The Mushroom Cloud of the Gold Derivatives Neutron Bomb

January 23, 2003

Gold $364.20 up $4.80 - Silver $4.76 down cents

"Success is sweet and sweeter if long delayed and gotten through many struggles and defeats." - Amos Bronson Alcott

How sweet it is! We are on our way.

Gold started to take off in Asian trading and stayed very firm around the clock. Early on in Comex trading, stops were touched off and gold soared to $366.70. Dealers frantically tried to take gold back down with the intention of filling what could be our "breakaway gap." No dice! Large retail buy orders (50 and 100 lots) absorbed their selling and they had to give up.

Realizing they would get nowhere with gold, the cabal forces, led by Goldman Sachs and Morgan Stanley, went after silver. What a joke! I thought the gold rigging was obvious all those years, but this silver is ludicrously obvious. When The Café opened in September 1998, gold was around $288 and silver was $5.20. I have no idea how they are doing it, but silver is clearly managed. When they finally lose that battle, as they have with gold, silver will explode. Don’t expect an orderly move higher.

As suspected, the gold derivatives neutron bomb is going off. We saw the first signs of its mushroom cloud today. Serious problems at the big hedgers ought to surface in the near future. A good number of them have hedged three to five years out, a few as long as ten years out. These hedges were put on below $300 years ago. They are way underwater.

Many of the big hedgers report their forward sales prices much higher than $300. That cannot all be accounted for by the old cantangos. A decent portion of their higher priced forward sales figures come from derivatives, such as written calls and other price enhancers. There have to be a few VERY unstable situations out there in big hedger land.

Adding to the derivatives problem are the calls written by option houses, bullion banks and some central banks. Then, there are the 15,000 tonnes of gold loans/swaps that must be dealt with in the weeks and months ahead. The gold price could do anything at any time.

The Gold Cartel and other shorts are doomed because the physical market is just too strong and the cabal has run out of ammo to hold it down any longer. Gold is on its way to $800/$1,000 per ounce!!!!

The general gold market commentary worsens by the day the higher gold goes. Seems as the investment world wants to attribute the rise mostly to war jitters. Surely, that has something to do with it, but that is only a secondary factor. The real reason gold is starting to roar is the gradual demise of The Gold Cartel and the surging physical market. War, or no war, gold is going many hundreds of dollars per ounce HIGHER!!!
Did the stock market rise and crude oil fall today on war fears???
Gold went up today on war fears and silver went down on war fears???



My kind of chart:

http://futures.tradingcharts.com/chart/GD/23

We can expect a test of the gap left today. Maybe it will be filled, maybe not. Regardless, gold is going much higher in the weeks /months to come. Can you imagine how much buying will come in when the investment world is finally clued in to what WE KNOW!?!?!

The John Brimelow Report

Thursday January 23 2003

Indian ex duty premiums: AM $1.18, PM $0.56, with world gold at $361.75 and $363.10. Below legal import point, of course, but not massively so. A report on TheBullionDesk from an Indian newspaper speaks of excited retail selling, natural since rupee gold touched an all time high today. It also quotes a dealer saying hopefully:

"One thing, however, is certain that the moment US president Bush softens his stand on war, the so-called safe haven will collapse like a pack of cards."

Both suppositions are questionable.

The key news of the evening was the arrival of the Japanese public. Several Bullion bank commentators allege that Fund buying timed for thin times during the US evening successfully triggered stop loss buying, and perhaps this was present, although on previous occasions Japanese selling blocked this tactic. Today, however, the Japanese were in a mood to buy also: on huge volume equal to 100,460 Comex lots, 151% above yesterday, and only 9,000 Comex lots below the all time high, they pushed $US gold to a $364.50 high in the middle of their afternoon session, before Trade Houses could access the opening European gold markets to drive prices back down. The active contract closed up 9 yen, $US spot closed at $361.50, $1.90 above the NY close. An interesting article on Platt’s quotes Japanese commodity brokers saying:

" "Everyone is a buyer, and no one wants to sell anything at the moment," … Another broker said Asian-based funds and individual speculators are rushing to buy gold…"the general public did not want to sell for profit. Everyone wants to hold onto their long positions," a Tokyo-based broker added. ".

See http://www.platts.com/stories/pr1.html

Every few years, TOCOM exerts a powerful and distinctive influence on world gold, the last time being a year ago. This could be decisively bad news for the Bears.

New York traded 51,374 lots yesterday, with open interest rising 2213 contracts, and 64,298 on Tuesday, when open interest rose 3,629. Open interest now stands at 220,499 contracts. TOCOM open interest is the equivalent of 132,237 Comex lots – early last year it was for some time larger than New York’s.

Tim Wood on The Mining Web site today usefully raises the issue of the extensive short interest discernable in gold shares. See:

http://www.mips1.net/mggold.nsf/Current/4225685F0043D1B285256CB60073B897?OpenDocument .

Certainly this provides a plausible explanation for the sluggishness of the group, well illustrated today by one noted bullion dealer, who yesterday supplied worthwhile charts presenting his concept that Bush’s popularity and gold are inversely related. If gold chooses not to break hard when/if Iraq is resolved, these shorts will have an interesting time.

JB
"Sorting out an order snafu at Kitco today (not their fault, my bank's), I'm told buy orders for gold - the physical stuff – are pouring in," says one Café member.



I wanted to throw up when I received this email last night:

I just saw an 3:03pm PST today January 22nd here in Oregon on CNBC on Business Center an interview of Carlos Asilios - Chief Strategist of JP Morgan by Sue Herrara . The interview was exclusively on gold. Incredibly, he said JP Morgan has been "bullish on gold for well over a year" and is still bullish today. He cited the Iraq war as the only reason, and if the war was called off then gold would go down. He did not reveal the real reasons, or JP Morgan's own hand in holding down gold.

How hypocritical! These "no goods" have been gold's biggest enemy and now they have been bulls in gold? Nothing would amaze me anymore from these bullion banks.

Gold up $2.00 in after hours after a +$2.40 session. Your site is incredible. My hat is off to you sir!!! My portfolio of gold stocks primarily GG and GFI are up 4xs. It looks like we haven't seen anything yet. Keep up the good work.

http://www.lemetropolecafe.com/