Amazingly, while gold and other commodity related stocks continued to be sold off to levels that are at deep discounts to their intrinsic value in October, gold continued to break to new all time highs in most major currencies. On October 9th and 10th gold recorded new all time highs in many currencies including the Euro, the Australian Dollar, British Sterling, the Indian Rupee, the Russian Ruble, the South African Rand and many others. The Dow Jones Industrial Average Stock also recorded a multi decade low in terms of gold. Investors are getting a very much skewed view of gold’s performance if they are viewing it in terms of the US Dollar or Yen. These are the two main currencies that have been used as cheap funding sources allowing speculators to take on incredible degrees of leverage to invest in higher yielding assets with much better fundamentals. The excessive debt is being unwound causing a very unnatural rise in the dollar as overleveraged investors raise dollars to pay down their excessive debt. This has caused an unlikely gift from heaven for foreigners holding dollars to sell their dollars which are being printed like at no other time in history while at the same time they are rising in value due to the even bigger buying by debtors selling other assets to pay down debt. The same is happening to the yen which is why in these two currencies gold has not yet recorded another new high like it has in the majority of other currencies.

The manipulative attacks on gold and silver are getting more and more desperate and obvious to the masses. You could say the action on October 10th went just a little too far to the point where even the mainstream press and media are commenting on the price discrepancies between paper silver and gold trading on the Comex and physical silver and gold which is ever more difficult to find available at any price. While the stock market was melting down on that day, gold went from up $40 to down $75 in a matter of hours. Silver went from a high of $12.32 to a low of $9.42 as well. Meanwhile in the physical markets for silver the best price I could find for silver was $16.50 per ounce, a whopping $7+ over the “market” price on the Comex. That is an incredible 75% premium! One ounce silver coins go for more than double the spot price on eBay. The manipulation has become so obvious we are seeing a steady decline in the weekly Commitment of Trader’s Report open interest figures for gold and silver. Could it be that investors are finally realizing that market is a total scam? The manipulators have been so outrageous, they are precipitating their own downfall as Comex longs are increasingly demanding delivery rather than rolling forward. After all, you can take delivery and now sell it for as much as a 75% premium in the physical markets on eBay, for instance. At this rate they are in huge danger of having their scam market revealed since there isn’t more than a fraction of the silver available for all of the demand which has been growing rapidly in recent times. This should soon result in a reemergence of demand for gold and silver equities as the convenience of the futures market and very probably the gold and silver ETFs are called into question. When the fraud is removed, be prepared for the biggest gold and silver stock rally of all-time. Right now the stocks are being sold with no attention to the underlying attributes of individual shares. While many gold and silver stock investors have had enough and want out at any price, those buying in this selloff are picking up stocks of companies trading at less than ONE! times earnings or cash flow and as little as 30% of the cash companies have in the bank. I don’t know if there has ever been a time in history where a group of stocks has traded so cheaply while their operations have performed so strongly and that is despite tremendous manipulation and suppression in their underlying products which are priced way below what they will be in a free market.

How could this have happened? This is what we have heard from insiders that witnessed some of the actions which engineered the selloff in the commodities sector.

Back in July, days before Fannie Mae and Freddie Mac were to be rescued, Bernanke and Paulsen were faced with a horrendous Consumer Price Index release of +5.4% which had already been deceptively massaged lower through various methods such as substitution, hedonic pricing, and geometric averaging, generating a number so low it bears no relationship to reality. Even with all the massaging lower of the CPI it was felt it had reached a level that would be most worrisome to the masses, particularly since gold and silver were working their way toward new highs recorded in March right around the time Bear Stearns blew up. Incidentally, it has recently been discovered that Bear was likely attacked by other financial firms since it was long $12 billion in gold derivatives and was not doing its part in the gold suppression scheme. Bear was no more bankrupt than all the other major banks and brokers, however, with the incredible leverage these organizations have taken, (most all are leveraged over 30 to one), a rumor about such a firm’s liquidity will soon become a self-fulfilling prophecy since there is constant refinancing going on.

Paulsen knew that top performing hedge funds had been making a killing riding up the long term wave of higher commodities and shorting financials. He was already validated in 2006 by his successful efforts to drop energy prices by getting his ex-employees at Goldman to change the weighting in the widely followed Goldman Commodity index over night. This caused a cascade of selling by indexers when the surprise change hit the press. The scrambling resulted in the failure of Amaranth, a large hedge fund specializing in energy which caused more selling.

This time it has been reported that in July, Paulsen went to big institutional investors such as CALPERS which had big exposure to the well positioned commodity sector and after relaying the seriousness of the condition of the financial system, persuaded them to sell their commodity related investments “for the good of the nation”. He wanted to turn the inflation scare suddenly to a deflation scare. With a few big institutional investors leading the way combined with rampant naked short selling of gold and silver equities by the likes of Goldman reported by Canadian brokers, a wave of selling in this area was put in motion that snowballed. The illogical selling resulted in broken technical patterns of stocks resulting in more selling. This has resulted in a high level of redemptions in gold funds that forces managers to sell even when the stocks trade lower than the cash the company has in the bank. A way to check if this is what happened is to analyze individual companies and see how they have performed. For the most part there is nothing that should result in a selloff, as these businesses are among the strongest in the world today despite suppressed prices for gold and silver that would be much higher at this time.

It is truly a disgrace that the modus operandi of our financial leaders is to send false signals to the marketplace and cause cascading selling and buying after having those in the know positioned to take advantage of the effect. That could have another name – robbery. The bifurcation between the price of the physical gold and silver market and the “market price” as represented by the Comex is an indication that a vast number of participants in these markets have come to the realization, finally, that the market price on the Comex is a total sham. It is most unfortunate that those that have invested in gold and silver to protect precisely against the financial dislocations that have accelerated since Bear Stearns was driven to insolvency, are putting in for redemptions or selling personally because “something is wrong”. Physical gold and silver in your own possession can not be ruined although its perception can be tainted by those that believe the fraudulent pricing from the Comex actually means something. Gold and silver are the mortal enemies of fiat money since fiat is always eventually abused to the point of worthlessness. Since the very banks which have an interest in seeing gold and silver discredited have access to unlimited borrowings from the Fed and have no restrictions whatsoever from driving the price of the metals and the stocks down, you can not rely on any message that lower prices of these invaluable assets is bringing. There are huge numbers of investors that are currently paying 70-100% over Comex prices for silver and 15-20% over for gold. These people are clearly not paying attention to what the Comex “market” reflects. Gold and silver serve a very special function in the protection of one’s assets and in a fiat money system gone totally out of control that is even more true. Investors need an appropriate weighting in precious metals that should not be sold because a line has been broken on a technical analysis chart. Even though it does not seem to be working while it is apparent that it should, it is the type of asset that will probably work all at once, when the constant manipulation is suddenly overcome by natural forces. Central bankers and the money powers are masters of all things paper. They very cleverly found a vulnerable area to exploit when they noticed hedge funds were very long in this area and that they were using excessive leverage. With a little cooperation from a handful of very large institutional investors they were able to initiate a domino effect of selling making this traditional safe haven look totally ineffective while in reality the selling is a result of holders using leverage and self defeating stop losses that takes them out of the sector when it is most needed. Those that were overexposed or leveraged in this area should bring their weightings down to an appropriate level but to abandon the sector completely at this time is very foolish. Gold and silver should protect assets from either inflation or deflation; however, a very rocky period before that protection becomes apparent should not be totally unexpected and reflects no understanding of what the recent manic money creation will bring about. The huge losses being experienced now are more due to not understanding this than anything else. Stocks can protect somewhat in a period of inflation but bonds would be lethal and unrecoverable. Deflation would make highest quality bonds acceptable but stocks would suffer. Cash would only protect in the case of deflation or in the initial stage of inflation coinciding with the period before that inflation rolls into the real economy. That is probably what is occurring now and you should be protected in t-bills until it is apparent that inflation is going to be so high that your purchasing power will be wiped out rapidly. In an era when most all major banks are recklessly leveraged at 30-40 times their equity it is clearly not safe to have much cash vulnerable to likely bank failures. To do a check on these statements look at the evidence from the Bank of International Settlements. Despite the belief that banks and financial companies are deleveraging there is almost triple the amount of derivatives as there was over a year ago at $1.4 quadrillion! The money powers are less in control every day and that is why the attack on gold and silver has been so vicious. They have been unsuccessful from stopping other countries and investors from pulling all the available gold and silver off the market and these are the holders that will have the economic power down the road. You can bet when all the leverage unwinding ends, the financial companies that were successful in engineering the selloff will be the new big owners of the stocks and metals that are being thrown away for less money than the companies have in the bank. Firms such as Goldman have vital information since they are among the largest prime brokers. They know how leveraged specific investors are and can use that info against them. One major prime broker raised their in-house margin requirements on mining stocks from 50% to 100% “because they are so volatile”. Obviously this resulted in more forced selling. They always pull out every trick in their bag to make sellers for what they want to buy. With the information they have in hand is it any wonder that the market can go up 900 points one day and then down 800 the next? They are gaming positions that should be privileged information. Ex-Goldman employees entrenched in key Government positions in many countries help the money powers influence policies such as continually attacking the gold and silver markets. In July, two US banks sold paper silver in a very short period of time equal to 1/4th of an entire year’s production driving the silver price from over $19 to around $12 in a few weeks time.

The Government and their agents have spent the last decade propping up zombie companies such as GM and the banks, and suppressing free market movements in gold and silver. They continue to add to the problem with the massive bailouts and money creation that is the key factor driving gold and silver up which is what they so foolishly are trying to stop. As derivatives positions blow up, the dollar gets a boost as failing counterparties try to raise dollars to pay off their failed bets. A very huge portion of the $1.4 quadrillion in derivatives is positioned directly against what the natural pull of a free market that would cause asset prices to move to. More specifically, interest rates on bonds would be very much higher, gold and silver would be very much higher, debt of most major corporations would be unsalable except at dramatically higher interest rates, etc. etc.

The key problem of the financial system is too much debt and leverage. All solutions so far to the key problem involve more debt and leverage. That is why derivatives have almost tripled since this crisis began over a year ago and we are no closer to a solution. Gold and silver are even better values now than ever. The $700 billion bailout which we were vehemently opposed to went to the banks and to furthering the goals of the financial powers which is not in your interest. Not a nickel of it has gone toward extending more credit to consumers, nor will be, you have been lied to. Guaranteed, some of it has gone to holding back the gold and silver price and from exposing the reality of the situation. Write your Congressman and complain, let them know you see what is going on. We do.

There are many money managers that clearly see what is going on and they have taken the appropriate steps to address the current scene. Managers such as Jim Puplava, Eric Sprott, John Embry, John Hathaway and many others have taken the correct steps. Their performance has not reflected that they are the correct steps but that will come in time unless we let the financial powers take from our very hands the investments that will protect us from their actions. No leverage whatsoever should be used in this environment. The only way you can have these stocks taken from you is if you are using borrowed money. Gold stocks, silver stocks, and uranium stocks have fundamentals so strong that they can not be hidden despite the unprecedented attempts to make them look bad. This is why silver trades as much as 100% above the phony paper markets. You should be increasing your exposure to these assets not withdrawing from them. The upside is absolutely unprecedented. Gold and silver stocks have never been cheaper relative to gold and silver than they are right now. If you are overexposed, cut back, do not withdraw completely. Do you own physical gold and silver? It is absolutely essential and can still be sold at close to all time highs despite the bogus paper markets. In this investment climate gold and silver should not only be a permanent part of your portfolio no matter how the investments respond in the turmoil, it should be an increasing portion. Physical metal is very difficult to acquire if you have waited to this point so do not give up on your gold and silver stocks. They have direct possession even if it is still safely below the ground.

Put the vast majority of your portfolio in cash generating gold and silver companies, there are many which trade below three times cash flow and even one times cash flow. Many, if not most, have more money in the bank than their entire market capitalization. Panic selling initiated by the Paulsen and Bernanke white wash did little to calm the nerves of the market place. It did shut off the escape hatch of gold and silver that will benefit like no other area when the money printing accelerates and escapes into the real economy. At that point, and we believe it is very soon, those that have sheltered themselves in cash and bonds will be annihilated and will be too afraid to move to the safety of gold and silver after what was just perpetrated. This is truly criminal activity, be aware of it and stay sheltered with an appropriate percentage of your assets.

The capital that has been cut off from mining will most definitely create an upward explosion in the price of gold and silver like nothing we have ever witnessed. Demand for gold and silver continues to mount, particularly on the investment side while supply is in the early stages of absolutely plummeting. Gold production was down 6% in the first half of the year and will be much worse in the second half. Some companies we spoke to are moving to slow their production because they feel the Comex prices are just ridiculous. We agree and are glad to hear they hesitate to throw away scarce product for an inadequate price. Silver production will likely skid sharply if the situation continues. The zinc price has dropped all the way back to .48 while industry breakeven is closer to the $1 mark. 32% of silver production comes to market as a byproduct of zinc and another huge portion over 25% comes as a byproduct of copper. The stage has been set for the most remarkable and likely rapid rebound of all time. The bull market in gold and silver and all commodities was catalyzed by a very long period of underinvestment and lack of capital. That situation is clearly being exacerbated by the events of the past five months which will cause an even more explosive upside than before. The supply side will be affected much quicker and deeper than any falloff in demand due to weak world economies. One can not just decide they all of a sudden would like to go find a new gold or silver mine or uranium field. Physical commodities must be priced above their production cost or the supply will simply dry up which is exactly what we are seeing in the gold and silver markets. Intervention can last for quite awhile but eventually the artificial prices result in ever bigger shortages and upward pressure on prices. People know that gold and silver should really be doing better now with all we have seen transpire this year so some people are using that as a justification not to buy it. As John Embry has said, “that is exactly the mindset the guys driving the price down are trying to create.” You can be sure when they can no longer drive it down they will be the big owners when it all bottoms.

Stocks in these sectors are trading at ridiculously low valuations based on earnings, cash flow, reserve values, and even just cash alone in the bank. This is clearly not a time to sell these companies yet investors have continued to do so forcing fund managers to sell stocks trading at a fraction of their real value to raise cash. As overleveraged hedge funds and investors sell investments and buy back dollars to pay off debt, the artificial strength of the dollar will persist until the debt is retired. Yes, believe it or not, there is global demand for the US dollar at a time when the country is fundamentally bankrupt which few yet understand in the US. This has all been set in motion by Paulsen and Bernanke with their scheme in July to twist the arms of big institutional investors to sell their commodity investments. The companies continue to report good earnings results even with the unnaturally low gold and silver prices. It is impossible to know exactly when the selling will stop since investors want out of the strongest performing industries remaining in the US. If they would only take a hard look at what they are selling the selling will stop but all things must run their course. The sad part is just as investors run to cash we are ever closer to seeing just how unsafe cash is. We have been wary of banks all year to the point of not allowing much cash to sit in them. Our worst fears regarding how unsound banks are has proven out. So far damage to depositors has been minimal as bigger banks that are in even worse shape have rescued bankrupt banks like Washington Mutual and Wachovia. Gold and silver continue to improve fundamentally with: wars on two fronts; huge, unprecedented and growing budget and trade deficits; ongoing financial crises with many more banks to go under; a recession that will uncover more financial problems; a flawed national energy policy; and improving supply and demand fundamentals. In addition, the monetary base is up over 50% over the past few months while other money printing to fund bailouts has even exceeded that. The Fed has kept its word that it is ready, willing, and able to print money in any quantity necessary to back these bailouts of the financial powers.

The uranium price moved down in October as hedge funds and financial players that were hoarding uranium metal were forced to sell in the deleveraging process. I was never a big fan of hoarding metal that already is experiencing shortages for its basic applications. Good for the electric utilities that got some material at a bargain price that they will find ever harder to acquire in the years ahead. The price has started to move back up over the past few weeks.

When you look at the actions of our Treasury Secretary and the Fed you have to question either their sanity or honesty, it is one or the other. The Government’s borrowing needs for next year are already expected to double to over $2 trillion. Contrast the recent bailout plan initiated by China with ours. The China plan is focused on infrastructure with such things as railways and public housing that will require ongoing demand for commodities with a real, lasting product that can be used many years into the future. The US plan is focused on funneling $100’s of billions of dollars and eventually trillions to failed financial firms as well as uncompetitive industries the most glaring of which is the US auto industry. These are the companies that caused the problems we have now. The Administrators running the bailout were complicit in this entire mess. AIG was just handed another $40 billion now raising that bailout for one firm to over $150 billion. AIG has been rumored to be the biggest short seller of gold and silver. Does that seem like a worthy bailout to you? Contact your Congressman! There should be no more bailout money funneled to the bankrupt Wall Street banks and brokers. American Express was just converted to a bank so it could too get on the gravy train. Enough! Let the chips fall where they may so we can start over. The current plan is just taking more from you and me in favor of the financial elites in power. The sooner it stops the better. Make no mistake, the market and the media can be moved at will with all of the financial weapons we have handed over. Congressmen were threatened with Martial Law if they did not cede all the requested powers along with the $700 billion. Protect yourself with t-bills and gold to the greatest extent possible. Be very wary of cash held by banks or any counterparty.

If you were a businessman and you bought a company that was generating cash equal to what you paid for the whole company or even 1/3 of what you paid for the whole company would you be upset and want to sell it? That is, in effect, what you are doing if you sell these companies that are trading at these very low valuations. It makes no sense but it is happening.

by Richard J. Greene

by Nick Barisheff Bullion Management Group

Gold is respected throughout the world for its value and rich history, which has been interwoven into cultures for thousands of years. Coins containing gold appeared around 800 B.C., and the first pure gold coins were struck during the rein of King Croesus of Lydia about 300 years later. Throughout the centuries, people have continued to hold gold for various reasons. Below are eight reasons to own gold today.

A history of holding its value
Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next.

Weakness of the US dollar
Although the US dollar is one of the world's most important reserve currencies, when the value of the dollar falls against other currencies as it did between 1998 and 2008, this often prompts people to flock to the security of gold, which raises gold prices.

The price of gold nearly tripled between 1998 and 2008, reaching the $1,000-an-ounce milestone in early 2008. The decline in the US dollar occurred for a number of reasons, including the country's large budget and trade deficits and a large increase in the money supply.

Inflation
Gold has historically been an excellent hedge against inflation, because its price tends to rise when the cost of living increases. Since World War II, the five years in which US inflation was at its highest were 1946, 1974, 1975, 1979 and 1980 (as of 2008).

During those five years, the average real return on the Dow Jones Industrial Average was -12.33%, compared to 130.4% for gold.

Deflation
Deflation, a period in which prices contract, business activity slows and the economy is burdened by excessive debt, has not been seen globally since the Great Depression of the 1930s. During that time, the relative purchasing power of gold soared while other prices dropped sharply.

Geopolitical uncertainty
Gold retains its value not only in times of financial uncertainty, but in times of geopolitical uncertainty. It is often called the "crisis commodity", because people flee to its relative safety when world tensions rise; during such times, it often outperforms other investments.

World's greatest investors
For example, gold prices experienced some of their largest recent movements during periods of tension with Iran and Iraq in 2007 and 2008. Its price often rises the most when confidence in governments is low.

Supply constraints
Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks. This selling by global central banks slowed greatly in 2008.

At the same time, production of new gold from mines has been on the decline since 2000. According to BullionVault.com, annual gold-mining output fell from 2,573 metric tons in 2000 to 2,444 metric tons in 2007. It can take from five to 10 years to bring a new mine into production. As a general rule, reduction in the supply of gold increases gold prices.

Increasing demand
Increased wealth of emerging market economies has boosted demand for gold. In many of these countries, gold is intertwined into the culture. India is one of the largest gold-consuming nations in the world, and gold has many uses there, including jewelry.

As such, the Indian wedding season in October is traditionally the time of the year that sees the highest global demand for gold. In China, where gold bars are a traditional form of saving, the demand for gold has also shown rapid growth.

Demand for gold has also grown among investors. Many are beginning to see commodities, particularly gold, as an investment class into which funds should be allocated. In fact, the largest gold ETF, StreetTracks Gold Trust, became one of the largest ETFs in the U.S. and one of the world's largest holders of gold bullion in 2008, only four years after its inception.

Portfolio diversification
The key to diversification is finding investments that are not closely correlated to one another; gold has historically had a negative correlation to stocks and other financial instruments. Recent history bears this out:

The 1970s was great for gold, but terrible for stocks.
The 1980s and 1990s were wonderful for stocks, but horrible for gold.
As of 2008, this decade has been a good one for gold, and an unfavorable one for stocks.
Properly diversified investors combine gold with stocks and bonds in a portfolio to reduce the overall volatility and risk.

Conclusion
Gold should be an important part of a diversified investment portfolio because its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. Although the price of gold can be volatile in the short term, gold has always maintained its value over the long term. Through the years, it has served as a hedge against inflation and the erosion of major currencies, and thus is an investment well worth considering.

There's a worldwide run on gold coins.

Even as the price of the precious metal itself comes under pressure along with commodities like oil and copper, people around the world are demanding so many of the valuable coins that government mints are having difficulty filling orders.

A spokesperson for the US Mint tells me that gold coins in this country, for the past month, "are being allocated because of an increased demand." [BMK note: Perth Mint is totally out of gold and silver coins]

And the price that the government charges coin dealers has recently been increased by as much as 10 percent for a 10-ounce coin.

Robert Mish, a coin dealer in Menlo Park, Calif., says customers who want to purchase 200 gold coins often have to wait up to two weeks. Six months ago, he said, a purchase that size could have been filled immediately.

Someone who recently tried to purchase 100 one-ounce American Eagle gold coins in the New York City area was turned away, even though he'd uneventfully made purchases before through the same dealer.

And even when gold coins are available, dealers report that customers are paying a bigger premium than they would have just a few months ago.

Previously, American Eagle coins were going for 5 percent over the market price of gold on the Commodity Exchange (Comex). Now the premium can be anywhere from 10 percent to 15 percent, even though the US Mint raised its price to dealers by just 3 percent for an ounce coin.

In one sense, the attraction for gold coins isn't surprising. Since ancient times, gold has been considered the safest investment to hold in times of uncertainty.

With fears of future inflation rising and concern about the value of paper currency and government debt increasing with each new recovery plan announced in Washington and in foreign capitals, the desire to hold gold grows.

That part makes perfect sense. But there's another more puzzling aspect to the recent gold rush.

Even as the demand for gold coins such as the Canadian Maple Leaf or the Krugerrand of South Africa has grown, the market price of the precious metal itself is off its highs.

In early October, the price of an ounce of gold on the spot market was about $930 an ounce. With the commodities bubble bursting in recent months, gold declined into the upper $600 range. Spot gold closed yesterday at $739.90, down $2.60.

Bill Murphy, chairman of the Gold Anti-Trust Action Committee, says the price of spot gold is even more perplexing given the demand for coins and the fact that central banks in Europe have stopped selling gold into the open market.

"Gold should be moving up," Murphy says. "How could there be such a dichotomy between the historic high premium for coins all over the world and the low Comex price?"

His answer? "Today the public is buying gold like crazy, but the US government and the banks that hold bullion are intentionally keeping the price down."

Ah, but that column will have to wait for another day.

From Lemetropole cafe

From what I've heard so far out of the G-20 meeting, nothing much of substance is forthcoming. The "plan" is to formulate a "plan" by April. Not gonna happen, the markets and economy are in an absolute nosedive and as with an airplane the central banks do not have the luxury of time to pullout [reflate] before crashing. The central banks had this meeting as an opportunity to fix the problem of "bad money", it looks like the opportunity will be squandered. Now it will be Mother Nature to the rescue but it will feel like anything but a rescue.

Make no mistake, big money around the world knows what must happen officially [central bank decree] or unofficially [Mother Nature]. Official money, ie the Saudis, the Chinese central bank, Russia and others have already started their moves toward Gold on a physical basis. They are not buyers of paper promises, they want the real thing because of the default risk. Up until this point the talk in the physical markets was about tight or non existent supplies at the retail level, this past week the lack of supply took a quantum leap when Europe began curtailing Gold shipments to the worlds' largest consumer, India. This has the possibility of starting a bidding war that breaks physical away from paper for good. Think of it this way, either Europe doesn't have the physical for delivery, they have physical but don't want to part with it, or they are afraid of default by India within the 3-5 day shipment period between the order and settlement. The truth is that probably all of the above are correct answers to some extent.

We really did receive news of epoch proportions this past week regarding Gold and either no one realized it or everyone is so demoralized that it didn't even register. The Saudis bought $3.5 Billion of bullion, the Chinese are talking about shifting or diversifying part of their $2+ Trillion of reserves into Gold, and the Russians are talking about a "Gold convertible Ruble". In my mind only the announcement that "Fort Knox is empty" could have been bigger news, in time I think we will find out the truth about U.S and IMF bullion reserves. So now we have governments that have been adversely affected by the fiat Dollar standard beginning to mobilize and act in their own best interests, they obviously see the writing on the walls.

Capitalism, as in any other game, the participants will act in their own self interest to "win". I have compared the current situation to "musical chairs" and a "game of chicken" many times in the past, it is fast becoming obvious that this is truly the case. For instance, while sovereign money has stopped and reversed in FNM/FRE bond purchases, they have only slowed or stopped their purchases of direct Treasuries. Who will be first to start the wholesale liquidation that's coming? Who chickens out first and sells U.S. Treasuries? While some governments have spoken about and others have begun "local currency settlement" of trade, who will be first to request settlement in bullion? This is absolutely where trade and currency is headed. While I'm sure the U.S. and it's allies put on the "stall" this weekend in Washington, I don't believe Mother Nature will have any of it. Without a coordinated "reflation deal", we can only see more deflation as the derivatives keep blowing out balance sheets like popcorn kernels in a microwave. It truly is REFLATE or DIE.

The sooner this process begins, the better! Governments can try to wait it out, stick their heads in the sand and peek out in the first quarter of next year only to find their butts were blown off while they weren't looking. Or, they can be proactive, close the markets and hammer out a currency deal that allows the world to execute commerce in a sound and stable currency. This is a currency crisis of biblical proportions that will not be solved with "Rubinesque" methods [just buy another 6 months time, and pray]. No, it is over and this past week saw the early posturing by sovereign nations preparing for a stoppage in the music. The sovereign floodgates into Gold has begun and will shortly become every nation [man/woman] for themselves. That's how Mother Nature works, she can be cruel but she is always fair as the rules are the same for everyone and they don't change in the middle of the game. Governments have tried for 5,000 years to cheat Mother Nature to no avail, today is no different.

This week, former chairman of the Fed Reserve Alan Greenspan in an interview aired on PBS' News Hour was asked by Jim Lehrer what should be the proper relationship between a chairman of the Fed and The President of the United States. In a shockingly honest tone Greenspan replies,

"Well, first of all, the Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take. So long as that is in place and there is no evidence that the administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don't, frankly, matter."

This issue with the Fed being above government is one of the key things We The People need to understand in order to wake up to the awful situation that we have found ourselves in. Our wealth, our labor, and anything we gain buy being productive has been stolen from us since the Federal Reserve took over our money system in the 1913.

Most people believe the Fed to be a government agency overlooked by the President of the United States. Others fully believe the statements of Mr. Greenspan but don't really understand what it means to have an "independent agency" (i.e. private banks) be above The Presidency, The Congress and Senate, and the Supreme court of the United States…

By Jim Sinclair
Let today be your answer to the many question concerning whether gold will ever rise again. The answer is it will to $1200 and then onward to $1650.

I suspect that we could soon have a financial/felony experience that could land on the dollar like a piece of lead. I suspect that the instant the USDX breaks its present up-trend line from .72 to about .89, it will look like the dollar stepped into an elevator door and found no elevator there.

I suspect that the next move in gold will witness the massive short covering in all variety of shares, both majors and juniors. Under no circumstances give away your insurance (gold and all things gold) and if you have then for your sake buy your insurance policy back ASAP (gold and all that is gold).

Gold is a currency that you will see perform as the currency of choice. There is no doubt we are headed into a planetary Weimar experience to some degree.

Dollars are being created faster now than in any other period in history. The Fed and treasury are guaranteeing everything from money market funds to large corporate entities in one way or another.

The first valuation of worthless OTC derivatives via a public sale of these at .0875 to .02 cents shocked anyone with a brain. Now the downturn in business is hitting financial entities and shortly litigation will smoke whatever is left.

The FDIC is already yelling for additional and significant funding from congress as their capital contracts on every Friday’s bailout and their responsibility to cover now goes to GE, a non-bank with no depositors.

People expect things to return to normal in 2010. That is a fairy tale. All these bailouts and Federal guarantees on credit items constitute a white wash on a falling economic structure going out of control and soon. The out of control point of major planetary dislocation is between today and 66 days from now.

Gold is the only viable insurance. The US dollar is not viable insurance because there is simply too much of it and that amount is growing every day. That makes the US dollar untrustworthy.

Gold is the only viable insurance. Clearly equities (with the exception of precious metals shares) are not. Gold is the only viable insurance. US Treasury bills are not because the yelling at all the rating agencies in Washington today just might get US credit downgraded.

General commodities have been viable, but by nature they are too wild and from now on will be selective until Pakistan implodes and Weimar appears Banks cannot offer insurance as they are in the main bankrupt.

Insurance companies cannot offer you sound insurance as they are now broke by OTC derivatives. Money market funds are not insurance, making gold the only viable insurance.

Retirement programs are no longer insurance and with Motor’s bankruptcy pending they can simply disappear into Chapter 11. Pensions are simply too large for the government agency to insure. Jobs are no longer insurance as companies are run by lawyers and accountants. Equity in your home is not insurance because it simply does not exist.

Your family is no longer insurance because they have the same problems you do. The assumption your kids will take care of you in your old age is not viable insurance no matter what you think.

Gold has no liability attached to it and is therefore the only viable insurance as honest money. Gold is universally exchangeable, making it the only viable insurance.

Gold has historically performed perfectly in maintaining buying power, making it the only viable insurance. Gold is the only viable insurance because it is Honest Money without liability or agenda.

Since gold is the only viable insurance and because everyone needs it, gold will trade at levels of at least $1200 and $1650. I could go on but gold is all there is that will protect you from the White Wash being applied to the Walking Dead entities by the Fed and Treasury on a structure that is in fact in a free fall.

I am not the least concerned about gold and believe you should not be either as long as you have no margin and understand what gold really is: the only honest currency and only historically functioning insurance policy. There is no other viable insurance in this most unusual situation.

This weeks technicals generally look more positive for gold and silver. This risk to the downside is fairly limited and we seem to be building a constructive base for a large move higher.

Gold weekly (in $AUD) click on chart for larger view
In Australian dollar terms the gold technicals are very bullish. Last week we tested resistance at $1076 and have bounced nicely to $1150. A break of $1168 could see $1225 very quickly.


Gold daily (in AUD) click on chart for larger view
The daily chart shows how gold has regained its uptrend from mid September. $1142 should hold some resistance next week.



Silver weekly (in USD)click on chart for larger view
We can see that silver is again holding its uptrend support from October 2001. $8.93 is a critical level to hold.



Silver daily (in USD)click on chart for larger view
The daily chart shows some short term strength and if next week we can break the $9.60 downtrend line we could see a rapid move to $10.50.