David Schectman

Interest Rates Are the Lowest In Decades

November 3, 2014

Now you see why the economy and especially the stock market faired as well as they did. How do you think they will fair, going forward, without QE?

I have not given up on Jim Sinclair. No one is right all the time, not in this heavily manipulated marketplace. Logic dictates that the Fed must continue QE in one form or another or interest rates will rise, and that is a political disaster since it will badly affect GDP and the stock market. Interest rates will not remain low with foreign countries backing away from our Treasuries and interest rates are the lowest in decades. The buyer of last resort IS THE FEDERAL RESERVE. Will the Fed follow the Bank of Japan and eventually purchase virtually all the maturing bonds? Until and unless interest rates rise high enough to cover "risk" and a fair return, the Fed can't drop out. Gold is now suffering the wrath of the fickle hedge funds and the horrible manipulation of commodities by the bullion banks. Let them have their short-term day in the sun. This will turnabout sooner rather than later and the investments that are now being shunned (gold, silver, platinum, etc.) will lead the way back up. It must end up that way. Inflation is on the way, best shown when the dollar reverses direction and then the currency debasement of the dollar will push prices up. Not demand, but currency-driven. Don't be fooled by the temporarily strong dollar. Its foundation is hot air and sand.

Now check the following two reports out from Jim Sinclair and Zero Hedge. They should be on your short-list of must reads.

My Dear Extended Family,

The Japanese central bank has stepped in to replace the US Federal Reserve's QE.

The US Federal Reserve will step into MA (Monetary Accommodation) to maintain low interest rates after the end of QE.

The dollar is up in a mirror image to low yen as a result of their QE. Gold is down because the dollar is up and because an important Swiss vote is pending that could go quite pro gold.

Nothing has changed. This will make the gold internet Trolls wild.

- Jim Sinclair, jsmineset.com, October 31, 2014

Here is a report from Zero Hedge:

"The decline in asset yields especially during QE3 created large wealth effects. Since the Fed's QE started at the end of 2008 the PE multiple of the S&P500 index (12-month forward) went up by five points, from 10.5 at the end of 2008 to 15.5 currently. This PE multiple expansion is responsible for around 650 index points or 32% of the current S&P500 index level. Extending that to the total stock of US corporate equities ($29tr currently), it implies an equity wealth boost of $9tr."   

- Zero Hedge, November 1, 2014

Quotes of the Day

Since the commercials are so collusive and in control of the technical funds' trading activities, they can do with the technical funds as they see fit. I truly believe that the key to understanding the manipulation is to know that the commercials control everything that the technical funds do; just like a puppeteer controls a puppet. If it were otherwise, we wouldn't see the clear pattern in managed money behavior in silver (and other COMEX/NYMEX metals) of massive technical fund buying as prices rise and selling on declining prices, always ending in extreme positions at reversal points.

With this in mind, the only explanation that seems plausible to me as to why the commercials let the technical funds off the hook the last two occasions of extreme managed money shorting is because the commercials were biding their time and waiting for a more opportune time to put it to the technical funds. Let's face it, the technical funds have been like the goose that laid golden eggs for the commercials. You don't cook and eat a goose like that without a thought. What I'm saying is that the commercials know that they can maneuver the technical funds into any extreme position at any time they want and that earlier in the year the commercials let the technical funds off the hook because they knew they could do it again whenever the commercials desired. (That's my explanation, but if anyone has a different take, please drop me a note).

- Silver analyst Ted Butler, Butler Research, October 29, 2014

It's official. October is the largest non-January silver sales month ever.

 -Andy Hoffman, Miles Franklin

Today's Featured Articles

Jim Sinclair (The Japanese central bank has stepped in to replace the US Federal Reserve�€™s QE.)

Zero Hedge (QE Added $9 Trillion In "Equity Wealth" Or 32% Of The Current S&P500 Level, JPMorgan Finds)(Martin Armstrong: "At What Point Does Revolution Take Place?")

Ed Steer (It's obvious that JPMorgan et al are going all out to get as favorably positioned as possible in the Comex futures market, as I expect whatever lows are set going forward will never be seen again once the inevitable rallies that will follow all this, begin.) 

LeMetropole Caf� (For newbies not aware of the Plunge Protection Team and Gold Cartel, what we saw today, and of late, are perfect examples of what they do and how they do it.) (No other way to explain this waterfall decline in the price of silver other than as an act of desperation.)

Arabianmoney.net (Swiss gold referendum likely to pass and send prices higher says Julius Baer's Burkhard Varnholt)

Kira Brecht (The Herd Is On The Move: Don't Try To Catch A Falling Knife)

Bill Holter

Has China Played Possum?

November 3, 2014

Alisdair Macleod of Goldmoney.com put out a piece last week which suggests China may already have accumulated between 20,000 and 25,000 tons of gold prior to 2002.  Please read this very carefully as it makes very good sense and puts a piece into the puzzle which was missing for so long.  Let me also add, if this turns out to be true then it is THE biggest financial news since August 15, 1971 when the U.S. defaulted on the gold standard.

Macleod believes that China has been playing possum regarding their gold reserves.  If you recall, China announced in 2009 they had accumulated a whopping 1,054 tons of gold.  The news at the time was a huge surprise and led to bullishness in the gold market as China was then a confirmed buyer.  This total vaulted them into the major leagues of gold hoards.  If Macleod is correct about holdings of 20-25,000 tons AS OF 2003, why would China want to "lie" about how much gold they have accumulated?  It is important to understand the mindset of the Chinese and the deep rooted thought process instilled in them by General Sun Tzu.  "Deception" is a core strategy to war, under this category would come the thought "help your opponent in his underestimation of you."  Why would the Chinese announce true or huge holdings if it was their intent to continue hoarding?  They wouldn't.

I wrote several months back regarding China's gold holdings and identified at least 8,000 tons, but my calculation was ONLY from 2009 forward and assumed the 1,054 tons to be accurate.  I hypothesized that if you added the 1,054 tons announced in 2009, plus 3,000 to 4,000 tons over the last 2-3 years and then add in another 2,000 tons of domestic production you could easily see 7,000 tons without anything from 2009-2011.  I postulated maybe another 1,000 tons over these three years and arrived at 8,000 tons.  Keep this number in mind for a calculation later.

So, is it even possible for China to have accumulated as much as 30,000 tons over the 20 years from 1983-2002?  I think it's very possible and here's why.  This would mean China needed to purchase 1,700-2,000 tons per year out of a market that was producing only slightly more than 2,000 tons per year.  From a monetary standpoint, this would only have been $20 billion-$25 billion per year as gold averaged around $350 per year during this timeframe, a sizeable sum back then but remember, China was attracting foreign "hot" investment capital and they were running a trade surplus every year.  From the standpoint of whether or not China could have afforded this, I believe yes it was possible.

The other side of the coin is whether or not this "size" of gold could have been available?  Is it possible for China to have purchased 20,000 tons and at the same time have the price dropping in a 20 year bear market?  I think it is for several reasons.  First, we know for a fact that many Western central banks were net sellers (The Washington agreement for example).  We also know about mining companies and central banks leasing gold (which gets sold into the market) from Frank Veneroso.  He estimated a total of between 10,000 and 16,000 tons leased back in 2002.  Central banks for the most part were asleep to the fact that gold was money, even the Swiss sold a large portion of their gold.  A couple of other anecdotes are the Germans and the Italians.  It has been thought for years that LTCM's was short 300 tons or more of Italian gold they had leased.  Also, why can't Germany repatriate her gold from the N.Y. Fed? 

Now for the big question, "how could the price have been dropping if China was such a big buyer?".  First, could China have just stood "under the market" all along and absorbed the leasing and sales?  Is it possible that China (via proxies) NEVER ever "bid" up for gold?  Could they have just stepped aside while the market was being capped (some of you may remember the $6 rule, same as the 2% rule today) and waited for the daily raids to accumulate positions?  Could they have even been part of the paper shorts to depress the price?  Did they maybe lose money on the paper side in order to accumulate the physical product?  Some of you may even remember Jim Sinclair speaking of "Hung Phat and Dr. No" ten years ago or more ...maybe of Chinese origin?

There is one more source of either supply or demand for gold we haven't talked about yet, the Arabs and in particular the Saudis.  Alisdair Macleod hypothesizes that the Arabs were big buyers of gold between 1983 and 2002, Early in the 1980's they may well have been.  But what if they were actually net sellers over the entire time period?  What if the U.S. somehow convinced the House of Saud with a "deal they couldn't refuse?"  We have been the protector of Saudi Arabia all these years, is it possible we told them that unless they released tonnage, our "protection" might disappear?  I'm just thinking out loud here because if China were to accumulate such large gold tonnage, it had to come from somewhere and that "somewhere" had to be a combination of mine supply, central bank sales and whatever other sellers that could be coaxed.  I also would like to mention that throughout the 80's and 90's many Arab children were educated in Western universities, were they taught of gold's new "barbarous relic" status and helped pry some of it loose from the older generations? 

Earlier I mentioned my figure of China accumulating 8,000 tons since 2009, if we assume Alisdair Macleod is on to something but cut his estimate in half to 10,000 tons ...we have a number of almost 20,000 tons or well more than double what the U.S. "claims" to have!  Another little tidbit of information is that China has allowed their population to purchase gold since 2003, why would they do this?  Did they as Macleod asserts have their sovereign fill and then decided it was time for the population to save in gold?  Was China actually more capitalistic than we ever believed and played possum for years while accumulating gold?  I believe this is very possible.

I do want to mention that if this is true, then our theory that China via proxies is the stubborn long in the silver market who refuses to go away has much more credibility.  China is said to have leased 300 million ounces of silver (maybe even 600 million or more) to the U.S. back in 2003.  The U.S. ran out of silver back then and China had it to lease.  Did China lease this silver in order to continue their drain of Western gold?  Have they had their silver returned to them or are they now angry because they were stiffed?  Did they sacrifice silver for the real crown jewels, our gold?  China has all new infrastructure and even ghost cities already built.  Who was the fool when we were laughing at them for building these ghost cities?  Was the West just plain foolish and sold off all of their gold or was it treason?

To finish I want to point out the obvious.  If China has amassed 20,000, 25,000 tons of gold or even more, what does it mean?  It means the West is financially bankrupt as by process of elimination much of this gold has had to come from Western vaults!  It means that money and power has shifted East right before our very eyes and under our noses.  It means that China can price or value gold at any price they would like ...and in any currency they'd like.  It means we will be living in a China centric world where the "rules are made by those who have the gold."  It means the U.S. (and much of the West) will be relegated to nearly immediate 3rd world status.  The danger of course is in today's world, if this really was a miscalculation by the West, a very nasty and game ending war could break out.  I don't believe we will have to wait too long to find out if China did in fact play possum as Alisdair Macleod may have now let the cat out of the bag!  As I said at the beginning, this could be THE biggest financial revelation in over 40 years! 

Kamikaze Attack and the End of Mining

October 31, 2014

The trials of Job indeed!

To that end, I do not recall taking a day off from writing in the past two years - and given the horrific immolation the world's Central banks are foisting on the world's population, I don't anticipate slowing down any time soon. Following the past two days' violent, post-FOMC precious metals attacks, my principal thought is not if, but when this "Cartel Suicide" yields an utter explosion of global physical buying. That is above and beyond this year's current pace of equaling last year's record level - inevitably, catalyzing dramatic product shortages (especially silver), as we experienced in 2008, 2011 and 2013.

As I wrote in yesterday's "BS to the Nth power," Wednesday's FOMC statement - in pretending to be "bullish" about the labor market outlook - was not just "misleading" and "disingenuine" but a flat out lie, ahead of Tuesday's mid-term elections. That said the fact their incremental words were not backed up by actions (they still expect to hold rates low for a "considerable time") is all one needs to know about their true intentions - which in fact, even the beholden cheerleading MSM is starting to understand.

Meanwhile, amidst yesterday's excitement of the "Dow Jones Propaganda Average" surging due to Visa's "great news" that Americans are borrowing more than ever at usurious interest rates; as well as the "better than expected" GDP report, due solely to government "defense" spending to bomb ISIS; and the rehashing of a 12-day old rumor that Japan's pension fund will increase its equity allocation in the most overvalued market since the internet bubble peak (care of the Bank of Japan holding debt yields near zero); interest rates actually declined on the day and didn't budge overnight.

As for the day's "other" news, which obviously the money printing, market-goosing algos don't care about, they included the largest-ever increase in non-performing loans at the world's largest bank, ICBC of China; an utter implosion of Greek stocks and bonds, as its inevitable default moves closer to the realm of imminence; and Citibank restating its earnings lower due to pending Department of Justice and CFTC "legal investigations." And don't forget the "gold-negative" announcement (LOL) that one of Germany's oldest banks has imposed an actual negative interest rate of 25 basis points on deposits above €500,000. Considering that 20% of Europe's banks failed the most passable stress test imaginable this week, how many investors will feel comfortable holding large deposits in German banks now - particularly when just last year, the largest German bank was deemed "so horribly undercapitalized, it's ridiculous?" Not to mention, foreign depositors, now that the ECB's QE program has caused the Euro to implode?

Given all this wildly PM-bullish news - not to mention, as I write, September consumer spending "unexpectedly" declined whilst personal income barely rose (weren't plunging gas prices supposed to fuel surging consumption increases?); TPTB were hell-bent on creating the opposite reaction. To wit, not only did they need to foster the impression that the FOMC statement was "America-bullish" ahead of the elections; but with the upcoming "Save our Swiss Gold" referendum gaining momentum, the last thing they need is surging PM prices to positively influence sentiment. That said, the physical reaction to their paper shenanigans was immediate, per this interview with Andrew Maguire - and the more they "push the envelope," the more rapidly their "paper dominion" over price discovery will end. To wit, the HUI is nearly down to its 2008 low, the TSX-Venture is dead and buried, and mining capital spending died years ago. In other words, there has been essentially no incremental exploration spending for years; and in my 12� years in the sector, exactly one major discovery - which, per this article, may never be developed. Throw in indefinite delays in major developments the world round - the poster child being Barrick's Pascua Lama project; and the outlook for global mine production has never been bleaker.

On last week's "Miles Franklin Silver All-Star Webinar Panel," we discussed the inadequate concepts of "cash costs" and "all-in sustaining costs"; as in the former case, few companies with "low" cash costs actually generate profits; while in the latter case, few companies with "low" all-in costs actually replace reserves. Long-time readers know how vehemently I despise mining shares - and generally speaking, all "paper PM investments," and this is exactly why. Poorly managed, woefully undercapitalized, and operating in the world's most difficult industry; with a Cartel not only suppressing gold and silver prices, but naked shorting the shares into oblivion. And no company characterizes this misery better than the world's second largest miner, Newmont Mining - which, in fact, inspired the latter half of today's article title.

Newmont, whose stock is back to 2001 levels - when gold was $275/oz. - reported last night that 3Q earnings declined 50% year-over-year, despite an average gold price decline of just 4%. And amidst the mining jargon, utilized to spin this earnings disaster positively is the irrefutable facts that one of the best capitalized gold miners not only generates an utterly miserable return on equity (worse if you consider last year's $1.6 billion write-off), but is experiencing steadily declining production and a dramatically weakening reserve base.

As you can see below, Newmont's proven and probable reserves are essentially the same as seven years ago, when gold prices averaged $575/oz. This year's production is expected to be 6%-11% lower than 2007; and given last year's reserve write-down with a $1,400 gold price assumption, I can only imagine the killer this year's write-down will be assuming prices remain near current levels. Heck, as we learned last year, prices don't even need to decline to yield write-offs - when the world's sixth largest gold miner, Kinross, reduced its reserves by an astounding 33%, despite no change to its $1,200 price assumption.

Comically, Newmont claimed its "all-in sustaining" cost is $1,020-$1,080/oz., despite not increasing reserves over a seven year period in which gold prices more than tripled. This year, capital spending was reduced by nearly 60% from 2013's levels, and gold prices have declined further. Thus, when reserves (and production estimates) are slashed again at year-end, be sure to have Newmont's management explain how their business is "sustained" at $1,020-$1,080/oz. In other words, such estimates are but a sham, as the real cost of sustaining the mining industry is far closer to the $1,500/oz. espoused last year by the CEO of Goldfields, the world's fourth largest gold miner.

However, I haven't even discussed the former part of today's article title, which could not be more PM-bullish - or "world-bearish." Which is that overnight, the Bank of Japan not only increased its "Abenomics" bond monetization target from �70 billion to �80 billion (in other words, essentially all government bond issuance), but tripled its Nikkei equity ETF buying program from �1 billion to �3 billion. Global stocks are exploding higher - on the prospect of potential hyperinflation; yet interest rates haven't budged and oil prices down to $79.60/bbl. are on the verge of breaking below the July 2012 European sovereign crisis low of $77.50 - when Spanish banks were bailed out, and Draghi was forced to make his infamous "whatever it takes" speech. Note bene, take a look at where Europe - and the Euro - are today, and tell me if you think he was "successful."

Back to Japan, where everything negative we have ever written - from "demographic hell" (July 2012), to "final currency war" (January 2013), "the real Yen bomb starts - NOW" (May 2013) and "the Japanese Noose is tightening" (February 2014) are coalescing in a hyperinflationary crescendo, which must end in complete financial cataclysm. To wit, if you think this chart depicting the unmitigated failure of U.S. QE is bad just think where it stands for Japan - now that it has been "QEing" for two decades with a 240% debt/GDP ratio, multi-year high in CPI inflation, and dramatically negative GDP growth; and oh yeah, another sales tax increase slated for 2015. Yes, this is what the "weak yen" the Bank of Japan so desperately wanted has brought to the "Land of the Setting Sun"; well, that and a 140% surge in corporate bankruptcies since Abenomics commenced 18 month ago. Actually, scratch that - as the 140% bankruptcy increase is just in 2014 alone!

As I write, the yen has not only breached the long-time "line in the sand" of 110/dollar, but plunged to more than 112/dollar, down a whopping 2.6% today alone. Before today, the Yen's "real effective exchange rate" had already plunged to its weakest level since 1982. However the financial death sentence Shinzo Abe has just unleashed on his population will make today's Yen levels look like the "good old days" in hindsight. Remember, the Yen traded between 200 and 300/dollar in the 1970s and 1980s - which is exactly where we believe it's going now, enroute to being the first "first world" nation to experience 21^st century hyperinflation. And heck, I haven't even noted this morning's broad-based dollar surge - not because the U.S. economy is doing so well (LOL), but because global fear is causing a liquidity surge into the reserve currency. Which, of course, we deem the "single most PM-bullish factor imaginable" due to the global inflation, currency wars and geopolitical tensions such devaluations cause. Not to mention, the massively detrimental impact on U.S. corporate earnings of a "strong dollar."

Again, we cannot emphasize enough our belief that we are back in "2008, with the temporary exception" of manically PPT-supported equity markets in TPTB's desperate attempt to prevent universal recognition of what global economic data, commodity prices, bond yields, and the desperate actions of Central banks like the PBOC, Bank of Japan and ECB are screaming loud and clear. For those holding mining shares and other "paper PM investments," is to pray they are not permanently destroyed - which frankly, many already are. And for those wise enough not to speculate in the world's most naked-shorted securities; but instead, save in history's only proven money, all we say is one word - RELAX. Global physical demand was already sitting at all-time highs before this month's Cartel paper raids; and now that the mining industry is all but destroyed, the upcoming production declines will be equally violent as the inevitable - perhaps imminent - physical demand explosion.

And once again, we at Miles Franklin ask but one thing of our loyal readers - which is to "give us a chance" to earn your business, should you decided to buy, sell, trade or store precious metals.

In The News Today - www.jsmineset.com

Posted October 31st, 2014 at 10:33 AM (CST) by Jim Sinclair

My Dear Extended Family,

The Japanese central bank has stepped in to replace the US Federal Reserve's QE.

The US Federal Reserve will step into MA (Monetary Accommodation) to maintain low interest rates after the end of QE.

The dollar is up in a mirror image to low yen as a result of their QE. Gold is down because the dollar is up and because an important Swiss vote is pending that could go quite pro gold.

Nothing has changed. This will make the gold internet Trolls wild.

Sincerely,

Jim

_____________________________

QE Added $9 Trillion In "Equity Wealth" Or 32% Of The Current S&P500 Level, JPMorgan Finds - www.zerohedge.com

Submitted by Tyler Durden on 11/01/2014 11:43 -0400

"The decline in asset yields especially during QE3 created large wealth effects. Since the Fed's QE started at the end of 2008 the PE multiple of the S&P500 index (12-month forward) went up by five points, from 10.5 at the end of 2008 to 15.5 currently. This PE multiple expansion is responsible for around 650 index points or 32% of the current S&P500 index level. Extending that to the total stock of US corporate equities ($29tr currently), it implies an equity wealth boost of $9tr."

Continue reading on Zero Hedge.com.

***

Martin Armstrong: "At What Point Does Revolution Take Place?" - www.zerohedge.com

Submitted by Tyler Durden on 10/31/2014 21:36 -0400

At what point does revolution take place? In our review of history, the probability is low but for the economic trend. In other words, turn the economy down and the percent of discontent rises exponentially. So beware - not ghosts and goblins, but politicians going forward. The problem is not that Americans are ignorant; they are being fed nonsense by the media to sell newspaper and TV advertising. We have fallen into a cycle of Yellow Journalism that was begun by Pulitzer. So perhaps Americans will wise up only when the economy turns down and the Internet provides a greater proportion of real news compared to mainstream media.

Continue reading on Zero Hedge.com.

 

_____________________________

59.7 Tonnes of Gold Withdrawn from the Shanghai Gold Exchange on October 24 - www.caseyresearch.com

By Ed Steer

October 31, 2014

 

The Wrap

 

It's obvious that JPMorgan et al are going all out to get as favorably positioned as possible in the Comex futures market, as I expect whatever lows are set going forward will never be seen again once the inevitable rallies that will follow all this, begin.  The Fed meeting---and the ensuing 'strength' in the dollar index---are just the smoke screen that they're using to do the dirty.

 

With today being month end---and Hallowe'en---it appears that JPMorgan et al have nothing but tricks up their sleeves for all the precious metal enthusiasts today---and I must admit that I'm not expecting great things when I roll out of bed and check the charts later this morning.

 

But this too, shall pass.

 

Continue reading on Casey Research.com.

 

  

_____________________________

 

10/30 Earthquakes - www.lemetropolecafe.com

 

The gold/silver headlines today are about the reaction to a hawkish Fed. Horse manure! When the last QE began, gold was $1793 and the DOW was something like 13,300. Gold is down almost $600, while the DOW is up around 3800 points.

 

No one outside of our camp ever goes there with any attempt to explain it all. Yes, some of the relative pressure in the precious metals prices could be attributed to a correction following years of rallies, but nothing close to that extent ... and nothing for this long a time.

 

Gold was bombed to $1198 and then $1194. Silver was trashed to $16.45, which means it has made a new low in its bear market move since March and then to $16.22. The HUI fell to 168 in the early going, which is a stunning collapse. Its 190-support area has become a distant memory.

 

Oh, for gosh sakes. The DOW is UP 100 on the same hawkish news, which has gold trading right above $1200. The DOW was initially called 70 lower, but reversed sharply. Did that reversal have any effect on silver, an industrial metal? Of course not, it lurched DOWN and made new lows for the day.

 

For newbies not aware of the Plunge Protection Team and Gold Cartel, what we saw today, and of late, are perfect examples of what they do and how they do it.

 

The official ending of QE in the States has been as advertised an event as could be. Talk about something already being in the market! Both Behavioral Finance operations were taking no chances on how they wanted it to be perceived. Their market manipulation operations were in place and ready to go into action once the Fed Minutes were released. Could anything be more obvious?

 

In that regard the gold open interest rose 5,045 contracts yesterday to 419,455, which is a new recent high. The Gold Cartel forces have been piling in on the short side in anticipation of the planned attack. Meanwhile, the unreal silver open interest made a new recent high too, up a whopping 2711 contracts to 176,444. The shorts continue to bury the longs as they have done since March. And yet the longs won't quit. It is beyond bizarre.

 

Mark Lundeen...

 

Hi Bill

 

No other way to explain this waterfall decline in the price of silver other than as an act of desperation.

 

Le Metropole Cafe

The shorts must be attempting to knock off as many longs from silver's open interest (Blue Plot below) as they can.

  

Le Metropole Cafe

 

With silver's OI representing something like 868 million ounces of silver, today's $0.80 (4%) decline cost the longs $694 million dollars. It will be real interesting to see today's open interest figures. If OI doesn't decline by much, or if it actually increased after today's drubbing, the longs must be holding on to demand for delivery as they don't seem to care much for their dollars. If that is the case, we could see a panic in the silver market before the year is out.

 

What's next? Is the COMEX going to change some long-standing rule to protect the big shorts? We may be watching history here!

 

Mark

 

So, what to think? What to do?

 

There is not one sign of anything changing ... nothing. The fundamentals don't mean a thing thanks to you know who and the bearish technicals keep winning the day. Even horrendous sentiment indicators, which normally would be constructive, have not meant a thing. The Gold Cartel is that intent on getting their way.

 

Why stick around then?

 

There is one major league reason why. There are number of us in our camp who believe something is very wrong behind the scenes ... and has led to the fanatic behavior of The Plunge Protection Team and The Gold Cartel. Very simply put, the last six years of pushing on the money string with QE has not got the job done as far as our economy is concerned and now it must improve without that support. We are in uncharted territory, especially considering how low our interest rates have been for so long. What does the Fed do for an encore should our markets/economy head south again?

 

What we saw two weeks ago with the DOW dropping hundreds of points in minutes, and the yield of the 10 yr. Treasury note disappearing to 1.86%, must have scared the money powers in the U.S. half to death. Hence, their market enforcers went to work on our stock market and the precious metals to shore up confidence.

 

The point is that what the markets did two weeks ago is most likely a precursor of what is coming down the pike ... except next time it will be too overwhelming to correct. Think of the market tanking of two weeks ago as an earthquake tremor, which is felt before THE BIG ONE. When that one hits, everything will change. While gold and silver could get belted initially in liquidity issues, they will then take off for the upside like never seen before ... and they will keep on going and going and going. The Fed will have no choice but to step on the money pedal again, and unabashedly so. The investment world will know overnight what that means and buying of gold and silver will reach panic levels. The issue is when this all happens. We don't know. But, just like two weeks ago, it will surface out of nowhere.

 

Chinese Gold Demand 1541t YTD

 

First things first, Chinese gold demand is still very strong and it's in an uptrend since July.

 

Apologies for my late reporting on the latest SGE withdrawals numbers - which are the best benchmark for Chinese gold demand. I was trying to figure out some details on gold trade rules between the mainland and the Shanghai Free Trade Zone. I still haven't got confirmation, so will get back to it.

 

Chinese wholesale gold demand is at least 1541 metric tonnes year to date (Inc. week 42 - until October 17). Shanghai Gold Exchange (SGE) withdrawals, as disclosed by the Chinese SGE reports, were 52 tonnes in week 42 and according to my estimates China has approximately net imported 991 tonnes year to date...

 

https://www.bullionstar.com/blog/koos-jansen/chinese-gold-demand-1541t-ytd/

 

-END-

 

To read the full article, please subscribe to Le Metropole Cafe.com.

  _____________________________

Swiss gold referendum likely to pass and send prices higher says Julius Baer's Burkhard Varnholt - www.arabianmoney.net

 _____________________________

The Herd Is On The Move: Don't Try To Catch A Falling Knife - www.kitco.com

Friday October 31, 2014 09:14

Gold prices are plummeting; the market has cracked through key long-term support at the $1,180 ounce area. The herd is on the move. Panic, fear, and a rush to the exits is being seen.

What's a long-term gold investor to make of all of this?

For those who see gold as a longer-term investment vehicle to build wealth, offer diversification and act as a hedge against currency credit risk, perhaps the answer is nothing. Perhaps the best approach is to simply stay on the sidelines and monitor the action from an objective, dispassionate viewpoint. Throughout history, those who stay cool, calm and collected during panics are often the ones who ultimately profit the most.

Gold is falling to find demand. If a monthly close is achieved under the $1,180 area it will confirm a bearish breakout from a large triangle pattern on the monthly continuation chart (see Figure 1 below). What does that mean in English? A continuation pattern likely confirms more losses ahead for gold. A minor target lies at $1,045, the February 2010 low, but a test of the $1,000 area is within the triangle objective.

Longer-term physical buyers are going to wait for the dust to settle before they re-enter the market to buy at lower price levels. Why try to catch a falling knife?

But, there remain enough longer-term, macro issues around the globe that investors will at some point turn back toward gold as a safe-haven investment.

Here's just one example. In early November, the U.S. will hold its mid-term elections. While actual market impact could be limited immediately following the results, the key takeaway from the November vote will be who holds the agenda setting power?

Currently, the Democrats control the Presidency and the Senate. The Republicans hold control of the House of Representatives. Will the Republicans seize control of the Senate? If they don't, Congress will remain divided and more partisan gridlock is likely ahead.  Right now, pollsters show the races to be a very close call.  

From a political perspective, the next two years are really just a big waiting game for the 2016 U.S. presidential election. But, there are some key fiscal points to watch along the way. Here are a few key dates to monitor.

November 4: U.S. midterm elections

December 11: Budget expires

January 3, 2015: first meeting of new Congress

March 15, 2015: Debt ceiling suspension expires

A divided Congress could create more partisan debate into that March debt ceiling timetable. Come March 2015, the potential for more political fireworks, partisan gridlock and standoff will increase if Congress remains divided.  These factors continue to brew in the background and will offer underlying support to the gold market, a long-time hedge against political uncertainty, and a general safe-haven investment tool.

Don't forget what happened when U.S. policy makers walked America to the precipice of default, just a few short years ago. In late summer 2011, the battle to raise the debt ceiling sparked a political firestorm that rocked financial markets and took the country to the brink of default and ultimately resulted in a credit downgrade for U.S. sovereign debt.

Nearby gold rallied to its all-time high during that time period. Looking at the numbers, from May 2011 to the September 2011 high, nearby gold futures gained over 29%.

However, shifting back to current gold market action. The bears have the momentum. Don't fight the current tide.

But, remember, the big picture issues -the larger macro uncertainties, and structural imbalances remain in full force in the older industrialized nations. For 2015, the Congressional Budget Office (CBO) projects the U.S. gross debt to GDP level at 73.1%. That is a lot of debt, and it is likely to worsen in the years ahead.

The largest budget items are Social Security, Medicare and Medicaid. With an aging population seen in the U.S., the debt issue becomes more dramatic down the road. Economists warn that the aging population and rising medical costs means the programs are growing at a significantly faster rate than the tax revenues the U.S. has to pay for them. There are current projections that Medicare will run out of funds in 2026 and Social Security around 2033.  

Long-term gold investors have a lot to chew on in the years ahead.

Kitco.com

 By Kira Brecht, Kitco.com

Follow her on Twitter @KiraBrecht

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