You are here

Auditions resume Monday at 9:30 a.m. at the corner of Broad and Wall

Section: Daily Dispatches

Not to be reproduced without permission

For a free two-week trial membership,

* * *


Huge Physical Market Buying From
Middle East Propels Gold to New Highs


Gold $350.90, up $5.10
Silver $4.87, up 8 cents

GATA love it out there in Cafe land. All what
Midas and many of the Cafe contributors have
brought your way is coming to pass.

I happened to wake up about 3 this morning
and my curiosity about the gold price got the
better of me, so I peeked: down $2.70. quot;Here
we go again,quot; I thought, as I went back to

Here we went again indeed! The Gold Cartel's
efforts to break gold down was thwarted for
the zillionth time. This time HUGE physical
market buying surfaced out of the Middle East
while Comex was trading down on the day.

Midas has brought their buying to your
attention in the past, but today was
particularly pronounced, according to my

This did not go unnoticed, and certain big
traders pounced on the long side to take
advantage of the surging physical market. The
most notable one was Goldman Sachs, of all
people. They turned on Morgan Stanley, the
aggressive short, so much so that Morgan
Stanley made the highs for the day, running
for the hills in a bout of panic short-
covering. What goes around comes around. It
was only yesterday that Morgan Stanley
stopped out its own client on the downside
and then turned aggressive buyer.

This is a good sign. The Gold Cartel is
falling apart as the rats are going after
each other. We will see much more of this in
the weeks and months to come. How delicious!

The hot rumor of the session was that Sons of
Gwalia, the big Aussie hedger, is imploding.
Supposedly they have a big problem with a 310
call position. I will track that one down as
best I can. GATA's Chris Powell puts it best:

quot;When their hedge book rips their manhood
off, they'll be the Daughters of Gwalia.quot;

A good number of other hedgers are going to
be in the same soup as gold moves higher
(that is the word circulating in the bullion
dealer world). All the inevitable hedging
trauma we have talked about for years is
bound to surface soon and cause much
financial stress. Counterparty problems, here
we come.

In the last Midas commentary I stressed the
growing volatility in gold trading. Today was
a good example of why it is so important. The
Gold Cartel is on its last legs and spent
more than a week defending the $348/$354
area, trying to break gold down. They have
been taken on in furious fashion by a surging
physical market and staunch speculators, many
of whom are aware of the massive 15,000-tonne
short position. The daily battle is like
watching the tide go in and out. Fortunately,
the tide is coming IN for our camp and OUT
for the wretched cabal crooks and other
reeling shorts.

I have been calling for a $20 gold price
explosion to stun the market one day. Such a
dramatic move could come at any time now, as
I expect gold to blow through $354 next week.

Some gold market highlights:

* The base below gold is an enormous one. It
is powerful enough to propel gold hundreds of
dollars higher. Almost all of Wall Street and
the bullion dealer world continue to say
little about the surging gold price. Some of
their technicians are bullish because they
HAVE to be, but their more important
fundamental departments remain silent. They
are silent because they are either short
(from the gold carry trade) or they are
afraid to tell the gold truth because they
know a roaring gold price might wreak
financial havoc in certain quarters.

* There are no gaps to fill below the market.
That leaves THE BREAKAWAY GAP still to
surface ahead of us. Tick, tick, tick. Will
the volcanic explosion of the gold
derivatives neutron bomb create that gap next

* As anticipated, the CRB made new highs in
formidable fashion. It closed up 2.06 at
240.19, another multi-year high. The move up
was led by oil, which finished the day in new
high ground too at $33.08, up $1.23. But
supposedly there is no inflation! The oil
news remains very bullish:

* * *

CARACAS (Reuters) -- Venezuela's strike-hit
oil industry will need at least four months
to restore operations to normal levels, foes
of President Hugo Chavez said on Thursday.
Earlier on Thursday Chavez told reporters oil
operations in the world's No. 5 crude
exporter would be restored in a few weeks.

quot;In order to reach November 30 production
levels, PDVSA needs at least four months,quot; a
press release from the Democratic Coordinator
opposition grouping said.

Striking employees from state oil firm
Petroleos de Venezuela (PDVSA) have said
Venezuela's month-long strike has cut output
to under 200,000 bpd. The OPEC nation pumped
about 3.1 million barrels per day (bpd) of
crude in November.

Venezuela's oil exports were slashed to
around 520,000 bpd last week compared with
crude and product sales of almost 2.7 million
bpd in November, according to data from PDVSA
and shippers.

* * *

* The Comex open interest stands at 207,213,
rising another 299 contracts yesterday. The
smart-money long specs are handing it to the
increasingly crippled Gold Cartel crooked
shorts. We ought to witness a Commercial
Signal Failure next week or in the near
future. Many cabal shorts will be forced to
cover when gold takes out $354.

$419 gold, here we come.

The Silver Streak HAS left the station. Up,
up, and away we go. Silver has broken out of
a massive base too and ought to accelerate
soon. A $1 or so daily move in silver is in
the cards as the concentrated silver shorts
will be forced to cover at the same time.
Silver hasn't left any gaps either. That is
very constructive. Expect silver to blow
through $5 any day and head for $6 near term.

* * *

The John Brimelow Report

Friday, Jan. 3, 2003

Indian ex-duty premiums: AM $1.93, PM $2.06,
with world gold at $344.60 and $344.20. At
legal import level. India's willingness to
follow the world gold price up some $30 in
the past month has been impressive, and very
bad news for bears. One also hears stories of
Middle Eastern appetite over Christmas week.

Clearly the last two weeks have been quite
vigorous, notwithstanding the many appeals by
bullion bank commentators to the traditional
quietness of the season. Volume today was
estimated at 44,000 contracts, yesterday was
39,172, and New Year's Eve (an abbreviated
session) 24,111. Several violent attempts
were made to sell the market off -- including
apparently a 10-tonne sale by an ECB
subordinate Central Bank in the holiday-
reduced week to Dec 27, way above the
Washington Accord-implied weekly rate -- but
all failed in the face of resolute buying.

Japan, of course, closed early last Friday,
and will not re open until Tuesday. While the
result of today's $US-gold rally has been to
restore yen-gold to essentially the level at
which it closed on the 27th, there seems to
be an important shift of opinion going on in
Japan. Ross Norman's invaluable site --

a href=

-- reports a significant article in the major
Japanese newspaper The Daily Yomiuri, in
which the deputy chief officer of the Yomiuri
Research Institute bluntly demands a lower

quot;The United States in the wake of the Great
Depression in the early 1930s adopted a
policy of having the dollar's value weaken by
as much as 40 percent by raising the price of
gold from $22 per ounce to $35. During the
same period in Japan -- the period of the
Showa Depression -- Finance Minister Korekiyo
Takahashi, with a view to resuscitating the
economy, dared to allow the yen rate to
decline by 60 percent per annum, from the
rate of 100 yen to $49.845 to 100 yen to $20

quot;Given the current state of the economy, the
current level of 120 yen to the dollar is
definitely too strong. The yen rate, which is
currently in the 120-yen range, or double the
value of the Japanese currency at the time of
the Plaza Accord -- about 240 yen to the
greenback -- has savaged the economy. The
root cause of the current economic woes is
undoubtedly the unduly sharp rise in the
value of the yen against the dollar since the
Plaza Accord.

quot;Japan, as a result of having faithfully
cooperated with the United States to help
extricate it from economic maladies, now
finds itself in dire straits. Now, it is the
United States' turn to help Japan out.

quot;Yen-weakening measures now seem inevitable.
The introduction of a government policy to
allow a certain level of inflation is also


a href=

Quite apart from the macro economic
implications of this, gold's friends will be
interested because of the strong appetite for
gold futures and, perhaps gold itself the
acceptance of such a policy is likely to

Andy Smith has given an important interview
on the MineWeb site, marking his very
accurate gold prediction for 2002 gold. He

quot;I felt quite strongly that something pretty
dramatic did change [after September 11,
2001). ... I find it very hard to be bearish
gold -- at least on a three-to-six-month
view. It's about geometry rather than
geopolitics if we stay above $340. People
have been asking me how long do I think it
can go on. 'Longer than you think, if you
think,' is my glib reply. Analysis at this
point is almost totally counterproductive.
We're in a technical territory that is likely
to excite all sorts of behavior. Few people
in the market can remember because we haven't
been here for five years.quot;

-- John Brimelow.

* * *

Nick Ferris of J-Pacific Gold provides the
follwoing observations about intensified gold

* * *

By Nick Ferris, CEO
J-Pacific Gold

Today's news of the huge buying from Western
Asia should be no surprise to Le Metropole
Cafe subscribers. Over the past few years the
cafe has been almost the only source of hard
information from the Great Continent. The new
gold markets of Dubai and Shanghai and the
associated liberalization of gold prices are
watershed developments. We are entering a new
monetary order with gold at the apex.

The definition of wealth is in profound
transition. We are witnessing a devaluation
of the dollar against the world's ultimate
currency -- gold. It is an event that is
largely being driven by the fears of the
Asian investor.

From the Near East to the Far East, Asians
do not trust paper. This distrust is
ingrained in the collective psyche of their
societies. To your average Asian, gold is the
wealth of the ages. Just try to convince an
Arab or Persian or Indian or Chinese or
Japanese housewife to sell her gold!

Over the past 30 years there has been a great
transfer of wealth from the West to the East.
From manufacturing, trade, and oil, the Asian
continent is now awash in dollars. Paper
values are simply a function of confidence.
Once the citizens of these Asian societies
lose confidence in the dollar, they will move
to convert dollar holdings to gold. In a
panic, it will not matter how many dollars it
takes to buy an ounce of gold -- they will
simply want the gold.

We have all the necessary incendiary material
for a sudden and massive devaluation of the
dollar against gold; a huge short position, a
widening supply deficit, the announcement of
the Federal Reserve's intent to mass-monetize
America's bad debts, and the threat of two
major land wars in Asia.

The catalyst is the Asian investor. It
appears that the fuse is now lit.