Every now and again this needs saying again. We’ve been saying it for years, and most recently since this site was launched we’ve said it, again and again.

Paper “wealth” is an illusion, and it’’s unraveling fast..

But those are old posts now, and don’t get seen as much as time passes, so let’s re-state our opinion on why you need to buy gold now, and let’s use the words of someone far more qualified and eloquently written, one of our favourite commentators Larry Edelson from http://www.uncommonwisdomdaily.com.  ..over to Larry.

…They called it “a relic of the past.”

They described its last major bull market as an “anomaly.”

They said it would “never again go much higher.”

And now, many are still in denial, claiming that it’s peaked and destined to lose 20% … 30% … even 50% of its value.

They’re referring to gold. And each and every time I’ve heard the pundits talk about gold, they’ve been dead wrong.

Indeed, just ten days ago, on May 14, an event took place that even the most skeptical of investors cannot — and must not — ignore:

The June Contract for Gold Bullion Hit $1,249.70 Per Ounce

Suddenly and inexplicably, the skeptics are gone.

Suddenly, everyone is starting to talk about gold again.

Only this time, they’re believers.

This time, they’re not calling it gold; they’re calling it names I’ve given it all along — like “hard money” … “real money” … the world’s only “real currency” … and even a name similar to my monthly newsletter, “real wealth.”

This time, they say, the strength in gold is different from past gold rallies.

On that score, they’re right — darn right: The rally you’re witnessing … the one successive record high after another in gold — is not only real, it’s destined to continue.

My forecast: Despite a pullback here and there — like the one occurring now — gold is headed at least $1,000 higher, to more than $2,300 per ounce. And probably, in the end, even higher than that.

What’s more is that it will likely happen within a timeframe that could come a lot sooner than anyone now dreams possible.

5,000 Years of Protecting Investors’ Wealth

For the last 5,000 years, the yellow metal has been propelled higher and protected investors for similar reasons gold is rising today.

In Rome, they devalued the denarius by removing its gold and replacing it with silver. Then they removed the silver and replaced their currency with slugs of copper.

In Byzantium, the gold Bezant was also watered down over time, eventually, like the denarius, becoming an obsolete currency as well.

In civilization after civilization, currencies have been devalued by a host of means — all of them giving birth to new bull markets in gold which protected investors, time after time.

And today, the reasons behind gold’s massive increase in purchasing power are not all that different …

#1. Paper money is being systematically devalued by central bankers and politicians, especially in the U.S. and Europe.

#2. The private sector and investors are losing confidence in governments all over the world.

#3. Geopolitical tension and civil strife is more prevalent than it has been in at least the last 40 years.

#4. The wild, out-of-control spending and debt accumulating that’s ingrained in today’s culture, especially in the U.S. and Europe.

And all of this is occurring as global gold production continues to dwindle in some regions of the world. Example: South Africa where gold production is now at its lowest level in 86 years.

The key to understanding gold today — and indeed, virtually all natural resources — is to understand how the public has gotten burned in the past. So let’s take a walk into the forest of paper assets, and look at some recent examples …

For the last 5,000 years, gold has propelled higher and protected investors.

The Time: The Middle of 1998 The Places: Thailand and the Former Soviet Republic

Strange bedfellows you might think. But not really. Moscow was reeling under an estimated $150 billion worth of publicly issued IOUs, debt they had accumulated when the Berlin Wall fell and the former Soviet Republic turned into a splintered group of free-market Russian states.

The debt, mostly issued with the intent of building infrastructure for the new Russia, was for the good of the region’s new 146 million capitalists.

However, corruption at so many levels in the government resulted in waste and bureaucratic nightmares. Projects either never got off the ground or ended up lining the pockets of the oligarchs who effectively printed their own money with assets previously owned by the state.

End result: The sovereign debts of the new Russia quickly went bad, and for the next five years Russia collapsed into turmoil.

Though almost a world away, it wasn’t much different in Thailand. The country’s economy was cooking in the earlier part of the 1990s. Gross domestic product was jumping at an average rate of 9% a year.

So the country borrowed money, lots of it, to expand even more. Public officials and those quickly getting wealthy in Bangkok were all thinking the same way.

In fact, so much money came into Thailand that the Thai baht was strengthening quickly in local markets. Yet it remained tied to the dollar, which at the time was also rising in value. So with a currency too strong, the economy suddenly became uncompetitive in the region.

Billions of dollars borrowed … billions promised by the government to the country’s citizens … and yet billions more bet on the future were all suddenly at risk. The economy started to collapse. The only option for authorities and regulators: Bust the Thai baht loose from the dollar and let it float freely on foreign exchange markets.

The thinking: Give the system some flexibility and let market forces take over. It was the only choice the authorities really had at the time.

But what they didn’t realize is that confidence in the government had already been lost. Investors felt insecure about debt issued by the government.

End result: The baht collapsed, soaring from 28 to the dollar to 58 OVERNIGHT.

Capital stampeded out of Thailand like there was no tomorrow. The economy collapsed, shrinking almost 50% in no time at all. Bonds and other debt offerings went bust. Gold soared in local prices, just like it did in rubles for the former Soviet Union.

Moscow and Bangkok … strange bedfellows no doubt … totally unrelated at first glance.

But in both cases, simmering below the surface, were excessive debt levels going bad. Paper assets went up in smoke. And investors got burned. Big time. Except for those who owned gold.

Another example from just a few years ago …

The Time: 2000 The Place: New York

The Nasdaq hit 5,132 in March 2000, up 1,489% from its low of 322.93 in October 1990. Dotcoms were everywhere, all the rage.

Investors couldn’t care less about brick and mortar companies with real assets, with real three-dimensional products for sale.

All they wanted to know was how many eyeballs are looking at a web page at any given moment. All they wanted to know was how many clicks a link on a website got. And all they wanted to know was the latest dollar figure being assigned to such numbers. They multiplied them out and got the stock price. Forecasts kept getting raised and share prices kept going up.

But suddenly reality set in and investors took a breather. They thought about what they were doing. They woke up and smelled the coffee, prodded no doubt by disasters such as Enron and WorldCom. They started to ask themselves what the heck they were really buying.

And voila! The paper assets suddenly collapsed virtually overnight, in the worst stock market crash since the Great Depression. Paper, in the form of stock certificates, crumbled in value.

But not gold. It started exploding higher, and since then, hasn’t taken more than an occasional breather, pulling back but consolidating to make a run to one new high after another.

Now, fast-forward to …

The Time: 2006 The Place: All Over the U.S.

The problem: Subprime mortgages. As much as $400 billion in debt, issued to anyone who breathed, is now in danger of going up in smoke as the underlying collateral, real estate prices, tanks.

Each time the stock market has crashed, gold has exploded higher, providing a safe haven for investors.

It’s not so much that real estate prices are falling. It’s that too big a debt pyramid has been built upon an otherwise solid asset, real estate.Now, the foundation is weak … not the property, but the borrowers.

As in the historical examples I just gave you, investors similarly saw debts in the private sector evaporate into thin air. Paper assets and debt, gone bad once again.

Meanwhile, the U.S. dollar, once the most respected currency in the world, began falling in value virtually non-stop.

The reasons: Pretty much the same as before …

#1. Paper money systematically devalued by the U.S. central bank — in an attempt to inflate away the debt crisis in the real estate sector.

#2. While the private sector and investors started losing confidence in Washington, and Wall Street.

#3. Causing civil strife, a tea party revolution, and massive anger at the upper classes and politicians.

And more.

Now Consider what’s happening in 2010 …

The debt crisis in the private sector has migrated to the public sector. Greece is broke. So is Portugal … Spain … and Italy.

Europe is now buried under so much bad debt, the euro is crashing. And guess what? The normally-conservative European Central Bank is now even printing money like mad.

Here, in the U.S. — the Federal Reserve has not only promised to help bail out Europe — it’s already flooded the U.S. economy with upwards of nearly $2 trillion in newly printed money as well …

With no end in sight to how much fiat currency it will print — and each and every one of the dollars printed adding to an unlimited supply of monopoly money.

Is it any wonder that gold has just hit new record highs?

Is it any wonder that gold is now being rediscovered as the hard currency it has always been?

I don’t think so. Not in the least.

My recommendation, assuming you want to protect your wealth — and even profit from what’s happening today: If you don’t own gold, or enough gold and investments tied to gold, then use the yellow metal’s current pullback, which is likely ending right now, to add to your portfolio …

Before it heads a lot higher!

Best wishes,

Larry

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Couldn’t agree more, start buying gold now – IT IS NOT YET TOO LATE!

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A great summary from our favourite commentator at our favourite place to buy, sell and trade Gold at spot Gold prices – Bullionvault

By Adrian Ash at Bullionvault.

Knowing how governments will respond to deflation, the case for inflation-proof gold looks increasingly clear to cautious wealth…

USELESS for pretty much everything except storing wealth (its economic value is social, not industrial), gold acts as inflation-proof money when investors need it most – right in the middle of an asset-price deflation.

At least, that’s how people choosing to buy gold amid today’s global deflation in risk assets see it. Why else do you think German coin and small-bar dealers are being emptied, even at 5% (and worse) premiums to “melt” value? Why else did gold-hoarding deliver secure, rising purchasing power amid the Great Depression of the 1930s…?

Given central banks’ default response to any level of financial stress, it’s a unique and appealing attribute. Because rather than leaving cash hoarders alone, sub-zero real rates of interest – plus the ever-present threat of massive devaluation – force sleepless nights on cautious savers. (The risk of banking collapse is an extra, but non-government-inspired threat.)

So when there’s a dash for cash, it’s little wonder that “worried wealth” finds gold better even than Dollars. Because gold cannot be inflated, nor destroyed. And it has 5,000 years of human use as a secure store of value behind it.

Yes, this month’s flight from everything into cash (which still means US Dollars worldwide) has knocked the gold price 6% off its recent record high vs. the greenback. But compared with all other assets bar Treasuries, however, gold shows phenomenal strength so far. Oil is down 20%. Platinum is 15% off. Aussie Dollars have dropped 10%, despite paying 450 basis points above cash deposits at the US Fed.

And should the slump continue, investment demand for physical gold is likely to put a floor under gold prices much sooner than other “risk assets” find their floor, just as it did during the Lehmans Crash.

Amid financial stress, physical gold hoarding creates a source of deep and widening demand that no other asset class enjoys. Not even silver comes close, because institutional and high-net worth buyers would rather get gold’s significantly deeper wholesale liquidity and much lower storage costs.

Indeed, it’s hard to class all “precious metals” together – in terms of price behavior – when the inevitable hits the fan.

Gold, unlike platinum and silver, commands a “safe haven” premium that industrial commodities can’t – a critical point when credit dries up and risk assets are converted back into cash.

Compare gold’s price-action with any other raw material, in whatever currency. When confidence and economic demand sink, gold attracts capital. Whereas crude oil, copper, soybeans, even silver and platinum…they’re all vulnerable to risk aversion, because their bull markets tend to rely on economic growth, whether or not it’s fed by money-supply inflation.

Gold, in short, is not merely the “inflation play” that most analysts and journalists think (if, indeed, they’re thinking at all). Hoarding physical metal may not seem a “sophisticated” reaction to current events. Hedging your move into cash may not even outperform an all-Dollar position, short or long term. But it is perfectly normal, historically evidenced, and sane response.

It also remains a minority sport at present.

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So, yes, there’s been another smallish correction in the Gold price..

And every time there is you get all the paperbugs out in force gloating about a $50 drop when it’s just taken out new highs again a week or two earlier. This is pretty laughable, and especially so when compared to the antics of the stock market or the FX markets lately.

We’ve written before about whether gold is in a bubble or not, and back in January  we correctly told you what was really going to happen in 2010, so maybe you should pay attention now too.

Gold, globally is not in a bubble

However, this kind of behaviour in certain parts of the world, should be ringing BIG alarm bells to anyone paying attention.

This is the Chinese, doing as bid by their government, and buying gold

So why exactly do you think their government have advised it’s citizenry to get out of paper and into real money?

Gold is going up a long way from here over the next few years, and this post by Toby Connor is how you should view Gold corrections in the meantime

FOCUS ON WHAT MATTERS – by Toby Connor – http://goldscents.com

I know this is hard to do, especially when one is weathering draw downs. And of course a liberal dose of gloating from the bears during these times doesn’t help either. But let’s not get sidetracked by the little things and let’s face it, the haters are going to show up every time gold corrects. We really should be used to that by now. They’ve been doing it for 10 years.

The cold hard reality is that gold is still in a secular bull market and the naysayers are having to ply their trade from ever higher levels.

So let’s take a look at what’s really happening shall we.

The single most important point everyone should keep in mind is the breakout above the 1980 high of $850. If it wasn’t for a once in a generation stock and credit market collapse I don’t think gold would have ever dropped back below that level. Even so the move was very brief and has now been tested at the last B-wave bottom.

Folks I seriously doubt the world will ever see sub $850 gold again. Just like we’ve never seen sub $250 gold after the breakout in the 70’s. So anyone forecasting $700 gold just doesn’t understand how bull markets work. It just ain’t gonna happen.

Next came the breakout above the last C-wave high at $1025.

That breakout was also tested during the February yearly cycle low. I doubt we will see gold back below $1000 for the remainder of this bull market.

Now gold is trying to breakout and hold above the next big resistance level of $1200. The initial break in December was repulsed. Now we have a second break that is in the process of testing the breakout.

Now I have no idea whether this breakout will be the one that holds or whether gold will have to consolidate a bit more. But sooner or later gold is going to break above this level and never look back.

I think we probably have enough time left in the current intermediate cycle for it to happen soon, but if not, I’m confident it will happen and I’m on board and ready for the ride when it does.

My suggestion is when you start to get sidetracked by the daily wiggles or the intermittent draw downs you come back and look at these charts and stay focused on what really matters.

BuyGoldSilver.org say

Nothing has changed, we’re just a little bit closer to the ultimate outcome, you still need to be transferring your paper into Gold to preserve your wealth for the next few years.

Get Started Now and get a FREE gram of Gold!

Well what a week we’ve seen, 1000 point Dow drops in 10 minutes, emergency Euro meetings to roughshod over all their deeply enshrined Germanic principles:

“Thou Shalt NOT Print Money”

When the Germans with their recent history of Weimar hyperinflation start printing money to buy bankrupt Government debt you can be truly sure the end (game) is not only coming, it is nigh..

We’re going to reiterate our core message again, because this last week has backed up what we’ve been saying for the last year, and hopefully shown everybody it

THAT THE REAL CRISIS IS NOT OVER, IT HASN’T EVEN STARTED YET..

Yes the Gold Train has left the station again taking out new highs in Dollars, Euros, GBP etc etc, but if you run you can still catch it, otherwise you take the biggest financial risk of your life staying in ” imaginary electron and paper land ” Larry_Edelson writes more eloquently than us, and has done just yesterday so we’ll hand over to him.

“Was last week’s amazing stock market rout and collapse in the euro currency the beginning of a new era of volatility in the markets?

Could the economy start turning down again? Could real estate prices enter a renewed decline? Could there be more big financial blowups?

My answers to the above: Yes, to all of those questions!

And as I have often warned, central banks and governments around the world — not just our Federal Reserve — will do anything and everything to try and prevent meltdowns from occurring, no matter what market sector they’re occurring in, or what country.

They will fight downturns tooth and nail. They will backstop and guarantee just about anything. They will keep investing and reinvesting in banks, mortgage brokers, real estate, busted industrial sectors, and more. No matter what it takes to try and save the world.

And they will continue to do it all by printing money like crazy … issuing — and even buying — their own mountains of new debt.

You see, central bankers have this odd personality quirk: They think they can defy the natural laws of the rise and fall of societies and civilizations … that they can change the inevitable cyclical forces that drive economies … and that they can even change natural human self-interest and behavior.

And indeed, some of their policies will help. But in reality, most policies will fail … backfire … and aggravate the crisis. And in ways very few today truly understand.

A few years from now, not only will we have witnessed the collapse of a mountain of debt in the private sector — but also in the public sector.

With precious few exceptions, most governments around the globe are going to end up either defaulting outright or on the sly on their IOUs … their bonds … their contingent liabilities and promises,

and YOU WILL BE THE ONE PAYING THE PRICE.

You can already see the early stages of this with what’s happening in Greece, Portugal, Spain and Italy … where bond and stock markets are collapsing … and where the currency, the euro, is in a veritable freefall … where investors all over the world are scrambling to get their hands on the only real form of money that has latest the test of time, gold.

And …

In The End, A Whole New Monetary System Will Be Needed

New currencies. New rules of the game. New institutions. A new monetary system.

Gold Has Now Closed Above $1,162 An Ounce — Your Signal That Its Next Phase Higher to Well Above $2,000 Has Begun.

I’ve warned you about this before. But if you still don’t believe me, I suggest you take your cues from gold, which is much more than just an inflation barometer. Much, much more. It’s the ultimate currency — real money.

That’s why last Thursday, as virtually all global markets were in meltdown mode — ONLY ONE market stood head and shoulders above all others, and exploded higher: None other than real money itself, GOLD!

And despite any pullbacks that may occur in gold in the weeks ahead — gold has now given me all the signals I’ve been expecting … and is now preparing to blast off to much higher prices.

Put simply, I believe the price of gold is officially now on its way toward $1,500 … then $1,750 … and then $2,000 an ounce, and probably much higher.

But mark my words: Gold’s next rocket ride higher is not just a bull market for savvy investors to take advantage of.

No, it’s much more than that — because the next phase up in gold will signal the final demise of the existing fiat paper monetary system, and the eventual birth of a new monetary system where the dollar is no longer the world’s reserve currency.

The problem: Between now and then, it will be holy hell for investors who do not understand what’s happening and do not appropriately protect their wealth.

Some Of The Things I Think You Need To Seriously Consider Going Forward …

1. The value of your current dollars. You’ve already seen how the euro has collapsed, shedding as much as 8% of its value in barely a month. So when this great sovereign debt crisis hits the U.S. dollar — you have to ask yourself a very simple question: What will your cash be worth if left in your typical savings account?

80 cents on the dollar? 70 cents? 50 cents?

I can’t predict what the exact future value of the dollar will be. At least not to the penny. But I can tell you this: The U.S. dollar, despite its recent strength, is in even worse shape than the euro and faces a historic devaluation.

That’s why I also agree with what famed investor Warren Buffett recently said about cash held in U.S. dollars …

“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”

And this is not new. It’s been that way for cash for a very long time.

For instance …

$5,000 in cash squirreled away in 1913, when the Federal Reserve was created, is now worth only 4.5 cents. That’s right, 4.5 cents.

Put another way, it would take $110,582.14 of today’s money to buy what $5,000 would have bought in 1913.

Want more recent examples? Consider the following …

It now takes $6,167.83 to buy what $5,000 bought just ten years ago

$27,319.59 to buy what $5,000 bought in 1970

$44,075.92 to buy what $5,000 bought in 1950

Even a McDonald’s hamburger — which cost a mere 57 cents in 1959 — now costs $4.29, an increase of 653%, or just over 13% per year.

Looking into the future, and at the rate the I expect the dollar to lose value going forward — a little over six years from now a Big Mac could cost twice that, or $8.58, if not more.

A burger costs 653% more now than it did 50 years ago. What does that tell you about the U.S. dollar?

So what do you do with your cash? Should you even keep it in the U.S. dollar?

What about …

2. The value of your stock market investments. Will stocks collapse to new record lows as the world moves through a major monetary crisis and the dollar is eventually replaced as the world’s reserve currency?

Or will stocks swing wildly, then inflate higher — as they have done in emerging countries where currencies were devalued?

The answer to these questions and the timing of them are absolutely essential for not only protecting your wealth, but for profiting from this crisis.

Suffice it to say, that only a few select and very savvy investors will profit in the world’s stock markets going forward — while more than 99% of investors will likely lose their shirts and get the stock markets’ next big moves DEAD WRONG, yet again.

What about …

3. Other investments besides gold that are likely to soar in the months and years ahead?

How will other precious metals perform, such as silver, platinum, and palladium?

What will energy prices do as the world moves into the next stage of this great financial crisis, where sovereign states are laid bare as emperors that truly have no clothes and are full of nothing but empty promises?

What other assets are the best to invest in? And how do you invest in them?

All these questions — and the answers to them — are now vital for the future, more than at any time in the past, INCLUDING THE 1930′S GREAT DEPRESSION.

And it’s why — now, more than ever before, the decisions you make and actions you take will determine how well — or even IF — your family weathers this historic economic hurricane.

As always, my team and I are absolutely committed to giving you the intelligence, strategies and recommendations you need to insulate your wealth and even grow richer as this crisis unfolds.

Best wishes, Larry Edelson – www.uncommonwisdomdaily.com

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The Gold Train is leaving the station

Remember not even two weeks or so ago we told you there was something big coming, we could feel it in our bones..?  ..Yea, well, told ya so..

This one was mailed in for consideration today and we couldn’t agree more. It’s by Jordan Roy-Byrne, CMT from thedailygold.com – original here .

Basically as we have been saying since the launch of this site last year, you have limited time to protect your wealth from the impending global meltdown, you need to be buying gold NOW..

Anyway, over to Jordan..

All Aboard the Gold Train as Recognition Move Approaches..

Since early 2009 we’ve written about the super-bullish long-term cup and handle pattern in Gold. It dates back to 1980 and has a logarithmic target of about $2,100. We noted that previous cup and handle patterns in Gold all reached their logarithmic target¹. We expect that this big move to $2,100 will be the recognition move that awakens the masses to the Gold bull market and the reality of severe inflation in the near future.

Speaking of the near future, the relative strength of Gold in the face of a strong US dollar (or weak Euro) is one big hint that this recognition move is around the corner. We’ve noted this before and it is important to explain to new readers. Gold priced in foreign currencies has been leading Gold in US$ terms. It is true for the entire bull market and is quite evident in just the past few years.

In the chart below we use the foreign currency ETF (UDN) to show Gold against currencies ex the US Dollar. The lower half shows Gold in US Dollars. Note how Gold/UDN is breaking away to new highs. That chart is so strong that it barely had time for even a small correction. Since Gold/UDN has been leading Gold reliably, this is an indication of what is eventually coming in the US Dollar price of Gold.

Nowhere Close to a Bubble

As Gold pierces $1200 and makes a new high, surely we will hear a new round of calls that Gold is in a bubble or it is a crowded trade. Be sure to avoid this unsubstantiated nonsense, as it will only serve to waste your time and inevitably reduce your net worth. Let me provide you with just a few pieces of information, which refute this baseless claim.

First, did you know that as of a few months ago, Gold equities and ETF’s only accounted for 0.7% of all managed assets in the world³! Can you imagine how high precious metals could rise, if everyone in the world just put 2% of their assets in this sector? What if it was 5% or 10%?

Second, Jim Rogers recently spoke at a conference with, in his words, 300 big-time money managers. Apparently 76% of them had never owned Gold!

Third, superstar fund manager John Paulson of subprime fame has had great difficulty raising money for his Gold fund⁴. Even one of the top fund managers can’t even convince people to get aboard the Gold train.

Finally, consider public opinion on Gold, courtesy of sentimentrader.com. In the past, public opinion followed Gold higher. Yet, since the end of 2008, public opinion has stayed in a range, while Gold has climbed about $300/oz. The public hasn’t budged despite the historic breakout and holding of $1000/oz level.

Policy Makers are Shooting Blanks

Mainstream and amateur analysts will make the claims that the Fed will tighten or that the government will get serious about its troubling finances. There is almost nothing the authorities can do to stop the coming inflation and the roaring bull market in Gold and Silver.

First and most importantly, because of the overall debt level, which is massive compared to 1980, the US cannot afford to let interest rates rise. If interest rates rise, the market will only lose greater and greater confidence in the US as the interest burden will accelerate thereby hurting the economy’s ability to grow and hastening the threat of bankruptcy. However, if interest rates remain low, speculation in hard assets will become rampant as these markets continue to rise, inflation ticks up and purchasing power declines.

Second, the Fed would have difficulty trying to tighten the money supply. Remember that to do this, the Fed would need to sell assets into the market. Remember, the Fed’s balance sheet consists of garbage assets that the Fed overpaid for. Yes they could raise interest rates but then how would the banks survive? They wouldn’t be able to borrow at 0.25% and repair their balance sheets. If the Fed would raise rates above the level of inflation, it would certainly end up threatening the financial system.

Moreover, as we’ve noted again and again, severe inflation results from a loss of confidence in a government’s ability to meet its debts. This manifests in a falling bond market, rising interest rates and currency weakness. Debt crisis’ go hand in hand with currency crises. Hence, we see Gold breaking out against numerous currencies even though “the banks aren’t lending” and “velocity is falling.”

The last line of defense is the Treasury market. If and when interest rates breakout to the upside, the authorities will effectively lose both control and power. At that point, the inflation genie will be out of the bottle. The action in Gold is already hinting at that outcome.

Conclusion

Even though Gold has risen nine years in a row, it is nowhere near a bubble. Just take a look at this chart courtesy of Frank Holmes. It compares Gold’s current bull market with its bull market in the 1970s.

Note that Gold rose about six-fold the first eight years into the bull market (it began in 1970). Ultimately it rose 25-fold.

The Nasdaq from 1982 to 1992 advanced about four fold. Ultimately it rose 29-fold. The Nikkei advanced less than three fold from 1970 to 1978. From 1970 to 1990 it gained 19-fold. Gold is nine years into its bull market and has advanced less than five fold. See a pattern here?

If you’d like professional assistance riding the coming acceleration and eventual mania in the Gold and Silver market, then visit their website and consider a free 14-day trial to our premium newsletter.

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

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Paul Tustain founder of Bullionvault explains the “100 to 1 leverage” in detail and simultaneously demonstrates why Bullionvault are our preferred choice for buying and storing gold safely.

“A note on the LBMA, gold futures and forwards, and “100-to-1 leverage” in London’s wholesale gold bullion market…

SOME COMMENTATORS are alarmed that the amount of ‘physical’ gold in London is not sufficient to meet the immediate demands of the market.

This concern is based on a simple misunderstanding. Read what follows and you will have a much better idea of how gold futures, forwards, the spot and physical markets interact.

Professionals who trade gold over the counter use a convenient standard for specifying the form of the gold they will deliver between each other. The standard is written and maintained by the London Bullion Market Association (LBMA).

This standard is the Good Delivery bar which weighs about 400 troy ounces, and is traded 100% fine (i.e. gross bar weight * purity). A Good Delivery bar must have been manufactured by a recognized refiner which subjects itself to rigorous and ongoing scrutiny by LBMA referees. All their output is carefully assayed.

Professional gold dealers, and they are mostly banks, trade both these bars, and notional contracts which are underpinned by these bars, i.e. ‘derivatives’ of the bars. These are things like gold futures, forwards and options.

Gold Forwards

The demand for forwards comes from volume buyers of physical metal – like gold dealers who wish to supply jewelry manufacturers – while the volume sellers are often gold mines and refiners. Both will make very specific forward settlement dates and conditions for the bullion delivery on a forward trade.

Private individuals would struggle to trade on their own account on the forward market, because they lack the settlement facilities – like vaulting accounts at the accredited vaults – which enable them to take and make delivery of Good Delivery bars. But a miner might go to an LBMA bullion bank and open a forward sale, and then arrange its gold to be shipped from a registered refiner direct to the buying bank.

So forwards are deals in physical gold, but not necessarily for immediate settlement.

Gold Future Contracts

Futures are different. Everyone – including private investors – can speculate on gold futures very easily. So is there physical gold behind futures trades?

A few Clearing Members of futures exchange will have a depository account with some real gold in it, though Ordinary Members would be unlikely to, and therefore cannot usually settle with their customers in gold.

Clearing Members’ gold sits in the depository vaults, and title to it rests with warrants which are passed between Clearing Members on the occasions there is a net settlement of gold between them. (Several years ago BullionVault spent quite a while trying to find a way of owning gold in a Comex Depository Vault, through a Clearing Member, but we never found a satisfactory way. Perhaps someone else has been more successful. If they have we’d be happy to learn how, and publish the details.)

Because there is not ordinarily access to gold via futures markets the huge majority of Ordinary Members of the futures exchanges, and their customers, settle cash, not gold. The cash amount they settle is calculated by reference to a specific price formula which becomes very relevant when a future contract expires.

Futures & Forwards Together

Futures and forwards work hand-in-hand. Futures give the bank the opportunity to approximately hedge out any price risk they have taken on a specific forward trade. Futures are standardized, highly liquid and easily traded in volume. The beauty of futures is that all the gradual liquidity of three months of forward deliveries on specific dates can be concentrated in a standardized futures contract which you can deal with any trader, because all the contracts expire on the same day and with the same terms, regardless of which trader you choose. This exchangeability is the source of their liquidity.

Forwards, on the other hand, are hopelessly illiquid. Each was custom built ‘over the counter’ for a specific settlement day. But forwards really are deals in physical gold – which will settle as Good Delivery bars, on almost every day of the year. So the flow of forwards through the vaulting system is smoother than the flow of futures through a futures exchange, which rush to close en-masse at expiry.

Adrian Douglas’ Misunderstanding

The key concern that Adrian Douglas (a director of the Gold Anti-Trust Action Committee (GATA), who attended the recent CFTC hearing) seems to have is that there is a giant physical exposure which remains undelivered. Let me explain why that is confused, while granting that there was no good explanation given by Jeffrey Christian (managing director of CPM Group, a New York commodities-market consultancy), who was in the hot-seat of a CFTC hearing. It is easier for me with the written word.

Forward contracts are priced according to two things: the price of gold, and the cost of money to the forward date of settlement (i.e. interest rates). Forward prices of gold stretch out into the future for months and years, forming what’s called the forward curve.

The entire length of that forward curve is what the LBMA member’s trader calls ‘physical’. For them this differentiates it from the cash-only-equivalent of a futures contract. So, when they talk about ‘physical’ or about the open ‘physical’ position they are talking about a whole lot of forward deliveries which sellers are under no obligation to deliver today, and which the buyers neither immediately want nor can demand.

Those forwards will fall due for delivery a day at a time without causing more than a ripple in the market. But being extended into a series of physical settlements stretching out on that curve for years, the open physical position is of course much, much larger than the amount of gold which happens to be in the various London vaults today. That’s no big deal, it’s where gold mines and aeroplanes come in.

So when a professional market analyst like Mr Christian says the open physical position exceeds the amount of gold in the vaults all he is saying is that the gold which is due for physical settlement next week or next month has not necessarily been shipped in yet. But he knows (even if he does not express it very clearly) that the seller of a forward is on the hook for making the gold available on the appointed settlement date. And of course the seller will incur a severe financial penalty for failing to settle, which is why forward sellers don’t sell gold without being very sure they can deliver it.

Mr Douglas seems to have made an understandable and honest mistake caused by the slightly confusing language which is used by traders. I hope you now see that the LBMA’s open physical position on its forward curve – far from being a risk – is a genuine benefit to the gold market’s smooth operation. It defines the daily rate at which real bars are needed into the future, and firmly places responsibility on the seller to make sure the gold arrives in good time. This helps keep the world of real bars settling efficiently.

At BullionVault we and all our customers benefit from this, because it means we can buy real bullion a few thousand ounces at a time from an LBMA dealer who keeps bars on hand to satisfy our modest demands. We don’t have to organize the shipments. We settle 48 hours after dealing, by sending a bank transfer and getting ViaMat (our recognized vault operator) to collect the bars. This is called spot trading, which is, in effect, the nearest 2 days of that long forward curve.

How Banks Use the Forward Curve

When novices jump into the spot market and buy up all the immediately available stock (and this happens from time to time) the result is a spike in spot prices which reflects a lack of sellers capable of making immediate delivery. It may not represent a fundamental shift in the value of gold; there might – for example – be plenty of gold arriving next week, and all of it available at a cheaper price.

What a trader will do is look at the shape of the forward curve. If he sees that the curve has developed a lump at 48 hours, caused by that aggressive novice’s buying, it will be profitable for him to sell his spare gold at spot, and buy forward by a week. He can deliver his bullion bank’s on-hand gold which will be replenished next week when the aeroplane arrives. And he will make money from the aggressive buyer who has paid a premium price for urgent settlement.

Meanwhile, as he buys one week forward in anticipation of the aeroplane’s arrival the effect is to distribute the novice’s order along the curve, and to smooth it out again. You may have read of gold bugs who put huge orders into the spot market to prove the gold is not there. Well now you understand why no-one sells it to them! Selling physical gold which you cannot deliver on time is a big mistake which professionals don’t make. If the gold bugs ordered 2 months forward – allowing time for sourcing and shipments – there would be plenty of sellers happy to take their business.

BullionVault Gold

So where does this leave the private investor? Using BullionVault, you can buy ‘Good Delivery’ gold from stock which is already in the vault. You are not even waiting for spot markets to settle.

The unusual rule on BullionVault is that a seller’s gold must be on-hand, in the vault, for settlement; and the buyer’s cash must be cleared in the bank. That’s why we host the only gold market in the world which offers instantaneous settlement at the point of trade, and on a 24/7 basis. Thereafter, BullionVault simply looks after your gold. It’s your property. It isn’t available for any selling when the spot market goes to a premium, and we have neither the right nor the wish to play the curve the way a bullion bank does.

You can see this proven, each day, on our Daily Audit. If we were delivering gold out to make a few dollars on the forward curve our bar lists would show we were short of physical gold in our vault. This is why we regard it as so important to publish our bar lists, and their reconciliation to all customers’ holdings, on a daily basis. So far as we know we are the only gold business in the world which does this.

We hope this has cleared up any confusion about the amount of gold in London vaults. Now we’d like to finish with a quick look at who is manipulating the futures market, and how.

Gold Futures Manipulation

Futures brokers here in the UK routinely tell their new customers that 9 out of 10 private customers lose money by dealing in futures. We understand the regulators require this as part of the necessary risk warning.

Part of the reason – which has recently been alleged by GATA – is that it is quite likely that there is some price ‘manipulation’ of futures contracts at expiry. This sort of thing is not a gold problem. It is a problem relating to futures markets in general.

Imagine you are a professional futures market seller – not necessarily of gold, but of anything – and you have the ability to settle the underlying commodity, while private investors do not. You sell the futures whenever they appear to be at a premium over your forward curve, which will happen as the speculators get into a buying frenzy on the futures market.

Suppose that at expiry the futures price is low against the forward curve, which is quite likely if lots of private investors are on the long side and are rushing to close out their near contract. You – the professional – will be perfectly happy to buy the future back, so long as the discount to forwards remains worth it, because then your physical stock won’t have to be delivered out, and you won’t need to buy a new forward to arrange a relatively expensive new delivery of physical stock into your depository account. So you see private investors will only find buyers for their urgent sales if the buyers get a discount to fair value. The professionals are in the box seat because they can settle.

Now suppose the opposite: that at expiry, the future is at a premium over the forward curve (which is what happens when lots of short sellers who can’t settle have been dominating the speculator’s market, and are now rushing in to buy to close before expiry). Now the professional will act as the seller, but only if the future is offering him a premium over the forward curve, otherwise he’ll run his open long to settlement. So once again the professional has the whip hand over a crowd all trying to do the same thing to avoid settlement. Whichever way the market moves the professional is in the driving seat if he can sort out settlements, which is the position few (if any) private investors are in.

It gets worse. Rolling over to the new futures contract doubles the opportunity for the professionals to profit. If, having just sold at a discount, lots of private investors are rolling forward to buy the new futures contract for the next quarter then that future will offer the professionals a premium over the smooth forward curve, and the professional will willingly sell it to them as soon as the premium is sufficient to make it profitable.

So you see even when private investors are offered rollover at apparently attractive terms (e.g. at middle prices and half the commission) the reality is that they are selling the old at a discount and buying the new at a premium. Wherever your trade is in the same direction as a large number of market participants who lack the ability to run their position until settlement you will probably lose out in this subtle way.

This is where the artificiality of futures wrings profit out of un-sophisticated investors who wish to speculate. Who’s to blame? It’s hard to accuse a seller of price manipulation when he runs his two month old trade to settlement, and it’s very hard to blame the opportunist professional buyer for supporting a low price by buying at a discount at expiry! The only people who can really be blamed for the expiry and rollover costs are the people who bought futures without both the money and the storage facilities to settle, and that’s usually those private investors who are its victims; which is ironic.

That’s futures, and it’s ultimately each investor’s own choice. If you choose to play you are dealing in a marketplace which may force you to trade at the time of your maximum disadvantage.

At BullionVault our position is that you might cautiously use futures for short term speculation. But we think you’d do better to avoid them for long term capital preservation, which for many is what buying gold is about.

Instead, you should choose physical gold through services like ours, where there are no artificial barriers placed in the way of smoothly continuous trading and settlement. All you need to do to avoid an unfair price dip in futures at expiry is buy the real thing, and although that’s difficult with pork-bellies, with gold it’s easy.

By Paul Tustain

BullionVault.com

Paul Tustain is the founder of BullionVault.com – with 13,000 customers and $600m in gold bars, now the world’s largest store of privately-owned investment gold bullion.

(c) BullionVault 2010

This is a great piece from Howard Katz at www.thegoldspeculator.com on keeping the daily and monthly Gold price moves in perspective.

We’ve written about this several times ourselves but its never been more important to keep this in mind, what with the Comex fraud & blatent Gold market manipulation, and the terminally broken global economy which ultimately only means one thing for gold over the long term..

Over to Howard..

Alas, poor gold bug; I knew him Horatio.  He had the brains to be perfectly positioned in the great gold bull market of 1999-2020.  Yet he did not make any money from his wisdom.  Take, for example, the sell-off of April 16, 2010.  Gold was just about to make another powerful move to the upside.  But the sell-off scared him away, and he missed the move.  What was it that he did wrong?

Those who read these articles know that I am a big chart man, and last week’s action in the markets is a good example of why this is so important.  There is much to be learned from the charts, but the most important is perspective.  When one looks at any object, perspective is very important.  Take, for example, a mountain range.  One can see it from a satellite picture taken from earth orbit.  One can see its majestic beauty from a few miles away (where it dominates the horizon).  Or one can focus on a single daisy on the mountainside on a summer day.  These are three different pictures, and they carry three different emotions.

The vast majority of your fellow traders (against whom you are competing) are not chartists.  The emotion with which they see the market roughly corresponds to the emotion of the average trader.  He remembers the market action for the past few months, and what has happened further back sort of fades into the distance.

First, as soon as you start to trade the market and have your own money at stake, your perspective changes radically.  You see everything through a microscope, as it were.  Time slows down, and everything becomes much more vivid.  Now, what is the message of this chart?

The answer is clear.  Gold is moving sideways.  Isn’t it obvious?

Well, not exactly, this is why I usually emphasize the 10-15 year chart.  It gives an entirely different picture.  Gold is going up.

Well, what is it?  Is gold moving sideways, or is it moving up?  And this is not just a matter of semantics.  The question is being asked from the very practical viewpoint of how do I make the most money?

In theory, it might seem that one can make money at either level.  Either focus on the short term and play the up and down moves, or focus on the big picture and hang on tight for the big move.  But over a century of trading by some of the country’s best has given a different answer, and I never tire of saying it.  THE BIG MONEY IS MADE IN THE BIG MOVE.

Yes, you can catch a short term move.  You can catch many of them.  But the short term is too hard to predict.  Take, for example, Friday’s decline in gold.  It was caused by the U.S. Government’s lawsuit against Goldman Sachs.  Like many other events which move the markets this was almost impossible to predict for two reasons.

One can imagine aggressive fundamental traders who employ a host of flies on the wall who travel over the world and spy on the key events which will move markets.  One of the flies is in the U.S. attorney’s office in Washington, D.C.  Another fly is in the office of the oil minister of Saudi Arabia.  And another fly has infiltrated into a radical terrorist group which is planning to blow up an oil pipeline.  (And then there are 4,567 more flies at various key points around the world where market-moving events are likely to happen, all ready with their cell phones to report in as soon as an important news item comes their way.)

But even if your army of flies is ready to go, you face a second problem.  You can be the smartest economist in the world.  You can correctly forecast the economic results of all the news your flies bring to you.  But how do you know how the markets will interpret that news?  The most famous example of misinterpretation of a news item was Nixon’s imposition of price and wage controls on August 15, 1971.  If your fly on the wall in the Oval Office in August 1971 had reported this to you, then, being a good economist, you would have said, “Wow, this means that Nixon is planning to print money.  This is bullish for gold.  I’m going to buy.”

But the stupid traders in the markets said, “Wow, the great leader is taking decisive action against inflation.  This means that prices will not go up.  Therefore, I’m going to sell gold.”

Now the stupid traders were wrong in the long run.  But there were so many of them that they dominated the markets in the short run, and both gold and gold stocks went down.  And this is another serious problem with fundamental analysis.  You can have flies on the wall all over the world.  You can correctly analyze the economic effects of the events they report.  But you can never be sure that the market will agree with your analysis.  All your good work goes down the tubes because of that large majority of stupid people (at least stupid compared to you) who move the market in the opposite direction from what it should be.

A good example of this is Friday’s attack on Goldman Sachs.  If you can remember back two years ago, when the Wall Street bailout passed Congress, candidate Obama supported it.  This support was crucial because it allowed the Democratic members of Congress to vote for the bill, and it was the Democrats who provided the votes needed for passage.  So in a very real sense it was Barack Obama who gave the $750+ billion to Wall Street (most of which ended up at Goldman Sachs).

In short, the entire anti-Wall Street aura of Obama’s lawsuit against Goldman is for show.  It is to convince the stupid public that he is against the rich.  Democrats have done this since the New Deal.  Rich Americans are willing to put up with this anti-rich rhetoric as long as the Government keeps stealing money from the average American and giving it to them, and they prove this by donating money to New Deal politicians.  Nothing has changed for 77 years.  The only difference is that the original New Dealers were more subtle about it.

So for traders to fear that Obama is suddenly turning against the rich is naiveté of an extreme kind.  It is the exact same type of misinterpretation of a news event as the price controls of 1971.  In the One-handed Economist of April 16, 2010, I present my argument that Friday’s decline in gold presents a buy opportunity.

If you compare the two gold charts in this article, you will come to understand the importance of the observation that the big money is made in the big move.  It has occurred to many people to focus on the short term and buy the dips and sell the rallies.  This can work for a while.

But sooner or later the market puts on a good move, and then you are left behind.

It is well known, for example, that in the options’ markets the option buyers usually lose, and the option writers usually win.  This is because the buyers are too focused on the short term.  They get overexcited by the prospect of big profits in a short period of time.  So they rush in and overpay for their options.  This is all the writer needs.  He plays it conservatively, gets the odds on his side and plays the percentages.  He is a winner.  The short term buyer is a loser.

The proven path to success in the markets is to latch on to a long term move whose cause is not understood by most traders.  This fundamental cause will dominate the markets, and it is most visible on the long term chart.  It took almost 5 years for gold to form its saucer bottom, and one was best advised to be otherwise occupied during that time.  But once the saucer broke to the upside (Dec. 2002) that was the signal that gold was going up.  And it has been up ever since.

We are a long way from the end of this gold bull market, and the best way to make some pretty pennies from it is to keep focused on the big move.  Keep in mind that long term chart, and expect reactions or consolidations to occur for periods of about half a year.  Design for yourself a strategy within your means which will being in the profits as the long term move unfolds.

Getting out near the end of the move is another problem but is not too difficult.  It is some distance in the future, and we can leave this problem to another day.  Right now the danger is not that we will overstay the top.  It is that we will be scaredy cats and sell too soon.  In this way, the market runs away from us, and we are not in it.

To guide you and help you to execute such a strategy, I write an economic letter, the One-handed Economist, on a fortnightly (every two weeks) basis.  I was a gold bug in the 1970s, a stock bug in the 1980s and ‘90s and am a gold bug again at the present time.  The One-handed Economist costs $300 per year.  You may subscribe by visiting my web site, www.thegoldspeculator.com

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We’ve had a strange feeling we’ve had for the last few weeks, that all is so-o not well, something’s brewing, and there’s just so many situations teetering on the edge of potential catastrophe to choose from at the moment, something’s got to blow..

Whether it’s a Greek default / bailout, (either has the potential to start a systemic crisis of one sort or another) or a Comex gold fraud explosion, a sudden currency implosion (think Sterling) or sudden or prolonged devaluation an unexpected Eastern Bloc debt domino knockout or any number of another credit ratings driven CDS related fiascos, it almost doesn’t matter what causes it, we are fairly sure it’s definitely coming in 2010…

You know when you can just feel it in your bones?

Well Larry Edelman from  Uncommon Wisdom Daily has  got it too. He thinks that Gold is flashing a warning loud and clear to anyone who’s listening, or looking for answers,  and it’s about China & the $ US Dollar  ..over to Larry..

“When you’ve been trading gold for 32 years like I have, you develop a sixth sense for the precious yellow metal. You can hear it speak to you. You can feel its heartbeat. You can interpret its signals.

Gold anticipates the not-so-obvious and often completely unforeseen economic developments better than any other investment I know of.

That’s why I am writing to you today. Gold’s rally last week to as high as $1,156 an ounce has an important message for all of us: It’s telling us that all is not well with the world and that something major is brewing out there.

What’s going on out there that’s not so obvious and that gold is picking up on?

It’s the relationship between China and the U.S. — and the implications of that relationship not just for the Chinese yuan, but also for the U.S. dollar.

You see, Treasury Secretary Tim Geithner travelled to Beijing this past week, where he got on his knees with his hat in his hand, begging Beijing to push up the value of its currency.

Now, no doubt, in the media, you’ve been hearing for years that China’s currency is undervalued.

But gold is telling you something different. It’s telling you the other side of the story. If the yuan is undervalued, then the dollar must be overvalued, meaning the greenback will soon resume its sharp decline in value.

If the yuan is undervalued, then the dollar must be overvalued, meaning the greenback will soon resume its sharp decline in value.

It’s telling you that if the Chinese yuan is undervalued, then the dollar must be overvalued against that currency too.

And that means that the U.S. dollar will soon resume its sharp decline in value, especially against what is now the world’s second largest economy.

So, right now, I want you to be prepared. First, by this heads up I’m sending you. And second, by understanding the historical progression of the relationship between gold and the dollar.

So let’s step back in time a bit …

How Gold and the Dollar Were Irrevocably Separated

It’s 1947. We’re in a London office on St. Swithins Lane. Inside are six members of the London Gold Committee. A bullion expert from N.M. Rothschild & Sons says, “Gentlemen, it is eleven o’clock.” We begin.

Each member immediately calls his office on a special direct telephone line to determine how much gold is available for sale and how much is bid for.

All heck is breaking loose because there’s not enough gold for sale to meet demand. Reason: Investors around the world have been jittery for weeks. They’ve been watching America’s financial position deteriorate.

In fact, America’s balance sheet is in such terrible shape that Treasury Secretary John Snyder had earlier been forced to announce new bond offerings to help cover the worst budget deficit in the history of the U.S. ($45 billion in the red), not to mention a $247 billion national debt.

The official price of gold is $35 an ounce and climbing. It seems like everyone wants the yellow metal. They’re worried that the value of the U.S. dollar will plummet in international currency markets.

Everyone’s hanging onto the gold they have, making the market even tighter.

Over the next few months, the buying pressure mounts, driving gold’s price up to $43.25, a gain of 23.5%. There are frequent rumors that the U.S. Treasury’s stockpiles of gold are dwindling. The squeeze is on.

The bull market in gold lasts until 1951 when Washington announces the so-called Treasury-Federal Reserve Accord, stipulating that the Treasury and the Federal Reserve act separately with respect to dollar policy and monetary policy.

The agreement effectively hands Washington the ability to spend unlimited amounts of money, with the Fed backing up the check book.

Twenty years later, the Bretton Woods Agreement on currencies is disbanded as Washington spends so much money and the Fed prints so much out of thin air that there simply isn’t enough gold to go around. Period.

Then, in 1973, all ties between gold and the dollar are officially cut by President Richard Nixon. Gold skyrockets from $43.25 an ounce to $850 over the next seven years, nearly a TWENTY-FOLD GAIN.

Now, Compare Our Nation’s Debts Today with Those in 1947, 1973 and 1980

In 1947, the official national debt was $247 billion. The price of gold was $35.

In 1973, the official national debt was $469 billion. The price of gold was $43.25.

In 1980, the national debt was $930 billion. The price of gold reached $850 an ounce.

Today, our official national debt is a whopping $12.78 trillion. That’s …

Important Message from the Gold Market … Thirteen times greater than it was in 1980

Important Message from the Gold Market … Twenty-seven times larger than our 1973 national debt, which broke the back of the gold standard

Important Message from the Gold Market … And nearly FIFTY-TWO TIMES larger than our national debt in 1947

And I emphasize, that’s just the official debt.

Today we also have more unfunded contingent liabilities than ever and more than any country in history, with our total outstanding debt and liabilities now exceeding $137 TRILLION.

Let’s Connect The Dots …

1943: Gold jumps as the world worries about our $247 billion national debt.

1973: The gold standard is abolished by President Nixon as our national debt hits $469 billion and all over the world investors are redeeming their weakening dollars for gold.

1980: Gold skyrockets to $850 an ounce as our national debt hits nearly one trillion dollars.

April 2010: A trade war between China and the U.S. heats up dramatically. Treasury Secretary Geithner travels to Beijing and essentially begs China to boost the value of its currency to “rebalance the global economy.”

And what country in the world has the biggest stash of U.S. dollars that would effectively be sold to boost the value of the yuan?

China!

Gold’s reaction: It starts to jump again, and flash buy signals.

Why? Because gold speaks the truth. That any revaluation higher in the yuan means mountains of dollars are going to be dumped, causing a massive dollar devaluation.

Not surprising, considering our national debt alone is now almost $13 trillion, more than twenty-seven times larger than is was when the gold standard was abolished.

My view: Listen to gold and what it’s telling you. I have absolutely no doubt that what’s going on between China and the U.S. … including Geithner’s visit to Beijing … is the next inevitable step in the demise of the dollar … and all about inflating away the U.S. debt problems.

Stay safe and cautious,

Larry – http://www.uncommonwisdomdaily.com.

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Well they just keep coming and coming don’t they?

Enron, Madoff, the bank-bailout-taxpayer-heist (1.5 Trillion so far) but they are all small fry compared to this.

We like the word “Trillions” here at buygoldsilver.org, and its a good job because 2010 is the year of the trillions alright, Trillions and trillions literally being begged, borrowed, printed, spent in your name (and charged to you) and now defrauded from the public at large..

Now thanks to the dogged work of GATA it’s finally becoming public news, but it has been obvious to anyone with a clue for years, but they (the manipulators) have always dismissed what is patently obvious to anyone looking as “paranoia, and “conspiracy theories”

.. well, it’s not just theories any more ..  ..from the Investing Contrarian

The Gold and Silver Manipulation spanning decades (going back well back into 1980s) has now taken mammoth proportions, one that could bankrupt not just a few banks but entire countries along with their central banks. Prime in this network are the Bank of England and the FED reserve who have been caught on the wrong side.

In an age of technology, Truth has started to take its stand against the mammoth cartel of the spider web of giant Investment Banks and Dealer Networks who are fronts for the governments and shadowy agencies (Rothschilds and the likes) whom they represent. Truth shall win and they better know this for their own sake.

Hitler spoke proudly about Gold manipulation “Gold is a state policy” meaning anyone found holding Gold will be punished. It is almost as if we are living in Hitler market in the precious metals pit.

For the first time now, the CFTC (The regulator) has a whistle blower testimony to make a legal move against the cartel of JPM and other trader network. In an incredible audio interview, the London based former Metals trader, Andrew Maguire, chronicled the silver manipulation, Trade by Trade in his running commentary to CFTC. This testimony is being ignored and being pushed under the carpet. Am yet to see main stream coverage of this mammoth fraud clinically and brilliantly uncovered by Andre Maguire, who is now a marked man for the cartel. He already has been involved in a Hit and Run case where a speeding car almost took him down. What is even more interesting, the driver has been caught and yet his testimony is still not being published. Why did he do it? Who paid him to do it? None of the details have emerged.

But for those who are on the Internet and can help in letting this be know to all, this is that interview and must be downloaded and kept for records. No one knows when the King Wold News website will be taken down which brought us this interview with Andrew and Adrian. We have already had one extraordinary attack on the website couple of days back through a coordinated DOS attack.

King World News today received more detail about yesterday’s attack on its Internet site, which happened soon after the posting of Eric King’s half-hour interview with GATA Chairman Bill Murphy, board member Adrian Douglas, and your secretary/treasurer about last week’s hearing of the U.S. Commodity Futures Trading Commission.

The major Internet hosting company that maintains the King World News site reported to King World News: “Your hosting account is the target of a distributed denial of service attack. To protect the network resources, we have temporarily placed your Web site behind a network filter. Once the attack has ended, service will be restored to normal. … Computers were attacking your account.”

Those who have not heard the interview of Andrw Maguire, please do listen to this bombshell and make your judgement on why it is not being given the importance in US justice department. This man while guilty along with the others had the nerve to stand up to the cartel.

The century biggest Fraud revealed

At a point within the interview Adrian Douglas makes the point that the Gold Market in LBMA (London Metals Exchange) is to the tune of $5.5 Trillion. And that is Gold contracts cleared only in London. Imagine COMEX when added to those volumes. We are talking of a market which is more than the economy of China and nearly 60% of US economy.

That market was closer to a few Billions in 1997 as noted by this article published in FT.

Literally at the crack of London dawn on January 30, 1997, the London Financial Times printed the following:

Deals involving about 30 million troy ounces, or 930 tonnes, of gold valued at more than $10 billion are cleared every working day in London, the international settlement centre for gold bullion.

This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.

With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.

The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr. Alan Baker, chairman of the association, pointed out.

It was also equivalent to the amount of gold held in the reserves of European Union central banks.

The size of the gold market will surprise many observers, but traders insisted the association’s statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr. Jeffrey Rhodes, of Standard Bank, London, said the 30m ounces should be “multiplied by three, and possibly five, to give the full scope of the global market”.

Mr. Baker said the association would produce average daily clearance figures every month. “They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business,” he predicted.

He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. “These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.

“The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics.”

LBMA members were divided over the move. One said he was puzzled. “What will people make of it?” Another said the exercise was “futile” because it did not give a complete picture of bullion market activity.

But Standard Bank’s Mr. Rhodes suggested the statistics would “become the key indicator in the world of gold, providing the numbers by which the market can be monitored”.

Mr. Martin Stokes, vice-chairman of the association, said: “This shows we have a serious market with a lot of depth and deserving of more attention.” The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank – a disposal that badly affected bullion market sentiment – was not a large amount by the market’s standards. The association was “making a bid to attract investors’ interest”.

The association also gave details yesterday about the silver market. Roughly 250 million ounces of silver valued at more than $1 billion are cleared daily in London.

It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7 million ounces of gold, worth nearly $3 billion, was traded daily by these market-makers.

The important point note is that the market is not made of Physical Gold but paper contracts exchanged in the form of Futures trades. This gives us the illusion of Price discovery and allows the players in the market to control and manipulate Gold and Silver Prices at will.

The recent hearing at CFTC were already under scrutiny of the cartel as this rather innocuous headline in Wall Street Journal indicates

The article continues its rant which can make one angry at even the language being used to describe the ones who are trying to bring justice to this dark and ill understood market:

One of the staunchest believers in the allegations of gold manipulation—the chairman of the Gold Anti-Trust Action Committee—will testify as well.

But others, including the CME’s Mr. LaSala and John J. Lothian, a commodity trading advisor, futures broker and the head of a well-known markets newsletter, will urge the CFTC not to pay attention to arguments that there has been manipulation.

“Those who believe gold and silver markets are manipulated to keep prices low are nothing more than politically opportunistic rent seekers in my book,” Mr. Lothian planned to say. “They are parasites on the body public profiting from selling fear and seeking political change that will benefit their world view and related market position.”

The CFTC called in a hearing n march 25 2010 post Andrew Testimony, which was to be live cast. Now, there were more than a few strange going ons at the hearing, one of which was that the video feed went dead just as Bill Murphy was about to detail the Maguire story for the CFTC. Here’s the video (that no one was able to see at the time) in which Murphy details Maguire’s charges that massive short positions by HSBC and JP Morgan aimed out flushing out longs occur regularly and predictably, in a coordinated fashion.

Let me address the cartel if ever they come across my writing: Truth will come out. Your days are counted. You will be taken down.

Every reader of this should make your own judgments on the sequence of extra ordinary events that have occurred from Jan 2010 to March 2010 including the Andre Maguire Testimony, his near Death, CFTC hearing going blank at critical times, and most importantly the forced ignorance of this mammoth Fraud which is being ignored by Main Stream even to the point of not having the desire to look one level deeper into all the Mire and dirt in the Precious metal markets.

Ka Boom!!!

We published Janet’s last article regarding Hedge Funds & speculators setting up CDS  s that demand payment in Gold a little while back, and it had some pretty big implications for anyone who was listening..

Well today’s is just mind-boggling..

How to Corner the Gold Market by Janet Tavakoli

First, let your greed overcome all regard for the stability of the global market, and overcome your aversion to illegal activities. Stay away from people like me, and fly under the radar, because I’d like to see you thrown in jail. Most Washington officials, regulators, and Wall Street managers are probably safe to hang around, especially if you cut them in for a piece of the action or give them vague promises of a future lucrative job.

Next, cultivate relationships—or plant someone—on as many as the gold exchanges as possible in London, New York, Chicago, Hong Kong, Sydney, and Dubai. Get to know key people at one or more of the bullion banks: JPMorgan Chase, UBS AG, ScotiaMocatta, Barclays Bank, and Deutsche Bank AG. Get to know as many mine producers as possible (China has been buying gold mines), and watch the sales of mines, particularly to China. Get to know all of the refiners.

Set up some new offshore corporations, subsidiaries of existing corporations, and a hedge fund or two of your own to engage in some gold trading.

Get to know as many hedge fund buyers as possible, and encourage everyone to buy physical gold. Remove the gold from custodian banks, and stash it in a vault solely under the control of the hedge fund. Use your network of people with net worth of $1 billion or more to get them to buy gold, too. Then work on the “small” investors with only $100 million or more net worth. Keep the key decision making group as small as possible to make it harder for anyone in your group to try to back out.

Pump up the gold story. Get your friends to tell retail investors to buy some gold every month. Get your buddies in the financial business to offer exchange traded gold funds (ETFs) that claim to buy physical gold. This will sound safe to retail suckers investors, but in fact, the ETFs are very risky. This will serve your purpose when you are ready to start a panic. These particular ETFs will allow the “gold” to be commingled with the custodian’s gold, and the custodian can lease out the gold. Moreover, the “gold” custodian can give it to a sub custodian that the manager doesn’t know. The sub custodian can give it to yet another sub custodian unknown to the original custodian. The manager will never audit the gold, and the gold is not “allocated” to a particular investor. Since this is an “exchange traded” gold fund, investors will probably assume the gold is regulated by the Commodities Futures Trading Commission (CFTC), but it isn’t. By the time investors wake up to the probability that there is very little actual gold backing their investment, your plan will be ready to execute.

Now you are ready to execute your plan.*

Step 1: Let everyone in the futures markets know you are buying gold, speculating in gold, and want to take physical delivery. It helps that China openly announced it wants to increase its gold reserves; the market isn’t looking too hard at you. At first, act like you’re naïve. Buy on margin and pyramid up by reinvesting your profits when you have them. This part is legal, but you don’t want to draw too much attention to yourself. Your buddies in the market will distract attention from you by buying gold and putting on straddles (selling the near months and buying in future months). No one will suspect collusion.

Step 2: Get the banks to let you finance your gold. They will lend you most of the value of your gold, especially if you do not argue about the interest rates they charge. Since they are borrowing from the Fed or another Central Bank at nearly zero, they consider the difference they get from you (backed by your gold) as gravy. As the price of gold rises, they will lend you more, and you can add to your gold position.

Be careful with the loans, though. In March, 1980, Paul Volcker was Chairman of the Federal Reserve. As the Hunts tried to corner the silver market, Volcker inadvertently ruined their plans. Volcker raised interest rates to fight inflation and issued a special credit restraint to banks admonishing banks not to provide financing for speculators in gold and silver. Borrowing costs rose, while silver prices dropped. The former billionaires were bankrupted by Volcker’s prudence. Fraud is not for sissies. But don’t worry too much. No one in Washington is really listening to Paul Volcker today. They just trot him out for a photo‐op, and then dilute any “rules” he suggests to render them totally ineffective.

Step 3: Book up all of the space at gold refiners, so that no one else can do it. Buy as many gold mines as possible, and do not hedge (sell gold forward). Since the price of gold is going up, persuade other mines to keep as much of new production as possible off the market, while you execute your plan to push up prices. Keep the part about your attempt to manipulate gold prices a secret. You won’t be 100% successful with all the mines, but you don’t have to be, and very bit helps. Besides, if these other mines insist on hedging (by selling gold forward), your plan may drive them into bankruptcy, and then you can buy them cheap.

Step 4: Create credit derivatives contracts that give you the option to ask for your pay‐off in gold. Make the reference credit the United States or the United Kingdom and create extra triggers like credit downgrades or other events that make it easier for you to demand payment in gold. The steps you use here to manipulate the gold market can be adapted to the credit derivatives market, so even if you can’t trigger the event, you can make the spreads move in your favor and demand collateral in gold. Hide the credit default swap contract from the eyes of the clearing exchanges by embedding them in a securitization, a credit‐linked note, or a sovereign fund product. The suckers investors that invest in these products never read the documentation, so when you trigger the event, they won’t realize they are caught in a short squeeze—scrambling for your gold at the high prices you set—until it is too late.

Step 5: Pick the future month to make your big move. You will go long gold futures and demand physical delivery. Your buddies will all go long, too. Mix it up a little by buying some straddles to make it appear you are just a regular speculator, and throw everyone off the scent. Balance your straddle so it is relatively neutral, and the initial long position continues to apply pressure. When the long side of your straddle becomes due, demand physical delivery (this will be before your other long position) to keep up the pressure.

Step 6: Secretly and habitually start making some large early purchases in non‐U.S. markets. That way, when the U.S. markets open, gold should follow the upward trend. Create chaos by doing as many as the following as possible in the shortest time possible. Move any remaining gold you have in trading depositories to private storage. Get some banks to issue research reports on how the bullion banks don’t have enough gold to cover their massive short positions, and talk about the tight gold supplies. Trigger some of those credit default swaps. Inform the suckers investors in non‐allocated “paper” gold ETF’s just how stupid it is to give their money to a “manager” that doesn’t audit the gold, insure the gold, prevent leasing of the gold, allocate the gold, or otherwise prove the gold is backing the fund.

Step 7: The bullion banks and dealers that have over‐hedged their physical gold with short positions will now be squeezed and have to make margin calls. You and all of your speculator friends will look bad, so now is the time to use a ruse. Offer to cancel some of your forward contracts in exchange for early delivery of gold. This will temporarily relieve the bullion dealers’ pain on their short positions, and give you control over even more of the gold supply.

Step 8: You and you friends have pinched off the gold supply and control most of the free gold supply having locked it up in your own vaults and warehouses. You are all long a lot of futures contracts, and you will all demand physical delivery. You now have the naked shorts exactly where you want them.

bullion banks, and they are all being bailed out by the Central Banks who will lend them what little gold they have left and then beg the IMF for whatever they have.

In lieu of that, you can set a very high cash gold price and take cash. In the gold feeding frenzy you have created, you can gradually unload some of your physical gold. If you managed to bankrupt any gold mines, circle back and see if you can scoop them up for a song.

China is a wild card. If it is not part of your scheme and decides to lend its gold, it could dampen your profits or even upset your short squeeze. But China may not want to help out your victims. Why should they? If China buys enough gold mines and increases its reserves enough, it may be in its interest to befriend you. Your combined ownership will have made the futures markets irrelevant. Together you will not only have cornered the gold market, you will have cornered gold.

* The Hunt Brothers used a similar earlier strategy in an attempt to corner the silver market in 1979‐80 as recounted by Stephen Fay in The Great Silver Bubble (Coronet, 1982).

By Janet Tavakoli

web site: www.tavakolistructuredfinance.com

Which way do you think the price is going? – Start buying Gold now, and get a FREE Gram!

Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct associate professor of derivatives at the University of Chicago’s Graduate School of Business. Author of: Credit Derivatives & Synthetic Structures (1998, 2001), Collateralized Debt Obligations & Structured Finance (2003), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, September 2008). Tavakoli’s book on the causes of the global financial meltdown and how to fix it is: Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street (Wiley, 2009).

© 2010 Copyright Janet Tavakoli- All Rights Reserved