The agreement at the G7 to allow the IMF to sell some of its gold is a confirmation of what I have been pounding the table about recently. The Cartel is against the ropes for supply!
My guess is that each 10 ozs of gold demand can be met with 1 physical oz of gold (and that may be conservative). This is because there are many paper instruments such as futures, pool accounts, GLD, derivatives etc. It is just like fractional reserve banking in the days of the gold standard. Many investors thinking they are investing in gold do not have title to a particular piece of bullion. Just like fractional reserve gold banking it worked fine until depositors got a whiff of a shortage of gold. Then you need 1 oz of physical gold for every 1 oz demanded. Mining supply is declining, CB stocks have been depleted to very low levels, and miners are dehedging. All this was already straining Cartel supplies…then out of the blue South Africa has a power crisis likely to reduce output by at least 20% for many years to come! As investors get a whiff of a "shortage of gold" more people will want to own the real stuff instead of paper alternatives then perhaps 10 ozs of demand may require 2 ozs of physical gold …that small change would DOUBLE the amount of physical gold supply required!! This is why declining supply is such a dramatic development. The loss of gold production may only be tens of tons or maximum 100 tons but if that triggers a shortage that can not easily be met then demand could increase by 1000 tons or more in a very short time.
The Cartel is desperate to get more gold supply to avoid a "gold bank run" equivalent being triggered…or perhaps what we might term "a GOLD RUSH 21"!
If the IMF sells its gold it will not be a "disposal". It will be "transferred" to the Cartel by arranged sale. Look who was eligible for entering the UK Gold Auctions
QUOTE
hm-treasury.gov.uk
Those eligible to bid included members of the London Bullion Market Association (both market makers and ordinary members), and central banks and other international monetary institutions holding gold accounts at the Bank of England.
END
Essentially only the Cartel and market insiders got to submit a bid, and from there you can be sure that only the ones from the Inner Sanctum got to have any gold. Don’t expect the IMF to put any gold on eBay! The gold will be transferred by arranged sale to the desperate Cartel who is gagging on its short positions.
Many investors may be feeling uneasy about this potential IMF gold sale. To me it is FANTASTIC news; it has made my weekend!! This is yet another sign of a lack of available physical gold supply. This is one step closer to an uncontrollable and dramatic rise in the precious metals prices.
Cheers
Adrian
Hi Bill!
So the IMF is threatening to sell some gold again? Hmmm, I seem to remember hearing threats like that before. What a reliable indicator of gold strength it is to have the IMF floating the gold sale balloon yet again.
I think its odd that news comes out without yet having US congressional approval which must occur before any sale takes place. I also think its odd that no specific amount of gold to be sold was reported, yet they did mention the entire bullion holdings of IMF. Is the IMF going to sell every ounce of gold? I dont think so, and in previous discussions on that topic, they always suggested they would sell a chunk of it to raise cash. So why are they releasing this statement now, with so little disclosure on what they plan to do?
Is there another hedge fund that is breaking down, similar to LTCM a few years ago, and the situation is so critical that the only remedy is to break off some of the last big gold holdings to fill the void? Is this yet another obvious ploy to 'talk' gold lower at a time when it has the potential to breakout past the $1000 per ounce barrier? We do not have to look back very far, when the UK sold off their gold reserves and did so in a way that almost guaranteed that they would recoup the lowest value for the gold, and in doing so succeeded in driving the spot gold price down.
I think the crisis affecting South African gold production may be very serious indeed, if the IMF card is to be played for once and for all. The Cartel is running out of aces to play.
Think about this quote: "The IMF is rich, if it wants to be." Just when the hell was the mandate of the IMF to become rich? The IMF appears to be yet another political slush fund to be employed as a blunt weapon whenever the status quo is threatened. Let them sell their gold and reap the whirlwind after realising a short term gain for their agenda. It worked out so well for the UK... not.
cheers!
Mexico Mike
One thought I would like to share with you is regarding the proposed IMF gold sales - I see that our friend Jim Sinclair says "not one ounce of this gold will ever hit the market," and that it will be gobbled up by Hung Fat and Dr. No and the gold-poor central banks - All well and good and probably true, but what I think is happening here and now is that this is THE mechanism for the Western Central Banks to retrieve some of the gold that they have lent out. They can't go into the market place to get the leased gold back, or the price goes ballistic. This way, they can replace a portion of what they already leased out at a fixed price and their purchase does not affect the overall price of gold. The bullion banks can (will) pay for the purchases - returning leased gold, in essence. A clean neat way to wiggle out of a public relations nightmare (ala Gordon Brown). Also, it gives them the opportunity to re-supply their "ammo" to continue to sell and lease more into the market and buy more time, if they choose to do so.
In the end it doesn't make a damn bit of difference. Under $60 billion buys up a years worth of mine production - chump change. Too much big money after gold in an inflationary world to hold it back, IMF or not.
I am so blessed to be a part of this industry. I know what is going on and have the means to take advantage of it, both through Miles Franklin (as earnings) and through my personal purchases which have been taking place for the past 8 years.
God told Noah that a flood was coming and to build an Arc. The thunder clouds and lightning are approaching and this time, the voice of God is trumpeting through LeMetropole Cafe the Arc is built with gold.
Best,
David Schectman
Miles Franklin
To clearly understand how the Western financial world works these days, one only need read this story. It certainly explains why the G-7 wants the IMF to sell all its gold (a sharply rising gold price is clearly IRRATIONAL to central bankers) and it is further vindication of what GATA has been pounding the table about for so long…
G7 discussed joint action if mkt moves irrational-Juncker
BRUSSELS, Feb 11 (Reuters) - Finance ministers and central bankers from the Group of Seven industrialised nations discussed collective action to calm markets if price moves become irrational, Eurogroup Chairman Jean-Claude Juncker was quoted as saying on Monday.
Juncker, who chairs the Eurogroup -- the monthly meetings of the ministers and the European Central Bank, told the Luxemburger Wort newspaper in an interview that turbulence on financial markets could continue for months.
"We are not yet at the end of the market crisis," Juncker was quoted as saying.
"The corrections will drag on for a few weeks, months. We have agreed in Tokyo that if there are irrational price movements in the markets, we will collectively take suitable measures to calm the financial markets," he said.
Asked what form such collective action may take, he said:
"Whoever has a strategy, should not set it out. Otherwise it will lost its effect if it is explained."
-END-
The gold open interest fell 5624 contracts on the nice move up on Friday … another clue that the gold Commercial Signal Failure is ongoing. This is serious stuff as more and more shorts (including hedgers) outside of The Gold Cartel continue to cover their positions. It also helps to explain the urgency of the dramatic G-7/IMF gold sale plan. They are in a panic.
The AM Fix was $925.50
The Comex gold close is at 28 year highs…
April gold
futures.tradingcharts.com
Silver is no longer a tramp. It is a champ, as it soared into 28 yr high ground…
March silver
futures.tradingcharts.com
The silver open interest rose 1502 contracts to 187,728. It is now only a little over 1000 under its all-time high, again, in contrast to the dwindling gold open interest.
Unlike many of the gold shorts, the silver price managers keep selling. The price of silver has a long way to go to catch up to gold, so they might not be feeling the same pain yet. They will. In addition, the silver price shorts can’t count on help from the IMF to bail them out. As expected, we ought to have some real serious silver fireworks in the near future.
THE champ at the moment is platinum. If not for the heinous Gold Cartel, this is what your gold chart would look like:
April platinum
futures.tradingcharts.com
The euro fell .09 to 145.16.
The dollar fell .05 to 76.56.
Crude oil closed the day at $93.59, up $1.82 per barrel, after taking out $94 at one point.
CARTEL CAPITULATION WATCH
The DOW was down over 80 this morning, which seemed warranted on the continuing HORRENDOUS financial market news (see below). Yet it managed to turn right around to finish up 58 to 12,240. THIS, as gold was held in check and the gold/silver shares were comatose.
The DOG gained 15 to 2328.
Dollar Libor may rise on failed muni sales-JPMorgan
NEW YORK, Feb 11 (Reuters) - Dollar-based borrowing costs between banks may increase next week, prompted by failed auctions in the municipal bond market and subprime woes that have slammed bond insurers, JPMorgan said on Monday.
A spike in the London Interbank Offered Rates (Libor) on dollar deposits could spark a fresh round of tightening in short-term credit, hurting business activities and the overall U.S. economy, JPMorgan analysts said in a research report.
Libor has fallen since December in the wake of the massive coordination between the Federal Reserve and other central banks to encourage bank lending that nearly ground to a halt amid the U.S. subprime crisis.
"Still, Libor levels remain very susceptible to market fears and to small changes in the funding landscape," the JPMorgan analysts wrote.
In recent days, municipal bond issuers like state governments and state-run universities have not been able to find buyers for their auction-rate securities (ARS).
The $250 billion ARS market "is beginning to crack under pressure and the pace of failed auctions is quickening," the analysts said.
Auction-rate debt carry rates are reset periodically and if an auction fails, the issuer must pay a higher penalty interest rate. Bond insurers often guarantee these instruments in an attempt to attract investors, and dealers who underwrite them can buy them back.
In the past two weeks, at least four dealers have overseen failed ARS auctions, according to JPMorgan…
-END-
Hi Bill,
Hope you are having a good weekend.
Please see this link. It seems as if the government statisticians think the cost of rescuing the Rock was close to £100 billion. It is only a small bank!!!
Bob
telegraph.co.uk
/2008/02/08/nrock108.xml
***
AIG Discloses 'Weakness' in Credit-Default Swap Accounting
Feb. 11 (Bloomberg) -- American International Group Inc., the world's largest insurer by assets, said auditors found a 'material weakness' in how the company values its credit- default swap portfolio.
AIG hasn't yet determined the decline in value that will be stated in its 2007 financial statements, the New York-based insurer said in a regulatory filing today.
The company, which has units that originate, insure and invest in subprime loans, has declined about 30 percent in the past year. AIG said in December that the value of the ``super senior credit derivatives' declined by about $1.1 billion in the first two months of the fourth quarter.
``AIG is still accumulating market data in order to update its valuation' of the portfolio, it said in today's filing.
-END-
21:33 Problems in the credit markets may expand reports the WSJ
Page One story about how a widening group of financial troubles may cause a new wave in the credit crunch with the possibility of hurting the U.S. economy. Low-rated corporate loans have plummeted in value while buyers have pulled back from the markets for securities backed by student loans and municipal bonds as well as debt backed by commercial real estate. Standard & Poor's said its index of the prices on high-risk corporate loans fell to a record low of 86.28 cents on the dollar at the end of last week. Collectively these issues may deepen the issues in the financial system and add to the growing list of shaky assets of bank balance sheets. One strategist says that the unwinding of the massive credit bubble still has further to go and no one is entirely sure where it will end. Trouble has already hit CLOs and total return swaps.
Reference Link (subscription required)
* * * * *
From Sabre:
Hands off financial markets: White House
Government would only get in way of market's self-correction: new report
marketwatch.com
tory.aspx?guid=%7B9151DB91%2D4B31%2D4A85%2D9F5A%2D0985561DD765%7D&dist=hplatest
This is simply laughable. These banks obviously run the world and the only thing saving them is the fact that elected officials have no idea what an OTC derivative is at the moment. They also will not have anyone in any regulatory oversight that will understand them either, for if they did they would be making a hell of a lot more money selling them than regulating them.
From Doug Noland's Credit Bubble Bulletin:
February 8 – The Wall Street Journal (Nicole Gelinas): "Fitch Ratings, while telling investors last Friday to expect additional 'widespread and significant downgrades' on $139 billion worth of subprime loans, has cited a new factor in their ‘worsening performance.’ ‘The apparent willingness of borrowers to ‘walk away’ from mortgage debt,’ the analysts noted, ‘has contributed to extraordinary high levels of early default’ on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007. Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They’re perfectly capable of acting rationally without political interference."
-END-
This is not good and vintage Bush:
Bush 'kills' Freedom of Information Act compliance officer
rawstory.com
_kills_Freedom_of_Information_0206.html
-END-
From Jesse:
jessescrossroadscafe.blogspot.com
jessescrossroadscafe.blogspot.com
-END-
What an extraordinary time for the commodities markets…
Venezuela's Chavez Threatens `Economic War' Over Exxon Freeze
Feb. 11 (Bloomberg) -- Venezuelan President Hugo Chavez threatened to halt oil shipments to the U.S. and fight an ``economic war' in retaliation for Exxon Mobil Corp.'s bid to freeze the country's oil assets overseas.
Exxon last week said it won court orders blocking Petroleos de Venezuela SA from selling assets as part of a legal battle over the seizure of operations. Chavez held U.S. President George W. Bush partly responsible for the freeze and worsening relations between the two countries…
-END- |
