Fiat -- Sharefin, 01:45:18 03/29/04 Mon Who Do You Believe? Who do you believe? John Templeton is maximum bearish on the housing market. Jim Rogers expects a long, deep decline in the dollar. Warren Buffett is negative on stocks, bonds, and the dollar. George Soros foresees a bond market rout. Bill Gross expects a recession at least as deep as in the early 1980s. On the other hand, President Bush and the U.S. Congress are certain we're only one good employment report away from everlasting prosperity. It must be true because Alan Greenspan said so. ~~~ The inevitable bottom line is that in an economy addicted to easy credit, cheap credit, and excess credit, there is no way that increasing interest rates can be other than excruciating. Greenspan is hoping that some smooth and slow deflation of the multiple bubbles in the economy can be brought about by a very gradual, very well-telegraphed increase in rates when the time comes. Financial history says otherwise. For President Bush Jr. and Congress, financial history is limited to the belief that Greenspan cost President Bush Sr. the election in 1992 by increasing interest rates. Any actual economic factors in play at that time are of no concern to them. Then there are the big-money traders – men who actually have to take responsibility for their financial decisions – like Templeton, Rogers, Buffett, Soros, and Gross. Their reading of financial history leaves them very, very worried. Who do you believe? Periodic Ponzi Update PPU -- $hifty, 22:59:04 03/28/04 Sun Ponzi Chart Periodic Ponzi Update PPU Nasdaq 1,960.02 + Dow 10,212.97 = 12,172.99 divide by 2 = 6,086.49 Ponzi Up 22.96 from last week. Thanks for the link Rossl ! Go GATA ! Go GOLD ! $hifty Periodic Ponzi Update PPU -- $hifty, 22:28:32 03/21/04 Sun Ponzi Chart Periodic Ponzi Update PPU Nasdaq 1,940.47 + Dow 10,186.60 = 12,127.07 divide by 2 = 6,063.53 Ponzi Down 48.87 from last week. Thanks for the link RossL ! Go GATA ! Go GOLD ! Hi Ho Siver ! $hifty Gold -- Sharefin, 22:49:51 03/16/04 Tue 8 Reasons to Ignore the New Central Bank Gold Agreement “In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement: 1. Gold will remain an important element of global monetary reserves. 2. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons. 3. Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement. 4. This agreement will be reviewed after five years.” This statement contains only 147 words, and it appears simple and straightforward enough on the surface. The central banks even tell us the reason for their statement - to ‘clarify their intentions'. Wow, aren't they swell guys. But don't be deceived. Central banks deserve our scorn, and for that matter, our enmity too for the interventionist, statist policies that they inflict upon us in order to sustain the fiat currency that they create, which the politicians then debase to our detriment. To truly understand the significance of any central bank pronouncement, one has to read between the lines. Here's how I read their statement: Fiat -- Sharefin, 22:41:29 03/16/04 Tue Currency intervention only works short-term--Kuroda WASHINGTON, March 16 (Reuters) - Foreign exchange intervention can be a useful short-term policy tool but cannot truly manipulate the world's three major currencies because of vast global capital flows, Japan's top financial diplomat said on Tuesday. ~~~ "We are still in a deflationary situation. Prices are still declining ... We are really concerned about the price implications of the yen appreciation at this stage and in order to avoid excessive appreciation, we have been intervening," Kuroda said. Fiat -- Sharefin, 22:38:54 03/16/04 Tue Bank of Japan Report Sinks Dollar Vs Yen NEW YORK (Reuters) - The dollar plummeted against the yen on Tuesday, reeling from a report late in the previous session that Tokyo could halt selling yen for dollars by the end of March. Japanese officials denied any change in currency policy, although a comment by Bank of Japan Governor Toshihiko Fukui that irregular currency moves had abated was interpreted by some as indicating a more relaxed stance on the yen's strength. Japan's Nikkei Financial Daily reported late on Monday that Japan may stop currency intervention aimed at weakening the yen to boost exports. "The BOJ (Bank of Japan) isn't there, so the dollar's going to fall," said Ralph DelZenero, vice president for foreign exchange at Bank One in Chicago. Fiat vs Gold -- Sharefin, 23:54:37 03/15/04 Mon France may go for gold to fund research Taking its cue from Germany, the French government is looking at the pots of gold sitting in central bank vaults as a possible means to finance research, despite likely stiff political and legal opposition. The need to invest in research in order to remain competitive internationally has pushed governments first in Germany and now in France to consider selling central bank reserves to generate funds for projects. The Bank of France has 3,000 tonnes of the precious metal in the form of ingots and worth more than EUR 30 billion (USD 37 billion). "These gold reserves are managed by the Bank of France but they belong to the nation," a French ministerial source said. ~~~ But Germany's Bundesbank, which openly wants to sell gold in order to diversify its holdings, has suggested that some of the gains from selling gold reserves could be reinvested in a national foundation to support research and eduction. However, the idea was rejected by all German political parties, which want to use pontential proceeds from a gold sale for the reduction of the national public debt. In France, the central bank has signalled its opposition to selling gold for research spending. A high ranking official at the Bank of France was quoted by the French business newspaper Les Echos as describing the idea as "crazy." Fiat -- Sharefin, 23:51:42 03/15/04 Mon Yen Surges on Nikkei Report BOJ May Curtail Its Currency Sales The yen rose to the strongest against the dollar in almost two weeks after Japan's Nikkei Financial Daily said the Bank of Japan may scale back sales of its currency that are intended to protect exporters. Unnamed central bank officials told Nikkei they expect the BOJ to ``walk away from large-scale'' yen sales by the March 31 end of Japan's fiscal year. The central bank has tried to stem the yen's rise during the last year so that Japanese goods don't become too expensive for U.S. buyers. ~~~ At 5:09 p.m. in New York the yen rose to 110.31 per dollar from 110.79 late Friday, and touched 109.20, its strongest since March 2, according to EBS prices. It pared some of the gains on traders' speculation the Bank of Japan sold yen. A Japanese finance ministry official in New York declined to comment. ``They've been back in,'' said Grant Wilson, a yen trader in Pittsburgh at Mellon Financial Corp., which manages about $612 billion. The central bank ``ramped it all the way'' back above 110 yen. ~~~ The BOJ, which acts for the finance ministry in the currency market, sold 10.5 trillion yen ($94.4 billion) in the two months ended Feb. 25, more than half of the annual record amount spent last year, to keep the yen from gaining. Periodic Ponzi Update PPU -- $hifty, 00:20:15 03/15/04 Mon Ponzi Chart Periodic Ponzi Update PPU Nasdaq 1,984.73 + Dow 10,240.08 = 12,224.81 divide by 2 = 6,112.40 Ponzi Down 209.19 from last week. Thanks for the link RossL ! Go GATA ! Go GOLD ! $hifty  SILVER'S X FACTOR....THE MONETARY DEMAND MISNOMER? -- auspec, 12:07:23 03/14/04 Sun SILVER'S X FACTOR....THE MONETARY DEMAND MISNOMER? There have been multiple recent reports/rumors of international silver buying in huge size.....European, Canadian, Chinese, etc. It reportedly comes from both funds as well as individuals. Clearly the eyes of the world are opening to silver fundamentals and silver potential. My question is: DOES THIS REPRESENT MONETARY SILVER INTEREST??? I will fully acknowledge that what is often called "monetary" demand for silver is the real wild card for the future silver price, but I believe this term to be a misnomer. In spite of the fact that billions of US ounces have been squandered sub economically, to the benefit of elitist entities, the market is really not now that far out of equilibrium, 100 M ounces or so. That's not a lot of silver in the long run as that supply/demand deficit can be made up by the miners over a couple years period of time without too much difficulty, imho. The market could, in reality, go from a 5 Billion ounce available above ground surplus right to a natural equilibrium, but of course, this is NOT the way of the markets. Silver WILL spike higher. Why? Enter MONETARY DEMAND, the X factor. Maybe it should better be called simply "PHYSICAL DEMAND FOR SILVER"????? Do I own physical silver because it's going to be MONEY again some time soon or because I believe it's an undervalued commodity in relatively compact form?? Those that recognize a "tight" commodity market are apt to look for opportunity to profit. Silver is now, most obviously, in a tight market and this will draw more and more attention, possibly even in these United States of America {chuckle}. Still, is this "monetary" demand? When I/we advocate that physical delivery be taken from CRIMEX.....is this "monetary" demand??? These 5000 ounce lots are going to be coined somehow in the future? Don't think so. This is an attempt to correct a crooked market....leading to, again, "physical demand". Take the shrinking supply of silver fodder away from the crooks and expose their game, according to their own frequently changing rules. As far as I'm concerned, until some country reinstitutes silver as MONEY, what is commonly called monetary demand for silver is in actuality a misnomer. Silver WAS the world's most common monetary element, but it HASN'T again been money for many decades. It's a history book phenomenon until it resurfaces as money. The Central Banks don't use it as money.......too cumbersome and too archaic. They've largely dispensed of their holdings, much to the delight of us silver afficionados, for they lose control alongside posession. Did the Silver User's Association gain control of monetary silver or commodity silver? Rhetorical question, of course. They abused the US citizens' silver hoard as a pure commodity ploy......they gained access to silver below the average cost of production. Quite a deal for them. Really no different than another elitist entity tapping into the US Strategic Oil Reserves on the cheap and using them for personal profits. How do we, once again, get to the point that silver is in monetary use, when it is in fact too rare for common use? There's not enough of it around, yet if it were made money again it would soon be more than plentiful because of mining incentives? Please don't nail me excessively on those questions because they are mostly a thought process at this time and point. There are advocates in both Argentina as well as Mexico for returning these silver rich countries to their roots of silver money and I sincerely hope it happens. Silver currency or silver backed currency would be honest money or at least more honest money than what currently exists. You likely know what the IMF thinks about that possibility. Over their dead bodies. Are even US Silver Eagles money? Are they pretty collectors' pieces? You make the call. Is a 100 ounce, a 1000 ounce or a 5,000 ounce silver bar "money"? Pretty cumbersome to be used as such for sure. So, where is this "monetary" demand going to come from that is going to be the coup de grace for the "poor man's gold"? When we buy a rare 1800's Morgan Silver Dollar, is even that monetary demand? Not really, in spite of the fact that it WAS money at one point. That's a collectors play.....buying rarity, buying history, buying perceived value. It's no longer "money", imho. PHYSICAL DEMAND for silver is what is going to cause the moon shot likely heading our way and I do think it is heading our way. If we ever get TRUE monetary demand for silver {silver coinage or silver backing to circulated money} it will really be off to the races. I'm not going to hold my breath for that factor to kick in. For those of you that repeatedly state that monetary demand for silver will take the price upwards by magnitudes of order, will you please clarify how exactly you expect this "monetary" phenomenon to take place? Let's take the gloom and doom projections where all markets lock up, the banks are closed and folks are left to conduct transactions as barter. Officially marked forms of silver would certainly be handy in such a time, be it former commonly used coins w known silver content or stamped bars or coins by known private sources. This absolutely would be a monetary use for silver, but it's hard to believe that the most bullish of the silver bulls are prognosticating super demand upon this variable alone. There are just so many Henny Penny's around the globe and there are only so many coins/ounces in small size to be widely used. One little stickler of a point makes me a tad hesitant in saying that silver won't again be money any time soon. The Power Elite moneychangers have tied silver to gold in their efforts to "commoditize" both. They will NEVER commoditize gold as it practically goes against the laws of nature. They could have "commoditized" silver by simply letting it run it's course w/o intervention.....yet they didn't. Huge mistake from my perspective for, in fact, they have treated it as money via these schemes, deeming it too important to be allowed to trade freely. Oops! Silver will soar for the following reasons: 1. Pure commodity necessity, industrial use. 2. Speculators sensing a tight market. 3. It's a strategic war element & last I heard war is a growth industry. 4. Medicinal uses. 5. Plus multiple other uses having nothing to do with silver as money. I'm quite open to being proved wrong on this issue, but until that happens you'll have to: SHOW ME THE MONE{TAR}Y {DEMAND}!! When and where will silver trade as coinage or back circulated money? It's time to clarify what is commonly called monetary demand for silver.  Gold -- Sharefin, 08:52:53 03/11/04 Thu Making a modest case for investing in gold or not Investing in gold is perceived as an efficient diversification of portfolios. Gold has traditionally had about zero correlation with equities and virtually no correlation with bonds. An inflationary environment very positive for gold is likely to be negative for bonds and stocks. However, during an economic rebound, both gold and stock prices may rise, with gold likely to lead rather than lag the equity rebound. Because gold prices are denominated in dollars, those investors who are concerned about a further decline in the dollar exchange rate might be interested in adding gold to their portfolios. Gold's recent surge is noteworthy only in dollar terms. In euros, gold price is still lower than at the beginning of 2003. This highlights the strongest case for gold, that it is a useful diversification element. ~~~ Central banks worldwide have long held part of their reserves in the form of gold. At the end of 2003, gold reserves at central banks and monetary authorities around the world stood at 950 million ounces, which is well below the level that prevailed in the 1970s. ~~~ Holding reserves in the form of gold carries a substantial opportunity cost. Traditionally, gold earned no returns, unlike financial instruments such as bonds or bank deposits. This has changed with the development of the gold-leasing market. This market allows central banks to earn up to 1 percent a year (depending on maturity) on the gold holdings they are willing to lend to the market place, which is still lower than the return on other assets. Around 118 countries, including several in the Middle East, did lend more than 35 percent of their gold reserves in 2002. ---------------- 950 million ounces = 29,548 tonnes 35% of 29,548 tonnes is 10,342 tonnes Which leaves them with 19,206 tonnes not lent out. Suddenly we're getting a lot closer to Frank Veneroso's numbers. I think this would have to be the most revealing public admission of this I've seen to date. And one would imaging that the stats have been officially compiled if they include the gold lending habits of 118 countries. Now where did they get the stats for 118 countries & what they'd lent out in 2002??? Gold -- Sharefin, 08:40:28 03/11/04 Thu Are huge deposits a thing of the past? TORONTO (Mineweb.com) -- The era of huge mineral discoveries containing substantial reserves are probably over, meaning major mining companies may have to settle for smaller deposits. In a presentation Monday to the international convention of the Prospectors and Developers Association (PDAC) in Toronto, mining economist Michael Chender of the Metals Economics Group, noted that while exploration is up, the size of new discoveries is shrinking. He also warned delegates at the conference that the reliance on junior mining companies to find grassroots exploration projects, was not a viable solution to the looming shortfall in new projects. ~~~ As a result, the current available pool of advanced exploration projects now under development has shrunk to between two and three years of reserves, he said. Unfortunately, many of these projects are well under the size of reserve targets required by major mining companies. In addition, the loss of key exploration personnel forces major mining companies to re-staff and lose corporate memory of important exploration targets. Other factors rendering exploration projects dormant, according to Chender, include low grades and regional politics. Gold -- Sharefin, 08:37:27 03/11/04 Thu Peru's January gold output hits new two-year high LIMA, Peru, March 11 (Reuters) - Gold output in Peru, Latin America's largest producer of the precious metal, rose 23.2 percent in January year-over-year to 17,387 fine kilograms, the Ministry of Mines and Energy said on Thursday. ~~~ Yanacocha, Latin America's biggest gold mine, led the surge in production with a 35 percent rise in output in January, compared with the same month in 2003. "Yanacocha accounted for 53 percent of total national gold production this January," the report said. ~~~ Peru is the world's seventh largest gold producer and is considered one of the globe's most promising prospects for new gold deposits. Gold -- Sharefin, 01:12:56 03/11/04 Thu German gold sale plan stalls, French show interest BERLIN/PARIS, March 10 (Reuters) - Germany's Bundesbank said on Wednesday it may drop its idea of funding scientific research by selling gold after politicians said the central bank had come up with an overly complicated plan. Meanwhile, the French government said it, too, was interested in the idea of selling gold stocks as thousands of researchers went on go-slow in protest over lack of funds from a government which faces regional elections in less than two weeks. The Bank of France, which would theoretically not be able to sell French gold before October in any case, declined to comment on an issue that was coming to a head in neighbouring Germany. The Bundesbank said it was reconsidering its position after politicians failed to show any support for a proposal that would involve selling gold, reinvesting the sale proceeds in a fund and using the fund's interest earnings to finance research. ~~~ Many parliamentarians believe the plan to set up a special fund, or foundation, to manage gold sale proceeds would create needless bureaucracy given that Bundesbank profits already flow to the government and could be spent on R&D directly. "If there is ultimately no support, then the board would have to review its decision to sell gold," a Bundesbank spokesman said. Fiat -- Sharefin, 00:33:23 03/11/04 Thu Gold traders show muted reaction to bankers' pact The gold market's muted reaction to the renewal of the European central bank gold agreement was just the ticket for bankers. It marked a successful managing of expectations by central banks. It was also a stark contrast to the first accord in September 1999, when gold prices soared more than $50 per troy ounce - or about 25 per cent from 20-year lows - as traders showed surprise that the banks had actually agreed to form an orderly queue to sell some of their gold holdings. ~~~ The sharp price move that followed the previous agreement had an adverse effect on central bank gold lending activities - the main source of income from their holdings - as it led to a decline in the rate banks could charge for leasing their gold to miners who wanted to hedge. It marked the beginning of the end for the forward gold sales boom of the 1980s and 1990s. This activity, also known as gold hedging, gave miners secure future revenues, but also had the effect of increasing supply. The big rise in hedging was widely blamed for the gold price decline to its 20-year nadir of $250 a troy ounce in 1999. Gold leasing rates have fallen from about 5 per cent in September 1999 to the current level of about 0.25 per cent. The fall in rates has made it less attractive for central banks to hold vast amounts of gold. "There is no lending business to speak of these days, and that is because there is nobody hedging any more," said one official at a European central bank. Fiat -- Sharefin, 00:30:41 03/11/04 Thu Derivatives losses fuel doubts over Fannie Mae Fannie Mae paid a net $25.1bn on derivatives transactions in under four years - nearly all of which may represent losses that cannot be recouped, in turn depressing future earnings. The potential scale of the liabilities, which have yet to be recognised in the company's earnings or in the minimum capital adequacy required by its regulator, raise fresh doubts about the financial health of the mortgage finance giant. Regulation of Fannie Mae and its sibling Freddie Mac is rapidly moving up the agenda in Washington, amid concerns that the two goverment-sponsored entities have grown so big that they pose a systemic risk to the US financial system. The two entities own or guarantee mortgages totalling $4,000bn. Fiat -- Sharefin, 00:29:00 03/11/04 Thu Greenspan is not learning from history That monetary booms are corrosive of morals and ethical behaviour is a sad fact that has been commented on innumerable times. The late Lionel Robbins, a British economist, lamented that booms create "a favourable atmosphere for the fraudulent operations of sharks and swindlers. The big frauds almost all have been perpetrated on a rising market." Robbins emphasised his point with a quote from Pope: Blest paper credit. Last and best supply To lend corruption lighter wings to fly The nineties boom is over and the lesson has still not been learnt. Evan as I write Greenspan's monetary policy is laying the foundations for another recession and everything that goes with it. And as always, capitalism will get the blame. Fiat -- Sharefin, 00:15:05 03/11/04 Thu Herb lore from the Sage of Omaha Warren Buffett, you may be surprised to hear, appears to share these concerns. “Yesterday's weeds”, he opined in his latest letter to shareholders, “are today being priced as flowers.” ~~~ A few at least in the Federal Reserve (and elsewhere) are becoming acutely aware that its ultra-low-interest-rate policy is having a hugely distorting effect on asset markets. Put simply, investors are taking on too much risk in too many areas for too little reward. Silver -- Sharefin, 05:47:58 03/10/04 Wed U.S. stocks drop; bonds, dollar and silver rally In New York, silver prices hit a 16-year high as big speculators bought on the idea that silver is still cheap relative to gold. Fiat -- Sharefin, 00:24:49 03/10/04 Wed Dollar remains strong against yen amid intervention rumors According to market sources, the BoJ splashed out around 20 billion dollars (16 billion euros) on Friday to support the dollar's value against the yen in the wake of the US jobs data. So far this year, it is thought the bank has spent around 90 billion dollars in similar actions. Silver -- Sharefin, 20:32:54 03/09/04 Tue NY Spitzer Returns Gift To Group Seeking Silver Market Probe WASHINGTON -(Dow Jones)- New York Attorney General Eliot Spitzer returned a silver eagle coin to a group that asked him to investigate alleged silver market manipulation and included the coin with its probe request. The Gold Anti-Trust Action Committee, or GATA, on Tuesday released the text of a letter from Peter Drago, director of public information and correspondence for Spitzer's office, saying the request for the silver probe "has been forwarded to the appropriate members of our staff" and "I'm sure that it will be of interest to them." Gold -- Sharefin, 02:11:42 03/09/04 Tue Open the Checkbook - Buy the Ounces The bull market in gold and silver has barely begun. It is still in its infancy as gold and silver move into their rightful role as real money. Unlike the last bull market of the 1970s where gold and silver were plentiful, this bull market is being driven by scarcity and the debasement of currencies around the globe. Gold and silver have been running supply deficits for well over a decade. According to the work done by GATA the gold vaults at central banks are now half empty. Over the last decade, through gold sales, gold loans and gold swaps, gold has flowed steadily out of the vaults of central banks reducing large stockpiles of gold. In the case of silver, supply is now at critical levels. Just as central banks have dishoarded over half of their gold inventory, aboveground stockpiles of silver have been eroded to critical levels as a result of 14 years of supply deficits. Those 14 years of supply deficits are now starting to impact the markets as the price of silver goes parabolic. Gold -- Sharefin, 02:07:08 03/09/04 Tue Treasury rules out further gold sales The UK Government yesterday ruled itself out of selling any more of its gold reserves for the foreseeable future. Britain declined to add its signature to an agreement in Basel, Switzerland, with 15 other European central banks which raised the amount of gold they can sell each year from 400 to 500 tonnes. The agreement lasts until 2009 and those signing up included the European Central Bank, and the German, French and Swiss central banks. It was a renewal of a deal forged in Washington in 1999 to prevent countries from flooding the market and depressing gold prices. Gold -- Sharefin, 02:04:42 03/09/04 Tue Australian gold output continues to rise Australia's gold production is increasing, with full 2003 output rising 5% to 290 t, Melbourne-based mining consultant Surbiton Associates announced yesterday. Gold production fell from its peak of 314 t, in calendar year 1997, to 275 t, in calendar year 2002, but has reportedly picked up substantially since mid-2002. Gold -- Sharefin, 02:00:12 03/09/04 Tue Murenbeeld Sees Gold Price Hitting $445 by End-04 The gold price should rise 11 percent by the end of 2004 because of a new pact restricting sales of the precious metal, a weak U.S. dollar and stable mine output, one of the gold industry's most respected forecasters said on Monday. Independent analyst, Martin Murenbeeld, told delegates at the annual convention of the Prospectors & Developers Association of Canada that the price of gold could close out 2004 at $445 an ounce before advancing another 3.4 percent to average $460 an ounce in 2005. Gold -- Sharefin, 01:29:27 03/09/04 Tue Danger Sign. . . or Worse? Gold Stock Analyst has long believed the current gold bull market to be a mirror image of February ‘85 to December ‘87 bull market, when gold soared from $284 to $500/oz. But, if the current is an exact duplicate, the top has been made. The chart below aligns the start dates of each bull market. The similarities are quite remarkable in terms of the general shapes, length in time, and the percentage gains. The driver of each bull market was/is the soaring U.S. Current Account Deficit (CAD) that flooded foreign markets with more dollars than they desired, leading to the dollars' sale and its fall in value.   Gold -- Sharefin, 01:25:58 03/09/04 Tue Gold Price May Fall to $350, Barclays Analyst Naqvi Says Gold prices may fall to $350 an ounce or less as fewer companies buy the metal to fulfill forward contracts and concerns about war in Iraq ease, a metals analyst told a Toronto mining conference. ``The peak has almost certainly passed,'' Kamal Naqvi of Barclays Capital in London said at the Prospectors and Developers Association of Canada conference, the largest meeting of its kind in the world. ``The gold industry is a little complacent about prices at the current levels.'' ~~~ Most of the factors that propelled gold prices higher have abated, including concerns about the U.S.-led war on Iraq, slumping equity markets and ``de-hedging'' or the elimination of forward contracts by companies such as Newmont, Naqvi said. Gold -- Sharefin, 01:23:49 03/09/04 Tue A Greenspan put -- for now? More shock and awe from Ben Bernanke? Careful study of this rising federal reserve governor's March 2 speech suggests there might really be a "Greenspan Put" underpinning the stock market -- great short-term, but ominous long-term. That November, he began his shock and awe campaign by asserting that, rather than accept deflation, "...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent)" that would be used to generate rising prices. This inflationist speech arguably triggered the gold's subsequent breakout. But Bernanke was never qualified or even questioned by the Fed. Subsequent, equally decisive speeches have made Bernanke the most significant Fed leader after Alan Greenspan -- more significant, indeed, for those who prefer intelligibility. Any future president may have difficulty not appointing Bernanke Greenspan's successor. Bernanke's adult life has been spent soaking in the history of the Great Depression. That event, it is now generally agreed, was essentially the fault of the Federal Reserve and other central banks. The fact that Bernanke's expertise in central bank mishandling of new policies was apparently his main qualification to become a governor might suggest that the Fed now regards itself as once again an innovator. This latest speech is titled "Money, Gold, and the Great Depression." On its face, it is a characteristically taut and elegant discussion of the 1930s. At a deeper level, it is a commentary on the aspirations of the modern Fed. Fiat vs Gold -- Sharefin, 01:21:57 03/09/04 Tue Money, Gold, and the Great Depression The second monetary policy action identified by Friedman and Schwartz occurred in September and October of 1931. At the time, as I will discuss in more detail later, the United States and the great majority of other nations were on the gold standard, a system in which the value of each currency is expressed in terms of ounces of gold. Under the gold standard, central banks stood ready to maintain the fixed values of their currencies by offering to trade gold for money at the legally determined rate of exchange. The fact that, under the gold standard, the value of each currency was fixed in terms of gold implied that the rate of exchange between any two currencies within the gold standard system was likewise fixed. As with any system of fixed exchange rates, the gold standard was subject to speculative attack if investors doubted the ability of a country to maintain the value of its currency at the legally specified parity. In September 1931, following a period of financial upheaval in Europe that created concerns about British investments on the Continent, speculators attacked the British pound, presenting pounds to the Bank of England and demanding gold in return. Faced with the heavy demands of speculators for gold and a widespread loss of confidence in the pound, the Bank of England quickly depleted its gold reserves. Unable to continue supporting the pound at its official value, Great Britain was forced to leave the gold standard, allowing the pound to float freely, its value determined by market forces. With the collapse of the pound, speculators turned their attention to the U.S. dollar, which (given the economic difficulties the United States was experiencing in the fall of 1931) looked to many to be the next currency in line for devaluation. Central banks as well as private investors converted a substantial quantity of dollar assets to gold in September and October of 1931, reducing the Federal Reserve's gold reserves. The speculative attack on the dollar also helped to create a panic in the U.S. banking system. Fearing imminent devaluation of the dollar, many foreign and domestic depositors withdrew their funds from U.S. banks in order to convert them into gold or other assets. The worsening economic situation also made depositors increasingly distrustful of banks as a place to keep their savings. During this period, deposit insurance was virtually nonexistent, so that the failure of a bank might cause depositors to lose all or most of their savings. Thus, depositors who feared that a bank might fail rushed to withdraw their funds. Banking panics, if severe enough, could become self-confirming prophecies. During the 1930s, thousands of U.S. banks experienced runs by depositors and subsequently failed. Long-established central banking practice required that the Fed respond both to the speculative attack on the dollar and to the domestic banking panics. However, the Fed decided to ignore the plight of the banking system and to focus only on stopping the loss of gold reserves to protect the dollar. To stabilize the dollar, the Fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them. The Fed's strategy worked, in that the attack on the dollar subsided and the U.S. commitment to the gold standard was successfully defended, at least for the moment. However, once again the Fed had chosen to tighten monetary policy despite the fact that macroeconomic conditions--including an accelerating decline in output, prices, and the money supply--seemed to demand policy ease. Gold -- Sharefin, 00:19:41 03/09/04 Tue Indian passion for gold to grow despite firm prices NEW DELHI (Reuters) - Indian farmers, flush with cash after a good harvest, are likely to shop for more gold over the next two months despite volatility in prices, dealers said on Monday. Gold demand in India, the world's largest consumer where people buy the yellow metal both as an investment and adornment, had fallen over the past few months as prices hit a 15-year peak of $430.50 an ounce on January 6. "We have already seen a pick up in demand at a price level of around $400 per ounce," said Girish Kumar Choksi, a bullion dealer in Ahmedabad. ~~~ But Choksi said rural demand for jewellery was likely to be strong with farmers harvesting good oilseed, cotton and grains crops, after excellent weather. ~~~ But Choksi said rural demand for jewellery was likely to be strong with farmers harvesting good oilseed, cotton and grains crops, after excellent weather. Gold -- Sharefin, 00:15:58 03/09/04 Tue DMCC activities – Gold statistics Dubai gold trade recorded a quantity growth 20.3% and financial growth 30.6% in the years 2001 to 2003. While in the years 2002 and 2003 the growth in the quantity of imported and exported gold was at rate of 12.7% and 28.6% of the total price value. The first official statistics for DMCC, stated that the trade of gold reached 495 ton and 486 kg in the year 2003, on the other hand it reached 411 ton and 847kg in the year 2001 with a growth percentage of 20.3. This trade is worth 5.88 billion dollars (16.56 billion dirham) with a growth percentage of 30.6. On the other hand in the years 2002 and 2003 the quantity growth recorded 12.7% as the gold trade in 2002 reached 439 ton and 348kg that worth 4.57 billion dollar (16.81 billion dirham), to record a growth rate 28.6% in the years 2002 and 2003. Oil -- Sharefin, 00:10:46 03/09/04 Tue Global Energy War Looms in As China consumes more and more oil, a silent energy war has broken out on a full scale. China's thirst for oil is now to the point that a direct pipeline between China and Saudi Arabia, the world's largest, simply won't quench it. The U.S. and Japan, the number 1 and number 2 energy consumers of the world respectively, are on alert as the more oil China wants, the less they can take. This shortage would hurt their economies. Large energy consumers have begun to woo producers in order to gain an upper hand in the competition. Oil market watchers opined, “The energy issue will become an important aspect of national security.” Energy War Triggered by China— China, which exported oil as late as 1992, has become a net importer starting in 1993. Currently, it is the second largest oil consumer of the world. China is the world's second largest by imported volume and the third largest by consumption growth rate. China's growth rate in oil consumption is six times as large as the international average. ~~~ China versus the U.S.-- China is putting all efforts into securing a supply of energy from across the world. In January, China and Saudi Arabia entered into a contract to jointly explore and produce natural gas. China and Saudi Arabia's state-owned Aramco formed a $3 billion petroleum chemical joint venture. All these moves make the U.S. uneasy as it depends on two key allies in the region, Saudi Arabia and Egypt, for control of the Middle East. Some signs suggest that Saudi Arabia and China are developing a weapons-for-oil deal. A government-sponsored energy policy group in the U.S. estimated that the U.S.'s dependence on foreign oil, which rose to 50 percent in 2003 from 30 percent in 1985, will reach 70 percent by 2020. This is why the U.S. sees China's search for stable energy sources as a challenge to its world hegemony. Along with the conflict over trade, military rivalry, and the space development race, the competition over energy will be an important axis of the U.S-China competition over international dominance. It explains why China does not support the war in Iraq. China versus Japan— Japan, which has little natural resources to turn to, is probably facing an impending energy crisis. Gold -- Sharefin, 00:05:17 03/09/04 Tue Dubai's gold trade records 28.72pc growth in value The continued appreciation of the gold price in the international markets coupled with high demand in export, have resulted in an increase in Dubai's gold trade, which last year recorded a 28.72 per cent growth in value, reaching $5.87 billion from $4.56 billion in 2002, according to the latest statistics released by the Dubai Metals and Commodities Centre (DMCC). While import of the yellow metal slipped to 373,771 kilobars from the previous year's 375,638, a 91 per cent growth in export – from 63,710 kilobars in 2002 to 121,715 last year – helped the overall bullion trade to rise to 495,486 kilobars from the previous year's 439,348 kilobars, said DMCC. Gold -- Sharefin, 23:25:48 03/08/04 Mon China no panacea for gold demand China's demand for gold will not to leap in line with its voracious appetite for every other commodity or raw material as it continues on a major industrialisation drive, an analyst said on Sunday. Kamal Naqvi, precious metals analyst at Barclays Capital in London, said the so-called Chinese "armpit theory" -- that China has a big population and if each bought a small amount of gold following the deregulation of the market, there would be a massive increase in demand -- was "deeply flawed".  Gold -- Sharefin, 23:23:21 03/08/04 Mon Collision Course In the world of finance (besides guessing where the stock market will end up this year), a topic that dominates front page news is the issue of inflation or deflation. The financial world is divided over this issue with the deflationist dominating the debate. The Deflation Argument The deflationists cite the historical levels of debt overhanging the economy and the enormous asset bubbles in stocks, bonds, mortgages and real estate. In a levered economy and financial market any increase in interest rates would cause the whole debt bubble to implode. This would lead to a deflationary spiral as debts are liquidated contracting the supply of money. In an economy and financial world, this leveraged rise in interest rates would devastate the financial markets and the economy leading us back into a recession. Rising interest rates would also usher in the next leg of the secular bear market which has yet to begin. Collapsing asset prices, debt defaults, and bankruptcies would surely contract the money supply and this would be deflationary. Another argument made on the deflationary side of the debate is the world is awash in excess capacity. Global competition is keeping a lid on prices, so therefore we live in an environment whereby prices continue to decline. Here again the same mistake regarding prices as a symptom rather than a root cause obscures the deflation debate as it does the debate over inflation. Defining Deflation I refer to Webster's definition of deflation: a lessening of the amount of money in circulation, resulting in a relatively sharp and sudden rise in its value and a fall in prices. As mentioned in a previous essay, inflation and deflation are both sides of the same coin. They are both a monetary phenomenon. A rise or fall in price is more of a symptom than it is a cause. Once again we have confusion here regarding monetary terms with deflation usually thought to be synonymous with falling prices. Historical evidence points to falling prices as a consequence of productivity and economic progress that result from increasing production and the supply of goods and services which lead to lower prices. Gold -- Sharefin, 23:20:56 03/08/04 Mon Gold glitters as dollar hit by poor payrolls Standard Chartered's Global Research team looks at the implications of last Friday's poor US economic numbers for interest rates and gold prices. ~~~ Friday's numbers were a big disappointment. Nonfarm payrolls rose just 21k in February, well short of the consensus of 130k and our own forecast of 200k. ~~~ The immediate market reaction to the payrolls was to sell the US dollar. What's bad for the dollar is good for gold prices. Since mid 2003, USD weakness has continued to support gold, despite the strengthening global recovery. The price of gold rose by 21% in USD terms in 2003, but was virtually flat in euro terms. The market has consolidated over the last month. The price has dropped back below USD400/ounce since late February as the dollar stabilised against the euro. Speculative net long positions on the COMEX have almost halved since their peak in January. However, they do remain significant, raising the risk of a sharp downward correction should USD sentiment change. We expect further overall dollar weakness in 2004, but some recovery against the euro from 3Q, putting pressure on gold prices in the second half of the year. Fundamentals are giving mixed messages. Mine production is constrained by strength in producer currencies, but scrap volumes are increasing. On the demand side, jewellery demand is suffering, but China is a potential positive factor – recent sector liberalisation could significantly raise investment. The 'Washington Agreement on Gold', ensuring the orderly release of central bank reserves onto the market, expires in September 2004, but we expect it to be renewed in some form. Overall, we expect 2004 prices to average higher than 2003 at 380-400 USD/ounce. Gold -- Sharefin, 23:17:14 03/08/04 Mon Remember gold? Now may be the right time to invest Price, of course, is also affected by supply and demand, though gold does not have a direct relationship with the other commodities. Supply, in the sense of finding more of it in the ground, is very limited. However, supply in the sense of people tipping it out of their pockets is another matter. Wolfgang Wrzesniok, a precious metals and commodities product manager at the investment bank Dresdner Kleinwort Wasserstein, says: "Currencies are the main driver of the gold market. The second most important driver has been speculative buying by gold mines. When the price of gold looked like it was about to decline, gold mines started to buy back the future production they had already sold to support the price." So where next for gold? Richard Davis, a fund manager on the Merrill Lynch Investment Managers natural resources team, says: "The outlook for gold remains reasonably positive and we expect the up-trend to continue for at least a couple of years as the dollar stays weak, mines continue to buy back their forward positions and investor demand continues to increase steadily." But Matthew Parry, senior commodities editor at the Economist Intelligence Unit, says: "From a historical perspective, the price of gold is too high at the moment. I expect it will continue upwards until the middle of this year, before a slow decline." Barclays Capital's metals analyst, Kamal Naqvi, confirms this outlook. "We feel prices are coming towards their head and the dollar will recover before steadying by the end of the year," he says. Mr Parry bases his forecast on the fact that huge stocks of the metal are available worldwide and the expectation that the dollar will strengthen. He predicts that by 2008 the price will come down to about $300 per ounce. But inflation could nullify this scenario. Mr Parry says: "Gold is a good store of value when there is high inflation. Federal banks around the world have taken a very laissez-faire attitude to inflation, but it could come back, leading interest rates to rise. If this happens in the States, say after the November presidential election, then the UK will follow and normal folk could start turning to gold as an alternative investment to property; this demand could support higher prices." On this outlook, how would "normal folk" invest in gold? The main options are investing in commodities funds, shares in gold mining companies, Gold Bullion Securities and buying physical gold in the form of gold bars, coins and jewellery. Gold -- Sharefin, 23:06:54 03/08/04 Mon Shanghai Gold Exchange suspends controversial gold futures product Shanghai. (Interfax-China) - The Shanghai Gold Exchange (SGE) has suspended its controversial gold futures product, T+5, originally launched as an experimental product among 28 of its members on February 18. The SGE told Interfax that the Au T+5 series had been suspended due to a lack of trading volumes. Since February 18, trades have been recorded in the product on only three days, with volumes amounting to just 14 kg. Since February 23, no trading has been recorded in the Au (T+5) series at all. Gold -- Sharefin, 23:04:21 03/08/04 Mon 11 die in Java gold mine fumes AT least 11 people, mostly illegal miners, have been killed by fumes at a state-run gold mine on Indonesia's Java island. Several newspapers reported today the victims were suffocated by smoke from old tyres which were allegedly set ablaze by mining company officials to flush out the illegal miners. There was no immediate official confirmation. Gold -- Sharefin, 23:02:12 03/08/04 Mon Tax cut in gold jewellery considered China's policy makers are currently looking at plans to scrap the 5 per cent consumption tax on gold jewellery, a move which could provide a great fillip to the nation's gold processing industry. ~~~ The better way to develop the industry is to increase the added-value of the products and to change Chinese consumers' attitudes towards gold and increase consumption, Luo added. Per capita gold consumption in China is just over 0.7 grams a year, compared with 11 grams in the United States and Europe, although China has become the third largest country in terms of gold consumption, standing at more than 200 tons last year. Gold -- Sharefin, 22:59:54 03/08/04 Mon Alarm bells sound for Fannie and Freddie Ordinarily, Alan Greenspan's testimony to Congress gives Prozac serious competition for medicating the over-anxious. Last week, though, the Federal Reserve chairman's warnings about Fannie Mae and Freddie Mac, the government sponsored enterprises, or "Sodom and Gomorrah", as one friend of mine calls them, came as something of a shock. He said that "we assess [systemic risk] as likely if GSE expansion continues unabated". Mr Greenspan's warning was accompanied by one from Gregory Mankiw, the chairman of the President's Council of Economic Advisors, who warned: "Even a small mistake in GSE risk management could have ripple effects throughout the economy." What's most odd about these warnings is that they appeared to come out of the blue. Over the past two or three years there has been a stream of articles, speeches, conference calls, and tedious op-ed columns by people such as yours truly about the potential systemic risk posed by Fannie and Freddie. Since Mr Greenspan is the master of acting hyper-political while posing as non-political, and since Mr Mankiw is on a very short leash held by the White House's political operators, one has to wonder the following: what do they know that we don't know? Is some buttress in the financial system going to fail soon? Why are the pilot and co-pilot putting on their parachutes? Should we buy some more canned food and ammunition for the country house? Not that I don't agree with everything both men said. They were entirely correct. However, there is no chance at all that there will be limits placed on housing finance in an election year. These are ass-covering memos. Gold -- Sharefin, 22:58:49 03/08/04 Mon Alarm bells sound for Fannie and Freddie Ordinarily, Alan Greenspan's testimony to Congress gives Prozac serious competition for medicating the over-anxious. Last week, though, the Federal Reserve chairman's warnings about Fannie Mae and Freddie Mac, the government sponsored enterprises, or "Sodom and Gomorrah", as one friend of mine calls them, came as something of a shock. He said that "we assess [systemic risk] as likely if GSE expansion continues unabated". Mr Greenspan's warning was accompanied by one from Gregory Mankiw, the chairman of the President's Council of Economic Advisors, who warned: "Even a small mistake in GSE risk management could have ripple effects throughout the economy." What's most odd about these warnings is that they appeared to come out of the blue. Over the past two or three years there has been a stream of articles, speeches, conference calls, and tedious op-ed columns by people such as yours truly about the potential systemic risk posed by Fannie and Freddie. Since Mr Greenspan is the master of acting hyper-political while posing as non-political, and since Mr Mankiw is on a very short leash held by the White House's political operators, one has to wonder the following: what do they know that we don't know? Is some buttress in the financial system going to fail soon? Why are the pilot and co-pilot putting on their parachutes? Should we buy some more canned food and ammunition for the country house? Not that I don't agree with everything both men said. They were entirely correct. However, there is no chance at all that there will be limits placed on housing finance in an election year. These are ass-covering memos.  Gold -- Sharefin, 22:55:14 03/08/04 Mon Gold bull has hardly started - Lassonde Newmont president, Pierre Lassonde, is certain that the gold bull market remains in its infancy, and points investors to the 1970s to understand how events might unfold in gold's favour in an era of a “manic depressive dollar”. “We haven't even started to correct the US financial imbalance of the last three years. Don't tell me that the gold bull market is over. It has hardly even started,” Lassonde told the audience at the 2004 BMO Nesbitt Burns Global Resources Conference in Tampa, Florida. He predicted that gold will outperform other assets for some time to come. “As long as they don't cure the financial imbalances, the dollar will continue to go down and be very volatile. I don't know how long it will take, but it will take quite a few years [to work through] and that is the gold story in a nutshell.” Gold -- Sharefin, 22:53:24 03/08/04 Mon ‘India should become a global hub' India should be developed as a major bullion hub on the lines of Dubai as the country, the largest consumer of gold in the world, has the potential for strong re-exports, experts feel. ~~~ Similar changes have recently taken place in Egypt, the second largest re-export destination for gold from Dubai. It is, therefore, important and the appropriate time to bring about further changes in the Indian bullion markets, mainly Mumbai, the experts said. Dubai has traditionally been called the ‘City of Gold' for its role as an entrep“t for gold, serving markets such as India and Egypt. In 1997, at the peak of its gold trade, Dubai imported 660 tonnes of gold and re-exported around 600 tonnes, with a market value in the region of $6.5 billion. Of late, however, Dubai's status as a major bullion center has eroded. Dubai's gold imports have fallen to about 257 tonnes in 2000, and its annual re-exports to probably just over 200 tonnes, with a market value of about $2.3 billion. Gold -- Sharefin, 22:51:50 03/08/04 Mon Strong rand knocked gold output in 2003 South Africa's gold production decreased by 4.9% to 375.8 tons in the 2003 calendar year, down from the 395.2 tons produced in the previous year, the Chamber of Mines (CoM) said in a statement. Gold output from CoM members fell by 10.4% in 2003 from the 2002 year. The fall in South African gold production in 2003 was characterised by the industry's response to the strong rand exchange rate and the impact of the strong rand on higher domestic production costs. The gold mining sector was forced to counteract the effects of the strong rand by mining at higher average grades, but this did not assist in boosting production to a level closer to that achieved in 2002. Gold -- Sharefin, 22:48:44 03/08/04 Mon Energy and the US Dollar Since the signing of the Maastricht Treaty, which created the Euro zone in 1992, there has been much speculation that the oil exporting world would one day consider pricing oil in euros. The world did not have to wait long after the birth of the euro in 1999 to witness Iraq's pricing its oil in euros. Australian environmentalist Geoffrey Heard provided some unique insight into fellow OPEC members' reaction to Iraq's decision to price its oil for export in euros in a 2003 article entitled “Not Oil, but Dollars vs. Euros”: “In 1999, Iraq, with the world's second largest oil reserves, switched to trading its oil in euros. American analysts fell about laughing; Iraq had just made a mistake that was going to beggar the nation. But two years on, alarm bells were sounding; the euro was rising against the dollar, Iraq had given itself a huge economic free kick by switching. Iran started thinking about switching too; Venezuela, the 4th largest oil producer, began looking at it and has been cutting out the dollar by bartering oil with several nations including America's bete noir, Cuba. Russia is seeking to ramp up oil production with Europe (trading in euros) an obvious market. The greenback's grip on oil trading and consequently on world trade in general, was under serious threat. If America did not stamp on this immediately, this economic brushfire could rapidly be fanned into a wildfire capable of consuming the US's economy and its dominance of world trade.” After the US invasion of Iraq, the country's oil exports were priced in US dollars. While Mr. Heard may have overestimated the role of the euro in the war in Iraq, there is no doubt that the falling US dollar has raised concerns over whether it is prudent for oil exporting countries to price a significant portion of their GDP in a depreciating currency. While many have argued that pricing oil in euros will lead to higher oil prices, not much attention has been given to the possibility of oil being priced in gold. While this might seem like a fringe idea, those who have an appreciation for gold's place in many Muslim oil exporting countries believe the pricing of oil in gold is inevitable. ~~~ I am rather confident that several Muslim countries will price their oil in gold before the end of this decade. The simple reason behind this change is that the US dollar and the euro are going to steeply depreciate against the value of gold. Gold -- Sharefin, 22:46:13 03/08/04 Mon Gold Sales Agreement Although the agreement calls for up to 500 metric tonnes of gold per year to be sold, it looks uncertain if this goal is achievable. For instance, Germany's central bank (Bundesbank) has stated its intentions to sell off 600 tonnes of its 3,440 tonne reserves, as part of the pact. Yet, the majority of Germany's Bundesbank board is not in favor of such an action The Swiss have no plan to sell beyond their current 130 tonnes. The United Kingdom dropped out of the agreement and replaced by Greece who noted they have no intension to sell any gold.. The Bank of Italy has not sold any gold for over ½ a century and is not clear if they will actually sell any of their holdings. Gold -- Sharefin, 19:47:50 03/08/04 Mon European banks to increase gold sales European central banks on Monday raised the amount of gold they planned to sell over the next five years, with a significant share of the proceeds expected to help plug the budget deficits in Germany, and possibly France and Italy. But the deal, which was broadly in line with market expectations, gave no indication of how sales would be allocated and could yet herald a bout of fierce haggling between the 15 signatories. The 15 central banks said they would limit joint sales of their gold reserves to 500 tonnes a year over the five years to September 2009, or a total of 2,500. This is above the 400 tonnes a year sale limit under the current five-year accord, which expires in September. "There has been no agreement yet (on gold sale allocations), but that will be the next thing we will have to work out," said one official at a European central bank. ~~~ The pact, which was signed by the European Central Bank, the 12 national central banks of the euro-zone and the central banks of Switzerland and Sweden, was announced after a Group of 10 meeting in Basle, Switzerland. ~~~ So far, German has said it has an option to sell 600 tonnes in the new pact. Switzerland and the Netherlands will have about 200 tonnes in total to sell in the new accord that they were unable to sell in the original pact. Leaving 1,700 tonnes of gold needed to be allocated for sale. Only France and Italy has bullion holdings that are large enough to fill this void. Italy, the third biggest holder of gold in the euro-zone, is also thought to be keen to sell some gold as is France although the French central bank has traditionally been hostile to drawing down bullion stocks. Gold -- Sharefin, 06:09:57 03/08/04 Mon Joint Statement on Gold - 2004 European Central Bank Banca d'Italia Banco de España Banco de Portugal Bank of Greece Banque Centrale du Luxembourg Banque de France Banque Nationale de Belgique Central Bank & Financial Services Authority of Ireland De Nederlandsche Bank Deutsche Bundesbank Oesterreichische Nationalbank Suomen Pankki Schweizerische Nationalbank Sveriges Riksbank In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement: Gold will remain an important element of global monetary reserves. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons. Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement. This agreement will be reviewed after five years. ~~~ Joint Statement on Gold - 1999  Gold -- Sharefin, 06:08:35 03/08/04 Mon European Central Banks Strike Gold Deal BASEL, Switzerland (Reuters) - Europe's central banks said Monday they had reached a new deal that raises the limits on their annual gold sales in a further blow to bullion's role as a global monetary tool. They capped sales at 500 metric tons a year for the next five years -- a total that was broadly in line with expectations and slightly higher than the expiring pact's 400-tonlimit. The overall limit for the five-year accord is 2,500 tons, up from 2,000 under the 1999 agreement. ~~~ The new accord will start in September 2004, replacing the original 1999 agreement that expires on that date, the central banks said. Before the new deal was struck, the Bundesbank, the world's second largest holder of central bank gold, said it had requested an option to sell 600 tons. The UK said it would not take part in the new program because Britain did not intend to sell any gold during the period covered by the deal. The Swiss National Bank said it had no plans to sell beyond 130 tons already planned. The agreement was announced on the sidelines of the Group of 10 meeting of central bankers from top industrialized nations and emerging markets. ~~~ "Gold will remain an important element of global monetary reserves," the joint statement by 14 central banks and the European Central Bank said. Central banks have been shedding gold, once a mainstay of their reserve assets, in favor of hard currencies as gold's status as a store of value has declined. Periodic Ponzi Update PPU -- $hifty, 21:39:03 03/07/04 Sun Ponzi Chart Periodic Ponzi Update PPU Nasdaq 2,047.63 + Dow 10,595.55 = 12,643.18 divide by two = 6,321.59 Ponzi Up 14.72 from last week. Thanks for the link RossL! Go GATA ! Go GOLD ! Hi Ho Silver ! $hifty Gold -- Sharefin, 02:18:17 03/02/04 Tue Gold to go higher in 2004 In December, the monthly average price of gold exceeded $400 per ounce, its highest level since 1996. Investment demand, driven by increasing global geopolitical risk and dollar weakness, helped propel the price of gold higher by over $70 per ounce in 2003. In addition, hedge unwinding by gold producers and limited gold production also underpinned gold prices. In 2004, the price of gold is expected to continue rising, reaching levels comparable to those seen in the early 1980s during the last oil price shock. Factors that pushed gold prices higher in 2003 will again drive gold prices higher in 2004. Most important for gold prices will be the strength of investor demand. Increasing global geopolitical instability, further dollar depreciation and growing risk of dollar devaluation will all strengthen investor demand for gold. Demand from producer de-hedging will continue at last year's pace. Gold supply is expected to remain nearly stable. Gold production will increase slightly while central bank sales of gold are expected to decline. With investor demand expected to increase and supply to hold roughly stable, the price of gold should approach $500 per ounce by the end of 2004. ~~~~ Increasing global geopolitical instability, weak US economic fundamentals and the preponderance of foreign investment in US fixed-income securities imply dollar depreciation will continue in 2004 and suggest the possibility of a large dollar devaluation. These factors are expected to increase the demand for gold among investors. In the past two years, producer de-hedging has also contributed to improved demand for gold. De-hedging, or reversal of forward gold sales by mining companies, has gained momentum with industry consolidation, pressure to improve accounting transparency and rising gold prices. Producer de-hedging created demand for 423 tons of gold in 2002 and an estimated 400 tons in 2003. In 2004, de-hedging is expected to induce demand for another 400 tons of gold. Fabrication demand for gold is expected to increase by around one percent this year after growing by an estimated three percent in 2003. Against the background of increasing investor demand for gold, continued producer de-hedging and steady fabrication demand, the supply of gold is expected to be steady. Gold production from mining has been nearly stable over the past two years. Consolidation among mining companies and mines has led to consolidation of gold production. Gold production should increase by only around one percent in 2004 to 2,625 tons. Apart from mining production, the other significant component of gold supply has been central bank sales of gold reserves. In 1999, 15 European central banks agreed to limit their sale of gold reserves to a total of 400 tons annually for five years. This agreement expires in September but will very likley be extended for another five years. Speculation surrounds the scope of the next central bank agreement. Expectations for the amount of gold these central banks will agree to sell annually range from 400 tons to 650 tons. While at least two more European central banks are expected to join the next gold sales agreement, the aggragate amount of gold that these banks will sell is very unlikely to increase sharply due to the impact that such a change would have on prices. In 2002, total central bank sales of gold amounted to 559 tons. Central bank gold sales are estimated to have increased slightly to about 575 tons in 2003. This year, renegotiation of the central bank gold sales agreement is expected to slow central bank gold sales to about 500 tons. ~~~ Overall, the total supply of gold should be relatively unchanged this year. With gold supply steady, demand - specifically investment demand - will determine gold prices this year. As in 2003, investment demand will benefit from global geopolitical instability and dollar weakness. However, this year, geopolitical instability and dollar weakness are very likely to intensify, pushing the price of gold toward $500 per ounce. Gold and gold mining stocks will remain an attractive investment and hedging vehicle in 2004. Over the next few months, the price of gold is expected to be volatile. This volitility will come as a result of speculation ahead of the next central bank gold sales agreement. However, once this agreement is finalized, probably in the second quarter, the price of gold will move higher. The price of gold will continue to rise as the US presidential elections approach in November. Gold -- Sharefin, 01:58:33 03/02/04 Tue India's gold appetite firm despite price rise: WGC Following are gold demand estimates in consuming countries as compiled by the GFMS. The figures are in tonne. 2003 India :- 568.7 Greater China :- 231.3 China :- 207.6 Japan :- 94.7 Indonesia :- 82.7 Vietnam :- 58.8 Saudi Arabia :- 133.1 Egypt :- 67.0 UAE :- 90.3 TOTAL :- 1534.2 tonnes Gold -- Sharefin, 01:54:40 03/02/04 Tue India's gold appetite firm despite price rise: WGC Demand for gold in India, the world's largest consumer, rose nearly four per cent in 2003 despite a 20 per cent jump in prices that cut consumption in some Asian countries, an industry official said on Monday. "This should be considered quite good because the price of gold had gone up so much," said World Gold Council's regional planning manager TH Koh. India bought 568.7 tonne of gold for jewellery and investment last year, against 547.3 tonne in 2002, leading mine research group GFMS said in a report compiled for the World Gold Council. ~~~ Bullion dealers expected India's consumption to reach 600 tonne this year. ~~~ Gold consumption in mainland China rose slightly to 207.6 tonne last year from 203.9 tonne in 2002. Japan's consumption fell to 94.7 tonne last year from 141.6 tonne in 2002.  Gold -- Sharefin, 01:52:28 03/02/04 Tue Banks may sell $41bn of gold European central banks may agree to sell as much as $US32 billion ($41billion) worth of gold in the next five years when an accord that has helped support prices since 1999 comes up for renewal this year, a survey of analysts and traders shows. The group of at least 15 banks, including the European Central Bank and the Bank of England, may lift their sales caps on bullion to 2500 tonnes over five years from 2000 tonnes in the current agreement, according to the median estimate of 13 analysts and traders surveyed by Bloomberg News. Germany's Bundesbank in January said it wanted to sell 600 tonnes, after shedding only 29 tonnes of gold coins since 1999. Gold prices have climbed almost 50per cent since the accord was first reached. It may be renewed as early as March, ECB council member and Bundesbank president Ernst Welteke said in September. "The market can absorb a slight increase," said Joe Foster, who manages $US290 million in gold-related investments for the Van Eck International Investors Gold Fund in New York. "We need their sales, or there wouldn't be enough supply." Platinum -- Sharefin, 06:29:22 03/01/04 Mon NY platinum futures hit 24-year high over $900/oz Platinum futures on the New York Mercantile Exchange rose above $900 an ounce for the first time since early 1980 on Monday, as speculative funds took their cue from strong buying in Asian precious metals trade. ~~~ Floor brokers said funds were heavy buyers in platinum and palladium, which was up $12.35 at $245.00 an ounce. Asian buyers bought platinum aggressively on the Tokyo Commodity Exchange overnight, mostly because the weakness of the dollar made it more affordable to investors holding yen. Silver -- Sharefin, 06:28:05 03/01/04 Mon NY silver tops $7/ounce for first time in six years COMEX silver soared almost 5 percent early on Monday to a six-year high as funds took advantage of one of the thin precious metals markets to run pre-placed buy orders above the $7-an-ounce mark. ~~~ Both the euro and yen were up against the dollar. The greenback's 2004 bear market continues to drive investors into alternatives, especially hard assets like precious metals. Silver followed a rally in platinum futures to a 24-year high, while palladium and gold were also up strongly. Periodic Ponzi Update PPU -- $hifty, 23:39:11 02/29/04 Sun Ponzi Chart Periodic Ponzi Update PPU Nasdaq 2,029.82 + Dow 10,583.92 = 12,613.74 divide by 2 = 6306.87 Ponzi down 21.61 from last week. Thanks for the link RossL ! Go GATA ! Go GOLD ! $hifty Fiat -- Sharefin, 21:02:13 02/29/04 Sun In Denial. One thing Europe and America have in common. But Europeans are not the only people who refuse to learn from their past mistakes. Remarks made by Federal Reserve Chairman Alan Greenspan and Governor Ben Bernanke, at the American Economic Association meeting at the beginning of January, were marked by a refusal to learn the lessons of history. The common thread of both key speeches was a denial that the Fed's failure even to attempt to restrain the bubble which burst in 2000 was a mistake. It has often been remarked that those who fail to learn the lessons of history are doomed to repeat their errors and, due to the frequency with which this occurs, it has been said with almost as much truth as wit that “history teaches us that it teaches us nothing”. By denying that they should have sought to restrain the bubble, the Federal Reserve's Governors risk repeating their mistakes. Although the stock market is well below its peak level, that level was so extreme that Wall Street appears once again as over-valued as it has been in all other stock market booms, such as those of 1929 and 1968. The element of denial in the Federal Reserve's attitude is underlined by the way in which the defence of allowing a bubble is changing. Previously the claim was that central banks should ignore changes in asset prices. However, part of the complaisance today is self-congratulation about the interventions to stabilise the stock market after its falls in 1987, 1998 and 2001. The asymmetry of the US central banks' policy is now affirmed. It seems that liquidity should be eased to prevent sharp falls, but it should not be tightened to avoid rapid rises. Such an attitude is almost a guarantee of future bubbles and the speed with which the current one has built up is thus less surprising than it would otherwise have been. However, when the current bubble bursts, the Fed will be faced with even greater problems that it was after the last one. ~~~ The apparent refusal of both Americans and Europeans to face up to the possibility of past error is sad and dangerous. There is a risk that the next Wall Street crash may come before Europe has staged any real recovery from its last recession and when the Federal Reserve may be unable to ameliorate the consequent US recession to the same extent as the last one. Fiat -- Sharefin, 20:28:41 02/29/04 Sun Russia ready to use reserves to calm rouble Russia is prepared to use its foreign-exchange reserves to cushion any upward pressure on the rouble, as it closely watches the U.S. dollar's fall against the euro, the Financial Times reported on Monday. Oleg Vyugin, the Russian central bank's first deputy chairman, told the paper in an interview that the bank was prepared to act to prevent the currency market from "overheating." Russia has seen strong interest from portfolio investors, lured by its rising markets and economic potential. "If there is a big flood of portfolio investment into the Russian market, the central bank is ready to use its reserves to sterilise this," Vyugin was quoted as saying. Russia's gold and foreign-exchange reserves stood at $86.7 billion as of Feb. 20, up $9.8 billion since the start of 2004, thanks largely to high oil and commodities prices, heavy corporate borrowing abroad and more Russians shifting their savings into roubles away from a weak dollar. That has propelled the rouble to almost three-year highs against the dollar and forced the central bank to contain the rise to help local producers compete with foreign goods Weekend Rant -- auspec, 13:06:11 02/28/04 Sat Subject: Sinbad Knows the Power Elite Game From a Feb 21st article by James Sinclair at www.jasmineset.com {fair use copyright, educational for his psycophants}: This is the final battle in which the spoils are not currency, markets, economics but rather POWER. The idea that the end game here is money is a critical error. Do not assume what you see being done is stupid, because that is simply not the case. The end game here is not currency because wealth today is POWER and power is the control of information and technology. Currency is not wealth. Lots of currency is a large pile of ever-depreciating paper enclosed within electronic chips called the bankwire transfer system. The SG-7 WASPs running the show already have what they want in terms of paper wealth. Now, it is control of information, technology, oil, minerals, strategic military assets and locations. The US dollar will only survive this experience as a second grade medium of exchange. It will never again - even among the ever believing equity flag waving, obedient sheep - be considered a storehouse of wealth. It is this self-evident development that has to indicate that the “end game” here is not the assumed greed for more paper wealth by the Muktar/Chiefs of this society. It is control of the planet via control of information and technology, which today is currency that is clearly a storehouse of value, a medium of exchange and a measure of value. Can't you see that the Muktar/Chiefs of the US, Japan, Euroland, Central Europe and the ex-Soviet Union are walking hand-in-hand to maintain each other's position of power at any cost, while spinning cover story differences to keep the sheep in line and asleep. Those who are not team players such as Middle East dictators are being removed and neutralized. Quack-Daffy, among Middle Eastern leaders for life, woke up to the realization and sued for membership. Yet, there is a cost to maintaining power by manipulation of those elements required to placate the believers because elections are still the means required to maintain the power base. The pretence of wishing stability is a great part of the unfolding drama. That type of initiative is demonstrated below but mark my words, the yen will trade below 100 in 2004. Gold is headed back into the US dollar but only after the dollar is reduced to fish food. The new wealth of information and technology will not in anyway belong to the public but only to the partners of SG-7. The public will and is presently adopting gold as the currency of choice. Outside of the control of technology and information comes minerals and energy. For those of us who still paddle their canoe in the river of normality, true wealth is in mineral commodities. This is wealth creation at its finest because you are discovering and developing something that has a tangible value and is genuinely needed by socieity. This is why I have and will continue to invest in gold and minerals while as a professional trader speculating in their paper equivalents thereby placing my hard won market winnings into a mineral company I manage..... END Comment: "Paper equivalents"........? Sorry, Mr. Gold, they are but a scam or facade of the real thing. In your article you talk about taking down physical as about the last choice you would ever consider. G, what a surprise, Mr. Paper. You have led many mice down your Pied Path and now you can watch over on your CRIMEX as the real players dismantle the silver sham. Without your own elitist ties you could have led the charge. If you are not part of the solution....you're part of the problem. This is not our Grandfather's gold market. Instead of teaching TA in crooked markets JS could have preached physical delivery from crooked markets. He has had his chance. Yea, I'm pretty insulting at times, but every now and then the nail slithers directly into the wood w one quick smack. Even with the above unflattering depiction of JS out of the way......one can still see his accurate depiction of the international battle for POWER, via currencies, technology, information as well as resources. He knows of which he speaks.............in fact he wants "in" at the highest level possible. His favorite "resource"....? Paper, what else. Someone is going to have to do "something" about dis here "NET". No? Waggin along, The au{in}spec{tor} {as in aw shucks........there he goes again} Fiat vs Gold -- Sharefin, 06:35:46 02/27/04 Fri Heading for a fall, by fiat? The trouble with paper money IS THE problem with the dollar only that it is falling? It has certainly been doing that. This month, it fell to $1.29 against the euro. This is its lowest-ever rate against the euro, and represents a decline of 19% since the beginning of 2003. In trade-weighted terms, the dollar has fallen less over the same period (15%), but mainly because Asian central banks have been intervening heavily to stem their currencies' rise against it. Of late, it has been wobbling around unconvincingly: America needs a weaker dollar to correct its current-account deficit. But given the dollar's role as a currency of last resort, some wonder if its decline heralds not just an economic adjustment by the United States, but a crisis of sorts in the value of paper money itself. Money in its present form is a relatively new invention. For most of human history money meant either gold or silver, either directly, or indirectly by means of the “gold standard” which meant, at least in theory, that all paper money was backed by gold. Enthusiasm for the gold standard evaporated in the 1930s, when it made dreadful conditions worse. But it was adopted in a watered-down version after the second world war, when only the dollar was backed by gold. This arrangement made some sense, since America held three-quarters of the world's gold stock. But it came to an end in 1971, when inflationary pressures in America caused the country's manufacturers to become uncompetitive and forced the country off the gold standard. Since then the world has relied on “fiat money”, so-called because it is created by government fiat and is backed only by the promises of central bankers to protect the value of their currencies. It is the value of those promises that some are now questioning. ~~~ The problem may be that bond investors, far from being far-sighted, are in fact myopic, and are perhaps being fooled by the temporary disinflationary effects of excess capacity and debts built up over the bubble years in both Japan and America. Perhaps, too, investors have been lulled into a false sense of security by the performance of central banks in recent years, and the independence that has been granted to many of them by governments. But this very aura of inviolability may be storing up problems, since it means that governments can borrow still more at cheap rates. And if governments then find themselves crushed by debt, you can rest assured that this independence will be taken away. And then, once again, the paper in your pocket will only be as good as a politician's promise. Fiat -- Sharefin, 21:27:51 02/25/04 Wed COMEX gold nosedives on ECB jitters COMEX gold fell more than 2 percent Wednesday to its lowest price in more than three months, as the dollar rebounded on reports that the European Central Bank stood ready to intervene to slow the euro's rise. Remarks Wednesday by Federal Reserve Chairman Alan Greenspan before the U.S. House of Representatives Budget Committee that the United States could not grow itself out of its budget deficit, which has fueled selling of the dollar on world markets, did nothing to slow the greenback. Benchmark April gold breached Friday's low point as it fell to $393.00 an ounce, its cheapest since Nov. 26. Traders pointed to a Market News International report that cited unnamed sources as saying the ECB and the Bank of Japan could step into the currency markets. Gold -- Sharefin, 07:40:02 02/25/04 Wed Will Asian central banks buy gold? Mumbai, Feb. 24 GOLD producers are incurable optimists. They constantly look for opportunities to expand the demand base. Believers in gold have always been positive about prices and are willing to project a favourable outlook based even on seemingly innocuous statements of policy makers. No wonder, the Japanese Finance Minister's statement last month about the ongoing discussions relating to positioning of gold in foreign reserves has evoked interest in the market. He was answering a question whether Tokyo would bring its gold reserves more in line with other nations. ~~~ It is no secret that large Asian central banks have a low proportion of gold as part of their total reserves as compared to European central banks and the US. However, Japan with 765 tonnes and China with 600 tonnes are amongst the top 10 largest gold holders already; and indeed, hold a similar quantum of gold as the ECB (767 tonnes). The difference is of course in gold's share of the total reserves. So, the question that arises is: will Asian central banks buy gold? ~~~ ``For example, if Japan wanted to match the proportion of gold in its reserves as the ECB (initially) then 15 per cent would equate to a requirement to purchase nearly 6,800 tonnes. Given that this represents 2.6 years' of mine output, such a purchase scheme is virtually impossible to transact in anything other than a massive off-market transaction,'' Mr Naqvi remarked. But gold market lives on hope. Few would have believed prior to September1999 that European central banks would come together to agree to conduct and contain gold sales as a group— but it happened and fundamentally altered the market. According to the analyst, if any of the major Asian countries had intention to meaningfully raise their percentage of gold as a proportion of their total reserves, then the next few months are realistically their only opportunity to do so. Before any new European gold sales agreement begins (it is up for renewal in September 2004), it is conceivable that an approach could be made to Europe from one or more Asian central banks to purchase several thousand tonnes of gold in a major `off-market' or `staged' transaction. Fiat -- Sharefin, 07:26:58 02/25/04 Wed IMF director endorses Tokyo yen intervention Japan was right to intervene massively in the foreign exchange markets, a "pragmatic" policy that had helped the economy and the fight against deflation, Horst Köhler, managing director of the International Monetary Fund, said Wednesday. In remarks that are likely to intensify debate over Tokyo's unprecedented and controversial levels of foreign exchange intervention, Mr Köhler said: "It is pragmatic and helps stabilise the financial system and battle deflation." ~~~ Last year, Japan spent about $185bn - about twice its trade surplus and three times the previous record - to prop up the dollar and arrest the yen's appreciation. The policy has been seen as aimed largely at helping exporters, who are leading Japan's economic recovery. However, Mr Köhler suggested it was also playing an important role in monetary policy. Japan has been steadily printing money to buy foreign currency bonds. ~~~ In an interview on Wednesday, Shintaro Ishihara, governor of Tokyo and an outspoken critic of the government, said intervention was aimed at helping the US, not Japan. Some academics have argued that Japan's massive purchase of US treasuries has played an important role in keeping US interest rates low and financing its twin current account and fiscal deficits. "Japan is the US's financial slave," Mr Ishihara said. ~~~ Most of Japan's $741bn of reserves, the world's largest, were parked in US treasuries, dead assets that could never be repatriated, he said. "If we tried to sell dollars, the yen would dramatically appreciate. Technically we could do it, but economically it's impossible." Fiat -- Sharefin, 07:04:02 02/25/04 Wed Fed's Gramlich warns on mounting U.S. debts Reserve Board Governor Edward Gramlich warned on Wednesday that large, persistent U.S. budget and trade deficits could lead to "significant economic adjustments" worldwide, and urged fiscal belt-tightening. ~~~ "In the long run, however, both deficits could become much more worrisome," he said in the text of a speech made at the Euromoney Bond Investors Congress in London. "At some point, continued large-scale trade deficits could trigger equilibrating, and possibly dislocating, changes in prices, interest rates, and exchange rates," the U.S. central banker said. "Continued budget deficits...may also trigger dislocating changes." Gold -- Sharefin, 06:19:14 02/25/04 Wed The Silver Lining in Gold The higher price of gold has led exploration to new frontiers. Expect gold to hit $500 an ounce this year, but the real excitement right now is silver, says Sprott Asset Management Chief Investment Strategist John Embry ~~~~~~ We've got worldwide growth which is in part driven by consumer strength in the U.S. The U.S. has been printing money and creating credit at a rapid pace, and a lot of demand is going to China and India. The inevitable direction of the U.S. dollar is to continue to move down. The weakness in the U.S. dollar will create pressure on other countries to print their own money to support the U.S. dollar. There's a "zillion" people looking for gold these days with the higher price of gold, because people can now get the financing. But gold is a precious metal because it's not easy to find. There was a lot of money put into the ground in the boom of the mid-90's, but very little was found. But now new frontiers are opening up, like in China and Mongolia. The Chinese have really opened up their doors. They want foreign capital and foreign mining expertise. He still likes Southwestern Resources. Even though the stock has gone up, he says people will be shocked at the number of ounces that company will be producing. Another stock he continues to like is Queenstake Resources. Although many people were concerned they don't have their resources to maintain their current capacity going forward, Mr. Embry is convinced it will last for many years, and that the stock is extremely cheap right now. Investors should also be paying attention to silver. He says silver is actually a better story than gold right now. Mr. Embry says there is 580 million ounces being dug out of the ground right now each year, but about 800 million ounces are consumed. He says he sees silver hitting $10 an ounce before the year is out. There aren't many good silver plays out there right now. There are no cheap silver stocks as the market has recognized the explosiveness of the situation. He says gold will hit $500 an ounce this year. That's been his story, and he's sticking to it. Gold -- Sharefin, 06:15:26 02/25/04 Wed Barrick Sees 40 Pct Rise in Gold Production by 2007 Barrick Gold Corp. , the third-largest gold producer in the world, said on Tuesday it expects to boost production by about 40 percent by 2007 as a handful of new mines come on stream. The Toronto-based miner said in a release that it plans to mine 6.8 million to 7 million ounces of gold by 2007, up 40 percent from the anticipated level of 4.9 million to 5 million this year. Gold -- Sharefin, 06:14:24 02/25/04 Wed Gold: Where to from here? And what about gold as an investment avenue on a timeframe greater than three years? Faber is in favour of gold. "Gold is the only currency whose supply cannot be increased by an irresponsible government, whose sole purpose is to get reelected in order to continue to rob hard working people and abuse its power." Gold -- Sharefin, 06:10:30 02/25/04 Wed Profit dive overshadows Lihir's reserves upgrade A significant increase in gold reserves would usually be warmly greeted by the market, but Lihir Gold [ASX:LHG] was instead marked down for a big slump in earnings announced on the same day. The Aussie-listed Papua New Guinean gold producer today (Tuesday) unveiled a better than anticipated expansion in proved and probable gold reserves for the Lihir operation of 4.4 million ounces or 27.5 percent to 20.4Moz (based on an assumed gold price of US$340 per ounce). Most of the reserve upgrade to 163.5 million tonnes grading 3.88g/t was generated by the inclusion for the first time of the higher-grade Kapit deposit, which contains 25Mt at 5.3g/t. ~~~ During the CY, Lihir elected to defer about 161,000oz of out-of-the-money hedge commitments in order to lift the volume of sales delivered into the higher spot price market. Its hedge book, which consists of about 2Moz of predominantly forwards averaging about US$330/oz, had a mark-to-market value as at 31 December of negative US$205 million. Although today's reserves boost certainly materially reduces the percentage of cover (to about 10 percent of updated reserves), the upshot of rolling over hedges, which incurs charges, seems to be stacking up in the near-to-medium-term. “We estimate that Lihir has an average of 46 percent of annual production from 2004 to 2009 committed through hedging,” forecast JP Morgan analyst Geoff Breen. Silver -- Sharefin, 05:55:24 02/25/04 Wed Does silver demand need slaking? Silver and zinc aficionados are congregated in Phoenix at the moment for the Zinc and Silver Institute annual shindig. Andy Smith, red rag to gold bulls, was there with deft parries on poor man's gold. ~~~~~~~~~~~~~~~~~~~~~~~ US Gov't stockpiles of silver have fallen from over five billion ounces to zero. From 1978 cumulative production is 358,000 tonnes From 1978 cumulative demand is 476,000 tonnes This leaves a short fall of 117,000 tonnes. This shortfall is 6.4 years production over just 24 years or running at 32%. Production in 2002 was 18,223 tones with demand at 26,842 tones. So the current shortfall is running at 47% of production. So the shortfall is accelerating right when stockpiles are exausting. Stockpiles across the globe have been exausted & anyone who has read the Charles River Report on silver stocks knows what the real story is. I am sure the price will put Andy Smith back in his place the same as gold has done. Why is such pathetic commentary shown when the real analysis is missing????? Let's wait and let the price do the talking. Same with gold rising. Same with toxic heging. Some people are slow learners of the obvious......  Fiat -- Sharefin, 05:06:59 02/24/04 Tue Asian banks dump dollar Asian central banks are quietly moving away from holding the US dollar in their foreign exchange reserves, suggesting further weakness in the value of the greenback this year. The research compared US Treasury statistics on foreign holders of its debt with Asian central banks' statistics on reserve holdings. ~~~ Other leading economists agree. 'It was very clear in 2003 that these central banks did not buy anywhere as much treasuries as they have accumulated forex reserves. It was particularly marked in the second half of last year,' said Jim O'Neill, head of economic research at Goldman Sachs. Silver -- Sharefin, 00:45:01 02/24/04 Tue Silver & Martha Stewart The CFTC is openly shirking its responsibility of preventing market manipulation in the silver market. This is the primary reason why the CFTC and U.S. commodity law exist. Every other responsibility is secondary. Therefore, it is incumbent upon the CFTC to be alert should they receive credible allegations of a market manipulation. That is not happening, and it is why I say that the CFTC is obstructing justice. I have no doubt that the silver market is manipulated. Every day more people agree. Manipulation is the No. 1 crime in any market, and preventing it is the chief responsibility of our regulatory structure. The silver manipulation is proved by the law of supply and demand, which dictates that the price of a commodity must rise if consumption is greater than production. Silver "leasing" and the largest uneconomic naked short position in history are manifestations of the manipulation, as is the depressed and controlled price for two decades. Silver -- Sharefin, 00:39:27 02/24/04 Tue 3 Silver Letters to The Powers That Be On February 2nd, the precious metals world first heard the news from Ted Butler that Bill Murphy, the Chairman of GATA (The Gold Anti-Trust Action Committee), had thrown "the full weight of his organization behind ending the silver manipulation as a means of ending the gold manipulation." Having been a card carrying member of GATA for four years and a big fan of all of Ted's work, I was thrilled to hear it. Ted Butler's lonely voice in the wilderness teaming up with the "GATA army"...it sure works for me. All I can say (and I know I speak for thousands of others) is....welcome aboard Ted, we're all delighted you're here! For those of you not familiar with Ted's extensive work on the manipulation in the silver market, his web site is hyperlinked here. Since that announcement, Bill Murphy and Ted Butler have given the cry 'all hands to battle stations' as we have been asked to write letters and/or send e-mails to both New York Attorney General Eliot Spitzer and the Director of Market Oversight at the CFTC, Dr. Michael Gorham, to complain about the rigging of the silver price on the COMEX by 'eight or less' traders. To those who are not privy to Bill Murphy's website...LeMetropoleCafe, there have been hundreds if not thousands of letters and e-mails sent...many of which have appeared in Bill's daily MIDAS commentary. And just recently, Reg Howe has added new commentary on the goings-on in the silver market at the "CRIMEX" as he puts it. Howe says "Ted Butler has performed for the silver market much the same role that GATA has for gold." There can be no doubt now that the manipulation of the silver price by the '8 or less traders' is fully exposed for all to see. Gold -- Sharefin, 07:54:45 02/23/04 Mon It's time to know your gold People will have more confidence in buying gold here after the municipality inaugurates its new gold assay laboratory. The facility has been built in Sharjah Municipality's technical test complex, and is due to start operating shortly, enabling the public to get their gold tested. Many customers said since they do not know much about gold, they have to trust the word of salesmen at gold shops. But they will now have the opportunity to have it tested, especially if they buy jewellery worth thousands of dirhams. Gold -- Sharefin, 07:49:34 02/23/04 Mon No Sign of Enforcement as Gold Shops Saudize RIYADH/JEDDAH, 22 February 2004 — Yesterday was the final day for jewelry shop owners to replace some 25,000 foreign workers with locals under the government's Saudization drive, sparking fears that the business could suffer setbacks as a result of the loss of qualified manpower. Gold -- Sharefin, 07:44:15 02/23/04 Mon Paper gold scheme on the cards The government is planning to launch a new gold deposit scheme, which will not only curb the demand for physical gold but also satisfy the needs of investors who prefer gold as a natural hedge against unforeseen circumstances. The Reserve Bank of India (RBI) is studying the proposal, which will have a significant impact on the country's monetary policy. It also held a meeting with leading banks, commodity exchanges and bullion associations a week ago to seek their views on the scheme. Investors in the scheme will be given certificates, indicating the ownership of the amount of physical gold they have paid for. These certificates will be tradable on the commodity exchanges. ~~~ On the flip side, the physical stock of gold backing the certificates will be in the custody of banks. Banks will hedge the commodity on the exchanges so that they do not suffer a loss when an investor comes to redeem his certificate. At the same time, with banks holding the gold stocks, these will add to the official gold reserves of the country. Fiat -- Sharefin, 23:22:50 02/22/04 Sun The Sphinx in Winter America's burgeoning trade deficits threaten Greenspan's legacy. In the past year we have seen a dramatic rise in the number of talking heads who openly question American trade policy. In the academic world, MIT economist Lester Thurow has suggested that America's trade deficits could trigger a 50 percent-plus collapse in the dollar's external value, and this in turn would lead to a global depression. Meanwhile on CNN, Lou Dobbs fulminates nightly about the impact of imports on American manufacturing jobs. In the world of business, critics of U.S. trade policy include that ultimate financial heavyweight, Warren Buffett. Even investment banker Robert Rubin, who as Clinton's treasury secretary did much to create the trade problem, has now added his voice to the hue and cry. Then there is Henry Kissinger. Obliquely criticizing American trade policy at a conference last summer, he suggested that a nation that had lost its manufacturing base could not long remain a world power. Figures to be published in March will show that expressed as a percentage of GDP the current-account trade gap has now topped the psychologically important 5 percent level. This is the worst performance since American economic records were first published in the 19th century. By comparison, the notorious U.S. trade crisis of 1971-72 was a mere blip. The trade deficit in 1972, at 0.5 percent of GDP, was less than one-tenth the current level. Yet the 1972 trade deficit seemed so troubling in prospect that President Nixon was forced to devalue the dollar and cut its erstwhile “sacred” link with gold. The recent trade performance stands in particularly stark contrast to America's days of greatest relative economic strength in the first seven decades of the 20th century. This was a period when, thanks mainly to the extraordinary exporting prowess of America's huge manufacturing industries, the U.S. showed a trade surplus in all but 11 years—and did so despite wages that were then five to ten times higher than in Japan and Germany. Not only is a 5 percent current account deficit unprecedented in American economic history, but it is shocking by all previous world standards. Other major nations have incurred percentage deficits approaching this scale only at times of extreme economic distress, most notably during the two World Wars and in their immediate aftermath. The only time any of the six most economically important nations ever ran a trade deficit of more than 5 percent of GDP was Italy in 1924—hardly an auspicious precedent given that economic problems helped pave the way for Mussolini's seizure of dictatorial powers. ~~ The same logic applies to nations. As the Federal Reserve should be acutely aware, it is a fundamental fact of economic life that every dollar a nation incurs in current account deficits must be funded by a dollar of foreign finance. In the case of the U.S. trade deficits, much of the foreign funding comes from foreigners buying U.S. Treasury bonds. Some comes from foreign banks lending to American counterparts. Much of the rest comes from foreigners buying American real estate and equities. In an increasingly troubling trend that has its roots in the trade imbalances, foreigners are even buying some of America's largest corporations outright. The United States is selling the family silver. ~~~ The U.S. has already sold so much of its asset base that its economic standing on the world stage has been significantly undermined. While this may not be obvious to the American public, it is shockingly clear in figures compiled by the International Monetary Fund. These show that between 1989 and 2000, America's net foreign liabilities ballooned from $47 billion to $2,187 billion. Moreover in a highly alarming development, America's problem of foreign indebtedness is now feeding on itself. In the words of the British fund manager Marshall Auerback, America has entered a banana-republic-style “debt trap.” The nub of the problem is in the vast and ever rising flow of dividends and interest payments that the United States must now remit abroad to foreign owners of American assets. ~~~ This helps explain why three years ago the U.S. government's own Trade Deficit Review Commission, in an extraordinary move that went largely unnoticed at the time, strongly hinted that America's current account imbalances were spiraling out of control. In an unusually outspoken report, it suggested that, even assuming the deficit in visible trade did not deteriorate further, mounting debt service costs would push the current account deficit to 7.5 percent of GDP by 2010. By all accounts, the outlook has worsened since 2000. Choate predicts that, absent drastic policy changes, America's current account deficit could reach 10 percent of GDP within a decade. ~~~ Though Greenspan has a record of perfect probity as a public official, he risks his entire legacy over his incompetent handling of trade. The graceful thing for him to do would be to admit what is now becoming obvious: that he has underestimated the seriousness of the trade trend. Following that, he should resign to make way for a younger, more energetic person to tackle the nearly intractable crisis. By the very act of nobly falling on his sword, Greenspan would powerfully dramatize the nature of the crisis and thus help galvanize the nation for inescapably tough measures. If, by contrast, he hangs on, he may succeed for a few more years in sweeping the crisis under the carpet. But in the absence of drastic policy changes, the truth will come out, probably in the form of a devastating dollar crash. By making a graceful exit now, Greenspan can hope to be remembered for his intellectual courage in admitting his mistakes. On the other hand, if he hangs on, the result will be certain obloquy: he will be fated to be remembered as the man who lost America. Periodic Ponzi Update PPU -- $hifty, 21:17:03 02/22/04 Sun Ponzi Chart Periodic Ponzi Update PPU Nasdaq 2,037.93 + Dow 10,619.48 = 12,656.96 divide by 2 = 6,328.48 Ponzi down 12.27 from last week. Thanks for the link RossL! Go GATA ! Go GOLD ! $hifty  Silver continued -- auspec, 13:37:49 02/22/04 Sun CRIMEX does as CRIMEX is. Not much new under the sun {especially the rising sun and TOCOM{EX}}. Someone recently said we'll see the Feds start messing w silver eagles to get a clue how close to end game we are. Wise words. We shouldn't be far away from that event. Personally, I think we'll have a time period of black silver being accessed that will frustrate those who already think we're at end game. Still, it won't take long anyway....and clues will be left along the roadside by the arrogant desperados for indication/encouragement. The games played out Jan 20th ONLY effect the very weakest of hands and the gullibles. The Vets see it as nothing but confirmation and opportunity. We're well past the point of having weak hands totally in charge of these markets. Their games only work at the margin....heehee. The "margin" has leverage BOTH ways, no? I will say this......while I don't understand how the Chinese could be stupid enough to believe that they will actually receive 75% of 2005 silver production via paper options.....I also don't doubt that this game isn't some how actually being played. For you see, they could well know they won't receive physical silver in a ridiculously tight {under water} market, but they might just be wanting something else.........no? There's a quid pro con for ya. Bottom line............derived from multiple sources of input around the globe........silver is, indeed, going "first". It IS in play as it absolutely had to be, sooner or later. That time is now. Game on! Choose your weapon, Sirs {@ the margin}! Here's a hint for the desperados to allow them to escape the carnage they've wrought for themselves {don't worry they aren't prone to taking good advice}. Allow silver to run up to $9 or $10 and DEFEND that position for as many years as you can. With a little luck the miners will kick in in time to rescue you from your foolish ventures. Did you ever hear of the average cost of producing an ounce of a silver or any other metal? For future reference.........trying to keep the price of silver below the average cost of production indefinitely is folly even beyond the scale of govt central planners. Of all people.....one would think you guyz could count down to five Billion {ounces gone}. Oh well. Of course, defending $280 gold wasn't too smart either, especially since we'd still be at $350 or so if you'd chosen this higher level of defense. Do they teach the mining/commodity cycle principles at Foggy Botom Institutions? Sheesh! We'll take a collection up for the Georgetown School of Mines if necessary. Yale Tech? Cyclin along............  China Buying Paper Silver? -- auspec, 10:31:22 02/22/04 Sun The following thoughts occur in response to this particular question: " Is China getting Comex Ag futures contracts, i.e. 75% of those listed for 2005?" I can certainly verify that this is RUMOR at this point, we'll see in time if true or not. Here's what I KNOW: 1. China lacks native silver. 2. China is quite obviously a PLAYER in the world silver market in spite of fact #1. 3. Silver Exchange options HAVE recently been expanded to stretch into further years. 3. Mexico is another major world player in the silver market......being the world's greatest silver producer. 4. Both China and Mexico have been recent candidates for dealing with the US "banking" authorities. Could be a quid pro quo or even a quid pro con. The fairly recent Mexican bailout and the Chinese admittance into the WTO have been key issues for these countries. It has been RUMORED that the ESF was involved in Mexico's bailout in some form or fashion. The ESF IS, by definition, involved in currency interventions and that includes precious metals. 5. COMEX just raised silver margin maintenance requirements just as they did in a rising gold market about a year ago. These are obvious signs of stress on the shorts in both cases. These are also obvious signs that these entities will make up whatever rules they want as they go along. Nothing less is to be expected of them. ************************* I can certainly advise that MULTIPLE parties will be caught off side; believing they own physical silver just because they have possession of paper contracts. It can be no other way. China could very well be one of them. How much of the globe now understands the difference between paper and physical possession is totally up for debate. I believe it to be a small minority at this point. I can also tell you that the "Silver User's Association" has, over the years, cheaply accessed the US Strategic reserve of silver and basically "absconded" with 5 Billion ounces or so. These same entities will next turn to the largest remaining world stockpiles for cheap access, namely, Mexico, India, as well as China. China because it processes so much silver, not because it mines so much silver. The world's refiner of last resort.........a.k.a. cheap refiner.....that's China. We'll just have to see how this all plays out. Those who use CRIMEX as their personal playground do so in a game of HARDBALL. They were so frightened of the current letter writing campaign they blatantly raised margin requirements {an in-your-face response in actuality} in COMEX silver and slammed the small speculators. They also timed it to coincide with a massive Japanese pro-dollar currency intervention. This just two weeks after the G-7, G-10 or G-String meetings in Florida. Was some type of market intervention not anticipated........? Wouldn't it OBVIOUSLY include the precious metals?? I won't be convinced otherwise. Remember, all these activities occurred during a campaign to clean up CRIMEX, as well as a campaign to TAKE PHYSICAL DELIVERY of silver as well as gold. The response of market intervention as well as CRIMEX margin changes was expected.......again, these guys play HARDBALL and this is, in actuality, a typical response from them. At what point such responses cross over into fascist territory I'll leave up to your own judgement and discretion. "You're either for us or against us." That statement also includes people who petition for actual free and honest markets, most unfortunately. The entire scenario smacks of total DESPERATION, DOLLAR, SILVER and GOLD desperation. Smart money won't be fooled as NO fundamentals have changed. All that has changed is the entry point for those still buying suppressed value. I hear some are not quite sated yet. Smile. Gold -- Sharefin, 09:30:26 02/22/04 Sun Toronto bourse eyes launch of global gold index VANCOUVER, British Columbia, Feb 20 (Reuters) - The Toronto Stock Exchange said on Friday it is keen to launch an index that could become the world's gold stock benchmark in an attempt to lure large, foreign mining companies to the bourse. Fiat -- Sharefin, 09:23:24 02/22/04 Sun ECB's Liebscher Says Intervention Never Ruled Out European Central Bank Governing Council member Klaus Liebscher said on Friday that foreign currency intervention by the ECB could never be ruled out but would not be discussed in public ahead of time. Asked in an interview with Reuters whether the ECB would be reluctant to intervene on its own to stop the rise of the euro on the foreign exchange markets, he replied: "It (intervention) is something which is never excluded. But don't talk about it beforehand, only talk about it afterwards." Fiat -- Sharefin, 09:21:45 02/22/04 Sun Japanese held hostage by U.S. buyers For Japanese policy makers, 2004 is off to a good start. At home, the economy is showing the first concrete signs of recovery, and in the world, the global policy maker consensus is coming around to the long-held view in Japan that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth." This is exactly the mantra official Japan has been using to justify market smoothing intervention over the years. Since early February, it is part of the official communique issued by finance ministers and central bank governors of the Group of Seven countries following their recent meeting in Boca Raton, Fla. Flexible markets, yes of course; but excessively flexible markets, no thank you. The global big boys are saying "Sayonara, market fundamentalism." To be effective, action must follow words. Here, Japan is quick to take the lead again. The national "war chest" to shelter its corporations from the negative impact of the U.S. dollar's decline has been beefed up. The numbers are so staggering that I think it is justified to call the yen a de facto pegged exchange rate--pegged with an upper limit for the yen against the dollar. The facts speak for themselves: in 2003, Japan spent about 180 billion dollars to protect companies against a rising yen. For this year, Prime Minister Junichiro Koizumi's national budget raises potential intervention firepower by 61 trillion yen or about 580 billion dollars. Put another way--after spending 15 billion dollars on average every month in 2003, Japan now has the budget to spend 48 billion dollars per month to protect its corporations from a falling dollar--48 billion dollars is more than three times Japan's monthly current account surplus. As if to leave no doubt about the global political economic realities, 48 billion dollars also amounts to just about the monthly U.S. budget deficit funding requirement. ~~~ Increased codependence is evident from the macroeconomic fact that Japan and the United States are currently engaged in the biggest vendor-finance relationship ever seen. Japan alone funds about 40 percent to 50 percent of the U.S. current account deficit by buying U.S. debt. China and the rest of Asia add another 40 percent to 50 percent. And it is this debt, in turn, that allows the United States to continue buying made-in-Japan or made-in-Asia products. Gold -- Sharefin, 09:12:34 02/22/04 Sun Terror alert hits $A and gold The Australian dollar plunged by 1.7 US cents, or 2.2 per cent, in New York yesterday morning to close at 77.10 US cents as the greenback rallied on new security fears in Japan and concerns that the Japanese and European central banks were intent on selling more of their currencies. Gold fell below $US400 ($A519) an ounce as the roaring US dollar made the precious metal more expensive for non-US buyers, while shares tumbled on Wall Street in volatile trading with investors spooked by the Japanese security threat and fresh inflation worries. European sharemarkets finished lower, with the German sharemarket diving 1.6 per cent. The Australian dollar got caught in a currency crossfire on Friday night as the US dollar rallied by 2 per cent against the yen and by 1.4 per cent against the euro. This followed comments from members of both the Japanese and European central banks indicating that they were intent on selling more currency to put a brake on the rise of the yen and euro against the greenback. ~~~ The main trigger for concern on Friday night came in a report that Japan had raised its terror alert to the highest level and had tightened security at hundreds of airports, nuclear plants and government facilities as it dispatched troops on a humanitarian mission to Iraq. This report was confirmed yesterday morning. A National Police Agency official in Japan said there was heightened security but refused to say whether the Government had new information about a possible terror strike. He said it was the highest show of security in Japan since the US-led invasion of Iraq last March. A police officer at the Tokyo airport confirmed yesterday that riot police had been deployed. About 650 vital facilities, including US bases in Japan, were put under increased surveillance, Japanese media reported. ~~~ The security move in Japan sent a shiver through global financial markets, knocking the yen to 10-week lows against the US dollar. Gold -- Sharefin, 09:08:26 02/22/04 Sun Heavy sales send gold prices plunging Mumbai, Feb. 21. (PTI): Gold prices plunged on the bullion market here today due to heavy selling by stockists, which followed a steep fall in global prices, especially in New York. The global trend, in turn, had been sparked by a sharp rise in dollar rates. Silver, on the other hand, managed to recover initial losses, yet closed sharply lower. Standard gold (99.5 purity) crashed by a whopping Rs 130 per ten gram to close at Rs 5950 as against yesterday's close of Rs 6080, while pure gold (99.9 purity) nose-dived by Rs 120 per ten gram to Rs 5990 from Rs 6115 yesterday. Dealers at the Comex division of the New York Mercantile Exchange attributed the sudden steep fall in gold prices to a sharp setback in the international prices. The most active April contract gold plummeted by $12.30 to $398 per ounce on Friday due to aggressive hedge fund and bullion bank selling spurred by sharp gains in the US dollar, they said. The dollar showed its steepest rally in 17 months against the yen at $ 109.04 from yesterday's level of $107.20 after Japan's finance ministry said it may keep selling the currency. The US currency also rallied against Euro to $1.2535 per Euro from $1.2716 per Euro, the biggest rally since January 16, after a member of the European Central Bank council said that the bank would sell its currency. Fiat -- Sharefin, 09:06:18 02/22/04 Sun The Pentagon's Weather Nightmare Global warming may be bad news for future generations, but let's face it, most of us spend as little time worrying about it as we did about al Qaeda before 9/11. Like the terrorists, though, the seemingly remote climate risk may hit home sooner and harder than we ever imagined. In fact, the prospect has become so real that the Pentagon's strategic planners are grappling with it. The threat that has riveted their attention is this: Global warming, rather than causing gradual, centuries-spanning change, may be pushing the climate to a tipping point. Growing evidence suggests the ocean-atmosphere system that controls the world's climate can lurch from one state to another in less than a decade—like a canoe that's gradually tilted until suddenly it flips over. Scientists don't know how close the system is to a critical threshold. But abrupt climate change may well occur in the not-too-distant future. If it does, the need to rapidly adapt may overwhelm many societies—thereby upsetting the geopolitical balance of power. Though triggered by warming, such change would probably cause cooling in the Northern Hemisphere, leading to longer, harsher winters in much of the U.S. and Europe. Worse, it would cause massive droughts, turning farmland to dust bowls and forests to ashes. Picture last fall's California wildfires as a regular thing. Or imagine similar disasters destabilizing nuclear powers such as Pakistan or Russia—it's easy to see why the Pentagon has become interested in abrupt climate change. Gold -- Sharefin, 08:08:58 02/22/04 Sun Bulls hate being milked, too The era of 24/7 printing presses is going to end one day soon. Could be next week, could be next year. But the dollar is getting chucked out of the bar and the hangover is going to be severe. January saw the Japanese throw $70 billion dollars down the toilet in a hopeless effort to destroy their currency even faster than we destroy our currency. It's not just amazing that they are quite willing to throw money away, it's had next to no effect. It sure seems to me that the last week has shown the Europeans have jumped on the bandwagon. Last Friday and this Tuesday had all the signs of massive and clumsy manipulation of both the Euro and the Dollar. And whatever you think of the Japanese, they flush their financial toilet with a lot more finesse than the Europeans do. So the rush to the bottom seems to have started. The Americans under Bush and Greenspan have a head start and the natural advantage that comes to any country in the very last stages of Empire. Our currency may as well be used toilet paper for all its worth. And if the Japanese and Europeans want to destroy their money, they probably will succeed, too. But if gold is in a bull market, it's hard to prove it in comparison to all the other industrial metals. Copper has gone up faster, so has zinc, and nickel. All real goods are both in high demand and short supply. I suspect the slumbering public is about to wake up and when they do, fasten your seat belts. A commodity bull market is interesting to watch. It's just my opinion, humble as it may be, that the world faces the biggest transfer of wealth known to man very soon. Paper assets are going to be destroyed and it really matters not if it's through inflation or deflation. A $100 trillion dollar debt load is going to implode as it sets off a $200 trillion dollar derivatives time bomb. While I agree gold and gold shares are going to rocket, beware getting caught up in a general stock market crash soon coming your way. I've said many times before and I will say it again. When the tide goes out, it goes out for all the boats. If you are in shares when the stock market goes down 20% in a day, your shares are going down and I don't care if it's Newmont or Intel. That isn't a recommendation to sell, it's a warning about a potential problem. If the market crashes it will take down all boats. The metals will drop less and recover faster but don't get caught up in the panic I see right around the corner. Maybe I'm wrong on timing, I saw a lot of danger last summer into the fall. And we made it through. But when you have record high bullishness and record low bearishness and new lows for cash available, you have a disaster on the way. Soon. Fiat -- Sharefin, 08:05:25 02/22/04 Sun Now the Pentagon tells Bush: climate change will destroy us · Secret report warns of rioting and nuclear war · Britain will be 'Siberian' in less than 20 years · Threat to the world is greater than terrorism Climate change over the next 20 years could result in a global catastrophe costing millions of lives in wars and natural disasters.. A secret report, suppressed by US defence chiefs and obtained by The Observer, warns that major European cities will be sunk beneath rising seas as Britain is plunged into a 'Siberian' climate by 2020. Nuclear conflict, mega-droughts, famine and widespread rioting will erupt across the world. The document predicts that abrupt climate change could bring the planet to the edge of anarchy as countries develop a nuclear threat to defend and secure dwindling food, water and energy supplies. The threat to global stability vastly eclipses that of terrorism, say the few experts privy to its contents. 'Disruption and conflict will be endemic features of life,' concludes the Pentagon analysis. 'Once again, warfare would define human life.' The findings will prove humiliating to the Bush administration, which has repeatedly denied that climate change even exists. Experts said that they will also make unsettling reading for a President who has insisted national defence is a priority. The report was commissioned by influential Pentagon defence adviser Andrew Marshall, who has held considerable sway on US military thinking over the past three decades. He was the man behind a sweeping recent review aimed at transforming the American military under Defence Secretary Donald Rumsfeld. Climate change 'should be elevated beyond a scientific debate to a US national security concern', say the authors, Peter Schwartz, CIA consultant and former head of planning at Royal Dutch/Shell Group, and Doug Randall of the California-based Global Business Network. Fiat -- Sharefin, 19:15:56 02/21/04 Sat What Problems Might Stem from Massive Intervention? Is There a Blind Spot in the MoF Strategy? Criticism of Japan's intervention policy is beginning at home as well. Major issues being raised in national Diet debates are (1) whether the discretionary authority of MoF officials to use trillions of yen in national funds on an ad hoc basis, albeit for the cause of currency stability, is acceptable within the context of a fiscal democracy, and (2) whether swap transactions with the BoJ to temporarily procure intervention capital illegally circumvent government budget restrictions. There is also increased mention of currency risk for more than US$740 billion in foreign currency reserves and interest-rate risk from a reversal in the Japan-US rate gap. It is theoretically possible to continue home-currency selling intervention indefinitely, however. Furthermore, since the government does not apply mark-to-market accounting to foreign currency reserves, currency unrealized losses will not show up unless they are realized by selling the reserves. If the government sells reserves as a dollar-selling intervention when the dollar is strong, it can realize profits rather than losses. In fact, management profits from foreign currency reserves more than offset unrealized currency losses. Furthermore, the government raises intervention capital at virtually no cost under the zero interest rate policy (ZIRP). Japan's intervention policy resembles an awesome carry trade, and we can see the MoF as the world's most successful massive hedge fund. Intervention also recycles Japan's current-account surplus overseas and is helping to finance the US fiscal deficit. Surplus dollar liquidity from intervention has contributed to the formation of a miniature bubble in US asset markets, with a favorable spillover effect on Japan's asset markets. Sustained massive intervention seems trouble-free on the surface. Is this true? We naturally anticipate renewed interest in intervention costs once Japan moves away from a zero interest rate. In this note, however, we look at potential downside right now, rather than in the distant future. Fiat -- Sharefin, 19:13:07 02/21/04 Sat All Cylinders? As impressive as this burst of global growth has been, I maintain the rather lonely view that the jury is still out on the key question of sustainability. My reservations go back to the same two growth sparks — the American consumer and the Chinese producer. For a jobless and income-short recovery, the recent performance of the American consumer is even more astonishing. With the internal dynamics of the US business cycle failing to deliver fundamental support to household purchasing power, the consumer has instead drawn support from more “toxic” sources of growth — namely, open-ended government deficit spending, ever-rising debt, reduced saving, and the ongoing extraction of incremental purchasing power from overvalued assets such as homes. If job creation and income generation continue to lag — a distinct possibility, in my view — the sustainability of consumption will require increasing support from these same toxic sources of growth. And the outcome in that case will lead to ever-mounting imbalances — not just higher debt and lower saving but the ever-increasing twin deficits of the government and the balance of payments. This, in my view, is not a recipe for sustainable vigor in the US recovery.  Today's Metals Market -- auspec, 11:44:06 02/20/04 Fri Anyone see what happened in the copper mkt today? Raising margin requirements significantly will predictably lead to positions being abandoned, no? That's the nature of playing these MARGINAL {extremely leveraged} CRIMEX games. Silver had to shed some weak hands today..........and who can blame them for bailing out as a lot of pain was administered. It is pretty much like a college baseball team going into Yankee Stadium and expecting to come away a winner, or the US Olympic hockey team taking on the Russians in 1980 and expecting victory {oops!}. OK, so the Russians would likely win 9 out of 10 games played.....WE won the historic one. Go see MIRACLE.....fantastic movie. Where was I? The COMEX participants with paper positions have little chance of surviving market activities such as today clearly exemplifies. It's like letting the Yankees make up the rules as they go along. The silver longs can't be blamed for getting out but they can be blamed for participating in a rigged market and not taking the proper precautions to keep from getting hammered. The paper game is turned into the speculator's advantage by demanding physical.....at least that works with silver or gold but don't try it with copper. SHOW ME THE SILVER will work each and every time. Bombing both gold and silver today is an abrupt in-your-face power play by the CRIMEX authorities. This is their answer to the many honest citizens calling them on the carpet for running a rigged insider game. This was orchestrated and the details of the orchestration will soon be obvious to all intelligent observors. In reality, today's actions should only steel the resolve of physical silver advocates {gold as well but silver is the more vulnerable to physical off take}. Today is nothing but 'NOISE" or market discord. Could end up being only a one day skirmish and minor victory for manipulation forces, meaningless in the long run. LOOK FOR VALUE....THINK LONG TERM. Living by the day or even by the month plays into these blokes' hands. This letter writing campaign to COMEX authorities cannot be just a few week {weak} effort. A steely resolve to gain victory over the next 12 months, or HOWEVER LONG IT TAKES, is the correct approach for sure. I understand that a major silver exploration company is in the process of taking a significan amount of silver off of the market. Wonderful, and congratulations to such far sighted management! As the CRIMEX silver supply continues to dwindle due to multiple entities, over an extended period of time, gaining possession of the metal, it will become more and more obvious that COMEX silver is a complete sham. That day isn't far away regardless of what today's market perceptions appear to be. What do two margin requirement hikes really mean? They are trying to keep people away from taking delivery!! Pretty soon you might just have to put up $5,000, $7,000 or $10,000 to be able to hold a silver contract worth around $32,000 in silver. They are blatantly demonstrating their desperation as well as their vulnerability. These folks have a good grasp of the element of "FORCE", they will change rules, use deceit, and blatently manipulate these supposedly free markets at will. Reasoning with complaining citizens and customers will never be their strong suit. They will, however, fully comprehend silver leaving their coffers. That lingo they get. That's the only one they will get. I think the Free Silver movement has legs and it will only be enhanced by today's selloff. Their demonstrated arrogance is incentive for more and more protests and even more physical silver purchases. Remember, they can't handle the scrutiny and it is only going to intensify from here forward. You want to make some money off of the obviously bullish silver fundamentals? Nothing wrong with that. First, don't ignore physical possession or you play into their paper hands. If you can handle COMEX contracts for delivery........help yourself, but don't offer yourself as cannon fodder for the likes of today's market activities by setting yourself up for marginal failures. To the true silver advocate COMEX should only be for physical off take. Otherwise find your shiny silvery objects at a local dealer or your favorite source. Just a casual hint, no? Ya wanna know what really sticks in my craw the most about this latest silver quashing? My instincts tell me that MANY insiders knew well what was heading the silver market's way and positioned themselves accordingly. Thus making themselves a bundle of cash as well as exacerbating the sell off. That's the way these blokes do business and that should anger all honest participants. Spitzer may or may not take notice of current activities and act accordingly....I won't hold my breath. I can well assure all that dwindling available silver stocks on the CRIMEX will get the attention of ALL. Personally, I wouldn't leave the goods in THEIR warehouses any more than I'd loan my wife to a philandering friend. It's a truck thing. Summary.......OUTRAGE IS THE CORRECT RESPONSE, along with a heightened determination to do something about it. Wimps stay home, please. We've got all year and much more......they have, well, uh, er, only the moment & on the margin at that. Fiat -- Sharefin, 07:16:50 02/20/04 Fri The coming storm IN THE autumn of 1998, Buttonwood was at a conference organised by Credit Suisse First Boston in—appropriately enough—Monte Carlo, when Allen Wheat, the then head of the investment bank, stood up after dinner and delivered a breathtaking mea culpa. Some sort of apology certainly seemed in order given the huge sums the bank had just lost from extravagant punts on Russia in particular and financial markets in general. The bets went spectacularly wrong after Russia defaulted, financial markets went berserk, and Long-Term Capital Management (LTCM), a very large hedge fund, had to be rescued by its bankers at the behest of the Federal Reserve. CSFB eventually admitted to losses of $1.3 billion, though the bank's official figures and the numbers bandied about by insiders were somewhat at variance. To cut to the chase: had they Mr Wheat's balls, Buttonwood thinks that the bosses of many a big bank will be making a similar speech before the year is out. The reason is simple: the size of banks' bets is rising rapidly the world over. This is because potential returns have fallen as fast as markets have risen, so banks have had to bet more in order to continue generating huge profits. The present situation “is not dissimilar” to the one that preceded the collapse of LTCM, says Michael Thompson, a strategist at RiskMetrics, a consultancy that specialises in the very risk-management models that banks use. Like LTCM, banks are building up huge positions in the expectation that markets will remain stable. They are, says Mr Thompson, “walking themselves to the edge of the cliff”. This is because—as all past financial crises have shown—the risk-management models they use woefully underestimate the savage effects of big shocks, when everybody is trying to wriggle out of their positions at the same time. ~~~ In total, banks have invested many billions of dollars in such funds. The reason, apart from an understandable desire to invest money with good traders, is that the money invested in this way is counted as an investment, and not as a trading position, so is not included in the banks' own trading books. Most of the money that banks invest has gone into hedge funds that specialise in bonds and other sorts of fixed-income instruments. Like the banks, hedge funds have been leveraging up their exposures to markets. All of which is splendidly profitable, as long as markets behave themselves. But the strategy puts banks and hedge funds alike at huge risk if markets suffer a severe shock—a far more common occurrence than banks allow for. Their models (and, yes, hedge funds use VAR models as well) assume a certain level of losses for moves of a given magnitude. The problem comes for the tiny number of crises when markets move much more and, to add insult to injury, banks' assumptions about the diversity of their portfolios are shown to be wrong. In other words, the models, says one regulator with a chuckle, are of least use when they are most needed. By regulatory fiat, when banks' positions sour they must either stump up more capital or reduce their exposures. Invariably, when markets are panicking, they do the latter. Since everyone else is heading for the exits at the same time, these become more than a little crowded, moving prices against those trying to get out, and requiring still more unwinding of positions. It has happened many times before with more or less calamitous consequences. It could well happen again. There are any number of potential flashpoints: a rout in the dollar, say, or a huge spike in the oil price, or a big emerging market getting into trouble again. If it does happen, the chain reaction could be particularly devastating this time. Banks and hedge funds have increased their exposures most to those markets that they are least able to get out of. Think, if you will, of the extraordinary rise in the price of emerging-market debt and junk bonds. “I used to sleep easy at night with my VAR model,” said Mr Wheat in his speech in Monte Carlo. Suffice to say that he suffered a sleepless night or two when that model was found wanting—and that bank bosses could be in for many a sleepless night this year. Silver -- Sharefin, 01:50:49 02/20/04 Fri AU & CU margin upped NEW YORK, N.Y., February 19, 2004 - The New York Mercantile Exchange, Inc., announced today that it will increase the margins on its COMEX Division silver and copper futures contracts at the close of business on tomorrow. The margins on each of the two contracts will be raised to $2,000 from $1,500 for clearing members and members and to $2,700 from $2,025 for customers. Kickin Butt in Silver -- auspec, 21:44:12 02/19/04 Thu TOCOMEX Maybe the CRIMEX boyz are expecting silver shipments from RUSSIA in the near future? Har, har. Two margin requirement raises in SHORT order? LOL Flat out guarantee ya the cia guyz are working overtime on this one. Ted Truman and fiends. Black silver.......................MANIFEST yourself!! Silver can be had, but the shorts WILL be had. Game on! WE wait for the squeeze and THEY do EVERYTHING within their powers to avert it. Most all the cards are on the table now and timing becomes paramount. This will become a month to month WAR! Your "nose" agree? In all sincerity....this game is over once the word is out that physical delivery of silver and or gold is the only route towards an accelerated victory. THE GIGGLE FACTOR........Watching the desperate scurrying about by elitist connected pawns....scrambling and salvaging about the globe for PHYSICAL silver. Deals to be made, quid pro cons {smile}.....for what? A few more months of paper games at CRIMEX. What unbelievable shortsightedness, what recklessness! We are living a time that will not soon be forgotten. The current annual silver "deficit" is not of a magnitude that it will immediately bury the shorts...........100 M ounces or something along those lines. That number is not unreachable as the market now stands. What makes this current relatively small "deficit" a killer is INFORMATION!! Information provided by Jim Blanchard, Franklin Sanders, Ted Butler and others that this structural deficit is longstanding...........some 14 or so YEARS now. Information, widely disseminated around the globe that perks the "noses" of the investing community....both institutions as well as individuals. The "100th monkey" phenomenon where the 100th monkey figures out a new reality and...VOILA!!.....pretty soon most all of the monkeys have it figured out. That's where we now stand and pretty soon the zoo will be ours. Here's a perfect analogy for potential silver investors. We're still very early in this game. Just a few scant years back the gold mining shares were selling at distress {literally} prices. More money will be made in this market as it continues to mature but the REALLY, REALLY easy money has already been made. The trade of buying solid companies on the cheap when, literally, no one else was interested. X-Cal at 8 cents, Samex at 15 cents, Golden Star at a few bucks and many, many more for illustration only. Does that mean that fortunes will not be made by those who take positions now in mining equities? Absolutely not....we're still quite early in the process. The stealth precious metal markets continue forward.....just the way I like it, for, you see, until my Mother-in-Law or my Brother's friends start showing interest in this niche....I know we still have miles to go before we sleep {soundly for sure}. We are nowhere near the end of this current bull gold/silver cycle!! All bull market cycles end in widespread euphoria and I await that happening. By comparison to recent performance in mining equities, silver below $5 was a complete "no-brainer" and those early into silver took advantage of this gift. I spared no words in attempting to proselytize this market anomoly over the many recent YEARS. What's the point? WE'RE STILL VERY, VERY EARLY WITH SILVER!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Did I make myself clear there? $6.50 silver is still a joke with the historic setup we've been presented. The nose factor as well as nearly a decade of studying silver adamantly states this case. You want to be the "smart money" that sees, early, what few others recognize? Here's your chance. Physical silver, not paper promises or options as the Chinese reportedly have involved themselves in for 2005 silver on COMEX. Can you say TOCOM and palladium? "Smart money" could care less about politics, hype, or fashion......it just wants to replicate itself. Smart money comes in all sizes and all forms. It may be the guy who looks like he's homeless but, in reality, sees through the smoke and knows when to call a BLUFF. {I'm going to delve into bluffs in a moment}. it may be an institution such as a commodity fund or a mutual fund or a company or even a COUNTRY. Smart money does what smart money ALWAYS does.... it positions itself, like Gretsky and the puck, well ahead of the action. Smart money is, in reality, just now positioning itself in physical silver. If the Chinese were really shrewd they would claim some REAL silver NOW instead of paper promises next year. They're early because they have seen the "problem", but in all likelihood, they aren't going to be "early" enough. Pardon me here while my gut splits into fractals......the Chinese are going to be just a tad too LATE onto the silver {ob}scene. Next year?? Har, har again. Silver will be a 2004 phenomenon...........we get freed THIS year. Selling product under the average cost of production is a losing proposition. That's what has happened over the last many decades. 5 Billion ounces of silver once laid in US possession.....now close to zero. Who lost? Those who owned it, of course. Who "won"? Those who sold it or used it.....the silver "managers" to coin an oxymoron or at least some form of one. What's it all mean??? It's just simple INFORMATION, nada mas, nada menos. Some of us were SO early into silver that we wish we weren't, almost a decade now. Go read Jim Blanchard's "Silver Bonanza" which laid the groundwork for today's silver market in 94 or so. Like Veneroso with gold in 1998. EARLY recognition!! What's the information? Silver shortage, paper games, elitist manipulations, extreme OPPORTUNITY. Sometimes it's painful to be early, but it's even more painful to be late or unaccountable. GATA, LeMetropole Cafe and the internet in general is a microcosm unto itself. I'm sitting at home with my Family late on a Thursday night banging out a few heartfelt convictions. What will be the end result? Who knows? With the internet, just possibly. a Japanese mutual fund will decide it, too, wants to be "early" into silver. Make my day. It really doesn't take too much to take down a paper game fraught with marginal manipulation w/o SUBSTANCE behind it. "My people perish for lack of knowledge". Understand the game......and the game is over. It has been played at such an extreme, ridiculous, margin {paper} that it is, in actuality, leveraged AGAINST ITSELF!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Did I make myself clear there? Can you say TOAST? Does the US or the world even need CRIMEX??? Plain and simple.....NO!!! They have been nothing more than a vehicle for elitist enterprises to abscond with some 5 Billion ounces of silver since 1950. CRIMEX be damned! This is their {elitists} usual game demonstrated in the EXTREME!!!!!!!!!!!!! Did I make myself clear there? I forget......how does one spell VULNERABILITY?? Fed up? Wanna be "smart money". Take down some silver and thank the "Silver Users Association", for they provided this opportunity. Not much left as they have absconded with the profits from 90% of it, but therein lies YOUR opportunity. What do I expect and hope for in 2004? First of all, this silver "campaign" needs to be far sighted. Let's forget their monthly games and beat them at their own. Chuckle, chuckle. It's the whole year amigos.....2004. They may conjure up enough silver in March from Sri lanka or Rhodesia, via quid pro con, but they'll NEVER OUTLAST US!!!!!! They are playing an assured loser's game. Nothing but this information stands in the way of a complete ROUTE in the silver market. Gold WILL follow. They play at the margin, at the moment {month}.....we kick their butts at the FUNDAMENTALS, over time. What could be more assured? Here's your homework assignment.........go spell and pronunciate the word "toast" as often as you can. If you get a little bored with that you might consider finding a way to fondle some of the silver stuff. If you want to be "EARLY", "EARLY".... get some gold too. Spread the word. Gold -- Sharefin, 20:49:27 02/19/04 Thu Lenny Kaplan While gold prices were up some 17.5% in USD last year, gold rose by only .12% in Euros, basically breaking even. Japanese investors in gold actually saw gold decline in value on the basis of their currencies, while Australian and Canadians experienced none of the reverie of their US counterparts. It is most clear that gold has risen in value over these years ONLY as the USD has fallen, and only experienced by those who live and breathe in US Dollars. It is only obvious that since gold is priced in USD worldwide, and as the value of the USD declines, that ALL commodities or products priced in USD must, of necessity, increase as its "currency denominator" falls in value. It would appear that gold will continue to rally if the USD falls, and will decline if the USD rallies, plain and simple. And, no other facts appear, at this point in time, to be of any importance. That said, logic forces us to state that gold is not in a bull market. It is not so much that gold is rallying in price, but that the USD is falling in value. Perhaps this interpretation is rather extreme, but it seems deductively forced upon us. I would postulate that gold will be in a bull market, if and when it begins to rise in price against most or all currencies. Right now, it is simply reflecting the economic reality of the decline of the value of the USD. I find the current situation rather alarming, as it would seem that the fundamentals are no longer important to this market. It no longer matters that jewelry demand is falling rather sharply due to the new higher price ranges, it no longer matters that the positions carried by speculators are near record high levels, in fact, none of it matters anymore. Just the value of the US Dollar. I do not recall any such period in my 30 years of watching this market, and, frankly, I do not expect it to continue for long. Somehow, it seems wrong. My sense is that we are in the very early stages of a bull market for gold, only a few years past the lows, and as such, gold prices are hogtied to an external influence for its sustenance, much as the young child depends upon his mother. As the infant ages, it takes on a life of its own. There is excellent reason to believe that as global economies and nations all "race" to depress the value of their currencies against one another through fiscal and monetary policies to gain economic benefit, that global investors, and not just those who live and breathe in USD, may begin to add their names to the gold market. If and when that occurs, that will be a true bull market, when gold rallies in most, or all, currencies. ~~~ Speaking of taking on a life of its own, silver rallied by 31 cents last week as speculative forces and large commodity funds continue to push the envelope. Volatility is simply incredible with prices moving some 68 cents from lows seen a week ago Friday, to highs seen last Friday. It is certainly not a commonplace occurrence when a commodity can move in excess of 10% of its value in just one week. ~~~ After two decades of gradually selling off its national gold reserves, Canada has finally cleaned the cupboard bare. All that is left of its original 20.9 million ounces of gold is 100,000 ounces of gold coins, probably Canadian Maple Leafs, needed as inventories for its gold bullion coin program. Joining Canada and those now bereft, Norway recently announced that it had sold 16 tons of its gold bar reserves and planned to sell the rest during 2004. And speaking of national reserves, the heartbeats of gold bugs the world over fluttered when recently, Japanese finance minister Sadakuzu Tanigaki told a parliamentary committee that he would have to "carefully consider" diversifying its central banks reserves into gold. With Japan holding less gold, as a percentage of total assets, than any among the 45 largest reserve holders, such purchases could be enormous. But don't hold your breath as I would consider such purchases about as likely as the Nobel Prize Committee starting a poolside bikini contest for their honorees. Gold -- Sharefin, 20:11:17 02/19/04 Thu Netherlands plans to sell $866m of gold London - The Dutch central bank planned to sell 65 metric tons of gold, worth $866 million, after a 15-nation accord on such sales expires in September, spokesperson Tobias Oudejans said yesterday. The agreement limited participants' total sales to 2 000 tons over five years. The Dutch central bank wanted to shed 300 tons of gold when it signed the accord and had sold only 235 tons so far. "We are seeking to sell the remainder, regardless of whether this is part of a new agreement or not," Oudejans said. He could not say whether the bank would seek to sell additional reserves as part of any new agreement. Silver -- Sharefin, 20:09:43 02/19/04 Thu Targeting the Gold Cabal with Silver Bullets Silver -- the "poor man's gold" -- may soon prove the Achilles' heel of the gold cabal. Connected by nature and history to gold, the older monetary metal by influencing gold may impact interest rates. See Gibson's Paradox Revisited: Professor Summers Analyzes Gold Prices (8/13/2001). Thus any efforts to affect interest rates through the manipulation of gold prices cannot safely ignore silver. As discussed in prior commentaries and monitored in the Gold Market Regression Charts, J.P. Morgan Chase has long been the major U.S. provider of gold derivatives and a linchpin of the gold cabal. Generally regarded as the Federal Reserve's banker, JPM is the dominant U.S. purveyor of financial derivatives, accounting for fully half of the $67 trillion in total notional value reported by all U.S. commercial banks to the Office of the Comptroller of the Currency as of September 30, 2003. As a percentage of credit exposure to risk-based capital, its derivatives registered at 783% compared to no more than 241% for any other reporting bank. In a recent article on JPM ("Dollars at risk," Grant's Interest Rate Observer (December 19, 2003), pp. 2-3), the witty and erudite chief editor of that publication noted that while the bank was "the league-table leader in a half-dozen other bankerly attainments," only its derivatives book is "in a position to make the chairman of the Federal Reserve wish he had never been born." However, the article ventured no opinion on a more basic question: Why did the Fed ever permit this extraordinarily risky situation to develop in the first place? ~~~ The just-released Commitments of Traders Report (COT), for positions held as of Tuesday, January 27, 2004, was a shocker for silver. It showed that the commercials increased their net short position in COMEX silver futures and call options to 470 million ounces [14,619 tonnes], an increase of more than 52 million ounces [1617 tonnes] in one week. This is a near-record in the dealers' net short position, exceeded only once before in COT history, some ten years ago. The eight or less largest traders held a net short position of more than 337 million ounces [10,482 tonnes]. There should be no question in anyone's mind as to why we sold off so sharply in silver on Thursday, Jan 29th, when silver fell 40 cents, its biggest decline in many years, and continuing today, Feb. 2. The connection -- largest short position in years, largest price decline in years -- should be painfully obvious to everyone. This is blatant manipulation, pure and simple. There were no fundamental developments in the real world of silver supply and demand, just illegal paper games on the COMEX. What makes this such an outrage is that these short commercials don't have the real silver backing these naked short sales. How could they? Their total net short position is three times the size of total world known bullion inventories. In no other commodity does this absurd situation exist. In addition, the shorts have struggled for a year to make delivery on the COMEX, consistently forcing some acceptors of delivery to wait until up to the very last delivery day, which is against all known delivery economics. More than 50 million ounces of paper silver shorts were added in the week, even while they struggled to deliver a stinking 5 million ounces of real silver that the Central Fund of Canada bought some 7 weeks ago. And to those who would suggest that this orgy of paper selling was legitimate hedging on the part of miners, since when are legitimate hedges established and liquidated on quick price drops, as is the pattern of the manipulative shorts? Fiat -- Sharefin, 19:50:24 02/19/04 Thu Here Come 'De Flation? Shilling, Prechter And Makin: Economists Not Singing In The Choir Independent Economic Researcher A. Gary Shilling's last two books have been all about the “D” word, and he is still a true believer. The Elliott Wave Theorist's Bob Prechter's latest book is “Conquer the Crash,” in which he talks about a coming deflation and how to cope with it. John Makin, an American Enterprise Institute Scholar who also works the hedge fund side of the Street, hasn't published a book on deflation, but says he “probably should. I'm really looking at continuing disinflation and the Fed's seeming indifference thereto.” And John has written copiously and cogently on same. This trio, quite evidently, are marching to a different drummer than the herd of optimistic prognosticators whose economic predictions already have produced any number of cheery “outlook” pieces in this still-new year. So what do they think they see that most economists are missing, amid their celebrations of booming GDP and quiescent inflation? Deflation, of course. I gathered them into a conference call last week, and challenged them to worry me. Gold -- Sharefin, 19:32:01 02/19/04 Thu Cyclical, Secular, or just Bull? There's been a lot of talk lately about the bull market in Commodities. Since 2001, most of the major commodity indices have risen by over 40%. That, in itself, is not unusual. Commodity prices are cyclical by nature, moving with the ebb and flow of the world's economy as a whole. It's wasn't very long ago that commodities in general were relegated to the dustbin of history, old economy relics that would scarcely be needed by the “new paradigm” world that would, presumably, survive on nothing but air, water and an AOL account. For those who take the long view however—the real long view, not the Saturday supplement variety, this sort of talk was welcome news indeed. Bull markets are sired by Bear markets and those who pay attention to cycles knew that the distain shown for anything non “new age” was a sure sign that it's time was at hand. No one doubts any more that we're in a bull market. HRA stated calling for one back in 2001 when we could see that the US Dollar was finally, (finally!) starting to show some signs of weakness. Now that we have the market that so may waited for, we have to climb the wall of worry every rising market faces. Being a cyclical sector, this wall is even taller for most investors. They know that commodity prices move both ways and no one wants to be the last one to leave the party. The question facing us all right now is: Just what kind of bull market are we in? Charles Dow, the namesake for the famous index felt there were a number of different trends that could be classified based on duration and size. Primary Trends are broad movement lasting 4-6 years, where each successive rally reaches a higher (or lower) level and each decline ends at an higher (or lower) level, depending on weather it's a Bull or a Bear trend. Secondary trends are much shorter, counter-cyclical moves (the bear market rally, or bull market decline) that are not large enough to violate the overall Primary Trend. The Granddaddy of them all is the Secular trend, which is made up of two or more Primary trends in sequence and lasts 5-20 years. The bull market in equities from 1982 to 2000 is the best known example of a secular trend. Of course, the story was a little different for most commodities, and especially gold. While the equities markets were celebrating the “greatest bull market in history” (ending in the greatest investment bubble in history) gold was going through a seemingly endless bear market of its own.  Silver -- Sharefin, 19:05:09 02/19/04 Thu ...another billion ounces or two WALLACE, Idaho - Whither the price of silver? Nowhere is that question being asked with greater intensity than here in the Silver Valley, the silver capital of the world, home of the genuinely Sleepless and the greatest pile of silver on the planet. Sitting on reserves that make Potosi and Comstock look like ma and pa operations - seriously, we've mined more than either and the old-timer geologists who really know this camp say there's at least as much still in the ground as we pulled out, another billion ounces or two - yeah, we're checking the price on an hourly basis. Silver's vindication at $6, should it hold through the summer, sets the next level of genuinely serious resistance at $10, not $7 or $8. Should it bust $10 some time this year or next, its next stop will be $20, with not even a by-your-leave-sir at $15. ~~~ Let's start from the top down. Wallace Realtors Bob and Linda Davison report a mini land boom; houses that have stood vacant or at least unwanted for a decade are all of a sudden just flat gone. Commercial property in the historic districts of Wallace and Kellogg is trading at a huge premium, if you can find any of it. Why? Because folks have figured out that big things are about to happen underneath us, in these deep, rich mines. Gold -- Sharefin, 19:03:41 02/19/04 Thu Gold and Jewellery Group report sales of AED 400,000,000 during DSF 2004 The Gold and Jewellery Group, Dubai, has reported gold and jewellery sales of AED400 million during this year's month-long Dubai Shopping Festival, with the award winning World Family Commemorative Gold Coin Promotion cited as the main reason for this impressive 22 per cent increase in festival sales. Fiat -- Sharefin, 02:59:50 02/18/04 Wed THE DOLLAR CRISIS: CAUSES CONSEQUENCES CURES Question 1: Your new book was recently released by J. Wiley & Sons. In the book you argue that the current International monetary system is in danger of collapse. Could you explain why you believe the present international trade system is a danger to all of us? Answer: It is the imbalances in the international trade system rather than the system itself that poses the danger. The United States ' Current Account deficit is now $60 million AN HOUR! It increased 28% in 2002 to half a trillion dollars, an amount roughly equivalent to 5% of US GDP. This unprecedented trade imbalance has created extraordinary disequilibrium in the global economy. The countries that build up large stockpiles of international reserves due to large current account or financial account surpluses—such as Japan in the 1980, the Asia Crisis countries in the 1990s and China today—develop bubble economies. When those bubbles pop, as they inevitably do, they leave behind banking crises and excess capacity. The governments of those countries must then go deeply into debt to bail out the depositors of the failed banks. At the same time, the excess capacity in the economy results in deflation. Economic bubbles and systemic banking crises can be expected to reoccur and deflationary pressure can be expected to persist so long as the US Current Account deficits continue to flood the world with dollar liquidity. Oil -- Sharefin, 22:17:12 02/17/04 Tue The 7 stages of a dollar crisis 'Experts' simplistically tout a weak dollar as good news. No wonder many regular folks are unaware that its dramatic decline could spell real trouble. Along the way to a full-blown crisis, the steps leading up to it may either pass unnoticed or prompt insufficient concern. That is the story of the dollar. Its decline continues to strike many folks as good news. It is only a matter of time before that perception changes. The inevitable crisis will inflict damage, but those who see where we are headed can protect themselves beforehand. To this end, I'll explain where I believe we are in that process. ~~~ 7 small steps to crisis Here, then, is my outline of a 7-step process of creating a full-blown crisis. Step 1. Nobody notices or pays attention that the dollar is falling. Step 2. Folks wake up, but they either don't care or rationalize dollar weakness as a good thing. Step 3. The central banks now know they have a problem, but the bankers think the market will obey them. It will, for a while. (This is the step we have now reached and what emerged at the G7 meeting.) Step 4. The dollar now tests everyone's resolve by resuming its decline. The currency markets will not respond to jawboning by finance ministers. Step 5. In this step, the finance ministers are forced to take action. (Think about it. Even if they'd stated that they wanted the dollar to go up, nothing either explicit or implied indicates they'll do anything about what's happening. That will come next.) When they do take action, the market will do what they want -- but only for a while. Step 6. The ministers take some additional action, but it won't be enough, and the currency markets won't do what the ministers want. Step 7. Finally, we'll have a full-blown crisis, and that will be the end game. Oil -- Sharefin, 22:13:54 02/17/04 Tue Dried Up? Are We Running Out of Oil? Scientist Warns of Looming Crisis "Civilization as we know it will come to an end sometime in this century unless we can find a way to live without fossil fuels." In his just-released book, Out of Gas: The End of the Age of Oil, published by W. W. Norton & Company, Goodstein argues forcefully that the worldwide production of oil will peak soon, possibly within this decade. That will be followed by declining availability of fossil fuels that could plunge the world into global conflicts as nations struggle to capture their piece of a shrinking pie. Real Estate -- Sharefin, 22:11:38 02/17/04 Tue Real Estate Riches, Ruins or Rewards Americans have assumed over the past two decades (and rightfully so) that the value of their homes will always keep going up. This is their “ace in the hole” if they need to take care of high-interest credit card and retail debt. With home prices stagnating here in Denver, and the average home price declining by $6,000 in October 2003, people are starting to realize this may not always be true. With the Greenspan Fed trying to inflate their way out of the great American debt mess, this monetary inflation is showing up in the form of higher food and utility costs. Assuming incomes stay the same, and these expenses take up more of Joe and Jane Starbuck's income, it'll put a further squeeze on already tight finances for middle-class Americans. While expenses are rising, a number of higher-paying, formerly “untouchable” white-collar jobs (mainly in IT) are leaving the US for India – and aren't coming back. The majority of Americans still have to work to pay their bills. With companies' hiring rates and wage increase rates stagnant to slightly declining, this is definitely a big strike against real estate values. If – more like when - 30-year mortgage rates increase another percentage point or two, this will be a body blow to the real estate market. The average American could be in the uneasy situation of making a ‘margin call' on their house (i.e., coming to closing with cash) because the house they paid $200,000 for a year or two ago, is now only worth $180-190K (or less). Because of the lack of financial and economic literacy (and history) among most Americans, I'm not sure if they'll understand that ever-increasing real estate prices are a myth, and the reality is that real estate prices can go down. By then, it'll be too late if they and 10,000 or more of their closest friends are all trying to sell their homes at the same time. ~~~ Warren Buffett says it another way: Be brave when others are fearful, and be fearful when others are brave. Right now, most Americans are pretty courageous in the stock and real estate markets. If you haven't noticed before now, conventional wisdom – well, isn't wise counsel. When everyone thinks something is a sure bet, eventually that's a sign it's not. Silver -- Sharefin, 21:54:22 02/17/04 Tue Keeping The Pressure On - Silver There is a simple, fair, and effective cure to the silver default problem. It doesn't require ten million dollars or ten billion dollars from the exchange. It is free. It won't put a Band-Aid on the fracture, it will cure it for all time. It will restore integrity to the COMEX silver market. It is such a perfect solution to the silver default problem, that not one word has been, or could be, publicly spoken against it. (But, be sure plenty is spoken against it privately - by the manipulative silver shorts.) It's my solution of certifying that the longs and shorts are qualified to complete their respective delivery responsibilities by first notice of delivery day - the longs by depositing the full cash value of their contracts, and the shorts by depositing unencumbered COMEX warehouse receipts. By mandating that all participants are ready on the first delivery day, and not waiting until the last day to find out that someone may not be ready, the default possibility is eliminated. Please see, "The Solution" Gold -- Sharefin, 21:52:27 02/17/04 Tue Gold hedging renaissance possible De-hedging by gold producers is slowing dramatically. Last year the number of ounces hedged fell by 12.9m, or just over 400 tonnes, to 70m. That compares with a drop of 14.1m ounces in 2002. This year de-hedging is forecast to be about 10m ounces. The forecast comes in The Hedge Book produced by the Virtual Metals and Haliburton Mineral Services independent commodities research consultancies. It is not possible to analyse how big a contribution de-hedging made to the bounce back in the US dollar price of gold, says Jessica Cross, VM's chief executive. But the reduced level of de-hedging and other factors – such as the big fall in demand from jewellery producers, rising output and continued sales from reserves by central banks – means “gold is looking vulnerable on the physical side.” Fiat -- Sharefin, 21:36:27 02/17/04 Tue Running on Empty According to Greenspan, it seems that we must be grateful to the Fed for its loose interest rate policy. Without this policy we would probably be suffering a terrible economic slump by now. In short, according to Greenspan the low interest rate policy of the U.S. central bank has strengthened consumers' and businesses' financial conditions. Our analysis, however, disagrees with this. Rather than showing strengthening in financial conditions the data demonstrates that the exact opposite took place. --- Excellent charts Fiat -- Sharefin, 21:34:07 02/17/04 Tue Dollar drinking in the Last Chance Saloon To highlight the problem, it's worth thinking about an earlier economic shock, namely the 1987 stock market crash. As it turned out, the crash was no more than a blip in the seemingly inexorable continuation of the bull market in equities that began in the early Eighties and which persisted all the way through to 2000. It didn't feel like that at the time, though. People feared it was the beginning of the end, the ultimate sign of economic hardship. Articles were written comparing the fate of people in 1988 and 1989 with those who suffered genuine economic distress in the 1930s. And, of course, those articles were wrong. Many economics commentators have a tendency to head for the "Dr Doom" view of the world - and you might think that I'm a prime example of this pessimistic trend - but the doomsters were wrong back then because they'd ignored the ability and willingness of central banks and governments to inject liquidity into the global financial system through a series of interest rate cuts that swiftly restored confidence and paved the way for the economic boom of 1988 and 1989 (and, indirectly, for the subsequent rise in global interest rates and the onset of recession at the beginning of the 1990s). The stock market crash in October 1987 had many causes, but chief among them was the breakdown of co-ordination between the world's central banks. Earlier that year, with the signing of the Louvre Accord, the G7 nations committed themselves to the maintenance of currency stability. Finance Ministers were becoming increasingly worried about the dollar's decline, and both Germany and Japan made a solemn commitment to set domestic policies that would be consistent with stable currencies. The dollar's decline was seemingly at an end. That was true up until the summer, at which point the Bundesbank decided to raise interest rates for domestic economic reasons. All hell broke loose. Currency markets realised the "co-ordination" game was up, and that the dollar was, once more, standing on the precipice. Down it went, up went US long-term interest rates and, eventually, crash went the stock market. Fiat -- Sharefin, 21:25:02 02/17/04 Tue Central Banking Discredited They are yesterday's heroes. Central banks ruled the world during some 22 years of disinflation. But like most champions, they have overstayed their welcome. The world's major central banks — the Federal Reserve, the Bank of Japan, and the European Central Bank — have squandered the capital they built up in the long and arduous war against inflation. And now, with their policy arsenals dangerously depleted, they are woefully ill-equipped to cope with the ever-daunting complexities of a post-inflation era. Bondholders beware: Your once-proud defenders have met their match. I fear modern-day central banking is on the brink of systemic failure. Fiat vs Gold -- Sharefin, 21:07:33 02/17/04 Tue The "Real" Value of a Dollar In a January 4 speech this year, Fed. Governor Bernanke opined that the rising gold price was caused by terrorism. Geopolitical tensions, he said, “account for the bulk of the recent increase in the real price of gold.” He also downplayed the weakness of the dollar. Weakness against the euro was less important than the fact that the dollar's “real value against the currencies of important U.S. trading partners, weighted by trade shares, has fallen only about 12 percent from its peak in the first quarter of 2002.” Bernanke's remarks in total formulate the rationale for the Fed's easy money policy. As such, they illuminate reality as perceived by the Fed versus reality as perceived by the rest of humanity. Bernanke's references to the “real” price of gold and the “real” value of the dollar suggest that he and his colleagues have access to information and knowledge unavailable to ordinary citizens. Policy decisions, and most specifically, the Fed's ultra easy money stance, are based on these “realities”. Those of us who believe the price of gold is rising in response to easy money as well as repeated interventions in past and prospective capital market crises have got it all wrong. Those who fear that the overvaluation of the dollar and resulting capital market imbalances may spell trouble for the financial markets and the economy can toss out the tranquilizers. ~~~ In other words, “trust us” to get it right. But is Bernanke's confidence that the Fed will act appropriately to maintain the dollar's value enough to dispel all doubts? Perhaps central bankers in Asia have not yet had a chance to digest Bernanke's words. This might explain the January 28 comments of Japanese Finance Minister Sadakazu. He said he wanted to carefully consider whether to change the weighting of gold in Japan's foreign reserves, which are “mostly made up of dollar-denominated assets”. Japan's reserves reached a record high of $673 billion at the end of December, 2003. Zhu Min, general manager and advisor to the president of the Bank of China, the largest holder of dollar reserves in China, recently stated: “all the Asian countries hold dollars for security reasons, but at some point, this has to end.” Speaking at the Davos World Economic Forum in January, he added, “Over time, China's pace of export growth would wane, weakening its ability to buy dollar-denominated assets.” Central bankers, upon concluding that they hold more of a particular reserve asset than they desire, have been known to act without any consideration of intrinsic value. One need only recall the relentless divestment of gold holdings by European central banks at prices well below the current market. That episode alone suggests that central bankers are either incapable of judging or indifferent to matters of valuation. ~~~ What is the value of a dollar? For us, the simplest and most reliable measure is the amount of dollars required to buy a fixed quantity of gold. We respectfully disagree with Mr. Bernanke. Whether he and his fellow governors are hypocritical or delusionary in their assessment of the dollar's intrinsic worth is of no matter. What is important is that they are flat out wrong. As anyone can see, the dollar is falling against gold and has been doing so for almost five years, long before terrorism became a front-page item. As we are very busy figuring out how to profit from the view that it has much further to fall, we have given little thought on how to fix the mess. Let us leave financial diagnosis and prescriptions to those wise policy makers who got us here. Still, we cannot resist offering some friendly advice. The next time around, respect history. Anchor a new global currency to something that has real monetary value. Fiat -- Sharefin, 04:11:22 02/16/04 Mon Another Viewpoint about currencies What are currencies anyway? They were backed by gold in the past until a major state backed out of this deal, and now only by the confidence of the currency holders and the credibility of the issuing states. I think economist call them Fiat Money. Who should determine the value of the currencies anyway; arguing economists, free currency trading markets or the unscrupulous currency traders as demonstrated in the raid on the Sterling Pound and more recently the Asian currencies. What are the bases for determining the values? Only vague qualitative arguments with no quantitative substantiation. More likely, the ability of the issuing nation in defending its currency exchange rate, that is the health of its economy. Fiat -- Sharefin, 04:05:10 02/16/04 Mon It's not the currency stupid, it's integration! It should be noted that Slick Willie has nothing over Treasury Secretary John Snow – who will snow you at every turn. The closing press briefing of the G7 finance ministers and central bankers on Saturday was a sterling example of arrogance and unbridled power in the hands of the globalists. What was on the mind of most reporters was the value of the dollar in world currency markets. Snow refused to comment on the way the dollar should go or if there was agreement that it was low enough to accomplish reducing our trade deficit. Seven times, he was asked differently phrased questions about the dollar. His prevailing response was, "I never comment on exchange rates or the levels of exchange rates. Both this agreement and the Dubai agreement were unanimously supported by every member of the G7 and reflect our views on the subject." It was five months ago in Dubai that the G7 finance and central bank ministers signaled their intent to let the markets determine the value of the dollar and other currencies. However, to one reporter who wanted to know the difference between his verbal statement and the final printed statement that called for flexibility of currencies, he replied: "A strong dollar is and has been the policy of the U.S. for a long time. It is in our national interest. But the relative values of currencies are best established in open, competitive, currency markets." ~~~ To the reporters concerned about the dollar, I say, "It's not the currency stupid, it's integration!" How do you integrate individual countries into one big world system? Well, first you have to drop national laws that impede global growth in finance, economics, trade, customs, transportation, etc. This has been done. Second, you have to set up the global institutions to facilitate the new global landscape. This has been done. Then you need to establish a stock market in every country of the world by privatizing and putting state-owned assets into the market. This has been done as the World Bank has greatly facilitated this in most developing countries so that today, every country has a stock exchange. Then you have to change the structure of government and privatize government assets and allow business to co-manage with government through public-private partnership. Bill Clinton called this "reinventing government." This has been done – not only in the U.S., but worldwide. At the same time you are implementing the above, you do not want to explain in clear terms what you are doing because then the public will understand that they have been lied to so that the powerful on the global level have the ability to control the value of all they own – mortgages, auto loans, stocks, bonds, real estate, etc. This has been done, as is evident by the kind of reporting the mainstream press has done, for we have all been snowed. Integration is the tricky part. How to get one country to buy more of another country's goods and vice versa. To do this, you need to change the global monetary system from one based on the accountability of gold to one of no accountability and paper. This was done. In 1971, President Nixon took the dollar off of the gold standard and – for the first time since the ancient trading routes in Babylon – paper was used as a currency instead of gold, silver, jewels, animals and clothing. With a paperless currency, it is possible to change the value of it upon demand. Now you are ready to integrate the countries of the world, through changes in the value of national currencies. Gold -- Sharefin, 04:01:24 02/16/04 Mon Indian foreign exchange reserves surge to new high BOMBAY (Reuters) - India's foreign exchange reserves, Asia's sixth-largest, rose to a record high on February 6 on a combination of currency inflows and revaluation gains as the dollar continued to trade weakly against global currencies. Data released by the Reserve Bank of India (RBI) on Saturday showed foreign exchange reserves rose for the third straight week to hit $106.6 billion, up $1.6 billion from a week earlier. Analysts say the rising reserves are inevitable, given the central bank's sustained intervention in the currency market through dollar purchases. The RBI has been purchasing dollars to prevent its currency from appreciating too sharply in a bid to protect the export competitiveness of domestic exports, analysts say. This is in line with other Asian central banks which have also been grappling with hefty capital inflows. Central bank intervention is seen as one of the major factors that has boosted Asia's combined foreign exchange reserves over $2 trillion at the end of January. ~~~ POLICY DILEMMA But while the rise in reserves is a welcome reversal for a country which teetered on the edge of a balance of payments crisis just over a decade ago, in 1991, it has presented the central bank with a policy dilemma. Its sustained intervention has helped limit the rupee's rise but the resultant flood of rupees into the domestic market has powered a steep fall in bond yields, which have turned negative in real terms in recent weeks. The benchmark 10-year bond yielded 5.29 percent on Saturday, while inflation was at 5.8 percent in the week ended January 31 and had been above six percent for the five preceding weeks. "It is a challenge to conduct monetary policy in conditions like this and underlines a case for introducing the market stabilisation fund as soon as possible," Sinha said. One of the tools Indian authorities are planning to deploy is a market stabilisation fund, which will issue special bonds. These bonds will be sold to market participants to drain liquidity. Other steps taken in recent months include freeing of capital controls to create greater demand for dollars. Gold -- Sharefin, 03:58:22 02/16/04 Mon Vyugin: Growth of Russian gold and currency reserves to stop MOSCOW - Increase of gold and foreign currency reserves in Russia will stop in February-March of this year, according to deputy president of Bank of Russia Oleg Vyugin. He stated that this would happen unless present situation in the market underwent a drastic change. Sharp increase of Russian gold and currency reserves in December 2003 and at the beginning of year 2004, which made $6 billion, was, according to Vyugin, evoked by influx of funds from foreign banks investing in various ruble assets. He characterized the situation of growing gold and foreign currency reserves as “very temporary”, Izvestia reports. At the moment Russian gold and currency reserves have reached record volumes. On Jan., 29 the total made $82.7 billion. Gold -- Sharefin, 03:57:02 02/16/04 Mon Russian gold and currency reserves keep stepping up On February 6, the Russian Central Bank's gold and currency reserves reached $84.3bn, increasing by $200m over a week. The reserves have been stepping up for a fifth week in a row. Over this time frame, they added $7.2bn. Nevertheless, the latest rise in the Central Bank's reserves has been the smallest since October 31, 2003, possibly due to large foreign debt payments. Gold -- Sharefin, 03:55:32 02/16/04 Mon Dollar Bounces Back, Helped by Euro NEW YORK (Reuters) - The dollar clawed back from early losses on Friday in volatile trade amid a wave of profit-taking in the euro after the single European currency hit a near-record high against the greenback. Earlier, the U.S. currency fell sharply against its major counterparts on a report that the U.S. trade deficit widened sharply and a surprisingly weak consumer sentiment survey. Markets were also perturbed by rumors of intervention by the European Central Bank after the euro fell a full cent in less than half an hour, reversing gains posted after the softer-than-expected U.S. data. Traders said the intervention rumors were fueled by the sale of some 2 billion euros by a big European bank, a move that accelerated losses in the single European currency. ~~~ Analysts, however, remain bullish on the euro and are likely to buy the currency again on some dips. Next week should provide ample opportunity to renew positions on the euro amid another heavy economic calendar, traders said, with the release of U.S. industrial production and capacity utilization, the February Philadelphia Fed survey and consumer price data. Gold -- Sharefin, 03:54:21 02/16/04 Mon German govt backs Buba's Welteke on gold fund plan BOCHUM, Germany, Feb 14 (Reuters) - German Chancellor Gerhard Schroeder has backed a plan by the president of Germany's central bank, Ernst Welteke, to use interest earnings from gold reserve sales to fund research and development. Speaking at a Social Democrats regional conference in the western town of Bochum on Saturday, Schroeder said it was vital the government continue its drive to boost research funding. "Maybe the government and the Bundesbank together will manage to put the income from the gold sales that have been discussed into a fund, where all the profits will be put into research and development," said Schroeder. Bundesbank President Ernst Welteke has said he favours selling some of the central bank's gold and using the proceeds to fund education and research projects but it is not clear if the Bundesbank's board would support the sales and no decision has been taken. Some German politicians have said it is not for the Bundesbank to decide how the funds will be used. A proposal to sell gold and invest the proceeds in interest-bearing securities to fund education and research would require a change in the current law governing Bundesbank profits, which are normally transferred to the government and used to pay down public debt. Welteke has already said that there would be no majority on the Bundesbank's board for outright gold sales without such a change in the law. Any change to the law governing the Bundesbank is a decision for parliament rather than the Bundesbank itself, the central bank said. Fiat -- Sharefin, 03:50:47 02/16/04 Mon The Mortgage-Stones of America In the rubble of post-bubble America, what do you do with the piles of debt that have been accumulated in the preceding boom? Normally, you might sweat if off, as you might work off a big meal. Recessions and busts are usually what do this, but this last downturn seems to have been mild and its work not yet finished. The current federal debt outstanding according to the Bureau of Public Debt stands at $6.9 trillion.[i] The public debt has risen without interruption since 1956.[ii] Consumers are no better off. Consumers have kept on borrowing and spending through the bust. Household balance sheets don't appear very sturdy. As quoted in a recent newspaper column, the ratio of household liabilities to net worth hit an all-time high of 22.6 percent in the first quarter of 2003 (the most recent data available). Outstanding consumer credit, mortgage debt and other debt hit $9.3 trillion by April 2003: "A lot of people are dangerously close to the edge and any minor setback could push them over," said Amelia Warren Tygai, co-author of The Two-Income Trap: Why Middle-Class Mothers and Fathers are Going Broke".[iii] Given the large amount of debt outstanding, it is easy to see that creditors are not likely to win any votes in deciding the future monetary policy of the country. Repudiation of debt is the familiar song in history, the favored path used to extinguish debt. It seems likely that it will be no different this time. Ever since the creation of money, there have been numerous attempts to cheat it – coin clipping, devaluation, confiscation of gold, etc. These are the recurring patterns of theft that wind through financial history as winters follow autumns. Fiat -- Sharefin, 03:49:33 02/16/04 Mon Debt vs. Income: At the Point of No Return At the beginning of 2003, the level of debt that American's owed as an absolute amount, and as a ratio of income, was already approaching levels never seen before. Debt can be handled in a number of ways: 1) earn enough money to pay it off; 2) default; 3) borrow even more; or, 4) pray for inflation so you can earn more dollars (but really pay back less). Where are we now? Last year, personal income increased about 2%. Individual debt increased about 10%. Personal debt for autos, credit cards, etc., topped $2 Trillion - up about $120 Billion despite massive debt consolidation and mortgage refinancing. Mortgage debt rose about $800 Billion, and total individual debt rose over $925 Billion, while wages and salaries rose only $190 Billion. Retirees and savers saw their interest income shrink, as interest paid on savings dropped by $30 Billion. Indeed, given the Fed's low interest rate policies, it doesn't pay to save. In December, the savings rate dropped to a new low of 1.5% and in the 3rd quarter of 2003, the only reason financial assets were acquired is because they were bought with borrowed money. The low savings rate is even more astounding when you consider the increase in Disposable Personal Income of around $200 Billion from the tax cut. The economy needs $500 Billion in government stimulus from tax cuts and increased spending just to keep employment from falling and to help consumers roll over their credit cards for another month. The savings rate is actually materially overstated. Personal Income, according to the Bureau of Economic Analysis, includes a few hundred billion dollars in “imputed income” for owning your own home and receiving value for other “non-cash services”. Imputed income is significantly greater than the 1.5% savings rate! Unfortunately, debt can only be repaid with actual cash flow. In January, Personal Income rose at about a 2% annual rate and very few jobs were created. Consumers are spending every last penny to live, and many are “tapped out”. What is perfectly clear from simple arithmetic is that without a sudden increase in the number of jobs and the wages they pay, individual debt can not be serviced by personal income. Worse yet, not only are people not saving, but their financial reserves are not in real cash. The only thing keeping the “national ponzi scheme” going is the illusion of wealth created by the Federal Reserve's low interest rates and liquidity that has allowed stock market valuations and housing prices to artificially inflate. Gold -- Sharefin, 03:46:09 02/16/04 Mon Shiny Dollar Hedge Among gold stocks, Denver-based Newmont Mining is a bellweather, a favorite among gold bugs and occasional investors alike. Newmont is the world's largest gold producer and the world's largest private sector precious metals royalty owner. The company has mines in North America, South America, New Zealand, Australia and Indonesia, and gold reserves of 86.9 million ounces. Curtis Hesler, the editor of Professional Timing Service, thinks now is a good time to buy.  Gold -- Sharefin, 03:40:17 02/16/04 Mon Gold choppy in Europe, reacts to dollar and U.S. data LONDON, Spot gold movements were erratic in Europe on Friday, reacting to a dollar buffeted by a double-whammy of weaker-than-expected U.S. data, and rose to nearly $417 an ounce before dipping. Gold touched a one-month high of $416.85, tracking a euro which leapt to the brink of a lifetime high after the February's University of Michigan consumer sentiment index came in 10.2 below market expectations at 93.1, compounding pessimism about the U.S. economy from a wider-than-expected trade deficit reported earlier in the session. The euro then eased over a cent to trade beneath $1.28, and bullion likewise backtracked to under $410.00. ~~~ In addition to volatility from the U.S. data, traders had warned of a choppy Friday afternoon for bullion as New York gold futures were closing early and would be shut all day Monday due to the Presidents Day public holiday. "The market has absorbed a lot of long liquidation and the funds are basically underweight gold at the moment, certainly relative to the other commodities and relative to the currency markets. So I think we will renewed fund buying through much of next week," Williamson said. In a report published on Friday on behalf of Investec industry specialists GFMS Ltd said gold hedging declined by around 2.2 million ounces worldwide to just over 69 million ounces in the fourth quarter 2003. Fiat -- Sharefin, 03:37:42 02/16/04 Mon China yuan move likely this year, but not due to G7 SINGAPORE: China will probably adopt a new currency policy this year which would allow the yuan to strengthen at least a little, but not in response to pressure from the Group of Seven (G7), according to a majority of analysts polled by Reuters. Fourteen of the 25 analysts polled said they expected a change in the yuan before the end of the year, most likely in the second half. Three saw a move next year, and eight said they could not see a change in the foreseeable future. Only eight analysts said last weekend's G7 meeting, which issued a communique that markets interpreted as a call on China and other Asian countries to allow their currencies to strengthen, had raised the likelihood of a yuan adjustment. ~~~ The United States and European countries have accused China of keeping its exchange rate artificially low, with politicians saying Beijing is stealing jobs and trade from the West. China has said in response that while it is working towards freeing up its exchange rate, internal stability is its priority. The Chinese banking system has massive amounts of bad loans and the reform of state-owned enterprises has caused unemployment. And the risks of an overheating economy and signs of rising inflation were of greater concern than G7 complaints, Beijing said. Fiat -- Sharefin, 03:17:21 02/16/04 Mon China yuan move likely this year, but not due to G7 SINGAPORE: China will probably adopt a new currency policy this year which would allow the yuan to strengthen at least a little, but not in response to pressure from the Group of Seven (G7), according to a majority of analysts polled by Reuters. Fourteen of the 25 analysts polled said they expected a change in the yuan before the end of the year, most likely in the second half. Three saw a move next year, and eight said they could not see a change in the foreseeable future. Only eight analysts said last weekend's G7 meeting, which issued a communique that markets interpreted as a call on China and other Asian countries to allow their currencies to strengthen, had raised the likelihood of a yuan adjustment. ~~~ The United States and European countries have accused China of keeping its exchange rate artificially low, with politicians saying Beijing is stealing jobs and trade from the West. China has said in response that while it is working towards freeing up its exchange rate, internal stability is its priority. The Chinese banking system has massive amounts of bad loans and the reform of state-owned enterprises has caused unemployment. And the risks of an overheating economy and signs of rising inflation were of greater concern than G7 complaints, Beijing said. Fiat -- Sharefin, 03:16:06 02/16/04 Mon Huge US trade deficit hits dollar The US trade deficit hit a record $489bn (£258bn) in 2003, with a quarter of the shortfall coming in trade with China, official figures have shown. The deficit was 17.1% larger than the previous record gap recorded in 2002. The US economy pulled in 8.3% more imports in 2003 than 2002, while exports grew at a slower pace of 4.6%. The news pushed the dollar to an 11-year low against the pound, and to within a cent of its all-time low against the euro, before recovering. The euro skirted a new record high but in late deals had fallen to $1.2737, having at one point in the session touched $1.2896, just short of its record 1.2898 set on 12 January. The pound was quoted at $1.8851, having earlier in the day hit a new 11-year high of $1.8989. The burgeoning deficit has put downward pressure on the dollar, which could create inflationary pressure as Americans pay more for imported goods. The monthly deficit hit a near-record $42.5bn in December, well above a median analyst forecast of $40bn. Gary Thayer, chief economist at AG Edwards & Sons, said: "(The figures are) suggesting the decline we've seen in the dollar over the last couple of years is not having an impact. "It suggests the dollar may still need to fall to help narrow the trade deficit. But there's a risk to higher inflation if it does." Forum Archived -- Sharefin, 02:57:15 02/16/04 Mon The Forum has just archived itself & prior posts can be viewed here. |
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