Thai Guru's Gold und Silber ... (Informationen und Vermutungen)

Thoughts from London after the pop:

Good afternoon Bill
I was interested to read the above article by Michel de Chabert-Ostland. Having nothing better to do than watch the dollar freefall again and gold spin its wheels trying to get some traction (which it got, making a move from $449.80 to $455.20 as I wrote this), I decided to apply a very simple Elliott Wave analysis to the spot gold price, which I believe is just starting a third wave up in the first wave of this secular gold rally.

I am no expert at this, so I would stand corrected by anyone who can do this better than I can.

The first wave up took gold from $252 to $325 - a move of $73.

Gold then corrected to $290 before rising to $433, to complete the second wave and correcting to $374.

The calculation for the high of the third leg up is: the first leg up of $73 x fibonacci 1.68 = $123; added to the second wave high of $433.

This gives a figure for the move of $556.

This compares reasonably well with the $580 target using the "teacup and handle" analysis I sent you in October.

Paradoxically, perhaps, I am not all that happy that gold makes a move that far, that fast (since third wave moves are strong and powerful), since you need to consider what it portends for the US$, and what message gold is sending. Certainly not better times. However, this will be payback time for the gold cartel and its years of chart painting and manipulation; they have created the very chart that will now lead to them being immolated.
Have a good weekend.
Ian

Big picture stuff before the gold pop:

Hey Bill,
I won't even go into my thoughts on the ridiculous price action. It's as if each day tops the prior day's craziness.

Anyhow, on a more pleasant topic I thought I'd share with you the following passage from Michener's classic "Caribbean", written decades ago. Reading it made me realize just how important gold is to the Indian culture, time immortal.

It is a fictional story of an Indian immigrant to Trinidad, whom is writing stories about his ancestors in India. These two simple paragraphs support all you have been saying about Indian demand, in my view.
Andy

Jewels as a proof of love: Grandfather said that if an Indian really loved his wife, he gave her jewels to prove it. I found a diary of a French traveler who wrote in 1871 of my great-great grandfather's wife: 'In Port of Spain at the well-known Portugeee Shop, I met Madame Banarjee, a woman of great charm who wore on each arm some twelve or fourteen big bracelets of solid gold or silver. Around her neck she wore chains of the same metal on which hung large disks of silver embellished with precious stones from Brazil, while in her nose she wore an immense diamond. Her worth as she walked to greet me must have been tremendous.

How to treat grave robbers: When the wife of my great-great grandfather died, he buried her wearing all her gold and silver, and an English official protested: 'But you're throwing away a fortune', but he replied: 'She brought me a fortune, and I would not like to see her in another world poorer than when she came to me.' Three days later, when the police came to the Portugee Shop to inform him that grave robbers had dug into her coffin and taken all the precious metals and the jewels, he said 'They were hers. She spent them as she thought best.' But when some of the jewels surfaced in the Trinidad bazaars sometime later, he made careful note of who had them and of how they had obtained them, and shortly after that several men were found dead...one by one.

-END-

Houston’s Dan Norcini with some good COT analysis:

This is the first week that I can recall in some time in which gold made net gains from Tuesday to Tuesday and the bulk of the NET BUYING was done by the COMMERCIAL category even though the market was in a sustained uptrend (February Gold closed at 450.20 on the Tuesday of November 23 when the this period's Commitments Data begins). This past Tuesday, November 30, that same contract closed at 453.20 after reaching a high of 457 on Monday). In other words, gold ran up another $6.80 based on Commercial buying and small spec short covering. The Funds were the main sellers this week.

We have seen this before but only when gold was experiencing those huge reaction sell offs. If this trend continues, and that is a big "IF", it will mark a major change in the fundamental structure of the composition of traders. Could this be the beginning of a commercial capitulation? It is too early to tell but this is certainly a nice treat for a change.

The commercial category were actually net buyers of some 8,400 contracts versus the funds who were net sellers of a bit over 10,000 contracts. We finally saw the small spec category become net sellers as many of those who were top picking were forced out. That serves them right for listening to their gold advisors. I hope them have the common sense to cancel their subscriptions and not renew for another year. Those advisors are a pox on the entire gold community and the sooner their victims wake up and release that they have done nothing but lose them money, the better off the entire gold community will be.

There was a total reduction of some 7,000 contracts from the previous reporting period to 345,646; however, that has pretty much disappeared already as today's release of the open interest totals for Thursday came in at 353,992 compared to the total open interest reported in last week's Commitments data at 352,638. It will be interesting to see if next Friday's release confirms this same pattern since we will have an increase in the open interest totals barring anything remarkable come this Monday and Tuesday.

What this data reveals is that some commercial end users of gold are actually chasing prices higher especially since the bulk of the commercial purchases were NEW LONG positions. It does appear that some of the trading funds are attempting to pick a top. It will be interesting to see how this goes next week especially after watching the dollar experience a late session sell off after the pit session Comex trading was closed.

Silver has yet to see the commercial category become net buyers for the week although the data does not include the price action of the past few days especially the all important charge above $8.00. The data does show that the net short commercial position is very close to the same size as it was back when it peaked in March of this year. I wonder if some of them have reached their peak threshold of pain yet or intend to hang around for some more in the hopes of some long liquidation to bail them out. I would personally love to see next week's release reveal some of these infernal, permanent commercial silver shorts covering. Will have to wait on that. Talk about what a nice Christmas present that would be!
Dan

More good input on the Gold Eagles:

Hello Bill & good Morning:

As of Monday, the United States Mint issued a statement that they will no longer produce 1 oz GOLD EAGLES for the rest of Calendar year 2004. Immediately, in the already on fire physical coin marketplace, PREMIUMS for Eagles INCREASED $3-$4 dollars a coin. Additionally, the DEMAND for Gold Eagles is such, (as the worlds pre-eminent gold bullion coin), that the marketplace has no "LIVE DELIVERY" of Gold Eagles.

Live Delivery means coins are "IN HAND" and are available for shipping "ON DEMAND"

Remember, Eagles are secondary market instruments, and in order to obtain them, someone has to SELL them to you.

Right now, the PUBLIC IS NOT SELLING AMERICAN GOLD EAGLES! The market is so tight for Eagles, that some marketmakers are not posting an ASK PRICE at all.

Some people are speculating that the Government, by staying OUT of the marketplace to PURCHASE, NEWLY MINED AMERICAN GOLD(as mandated by law), is their way of taking some of the PRESSURE off of the HOT gold market. Will they mint Year 2005 1oz GOLD EAGLES? The MARKETPLACE is currently paying a $4 insurance policy just in case!

Glenn R Fried
http://www.coinmoney.com
straightalk@mindspring.com

More input from the SF gold conference earlier this week:

Bill, I too attended the San Francisco Gold and Precious Metals Conference last weekend. Several have commented on it, but nothing has been said about what I consider to be one of the most encouraging facts for gold that I have been been exposed to in the four years as a gold bull and faithful LeMetropole subscriber.

Pierre Lassonde, President and Director of Newmont Mining, among other very clearly stated views, pointed out a shocking historical comparison. That is the Dow/Gold ratio. He said he thought that Newmont developed this comparison. In 1929 the ratio reached a high of 20:1 - 20 Dow:1 Gold. It bottomed in 1934 at a shocking 1:1 ratio. In 1969 this measure reached another historic high at 30:1. By 1979 it was back to 1:1. Then in 2000 it reached another high at 40:1. Lassonde, after stating these facts, said "you take a guess where the Dow is going".

For those discouraged with the horrible recent performance of the shares and the metal, think about the Dow at 5000 and gold at $5,000. Or the Dow at 3000 and gold at $3,000. Take a guess at where you personally think these markers might go.

Thought our fellow subscribers would take heart with these facts presented by the President of the worlds largest gold miner Newmont Mining.

A side note Bill, is that I wish you had been invited to this convention!! Only seen you on videos, and would like the privilege of hearing your views in person.
David Lindgren

On trading with the trend from my friend, Nick Ferris in Vancouver:

Today's gold price action was something to behold. Given all the talk and expectations of a bear raid by the cabal, it is important for investors to be aware of some very basic trading principals. Most importantly, NEVER EVER TRADE AGAINST THE PRIMARY TREND. The old adage, "THE TREND IS YOUR FRIEND" must be a traders mantra in a bull market like this.

It is so easy to listen to "expert" advisors, but all too often the small trader will overload their senses with such opinions of these advisors. An investor must make their own decision as to the trend of a market then structure a portfolio that should take best advantage of the trend. Secondly, NEVER OVERTRADE YOUR POSITION. For most small investors, trading of a portfolio to catch minor corrections will often cause them to lose their positions at the most inopportune time and thus miss entire major up moves in the bull. Importantly, it is psychologically impossible for most small traders to buy back a position in a trade at higher prices than that at which they sold. You can easily become a very depressed observer if you lose your position.

This is a very young bull market and as we all know, there is very little froth in the trade of gold or gold shares. The big money in a primary trend is made over the long-haul of the trend and not through trading for small moves and corrections. There is another old traders adage, "BUY 'EM WHEN THEY'RE CRYING, SELL 'EM WHEN THEY'RE YELLING". Right now, the masses are still crying. It's a young bull market indeed!

Good trading to all of you.

Nick Ferris
J-Pacific Gold Inc.
info@jpgold.com
http://www.jpgold.com
1-888-236-5200
TSXV Symbol: JPN
OTC BB Symbol: JPNJF

Some thoughts on the gold shares, which I am going to touch on:

Hi Bill, I would like to say a few things that should be posted. I have very strong conviction that you are 100% right about the gold and silver markets. Not only of demand and your 15000/17000 ton short position and your projections in future price. It can be no other way period. The dollar tells it all. Now why would anyone think the gold shares would not be subject to the same pressures? They are part of a controlled market. That will not last forever. I am buying every dip and saying thank you to the Boys. Now to change the subject. Back in the late1980s I watched the Japanese people with a stock market at 39000+ let it go to there heads and get pretty rude to the rest of the world. We Americans now think we have earned that right, pretty embarrassing. There are a lot of good Americans and as one I would like to apologize for this blatant stupidity not only to the whole world but to the Canadian people in particular. Fox news should also be apologizing too. Thanks TKT

More and more this is beginning to look like 1987. The dollar went into a free-fall today, yet the bond, stock and gold share traders yawned. The dollar:

http://futures.tradingcharts.com/chart/US/C4

British pound:
http://futures.tradingcharts.com/chart/BP/C4

Euro
http://futures.tradingcharts.com/chart/EC/C4

An overbought DOW gained another 7 to 10,592, while the DOG rose again, this time to 2147, up 4. The 30-year DEC T Bond rose 1 18/32 to 112 6/32.

The US financial markets are completely unperturbed re what the dollar is doing, as if there are to be no consequences for the drop. This is exactly the sort of complacency seen during the summer of 1987, before the US market crashed.

At the same time the gold share investors can’t get out of their longs fast enough. Each time gold makes new highs, the action worsens. Unbelievably, the XAU only rose .64 today to 105.97. The HUI was even worse as it only gained .47 to 227.24.

What the heck is going on here? The gold shares should be flying and the general market should be under pressure.

My take on the shares, some of it a review of recent commentary:

*Most of the gold pundits are all bearish and advising clients to be out of the market.

*The investing public in the US sees no reason to buy the shares because bonds and the US stock market are doing fine.

*Almost all of Wall Street is gold bearish at this price level.

*Foreigners can’t see buying the shares as none are experiencing a gold bull market in their own currencies.

*The action is so bad it would seem to me The Gold Cartel, having trouble with the bullion market, is sitting all over the shares in order to dampen enthusiasm and gold fever. Hate to go there as we don’t have proof, as we do in the bullion market. However, this is getting to the point where it can’t just be no interest. The shares should be going ballistic. Most are substantially lower than when the gold price itself was $33 lower.

Meanwhile, the smart money and other physical market buyers, who are anticipating what this dollar debacle is leading to, are loading the gold boat. They could care less what the gold share folks are doing. These buyers know where the price of gold is going and why. Gold coin owners and gold futures longs are laughing all the way to the bank and their penthouse, while the gold shareholders are moaning at their view of the poorhouse.

We are all disturbed over the gold share action. However, while incredibly aggravating, this is going to change dramatically in the weeks/months to come. The sentiment will change and when it does it will be one moonshot after another. Gold/silver companies are raking in the dough these days with prospects of next quarter to be that much better. The need to find gold supplies in the ground is going to go into a crescendo early next year. The good explorations will knock em dead. It is only a matter of time before the shares play catch up.

GATA BE IN IT TO WIN IT!

MIDAS

Howard Campbell: Received your check thanks, however don’t know where to apply it. Please contact me.

Two postings from the Golden Star Resources bulletin board:

What is happening here. The Gold riggers are losing control of physical and are now focusing on thrashing the shares. Almost every gold analyst follows the old adage that the shares lead the POG. So if they can cap all the shares in the XAU and HUI and create what appears to be a false flag breakout with the POG then you have all the gold writers calling a top and sitting on the sidelines or worse yet selling into the breakout. And that is exactly the case now. Along with the heavy short interest and the recent downgrades and most of the new money being sucked into the dubious ETFs you can see why the shares are just stalling here. The good news- it's only a desperate delaying tactic and can't last. So hold tight and don't be fooled into giving up your shares. POG is blowing up and GSS is strong.

****

From GSS I.R.

Many thanks for your e-mail. As senior management are still in Ghana, they have asked me, GSR's investor relations consultant who has been working with the company for nearly two years, to respond.

The fundamentals are all in place for the company to more than double production between 2004 and 2006 and to continue increasing its 10 million ounces of resources from its mineralized exploration targets, which will lead to growth beyond 2006.

We've had 10 quarters of profits and one quarter with hiccups, partly due to exceptional rainfall (57% more than the 10-year average), partly debugging a plant being commissioned (that's what commissioning is all about) and partly caused by a hedge fund dumping those 11 million shares you mentioned over a two day period. You might be interested to hear that two of our largest shareholders, Fidelity and Royce, bought 4 million of them.

I would be happy to discuss your concerns at greater length on the phone. Please give me a call.

Morgan Stanley
December 3, 2004

<>Global: Bubble Day

Stephen Roach (New York)

December 1, 2004 could well go down in history as yet another important milestone for America’s bubble-prone economy. No, I am not referring to the 162-point surge in the Dow Jones Industrial average that occurred on that day. Instead, my focus is on two widely overlooked statistical reports put out by US government statisticians -- the latest tallies on home prices and personal income. Collectively, these reports paint a worrisome picture of an asset economy that has now truly gone to excess. As was the case in early 2000 when Nasdaq was lurching toward 5000, denial is deep over the potential downside of yet another post-bubble shakeout. That’s what worries me the most.

The just-released report on US house prices for the third quarter of 2004 was a shocker -- an 18.5% annualized surge from the second quarter and a 13.0% increase from year-earlier levels, according to the tabulation of the Office of Federal Housing Enterprise Oversight (OFHEO). That represents a stunning acceleration from the 9.8% Y-o-Y increase of the second quarter and pushes nationwide house price appreciation to a 25-year high. It’s an even larger rise in real, or inflation-adjusted, terms. The surge over the past year is now running nearly five times the 2.7% annualized increase of the non-housing components of the CPI.

Housing analysts and central bankers often chide those of us who draw macro conclusions from a highly fragmented US real estate market. In the housing business, where "location" matters, concerns over nationwide trends are often dismissed out of hand. In a recent speech, Federal Reserve Chairman Alan Greenspan noted while discussing housing prices, "Overall while local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity" (see his October 19, 2004 speech, The Mortgage Market and Consumer Debt, at America’s Community Bankers Annual Convention, Washington DC). It’s a nice theory, but the risk is that it may now be wrong. According to the latest OFHEO tally, house-price inflation over the past year has run at double-digit rates in 25 out of 50 states plus the District of Columbia. In six states -- Nevada, Hawaii, California, Rhode Island, Maryland, and Florida --- home prices increased by 20%, or more, over the past year. Housing is an asset class that is just as prone to excess as are stocks, bonds, currencies, or commodities. If it feels like a bubble, acts like a bubble, and looks like a bubble, it probably is one.

Meanwhile, also on December 1, the Bureau of Economic Analysis of the US Department of Commerce released its regular monthly update on personal income. The stock market loved the October numbers -- stronger-than expected gains in both income (+0.6%) and consumption (+0.7%) that were perceived as signs of ongoing resilience of the indefatigable American consumer. I found the report appalling. What caught my eye was a further reduction in the already sharply depressed personal saving rate -- down to 0.2% in October from 0.3% in September. The September numbers were widely thought to have been distorted by temporary hurricane-related losses to personal income. Most expected personal saving would rebound from this artificially-depressed reading. There was no such bounce in October. The consumer saving rate has now basically gone to zero.

Nor is the profligate American consumer the only source of the US saving shortfall. A day earlier -- November 30, to be precise -- the government also released its third-quarter report on national saving. This broad measure of saving -- the combined saving of households, businesses, and the government sector -- is most meaningful when expressed on a "net" basis by taking out the depreciation that goes toward replacement of worn-out, or obsolete, capacity. The resulting concept of net national saving measures the saving left over to fund the net growth in productive capacity -- the sustenance of any economy’s long-term productivity and growth potential. On this basis, America’s net national saving rate fell to just 1.2% in the third quarter of 2004 -- down 0.9 percentage point from the already depressed second quarter reading and nearly back to the record low of 0.4% recorded in the first quarter of 2003. The rest of the story is all too familiar: Lacking in domestic saving, the US must then import surplus saving from abroad in order to grow -- and to run massive current-account and trade deficits to attract that capital. In other words, a further sharp reduction in national saving is not exactly a desirable outcome for an already unbalanced US economy.

The key to this puzzle is to recognize that the housing bubble and the saving shortfall go hand in hand. The "asset economy" is a conceptual framework that brings these two seemingly disparate trends together. As seen through this lens, "rational" consumers take their income-based saving rates to zero only if asset-based saving provides an offset. As long as asset markets keep rising, that makes perfect sense. However, when asset markets correct, this decision can backfire. That was the case when the equity bubble popped in 2000 and could well be the case following the bursting of today’s rapidly expanding US housing bubble. That’s why the latest trends in house prices and saving are so disturbing. In my view, they underscore the distinct possibility that America’s asset economy is in the midst of yet another bubble-induced blow-off.

Not surprisingly, these circumstances put the Fed in an especially difficult position. That’s because the US monetary authority used up most of its basis points in order to contain the damage from the equity bubble. Unfortunately, in doing so, the Fed kept interest rates at extraordinarily low levels for far too long -- setting the stage for the housing bubble that was to follow. The risk all along is that the Fed had only a one-bubble damage containment strategy -- leaving itself with little ammunition to deploy in the event of another serious problem. While the US central bank has tightened to the tune of 100 basis points over the past four months, a federal funds rate of 2% hardly offers much leeway for easing should conditions take a turn for the worse. Yet there’s an added complication to all this: The housing bubble-induced saving shortfall has pushed America’s current account deficit into uncharted territory -- raising the risks of a sharp correction in the dollar and a related back-up in longer-term interest rates. The last thing America’s housing bubble needs is an interest rate shock. That is a classic recipe for a sharp decline in US housing prices -- an outcome that might spell curtains for an overly-indebted American consumer.

Ironically, there have been a number of positive developments that have fallen into place recently -- an orderly depreciation in the dollar, sharply declining oil prices, and grounds for encouragement on the prospects for a soft landing in China. But America’s imbalances have taken a turn for the worse, and the housing bubble could well be the final straw. Income-short consumers are playing this bubble for all it’s worth -- enjoying the psychological benefits of the so-called wealth effect and utilizing the technology of refinancing and second mortgages to extract purchasing power from this over-valued asset. Unfortunately, these trends have led to the virtual elimination of US saving -- triggering a classic current-account-adjustment dynamic with attendant risks to the dollar and interest rates. That makes the downside of this bubble potentially far worse than that of the equity bubble. That would be an especially worrisome development for the US economy, since household real estate holdings of some $14 trillion currently are almost double the aggregate size of equity portfolios.

While it has only been four and a half years since the bursting of the equity bubble, memories have already dimmed of that extraordinary speculative excess. Yet in retrospect, that may have only been the warm-up for the main event. Bubbles have a way of feeding on each other -- ultimately compounding the problem and leading to an even more treacherous shakeout. That’s certainly the lesson from Japan and could well be the case in the United States. America’s housing bubble is now in the danger zone. So is its saving rate, current account deficit, and overhang of consumer indebtedness. It’s been a US-centric world for so long, that everyone takes it for granted. Yet global rebalancing poses challenges for all major countries in the world. Saving-short America will not be spared -- especially if it must now come to grips with the biggest asset bubble of them all.

December 5 – Gold $455.40 – Silver $7.99

Gold CHARGES Higher With Most Long-Term Gold Bulls BEARISH!!!

Years wrinkle the skin, but to give up enthusiasm wrinkles the soul..Douglas MacArthur

GO GATA!!!

What is going on in the markets at the moment is so striking, I decided to whip a MIDAS together to emphasize a few points because collectively they seem so important and, as such, may be of help to many Café members in the weeks, months and even years to come.

First the latest gold news:

Gold Prices Soaring But Indians Continue Buying

The Hindu, Madras
Sunday, December 5, 2004

http://www.hinduonnet.com/theh…olnus/006200412051101.htm
By Press Trust of India

NEW DELHI -- Gold prices are soaring but this has failed to affect the buying spree in the Indian wedding season. In fact, people are buying more, fearing a further hike in prices, those in the business say.

Contrary to popular belief that rising gold prices affect buying negatively, apprehensions of a further price hike have led to panic buying. This has resulted in higher sales as compared to the last few years, says Madan Mohan, a member of the Karol Bagh Jewellers Association.

"People know that the gold rate in the domestic market is linked to international prices and beyond anybody's control here. So fearing a further hike, they are buying and there is no stopping," says Mohan.

"Moreover, there are certain market segments which are not affected by prices -- the rich and those buying for wedding purposes. However, those buying for festive reasons would still buy, though in less quantity," says G.S. Pillai, president of Gold Souk.

"Also, those who have more disposable income at hand are buying now," he says, adding, "The Gold Souk is experiencing amazing footfalls of 2,500 customers on average over weekends."

"These are serious buyers who come for buying purposes irrespective of the prices," he says.

Says Harman Dhillon from Tanishq, "November saw an increase of 40 percent in sales over the same period last year."

-END-

Of course Café members have been way ahead of the pack in recognizing how strong Indian gold demand has been thanks to John Brimelow’s focus on the Indian premiums. This is just what John was bringing to our attention for the past MANY months, even as your bullion dealer crowd pooh-poohed the notion gold demand in India was robust. Just another example of how poorly the gold market is reported. Could it be The Gold Cartel bullion dealers and others were downplaying the demand because of how short they are? Nah, they wouldn’t stoop to that sort of deception and lies. Yeah, right!

Well here they go again. A few months ago it was noise coming from the French about selling their gold. That didn’t work, so now the establishment has gone the German route:

GERMAN PRESS: Top Economists Urge ECB Dlr Intervention

12/05/04 FRANKFURT (Dow Jones)--Peter Bofinger, one of Germany's five economic wise men, and Hans-Werner Sinn, president of the Ifo economic research institute have called for immediate intervention from the European Central Bank to strengthen the U.S. dollar, weekly magazine Spiegel reports in an advance copy of Monday's edition.

Sinn said that international capital flows are determining economic development "to an extent which is hardly bearable anymore," which is why the ECB would have to take action.

In an advance copy of Monday's Berliner Zeitung, Bofinger also called on the Deutsche Bundesbank to sell its gold reserves as soon as possible. Instead of keeping gold reserves, Bofinger said the money would be better invested ineducation and people.

Magazine Web site: http://www.spiegel.de
-Frankfurt Bureau, Dow Jones Newswires;

-END-

The Gold Cartel is working overtime to get this spin out there. Another slant on the same planted story:
German "wise man" urges Bundesbank gold sale-paper

BERLIN, Dec 5 (Reuters) - The Bundesbank should sell its gold holdings as quickly as possible, one of the German government's panel of independent economic advisers was quoted on Sunday as saying.

"From a monetary policy point of view, there is no reason to retain these gold holdings," Peter Bofinger, one of the so-called government "wise men", was quoted as saying by the Berliner Zeitung. "It would certainly be sensible to invest the money in education and human capital."

The newspaper also said leading members of the ruling Social Democrats parliamentary party were pressing for the sale of gold holdings and had been in regular contact with the Bundesbank.

Bundesbank President Axel Weber said last month the Bundesbank would decide by the end of the year whether to use an option to sell any of its gold under an agreement with other European central banks.

The European Central Bank Gold Sales Agreement, a five-year sales pact that came into force at the end of September, regulates the amount of gold central banks can sell.

Under the pact, Germany, the world's second-biggest holder of gold with reserves in excess of 3,000 tonnes, has an option to sell 600 tonnes of the precious metal over the five years. ((Writing by James Mackenzie, editing by Chris Johnson; Reuters Messaging james.mackenzie.reuters.com@reuters.net, Berlin Newsroom +49 30 2888 5230, berlin.newsroom@reuters.com))

I guess these German wise men want to make like the English who sold their gold at $280 so they could invest the proceeds in interest bearing dollar vehicles (nice move). No pretense of that here. Just sell the gold because it is going straight up and proving to be a very valuable asset. Wonder who got to these guys?

What these wise men don’t know is Germany’s gold, or at least half of it, may already be gone, lent out at $150 below current prices. Perhaps some in the German political/banking world fear they will be found out and want to get these loans off the books by declaring them as sales and receive cash from the proceeds?

What the GATA camp knows for sure is there is some 10,000 to 15,000 tonnes of central bank gold "officialdom" has not accounted for via sales and hedge book loans. Whose central bank gold is it? The US? Germany? The amount is so large some of it has to come from one of those countries as they supposedly account for 1/3 of the central bank gold reserves in the world.

For reference on where I am coming from on this let us review the prescient work of GATA’s James Turk in some excerpts from:

Accounting for the ESF's Gold Swaps
by James Turk

August 13, 2001

http://www.gata.org/esf_gold.html

Last April in "Behind Closed Doors", I presented evidence that the US government had swapped with the Bundesbank some 1,700 tonnes of gold stored at the depository in West Point. At the time, I wasn't able to figure out where the transaction was hidden in the US governments accounts, but I now have the answer. This 1700 tonnes at $280 per ounce is a $15.3 billion transaction. This accounting entry is in the $20 billion liability explained above, which at $280 per ounce allows for the possibility that the size of the gold swap has increased to $20 billion. I say 'possible' because the rest of this liability may have arisen from a currency swap.

So here's the accounting. The US government swaps gold with the Bundesbank, which now owns the gold in West Point. Further, to secure this transaction, the Bundesbank receives SDR Certificates, which solves "The Mystery of the Disappearing SDR Certificates" (Letter No. 289, August 13th, 2001). The ESF gets the gold in the Bundesbank's vault, which it then lends to the bullion banks in an off-balance sheet transaction.

Since I first reported that the Bundesbank owns the gold in the Treasury vault at West Point, I have been asked countless times, how can the gold still be reported as being held in the Treasury vaults and listed as a US Reserve Asset if it is really owned by the Bundesbank? Well, according to GAAP accounting it can't. And that is what I have now discovered in the 2000 CFS, which presents the offsetting gold liability in the IMA.

This 2000 CFS footnote was changed from the 1999 CFS for a reason - to reflect new conditions in the accounts. As further confirmation of this point, we already know that on September 30, 2000 in its reports of the US Gold Reserve, the Treasury began labeling the gold in West Point as "Custodial Gold", changing it from its previous classification of "Bullion Reserve". This gold is being held in custody for the Bundesbank, its owner.

It is worth recalling that all of these changes took place in the fiscal year ending September 30, 2000. That year began October 1st, 1999, just days after the Washington Agreement. There has been a lot of evidence presented that the Bank of England and other central banks intervened heavily in the gold market to cap the rally then underway to get the gold price back below $300 per ounce. See for example, Paragraph 55 of Reg Howe's Complaint against the Bank for International Settlements et al., at http://www.goldensextant.com.

James Turk’s original work on Germany’s gold in this piece:

Behind Closed Doors
by James Turk

April 23, 2001

may be reviewed at

http://www.fgmr.com/clsddoor.htm

***

Now back to the latest. Of utmost significance to our camp is the mainstream investment world’s (and almost all gold market pundits) lack of short-term bullishness regarding gold. It is extraordinary and bodes well for the few of us who have remained steadfastly bullish all the way up, as well as for those with gold share investments of any kind. As we all know, gold futures longs and gold bullion/coin holders are standing tall today, whilst gold shareholders are suffering and bewildered because of the pathetic performance of the shares.

Sure, the world powers can intervene in the dollar at any time which could jolt the gold price. Yet, this is what the correction camp has been saying for weeks. Since the New Orleans Investment Conference on November 10th, with most every gold pundit in attendance looking for a correction, gold has rallied more than $20. Even if there is a massive intervention, gold would most likely (worst case) head back down to its break out point of $430. The cash market is just too strong for gold to deteriorate much further than that. Meanwhile, most of the pundits have their clients out of a market move of historic importance, and maybe the most historic investment opportunity of all time! To play for pennies makes no sense to me when there are SO many marbles (chips) are on the table.

The irony is almost ALL the short-term gold bears think they are contrarians. They are the ones with almost ALL the company, and have been for some time! Even more ironic is the higher gold moves, the more company joins them from those leaving the bull camp. Right now who do you know out there who believes gold will rally from here? Almost no one is talking UPTOWN! To be lonely BULLISH soothsayers, as most of the GATA Camp is in at the moment, should be comforting, as it is commonly a winning viewpoint for true contrarian investors!

In addition, here we have gold screaming into 16-year highs and there is nary a peep from the media. No hoopla at all, the kind one might normally expect at market turns. One could say the reaction to the gold surge is extremely bizarre – or more appropriately, like benign neglect.

Take this Kitco, December 4 posting, for example:

London gold closes at $444.70 US, down $0.47
LONDON (AP) - Selected world gold prices Friday in US dollars a troy ounce:

Hong Kong: $448.50 off $7.55
London: $450.20 up $2.60
Paris: $444.70 off $0.47
Zurich: $449.53 off $0.70

***

HUH?????? Selected prices – for what – to accommodate the bear’s wishful thinking?

We already know about Dennis Gartman’s brash call to go short with impunity on Friday (he’s already down $2 to $3 per ounce). Here are some comments from this Mineweb story, which can be read in full at:

http://www.mineweb.net/sections/gold_silver/396837.htm

Gold takes a breather
By: Gareth Tredway
Posted: '03-DEC-04 15:00' GMT © Mineweb 1997-2004

On Friday, after initially rising nearly $2/oz on a US new job creation number that was half that expected, the price dipped below $450/oz. A South African commodities trader says the market was expecting the numbers to be worse and, so, the price only rose slightly on the news.

"For now I think we have seen the top, and maybe we will see a pull back on gold and the euro," said the trader. This pullback would see gold drop to around $445/oz and a euro back at $1.3280 to $1.3250, the analyst reckoned…..

The trader says, gold should be at the $460/oz - $465/oz level at the moment, but added that the metal will test these levels within the next two to three months. "We shall maybe struggle around there again," he said……

Gregor Krall, technical analyst at BOE private clients, told Mineweb on Thursday that for the present gold could be a little overdone, but there is strong support at the $425/oz - $430/oz levels. At the other end of the scale, Krall said strong upper resistance was seen at $468/oz and the $503 levels…..

Most market watchers remain cautious for the present, saying: "There is always the risk that the dollar whips back."

-END-

Points to make:

Not one of these pundits, naturally, dealt with the fact that gold did not respond like it should have because of Gold Cartel intervention. Instead the dingy SA commodities guy says traders were expecting the jobs number to be worse than expected. What a bunch of crud. NONE of the Wall Street pundits were bearish on the jobs number which is why the bond market soared when the jobs number was announced. This is a good example of what I mean when I say the gold market is the worst reported-on one in history.

The emphasis on gold, as always, is on "overdone to the upside" and on a "top." How about pointing out that even with the "dazzling" new WGC ETF buying, gold has not even kept pace with the dollar fall? What could be more obvious that "Something Is Rotten In The State of Denmark?" If the WGC ETF really did buy 100 tonnes of gold, it had little to no affect on the price as gold is actually trading worse vis-à-vis the dollar than BEFORE this supposed new buying kicked in. How can that be?

None of these enlightened pundits, like so many others, talk about the possibility gold could have a ways to go to the upside FIRST before we get a meaningful correction, like all markets eventually do. Except for Jim Sinclair, John Embry, John Brimelow, James Turk and myself, almost everyone in the public commentary domain is short-term bearish.

Sure gold should be at least $460 to $465 right now, just to keep pace with the dollar’s drop, as per this MineWeb pundit’s comment. We know why it isn’t. Hip, hip for The Gold Cartel! These people who fail to report on it are clueless and/or are prohibited from letting the truth out there, as is Davin McGuire of Dow Jones. I feel sorry for him at this point. Good guy. Just muzzled by the Orwellians in our American financial market press

Let us now switch to a Dan Denning (Daily Reckoning) article, sent to me on Friday, and posted at

http://www.kitco.com/ind/Denning/dec032004.html.

Kind of strange at it was sent out with a November 23 dateline. Some excerpts from GOLD AND GRAVITY written with Feb gold at $450 (nearly $8 lower than Friday’s close):

Is the gold price giving us a repeat performance of October’s fake-out in the oil market? My suspicion is that gold is acting a lot like crude did last month...running up to fresh highs – and making headlines all the way...

But this isn’t the main event. Not yet.

The day of reckoning for America, her deficits and her dollar is surely on its way. Investors who haven’t yet bought gold as protection could be forgiven for thinking they’ve missed their chance. But we may see gold make the inevitable run up to $450 – as early as next week - and then experience a serious correction and consolidation……

With gold making 16-year highs, the dollar making fresh lows in euro and yen terms, I'm more inclined to take recent developments as a sign of a near-term top in the gold price. In contrarian terms, whenever the crowd is all on the same side of the trade, the trade is nearly over….

***

Dan Denning is a smart guy, I am sure. And his call could be right on the money too. However, to say his call is contrarian is "dead reckoning" wrong. The MOB calling for a correction has been howling for many weeks, gaining disciples on each $5 rally; leaving only a few lonely short-term bulls as gold grinds higher and higher, despite what the crooks are doing.

What the correction camp may be missing:

*Since the financial markets are so sanguine about a dollar drop, the central banks may have decided to let the dollar take its medicine right now, letting the dollar fall far more than anticipated in the near-term without any kind of meaningful correction. The longer the US bond and stock markets maintain their serenity, the more likely it is the dollar will fall.

*GATA’s Chris Powell sent out a dispatch last week re a Swedish central banker who stated he had information there would be no meaningful currency intervention at all in the near future. So far this has been the case, to the consternation of dollar correction bulls.

*Chris then put out this dispatch yesterday which should send shivers to dollar longs and those gold bulls who are short or out of the market:

8:25p ET Friday, December 3, 2004

Dear Friend of GATA and Gold:

The Reuters story about today's decline in the U.S. dollar, just dispatched to you, mentioned a report in a German newspaper quoting an unidentified U.S. Treasury official as saying that the U.S. government would not intervene in the currency markets to support the dollar until it fell to $1.45 to the euro.

That newspaper was Boersen-Zeitung, a financial paper in Frankfurt, and the story at issue is appended for our friends who are fluent in German.

The story is not terribly coherent when run through an automated Internet site translator, but it does say that the U.S. Treasury Department considers exchange-rate adjustments to be the best way of rebalancing international trade.

If the story says anything of great interest, perhaps our German-speaking friends will let us know -- or at least send us some good sauerbraten and beer. You should see the slop some of us GATA drones have to eat in front of the computer on Friday night as we troll the Internet for clues to the truth. Truth may feed the soul but put ketchup on it and it's just ... ketchup!

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

* * *

Boersen-Zeitung, Frankfurt
Saturday, December 4, 2004

http://www.boersen-zeitung.com…tion/aktuell/bz236013.htm

USA wollen erst bei 1,45 Dollar intervenieren --Treasury: Auch kräftige Yen-Korrektur nötig

US-Regierung sieht in weiterer Dollar-Abwertung "effektives Instrument" gegen Leistungsbilanzdefizit det Washington -- Die US-Regierung ist offenbar bereit, einen weiteren deutlichen Kursverfall der eigenen Währung in Kauf zu nehmen. Ein hochrangiger Mitarbeiter des US-Finanzministeriums, der namentlich nicht genannt werden wollte, sagte der Börsen-Zeitung, man werde frühestens dann an Stützungskäufe denken, wenn der Euro "die Marke von 1,45 Dollar überschritten hat".

US-Finanzminister John Snow habe die langfristigen Gefahren der Defizite im Haushalt und Außenhandel der USA für die Konjunktur erkannt. Er akzeptiere,
Auch wenn Snow und andere Regierungsvertreter zumindest in der Öffentlichkeit an der seit über zehn Jahren geltenden Doktrin des "starken Dollar" festhalten, hat sich diesen Aussagen zufolge hinter den Kulissen ein grundlegender Gesinnungswandel vollzogen.

Wie der Treasury-Mitarbeiter weiter erklärte, will sich das Finanzressort in Washington von dem Säbelgerassel aus dem Ausland und den Aufrufen zur Dollarunterstützung keineswegs einschüchtern lassen. Die Äußerungen des japanischen Finanzministers Watanabe, der gemeinsame Interventionen der japanischen Notenbank und der Europäischen Zentralbank in Aussicht gestellt hatte, sofern Washington nicht irgendeine Bereitschaft signalisiere, die Talfahrt des Dollar aufzuhalten, stößt bei Snow offenbar auf taube Ohren. "Die Drohgebärden werden an unserer Politik nichts ändern", betonte sein Untergebener. "Sie sind aber auch nicht dazu geeignet, das Gesprächsklima zwischen Washington und Tokio zu verbessern."

Zu den Wechselkurskorrekturen müssen nach Ansicht der Bush-Regierung insbesondere auch die asiatischen Länder beitragen. Auch wenn sich die US-Valuta mittlerweile der psychologisch wichtigen Grenze von 100 Yen genähert hat und ein weiterer Wertverlust den Konjunkturaufschwung in Japan bremsen könnte, geht Washington davon aus, dass Japan einen überproportionalen Anteil an den Korrekturen tragen wird und der Dollar im ersten Halbjahr 2005 auf 90 bis 95 Yen sinken könnte.

Der Kursverlust des Pfund hingegen brauche sich nicht mehr fortzusetzen. "Die Engländer haben ihren Teil getan", erklärte der Treasury-Mitarbeiter. Die weiteren Beiträge "müssen zum einen von der Eurozone kommen, aber auch von Asien, insbesondere China". Eine Entkoppelung des chinesischen Yuan vom Dollar werde man zwar nicht verlangen, aber doch überzeugende Schritte hin zu einer Lockerung der Anbindung.

–END-