Saturday, May 24, 2008

May 23.08 commentary...important.


Good morning Ladies and Gentlemen:


Gold closed up by 7.50 to finish strongly at $925.60.  Silver continues to do its thing moving up in a strongly bullish manner to finish at 18.24  up by 32 cents.  The gold open interest marginally rose on Thursday up by 497 contracts and its final OI resting spot is 439773. It is obvious the raid had little effect on holders of long gold. Silver OI  dropped a further 1300 contracts and its final resting spot is 124400.


The dollar continued to sink closing down by .19 to 71.95.  As I have pointed out many times, the markets go into turmoil mode once the dollar breaks into the “71” column on the usa index.


Oil reversed Thursday’s losses rising by 1.38 to close at 132.19, its second highest closing ever.  The CRB rose by 2.32 to close at 431.09., which is at all time high territory.


Commodity prices continue to rise as the dollar sinks.  Yesterday we saw the long bond yields fall, (price rises) as investors sought the safe haven environment of bonds.  The bond rose a full point.

What we are witnessing is a self perpetuating events on the markets in which the long bond yields, being mighty low are acting as a catalyst  for the dumping of dollars.  If the long bond yield were to rise, we would get some strengthening in the dollar  as investors might want to hold these securities with a higher yield.  However, it looks like foreigners are sensing  massive inflation on the horizon so they are dumping bonds and thus dollars which these instruments are denominated.  This forces the usa to buy its own bonds and store offshore.  This massive purchase of its own bonds, lowers the bond yields but also lowers the value of the dollar as nobody wishes to hold bonds with a yield of 4% and inflation running at 12%.  With the dollar sinking and the world seeing such a mess in the banking sector, there is every reason to dump shares and that is what we are witnessing.  The Dow tanked again by 145 points yesterday to close at 12500.


Silver is starting to act independent of gold probably because of bank shortages and mint problems.  The USA mint has stopped making 2008 silver eagles.  The Bank of Nova Scotia yesterday reported to a customer requesting silver that they have only 2 bars in their inventory for sale.  The Bank of Nova Scotia is the only bullion bank in Canada and 40 King st  is out of silver..


The gold and silver shares fell yesterday, as the cartel did like the open interest numbers they witnessed in the morning, so they threw a tantrum and sold gold shares short again.  It seems they huff and puff and nobody wishes to leave the precious metals arena. Please remember that we have only one day left for trading in the June contract and that will be Tuesday.  Expect the cartel to raid the comex gold on Tuesday as many calls are in the money and our criminal cartel do not wish our  guys to exercise contracts in the money and stand for delivery.  The cartel are ever mindful of their declining resource.

The open interest fall in silver is caused by some commercials covering their shorts.  Silver has broken out of its downward line trend and it is now starting to assert its authority.  We could see 2 or 3 dollar moves in silver in a given day.


In economic news, April home sales fell one percent to a 4.89 million annual rate.  Thursday,  we reported on home prices falling and this is the Achilles heal of the banks.  Their collateral continues to deteriorate. 


The banks need to repair their balance sheets because of the huge hole created by the housing mess.  The losses on the subprime,  Alt A , Prime, and credit card defaults will probably be closer to 2 trillion than what wall Street is reporting.  On top of that you have derivative trading which is estimated to be 10 times the 2 trillion loss or 20 trillion dollars.  The BIS data seems to back up this notion as the total derivatives rose by 40% in the credit derivative arena.  Even gold derivatives rose by 40% to an astronomical 595 billion dollars…a sum greater than the entire gold held by all central banks in the world.

The banks see that their only salvation is to invest in oil and hope that the profits from oil repair their balance sheet.


Oil is the world’s most important  commercial  asset. Gold is the worlds most important financial asset.  The banks knowing that they have shorted massive gold to keep paper assets alive had no choice but to buy oil as they knew this would rise as the dollar collapses.  The high cost of oil is now manifesting itself throughout the world .  The airline industry is now basically bankrupt as jet fuel skyrockets.  All airline stocks and the cruise lines,  are falling badly as it will be hard to make money in this environment.  Mining companies costs are skyrocketing.  Many have reported that mining costs are now around 700 dollar per oz of gold mined.


There is no question that costs of products are rising because of the skyhigh price of oil.  The bankers  were certainly aware of their folly but they do not care about citizenry at all. 

In South Africa, in the usually safe city of Capetown we are seeing foreigners seek shelter in police stations  because of mass killings.  Zimbabweans are crossing into South Africa seeking food to feed their families.  Workers are afraid to show up for work at the mines in Johannesberg and mine production is fearing to be down by a full 20% because of the killings and electrical shortages.

It is certainly not a pretty picture.


In other related news, the city of Vallejo California entered into Chapter 9 bankruptcy proceedings, being the first municipality to declare bankruptcy since Orange County in 1994.  This will be the first of many in California as many have difficulties in paying their bills.  Next week, Jefferson county which houses the capital city of Birmingham Alabama will also seek protection.


Over in Europe, it looks to us that the sovereign nation of Spain will seek protection of some sort.  They have totally obliterated their reserves. It looks like the ECB will let them die financially.  This will also force the bankruptcy of Portugal.   What will happen to the Euro is anybody’s guess.


We have heard from any sources, the troubles at Lehman brothers.  With the sinking dollar, my bet is that these guys are already talking to the Fed in a similar bailout that was fashioned for Bear Stearns.

The problem here is that the Fed is running out of valuable capital that they can exchange for this junk.  They have expended already 50% of its capital and the Fed has already 90 billion of negative non borrowings.  In English:   all the depositors have lost their money at all the banks.  The reserves that are deposited at the Fed so bankers can loan out dollars have been totally annihilated!!


There is word that Merrill Lynch also has massive problems as does Morgan Stanley.  And then we have Goldman Sachs with its huge 100 billion dollars of level 3 assets that cannot be priced.

Look for a huge banking mess in the coming weeks.


As I have mentioned in previous commentaries, the end game is upon us.  Take delivery of your physical metal.


Have a great weekend.


Thursday, May 22, 2008

May 22.08 commentary.


Good evening Ladies and Gentlemen:


Right on cue, the cartel attacked gold and silver.  This  reason for this  is gold comex delivery for June.  The last day for trading the June contract and also the option to purchase a gold contract is on Tuesday.  Also remember that Monday is a holiday.


Gold fell by 9.50 to 918.50 and silver fell by  6 cents to 17.92.  The open interest on gold fell by a surprising 13000 contracts with gold’s big advance.  Word has it that many smaller commercials decided that the heat was getting to them so they bailed out of their shorts.


The Oi on silver  dropped a smaller 220 contracts and the new Oi rests at 125000.


Today was actually a very boring day.  Crude oil fell by 3.00 to 132.00 a barrel.  The usa dollar rose a bit but the long bond tanked by 1 and ½ points.  The cartel have their hands full juggling all the balls in the air. 


In financial news, home prices fell again last month down 1.7%.  Banks do not like this as their collateral continues to sink.  Also total delinquency rates for usa home equity lines increased last month.


The subprime mortgage delinquency rose to  a staggering  25.7% of all delinquencies.  Alt A’s are also increasing and they are now  at 25.7% as well.


We have another criminal investigation to report.  The authorities have been called in to investigate the collapse of debt at Jefferson county in Birmingham Alabama.  Authorities are delving into the default swaps initiated by JPMorgan and the secret commissions paid to employees of JPMOrgan  who engineered the deal.


Yesterday, we got Moody’s and today, its JPMorgan.


As promised to you, the BIS announced its findings on derivatives.  As many of you know, the BIS reports on derivatives and the risks to the banks.  It is not interested in parties that are not banks.


Strangely, the total derivatives rose at the end of 2007 by 44% to 591 trilllion dollars from 511.00.  Remember that in July of 2007 the mess started to unravel at Bear Stearns and Merrill Lynch.   What is even stranger is the derivatives on gold.  The total gold derivatives rose  by a full 40% to 590 billion dollars.   The entire gold supply of central banks in dollars is less than 500 billion so what on earth was going on?


Strangely, the mining companies dehedged which should have caused the banks to rein in their derivatives as the hedge was just not needed. 


Reg Howe is now going over the data and will report on this very important development next week.


Expect more gold raids in the next 2 days, as the cartel members  do not like to see the huge number of option contracts on gold stay in the money.

Gold should be flying by Wednesday.

 I will give a comprehensive review on Saturday.



Wednesday, May 21, 2008

May 20.08 commentary.


Good evening Ladies and Gentlemen:


Gold closed up by 8.20 to a final price of 927.60.  Silver continued its advance climbing a further 34 cents to 17.98.


The open interest on gold continued to climb marginally despite gold’s big advance yesterday. The OI rose by 1300 contracts to a new level of  453000.  Silver’s OI advanced by 2400 contracts to 126000.

It rose marginally with the big advance of silver.


The big news of the day has to be the price of oil.  It climbed a further 4.60 to close at 134.60 a barrel.  The Dow took it on the chin today with the dual news of the rise in the price of oil and the news from the minutes of the last Fed  meeting in which the drop in the fed funds rate was a close call.  The Fed also alarmed the street that inflation is their key concern.  Gee!! I guess the Street found religion.  And they now believe that inflation is upon us?  The Dow fell by 227 points.


We got word from Europe that only 1 captive bank sold gold and that was a paltry .997 tonne of gold.  Clearly Europe has not been involved in selling any gold for the past 6 weeks.  However we had a strong seller of gold during London first fix and also at the Comex.  However, we have a determined buyer on both exchanges.


There is now an investigation into the practice of Moody’s in the grading of securities.  Word has it that senior people knew of a “computer glitch” in the pricing of bonds at Aaa and management decided to do nothing.  It looks like the FBI are being called in.


In the Midas report there is a commentary by Jim Willie.  As most of you know I follow this gentleman.  He has discovered that the CFTC has decided to change the accounting rules for Street Tracks on the GLD and SLV.  It is very obvious that these guys have either no gold or silver or pledged 100% of their gold and silver over to the cartel.  Willie now considers GLD and SLV as frauds.

As many of you know, I along with James Turk believed that these two entities were total fraud.  The problem was we were the only two.  Even our good friend Reg Howe believed that it would be impossible to commit such a fraud on the world.  I guess we now have company as many believe this is nothing but an outright fraud.


I urge any of you that have this vehicle, please get out and buy Central Fund of Canada which has gold and silver in a vault.




I am going to investigate why Barrick spent 240,000$ on lobbying mining rules and IMF sales.  Are they for or against IMF sales?  This would be a good question to ask Barrick.


Gold shares fell along side other Dow companies.  Generally, when you view this we have a raid forthcoming.  However oil continues to advance which is confounding things.

Option expiry on gold comex is Tuesday so we have 3 days in which cartel members can short gold.  However if a sovereign nation is behind the purchases and the cartel sense this, the exercise would be futile and they will retreat. I can tell you this  June gold is the second busiest month for gold deliveries. On all previous June expiry, the cartel hit gold in order to cause options of gold to expire worthless.

If gold continues to rise for the next 3 days, then you can safely say that gold will hit 1000 before the June month is over.


The long bond continues to rise in price as the Government continues to buy its own bonds with the paper it prints. This will be the last nail in the coffin.


See you tomorrow



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