With 10% swings in opposite directions in the last two weeks precious metals have shown why they are not for the faint hearted investor. The anticipated MACD cross over occured in both gold and silver on Tuesday sparking a strong rally.

Silver in USD

Silver recovered all of last weeks drop with an 11% rally. Again the $10.60 level proved strong resistance with price dropping back to $10.27 by Fridays close. With four tests of the $10.60 level behind us and a weekly MACD cross over now in place I expect a break out for silver as soon as next week. As previously stated any break will be powerful. Expect a brief pause at $11.43 and a then a fast move to my year end target of $13.66. Major downside support remains at $8.93.

Silver in USD (Click on image for larger chart view)




Gold in USD

Gold gained about $70 or 9.3% for the week to settle at $822, right on the 50 day moving average. $830-$850 remains strong resistance but the technical set up remains extremely bullish for a break out as early as next week. With last weeks washout now behind us I remain committed to a target of around $1000 by year end. My expectation of a near 20% rally inside two weeks shows how bullish the technical set up is right now. On the downide $770 remains key support.

Gold in USD (Click on image for larger chart view)

Gold in AUD

In AUD terms gold held the key support level of $1168 and rallied to close at $1236, just above the 50 day moving average. whilst the technical set up for gold in AUD terms is less bullish than USD, I still expect $1400 gold by year end. Support remains $1226 (weak) and the $1168 (moderate).

Gold in AUD (Click on image for larger chart view)

by Jim Sinclair

From the Dow Jones high in 1929 it took until 1932 to establish the absolute low. From the establishment of that low point in 1932 low it took 35 years to regain the 1929 high (1954).

It was no coincidence that Roosevelt went to fiscal stimulation in 1932 - 1933 in the form of jobs creation by proxy, such as the Civil Conservation Corp (CCC) and other make work programs. Roosevelt proposed conservation and other work programs as the means of unemployment relief during the 1932 presidential campaign. Senate Bill 5.598, the Emergency Conservation Work Act; was signed into law on March 31, 1933. This initiative is still on the books, having not been funded since 1941.

This is why liberal President Elect Obama will embrace fiscal stimulation with a vengeance, possibly as soon as at the Swear In Ceremony.

I am told that $1 trillion is only for starters.

Today is so different in substance than 1929 - 1932 even if it is a mirror image in unfolding chapters.

Monty is spot on regarding the total final cost of the Sin of OTC derivatives, saying that it will reach only $20 trillion if we are lucky.

CONSEQUENCES my friends. Consequences cannot be avoided.

While the Fed and Treasury take their lead into action from what went wrong with 1929anti deflationary policies, no one is considering the consequences of their present economic acts that will go infinitely more wrong than any boo-boo in the 1929-1932 period.

Gold is going much higher than $1650. Alf Fields is right in his studies. My estimate of $1650 that I have held since 2000 is terribly conservative.

Be strong. Stop looking for why you are wrong and start knowing why we are right.

Bert Seligman taught me a simple truth: "The weak succumb, the strong survive."

Be strong in your commitment. Don't let some wackjob with a second hand laptop and a bottle of cheap gin cause you to lose sleep.

Interviewed Monday this week on the "Trading Day" program of Business News Network in Canada, former Federal Reserve Governor Lyle Gramley hinted that a big upward revaluation of gold may figure heavily in the Fed's attempt to rescue the U.S. economy.

The program's guest host, Niall Ferguson, an author and history professor at Harvard, asked Gramley, now senior adviser at Stanford Group in Houston, about the seemingly grotesque expansion of the Fed's balance sheet in recent months.

Ferguson asked: "I've heard it said that the Fed has turned into a government-owned hedge fund, leveraged at 50 to 1. Do you feel nervous about what this might actually do to the Fed's reputation?"

Gramley replied: "I think you have to reckon with the fact that one of the Fed's assets is gold certificates, which are priced, as I remember, at $42 an ounce, and if we were to price them at market prices, the Fed's leverage would look a lot less than it is now."

While valuing the U.S. government's claimed gold reserves at today's Comex closing price of around $822 per ounce instead of the government antique bookkeeping entry of $42.22 per ounce would indeed vastly expand the government's monetary assets, it might not be enough to offset the liabilities and guarantees the government lately has taken on. But the job might be done by revaluing the gold to $5,000 or $10,000 per ounce, as the British economist Peter Millar speculated two years ago might be necessary to prevent debt deflation:

by Julian Phillips

The $ has started to tumble and the gold price has positively turned. Meanwhile investors are not staring into the abyss quite as much. With interest rates tumbling across the globe, the world’s central bankers are acting in concert, clearly in hopes that foreign exchange rates will steady. At the same time, the global economy and the nations that make it up are all stimulating their economies. The Swedish central bank, Bank of England, and the European Central Bank cut short-term interest rates by 1.75% to 2%, 1% to 2%, and 0.75% to 2.5%, respectively in the last week and, without a doubt, more cuts to come, from anyone out of line. Add to this the monetary stimulation, through direct injections into the money system, alongside “quantitative easing” [flooding the system with liquidity directly] that we are now seeing across the developed world, and you end up with a tidal wave of reflation that hopefully will effectively tackle deflation. In the event that this does in fact take place, will all be well again? Unfortunately, the answer is no and we firmly believe that the Central Bankers are fully aware of this.

If successful, we will return to the days of “live now, pay later” that supported the global economy before we were bitten by the credit crunch. The tidal wave of new money will add up, globally, to a Tsunami of capital. This leaves another monetary disaster ahead of us; that is unless the stimulation is allowed to cheapen paper money irrespective of its dropping value persistently preventing any repeat of a credit crunch. And what of the buying power of money? It will drop directly in line to the additional quantity of money released less the amount lost through deflation. This will send the gold price soaring. There is absolutely no doubt that this will send the gold price up to the extent necessary to counter such a cheapening of currencies. Even now, many are alarmed that governments and institutions are staring at government promises [Treasuries] at a zero interest rate, the same rate that promise-free gold offers. Bankers hate gold because it can be as attractive as paper to individuals and institutions everywhere. Bankers don’t like the competition, but it is a useful counter to the $ no matter what bankers throw at it.

The gold market currently is tiny compared to the cash markets of the world, but it was not always so. There was a time in yesteryear when gold backed the entire global monetary system and removed doubt from the question of what really is paper money worth? Since the system of gold backed money was dropped, the sheer quantity of money has increased so much so that many will say it can no longer be used to back money. That is true with gold at its current prices. The uneven spread of gold in the world’s system also mitigates against its use to back paper money, even if the gold price were raised to the level where it could back money again [five figures + ?]. But if gold is used as a back-up to paper money, it will engender confidence in currencies [held only in Central Bank Vaults?]. It could even find a valuable home in the monetary system on a more active basis.

So why would there be such resistance to that? What was the reason it was removed from the system in the first place? The reason is primarily that gold was seen at that time to be unable to provide the flexibility to accommodate a money system that needed huge and growing quantities of money. Global economies needed such growth to provide governments with tools that empowered them in the way paper has since it cut its links with gold. The U.S.A. would have been in a very different state had it not been for the unbreakable link between the $ and oil. If that link were broken, global demand for the $ would sink.

Governments wanted to pull gold’s teeth and to hold the reins of money in their own hands as they did in 1971. The global use of oil provided that link to the $ that forced everybody to turn to it. Of course all oil producers had to agree to the pricing of oil in the U.S. $. And they did, ensuring that the world’s most powerful economy stayed so, linked to the world’s most needed commodity.

But the U.S. economy is on the wane as the hinge of the global economy as the Far East, with half the world’s population living there, rises up. Simply because of that, the $ has to retreat from the center of the monetary stage and does so in an orderly fashion. But can it, or will it, be allowed to? China, with its $2 Trillion of reserves, holds the answer to that. Yet China will not give that answer until it suits it to do so, no matter how much pressure Paulson and Co. exert. While major global structural changes happen in the next few years, taking wealth to the East from the West, the global money system needs an internationally respected instrument of value that can strongly support the global money system. Hopefully that respected commodity will be gold. With gold back in the system, the worst of monetary abuses is hoped to disappear. Unless this happens soon, we will see a new global financial crisis on global foreign exchanges.

But Bankers will not want to be restrained by gold in any way, nor will governments. So the role such an anchor will take will still have to be under their control if they are to willing to bring it back into their money systems. Its role will only be as support, and not as the Gold Standard was, the measure of money Gold’s role will only be supportive, with no chance of a reversion to the Gold Standard, where it was the measure of money. In the Gold Standard, it became clear that there was more money printed against gold, than there was physical gold. Bankers did not like this revelation. Bankers loathing of gold comes from the punishments it inflicted on them at the revelation of these abuses. They will be most careful not to let it be seen as active in the money system. No doubt, should he want to, Mr. Ben Bernanke, who is the sage on the way to handle deflation, together with his peers, can re-write the use of gold into the global economy. Using similar methods, gold’s role needs not inhibit monetary expansion, but support it. In this role international bankers will show greater confidence in other currencies as well because a banker has to trust another banker no matter where he’s from for the global money system in order for it to work. The clear lack of such trust, alongside their unwillingness to lend even to each other, is bringing bankers into the spotlight, a place they don’t like. We have no doubt that between each other they will trust gold.

by Jeremy Clarkson

I was in Dublin last weekend, and had a very real sense I’d been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that’s now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it’s the other way around.

Everyone appeared to be drunk on naked hedonism. I’ve never seen so much jus being drizzled onto so many improbable things, none of which was potted herring. It was like Barcelona but with beer. And as I careered from bar to bar all I could think was: “Jesus. Can’t they see what’s coming?”

Ireland is tiny. Its population is smaller than New Zealand’s, so how could the Irish ever have generated the cash for so many trips to the hairdressers, so many lobsters and so many Rollers? And how, now, as they become the first country in Europe to go officially into recession, can they not see the financial meteorite coming? Why are they not all at home, singing mournful songs?

It’s the same story on this side of the Irish Sea, of course. We’re all still plunging hither and thither, guzzling wine and wondering what preposterously expensive electronic toys the children will want to smash on Christmas morning this year. We can’t see the meteorite coming either.

I think mainly this is because the government is not telling us the truth. It’s painting Gordon Brown as a global economic messiah and fiddling about with Vat, pretending that the coming recession will be bad. But that it can deal with it.

I don’t think it can. I have spoken to a couple of pretty senior bankers in the past couple of weeks and their story is rather different. They don’t refer to the looming problems as being like 1992 or even 1929. They talk about a total financial meltdown. They talk about the End of Days.

Already we are seeing household names disappearing from the high street and with them will go the suppliers whose names have only ever been visible behind the grime on motorway vans. The job losses will mount. And mount. And mount. And as they climb, the bad debt will put even more pressure on the banks until every single one of them stutters and fails.

The European banks took one hell of a battering when things went wrong in America. Imagine, then, how life will be when the crisis arrives on this side of the Atlantic. Small wonder one City figure of my acquaintance ordered three safes for his London house just last week.

Of course, you may imagine the government will simply step in and nationalise everything, but to do that, it will have to borrow. And when every government is doing the same thing, there simply won’t be enough cash in the global pot. You can forget Iceland. From what I gather, Spain has had it. Along with Italy, Ireland and very possibly the UK.

It is impossible for someone who scored a U in his economics A-level to grapple with the consequences of all this but I’m told that in simple terms money will cease to function as a meaningful commodity. The binary dots and dashes that fuel the entire system will flicker and die. And without money there will be no business. No means of selling goods. No means of transporting them. No means of making them in the first place even. That’s why another friend of mine has recently sold his London house and bought somewhere in the country . . . with a kitchen garden.

These, as I see them, are the facts. Planet Earth thought it had £10. But it turns out we had only £2. Which means everyone must lose 80% of their wealth. And that’s going to be a problem if you were living on the breadline beforehand.

Eventually, of course, the system will reboot itself, but for a while there will be absolute chaos: riots, lynchings, starvation. It’ll be a world without power or fuel, and with no fuel there’s no way the modern agricultural system can be maintained. Which means there will be no food either. You might like to stop and think about that for a while.

I have, and as a result I can see the day when I will have to shoot some of my neighbours - maybe even David Cameron - as we fight for the last bar of Fry’s Turkish Delight in the smoking ruin that was Chipping Norton’s post office.

I believe the government knows this is a distinct possibility and that it might happen next year, and there is absolutely nothing it can do to stop Cameron getting both barrels from my Beretta. But instead of telling us straight, it calls the crisis the “credit crunch” to make it sound like a breakfast cereal and asks Alistair Darling to smile and big up Gordon when he’s being interviewed.

I can’t say I blame it, really. If an enormous meteorite was heading our way and the authorities knew it couldn’t be stopped or diverted, why bother telling anyone? Best to let us soldier on in the dark until it all goes dark for real.

Jason Hommel from the silver stock report has been a vicious critic of the Perth Mint for several years now. It has been my view that the bulk of Jason's claims have been at best a misunderstanding of the facts and at worst unfounded sensationalist self promoting journalism.

The following interview is the postscript to a meeting held between Jason Hommel and the senior management of the Perth Mint. Whilst I consider Jason to be largely respectful of the Perth Mints efforts he clearly misunderstands the integrity, politics and operations of institutions such as the Perth Mint. Jason is a credible expert on silver but some of his comments are very naive in a business sense. For example Jason suggests the Perth Mint simply drop its contracts with the US mint and sell its bullion on bullionseeks new auction site. With full respect to bullionseek (who are doing an outstanding job) it is hardly realistic or prudent to divert long standing business arrangements with broad political implications to a start up online bullion exchange. Shareholder (WA government) expectations, organisational capability, existing contractual arrangements, political implications, long run forecast assumptions etc all need to be considered in business decisions not simply price and margin in one small channel in 2008.

Whilst I accept Jason needs more time to "run the numbers" before issuing his full response this interview again reinforces my view that he has the tendency to shoot first and think later (if at all). The Perth Mint have been extremely respectful to Jason. I hope that he shows a similar respect going forward. Unfortunately this latest interview indicates we may be in for more of the same - unfounded sensationalist self promoting journalism. Listen the interview and you be the judge. I guess time will tell.

By Ambrose Evans-Pritchard

The investor search for a safe places to store wealth as the financial crisis shakes faith in the system has caused extraordinary moves in global markets over recent days, driving the yield on 3-month US Treasuries below zero and causing a rush for physical holdings of gold.

"It is sheer unmitigated fear. Even institutions are looking for mattresses to put their money under until the end of the year," said Marc Ostwald, a bond expert at Insinger de Beaufort.

The rush for the safety of US Treasury debt is playing havoc with America's $7 trillion "repo" market used to manage liquidity. Fund managers are hoovering up any safe asset they can find because they do not know what the world will look like in January when normal business picks up again. Three-month bills fell to minus 0.01 percent on Tuesday, implying that funds are paying the US government for protection.

"You know the US Treasury will give you your money back, but your bank might not be there," said Paul Ashworth, US economist for Capital Economics.

The gold markets have also been in turmoil. Traders say it has become extremely hard to buy the physical metal in the form of bars or coins. The market has moved into "backwardation" for the first time, meaning that futures contracts are now priced more cheaply than actual bullion prices.

It appears that hedge funds in distress are being forced to cash in profits on gold futures to cover losses elsewhere or to meet redemptions by clients. But smaller retail investors -- and perhaps some big players -- are buying bullion in record volumes to store in vaults.

The latest data from the World Gold Council shows that demand for coins, bars, and exchange-traded funds (ETFs) doubled in the third quarter to 382 tonnes compared to a year earlier. This matches the entire set of gold auctions by the Bank of England between 1999 and 2002.

Peter Hambro, head Peter Hambro Gold, said the data reflects a "remarkable" shift in the structure of the market. The rush to safety reflects a mix of fears about the fragility of world finance and concerns that the move towards zero interest rates could set off an inflationary surge further down the road, and possibly call into question the worth of some paper currencies.

The near paralysis in the "repo" markets may prove to be no more than pre-Christmas jitters as banks square their books.

However, there are some signs that extreme monetary stimulus by the US Federal Reserve and other banks is starting to have unintended consequences.

The Bank of Japan is reluctant to cut its rates to zero again because of the damage this causes to the money markets, which serve as a key lubricant of the credit system. The US is now starting to face the same dilemma.