Saturday, March 14, 2009

March 14.09 commentary.

Good morning Ladies and Gentlemen:
Gold closed up by $6.30 to 929.70  Silver climbed 25 cents to 13.17.
The open interest on gold comex rose by a huge 6000 as gold climbed Thursday.  Silver's Oi also climbed
667 contracts to 92550 as silver also advanced.
After the 4 o'clock close they released the COT report and one witnessed the huge accumulation of gold and silver contracts by the commercials and some liquidation by the specs.  This is generally extremely gold bullish.
Today, I am going to tell you on three developments that will play significantly in the precious metals arena in the next few months.
Yesterday at 8:30 the trade figures were released:  First the report:

08:30 Jan Trade deficit narrows to ($36.0B) vs. consensus ($38.0B)
Prior figure ($39.9B). 
* * * * *

US trade gap narrows for record sixth month 

WASHINGTON, March 13 (Reuters) - The U.S. trade deficit shrank 9.7 percent in January to its smallest since October 2002, as both imports and exports tumbled for the sixth consecutive month in the face of shrinking global demand, a U.S. government report showed on Friday. 

The monthly trade gap totaled $36.0 billion, below a Wall Street consensus estimate of $38.0 billion before the report. The deficit has now narrowed for a record six consecutive months, the longest previous run being from April through August 2007. 

U.S. exports of goods and services fell 5.7 percent from December to the lowest since September 2006 and imports tumbled 6.7 percent to lowest since March 2005.




The deficit shrank by almost 10% as both imports and exports tumbled.  On closer examination of the figures we see that the two bright lights in the export side of things was gold and other precious metals:

that being silver and gold


Total January exports out of the United States fell 22% YOY; the one bright spot was non-monetary Gold and Precious Metals. January exports of non monetary Gold (Gold not in official central bank reserves) was $1.3B up 24% YOY. Other precious metals exports were $569MM up 29% Year over Year. In the month of January these were the U.S.’s two fastest growing exports.  end


The usa produces 240 tonnes of gold per year or 20 tonnes per month.  Each tonne has 31000 oz of gold.

If you take the average price last month of 920.00 usa you get 20 x 31,000 or 620,000 oz produced x 920 usa dollars or total revenue from gold production of $570 million dollars.


The usa exported 1.3 billion dollars of gold.  They also state that it is non monetary gold which can only mean gold produced and not official gold. (Fort Knox)


The usa is including in their export figures gold shipped from the Federal Bank of NY.  This bank is a foreign depository of gold.  The other known foreign depository is the Bank of England. 
The reason for picking these facilities is geography as a threat on a nations gold  would wipe out that nation for good.

The usa for some hedonic reasoning include the export of foreign gold as an export on their books. They include it on the top line of the exports and remove it far below theline where nobody sees it.


What is fascinating to see is that foreigners are becoming reluctant to keep their gold on usa soil. It looks to us like 700 million usa dollars worth of gold have left the Bank of NY  or about 25 tonnes last month.


If you look at the next precious metals export of 569 million it is even stranger.  Silver production in the usa is about 10% of total production of 500 million oz or about 50 million oz. Thus 4 million oz of silver is produced per month on usa soil or approximately  50 million oz worth.  Very little Platinum is produced.

Also no Platinum or silver are stored in safe-keeping facilities.  So what is this 569 million export figure?  I have no idea. This is the first time, the usa used other precious metals in its export figures.

Looks to me like a phony!.

The usa still exports 100% of their gold production.  They keep zero gold on reserves as they print massive dollars.  Foreign nations demand gold at a increasing clip.  All the mints show record production and some like the usa mint are flat out:

World mints report soaring demand for gold coins 

LONDON (Reuters) - Mints around the world say demand for gold coins has risen sharply as interest in the precious metal soars on the back of financial instability and concerns over the inflation outlook. 

The Royal Canadian Mint, which produces Maple Leaf bullion coins, said it quadrupled its production capacity late last year as demand for gold and silver bullion products leapt. 

Gold was one of the few commodities to rise last year as turmoil in the financial sector sharpened investors' appetite for assets seen as a safe store of value, such as bullion. 

Spot gold rallied to an 11-month high of $1,005.40 on February 20 as a slide in equity markets increased interest in the precious metal. Demand for physical gold products such as coins and bars has been particularly strong, traders say. 

The United States Mint said sales of its one-ounce American Eagle gold bullion coins rocketed to 710,000 ounces in 2008, from 140,000 ounces a year before. 

"The demand for gold and silver has been unprecedented," a spokesman for the Mint told Reuters. 

The chairman of the French Mint, Christophe Beaux, said sales roughly doubled last year in value terms and are expected to rise by another 50 percent this year. 

The 2009 catalog the mint had produced was almost entirely pre-sold, he said. The French Mint produces 100 euro gold coins, and plans to mint 10-ounce and 1-kilo coins this year. 

In South Africa -- the world's second-largest gold producer -- Natanya van Niekerk, deputy general manager for numismatics at the South African Mint Company, said she had seen a big increase in demand for gold. 

"I think we will see this same trend in this and the next quarter," she said. "Gold surely has been resilient in these times." 

Michael O'Kane, head bullion trader at the New Zealand Mint, said many overseas buyers had come into the New Zealand market. "We're seen as a safe-haven market," he said. 

He said buying had been strong since the collapse of U.S. investment bank Lehman Brothers in September, as investors moved money from banks into hard assets like gold. 

The mint was averaging "a month's transactions in a day," he said, adding he saw demand continuing to rise.


American Eagle Gold Uncirculated CoinsProduction of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins "in quantities sufficient to meet public demand . . . ."

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.


On the NYSE< the gold  ETF  GLD advanced a huge 15.29 tonnes yesterday.  Gee! these guys are good. They can locate physical metal, air freight it, insure it, store and guard it.  By the way 15.29 tonnes is 4 planeloads of gold.  Here is the report:


The GLD ETF added a rather substantial 15.29 tonnes today (equal to 4,916 Comex lots) to a record 1056.82 tonnes. MarketVane’s Bullish Consensus added one point, to 77%.

If the usa exports all of its gold; how is it financing the comex?  At the comex approximately 1.3 million oz of gold is called upon every two months.  The usa must use official gold to supply the comex.  This must be so because the usa exports 100% of its gold.  It needs to finance the mint and comex and jewelry from official stocks. Who supplies the gold that London hands out everyday?



The big news of the day however was announcements by Mainland China.   This next statement is a dandy:

In an astonishing development, the Chinese Central Bank, in its Annual Report, has predicted:

" in 2009…gold might scale a new peak"according to Reuters. See 


Wen, the Chinese Premier went on by stating that he felt that gold will rebound and he forsees a new gold peak.


China is sending messages to the usa that they are not happy with the risk of all the bonds and agency paper that it holds.  The total usa holdings exceed 1.3 trillion.  China holds amost 2 trilllion dollars of foreign debt.

There is no doubt that  China is accumulating gold. Here is what our editor thinks of the situation:

That the Chinese Government is saying publicly that gold is going higher tells you they are accumulating gold using their heavily weighted US dollar reserves, they will continue to accumulate gold and, I believe cryptically, you can interpret this comment to signal a decline in their continued support of the U.S. dollar and U.S. Treasury bonds. I say this last point because they have dropped other hints over the past few months that they have become less interested in investing in U.S. debt, including their massive unloading of U.S. agency paper on swap for Treasuries.


And this certainly adds to the uncertainty of holding usa bonds:


Foreign central banks cut back US debt holdings 

NEW YORK, March 12 (Reuters) - Foreign central banks sharply reduced their holdings of U.S. debt in the latest week, according to Federal Reserve data. 

The Fed's holdings of U.S. securities for offshore central banks fell $15.2 billion to $2.584 trillion, reversing much of the prior week's $19.27 billion gain. The decline in U.S. Treasury holdings amounted to $11.03 billion. 

Many investors fear overseas demand for U.S. government bonds could wane as the Treasury faces a record $1.75 trillion deficit. 

Overseas central banks, particularly in Asia, have been huge buyers of U.S. debt in recent years and own over a quarter of marketable Treasuries. China recently overtook Japan as the biggest such buyer. 

Thus far, concerns that they would stop buying American bonds have proved unfounded. A reopened auction of 30-year bonds on Thursday, for instance, drew a very strong indirect bid, a category that includes foreign central banks. 

Still, the latest figures pointed to some reduction.

Holdings of debt issued or guaranteed by government-sponsored entities like Fannie Mae and Freddie Mac dropped $4.2 billion.


Finally, it looks like the Swiss are moving into gold as they devalue their currency.  This country knows this metal better than anybody as they accumulated their wealth by confiscation and destroying records.

If they must give up bank secretcy, they might as well accumulate the metal.  This sovereign nation may be the nation repatriating its gold onto its soil from the usa.  They may be the purchasers of gold with the Chinese on the comex. Here is what one cafe member remarks:


More on the Swiss move…

The SFr lost 3% yesterday vs the Euro, but independent commentary in the articles below suggests another 7% devaluation may be the primary target of the SNB.

If gold moves in tandem as yesterday, another 7% rise from 930 would take it to 995.

The comex shorts could have their work cut out to defend the 1000 in the next few days, if this scenario has legs

« And the central bank may even have some more powerful aces up the sleeve should it become necessary:

Vice-chairman Philipp Hildebrand said in January, the SNB could start buying other currencies at a fixed rate, de-facto switching to a system of fixed foreign exchange rates, should it be necessary to avoid deflation. »


and this from another member:

Tax Havens Pledge to Ease Secrecy Laws some thoughts on yesterdays currency market events as seen from the conspiracy point of view.

The US pressure on the Swiss banking secrecy laws is increasing and the Europeans are jumping on the band wagon.

Is it just coincidence that the SNB’s timing in launching their currency intervention yesterday comes just before the Swiss announce what they intend to do on banking secrecy ?

Did the SNB buy US$ yesterday in one of the biggest daily moves ever in the SFr, over 3%, and then buy gold using the $ they had just purchased ?

Was this a warning shot across the bow of the US to get some leverage in their B.S. negotiations ?

Do the Swiss understand that the achilles heel of the US$ is the gold price ? (The Federal cabinet are probably not up to speed on this, but the guys at the SNB certainly understand)

How much of the SNB gold is actually stored in the USA and perhaps already compromised by swaps, sales or other transactions ?

Why would the Swiss buy gold after having sold half of their reserves a couple of years ago at lower prices ?

Answer : Because now they have a forecast for 2009 of 3% negative GDP, 1% deflation, and pressure on their banking industry from New York and London to steal their customers. (aka the UBS affair). Back then, when the SNB sold their gold to help the US$ they were on more amicable banking relation terms with the USA.

The BahnhoffStrasse had an axis with Wall St. !

All the above of course is pure conjecture and may be completely unfounded.

We will have to judge the situation by observing the outcome of the Bank Secrecy negotiations and following the SFr exchange rates and gold price over the next few weeks to see whether there is any merit in the above hypothetical scenario, because we will never get the truth !

After all Switzerland still has banking secrecy---- at least for today, ----- tomorrow may be another matter ?



From my vantage point, it sure looks like many central banks are turning to gold. We now have Venezuela, Ecuador, Russia, China and now Switzerland accumulating.

In economic news, I guess this is the only noteworthy story:

U.S. economic growth falls to a 14-year low -ECRI

NEW YORK, March 13 (Reuters) - A measure of U.S. future economic growth fell to a fresh 14-year low in the latest week although its annualized growth rate inched higher, a research group said on Friday. 

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index slipped to 104.8 for the week ending March 6, from 105.1 in the previous week. 

It was the WLI's lowest reading since March 10, 1995, when it was 104.7. 

The index's annualized growth rate edged up to a six-week high of negative 24.1 percent from negative 24.2 percent, offering some light in a period of economic downturn. 

"While the WLI slid to a new cycle low, indicating that a business cycle recovery is not yet in sight, the uptick in its growth rate to a six-week high suggests the pace of contraction will slow in coming months," said Lakshman Achuthan, managing director at ECRI. 

The weekly index fell due to higher interest rates and jobless claims data, with the decline partly offset by higher commodity prices, Achuthan said.



I cannot see how the banks are making money unless the TARP dollars are turned into "profits" or another Ponzi or Madoff Scheme.

Today, the G20 meet in order to save the banking mess.  I doubt that anything will come out of this.

Speak to you on Monday



Thursday, March 12, 2009

March 11.09 commentary.

Good evening Ladies and Gentlemen:
Gold closed up by 14.60 to 923.60.  Silver advanced by 13 cents to 12.92.
The open interest on gold fell by 4000 contracts despite gold's advance.  Generally this is viewed as some short covering.
Silver's OI hardly moved.
There are two related gold related events to report on and both very significant:
The first story is the dehedging by all of the miners.  The total amount of gold shorts out there are 15.5 million oz.  Barrick owns 9.6 million oz of the short and Anglo has about 6.0 million oz and thus these two control almost 100% of the shorts.  Everybody else has covered.
The second story is a huge one:  The Swiss National bank has decided to flood its country with Swiss francs in order to get a competitive advantage on the Euro.  Gold definitely advanced on this news as it caught the gold cartel totally offguard.
The following two stories are highlighted for you:



Gold jumps as SNB currency sale spooks market 

* SNB sells francs against dollar, euro 

LONDON, March 12 (Reuters) - Gold jumped more than 2 percent on Thursday, boosted after the Swiss National Bank sold francs against the euro and raised the spectre of a race to devalue major currencies. 

Analysts said the SNB intervention means one of the world's safest currencies is being deliberately undermined to help boost growth and that other countries could follow. [ID:nLC942828] 

"If all currencies are being devalued against each other then gold is a currency which is going to profit from it," Commerzbank analyst Eugen Weinberg said. 

"So we have bad currencies, worse currencies and the worst currencies, and gold could be an alternative stable currency in this case." 

Spot gold rallied to a high of $930.45 and was quoted at $923.45/924.95 an ounce at 1444 GMT from $906.65 late in New York on Wednesday. 

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $14.20 to $924.90 an ounce. 

The Swiss franc had its biggest ever one-day drop against the euro after the SNB said it had sold francs as part of a drive to boost the economy, which also includes an interest rate cut and planned bond buy. [FRX/] 

"The SNB have now fired the first formal shot in the forthcoming currency war," ING Bank said in a note.


After 6 full trading sessions of zero additions, the gold ETF, GLD added 9.18 tonnes as of Wednesday.  They also reported a further gain tonight of 3.31 tonnes.  The new total is 1041.1 tonnes of gold surpassing easily the country of Switzerland.  Here is the report:
The GLD ETF came to life today and added 9.18 tonnes to reported gold holdings, the largest change in three weeks and a new record. Those who feel inflows into the ETFs are of immediate significance to gold price action will be encouraged. MarketVane's Bullish Consensus for gold rose two points to 75%.
In economic news today we are still witnessing stress amongst the banks.  The Libor rate remains at 1.33% and the Libor_OIS spread remains at a huge 1.07 percent.  In good times the Libor/OI spread is 11 basis points.  Today it is 107 points.  This means that banks are still loathe to loan. Here is the press release on this:

"The stress is reflected in the so-called Libor-OIS spread, which measures the gap between three-month Libor in dollars and the overnight index-swap rate, or what traders expect the Federal Reserve's target rate for overnight loans between banks to average during the term of the contract. "

"That spread averaged 11 basis points from December 2001 to July 2007, and soared to 364 basis points in the weeks following the Sept. 15 bankruptcy of Lehman Brothers Holding

Inc. Libor- OIS was 107 basis points yesterday."

Today, the stock market rallied by 239 points, on news that JPMorgan sees earnings growth once again in the banking sector.  They announced that they had positive earnings for the last two months. However credit card losses and losses on mortgages , and losses on commercial real estate etc were not included.  I have no idea how these guys are earning money,  They are not lending as indicated by Libor and the TED spread.  Confidence is waning.  Tax revenues are shrinking.  The following is what Bix Weir thinks: 


by Bix Weir 

To restore the underlying false confidence in our economic and monetary systems thus continuing the dominance of the global financial power elite. 

Plan of Attack: 

1) Start by having the President tell the investing public to buy stocks because they are cheap. 

2) Slam the gold and silver markets using the traditional COMEX paper rigging operation to hide the truth about the condition of the US Dollar and the fact that the world is quickly running out of both physical metals. 

3) Have CEO's of major banks such as Citigroup and JP Morgan announce that they had a great first two months (excluding losses in mortgage portfolios, credit card portfolios, credit default swaps and other toxic derivatives) 

4) Have the Plunge Protection Team flood the markets with stock buy orders to flush the shorts and brings along the perma Bulls like lemmings. 

5) Float rumors of ending mark-to-market accounting and re-instating the uptick rule to fry the short traders. 

6) Have GM announce that they don't need the extra $2B in March (ooo, so all their problems are cured... for 3 weeks at least!) 

7) Have the Muppets on financial TV programs proclaim that the bottom is in and it's safe to go back in the investing water. 

8) Introduce a restrictive US mining law that would destroy all hard rock mining operations in the US so the banking cabal can cover their naked mining share shorts.. 

9) Downgrade GE to AA+ and declare "it's a good thing" giving them a "Stable" outlook and goose their share price so no one thinks there's anything wrong..."No problems here". 

10) Do anything and everything you can except NEVER show the true fragile state of the monetary system with over a QUADRILLION DOLLARS in derivatives that have yet to be resolved ( fact they are growing exponentially!) 

EXPECTED RESULT: Buy a few more weeks/months before the complete collapse of the global monetary system.  end

The jobless claims continue to rise as new claims hit a record.  The Labour dept said initial claims for unemployment insurance benefits increased to 654000 in the week ending March 7.09.


How on earth are the banks earning money?

US jobless claims up, continued claims hit record 

WASHINGTON, March 12 (Reuters) - The number of U.S. workers filing new claims for jobless benefits rose 9,000 last week and so-called continued claims notched a fresh record as a year-long U.S. recession continued to slam the labor market, data on Thursday showed. 

The Labor Department said initial claims for state unemployment insurance benefits increased to a seasonally adjusted 654,000 in the week ended March 7 from a revised 645,000 the week before. 

Analysts polled by Reuters had forecast 645,000 new claims versus a previously reported count of 639,000 the week before.
Reuters claim that US unemplyoment is near 10% as the slump worsens.  Reuters believes that 13 million Americans will become jobless.
How are the banks making money?
U.S. unemployment to near 10 percent as slump worsens 

NEW YORK (Reuters) - U.S. unemployment will approach 10 percent as the country endures its worst recession since World War Two, leaving more than 13 million Americans jobless, according to a Reuters poll of economists. 

The economy will level out in the third quarter, the results showed, but the poll painted a bleaker picture than a survey conducted just a month ago. 

Median forecasts now assume gross domestic product will shrink an annualized 5.3 percent this quarter, following a brutal 6.2 percent decline at the end of 2008. 

The recession will continue into the second quarter, moderating to a 2 percent drop, stabilizing sometime this summer. GDP should turn the corner, albeit hesitantly, by autumn. 

Analysts say the turbulence plaguing large sectors such as banking and autos means predictions are less reliable than usual. 

"The economic outlook remains very uncertain," said Scott Brown, chief economist at Raymond James & Associates. "A bottom is likely by the end of the year, but downside risks continue." 

The Reuters poll indicates the jobless rate, already at a 25-year high of 8.1 percent, will climb to 9.6 percent, probably sometime early next year, before receding. An eventual rebound in hiring will probably be mild and erratic….
US retail sales fell by .1% in February.  If you include inflation then sales are down pretty hard.
How are the banks making money?
U.S. retail sales fall 0.1 percent in February 

WASHINGTON, March 12 (Reuters) - Sales at U.S. retailers fell by a smaller-than-expected margin in February after a surprise gain the prior month, as a rise in gasoline prices limited the impact of slumping vehicle sales, a government report showed on Thursday. 

The Commerce Department said total retail sales eased 0.1 percent after rising by a revised 1.8 percent in January, previously reported as a 1.0 percent increase. 

Excluding motor vehicles and parts, sales increased 0.7 percent in February, compared to a 1.6 percent advance the previous month. Vehicle sales plunged 4.3 percent, after a surprise 3.1 percent rise the prior month. 

Analysts polled by Reuters had forecast February retail sales falling by 0.5 percent. Excluding motor vehicles, sales had been predicted to ease by 0.2 percent. 

Gasoline sales climbed 3.4 percent, the biggest rise since November 2007, after increasing by 2.8 percent in January. Sales of building materials dipped 0.2 percent in February after slipping 1.3 percent in the prior month.
Commercial paper, the lifeblood on any economy continues to contract.  If the banks are making money then you would expect that commercial paper would expand.
How are the banks making money?




US households saw their net worth drop by 5 trillion dollars.  The consumer is 70% of GDP.  If their net worth dropped, then they certainly are not borrowing or using any of their collateral to the banks to help them consume.
Again, how are the banks making money?
US Q4 household net worth drops $5.1 trillion -Fed 

WASHINGTON, March 12 (Reuters) - U.S. households suffered a record-large 9 percent drop in wealth and curbed borrowing in the fourth quarter as a deepening recession battered confidence and finances, Federal Reserve data showed on Thursday. 

Household net worth dropped by $5.1 trillion from the prior quarter to $51.5 trillion. For the full year, net worth dropped by $11.2 trillion, reflecting steep declines in the housing and stock markets. 

The U.S. central bank's quarterly Flow of Funds report also showed that household borrowing contracted at a 2 percent annual rate in the fourth quarter, after increasing at a 0.2 percent pace in the previous period. Home mortgage debt fell at a 1.6 percent pace -- the third consecutive quarter of declines -- and consumer credit dropped at a 3.2 percent rate.
US foreclosure filings resumed its upturn in February despite numerous programs to quell the record pace of failed mortgages.  This was reported today by the reliable firm, RealtyTrac.
Again, how are the banks making money?

U.S. foreclosure filings rise in February 

NEW YORK (Reuters) - U.S. home foreclosure activity resumed its upturn in February after a brief dip, despite numerous programs meant to quell the record pace of failing mortgages, RealtyTrac reported on Thursday. 

Filings, which include notice of default, auction sale or bank repossession, rose 6 percent in February after slipping 10 percent in January, and leaped 30 percent from a year ago, the Irvine, California-based real estate data firm said. 

One in every 440 households with loans drew a filing last month, RealtyTrac said. Nearly 291,000 properties in the U.S. got a foreclosure filing in February, the third highest monthly total since RealtyTrac began tracking the data in January 2005. 

"The rate of foreclosure activity is increasing beyond the ability of even these types of moratoria to slow down," Rick Sharga, senior vice president at RealtyTrac, said in an interview, referring to major state and corporate moratoriums on foreclosures. 

In Florida, where a 45-day voluntary moratorium ended at the end of January, filings jumped 14 percent in February, James J. Saccacio, RealtyTrac chief executive, said in a statement. Florida has one of the highest foreclosure rates in the nation…-END-

Freddie Mac issued 30.8 billion dollars of preferred to the government.  The interest rate is around 12%.

The total amount of dividends that Freddie must pay the government is around 4.6%.  They are not even coming close to earning this kind of money.  The government may need to take the entire Freddie Mac over.


Fannie today also asked for a further 30 billion they see no end to the housing crisis.

And,  the banks made money?




00:26 FRE Freddie Mac warns of increasingly negative cash flows - Bloomberg (0.42)
The company's 10-K filed post-close yesterday notes that by adding $30.8B worth of preferred stock to the government's holding, FRE's annual dividend payment to Treasury will be $4.6B, an amount that exceeds its annual historical earnings in most periods. Failing to make good on dividends may force Treasury to raise the interest, write off the debt, or assume full control of Freddie.

This came in from England.  A further fall of 55% in housing will bankrupt England.  The author is certainly correct, however a drop of 30% will do it as well.  Here is the article:

In my opinion, the usa in engaging in fraud by pumping the market to get innocent people buying worthless bank stocks.

I will speak to you on Saturday.


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