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GATA - Bill Murphy writes....

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NYBob Member Level  Wednesday, 05/10/06 01:09:13 AM
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GATA - Bill Murphy writes....

May 9 – Gold $699.70 up $22.30 - Silver $14.49 up 71 cents

$700 Gold Is Here / Silver Soars / Gold Cartel Seen Crying In Men’s Room -

"Who Are Those Guys?" … Goldman Sachs


It’s no one man gang, Goldman Sachs. That’s for sure. You have been had by the whole lot of us, which includes the entire GATA ARMY … and we have done so by following our "Enveloping Horn" strategy, borrowed from Africa’s greatest general, SHAKA!

Goldman Sachs: you messed over the poor blacks in Africa with your bogus, lying gold price suppression scheme and it has come back to haunt you. May you suffer the same fate in gold as did Shaka Zulu’s adversaries so long ago.

Congrats to Adrian, who did it again with his alert last night (served at the TL Table).

With gold and silver correcting yesterday, I mentioned the following in MIDAS:

What is remarkable, and part of the public record, is how few bulls there have been on the way up and how few bulls there are now. I mean look at the chart. The reason is obvious … most everyone refuses to deal with what GATA knows. I believe I have made that comment almost every week since GR 21 … or for the last $250 of the move!

With all the hysteria about a gold market correction, today will barely register on the charts. If I were short, I would be VERY nervous. No doubt The Gold Cartel and the rest of them ARE…

Gold rose every day last week and 10 out of the last 11 days, prior to today’s normal setback. It changes nothing regarding the building squeeze, nor where gold is likely to head in the near future. It could easily trade $700 per ounce before the week is out.


Make that REAL easily - and every week since GR 21 … or for the last $270 of the move.

Gold firmed up soon after the Comex close last night, rising as much as $5. After a brief dip in early London trading this morning, it firmed up once again going into the Comex opening. Any astute trader could see and feel something special and very bullish was about to occur today.

It was THE strongest gold trading session on the Comex I have ever seen. Gold did not back off all session long, moving up in spurts and then holding its ground, only to make new highs on the close.

What you are witnessing is a rare market phenomenon … a bunch of trapped bullies trying to get out of their massive gold short positions in a market which is in a steep supply/demand deficit to begin with. At the rate the bad guys are exiting the market, it might take them another TWO YEARS to eliminate their short positions. In a way I am kidding about that and yet in another way I am not. The Gold Cartel and other shorts still CANNOT cover those positions at these LOW prices and it will take a long time for them to bow out.

With all the GATA camp knows about what The Gold Cartel has done and what the gold market is all about, we don’t know exactly what amount of the short position must be covered with physical gold and how much can be paid back with cash. However, as mentioned before, the shorts must be at a point where they must cover price-wise in order to keep their losses from mounting. We are talking about some serious money here with gold moving like it is.

So what do they do? Does Goldman Sachs call up the central bank that lent them the gold and tell them they have decided to send them a check? For what price? You got me. There must be all sorts of havoc going on behind the scenes.

Speaking of havoc, some of the major hedgers have to be in the deepest of troubles … firms like AngloGold, Barrick, and Newcrest. Their hedgebook losses are monstrous and ballooning nearly every day. A savvy vet of the gold business told me this morning that Australia’s Newcrest is technically bankrupt … that if they don’t do some kind of "rights issue" they are tapioca. If they go down, who takes over their sizeable hedgebook?

Again, what almost no one outside of the GATA camp is even dealing with (factoring in, mentioning) is how this HUGE short position, a varied one, is affecting the market. You have numerous calls written over the years which are continuously going into the money, meaning the writers of the calls must come up with physical gold to the call owners. So we have a surging physical market competing with desperate gold shorts of different strokes.

This could very easily lead to a GOLD DERIVATIVES BANKING CRISIS. Veteran Café members will remember when a GATA delegation presented our document of the same name on May 10, 2000 to the Speaker of the House, Dennis Hastert … and then to the members of the House and Senate banking committee. That special report may be found at the upper left corner at www.GATA.org.

There is a very good shot of a staggering gold price melt-up in the days and weeks ahead … one which will shock the investment world … as the GATA camp watches with big smiles on our faces.

"When Solomon said there was a time and a place for everything he had not encountered the problem of parking his automobile." --- Bob Edwards (1947), US radio broadcaster.


"When Solomon said there was a time and a place for everything he had not encountered the Gold Cartel’s problem of covering a 10,000 tonne gold short position!" GATA (2006)

While the AM Fix was little changed from the Comex close, the PM Fix roared to $691.25.

The gold open interest fell 855 contracts to 357,086, while the disappearing silver open interest dropped 2429 contracts to 108,056. The silver OI is some 35,000 contracts less than it was at its highs. The silver shorts continue to use every dip to run for the hills.

JP Morgan’s Chris Jordon turned silver buyer … bad news for the bears. Haven’t heard from him in a while. As soon as he showed up on the buy side, silver took off and followed gold’s lead. No telling what silver could do in the days ahead too.

Our kind of chart … one many of us dreamed of for so long.

June gold

The fun part is this move up will look rinky-dink in the months and years ahead.

All the metals were on fire:

*Platinum was up a whopping $41 to $1229 per ounce. The price of gold will overtake platinum as The Gold Cartel goes down in flames.

*Palladium danced $17 higher to $388.

*Copper, "The Energizer Bunny," closed at a lofty $369.60, up another 9.05 cents.

The PERFECT STORM is building … its clouds darkening by the day with typhoon winds building.

Crude oil closed up 92 cents to $70.69.

The dollar sank .43 to 84.63. The euro rose .53 to 127.53.

More gold goodies:

Indian ex-duty premiums: AM ($1.44), PM $3.93, with world gold at $681.65 and $681.35 Below, and above legal import point. This is basis Ahmedabad; other Indian cities gave similarly confused readings. Volatility must be troubling Indian import dealers: but it cannot be said their customers are out of the market. The Bombay stock exchange closed at another record high today.

When Japan re-opened today it found world gold at virtually the same level as the previous close: $682.25 v $683.05. Despite this high level and the steadiness of the yen, the Japanese public bought. On volume equal to 30,426 Comex lots (-50%) open interest surged 11.7 tonnes (3,750 Comex lots). Mitsubishi’s data implies that the public added 8.5 tonnes to its long. The active contract finished down 11 yen, but world gold went out $1.30 above the NY close, having been as much as $4 higher earlier.

This is uncharacteristic behavior by the TOCOM general public: maybe they think these are unusual times.

The weekly ECB statement of condition reported a gold sale of E916Mm last week, 59.05 tonnes at the current book value. Four banks were reportedly involved. Almost certainly, 57 tonnes of this was the sale announced by the ECB itself on March 31, which had not previously shown up in the accounts. Exactly the same thing happened last year. This leaves 2.05 tonnes to be split amongst 3 banks – so small as to suggest calls being exercised. At 25 year highs, the ECB group of Central Banks appear to have flinched from selling.

Yesterday in NY, of course, a pretty serious effort was made to break gold down. Several commentators remark that strong physical off take was seen on the lows in the low $670s. However, on volume of 64,177 open interest only slipped 855 lots (2.65 tonnes), indicating very little net liquidation. Any shorts who joined in the downswing could not have enjoyed this morning.



The DOW rose again, climbing 55 to 11,640. The DOG lost 7 to 2378.
US economic news:

10:00 March Wholesale Inventories reported 0.2% vs. consensus 0.5%
Prior 0.8% revised to 0.9%.
* * * * *

Huh?? Where has everybody been:

11:17ET Bond Watch: Dollar Clocked on Iran Billing Rumors (BONDX) :The dollar has gotten hit hard against the euro as the foreign exchange world buzzes about Iran starting to bill for crude oil in euros. The euro saw a 0.7% bounce against the buck on the chatter

U.S. consumer confidence slips further in May: IBD

NEW YORK (Reuters) - Consumer confidence in the U.S. economy fell for the third month in a row in May as higher gasoline prices offset robust economic growth, according to a survey released on Tuesday.

Investor's Business Daily and TechnoMetrica Market Intelligence said their economic optimism index declined to 46.1 in May from 48.6 in April and 49.1 in March.

A reading below 50 indicates pessimism…


05:36 Real Estate market chill reported by NY Times
The Times reports that, though prices remain on the rise, that median home price increases are slowing, and that in some cases, prices are in fact falling. The Times cites data provided by ZipRealty, who reported a 35.7% reduction in Boston area real estate prices, and says similar trends exist in San Diego, Sacramento, Los Angeles and Miami, as well as Chicago, Washington and Baltimore.
Reference Link (registration required)
* * * * *

Check out Jesse’s web site:



From a fellow Café member on silver in Canada:

"Just talked to the head bullion trader at TD Bank. They are running very low on physical silver! This is very bullish news!!!!!!! I am curious about the other Canadian Banks!"


This one blows me away. Yesterday I vented my theories on what was going on in the commodities world … an opinion that is nowhere to be seen on Planet Wall Street or the mainstream gold world.

First, the MIDAS thinking, followed by the news of the day …

Perhaps the most common man thinking of the day is that we are in a COMMODITIES BUBBLE. Warren Buffet, Dennis Gartman (on CBNC this morning), etc., are all talking of the great commodities market bubble.

I will dissent for the following reasons, including my thoughts:

*Samex’s Jeff Dahl has been reporting for a very long time now about the Chinese scouring Chile and South America to tie up copper supply for the future. The South Koreans are not far behind, according to Jeff.

*Our STALKER source has reported Chinese buying of gold for years. MIDAS reported the Chinese canvassing South Africa five years ago to tie up supply.

*We know of the Chinese interest tying up zinc supply.

*The common man thinking is unwarranted hedge fund speculation is driving up commodity prices. Maybe that is so with oil, but I suspect much of the run up in the metals sector is due to Chinese accumulation of those metals … BUYING through intermediaries, which are THOUGHT to be hedge funds. If so, it is the shorts in these markets who have been had by the Chinese.

*Bubbles are made of excessive public accumulation by people who are only along for the move, without knowing what is behind it. I see none of that. Matter of fact, it is more of the opposite. The Café Sentiment Indicator, with all this is going on gold-wise, was only a FOUR this weekend. A stinking lousy 4. What we have is the exact opposite of a bubble … general ennui by the general public.

*Regarding the story of the rogue Chinese trader above. The common thinking is this guy is a bonehead, who risked execution Chinese style to do his own thing. I don’t buy it. My guess is this guy was trotted out there to disinform the investment world as to what the Chinese are really doing: BUYING. Yes, his short trading position was no doubt real. However, my guess is there were other Chinese traders on the long side hidden from view, maybe with double his short position. Those long traders will never be heard from.

*And finally, there is little talk about the astounding gold short position outside of the GATA camp. The reality re gold is the REVERSE of a bubble. It is about a position which cannot be covered at these price levels.


Then this:

05/09 4:18A (DJ) DJ China To Build Uranium, Iron, Copper Strategic Reserves Story

BEIJING (Dow Jones)--China plans to start building strategic reserves for uranium, iron, copper and other key mineral resources, and accelerate the construction of strategic petroleum and coal reserves as part of the government's official five-year plan, said the Ministry of Land and Resources.

The ministry is targeting adding proven reserves of 4.5 billion-5.0 billion metric tons of oil, 2 trillion-2.25 trillion cubic meters of natural gas, 100 billion tons of coal, 5 billion tons of iron, 20 million tons of copper and 200 million tons of bauxite by 2010. The government officially released the five-year plan for 2006-2010 on April 28, which Chinese media didn't pick up until Tuesday.

Government offices and financial markets were shut May 1-5 due to the Labor Day holidays.

The energy and mineral resources reserves, funded by both the government and companies, will be designed to adjust to market supply and meet emerging demand, the ministry said in a report recently posted on its Web site.

To increase uranium reserves, China will expand exploration of uranium resources in northern and southern mining regions, it said.

China will also strengthen the exploration of key metal mining zones in southwestern rivers, as well as Tianshan Mountains in the northwest, Nanling Mountains in the south and Daxinganling Mountains in the northeast.

The country will accelerate the construction of oil reserve tanks and supplemental system and explore more oil reserves, the ministry said, without elaborating.


Followed by this:

China Is Urged to Quadruple Gold Reserves, Reuters Reports
2006-05-09 11:13 (New York)

By Danielle Rossingh
May 9 (Bloomberg) -- The Chinese government was urged by economists to quadruple gold reserves to 2,500 tons from 600 tons, Reuters said, citing an official industry newspaper.

Gold should comprise between 3 percent and 5 percent of China's foreign-exchange holdings, from 1.3 percent now, Liu Shanen, an expert at the Beijing Gold Economy Development Research Centre, told a conference, Reuters quoted the China Gold newspaper as saying. China should increase its gold holdings given the strength of its economy and the size of its foreign trade, Shanen said.

China's gold reserves have remained stable since December 2002, Reuters said.


Chinese gold:

Resource Investor, VA - Apr 17, 2006
By Jon Nones. China holds 19.29 million ounces in gold reserves at end-March, unchanged from end-January, end-February, central bank data show.

Some market reaction to the Chinese gold flap:

11:28 June gold touches $700; currently $699.30, +$19.40
An additional factor being mentioned to explain the strength in gold is a Reuters report that China is being urged to quadruple its gold reserves. The source of the story was comments by Liu Shanen, an expert at the Beijing Gold Economy Development Centre, at a conference. It is unclear if Liu Shanen's opinion has any bearing on official Chinese policy.
* * * * *

I cannot stress this enough: Via our STALKER source MIDAS has been reporting Chinese buying of gold for years. The Chinese have been buying metals for a long time, as one way of unloading their dollars on the cheap … without insulting the US on the world economic scene. They have been doing this buying in the most discreet of manners. It is remarkable how sophisticated they are in the commodities arena and how clueless the West is on what they have been up to.

A copper, gold bull:

Freeport's Adkerson Says Copper, Gold Prices May Keep Rising
2006-05-09 09:12 (New York)

By Mike Schneider

May 9 (Bloomberg) -- The failure of the world's copper mines to keep up with demand is keeping prices at record highs, and defensive investing is boosting gold, said Richard Adkerson, chief executive officer of Freeport-McMoRan Copper & Gold Inc.

``The copper market remains very tight,' Adkerson said today in an interview from Miami. ``Even though we have such high prices, the industry has been characterized by a challenge in adding new supplies. There's an absence of major new projects.'

Copper prices have more than doubled in the past year, and gold has surged to a 25-year high, boosting profit for New Orleans- based Freeport, owner of the world's largest gold mine and second- largest for copper. First-quarter earnings surged 83 percent, even as production of copper and gold tumbled at its Grasberg mine in Indonesia.

Lower output ``is being offset by the very strong prices that we have,' Adkerson said. ``We had a third less copper and 20 percent less gold than a year ago. Yet, it was our second-strongest quarter from an earnings standpoint than we've ever had.'

Adkerson said he isn't concerned about manufacturers seeking alternatives for copper, used mostly in wiring and pipes.

``The really great thing about copper as a commodity is it's physical characteristics are such that it's difficult to replace for its basic uses,' he said. ``As industrial output grows, as urbanization grows in the developing world, the demand for copper is a necessary element of those conditions.'

Gold prices probably will remain strong as demand increases from ``defensive investing,' Adkerson said.

``Gold is driven by issues beyond near-term supply,' he said.

``Demand is driven by currency issues and political concerns. With events we face around the world today, the outlook for gold is strong.'



Good Evening Gentlemen,

On May 8 the seven large TOCOM gold shorts reduced their net short position by 7,174 contracts to a total of 171,690 contracts or 5,519,961 troy ounces.

In silver, the same dealers reduced their net short position by 127 so far.

Have a good night,

In the May 8 session on the TOCOM Goldman Sachs decreased their short position by 251 contracts. They achieved this by covering 948 contracts in DEC 06 and 903 contracts in FEB 07 and going short 1600 contracts in APR 07. This continues their ongoing "Operation Toxic Waste" as they move their short position as far away as possible. Unfortunately, just like with toxic waste, the problem doesn’t go away when you try to bury it.

I used to think bears were cute and cuddly… so far they’ve got zero out of ten on both counts!

Hello Gentlemen,
I was just doing some calculations using today’s spot gold and silver closing prices from Kitco, and yesterday’s (May 8) TOCOM dealer net positions data. Using Sumitomo Corporation, who is currently the largest TOCOM gold and silver short, and assuming that they did not buy or sell any additional gold or silver contracts on the May 9 TOCOM session and that they are not hedged in any other way, we can conclude that someone, somewhere, is having a bad day today. I say this because on May 8 Sumitomo Corporation was net short 72,693 contracts of gold and 5,518 contracts of silver. If we convert these contracts to troy ounces and multiply the result by today’s price gains we can get some idea of the potential losses.

72,693 contracts x 1kg per contract x 32.1507 troy ounces per kg = 2,337,130
troy ounces

2,337,130 x U$22.30 (today’s gain) = U$52,117,999 loss


5,518 contracts x 60kg per contract x 32.1507 troy ounces per kg =
10,644,453 troy ounces

10,644,453 x U$0.71 (today’s gain) = U$7,557,561 loss



U$52,117,999 + U$7,557,561 = U$59,675,560 hypothetical gold/silver one day loss

That can’t be good!!!

Take care,

One of the mainstream gold world’s grandest dingbats:

GFMS's Klapwijk Comments on Gold Market, Chinese Gold Holdings
2006-05-09 12:19 (New York)

By Danielle Rossingh
May 9 (Bloomberg) -- Philip Klapwijk, executive chairman of GFMS Ltd., a London-based research company, comments on rising gold prices and speculation China may increase its gold reserves.

Gold today traded at $700 an ounce for the first time since October 1988 as tensions increased over Iran's nuclear-research program.

On gold's rally:

The gold market ``is being driven by investors and speculators, instead of the normal ebb and flow of supply and demand.'

On China:

``There's quite a rumor mill going round the market at the moment. China is frequently being mentioned.'

Increasing reserves ``wouldn't make any sense. I just don't believe it.'

``Why would they buy at these levels? The Chinese are very big holders of dollars. It would send a negative message on the U.S. dollar. They're very cautious.'

``It would only complicate the management of their portfolio.'


It’s Klapwijk who makes no sense.

To the GATA camp:

Dear Bill
As I watch gold hit $700, I’m thanking God for the many blessings this has allowed. I also want to thank you and GATA for shedding light on the untold story of gold manipulation. I have no doubt I may have missed this whole move if I didn’t subscribe and believe in your analysis these past few years.
God Bless,
Peter Grandich

One point to make. There is nothing close to knowing what GATA knows to have nailed this gold market move. One other positive is, like Jim Sinclair, I was a big time commodities trader in another life … one who put on a limit position at one time.

This has helped me understand what is going on here. Many of the gold pundits have never traded a futures contract in their life. There is no way they could get a feel for how a market trades like Jim and I have. There is no substitute for that kind of extensive experience.

The gold shares were their usual comatose selves this morning, even with gold rocking along. It was pitiful. However, they caught some serious bids late, as the HUI began to quietly run away from 385/386 resistance. As it became apparent this heavy resistance area was to be overrun, the bids became more aggressive.

After all, there are more gold pundits who are OUT of this market than in. What does one do when you are predicting a correction for weeks and months … only to see gold fly to $700? At one point do these gold pundits, who are dead wrong, bite the bullet and start buying the shares? Some started today. They (SO MANY OF THEM) have a long way to go.

The XAU rose 7.63 to 167.46, while the HUI gained 17.16 to 393.28.


Gold, silver and the shares remain THE historic investment opportunity of a lifetime. Starting to look that way, isn’t it.




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