Saturday, May 10, 2008

May 10.08 commentary..extremely important.













Good morning Ladies and Gentlemen:


Yesterday, we witnessed a powerful outside day reversal which generally happens rarely.  However in the gold and silver market it is getting quite common.  Gold closed by by 4.10 to 884.70 and silver rose by an insigificant 1 cent to 16.80.  Early in the  European session  gold was up by 6.00.  However news hit the wires that the big insurance company AIG  had a huge loss of 7.81 billion dollars and they will  need to raise over 12.5 billion dollars to shore up its balance sheet.  Many of you will remember me telling you that AIG was the big short of silver. However their chairman, Hank Greenberg got in trouble with the law and they had to pass the baton over to Scotia Macotta and HSBC.  However the derivative losses stayed with them and yesterday it came back to haunt them. 


Wall Street did not like the news especially when it saw Europe tank.  The futures fell sharply, so wall street called in the cavalry and they decided to bomb gold and silver. It was not well orchestrated.  Usually we see premiums on the puts rise the day before which is their signal to all that a raid is coming. On Thursday, premiums were normal.  However events of yesterday startled the street and they were just not well prepared.

The cartel continued to supply the shorted gold paper and on the buy side we had willing buyers at lower and lower prices.  Nobody left the gold and silver arena.  At one point gold was down 13.00 and then it slowly rose and by noon time it had crossed over into positive territory.  It finished up by 4.10. In plain English:  the cartel got stuffed.


In other financial news, we saw that oil traded at a high of 126.40 and finished at 125.90 per barrel.  This oil is referred to as West Texas Intermediate. Also Brent Sea oil rose above 125.00 and the spread btw the two are neglible.  Usually we see a spread of 3-4 dollars but not yesterday. Usually West Texas Intermediate trades at a premium to Brent.


There is another strange development in the oil sector that I would like to highlight to you.  Gasoline which is a distillate of oil and it usually trades at a price range of 27 to 42 to the price of oil.  The average mean over the years is 37.00.  Oil is priced in dollars per barrel and gasoline in dollars per gallon.  The spread is known as the crack spread.  Generally, gasoline price is higher in the summer and we generally see the crack spread closer to 27 where the refiners make big money.  It is lower in the winter as fewer drive.  The spread widens to 42 and the refiners make zero so they do not refine any gasoline.

Today the crack spread is 46.00 as the refiners are making zero and the driving season is now upon us.  Gasoline is low with respect to oil and the relationship over the years is a close 98% correlation.

Adam Hamilton addresses this in Midas at the Doss Passos table and you can review it.  It basically states that gasoline must rise to 4-5 dollars per gallon  just to keep up with the spread.  If the spread goes down to 27 then 6.00 per gallon is in the offering.

Gasoline is something that everyone sees.  You drive buy a gas station and see 1.25 per litre in Canada and 3.40 per gallon in the usa and just shake your head.  This is the commodity that everyone understands.  When this commodity rises, then the whole world will now see we are in hyperinflation mode and they will never believe usa stats.


Yesterday, we saw soyabeans rise 13 cents to a record 13.58 a bushel.  This is a major food component in the food chain.

Live cattle rose significantly on the heals of another rise in the price of corn.  The Dept of Agriculture has stated yesterday that it expects total stock in corn to drop significantly at the end of this year by 685 million bushels.  Corn prices will continue to rise.

India has suspended trading in soyabean oil, potatoes, rubber and chickpeas as inflation is running rampant over there.


The CRB index which is a measure of commodity prices rose a huge 5.31 points to a record 427.45.  The usa dollar continued to sink closing at 73.05 with the Euro rising to 154.79 up by .74.  So much for banking intervention.


And now for some interesting developments that we are following:


The usa released the trade figures yesterday and everyone got so excited that the usa trade deficit shrunk from minus 61 billion dollars to negative 58 billion dollars.  There are two important figures in the report that I would like to highlight to you and from that you will be able to see the fraud that we are facing.


On the oil front, the government used a price of oil at 88.00 per barrel. What is interesting is that oil never traded at any time below 108 during this period so this figure is totally bogus.   The usa consumes 20 million barrels per day or  600 million barrels per month. It imports 12 million barrels or 360 million barrels per month.   If one where to use the correct price of oil then the deficit is a bigger 7.2 billion dollars.


The next commodity in the trade report is gold and Garic did not fully understand its significance.  Reg Howe, Don Jack and I have been watching this development over the past one year.


In a nutsell, the usa reports every month gold exports.  For March it was 2,454,000,000 dollars  (call it 2.454 billion).  In February it was 2.208 billion dollars and January it was 1.49 billion dollars.  It has been rising steadily for the past year.


The entire usa produces 240 tonnes of gold basically at the Nevada mines of Barrick and Newmont and the South Dakota mines of Newmont.  The 240 tonnes of yearly gold or 20 tonnes of monthly gold go to two places:


1.  the comex


2. over to England where it is sold to physical buyers who await anxiously for their metals at the morning fix and afternoon fix.


The comex handles gold for those fortunate souls like me who take delivery.  Generally 3% of all front month contracts take delivery.  Deliveries are always two months apart.

For gold the 6 delivery months are :


1. Feb

2. April

3. June

4. Aug.

5. Oct

6. Dec


For silver there are 5 delivery months:


1. March

2. May

3. July

4. Sept

5. Dec


Note:  there is no delivery for any silver and gold in January and only in December do we have deliveries in both silver and gold.

The two biggest delivery months for gold is December and June.


We have been witnessing huge increases in the delivery of gold and silver on the comex.

For instance in the lastest delivery for silver we are close to 33 million oz of May silver.

In April we saw over 2.8 million oz of gold delivered.  It has been rising now every delivery month.  One year ago about 1.8 million oz was delivered.


In order to satisfy the comex approx 90 tonnes of gold is needed per delivery period or 45 tonnes of gold per month.

The usa produces from the ground 20 tonnes per month or in the two month period 40 tonnes.  The 90 tonnes of gold needed by the comex cannot be satisfied with  usa production. 


The usa for some arcane reasoning includes foreign gold leaving usa soil in the export figures.  For example, in March the export of gold in the trade figures came in at 2.454 billion dollars or if one were to use 930 usa dollars per oz approx 100 tonnes of gold left the usa.  If one were to calculate each month , it looks like approx the same amount of gold is leaving.


If the usa is producing 20 tonnes per month and the usa is:


1. exporting  100 tonnes of gold

2. needs 45 tonnes of comex gold to satisfy customers on a monthly basis  (90 tonnes bi-monthy)


It is obvious that the figures do not match.


First of all, the trade deficit is off by at least 80 tonnes or 80% of 2.454 billion dollars.  You cannot count as an export someone elses gold.




maybe it is their gold.


There can only be 3 reasons for the above scenario and only three and I will highlight them to you:


1.  The gold at the Republic Bank of NY( which is a foreign depository) is being repatriated to their mother country because of fears that the true owners  will not get their gold back.  They fear that the usa will not let them have their own gold back. So they are taking no chances and shipping the gold back across the Atlantic now.


2. The gold is leaving now to enter the leasing pool  as I have described to you continually.  The leasing game hides the true reserves of all countries gold. In other words if France wishes to lease gold, it might as well use the gold on usa soil first, rather than their gold on their own soil. They would then order this gold back and since it is coin melt, it would first go to the refiners and then off to the leasing department.


3.  The USA has clandestinely removed gold from Fort Knox, sent this over to refiners in Europe and sold/leased that gold through the Bank of England.


The gold at Fort Knox is the only official gold in the world that is not pure.  It is.91 gold or what we call coin-melt.  USA received most of its gold in 1933 by melting all the gold coins. It never refined its gold and thus it is the only official non pure gold in the world.


There is now, no question that 100 tonnes of gold is leaving the usa on the monthly basis.   Maybe 80 tonnes is Foreign gold.  Maybe 80 tonnes is USA gold that is sold to keep the paper game going.

As I pointed out to you  yesterday, the selling of usa gold is criminal.  The gold is not owned by the government, it is owned by its citizens.  You can only sell gold by an act of Congress and Congress would certainly say no to any proposal on that scale.


I will let you decide what is going on.  Suffice it to say, the world is in serious trouble and it is amazing to hear pundits say that gold is nothing but a barbaric relic of the past.  It is strange that they certainly are using gold for monetary purposes.


see you on Monday.

read todays commentary slowly and carefully.

















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Thursday, May 8, 2008

May 8.08 commentary.


Good evening Ladies and Gentlemen:


gold rose by 11.30 to 880.60 and silver rose by 17 cents to 16.79.


We again saw open interest on gold rise by 1800 contracts to 435000 despite gold's fall yesterday.  As a matter of fact, gold open interest is rising whether gold rises or falls.  This is deadly to our cartel members as they are feeding  short gold comex contracts  at lower prices and the good guys accept them readily and will never part with their new found gains.

Expect gold to rise appreciably as the cartel seeks higher ground in order to defend the price of gold …(actually they are defending the usa dollar).


Silver's OI continues to contract marginally.  The OI remains at 120,000.  Again silver looks extremely cheap here and should hit 18.00 by next week.


In todays, news, we had record prices for oil which hit 124.35 per barrel .  It closed at 123.45 in the regular market but zoomed in the access market to 124.35 .  The Dow rose by 52 points on the news that oil has again hit a record closing price.  Corn also hit its record high of 6.31 per bushel.


The big news of the day has to be the big decline in commercial paper.  Commercial paper is the "oil" that juices the financial markets.  When it declines the entire economy contracts.

We are witnessing a fall in commercial paper and in asset backed commercial paper.  The financial markets are seizing up as bankers refuse to lend.

Today, we learned that California has a 20 billion dollar deficit.  California is the world's  6 largest economy and these guys are hurting from the housing crunch.

California has 31 million people and it is quite easy to deliver goods up and down the coast.  If these guys are in trouble you can imagine us guys here in Canada.

We have 30 million people spread out over 3000 miles and we have to deliver goods in two languages.  Production runs are very expensive.

Needless to say that Ontario, the engine of growth for Canada is having real problems.  Newfoundland and Alberta with their oil are doing just fine.


I would like to highlight problems in one state which will multiply to all 50 states.  The state is Tennessee. Today, the state governor of Tennessee,  Phil Bredesen announced that state tax collections have deteriorated over the past few months. He announced that he was going to lay off 2000 people because of low state tax collections.  He stated that april 2008 collections is the lowest on record since record keeping began in 1961.  This shows the extent of the credit contraction.  Expect this in all states as the economy continues to deteriorate.


We have received the 900 pages on the gold swaps on our freedom of information.  Most of the stuff is garbage and we will sue for the redacted stuff.


To our Agnico Eagle shareholders:


the results of Agnico Eagle are powerful.  They earned 28 million dollars in the quarter after spending huge bucks on all their mines.

Goldex went into production and they will produce 175000 oz per year from goldex alone.

Kitla is start in Sept.  They will go at a clip of 150,000 oz per year.


The big news is that futher exploratory holes are indicating that Kitla is finding gold at deeper depths.  This should dramatically add to  reserves.

Also Mexico in the Pino Alto mine they are showing huge grades of silver to go with their gold.  This one is going to be a dandy.


They mined less gold this quarter because of the high price of gold.  They mined the lower grade stuff in gold anticipating the high price of gold to go along with the base metals.  They still increased their earnings and kept the gold in the ground.

These guys are great miners.  Their reserves have increased past the 20 million oz mark.  I will get a closer look at the figure later tonight as I delve into each mine.


To our ECU shareholders:


these guys hit a new vein of .52 meters grading  .52 grams per tonne and a whopping 3200 gms/tonne of silver.  That is 105 oz per tonne of silver and  1/60 oz of gold per tonne.  The silver will make it economic.  The width is not the greatest but it is a new section entirely and this is good.  I expect an offer by a major soon on this one.


speak to you on Saturday with a comprehensive review





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Wednesday, May 7, 2008

May 7.08 commentary.


good evening Ladies and Gentlemen:


Quite a day today.   First of all gold fell by 6.70 to 869.70.  Silver fell in sympathy by 19 cents to 16.62.


The open interest on both silver and gold rose with yesterdays rise in both precious metals.  The gold OI rose by 1000 contracts to 433000 and silver rose by 500 contracts to 121000.  This is the first rise in silver OI  in a week.


The big news of the day was the price of oil.  It rose to a record 123.86 a barrel.  Many believe that this was the reason for the tanking of the stock market.

The Dow was  hit pretty hard, tanking by 206 points.


The real reason for the market tanking was the news coming from the SEC:

The SEC is now going to require investment banks to  disclose their capital levels and the liquidity levels.


The banking sector started their freefall in a hurry.  It is amazing that nobody listened to Paulsen  state that the credit crunch was over.  I guess  our little usa banker friends know the jig is up and they bailed out of securities as fast as their little fingers could push the sell buttons on all those financial securities.  Almost all banking securities got annihilated today.


It is amazing that oil is now behaving like money.  The world is flocking to it because of perceived massive inflation in  prices  of goods and services.

The world is basically monetizing commodities because they have no faith in dollars.  Oil is now been ordained as the king of the commodities.
And what about gold?  and silver?


The answer is simply the usa authorities think it is best to unload its central bank hoard to give the perception that everything is OK.

Many are perplexed.  Many ask me why is oil rising to the stratosphere and not gold or silver.   The reason:  the bankers short the precious metals and maintain their short position for many years.  The commercials are now short in excess of 20,000 tonnes of gold and 1.3 billion oz of silver.

They need food riots like a whole in the head.  They want the world to point to gold and say:  " look at is not rising.  We do not have an inflation problem."


Many ask me  if the usa will raise interest rates to combat inflation.  The answer is simply  no.   If they raise interest rates the housing sector that has not blown up yet will do so.


In other news today, the city of Vallejo  in California which  is a city surrounding San Francisco Bay has gone into receivership.  They have 60 million dollars in interest payments due and no revenue because of the housing bust.  The authorities there decided that they had no chance of recovery so they went into Chapter 9 which is like  Chapter 11 for businesses.  It is interesting to note that all of its bonds are either AA or A plus.

The credit default boys are going to have a field day on this one!   And I guess the rating agencies are going to be litigated  because of losses on bonds held by creditors.


Many are commenting on the iMF situation.  Note that they will not get to vote on the deal until next year.  The USA congress must ratify this.

However please note that they prefer the private route of sale and China has come willingly to the forefront in a bid to purchase this 403 tonnes.


As far as I am concerned, this is criminal activity to the highest degree if not treason.  How can any nation let go of their most valuable asset?


We are relatively sure, that the official sector nation that is at the front of action in gold sales in the early morning is the usa. Generally all official sector sales are announced.  The ECB announces weekly as does every nation.  The usa does not utter a word.  It cannot legally sell gold as it does not own it.  Only the citizens of the usa own gold.


speak to you tomorrow


Tuesday, May 6, 2008

May 6.08 commentary...important



Good evening Ladies and Gentlemen:


Today gold rose by 4.10 to 876.40 and silver rose by 8 cents to 16.81


The open interest on gold continues to rise adding a further 3000 contracts to 432300.  Silver's OI continues to fall .  Its new OI is 120,000 a drop of 300 contracts.


Today we learned that in the COT report,  the commercials dropped 20,000 contracts or 2 million oz of gold.  In silver however, with the big drop in price by over 1.20 last week, strangely they added 10 million oz.  We saw the same behaviour in the ETF's with gold holdings dropping in the GLD but silver holdings  in the SLV rose.

We also witnessed  the net concentrated short position in silver rise to the unheard of level of 83% for the top 8 traders.  This is total manipulation and must have the regulators very worried.  Why?  silver is now very low and it will be difficult for the shorters to add to their already precarious short position. This must be worrying Bank of Nova Scotia who is probably short in excess of 300 million oz of silver and HSBC who is short 700 million oz.

You will probably see silver advance at a greater clip than gold.


There were several big stories today.  I will try and highlight them for you.


Of course, the big story everyone is aware of is the rise of oil above 122.00 per barrel.  Since everything is made from oil, it will be difficult for prices of goods to come down.  Inflation will now turn into hyperinflation.


We also witnessed that the long bond continues to fall In price  (rise in yield).  It is becoming evident that bond holders are not happy with the inflation scenario and/or not believing wall street. They are dumping the long bond and thus its price is falling!


The next big story came from the ECB itself.  It's announcement is simply:   we have sold ZERO gold this week…not a single oz.

With Switzerland already stopping its dishoarding of gold, it leaves one wondering as to who is selling.  We are definitely witnessing a large official seller of gold. The problem is that no-one is stepping forward and announcing its sale!!


I have always thought it was the IMF that was the guilty party.  I have changed my mind.  Judging from the answers by the IMF it looks like its gold has been double counted.  The IMF gold is held in situ at 4 places:  Bank of England, Bank of France, Bank of India and the Federal Bank of NY.  Its gold is co-mingled with official gold of its host country.  When the IMF was created, countries would pledge gold over to them but hold custody at the 4 above locations.

If I was a betting man  I will wager you that this gold has already been leased out.


To me it looks like the gold coming into the market is coming directly from refiners directly linking usa involvement.  In other words, the usa is depleting its reserves.  It is interesting that the IMF is very anxious to announce a sale of 403 tonnes.  They approved the sale in committee.

The problem of course, is that the USA holds a veto vote and only an act of Congress can allow the iMF to sell its gold.  Also  only an act of Congress can allow gold to be sold or leased by any usa authority. The usa gold does not belong to the Fed, it belongs to its citizens.   The Fed and/or treasury needs congressional approval to sell or lease or breathe on gold that does not belong to them.


The next big story came from Anglo Gold.  At the start of 2008 Anglo had 11.1 million oz of gold short.  They stated that by the end of the year it will be zero.

Well strangely they have cut their short position from 11.1 million oz at the start of the year to 9.2 milllion oz by March 30.08.

Today, they announced that they were going to have a rights offering and raise 1.6 billion dollars  and this money was going to reduce its short positon.

At todays price, 1.8 million oz of gold would be bought and thus reduce their hedge.


I have always stated that we must watch Anglo and Barrick  as to the covering of their short positions.   I stopped watching Barrick as I believe the Fed owns the Pasqua Lama project and thus the 9.6 million oz in situ.  So it interests me to see Anglo rush to cover.  Something big is going on here!!


In more mundane announcements, we learned that Fannie Mae lost $ 2.57  per share (instead of anticpated 60 cent loss) and that they were going to raise 6 billion dollars from the market to shore up their faltering balance sheet.  The market rejoiced with this wonderful news by bidding up Fannie Mae by 4 dollars.

It seems that the Fed will allow Fannie to take up more debt.  And I guess this is good because Fannie has not produced an audited statement since 2004.

Only in America!!


Next we learned from Merrill Lynch , the big brokerage firm.  Today they raised their level 3 asssets to 70 billion dollars.

Their retained earnings are 36 billion.  If you were to take 50 cents on the dollar for level 3 assets then you would wipe out its R/E.  If you were to use 10-15 cents on the dollar, Merrill Lynch is toast.  You do the math.


UBS us cutting another 5500 jobs as earnings continue to deteriorate.


I just highlighted the major stuff.  I have left out the impending bankruptcy of GMAC and 600 million oz its bonds that cannot be paid this month.

There are about 20 billion dollars of credit default swaps connected to GMAC.  This is worth watching.


I will let you go

See you tomorrow.




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Monday, May 5, 2008

May 5.08 commentary


Good evening Ladies and gentlemen:


_gold closed up today by 16.10 to 872.30. Silver rose by 35 cents to 16.73.


The open interest on gold continues to rise a further 1000 contracts and the new OI is 428000.  Silver OI continues to contract to a new figure of 120,000. However a total of 25 million oz of silver has been delivered upon and there remains another 3 million oz to go.    Somewhere in the shuffle 5 million oz of silver vanished.   I could not find it in the deliveries and the OI declined and thus no rolls to future months.  They just vanished.  In essence I do not trust the data coming from the comex.


Today we heard from Jamie Dimon, CEO of JPMOrgan and he states that the credit crunch is far from over.  You must pay attention as this guy continues to claim that the housing crisis is still upon us. JPMorgan is the largest derivative player in the world with over 90 trillion dollars in nominal derivatives.


There is more reporting on the ficticious jobs reports.  They are saying what I told you on the weekend.  In reality 277000 jobs were lost and not 20,000.

One can verify that by the fact that weekly earnings fell .2%; the workweek declined to 33.7 hrs instead of last month's 33.8; overtime declined to 3.9 hrs instead of 4.0 hrs. The work week plunge of .3% is equivalent of job losses of 400,000 people.

The whole reporting of the jobs picture is just one piece of total fiction.

In other financial news, oil traded today at 120.30 usa dollars per barrel and finished the day at 119.97.  Copper traded up to 3.975 per lb.


Oil was up because of possible invasion of Iran.  Also rebels got hold of the major pipeline in Nigeria and stopped production there.

Also Iran is quoting all food stuffs in Euros and not dollars.  The usa is not happy and will probably invade Iran as the usa considers the pricing of foods  and oil in currencies other than the usa as an act of war.


Copper rose because of low output from No 1 producer Chile.  Poor rainfall created poor electrical output for the mines.  Also South Africa is still having power outages and this is causing havoc for Platinum and Gold.


This will be a short commentary. 


I will speak to you tomorrow




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