MURPHY ON THE MARKETS
February 4 – Gold $414
down $2.20 – Silver $6.61 down 5 cents
The Twilight Zone /
Greenspan On Gold In 1981
Obstacles are those
frightful things you see when you take your eyes off your goal..Henry Ford
GO GATA!!!
The nightmare rolls on
and the patsies in the gold industry maintain their Tweedledee Tweedledum
silence over the glaring manipulation of the price. (Emphasis on dum).
From yesterday’s MIDAS:
"Once again, gold
broke first, followed later by an UP move in the dollar. The Gold Cartel
traders get their heads-up before the rest of the market participants and get
in their money-making licks ahead of time. Let’s hear it for democracy and our
free markets."
Well, the Orwellians
swung into action for the second day in a row with even more blatant price
managing today. First, firm physical demand supported the gold price in London
with the AM Fix coming in at $416.50, up from the Thursday Comex close.
However, by the open this morning, gold (as usual) came off that Fix to come in
$1 lower. All eyes were on the pivotal US jobs number.
As has been the case for
months for US economic statistics, the number
* * * * *
This very disappointing
payroll number sent the dollar reeling. The euro rose .8 and the pound and yen
took off. Yet, an oversold gold could only go up 20 or 30 cents. The gold
action was beyond terrible. I sat there starting at the screen uttering,
"Uh-oh, something is up and it’s not good….gold should have popped $3
easily on the news."
No sooner had those words
come out of my mouth when the dollar made a sharp u-turn. The March euro went
from 130.42 to 129.13, rallied, then plummeted to 128.83, down .92. Gold dropped
$3. Obviously, for the second day in a row, The Gold Cartel traders knew
intervention was soon to hit the market, so they sat on the gold price, waiting
to rip off the unsuspecting public who went long on the lousy jobs news. What
was it, I wondered, that could move the dollar so much, so fast? When I found
out it was a big fat zip nothing, I almost fell off my chair:
08:46 Greenspan says
that market pressures may reduce the current account deficit -- Greenspan notes that US exports are
increasing, and a drop in imports may be approaching as import prices have been
rising. The Fed Chairman's comments were made at a speech in London.
* * *
* *
LONDON, Feb 4 (Reuters)
- Federal Reserve Board Chairman Alan Greenspan said on Friday market forces
and likely action by Washington to cut its budget deficit "appear
poised" to stabilize, and perhaps cut, the record U.S. trade gap.
"Besides market pressures, which appear poised to stabilize and over the
longer run possibly to decrease the U.S. current account deficit and its
attendant financing requirements, some forces in the domestic U.S. economy seem
about to head in the same direction," Greenspan said in remarks prepared
for delivery at a conference hosted by the British Treasury.
"The voice of fiscal restraint, barely audible a year ago, has a least
partially regained volume," the influential Fed chief said in an apparent
nod to the Bush administration's pledges to hold down government spending.
Analysts have said a fall in the value of the dollar over the past 3 years had
partially reflected nervousness over record U.S. budget and trade gaps.
Greenspan said the willingness of overseas businesses that export to the United
States to accept lower profits, which has helped hold down U.S. import prices,
may wane if the dollar falls further.
"We may be approaching a point, if we are not already there, at which
exporters to the United States, should the dollar decline further, would no
longer choose to absorb a further reduction in profit margins," he said.
Greenspan said higher U.S. import prices would cut the volume of imports
"but leave the resulting value of imports uncertain."
-END-
Huh? What a joke! He
said nothing. There is zero evidence of any improvement in anything on the US
scene to alleviate our growing fiscal problems. As a matter of fact, there is
actually evidence the situation is worsening:
NEW YORK, Feb 4
(Reuters) - U.S. inflation pressures rose in January as a result of faster
growth in loans, but that was offset by slower growth in input prices, a report
said on Friday.
The Economic Cycle Research Institute's Future Inflation Gauge, which is
designed to anticipate cyclical swings in the rate of inflation, rose to 120.0
in January from an upwardly revised 118.7 in December, the research group said.
The index's annualized growth rate, which smooths out monthly fluctuations,
rose to 4.5 percent in January from an upwardly revised 3.4 percent in
December.
"The index is designed to signal the future direction of inflation, and it
is clearly telling us that there is no downturn or easing of inflation in
sight. This is at odds with the market's initial response to today's
weaker-than-expected jobs report," said Lakshman Achuthan, Managing
Director of ECRI.
-END-
No matter. The
Orwellians were ready to turn the jobs report lemon into lemonade via dollar
intervention. They would use Greenspan’s comments to turn the dollar around and
get the currency traders onside. It worked. Since PRICE ACTION MAKES MARKET
COMMENTARY, the spin by the pundits would focus on how right Greenspan is.
This has become The
Twilight Zone, worsening from The Stepford Wives/Matrix Syndrome. Facts mean
little anymore. Spin and market manipulation rule the day.
As anecdotal evidence of
how trumped up today’s dollar action was, we need only see what the 30-year
bond did:
March bonds, 105 29/32,
up 1 3/32
http://futures.tradingcharts.com/chart/YH/35
Good grief. Taken by
itself, the bond market move to new low yields suggests a massive recession
coming down the road. Some will say it portends deflation and rightfully so.
That will be open to
various interpretations. Yet, was does not jibe is the action of the dollar
(euro) vis-à-vis the bond move. Had the bonds collapsed signaling much higher
interest rates, one could understand the dollar going much higher. However,
that is not the case at all.
Oh wait, just in – here
is a reason for the dollar to take off against the euro this morning:
Moscow News
Friday, February 4, 2005
http://www.mosnews.com/money/2005/02/04/currencybasket.shtml
Russia's central bank
said on Friday it had begun targeting the ruble's nominal exchange rate against
the euro as well as the dollar, the Reuters news agency reports. The shift is
meant to bring currency policy more in line with trade flows.
The Bank of Russia said in a statement it had begun targeting a dual currency
basket -- made up of 90 U.S. cents and 10 euro cents -- as of Feb. 1 and would
gradually raise the weighting of euros.
"Increases of the weighting of the euro in the twin currency basket, to a
level appropriate for the task of exchange rate policy, will take place
step-by-step as market players adapt," the statement said….
-END-
Back to the market. The
Gold Cartel (trade) capped the price early, sold a little more when the dollar
reversed… then watched the funds unload as the euro collapsed. When gold dipped
$2/$3 on the day, they turned heavy buyers. Same drill as yesterday. More
profits for the crooks (Goldman Sachs, JP Morgan Chase, etc.) and more losses
for the bewildered little guy investor.
This is not sour grapes.
It is fury over what is going on here. Day after day we receive commentary from
all over on how solid gold demand is. We hear from veteran gold investors how
pleased they are with the new gold EFT’s and what a significant plus it is for
the gold market. Some say the biggest deal in 20 years. Horse Manure. The only
thing that counts is whether The Gold Cartel can be beat. Until they are
carried out on stretchers, nothing will matter.
This is why GATA is
going through an extraordinary effort to host GOLD RUSH 21 (http://www.goldrush21.com/
) in the Yukon. Enough is enough. As long as we are focused on the gold sector,
we might as well do what we can to stop being pushed around by a bunch of
arrogant bullies. On that note we have begun to send out our invitations.
This is not sour grapes
either…from Jesse this morning:
First, I will be putting something on this out later, to show what happened,
but the BLS went back and revised the jobs to MARCH 2004 to dig up enough jobs
to make January look 'good' enough to pass, and keep December from dropping too
much to make things look bad and keep Bush from being the first president to
lose jobs in his first term since Hoover.
So bonds are up and stocks are up and the dollar is holding its own.
Does anyone care what is 'real' anymore? Does anyone actually concern
themselves with anything except the last trade and next one, whether they are
based on anything but falsehoods anymore.
I can honestly say this is the FIRST time I have ever really been discouraged
about things. The sheer hypocrisy and willingness of the financial press to
accept these falsehoods is just .... almost too much to bear.
***
Jesse later on after
doing some serious homework:
Just going back to April
2003 which is as far as I have accurate records of my own, the BLS added a net
209,000 jobs into December in this revision.
This gives them the plus 146,000 that they achieved in January. It basically
allowed them to overcome the adjustment in the Birth Death model which was
280,000 and even that was a bit light because they revised that back to April
2003 as well.
The bottom line is that we had a loss of jobs in January, and the non seasonal
number was a shocking loss, but those numbers tend to vary quite a bit.
However, just comparing january 2005 to january 2004 non seasonals we lost an
additional 430,000 jobs in January 2005.
***
The gold open interest
rose 1121 contacts to 254,051.
Silver continues to hold
up well. I have been so wrong in the short-term lately, I hesitate to jinx
silver. However, it is trading like it wants to climb over $7 fairly soon, once
gold gets its bullish act back together.
The silver open interest
dropped 32 contracts to 96,721.
The March dollar
finished the day at 84.45, up .42. The yen rose to 103.93 and would have closed
much higher if not for the euro rout.
The John Brimelow Report
Maybe
this '99 - but Spring or Summer?
Friday,
February 04, 2005
Indian ex-duty premiums:
AM $7.86, PM $8.67, with world gold at $415.65 and $416.20. High: ample for
legal imports. The rupee weakened slightly today and the Reuters wrap up
unprecedentedly attributed this to increased gold demand:
"The rupee ended
weaker on Friday as …demand for dollars from gold importers weighed the Indian
currency down…(a senior dealer at a foreign bank said): "There was some
gold-related dollar demand as gold prices have fallen quite a bit and this also
dragged the rupee (down)."
This is quite plausible
– gold is India’s second import item after oil – but I have never seen it said
before.
Gold’s fall in NY
yesterday did elicit some response from TOCOM, albeit not very decisive. Volume
jumped 52% to the equivalent of 18,219 Comex lots, and open interest rose the
equivalent of 1,083 Comex (to the equivalent of 109,988 Comex). But Mitsubishi
says the public was a seller and reports their long slipped very slightly (279
Comex lot equivalent). The active contract was down 11 yen and world gold stood
70c below the NY close at the end. (NY yesterday traded 59,831 contracts – 42%
above the estimate. Open interest rose 1,121 lots.)
At the Shanghai Gold
Exchange, premiums over world gold have now reached $4.04 -$4.47, with world
gold at $415.65 this morning. This could be seen as a comment on the cheapness
of $US gold; or as a statement of mounting confidence amongst the Chinese
business community that G-7 efforts to curtail the Yuan undervaluation gravy
train will fail. (The latter is my interpretation.) Premiums were last here at
the bottom of gold’s downswing in May of last year.
The open interest data
suggests that at least part of yesterday’s persistent selling pressure was
shorting; although stop-loss selling was also detected. Gold’s weakness yesterday
was not just a case of the market automatically adjusting to the flow of malign
Official Sector comments: there was significant selling, especially in Europe.
This IMF gold sales saga
has created an unusual situation amongst commentators. Three significant
bullion banks, UBS, Royal Bank of Canada, and HSBC have now published analyses
concluding that IMF gold sales (as opposed to market-benign revaluation) are
impractical for reasons derived from the IMF Constitution and irrational from
the point of view of debt relief. All three are making bullish noises:
UBS:
"We believe that selling gold for debt relief of poor countries makes no
sense, as it is neither practicable nor necessary…we expect the market to snap
back once revaluation and its implications are accepted by the market."
HSBC:
"…we doubt that anything material has changed in the bullion market to
justify such huge swings in the long gold/short dollar positions and look at
current price levels as an increasingly attractive buying opportunity"
RBC:
"We feel the market has overreacted to Brown’s comments, and that gold is
oversold… gold’s current weakness presents a good buying opportunity."
The problem with all
this is, as remarked yesterday, extremely painful experience ’96-’98 taught
that if the Official Sector is involved, being rational is very dangerous. This
is because their objectives may simply not be what a business-oriented mind
assumes.
In this respect it is
ominous that the apparently casual remarks by US Treasury Under Secretary
Taylor that the US was "not convinced of need for IMF Gold Sales" (as
the Reuters news flash put it) was countered within half an hour by a UK
briefing asserting "UK has G7 majority backing on debt relief".
Something is clearly
stirring here.
If it involves gold, the
physical market is behaving like summer ’99 (e.g. at the bottom) the noted gold
bear, and for that matter the Gartman Letter with its Hedge Fund informants,
while enjoying the spectacle, seem disinclined to go short.
JB
CARTEL CAPITULATION
<WATCH< P>
The US stock market took
off with the DOW gaining 123 to 10,716, while the DOG leaped 29 to 2087. Bad
news is good news I guess.
US economic news:
09:47 Jan. final
Univ. of Michigan Confidence reported 95.5 vs. consensus 96
Prior reading was 95.8. S&P futures currently at 1192.5.
*************
G7-Taylor says U.S.
opposes UK debt relief plan
LONDON, Feb 4 (Reuters) - U.S. Treasury Under Secretary John Taylor on
Friday dealt a setback to debt relief, saying the United States could not
accept the British proposals or a new financing facility.
"Not only does the IFF not work for the United States, we don't need the
IFF, " Taylor said, referring to British finance minister Gordon Brown's
idea for a new International Finance Facility and writing off debt to poor
countries.
Taylor, speaking to a small group of reporters who travelled with him to the
Group of Seven finance ministers' meeting, said the U.S. has its own
"bold" proposal for debt relief for poor countries that would also
include more aid through grants instead of loans in the future.
Taylor also said that the U.S. is "not convinced of the need" to sell
International Monetary Fund gold to finance debt relief.
-END-
Rhody with a leasing
update:
Good morning
Bill:
Backwardation eased again in gold
lease rates this morning. Now we have a flattened rate curve. To put this in
perspective, the difference between the one month lease rate and the one year
rate is .075%. The similar figure for silver is .76%. That means silver's rate
curve is ten times steeper than that of gold, and that means gold is being
leased in the near term for capping purposes at many times the volume of
silver. If you compare gold and platinum's rate curve, platinum has a .6%
difference between the one month and the one year rate and it's rate curve is
similarly flattened as gold, but at a far higher level of over 3%. Platinum has
been like this for years. It is only gold and silver that show huge changes in
the steepness of the rate curve.
I think this
is because of leasing for capping rather than leasing for commercial purposes.
It is the difference between leasing for politics and leasing for business
purposes.
Regards, Rhody.
Hi Bill:
In the 2/2/05 Midas, a GATA soldier referenced a 1981 WSJ article. Enclosed is
a copy of the 9/1/81 WSJ article, " Can the U.S. Return to a Gold
Standard?" by Alan Greenspan. Alan "goldbug" Greenspan indicates
that the major roadblock to restoring the gold standard is the problem of
re-entry. Alan proposes that convertibility be instituted gradually by issuing
gold notes. Alan needs to exorcise his fiat currency demons, work with Antal
Fekete and GATA, and get the parallel gold-coin standard rolling.
Regards,
Paul
Greenspan Article 09-01-1981.pdf
(Easy to read once enlarged)
Nice work Paul.
Chuck checks in:
At the end of such a
week, one would think that it would be impossible to write an upbeat assessment
of our market. But I believe I can and with conviction. Each day this week seem
to bring polarized moves in stocks and gold. The stock market that is reeking
with optimism and complacency moved higher and higher culminating on Friday
which to me is a historically turn day. The VIX now has sunk to a little over
11. Each day the market either gapped up or was up after 20 minutes and then
never looked back. A 10 point set back has been a rarity.
Contrast that with a
gold market that gapped down almost every day irregardless of the condition of
the dollar. That meant to me that there was a concerted selling by the central
banks in front of a political event, the G7. These are the kind of conditions
that precede a turn. It is as though if you ask why the players are buying
stocks, they would say, "I don't know but everyone else is." And why
everyone is selling gold stocks, they would respond just the opposite. Please
read Adam Hamilton's excellent essay today on the true condition of the HUI for
a healthy perspective of the gold market.
The bottom line is that
the personality of the stock market, except for that period when stocks
declined sharply off of their 2000 highs, has not changed. A blind faith and
optimism relentlessly continues. The only difference is that this time it has
been joined by an unreal real estate bubble that is enchanting our nation even
more than the high tech mania ever did. The wolf is at the door. Chuck
The gold shares held
their own with the XAU up .07 to 91.09 and the HUI only down 1.03 to 197.73.
My island reversal hope
trade went out the window, which is how they got their name. Veteran traders
know when you are counting on a hope trade, you are in trouble. Maybe Monday?
Well, the real estate on
our planet got cheaper this week, even though the fundamentals went our way on
almost all counts. With the Orwellians doing their thing out there,
analysis doesn’t count for much, especially mine.
Still, gold and silver
should take off in the months to come and the stock market ought to be
clobbered. Patience has taken on a new meaning.
At least I can root for
my old team, the Patriots, this weekend. Go Pats!
GATA BE IN IT TO WIN IT!
MIDAS
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