Feb 28, 2007

Regarding COMEX computer glitch post...

I posted a GATA dispatch this morning regarding a computer glitch at COMEX gold spot price tracking. This post has been removed because it was really a spoof (joke's on us) from GATA as a jest follow-up to a previous dispatch regarding (and this is for real): "Computer problem exaggerated Dow's plunge!...

You can read all about it ...here
(Truly sorry if it confused people!)

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Jim Sinclair: Key Points to Review Given Today's Action in the Gold Market

Here's a short yet sobering communique from Jim Sinclair:

"What the market is showing us today are all the same items that occurred in the 70's. I have been telling you this for months if not years.

Key Points in action right now:

We have witnessed the Dow rise on economic news,indicating deceleration of activity. This will continue until major corporations announce poor earnings, making the Dow fall faster than it rose and moving it deeply into the red.

I heard all this "slow business" as negative to gold talk in the 70's. It was totally wrong then. It will be exactly the same now.

Those of you who were panicked by today's action in gold and gold shares are simply doing the WRONG thing. If you had reviewed any of my public commentary you would know that what is taking place in general equities and the general economy is completely gold positive. Yet out you go in a state of total abandon."

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Feb 27, 2007

China Alert...come true!

Forewarned is Forearmed

Only last week we drew readers' attention to the technical aspects of the parabolic rise in the Shanghai Index.
Today the Shanghai Index semi-crashed by 8.8%

Here's some relevant news items:

  • China stocks sink 8.8 pct on crackdown fears Reuters - Tue Feb 27, 7:25 AM ET

    SHANGHAI (Reuters) - Chinese stocks plunged nearly 9 percent on Tuesday, erasing about $140 billion of value in their biggest fall for a decade, amid fears that authorities would crack down on speculation that drove shares to record highs.

  • Stocks plunge after big decline in China AP -

    NEW YORK - Wall Street fell sharply Tuesday, joining a global stock decline sparked by growing concerns that the U.S. and Chinese economies are cooling and that U.S. stocks are about to embark on a major correction. The Dow Jones industrials dropped more than 180 points.

  • Stocks sink on China, economic concerns Reuters - Tue Feb 27, 10:01 AM ET

    NEW YORK (Reuters) - Stocks tumbled on Tuesday after a weaker-than-expected economic report and a sharp fall in China's main stock index unnerved investors after two consecutive days of Wall Street losses.

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Feb 26, 2007

Technical analysis likes metals; central bankers read it, and don't...

Latest newsletter from GATA

8:21a ET Monday, February 26, 2007

Dear Friend of GATA and Gold:

There's some awfully serious technical analysis of the gold and silver markets this morning:

-- GoldMoney founder, Freemarket Gold & Money Report editor, and GATA consultant James Turk writes that gold and silver are moving "from strength to strength." He'll be surprised if gold isn't breaking through $715 soon. You can find Turk's analysis in the "Founder's Commentary" box at the top left of the GoldMoney home page here:


-- Gene Arensberg's "Got Gold Report" at Resource Investor is spectacularly detailed and very bullish on the precious metals but notes the failure of the mining stock indexes to break out. You can find it here:


-- Merv Burak at Market Oracle writes that the gold and silver bulls are running strongly again. You can find his weekly report here:


Of course Hank Paulson, Ben Bernanke, and their friends at the Western central banks and the Bank for International Settlements read all this stuff too. They HATE technical analysis that foretells higher precious metals prices, and with their fingers on the triggers for dishoarding government reserves, they are very good at proving technical analysis wrong and ensuring that government-sponsored metal goes into the market at the worst possible prices.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Feb 23, 2007

Richard Russell: "..gold, the metal, is timeless money"

R. Russell's market wisdom on gold, silver and mine shares:

"..You don't have to be a genius in order to read the chart below. This is GLD, the Exchange Traded Fund which serves as a proxy for gold. The breakout came this month when GLD filled the 65 box. Since then, GLD has rallied to the 67 box (670 in gold), and this gives us an upside gold "count" to 820.

Of course, the next real test is for GLD to reach the 72 box -- and then to surpass it. I believe that's going to happen. How it will happen and when -- ah, I wish I could tell you. But I can tell you this -- the great gold bull market is intact and right on course.

The next chart is SLV, the Exchange Traded Fund and a proxy for silver. Yesterday SLV filled the 142 box, signaling a bullish breakout. The count for SLV is now 184, which would take silver over 18 dollars an ounce. The immediate upside target for SLV is the 152 box. I think that high will be surpassed this year, possibly early this year. But hey, what's the hurry? It's a bull market, and it will progress at its own pace and in its own time.

Next, we have GDX which is the Exchange Traded Fund for the gold mines. This is an intelligent and easy way to be invested in assorted gold mines. GDX includes a good assortment of the best mines plus a number of smaller speculative mines. We're still waiting for an upside breakout in GDX, and this would entail GDX rising to 43. The mining shares at this time are lagging the metal, but as I've said so many times, the mines and the metals alternate in leadership.

However, it's important to remember this -- gold, the metal, is timeless money, it's the obvious base of the precious metals universe. The mines are always speculations, they have the leverage, but they also may have the problems. My personal preference would be to own two-thirds metals to one-third mine shares. Others may differ, but subscribers know me -- I'm conservative and I always have risk in mind. A gold coin in the hand represents pure intrinsic wealth in any nation at any time in history. A hundred shares of a gold mine is a speculation and the hope of a profit in the period ahead.

I occasionally mention the Commercials in relation to gold. I consider the gold Commercials to be basically the gold mines themselves and perhaps the gold banks, those few banks that make a market in gold. The gold mines often sell forward gold, thereby locking in the current price. In doing so, they are also short gold. Occasionally, for instance, now, the Commercials will assume a large short position in gold. If gold rises, the mines lose on their short positions, but they can then either wait for a correction, at which time they can cover. Or, if need be, they can cover their short positions by supplying the actual gold which they mine.

But once in a great while, the Commercials get caught. They have assumed a large short position, and the metal goes against them. They don't get the decline they need -- and instead the metal powers higher. It's possible that this is one of those times. Yesterday's 23 dollar surge in the face of the current large Commercial short position had me thinking that way. If, indeed, the Commercials are caught here, we should see a concerted surge to the upside with very little "give" on the downside. Remember, trading is thin in the after market, and this is the time when the Commercials will try to knock the price of gold down, as they seek to present a picture of weakness in gold.

I want to emphasize the part that China and India and probably various Arab states could now be playing in the gold picture. Unlike US citizens, the three just mentioned are well versed in the value and the power of gold. The Chinese, Indians and Arabs understand that gold is real money, that it represents wealth that cannot be destroyed by governments or central banks. Thus, I believe that our overseas friends will be playing an increasingly large part in the gold picture.

In both ancient and modern history, gold has always flowed towards the strongest nations. Financial and even military strength has always acted as a magnet for gold. Thus, it will be most important to watch the flow of gold towards nations in the years ahead. Interestingly, the nations mentioned are all actively encouraging their citizens to accumulate gold. This is particularly true, I believe, in the case of China.

By the way, over the last five years gold has outperformed the S&P. In case you missed it, this rundown below shows gold's progress in various currencies. In dollars, gold is up 6 % so far this year (chart borrowed from John Mauldin's recent article.)


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Feb 21, 2007

NY spot gold up more than $20

Feb 21, 2007 14:40 NY Time
Bid/Ask 679.20 - 680.70
Low/High 656.60 - 682.90

Click for larger version

Gold rallies on above-consensus CPI
Traders see possibility of further upside for precious metal

By Polya Lesova, MarketWatch
Last Update: 2:34 PM ET Feb 21, 2007

NEW YORK (MarketWatch) -- Gold futures rallied to a seven-month high on Wednesday, after data showed consumer inflation rising at a faster-than-expected pace in January, boosting the lure of gold as an inflation hedge.
Gold for April delivery closed up $23 at $684 an ounce, its highest close since July 7, on the New York Mercantile Exchange.
"A powerful reversal lifted gold out of its Tuesday slump and values closed today's session at levels not seen since last spring," said Jon Nadler, an investment-products analyst at bullion dealers Kitco.com.
"Spot gold ignited on the heels of core CPI [consumer price index] statistics and after Tehran's outright refusal to halt uranium enrichment and the pursuit of nuclear power," Nadler said.
Gold futures began their rally after the Labor Department said inflation at the retail level increased 0.2% in January, while the core CPI, which excludes food and energy prices, rose 0.3%. Economists polled by MarketWatch had been looking for increases of 0.1% and 0.2%, respectively.
Last week, Federal Reserve Chairman Ben Bernanke told lawmakers that the Fed expects core inflation to drift lower, but cautioned that the Fed is poised to raise rates if necessary to contain inflation. See full story.
Generally, when people think the Fed's going to raise rates, gold goes down, said Peter Schiff, president of Euro Pacific Capital, based in Darien, Conn.
Today's rally in gold "might be an indication that the Fed and Bernanke are losing credibility and that the Fed is all talk and no action," Schiff said. "The Fed is afraid of raising interest rates, but it can't let the market know that. Gold's saying we don't believe you. You're still on pause."
"The Fed wants to maintain the illusion that they're going to raise rates, because the economy can't stand it," Schiff said.
A recovery in crude-oil prices also boosted gold. Crude futures rose sharply to trade back above $60 a barrel as traders eyed developments in Iran and braced themselves for weekly data on supplies for some measure of how the chilly weather of the past week has impacted higher-than-normal inventories.
Crude for April delivery was up $1.25 at $60.12 a barrel on its first day of trade as the front-month contract on the New York Mercantile Exchange. Prices have struggled to hold above $60 in recent weeks. See Futures Movers.
In the latest news from Iran, President Mahmoud Ahmadinejad said he is aiming to achieve nuclear capability as soon as possible, even to the exclusion of everything else, the BBC reported.
The president made this latest pronouncement to the Iranian Isna news agency. It coincides with a United Nations deadline for Tehran to freeze its uranium enrichment activities or face further sanctions.
"Gold's sharp rebound is apparently being driven by short-covering as opposed to any major news or rethink in the markets," said Brian Dolan, director of research at Forex.com.
However, "higher CPI and Iran noise continue to provide a fundamental basis for firmer gold prices," he told clients.
On the currency markets, the yen slumped to a fresh record low against the euro and one-week low against the dollar Wednesday, after the Bank of Japan hiked its key interest rates but indicated that further rate increases would be gradual. See Currencies.
On Tuesday, gold closed down $11.80 at $661 an ounce, as the U.S. dollar strengthened and oil traded lower, providing an excuse for traders to lock in gains.
"We see yesterday's fall as just flux on the way toward $700 later in the year, as both physical and investor demand is likely to be strong," said Sherry Cooper, chief economist at BMO Capital Markets, in a morning note.
Nadler of Kitco.com said: "The gold market's character now shifts to high volatility and possible de-coupling from conventional drivers. There is little that would surprise us in coming days -- whether that means $700 or $650 gold -- it is all fair game."
Other metals prices also rose on Nymex. March silver futures rose 44.3 cents to $14.273 an ounce, April platinum surged $14.10 to $1,233.20 an ounce and March palladium was up $4.40 at $344.15 an ounce. March copper ended up 6.85 cents at $2.6545 a pound.
William Adams, analyst at BaseMetals.com, said that the base metals held up better than the precious metals on Tuesday, because there was trade buying interest in the former, while "the precious metals have been pushed higher in recent weeks by aggressive investment interest."
"The market may not have to wait too long to see sentiment turn bullish across the board," Adams said. "Don't forget that the January-February period last year was relatively subdued, and it wasn't until March that the rally took off."
On the supply side, gold inventories were unchanged at 7.49 million troy ounces as of late Tuesday, according to Nymex data. Silver supplies added 272,835 troy ounces to stand at 116.54 million troy ounces, while copper stockpiles rose 274 short tons to reach 36,631 short tons.


China Alert!

The Shanghai Index has been in a "parabolic rise" since late last year, moving much higher and faster than the Internet bubble of the late 90ies:

It's no rocket science figuring out the exponential rise. The Index went up 1060 points or 20.97% in 9 days, protracting the already ominous parabola.

Extreme caution is advised to all those involved!

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Feb 19, 2007

Richard Russell agrees with GATA: Central banks rig gold

This is from yesterday's GATA newsletter:

"Dear Friend of GATA and Gold,

Nine years after LeMetropoleCafe.com proprietor Bill Murphy, soon to start the Gold Anti-Trust Action Committee, started screaming that the price of gold was being suppressed by collusion on the commodities exchanges, the king of technical analysis of the markets and the most venerable of U.S. financial letter writers, Richard Russell, has fully concurred.

In an unusual weekend letter distributed yesterday, Russell told subscribers to his Dow Theory Letters:

"Let's start with this vital and rather shocking piece of information, courtesy of Stephan Roach, chief economist at Morgan Stanley: 'Net foreign inflows into longer-term U.S. securities fell to just $15.6 billion in December 2006. This is the weakest reading in nearly five years. This stands in sharp contrast to America's enormous external financing needs -- about $3.5 billion of foreign capital inflow each and every business day is required to fund a current account deficit that was running at close to an $875 billion rate in the first three quarters of 2006.'

"What does this mean? It means that the squeeze is beginning.

"Normally, the U.S. reaction to the 'shortfall' would be a recession in order to cut way back on U.S. spending. Or it could be raising rates in order to make it more attractive to accumulate and hold U.S. securities. But raising rates would impact on the fragile U.S. housing situation. If the negative current account deficit trend continues, I don't know how it will be resolved.

"One result should be a weaker dollar and rising gold. If the shortfall continues, we can be sure of one thing -- something has got to give.

"Meanwhile, the central banks of the world are on a tear. I guess you could call it 'deflation-phobia.' At any rate, check out these statistics:

"In Australia, the M-3 money supply is running 13 percent over last year. In the Euro-zone, M-3 is up 9.3 percent. In Britain, M-4 is up 13 percent. In Korea, M-3 up 10.3 percent. In China, M-2 is up a whopping 16 percent. Russia shows M-2 up 45 percent. In the United States M-3 has been reconstructed to show that it's up 10.7 percent. As one wag put it, the central banks have instituted a campaign of 'whip deflation now!'

"I've described the situation previously as 'money gone wild.' It's a blizzard of fiat paper and credit beyond anything ever seen before in world history.

"The mystery is that gold isn't higher, much higher.

"My thinking is that central banks and others have, so far, held gold back with derivatives and massive short sales. I doubt that this can continue."

Yes, Mr. Russell, if gold had held its traditional ratio to money supplies and the prices of commodities, its price would be in the thousands of dollars by now. So much for the last decade of technical analysis of the gold market, which hasn't been able to figure out what has been going on.

No analysis of the gold market is worth anything if it fails to account for both open and surreptitious intervention by the central banks and their agents, the bullion banks, and by the mining company that, in U.S. District Court in New Orleans, claimed immunity to suit by declaring itself the agent of the central banks in the gold market, Barrick Gold.

This intervention has been too much lately even for technical analyst Dennis Gartman of The Gartman Letter, who now acknowledges that a government just might be behind the recent and most blatant efforts to suppress the gold price. Other technical analysts, like Clive Maund, still don't want to hear anything about it and get indigant and unresponsive when challenged. But give them a little more time. They probably will not want to be the last to acknowledge what has become obvious to everyone else, and what, in fact, is already on the public record in a half-dozen places technical analysts never look, since reality would get in the way of their beloved formulas and charts.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Feb 18, 2007

U.S. Rep. Ron Paul: Proposals for transparency at the Fed

Before the U.S. House of Representatives

February 15, 2007

Statement for Hearing before the House Financial Services Committee, “Monetary Policy and the State of the Economy”

"Transparency in monetary policy is a goal we should all support. I’ve often wondered why Congress so willingly has given up its prerogative over monetary policy. Astonishingly, Congress in essence has ceded total control over the value of our money to a secretive central bank..." CLICK HERE FOR MORE

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IMF Admits GATA is right?

Silver Stock Report editor Jason Hommel has reviewed the International Monetary Fund's concern that its rules allow central banks to double-count their gold, to count leased gold as if it is gold still in the vault. Hommel's essay is titled "Has the IMF Admitted GATA Is Right?"

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Uranium: going to US$240/lb?

Uranium going to US$240/lb?
The uranium market has been in an uptrend for the past six years. In the past 12 months, uranium has outperformed all other metals (except nickel), rising by 100% to US$75/lb. How much higher can it go?
A Canaccord Adams report published this week says uranium can rise to US$240/lb and still produce electricity for the same cost as a coal-fired power station at around US$63/MWhr.

Canaccord Adams’ peak price forecast of US$103/lb in 2009 is based on the assessment of the current supply and demand fundamentals in the market, which includes the likelihood of delays to major projects such as Cigar Lake and Olympic Dam.

With issues such as Global Warming being taken seriously by many governments as well as industry, nuclear power is being increasingly considered to offer an essential part of the solution in meeting rising electricity demand as well as addressing the issue of carbon emissions. The previous peak price was achieved in 1979, at US$43/lb, but after adjusting this figure for inflation you can arrive at today’s price of US$145/lb.

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Feb 15, 2007

John Embry: Great performance of gold, silver is practically a secret

Returns on Gold and Silver Surpass Most Others Again

In his latest commentary for Investor's Digest of Canada, Sprott Asset Management's chief investment strategist, John Embry, notes that gold and silver again delivered superior returns in 2006 but ordinary investors would never know it from the establishment news media. Embry predicts that these returns are only going to get better as the U.S. dollar disintegrates. You can find Embry's commentary at the Sprott Internet site here:

"Returns on Gold and Silver Surpass Most Others Again"

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Feb 14, 2007

Still a Golden Opportunity to Buy Gold Shares?

The following article from Peter Zihlman of the P. ZIHLMANN INVESTMENT MANAGEMENT AG and appeared yesterday on the Gold Eagle website:

Still a Golden Opportunity to Buy Gold Shares?
Follow-up No. 6
Peter Zihlmann
February 13, 2007

The Long-term Picture

The two lengthy consolidation periods within this solid long-term up-trend shown in the chart above in red circles reveal in fact striking similarities. One similarity e.g. is the surge of the Index by more than 100% before the inevitable movement of consolidation began.

If the past is admitted as a guide to the future, we can deduce how far the market may rise during the up-swing which is currently in the making.

Investors who have been waiting for almost a year to see their purchase prices again, have a tendency to get out once they can get out even and often miss for this reason the ensuing chance to make a substantial profit.

"Therefore, we should keep our fears in check and ask ourselves without emotions where the market may lead us. In our opinion, it is of course only possible to indicate a range within which this movement could end, and we would place our Index target between 350 points as a minimum and 430 points as a maximum before a further consolidation phase starts.", we wrote on September 20, 2005, while the Index stood at 237 point. As we now know the Index did in fact peak at 401 points.

As we are in similar situation as in September 2005, we venture at present to set new target range, namely of 680 to 850 points.

The Medium-term Picture

The symmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. When these points are connected, the lines converge as they are extended and the symmetrical triangle takes shape. You could also think of it as a contracting wedge, wide at the beginning and narrowing over time.

While we may have to wait a little while till the Index jumps out of the triangle, we believe that purchases of selected shares should not be deferred.

The Short-term Picture

This short-term up-trend started early this year suggests that the market may have a bit of resistance to overcome before it will take off decidedly.

It may however prove to be expensive to wait for a short-term correction as, first, we are in a secular bull-market and, second, we are just coming out of a lengthy consolidation which is drawing to its end.

In the 1970s, the most admired technical analyst was Joe Granville. In fact, for a brief period of time Granville's buy and sell signals would move the US stock market - at least temporary. Granville's demise as a market guru then followed. In 1982, he failed to realize that a secular bull market in bonds and stocks had begun and remained bearish.

There are many ways to participate in this unfolding next leg up in the secular bull-market of precious metals and the corresponding shares. One way of course is to simply buy the industry's leader, like Newmont Mining, shown in the chart below. You would have made 270% if you bought at the bottom.

Medium sized companies and juniors however offer a lot more leverage to the gold price but are also riskier.

Another way of participation is through an investment fund that primarily invests in mid-sized and junior companies like THE TIMELESS PRECIOUS METAL FUND (+61% in 2006) .

We also offer Portfolio Management services for clients who prefer to have their individually managed precious metals portfolios:
invest@pzim.ch Tel.+41 44 268 51 10
Mobile +41 79 379 51 57

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Feb 12, 2007

James Turk: Gold pulling away from $600

GoldMoney founder James Turk, editor of the Freemarket Gold & Money Report and consultant to GATA, writes that gold's low of $604.90 on January 5 appears to have been a "selling climax" and that gold now is pulling away from $600 for good. Turk writes that silver is showing even more strength:

Pulling Away From $600

It has been my contention that the $604.90 low reached on January 5th was a selling climax. For example, see my January 14th alert.

It has now been more than one month since the January 5th low, and the performance by both gold and silver has been impressive. Gold has climbed $62.60, or 10.3%. Silver has done even better, climbing $1.75, or 14.4%. The following charts speak for themselves.

Both gold and silver are showing impressive technical strength, but as I have been commenting in previous alerts, silver is doing even better than gold. Silver's outperformance can be seen in the following chart of their ratio. A declining ratio means that silver is outperforming gold.

The evidence is building that January 5th was indeed a selling climax. There are of course never any certainties when it comes to markets, but as the days go by, the probability improves that $604.90 marks an important low. If so, then gold will never again go back below $600, just like I expect that it will never again go back below $500 (which I consider to be a 75% probability), or $100 (a 98% probability) or fall to $35 (a 99.99% probability).

The $35 rate of exchange to the dollar ended with President Nixon's decision to abandon the gold standard, creating the fiat currency we have today, which brings to mind another probability. Monetary history shows that no fiat currency has ever survived, which suggests a 100% probability that the dollar eventually will be destroyed. But as I note above, nothing in the world is certain. Maybe 'Helicopter' Ben and his cohorts at the Fed will make history, and the dollar will prove to be the exception to the rule and become the only fiat currency that survives. But if you don't like the long odds of that outcome, buy gold instead.


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Feb 11, 2007

How to profit most from $1,000 gold: juniors and self-publicists

A word of advice on junior mining shares from AMEInfo.com,

Dubai Sunday, February 11, 2007

Whether the International Monetary fund recasts its rulebook against the manipulation of the gold market by central banks, or Chinese and speculative buyers push up the price from $666 an ounce at the close last week, there is an emerging consensus that $1,000 is a reasonable target for the yellow metal. Leveraging off this trend then ought then to be a friend indeed.

In one of his recent commentaries legendary gold investor Jim Sinclair whose timing of markets over the past 40 years has been superb, looked back briefly to some of the star investments of a previous gold boom (see www.jsmineset.com).

He mentioned a company called Durban Deep, a firm with questionable reserves that saw its stock price rise from 36 cents to $35 in 1980, and Randfontein, which did the same thing. "What is the difference between 1968 to 1980 and 2001 to 2012? The answer is: nothing!," says Mr. Sinclair.

So just who are these junior gold mining stocks? What is their business strategy?

Consider the following parallel: East European property was dirt cheap after the initial excitement of the collapse of communism fell away; then a few bright individuals bought up this real estate; later these states joined the European Union and small property speculators drove the prices up, leaving those original buyers rich.

Junior gold mining companies have done the same thing with gold. They bought up gold mining claims at low prices some years ago before the price of gold really took off. Now these companies are sat on potential gold reserves that are worth many times what they paid for them.

As yet the share price of many junior mining companies still does not reflect the recent upward movement in the gold price. It is not uncommon to find these shares trading at a price that has hardly changed in two years despite the $200-plus increase in the gold price to $666 an ounce.

But how do you pick the winners among these stocks? Whom should you choose to invest in? This section of the stock market is under-researched, and the stock-tipping websites often recommend shares in which they have quite openly taken an interest.

One simple criterion is to select the best self-publicists. Who is marketing their company best? Whose adverts appear most on the specialist websites like www.GoldSeek.com or www.Gold-Eagle.com?

It is not just that effective marketing is likely to be a clue to competent general management, although many times it probably is such a guide. It is more a question of isolating which shares are most likely to gain public attention in a junior gold stock boom.

As we know from the dot-com boom days, the public is not a very discriminating buyer, and an analysis of the fundamentals of stocks usually goes out of the window in a boom period. But what is important is an ability to capture the public mood and imagination.

And the junior gold companies that are doing this now are also the most likely to succeed in doing it then. So buy the best self-publicists today to sell when the gold price booms.

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Understatement of the year: subprime lenders are having a rough time

The Real Estate house of cards is gradually coming down...
Here is a humorous and enlightening review of the re-fi scenery taken from Bill Bonner and Addison Wiggin's The Daily Reckoning newsletter:

"..It's the bleak mid-winter here in Paris. Snow lies all around.

From the news, the markets are jelled with cold too. The Dow has barely moved. Not a dollar...or a bond...is stirring.
But what still won't keep quiet is the creaking, crunching sound of the housing market. It is sliding - like a glacier - down.

Yesterday came word that New Century Financial Corp. - the nation's second largest provider of sub-prime mortgages - is having a rough time of it. When its mortgages go bad, it has to buy them back. Predictably, it now discovers that it did not set aside enough money to do that. So, when investors got wind of this situation yesterday, they took down the stock by more than one-third. Which must have been a bad day for the insiders and large shareholders. They should have unloaded that stock on the unsuspecting public long ago. Perhaps they did.

"Refinancing gets tougher," says the Wall Street Journal.

"Lenders battered by late payers," adds the Associated Press.

Dear, dear reader...who would have thought that lending money to people who could not afford to pay it back would lead to problems? Life is just full of surprises, isn't it?

According to the Mortgage Lender Implode-O-Meter, 20 lenders have gone kaput since December 2006.
Meanwhile, the Toll Bros stepped up to the microphone, too. They said their orders for the first quarter of this year have plunged 33%. Revenue is off 19%.

And now we have Desert Storm Three. Phoenix, as hot as it is, seems hard hit by the icy winds from residential neighborhoods caving in. Pulte lost money in the last quarter of '06, largely because of weakness in the desert. Sales in 2006 in the Phoenix area fell 26% over the year before.
Locally based builder, Fulton Homes, said its closings were cut in half last year.

And behind it all trot the real estate agents, brokers, and granite counter-top installers. They, too, are astonished by this sudden turnabout. Realtors are said to be giving up after the average agent earned 20% less in '06 than in '05. Prices weren't much lower in most cases, but there were fewer sales...and less commission.

And what's this? One of the biggest financial firms - Merrill Lynch, a company that has boomed with the global liquidity boom - is now warning its customers to watch out. A global liquidity inflation is inevitably followed by a global liquidity deflation, says Merrill, warning its customers to take cover.

Merrill sees higher interest rates, possibly sooner than most expect.

"Fed official...rates may rise," says a headline from the Philadelphia Enquirer.

We don't put much stake in such headlines. But there must come a time when lenders get nervous and yields rise. That is when you will have wished you had cocked your head up and seen our Crash Alert flag flying over the Daily Reckoning headquarters...or paid attention when Merrill Lynch told you to head for high ground."

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Feb 10, 2007

The venerable Richard Russell on Gold

More investment wisdom from Richard Russell's newsletter...

"... I noted on yesterday's site that gold is now advancing against all fiat currencies. And against some, like the Japanese yen, gold has become an almost irresistible buy. The chart below follows gold in terms of yen over the last two years. First, we see the big rise to the May 2006 high. Next, a correction as gold formed a huge symmetrical triangle. And most recently, gold has broken out of the triangle to match its May high.

click for larger version
Looking at this chart, you wonder how the Japanese can not be buyers of gold. As a matter of fact, I believe they are buying gold, but still in conservative quantities. In due time, I think all currencies including the dollar are going to resemble this chart. Ten or twenty years from now, who knows what will be left of the dollar or the euro or the yen? But one thing I can guarantee -- come what may, an ounce of gold will still be an ounce of gold. In time, most of the world will understand this. And the latest great adventure in man-made fiat money will be over.

I lived through and was active during the great gold bull market of the 1970s. That bull market was based on fear of the loss of purchasing power of the dollar, in other words, fear of inflation and dollar weakness.. The current bull market in gold is still in its early stages. But I think in its later stages, this bull market in gold will be based on fears about the very survival of fiat money.

If the US government told you that they had suspended the laws of gravity would you believe them? Of course you wouldn't. Then how about this -- if the US government told you that they could print wealth would you believe them? Of course you would -- and we're all working for Federal Reserve Notes aren't we? Sure we are, and we can buy a car or a dinner or even a subscription to Dow Theory Letters with those Notes. My advice, just put those dollars away for your kids.

I want to add one concept here that I don't think most people understand. It's the idea of devaluation, or lowering the value of an item. But when we say the dollar is being devalued, we have to ask, "Devalued or lowered in value against what?" And the answer is always, lowered in value against time honored intrinsic money -- gold. Of course, "the dollar being devalued" is a concept that the Fed doesn't want to hear about and doesn't want you to hear about. A "dollar devaluation," that sounds terrible.

But that is exactly what is happening when the price of gold rises in terms of dollars. Here's an example. In the year 2001 George Bush was elected President. Gold at that time was selling for 285 US dollars an ounce. Here in 2006 gold is selling; for roughly 660 US dollars an ounce. In other words, the US dollar has been devalued against gold, by almost 60%. Why don't you ask Dr. Benjamin Bernanke, our Fed Chairman, about the ongoing dollar devaluation. Chances are, if he is willing to respond at all, he'll tell you that the Fed is watching carefully and has inflation under control Sure they have. "But Ben, you're changing the subject, what about dollar devaluation?"

So just in case the dollar continues to be devalued, my advice is to own some gold. You see, just as the dollar is being devalued, gold is being revalued."


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Feb 9, 2007

Financial Sense...

...The Big Picture!

...read all about  it!

With Jim Puplava

Feb 8, 2007

Central banks are becoming gold buyers...

...Blanchard & Co. says:

Company Press Release

By Neal R. Ryan
Vice President and Director of Economic Research
Blanchard and Co. Inc., New Orleans
Wednesday, February 7, 2007


According to recently updated IMF reserves statistics, some central banks have begun purchasing significant quantities of gold over the past few months, in stark contrast to the most recent figures available to the market, says Donald W. Doyle, Chairman and CEO of Blanchard and Co. Inc.

The central banks of Russia, Kazakhstan, Greece, and the Philippines all have added to gold held in reserve, according to figures updated February 5, 2007.

"The general trend of central bank activity regarding gold reserves has changed a great deal in the past year," Doyle says. "For the first time in the seven years of the program, banks affiliated with the Central Bank Gold Agreement failed to reach sales quotas in 2006, and now, with updated IMF reserve data just published, it is apparent that gold sales have slowed. In addition, the much-anticipated and speculated-upon gold buying is finally emerging in the market."

According to IMF statistics, Russia has added 7.45 tonnes to reserves, Kazakhstan has added 7.38 tonnes, Greece has added 3.56 tonnes, and the Philippines added 1.4 tonnes. While Russia stated publicly in 2006 that it would increase its gold reserves substantially over the coming years, the moves by other central banks were unexpected in the market, clearly a bullish signal, Doyle remarked.

Blanchard and Co. Inc. is the largest and most respected retailer of American rare coins and precious metals in the United States, serving more than 350,000 people with expert consultation and assistance in the acquisition of American numismatic rarities and gold, silver, and platinum bullion. The Blanchard Economic Research Unit is a key source of precious metals market analysis and continues to be an important resource for financial and consumer media throughout the United States. Blanchard and its predecessor companies have called the New Orleans area home for more than 30 years. For more information about the company, visit BlanchardGold.com or call the company toll free at 1-800-880-4653.

* * *
Chrysotheras says: "Got Gold?"...

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Feb 5, 2007

Northern Dynasty Minerals – The End Game is Under Way

What follows is a Special Alert newsletter from Peter Grandich regarding Northern Dynasty Minerals (*)

It’s been my firm belief that NDM is the number one target on the shopping lists of the top five or so mining companies in the world today. As hard as it is to imagine this mammoth deposit can get much bigger, the most recent drill results, including the highest grade intersect to date, strongly suggest that when it’s all said and done, the Pebble can be the biggest deposit in the world.
(See http://www.alaskajournal.com/stories/020407/nat_20070204023.shtml).

Simply put, I believe it’s a “must own” for companies like Anglo American, BHP, Newmont, Rio Tinto and other giant mining companies. I have little doubt that several of them have been pursuing it via a lengthy due diligence process.
These companies’ “window of opportunity” was dramatically reduced when Rio Tinto announced it has increased its ownership of NDM shares to 20%.
(See http://biz.yahoo.com/iw/070130/0209057.html).

While such ownership gives them zero interest in the project itself (a key point to grasp), it does give them a leg up. It also should make it clear that Rio is very serious and also believes in the ability for the project to end up being built.

So, on the assumption that there is at least one other interested party, what are the possible scenarios that can unfold?
  • Another company makes a bid for all of NDM shares.
  • Another company enters into a strategic relationship with NDM whereupon it agrees to pay all further costs, carry NDM throughout and NDM retains a 50% or so interest (thereby leaving that ownership still open for purchase).
  • NDM issues new shares to market at a substantial premium that allow the buyer to have similar or equal ownership to Rio’s present ownership.
While all three scenarios are okay, the second is better than the first because I believe someone eventually buys NDM’s share of the project. The last one is the best, as it would signal to the whole world that a bidding war is coming.

There remain risks, including the ability for the project to eventually get permitted, a big decline in metals prices and other unknowns, but I personally believe these potential negatives are down the road and NDM is just days or weeks from one of the three scenarios actually unfolding.

Technically, NDM is a little overbought in the short-term but it’s close to breaking out above key resistance in the 10 ½ - 11 area. As you can see, it’s been making higher lows since October and pressing up closer to key resistance.

Please Note – While Grandich Publications hasn’t been engaged by NDM since July of 2005, it is engaged by other Hunter-Dickinson companies.
Copyright 2007, Grandich Publications, LLC., Peter Grandich • Phone 732-642-3992
February 5, 2007 (www.Grandich.com)

(*) Northern Dynasty Minerals, Ltd. 1020-800 West Pender Street Vancouver, BC Canada, V6C 2V6
Toll Free: 1-800-667-2114
Phone: (604) 684-6365
Fax: (604) 684-8092
Email: info@hdgold.com

TSX-V: NDM $ca 9.85
AMEX: NAK $us 8.32
as of 10:15 a.m. EST

Share Structure: (at December 31, 2006)
Common Authorized Unlimited
Issued: 91,685,519
Fully Diluted: 94,048,890

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Feb 3, 2007

Review on Vancouver & Silver

Jason Hommel's debut on Youtube. All about Silver...

duration: 20:30'

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The reasons why proposed IMF gold sales won’t happen

by Neal R. Ryan
'02-FEB-07 08:00'

NEW ORLEANS (Mineweb.com) --There are numerous reasons why the IMF panel of distinguished current and former central bankers’ recommendation for the sale of 400 tonnes of gold to help plug operating IMF budget deficits won’t happen.

Even if the IMF gold sale does occur, it will give the market yet another bullish signal on prices.

There are a number of reasons this won't happen, but should it still come to pass, it will give the market yet another bullish signal on prices.

First, the U.S. Congress would have to approve the move by the IMF because the United States has ultimate veto power over IMF decisions. The IMF needs an 85% consensus on a move like selling gold reserves.

Since the United States holds 17% of the voting power at the IMF, if Congress isn't on board, it's a non-starter. Currently, Congress can't seem to agree on anything, and might be as partisan a group of lawmakers that has existed in the United States in the past 150 years. Therefore, don't expect anything to happen anytime soon from this group.

Also keep in mind that every time a budget gap needs to be filled, education programs need cash, health care initiatives need funding, heavily indebted countries need relief, and the IMF gold sale idea is trotted out to the public.

The UK's Gordon Browne has been the main instigator of mobilizing IMF gold from vaults over the past few years to fund numerous programs or reduce debt for countries. Few would argue that his pulse on the gold market has been as consistently wrong as any other central banker.

The IMF's gold reserves should be viewed as an ultimate insurance policy on global fiscal crisis, not a piggy bank to be broken open repeatedly to help bridge funding gaps.

What happens if the IMF does start using gold reserves to pay for ordinary budget deficits and we see a global currency crisis repeated in Asia? What if a Latin American economy tanks, or there is another Russian currency crisis that requires immediate funding, potentially from gold sales?

There was no mention Wednesday of cutting IMF spending or reviewing budget expenses. Surely a government agency, such as the IMF, can find some costs that can be reduced and expenses that can be cut?

The gold sale recommendation is the lazy way to solve the problem of operational budget gaps and fixing spending issues. Once the gold is gone and the IMF continues to run operational deficits, what's next? From where does the crisis funding come if it's been spent to solve operational issues?

The last time the IMF sold gold reserves was 1976-1980 during the all time gold price high in 1980. Had the IMF held onto some of the 50 million ounces it disgorged during the first few years of this sales program, they would have realized prices at much higher multiples to what they received.

Similarly, the Bank of England sold 400 tonnes from 1999-2001 and the Bank of Australia sold significant gold reserves in 2000-2001. In hindsight, this has been shown to be the signal of a market bottom of prices.

These points illustrate that maximizing return on assets has not been the primary benefit of selling gold reserves in recent history. The market participants that purchased during these large sales have been the end beneficiaries, experiencing enormous price increases in short order after the sales were complete.

More than likely, any IMF sale will not actually hit the market, but will be sold directly to a large central bank looking for significant reserve diversification while also being able to bypass regular market trading fees.

Speculation has been rampant on the potential of the Chinese government to begin diversifying their massive dollar reserve base into gold. If the Chinese decided to take just a handful of their $1 trillion and buy the IMF gold outright--sales are expected to fetch roughly $6.6 billion at current prices--they could do so without batting an eyelash. Also, the act of diversification into gold can be a prudent one for the Chinese or other interested governments.

Any central bank making direct purchases from the IMF would be able to get 400 tonnes of gold without having to pay a cent in commissions to brokers or bullion banks.

The IMF Crocker Report mentioned that if the sales were to take place, they would be spread out over a considerable period of time, and would stay confined to the sales quotas of the Central Bank Gold Agreement (CBGA). Meanwhile, CBGA banks are heading towards a second straight year of missing sales quotas (and missing them significantly) after having completely filled sales quotas for seven straight years.

The market has continued to show outstanding resiliency in the face of a regular selling program. Should the IMF sales dovetail into CBGA activity, there is no reason to believe the market won't digest the additional tonnes and keep marching forward.

Finally, don't expect to see the IMF selling gold anytime soon. If sales end up becoming a reality, they will be done in such a way as to potentially never even hit the open market, not auction style like the Bank of England's gold sales.

Even an outright sale of 400 tonnes into today's gold market would cause some weeks of indigestion for some traders. But the market participants would jump at the opportunity to remove significant gold holdings from weak hands and distribute that to the strong hands of individual investors. History has shown that buying during periods of announced bank sales has proven quite beneficial for investors in the long term.

(Neal R. Ryan is Vice President and Director of Economic Research for Blanchard & Company, a New Orleans precious metals retailer)


Feb 2, 2007

Gold Breakout Today

Below you'll find a P&F (Point and Figure) chart of GLD exchange traded fund (ETF) posing as a proxy for gold (one share of GLD equals 1/10 of spot gold price $/oz)

What you see here is a Triple Top Breakout (the three x's tops shown at $64 are followed by a break above that price for February 1st - represented here by the numeral 2)

The P&F "count" now is 70 for GLD, or -in other words- $700/oz. for gold.


Feb 1, 2007

But why would anyone want to manipulate the price of gold?

...look for the answer to this 'conundrum' in the following excerpt from Richard Russell's latest Dow Theory Letter.

How interested are the pros and the money managers, in gold? How about this? Gold funds hold about $17 billion in gold stocks. On top of this, the new gold Exchange Funds hold about $11 billion in actual gold. That's about $28 billion all together.

Big deal! The value of all US funds runs about $10 trillion. That means that the percentage of gold-oriented material held by the funds is about one-quarter of one percent. To put in another way, that's about $2.80 out of every $1,000 invested in gold. The surprising fact is that gold plus all the gold stocks don't even figure as a percentage of the holdings of US funds.

The interesting thing about the precious metal ETFs is that when you buy their shares, you are effectively taking the metal off the market. The largest gold ETF is the Streettracks Gold Trust. This trust now holds $9.5 billion in actual gold. But it's growing at the rate of 17% a year, which means that it's taking an increasing amount of gold off the market.

I just read Doug Casey's piece about gold manipulation; you can read it on the excellent 321Gold site, which is free on the Internet. Frankly, I've always been sceptical regarding claims of manipulation. But the Casey article is quite convincing. Governments and central banks manipulating the price of gold? Would they really do that? Sure they would -- hey, didn't the Fed under Greenspan hide the M-3 numbers. And Bernanke came in saying that he wanted to make the Fed more transparent. Really, then why didn't he bring the M-3 figures back? Oh, I see -- he didn't want to insult Greenspan.

But why would anyone want to manipulate the price of gold.?

The answer is obvious enough. Rising gold is a red flag -- if gold rises too rapidly, it attracts attention, it makes headlines, and then people ask questions. Rising gold might even give the whole plot away. You see, the fiat currency thesis is basically a fraud. It depends on a certain amount of systematic inflation (about 2 percent a year) in order to survive.

Next question -- why do central bankers want the fiat money system to survive? Simple, it's their livelihood. It's what they live on. It's their ticket to power. When Volcker was asked what he liked best about being head of the Fed, he said, "What I liked best was being addressed as 'Mr. Chairman.'"

But if the public, the voters, ever fully understood what a fraud the fiat money system is, they'd vote to end it. Fortunately for the central bankers, money seems to be the hardest thing in the world for the average tax-payer to understand. And even though the fiat money system robs the populace of the fruits of their labor and their savings, the people continues accept it -- they just don't know any better. So on and on it goes, and all the while the central bankers continue to put out their brand of BS.

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