August 20 - Gold $412.90 up $6.30 – Silver $6.85 up 5 cents
"THERE IS NO EXTERNAL POWER ON EARTH OR THE UNIVERSE THAT CAN BRING DOWN THE GOLD AND SILVER PRICES. DESTINY HAS BEEN WRITTEN AND I AM JUST PREDICTING IT AS IT IS." Mahendra late last week with gold around $395
GO GATA!!!!!
When I awoke this morning (August 20), gold was due $1.70 lower even though oil was well over $49 per barrel. The supposed culprit was a stronger dollar – the euro was fading fast in London for some mysterious unknown reason. Anecdotally, it seems to me whenever our stock market (it was due lower) could be under severe pressure (in this case due to the soaring price of oil), the dollar tends to strengthen rather remarkably. Today was no exception.
However, The Working Group on Financial Markets has a short-term problem when it comes to gold. The physical gold market is on fire; at the same time, the funds are entering the fray in a substantial way. We know there is plenty of spec buying power out there due to the relatively low Comex open interest - as compared to what it has gone to over the past year. It is especially important to appreciate the fact that it is not only funds entering the gold market via the long side of the paper market. You will recall our Stalker source telling us THE STALKER is out there buying $1 billion worth of physical bullion and a smaller fund was going to step up to the plate if gold showed it was on the move, mostly likely that meant taking out $405, which it did yesterday. Then....there is the Arab buying.
It is not that often when extremely valuable information comes my way and I am fortunate to be able to pass it on you. This past Monday was one of those days and is THE KEY to what gold did this week. For your review, from MIDAS on August 16:
A lot to report to you from the physical market front and add to John Brimelow’s superb input. London, as you might recall, was looking for gold to start its move the last two weeks of August. So far, so good. Our British dealer source checked in today and is very upbeat. NEW buying has surfaced out of Saudi Arabia and the Far East, notably Hong Kong (heavy buying). The feeling from England is that if gold closes above $405, it will shoot up to $428/$430 very quickly. Our London source is looking for $456 by the end of the year and $500 in the first quarter to second quarter of next year.
Also heard from a different source that THE STALKER is back in the market, after a sustained absence, and is going to buy 1 BILLION worth of BULLION. Meanwhile, a smaller stalker may also enter the fray, to the tune of 100 million to 1 billion. We don’t know the amount. What we do know is they are only going to buy strength, or when gold is "jumping." We take that to mean it has to take out $405 first.
Word to me this afternoon is that Morgan Stanley was a monster buyer today and it is related to new fund buying in the cash market. This fits in perfectly with the information brought to your attention from my STALKER and London bullion dealer sources. This is good, very good!
***
What a week! It seems a few very consistent gold trading patterns were broken. Today, for example, gold made new highs for the session over and over again. No more of this surge early, and then cap, cap, cap. Yesterday, the HUI surged while the general stock market was under pressure. In times past, a weaker stock market has had a tendency to affect the gold shares. And as RL noted earlier, "the old cabal trick of intervening to support the dollar and bashing gold on the strong dollar pretext - that tired routine - isn't working today." Finally, gold closed higher on a Friday for the FOURTH week in a row.
The best news of the day was to see gold take off, even as the dollar rose a good bit, closing at 88.23, up .41. The euro was hit fairly hard, dropping .60 to 123.04.
As veteran Café members well know, gold rallying without dollar help has been a theme of mine for some time, even as late as last Tuesday’s MIDAS – "There is no reason gold shouldn’t rally $100 per ounce with the dollar doing nothing." Those out there who say gold is only about the dollar have it wrong. The key to the price is whether physical market buying can overpower a corrupt price-capping Gold Cartel. The cabal’s best laid plans went awry today. I can’t recall gold running this amount with the dollar so much on the upside.
You have to think the stunning Argentine central bank gold buying news has to be a HUGE plus too. As covered in last night’s MIDAS, this one seminal event could produce a sea change of thinking by other central banks. Incredibly, it was hardly mentioned anywhere by the mainstream gold world or financial market media. It’s bad enough the mainstream media hates gold, yet when the establishment gold world won’t jump up and down about this significant happening, it is OUTRAGEOUS!
The World Gold Council should be disbanded by the end of this year for the good of gold shareholders everywhere. GATA intends to press this issue!
The gold open interest rose another 4747 contracts to 238,015. This represents tech funds and pricing due to physical market buyers taking on the despicable Gold Cartel, who have been desperately doing what they can to keep the price of gold from exploding. THIS could not be clearer as we know who the sellers were this past week.
Not everything has changed when it comes to the gold market. While the cabal was in full scale retreat today, they still managed to hold the line with the $6 RULE! When that tiresome rule is obliterated, we might have a good feeling the bad guys are going down for the count.
The gold volume today was enormous at 100,000 contracts (only 1,000 switches). The price fixers had to call in their cavalry to keep gold from going berserk and within their $6 RULE perameters.
Next Thursday is option expiry. Some of the outstanding call gold call option strike price positions of note:
*405 – 5374
*410 – 2181
*420 – 10,000
*430 – 8771
Silver faded late for the second day in a row, putting in its second tired performance in as many trading sessions. With the cabal having serious trouble with gold, they seemed to have shifted some focus on keeping silver from taking out $7. My floor sources, who are bullish, were not perturbed by the silver sell-off as long as it held $6.83, basis Sep, and it did.
The silver open interest rose 2231 contracts to 99,926.
As far as the dollar goes, if the July trade deficit was $55 billion with $40 oil, what will the August figure be with oil approaching $50, $65 billion? The dollar rally here is both ludicrous and contrived!
Fine looking gold and silver charts:
December gold
http://futures.tradingcharts.com/chart/GD/84
Some base gold has built. All near-term technical resistance has been cleared. Next stop is to fill the gap right below $420 and then to $430.
September silver
http://futures.tradingcharts.com/chart/SV/94
For months I have mentioned how atrocious The Café Sentiment Indicator has been, saying:
*Never seen it this poor for so long over the past 6 years, especially with gold doing so relatively well compared to days of yore.
*My hunch has been the lack of interest in gold by the general public was setting up a major move.
Even with the excitement this week, it is no better than a 3, tops. Unreal!
The John Brimelow Report
VERY bad for day for Bears
Friday, August 20, 2004
Indian ex-duty premiums: AM $5.74, PM $7.48, with world gold at $407.70 and $405.40. Adequate, and lavish, for legal imports. India, for whatever reason, appears to be an enthusiastic buyer of gold from overseas at these levels.
Standard London’s Dubai kilo bar premiums continued generous. The Shanghai Gold Exchange is showing steep discounts (over $2) from world gold, but very heavy volume. Exactly how the SGE fits into the world gold trade is unclear, but the volume suggests someone was a strong buyer during Chinese hours.
TOCOM reversed course. Volume exploded up 166% to (a still not impressive) 16,167 Comex equivalent, the active contract closed up 9 yen, and world gold went out up 60c above NY. The white metals were all soft. Open interest slipped another 728 contracts, but inspection of the (1 day lagged) Members position suggests spec liquidation on TOCOM may indeed be finishing. (NY yesterday traded 45,574 contracts, with open interest climbing 4,474 contracts. Comex open interest has risen 18,623 contracts in the four days reported this week, (or 8.5%) - 57.9 tonnes. Gold has only risen $7.80.
The dram...