GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Gold Market Rigs Exposed
* USDollar Revaluation Urgency
* On the Verge of British Implosion
* Shortage, Manipulation & Default
* Charts Fail to Tell the Story
* Chinese Financial Shock Waves
* Chinese Big League Gold Action



HAT TRICK LETTER
Issue #73
Jim Willie CB, 
“the Golden Jackass”
18 April 2010

"Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." -- Alan Greenspan (1966)

"Rising prices of precious metals and other commodities are an indication at a very early stage of an endeavor to move away from paper currencies. What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment." -- Alan Greenspan (2009)

"The just released minutes from the March 16-17 policy setting meeting by the Bank Of Japan indicate that dissension to global ZIRP, and its mutant step brother Galactic Moral Hazard is growing. The vote to double the BOJ 0.1% interest lending facility to ¥20 trillion saw a final tally of 5 to 2, with two opposing." -- Tyler Durden of Zero Hedge

GOLDEN POTPOURRI

◄$$$ MY ARTICLE HIT A CHINESE WEBSITE. $$$ Apparently Popular Financing out of China was impressed by my last public article on the two major signals for the gold price, in a rising crude oil price and rising USTreasury Bond yield. They published the article in English in its entirety on a Chinese website, one that featured their language and symbols, kind of funny to look at. Many thanks. See the article re-titled as "Two USDollar Signposts and Gold Silver Stealth" on the Popular Finance journal (CLICK HERE). One must wonder whether readers are mostly in Hong Kong.

◄$$$ SOME CONJECTURE IS IN ORDER FOR AN ALTERNATIVE CURRENCY RESERVE LAUNCH. THIS ARENA IS TREACHEROUS FOR ALL PARTIES, YET IT IS INEVITABLE. MY POSITION FOR TWO YEARS HAS BEEN THAT THE FIRST NATIONS TO BREAK FROM THE USDOLLAR WILL BE THE NEXT LEADERS IN THE NEW CHAPTER TO COME. THE HATCHING PROCESS OF A NEW GLOBAL RESERVE CURRENCY WILL BE MYSTERIOUS AND CLOAKED. $$$

It is the Jackass belief that a new currency will be introduced within the next several months, maybe the next year and a half. But, and a big but, YOU WILL NOT KNOW IT WHEN IT HAPPENS!!! Pay special heed to the German notification that suggested a new European Monetary Fund should consider a gold backed fund instrument. This is of key importance. Nobody paid much attention. In the world of high finance, all hints must be heard, since they might contain the key to the next door that opens. Germany might be fashioning a back door for a new currency reserve, in direct opposition to the US-UK fiat regime. The European Monetary Fund would compete or replace the IMF fund, but bear almost no resemblance to it. The German story painted a picture of the EMF creation to supplant the IMF, in clever tones. Anything anything anything that contains a fund with gold backing will instantly become a reserve currency in a limited sense, then expand its role later. The one thing observers can absolutely count on is that any movement to displace the USDollar will occur without direct labeling. It will happen, develop, evolve, and cause a global revolution from under the US crippled corrupted contaminated feet. The seed must be planted, and when it is, it must be watered and nurtured. The Germans might be the gardener to make it happen, using the threat of a Greek debt default spillover as the leverage. The British do not wish to suffer the same fate as Greece, next Spain and Italy, consequently might give the approval. So perhaps a Euro Monetary Fund can bring about limited usage of gold bullion in reserves, prop a rescue fund for broader usage across Southern Europe, and redirect European Union member nation gold into the fund's vaults. The US-UK Anglo alliance might be compelled to permit the EMF gold launch, for fear of powerful attacks on the British and American debt fortress, deeply weakened. This initiative bears watching.

◄$$$ THE NATIONAL INFLATION ASSN REPORTS THE MELTED VALUE OF COINS IN U.S. CIRCULATION. THE VALUES EXCEED FACE VALUE. THIS ANGLE SHOULD ALWAYS BE KEPT IN MIND, A HANDY ITEM OF PROOF IN YOUR POCKET EVERY DAY THAT FIAT CURRENCY IS A SHAM. $$$

The National Inflation Assn has announced the launch of a new platform program called "Coin Melt Values." The new NIA feature, shared with a public webpage, will update on a daily basis the latest meltdown values of US coins currently in circulation, in addition to those previously in circulation. Their purpose is to demonstrate how over time, inflation renders US coins worth more than their denomination values. The motive is made to reduce coins to metal for profit, without urging the public to engage in such illicit activity. It is not a felony to declare paper as legal tender, but it is a felony to melt down metal in coins. Go figure!

Due to the rise in the price of copper, the 1909-1982 US one-cent penny is now worth 2.2402 cents, more than double its face value. The US five-cent nickel is now worth 5.7412 cents, or 15% over its face value. Last December 2009, the NIA declared in forecast silver to be the best investment for the next decade. Their webpage shows how US silver coins that circulated during the 1900s are now worth between 5-fold and 19-fold of their denomination values. NIA believes these silver coins will be useful in future barter during the next hyper-inflation phase. See the National Inflation Assn webpage for coin melt values (CLICK HERE).

◄$$$ AN OFFER IS REJECTED FOR A BUYOUT OF A GOLD FIRM. ONE MIGHT CONCLUDE THAT THE MINING FIRM IS WORTH FAR MORE THAN OPENLY ESTIMATED BY MARKET PRICES. $$$

Lihir Gold has rejected a A$9.2 billion (=US$8.4B) offer from Newcrest Mining. The Australian deal might have been inadequate in the eyes of Lihir executives. Their staff might harbor a viewpoint of sharply higher gold prices in the future, and more difficult gold deposits to be found. Newcrest Mining hoped to boost production at Australia's largest gold mining company by 65% to 70%. The bid included a 28% premium over current value of Lihir stock price. Lihir owns mine properties in Papua New Guinea, Australia, and Africa. This is a very good sign, when those closest to the industry have a firm conviction that their assets are grossly under-valued. Lihir intends to boost output about 40% by 2012. See the Bloomberg article (CLICK HERE). Gold mining stocks are universally under-valued by 50%.

GOLD MARKET RIGS EXPOSED

◄$$$ WHISTLE BLOWER MAGUIRE TRIGGERS A GLOBAL STORY THAT SPREADS LIKE A VIRUS. THE STORY IS ELECTRIC, HISTORICALLY UNPRECEDENTED, AND GAME CHANGING. THE SILVER PRICE HAS MOVED IMMEDIATELY AFTERWARDS. REVERBERATIONS ARE AS POWERFUL AS THEY ARE BROAD. EXPOSURE OF THE SYNDICATE MANIPULATION OF THE SILVER MARKET IS LAID OUT IN SOME DETAIL, WITH WARNING GIVEN TO THE REGULATORY OFFICES. NO FOLLOW-UP HAS COME, NO MENTION IN THE MAINSTREAM PRESS, ONLY AN ELECTRIC VIRUS FLASHING ACROSS THE INTERNET, WHERE TRUE REPORTING OCCURS. THE LESSON LEARNED IS THAT ONLY PHYSICAL BULLION MAKES SENSE. INVESTORS SHOULD DEMAND DELIVERY OF PHYSICAL METAL IN ALL CASES. THE OFFICIAL MARKETS ARE RIGGED, RUINED, AND RECOGNIZED. $$$

A potentially devastating sequence of events has occurred in the silver market, which by example can be correctly inferred to the gold market. It seems the swine flu virus has been replaced by the silver rig virus, a powerful strain that circles the globe, infecting local markets, and causing perceptual shifts. Following the decisions of the regulatory commissions to investigate the effect of large futures positions on the commodity markets, the Powerz opened the door. At the same time, highly damaging emails between an individual warning the USFed watchdogs of silver manipulation in the metals market were secretly removed from their safe hiding place in the marbled offices of the USFed itself. The emails detailed in advance the price suppression to be done by JPMorgan, complete with timing and devices, timed to perfection since the events occurs as forewarned. The combination of events resulted in powerful testimony by a few people at what were scheduled to be sham hearings by the Commodity Futures Trading Commission on March 25th. Mark that day down in history. The CFTC, like the Securities & Exchange Commission, are blatant puppet groups run by Goldman Sachs and JPMorgan.

Gary Gensler presides over the CFTC joke of a watchdog squad, another Goldman Sachs preppie. At least 100 GSax threads weave together the fabric of Wall Street and USGovt corruption. Enter Andrew Maguire, a metals trader from London. He blew the doors off the hallowed silver rigging altar, blew them off completely, and did so with great earsplitting volume. Be sure that the exact same techniques for silver are used to corrupt the gold price. Maguire set a gigantic trap for CFTC head Gensler, who now has been implicated in somewhat criminal light, with foreknowledge of criminal activity, responsibility from a regulatory post, but no formal response taken. The mainstream press barely took notice. Hats off to the New York Post, which did run the story. The story has been reverberating around the world, from New York to London and to Germany, even Russia, China, and Japan. The power of cartoons is tremendous and under-estimated. They brought down Boss Tweed 150 years ago, along with his New York City crime organization. The cartoon below reveals that the big secret being guarded is that no gold is in the USGovt vaults, and no gold is in the COMEX vaults. The hitmen are soon to attack the gold & silver metals markets, precisely as the Jackass warned in May of 2009. The billboards are now written loud & clear in large letters. The process has begun, as supposed allies of the gold & silver cartel are betraying the maestros, and giving them a stab in the back.


The shattered facades of the golden altar rig are many-fold that were removed, unmasked, and discredited. In one single day, more proof came to the fore of gold & silver market rigging in a public spectacle hearing than in the past two decades, which dismissed the naysayers who claimed that precious metals could not be subject in any way to price suppression. The harsh critics to the gold community have begun to say "OF COURSE" now that the proof is piling up. They look clearly like hypocrites, like the incredibly stupid and arrogant Dennis Gartman. Editor Bob Moriarty of 321Gold has oftentimes ridiculed the GATA crowd and others who bark at price suppression techniques, but now BobMo is just the elderly dog in the slow lane, avidly licking his hind parts and genitalia with pride and dexterity. Finally, many analysts and fund managers can come forth and jump on the bandwagon, since it has been constructed in the public arena.

The following main points were made at the hearing by a stream witnesses led by Maguire, but also Gene Arensberg, Jeffrey Christian, Harvey Organ, and Bill Murphy:

Ø  JPMorgan routinely floods the gold & silver markets with naked short futures contracts, without benefit of metal collateral. JPM and the Big Four banks appear totally exempt from collateral rule enforcement.

Ø  JPM and the Big Four banks hold huge concentrated positions that never seem to diminish, but rather grow each and every year. The size of their position is usually greatly in excess of annual global production and has no possible economic bearing on mining operations.

Ø  JPMorgan routinely sells gold & silver futures contracts during thin market times like early in Asia, and even enlists small platoons of metals traders to join them with subtle hints and messages. They show no appearance of seeking the highest optimal sale prices.

Ø  JPMorgan and other Big Four banks routinely manage the exchange metals inventory with fractional techniques, whereby 100 times as much metal is sold than exists in hand. This is part of the Ponzi framework.

The impact of the Zero Hedge exposé is magnificent. Its analysts operate under the guise of pen names, and come from inside the fortress, almost all Wall Street insiders, analysts and brokers. Their work is seminal in reshaping the next stage of the Western financial landscape. They do a spectacular job. Their usage of Tyler Durden and Gordon Gekko names is hilarious, taken from leading characters in two Hollywood movies. They feature guest writers such as George Washington, who would be appalled at the fascists that have overrun the nation and enslaved its citizens to price inflation, high taxes, corporate abandonment, predatory banking, and bloated government. See the Zero Hedge article entitled "Whistleblower Exposes JP Morgan's Silver Manipulation Scheme" by the irrepressible Tyler Durden (CLICK HERE).

Much credit as usual goes to the Gold Anti-Trust Action (GATA) group, which had just broken a major story, in which a London metals trader turned whistleblower. GATA exposed JPMorgan's silver price suppression and manipulation scheme. The testimony by Maguire at the hearing was a redux of the GATA breaking story. Pressure on CFTC head Gensler will be tremendous, not for losing his job, but rather for serving as the central target to defense the Wall Street syndicate and their untold profits in the rigged gold & silver markets. The full picture has two big sides. JPMorgan and the Big Four routinely win short-term profits from rigging these markets, but their gains are set up by ruinous long-term positions that never go away, and always grow larger. Their balance sheets are polluted with the long-term core positions, toxic and deeply under-water. Imagine all the short contracts in gold when it was under $500 a few years ago. As for prosecution, that might come from foreign USTreasury creditor sources, not from inside the USGovt. Gensler might face US criminal prosecution, if a willing prosecutor can step forward in face of hostile threats by the syndicate. Any new Elliott Spitzers will be smeared or killed. In fact, Maguire almost lost his life, as his car in London was run off the road by a big vehicle that sped away, a hit & run incident. It was a warning that seems not to have made much impression. Other whistle blowers are emboldened. Look for a wing of the USCongress eventually to assemble an investigation unit with teeth, which could pursue this criminal breach of proper regulatory enforcement. Not very likely really, but one never knows after the Goldman Sachs fraud charges were filed. The trouble is that their legal action success would result in a near catastrophic decline in the USDollar and a corresponding rise in the Gold price. Obviously, silver would tag along for a bigger meteoric rise.

Andrew Maguire is a brave man. Let's hope and pray he survives the next year, is not killed by a drive-by shooting, is not the victim of a home robbery murder, is not suicided from hanging by the neck like the Freddie Mac CFO in his own home, and is not caught suddenly with child pornography on his office PC. Maguire is a metals trader in London with years of experience. He has been told first hand by traders working for JPMorgan that the monolith JPM manipulates the precious metals markets. The bastards at JPM openly boast about their easy substantial profits, the devices they use, and the impunity they operate under. What makes the Maguire story so damaging is the chronicle step by step, with advanced warnings, communications with the regulators, and their sleepy responses. He described in detail the way JPMorgan signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside the lead wolf JPM. Maguire explained how there are regular and predictable market manipulations at the time of option expiration for precious metals futures contracts, of non-farm payroll data announcements, and of COMEX contract expiration rollovers. For instance, unsuspecting gold contract holders were overwhelmed by illegal naked shorts placed by JPMorgan and HSBC immediately before March 26th, option expiration. There was large open interest at strike prices from $1100 to $1150 in gold. As predicted by GATA, the manipulation started a week beforehand when gold was trading at $1126. Following expiration, gold traded at $1085 and all those call options expired worthless. Just another day at the office for JPMorgan hoodlums in London.

The Zero Hedge article displays exact email transmissions given to Eliud Ramirez, a senior investigator for the CFTC Enforcement Division, just before specific events, which offered in detail how the manipulation of the market was making progress. Such correct expected price movements would not be possible to predict unless the market was manipulated and heavily controlled. Maguire highlighted illegal concentrated and manipulative positions, and offered details of a series of correct warnings with anticipated outcomes. The CFTC, under influence by the Big Four, the USDept Treasury, and the USFed, permit the price intervention and manipulation to control. It is part of the USDollar and USTreasury defense of the indefensible. Ramirez showed notable politeness in response, but hardly any effectiveness at sentry duty. His job might be to cover up crimes rather than enforce laws, and ditto for Gensler. Not a single complaint filed to the CFTC for over a decade has ever resulted in any action whatsoever. By the way, Maguire let it be known that he has tape recordings of his telephone communications with the CFTC, which will be exposed in due time. Perhaps a class action suit by the People against the CFTC might be forthcoming, led by GATA.

Maguire was not alone in tipping off the CFTC, only to find no action taken. Precious metals analyst Gene Arensberg wrote a letter to the CFTC before the spectacle hearing. He pointed out the concentrated positions by the Big Four banks, and the existing position limits that are not enforced. Arensberg wrote, "[Exemptions to positions limits are] given in such huge size that they overwhelm the trading of that market. Yet, that is exactly the condition we find in the gold and silver futures markets from time to time... [Such exemption has allowed] one side of the market to become dominant and very highly concentrated." That is the essence of market rigging!

At the same CFTC hearings, astounding testimony came from Jeffrey Christian, founder of the CPM Group, a precious metals consulting firm. Formerly of Goldman Sachs, Christian actually revealed that the LBMA trades more than one hundred times the amount of gold that it actually has in inventory to back up the trades! He claimed that investors who buy physical gold on the LBMA are actually buying paper gold via contracts. The LBMA relies and hopes that most of the buyers will not demand physical delivery of their gold. If and when they do, then cash settlements are offered instead, exactly as reported by the Jackass several months ago. Christian's testimony has serious implications. It means that the LBMA is actually short many times the amount of gold it has in possession, as they run a Ponzi scheme. With sufficient delivery demands, the LBMA would quickly be in default. In fact, given that the LBMA has been pressuring buyers to take cash plus 25% rather than physical delivery, one can conclude already that the LBMA has been in technical default on its contract obligations to deliver physical gold to buyers. The LBMA is running a gold fractional metals exchange without disclosure. Look for possible prosecution of the LBMA for contract fraud.

◄$$$ REACTION IS BROAD AND DEEP TO THE C.F.T.C. HEARINGS ON THE RIGGED SILVER MARKET. A QUICK REVIEW IS GIVEN BY SOME PROMINENT PEOPLE. RADIO SHOWS AND VIDEO CLIPS FROM LEADING MEDIA INTERNET FIGURES CONTINUE TO FAN THE FLAMES. $$$

The Jackass had some doubts that the story would disseminate quickly and turn viral globally. It has, but the viral response is still early in the reaction to criminal pathogenesis. Jesse of the Cafe Americain calls it 'The Biggest Fraud in the World' in sincere style. Actually, the Fannie Mae multi-trillion$ fraud ring is a rival on size, the central clearinghouse for numerous fraud rings. But the gold price rigging is central to the entire USDollar and USTreasury management, thus more far reaching importance. Regardless, Jesse reminds us that almost none of the mainstream media networks have bothered to cover this story and to speak to the principals, and either to debunk them, to support them, or even to consider what they have to say. Jesse compares the Maguire story to the Harry Markopolos story, trying to get a hearing on the Madoff Ponzi Scheme. Markopolos has been repeatedly ignored, intimidated, and discouraged in every way possible by the establishment, and even has feared for his life. Jesse calls the Maguire testimony about the CFTC retarded behavior a bombshell. Jesse wrote, "This has to be dealt with, one way or the other. Bring it out into the light of day, and let the facts be known. This is either the equivalent of the fictionalized testimony on the order of the Salem Witch trials, or one of the most damning accusations of malfeasance in office against quasi-governmental agencies, and probably US officials, since Teapot Dome. Giving the mainstream media the benefit of the doubt, they are afraid to touch it because it is radioactive. They will wait on the sidelines until something happens. And the strategy seems to be to stonewall, and hope it goes away. This is always the first mistake of a government in approaching a breaking scandal. But they never seem to learn. You deal with it up front and early. It was not the actual burglary at the Watergate that brought down the government, and took American into its long national agony. It was, and always is, the cover-up." See the Cafe Americain article (CLICK HERE). The Jackass agrees with comparisons of magnificent national scandals, but the Fannie Mae fraud ring requires more attention. It is of equal magnitude, possibly one order of magnitude larger, and involves presidents.

James Turk of GoldMoney stature believes a 'New Dynamic' has entered the Gold Market. That seems clear. He makes a direct parallel to the Markopolos warnings about the Madoff Ponzi Scheme and the SEC inaction. Both regulators in the CTFC and SEC are Wall Street and USGovt tools, no more. Turk stressed the importance of key funds switching out of the major corrupted Exchange Traded Funds and turning to physical metal. He believes the gold cartel will be targeted by powerful players, in a shift of perceptions and strategy.

James Turk wrote, "The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. To achieve this manipulation, the gold cartel has accumulated a huge short position. Importantly, the hearing confirmed that the gold cartel's huge short positions are naked, meaning that these positions are not hedged. More to the point, the CFTC hearing revealed that there is 100-times more paper gold outstanding than physical gold... The revelations from the CFTC hearing are earth shaking, and indeed a 'New Dynamic' has emerged. The gold cartel now has a big target painted on its forehead. One can never predict the future, but it seems to me that as this news about the gold cartel's huge naked short position spreads, two things will happen. It is inevitable that the big traders and hedge funds will push the naked shorts to the wall by asking for physical metal. We could therefore see more hedge funds switching out of GLD like Greenlight Capital did last summer, which leads to the second likely outcome. If we get a squeeze on the naked shorts, the sky is the limit for precious metal prices. The gold cartel may not yet be finished, and will not be until the unholy Wall Street-WashDC axis is dismantled. But the gold cartel is on its way out. Over the past ten years, the gold cartel has staged a controlled retreat.  It has been fighting the advancing gold price with propaganda, paper short sales, and the occasional dishoarding of physical metal from central bank vaults and more recently, the IMF. This retreat is, I suspect, about to turn into a rout, which means the upside potential for the precious metals is huge."

Turk reminds the gold community of a principal message made by GATA in The Wall Street Journal more than two years ago, seven weeks before the collapse of Bear Stearns and the start of the present financial crisis. It is worth re-reading every six months for a reality check and inspirational lift. GATA wrote in 2008, "The objective of this manipulation is to conceal the mismanagement of the US dollar so that it might retain its function as the world's reserve currency. But to suppress the price of gold is to disable the barometer of the international financial system, so that all markets may be more easily manipulated. This manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world." The false foundation of the USDollar requires a corrupt Gold market. All US$-based markets are corrupt to the core by definition. My view is that the USTreasury Bond and Fannie Mae entities are also consequently corrupted heavily by Wall Street connection. The credit derivatives market is also corrupted by extension. However, the core problem is that the USDollar is broken and illegitimate, having rendered itself impossible to manage. See the Free Gold Money Report article (CLICK HERE).

Radio shows have contributed much to the publicity for the gold & silver story gone viral. Tribute is due to Eric King and Max Keiser, who fan the flames around the globe. Hear the King World interview of Maguire, up close and personal, reviewing the details put forth at the CFTC exposure (CLICK HERE). Also hear the King World interview of a second bombshell. It involves accusations against ScotiaBank for an alleged vast shortage of gold bullion. Stunning new information has come forth about another piece of the puzzle in the gold fraud game. This time a finger is pointed at a large international bank with almost 15 million customers in 50 countries around the world, Scotia Macotta, the gold bullion bank. The unfolding saga continues to reveal a truly scummy sordid under-belly of US-UK financial stewardship. Hear the King World interview of Harvey & Lenny Organ & Adrian Douglas (CLICK HERE). A helpful hint: Click on the left side purple transmitter icon with the concentric circles to start the interview.

In addition, Max Keiser and Stacy Herbert used the majority of time on the hard hitting Keiser Report program on the Russia Today television network to discuss the manipulation of the silver market. They covered silver trader Andrew Maguire's warning to the US Commodity Futures Trading Commission about a manipulation of the silver market in London. GATA's work is mentioned. See the Russia Today video (CLICK HERE).

◄$$$ A SECOND WHISTLE BLOWER HAS ENTERED THE ROOM, WITH FURTHER DETAILS ABOUT ANOTHER CHAMBER OF THE SILVER MARKET RIG GAME. IT INVOLVES PHIBRO AND WARREN BUFFET. $$$

Another deep insider has joined the explosive exposure of the silver market. It is not a surprise to the Jackass to see Warren Buffet and his Berkshire Hathaway firm implicated. For five years, the Jackass has pointed out the ugly illicit connection between Buffet and Hank Greenberg of AIG. Buffet dirtied his hands with involvement in the silver market, losing his 129 million ounces, lying to his investors about selling the silver too early, and handing over the silver hoard to Barclays, which launched the totally corrupt SLV silver Exchange Traded Fund. Buffet might regret crawling into bed with Greenberg. He openly regrets swallowing the General RE credit derivative sewage. Buffet continued his Wall Street whoring with a  purchase of a minority stake in Goldman Sachs. My guess is the investment was intended to patch up a wounded relationship, and earn Buffet a club membership card for future favors, like a GET OUT OF JAIL card on possible future legal prosecution. The deep insider has a message that will be developed. The weakest link in the precious metal market is abused by the big player, which involve Phibro and Warren Buffet. One should notice the parallels between the methods employed in the 1990 decade and the current market rig techniques. Pandora Box's has been opened, impossible to close. See the Zero Hedge article (CLICK HERE).

◄$$$ BIG FINGERS ARE POINTING AT SCOTIABANK. THE RIGGED GOLD MARKET CONTROVERSY HAS TURNED TO A CANADIAN FIRESTORM. ACCUSATIONS HAVE BEEN MADE THAT SCOTIA MACOTTA, THE BULLION BANK SUBSIDIARY OF SCOTIABANK, HAS ONLY PALTRY AMOUNTS OF GOLD, 10 TIMES LESS THAN THEY SHOULD IN INVENTORY TO MATCH ITS INVESTOR ACCOUNTS. A BROADER ACCUSATION INVOLVES THE BIG PICTURE OF EXCHANGE TRADED FUNDS FOR GOLD, WHICH INCREASINGLY ARE BEING SHOWN TO BE VAST CHANNELS FOR WALL STREET FIRMS TO CONFISCATE GOLD BULLION. E.T.FUNDS ARE NOTHING BUT PAPER SHELLS AND SCAMS. THEIR INVESTORS WILL NOT ENJOY THE GOLD RUN. $$$

Reaction has come with serious doubt on the legitimacy of any Exchange Traded Fund for gold. The target is the iShares Gold ETF (IAU) whose vaulted gold bullion is supposedly in ScotiaBank. Claims by informed persons have been made that 90% of its inventory has been covertly depleted. Accusations are lodged that JPMorgan and Goldman Sachs have taken the gold illegally. Zero Hedge presented an interview in the first week of April, featuring Harvey and Lenny Organ with King World News, in which the Organs recounted their personal visit to Canada's only major bullion bank vault, Scotia Mocatta. According to them, the vault contained roughly 89,000 ounces of gold, in the form of 210 separate 400-oz bars, 4000 maple leaf coins, 500 gold eagles, 10-kg bars, 10 one-kg pieces of gold nugget form. As GATA's Adrian Douglas confirmed, these items carry about a $100 million market value at today's gold price. Compare and contrast to the disclosed gold holdings of the iShares Gold Trust (IAU) in the very same vault, which amount to 457k troy ounces in claims. The Royal Mint of Canada has sold over $1 billion worth of gold in 2008 alone, most purchasers having chosen the Scotia Macotta vault for storage. A grotesque mismatch of vault content versus investment account value in paper certificate from iShares seems to be evident. Bloodied by not shaken, Tyler Durden wrote "Are precious metal ETFs nothing more than a perfectly legal, CFTC supervised operation that allows the Authorized Dealers of the world to withdraw the physical gold out of various world vaults, even as the retail population ends up holding increasingly more worthless stock certificate whose asset collateral is approaching zero?" See the Zero Hedge article (CLICK HERE).

The same story of the Organs contains different intertwined details. They mentioned their visit to the only bullion bank vault in Canada, that of Scotia Mocatta, only to find the vault to be practically empty. Harken back to the past when a class action lawsuit filed against Morgan Stanley was settled out of court. In that lawsuit, it was alleged that Morgan Stanley sold to clients precious metals later to be taken in full possession, which the firm would store. It turned out that Morgan Stanley charged storage fees but was not in actual possession of the bullion. The prima facie case of fraud in such instances is charging fees for vaulting services, when no metal was placed on account in vaults. The world is slowly discovering that this kind of lack of physical holdings by major financial firms on Wall Street and London is pervasive. They claim to hold gold in storage but the actual gold is held primarily in paper or electronic form. The gold has been ransacked by the syndicate, traded for paper certificates. Lenny Organ entered the vault of Scotia Mocatta . He reported, "What shocked me was how little gold and silver they actually had." Lenny offered a thorough description of what he saw, listed above. Organ concluded, "The game ends when the people who own all these paper obligations say ENOUGH and take physical delivery. That is when the mess will occur." See the second Zero Hedge article on the subject (CLICK HERE).

In fairness, other individuals report that upon personal visits and loose inspections, large quantities of gold bullion are visible at Scotia Macotta facilities, in opposition to the claims made above. The jury is still out. In my view, and the view of some personal colleagues, the Organs are at risk of lawsuit. They are exposed for slander, since their claims of fraudulent gold bullion bank management might be sloppy and premature. Word has come that Scotia Macotta owns about six Toronto vault facilities. The Organs visited one, perhaps with a different function. Gold accounts come in different types, like certificate accounts, allocated accounts, and unallocated accounts. A blowback might come to hit the Organs. The jury is out on Scotia Macotta, a truly huge firm with a solid reputation. Time will tell.

◄$$$ A HIT & RUN CAR INCIDENT ALMOST KILLS THE WHISTLE BLOWER MAGUIRE IN LONDON. LIKE THE C.F.T.C. HEARING, PRECIOUS LITTLE COVERAGE OF THE ASSAULT THAT COULD EASILY HAVE TURNED TO A MURDER. $$$

The CFTC whistleblower was injured in a London hit & run incident. The London metals trader Andrew Maguire was injured along with his wife the next day after his testimony when their car was struck by a hit & run driver in the London area. Maguire clearly angered the London & Wall Street power structure with his detailed exposure. He warned an investigator for the US Commodity Futures Trading Commission in advance about a gold & silver market manipulation in metals futures trading by trading desks for JPMorgan Chase in February. According to GATA board member Adrian Douglas, Maguire and his wife were admitted to a hospital overnight and released today and are expected to recover fully. Maguire told Douglas by telephone that his car was struck by a car that suddenly came out of a side road. When a pedestrian who witnessed the crash tried to block the other driver's escape, the hit & run driver accelerated at the pedestrian, causing him to leap to avoid being hit. The attack car then struck two other cars in escaping. The vehicle and driver were caught by police after a chase in which police helicopters were summoned. One can be sure that police authorities will make certain that no charges will be brought, and the driver's identity (with banker connections) will never be known, the incident forgotten since the perpetrator is a hired consultant for the bankers. The only news publication to cover the story so far is the New York Post. See their article (CLICK HERE). See also the GATA story on the entire incident (CLICK HERE).

The Maguire testimony has ripped the tightly sealed lid off of Pandora's Box with regard to the extreme fraud and manipulation in the gold & silver markets. The whole episode, complete with implications, has been covered up by the US mainstream financial networks. However, hope is fed in extremely powerful channels. The story and the related facts have been given widespread attention globally. In fact, Bill Murphy of GATA was scheduled to have interviews with Bloomberg and CNBC Asia after the CFTC hearings, and those interviews were abruptly cancelled by those two networks. Worse, the Murphy portion of the CFTC hearings suddenly suffered a television disconnection in midstream. The connection was restored just as suddenly after Murphy concluded.

The New York Post has published the Andrew Maguire silver manipulation story, including some of the email exchanges between Maguire and the CFTC outlining the exact sequence how JPMorgan silver traders would manipulate the market, and how huge illegal windfall profits would be gathered. The CFTC was going to bury those emails. Enter Maguire, who sent them to GATA after it was made clear to him that the CFTC was going to cover them up in a heap behind marbled walls. Bill Murphy then read them verbatim at the CFTC hearing two weeks ago, much to the obvious surprise and horror of Gary Gensler, chairman of the CFTC. The Golden Truth editor received word from a very good friend of his in New York City who knows someone at the New York Post. Apparently JPMorgan went ALL OUT to try and prevent this story from being published. They failed. The word spreads. See the Golden Truth with many portions of the Maguire emails with the CFTC (CLICK HERE).

A few Jackass comments. One should anticipate the lesser newspapers will eventually jump to take the risk of reporting the story. Some will attain prominence from courageous and intrepid reporting. This is hopeful, but syndicate backfire like murder and other threats against editors is also possible. Woodward & Bernstein made careers out of the Watergate story with the Washington Post. Remember that once upon a time the three major networks and affiliations owned television. Now HBO, TNT, ESPN, and Discovery have blown away the major networks on cableTV.

◄$$$ EVERBANK REVEALS INDIRECTLY ITS OWN GOLD FUND FRAUD. THE EASY INFERENCE IS THAT THEY PROBABLY HAVE LITTLE OR NO GOLD BULLION. AT LEAST THEY ARE HONEST ABOUT THEIR IMPLICIT FRAUD. READING BETWEEN THE LINES GIVES A CLEAR MESSAGE. $$$

The management at EverBank appears to be admitting they have far less gold bullion that expected by investors, if one interprets their new policy. They admit a harsh policy was passed, as they even say, 'Inserted Without Proper Review' but they follow by defending that policy. They made a public announcement to possibly shut down gold & silver accounts, and convert to USDollars, a paper conversion. The slippery maneuver seems a clear violation of their own prospectus, even perhaps an SEC violation, maybe contract fraud. They cannot dictate what their liability is to investors. They announced, "Section 6.3.7. General Terms: We have added language clarifying our right to close your account. We may close your Metals Select Account at anytime upon reasonable notice to you. If we believe that it is necessary to close your account immediately in order to limit losses by you or us, we may close your account prior to providing notice to you. Notice from us to one of you is notice to all of you. If we close your account, we reserve the right to convert your Precious Metals to US dollars and tender the balance to you by mail."

Notice the clear multiple mentions of conversion to USDollars, a point they do not wish to be unclear about. They continued with further written explanation. "We may close your EverBank Metals Select Account(s) or to convert Precious Metals to US dollars at anytime, if we deem such action prudent, necessary or appropriate, in our sole discretion, in response to acts of God, government restrictions (including, without limitation, the denial or cancellation of any export or other necessary license), wars, insurrections and/or any other cause beyond the reasonable control of us. If we do close your EverBank Metals Select Account(s) or convert the Precious Metals in such account(s) to US dollars as described above, we will not have any liability to you resulting from changes in the value of those Precious Metals resulting from the timing of our closing the account or converting the Precious Metals to US dollars." One is left to wonder if Goldman Sachs activity is covered by their acts of God!!

What they seem to admit, without actual words, is that they have very little gold & silver bullion, and probably have a large hedge position. They could be heavily short both gold & silver, and own a pile of paper certificates, working in league with the gold cartel. They are positioning themselves with a back door to exit in case the precious metals prices zoom higher. An investor would not participate in the price rise. They could be an enlisted player in the Ponzi Scheme. They might be deadly fearful of the CFTC revelations of price rigging in the gold & silver markets, timed in unison suspiciously. They might be at high risk for catastrophic losses due to the 100:1 leverage in the LBMA & COMEX exchanges, with far more metal sold than exists in inventory. They are very clearly in my view admitting that they have almost no gold or silver, and have been running a fraudulent shell game.

The other great possibility is that EverBank will assist the USGovt in the confiscation of gold accounts, or rather claims to gold bullion. Redemptions in US$ terms after liquidation appears to be the path soon to be taken, precisely what the Jackass has warned about for over four years. Conversions of accounts to cash will deny investors of participation in the powerful upward price thrust. Therefore, Everbank gold fund investors should get the hell out immediately. They repeat their legal obligation to send investors their gold & silver directly in certain types of accounts at any time. In effect, London has already defaulted as a result of such cash bonus payments. EverBank is small, and appears to be coming clean on fraud. It is an order of magnitude smaller than the $40 billion fraud in the SPRD Gold Exchange Traded Fund (GLD) run by the trusty JPMorgan custodians. Paper gold promises such as ETFunds, Gold investment funds, Unallocated & Pooled accounts are practically worthless in my opinion. They all have back doors leading to the gold cartel. See the Zero Hedge article (CLICK HERE).

USDOLLAR REVALUATION URGENCY

◄$$$ HEAD OF NEW YORK FED DUDLEY HINTS OF BIG USDOLLAR DEVALUATION. THE US BANKERS HAVE VERY LIMITED OPTIONS, GIVEN THE PERVERSE INSOLVENCY AND SLUGGISH IF NOT MORIBUND ECONOMY. $$$

Goldman Sachs alumnus William Dudley hints at the endgame, rather than Exit Strategy, involving a steep USDollar devaluation. He seems to concede the near permanent near 0% official interest rate. Dudley spoke of FOREX pressure to push the USDollar exchange rate down. Whether it is planned or forced upon them, the US$ is heading lower and Dudley seems to acknowledge the fact. The endgame is inevitable, due to colossal deficits, huge unfunded obligations, and the desperate need to stimulate the moribund USEconomy. He might even be implicitly urging Americans to stop saving. Dudley lays out the failed effects of monetary policy when he said, "What I would like to do today is to explain in some detail the logic underlying this expectation that economic conditions will warrant exceptionally low levels of the federal funds rate for an extended period. There has to be a further demand impulse, be it a decline in household saving rates, a rise in business investment relative to profits, a further expansion of fiscal stimulus, or an improvement in the net trade balance via an increase in exports relative to imports. The fact that our foreign indebtedness is for the most part denominated in our own currency is a huge advantage in the event the dollar were to come under significant downward pressure." See the Zero Hedge article (CLICK HERE).

◄$$$ THE EURO CENTRAL BANK AND BANK OF ENGLAND HELD INTEREST FIXED AMIDST THE GREEK CRISIS. THE EURO C.B. IS TRAPPED, JUST LIKE THE USFED. EUROPE IS TRAPPED BY SOVEREIGN DEBT. ENGLAND IS TRAPPED BY ITS FEDERAL DEBT AND NEED FOR STIMULUS. THE UNITED STATES IS TRAPPED BY MORTGAGE DEBT AND ITS OWN FEDERAL DEBT, AS WELL AS NEED FOR STIMULUS. THE AUSTRALIANS SAW FIT TO HIKE BY 25 BASIS POINTS, A WORLD APART, AS COMMODITY PRICES REMAIN FIRM. $$$

The European Central Bank left its benchmark interest rate at a record low of 1.0% for the 11th month in a row. Recession, sovereign debt to the South, and the need for stimulus are the dominant themes for continued accommodation. The spread between Greek and German debt is widening, in fact worse than the first glimmer of the credit crisis a few months ago. The Greek Govt 10-year bond yield went over 4.4% points, the highest level ever since the Euro currency was launched in 1999. Adding stress to strain, the Greek 2-year bond spread has moved up 1.2% in consistent manner. A key point was made in bank policy by Trichet. The EuroCB head told the European Parliament that so-called collateral crisis measures will not be abandoned at the end of 2010 as originally planned. The EuroCB will continue to accept lower rated government bonds as collateral from banks. It will swap garbage for government backed debt securities. Changes to the execution of the policy will be steered to benefit the highest rated countries like Germany and France. The decision is a clear concession to Greece, whose credit rating has been slashed and whose debt is being sold off rapidly. Investors had worried that the EuroCB would no longer accept Greek debt.

The Greek Govt debt has been nothing but a slide into the chasm. The main focus has been on the 10-year bond yield, and the spread versus the German Bund. Peaking near 7.350%, the Greek long bond yield relaxed after the quixotic positive reaction came about an aid package being fashioned. Nevermind that the aid is vaporous and not genuine. Their bond yield fell to 6.585%, providing a wonderful opportunity for the credit market to sell it. Sell it they did, the bond yield rising over 7.0% again. Some phony stories are pushed in the press, where Wall Street and London firms exert some control. Unjustified volume then returns to the Greek bond sales, enough to provide the Wall Street giants a great opportunity to short the offerings and pad their profit lines. They do need to fund their outsized executive bonuses. The game is almost funny, as the credit markets seem desperate to lurch for any branch of hope, only to feed the US-UK financial syndicate. Even prosecution of fraud does not prevent such hope that feeds syndicate profits.

In the same week, the Bank of England extended a record low in interest rates and put the £200 billion asset purchasing program on hold. They await a national election. Their official interest rate was left at 0.5% for the 13th consecutive month. Recession, deep deficits, and the need for stimulus are the dominant themes as well. See the Yahoo Finance article (CLICK HERE). Controlled low UKGilt yields will soon turn into a curse. Bidders will not arrive.

The Reserve Bank of Australia hiked their official interest rate by 25 basis point to 4.25%, in defiance to the Western trend. Their economy has far different dynamics. The deficits seem not to be out of control. The perceived threat to price stability is the broad systemic rise in commodity prices. The USDollar hedging has led to very firm if not rising pricing in the entire spectrum of commodities, which are the mainstay of the Australian economy.

◄$$$ RICKARDS OFFERS A SYNOPSIS OF THE USDOLLAR, USTREASURY, AND GOLD LANDSCAPE. IT LOOKS BLEAK FOR THE USGOVT, WHICH MUST GREATLY DEVALUATE THE USDOLLAR AND ACCEPT LOWER VALUE FOR ITS SOVEREIGN DEBT IN THE FORM OF USTREASURYS. WORSE, THE USDOLLAR MUST BE DEVALUED ACCORDING TO THE FEDERAL GUARANTEES FOR MORTGAGE AGENCY DEBT AND CREDIT DERIVATIVE BACKSTOPS. IMPLICATIONS TO GOLD ARE IMMEDIATE AND POWERFUL, ONCE MONETIZATION IS NO LONGER HIDDEN. $$$

Jim Rickards is cited in the Hat Trick Letter at times. As senior managing director for market intelligence at Omnis, he commands respect. His viewpoint is usually a high level, without too many details, but with arguments containing much credibility and legitimate force. He describes the gold market, the USDollar, the debt situation in the United States, and the Chinese angle. The perverse aspect of the USDollar is that since it is the global reserve currency, its USGovt debt is not priced like a Third World debt security, with interest rate near 10%. Instead, the near 0% rate creates unsustainable forces in the credit market, while it encourages a global revolt against the USDollar. The adjustment process will propel the Gold price much higher, multiples higher.

The following are points made by Rickards in synopsis. Obviously not enough gold & silver exists to cover the physical demand if holders of paper certificates in unallocated accounts demand delivery. Most likely only a small fraction of claims could be covered with the practical physical supply available. Cash settlement would have to be enforced in the majority of cases, known as technical default. The terms of cash settlements would not be advantageous, to say the least. The price would be set as of a record date, limited the effect of a run on gold & silver. That redemption price would be much less than the current physical price, which would continue to run higher apart from the defaulted settlement of the paper claims process. In other words, the settlement in cash would be both a contract violation and a denial that claims the best price. There is more here than meets the eye, based upon technicalities. If holding metal holdings are in an unallocated account, they are likely to be considered an unsecured creditor position. The fractional banking techniques have been revealed, laden with risk. The 100:1 leverage is reckless no matter what commodity or asset it involves, leaving little room for error. The gold bankers are in a bind of their own making.

In no way can the existing real USGovt debt be paid off without inflating the currency in which the debt is held, even to the point of hyper-inflation. The risk of unavoidable, since valuation of a national currency must eventually reflect its fundamentals. Furthermore, if the USFed's mortgage assets were marked to market, the USFed itself would be declared insolvent (a point made months ago by the Hat Trick Letter). Anything involving paper claims payable in USDollars (stocks, bonds) is a 'Rope of Sand,' a complete illusion that is fraught with risk. A $5500 per ounce of gold would be sufficient to back up the money supply (M1) as an alternative to hyper-inflation and an inflationary issuance of the currency. Either powerful price inflation is permitted, or a five-fold rise in the Gold price is permitted. The pressures are unavoidable. The target price is $5000 to $10,000 per troy ounce in current issue USDollars. The break point will be when the US debt can no longer be rolled over, from REPOs or formal USTreasury auctions. This is the typical Third World debt risk factor. At the pace seen, the USGovt will not be in any position to finance its debt without taking drastic action on the backing or nature of the currency. Debt must be discounted via the US$ currency in denomination.

The gold picture in China has turned powerfully positive for the Gold price. China needs about 4000 tonnes of gold, but only has 1000 tonnes today in possession. China cannot fulfill this goal even by taking all of its domestic production for the next 10 years. The Chinese people are showing a strong preference to hold gold personally, not as part of lunatic funds managed and corrupted by fund managers as in the West. From 1950 to 1980, the USTreasury gold supply declined from 20,000 to 8000 tonnes, basically moving a large amount from the US to Europe, where the masters reside who control the United States and its central bank. The Chinese are frustrated that they cannot obtain sufficient gold at reasonable prices as Europe did. Beijing leaders wish to withstand the currency wars and the reworking of international finance. Private ownership of gold is of paramount importance, a position that enables benefit from the gold price advances. Holding investor gold in a bank correlates the investor to the banking system, and puts the investor at the mercy of the banker whims, the very risks which must be avoided. These are the points made by Rickards.


Jesse of the Cafe Americain said, "I was gratified to see that Rickards has come to the same conclusion as I had, that the limiting factor on the Fed's ability to monetize debt will be the value and acceptance of the bond and the dollar." The USGovt and the US Federal Reserve must eventually monetize the debt in a more formal manner, which will ensure a powerful devaluation of the USDollar and corresponding powerful rise in the Gold price. Hidden monetization schemes as done today only ensure a quantum move in both the US$ exchange rate and Gold price, once discovered and fully factored in the FOREX market. Great instability will result, unavoidably. My description is the upcoming monetary crisis with US$ epicenter.

Aaron Krowne of the Mortgage Lender Implode website made some excellent comments. He said, "Rickards is extremely generous on two points: (1) that the USGovt actually has 8000 tonnes of real non-debased gold, (2) that M1 is a useful numerator against which to measure dollar solvency, given the USGovt's short-term liabilities. Even just at the federal, public, acknowledged level, these liabilities already well exceed M1. Then start adding in Fannie & Freddie obligations, AIG, other bailout obligations, the general deficit spending, state & local government obligations, and the picture darkens considerably." Notice the term non-debased gold to mean not tungsten bars with gold plating. The debt that must eventually be monetized is not just its partial reflection in the money supply, but all federally guaranteed debt. The nationalization of agency debt and credit derivative risk must be factored also into the USDollar and Gold price. So far, it has not in any scintilla or meaningful way. Thus the destabilizing events to come in a US$-based monetary crisis.

Rob Kirby is much less generous, and provides an angle to a greater perspective. He assists in revealing the past track record of Rickards, who must be careful in what he says. Kirby implicitly reveals why Rickards speaks in such general tones. Kirby said, "Rather humorous that Rickards, former legal counsel to LongTerm Capital Mgmt, would be giving all of us talking points regarding the root of our financial problems and how to patch things up, ten years or more after his former firm nearly brought down the world's financial system. His LTCM firm was bailed out, allegedly, because they were SHORT some 300 tonnes of borrowed sovereign Italian gold bullion, something which nobody from LTCM has ever addressed publicly, to the best of my knowledge. [Some research reveals that] Goldman Sachs employess literally made a MAD DASH from the doors of LTCM and SCOFFED all the computers and relevant data when they were placed into receivership. When low lifes Greenspan & Rubin assembled a vaunted team of banks and investment banks at the New York Fed and read them the riot act how LTCM had to be BAILED OUT, they were told they would all share proportionately in the costs. It was BEAR STEARNS who said, NOT A CHANCE we participate in bailing out this renegade firm." Fast forward ten years later, and Bear Stearns was targeted, destroyed, and carved up, labeled by Wall Street a failure. The LTCM episode provided motive to kill Bear Stearns, which retained its maverick status, a fact mentioned before in the Hat Trick Letter. Kirby mentioned further than Rickards is sworn to secrecy, sold out to the Dark Side years ago, and might be a prominent figure if he ever wrote his memoirs to recount those days late in the 1990 decade. My view is more generous, that Rickards is attempting to promote gold without angering his former Wall Street masters and earn banishment from the financial world or worse, a hanging in his own living room.

ON THE VERGE OF BRITISH IMPLOSION

◄$$$ BILL GROSS OF PIMCO GIVES CREDENCE TO A VICIOUS DEBT TRAP TO HIT THE UKGOVT. THE SOVEREIGN DEBT CRISIS CONTINUES ITS VIRAL PATH. THE GLOBAL CENTRAL BANK COP & GUIDE (BANK FOR INTL SETTLEMENTS) WARNS OF SOVEREIGN DEBT REACHING THE BOILING POINT. $$$

The US bond fund PIMCO has warned that Britain risks a vicious circle of rising debt costs as global investors demand a penalty fee on UKGilts to protect against inflation. The risk premium must be given to offset both the flood of federal bond supply and the threat of a large British Pound currency devaluation. Bill Gross is considered widely but incorrectly to be a bond vigilante, but in my view he has compromised himself in the last two to three years. Since the USTreasury Bond bubble has been created, Gross is caught in the bubble. His PIMCO firm is bound to the identical bubble risks as the USGovt, its new unwilling partner. Regardless, Gross admitted that the United Kingdom was on the PIMCO list of MUST AVOID nations along with Greece and the PIIGS nations of Southern Europe. Gross warns that a massive trap is in the formation process. He describes what could lead to a British financial collapse, or at least a major destructive financial event. Gross said, "[Huge UK debt is likely to] lead to inflationary conditions and a depreciating currency. If that view becomes a consensus, then at some point the UK may fail to attain escape velocity from its debt trap." The situation runs the risk of a breakdown in the structure of the UKGilt market, the official UKGovt bond security. If investors do not perceive staying ahead of the curve on these bonds, where reward is compensated for the risk, then bidders will vanish and the UKGilt market will be subject to an explosion bust. See the UK Telegraph article (CLICK HERE).

The Bank for Intl Settlements (BIS) is the quasi-central bank for central banks, the last resort lender and temporary deal maker. The BIS also serves as the central bank analysis think tank. Their power is far more than even astute analysts assess. They had a key role in forcing the Wall Street issue in September 2008. The BIS has warned that sovereign debt crisis is at a boiling point, in its words. In a report, the BIS calls the baseline projection for the USGovt debt ratio to GDP to reach over 400% by 2040. THAT IS THIRD WORLD LEVEL. This is unacceptable, astonishing, and radical to the extreme. Bear in mind that they did NOT factor in Fannie Mae & Freddie Mac, nor the bankrupt Social Security, nor the soon to be bankrupt Medicare, and surely not the credit derivative exposure resident in AIG. Consider the BIS conclusion to be somewhat a confirmation of Professors Reinhart and Rogoff, whose work builds the case that the entire developed world is now bankrupt on a discounted basis. The high price of big bank sector bailouts is doom for nations. The bailouts for the banking system stand as the greatest fatally flawed Private-Public risk transfer experiment ever attempted. A grandiose banker welfare program has incited anger from the public, the bagholders bound to pay higher taxes and to suffer uglier price inflation, even as their pension and savings will shrivel and prove to be grossly inadequate. The public is only barely aware of the magnitude of the bailouts. Other elements include pouring money into the Black Holes of the Fannie Mae, AIG, and JPMorgan for staving off credit derivative losses hidden from view. See the UK Telegraph article (CLICK HERE). Global bankruptcy might be the plan, the final destination that permits imposition of a vast fascist regime over the Western world.

◄$$$ GASOLINE (PETROL) PRICES HIT £6 PER IMPERIAL GALLON. A PERFECT STORM IS HITTING THE UK ECONOMY. THE COST STRUCTURE IS RISING POWERFULLY, ENOUGH TO RENDER IMPOSSIBLE ANY RECOVERY. WORSE, IT GUARANTEES A COLLAPSE. $$$

A preface to cover the conversion of units. A £6 price per imperial gallon (five quarts) translates to US$7.20 per US gallon (four quarts), and to US$1.70 per liter (approx 95% of one quart). The story of petrol prices in Britain is alarming, and highlights the tremendous stress at works from higher costs filtering throughout their economy. Americans and Canadians call it gasoline. The price of gasoline is now almost US$9 per imperial gallon in Britain. Price inflation has struck, matched by a record high gold price. Worse, Britain must deal with a heavy tax burden. Misery has come to motorists and consumers alike, who must pay for the midstream energy costs built into almost everything sold in the UKEconomy. The result is a perfect storm of rising wholesale costs, the weak British Pound currency, and more UKGovt tax hikes. All three factors will propel fuel costs even higher, and final product prices higher, while purchasing power is diminished. Many call the upward price trend as unsustainable. They are not students of inflation history. A catastrophic spiral lies ahead as wholesale fuel costs continue to soar. See the Daily Express article (CLICK HERE).

People are witnessing, whether they realize it or not, the accelerated deterioration of the UKEconomy, whose basis is the broken financial foundation. The events are unfolding as a correct Hat Trick Letter forecast made in 2007 and 2008. The breakdown in the British Pound that occurred in August 2008 was the initial signal of the Wall Street collapse, led by Lehman Brothers, joined by AIG and Fannie Mae.

SHORTAGE, MANIPULATION & DEFAULT

◄$$$ SILVER SALES ARE SOARING IN THE UNITED STATES. DEMAND FOR COINS ALONE HAS GRABBED ALMOST ALL NATIONAL SILVER PRODUCTION. THE COIN BUSINESS IS VISIBLE TO THE PEOPLE, THE ULTIMATE SOURCE OF THE GOLD FEVER. $$$

The USMint seems to be one of the biggest and loudest promoters of gold & silver as an investment, due to their steady stream of news to tell the public of NOTHING AVAILABLE. Not quite nothing, but extreme shortages, suspended sales, long waits for delivery, wrong orders filled (from undesired substitution), seeking raw metal, and so on. The USMint just reported another record, but for silver. The USMint sold more Silver Eagles in March and in 1Q2010 than ever before in history. A total of 9,023,500 American Silver Eagles were purchased in the first quarter, the highest amount since the coin was introduced in 1986. While this is certainly bullish, something potentially more potent is developing in the background, namely, how this data coincides with US silver mine output. Like gold, the USMint only manufactures Silver Eagles from domestic production. The US-based mine output for silver is around 40 million ounces. In other words, the point has been reached where virtually all US silver production is going toward the manufacturing of Silver Eagles. Impact to industry from shortages must be either imminent or current, which seeks confirmation. Consider that nearly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals. Mine production is an important source of silver, but not the only source. In 2009, a sizeable 52.9 million silver ounces were recovered from various sources of scrap. Rumors are prevalent that hidden sources are coming to market, hidden hoards, like from India. Furthermore, the USEconomy imported a net of about 112.5 million ounces last year. That amount sccreams of foreign dependence.

Jeff Clark from Casey Research shares his theory, which on its face seems very credible. Silver has been known as the poor man's gold for decades, kind of like the Audi as a poor man's BMW or Mercedes. Consequently, the market effect comes as rising silver demand when gold becomes perceived as too expensive. The gold price has stubbornly remained above the $1000 level for over six month, even spent many weeks above $1100. The silly forecasts from Prechter and Gartman and other clowns turned out to be nonsense, maybe motivated by bribery. After paid premiums, the current gold coin price is above $1200, an amount beyond affordable for many people. But the common folks might find a handful of silver coins easier to snag in a sale, a 12-pack for Joe SixPack, as Clark colorfully describes.

Watch for confirming evidence of precious metal market bifurcation, if and when gold sales were down in the face of higher silver sales. The USMint reported a decline in gold bullion sales of 20.8% in 1Q2010 versus the same quarter of 2009. The Austrian Mint reported an 80% drop in gold sales for the first two months of 2010, and the Royal British Mint reported a 50% decline in gold coin production for the first quarter. Compare the value of recent sales figures. Gold Eagle sales in the United States declined by $10.26 million from a year earlier, while silver sales increased by $61.86 million. Notice the silver growth volume exceeded the gold decline volume by a 6:1 ratio. Evidence of bifurcation has arrived, in an early stage. See the Silver Seek article (CLICK HERE). My forecast is for the silver price increase from the current level to be three to five times greater than the gold price increase from the current level, in the next few years.

◄$$$ PRECIOUS METALS PRICES ARE BEING RESTRAINED BY MASSIVE NAKED SHORT SELLING, THE USUAL MODUS OPERANDI. THIS RALLY IS GRADUAL AND SERIOUS OPPOSED. THE METHOD IS NOT NEW, AS DETAILS ARE READILY AVAILABLE TO OBSERVE. MASSIVE PHYSICAL SUPPLY HAS BEEN REMOVED BY THE CORRUPT S.L.V. EXCHANGE TRADED FUND. THE MARKET DEVELOPMENTS COULD RESULT IN A ROBUST SHORT SQUEEZE AGAINST THE SILVER MANIPULATORS. $$$

Thanks to Ed Steer of Edmonton Alberta, a member of the GATA team and the Casey Research team. The dual affiliation might seem incompatible, but it works for him. Here is his description, somewhat blow by blow, of action in the gold & silver markets, and the heavy handed opposition. Those readers who interpret that to mean naked shorting of precious metal, with zero collateral posted, with huge concentrated positions stacked ream upon ream, are correct. The regulators exempt the Big Four banks from the rules, and never enforce proper collateral posted. The law is that 90% of the collateral metal must be demonstrated to be available, like in the exchange warehouse. Notice the possible tactical changes deployed by JPMorgan, which must feel under the microscope of scrutiny. Steer pointed out how a huge amount of silver bullion has been pulled out of the corrupt SLV silver Exchange Traded Fund managed by Barclays. Last Friday a big chunk of silver was pulled out o f SLV once again, totaling 1,470,729 troy ounces. Since February 26th, a whopping 17.9 million ounces of silver have been withdrawn from the SLV fund, a mere conduit to the London metals exchange where they take what they need. Since the start of April, a hefty 12.5 million ounces has been taken from SLV. The silver price trend has been up since end February, so no market need to remove metal except if thoroughly corrupt. Steer wrote the following about the COT tracking and JPMorgan activity.

"The Commitment of Traders report for positions held at the end of trading on Tuesday, April 6th were wall-to-wall ugly, and have deteriorated even more since then. The bullion banks increased their short position in silver by a whopping 5369 contracts. That is 26.8 million ounces worth of paper silver that they have sold short to stop the price rise as the tech funds rush in. Here is the full color COT graph for silver (CLICK HERE). Gold was just as ugly. The bullion banks increased their net short position by a monstrous 37,215 contracts, equal to 3.72 million ounces of paper gold since the prior week. As I said a couple of times during the last week or so, this rally is not going unopposed! Here is the full color gold COT report (CLICK HERE).

One thing that Ted Butler pointed out was that JPMorgan does not appear to be going short silver on this rally, as other bullion banks are taking up the slack. I am of two minds on this turn of events. Either the CFTC has told JPMorgan to get out of Dodge, and they are trying to do just that without the other bullion banks finding out. Or they are just spreading out the short position equally between all '8 OR LESS' traders to take the heat off JPMorgan. But JPMorgan is the ring leader, and by far the biggest short in silver."

A major silver short squeeze could be imminent. The National Inflation Assn has been publicizing the ripe conditions for a powerful market event to propel the silver price upward. In mid-December 2009, NIA declared silver the best investment for the next decade. The NIA pointed out the lack of coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. They went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is that Bear Stearns was on the verge of being forced to cover their silver short position." WOW! Quite the ulterior motive! JPMorgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price for silver. In a short period of time, JPMorgan pushed the price of silver through strongarm manipulation below $9 per ounce. NIA describes many of the common price suppression techniques. That event seems long forgotten, but not to the Jackass. Investors who were not disheartened took the opportunity to buy large amounts of heavily discounted silver over a few months. NIA accuses JPMorgan of driving the price of silver down through naked short selling, selling silver futures contracts not backed by physical silver. The National Inflation Assn prefers to take the safe road politically. They state they tend not believe in conspiracy theories, yet describe the syndicate motives and many methods perfectly. They go on to mention that the precious metals market rigging is a potential multi-trillion$ fraud which has the potential to bring down the world's financial system. Therefore the Maguire hit & run car incident really makes a person think. But the NIA chooses to limit thinking at that point, at least publicly.

The silver market provides a strong indication and preview warning into what is happening in the gold market. The silver market is small and its short position is so concentrated. Thus its price is easier to manipulate than gold, using the exact same manipulation techniques. It is all part of a grand initiative with powerful players to support the USDollar. Higher gold & silver prices would weaken the USDollar, or at least do damage to its image. An upside explosion in gold & silver prices would result in a complete loss of confidence in the USDollar, an event that is my longstanding forecast. All paper fiat currencies rely upon trust and confidence, and those byproducts are fading fast. Address also the USTreasury facade, its avalanche of supply from outsized endless USGovt deficits, and the very real threat to tarnish the USDollar from the paper side. So the USDollar is at heightened risk from both the metal (gold) side and the paper (USTBond) side. The USDollar is decaying, debauched, doomed, and dead, but it remains the vehicle for Wall Street fraud.

At some time in the future, probably not the distant future, the NIA believes investors will refuse cash settlements and will demand with legal force through the usage of attorneys and the courts the physical delivery of gold they purchased legitimately. When that day comes, NIA believes it will result in the biggest short squeeze in the history of all commodities. The coin sector should continue to apply firm pressure on the squeeze story, since on the streets. The demand for silver coins is growing fast, while the supply of silver mine production is lagging badly. The United States needs to draw upon almost all of its silver production just to keep up with the demand for American Silver Eagle coins. Silver dealers generally force their customers to wait several weeks, at least an extra month, to receive the silver bullion on orders. Amidst the acidic negative publicity and spotlight, JPMorgan might find it more difficult to conduct its price manipulation. The watchdogs, public and private, have been alerted like never before. One of the largest frauds in financial history is coming slowly to light. Conditions are forming for a gigantic silver market price squeeze, that could take the silver price to $50 per ounce, then $100 per ounce, my long range forecast.

◄$$$ A SILVER DEFAULT OCCURRED ON SMALL SCALE. THIS COULD BE A SIGN OF THINGS TO COME. BIG BANKS ARE IN MORE DIRE STRAITS WITH SILVER THAN GOLD, BUT ON A SMALLER SCALE. BETRAYALS WITHIN THE GOLD EXTENDED CARTEL CAMP MIGHT HAVE BEGUN. $$$

A potentially explosive event has occurred that could mushroom into a broader chain of events. The metals exchanges have tiny amounts of silver bullion, and a default appears to have hit one major Wall Street bank. Harvey Organ shares the story. The key dynamic in the default is highly dangerous and extremely important for a change in the wind. Players in the silver market, typically those who heap praise and fear to the big cartel controllers, are betraying the big players by seizing silver product after they observe the price raids. They are snagging silver from under the noses of the Big Four banks after the price is pulled down by illicit force, common recognized tactics. They are greatly adding to the stress that Big Four banks are feeling by removal of physical metal, the Great Achilles Heel. This is a sterling silver knife in the back!! It is great to see the onset of deep division within the ranks of the cartel. They are turning on each other, sensing an opportunity to profit from the discount to physical metal offered by the cartel itself in its price suppression tactics. Seizing product after price raids is the ultimate in syndicate betrayal. Supposed cartel allies are attacking the cartel in skirmishes. Soon big players will join the attack on the cartel stronghold of metal inventory. The accelerating vanishing act of bullion metal is next, what is left of it. Not much!!

Organ wrote gingerly, "I am going to report on rumors. I emailed Adrian and he told me that this could be very explosive. I will not comment on it until I see all the details. The following rumor came my way this morning from the best of sources: A major Wall Street firm has defaulted to two of their clients on delivery of mini-silver contracts which were supposed to be delivered in January. Mini contracts! Stay tuned on this one. Will update you if I hear anything more. The odds are growing that the Gold Cartel is getting turned on (not in a physical way) by its own sycophants who are now buying gold & silver once they take the prices of each down on one of their raids. The Gold Cartel's former allies are laying in the weeds, so to speak. So instead of gaining traction with their former allies, they are losing traction with the same group... making their price manipulation extremely difficult." See the Harvey Organ Daily Gold weblog (CLICK HERE).

CHARTS FAIL TO TELL THE STORY

◄$$$ A PREFACE, ON REPORT SHIFT FOR THIS MONTH. $$$ Any financial market contains quantitative aspects (price, orders, demand, supply) and qualitative aspects (trend changes, confidence, fraud charges, political cover). The four markets of the USDollar, USTreasury Bond, Gold, and Crude Oil are loaded with both. Never in the six years of the Hat Trick Letter have the qualitative factors been more important than now, in shaping the market for the gold, and threatening paradigm shifts. Extreme forces are at work, from European sovereign debt risk, to London shortage of gold, to appearances of tungsten lacked gold bars, to admission of gold swaps by Greenspan, to outsized naked shorts under scrutiny, to skyrocketing USGovt deficits, to heavy hidden USTreasury monetization, to ongoing sacred wars, and finally to the CFTC hearings on gold & silver, combined with fraud charges against Goldman Sachs. The winds have changed in the last few months in a significant historically unprecedented and highly dangerous manner. Charts will be provided for the major assets and instruments, as usual, but be sure to know that on a given week in the future, a quantum change might come to any one of them, with a huge price shock. The decline shock in gold & silver, along with upward shock in USDollar was seen in the autumn months of 2008. My suspicion is the reverse is about to occur, and very soon. The following charts attempt to address qualitative factors with more emphasis. More conceptual items, less numerical items.

◄$$$ THE USDOLLAR IS EXHAUSTED IN ITS QUEER BOUNCE, HARDLY A RECOVERY. THE SOURCE OF ITS STRENGTH WAS THE WEAKNESS AND CONFUSION OF ITS ADVERSARY, THE EURO. THE NEXT MOVE IS DOWN, NO MATTER WHAT HAPPENS IN EUROPE. THE USDOLLAR WILL SOON TRADE ON ITS OWN RUINED MERITS. A DIRE NEED FOR BIG DEVALUATION IS URGENT TO RESTORE SOME BALANCE. $$$

◄$$$ THE EURO HAS GONE THROUGH A NIGHTMARE. ITS FOUNDATION HAS BEEN SHAKEN. ANY ADDITIONAL BLITZKRIEG AGAINST THE EURO WILL BE WITH REDUCED STRENGTH. AT ITS GERMAN CORE, STRENGTH ABOUNDS. SOUTHERN FAT IS SOON TO BE CUT OFF. $$$

◄$$$ THE USTREASURY LONG-TERM YIELD IS A MAJOR THREAT TO THE SYNDICATE. THE GOLD CARTEL AND USGOVT MUST CONTAIN ITS RISE. USGOVT DEBT ISSUANCE DICTATES CONSTANT PRESSURE FOR HIGHER YIELDS. THEY WILL BE RESISTED BY POWERFUL JPMORGAN ATTACKS USING HEAVILY LEVERAGED INTEREST RATE SWAPS, THE USUAL WEAPON. BUT FIRES ARE BURNING IN THAT FRAGILE WEAKENED BASEMENT. $$$

◄$$$ THE CRUDE OIL PRICE IS DEMONSTRATED PROOF THAT ALL MAJOR CURRENCIES ARE IN DEEP TROUBLE. DESPITE A SUPPOSED STRONG USDOLLAR WITH GOVERNMENT AND MEDIA SUPPORT, CRUDE OIL RISES IN A STEADY GLIDE PATH. CRUDE OIL IS THE BEST COMMODITY HEDGE AGAINST BOTH THE USDOLLAR AND ALL OTHER MORTALLY WOUNDED CURRENCIES. THE OIL PRICE IGNORES A SUPPLY GLUT. $$$

◄$$$ THE GOLD MARKET HAS UNDERGONE A PERCEPTUAL CHANGE. THE EXTREME SHORTAGE IS RECOGNIZED. THE RIGGED MARKET IS SLOWLY BEING UNDERSTOOD, ACCEPTED, AND REVEALED. THE UPTREND IS CLEAR, AND A CHALLENGE OF HIGHS IS IMMINENT. A $100 SINGLE WEEK MOVE IS POSSIBLE SOON. $$$

◄$$$ THE SILVER MARKET HAS ALSO UNDERGONE A PERCEPTUAL CHANGE. AN EVEN GREATER EXTREME SHORTAGE IS RECOGNIZED. THE RIGGED MARKET IS SLOWLY BEING UNDERSTOOD, ACCEPTED, AND REVEALED. A STRONG REVERSAL IS EVIDENT, SOON TO SEE A CHALLENGE OF HIGHS. THIS IS A MUCH SMALLER AND MORE EXPLOSIVE MARKET, WITH AT LEAST DOUBLE THE POTENTIAL PRICE GAINS COMPARED TO GOLD. A $10 SINGLE WEEK MOVE IS POSSIBLE SOON. $$$

◄$$$ THE GOLD MINING STOCK ARENA IS TIMID. IT BENEFITED FROM A REVERSAL LAST YEAR. THE UPTREND IS SLIGHT. THE TIMIDITY IS CLEAR. MY PREFERENCE IS FOR PHYSICAL METAL OVER ANY FORM OF PAPER, INCLUDING MINING STOCKS. $$$

CHINESE FINANCIAL SHOCK WAVES

◄$$$ A CHINESE BOND FAILURE OCCURRED. THEY DO NOT HAVE RIGGED PHONY MARKETS ARE ARE THUS MORE VULNERABLE WHEN REALITY STRIKES. BOND VIGILANTES ARE ALIVE AND WELL IN CHINA, DOING IMPORTANT WORK, UNLIKE THE UNITED STATES, WHERE PHONY BOND MARKETS ARE SUSPENDED BY MANIPULATION, ARROGANCE, AND FRAUDULENT MOTIVES. $$$

A Chinese Bill auction failed, the first important such auction globally. Even Greek bond auctions have not failed, which Wall Street and London bankers pump prime so they can short them. It was inevitable, given the flood of Chinese debt supply and the weakened credit market from three years of wreckage. The other great liquidity pump and Keynesian playground of China was the location. Market News reports that the Chinese Ministry of Finance was unable to sell its entire planned issuance of 91-day and 273-day Bills. Officials attributed the failure to extreme concerns over recent monetary tightening, typically a directive aimed at the short-term rates. Inability to fill a 3-month Chinese Govt backed Bill is significant and shocking. One might suspect that bond vigilantes are active. A formal interest rate hike is assured, unless new printing press money is used, or unless the mountain of US$-based bonds is tapped for some conversion in order to provide demand to meet supply. The former (inflating) would send the Yuan currency down, but the latter (conversion) would send the Yuan up. A threat to liquidity is present in China. See the Zero Hedge article (CLICK HERE).

◄$$$ CHINA DECENTRALIZES THE SHOCK WAVE TARGET ZONE. IN THE PATH LIE SCORES OF SUICIDES FROM LOCAL CITY AND REGIONAL OFFICIALS. SOMETHING UGLY IS IN PROGRESS WITH DEBT DEFAULT, REVEALED CORRUPTION, AND MASSIVE BANK LOSSES. IT WILL TEND TO OCCUR OUTSIDE THE BEIJING CONFINES. THAT APPEARS TO THE STRATEGY, AS A FIREWALL IS BEING CONSTRUCTED. $$$

In China, the heat is being turned up on local governments, ever since the Chinese Govt decision to allow them to twist in the debt ridden wind. The regional and city governments are on their own with debt risk, not to enjoy federal backstops on loans. The loans will default, all due time. Some analysts call the Chinese financial bubble loaded with their own version of deadly Structured Investment Vehicles, just like Wall Street contraptions. Local governments are burdened with huge debts, and are desperate for the real estate bubble to continue. The beast continues to be fed, but with less vigor. Stories are popping up across China, of common suicides among local governments. The Shanghai Daily reports, "The mayor of a southeast China city committed suicide yesterday by jumping from a government building. Officials in Fujian Province confirmed Zhang Guosheng's early morning death. Zhang, the mayor of Putian, jumped about 8:30am after he scrambled out of a toilet window on the fifth floor, according to a statement released by the information office of the city yesterday afternoon. He died later in hospital."

The story is remarkable since it is not isolated. Intrigue has entered the picture. The deaths might be attempts to abridge and curtail investigations. The Shanghai Daily describes this as a trend. It reports, "More than 20 suicides have been reported among China's officials since 2009. Their deaths have fueled speculation they were 'sacrifices' to prevent investigations of other corrupt officials. Zhen Lifu (51) a senior political adviser in Jiangmen City, of south China's Guangdong Province, was found dead after hanging himself near his home on March 20." Each death possibly contains a nest of either corruption or profound losses extending to the public for their finance. See the Business Insider (CLICK HERE).

◄$$$ THE EURO CENTRAL BANK WILL SOON BLOCK ANY ATTEMPT TO USE NON-EURO BONDS AS COLLATERAL. THE ASSAULT AGAINST THE USDOLLAR COMES FROM AN UNLIKELY SOURCE. REGARD THE GESTURE AS AN ACT OF SELF-PRESERVATION TOWARD SURVIVAL AMIDST GREAT CHALLENGES. $$$

The Euro Central Bank has recently released its collateral schedule, a list of acceptable assets for exchange. The EuroCB will no longer accept non-Euro denominated assets as collateral. The EuroCB will continue to accept sub-A rated debt as collateral after January 1st 2011, as was widely speculated. Such policy is crucial to facilitiate funding requirements for countries that lack solid debt ratings. The flow of bank asset swaps will continue as brisk. One can conclude that the EuroCB acts as the toxic European bond repository, and will win insolvency as its eventual reward. The EuroCB has been clear, when they stated "The new haircuts will not imply an undue decrease in the collateral available to counterparties." The great notable policy change, however, is that the EuroCB has announced that non Euro-denominated collateral will no longer be accepted after year 2010. Such news is alarming for countries whose financial firms had planned on dumping their US$-based debt securities, otherwise called syndicating the debt. The practice had been a regular exercise recently for Portugal, and currently Greece, which is more concerned about outright debt default rather than streamlined bank reserve balancing acts. See the Zero Hedge article (CLICK HERE).

CHINESE BIG LEAGUE GOLD ACTION

◄$$$ HONG KONG PULLS GOLD RESERVES FROM LONDON, AS IT READIES THE NEW AIRPORT VAULT FACILITY. THE ACTION IS FOLLOW-UP TO ANNOUNCED PLANS IN JANUARY. THE CENTRAL OF GRAVITY FOR GOLD IS MOVING EASTWARD. $$$

Hong Kong has finally yanked all gold reserves from depositories in London where it has been held in custodial accounts. The new Hong Kong facility enables Asian nations to store gold bullion closer to home, making for a direct challenge to London. The new high security depository is built at their Chek Lap Kok Airport, a 3660-sqft depository. It is intended to serve as a storage facility for local and overseas government institutions, according to the government s tatement. Industry professionals expect the facility would support Hong Kong's emergence as a Swiss-style trading hub for bullion, and at the same time reduce London's status as a key settlement and storage center. The Hong Kong facility is the first with official government backing in the region, one to enable metal trading in the Asian region. The Hong Kong Monetary Authority, which functions as the territory's unofficial central bank, will transfer its entire gold reserves stored currently located in other vaults to the depository later this year, according to the HKGovt announcement. The monetary authority reported $63 million in physical gold reserves as of July 31st, according to its International Reserves & Foreign Currency Liquidity statement. Traders are anxious for the new depository facility to foster new financial products, such as more legitimate Exchange Traded Funds based on precious metals. That is, more legitimate than those gold ETFunds run by the Wall Street and London syndicates, which are mere fronts to convert to gold certificates and feed the metals exchanges in offsets to short futures contracts. Hong Kong should offer reliable legitimate gold ETFunds.

The Asian regional central banks are certain to use the Hong Kong facility, even to accumulate more gold reserves, in response to the global banking meltdown. The HK vault facility would place gold at their disposal within their own region. The Hong Kong Mercantile Exchange has also signed an agreement to use the depository for its physical settlement and storage needs. Marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility, according to reports citing Raymond Lai, finance director with the Hong Kong Airport Authority. Efforts will also be made to reach out to commodity exchanges, banks, precious metals refiners, and Exchange Traded Fund providers, the reports revealed. One such fund would come from Value Partners, which plans to launch an ETF gold fund that will use Hong Kong instead of London as a repository for the gold backing the fund, according to local reports. See the King World News article (CLICK HERE). Observers should keep a close eye on commentary or actual usage of the HK vault facility by Beijing and the Chinese Govt.

◄$$$ CHINESE CONTINUE TO DOMINATE IN PHYSICAL GOLD DEMAND. A 6% RISE IN JEWELRY DEMAND PUSHED CHINA TO 21% OF GLOBAL DEMAND. A 22% RISE IN RETAIL DEMAND PUSHED CHINA TO 43% OF GLOBAL DEMAND. CHINESE CITIZENS ADD PRESSURE TO THE GOLD MANIPULATORS IN THE WEST. $$$

The insatiable Chinese appetite for gold continues to exceed supply. The latest research document from the World Gold Council comes from an analyst standing in China, one Elly Ong. The study looks at both supply and demand in the country. It concludes that the economic demographics of the country support a robust outlook for gold demand. It points out the sustained structural shift in Chinese gold demand and supply that is very favorable to a rising gold price. The study describes an insatiable appetite for gold which is not offset by local domestic mine supply. Gold supply lags badly behind demand. Their conclusion stated, "Time will tell how China will evolve, as the nation faces multiple challenges in the wake of the global financial crisis. With ongoing uncertainties surrounding the economic recovery, currency and inflation, the search for alternative international asset choices for both investors and the central bank should, in our view and for the reasons outlined in this report, clearly involve consideration of gold." They explicitly advise the Chinese people and Chinese Govt to accumulate gold!

Chinese jewelry demand has averaged 250 tonnes of gold per annum over the past ten years. Total jewelry & bar hoarding demand has averaged 3355 tonnes annually over the same period, according to GFMS data. That gives China an average market share of just over 7% of global demand. Last year, jewelry demand in China grew by 6% on an annual basis to reach 347 tonnes, which was equivalent to 21% of world jewelry demand. Higher Chinese income will surely go hand in hand with greater gold demand. A high savings ratio, plus limited alternative investment vehicles, points to a growing interest among the Chinese in commodity investment generally. Gold is their lead commodity investment. Net Chinese retail investment in gold was 81 tonnes in 2009, up 22% on an annual basis. Based on the defined net retail investment in the World Gold Council report, China has accounted for 43% of the world total last year. A red flag signal comes from the China Investment Corp, which is moving into commodities and real estate. Recent filings with the SEC show that the CIC took a 1.45 million share stake in the SPDR Gold Shares Fund (infamous corrupt GLD) in New York, valued at $1.6 billion. They are led to believe they therefore own an equivalent of 4.5 tonnes of gold, when actually they own a large pile of paper with gold certificate claims written on them. The ink is far less valuable than the gold. The CIC might be setting up Wall Street for criminal charges and world court prosecution from gold fund fraud. Just speculating, but the Chinese are not stupid and gullible. They usually take steps after much study. They might have constructed a gold leverage tool.

Thanks to the following for charts StockCharts,  Financial Times,  UK Independent,  Wall Street Journal,  Northern Trust,  Business Week,  Merrill Lynch,  Shadow Govt Statistics.