May 14 - Gold $376.70 up $2.30 - Silver $5.71 up 11 cents
. . . Moreover, the global economy has moved into uncharted waters. Never before has a monetary authority embarked on a well-publicized monetary policy whose sole purpose is to boost asset prices in order to sustain consumption, and hence the economy, as is now the case in the United States. That such a desperate, and on many counts highly objectionable, monetary policy can only end in calamity should be clear, but what is less clear is precisely when disaster will strike and how the calamity will play itself out.
Credit has to be given to Fed Chairman Alan Greenspan. He is the first head of a monetary authority who has not only managed to create a series of bubbles in a domestic economy, the United States, but also managed to create bubbles everywhere in the world -- in New Zealand and Australian dollars, emerging market debts, government bonds, commodities, emerging market equities, and capital spending in China. This is an achievement that no one else in the history of capitalism has ever accomplished, and one that investors will never forget once this universal bubble bursts and fills entire chapters of financial history books." -
Marc Faber, "Strategic Investing," April 7th issue
As the markets are wont to do, instead of a wild volatile day in the gold pits and in the other financial markets, trading was very subdued. Gold came in lower, rallied after the CPI number, sold off again to the unchanged area, and then drifted back up late in the day. The volume was very light.
Silver was firmer all day long and closed near its highs and HIGHER than the week before for the first time in six weeks. Technically, it appears silver has bottomed after an incredible massacre, one engineered by the price money managers.
Neither gold, nor silver have any gaps to fill on the downside.
The gold open interest fell 257 contracts to 255,231 and the silver open interest fell 425 contracts to 91,046.
Some fundamental news input from my STALKER source. Business is very brisk in London and Zurich as far as bullion is concerned. A decent amount of that buying is coming out of wealthy individuals who live in Saudi Arabia. They don't buy for one second what the vice-governor of the Saudi Arabian Monetary Authority said in his Reuters interview yesterday about gold being "a relic." They probably know it was a planted statement also. Muhammad Al-Jasser, who gave the interview, could be the new designated spokesman for The Gold Cartel in Europe now that Ernst Welteke, former Bundesbank head, has been sacked.
Oil closed in all-time high ground at $41.38, up 30 cents.
The dollar closed down .35 to 91.80, while the euro rose .58 to 118.69.
Gold has a way to go to prove itself as far as a technical turnaround is concerned. First stop is a close above $380. If cleared, we should head back up to the $390/$395 area and gold might do so very quickly. A close above $395 sets our sights on $430 again.
With oil making all-time highs, US rates still at 1%, and the geopolitical situation in Iraq continuing to deteriorate, the gold fundamentals remained at "10+++" or even went up a notch. Meanwhile, the gold sentiment and despair out there over the last six week debacle is sky high (low is more like it). We now have a set up for gold to explode. It might even be a picture perfect scenario. The same for silver.
The John Brimelow Report
Portuguese; Interesting UBS on CFTC
Friday, May 14, 2004
Indian ex-duty premiums: AM $8.34, PM $7.56, with world gold at $373.85 and $ 373.50. Comfortably above legal import level. Financial markets in India continue traumatized by the electoral victory of the leftish Congress Party. The rupee slipped almost 1% to a gold-import unfriendly 4 ½ month low. The stock market collapsed by 6.1%. That, of course, could be gold friendly, since it implies less competition from an alternative asset class. No evidence has yet emerged that India's current gold import regulations are threatened.
Japan displayed no interest in gold today, with the yen low but steady. TOCOM volume shriveled 55% to a derisory 10,903 Comex equivalent and open interest dropped the equivalent of 742 Comex lots. The active contract was up 3 yen, but world gold was down $1.80 from the end in NY on offshore selling. Mitsubishi reports:
"Loco Ldn gold was under pressure by dealers selling to the low."
(NY yesterday traded 59,817 contracts. Open interest fell 257 lots.)
Once again, a backdrop of very gold-positive news failed to rally bullion as ready sellers came forward to quench any appetite. Estimated volume surged 44% in the last half hour (10%) of the trading day, blocking gold's recovery from the day's low.
UBS makes an interesting comment about the upcoming CFTC data:
"COTR data, to be released after tonight will show the degree of long liquidation and new short selling that has entered the gold market recently. We suspect that the release will show that funds held net long positions of around 8-9 million ounces in size as of Tuesday. If the net long position has fallen by more than we are expecting, however, the market could react very positively."
Late yesterday, the Bank of Portugal admitted the sale of another 35 tonnes of gold, "with settlement in May". The fact that this minor amount was sold "in recent months" rather than in a brief time supports the argument of those who believe the Portuguese have complex derivative obligations which trigger from time to time at higher prices. And, of course, the failure even by this relatively punctilious Central Bank to report these sales monthly underlines the unreliability of Central Bank reporting on gold.
JB
CARTEL CAPITULATION WATCH
The DOW came back from an early drubbing, however, it couldn't hold any kind of rallies, even with the bonds rising 24/32 to 104 12/32. The best that can be said for the DOW is the PPT managed to give it a close above 10,000 at 10,012, up 2. The DOG was hopeless all day long, finishing at 1904, down 22.
The US economic numbers were mixed. Capacity utilization at 76.9% and industrial production, up .8%, were fractionally better than expected. The highly suspicious CPI numbers came out with the core CPI up more than expected:
May 14 (Bloomberg) -- Prices paid by U.S. consumers in April rose 0.2 percent, the fifth straight increase, reflecting higher costs for hotel stays, medical care and college tuition. The increase in the consumer price index followed a 0.5 percent gain in March, the Labor Department said in Washington. Excluding food and energy, the so-called core index rose 0.3 percent after a 0.4 percent rise. -END-
A slight consumer confidence disappointment:
May 14 (Bloomberg) -- The University of Michigan's preliminary index of consumer sentiment for May was 94.2, the same as a month earlier and less than forecast. The university's expectations index, which measures optimism about the next one to five months, fell to 85.8 from 87.3 last month. The current conditions index, based on perceptions of consumers' financial situation and whether it's a good time to make big purchases, rose to 107.2 from 105 in April. -END-
One of the big surprises of the day, one which will affect US import prices:
May 14 (Bloomberg) -- China's consumer prices rose in April at their fastest pace in seven years, led by food, which may harden the government's resolve to restrict lending and clamp down on industrial projects that are encroaching on farm land. The consumer price index, which measures the cost of goods and services, increased 3.8 percent from a year earlier after rising 3 percent in March, according to Beijing-based Mainland Marketing Research Co. (China), which releases monthly figures on behalf of the statistics bureau. The gain was the biggest since March 1997 and exceeds the government's 3 percent average inflation target.
-END-
GATA's Mike Bolser:...