New article calls attention to supply/demand imbalance in silver

Section:

EXCERPTS FROM 'MIDAS' COMMENTARY
FOR FEBRUARY 3, 2003
Copyright 2003, www.LeMetropoleCafe.com

By BILL MURPHY

Gold $370.40, up $3
Silver $4.81 down 1 cent

The daily gold chart reveals that gold has gone straight up in
controlled fashion. The deepest correction was only around $6:

http://futures.tradingcharts.com/chart/GD/23

Repeatedly, John Brimelow pointed out it was likely the
Japanese would be buying gold again in a big way, due to
their increasing financial market problems. That is just what
happened last night as gold rose smartly, approaching the
$372 mark. That technical resistance point has been a tough
nut to crack, but it should fall prey any day now, to the
ever-more-successful onslaught of bullish buying.

The Gold Cartel attempted to sell gold down again, but was
thwarted as they have been for the last $57 in the up move.
Gold popped nicely overseas as the dollar gained ground
(especially against the yen). Later, the stock market moved
higher in the U.S. and oil was hit hard, but the dollar closed
mixed. None of it mattered to gold. It was the physical
demand increase that mattered a great deal, as it put
increasing pressure on a desperately short Gold Cartel --
which is slowly being carried out on GATA's stretcher.

We have to be getting closer and closer to our awaited
Commercial Signal Failure. The commercial sellers continue
to lose as the specs continue to win. I thought the market
would move this way because many of the commercials are
part of the Gold Cartel and they are going down. Some are
so arrogant, they don't get it yet. That must be so because
we have seen no signs of a real panic. They keep waiting
for gold to correct. Look at the poor silver and gold share
action, they point out.

The bottom line is gold has gone straight up since the
Howe/Bolser report was posted on December 4 and
Lawrence Lindsey and Paul O'Neill resigned on December
6.

The Comex open interest dropped on Friday's setback to the
tune of 3,680 contracts. It now stands at 234,148 contracts.
Technically, it has been textbook bullish action, as it generally
expands on rallies and contracts on setbacks.

Once gold closes above $372, it ought to shoot for the
$410/$420 area.

John Brimelow nails it:

* * *

The John Brimelow Report

Monday, Feb. 3, 2003

As presaged on Friday, Japan exploded into action in
gold today. Even before a report appeared that the new
head of the BOJ would be an avowed inflation targeter
(which was later denied), TOCOM was bidding the gold
market up. On record volume equivalent to 81, 931
Comex contracts, the active contract rose 12 yen, pushing
$US gold up $2.75 from the NY close. Open interest rose
a huge 7,118 Comex lots (+5.2%).

"We're seeing some fresh buying from funds and
individual speculators" Reuters quotes a Japanese dealer
as saying.

Crucially, this was a widespread development. TOCOM
as a whole traded a record volume, with kerosene and gasoline
contracts being notably active. For once, the Tokyo stock
market had a good day, with export shares being particularly
strong. Clearly the Japanese investment community suspects
its government of being about to engage upon a major
weakening of the domestic and international value of the
yen. This is a possibility which has been foreseen in an
interesting discussion by AIG's Bernard Connolly. A
confirmation of this suspicion will make what New York
thinks about gold irrelevant, at least for a while.

Certainly, by traditional yardsticks, there is reason for
concern. Although MarketVane's Bullish Consensus,
falling on Friday to 85%, is at its lowest level for three
weeks.) And it is clear from the Bullion Bank comments
that serious resistance, probably Official, is forming in
the $370s. Nevertheless, given the stresses they have
been through, this is not the time to ignore Japan.

-- JB

* * *

On the yen:

"Tokyo, Feb. 3 (Bloomberg) -- The yen may fall for a third
day after Zembei Mizoguchi, vice minister for international
affairs, said Japan could sell its currency in a 'massive' way
to avoid 'rapid' movements.

* * *

Australia's Nick Laird points out:

"Gold open interest for January was the sixth highest-ever;
volume is the eighth-highest ever."

http://www.sharelynx.net/Markets/Charts/AUOpenInterest.htm

* * *

Yesterday I forwarded Chris Powell's GATA email alert about
Dimitri Speck's commentary recently posted at:

www.gold-eagle.com/editorials_03/speck020303.html

It is titled, "FED: Musings on the Eve of the Gold Suppression."

Speck's wonderful effort is one more piece of the puzzle that
solidifies GATA's claims that the gold price was rigged with
great fervor by a Gold Cartel -- one that included the Fed and
the Exchange Stabilization Fund.

This new piece of evidence is especially gratifying to me as it
was the basis for a major point in my presentation last week
at the Vancouver Resources Investment Conference and will be
again when I go back to Vancouver to speak at the World
Outlook Investment Conference this weekend.

We can now witness even more clearly how and why the price
of gold was manipulated for a decade or more -- a manipulation
that went into steroid-like high gear under the auspices of
Treasury Secretary Robert Rubin in 1995. The rigging of the
gold price formed the basis of his 'strong dollar policy.'' It
always
astonishes Chris Powell and me that no reporter ever articulates
how that policy was carried out if not by suppressing the price
of gold.

I thought I would go into this in some detail because once you
understand what was done to gold, why and how the Gold Cartel
carried out their scheme, you will know why the gold price is
doing what it is doing today. It will also help to strengthen
convictions that it MUST go far higher as a result of what the
cabal put in motion.

Dimitri Speck's discovery in the Fed minutes solidifies
GATA's contention regarding the reason JP Morgan Chase
has such massive gold/interest rate derivatives on its books.
At last count, they had something like $41.8 billion in gold
derivatives and $24 trillion in total derivatives, much of
which are interest-rate related. The GDP of the US is $10
trillion. It has been GATA's contention that the rigging of
the price of gold was related to U.S. interest rates. It has been
our contention that, as time goes by, a sharply rising gold price
could set off a derivatives crisis and could harm financial markets.

This takes us right to former Treasury Secretary Lawrence
Summers' paper, "Gibson's Paradox and The Gold Standard."
GATA's Reg Howe noted that the bottom line of Summers'
analysis is that "gold prices in a free market should move
inversely to real interest rates."

Therefore, by capping gold and then tanking it, they constructed
an abnormally strong dollar market situation, which is now
blowing up on the Gold Cartel.

Is it a coincidence that the price of gold has gone straight up
since the Howe/Bolser report was issued December 4? Is it
a coincidence that gold has gone straight up since Treasury
Secretary O'Neill and Presidential Economic Adviser Lawrence
Lindsey resigned on December 6?

The price of gold is going to skyrocket because the Gold Cartel
has been found out by GATA and they are being overpowered
by surging demand for physical gold around the world. Half the
central bank gold is gone. The current supply/demand deficit
exceeds 1,500 tonnes per year. As such, the plight of the Gold
Cartel is worsening daily and is moving into crisis mode. The
situation is explosive. The bad guys have done themselves in.
They are trapped and cannot exit their massive gold short
positions gracefully, or without incurring enormous losses.
Gold must rise hundreds per ounce to clear the market.

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