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Bill Murphy on Gold

January 27 – Gold $558.50 down $1.20 - Silver $9.57 up 3 cents

Robert Rubin as he reveals the motivation or drivers of crisis management in the interaction between himself, Lawrence Summers, the ESF [exchange stabilization fund], the IMF and presumably the Maestro at the Fed - during the Clinton administration. On pages 290 - 291 of his book, In An Uncertain World, referencing the Brazilian financial crisis of the late 1990s, Rubin outlines how very expensive "bad decisions" can buy time. Sometimes, he asserts, these bad decisions have a great deal of merit because they can …

Yes, Mr. Rubin, the young adults and children of America thank you.

It’s Action Jackson Time. Gold fell $3 during Asian trading last night and gradually firmed up going into the Comex opening … a nice change of pace. The AM Fix was $559.75. However, the PM Fix came in at $561.75. At one point on Comex gold was up nearly $4.

With silver up 20+ cents in the early Comex trading, it appeared both precious metals were ready to rocket. Yet, as usual, on the days when gold and silver should do the best, The Gold Cartel goes into all out attack mode. Clearly, the cabal forces furiously leaned on bullion to calm down the gold market and continued their defense of the $563/$564 level. After all, we have the Bush State of the Union Address on the same day Alan Greenspan leaves office, January 31. How would it look if the price of gold were soaring going into, or on, that day? A real Gold Cartel/Planet Wall Street/Orwellian No No.

According to our floor sources, it was massive dealer selling which took gold down $7 off its highs … a.k.a Gold Cartel and allies.

David Letterman-like reasons for gold and silver to sell off:

*The price of crude oil shot up $1.50 to $67.76 per barrel.

*Platinum gained $7.60 to $1072.70, an all-time high close.

*March copper closed at $2.2330, up 3.15 cents, and another all-time high.

*The CRB rose 3.67 to 347.13, an all-time high close.

*The Hamas victory in Palestine.

* Surprisingly constructive comments about central bank gold sale reductions.

I cannot stress how bullish this central bank gold story is:

Central Bank Gold Sales Seen Falling Short of Quota -HSBC

LONDON -(Dow Jones)- European central banks are highly unlikely to sell the total 2,500 metric tons of gold permitted under the five-year Central Bank Gold Agreement, HSBC analyst Alan Williamson said Friday.

Total confirmed and probable sales under the renewed agreement currently stand at 1,441 tons, of which 599 tons has already taken place and a further 842 tons are expected to take place over the balance of the agreement, Williamson said.

"Within this category we have included the 130 tons of Swiss sales, which completes the longstanding disposal program, the 600 tons of likely French sales (151 tons already completed) and the Dutch sale of 165 tons (75 tons already)," Williamson said.

"In addition, we have included likely Portuguese sales of 160 tons (of which 65 tons has been completed), Austrian sales of 90 tons (of which 15 tons done already) and probable Swedish sales of 60 tons (17 tons done)," he added.

Williamson said also included are European Central Bank sales of 47 tons undertaken so far and the 6 tons of gold sold by the Bundesbank for coin minting.

Also, Belgium has likely sales of 120 tons (of which 30 tons have been completed), and Spain has sold 63 tons.

"These sales total 1,441 tons, or just over half of the potential sales under the agreement," Williamson added.

In addition to these sales, there is a potential 876 tons of central bank disposals that can be identified, Williamson said.

"Within this we would include a further 594 tons of German sales if the Bundesbank were to take up its full 600 tons allocation - although it passed on the possibility of sales in the first year of the revised agreement and has not yet stated its intentions," he noted.

"In addition, we have included a further 220 tons of possible ECB sales, which is approximately what would need to be sold to reduce its holdings to 15% of total reserves, and a possible 62 tons of Belgian sales," he said.

But even in the "unlikely event" all these sales materialize, Williamson said total sales under the renewed Central Bank Gold Agreement would be just over 2,300 tons, still almost 200 tons short of the maximum permissible.

"Unless another central bank emerges as a seller, we remain of the view that the full 2,500 tons quota will not be filled. Indeed, in the event that either the Bundesbank and/or the ECB decide not to undertake any further sales, aggregate sales will fall short of the 2,500 tons maximum," he added.

The five-year agreement is the second of its kind and limits combined annual sales of gold by individual countries to a total 500 tons. Each Central Bank gold agreement year runs from the end of September.

-END-

Seems to me Mr. Williamson was neutral to bearish all the way up the last four years. Why the MIDAS hoopla:

*The gold market cannot handle an unexpected 1,000 tonne drop in expected central bank sales. The Gold Cartel and other shorts desperately need the European central banks to sell 2500 tonnes of gold per year and clandestinely lease gold on top of that.

*The yearly supply/demand deficit is 1500 to 2,000 tonnes right now. The price of gold is taking off anyway. Without all the allowed central bank gold hitting the market, the price HAS to SOAR!

*This is nothing less than sensational talk coming from the mainstream gold world. It MUST have The Gold Cartel gagging.

*All of this continually changing talk has surfaced following Gold Rush 21 and the Russians leaving our conference in Dawson City.

Before Gold Rush 21, talk of central banks buying gold (Russians, Iranians, Chinese, South Koreans) was virtually non-existent, as was any talk the central banks might not come close to meeting their Washington Agreement quota.

*The Gold Cartel is likely experiencing some angry fallout from central bank sheeples who now feel duped about selling their gold at such low prices. GATA hero Ferdi Lips said years ago the Swiss would rue the day they dumped gold at bargain basement prices years ago.

The gold open interest news is nothing less than stunning and very exciting as it continues to confirm the MIDAS/GATA analysis that The Gold Cartel and others are desperately trying to cover their shorts whenever they can. It fell a whopping 9987 contracts to 351,369!!!

I am not sure how yesterday’s option expiry plays into this (probably call owners selling futures the last few days and given long futures for their calls, thereby reducing the OI, which led to this sharp OI reduction). However, it does not matter in the end. The bottom line is gold has risen some $120+ while the gold open interest is more than 20,000 contracts off its highs.

The gold market is NOT overrun with foaming specs yet. Based on the price action, there is room for 100,000 more specs to pile into this market before it gets overdone. Those specs will be competing against more and more pale faced shorts trying to cover their butts. Gold remains explosive.

Just in … Not only are the gold open interest numbers continually bullish, so is the Comex Commitment of Traders report. The large specs reduced their longs by 2,722 contracts and increased their shorts by 2,908 contracts. The small specs reduced longs by 695 contracts and increased their shorts by 661 contracts. The commercials reduced longs by 3152 contracts, yet REDUCED SHORTS by 10,318 contracts.

Once again we have concrete evidence the Commercial Signal Failure is in play. Facts are facts. Meanwhile, instead of the specs driving the market up, they are going more SHORT. This is SO bullish!

The silver open interest only rose 1069 contracts to 133,175. The Silver OI is around 10,000 contracts off its old high. For silver to rise like it has, and for the open interest to go up so modestly, tells us the silver shorts are scared stiff … with many of them finally wanting out too.

March silver
http://futures.tradingcharts.com/chart/SV/36
Weekly silver (up a rabid 70 cents)

http://futures.tradingcharts.com/chart/SV/W
The floor noted some buy silver/sell gold spreading.
 

Indian ex-duty premiums: AM $2.51, PM $3.36, with world gold at $558.20 and $559.45. Adequate for legal imports. The rupee firmed again this afternoon, as the Bombay Stock Exchange closed again at record highs. India is positioned to block any serious sell-off.

Japan remained indifferent. Volume was static at the equivalent of 23,578 Comex lots (+1.2%), and open interest slipped the equivalent of 248 Comex lots – although Mitsubishi’s data implied that the public added 1.3 tonnes to its long. In the absence of a strong uptrend in world gold or (even more helpful) a downtrend in the yen, TOCOM’s traders are likely to be distracted by platinum and silver futures.

The Shanghai Gold Exchange, which will now be closed for a week, displayed discounts to world gold only slightly narrower than yesterday: $2.42-$2.65. A Reuters story today reports comparatively strong Chinese interest in gold items for the lunar New Year celebrations: but there is no evidence the country is a significant factor in the world gold trade at present.

The two precious metals where their absence might be felt are platinum (of which China is a substantial importer) and silver (where for some years they have been a heavy exporter). In the current state of the silver market, China being closed might have an effect.

Yesterday in NY volume was very heavy: 130,369 lots (37% above estimate) or 100,000 net of the switch effect. Open interest dropped a starting 9,987 lots (31 tonnes). No doubt this was somewhat connected with the Comex option expiry: the $350 calls expired in the money, wit an unusually substantial open interest. ScotiaMocatta remarks that yesterday:

"Gold gave back about $5.00 overnight, trading 557.20/557.70 by the time New

York opened for business. Follow through selling from overseas sources hit the market shortly after the open forcing gold to the session low of 554.60/555.10. The market mood soon …helped along by a renewed buy interest from funds. The fund buying enabled gold to reach a peak of 560.90/561.40 before finishing the day 560.00/560.50."

Today sees the OTC options expire: and the same capping operation has been in effect, blocking an attempt by gold to move after the adverse GDP figure. Estimated volume at 1PM was 115,000.

HSBC put out an interesting piece reported by Dow Jones, suggesting, for no obvious reason, that the full Washington Accord quota might not be sold by the participating Central Banks. It did not discuss possible purchases. Viewed as further evidence that the major bullion banks are increasingly pessimistic about the volume of net sales forthcoming, this report is significant. Apprehension about Central Bank intentions has sunk pretty deeply into the mind set of Western professional investors.

The HSBC daily offers the arresting slogan

"Gold ETFs; bigger consumer of gold than India? This of course involves being confident about what the ETFs actually hold – but in the current climate is the sort of thing which might cause a buyer stampede.

With the lower $560s looking increasingly congested, the issue as to the nature of the resistance there, raised yesterday, remains open. Gold’s friends can take some comfort from the robust behavior of the gold shares.

JB

CARTEL CAPITULATION WATCH
 

The DOW roared 97 higher to 10,907 and the DOG gained 21 to 2304.

The US economic news stunk, yet the US stock market took off and the dollar rose .73 to 89.19, with the March euro giving up 1.09 to 121.35. It makes no sense unless one focuses on the Presidential State of the Union address on Tuesday. The PPT and market managers were working overtime today to have the US financial house looking good going into this important event.

"Everything is fine in Stepfordville," the Orwellians in Washington and Planet Wall Street pontificate. What a crock!

08:30 Q4 GDP reported 1.1% vs. consensus 2.8%; Personal Consumption 1.1% vs. consensus 0.4%
No revisions.
* * * * *

U.S. GDP slows to 1.1% rate in fourth quarter - Rex Nutting
STOCK MARKET FUTURES PARE GAINS AS GDP FALLS SHORT

U.S. CORE PCE PRICE INDEX UP 1.9% YEAR-ON-YEAR
U.S. 2005 PERSONAL SAVINGS RATE NEGATIVE 0.5%
U.S. 4Q DURABLE GOODS SPENDING FALLS 17.5%, MOST IN 18 YEARS
U.S. 4Q CORE PCE PRICE INDEX RISES 2.2%
U.S. 2005 RISES 3.5% VS. 4.2% IN 2004
U.S. 4Q BUSINESS INVESTMENT RISES 2.8% VS. 8.5%

08:37 G DP weaker than expected at +1.1% in Q4; price index slightly worse at +3.0%
Consumption also rose 1.1%, and final sales fell (0.3%). The unexpected weakness in Q4 GDP appears to be due primarily to a surge in imports and a surprising (2.4%) decline in goverment spending. The price index rose slightly more than expected at +3.0% vs the +2.7% consensus. Though this report will likely prompt speculation that the economy is slowing markedly, it is important to note that volatility in quarterly GDP reports is more common than the recent stable trend would suggest, and personal consumption and government spending in particular are likelyto recover. For today, concern about growth will win the day however: S&P futures +2.1 and off over 3 pts from pre-report levels; 10-year note+4/32 to yield 4.50% as the bond market benefits from perceptions that there will be less pressure on the Fed to tighten further.
* * * * *

Bill;
This morning's much weaker than expected GDP number has "reportedly" caught many mainstream bubble vision pundits off guard. Remember how weak the 2 year auction was 2 days ago? Remember me saying that foreign demand was weak [in particular] and the dealers "owned" that inventory [the bulk between 4.37 - 4.42 %]? Funny, isn't it - how a much weaker than anticipated GDP number would NORMALLY serve to buoy the short end of the curve - perhaps giving the dealer community a respite to [hopefully] move some inventory and hopefully make room for the next round of debt issuance. From the look of things, the 2 year note has not rallied - still stuck at 4.49 % - could be a large problemo going forward - shortly. Then again, maybe some friendly Pirates will make the problem go away?

Observation:

Lots of things - besides the price of gold - are starting to not behave as one would expect under the circumstances. GDP is one third what was expected and the DOW is up 115 points. Life is good in Stepfordville.
best,
Rob

NEW YORK, Jan 27 (Reuters) - Billionaire financier George Soros told CNBC television on Friday U.S. consumer spending would slow sharply next year as a slowdown in housing hurts purchasing power.

"There's (a) problem that I think is brewing, and that is the end of the housing boom in the United States and the ability of households to spend more than they earn because the value of their house is rising," Soros said in the interview.

"So I expect that by '07 there will be a significant decline in U.S. consumer spending and I don't see what will take its place because it's so important as a motor of the world economy," he said.

Soros argued that a veneer of relative calm both in the United States and international financial markets masked some troubling patterns in the global economy.

"Everything looks to be just hunky-dory but I don't think the outlook for the next two years is very good," he said. "The downside risks are bigger than the upside potential."

Speaking at a the World Economic Forum in Davos, Switzerland, Soros said global leaders appeared overly optimistic.

"The conference is remarkable for its complacency. It's a bit like dancing on the Titanic. They're having a very good time and there's a very cheerful atmosphere."

-END-

09:31 GM GM target cut to $10 at Banc of America (pre-open) (23.05)
Firm now sees bankruptcy risk as more likely than not over the next two years from prior risk of 40%.
* * * * *

10:00 New Home Sales +2.9% to 1.269M rate vs Bloomberg consensus 1.225M
* * * * *

US fiscal facts of life:

Hello Bill:
(CBS/AP) President Bush signed legislation last Friday raising the government's debt limit by $800 billion and clearing the way for Congress to send him an overdue $388 billion spending bill to finance most federal agencies.

The new federal borrowing cap is $8.18 trillion; that's 70 percent the size of the entire U.S. economy, and more than $2.4 trillion higher than the debt Mr. Bush inherited upon taking office in 2001.

END

THE US GOVERNMENT IS $8.5 TRILLION DOLLARS IN DEBT!

THE US BUDGET DEFICIT WILL NOW BE $336 BILLION ...AND...

LIKELY TO INCREASE BECAUSE OF KATRINA & THE WAR IN IRAQ!

A scary perspective... It's only a billion...

The next time you hear a politician use the word "billion" casually, think about whether you want the politician spending your tax money.

A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into perspective in one of its releases.

A billion seconds ago it was 1959.

A billion minutes ago Jesus was alive.

A billion hours ago our ancestors were living in the Stone Age.

A billion days ago no one walked on earth.

A billion dollars ago was only 8 hours and 20 minutes, at the rate our government spends it.
Regards,
Glenn

 

Do you think the deflation fairy waved her wand, and the US Bond and dollar strengthened and gold weakened with all commodities in the US in the Great Depression?

Get the Facts. Jesse's Charts http://www.geocities.com/arthurcutten/jesse.html

Hello Bill:
We have a lease rate event! This time it's in silver:

In the past two days, silver lease rates have tripled in the one month term and spiked to somewhat lesser peaks in the other terms, but all terms are up at least 50% in absolute terms. The relative concentration of the spike in the near terms screams price suppression as the principal motive. Gold on the other hand displays a weak internal backwardation, and a widening spread between one month and one year, which is indicative of less suppressive leasing. Silver's rates are rising across all terms, and rising (at the moment) faster in the later terms than the near terms. In this, silver differs from gold, and I think that difference is related to the liquidity crunch in the physical market. There is relatively little central bank silver, so the rates respond to lease demand far more violently than gold rates. In any given term, there is relatively little metal available to borrow, so the leasing is spread out across all terms to spread the cost, and I think concentrated in the later terms with the expectation that time will let the borrowers out of their exposure at lower prices.

The surge in later terms may also reflect higher risk of a market blow up. It has always been my contention that silver is more explosive than gold simply based on the supply/demand fundamentals, lease rate behavior, and the incontrovertible fact that silver is still Constitutional money. Silver has been under suppression by various monetary authorities (mostly British) for 300 years. If the authorities suppress price while demand balloons, there must come an inevitable price explosion. Perhaps this has arrived for silver.

Platinum is also under attack, with a lease surge that resembles the one in silver, but not in degree. Rates here are increasing across all terms, but more so in the later terms. The platinum lease market is also illiquid. Palladium has blown out into a full inversion, as one month lease rates surge, while later terms fall.

Over in the pits of COMEX, 1.22 Moz of silver were delivered. And who took most of it you ask? Why Bank of Nova Scotia (again). They took all but 3 of the contracts delivered this morning. That brings the total silver deliveries up to 7.46 Moz for the month of January.

http://www.kitco.com/market/lfrate.html

Have a nice weekend, Rhody.

More of same trend re world gold production:

Russia 2005 gold output 168 t, 2004 data revised down

Russia's gold output fell to 168,03 t in 2005, down 3,5% from 2004, industry lobby the Russian Gold Industrialists Union said on Friday.

The lobby has revised down its estimate of total gold output in 2004 to 174,14 t from a previous 180,5.

"The 2004 secondary gold output figure had to be revised down by some six tonnes," Valery Braiko, head of the lobby, told Reuters. He declined to elaborate.

The lobby initially expected output last year to reach 183 t. But it cut its forecast in November as reserves at some deposits had proved to be lower than expected, while at others companies had to switch to processing ores with lower than expected quality.

A lobby statement said output of gold from mines fell by 4,3% to 152,03 t last year from 158,88 in 2004.

Gold output as a by-product of other metals rose by 6,8% to 11,12 t from 10,42, while refining of the metal from scrap rose by 0,8% to 4,88 t from 4,84 in 2004.

-END-

Speaking of Russia, they have a lot of money to purchase gold with:

Moscow Times
Friday, January 27, 2006. Issue 3340. Page 6.
 

The country's foreign currency and gold reserves rose to a record $185.2 billion, as revenue increased from oil exports.

The reserves, which surged more than 46 percent, or about $58 billion, in 2005, added $600 million in the week ending Jan. 20, the Central Bank said Thursday on its web site.

The reserves surged $2.3 billion the previous week. (Bloomberg)

The usual drivel from the mainstream precious metals world:

Tokyo (Platts)--27Jan2006

The recent spike in silver futures around the world lacked its own momentum and did not represent supply shortage of the material, Yuki Sonoda, a precious metals market analyst and advisor to Japanese commission house Daiichi Shohin, told Platts on Friday.

The Tokyo Commodity Exchange saw silver futures rise to limit high prices on Thursday. Following the bullish Tokyo trades, silver futures on COMEX rose to record territory. Nearby March 2006 silver contracts rose 9.5cts to close at $9.605/oz on Thursday, the highest level since 1987.

"Japanese camera film makers are suspending the production of camera films...the supply and demand balance is on the weak side," Sonoda said. Japanese camera maker Nikon announced on Jan 11 that it would change its camera portfolio to put more focus on digital cameras. Silver is used in halide analog films, which are plastics coated with silver compounds.

-END-

02:25 Gold's rise may make smaller producers attractive says the WSJ

The 'Heard on the Street' column says some analysts and investors are saying gold is now expensive enough to enable even the less-efficient producers to benefit. Some have been focusing on BGO while those with a higher risk tolerance are looking at HL. After ABX's deal for PlacerDome, some analysts are pointing to BGO, EGO and AUY as possible takeover candidates. Some hedge funds note that there is usually a lag between the rise in the price of a commodity with its rally in the price of the largest producers and the catch-up rally among the smaller companies with more challenges. Others say new money worldwide is increasingly looking for plays on gold while emerging market demand for jewelry is growing.
Reference Link (subscription required)
* * * * *

More on Barrick:

Hi Bill,
Reading MIDAS I've just read about BMO Nesbitt Burns. Incredibly, even though they realize the hedge book problems, Barrick is one of their TOP PICKS!

And reading the disclosures at the end of one of their reports I found this line: ABX - BMO Nesbitt Burns, Barrick Gold Corporation and others are defendants in a U.S. securities fraud class action on behalf of all U.S. purchasers of Bre-X stock.

I don't know anything about the Bre-X fiasco, but maybe you'll find it interesting...
Cheers
Chris

The gold/silver shares held their own with the XAU up .8 to 146.78 and the HUI 2.23 higher to 324.32.

Was it prayer, Gold Rush 21, or both, which helped send gold more than $120 higher since the conference in early August?

Been following your reports, and joined the fight on a different field - prayer. As a Welkom inhabitant for the past 25 years I believe the results speak for themselves. Began praying against the manipulation in Aug'05 (437$/ounce) and spoke prophetically about going through $500 by Dec'05 and through $600 by june'06. Good to see Greenspan go, but we here in the tip of Africa are positive "here comes mega bucks"

Be blessed in seeking to expose the system - God is in control (Rev17vs1)
Shalom - Johan Fouché

The following pictures of the Gold Rush 21 DVD Premiere at the Vancouver conference are courtesy of GATA supporter Michael Rennie of Vancouver. The first one is of me introducing the DVD.

GATA extends our profound gratitude to Goldrea, Kirkland Gold, International PBX Ventures and Linux Gold Corp. for their generous contributions to GATA.

We all know a number of friends who are watching this gold move up with amusement, and even some interest, yet have not invested. The time to have them do their homework is NOW, not when gold goes $800 bid. Ask them to review the DVD trailer at www.GoldRush21.com and, if they like what they see, to spend some chump change and order the DVD. What ought to hit them over the head is how this gold market is playing out as the speakers said it would and why.

Boy, are they in for a shock! If your friends take 25 minutes to watch the highlight film, they won't be due for a shock and can still get onboard while the going is good.

Gold, silver and the shares remain THE historic investment opportunity of a lifetime!

GATA BE IN IT TO WIN IT!

MIDAS

Appendix

Hi Bill & Chris,
Everyone at Anglo Far-East are looking forward to receiving our copies of the GR21 DVD's. We appreciate all the work GATA has done and is doing to equip all in our industry with the necessary tools and weapons needed to get this message out there.

Also on our main indexed webpage we have loaded your GR21 BANNER which links direct to your DVD order webpage.

FULL LINK; http://www.anglofareast.com/

Thanks again,
Yours Sincerely,
Simon Heapes
The Anglo Far-East Bullion Company ~ Asia/Pacific Manager
Unit 801, 8th Floor, Pacific House, 20 Queens Rd, Central, Hong Kong.
Email:- sheapes@anglofareast.com
Office:- +852+28680248 ~ Direct :- +64+93370715
USA(Help Desk):- +1+786 8669432 ~ Fax:- +64+9+3370716
http://www.anglofarest.com/Hello Bill,
I just watched the trailer for the Gold Rush 21 Conference and I immediately placed an order for 20 today. I am going to send them to current and potential customers. They MUST KNOW THIS INFORMATION!!!
Thank you Bill, Chris and everyone for a super-human effort of sustained duration. Without your efforts we would be several years behind where we are now!
Best Regards,
Mike W.
http://www.encoregold.com/

Bill:
The Gold Rush 21 DVD's are GREAT! Very well produced and done. I am proud, and have always been proud, to be a long time GATA member.
Thanks for all you have done and continue to do.
I can't imagine how I would have kept my gold investments for the last 8 years with out your http://www.lemetropolecafe.com/ website.
Thank You, et.al!
GoldlessSacks

Hello Bill,
I viewed the Gold Rush 21 DVD and it was very well done. I was surprised, and honored, that my name appeared as a sponsor. I don't know that my contribution warranted it, but thank you. As the Dawson City event approached I told people that it would change the world and be recorded in the history books. I am certain it will happen.
Thanks,
Hank Fellerman

Bonjour Monsieur Midas,
LOVE THE DVD! Missed you at the conference but just wanted to let you know the more I study the history of mankind the clearer it becomes clear the more important you, Mr. Powell, Mr. Howe and all those associated with GATA become. I hope one day you all get the reward you deserve. I guess it is not so comforting to note that the charlatans will get what is coming to them too.
Thanks again,
Carolynn

- END -