Thanks OGI,
Here you go. Bill
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March 2, 1999 - Spot Gold $286.70 up 30 cents - Spot Silver $5.32 down 21 cents
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Technicals - <p>
The stakes are growing. Gold made a run for $290 today, but the "Guns of Navarone" were blazing and this solid resistance point held once again. Gold continues to hold $285 and cannot break through $290. The bears have marshalled the troups to defend this area with good reason. <p>
The open interest on Comex is around 193,000 contracts- give or take. The large spec open interest is an astounding net short 70,000 contracts. That is a lot of gold. The commercials are very long. They are long for good reason; the physical gold market is very strong. The gold premiums around the world are firm and coin sales are rocketing. <p>
The shorts know that the key moving averages are right above $290. So, this is a key chart point as the downtrend line from last May is also at $291. The all important 100 and 200 day moving averages are right above that number. To put this in perspective and to grasp the technical significance of this area, one can view these averages at The Captain's, Privateers gold web site at the-privateer.com. Bill Buckler has been around for some time and his commentary is exceptional. <p>
With all these convergences, a move into the low $290 area could result in an explosive move to the upside as all the technical signals turn bullish at once. The Big Bad Bear knows this and is making a "Custard's Last Stand" defense at $290 to prevent a move higher that could prove to be ruinous to his short postion. <p>
We have been saying for some time that it is the borrowed spec gold crowd and the "block busting line of commentary" by the New York financial gold analysts ( London as well ) that has pressured the gold market in recent months. In some sense they are all in cahoots as they know how short gold they all are ( having borrowed it so cheaply) to finance other trades and financial predicaments. Most financial markets have been very volatile. Not gold. Why? <p>
The gold genie has been locked in a bottle by the "big boys". The genie wants out of that bottle and wants to fly higher. The shorts are making him very, very irritable by making him grovel. It will not be long before he blows the lid off the bottle and turns his rage against these arrogant characters. Uptown for gold!!! <p>
Silver is all over the place. Today's action, price wise, on the surface is perplexing. After last Friday's rare close, Midas expected a sharp move up, not a correction back down. So what is going on? The lease rates have moved back up to the 8% - 11% area which indicates very tight supply. There was an Indian holiday, which shut down demand from that powerhouse for a day, but even there the cash premiums are still firm. <p>
The large specs are very long- some 52,000 contracts net - and some would say that is a reason for a flush out. Maybe so. But, the bullish consensus is below 55 which is average for a commodity market. It reached 85% last year on the Buffet run up. While it is very important to take this fact into consideration, most of the really big moves of all time come from the specs ( when they are really long or short ) being the winners, not the trade. Recent examples of that include the yen move to 145 and the gold move down from $385 to $300. Then what is Midas' explanation of this silver setback? <p>
The move on Friday was extraordinary and normally a VERY bullish technical development. Late last fall, I made similar commentary about a break out silver move above $5.00. It was soundly trashed the next day- percentage wise about the same as today. Then, sounds just like now. Here is Midas commentary of Dec. 17, 1998:<p>
"Like clockwork. The price of gold rallied from the lower end of its base and then was mauled today by the same group of sellers. They are relentless and it is clear that the cabal is part of one Fed orchestrated agenda that has been put in place. The best that we can do is to continue to monitor signs that they are losing control of the game that they have decided to play. And we will do so with great vigilance.<p>
The same group went after silver causing it, at one point, to give up all of its 19 cent gains that it made yesterday. Silver has never traded like this ever before ( see below ). However, silver has strong hand sponsorship and was able to fight its way back and eventually only gave up half of yesterday's powerful move. Yesterday's spot close was the highest in many months and registered a clear break out. At least, that would have been a reasonable technical comment when the precious metals traded free from government sponsored, market capping bullies. Even with yesterday's run up, the Indian premiums held at 8.7% which is still ample enough to encourage imports to India. The Comex silver stocks at 76,869,118 ounces are at historically, very low levels. We remain very bullish on silver………..<p>
Outrage. I am so mad I feel like screaming out the window like Peter Finch did in the movie, Network. The difference between the two of us is that, while mad and screaming, I am only warming up and I can take a lot more. I hope you are outraged too. What our government is doing to manipulate the gold and silver markets is scandalous. Goon squad leader, Goldman Sachs, was the big seller again today. What is nauseating is that this is becoming so transparent and we hear so few outcrys. Case in point is silver. TWICE now, silver has recently breached $5 to the upside and the very next day it has been broken back down by the goon squad by as much as it went up the day before. Never before has there been anything like this. After a breakout out of a base like we just had, silver ( or any other commodity ) might run up to, at least, say $5.25. The specs would come in, and if the fundamentals did not justify it, the price might collapse. That could happen over a two week to a month period. That goon squad is so afraid of something, they will not let silver stay over $5 even for a day. And, they have acted precipitously twice now to bash it down. How badly is the financial stress behind the scenes that they fell they have to be so concerned about the price of silver staying over $5? This smells to high heaven. It is only a matter of time before the situation gets out of hand and they have to pay for their arrogant, price manipulating ways. <p>
What is the big deal to them about keeping silver below a very important psychological number when they can orchestrate a warish conflict and bombing attack to serve their self preservation purposes!" <p>
Perhaps Midas is a bit emotional at times, but there is no lack of passion or conviction in our analysis. It is remarkable how today's setback is reminiscent of Dec. 17. VERY strange technical action. Espcecially in light of these comments by renowned silver expert, Ted Butler, that were seen on the Kitco site:<p>
"The first three days deliveries on March COMEX silver now total 1005 contracts - or roughly 5 million ounces. This is the smallest amount delivered in the first three days of an active contract in modern history. That it comes at a time of an historic net commercial short position is notable. Since economics dictate that the shorts don't gain by delaying delivery once they have committed in the spot month, the question becomes what are the intentions of the spot month longs - will they roll over their positions, or do they need the merchandise? With over 4700 contracts ( over 23 million ozs ) still open as of last night's close, the next few weeks should be interesting. <p>
This reluctance ( or inability ) of the shorts to deliver just might be confirming that cash silver in size is only available at a price higher than the COMEX price. Aside from the obvious confirmation in the retail market ( coins and small bars ) , the fact that one year lease rates on silver are quoted at 10% - indicate someone is willing to "pay" 55 cents over Comex for real silver ( Pay is not the correct term, of course, because the borrowers don't pay anything in these stupid fraudulent transactions - just interest and a someday I promise principle pay back ) . COMEX silver prices sure look like the cheapest in world to me - notwithstanding the current battle being waged by the tech funds and the banking group commercials, which can drive the price lower temporarily. <p>
If these conditions persist, it shouldn't be long before the commercials users do the right thing - start taking delivery of the cheapest silver via the COMEX. That would not be bearish."<p>
Bottom line to Midas: the desperadoes are making another stand to keep precious metals from taking over the town and in the case of silver, have to pay very expensive 10% money, or so, to borrow silver to bomb the market. My guess is this: Mr. Strong Hand is on the sidelines with a big smile on this face. The desperate shorts are sinking themselves in deeper and deeper. It will only make the move up that more dramatic. $9.78 here we come. <p>
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Fundamentals - <p>
The news from the conservative world of central banking continues to astound. First, the Central Bank of Italy is exposed as having invested in Long Term Capital Management and losing a bundle. When confronted, they top man first said he had no knowledge of the investment. Now this from Dow Jones:<p>
"At a time when world equity markets are looking decidedly toppish, the Swiss National Bank, one of the world's most conservative banks, is thinking about shifting some of its assets into stocks and shares."<p>
"Central banks, including Switzerland's, are increasingly under pressure from cash-strapped governments to produce revenue from their mountains of assets rather than leaving them in gold bars in their vaults, where they actually cost money, or to sit in short-term sovereign debt offering a puny return."<p>
Much of the talk is coming out of Switzerland now due to commentary about what will be done with the proceeds of a proposed sale of 1300 tonnes of gold. The Swiss will vote on this issue in a popular referendum next year. The referendum would allow the constitution to cut the Swiss franc's link to gold.<p>
Years and years of bull markets has now produced a banking mentality of maximizing returns instead of making sure the fort is sill standing proudly on rainy days. Investing today seems to be regarded as a one way street. Money is always made; it is just a matter of how much. Greed has replaced fear of loss even in the banking world. Seems to me like a recipe for a big time disaster down the road. If many Long Term Capital Mangements surface at the same time, what will happen then. Does the bailing out process never end?
Are central bankers becoming the foxes in the chicken coups?<p>
Interestingly enough, the Chinese appear to be headed in the other direction. They have seen the economic devastation in Asia these past years and they have seen the purpose that gold served during the crisis and currency meltdowns.<p>
From Platts: China should increase its gold reserves to hedge against financial risks, China Daily quoted a statement by the country's Gold Economic Development Research Center on Monday. China should increase its gold reserves to reduce reliance on the U.S. dollar and to hedge against financial risks, said Liu Shan'en, deputy director. "If there are problems with the dollar, there will be an international catastrophe. An increase in our country's gold reserves is necessary.'' <p>
"Maintaining a greater variety of reserves is the only way to reduce risks," said Liu Shan'en. In 1997, China's gold reserves were only 395 mt, 2.6% of total reserves. That proportion contrasts sharply with Germany's gold reserve ratio of 34% or France's 55% at that time. <p>
In general Asian gold reserves are only 5% of total reserves, so it is easy to see where future gold demand is most likely to surface in the official sectors. <p>
Then there is India, carnivor of gold and silver. Their government has proposed a scheme to mobilise gold reserves in that country. According to Reuters: Under the scheme, "selected banks will be permitted to accept gold deposits and issue interest bearing certificates or bonds which, on maturity, can be reclaimed in gold". Capital gains and interest would be exempt from taxation. <p>
Le Metropole's John Brimelow had the most astute take on this potentially new Indian development that we could find. John reads the Indian newspapers and has a better grasp on the Indian precious metals situation than any one else in the gold industry. The conventional line (what else is new ) is that this is bearish. Not so, says John.
"First, the government slapped a 10% new tariff on all goods, but gold and silver. This is a gold and silver government friendly action. The government likes the gold and silver tax revenue stream and felt that a new tariff would just be counterproductive as much precious metals would just be smuggled into the country and revenue might actually be reduced by new government action." <p>
Second, says John: "The populace fears the government in some ways and does not want the government to know what it has. Therefore, the masses will not turn in their gold for the bond scheme. They know the governments of the past banned imports of gold for some 30 years. The old governments viewed gold as a Keynesian barbaric relic and the populace wants no part of turning it over to them".<p>
Why the mobilization scheme is bullish, according to Brimelow, is that is actually might appeal to the Indian crowd not presently buying gold that fears a rupee devaluation. This is the crowd that invests in the markets, owns paper, and the government knows just what they have. A gold investment of this sort might appeal to them and that ( all in all ) will increase Indian gold demand.<p>
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The down and dirty recap of all these machinations by governments regarding what to do with gold: Certainly, they will do what they are going to do, but it will be interesting to see if the Europeans are pounding the table to sell gold and invest in the stock market when, and if, the equity markets undergo severe corrections. After, many long term "investors" have been wiped out. After more hedge funds have blown up. THEN, I would like to see if these "shrewd" bankers talk the same talk. What do you think the odds are of that? <p>
Potpourri and the Gold Shares<p>
The XAU closed at 60.70. About unchanged.<p>
The average cash operating cost of gold production for Western World producers posted a significant fall from $232/oz in 1997 to $193/oz. in 1998, according to the latest study by Australia's AME Mineral Economics. The findings were based on a survey of 172 mines accounting for around 70% of Western World output and said costs have fallen by $52/oz in South Africa, $40/oz in the US, $43/oz in Australia and $12/oz in Canada. The major component of the cost falls in South Africa, Australia and Canada was the depreciation of local currencies against the US dollar. I could find no explanation of why US cash costs decreased so much. The AME predicts low gold prices on in to the year 2002.
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The good news is how bearish everyone is. When was the last time you read any of the sophisticates of the gold industry talking about a big move up? This sort of analysis is what mainstream gold people think and that type of thinking is what spawns bull markets.
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John Brimlow day. Their has been movement of palladium into Switzerland causing bearish commentary by the pgm analysts. John said the same type of movement occurred in late 1996- right before the palladium squeeze of 1997 on into 1998. <p>
Late word from Canada. The bullion dealers in Canada were astounded by today's gold action and now even they are railing about gold price manipulation. GATA has really raised the sensitivity level on this issue.<p>
Our sources also tell us to watch the Singapore gold shipments. They feel the official sectors of Japan and China are about to re-enter the physical gold market as substantial buyers. <p>
Midas
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