Riding the "Winds of Change" ~
re: Gold is breaking free from it's shackles...
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www.LeMetropoleCafe.com
By Bill Murphy
June 24, 2005
June 23 - Gold $440.80 up $3.20 - Silver $7.24 up 1 cent
YES!!!
"I detest that man, who hides one thing in the depths of his heart, and speaks forth another." – Homer
The Gold Cartel had its chance to put gold away on Tuesday and Wednesday. What was so noticeable about those two trading days was their failure to do so, as noted by MIDAS. Well lo and behold, they got their third chance today and still shot blanks.
Gold came in unchanged with the dollar sharply higher against the euro. This alone had me ranting right after trading commenced on the Comex. Soon after the opening, the euro went down one full point, while gold ticked up 50 cents and more. The euro price of gold rocketed to 364+ after the first half-hour of trading.
As someone with 25 years of commodity trading experience, and at the highest level at times, this had me licking my chops, which is why I am writing this so early on in the day. It is rare that a market screams, "BUY ME" to you. This is what Tony Wilson of Refco in Toronto and I were jumping up and down about this morning with gold at the unchanged mark.
There is a significant reason to point this out – and that is to give you more confidence that the Planet GATA analysis of the gold market is the correct one and has been for some time. AND, that the historic gold/silver move is about to kick into high gear, just when most investors aren’t paying attention to what is happening and why.
One month ago you could not find anyone, anywhere who said gold could run like this without dollar weakness, much less dollar strength; nary a one, except MIDAS/Planet GATA and, of all people, Dennis Gartman. Of course, our reasoning for such an occurrence could not be further apart.
It has been Planet GATA’s contention the gold market has been rigged by a Gold Cartel taking physical gold from the central banks and clandestinely lending this gold into the cash market via their bullion dealers to artificially suppress the price by hundreds of dollar per ounce. They have done so to such an extent that the central banks probably have less than 14,000 tonnes of gold left in their vaults, instead of the 32,000 tonne figure bandied about by Planet Wall Street and the apologists of The Gold Cartel in the mainstream gold world.
It has been GATA’s contention the bad guys would eventually hit the wall, meaning run out of enough supply to meet demand, which is disappearing at a rate of 1500+ tonnes per year greater than mine and scrap supply. We, including the very savvy John Brimelow, have also pointed to a short-term gap in their supply chain this summer due to the European sellers of gold in the Washington Agreement having gone through most of their quota for this current selling year, which ends on September 25th.
Is it any wonder then that gold is dazzling investors by running higher, even as the dollar continues to rise and rise? PRICE ACTION MAKES MARKET COMMENTARY. While NO ONE out there said this was possible a month ago, now everyone is leaping on board as to what is happening and why. The most popular reasons for gold moving like it is seem to be:
*Global interest rate yield drops.
*Increasing inflation (even as so many on Wall Street state on CNBC there is no inflation threat).
*Greater concern over fiat currencies.
All of these are valid to some degree, yet none are new. Only the "NO" votes over the Euro Constitution are a development not in play before the past few weeks. Matter of fact, the historic reasons for gold to move up have diminished of late with happy US real estate, stock market and bond investors everywhere. Over the past couple of years, at various times, you could have come up with many more powerful reasons for gold to move up like it is, rather than ones presently discussed.
Most of the commentary re gold seems to be more of a struggle to explain what is going on. For sure, we see one different explanation after another. The only consistent explanation over the past many months, even years, comes from Planet GATA. We have stated over and over gold will move much higher when The Gold Cartel begins to lose control over their price-rigging scheme. We already know they have LOST one of these tools – that being their using the dollar for manipulation purposes. You don’t hear this from anyone not in our camp. Whether exactly correct or not, we have it right so far and have been Steady Eddie with our analysis – just like we got it right when gold was below $300 per ounce – when so few others were bullish. As I mentioned the other day, this latest gold development is just one more reason for money managers and gold companies to attend Gold Rush 21. The Masters of the Gold Game will be there, all together for the first time ever.
GATA is on the money once again. More importantly, as a result of the nefarious activities of the white-collar crooks in the Gold Cartel, we know what lies ahead for the price of gold and why. The price move up in gold will ASTOUND the investment world. I believe this will be invaluable input for those taking the time to go north to The Yukon Territory in early August. Please take some of your time to send this part of the MIDAS commentary to your gold companies with a personal short note attached. Ask again, even if they said no the first time. Persistency rules the day.
While there is reasoned concern over the sharp gold open interest increase on Comex with The Gold Cartel stopping gold at the $440 level basis spot, of more trouble to the shorts is the 25,000 August $445 call position. This is a HUGE number and gold has to rise only a few more dollars for them to go in the money with a month left until option expiry. August gold closed at $443.20. As is, some of the trade who wrote these calls are covering as they must do as the price goes closer to the call price. Much of this buying is strictly based on delta hedging formulas, which means as the price of gold rises towards the call price, the writers of the calls must gradually buy futures to cover their upside exposure.
It is important to keep in mind by far the most significant buyer of these calls is a former trader for Goldman Sachs who now works for a fund. If anyone would have the inside track about what has really transpired over the years in the gold market and what lies down the road, it is a former trader for Goldman Sachs. The floor reported this trader doing a little bit of selling this afternoon, which is very normal.
Should August take out $445, which I expect it to do, all heck can break loose.
August gold
futures.tradingcharts.com
As to the MIDAS references the past few weeks re the changes in the way gold has traded of late, which is far different than the over the last half decade plus:
*Comex gold exceeded both the London AM and PM Fixes today.
*Instead of making a charging high early and going comatose, gold made new highs as the morning wore on –even if it did stall out the last few hours.
*It continues to trade on its own, independent of the dollar action.
If and when the $6 Rule is overcome, we will know for sure the bums are in as much trouble as GATA thought they might be over these last weeks.
The gold open interest dropped 359 contracts to 289,412. Yesterday’s price setback on light volume (33,000 contracts) and small OI drop is bullish from a technical perspective.
It was NOT the usual culprit Gold Cartel sellers today, at least on the Comex. Featured on the sell side were Soc Gen, Morgan Stanley and Hudson River. Cargill was a modest buyer. Yet the way gold stalled out the last few hours, it suggests the cabal was active on the OTC market.
At the Comex close, the euro price of gold was 366, up nearly 5.
The CRB closed higher once again at 313.03, up 1.01, with oil rising to 59.42, up $1.33, after eyeballing $60 per barrel. A normal 15 to 1 gold oil relationship gives us $900 gold, which is where it ought to be already.
Gold’s breakaway gap around $430 continues to hold and it ought to from here on in. There are no other gaps to fill, so all systems go from that technical standpoint.
Silver has me totally confused. It ought to be on the move. My only comments are that it is not doing so because the bad guys are in the process of losing control of gold, thus they are all over silver for the time being.
The silver open interest rose 1073 contracts to 132,207, a new high. This bears close watching. One day silver is going to go bonkers.
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