TheDailyGold

Liquidation of “Crowded” Gold Trade Pauses But “Clean-Out of Weak Hands Necessary”

BENCHMARK prices to buy gold for London settlement rallied more than $10 an ounce off new five-month lows beneath $1528 on Wednesday morning, bouncing as the Euro, world stock markets and commodity prices also paused this month’s sharp liquidation.

Spanish and Italian bond yields also eased back but remaind over 6% after Spain’s prime minister Mariano Rajoy told the parliament in Madrid there is “a serious risk that the markets won’t lend to us or lend only at astronomical prices.”

Over in Greece – where the daily “bank run” of withdrawn Euro deposits is now totaling some €700m per day – president Karolos Papoulias meantime appointed a judge to act as interim prime minister and set the date for an election re-run as 17th June.

“[Gold] selling continued in Asia today across all exchanges,” says Swiss refinery and finance group MKS in a note.

“Market participants have given up waiting for a bounce,” says a Singapore dealer. “The market will do what it needs to do to clean out the weakly margined before it becomes healthy once again.”

Hedge-fund legend George Soros opted to buy gold in the first quarter of 2012, reversing previous sales according to new data from March 31st released yesterday and showing his fund more than trebling its position in the $60 billion New York-listed SPDR gold ETF.

Fellow billionaire hedge-fund manager John Paulson – who represents the largest single holder of SPDR Gold shares – maintained his clients’ stake, leaving it unchanged for the first time since June 2011 at the equivalent of 53.8 tonnes.

Losing 8% since end-March, prices to buy gold have now lost one-fifth from the record Dollar peak of September last year – “the common definition of a bear market,” notes Bloomberg News.

“This is an example of our old friend ‘the crowded trade’,” reckons John Ventre, manager of Skandia’s Spectrum and multi-asset funds, speaking to Investment Week.

“Very many investors now own the asset, even though the market is in fact incredibly small. As investors – particularly levered ones like hedge funds – take losses in other parts of their portfolio, then selling pressure emerges across the board as investors pull their horns in.”

The spot-price to buy gold “is not far from our downside target zone at the September and December 2011 lows,” says the latest weekly report from technical analyst Axel Rudolph at Commerzbank in Luxembourg.

“Over the next few days a minor bounce back towards the breached 2008-12 uptrend line is likely to be seen before another down leg rears its head, probably by next week.”

Together with gold Wednesday morning, silver bullion also bounced from new five-month lows, adding 50¢ to trade above $27.70 per ounce.

Over on the Hong Kong stock exchange, however, shares in Chow Tai Fook Jewellery Group – the world’s biggest publicly listed jewelry retailer – closed 10% down at an all-time record low.

Along with the rest of Asia, the Hang Seng Index overall fell for the 9th session in ten, while US crude oil dropped through $93 per barrel and copper contracts dropped another 1.5% on the day.

“Gold’s slide has to be put in perspective with other commodities,” says Walter de Wet at Standard Bank in London, pointing to the 1-month drops in crude oil, platinum and copper.

While prices to buy gold have lost 7%, “Even [emerging-market] currencies such as the Brazilian Real and the South African Rand have depreciated 7.9% and 5% respectively against the US Dollar.

“Liquidation is taking place irrespective of market fundamentals.”

“Jewelers don’t know what to do,” says Ronald Leung, head of Hong Kong’s Lee Cheong Gold Dealers, speaking to Reuters.

“Maybe when the price has stabilised at some levels, they will start to reenter the market. There’s a bit of scale-down buying.”

Some wire reports said Wednesday that demand to buy gold had picked up despite a fresh record low in the Indian Rupee capping the new lows in the world’s #1 consumer market.

“Amid drying-up demand in off season,” says NDTV – pointing to the traditional summer lull between wedding and festival periods – these lower gold prices “could ease the burden on [India's] import bill.”

India’s gold bullion imports equaled some 2.6% of GDP last year, almost equal to the country’s entire balance of trade deficit.

On top of 2012′s quadrupling of import duty, “Gold imports could be discouraged by creating opportunities for more productive investments in the economy,” writes RV Kanoria, president of the Federation of Indian Chambers of Commerce & Industry (FICCI) – fresh from urging the privatization of India’s coal-mining sector – in the Economic Times of India today.

“A better investment climate through focus on reforms will steer investors to look towards ventures than just stock up gold.”

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

GDX declined by -3.98% while GDXJ declined by-7.06%  and SIL  declined by -5.00%

Today’s worst performing silver and gold stocks:

We now have a Bullish Extreme in the USD. Over the last 5 years, Bullish extremes have been very good indicators that a top was within a hand’s reach.

Chart courtesy sentimentrader.com

On top of the Bullish extreme in the USD, we also have a Bearish Extreme in Gold sentiment. Bearish extremes have been good indicators that a bottom was near.

Chart courtesy sentimentrader.com

Silver Sentiment is also very depressed at the moment, with only 29.70% bullishness. However, sentiment hasn’t pierced the “standard deviation bands” yet, and thus has more downside potential…

Chart courtesy sentimentrader.com

All this Dollar-bullishness/Gold-Bearishness has caused mining companies to sell off BIG TIME.
Some of them are now 75-80% below their top, and when you look at their charts, it looks like the world is coming to an end for those companies.
That being said, the BPGDM index from stockcharts, which shows the % of mining stocks that have a BUY signal on the Point&Figure chart, is very depressed at 10.71% at the moment. In late 2008, this index reached 0% for a very short time. Funny to see that that time, the mining stocks had set a higher low. The HUI index has now dropped below the 50% Fibonacci Retracement level from the bottom of 2008 to the top of 2011, so the next target would be the 38.20% level, which comes in slightly below 350. My expectations are that we might get close to this level over the next couple of days, followed by a very sharp rebound (possibly as high as 450, which is the 61.80% level). What happens then is still unknown, but as I pointed out, the severe underperformance of the HUI stocks to Gold is very similar to 2008, which means that the decline might not be over yet, even though a sharp bounce is overdue now with the extreme bearishness…

Chart courtesy stockcharts.com

Let’s have a look at the weekly charts. Gold is ready to set a tripple bottom. However, if that attempt fails, look out below (especially below $1,450). The MACD has just turned negative, which doesn’t look well…

Chart courtesy stockcharts.com

When we have a look at the following chart, which is a weekly chart from 1980, we can notice a similar pattern:

Chart courtesy stockcharts.com

When the MACD just turned negative in 1980, Gold was trading above $500 per ounce. It fell all the way to $300 in the next 1.5 years or so.

Chart courtesy stockcharts.com

Silver is also at a critical point right now. If this level holds, then we have a tripple bottom. If not, look out below…

Chart courtesy stockcharts.com

Now over to the monthly charts:
Gold’s MACD is extremely stretched, and we have negative divergence between price and RSI. Since this is on a monthly basis, this is not a good sign for the future.

Chart courtesy stockcharts.com

Silver’s MACD looks set to drop lower (potentially much lower). First support comes in around $19-$20:

Chart courtesy stockcharts.com

The Quarterly chart for silver shows an extremely stretched MACD, and an RSI that is still hovering around overbought levels:

Chart courtesy stockcharts.com

The situation is even worse for Gold:

Chart courtesy stockcharts.com

When we finally look at the Yearly chart, we can see that Silver has set a bearish reversal candle last year, which we have commented on late last year. On top of that, the yearly RSI is still OVERBOUGHT!

Chart courtesy stockcharts.com

Last but not least, the comparison between Silver Now and the Nasdaq is still very accurate:

Chart courtesy stockcharts.com (Nasdaq Bubble)

Chart courtesy stockcharts.com (Silver “Bubble”?)

An overlay of the two charts speaks more than a thousand words:

For those of you who want to call me an “idiot” who doesn’t look at fundamentals, Martin Armstrong wrote in his latest report:

“Fundamentals really mean little. The whole fiat reasoning means nothing since gold declined for 19 years from 1980 when it was still fiat. The same is true in stocks when the price can decline on good news and it is explained by saying the market was expecting results “better” than that. Markets trade technically because they are influenced truly by everything. Each market is interlinked to everything else so it becomes a delicate dance of comparison and capital flows like water to the lowest cost for the greatest gain. Focusing upon just one market exclusively ensures failure.”

For more articles, analyses and trading updates, visit www.profitimes.com

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TORONTO, ONTARIO–(Marketwire – May 15, 2012) - Argonaut Gold Inc. (TSX:AR) (the “Company”, “Argonaut Gold” or “Argonaut”) is pleased to announce its financial and operating results for the first quarter ended March 31, 2012. All dollar amounts are expressed in United States dollars unless otherwise specified.

FIRST QUARTER 2012 & RECENT HIGHLIGHTS

Financials

• Revenue of $24.4 million.
• Net income of $7.3 million, $0.08 per basic share.
• Cash flows from operating activities before changes in non-cash operating working capital and other items of $8.1 million.
• Cash on hand was $17.8 million at March 31, 2012.

Gold Production and Cost

• Ounces loaded to pads: 44,169 gold ounces and 861,644 silver ounces.
  • El Castillo: 35,283 ounces (up 25% from Q1 2011); La Colorada: 8,886 gold ounces and 861,644 silver ounces
• Production of 20,884 gold ounces in the first quarter of 2012.
  • El Castillo: 17,799 gold ounces
  • La Colorada: 3,085 gold ounces and 17,182 silver ounces
• Cash cost per gold ounce sold – $639.

Operational Improvements:

• Cash expenditures of $12.3 million on mineral properties, plant and equipment.
• The Company’s El Castillo mining contractor expanded the mining fleet to 18 trucks (100 tonne capacity).
• Leach pad 7A west side pad construction initiated at El Castillo and will be commissioned in the second quarter.

Exploration:

• El Castillo - Three additional drill core holes were sent for testing during the first quarter of 2012.
• La Colorada – 14,860 metres from 54 drill holes were completed during the first quarter. Three drills continue work on a planned 35,000 metre drill program.
• San Antonio - Completed 3,285 metres from 14 drill holes during the first quarter.

This press release should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements for the first quarter ended March 31, 2012 and associated management’s discussion and analysis (“MD&A”) which are available from the Company’s website, www.argonautgoldinc.com, in the “Investors” section under “Financial Filings”, and under the Company’s profile on SEDAR at www.sedar.com.

Three months ended March 31, Financials 2012 2011 Change Revenue $24,353,000 $25,676,000 +5 % Net income $7,260,000 $5,930,000 +28 % Income per share – basic $0.08 $0.07 +14 % Income per share – diluted $0.07 $0.07 - Cash flow from operating activities before changes in non-cash operating working capital and other items $8,141,000 $9,339,000 -8 % Gold ounces sold 14,498 18,461 -22 % Gold ounces produced 20,884 18,014 +16 % Average realized gold sales price $1,677 $1,388 +21 % Cash cost per gold ounce sold $639 $590 +8 %

Financial Results – First Quarter 2012

During the first quarter of 2012, revenue was $24.4 million from gold sales of 14,498 ounces compared to $25.7 million from sales of 18,461 ounces in the first quarter of 2011. Cost of sales was $12.1 million for the quarter compared to $14.6 million for the first quarter of 2011. Cash cost per gold ounce sold was $639 compared to $590 in the same period of 2011. (Cash cost per gold ounce sold is a non-IFRS measure, see note below).

During the first quarter of 2012, gross profit was $12.3 million compared to $11.0 million gross profit in the first quarter of 2011. During the quarter, profit from operations was $9.7 million compared to $9.1 million for 2011. Net income for the quarter was $7.3 million or $0.08 per basic share versus $5.9 million or $0.07 per basic share in 2011.

Cash on hand decreased from $34.9 million at December 31, 2011 to $17.8 million. Capital expenditures in the first quarter were $12.3 million primarily as a result of expanding operations at the El Castillo and La Colorada mines. The 2012 capital expenditures and exploration programs for Argonaut Gold includes $38-$48 million at El Castillo, La Colorada and San Antonio which includes pre-production stripping at La Colorada of approximately $6 million. Cash flow from operations before changes in non-cash operating working capital and other items was $8.1 million during the quarter, compared to $9.3 million for the first quarter of 2011. The cash flow used in operating activities in the quarter was $5.3 million after taking into account the buildup of inventory and other working capital.

CEO Commentary

Mr. Pete Dougherty, Argonaut’s President and CEO states: “The Company continues to benefit from the gold production and cash generation at El Castillo, which has enabled us to fund construction of the La Colorada mine. The developments at La Colorada since acquiring the project have been quite impressive. The mine has been put back into production less than one year after finalizing the acquisition. The startup of gold production at La Colorada will provide growth to the Company’s production profile in 2012 through reprocessing the previous run-of-mine material. Expansion of the processing facility continues with final construction taking place on the desorption and recovery plant. 2012 is an important step in growth for the La Colorada mine. While much has been accomplished, there is much more work to be done with important milestones expected to be achieved in the second and third quarters.”

Three months ended March 31, El Castillo Operating Statistics 2012 2011 Change Mining Tonnes ore 3,050,527 2,538,264 +20 % Tonnes waste 2,914,397 2,221,194 +31 % Tonnes mined 5,964,924 4,759,458 +25 % Waste/ore ratio 0.96 0.88 +9 % Heap Leach Pad Direct ore tonnes to pad 2,183,893 1,813,011 +21 % Crushed ore tonnes to pad 838,378 729,104 +15 % Production Gold grade g/t(1) 0.36 0.35 +4 % Gold ounces loaded to pad 35,283 28,225 +25 % Gold ounces produced 17,799 18,014 -1 % Gold ounces sold 14,498 18,461 -22 % Cash cost per gold ounce sold $639 $590 -8 % (1) “g/t” is grams per tonne

El Castillo Summary of Production Results

Total tonnes mined increased by 25% for the first quarter 2012 over first quarter 2011. The total ounces loaded to the pad were 35,283 in the first quarter of 2012; this represents a 25% increase over the first quarter of 2011.

The strip ratio of waste to ore was 0.96 compared to a strip ratio of 0.88 in the first quarter of 2011.

2012 guidance at El Castillo is for 75,000 to 80,000 ounces at a cash cost between $625 and $650 per gold ounce.

La Colorada Operating Statistics Three months ended,3/31/2012 Mining Total tonnes moved from ROM pads 678,310 Heap Leach Pad Crushed ore tonnes to pad 680,396 Production Gold grade (g/t)(1) 0.41 Silver grade (g/t)(1) 39.39 Gold ounces loaded to pad 8,886 Silver ounces loaded to pad 861,644 Gold ounces produced 3,085 Silver ounces produced 17,182 Gold equivalent ounces produced(2) 3,415 Gold ounces sold - Silver ounces sold - (1) “g/t” is grams per tonne (2) Applied ratio of 52 ounces of silver per 1 ounce of gold

La Colorada Summary of Production Results

Non-commercial mining at La Colorada began in the first quarter of 2012. Initially, production generated at La Colorada will come from reprocessing of run-of-mine (“ROM”) material on site. 2012 guidance at La Colorada is for production of 13,000-17,000 ounces at a cash cost between $625 and $650 per ounce.

There was no inventory at La Colorada prior to the first quarter of 2012.

Looking Forward – 2012:

The Company plans on investing between $38 million and $48 million on capital expenditures and exploration initiatives in 2012.  These expenditures are expected to include the following:

• $26-34 million of capital expenditure investments
  • El Castillo – Capital expenditures are primarily for expanding West heap leach pad capacity and operational improvements including a conveying and stacking system.
  • La Colorada – Capital expenditures are primarily for new infrastructure including crushing, screening and conveying, heap leach pad construction, a gold recovery plant and refinery, and other infrastructure.  Additional expenditures are expected to include land acquisition, and permitting.
  • San Antonio – Capital expenditures are allocated for engineering and environmental studies, land and water rights purchases, permitting for the project and infrastructure improvements.
• $5-6 million for La Colorada pre-production stripping costs
• $7-8 million exploration program
• El Castillo – 1,400 metre core drilling program to collect mineralized sulphide ore for further metallurgical test work.
• La Colorada – 35,000 metre drill program to expand resource areas and test multiple exploration targets within the Company’s land position is in progress.  Planned drilling on mine dumps and stockpiles was completed during the quarter.  The main resource targets for 2012 are El Creston and Veta Madre.
• San Antonio – 10,500 metre drill program to test multiple exploration targets and complete condemnation drilling in areas of planned processing facilities is ongoing.

Non-IFRS Measures

The Company included the non-IFRS measure “Cash cost per gold ounce sold” in this press release to supplement its financial statements which are presented in accordance with International Financial Reporting Standards (“IFRS”). Cash cost per gold ounce sold is equal to cost of sales less silver sales divided by gold ounces sold. The Company believes that this measure provides investors with an improved ability to evaluate the performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS. Therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Please see the MD&A for full disclosure on non-IFRS measures.

Technical Information and Mineral Properties Reports

The technical information contained in this document has been prepared under supervision of, and reviewed and approved by Mr. Thomas H. Burkhart, Argonaut’s Vice President of Exploration, and a qualified person as defined by National Instrument 43-101 (“NI 43-101″). For further information on the Company’s properties please see the reports as listed below on the Company’s website or on www.sedar.com:

El Castillo Mine NI 43-101 Technical Report on Resources and Reserves, Argonaut Gold Inc., El Castillo Mine, Durango State, Mexico dated November 6, 2010 La Colorada Property NI 43-101 Preliminary Economic Assessment La Colorada Project, Sonora, Mexico dated December 30, 2011 San Antonio Gold Project Technical Report and Mineral Resource Estimate on the San Antonio Gold Project, Baja California Sur, Mexico dated June 30, 2011 La Fortuna Property La Fortuna, Durango, Mexico, Technical Report dated October 21, 2008

About Argonaut Gold

Argonaut is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets are the production-stage El Castillo Mine in the State of Durango, Mexico, the La Colorada Mine in the State of Sonora, Mexico, the advanced exploration stage San Antonio project in the State of Baja California Sur, Mexico, and several exploration stage projects, all of which are located in Mexico.

Creating Value Beyond Gold

Cautionary Note Regarding Forward-looking Statements

This news release contains forward-looking statements that involve risks and uncertainties that could cause results to differ materially from management’s current expectations. Actual results may differ materially due to a number of factors. Except as required by law, Argonaut Gold Inc. assumes no obligation to update the forward-looking information contained in this news release.

Contact Information
Argonaut Gold Inc.
Nichole Cowles
Investor Relations Manager
(775) 284-4422 x 101
nichole.cowles@argonautgoldinc.com
www.argonautgoldinc.com

Based on the May 11th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

So far, 10 European political leaders out of 17 have been ousted out of office like a falling dominos in a little more than a year.

The issue that has angered voters other than unemployment is austerity. We know from personal finances that when we overspend, we must cut back, pay our debts and rebuild our savings. That’s the prudent thing to do and that’s what the austerity school preaches. But what happens if the financial hole is so deep that there is no way to climb out by reasonable cutting back and saving? That’s when you declare bankruptcy and your creditors share the pain. The laws of capitalism decree that if you don’t assess risk correctly, you lose money. The conclusion is that austerity has to come with a mechanism for default, which is not the case in Europe.

The growth club, represented eloquently by New York Times columnist and Nobel Prize winner Paul Krugman, believe that borrowing and spending will spur growth and consumption and that austerity will begat only more austerity. In other words, the European Central Bank (ECB) should print money and then Greece and the others can service their debts with cheaper euros due to the inflation caused by money printing. Is this not a kind of default, since you are paying back your debts with devalued money?

We believe that the massive printing of euros will eventually take place and please keep in mind that unlike Fed, EBC has still room to lower its main interest rate. Once markets believe that this is the likely (or even inevitable) outcome, the gold price will soar not only in terms of euros but also in terms of other currencies.

The ECB recently lent money at concessionary rates to European banks in an effort to co-opt these nearly bankrupt institutions into financing the nearly bankrupt European sovereigns. They offered loans against dubious collateral, to tempt commercial lenders to play the “carry” game, namely, buying Spanish and Italian debt of varying maturities yielding up to 7% while paying a mere 1% for a three year loan. The prospect of a devastating run on banks was avoided, for now.

We wonder if this is not pushing the can down the road.

There are certain things that look to be almost inevitable. The eurozone is in trouble, in particular Spain, Portugal and Italy. (We don’t even talk about Greece, that country is already just about bankrupt in more ways than one.) The longer this crisis will take to play out the deeper it will get with more countries caught in the net, with Belgium, France and Netherlands not far behind. The proportion of young people between the ages of 15 and 25 who are now without a job is 51 per cent in Greece and Spain, 36 per cent in Portugal and Italy and 30 per cent in Ireland. In France “only” one in five young people are out of work.

History has shown over and over again that when there are deep economic problems, the monsters that lurk in dark, dank corners come out brazenly into daylight looking for victims or scapegoats. It wasn’t so long ago when this is precisely what happened in Europe. This week in Greece a Neo Nazi party took 21 out of 300 seats and 7% of the popular vote – the first neo-Nazi party to enter a European assembly since the Second World War. This is enough to give us shivers. The center seems to be falling apart and the extremes of left and right are gaining power.

Even Somali pirates preying on merchants ships are having a hard time due to the economic downturn. On the one hand, things couldn’t be better for them. Shipping companies have reduced ship speeds through the highest-risk area to save on fuel, making the ships easier targets. But the companies have switched to relying on guards, rather than speed, for protection, which will make for shoot outs on the high seas. The math is simple. A single day at lower speeds can save $50,000 in fuel at current prices – enough to pay the guards for the entire journey.

The image reminds us of Europe, a cumbersome ship overgrown with barnacles, trying to make its way in pirate-infested waters. Instead of finding a solution to the problem, and perhaps there is no simple or fast solution, European leaders keep finding stop-gap, make-do, arrangements. So, do you put on speed with the hope of creating jobs and growth and outrunning the pirates, or do you cut back and hire armed guards?

So why do we focus on these political and economic factors that much? Well, we do feel that there is a need to separate short-term turmoil from the long-term fundamental picture. Markets are intrinsically emotional and prone to a sudden change of mood. Sometimes even seemingly unimportant events can spark an abrupt move, yet in the long term the fundamentals make the decisive impact. And these are indeed favorable for gold and the whole precious metals sector.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It’s free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
www.SunshineProfits.com

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All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

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$1522 “Next Target for Gold”, But Dealers in Asia See “Sudden Surge” in Physical Bullion Demand

WHOLESALE MARKET gold bullion prices dipped below $1550 an ounce for the first time since December on Tuesday – a fall of 7% since the start of this month – before regaining some ground by lunchtime in London.

“The bear channel support had been at $1581,” say technical analysts at Scotia Mocatta, the bullion banking division of Bank of Nova Scotia.

“The next target is a full retracement to December’s low of $1522 and there does not appear to be much standing in the way.”

“Gold bugs[are] hiding deep in their gold caves pondering why gold isn’t rallying in spite of [the] sharp spike in risk-off sentiment,” said NYU professor Nouriel Roubini on Monday via the medium of Twitter.

Asian dealers however report a pickup in physical gold bullion demand.

“At the moment supply is a bit tight for immediate delivery,” one Singapore dealer tells news agency Reuters.

“Refiners can’t deliver immediate gold because there’s a sudden surge in demand. We’re seeing demand from India, Thailand and Indonesia.”

Silver bullion meantime dipped below $28 per ounce for the first time since January 1 on Tuesday, before bouncing slightly, while European stock markets also regained some ground after Monday’s heavy losses. Commodities were broadly flat on the day, while major government bond prices eased.

The president of Greece is today expected to ask politicians to agree to the formation of a technocrat government, as the stalemate following last week’s election continues. The left-wing Syriza, which came second in the election and currently leads opinion polls, has indicated its opposition to the proposal.

“We don’t want to consent to any kind of bailout policies, even if they are implemented by non-political personalities,” said Panos Skourletis, spokesman for Syriza, referring to austerity measures such as public spending cuts, agreed by Greece’s previous government as part of its bailout package.

Any Greek government “would have to stand by the [austerity] program,” said Jean-Claude Juncker, Luxembourg prime minister and chairman of the Eurogroup of single currency finance ministers, speaking on Monday.

“If there are dramatic changes in circumstances, we wouldn’t close ourselves off to a debate over extending the deadlines.”

“The Euro breakup story is gathering steam again,” says Marchel Alexandrovich, London-based senior European economist at Jefferies International.

“If Greece were to ever exit the Euro, no amount of reassuring comments will convince investors that other countries won’t soon follow.”

Greece has meantime said it will meet €430 million in bond payments due today, Reuters reports.
Ratings agency Moody’s announced Monday that it has downgraded 26 Italian financial institutions. Over in Spain, yields on 10-Year Spanish government bonds remained above 6% on Tuesday, a day after hitting their highest levels since November.

“It’s looking alarming right now,” says Luke Spajic, senior fund manager at world’s largest bond fund Pimco.

“The market is effectively trying to price in a disorderly exit for Greece.”

In contrast with Spanish bonds, yields on 10-Year German bunds sank to record lows Monday, hitting 1.43%. Germany’s economy meantime grew 1.7% in the year to the first quarter of 2012 – up from 1.5% annual growth to Q4 2011 – according to provisional estimates published Tuesday.

Growth in the Eurozone as a whole was flat, showing 0.0% year-on-year GDP gain in Q1 – down from 0.7% to the previous quarter – Tuesday’s provisional estimates show.

Germany’s Federal Court of Audit is to report to the Bundestag its objections to the way the nation’s gold bullion is stored, the Wall Street Journal reports. The Court is expected to ask the Bundesbank to check that gold stored abroad is still there, the WSJ adds.

Over in India, “gold smuggling has increased drastically because of the increasing value of the metal,” Indian customs commissioner PM Salim told Indian press Tuesday.

“Most of the money used in gold smuggling is hawala money,” added another customs officer, referring to transfers of wealth that occur outside traditional channels so as to avoid leaving a trail.
“If people buy the metal from here, they will have to show the purchase, but if gold is bought from outside, they can pay hard cash and not pay any tax to the government.”

India’s government has twice this year doubled the import duty on gold bullion, as well as proposing to extend gold jewelry sale taxes. The latter measure was dropped following a three-week long protest by Indian gold jewelers.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

There are signs in the recent jobs and ISM reports that the previously inflated economy is decelerating. Late last week, the clown running JP Morgan said stupid things about the smart [read: talented] people he has running his high risk trading operations. Europe is of course front and center as it continues to fall apart, with Gilts and Bunds rising on ‘safe haven’ buying and the bonds (debt) of Greece and other Euro basket cases declining toward their value, which is less than zero.

The precious metals appear to be watching for signs of outwardly promoted QE policy. But NFTRH has remained cautious on the timing of this pending a crack in the US stock market, so let’s review the big index.

People have gotten into trouble by failing to see that there would be little likelihood of policy maker ‘QE’ action with the broad US market flying around up there near post-2009 recovery highs. Our view has been that at the least, SPX must break down and test some support levels that were created out of the most recent downside turmoil, which was last summer’s acute phase of the Euro crisis. Otherwise, the Fed sits back and does little more than monitor the situation.

Well, the SPX is now testing a very important support level. If 1360 fails, the objective becomes 1300 strictly based on the measurement of the topping pattern. But it is more likely that the support zone in the 1260 to 1280 range would be tested as that is where visual support and standard retrace levels out of last summer’s bottom start coming into play.

The JPM noise reminds the public of the rotten scoundrels that wrecked the system in 2008 and it and any coming similar noise can only be supportive of policy makers laying in wait to inflate. ‘Laying in Wait to Inflate’… sounds like the title of a future public article. 

The Fed is among other things, a political animal. I believe this animal becomes sensitive to calls for auditing its operations and austerity of policy with the public’s money. I also believe the Fed is boxed into a corner with an unofficial ‘inflate or die’ mandate because deflation scholar Ben Bernanke knows full well what would happen if the whole stinking inflated mess were to implode in a falling macro soufflé of debt, derivatives and leverage.

It is an election year and thus, we are on watch for the right conditions that would draw out policy from the inflators. SPX at 1420 is not gonna do it. SPX at 1260 just might, if it comes along with further signs of erosion in the economy. Every ‘jobs’ report going forward becomes a potential flash point.

NFTRH187 goes on to update technical and fundamental analysis of the gold sector, which would be an important first mover to any coming inflationary policy, if applicable. 187 discusses our long-held theme of deflation as a ‘lever’ that is necessary to future inflationary actions. We look at seasonals within election years and review the entire outline of the favored plan for the balance of 2012.

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Bull Market in Gold “Not Over” But Speculators Turn Bearish as Greek Insolvency Looms

THE PRICE OF GOLD and gold futures dropped yet again Monday morning, recording the seventh drop in nine trading days in May so far as industrial commodities, global stock markets and the Euro currency all sank amid Athens’ failure to negotiate a new coalition government.

Silver bullion also fell hard, touching $28.44 per ounce and losing 8.9% from the start of this month.

The price of Spanish government debt today fell yet again, pushing 10-year yields above 6.2% ahead of an auction of new bonds later today.

Greek public-sector salaries and state pensions may be unpayable “from the beginning of June” says a letter from stand-in prime minister Lukas Papadimos to party leaders, republished by Ta Nea, after May’s tranche of the international bail-out was cut and tax revenues came in below target.

“We do not think the gold bull market is over,” says a note from Morgan Stanley analysts, even though “gold has moved lower and is trading at levels not seen since December 2011.”

Viewed on a technical chart analysis, “Damage has certainly been done [but] we do not think it is irreversible,” they add, pointing to a sharp rise in speculative “short selling” by gold futures traders now expecting prices to fall further.

“The last time positioning was at these levels, prices embarked on a move higher, rallying to near $1800 per ounce. We are buyers of gold here.”

The rise in speculative short-selling of gold futures is “disconcerting” however, says Marc Ground at Standard Bank, because “while investors have over the past few weeks appeared cautious of running too short on gold, this fear seems to have evaporated.”

Over in the currency markets – where the Euro fell to new 4-month lows vs. the Dollar at $1.2860 – “We continue to target $1.20 for Euro/Dollar,” says Ground’s colleague, currency strategist Steve Barrow.

“Whether this takes time, or comes in an instant, could depend on the outcome of Greece’s political impasse.”

Energy, metal and food prices all sank once more Monday morning as European stock markets lost more than 2% of their value, with Madrid losing 3% and Athens dropping 5.3%.

At the weekend Swedish central banker Per Jansson said that “of course the question [of a Greek exit] is discussed.” Irish central bank chief, and fellow European Central Bank policymaker Patrick Honohan told journalists that “technically, it can be managed.”

“We wish it to be possible for Greece to remain in the euro but Greece must live up to its commitments,” a spokeswoman for the European Commission said Monday morning.

If Greece breaches the agreed terms of its bail-out deal then staying in the Euro would be “an impossible equation and I think in that sense it is an irresponsible statement,” said Finland’s Europe minister Alexander Stubb today about the ongoing calls for an end to cuts in Athens.

German chancellor Angela Merkel meantime suffered a drubbing in a state election on Sunday, with her Christian Democratic Union drawing only 26% of the vote in North Rhine-Westphalia, giving the coalition of Social Democrats and Greens a winning majority of 50%.

Price inflation in Germany’s wholesale markets rose sharply in April, new data showed today, while industrial production across the 17-nation Eurozone fell much harder than forecast, down 2.2% year on year.

On the FX market, the Euro today hit fresh 42-month lows vs. the British Pound, but fell less quickly than gold futures or bullion, with the gold price for Eurozone buyers slipping beneath €39,100 per kilo for the first time this year.

For Indian buyers, “The weakness of the Rupee is countering the fall in the Dollar gold price,” says Jeffrey Rhodes, global head of precious metals at INTL Commodities DMCC in Dubai, speaking to the Wall Street Journal.

“That’s likely to act as a drag on demand in the world’s biggest market.”

“There is hardly any work these days,” complains a Jaipur goldsmith to The Times of India. “First the 21-day long jewelers’ strike and now the increasing gold prices have rendered us jobless.

“It is getting tough for us to survive.”

India’s imports of gold bullion fell by two-thirds last month compared with April 2011.

Gold futures on the Multi Commodity Exchange in Mumbai today slipped back to a 5-week low, down 3.3% from early May’s new all-time highs.

Adrian Ash
BullionVault

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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Normally catching a bottom is not difficult. Bottoms tend to occur instantly while market tops form during a process. Yet, I’ve found that bottoms of long-term significance do not occur instantly. Like tops, they can take time to develop. For example, think about late 2008 to early 2009. Commodities hit their price low in December but the bottoming process began in October and wasn’t complete until May. Emerging markets hit their low in November but the process began in October and ended in March. Returning to the present, we see that Gold and Silver look set to retest their late December lows. Our work leads us to argue that the metals will successfully retest their lows and soon emerge from what in the future will be considered a major bottom in-line with 2008, 2005 and 2001.

We begin with a daily chart of Gold which shows its daily closing prices and a volatility indicator. The percentage figure refers to the percent bullish reading from the daily sentiment index. As we noted recently, each bottom in Gold (except 2008) has come during a period of low and declining volatility. Volatility is currently at a 9-month low while only 7% of traders are bullish on Gold.

Next, let’s take a look at the current Commitment of Traders Report (COT) for Gold which shows the commercial short position and open interest at the bottom. The current commercial short position has reached a 3-year low while open interest recently touched a two and a half year low.

Moving to Silver, we see the metal is nearing significant support at $27. Silver closed at $28.93 and has a bit of room to fall before testing $27 and the 600-day moving average, which has been an important pivot point since late 2008. The current daily sentiment index is 16%. We think, with another day or two of weakness in Silver, the daily sentiment index would decline to single digits. We also want to note that $26 is the 50% retracement of the entire bull market.

Silver, unlike Gold, has seen more interest recently as open interest has increased since late last year. However, open interest would have to rise 40% to reach the old high. Commercial traders are net short 17.9K contracts, which is a within a whisker of the 10-year low which was reached at the end of last December.

We remain encouraged that a bottom is developing in the mining equities. Below we show a weekly chart of GDX. Last week GDX bounced from $41, which is the 50% retracement from the 2008 low to 2011 high. $41 also marks the strongest pivot point since $52. Furthermore, GDX’s volume was very close to a 3-year high. Note how strong volume has market past bottoms.

Breadth indicators suggest the gold stocks are near a major bottom. The chart below is from SentimenTrader.com. The McClellan Summation index is near levels last seen at bottoms in 2008 and 2006. The bottom row shows the percentage of stocks in the sector that closed above their 200-day moving average. The figure has been at zero percent for more than a month. The last time that happened? 2008.

The next chart, also from SentimenTrader.com, shows the assets in the Rydex Precious Metals Fund. Since the late 2010 peak, the fund has dropped by 40% while the assets in the fund have declined by 70%! Interestingly, the assets in the fund declined by 70% in 2008. The difference is the fund’s price declined by 73%. In other words, we are seeing the same amount of outflows as in 2008 yet the market has declined by 40% and not 73%.

While technical analysis and sentiment indicators make a convincing case that a major bottom is near, it is important to note the fundamental considerations which support our thesis. In recent editorials we’ve noted the trend of weakening data in the US. Obviously, should it continue into the summer, then it would raise the odds of Fed action. Shifting east, Europe is headed for a recession and monetization is badly needed first to prevent debt contagion and second to prevent economic contagion. Germany, the lone hold out against monetization, indicated last week it might budge a little bit. Continuing eastward, China cut the reserve ratio for its banks and is likely to do so again reports the Wall Street Journal. Also, India and Australia recently cut interest rates.

Consider these emerging fundamentals and then consider our technical analysis. Technicals always lead fundamentals and markets tend to look six to nine months into the future. We are not predicting imminent action from the Fed or imminent money printing from the ECB. However, we are noting the emerging positive developments which will drive precious metals higher into 2013. Policy from the east is shifting towards easy. Europe will have to embark on some major money printing likely by the end of the summer. Finally, continued weakness in US data along with the strength in US Bonds and the US Dollar will facilitate the environment for the next round of Fed action.

We anticipate a bottom this month to be followed by a higher low in July or August. The fundamentals should become more clear by the end of the summer and would drive the precious metals complex much higher during the seasonally strong period. Remember, major bottoms take some time to develop. We believe a bottom is at hand and that is why last week we began to scale into some positions. If you’d be interested in professional guidance then we invite you to learn more about our service.   

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

Reckoning in Europe begins with intent

Posted MAY 11 2012 by WILL BANCROFT

We’ve talked about the Eurozone a lot these last few months. Investors have had to focus most clearly on Europe, it’s been the acute infection in a larger open wound that is the banking system. Admittedly, all is far from rosy elsewhere. Elsewhere is just relatively less bad.  Issue fatigue, nay crisis fatigue, has been creeping upon us all. This is only natural.

However, after a potentially LTRO induced hiatus, and short-term political appeasement, the pressure is taking its toll in the Eurozone again. Two elections have recently been held, in France and Greece. In France, Sarkozy, who was politically joined at the hip with Angela Merkel, has been ousted. The conservative right, Sarkozy’s previous intellectual constituency, fractured with a significant part of the further right leaning vote opting for Marine Le Pen and the Front National.

Angry voters in Europe

France has now elected a socialist with a limited and inglorious political past. Francois Hollande won the French election on a ticket that said no to austerity and pain, and promised more borrowing and ‘growth’. The Franco-German alliance at the heart of European politics looks to be replaced with future squabbles over differing economic ideologies.

The election in Greece is more interesting in terms of politics deviating from the status quo. Since World War Two the conservative and socialist parties have held the mainstay of Greek politics; normally sharing around 70% of the vote. This Greek political mainstream was establishment, pro-EU, pro-single currency, in favour of bailouts and trying to work things through in accordance with the Merkozy inspired fiscal treaty, and most recently complicit with the European centre parachuting bureaucrats in to run Greek affairs. The long suffering Greeks have had enough and have voted in new directions. New parties such as the communists and radical left-wingers have experienced real success, whilst a new party from the far right, The Golden Dawn, achieved 7% of the ballot.

The Golden Dawn, let by Nikolaos Michaloliakos, is described as ‘genuinely Neo-Nazi’. If you look at their politics and practices this claim is difficult to refute. They embrace raised arm salutes and insist that members can trace their Greek citizenship back 7 generations. As Nigel Farage points out: “even Hitler only went back to your grandparents”.

The markets were bound to be disturbed by this, and have traded this week as such.

Dominos falling in the European banking system

We have also talked about Spain and her role in the unravelling of the euro. Spain experienced an even more spectacular property bubble than Ireland, and Spanish banks have been sweating under mountains of dodgy property loans that were made during the bubble. These loans, with inadequate provision set aside against them to cover potential defaults, are a ticking time-bomb waiting to affect the Spanish economy.

Property debt in the Spanish banking system is now coming home to roost. Bankia, the country’s 4th largest lender, was not able to manage its troubled loan book as a private company and fled into the arms of the Spanish government. The Spanish central bank reports a deal that will give the state a 45% indirect stake in Bankia in exchange for a previous loan of 4.5bn euros.

Reuters reports that: “since the banking crisis began, Spain has bailed out seven smaller savings banks, but the Bankia rescue is by far the biggest and it comes after a string of other banking reform plans revealed over the past week”. And, it looks like Spain is set to continue down this path. “We will deepen the process of cleaning up the banks” advised Prime Minister Mariano Rajoy.

The bailout precedent has been continued. A major banking domino falls in Spain, and whatever the full extent of Bankia’s problematic property loans are, the state will have to continue its support. If this Spanish policy response remains consistent then in the next few years the government apparently stands ready to take on what analyst believe is up to 100m of bad property loans.

Yet again the good times in banking were enjoyed by few, and now the losses and consequences are shouldered across tax payers generally. More debt will move from private balance sheets to the public balance sheet; an equity market problem moves on to add to a government bond market problem. Investors will require greater interest payments to hold Bonos and Obligaciones del Estado. Without a continued ECB bid, or LTRO financed private bid, in these debt markets the bond vigilantes can finally have their way. And, if easing and printing are continued as the mode du jour then yet more good money is being sent after bad.

Debt is being reckoned with in Europe; look out below. This is where assets that are nobody else’s liability earn their reputation and keep as part of a balanced portfolio. Gold is the king of these ‘real assets’. It cannot be frozen, repudiated or defaulted on. We may be bored of the ‘end of the bull market’ debate about gold, and thegold price might have disappointed investors these last 7 months, but hang onto old Yella’.

This might just be the “end of the beginning” of the Eurozone crisis.

 

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Central bankers are morally bankrupt

TAGS: Central Banks, Eurozone crisis, Gold bullion, Gold Investment CATEGORIES: Original commentary

About the Author Will BancroftAside from being COO, Will also contributes to The Real Asset Company’s Research Desk. His passion for financial markets and investment led him to develop a keen interest in monetary economics, gold and silver. Will’s views are sought by and appear on sites such as Seeking Alpha, Market Oracle, Stockopedia, Resource Investor, and Commodity Online. Will holds a BSc Econ Politics from Cardiff University.

Should both Gold & Silver Bulls & Bears take a long winter sleep?
Maybe…

When we look at Silver prices from 1985 to today (Green line in the chart below) and compare the evolution to the one from 1967 to 1974 (black line in the chart below), we can see a very similar pattern. If price would continue to track this pattern, it could mean that silver has just entered a 20 years lasting winter sleep. In the meantime, it would trade between $20 and $50, before taking off again in 2032… From then on, it could gain over 2,000% to reach nearly $1,000.

A similar pattern can be observed in the price of Gold, although the time scale is slightly different.
Gold would drop towards $1,000 in 2015, before taking off to about $12,000 by 2025.

Why the hell would Gold drop towards $1,000 per ounce by 2015, while all the fundamentals are pointing to a “screaming buy”?

Well, if Martin Armstrong is correct and we would get a Sovereign Debt “Big Bang” sometime late 2015, then that could be the reason for Gold’s drop (please have a look at the following slide which he presented in 1998 & click HERE for the complete presentation).
Sure, Debt Crises SHOULD be good for Gold, but even though the crisis in Europe is escalating, Gold is not acting as a “safe haven”. If the Debt crisis continues until 2015 (to reach a climax late 2015) and Gold continues to act the way it does right now, we could see Gold trade as low as $1,000 per ounce again.

All of Martin Armstrong predictions in 1998 came true, so the chances are high that the last one will too.

Jim Rogers was recently quoted saying: “It’s extremely unusual for any asset in history to move higher for 11 straight years. That’s why I expect the recent correction in gold to continue.” He’s not selling any of his gold. And he’s not shorting it, either.
It would take a “gigantic new gold supply” or all the world’s central banks deciding to dump gold before he’d short. That’s because Roger’s believes the big gold bull market has “years to go.” Still, gold could drop as far as $1,100 an ounce, he said. “I would buy gold if prices fall to $1,100 or $1,200 an ounce. A pullback of this magnitude is normal.”  (Read more: Stockhouse).

Back in 2008 when Gold was trading around $900 (after having traded above $1,000 for the first time in history), he said in an interview with the Chinapost he would buy Gold if it were to drop towards $750. Eventually, it bottomed 10% lower around $680, before nearly trippling over the next 3 years.

Assume Rogers is right, and Gold drops towards $1,100 (the point where he would add to his positions), and history repeats (meaning Gold bottoms about 10% lower), that would put Gold at $1,000 an ounce, which is also the price target of the second chart above.

Now why should Gold & Silver take a break?
First of all, as mr. Rogers says: Gold has gone up for 11-12 years in a row, which is exceptional. One down-year means nothing as long as the Bull market is intact.
Another reason would be the fact that Silver outperformed Gold by a factor of nearly 2x over a 4 years rolling basis in April 2011. Please read THIS ARTICLE, where we discussed the following chart (created by Roland Watson):

Now let’s have a look at the markets. I have written extensively about how the HUI index has been under performing Gold, just like in 2008. The pattern is still holding so far, which does not look good at all:

However, sentiment in Gold Stocks is VERY depressed at the moment, as only 10% of the Gold stocks have a BUY signal on the Poing & Figure chart, as shown in the following chart ($BPGDM). On top of that, the HUI index has now hit the 50% Fibonacci Retracement level from the bottom in 2008 to the top in 2011:

Gold stocks are trading at historical low valuations compared to Gold, so this combined with the extremely depressed sentiment could mean that Gold Stocks are at or near a bottom, although the similarities with the 2008 crash are still striking and therefore worrisome.

I haven’t bought Gold stocks since I sold them in 2011, right before Silver hit nearly $50 per ounce, but am now back in the market.
To find out which stocks I Buy & Sell, feel free to sign up for my services.

I have decided to only accept new subscribers until June 30th. From then on my services will be open to existing subscribers ONLY. To secure your membership now, visit www.profitimes.com and subscribe now!

Stronger Dollar “Makes Gold Rally Difficult”, Chinese Buyers “On the Sidelines”, Indian Dealers “Just Buying What They Need”

WHOLESALE MARKET gold prices touched their lowest level since the first week of January Friday, hitting $1574 an ounce before recovering some ground, while stocks and commodities fell and US Treasury bonds gained, with dealers in major gold buying countries reporting continued limited demand for precious metals.

Silver prices fell to $28.54 an ounce – also a four-month low, and 6.1% down on last Friday’s close.

Heading into the weekend, spot market gold prices looked set for a 3.7% weekly loss by Friday lunchtime in London. Based on PM London Fix Gold prices, the week ended 2 March was the last time gold fell further in a single week.

On the currency markets, the Euro fell to its lowest level against the Dollar since January 23 – two days before the Federal Reserve published policymakers’ interest rate projections for the first time, showing a majority expected near-zero rates until at least late 2014.

The US Dollar Index – which measures the Dollar’s strength against a basket of other currencies – hit its highest level since March 16 this morning.

“When the market gets very nervous, then they buy Dollars and gold finds it difficult to rally,” says Jesper Dannesboe, senior commodity strategist at Societe Generale in London.

“Given what’s going on in the markets at the moment, any rally will probably just be a bounce before another setback.”

The Reserve Bank of India ordered exporters to convert 50% of their foreign exchange holdings to Rupee Thursday, a day after the currency closed at an all-time low against the Dollar in Indian trading.

Despite the central bank’s move, however, the Rupee again fell against the Dollar on Friday, at one point coming within 0.6% of Wednesday’s low. Rupee gold prices however still traded slightly lower this morning. The most heavily traded gold contract on Mumbai’s Multi Commodity Exchange, the June delivery contract, touched its lowest level in over a month during Friday’s trading.

“Slowly deals are taking place as market is in the falling mode,” one dealer told newswire Reuters.
“Traders will try to catch the bottom…[but] people will not be willing to maintain huge inventory in a falling market and only resort to need-based buying.”

Over in China – behind India the world’s second-largest gold buying nation last year – some gold dealers say they expect to see gold demand growth fall this year.

“Chinese consumers share a quite pronounced tendency in which they usually buy gold when prices are rising and refrain from purchasing when prices are conceived to be on a downtrend,” says Xin Zhihong, vice president at Shanghai jeweler Lao Feng Xiang.

“Some consumers are now sitting on the sidelines…the expectation that gold prices will always rise and that gold’s value can only appreciate seems to have faded.”

“It’s the worst start of the year [for Chinese gold demand] since the financial crisis in 2008,” adds Emily Li, brand general manager at Chow Sang Sang, the second-biggest gold jeweler in Hong Kong.

China’s gold imports from Hong Kong – seen by many as a proxy for overall imports – rose 59% month-on-month in March, figures published this week show. The 63 tonnes figure however was 39% down on last November’s all-time high, while the volume of gold heading from China to Hong Kong also rose, leaving net exports in March at 38 tonnes.

Chinese consumer price inflation fell to 3.4% last month – down from 3.6% in March, according to official data. Growth in retail sales and industrial production also slowed, while figures published Thursday show exports grew by 4.9% year on year in April, compared to 8.9% y-o-y a month earlier.

The lower CPI figure “confirms that inflation is trending down and that the policy focus will remain on promoting growth,” reckons Zhang Zhiwei, Hong Kong-based China economist at Nomura.

“The weak export data yesterday put more pressure on the government…probably policy loosening will become more likely going forward.”

Here in Europe, the Spanish government is set to miss its deficit targets in both 2012 and 2013, with both Spain and Italy expected to fall back into recession, according to European Union forecasts published Friday.

The forecasts, produced by the European Commission, show that Spain’s deficit for this year is expected to be 6.4% of GDP – compared to an EU target of 5.3%. In 2013, Spain is expected to have a 6.3% deficit-to-GDP ratio, versus a target of 3%.

Despite the news, yields on 10-Year Spanish government bonds fell slightly this morning, dipping back below 6%.

France meantime is forecast to meet its 2012 deficit target of 4.5% of GDP. Next year, however, the Commission says it expects the French government deficit to be 4.2% of GDP, meaning that France, like Spain, would miss the 3% target. The Commission has the power to fine governments that miss EU targets.

“Without further determined action…low growth in the EU could remain,” said Olli Rehn, European Commissioner for economic and monetary affairs, adding that there are “large disparities between member states”.

In Germany, consumer price inflation remained unchanged at 2.1% last month, official figures published Friday show.

German inflation however is likely to be “somewhat above the average within the European monetary union” Bundesbank head of economics Jens Ulbrich told the German parliament finance committee this week.

Greece, which is still without a government after Sunday’s election, must stick to its reform plans or it risks having bailout payments stopped, German foreign minister Guido Westerwelle said Friday.

“If Greece strays from the agreed reform path, then the payment of further aid tranches won’t be possible,” said Westerwelle.

Over on Wall Street, JPMorgan recorded a $2 billion trading loss in the first quarter of the year, Q1 earnings published Thursday show.

“This puts egg on our face,” said JPMorgan chief executive Jamie Dimon, who blamed “errors, sloppiness and bad judgment” for the losses.

Investors meantime are “losing faith” in commodity hedge funds, Reuters reports.

“For people that only came in when the noise about commodities started a couple of years ago, they have basically done nothing,” one investor told the newswire.

Ben Traynor
BullionVault

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

FIRST MAJESTIC SILVER CORP. (AG: NYSE; FR: TSX) (the “Company” or “First Majestic”) is pleased to announce the unaudited condensed consolidated interim financial results for the Company for the first quarter ending March 31, 2012. The full version of the financial statements and the management discussion and analysis can be viewed on the Company’s web site atwww.firstmajestic.com or on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

2012 FIRST QUARTER HIGHLIGHTS

• Earnings per Share (basic) amounted to $0.25, representing a 5% increase from Q1 2011
• Cash Flow per share (non-GAAP) of $0.35, unchanged from Q1 2011
• Adjusted Earnings per Share (non-GAAP) amounted to $0.26 after removing an unrealized loss on silver futures
• Gross Revenue of $57.8 million showing a 5% increase from Q1 2011
• Net Earnings after Taxes amounted to $26.4 million, a 10% increase from Q1 2011
• Mine Operating Earnings totaling $35.7 million
• Total Production Cost per Tonne was $29.24, a decrease of 3% from Q1 2011
• Total Cash Cost was $8.96 per ounce, up 8% compared to Q1 2011
• Silver ounces produced increased by 3% to 1,826,803 compared to 1,769,208 ounces in Q1 2011
• Cash and Cash Equivalents now stand at $85.3 million and Working Capital of $108.3 million
• In addition to Cash, First Majestic was carrying 596,520 PSLV (Sprott Physical Silver Trust) units at quarter end

2012 FIRST QUARTER HIGHLIGHTS TABLE

(1) Payable Silver Ounces Produced is equivalent to Silver Ounces Produced less metal deductions from smelters and refineries.
(2) The Company reports non-GAAP measures which include Total Cash Costs per Ounce, Total Production Cost per Tonne, Average Revenue per Payable Equivalent Ounces Sold and Cash Flow Per Share Before Movements in Working Capital. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and may differ from methods used by other companies with similar descriptions. See Reconciliation to IFRS on pages 13 and 14.

Keith Neumeyer, President & CEO of First Majestic, stated, “The first quarter was another successful period for the Company as it continues its growth objective. Our strong financial position ensures the timely construction of our Del Toro mine with the goal of initial production scheduled in the fourth quarter of this year. Also, an updated NI 43-101 and Preliminary Economic Assessment (PEA) on Del Toro is scheduled to be released in the coming weeks.”

“While cost inflation continues to be a strong headwind for the mining industry, First Majestic’s operational team has done an exceptional job maintaining costs. On a year-over-year basis, total production costs have been reduced by 3% to an industry-leading $29.24 per tonne while many of our peers have experienced cost increases ranging between 25% to 50% per tonne. First Majestic remains on track to meet its production guidance for 2012 and management plans to provide further guidance regarding the Silvermex acquisition once the deal closes over the coming months.”

FINANCIAL HIGHLIGHTS

• The Company generated revenues of $57.8 million for the quarter ended March 31, 2012, an increase of $2.5 million or 5% compared to $55.3 million in the first quarter of 2011 based on higher production totals compared with the first quarter 2011.
• Recognized mine operating earnings of $35.7 million, which was consistent with $35.6 million in the first quarter of 2011.
• Net earnings after taxes for the three months ended March 31, 2012 were $26.4 million compared to $23.9 million in the first quarter of 2011, an increase of 10%.
• Earnings per share (“EPS”) for the three months ended March 31, 2012 was $0.25, an increase of 5% compared to $0.24 for the three months ended March 31, 2011.
• During the quarter, the Company converted the unrealized loss of $4.2 million related to the prior quarter’s one million silver ounce long position into gains of $5.475 million. At the end of the first quarter, the Company was long 500,000 ounces at an average price of $34.063 per ounce which was marked to market at $32.484 at March 31, 2012 resulting in an unrealized loss of $0.8 million.
• Net earnings for the quarter ended March 31, 2012 reflects the unrealized loss on silver futures of $0.8 million. Adjusted EPS (a non-GAAP measure) after removing the unrealized loss on silver futures was $0.26 for the quarter.
• In January 2012, the Company purchased 757,500 trust units of Sprott Physical Silver Trust (PSLV) at $13.20 per unit for a total cost of $9,999,000. During Q1 2012, the Company also sold 160,980 trust units at an average price of $15.45 per unit for total proceeds of $2.5 million and realized a $362,677 gain on the sale. At March 31, 2012, there was an unrealized gain of $255,601 recognized related to the remaining 596,520 trust units, revalued at $13.63 per unit.
• Cash flows from operations before movements in non-cash working capital and income taxes in the first quarter of 2012 increased by 6% to $37.1 million ($0.35 per share) compared to $35.0 million ($0.35 per share) in first quarter of 2011.
• Cash cost per ounce (a non-GAAP measure) for the first quarter of 2012 was $8.96, an increase of 8% compared to $8.26 in the first quarter of 2011. Cash cost was higher primarily due to lower grades and recoveries at the La Encantada mine in the first quarter. Since installing a new ball mill in mid-April, recoveries have been improving due to a higher proportion of fresh ore being processed.
• Production costs per tonne decreased 3% to $29.24 per tonne compared to $30.04 per tonne in the first quarter of 2011, reflecting production cost decreases at the La Parrilla mine associated with its increased scale of production.
• The new 1,000 tpd cyanidation circuit at the La Parrilla Silver Mine was commissioned effective March 1, 2012. The new parallel 1,000 tpd flotation and 1,000 tpd cyanidation circuits (2,000 tpd combined), which replaced the old 850 tpd mill, are now fully operational and were operating at an average throughput of 1,850 tpd in the month of March 2012.

IN SUMMARY

First Majestic has experienced another solid quarter of earnings and cash flow due in part to an increase in total production to 2,007,219 silver equivalent ounces, an increase of 10% compared to 1,825,366 silver equivalent ounces produced in the first quarter of 2011. Silver production remained robust during the first quarter with 1,826,803 ounces of silver being produced, representing an increase of 3% compared to 1,769,208 ounces of silver produced in the first quarter of 2011.

At the La Parrilla Silver Mine, the recently expanded 1,000 tpd oxide circuit was commissioned on March 1, 2012 allowing for increases in production of silver doré bars. The second quarter of 2012 will mark the first full quarter of commercial operation for both expanded production circuits (1,000 tpd flotation + 1,000 tpd cyanidation). As a result, cash costs per ounce at La Parrilla are expected to decrease due to the increased scale of production to 2,000 tpd, and a higher portion of silver doré which has a lower refining cost compared to concentrates.

At the La Encantada Silver Mine, the recent installation of the third ball mill is showing a positive effect on silver recoveries. The third ball mill became operational on April 19, 2012 with the objective of increasing recoveries and average head grades by enabling increases in the rate of production of fresh mine ore. Due to ore stockpiling over the past few months and successful developments in the mine, management has decided to bring the fresh ore production component to 1,800 tpd compared with the previous guidance of 1,500 tpd. In addition, the metallurgical testing continues with final assessment of economics. The mill construction progress at the Company’s exciting Del Toro Silver Mine remains on track for initial production in the fourth quarter of 2012.

First Majestic is a producing silver company focused on silver production in México and is aggressively pursuing its business plan of becoming a senior silver producer through the development of its existing mineral property assets and the pursuit through acquisition of additional mineral assets which contribute to the Company achieving its aggressive corporate growth objectives.

FOR FURTHER INFORMATION contact info@firstmajestic.com, visit our website at www.firstmajestic.com or call our toll free number 1.866.529.2807.

FIRST MAJESTIC SILVER CORP.

“signed”
Keith Neumeyer, President & CEO

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This news release includes certain “Forward-Looking Statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. When used in this news release, the words “anticipate”, “believe”, “estimate”, “expect”, “target”, “plan”, “forecast”, “may”, “schedule” and similar words or expressions, identify forward-looking statements or information. These forward-looking statements or information relate to, among other things: the price of silver and other metals; the accuracy of mineral reserve and resource estimates and estimates of future production and costs of production at our properties; estimated production rates for silver and other payable metals produced by us, the estimated cost of development of our development projects; the effects of laws, regulations and government policies on our operations, including, without limitation, the laws in Mexico which currently have significant restrictions related to mining; obtaining or maintaining necessary permits, licences and approvals from government authorities; and continued access to necessary infrastructure, including, without limitation, access to power, land, water and roads to carry on activities as planned.

These statements reflect the Company’s current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements or information and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: fluctuations in the spot and forward price of silver, gold, base metals or certain other commodities (such as natural gas, fuel oil and electricity); fluctuations in the currency markets (such as the Canadian dollar and Mexican peso versus the U.S. dollar); changes in national and local government, legislation, taxation, controls, regulations and political or economic developments in Canada, Mexico; operating or technical difficulties in connection with mining or development activities; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins and flooding); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inability to obtain adequate insurance to cover risks and hazards; and the presence of laws and regulations that may impose restrictions on mining, including those currently enacted in Mexico; employee relations; relationships with and claims by local communities and indigenous populations; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses, permits and approvals from government authorities; diminishing quantities or grades of mineral reserves as properties are mined; the Company’s title to properties; and the factors identified under the caption “Risk Factors” in the Company’s Annual Information Form, under the caption “Risks Relating to First Majestic’s Business”.

Investors are cautioned against attributing undue certainty to forward-looking statements or information. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements or information, other than as required by applicable law.

GDX gained by 0.16%  while GDXJ gained by 1.17%  and SIL  gained by 0.48%

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Posted MAY 9 2012 by JAN SKOYLES in GOLD BULLION, ORIGINAL COMMENTARY

In a week where we have seen the gold price plummet and return to levels below $1600, investment decisions are feeling as confusing as ever. No-one knows if the Eurozone will make it to the end of next week and the markets are responding to various elections and announcements in a reflective manner.

For gold investors it is particularly confusing especially when Warren Buffet and his Merry Men continue to trot out the ‘gold is stoopid’ line. We have written so many times in regard to how gold will protect its investors in times of financial difficulties, but at present we are sitting in a bit of limbo in regard to the markets and the gold price does not seem to be enjoying it.

Earlier this week the FTSE 100 fell to its lowest level this year by 1.78 per cent to 5,554.55. Other indices fell around the globe on the back of fears that Greece may be forced to leave the Euro and concerns that faith in major parties in Europe has disappeared.

How has gold responded? It has fallen below $1600 in a similar pattern to its fall just before Christmas. Understandably, some investors are feeling wobbly about their gold bullion and wonder if they should sell before they lose more money.

Should investing be so stressful?

The reason Warren Buffet and his friends don’t like gold is because they don’t understand its value. Because it doesn’t pay any dividends, because it does not have a clear revenue stream, or a clear business model it is, in comparison, not as easy to value as it is with stocks and shares.

But perhaps savers, gold bugs and loyal Berkshire Hathaway fans should meet in the middle and appreciate the value which lies in a portfolio which is balanced between all major asset classes.

Gold investment was never supposed to be a short-term game. It was always there for the long-haul, to guide you through the good times and the bad. Is it better than other investments? As the Daily Reckoning recently pointed out, if it makes up part of a balanced portfolio you will see the benefits.

In 1981 investment guru, Harry Browne, developed a ‘set-it and forget-it’ portfolio strategy. The portfolio consisted on four main elements.

As the Daily Reckoning reports, the portfolio was laid out as follows: ‘25% cash, 25% bonds, 25% stocks, 25% gold.’

The idea behind the portfolio was to sit back and allow each element to perform when its time came according to the current economic environment.

The Permanent Portfolio’s proven success is due to its wide and true diversification across asset classes. As its managers argue, ‘You have exposure to assets that can grow you money safely at all times without having to predict the future. You also have protection in the diversification against losing large amounts of money which can cause you to abandon the strategy in bad markets.’

Between 1972 and 2008 this set it and forget it strategy was able to achieve 9-10% compound growth per year (CAGR). The CAGR for the entire period was 9.7%.

For evidence of the value of investing in gold alongside other investment classes (such as those in the Berkshire Hathaway portfolio) we can look at how gold has performed in the portfolio and kept it balanced during times of major financial turmoil.

In the 1970s, when inflation was rife, and stocks, bonds and cash were all down the portfolio was still able to generate positive returns. This was thanks to the inflation-proof asset of gold.

Having 25% of your investment portfolio in gold sounds like a hefty amount. Particularly in a world where, according to the World Gold Council, as recently as the end of 2010 gold holdings accounted for approximately 1% of global assets under management.

But if you are of the Warren Buffet mind-set then, according to the World Gold Council, you don’t even need to commit 25% of your portfolio to gold. The WGC finds that by adding an allocation of gold of between 3.3% and 7.5% the investor can ‘obtain a desired expected return while incurring less risk than on an equivalent portfolio which does not include gold.’

But was gold a success in the Permanent Portfolio because times were different then? Is gold no longer a modern enough investment for market-savvy investors?

 

The naughty noughties

Warren Buffet is open about the huge gains gold has made since the 1960s, however stocks have made similar, if not higher, gains. The issue gold investors should remember however is that Mr Buffet chooses to forgo the protection gold offers in order to enjoy the upside of stocks. Gold investors invest in the yellow metal in order to enjoy the protection of gold and still enjoy some upside.

The success of gold investment, and reasons for it, are highlighted by investment decisions made by legendary investor Jim Rogers. He has made one decision about allocating his capital to an asset class every ten years in order to enjoy higher returns than one would with a diversified portfolio.

Mr Rogers invested in gold during the decades of 1970s and the 00s. In both decades he saw huge returns, 1,363% and 391% respectively. This is reflected in the Permanent Portfolio’s performance in during each of these periods.

Since 2000, inflation has steadily been creeping up on the markets. In the last decade alone, gold has increased by 500%. The noughties is the second period where gold has shone and proved its worth. Namely since 2001 gold has provided a significant positive return.

But is this just a reflection of the seventies, will things get better; will we see a drop in the gold price once again?

According to Bill Bonner, it’s not likely:

In the seventies, the US was on top of the world…and headed higher. It was owed more money by more people than any nation ever had been. It was the leading energy exporter. It was the world’s leading capital investor. Its people were earning more and more money — in real terms. Total consumer and government debt, as a percentage of GDP, was barely a fifth of today’s level.

The Permanent Portfolio’s golden success

Whilst both Warren Buffet and Jim Rogers have made huge amounts of money from their investment strategies, their investment decisions are their careers. For the average investor, a diversified portfolio, and one which does not require over-active management suits the modern investor looking for somewhere to first preserve, then grow, their wealth over the long-term.

The success of Mr Browne’s Permanent Portfolio was down to its stability and growth, both of which can be attributed to its breadth of diversification across different asset classes. Unlike other popular investors he is not just focused on one asset class, or one country. People talk about the US, Japan, China,  Brazil, without remembering that they are investing in equities in all these geographies. Other people talk about having exposure to the dollar, the euro, the pound, or other currencies, whilst forgetting that these exposures are all to fiat currencies. The Permanent Portfolio went beyond this. In line with the advice from the Swiss banking tradition, Mr Browne’s portfolio has a significant holding of gold. This acts as an anchor during times of stormy economic downturns and threats of hyperinflation.

Unlike the decade of the seventies we do not appear to be coming to any sort-of quick fix solution, nor does anyone seem to know which authority or country to turn to in order to guide us out of this mess. We can’t even agree on whether we should be tightening our belts or digging deep into our pockets.

No one has a crystal ball, not even billionaires such as Warren Buffet. Therefore, perhaps we should take a leaf out of Harry Browne’s book and not worry too much about what may happen, balance your portfolio with the ‘civilised’ and (apparently) not so civilised investments. Place gold on the other side of the scales and sit back as it balances you out during the rough and the smooth.

 

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Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.

 

About the Author Jan SkoylesJan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working at Cheviot Asset Management in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from university Jan joined The Real Asset Co research desk and now contributes to the Cobden Centre, The Commentator, The Renegade Economist and Market Oracle.

Based on the May 10th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

We’re getting whiplash from all the political changes in Europe, neo-Nazis in an unstable government in Greece and a changing of the guard in France– “adieu” to Nicolas Sarkozy. We see plenty of reasons for holding on to our long-term gold positions despite the clobbering the yellow metal got on Wednesday down to a four-month low. The euro tumbled this week against the dollar in the worst run since 2008. There is an intense resurgence of political risk in Europe and a couple of months of weak jobs numbers in the U.S. All that has put stimulus back on the table. Another item on the table is the risk of a Greek euro exit, which has risen to as high as 75 percent; according to Citigroup Inc. We also see a rising anti-austerity tide gaining ground in Europe and the abolishing of a gold excise duty in India, all favorable for gold.

Francoise Hollande has been elected France’s president, the first socialist president in almost two decades, on the promise that he would deliver an alternative to the austerity diet. The French have been wondering who had moved their high-calorie cheese. They have become tired of the message reiterated by Nicolas Sarkozy that painful choices and belt tightening will bring jobs and growth. Hollande takes power at a critical juncture for both France and Europe and he will have to deliver fast –no honeymoon vacation. France has a ten per cent unemployment rate and its labor costs are among the highest in the OECD. With a budget deficit for almost 40 years, France lost its triple A credit rating this year. The day after Hollande takes power next Tuesday, France must raise €12 billion on the markets. He then will have to convince German chancellor, Angela Merkel, who was cozy with Sarkozy, to renegotiate the European budget austerity pact to add measures on growth. Investors are worried about potential tension between Germany and France, the two eurozone heavyweights.

It is not likely that Germany will be willing to foot the bill for Hollande’s campaign promises.

Having discussed the political factors driving the price of gold, let us now see how the markets can influence the yellow metal’s behavior in the days to come. We will start today’s technical part with analysis of the S&P 500 Index and begin with the long-term chart (charts courtesy by http://stockcharts.com.)

In the chart, we see that prices have moved below the support line created by the 2011 highs, which looks bearish. Taking a relative comparison to the similar rally that we saw in the second half of 2010 (more on that topic can be found in last week’s commentary) with the current price patterns, it seems quite possible that we could have simply seen a correction with a rally now to follow.

Let us now take a look at the financial sector.

In the Broker Dealer Index chart (a proxy for the financial sector), we do not have any clear “buy now” signals (based on this chart alone) but may have some confirmation here that a bottom has formed in the general stock market. This index bottomed at the 50% retracement level of its previous rally, something that could be expected during a correction (just like a bottom being formed with financial at other Fibonacci retracement levels, so, again, this is not a crystal clear buy signal).

Let us now move on to the crude oil market and try to find out whether the black gold will have an impact on the real one’s future price.

Looking at the chart we see that prices have moved lower after trying to break out above the declining resistance line. Since that attempt, prices have declined and are now actually close to the long-term support line. RSI levels suggest that a rally is likely to begin sooner rather than later. Another small move to the downside may be seen, and a powerful upturn could follow. The situation will become clearer once oil price finally confirms either a breakout or a breakdown.

Overall, the signs here are blurry but favorable for gold in the short term, as the gold market has been generally aligned with the crude oil market this year. This is not necessarily true for the very short term, but the two markets were generally positive correlated lately and their overall directions are similar. The implications from the crude oil price chart are a bit more bullish for gold than not as the support line is closer than the resistance line and the RSI says “buy”.

To finish off today’s essay let’s have a glance at our in-house developed tool that traces the intermarket dependencies.

The Correlation Matrix is a tool, which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector. This week we see that precious metals are negatively correlated with the USD Index and positively correlated with the general stock market. The outlook for the general stock market is more bullish than not, and the implications for precious metals are therefore more bullish than not as well.

Summing up, the situation in the general stock market is mixed for the long term and a bullish scenario seems a bit more likely than the bearish one for crude oil. The implications for gold based on the outlook for crude oil and the general stock market seem to be a bit more bullish than not at this time.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It’s free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
www.SunshineProfits.com

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All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Precious Metals Steady as China Spurns Euro Debt, Greece Warned on Euro Exit

WHOLESALE MARKET prices to buy gold and silver repeated yesterday’s rally in London trade after a slight drop Thursday morning, rising back above $1594 and $29.30 per ounce respectively as platinum and palladium also stemmed this week’s sharp drops.

“Technically, many [precious metals] are now oversold,” says a note from dealers Intl FC Stone, pointing to chart analysis and noting that gold trading volume on the Globex futures platform was 40% above the last month’s quiet average on both Tuesday and Wednesday.

“The [price] drop was large and quick, Bloomberg quotes analyst Xiang Nan at CITICS Futures Co., calling a rebound in Asia’s wholesale demand to buy gold overnight “not surprising.

“But the Dollar looks to be strong in the near term and this will limit gains.”

Thursday morning saw the US Dollar creep back from its near-2012 highs vs the Euro, while major-economy government bonds also slipped in price, nudging yields higher from yesterday’s historic lows.

Asian stock markets fell however for the fifth session in a row on Thursday, despite news of a turnaround in China’s balance of trade to a surplus of $18.4 billion in April.

Crude oil extended its drop to 9 days on the run, the longest stretch since early 2009. European stock markets rallied around lunchtime in London, after giving back all of an early rise.

“We doubt whether effective demand by households and firms in the US and the UK today is being boosted materially by 10-year Treasuries being at [historic low yields],” says a new paper from Citigroup economist – and former Bank of England policymaker – Willem Buiter, co-authored with Ebrahim Rahbari.

“[It's time for] reducing rates all the way to zero” across the US, Euro, Japan and UK they advise, “carrying out more imaginative forms of quantitative easing and credit easing…[and] engaging in helicopter money drops: a combined fiscal monetary stimulus.”

The Bank of England voted today to keep UK interest rates at a record low of 0.5% for the 38th month in succession. It also left its “quantitative easing” program of government-bond purchases unchanged at £325 billion – equal to almost one-third of all gilts currently in issue.

Sterling pushed up to fresh 3-and-a-half year highs versus the Euro currency. Prices to buy gold in British Pounds held near 9-month lows beneath £985 per ounce.

Gold priced in Euros recovered from Wednesday’s 4-month low at €39,200 per kilo.

Shorter-term, howerver, prices to buy gold “continued their melt-down” on Wednesday, says the latest technical analysis from bullion bank Scotia Mocatta, pointing to the sharp recovery from yesterday’s 4-month low.

“[That] 1585 level was also our initial downside target on this move,” says Scotia. “A close below this critical support level will open up a full retracement to 1522. Topside resistance is at 1612, the previous interim low.”

Strong demand to buy gold “will likely require continued deterioration in Europe or in the United States,” says Goldman Sachs’ updated gold price forecast today.

Restating Goldman’s 2012 target of $1840 per ounce on average, “The case for higher gold prices remains in place,” says team leader Jeff Currie, calling gold a “currency of last resort” and warning that June will prove a key period because of US Federal Reserve decisions, European political summits, and a possible re-run of last week’s indecisive Greek election.

“If Greece decides not to stay in the Eurozone, we cannot force Greece,” said Germany’s finance minister Wolfgang Schaeuble at a conference Wednesday/.

“There is no alternative to the agreed consolidation program if Greece wants to remain a member of the euro zone,” said his former deputy – and current European Central Bank member – Jorg Asmussen to the Handelsblatt newspaper.

China’s $440 billion sovereign wealth fund China Investment Corp. has suspended new purchases of Eurozone government debt, its president Gao Xiqing said in an interview Thursday.

“What is happening in Europe right now is of course of concern,” Gao said. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.”

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

GDX gained by 2.02% while GDXJ gained by 0.59%  and SIL  declined by -1.10%

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“Bearish” Gold Hits 4-Month Low as Markets Fear Greek “Knock-On Effects”

SPOT MARKET gold bullion prices fell to their lowest level in four months during Wednesday morning’s London trading, hitting $1581 an ounce – 3.7% down on the week so far – while European stock markets and commodities also fell and US Treasuries gained, with Greek uncertainty continuing to cast a shadow.

A day earlier, gold fell below $1600 for the first time since early January.

“Gold seemed to know only one direction today – down,” says Tuesday’s note from Swiss precious metals group MKS.

“The bearish close opens up a full retracement to the December low of $1522,” adds the latest technical analysis from bullion bank Scotia Mocatta.

Silver bullion fell to $28.69 per ounce – also a four-month low, and 5.6% down on last week’s close.

On the currency markets, the Euro failed to regain $1.30, after falling back through that level yesterday having breached it on Monday for the first time since February.

Sterling meantime hit its highest level since August 2009 on a trade-weighted basis. The stronger Pound saw Sterling gold prices drop to £982 per ounce on Wednesday, their lowest level since last July.

On the New York Comex, open interest in gold futures trading rose to the equivalent of 1312.5 tonnes yesterday – up 2.4% on Tuesday last week – though it remains broadly in the middle of its range for the last five years.

It will not be known however what proportion of these positions were long and short until the Commodity Futures Trading Commission publishes its weekly Commitments of Traders report on Friday.

The volume of gold bullion held by the world’s biggest gold ETF, SPDR Gold Trust (GLD), remained unchanged Tuesday from a day earlier at just under 1275 tonnes.

GLD volumes did though spike higher yesterday, more than doubling from a day earlier to 17.8 million shares – although Monday’s volume was towards the lower end of the recent range.

The largest volume for GLD trading this year was 44 million on February 29, when gold fell $100 an ounce following Federal Reserve chairman Ben Bernanke’s appearance before Congress.

Alexis Tsipras , the leader of Greece’s left wing Syriza, which came second in Sunday’s election, will continue his efforts to form a government today, according to press reports.

The mandate to form a government passed to Tsipras after first-placed New Democracy was unable to form a coalition. The Syriza leader has outline a five-point plan which includes cancelling the terms of Greece’s bailout, suspending service payments on public debt, and investigating Greece’s banking sector.

“Voters [on Sunday] rejected the barbarous policies in the bailout deal,” said Tsipras Tuesday.

“They abandoned the parties that support it, effectively abolishing plans for [public sector] sackings and additional spending cuts…the popular verdict clearly renders the bailout deal invalid.”

Tsipras is today due to meet the leaders of New Democracy and third-placed Pasok – former coalition partners that backed Greece’s latest bailout and who both saw their shares of the vote fall on Sunday.

Many analysts, however, say they do not believe Tsipras will gain the agreements he needs to form a government.

“Mr. Tsipras asked me to put my signature to the destruction of Greece,” said New Democracy leader Antonis Samaras on Tuesday.

“I will not do this. The country cannot afford to play with fire.”

Should Tsipras fail to form a government, the mandate would pass to former Greek finance minister and Pasok leader Evangelos Venizelos.

“The Greek people asked for two things,” said Venizelos Tuesday.

“For Greece to stay safely in Europe and the Euro and at the same time to seek the best possible change in [bailout] terms so that citizens and growth can be helped.”

“Greece needs to be aware,” warned European Central Bank executive board member Joerg Asmussen Tuesday, “that there is no alternative to the agreed reform program if it wants to remain a member of the Eurozone.”

“A Greek return to the polls in mid-June looks increasingly likely,” says Malcolm Barr, London-based economist at JPMorgan Chase.

“There is little doubt that the drop in support for New Democracy and Pasok has raised the probability of an eventual Euro exit.”

“Greece in itself isn’t a big issue,” adds Adrian Cattley, European equity strategist at Citi.
“What does matter of course is the knock-on effects and contagion fears and what that would mean for the wider market.”

Here in the UK, prime minister David Cameron described the Euro as “a project in transition” in a newspaper interview published Wednesday.

“There’s nowhere in the world that has a single currency without having more of a single government,” said Cameron, although he added that “all these countries have to make their own choices” and that the Eurozone project “could go in a number of different ways”.

Spain’s government will tell the country’s banks to set aside an additional €35 billion as provision against loans made to the construction sector, newswire Reuters reports.

Ratings agency Moody’s meantime will begin cutting the credit ratings of over 100 banks this month, which could increase their funding costs and force them to reduce lending, according to Bloomberg.

China meantime has been buying oil from Iran and paying with Yuan and gold bullion, according to the Wall Street Journal.

Ben Traynor
BullionVault

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

If today’s landscape was a war setting, it would feature collapsed buildings, rubble on the streets, empty warehouses, smoke spewing upward from numerous city heaps, and fire hoses sending water in every conceivable direction throughout the entire city. And sadly, also dead bodies littered everywhere. They serve as the economic damage. The city ruins are marred by additional water damage, rubber boots a necessity. The buildings can be seen as the crumbled sovereign bonds. The street rubble is the home equity destroyed, some still underwater. The shattered warehouses are businesses either wrecked or in fast retreat. The smoke is the painful emotions based in despair, loss, and absent opportunity. In stark display, the fire houses are the central banks printing and dispensing money from tainted sources, not from factory income but rather the vacuous Weimar press. Of key significance is the compounded damage inflicted by the water itself. ZIRP and QE are tandem weapons of mass destruction that have been at work toward business destruction and capital ruin of the USEconomy for three full years. The zero interest rate policy assures the wrong pricing of money, the capital fuel, thus distorting all markets. The quantitative easing is based in extreme desperation, as the USGovt has lost the majority (80%) of its foreign creditor support.

The celebrated bond monetization assures the steady rise in cost structure which forces a vanishing of business profitability. The nation was taught improperly in pure heresy from USFed high priests that the free flowing liquidity was good, as the housing market expanded (bubble #1) alongside mortgage finance (bubble #2). The public was told incorrectly in 2007 that the damage would be limited. The Jackass forecasted absolute bond contagion and destruction, which has come to pass in shocking style. The sovereign bond collapse in Europe, where the USDollar printing must be conducted through the swap facility conduit, is evidence of the absolute destruction. Witness the collapse of the global fiat monetary system. The supposed solution from evermore central bank monetary creation has compounded the problem by adding to capital ruin. No solution within the current monetary framework is possible, thus the demand for gold. Impairment has moved from the margin to the core from water damage. Central banks, big corporate bankers, and finance ministry heads have no clue what to do and have begun to display their panic. They are out of options.

Conditions for gold investment and price rise could not be more perfect in the current environment. The infusion of fresh money without basis has led to historically unprecedented monetary debasement. The ruin of money is well along, certain to continue in greater amplified manner. The solutions based in debt gauze and debt ointment cannot cure the indebted patient suffering from debt breakdown and bankruptcy. Central bankers, looked to for leadership, have no clue what to do. They turn repeatedly to a broken first aid kit. The United States has seen over $3 trillion in new money shoved into the system in the last couple years. The European landscape has been overwhelmed by over $3 trillion just in the last several months. Yet no remedy is remotely visible, the new consensus. France has taken on the popular virus, calling for socialism in stronger dosage, to help the people. Spain is emboldened on the socialist theme, having given clear signals in rejecting austerity also. Italy could soon be worse infected, as unelected castle appointee Mario Monti must worry about being tossed off a balcony. The Greece showcase of failed solutions is visible to all, hardly the path other larger nations wish to follow. But the Greeks had no legs, no courage, and no guts to resist. Their leaders bent over at every request. Iceland stands as the workable model, whose solution rested on nationalizing the banks and repudiating debt held by banks.

The smell of monetary ruin is everywhere, as investment houses and private investments struggle to determine what money is anymore. It surely is not the fiat paper coerced as legal tender that is backed by debt and not output. However, in this perfect situation for gold investment, the main thrust powerpack is negative real rates. The prevailing ultra-low official interest rate is far below the reality-based prevailing price inflation rate. Even the 2% yield on the 10-year USTreasury is far below the true price inflation, whose annual rate is measured between 9% and 11% for several months by the unerring Shadow Govt Statistics craftsmen.

PROPAGANDA PUSH

The mainstream has chosen to trot out some supposed experts among the elite business class. The banker class has been discredited. The Wall Street lieutenants appear more like mafia dons, smirking with Cheshire grins over unprosecuted $trillion fraud committed in serial fashion. So from Berkshire Hathaway came Charlie Munger to denigrate gold. He does not look like he misses any meals, nor has Warren Buffet’s portly son. Neither have any gold credentials whatsoever, unable to recite even the basics of the market or its chief driving factors. Munger stated (as though an authority) that gold was not an investment for the civilized. Oracle Warren Buffet sold silver early, so he claims, back in 2003. What a grand lie! He followed Hank Greenberg’s lead and created an income stream in selling option calls. The practice made Warren a liar, since he constantly proclaimed precious metals offered no income. When Warren’s 129 million silver ounce hoard was called away in an option settlement, the Barclays gang took it and started the corrupt SLV exchange traded fund. Later it was sold to JPMorgan, where it has been corruptly managed ever since, to keep America strong. Their stock & trade is naked shorting of the metal, selling paper futures contracts with no posted collateral. Heck, on February 29th, they sold more paper silver in one hour than was produced by mining firms globally in a full year. The wonders of financial engineering by the New York & London crowd are glaring, the pus for which is visible from MFGlobal account thefts.

In the same manner, Bill Gates of Microsoft fame was trotted out. He had fewer words of wisdom to share on gold, except that it was speculative. Neither Munger nor Gates seems aware that the flow of financial crisis events and their aftermath reflect not in any way shape or form on civilized nations. Neither Munger nor Gates seems aware that investment in protection is highly prudent and justified against inflated asset breakdown, against debt saturation implications, against secretive elite cornering of official aid, against bailouts with new debt to cover old debt, against sovereign bond crumbling, against absent economic stimulus with meaning, against systemic capital ruin, against chronic job loss. But the Jackass digresses, certain to be called extreme and wild until the next dire forecast comes to pass in a long sequence of correct calls. To be honest, my forecast record has taken a nice turn toward the rosy and charmed ever since taking Rob Kirby’s advice not to forecast long-term US interest rates anymore. He called the USTreasury Bond market the most corrupted interfered controlled and mangled of any market in the world. That was back in 2009. How true! See the Interest Rate Swap for long-term rate management. See the USFed for its chief buyer of USTreasury Bonds in a balance sheet wrecked as badly as the European Central Bank, both badly and irreparably toxic. They preside over monetary wreckage and banking system ruin.

The gold cartel has used a favorite piece of propaganda since 2003 when the bull market began in earnest. The claim has been regularly made that the gold bull is tired and exhausted since jewelry demand has fallen off. Any student of gold can tell you that tapered jewelry demand is solid confirmation of the gold bull market. It serves as an extremely reliable gold contrary indicator. It is easy to explain. People buy fewer necklaces, bracelets, and other valued objects, since they cost more in a noticeable manner. Some turn to selling old unwanted jewelry, especially if a reminder of a lost love interest. In its place comes a torrent of investment demand, where not $300 is spent on a piece for a lovely neck, but rather $30 thousand or $3 million in gold or silver bars. Investment volume is at least an order of magnitude greater than for jewelry. The motive for jewelry is often discretionary in the West, but a method for the lower and middle class to save in the East. The gold cartel trots out the idiotic vacant propaganda about sagging jewelry demand every four to six months, in order to fool the stupid masses. It works for some, especially those with lazy herd mentality research and with inadequate brain stems. To be sure, sluggish jewelry demand is a very reliable contrary signal to confirm a gold bull market, always has been, always will.

A sidebar note on Microsoft. When Gates was faced with anti-trust violations and potential breakup in 2004 and 2005, which would have been justice meted, he argued that the firm was a colossus to be sure, but was successful in innovation and needed to remain intact. Ever since reading the unauthorized biography entitled “Hard Drive” back in 1992, my trails have followed the Microsoft path closely. Their marketing innovation was sequential date rape, inviting the next generation for product development, hiding the systems software guys with swapped business cards, offering up a few $million to ambitious fools, then pulling the plug after the fools showed their trade secrets and copyrighted software (lifted their skirts, in the trade parlance). Months later, Microsoft would produce a competitor product, with the advantage of making the hooks efficiently tied to the operating system, but with broken hooks for the competitor products. So much for product innovation, Mr Gates. Their innovation was evident in the crappy products released for database management, like MS Access which is denigrated by every database expert the Jackass ever talked to. Oracle DB is for professionals, and MS Access for amateurs lacking standards of excellence who are required to use it.

The list of such violated companies is as long as a page, led by Ashton Tate, Micrografx, and Stac Electronics. In fact, the Jackass had a nice investment in Stac (CLICK HERE for background). Note the complete lie about talks for licensing, as intimidating requests for donation and zero compensation does not constitute as talks for licensing at all. Stac Electronics produced a software product that virtually doubled the disk drive capacity in the 1990 decade, long before 40gb was a standard hard drive, and compression was made obsolete. Recalled well were the words of my stock broker, who urged me never to bet against Microsoft, or Big Mo as he called it. He said any investor betting on the first successful infringement lawsuit against Microsoft was a surefire loser. Not!!! What the Jackass bought in Stac stock at $1.50 per share was sold at $4 to $5 per share about one year later after Stac won a lawsuit for theft of product, the first against Big Mo. To be sure, the Jackass did not have any great string of investment wins, but some.

Later, the MS Windows product development was unveiled further in ugly public glory. What a travesty in poor software development, totally lacking innovation, a glaring display of shabby software! They stomped on Netscape after severe intimidation, after they refused to donate to the MS Monopoly Kingdom. As it turned out, Microsoft bought the also-ran anti-virus software McAfee after Norton told them to get lost. They essentially appealed to the third best in an assortment of system software utilities, requesting them to donate their software for free, join immortality, and live on. The best and second best obviously refused. The third best were flattered and accepted, having no viable option in a tough marketplace. MS Windows continues to have substandard virus protection. Their defragmentation software is also substandard. Their breakdown recovery software is also substandard. So as for claims to excellence, Mr Gates is a laughing stock. His comments on gold were as deep as a 12-year old child’s. Digress no more.

GOLD COVER CLAUSE

A gold cover clause for new viable strong currencies is an idea whose time has urgently come. Consider another often used piece of propaganda that actually exposes the desperation of the gold cartel, and the assumed ignorance of the public once more. The concept goes like this: The gold supply is so limited, so that it could not possibly qualify as a hard asset backing for the money within the global monetary system. How totally wrong! How incredibly shallow! What they do is expose their own greatest vulnerability. Back in 1971, when the Bretton Woods Accord was broken, the gold price was officially set by force at absurd level, like under $40 per ounce. It quickly zoomed in the next decade to $800 in a relief exercise much like a jailbreak of a bunch of anxious men bent on seeking fun after restricted times.

Over the last 30 years, the growth in the money supply has been unspeakable in its huge volume. It could be several tens of $trillions just in official data for only the major nations. It could be well in excess of $100 trillion over the years, after excluding the derivative volumes. The monetary growth is like umpteen multiples over the timespan. Normally, the gradual growth in monetary aggregate would be accompanied by gradual new gold output to match it. The fiat currency system has permitted the expansion of social system networks. It has permitted the series of asset bubbles and busts, a cyclical phenomenon blessed as good by the clownish central bankers. It has permitted unchecked war aggression, complete with private profiteer motive. It has permitted magnificent bond fraud and counterfeit of both bonds and cash, the chief $100 bill violations coming from Langley and Tehran. Just last 2007, the USDept Treasury complained about missing $100 bill templates, a firm finger pointed at Langley, where independent income sources have long been desired and achieved. See the narcotics monopoly they command, with major platforms in Cambodia, Yugoslavia, and Afghanistan over the decades. So the false argument of adequate gold supply is trumpeted, but in ignorance as they reveal the very reason why gold should be priced at multiples higher. If the expanded monetary aggregate (money supply) were to be properly reflected in the price of gold, its price per ounce would be somewhere between $10,000 and $15,000 easily. So the hack argument is put forth on occasion. The rebuttal is that the torrid growth of new money without basis would justify a gold price almost ten times higher, at which point the shortage of gold would not be so acute.

In fact, the gold cover clause would then enter the equation. Note first a quick reference to the fractional concept. The gold cartel enjoys its fractional reserve policy that extends to bank lending and even the illicit gold bullion management. The central banks, sometimes with Congressional input, choose to dictate lending reserves within the entire banking system. In general, 10 to 20 times as much money is lent to borrowers as is held in bank reserves. It is called the fractional banking system. Pain comes only when economies go into reverse, as banks fail like flies caught in window sills during summer heat spells. The gold cartel illicitly extended the fractional practice to their gold management scheme. Investors typically place their gold bullion in the custody of the big banks, which assign Allocated accounts (metal bars identified with specific owners) or Unallocated accounts (cumulative metal pooled with owners of redeemable certificates). Unbeknownst to many supposed allocated account holders, their gold bullion metal is gone, treated to pooling improperly. This is precisely the basis of several multi-$billion lawsuits in Switzerland. The financial press prefers to genuflect and not mention the story to the public, for fear of alarming the investment community into a veritable stampede. The Swiss violations were tipped off to the Jackass in the summer 2010, having escalated into a national crisis but of hidden proportions.

The global monetary system could be backed by gold, but in a cover clause whereby each participating nation would declare a given percentage of gold for redemption upon demand. For instance, the entire world could do very well to create a stable financial platform and foundation for the monetary system with a 5% gold cover clause. If someone holds $100,000 in cash in whatever country, then the holder could demand $5000 in gold bars. A financial firm with $100 million in cash could demand $5 million in gold bars. The stability of the system would be made strong. The argument of inadequate gold supply would be alleviated during a rendered 20-fold increase in the money stock. Consider the workable 5% cover clause. Furthermore, in times of crisis replete with extensions to the scourge of steady USGovt $1.5 trillion deficits, and multi-$trillion Wall Street fraud, and endless $trillion Western Europe bond bailouts, the gold cover clause could be increased to 10%. In more stable times, the gold cover clause could be reduced back to 5% and even lowered to 3%.

COMPETING NEW CURRENCYS

The flexibility of a gold cover clause device could enable a few competing currencies. They would float, but the linkage to gold would prevent much fluctuation beyond recognized bands. If the Russian Ruble were backed by a 2% cover clause, then that currency could float but drift lower in value. If a Chinese Yuan were backed by an 8% cover clause, then it could float with a higher drifted bias. If a new Euro Mark currency were backed by a 5% cover clause, then it could float with an even keel. The kicker could be the Gulf Dinar, which might be required for purchasing crude oil. The varying cover clause could act in the future monetary system backed by gold as a flexible system where the major nations could alter their percentage in gold cover redemption in much the same way they do nowadays with official interest rates. The many major central banks could actually manage the gold supply in a responsible manner, resorting to mundane duties like counting money and acquiring more gold, rather than the present function where they oversee reckless monetary expansion, control currency debasement, coordinate bond fraud, dispense gigantic grants to the elite caste of banks, and conceal narcotics money laundering.

See the March and April Hat Trick Letter reports for a continued discussion of a potential four currency system, all backed to some extent by gold. An extremely important point on new currency offerings. The opportunity for a second nation to launch a new hard asset currency is ripe when the first is announced. There is strength in numbers when it comes to new currencies, seeking the greatest critical mass. The odd men out would be the USDollar and the British Pound, possibly the Swiss Franc. No doubt in my mind that Japan would sign on with China to create a powerful and solid foundation for Asia. The US and UK would be forced to compete with at least three new strong kids on the FOREX block. The argument sometimes heard is that the Euro cannot break up, the Germans cannot start a viable new Nordic Euro currency, since the new currency entry would be a sudden victim of its own success. As it showed its strong foundation underpinnings, its exchange rate would rise and rise, enough to put the German export industry at great risk. True! But true only if the new Nordic Euro (or Euro Mark) is the odd man out.

Supposing four new currencies were launched, all hard asset currencies, in which the majority of global trade was settled, then the argument has big holes since the existing system would suddenly find itself outside looking in. That is precisely what is in progress of occurring in a system overhaul outside the US-UK sphere, after mammoth planning and execution in the background, with Finnish assistance and big commitments from Russia and China, the lead coordinator being Germany. The key is to produce a new system quickly and responsibly, in a manner with strength and vitality, that does not depend upon faith so much as substance. The Western leaders, principally US, UK, and Switzerland, have amply demonstrated that they prefer fraud and theft to leadership and integrity.

EUROPEAN LIGHTNING HITS

Prepare for a simultaneous currency launch that will shake the Western power structure to the core and cause financial tsunamis from the grand tremors. The trigger could very likely be the sudden collapse of key nations like France, Spain, and Italy together as they reject austerity and push the bond market past the limits. In my view the fuse has been lit. Their banking systems and bond structures cannot withstand any more shock. The popular votes cast against austerity and the present course could instead be regarded as a clear toilet plunger pull, much like a popular uprising. The consensus want no more elite banker bailouts and harsh neglect of the people. The upcoming Eastern SWIFT bank transaction system is almost ready for prime time, its development in progress. The Chinese will take the lead position, taking the flack, pushing the process, which will not resemble the current SWIFT system in the flow vehicle. The transition of political power in Beijing makes the timing perfect. The Iran sanctions served to galvanize the anti-USDollar movement. One source involved in the barter system design, at the fringe of the new SWIFT system, reported that the Iran sanctions did them a great favor, by bringing several newer nations to the planning room for integration in the new global trade transaction system. DO NOT BE SURPRISED TO HEAR IT HAS A GOLD FEATURE TO HANDLE THE TRADE. Rumors to the effect that the Chinese want to implement a gold backed trade settlement system outside the USDollar, have been confirmed by my great reliable indefatigable source.

France will trigger the disruption process. Higher deficits are coming, also to Spain. Both nations reject the austerity built into budgets that clearly does not work. The next major challenge is to finance government debt. Watch for higher bond yields on sovereign debt, the signal for breakdown. The big new wrinkle is widespread rejection of austerity budgets. The major victims will be the big banks, which in my opinion will begin to topple quickly, and require bailouts, even a full recapitalization overhaul, more fuel for the gold bull. Already talk is loud in France over the potential failure of Credit Agricole. The big bank could imminently fail. Its failure seems an easier foreseen event than Lehman Brothers. The bond markets will resist with fierce stubbornness any easy financing of expanding government deficits. The bond traders are typically smart. They expect much larger deficits immediately. They can see that the economies in recession will make for a nearly impossible payback in debt, with certain larger deficits to follow. Expect even grander central bank bond monetization as the process accelerates. The truly stupid debate over QE3 is mind numbing in its empty thought. The Quantitative Easing never stopped. What fools to debate! Like arguing over a possible nasty rain session during an actual thunderstorm. The QE will become a widely publicly recognized phenomenon. The impact will be felt in gold demand, during an orchestra of monetary devaluations. Once again, another major wild card is the bank system recapitalization, whose needs would be several $trillion. It will made more urgent by the new wave of socialists in power, namely in France and Spain. During all this, the stifling MFGlobal effect has removed many legitimate players from the COMEX. It will become an irrelevance, an empty stadium. Perhaps the new Asian exchanges will thwart the Western influence (Rock & Roth gangsters) and take up the slack to produce an honest risk hedge market with price discovery brokering. The disintegration of COMEX, and deterioration of USEconomy will be events for the ages. They already are.

GOLD READIES FOR STORM

My firm belief is that a fair equitable gold price will come only after the price goes dark in the normal traditional paper dominated channels. For over a month, the gold market has been operating like within the eye of a hurricane. At work is a new promising dynamic that most in the gold community seem totally unaware of, without solid sourced information. Repeatedly, my gold trader source, who has numerous billionaire clients on three continents, informs that truly gigantic buy orders are sitting between 1600 and 1680, spaced by 10 dollars apart, having greater volume with each lower notched price in an inverted pyramid. The Eastern Coalition is angry and motivated, fitted with well over $50 billion in a war chest, determined to wreck the New York and London bankers and remove them from their corrupt perch. Gigantic buy orders are being filled, the victims being gold cartel member banks themselves. They are highly vulnerable. They are strapped for cash, confirmed by a separate source. They face margin calls on sovereign bonds of Europe, compounded by some bad FOREX positions. To extract themselves from the pinch of the margin calls, the cartel banks are being forced to sell out their precious metals bullion held in reserve, in order to obtain desperately needed cash. This is a new phenomenon, not seen a year ago, in a total reversal used against them, since in the past, the cartel used the same methods against client hedge funds.

THE GOLD PRICE WILL RISE ONLY WHEN THE EASTERN DEEP POCKETS DECIDE THEY ARE CONTENT WITH THE MASSIVE GOLD RAIDS ON CARTEL GOLD RESERVES, ONLY WHEN ENORMOUS VOLUMES OF ORDERS ARE FILLED AT LOW PRICES, THUS DRAINING CARTEL MEMBER BANKS. The gold price will not rise until the Eastern Coalition has had their fill in a Western diet rich in gold on this round of the Groundhog Day cycle. The last cycle ended in mid-January. This round lasted longer, and involved much more gold taken from the cartel banks. They are badly and soon mortally wounded. Witness the unraveling of abused leverage by the cartel banks. In the process of de-leveraging, the cartel is losing their gold bullion. They are vulnerable, made worse by their insolvency, aggravated by their lack of liquidity. The paper gold price is imploding, but not the physical price. The divergence between paper and physical gold markets is proceeding exactly as previewed a few months ago. It is hard to see, because the great majority of gold investors do not have access to details on $billion gold orders being filled, who is supplying the gold, who is demanding the gold, and the conditions relating to margin calls, complete with motivated vengeance to deliver death blows in a global power struggle. Most people cannot contact their favorite friendly gold trader with a Rolodex of ten-figure clientele and request the latest battle won against a targeted bank. History is being made, but behind big broad curtains.

Unfortunately, the Eastern gold raids waged against the Western gold cartel might be satisfied with gold bullion pulled from the back door of the GLD exchange traded fund. As the Eastern Coalition observes the de-leverage process and swoops to exploit the insolvent condition compounded by lack of liquidity, the demands made on cartel member gold reserves might come from the GLD fund itself. The cartel simply shorts the GLD stock, entitling themselves to vast truckloads of GLD gold bars in illicit grabs. The tracks are covered by altered bar lists, whose track record is so abysmal and faulty that new covered tracks are easily made. The GLD fund is destined for a day like Madoff and Corzine before the Congress, but with far more lawsuits. Given the vast conduits between Europe and the United States, any event triggered on the continent will extend quickly to the US and UK.

The first victim was UBS, stripped of their gold last summer. A hint was given that the next victim might be Deutsche Bank. My other guess is a London player like Barclays is being stripped of its gold, or a big US bank turned timid after the MFGlobal attention. Major players are falling victim to the global financial crisis, better described as the global monetary war in which the USDollar and its USTreasury trading vehicle are the weapons of mass destruction. The race is on to replace them. The Chinese and their allies are the Team East in charge of overturning the current power structure dominated by gold story propaganda, mortgage bond fraud, hidden USTBond monetization, diverse market interference, private account theft, chronic naked futures shorting, controlled regulator puppets, rifled allocated gold accounts, salted gold bars, expansive derivative schemes, abuse of leverage, and numerous $trillion role programs conducted by the USDept Treasury and the Bank of England.

The new monetary platform will have many aspects, such as a vertically structured barter system, a handful of hard asset currencies, and potentially an element of gold in trade settlement. The role of gold in trade settlement is taking shape, a movement which will turn the USDollar into a widely discarded toxic paper, a ticket to the Third World. These are exciting times, if one can avoid the traps and pitfalls, including hooligans bearing USGovt badges offered bounty working against enemies of the state (without definition).

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