GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Potpourri
* Intrigue in Gold Stories
* Gold Market Shortage & Skews
* Competing Currency War Chapter
* Pressure Builds for Gold Move


HAT TRICK LETTER
Issue #72
Jim Willie CB, 
“the Golden Jackass”
21 March 2010

"But this time, the anxiety seems like more than a feeling. It is more deeply rooted in concerns about long-term trends, and warning lights are flashing in several places. It is harder now to shrug off the America-in-decline theories than ever before." -- Newsweek

"Why did I go back? Because it is important. It is the collapse of capitalism and the collapse of our society. Our way of life is going to change." -- Oliver Stone (comments before release of his new movie sequel entitled "Wall Street: Money Never Sleeps")

GOLDEN POTPOURRI

◄$$$ CANNOT RESIST, GOTTA REPORT... THE STRONGEST CURRENCY IN THE WORLD RIGHT NOW IS THE COSTA RICAN COLONE. WHAT A SURPRISE! $$$

When arriving in Costa Rica in January 2007, the Jackass began participation in a new economy where the USDollar exchange rate was 500 Colones, give or take. In the year 2007, the US$ rose to 550 steadily. In the year 2008, the US$ rose to 570 Colones, but only after a move backwards to 530. In the year 2009, the US$ continued to maintain the 560 to 580 range consistently, with a 575-580 range at end November. The Dubai debt default event struck at that time. In the following four months, the US$ gained 10% versus the Euro in the midst of a sovereign debt crisis, running the Euro down from 150 to 135 where it is today. However, during those same four months, the US$ fell from 575 to 530 versus the CR Colone. Que fuerte la moneda costarricense!! The 6% rise in the CR Colone is impressive, given the world events. Upon investigation, one cannot find an available reason why the Colone has suddenly been so strong. Enter the Chinese. In 2008, they purchased the San Jose CR airport. Renovations and expansion are underway, but that does not explain the full rise. In 2008, they began construction on the San Jose football stadium, soon to seat 50 thousand fans, but that does not explain the full rise. The Jackass has come to learn that the Chinese have invested $200 million in Costa Rica in the last four months. They are purchasing hotels, shops, banks, land, and repairing the railroad (land canal) damaged by numerous earthquakes. They want to create a Chinatown in San Jose over four square blocks. Bienvenido, Chinos! Please, be sure to push the USGovt officials out of their perch over the national banks here. The lack of an army is not an advantage when it comes to banking. The Americans run roughshod in monitoring accounts; they dictate the rules. The sun is soon to set on the American influence here, but not totally, ever. Word has it that both Costa Rica and Panama have been declared sanctuaries in the next chapter. The Chinese will soon have a strong presence in both countries, as part of an encirclement strategy. Panama uses the US$ in its entire economy, banking too. Rumor has it that the CR Govt might switch to the US$ in suit. The wealthy here usually have their money saved in US$-based bank accounts. They are losing money.

◄ See the Hat Trick Letter Special Report entitled "European Battle over Solidarity" for March. This will be a long drawn out saga that ends in expulsion, my forecast all along. The Greek aid plan announced by Germany might have been constructed in order to fail. The High Court in Germany provided the necessary leverage to nix and kill the Lisbon Treaty. Chancellor Merkel might have winked to her country corps of leaders when an aid package was announced, knowing the contraption would not ever fly. One should never lose sight of the fact that Greece cannot pull itself out of the financial morass. It lacks the industry from which to earn sufficient foreign revenues. It cannot devalue its currency, unless it exits the European Monetary Union. The poisonous austerity plan will weaken the Geek Economy, reduce federal income much more than bring down costs, and make all deficits much worse, sure to result in a more perilous downward spiral. Greek tax increases designed to reduce the largest EU budget deficit will fail to generate as much additional revenue as estimated by the Athens team, according to a draft EU report. Economic destruction is the typical result of austerity measures. Higher tax rates almost always fetch lower tax volume, a lesson NEVER learned by hacks running economies, including politicians and bankers. Fitch Ratings maintained its negative outlook on Greece's BBB+ sovereign rating. The recent bond auction conducted by Athens was an exercise in wishful thinking and market delusion, but with cooperative spirit. The Greeks gathered ¬5 billion (=US$3.7B, =£4.5B) from the sale of 10-year bonds. Tensions grew when Merkel's political allies Josef Schlarmann and Frank Schaeffler told a German newspaper that asset sales like of uninhabited islands would be something Greece could do to reduce the deficit.

Sovereign debt default offers two choices, both extreme. Either bankruptcy for nations or even greater extended debts and leverage. Remedy cannot come within a shared Euro currency setting, plain and simple. Every European nation enjoyed low German interest rates, an unrealistic setup that fractured the European Monetary Union long ago. Germany wants an end to its ongoing relief guarantor role position to aid foreign financial balance sheets. Greece cannot stop adding new debt, just like Italy and Spain. Political turmoil is the ongoing outcome. The final solution, if Greece is indeed rescued without default and expulsion, might involve creation of a European Monetary Fund. The fund might be a clever ploy by Germany to establish a gold-backed fund with a quasi currency for wide usage to handle sovereign debt. If other nations refuse to comply with a new fund on Germany's terms, then other nations will deflect the blame. Germany is playing this entire Southern Europe chess game with keen adroit skill. The Intl Monetary Fund might also be a vehicle to aid Greece, but it too is subject to the possibility of new currency creation, even gold-backed currency. A major chess game is playing out in Europe.

Hedge fund scrutiny has begun toward examination of their role in bringing Greece to the default brink. Authorities look for a scapegoat and avoid mirrors. The financial politics predictably seek out a wrong angle to serve as smokescreen. The real problem is the faulty origin of the Euro currency and its intractible remedy. Big financial players only rip apart what is already broken. Permitting the big banks to continue to ply their trade will result in a string of sovereign debt defaults, because they can and because true value dictates default. Already, the big US investment banks have been banned from the lucrative bond sales for European Govt sales. Ripple effects are finally being understood, as sovereign debt default spreads from banks in a way to render other nations badly exposed. The banking system could really act as a shock enhancer, given that banks in Europe hold large claims on Greece. The confidence ripple would raise doubts that the debts of other nations, including Spain and Italy, and even Great Britain and the United States, are safe and secure. Spain finds itself stuck with regional budgets not being reduced. Their leaders face re-election. Spain has not written down much of any property values, not taking big bank losses, not made any progress, living in an unrealistic world. They will be treated next along with Italy, granted an expulsion after a shorter saga is played out.

The parallel is slowly emerging as clear and stark. Just as subprime mortgage loans, from a small corner of the global financial arena, triggered a massive crisis in 2007, so could Greece cause a skein of powerful default problems for much bigger and equally debt-ridden nations around the world that mask their instability. The contagion risk is gradually becoming recognized. So far, the episode has led to a vast flow of funds into USGovt debt. To call it a safe haven anymore rings hollow, even as the US deficits grow, the US remedy reeks of banker welfare, the USCongress fiddles with health care, and the leadership considers its wars sacred. They are sacred only if one regards narcotics as a deity. The fundamentals dictate a USTreasury Bond yield like a Third World basket case nation. Thus vast pressures are building, with important psychological implications. Confrontation between Greece and Germany has extended to Nazi resolutions from 60 years ago. The aid from Germany will never come to handle current debt rollovers, my constant forecast. Claims of pilfered gold, reparations for Nazi occupation, and multitudes killed have been lodged. The signals point clearly to avenues for abandoned initiatives coming come to the surface. The conflict is being played out between covers of popular national magainzes. See the German Focus journal flipping the bird, while the Greek Eleftheros Typos journal displayed the goddess Victoria atop the Siegessaeule in Berlin holding a swastika. Getting nasty!!

 

◄$$$ GOLD HEDGERS UNDER SCRUTINY. THE EUROPEAN UNION C.D.SWAP INVESTIGATIONS MIGHT OFFER PHONY COVER FOR ATTACKS ON THE FUNDS LONG ON GOLD. $$$

Several governments plan to investigate selected hedge fund operators on their Euro Credit Default Swap trading activities. They believe the private funds have wrought deep damage to sovereign debt securities. They have, but that is the market action doing what is designed to do, FIND CORRECT VALUE in an equilibrium. Corrupt leaders and corrupt markets despise fair equilibrium seeking proper value. A thorough investigation would reveal Wall Street firms at the heart of the speculative activity, and heavy profits. See the Market Watch article (CLICK HERE). A bright subscriber sent a message last week. He wrote, "Read closely the major hedge funds under investigation. They are each large holders of gold, such as Paulsen, Soros, and Greenlight Einhorn. At least three funds the authorities wants trading records from are bullish on gold and are vocal about their positions. Are there not any other big players on Wall Street that trade the Euro currency and CDSwaps on European debt? Like Goldman or JPMorgan?"

◄$$$ WALL STREET FIRMS ARE EXCLUDED FROM EUROPEAN BOND SALES. THE IMPACT AND CONSEQUENCES HAVE BEGUN. $$$

European countries are blocking Wall Street banks from lucrative deals to sell sovereign debt in retaliation for their role in the credit crisis. The lost income is in the hundreds of ¬ billions, a sum worthy of attracting syndicate attention and response, if not retaliation. We are moving toward an unprecedented situation. For the first time since 2005, no big US-headquartered investment bank is listed among the top nine sovereign bond bookrunners in Europe, according to Dealogic. Only Morgan Stanley ranks at number 10. Goldman Sachs does not make the table, ranked #5 last year. JPMorgan does not make the table, ranked was in the top ten last year. See the Cafe Americain article (CLICK HERE).

◄$$$ SMOKING GUNS SCATTERED ACROSS THE CONFERENCE TABLE. THE NEW YORK FED IS IMPLICATED IN ACCOUNTING FRAUD, COLLUSION, AND AIDING & ABETTING IN REGARDS TO THE LEHMAN IMPLOSION. IF PROSECUTED OR PUBLICIZED, IT SIGNALS THE BEGINNING OF THE END FOR SYNDICATE RULE. $$$

In the late stages of a financial collapse, expedited and accelerated by a criminal syndicate, the predators feed upon each other. That is normal in the pathogenesis. Goldman Sachs exploited the Lehman Brothers demise. The New York Fed has been implicated. The court appointed bank examiner Anton Valukas has produced a highly damaging 2200 page report on details that led to the Lehman Brothers bankruptcy. Valukas provides powerful evidence that Lehman executives were involved in 'Balance Sheet Manipulation' by various illicit methods. Lehman was forced to go outside the United States to find an accounting firm to provide a favorable opinion letter of approval. So Lehman enlisted a corrupt London firm that approved the procedure. The report exposes the opaque but central role of the Repo market. It provides crucial short-term loans for financial institutions, and in the Lehman case, the New York Fed colluded with Lehman to conceal its deeply impaired credit assets by means of bond swaps. The bank regulator hid the toxic trash. The report also exposes the cozy criminal relationship between the the main US regulatory bodies and the Wall Street giants. The activities of the New York Fed, headed then by current USTreasury Secy Timothy Geithner, is directly implicated for his actions. The report should trigger an immediate Congressional investigation, probing the whole affair and most importantly the role of the USFed network.

Without question, the report is a keg of dynamite. The question is begged on who has the power and courage to proceed with an indictment of Timothy Geithner and Benjamin Bernanke. The USDept of Treasury is both a friend of the fraud kings and a key central control tower. The Securities & Exchange Commission is appointed by the same fraud kings. The USAttorney General office is a likely spot to begin prosecution, but from a regional office. Michael Hudson is an ex-Wall Street economist and acclaimed author of "Super Imperialism: The Economic Strategy of the American Empire." He put the Lehman case into proper perspective, with an accuraet summary. He wrote, "When predators have exhausted the economy, they turn on each other. The result is financial cannibalism. After all, who else is it possible to get money from in today's negative equity environment? If the media are missing anything, it is that the game is over. The financial institutions are taking their money and running. They know it is over. And the only source of cashing out is the US Treasury and Fed. My solution... There is an easy place to start, that can take only a few weeks. That is to look at the Fed's $1.3 trillion in cash-for-trash swaps. If these prove to be junk mortgages for which the Fed has given good US Treasury Bonds, at the proverbial taxpayer expense, then the Fed and Treasury administrators should have criminal charges brought against them, the accounting firms of the companies pledging these junk mortgages and other financial junk should be closed down and RICO charges brought, and the banks themselves should be wiped out. I have urged the appropriate Washington oversight committee to open an investigation along these lines." Do not hold your breath or raise hopes too much!

The key here is the continuation of the same fraud. THE CRIMINAL ACTIVITY CONTINUES UNDER THE NOSE OF THE USCONGRESS AND SLEEPY EYES OF THE FINANCIAL MARKETS AND LEGAL AUTHORITIES. What the NYFed did as favors to cover up the Lehman insolvency, the USFed does as favors for Wall Street banks. It is called the Quantitative Easing program, which operated under the same guidelines. The $1.25 trillion QE program intended to extend credit to consumers and businesses was actually a scam designed to transfer USGovt funds to the very same fraud kings who exploited the system and caused the grandest financial meltdown since the Great Depression. See the Counter Punch article (CLICK HERE). Consequences of the biggest financial fraud in US history are tremendous, calamitous, and far reaching. The misallocation of capital has worsened the recession, kept the banking system insolvent as well as dysfunctional, deprived businesses of needed capital, and sent unemployment skyward. The financial fraud in my view is deeply interwoven with treason. It must be prosecuted.

◄$$$ ROYAL BANK OF SCOTLAND PLAYS A SHELL GAME WITH PROFITS. THEY AWARD MORE EXECUTIVE BONUSES THAN CORPORATE PROFITS, AN AMAZING ACTION TAKEN IN ABSOLUTE DEFIANCE. RECALL THE UKGOVT SUBSIDIZES THIS FAILED FIRM. A LEADING GERMAN INVESTMENT BANK GAVE ZERO BONUSES. $$$

Royal Bank of Scotland paid out £1.3 billion in bonuses to investment bankers on profit of only £1.0 billion last year. They used a clever smokescreen, whereby a supposed record £5.7 billion loss was declared but tucked away. Check the details. RBS loaded a raft of their investment bank division losses, fully £4.7 billion of them, and shoved the red ink into the non-core division being dissolved. The clever move is impossible to conceal. It enabled management to present a record year for the division. CEO Stephen Hester thus doctored the accounting to justify the £1.3B bonuses paid to investment bankers, at least 100 of whom received more than £1 million. No other UK bank separates out its toxic legacy debt in this manner. RBS is a state backed big bank, one should bear in mind. Even Barclays investment bank, of Barclays Capital, suffered £2.6 billion of writedowns last year, cutting their stated profits to £2.46 billion. Credit Suisse has hived assets, but their bonus payouts are linked to the performance of the entire portfolio. Commerzbank, the German lender rescued by Berlin, announced zero bonuses to its investment bank brass. See the UK Telegraph article (CLICK HERE). Unclear whether the reader should laugh or show anger.

◄$$$ HONG KONG SOON TO LIST CHINESE YUAN BASED BONDS AND DERIVATIVES. NEXT COMES STOCK LISTINGS FROM EMERGING MARKETS ACROSS ASIA. THE EXPANSION OF CHINA CONTINUES, ENCROACHING UPON THE SACRED FINANCIAL GROUND OF THE U.S. AND U.K. THEIR CHALLENGE IS TO INVEST FOREX SURPLUS RESERVES WITHOUT UNDULY LIFTING THE YUAN CURRENCY. $$$

Hong Kong Exchanges & Clearing will soon offer Chinese Yuan-denominated financial products. They plan to become a primary channel for investing by Chinese nationals overseas. They are the third largest Asian exchange. Hong Kong Exchanges announced an objective to study Yuan products, particularly in various types of bonds, exchange traded funds, and derivatives, according to a strategy document released. They intend to capture opportunities from the what they describe as increasing internationalization of the Chinese currency, explained CEO Charles Li. He also mentioned they continue to fend off competition from global exchanges. Li spoke figuratively when he said, "When the Three Gorges Dam is full, you need to figure out how to let the water out. In the end, physics dictates, and the water is going to come down. That is the trend. I do not know when. I just know it is going to come, and we need to be ready." Jasmine Lai is an analyst at DBS Vickers Hong Kong. She pointed out how a strong demand and interest exists to invest in Yuan-based financial products. She said, "I particularly like the part about Yuan products because for foreign investors, betting on Yuan appreciation is a big theme. This is the Hong Kong Exchange niche. There is no harm to broaden the focus to the likes of Russia, but China unavoidably should be the focus with the biggest business potential."

Chinas economy is the world's third biggest behind Japan. It is expected to surpass Japan as #2 behind the United States this year, according to data compiled by Bloomberg. Yet its financial sector is severely under-developed. More mature financial development could greatly enhance Chinese Economic growth, if built in sound structures that can contain moderate Yuan debt. Inflows of overseas capital have led the Chinese Economy to overheat, complete with asset bubbles. They have created gigantic FOREX reserves worth $2.4 trillion, a 23% rise in 2009. The allowance of fund outflows is becoming a hotly debated topic. Leaders must seek and find Yuan-based investment that do not quickly lift the currency valuation, a tough challenge. Domestic demand and consumption is a valid healthy route. Alternatives to USTreasury Bonds must be created in reliable exchanges. Compounding the challenge is the credit growth granted by Chinese banks. Credit volume grew by a record 9.59 trillion Yuan (=US$1.4 trillion) last year. Kevin Chan is an analyst at CLSA. In a recent research report, he wrote that while the scale and timing of Yuan convertibility are out of the bourse's control, the exchange is "sending a message to policymakers that they are ready for the opportunities. And it is proactively defending Hong Kong's role as China's international financial center." Beijing has been very intelligent in permitting Hong Kong to continue without interference, as the communists turned capitalists learn and exploit the century of HK experience.

The initiatives by the Hong Kong Exchanges form part of a three year plan to capitalize on the opening of the mainland Chinese market. The exchange aims to attract international listings from emerging markets, particularly companies in metals and mining, including traditional and alternative energy, according to the stated plan by the bourse. Hong Kong Exchanges expects five to ten Russian companies to seek listings in the next two years. In addition to Russia, Hong Kong Exchanges has also held discussions in 2009 with potential listing companies from Australia, Japan, Korea, Mongolia, Taiwan, the UK, and Vietnam. In all, 40 listing applications are being processed at the moment. Anthony Yau senior portfolio manager at State Street Global Advisors in Hong Kong. He said, "In terms of IPOs, Hong Kong has way more advantages. From the company's point of view, Hong Kong has better liquidity. From an investor's point of view, if I see a company listing in Hong Kong, it gives me certain level of confidence in terms of the company's corporate governance." See the Bloomberg article (CLICK HERE). The Chinese Govt Bond could become a formidable competitor to the USTreasury and a viable global reserve instrument, but its presence could enable strong Yuan currency growth, more than desired, due to foreign demand for it. The USGovt and Wall Street quietly tremble over such a widely traded security, since it could become a standard. However, Beijing could lose control over its Yuan valuation. That is why they have been careful in placing Yuan Swap Facilities designed for usage among import export deals in bilateral frameworks like with Brazil. A Dragon Bond (my name) would represent a flock of birds leaving the nest. The Brazil Swap facility is a nest of birds contained in a large cage.

◄$$$ STRESS THE NEED FOR PHYSICAL GOLD & SILVER INVESTMENTS, MUCH LESS RISKY THAN THE NUMEROUS PAPER VARIETIES, INCLUDING MINING STOCKS. THE EXCHANGE TRADED FUNDS ARE PRINCIPALLY A MAJOR FRAUD THAT SUPPORTS THE METALS EXCHANGES AND CHEATS THE INVESTORS. $$$

Beware of the phony gold & silver investments, like many Exchange Traded Funds, the worst and most corrupt being the GLD and SLV. They have nowhere near the inventory to back investor funds. They are selling their bullion to the COMEX and LBMA to meet delivery demands. They permit usage of their shares to offset COMEX and LBMA short positions that should be covered. Their bullion bar lists are routinely doctored. In time, when the crisis hits peak and the scandal is fully revealed, investors in the paper charades like the ETFunds will be redeemed at ridiculous artificially low prices for gold & silver dictated by broken corrupt exchanges. My preference is to give little attention to the mining stocks, since so much naked shorting takes place without proper regulatory reprimand, scrutiny, cleanup, or prosecution. Vancouver and Toronto are almost as corrupt as New York, sadly. Many mining firms, even those with solid integrity, are caught in the credit crisis on one side and with geological challenges on the other side. They tend to dilute their stocks with new issuance to raise funds. They tend to encounter high costs to produce from more difficult deposits. The majority of mine projects never reach the production stage, which marks a very costly leap when the time comes to purchase or contract for usage of a mill, and access roads must be built to ship it. MY PREFERENCE IS BULLION METAL IN ACCOUNTS HELD OUTSIDE THE UNITED STATES AND UNITED KINGDOM. The risk is low, and the pressure acute on the syndicate. Lately, important questions have been raised about stored bullion accounts even in Switzerland. Seek out storage vault facilities in Canada, Hong Kong, Dubai, and Russia.

INTRIGUE IN GOLD STORIES

◄$$$ JIM SINCLAIR LAYS OUT HIS THEORY ON GREECE, MONETARY EXPANSION, AND THE GOLD PRICE. BOTH OUTCOMES ARE POSITIVE FOR GOLD. THE MORE BULLISH SCENARIO IS THE GREEK DEFAULT. $$$

Self-styled charismatic Jim Sinclair lays out two scenarios. They are both positive for gold. The paths are guided by either powerful Quantitative Easing or powerful Credit Default Swap thrusts in the Over-The-Counter derivative market. Both scenarios could initially lift the USDollar, but what follows would be a skyrocket for the gold price. Sinclair wrote (with my comments interjected, as in ME):

1. Greece getting bailed out means QE (printing of money) to infinity. That means gold would rise from here to $1650 by January of 2011, or as Martin Armstrong said, by June of 2011. The dollar would fall. Equities and commodities would rise. ME: He might overlook how QE would push the Euro currency down from dilution initially. But the global round robin of QE for a sequence of national debt default threats would send all currencies down relative to gold.

2. Greece getting flushed means that would enrich the CDS OTC derivative tool. Immediately the next target currencies will be attacked by this tool. Currencies will fall like dominoes. At first the dollar will strengthen, equities will fall and gold will go lower. However, soon the recognition will come that a disaster has occurred that is more serious than the Lehman flushing. Confidence in currencies will fall everywhere. Gold will then rise not to $1650 by the same time in 2011 but to $5000 and perhaps beyond. ME: The hedge funds would run wild with leveraged attacks, emboldened by the success of their Death Star tool. Sinclair calls them targeted currencies when they would actually be targeted sovereign bonds backed in time by the not-yet-traded former currencies.

"Either way both paved the road to a single virtual reserve currency and a single Central Bank (IMF) of Central Banks. If Greece is bailed out it will take longer for the establishment of the single virtual reserve currency. If Greece is flushed it will happen so fast you will lose your breath. Either way I see gold as the only reliable fundamentally correct safe harbor. Gold will play a part at a very high price with the single virtual reserve currency in order to keep gold from being a competitor with it. Gold's role will be in the form of the Federal Reserve Gold Certificate Ratio, not tied to the dollar, but rather tied to the single virtual reserve currency in a ratio to a measure of world liquidity. There will be no interest rate automaticity to the new form for gold's role in a monetary system. It will follow the many articles I have written on the FRGCR, not tied to the dollar but rather the single virtual reserve currency. Gold will not be fixed or convertible but will trade within a market as a close band to where the price gold is trading, when the single virtual reserve currency is created. It will lend to this construct some real validity."

So Sinclair anticipates a new global reserve system apart from the broken, corrupted, savaged, disrespected, and rejected USDollar. He implies the Intl Monetary Fund will launch the recognized new global reserve currency, in the form of Special Drawing Rights, a queer name given to a basket of major currencies. Gold will be at the central core to the virtual reserve currency in order to build stability into the new system, since paper currency can NEVER replace a failed paper reserve currency. Paper currency NEVER replaces failed paper currency!

◄$$$ RUMORS CIRCULATE OF NEW DEMANDS CONCERNING INSURANCE ON U.S.-BASED FIRMS AND ASSETS. THE DEMAND IS FOR CREDIT DEFAULT SWAP CONTRACTS TO BE SETTLED IN GOLD. THEY ARE CURRENTLY TRADED IN EUROS. THEY CANNOT BY DEFINITION TRADE IN USDOLLARS, ESPECIALLY THE CDSWAP ON USTREASURYS. $$$

The globe is catching on. If the King USDollar or its Queen USTreasury or its Corporate Knights fail, redemptions must be paid. But the Credit Default Swap contract cannot be paid in the currency used for international settlements. Janet Tavakoli of the Huffington Post has stirred the pot. She notes how credit derivatives are totally out of control. Without their activity, the US banks would have gone bust a decade ago. The CDSwap is a thoroughly corrupt vehicle, where a major firm can load up on insurance for a rival's death, then contribute to the rival's demise and profit from it. That is what Goldman Sachs did in serial killings. The US credit default swaps currently trade in Euro terms. After all, if vital elements of the US$ financial system defaults, payment in devalued USDollars would be futile, since a burned currency. After seeing the Euro recently weakened, market participants are calling for CDSwap contracts to require payment in gold. Speculators on the winning side of a corporate or asset bust would demand collateral paid in gold. They recognize the inviolable nature of gold as a currency. They are being harmed by the mere mortal Euro currency.

Control of the gold market would quickly be lost by the Powerz who love their handy levers to suppress the gold price. The CDSwap would overwhelm the basic gold futures contract in determining gold price moves, the ultimate vengeance since the CDS weapon would be turned on the Powerz! Spreads (or prices) on the Credit Default Swaps could simply move based on news pertaining to corporations or assets entrenched in the ruined US camp, and demand for gold would soar. Normal speculation in the credit derivatives alone could push up the price of gold. The available gold supply is limited, with hardly a bar in possession of the Wall Street paper kings. The topic of USTreasury default insurance is the quintessential among insurance contracts. If insurance is to mean anything, contracts must be priced in non-US$ terms. Truly challenging questions arise on the credit derivative front. Some entity must stand to deliver upon a failure. Gold is the logical choice, but the place for counter-party to stand must be outside the system. Counter-parties must be resident on planet earth. Much industry respect is given to Janet Tavakoli, since this is her area of expertise with industry connections. See the Huffington Post article (CLICK HERE) and the unfortunately limp response by Jesse on the Cafe Americain (CLICK HERE). Jesse is usually very sharp, but here he seems not to grasp the paradox, shell game, and intractible corner that are CDSwaps.

◄$$$ A TALE IS TOLD OF PAST GOLD SALES IN A BACK-DATING EFFORT. IT IS HIGHLY SUSPICIOUS AND COVERS PAST TRACKS. ILLICIT OR ILLEGAL ACTIVITY YEAR AFTER YEAR OF A ROUTINE NATURE IS INDICATED BY THE USGOVT. $$$

Rob Kirby is one of the sharpest financial analysts in the gold and currency markets. He is also a personal friend and trusted colleague. He has uncovered a highly suspicious entry in the USFed 'Flow of Funds Report' from 4Q2009, what he calls a fascinating find. See it on the USFed website (CLICK HERE). On page 24, line #14, it states that the USFed sold $190.7 billion worth of gold in SDRs in 3Q2009. That comes to 5397 tonnes of gold for the $190.7 billion using simple math of $1100 per ounce. A client of Kirby's is a Chartered Financial Analyst who diligently follows this release every quarter, offering an alert to the obvious 'Back-Dating' of the gold sales for 3Q2009 in the release. The interested blood hounds might wish to check the flow report from a year ago to see no mention of any gold/SDR sales (CLICK HERE). Since central banks each sell gold bullion, the accounting is done in Intl Monetary Fund units of currency, the Special Drawing Rights that are comprised of a basket of major currencies. They must keep their accounting consistent across nations.

It seems clear that the Federal Reserve just papered over the accounting of a 6000 metric tonne disgorgement of sovereign USGovt gold bullion. The USGovt claims to possess 8133 tonnes of gold. Thus, 73% of the USA gold reserves have been liquidated, at least on the balance sheet. Technically, the USGovt must be given Congressional approval to sell the gold. A veteran gold trader shared his thoughts on the story. He wrote, "This is all creative bookkeeping. There is no Gold anywhere in any of the US government depositories to be found. The easiest would be to audit and report the results. And that is not going to happen as we know. At the Fed Reserve in New York, they appear to have exchanged some foreign government owned Gold with Tungsten bars. The bar lists do not match any longer and some foreign governments are getting mighty angry."

My personal view is that a full decade has been necessary to cover the tracks of the Clinton Admin, which under Treasury Secy Rubin's leadership sold the entire USTreasury supply of gold. Not only that, but Rubin sold a good deal of leased European and London gold. Many supposed IMF gold sales in the past few years have been disguised to hide the short covering by the USGovt from borrowed, leased, and sold foreign gold. The illicit sales were completed by Rubin over ten years ago, tied to complex but profitable derivative contracts. Furthermore, in the last couple years, entries in the USFed Flow of Funds Reports have shown similar high volume of 'Gold Components' in sales. This is another fictitious ledger item. We are led to believe the USGovt and its agencies gather scrap gold off the defense contractor shop floors or Pentagon recycled computers and telecom systems. What rubbish! This gold story that reveals the BS nonsense that is USGovt gold accounting after past sales that smacked of treason and veiled theft. This story could be their back-dated accounting to cover their tracks.The USGovt and Wall Street tell the gold community they are selling boatloads of gold periodically. They do not possess any gold and have not for over 10 years. We have been exposed to a massive shell game. The timing of this story opens up a new angle of deceit. Just when the USDept Treasury and USFed announce they are finished with the $1.25 Quantitative Easing program that shoves a mountain of money into the system for the purchase of USTreasurys and USAgency Mortgage Bonds, we see the USGovt is creating $190 billion from a single quarter, back-dated to hide a possible printing exercise in the last few months. The devices used by the criminal elite controlling the USDollar and USTreasurys are as vast as the operators are corrupt. The USFed bookeeping seems like an obvious entry to serve as a smokescreen for undeclared monetization.

◄$$$ SPROTT LAUNCHES A PHYSICAL GOLD EXCHANGE TRADED FUND, WHOSE GOLD IS TO BE STORED IN CANADA. ITS COMPETITION VARIES IN CORRUPTION AND TAINTED PRODUCT. $$$

On February 26th, Sprott Physical Gold Trust (symbol: PHYS) began trading on the New York Stock Exchange. It is the latest physically backed gold exchange traded product. The fund also applied for listing on the Toronto Stock Exchange under the symbol PHY, soon to commence in Canadian trading. The fund will be managed by Toronto-based Sprott Asset Mgmt and will store its gold at the Royal Canadian Mint. Sprott has a high integrity business operation plan, fully disclosed, fully available. His competitors do not. Unit holders will have the ability on a monthly basis to redeem their units for physical gold bullion in a minimum of one bar of weight 350 to 430 troy ounces. PHYS expects to have expenses capped at 0.65%, making it more expensive than its major competitors. The three principal competitors to PHYS are SPDR Gold Shares (GLD), iShares COMEX Gold Trust (IAU), and ETFS Physical Swiss Gold Shares (SGOL). The founder Eric Sprott, CEO of Sprott Asset Mgmt, purchased 8 million units of the new fund as part of the IPO. See the Invest With an Edge article (CLICK HERE).

The Sprott competition from GLD is totally corrupt to the core, a phrase that is actually an under-statement. The SPDR Gold Shares hand over gold bullion to the London and COMEX exchanges to satisfy delivery. The GLD shares are used increasingly to offset and satisfy short gold futures contracts, to retire them. So GLD shares sit within the COMEX mountain, melted down in a manner of speaking. The IAU and SGOL routinely cooperate also with the Powerz, but to a lesser extent. Sprott bought a sizeable tonnage of gold while paying a 4.85% premium. Either he bought off market and was lucky to get his hands on such an amount of physical, or he procured the metal in the same manner at the Central Exchange Fund (CEF) of Canada. They use a 'Price Lock' on the actual physical, subject to a possible wait of a few months for actual delivery.

◄$$$ CHINA POO-POOS GOLD, A PLAIN PROPAGANDA EXERCISE. NONSENSE! CHINA HAS A DEEP LOVE AFFAIR WITH GOLD, AND A GROWING RESENTMENT BASED IN DISTRUST FOR WESTERN PAPER CURRENCIES THAT HAVE BETRAYED THEM IN GLOBAL TRADE EXCHANGES. AN I.M.F. GOLD SALE TO CHINA WOULD BE EXTREMELY SIGNIFICANT. $$$

Beijing leaders have turned clever. The Chinese talk down gold at critical times, thus enabling large scale purchases at cheaper prices. They did it in early December after the Dubai default came to fore. They did it again in early March. The comment made, not a quote, but capturing the meaning, is that Gold has risen in price for ten straight years but is unlikely to be a primary investment for China and its vast sovereign wealth funds (SWF). Poppycock! The statement was made by Yi Gang, the head of the State Administration of Foreign Exchange (SAFE). That is one of their two primary sovereign wealth funds. The comment rendered some psychological damage to the gold price. Yi said, "[The gold price has] had handsome gains in recent years. If we look at the past 30 years, it had big ups and downs. [Increasing its reserves of gold would] push up prices and hurt Chinese gold consumers. [USTreasury investments are] very important. China is a responsible investor, and we do not want to politicize the issue." He must have been well paid for the words spoken, maybe a bonus in gold bars. China has lifted its officially stated gold holdings by 454 tons to 1054 since 2003, making it with the fifth largest in the world. Their actual holdings in auxiliary funds outside of central bank is much higher and not subject to public disclosure, like the two giant SWFunds. After India, China is the biggest consumer of gold in citizen collections of gold coins and bars. Broad central bank purchases, in particular by those in China, Russia, and the Persian Gulf states, has fueled the gold demand. That trend will NOT stop, certainly not with some targeted disinformation. See the UK Telegraph article (CLICK HERE). If the denial by Yi is real, then proof might come in announcement that Chinese gold mining firms will make their gold output available for export. Do not count on that! If the denial is real, look for renewed large scale USTreasury purchases. Do not count on that!

The Moscow based website Rough & Polished has reported that China had "confirmed its decision to acquire 191.3 tons of gold auctioned by the International Monetary Fund." Verification is difficult, even if major news wire stories come to pass, since hardly a single story EVER is true regarding Intl Monetary Fund gold sales. Their history is very consistently false, a main tool abused by the Powerz. China serves as a very important counter to the gold price suppression schemes of the Western banking cartel. Chinese official purchases of IMF gold serves as a grand counter-balance. See the Underground Investor article (CLICK HERE).

The IMF history is of near constant disinformation. They concealed numerous closures of past USGovt short sales, disguising them as IMF sales, when no gold bullion changed hands, only termination of old short contracts when the Clinton Admin under Rubin aegis sold the US gold and some leased European gold. They promoted phony IMF sales news stories to dampen gold price advances. The large scale short sales had to be closed out, both in overt transactions and deceptive accounting. This point requires regular repeating. China can be relied upon still to intercede and support gold prices whenever they are being attacked by the USGovt on currency or trade matters, even Taiwan weapons sales. Beijing last September launched an unprecedented attack against New York OTC derivative mercha nts. Gold is a great weapon and will continue to be used by China to silence or weaken the US-UK Powerz. Arrangement to purchase whatever is legitimately made available for sale by the IMF is a stable process, and works in the favor of the buyer. Such large purchases in the 200 metric tonne range alter the balance of the gold price market. The resultant backstop drains the loose warehouse gold bullion, putting more pressure and strength into the coiled spring, to be sure. My belief is that an inside Chinese source leaked this story, with a purpose, perhaps to soothe bilateral tensions. Beijing leaders are in a strong position. The US-UK controllers might not wish to sell IMF gold to China for a second time. China quietly threatens to disrupt the Ponzi gold market by buying an equivalent large amount on open market, if the IMF gold is not sold to them. China clearly smells blood. They will be patient though, as time kills the US structural financial framework gradually through weakened termite-ridden beams. The US has limited time and capital to treat its ills. Beijing leaders must see the US-UK squandering time and capital.

GOLD MARKET SHORTAGE & SKEWS

◄$$$ A GOLD SUPPLY SHORTAGE IS TURNING CRITICAL ON A GLOBAL BASIS. MINE OUTPUT IS THREATENED. MINTS ARE STRUGGLING TO CONTINUE PRODUCING COINS. CHINA GOLD MINE OUTPUT IS TAPERING OFF THIS YEAR. NEWMONT MINING SAYS CHINA IS STILL BUYING BIG AMOUNTS OF GOLD. $$$

The National Bureau of Statistics in China announced on March 11th that production in February was down 20.7% versus the same month last year. Output was 47,417.20 kilograms of gold in February according to their latest statistics. However, the first two months output in 2010 was down only 2.7% from the the same months last year, with output at 86,615.50 kg. According to NBS statistics, Chinese gold mine output in 2009 reached 313.98 tons, up 11.34% year over year. China overtook South Africa in gold production to become the #1 global gold producer in 2007. See the China Mining website (CLICK HERE). The South Africans face much steeper declines ahead, due to their ruinous taxation policy and disastrous electrical generation management.

The gold shortage is felt at the coin industry noticeably, and for many months. Stories are common across the coin industry. Here is one that stuck out as noteworthy. Andrew Schectman is co-founder of Miles Franklin, the international precious metals dealer. He said, "We work with one of the largest mint distributors in the world, and when we tried to place an order earlier today [18 February 2010] for silver eagles, they would not even take it. The USMint is completely and totally out of silver eagles right now. They are running things on a rationing basis." When an interviewer asked him if he foresees a supply shortage in the near future, he responded, "A major supply shortage. I think that is the key to this industry. The availability of product to me is the key to understanding the importance of buying gold and silver now, irrespective of what the price is doing." See the Seeking Alpha article (CLICK HERE). So the anecdotal evidence from the field goes directly in conflict with the falling price dynamic. In no way does a falling price indicate a glut of supply. The exact opposite is the case, due to price fixing and heavy suppression. Other mints are playing legal games dragging their feet, abusing the official rules, in an attempt to dampen legitimate demand.

Newmont Mining brass believes Chinese demand for gold will continue to remain strong in 2010. Speaking with Dow Jones, Newmont Asia Pacific operations regional group executive Philip Stephenson said he expects continued strong investment demand from China in 2010. He said, "We saw a 20% increase in investment demand from China last year, and we are expecting similar demand levels in 2010." The gold price ranged from $850 to $950 for the first half of 2009, and currently trades at just over $1100 per troy ounce. High demand is expected even at slightly higher price. See the Mining Technology article (CLICK HERE).


◄$$$ COMEX INVENTORY DATA REVEALS AN ALARMING TREND. INVENTORY LEVELS ARE RAPIDLY DECLINING. WITHDRAWALS FROM THE EXCHANGE ARE HAPPENING MUCH FASTER THAN DEPOSITS. EVIDENCE POINTS TO DELIVERIES BEING MET BY LEASED GOLD FROM 'ELIGIBLE' CUSTOMER ACCOUNTS. SOME OF THAT LEASING MIGHT NOT BE APPROVED OR PERMITTED OR EVEN KNOWN BY CUSTOMERS WHO STORE THEIR GOLD AT THE COMEX WAREHOUSE. $$$

The COMEX exchange is being drained as fast as corrupted. Adrian Douglas is a super sleuth in the gold industry, whose revelations cast a strong light on the shenanigans and outright corrupt practices at the metals exchanges. He has shared his work over the last six months, having discovered an alarming trend of precious metal depletion. To begin with, data from the COMEX must be gathered on a daily basis for gold & silver, since no database is maintained for public usage. Why would the syndicate offer evidence of its criminal activity? Two types of warehoused inventory is stored at the COMEX, the Registered metal available for delivery owned by commercial dealers, and the Eligible metal not available for delivery owned by private parties often called customers. Mining firms, smelting factories, and recycle mills work through their commercial agents to bring metal to market. Only about 1% of all gold & silver futures contracts bought or sold at the COMEX result in delivery, as most are either rolled into a future month or closed out.

A trend has been noted in the last few months that customer Eligible accounts have been systemically removed and pulled out of the COMEX (and London Bullion Market Assn also) due to the heightened distrust felt by private investors of the exchange officials. Anecdotal evidence points in many cases to improper leasing, which means customer accounts have been raided, the metal taken, replaced by certificates. They suspect the exchanges are engaged in criminal fraud sanctioned by the USGovt and UKGovt. These are not isolated or minor events, but frequent and the subject of hidden legal action in response from powerful billionaire clients in foreign nations.

Note in the table the hefty inventory drawdowns in the last six months. The cumulative withdrawals amount to the reduction in inventory offset by new deposits. What strikes the eye immediately is that 33.5 million oz silver was demanded for delivery, against only 16.3 moz silver in exchange withdrawals, or 49% of demand. Similarly, 2.8 million oz gold was demanded for delivery, against only 2.04 moz gold in exchange withdrawals, or 73% of demand. Only the Registered inventory is typically used. Data cited is for the Registered tallies. The vast gap between delivery and withdrawal must be explained, on how deliveries were completed. Minor factors must be cited initially, which do not account for the vast volume gap. Some deliveries were re-submitted for cash settlement. Some deliveries have not yet been completed, as in delayed. One explanation makes the most sense, representing the most distinct possibility. Douglas surmises that gold & silver metal is increasingly leased from the customer Eligible inventory in order to satisfy strong delivery demand. Whether or not with customer permission and approval, that is subject to debate.

The other shocking trend is the extreme rate that Registered official dealer inventory for gold & silver has been drawn down. Precious metal is flying out of the exchanges. In fact, one can make the argument that the gold & silver exchanges have almost no precious metal and have become paper factories laced with fraud. They sell gemstones without diamonds. They sell lumber without wood. The silver inventory has come down from 62.5 moz to 47.4 in six months, a 24% decline. The gold inventory has come down from 2.81 moz to 1.64 moz in six months, a 41% decline. Over the same time span, the Open Interest (OI) in silver contracts has grown by 19%, while the OI in gold contracts has grown by 15%. The normal response for a healthy functioning business is to build and replenish inventory when demand is rising, seen in Open Interest, the outstanding number of futures contracts. The most likely reason, as Douglas concludes, is a growing shortage of bullion.

The COMEX is caught with its paper panties down at its ankles. Paper gold in the form of futures contracts have been sold in numerous frequent blizzards in order to suppress the gold & silver prices. They sell without benefit of metal. Take the net short commercial dealer position in gold. It equals all the gold reserves currently held worldwide in bullion banks. It equals 25 years of gold mine production. This is the grandest naked short criminal fraud case in modern history, and the primary motive for gold investors to make physical gold investments. The investors are paragons of patience, but not fools or chumps. They are taking control of the lifeboats, while the Powerz control the helm of a sinking vessel. Douglas estimates that as much as 50,000 tonnes of gold has been sold that does not exist. The investors expect a massive short squeeze to occur when the COMEX is unmasked as a fraudulent enterprise, just like Wall Street was exposed with its mortgage bonds. The evidence produced by Adrian Douglas leads the analyst, the investor, and the observer to conclude that the day is near for exposure and that powerful short squeeze. The gold market is but one of several financial syndicate ongoing criminal projects in the process of being exposed. USTreasurys and Fannie Mae mortgage bonds are other criminal shams, even major US Bank stocks. My hope is for prosecution in time. Douglas mentions several coincident factors that support the extreme gold & silver shortage. The USMint regularly suspends production of coins due to metal shortage. The COMEX prices often flirt with backwardation, where the current month price is above forward months. London now routinely offers a 25% or greater premium for settlement of gold & silver contracts in cash, a basic bribe. Central banks are net buyers of gold worldwide. Barrick Gold has embarked on repeated hedge book buybacks, never able to close them out. See some recent Douglas articles from the GATA website (CLICK HERE or HERE).

It should be noted that the total Registered plus Eligible gold in inventory had not changed much from month to month and from year to year. So this is a new phenomenon. Also, the times when the ultra-stable figures in the past moved on metal exiting the exchange was when new metal entered. That meant the inventory might have been phony all along, and possibly loaded with tungsten gold. The exchanges never had the amount of gold they claimed, and might have hidden the tungsten gold, parked safely where never a formal audit is permitted or conducted. Just raising a hypothesis of where tungsten gold bars could be hidden.

◄$$$ THUNDER ROAD EXPOSES PROFOUND IRREGULARITIES IN THE GOLD MARKET. DUPLICATE OWNERSHIP IN FRACTIONAL RESERVE BANKING IS ONE POSSIBLE CONCLUSION OF GOLD BARS IN EXCHANGE INVENTORY. FAR MORE GOLD IN PRIVATE HANDS IS WORKING ITS WAY THROUGH THE LONDON GOLD MARKET. A POSSIBLE SOURCE IS IDENTIFIED. $$$

Paul Mylchreest, editor of Thunder Road, provides a thorough analysis in his mid-October 2009 report. It is a follow-up to the previously posted Redburn Partners report. He makes two meaningful arguments to explain irregularities in the gold inventory and accounting of London inventory. He proposed two alternatives:

"Alternative 1: On average there is more than one ownership claim on each gold bar conforming to London Good Delivery (LGD) standard on the pool of gold which acts as liquidity for the massive OTC gold trade based in London. Essentially, the market operates on a fractional reserve basis, but if a sufficient number of market participants become concerned about this and there is a stampede to take delivery of physical bullion, there is a risk of market failure. Such a process could be delayed by central banks lending gold to the market, although this would likely be obvious by a spike in gold lease rates, or by a much higher gold price in order to encourage holders to sell bullion. In this scenario, the gold price could SOAR at any time and the gold market, which is subject to little regulation, is basically an accident waiting to happen. [We do see occasional lease rate spikes]

Alternative 2: There is FAR more gold bullion held in private hands than is acknowledged by current industry estimates. It is the large amount of additional gold on top of known gold stocks which provides sufficient liquidity to support the high volumes traded through London. The most likely source for this gold dates back to the Japanese conquest of Asia from 1894-1945, when Japan is alleged to have looted the gold and valuables of twelve nations. It is best known as the story of Yamashita's Gold. If true, my analysis shows that particularly heavy volumes of this gold may have been laundered into the London market during 1986-90 and the mid/late 1990s. In this scenario, the continued evolution of the gold bull market could be more protracted, if supplies of this gold continue to enter the market periodically." [Seized booty from World War II, or perhaps it is gold stolen from the Fort Knox in the United States, replaced by tungsten bars.]

◄$$$ FINALLY, GOLD BARS LACED WITH A TUNGSTEN CORE HAVE BEEN FINALLY REPORTED ON FULL DISPLAY IN GERMANY. PROOF WILL CONTINUE TO FLOW, COMPLETE WITH SOURCE, CONTENT, AND PATHWAYS. DENIALS BY THE NAIVE, STUBBORN, AND PATRIOTIC WILL CONTINUE WITHOUT END. $$$

The German television channel called ProSieben has provided a demonstration of the gold plated tungsten bars. They display a half kilogram bar as evocative proof of gold bullion counterfeiting, in the form of tungsten gold. Much controversy has emerged in the last few months. Much denial even within the gold community has come also, demanding proof. In my opinion, no level of proof will satisfy some stodgy folks, steeped with mental constipation, or stifled by patriotic remnants, or frozen in their personal psychological protective armor. They have no real appreciation for the deep syndicate activity, like possibly stealing and replacing the majority of Fort Knox gold during the Clinton Admin under the guiding hand of former Treasury Secy Robert Rubin, of Goldman Sachs pedigree. The tungsten gold substitutes shown below arrived at the W.C.Heraeus foundry, which is the world's largest privately owned precious metals refiner and fabricator, located in Hanau Germany. The bar was due for melting, and originated from an unnamed bank. More details are likely soon enough. See the YouTube video (CLICK HERE) and the Zero Hedge article (CLICK HERE).

The Gold Anti-Trust Action committee made a statement after the German display of tungsten laced gold bars. They wrote, "What appears to be the first documentation of counterfeit gold bars made of plated tungsten was noted today by Zero Hedge as having been reported by a German television station. The counterfeit bar reportedly is in the possession of the W.C.Heraeus gold foundry in Hanau Germany, said to be the world's largest. This sort of thing might shake the gold market even more than, say, the International Monetary Fund's confession that it really does not have any gold and that it has been selling only bookkeeping entries all this time." Almost every single claim of impropriety, price suppression, falsified accounting, corruption in metals exchanges, and treason by leaders cited by GATA have come to be proven true. My contacts report the source of most tungsten gold bars is the United States during the Clinton Admin, using a clever trail with shutdown smelters and the same shipment routes as the narcotics (see Panama and Arkansas). Evidence is being gathered, and mounts, for release at the strategic moment, since so dangerous to possess. The Jackass is a pure observer in the process of syndicate exposure. For a fine article about the competing properties of gold versus tungsten, and detection methods, see the article entitled "Fake Tungsten Gold Found" by Trace Mayer (CLICK HERE). The tungsten gold theme is blossoming and going mainstream.

COMPETING CURRENCY WAR CHAPTER

◄$$$ FELDSTEIN SAYS TO WORRY ABOUT THE USDOLLAR, NOT THE EURO. U.S. FUNDAMENTALS ARE ROTTEN, WITH HUGE FEDERAL DEFICITS AND GAPING TRADE DEFICITS. HE EXPECTS A LOWER USDOLLAR TO COME. REGARD THE BRITISH POUND AS THE LEADING INDICATOR TO A SEVERE U.S. CRISIS. $$$

Martin Feldstein has pedigree, respectability, and experience, but from the corrupt castle. He is a Harvard University Economics Professor and former president of the National Bureau of Economic Research, where recessions are declared and blessed after the fact. Some recessions are edited out in excisions after the fact. Feldstein calls the Euro currency decline since November pure 'Panic Selling' without justification. He said, "The Euro is weakening despite their better trade balance. This is a kind of an irrational or panic selling where people are just saying, [GET OUT OF THE EURO IN THIS CONFUSION]. What is happening with the Euro is an overreaction. There is, in my judgment, no real reason why the Euro should have sold off, overall. After all, Germany is not at risk. France is not at risk. Europe does not have the need to draw in funds from the rest of the world in the way that the United States does. If I wanted to be nervous about the future of a currency over the next five years, there is more reason to worry about the USDollar given the size of the US budget deficits and given the size, even more importantly, of our trade and current account deficits." Feldstein believes firmly that enormous fiscal deficits projected over the next decade translate to a lower USDollar value. He warned that any tax increases would render harm to the fragile USEconomy. He comprehends the Euro well. Back in 1997, he called the European Monetary Union badly flawed, whose conflicts would extend to its political framework.

On the fundamentals, Feldstein makes some good points. The problem with Europe is that it is sitting on the fence with its union, and the Greek debt crisis merely highlights their weakness from structural underpinning. It is unclear what the EU is likely to become to the FOREX market. As for the United States, its day is fading, and it is in the grip of financial interests that will wring the last drop of vitality out of it given their way.

Jesse makes a very interesting observation in response to Feldstein's comments. Jesse regards the Greek problem as the the most obvious sign of severe structural weakness in the European Union with its adjoined currency. He sees the British Pound Sterling currency as offering the key signal on the direction for the USDollar. However, with resignation he believes the US is long past the point of remedy. He said, "As for the United States, its day is fading, and it is in the grip of financial interests that will wring the last drop of vitality out of it, given their way. The American economic system cries out for meaningful reform. Deficit spending without reform is futile, the road to addiction. But no government led structural repair efforts is the sure road to stagnation and a zombie-like existence such as has been seen in Japan, or even worse, a third world status and regional fragmentation. My own bellwether is the UK. I believe quite strongly that Britain will reach its crisis before the US. And it may provide a proper warning, but all things considered, it may be too late. While there are many good signs in the financial reform regime from regulators aghast at the mindless venality that has brought the country to the brink of ruin, there is still the matter of the current political leadership, and its failure to engage with the issues in meaningful ways."

Jesse must refer indirectly to the lack of structural reform, the devotion to Wall Street, or the endless wars. Maybe my inference is off, but doubtful. The umbilical linkage between the United States and United Kingdom is direct and immediate. The British offer cover for the mammoth USTreasury hidden monetization, while the US offers its Printing Pre$$ assistance to cover English debt from equally hidden chambers. Crisis in London would lead to a crisis in New York and WashingtonDC within days. See the Cafe Americain article (CLICK HERE). It is indeed way too late.

◄$$$ JIMMY ROGERS FORECASTS A BRITISH POUND COLLAPSE VERY SOON. HE CALLS IT VULNERABLE , AND POTENTIALLY A BASKET CASE, VERY JUSTIFIABLY. $$$

Self-styled financial wizard Jim Rogers predicts a British Pound complete collapse could occur within weeks. The event would send shock waves throughout the global financial structures and herald a new chapter, transforming the credit crisis into a monetary crisis. He said, "Other currencies are not strong and the Euro has real problems, with cracks much wider than Greece beginning to show. But it is the Pound that is most vulnerable. In real terms, it is already devalued against virtually every currency barring the Zimbabwean dollar and it is especially exposed over the weeks running up to the UK election. In a basket of currencies, the Pound is potentially a basket case. And that will put Britain in an extremely bad position for the shakedown. The last few months have seen a false bounce, shorn up by massive short-term injections of government underwriting. But it cannot last. We have been applying temporary sticking plasters, not long-term cures. Later this year we will see the start of the real recession, with more Lehman scale disasters and a fallout which will not stop until the underlying malaise is genuinely cured."

England faces an imminent return to economic recession. Rabid stimulus and rescue aid spending by the UKGovt could quickly lead to a run on the British Pound, a process that appears to have begun, soon perhaps in earnest. The harsh decline in the BPound Sterling has been a forecast over the last several months in the Hat Trick Letter. Its second phase is happening right now, after a powerful decline in 2008, also forecasted two years ago. The awaiting trigger appears to be an admission that Quantitative Easing must resume from the London basement machinery. Mervyn King, the Governor of the Bank of England, assured readiness to print more money and "do whatever seems appropriate" in an urgent message. That sounds like desperation, with the UK currency the victim to be sacrificed. Strong motive swirls in political circles to prevent a UKEconomic meltdown. They will earn a different crisis instead, a monetary crisis. They will choose the heavy price inflation as the prize. See the Prison Planet article (CLICK HERE). The breakdown will be matched by a move to Fascist Dictatorship, just like in the United States.

◄$$$ A PLUNGE IN THE BRITISH POUND IS DEAD AHEAD, THE COURSE ALREADY BEGUN. SOME ESTIMATES ARE FOR ANOTHER 20% TO BE SHED FROM THE POUND STERLING, ENOUGH TO CHALLENGE USDOLLAR PARITY. IT WILL EASILY REACH EURO PARITY. THE STAGGERING UKGOVT DEBTS ARE THE PRINCIPAL CAUSE, AGGRAVATED BY LACK OF ECONOMIC RECOVERY, CHAINED BY AN INSOLVENT BANKING SYSTEM. RECALL THE HOUSING BOOM THAT SERVED AS FOUNDATION FOR ECONOMIC GROWTH, JUST LIKE IN THE UNITED STATES. $$$

Edinburgh and Scotland generally are bracing for the British Pound to plunge and cause shocks. Attention is on Greece now, but it will shift soon to Great Britain. Haig Bathgate is head of strategy at Turcan Connell, which manages investments from wealthy families. Bathgate expects the Pound to lose between 20% and 30% against the USDollar once investors turn their sights on Britain as its government sells a record amount of debt. This is basic currency debasement. The pressure should arrive in his view when the Bank of England resumes its Quantitative Easing program, a process of injecting new money into the economy, within the next three to four months. Bathgate said, "Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly. The UK is in a similar predicament. It could be hit very hard. When there is a fiscal crisis, the markets tend to punish that country very quickly. I do not think Britain is in nearly as bad a position as Greece. We have got a good taxation system, however the position of the economy is very dire. My strong view is the government is trying to create inflation and devalue the currency." Bathgate points to a hung Parliament, or signs economic growth does not recover, as potential catalysts for the Pound to accelerate in its decline. He deceives himself about the UKEconomy. It grew far too dependent upon a housing bubble, just like the United States. The destruction will be thorough and long lasting, led by the London banks. The damage will duplicate the destruction that occurred in the United States and New York banks. The UK landscape will be exposed in shambles before the US landscape. First the British Pound craters, then the USDollar finally follows, as the Competing Currency War weave a confusing trail, except to Von Mises students of sound money. They have seen the pathway clearly for several years.

Bruce Stout manages the Murray Intl Trust in Edinburgh, which has doubled over the past five years. He calls the odds of a plummeting Pound currency better than even, describing Sterling as a very vulnerable currency in his words. UK fund managers at Aegon Asset Mgmt and Scottish Widows Investment Partnership are responsible for more than £30 billion (=$45B). They revealed in January a program to buy companies that do most of their business abroad. Another viewpoint highlights the risk from the other side. Should the UKGovt discontinue emergency spending too quickly, the Pound may fall below parity with the Euro and drop to the lowest level against the USDollar since the mid-1980s, according to Mansoor Mohi-Uddin, chief currency strategist at Union Bank of Switzerland. UBS, the world's second biggest currency trader, predicted the Pound Sterling could fall quickly back $1.05 or even lower. The AngloSphere currencies are propped solely by government support. Deception on restored economic health in the UK and US will lead to currency declines first in England and then in the United States. The banking leaders will strive to a return to normalcy, when none exists.

The UKGovt deficit is nearly equal to that of Greece, each over 12% of economic output. In December the schedule was announced for an increase in UKGilt sales. For the fiscal year ending March, it will expand to a record £225.1 billion from the £220 billion previously announced. Moodys Investors Service has let it be known that the UK may "test the Aaa boundaries" with grander debt issuance. Prime Minister Gordon Brown is worried about the potential for no party to emerge with a clear majority in the June election. He said, "There could be a number of triggers. If there is indecision about how you deal with a problem, that is when things start to fall apart. We could be in the position where the spotlight turns to the UK. See the Bloomberg article (CLICK HERE). " Gordon and Mervyn deserve all the spotlight of attention that can be mustered.

◄$$$ THE BRITISH POUND WILL SOON BE DRAWN TOWARD THE 138 LOW FROM EARLY 2009. FUNDAMENTALS DEFY DESCRIPTION ON THE NEGATIVE SIDE. QUANTITATIVE EASING WILL LEAD TO POWERFUL DECLINE TOWARD USDOLLAR PARITY. THE POUND STERLING BREAKDOWN TO 2009 LOWS SIGNALS $1400 GOLD, WHILE A DEEPER BREAKDOWN TOWARD USDOLLAR PARITY SIGNALS $2000 GOLD, ALL IN TIME. THE U.S. & U.K. SHARE A FATE IN THE DEATH OF THE ANGLOSPHERE. $$$

The British Pound offers a preview of a much more powerful decline in the coming year. The intermediate breakdown shows technical markers. The 20-week moving average could not rise above the trend-setting 50-week MA. The January exchange rate could not rise above either moving average. A breadown resulted. The fundamentals for the UKGovt and UKEconomy are so bad, that adequate descriptions are not available with mere words. The nation followed the destructive lead of the Americans, and built an economic growth cycle atop a housing & mortgage finance bubble. The wreckage includes an insolvent banking system, massive home equity loss for citizens, and an economy that does not respond to stimulus. Check the morgue and cadavers for similar lifeless forms. Notice the 10-unit incremental declines that are clearly evident. The top of 168 was reached twice in the last nine months. A bounce came off 148 after the Pound fell below 158 support, nicely signaled by the stochastix lower peak in November, a bearish divergence. The critical support from early 2009 came at 138, which will be tested very soon. The next admission of Quantitative Easing by the UKGovt and the Bank of England will open the door to a move toward 138 and at least a touch. The continued QE course will provide sufficient justification for a breakdown toward 100 parity versus the USDollar, probably between late 2010 and mid-2011. The momentum swing of 30 points indicates a long-term target of 108. The word UGLY comes to mind, better yet the word FUGLY.

It will be ironic how a weakening British Pound provide the signal for a deadly USDollar decline, when the lower BPound lifts the US$ itself. Loud calls will come from the Wall Street fraud kings that the falling Pound Sterling demonstrates the safe haven and resilient strength of the USDollar. Nothing could be further from the truth. The fall from grace for the British Pound currency will serve as an indisputable signal that the USDollar will sit at the epicenter of a global monetary crisis. All in time. The death of the USDollar is assured by the critical decline in Pound Sterling. They are joined at the same Anglo hip (genetic & language), connected by the same financial umbilical cord (Londoners own the USFed), partners in the same corrupt fiat gaming (see Caribbean centers), comrades in the same gold exchange criminal defense for two decades (see COMEX & LBMA). The retest of the BPound to 2009 lows signals $1400 gold. The path will not be clear, however, since lifts in the USDollar come from the UK hardship, until the global FOREX market realizes that the British Pound is the harbinger for the USDollar, a shared fate. The fall of the BPound signals $2000 gold, but with a wait!!

◄$$$ ENGLAND HOLDS STEADY WITH OFFICIAL INTEREST RATE, AND RESTRAINS FURTHER MONETARY EXPANSION. RESTRAINT IS NOT EXPECTED TO CONTINUE. $$$

The Bank of England has kept interest rates at a record low of 0.5% for the 12th consecutive month. The Euro Central Bank also has kept its official interest rates constant at 1.0% for several months. The BOE decision was widely anticipated, due to quietly festering desperation, profound weakness, and broad insolvency. Any rise in borrowing costs would render great harm to the non-existent UK Economic recovery. The central bank has not pumped any more money into the economy under its quantitative easing (QE) program for a good stretch of time. Vicky Redwood is senior economist at Capital Economics. She summarizes well the predicament, that without QE the United Kingdom could still be in recession, although the policy has not worked well enough to kick-start a strong recovery. She fails to notice the recession. She said, "We doubt that the £200 billion undertaken so far will be enough to ensure a strong and sustained economic recovery. We still think that the MPC will have to take further action." The Bank is setting up for consequences to an important error, as it expects the full effects of QE will take more time to filter through to the economy, although continued economic growth is not yet guaranteed in their view. They fail to notice pumping blood through a dead corpse (the banking system). The claimed 0.3% growth in 4Q2009 contained the usual exaggerations. As monetary support is pulled back slightly in tests, the resulting economic response with slowdown will urgently motivate more QE monetary pumps, like night follows day. See the British Broadcast Corp article (CLICK HERE).

◄$$$ GERMAN EXPORTS FALL. DEUTSCHELAND IS AT A POINT OF FLUX. BEWARE WHEN WEATHER IS EVER BLAMED FOR SLUGGISH ACTIVITY. THE LOWER EURO CURRENCY HELPS GERMANY AS AN EXPORT STIMULUS AND FROM LOWERED COMMODITY COSTS. GERMAN TRADE SURPLUS WILL PROBABLY REMAIN STRONG. $$$

German exports fell by 6.3% in January versus December on a seasonally adjusted basis. The trade surplus came down to ¬8.7 billion in January from ¬16.6 billion in the previous month, according to the Federal Statistical Office called Destatis. Exports are widely expected to continue in recovery, especially since the Euro currency has come down from 150 to 135 in the last three months, bottoming near 134. Simon Junker is an analyst at Commerzbank. He said, "This surprisingly poor figure probably does not mark the end of the recovery of exports. Despite this setback in exports, we stick with our prediction that the German economy will continue to recover, and foreign trade will play a significant part in driving this recovery." Orders in the important manufacturing sector have risen noticeably in past months. Compared to the same month a year ago, exports rose 0.2% and imports declined 1.4% in January. Imports are expected to reduce more, since unusually strong. The 1Q2010 GDP is at risk of a sluggish figure, from the hard hit construction sector alone. However, German industrial production rose 0.6% in January from the previous month, a powerful mitigating factor. Also, new industrial orders posted a monthly rise of 4.3% in January, further pointing to a continuation of the economic recovery. When the new trimmed Euro currency is finally announced, its core will be from Germany, still an export giant. Their surpluses have steadily been greater than those of Japan for two decades. That means the new Euro will be an instant threat to the USDollar.

◄$$$ AUSTRALIAN CURRENT ACCOUNT DEFICIT GROWS. IMPORTS ARE GROWING FASTER THAN EXPORTS, A TYPICAL RESPONSE TO A CURRENCY THAT ROSE 30% IN THE LAST YEAR. JUST ANOTHER EFFECT FROM THE COMPETING CURRENCY WAR. SUCCESS IN A CURRENCY PRODUCES A STRONG HEADWIND OF RESISTANCE. $$$

The Australian Current Account deficit grew by 19% in 4Q2009 versus the preceding three months. The net goods deficit expanded by A$1.4 billion to A$5.72 billion, as imports rose 2% while exports declined by 1%. Services imports rose 4%, a faster pace than the 1% lift in exports of Australian services. The C/A deficit is expected to reduce by 1.3% any growth in Australian GDP this quarter, according to the Australian Bureau of Statistics. The seasonally adjusted data showed the deficit in the balance of payments account rose to A$17.46 billion (=US$15.71B) in 4Q2009 from A$14.73 billion in the July-to-September Q3 quarter. The wider deficit was mainly attributed to the goods & services ledger item, which showed a shortfall of A$6.06 billion during the quarter, compared to A$4.22 billion in the previous quarter. See the Market Watch article (CLICK HERE).

The Aussie Dollar should remain bound between 86 and 93 for a while, as it stabilizes further. The battle royal is on, with strong opposing forces at work. The A$ will tend to rise from its strong commodity basis behind the currency. The Australian Economy will benefit at some level from reduced import costs. The A$ will tend to fall from sustained export damage due to the higher exchange rate. For example, see the high copper price. The 20-week moving average will continue to level out, as will the more stable 50-week MA. The move upward in crude oil above the $80 mark signals continued weakness in not just the USDollar but the entire monetary system. Strength among commodities generally keeps the Aussie Dollar lifted. The Canadian Dollar and Aussie Dollar serve as the best indicators of commodity currencies, whose behavior will be very telling in the Competing Currency War. They will as a group announce transition points from one phase to the next, as all currencies are eventually wrecked. The fiat currency system has in a death spiral since September 2008, little recognized. Each phase will favor or reject different types of currencies, dictated by commodity ownership, trade surplus beneficiary, or debt burden slave.

The Australian Dollar in my view is the primary factor in the growing trade deficit. This is a normal response from a currency that grew by 30% in valuation in a single year, and nearly 50% in the past 18 months. The commodity currencies bear such risk, like Canada and Brazil. In the Competing Currency War, the currencies with tangible assets behind their economies will benefit in strong fashion in the next phase. This has been the Hat Trick Letter forecast for several months. Global currency forces will tend to favor a solution of an asset-backed global reserve currency. In the meantime, before such an imposed solution arrives, the currencies behind asset-backed economies rise in good stride. Damage to their economies is to be anticipated from the higher currency. The currency war is like a rotating device of knives that cut deep wounds.

◄$$$ THE CANADIAN DOLLAR LOOKS VERY SIMILAR TO THE AUSSIE DOLLAR, AS IT SHOULD. BEING A BIGGER OIL PRODUCER, CANADA HAS SEEN ITS CURRENCY MAKE A ONE-YEAR HIGH AND CHALLENGE PARITY. IT WILL EASILY SURPASS PARITY, BUT IT IS BOUND TO THE CRUDE OIL PRICE. $$$

Canada avoids some of the emcumbrances that Australia has, what with large federal deficits. While Australia has followed the Bush War Model, going over the cliff in military expenditures, Canada has concentrated mostly on domestic commodity production, in particular crude oil and natural gas. The results show in the stronger Canadian Dollar. Both moving averages are trending upward. Notice the stronger stochastix index also, indicating the path upward. The breakout from the bullish triangle indicates a target in the 103-104 range. The loonie will challenge 100 parity very soon, surpass it, and stay above 100 as long as the crude oil price remains strong. The move upward in crude oil above the $80 makes the loonie very attractive. The CanDollar in my view is the premier commodity currency. The main drawback consequence of the rising Can$ is that gold investors do not receive the payoff they should.

PRESSURE BUILDS FOR GOLD MOVE

◄$$$ THE USDOLLAR IS DONE, COOKED, DEAD, KAPUT. A PERFECT STORM HAS HIT, AND CONTINUES TO INFLICT TREMENDOUS DAMAGE. THE USDOLLAR STILL IS THE KEY FOR GOLD, SINCE IN THE LIQUIDATION AND CLIMAX PROCESSES, DEMAND FOR THE USDOLLAR WILL CONTINUE. IT IS NOT SAFE HAVEN ANY MORE THAN A RAGING INDUSTRIAL SMELTER FURNACE IS A LIVING ROOM SOURCE OF HEAT FOR A FAMILY. RESUMPTION OF THE LONG-TERM BEAR DECLINE IN THE USDOLLAR IS IMMINENT. $$$

In the last month, the USDollar has begun an important intermediate breakdown, one that will bring about a resumption of the long-term bear market. The damage to the Euro and British Pound appears to be in a pause, sufficient to permit the US$ to resume its decline. Both the weekly and daily US$ DX charts are shown, since the juncture is so critical. A strong US$ decline could easily power the US stock market indexes upward in a significant fashion, for the Dow, the S&P500, the Nasdaq, the Mid-sized, and the Small-caps. The run could be well described as a meltup, as monetary inflation in a new Quantitative Ease cycle would be its generating source, while global monetary crisis would be its underlying power source.

The weekly chart shows an overbought situation coming apart. The 20-week moving average might cross above the slower 50-wk MA, whose signal must be watched closely. A convergent kiss rather than a firm crossover usually means the downtrend will resume. My forecast is for the 20-wk MA to level off, for the bull signal to evaporate. The double top from 12-18 months ago, closely spaced in time, is clear as a initial liquidation response to benefit the USDollar. The retest fell way short of the 88 level, as the 80 level proved to be a strong psychological resistance. The big picture reveals extreme reactions on highs and lows that resemble pendulum swings. The next direction is down, since a resolution in Europe will gather some clarity either with rescue aid or abandonment explusion.

An important intermediate failure is in progress, with powerful resistance at the 80 level. Take next the daily chart. Notice how the 80 level has numerous touch points, which gives it structural strength in resistance. The bullish moving average crossover in February (50dMA > 200dMA) was trumped and neutered by the bearish stochastix divergence, a firm negative signal. The downslope in the stochastix indicator ruled the day and ended the counter-trend bounce. Next the 50-day MA will act as support, the stronger 80 level the resistance, as the long-term decline will take control in resumption of trend. Watch for a move below the 50dMA as the key signal for resumed downtrend.

◄$$$ THE UNITED STATES HAS LOST OLD FRIENDS ALMOST AS FAST AS IT HAS MADE ENEMIES. EVENTUALLY CONFIDENCE IN THE USDOLLAR AND TRUST IN IT WILL GIVE WAY TO LOST ACCEPTANCE. THE USDOLLAR IS SET TO RESUME ITS SECULAR BEAR MARKET. $$$

The United States has become isolated internationally since 2000, when the Bush II Admin alienated friend & foe alike, in pursuit of the syndicate flourishment. Treaties with NATO were violated among Western European nations, which almost uniformly lost respect for American leadership. The Axis of Fascism consists of the United States, England, and Israel, a functional configuration not even 1% of Americans have figured out. It is ruled and controlled by a vast multi-faceted crime syndicate, whose description will not be detailed here. European leaders pay lipservice to US ministers and emissaries, little more. The USGovt is at war financially with Switzerland. The USMilitary is slowly being urged to leave Japan. Its newest best friends are Yemen and Haiti, whose nations garner little more respect than North Korea. The old stable ally Germany has been playing an intriguing role for over a year, advising the Swiss, the Arabs, the Russians, and the Japanese to remove their gold bullion from corrupted New York and London metals exchanges. The Germans are also the secretive spearhead behind the Saudi decision to make distance from the USDollar on crude oil sales. The seven year American presence in Iraq has exhausted the patience of Arab nations, in particular Saudi Arabia, who courts the Russians for military security protection. China has been quietly building its presence across the entire Persian Gulf states. They have created a Chinese Security Umbrella in the Persian Gulf. In such a global isolation, the USDollar will continue to be abandoned. The Wall Street export of fraudulent mortgage bonds further soured American relations, as foreigners have gradually concluded a criminal syndicate has firm control of the United States Govt. The War on Terrorism is widely recognized across Europe, the Middle East, and Asia to be phony, and a cover for a vast sprawling narcotics enterprise. The USMilitary, Secutiry Agencies, and Defense Contractors routinely abuse foreign air bases in the transport of narcotics, with broad recognition. The Global Paradigm Shift involves a rejection of the USDollar and the American mantle of leadership. The integrity of the USGovt is at rock bottom, global prestige lost.

◄$$$ GOLD HIT A RECORD HIGH IN EURO CURRENCY TERMS, JOINED BY A PARALLEL HIGH IN BRITISH POUND TERMS. EUROPEAN TURMOIL MIGHT PUSH THE PARADOXICAL USDOLLAR DEMAND, BUT IN EUROPE IT TRANSLATES TO DEMAND FOR GOLD AMIDST A CONTINENTAL MONETARY CRISIS. WITNESS GOLD COMPETING AS A CURRENCY. $$$

Uncertainty over Greek sovereign debt lifted demand for gold bullion across Europe as a hard asset. The direct Euro currency competitor is gold, a situation only apparent in Europe at this time. Deep concern over the next targeted nations for sovereign debt default in Italy, Spain, and Portugal make for a continental monetary crisis of high order. The Euro currency is not fracturing, but rather consolidating as it removes superfluous fatty portions. The European Union is not fracturing, but rather consolidating as it removes the insolvent dead portions. In the process, as the monetary crisis spreads across Europe, gold has been elevated into a currency status. The effect is visible in financial markets at higher levels, not in the economies. Gold has been lifted as an alternative asset. People are catching onto the fact that gold was the best performing asset in the 2000 decade, with no close second in competition. Great volatility in the European currencies since the latter months of 2009 has prompted demand for gold, the true safe haven. Gold has traditionally served as the ultimate safe haven in times of political and financial uncertainty. Gold's intrinsic value is not bound to debt, as it rides above the paper currencies, which are actually no more than debt denominated legal tender.

A transfer has begun in psychological capital. As the Euro begins to stabilize, the movement has been toward gold demand. A gold breakout has taken place over European soil. That demand will continue to rise. Despite a stabilizing exchange rate, the underlying sentiment behind the uncertain Euro has crept into the FOREX arena. The Gold price in Euros is pushing out new highs in a gradual process. A very clear bullish Cup & Handle reversal pattern indicates a 940 long-term target. Rising moving averages confirm the uptrend, as does the stochatix cycle. However, the breakout is tentative for Gold in Euros, probably due to the queer US$ benefit. As funds move away from the Euro, the paper dependence and pre-occupation lead to US$ alternative demand that suppresses the base gold price. The Gold breakout in price will occur last and most powerfully in US$ terms.

◄$$$ GOLD HITS RECORD HIGH IN BRITISH POUND TERMS. THEIR DIRE DEBT SITUATION COULD NEXT BE COMPOUNDED BY A PARLIAMENT LACKING DIRECTION AND RESOLVE. THE ELECTIONS MIGHT PRODUCE A HUNG MAJORITY WITHOUT CONVICTION. ADD TO THE MIX A NEARLY CERTAIN RESUMPTION OF QUANTITATIVE EASING (QE). DEMAND FOR GOLD IS AS STRONG IN BRITAIN AS REVULSION TO THE POUND STERLING CURRENCY. $$$

A multitude of extremely powerful factors are aligned to push the Gold price in Pound Sterling terms to new highs. The move, like in Euro terms, is tentative but clear. USGovt debt is out of control. Rescue for banks, economic stimulus, basic outsized federal deficits, and monetization of the finances work to produce a perfect storm. It will push up the Gold price. Reality is soon to strike Britain that not only is another firm Quantitative Ease round due, but the financial situation is not resolvable. Talk of UKGovt debt default will rise to a crescendo level. What happens to Britain will happen to the United States, but with a delayed timing. The next UK general election is expected to result in a hung Parliament. The absence of a firm leading coalition would have an equivalent effect of permitting blood to leak into the waters for all FOREX trading sharks to see. The incoming UKGovt would struggle to take the action necessary to reduce debt, to install reform, to resolve the bank insolvency, to promote stimulus, to do anything constructive. The onliest task they will undertake with gusto is more bank welfare. The consensus is growing for QE2, another powerful round of monetary expansion to compensate for what Britain cannot execute, the accomplishment of a recovery or integration of effective reform. The corrupted financial sector is beyond remedy. New sterling money must be created in order to buy UKGilt bonds, as gigantic deficits are to continue, forcing debt monetization longer than expected. The British Parliamentary elections have resulted in a heightened volatility in the British Pound currency, a flash point.

The Gold price has taken flight over British soil, also in a gradual process. A different type of bullish Cup & Handle reversal pattern is evident, one with an even more bullish neckline tilt bias. It indicates an 880 long-term target, the lift calculated from the breakout level at 720. Rising moving averages confirm the uptrend, as does the stochatix cycle. However, the breakout is tentative for Gold in Euros, probably due to the queer positive paradoxical US$ benefit. As funds move away from the British Pound, the paper dependence leads again to US$ alternative demand that suppresses the base gold price. The Gold breakout in price will occur last and most powerfully in US$ terms.

◄$$$ THE CANADIAN GOLD PRICE HAS FALTERED AFTER A DOUBLE TOP DECLINE. LACK OF A SUSTAINED GOLD RISE IS THE PRICE OF OWNING A STRONG COMMODITY CURRENCY. SUCCESS HAS ITS PENALTY. $$$

Two very different technical perspectives can be argued. First, the double top has produced an intermediate failure. A strong Canadian Dollar currency inhibits any gold rally in Can$ terms. Gold typically competes with the domestic currency, but the Loonie is strong due to its commodity fortifications led by crude oil and natural gas. So a gold rally is not underway over Canadian soil. Consider a less plausible scenario. Second, the double top could be part of a similar Cup & Handle reversal of bullish nature. The key is the right side handle. It cannot be permitted to break down further. It has already fallen more than is healthy, more than the Gold-Euro price and more than the Gold-Pound price. The right handle is supported by the 50-week moving average, not a good development for the reversal breakout argument, but surely positive to maintain a stable price. The giveaway that convinces the technical analyst that the 'First' double top failure scenario is the correct one, in my view, is the poor stochastix cycle near oversold ground. It shows weakness. Perhaps a second Cup & Handle is being formed, still a potential bullish indication. In effect, the right side handle could be yet another cup in the making. Time will tell. My forecast is for the commodity currencies (Canadian & Australian Dollars) to outperform all major currencies in the next chapter of the Competing Currency War. In the process, a gold breakout in those currencies is not possible. One should remember that the Gold breakout in price will occur last and most powerfully in US$ terms.

◄$$$ SILVER COMMITMENT OF TRADERS SHOWS A STRONG POSITIVE SIGNAL. THE LAST FEW TIMES SUCH A SIGNAL WAS SEEN, THE SILVER PRICE ADVANCED STRONGLY. OF COURSE, NOTHING STOPS JPMORGAN FROM ILLEGALLY POUNCING ON THE MARKET, SELLING SILVER WITHOUT METAL COLLATERAL OR INVENTORY, TO KEEP THE PRICE DOWN. $$$

The Commitment Of Traders Report from late February was very promising. It marked the end of contract expiration, usually bullish. Open interest was 117,376 but as of the close on the March 2nd, the COMEX Open interest was almost 10,000 contracts less at 107,748! That large drop in one week coincided with the silver price pulling away from the floor at the $16/oz price and rising up. The Ratio of Commercial Short contracts to Commercial Long contracts is close to 2:1, an extreme low in historical terms. To many precious metal experts (traders & analysts), this ratio is the most consistent of all buy indicators. See the chart of the Short/Long Ratio (in red) below against the silver price (in blue), with the extremes shown in green ovals and the extreme ratio pointed to with a green arrow. The chart is admittedly not current.

Note in the graph that since January 5th, only four times has the Commercial Short/Long Ratio fallen to 2:1 or lower. On each occasion, a strong rise in the silver price resulted, forming intermediate term bottoms. This buy indicator proved reliable during the confusing times of late 2008, when the hedge funds were under attack by Wall Street with USDept Treasury complicity, guidance, and assistance. On each occasion when the ratio dropped to 2:1, a purchase of silver would have given an investor a profit of well over 50% in the next several months. From the January 23rd data, the ratio was at 2.09-to-1, a bullish signal. The deep decline in Open Interest suggests the strong possibility of heavy liquidation in the Commercial Short position. A rise in the silver price in the next few months seems assured. James Turk seems right on the money, calling the end of Q1 timeframe the low point for gold & silver.

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