaganda preaches. In fact, India and China posted increases in jewelry demand last year, outside the global trend. Silverware demand rose by a decent 4.6% to 59.5 moz, largely due to a surge in Indian fabrication. Their middle class grows impressively. As for supply, the silver mine production rose by 4.0% to 709.6 moz in 2009. Gains came both from primary silver mines and output from mining by-product. The strongest growth came from Latin America, where silver output increased by a hefty 8%, the biggest gains logged in Argentina and Bolivia. Again Peru was the world leader in silver production in 2009, followed by Mexico, China, Australia, and Bolivia. All of these countries saw increases last year except for Australia, where output was dragged down from the lead/zinc sector, with the by-product impact. Some mines are devoted solely to silver targets, called primary silver projects. Global primary silver output saw a 7% increase in 2009, accounting for 30% of total mine production last year. The cash operating costs for primary silver mines remained relatively stable, rising by less than 1% to $5.23/oz in 2009. The big story is the huge decline in net silver supply from above ground inventory stocks, which were reduced by 86% to 20.2 moz in 2009. The drawdown was driven mostly by the surge in net investment, higher de-hedging (the active reduction in forward sale contracts), lower government sales (like official mints), and a drop in scrap supply. The scrap supply came down by 6% from 2008, enough to register a 13-year low of 165.7 moz. It was the third consecutive year of losses in the scrap category. Government stocks of silver, the feeder in official coin mint programs, fell by an estimated 13.7 moz last year, to reach their lowest levels in more than a decade. Data was supplied by the Silver Institute (SEE LINK). IMPACT OF Q.E. CANCERThe big event on the horizon has been the US Midterm Elections, just completed. Its outcome was close to poll expectations. Many decisions have been delayed. Much detail has been withheld. Unfortunate pauses have come as a result. A palpable dread can be identified and pointed to. Difficult unpopular decisions will now be made. Some of the decisions will involve continued bank sector welfare after failed fiduciary responsibility. Some of the next programs or legislation will involve devious political and legal cover for criminal bond fraud related to the mortgage industry, which is fully in the open for dissection, outcry, and acrimonious debate. Basically, the bank sector will see great maneuvers to be supported, protected, with escape routes, now that the consequences of voter backlash are out of the picture. Furthermore is the issue of political partisan gridlock. Only dim bulbs would call the gridlock constructive or a good thing in the current setting. When a nation is mired in a financial crisis, requires leadership, demands restructure, and urgently needs reform, any inaction from gridlock is like fighting over the steering wheel on a big tractor trailer truck unable to manage a winding road, certain to careen over the cliff. Some analysts use the term public serpents to describe public servants, which seems spot on. Activists should demand that private bank accounts be investigated of committee heads, or even past Secretary of State (Colin Powell), or joint chiefs of staff at the Pentagon, or past SEC and CFTC heads. While at it, check the bank accounts of past presidents too. The most reliable and expert sources within my contacts mention a specific point, with consistency. When the US elections are over, and after the USFed gives some guidance on the QE2 Launch for monetized debt, the system will experience tremendous added strains and will gradually show signs of breakdown again, in accelerated mode. This time, unlike September 2008, efforts to stabilize will not be possible. The system will degrade, as supports, pylons, control cables, levers, guy wires, and buttresses will be removed in the coming weeks. The Midterm Elections served at the roadblock event, the beacon on the horizon, the gate factor, the delayed lit fuse. The actions taken in November will involve both the US captains and foreign entities. The US brass can act without as much concern of voter backlash. The foreign financial decision makers can act with knowledge that the USGovt, the USFed, and Wall Street will not make a single solitary move toward bank system reform, toward bank debt restructure, or toward debt liquidation on the balance sheets. Instead, the US will redouble the magnitude of what failed, their habit, their engrained failure in policy, their legacy. The main worry by the USFed and USDept Treasury will center on foreign creditors and abandonment. US bank leaders will ramp up the monetization under the QE2 banner with added motivation. Trade war stokes the fires of hostility, angst, and rebuke. Foreign creditors are worried that their debt security paper is being diluted. Its value will be diminished, but later in time. Expect a new European Dollar Swap Facility to be announced soon, but with less delay than the last one. They must match and offset the power of the QE2 initiative. It could be urgently declared by EU in next several weeks. They must defend against a rising Euro currency. Do not be trapped into thinking a USTreasury Bond rally means a USDollar coincident rise. The USTBonds are from the Printing Pre$$, which means no source of funds to convert. The Jackass still believes 2.0% is an important 10-year USTreasury yield target. All hell breaks loose after the target is hit, as the USTBond bubble is likely to give off massive greenhouse gas afterwards. UNWIND OF TREMENDOUS SUPPRESSIONWhen professional equity analysts ply their craft in examining the merits of a certain stock, they often use a simple statistical technique. They fit a model of the growth in a stock Y versus the sector X in which it trades, like BAC (Bank of America) versus the BKX (bank index). They fit a model of the growth of a major stock Y versus the X market backdrop, like IBM versus the S&P500 index. A stock Y performs well if it does better than its sector or does better than the entire market. That shows up as a BETA over 1.0 within the fitted model using data as weekly change entries in price for X and Y. Take silver as Y and the entire commodity arena as X, as measured for instance by the CRB index. Clearly silver rises and falls with the commodities, and even makes swings with more volatility than other items. That testifies to a high silver BETA. Lately, the silver move has been powerful, much bigger than other commodity items since it is being recognized as a currency hedge, a safe haven asset, with the menace of lawsuits and investigations hanging overhead. In fact, Silver is a currency, if pure money can be classified as currency at all. Like gold, silver is a super-currency. Y = α + β XThe important aspect to highlight of the linear price change model is the ALPHA component. When an asset or stock has a particular advantage or unique strength, it can outperform its class. Take for instance a pharmaceutical firm with a vaccine discovery, or a computer firm like Apple with a nifty IPod winner, or a mining firm with a huge ore discovery or great process improvement. Silver and gold each share a robust ALPHA feature that is not often mentioned, even in the gold community. As the monetary system crumbles further, as the big banks topple amidst insolvency, as the sovereign debt for certain nations defaults, as the USGovt deficits spiral endlessly into the $trillions, the concept of real money is being questioned by important chambers of global finance. Money wants to escape the false monetary clutches, and find true safe haven. Sound money is sought out with increased vigor and even desperation to preserve wealth. At the same time, illicit activity from two to three decades of gigantic price suppression, extended from enormous naked short positions being revealed, has conspired to suppress the price of gold & silver. The slow healing of the market infestation reveals the manifestation of the Silver Alpha, during its release. The monetary system works gradually to unmask the corrupt precious metals market, and to lay bare the absent bullion at the official metals exchanges. Angry depositors like the Chinese and Arabs have been demanding their bullion for return back home, no longer trusting the London and New York banksters. They have grown fully aware of illicit gold leasing as commonplace. The fraud of the USGovt balance sheets, recording deep storage gold as a ledge item, an utter absurdity, only adds to the motive to unmask the banksters at their own game. The fast rising deadly USGovt deficits has brought cries to prove the collateral for new debt added upon old debt, in an uncontrollable debt episode. The world pursues gold & silver, knowing the USGovt has none, even as it continues to suppress its price with heavy hands. Foreign creditors are angry that the gold & silver they hold has been pushed down in price by illicit USGovt devices. The consequence is that SILVER possesses a high ALPHA. What lifts the ALPHA is many factors, each powerful. The Silver price will rise much more than price inflation. The Silver price will rise in response to money fleeing corrosive vehicles like the major currencies, whose basis is not gold but rather rapidly growing debt resting upon broken banking and economic foundations. The Silver price will rise as the USTreasury Bond bubble becomes more widely recognized. The Silver price will rise as greater volumes of freshly printed money undermine the USDollar well behind controlled activity. The Silver price will rise more than most analysts anticipate out of the sheer release from corrupted markets that hold down the price after a mountain of silver has been shorted in the market without collateral. THIS IS THE ESSENCE OF ALPHA!! The shorts are being squeezed, in clear fashion since August. The naked short quantity for Silver is well beyond a full year of annual global output from the mining industry. As the markets work toward a freely traded system that seeks a true equilibrium, the Silver price will move past $100 per ounce easily. Laughter now will be followed by sheepish quiet in three years. But first it will surpass the $40 price, maybe as soon as late 2011 or early 2012. The silver ALPHA is big, and that fact will be quite evident very soon, if not already. My forecast is for a $29 to 31 price for Silver by mid-January. Both December and January are strong seasonal months for silver, just like September. Notice how silver is outperforming the commodity group, and shows a BETA over one. INELASTICITY PARADOXIn many recognized markets, a higher price dampens demand, and a higher price adds to new supply. That is the normal Elastic market. Imagine the price of beef steak like tenderloins or porterhouse or T-bone, even the high end eye of the round. Suppose the steak price rose 10%. Two things would happen in the market for steak. Demand would reduce as consumers would turn to pork or chicken or fish to a greater extent, or order their steak less often. As a result, less steak would be bought. On the supply side, ranchers would be more encouraged to raise more cattle, while at the same time they would be led to slaughter less of the herd. More steak would come to market. That is what Elasticity is, a direct market impact from price. Actually, an interesting fine point is necessary for a deeper concept on Elasticity. Among the big battles for market share, sometimes a slighter lower price offered by a big supplier can result in impressive gains. Suppose Sony Ericsson decided to cut their cellphone prices by 5% in an attempt to win a larger slice of market share. The profit margin is sufficient to permit the tactical maneuver, as that margin would come down by 5%. Refer not to a loss leader tactic or a losing ploy in order to gain market share. They sacrifice some profits in order to wrest more market share and at the same time, they test whether the cellphone market is Elastic. If sales rise by more than 5%, then economists claim this market has strong Elasticity. Total sales revenue of greater proportion comes from a corresponding slight price reduction, thus greater profit. The most capable firms can rely upon the aggressive tactic, since they are more efficient, and can afford to take the profit risk. If the cellphone market already is loaded with excellent competition, with several very efficient firms battling it out, then the response of the Sony Ericsson 5% marketing plan might result in only 3% sales growth. The Elasticity would be 0.6 (less than 1.0) and thus not worth the promotion. Under such circumstances, the giant would discontinue the program. It would not be worth it. The price would slide back to where it was. If the promotion was a big hit, they might realize a 6% sales gain. That would translate to a 1.2 Elasticity and very much worth the promotion. Precious metals have an Inelastic market, a remarkable anomaly, the opposite effect at work. When the gold price falls, demand slacks off. In fact, demand for gold has never been lower in almost the last 20 years when it made a price low in 2001. It is called the Brown Bottom after numbskull Gordon Brown, who sold half of the British gold in aid of Deutsche Bank. When the gold price rises, demand jumps. It is called a gold fever. The same effect applies to silver. So gold & silver demand is inelastic, a counter-intuitive market. The truly intriguing part of the equation is that Gold Supply is also inelastic, a claim made in 2005 and repeated in 2006 and 2007 in the Hat Trick Letter. As the gold price rises, supply actually falls. The more accurate statement should be the supply inelasticity combines with geological and jurisdictional factors to reduce supply over time. During the passage of time in recent years, the gold price has risen. In statistical parlance, we call this a confounding of factors, a confounding effect, impossible to separate and measure without experimental design. The gold ore deposits are deeper underground, in thinner veins, of lower yield grade (as in grams per ton). The multitude of national governments that host mining operations varies tremendously. Some are suing the mining firms like Indonesia for massive pollution runoff in the water systems. Others like Uzbekistan engage in contract treachery to basically steal property rights. Others like South Africa introduced marxist nitwits to manage the electrical grid, only to cripple the output urgently needed to run underground operations. Others like Mexico are in the middle of a systemic failure, an explosion of violence during a battle for national control with drug cartels. Others like Mongolia have turned fickle, on again, off again, to the point that mining firms cannot maintain enough trust to invest heavily. Others like China and Russia has closed their doors to export. The analytic fabric is even more interwoven. The supply of silver, in particular, is wrapped within the economic outlook and fallout. Silver is a major by-product of mining operations for copper, lead, tin, and zinc. Ore deposits that contain silver actually contain orders of magnitude more industrial metals. As these more common industrial metals suffer reduced demand, due to a decline in the global economy, a reduction is seen from mining output. Therefore the silver output falls in tandem. Although sizeable, the silver mine output is a fraction of the major industrial metals. It runs as the tail on industrial metal mining operation dog. Matters related to silver do not drive the decisions for the majority of its mining output. As copper, lead, tin, and zinc push the decision process in business operations, the silver output follows. Silver might have numerous important and even unique industrial applications, but its niche market is subservient to the major metals. Hence, as the global economy has entered a decline over the last three years, the global output for silver has actually come down. It has not responded to a higher silver price with much greater supply from encouraged profit. Instead, it responds to demand for base industrial metals. PROPAGANDA ANGLESThe Quantitative Easing name makes the Jackass irritable, whose sound is much like that made by fingernails on a chalkboard. The QE nametag is hyper-inflation in official parlance. QE is ruinous to the monetary system and the major currencies. QE represents a magnificent escalation in the currency war. It motivates central bank retaliation, often called the Competing Currency War, in the defense of large native export industries. It triggers amplifies gestures toward trade protection. It can be easily stated and more easily defended that the United States has done more to worsen global trade war than any nation. Its export of fraud-ridden mortgage bonds and tainted USTreasurys that support annual $1.5 trillion deficits has flooded the global banking systems, inviting sharp response. Its decision to export a significant portion of its industrial base to China, the so-called Low Cost Solution, promoted from 2001 to 2005, is an unmitigated disaster not yet recognized as such. The USGovt turned from promoter of the factory export to China early on, only to condemn its fruit harvested by China in the form of $20 billion monthly surpluses. How unspeakably incredibly blockheaded stupid, deceitful, and destructive can a nation be from its leadership helm?? A tight race exists between stupidity and corruption. The Quantitative Easing has been hinted in August, confirmed in September, and detailed in November. The QE program has been minimized in the press, more pure propaganda slop. It has been estimated to arrive as $500 billion more in pure monetary inflation, only to rise to another $1000 billion by next year. QUANTITATIVE EASING IS PURE HYPER-INFLATION of the most egregious magnitude in modern history. The bubble is found in the USDollar. The cancer is infectious and contagious, if not a metastasis in progress. Capital is in steady profound destruction. Europe took charge of $750 billion in Dollar Swap Facility that monetized European bank debt. The entire world must quarantine the US cancer, but it feels somewhat helpless. Therefore, initiatives proceed behind the scene, like the movement by the Eastern Alliance to find a USDollar alternative in global trade settlement, like The Group of Central Europe in fashioning, implementing, and executing a New Nordic Euro currency. If Germany does not launch a new Nordic Euro currency with a gold component, it will sink into oblivion, and suffer a financial collapse, the same type that United States finds itself sinking deeper into. Propaganda extends to the Canadian Mint story. At one point a large number of gold bullion tonnage was missing. Then it was reclaimed in part by accounting corrections, even nonsense like recovery of drips and waste on the floor. Then came the final coverup story of the gold bullion actually being found. What a relief? Perhaps they found tungsten laced gold bars, and did a quick recovery in the dead of night, forcing losses on the supplier. Couple the mint story with the bizarre deceptive IMF stories of gold bullion sales. The IMF sales announced during the last several years were rife with blatant falsehoods, as most were close-outs of old USGovt leased sales. On the books, an amateur or an ignoramus could call it a sale. It was a sale, but it occurred back in the Clinton Admin days. Lease, then sale, and years later buy it back, but put press focus on the original sale and lie about the timing. Clever indeed! RISING SPECTER OF CHAOSThe beacon event in the elections has passed. Those in power will feel free to redeem more US$-based bonds. The official story came from the USFed on Wednesday, that $600 billion in long-term USTreasury Bonds would be bought with freshly printed money. The key is how the number exceeds the consensus $500 billion. Also, the USFed announced up to $900 billion in total asset purchases. The key is how mortgage bonds will be bought, fair game. One can be certain as an observer, a vassal bound within the castle walls, that TARP-2 has been secretly launched. More toxic bank assets will be purchased. No waste of bank lobby funds will be squandered on the USCongress minions. They will be circumvented as will the annoyance. This is all about the ruling elite in a nation of the banks, by the banks, and for the banks. A process will resume for redeeming blood on the floor, banker blood, as their death episode never ended. The big bank mortgage bond putbacks (under legal force) will proceed with dangerous high volume. The QE2 will absorb much of this swill and thereby relieve the big banks. No TARP-2 could possibly pass as legislation, so the bankers will rely on a hidden QE2 expansion, a vast expansion. The amount stated for QE bond purchases is a ruse. The stated volume represents a line in the sand brushed away by a banker footprint or sudden wave of seawater, even sheer expedient. The unknown is whether the USFed will detour the high volume of toxic mortgage bonds from monetization operations into the Fannie Mae basement filing cabinets. The emphasis of the USFed QE bond purchase is between 5-year and 10-years duration. Look for the 2.0% TNX target to be hit easily, even shock the textbook bond analysts who point too much to heavy USGovt debt supply and ignore the monetization initiatives. The USTBond rally in the face of huge deficits is proof of never ending monetization, hidden poorly. It should be noted that the USFed will only devote 3% of purchases to TIPS. They have been purchasing the Treasury Inflation Protection Securities all along for the last year. Doing so is a travesty and violation of its security prospectus. Imagine monetizing an inflation meter, a ruinous step much like placing a thermometer in a cold glass of water next to the flu victim suffering a fever. The patient What a charade! Only in America! The inescapable truth is that as for restructure of banks, NOTHING. As for the return of US industry from Asia, NOTHING. The USFed with USDept Treasury running interference will next fund programs without reform or restructure, which Joseph Stiglitz is quick to point out will not produce any positive results, and accomplish little if anything. It is like feeding a man whose legs require amputation from gangrene. He (the big banks) cannot walk (lend). By the end of 2011, expect a full discussion with debate on the need for QE3. Witness the ruin of currencies, part & parcel to the monetary system destruction. Gold will respond. Its highly inelastic little brother Silver will respond even more.THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
Market pulseNov. 4, 2010, 2:28 p.m. EDT Gold rallies to record as Fed feeds inflation fearRelated storiesGold, silver surge as Fed move punishes dollar (10:43a) Gold surges as Fed, ECB moves batter dollar (9:45a) Nikkei spikes to lead Asia higher (8:23a) Metals ETFs rally to new 52-week highs (12:57p) Story (MarketWatch) -- Gold futures rallied to a record over $1,380 an ounce Thursday, and silver futures rocketed more than 6%, after investors piled into precious metals as a hedge against the sinking U.S. dollar after the Federal Reserve rolled out a new, $600 billion of extraordinary stimulus measures to prevent deflation. Gold for December delivery closed up $45.50, or 3.4%, to $1,383.10 an ounce. Silver for December delivery surged $1.61, or 6.6%, to $26.04 an ounce. December copper rose 13 cents, or 3.4%, to $3.91 a pound. Palladium rallied $32.05, or 5%, to $674.75 an ounce. And January platinum advanced $58.70 an ounce, or 3.5%, to $1,755.90 an ounce.
I've have removed my 7 Silver Morgans Dollars of .773 troy weight Silver, haven't included any 40% silver, or 2 Wheatland pennies, and 1 Silver Nickel....but all else is included in this report.Mybullion Tracker: Bullion and Junk Silver Market Close Report For Friday Nov 5Th 2010 Spot OZ Cost Value Gain/lossGold 1392.71 1.37 1851.00 1908.01 +$57.01 +3.08%Silver 26.71 255 5566.95 6811.05 +$1244.10 +22.35% Palladium 682.00 4 2430.00 2726.00 +$298.00 +12.26% ------------------------------------------------------------------------------------------------------------Totals: $9847.98 $11477.06 +$1599.11 +16.24%Junk silver Report:Looking at Coinsplus site currently I could sell a Face value bag of 1000.00 dollars of 1964 or before 90% coins for $17951.79Divide that by 1000 you get: 17.95179 or rounded to 17.95 (Thats The Face Value Price Per Dollar)According to my records I have either boughten or found: $163.25 FV (Face Value)It cost me: $3098.00 ( Thats just stuff I bought)Current FV Price is 17.95$163.25 x 17.95 = $2930.34(rounded)Now you add costs to costs and profit to profit:Bullion Cost: $9847.98Junk silver: $3098.00Total: $12945.98 Bullion Value: $11477.06Junk silver: $2930.34Total: $14407.40Total Investment Profit:Value: $14407.40Cost: -$12946.03-------------------------------------------------------------PROFIT: $1461.34 From Metals InvestmentLOAN: -$5000.00 (No interest due to fact it was Loan from Mother! )Break EVEN and BEYOND Loan NET Profit: -3538.66Please remember I've recently made two more investments that impact my profit margin...cost of which was about 5,500.00 dollars, with new RP's to over come.
Is The Rise In The Gold Price Just A Fall In The Dollar? By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch - GoldForecaster.com -------------------------------------------------------------------------------- -- Posted Sunday, 7 November 2010 | Digg This Article | Share this article| Source: GoldSeek.com As we write, the gold price is about to assault the $1,400 level having been $1,332 on Wednesday of this week, a day ahead of the Fed announcement. Against the pound sterling, the yen the Swiss franc and most other currencies the dollar has weakened too. In the days ahead of that announcement the dollar had been wavering between $1.38 and $1.40 against the euro. After the announcement the U.S. dollar fell quickly down to $1.42 against the euro. But then the dollar recovered and is sitting at $1.41. Recently gold has again moved in the opposite direction to the dollar, until it ran up in the euro vigorously, so has this now changed again? Can there be more to the rise in gold than just the fall in the dollar? We believe so, because far more than QE 2 happened this week. Did the mid-term elections affect the price of gold?In the run-up to and after the announcements of the results of the U.S. mid-term elections the gold price barely moved. On the surface we can therefore conclude that the mid-term U.S. elections did not affect the gold price. But whether the Republicans or the Democrats won is not an issue for the gold market. What is an issue for precious metals is, can the U.S. government govern in the monetary area sufficiently to invigorate the U.S. economy and should they wish to do so, strengthen the U.S. dollar? We found the result pointed to an emasculation of the government’s power on the monetary front. Far too much of a burden has fallen on the shoulders of the Federal Reserve, an institution with only limited powers to resuscitate the U.S. economy. Government should shoulder that role, supported in this by the Fed. Government does not appear to now have the capacity to resolve the economic problems of the U.S. This tells us that the enormous steps needed to be taken to strengthen the U.S. dollar are not going to be taken, so a fall in the U.S. dollar is widely expected. The difference for the dollar now is that its fall can be precipitous and not simply a repeat of the fall in the last two years. Control over the dollar’s value for the next two years appears to have slipped from the grasp of the U.S. monetary authorities. This is extremely positive for the gold price. Did the Fed’s announcement of Q.E. 2 affect the price of gold?Ahead of the announcement a ‘bear raid’ on gold was mounted that had the gold price drop from $1,358 down to $1,332 in a steep dive that shook the weak holders and triggered more than a few ‘stop loss’ positions. Ordinarily, this would have been enough to deter investors, but it happened when the market was seeing thin volumes of trade, hence the size of the fall. On the announcement these bears received a very sharp silver coated, golden horn in the sensitive parts and rose like a space shuttle breaking up through the fifties and sixties and on through resistance at $1,370. Right now we are tapping $1,400. Undoubtedly the activity of buyers looking for physical gold from most gold markets in the world was the primary driver. But add to this the scramble of short covering that is now going on. The short covering comes not only from those who went short ahead of the announcement but from longer-term shorts, realizing that the breakout to new levels is well founded on fundamental factors. The announcement from the Fed established those fundamentals. However, a greater and greater proportion of gold investment buying globally is due to a growing fear of the global currency system itself! What are the Ramifications of the Fed’s announcement?The entire financial world had been waiting for weeks for the Fed to make this announcement. It was important because it directly affects the value of the dollar inside and outside the U.S. While the U.S. does not intend to cause a devaluation that will enhance the international competitiveness of the U.S., that is what is happening. That is how the rest of the world will see it. They will take action in their own interests to protect themselves. They have to or see themselves suffer as the U.S. has been doing so for some time now. This will have three primary effects on the global economy: 1. The U.S. will lose the cooperation they had hoped for with China and other nations who they asked to let their currencies rise but who will now suffer from a lower dollar, such as China. Global monetary cooperation, sorely needed now, will decay. Currency crises in different nations will be inevitable as they each strive to protect their own interests.2. Foreign investment capital channeled into the U.S. and badly needed by them, will accelerate its diversification from the dollar. This will accelerate the fall of the dollar and see capital exit the U.S. To the extent this happens it will act as a counter to QE 2. 3. It will undermine the dollar’s global hegemony, which in itself will create considerably more uncertainty as to exchange rates and values.