Steve Quayle News Alerts

January 28, 2004 -

Gold $414.60 up $4.90 - Silver $6.60 up 7 cents

"You know, it's a funny thing, the more I practice the luckier I get." — Lee Trevino

When I woke up this morning, gold was almost $3 higher despite a rising
dollar. Par for the course, it began to fade as we approached the Comex
opening and then was slammed on the opening bell, briefly going down 60
cents. Always the same drill from The Gold Cartel. The locals know the
program so well they constantly jump on board with them. However, I believe
this will change soon. Just as the silver market action began to trade
differently when it traded above $5 for awhile, I suspect the nature of the
gold trading action is going to change with gold having held the $400+
support area very easily. Instead of looking to sell all gold rallies, the
new deal is going to be to buy the dips.

In many various presentations and public commentary at the Vancouver
conference I stressed the importance of what was going on in the physical
gold/silver market and laid out what has been presented to Café members,
including John Brimelow's unique and extremely valuable work. There was no
one else at the conference doing so. While most conference presenters
stressed the weak dollar as the most important gold factor, I stressed it
was the surging physical market.

On that regard, I learned this morning THE STALKER (probably China) just
completed the last bit of its $6.8 billion order. NOW, THE STALKER is
working on its additional 800 million to $1.2 billion dollar gold order
(brought to your attention recently). I might know more on this on Friday.

To give you some idea of how significant this is, Norway just reported they
sold 16 tonnes of gold in January (see below) and plan to dump another 17
tonnes of bullion, which will clean them out. The Gold Cartel and friends
jump up and down about more central banks selling their gold and make a big
deal how negative it is. What The Gold Cartel fails to tell the press and
their clients is who is BUYING gold and to what extent. Can they all be so
uninformed?

At $410 gold, a billion dollar buy order means THE STALKER is going to buy
another 76 tonnes of gold, AFTER buying 500 tonnes+, starting below $350.
Just the new order amounts to more than double what Norway is dumping.
There is enormous BIG PLAYER gold investment demand kicking in all over the
world which is making life miserable for The Gold Cartel and friends and
confounding the gold pundits, most all of which expect gold to break $400.

The gold trading today was picture perfect. After the early sell off, gold
charged back to go into positive territory. After trading either side of
unchanged, it began to make new highs. Each time, gold would set back and
then make another high. Outstanding price action. Meanwhile the euro
managed to climb out of a hole, climbing back also to the unchanged area
ahead of the FOMC meeting announcement.

Silver closed at a six-year new high and did so with little fanfare and no
bells and whistles going off. Meanwhile, there is a serious possibility the
March silver contract could be squeezed. What I like most is: NO ONE ELSE
is even talking about it.

Yesterday, both gold and silver put in outside day key reversals to the
upside, a technical development which bodes well for both precious metals:

Gold
http://futures.tradingcharts.com/chart/GD/24

Silver
http://futures.tradingcharts.com/chart/SV/34

There are no near-term gold and silver gaps to fill, a short-term bullish
consideration. It now appears the two big gaps silver left around $5.80 and
$6 are important breakaway gaps, which might not be filled for years to
come. From a technical perspective, this is VERY bullish. One of these is
unusual for silver, but two!!!

The silver open interest rose 2687 contracts on yesterday's big pop to
114,036 for the move. I believe that is a new high.

The two week composure period for gold is ending. Funny how it follows this
pattern over and over. Bullion could easily soar from here and rise faster
than most in the gold world think. First target is to fill the gap left
around $420. I thought gold would explode in January. Perhaps that
assessment was a month early. FEB might be the month.

The John Brimelow Report
New Bull indicator: Central Bank harrumphing
Tuesday, January 28 2004

Indian ex-duty premiums: AM $5.65, PM $5.36, with world gold at $408.60 and
$410.70. Comfortable for legal imports. The Indian Budget, announced today
produced dramatic headlines about gold importation, but on close inspection
the proposal is simply to cease restricting the list of permitted
importers. This is a marginal adjustment from the standpoint of the global
bullion market.

Indian drama was massively upstaged from Japan, where an enterprising
supplementary question to the Japanese Finance Minister during a
parliamentary committee, produced the answer that the question of Japan's
FX reserve gold holdings would be considered "carefully".

Since it is obvious to everyone that the failure of the Asian nations to at
least keep stable the gold proportion of their ballooning FX reserves since
the late 80s has profoundly impacted the gold market, and that the major
Asian FX pools are crazily undiversified on any normal standard of
investment management prudence, this has naturally electrified the gold
community. Two Bullion dealer commentators devote much of their dailies to
the news. And it certainly could catch speculator attention.

My own view is that the pattern on Asian FX asset distribution is the
product of intense diplomatic effort by Washington over the years,
involving mainly bullying with client states like Japan and Taiwan, and in
the case of China, bribery: tolerance of a ridiculously undervalued
currency permitting predatory export pricing. The Japanese Minister's
response was actually non committal. One day this will all change, but
probably not yet. Still, the fact that the issue was raised, and the
interest shown today, underline how sensitive the question is.

This exchange was not picked up by the Japanese media. The yen was firm.
TOCOM was grudging towards gold's remarkable reversal in NY hours
yesterday: the active contract was up 16 yen, but world gold was 25c below
the NY close at the end. Volume slipped 15% to the equivalent of 35,930
Comex lots; open interest declined by another 1466 Comex equivalent. (NY
yesterday traded a huge 153,267 contracts. Open interest was virtually
unchanged, down 324.)

Tuesday was once again, very illuminating. Bearishness was rampant when
Comex opened after the peculiar breaking of the much-watched $405 level the
previous evening. More alert bears, however rapidly became alarmed at their
inability to make downward progress. An unexpected and sharp decline in the
Dollar then completed the stage setting for a disorderly rout, so many
short term traders being caught out. This did not happen because after
rising $6 in 2 &Mac184; hours on an estimated 75,000 contracts, gold was pinned
just below $411 for the next $2 &Mac184; hours, during which an estimated 85,000
lots traded. As a result gold essentially matched the Dollar Index decline,
despite having achieved a far more significant technical reversal. In
ScotiaMocatta's words, employing the familiar euphemism:
"There were not many offers in the market forcing the funds to chase the
price all the way to 412.00/412.50 before any resistance appeared. Overseas
offering then appeared late in the day forcing the price to a settlement of
409.80/410.30".

So who was this public-spirited entity which ignored the chance to scale up
advantageously, greatly assisting the shorts? And why would the Norwegian
Central Bank announce it sold half its gold reserves in January and that it
was going to sell the remaining 17.5 tonnes, rather than complete the
program first, or say nothing as to the balance? And is anyone surprised
today to find a Reuters interview, published in the late European day, with
a "senior euro zone source" repeating that the Washington Accord renewal
may increase selling limits, perhaps by 25%?

What is, however, worthy of note is that, unlike during the second half of
the 90s, the bullion market seems able to absorb this treatment. In fact,
Central Bank harrumphing, if anything, suggests a rise to a new level is
close.
JB

CARTEL CAPITULATION WATCH

Disappointing economic news:
Jan. 28 (Bloomberg) -- U.S. orders for goods made to last at least three
years were unexpectedly unchanged in December, restrained by less demand
for metals, communications equipment and appliances, a government report
showed.

Orders for durable goods held at $181.4 billion after falling 2.3 percent
in November, the Commerce Department said in Washington. Excluding
transportation equipment, orders dropped 0.7 percent after falling 3.2
percent in November. Economists surveyed by Bloomberg News had forecast a 2
percent rise in orders, according to the median estimate.

Jan. 28 (Bloomberg) -- U.S. sales of new homes unexpectedly fell in
December to a 1.06 million annual pace, the slowest in eight months,
setting the stage for a slowdown after last year's record.

The 5.1 percent decline followed a 2.8 percent decrease to a 1.117 million
rate in November, the Commerce Department said in Washington..

END-

Horrendous US economic news:

Federal Deficit Is Expected to Reach $477 Billion For '04
Mon Jan 26, 2:33 PM ET

WASHINGTON -- The Congressional Budget Office (news - web sites) said it
expects the federal government to run a $477 billion deficit in fiscal year
2004 -- the largest ever in terms of dollars.

The CBO also warned Monday that the cumulative deficit that will accrue
between 2005 and 2014 will hit $1.9 trillion, and this figure doesn't
include President Bush (news - web sites)'s proposal to make his tax cuts
permanent.

The fiscal picture from 2004 through 2013 has worsened by $986 billion
since CBO last released deficit projections in August.

END-

GATA's Mike Bolser:

Hi Bill:
The Fed added $9 Billion in repurchase agreements today, January 28th
2004.This action kept the repo pool well below its 30-day moving average
and continued to reduce the purchases of DOW futures and remove support for
the DOW.

At this hour the DOW is up a bit, trading at 10,640.

While we could simply see a sideways move for a month or so, I still expect
the DOW to retrace back down to 10,300 and then move on back to its trend
line. The Fed has acted boldly (and continues to do so) to remove repo
support and this time the DOW exuberance is well entrenched and has
sustained the index further than the Fed expected (I am guessing here).

The key indicator of the repo pool's 30-day moving average continues to
steeply fall and is a powerful signal that the Fed has kept the hammer down
and will keep it down until the DOW responds. Time will tell how long the
DOW will keep running.

Later this evening I will post a DIVG update to better assess the cartel's
latest counter attack. They have temporarily taken back some ground.
Mike

Chuck checked in last night:
Make it 20 of 21. Even after an excellent move in gold and the shares, the
last hour in the shares is sloppy and nervous. It's as though no one wants
to go out on a limb on the close and actually expect the gold market to be
up the next day. Actually, I am surprised that anyone is left to sell them,
but there are probably some day traders who have nailed down a huge 2% gain
in their trades today. What a vision for gold! Even though the juniors have
held up relatively well recently, there is no interest today in them.
With the dollar retesting again the 85 level, we could have a surprise sell
off in it. Interesting how strong the yen is remaining despite all of the
intervention to lower it. Could mean there is a major breakout here. Very
very bullish technicals here. Very heavy volume in the Comex during the
past 3 days. Should mean something. I think that tomorrow with the Fed
rolling out the bull statements but the need to keep rates low, could be
interesting.
Chuck

Make that 21 out of 22 Chuck!

Adrian on the yen taking out 106:

Bill,
The Bloomberg release in your Midas is dynamite! I had postulated to you
that there was paranoia about breaking $/Yen=106. Breaks of this level
created violent gold market attacks even on gold friendly news days. Today
was a decisive break and a close below 106. The statement from the Japanese
suggests that there must have been a line in the sand agreed between BOJ
and FED. The Japanese must have said that they would weaken the Yen if
$/Yen stays above 106 but a break below it would suggest they would not be
supporting the dollar in temporary market weakness but trying to reverse a
bear market trend. There seems to have been a pre-arranged point (106)
where the BOJ must have considered that intervention would be imitating
King Canute. It looks like they have abandoned the FED and the Cartel. The
reason for the paranoia will probably be apparent as the dollar makes
friends with Isaac Newton and discovers the law of gravity.
Adrian

Today's early overseas currency news:

Jan. 28 (Bloomberg) -- The yen fell against the dollar in London after the
Bank of Japan sold its currency, said traders who deal with the central
bank and asked not to be identified.

Japan may have spent as much as $5 billion today, according to Minoru
Shioiri, senior manager of the treasury and foreign exchange division in
Tokyo at Mitsubishi Securities Co. Finance Minister Sadakazu Tanigaki said
the yen's rally to its highest in more than three years yesterday was ``a
bit rapid.''

``It's a message saying `we're still there. We can't reverse the rise of
the yen, but we can slow it down,''' said Niels Christensen, currency
strategist in Paris at Societe Generale SA.

Jan. 28 (Bloomberg) -- European Central Bank council members Klaus
Liebscher and Nout Wellink signaled they see no need for the bank to stem
the euro's appreciation with an interest-rate cut or currency sales.

``We haven't been and we aren't of the view that we should do something,''
said Wellink, one of 18 rate setters at the ECB, in an interview with
Bloomberg News in Toronto. ``The economic rebound shows that other factors
are at work. Interest rates are appropriate,'' said Liebscher in a separate
interview in Vienna.

END-

The sheep-like dummy Western central bankers continue to naively dump cheap
gold:

Norway c.bank says sold 16 T gold, to sell more
OSLO, Jan 28 (Reuters) - Norway's central bank said on Wednesday that it
sold 16 tonnes of gold bars in January and is planning to sell the rest of
its holdings in bullion.

It said that at end-2003, it had gold reserves of 37 tonnes, consisting of
3.5 tonnes of coins and 33.5 tonnes of gold bars.
"Revenues from the sale have amounted to about 1.5 billion Norwegian crowns
($219.2 million), which has been invested as part of Norges Bank's foreign
exchange reserves," it said in a statement. It said that it would sell all
the remaining gold bars but keep the coins.

END-

What fools! Oh well, they only have 17 tonnes left to unload, which THE
STALKER will eat right up. Meanwhile, more evidence the East is willing to
accommodate the foolish West:

Bullion Traders Cautiously Upbeat On Tanigaki Gold Remarks

Sydney, Jan. 28 (Dow Jones) - Asian bullion traders have reacted with
cautious optimism to remarks Wednesday afternoon by Japan's finance
minister on the country's desire to re-examine its foreign exchange
reserves, including its gold holdings.

"It's certainly very interesting, and if Japan do go ahead and buy more, it
would have a very, very positive impact on gold," Martin Mayne, associate
director of bullion sales at N M Rothschild and Sons in Sydney, told Dow
Jones Newswires

Sadakazu Tanigaki said his ministry will carefully consider whether to
change the composition of its US$673.53 billion in forex reserves,
including the weighting of gold in that total.

According to the latest data, Japan has a relatively low amount of bullion
compared with other nations, including the U.S. The market may interpret
the remark as suggesting it will move to diversify its portfolio on concern
over heavy exposure to U.S. dollar-denominated assets.

While traders said the initial reaction in the bullion market was muted,
they credited the news with nudging up the spot price by about US$1 in late
afternoon Asian trade.

Of the four traders reached by Dow Jones Newswires, all said the key
question was whether words translate into action and Japan does indeed go
ahead and buy more bullion. If so, the price of gold stands to rise, they
agreed.

"It's a little unusual," said one Hong Kong trader upon learning the news,
"but presumably good for gold."

-END-

What is important about the Japanese gold news is the fact bullion was even
discussed. It makes so much them for diversify their foreign exchange
holdings.

From Economy.com this morning on the Japanese gold story:

Tokyo to Buy Gold?
The Japanese MoF is contemplating shifting its massive currency reserves to
gold. Minister of Finance Sadakazu Tanigaki indicated today that such a
move was possible, but abstained from giving details and a time frame. If
adopted, this shift would have repercussions on the U.S. dollar, gold and
the servicing of the U.S. current account deficit.

Years of consistent currency market interventions to stem the appreciation
of the yen have led to the accumulation of colossal reserves. At the end of
December 2003, Japanese foreign reserves stood at U.S. $673.5 billion, the
largest held by any country. An anomaly, however, was that gold only
accounted for $10.2 billion of the reserves, a very low amount compared to
other nations, including the U.S.
Currency market intervention has come at a price for Japan. Acquiring U.S.
Treasury securities with U.S. dollars purchased with yens has led to
substantial loses given that U.S. interest rates have been at historic
lows. Simultaneously, the price of gold has shot up to record highs, making
the yellow metal an attractive alternative as store of value. Thus, from
Tokyo's standpoint, a shift away from the U.S. dollar and toward gold would
be judicious.

In taking a broader perspective, this move could rattle already-volatile
currency and commodity markets, especially if Tokyo's lead is followed by
other East Asian countries. Indeed, East Asia holds two-thirds of the world
foreign currency reserves, the bulk of which is held in U.S. Treasury
securities.

Should the region adopt gold as store of value, Washington will be left
with a riddle. The U.S. current account deficit necessitated U.S. $33
billion in servicing on average each month last year, nearly half of which
was funded by foreign central banks acquiring U.S. Treasury securities.
Inadequate current account deficit funding could have ramifications of U.S.
fiscal and monetary policy.

-END-

OH SO WHAT:

FRANKFURT, Jan 28 (Reuters) - European central banks are mulling an
increase, possibly as much as 25 percent, in the amount of gold they can
sell under a new gold agreement expected this year.

"It could be in the ballpark of 2,500 tonnes, from 2,000 now," a senior
euro zone source said of talks about a successor to the current five-year
pact, under which 15 European central banks have been capping sales at 400
tonnes per year.

The current accord expires in September, and dealers have said sales above
500 tonnes a year would be bearish for prices.

END-

As previously mentioned, THE STALKER alone will eat up 500 tonnes in less
than a one year period. This is one major buyer. With the Chinese market
opening up and the growing Indian economy going like gangbusters, it won't
really matter what the West does with its Washington Agreement in the years
ahead. Why any of them would want to sell any cheap gold is beyond me? They
will look foolhardy
down the road for their blundering, myopic ways.

From The Contrary Investor, 1/27, "Weighing In On Rate Sensitivity"

THE FOREIGN SECTOR

A few weeks back, the US Treasury released November 2003 numbers for
foreign purchases of US Treasuries. As of October month end, the foreign
community owned 41% of total marketable US Treasuries outstanding. As of
November month end it was 42.2%. Will it be another 58 months or less until
the foreign community owns all marketable US Treasury debt? Of course this
is a sarcastic comment, but directionally the increase in foreign ownership
of US Treasuries has been going straight up for the past few years
literally by the month.

When we broke apart the November numbers, 72% of total November Treasury
buying came from five Asian countries - Japan, China, Hong Kong, Taiwan,
and Korea.

As you remember, in early 2003 the Fed threatened to essentially monetize
US debt (buying bonds with money that was basically "printed") if deflation
were to become a significant problem stateside. The Fed never had to make
good on this threatened promise as Asia has been doing the job for them,
deflation or no deflation.

We've focused on foreign exchange intervention in many a discussion and
necessarily this has included an examination of foreign buying of US
Treasuries in support of foreign exchange interventionist efforts. We won't
go through another long explanation of the process by which this is
happening in this discussion. You already know that a declining dollar has
made foreign purchases of US financial assets of all types a losing
proposition for some time now.

But so far into this process, interest rates have behaved. The losses for
the foreign community have really come in the form of exchange rate losses
as opposed to absolute price destruction as a result of higher US domestic
interest rates. A forward rise in interest rates would change this in a
heartbeat.

Of course what we don't know is how the dollar will react when interest
rates eventually do rise meaningfully. Nonetheless, as we continue to move
ahead toward the next interest rate up cycle, we do so with foreigners
owning more US fixed income assets than ever before. For now, what this
ultimately means remains to be seen. Maybe the foreign community will be
completely content to suffer yet further losses in bond values as US
interest rates rise. Or maybe a meaningful trajectory of higher rates will
be the straw that breaks the proverbial camels back in terms of foreign
support of US fixed income markets. In 2003, foreign holdings of US debt as
a percentage of the total US debt market reached a new high.

-END-

A long standing theme of mine is to buy the quality exploration companies
because there just isn't enough gold coming on stream in the years to come
to satisfy the growing gold demand. A gold exploration boom is coming and
the best exploration firms (the ones coming up with the goods) are going to
fly:

Mining exploration booms but big finds elusive
1/27/2004 3:33:37 PM
Nicole Mordant

VANCOUVER, British Columbia , Jan 27 (Reuters) - For the first time in six
years, mining exploration companies and in-house divisions are stuffed to
the gills with cash as higher metal prices lure investors back into the
recently shunned sector.

But analysts say investors anxious for a major discovery and a quick buck
may have to be patient, despite the billions of dollars flowing into
miners' coffers last year.

"It takes time to find a deposit. With the past lack of exploration
spending and despite the money raised last year, there will probably be a
lag in new discoveries," said Alex Davidson, vice-president of exploration
for Barrick Gold Corp.

The sudden pick-up in available money follows a skeletally lean period
since 1997, the year when Canada's Bre-X gold scandal shattered confidence
in the mining exploration industry at a time when metal prices were also
heading south.

Thousands of investors lost money when Bre-X, a Calgary exploration firm
convinced them it had made a massive gold discovery in Indonesia that later
proved to be a hoax.

"The problem in the past five years was that most of the money being raised
was just to keep the lights on," said David Caulfield, president of Rimfire
Minerals Corp., a junior exploring for gold in British Columbia.

But last year miners on Canada's TSX Venture Exchange raised C$1.28 billion
($946 million), up a whopping 124 percent from 2002. The exchange has the
world's greatest concentration of explorers, hunting for precious and base
metals in just about every corner of the globe.

Larger mining companies are also increasing exploration budgets for the
first time in years, dipping into the $4.2 billion that the global mining
industry raised in 2003.

Barrick's Davidson said the spate of mega mergers in the mining industry
since 2000 are also to blame for the downturn in exploration spending in
recent years as individual budgets, and jobs, were slashed when two firms
became one.

The new mining giants are also looking for larger deposits than the smaller
ones they were satisfied with in the past.

"Areas are getting more mature, especially Canada and Australia," said
Caulfield.

"The easy stuff has already been found... I guess, we are just going to
have to work harder."

-END-

The Vancouver conference was a lot of fun for me. I have more friends up
that way than here in Dallas. The place was packed with 4500 people flowing
through the booths and listening to the various presentations. On Monday
night Chris Powell, Ed Steer and I went out to dinner with Samex CEO Jeff
Dahl, J-Pacific CEO Nick Ferris and JP Shoemacher, who is Ferdi Lip's
partner at the TOP GOLD fund in Switzerland.

A special salute to mega GATA supporter Doug England who joined Chris and I
for lunch on Monday. He has successfully battled eye cancer and is retiring
this week after a distinguished business career.

It was a fine day with our camp all smiles when, all of a sudden, The Gold
Cartel swung into action out of nowhere. The moment the closing Comex bell
was wrung, the gold shares went into a full-scale retreat. The HUI was not
too far off its high of the day of 231.77 when it suddenly sold off 3
points for no apparent reason. The DOW at the time was up 30 and quiet
ahead of the FOMC announcement. What is going on here I thought to myself.
Nothing is moving, but the gold shares. The dollar, bond and stock markets
were barely trading and very quiet.

Then this Fed announcement:

Fed Drops `Considerable Period' Phrase, Holds Bank Rate at 1%

Jan. 28 (Bloomberg) -- Federal Reserve policy makers unexpectedly dropped
their commitment to hold interest rates low ``for a considerable period''
today, while voting to hold the benchmark U.S. interest rate at 1 percent.

The Federal Open Market Committee voted unanimously to leave the overnight
bank-lending rate at the lowest since 1958, according to its statement
after a two-day meeting. Economists at 21 of 23 firms that trade securities
directly with the central bank had expected the Fed to keep the
``considerable period'' wording, which had been in each statement since
August.

END-

Because of the changing of a couple of words, US interest rates shot up,
the US stock market swooned, the dollar roared and the gold shares went
into a free fall. Sarge had it nailed:

"They set that one up earlier in the day, starting at 12:30 CST. Sold the
hell out of gold stocks before the FOMC announcement knowing that they were
moving in for the triple whammy at 2:15 (buy dollars, sell euros, sell
gold/stocks). So what if the DOW craters, right?? That is easily handled
with a few REPO bucks."

From Houston's Dan Norcini the specifics on the HUI decline prior to
announcement a drop after both gold and silver went out on their highs:

Bill:
Here's the prices from the ten minute daily. Notice, we are down a bit more
than 2 points before the release of the FOMC statement to the press from
the time Comex gold closes. A bit strange considering the weakness in the
dollar throughout the entire day and the strength in gold itself. After the
release, "BOOM" , they all get nailed at once.

12:30 Close 230.29
12:40 Close 229.96
12:50 Close 229.14
1:00 Close 229.16
1:10 Close 228.20
1:20 Close 224.78

The HUI was approaching 226 AS the Fed made their announcement.

How sickening! Anyone who was watching the gold share market today between
1:30 EST and 2:15 EST and doesn't realize the "fix" was in is a complete
moron. Nothing could have been more obvious after listening to the Fed
announcement. This is a reason The Gold Cartel capped gold again today
within its $6 rule. Even accounting for 34,000 contracts of Feb gold
switches, today's Comex was volume was huge at 110,000. Buyers were pouring
in and the crooked Gold Cartel was holding their fort, waiting for word
from the FOMC. They knew exactly what was coming.

This is about their 748th violation of the anti-trust laws of the United
States. The insider Gold Cartel continues to fleece the public, laugh, and
steal your money whether it be in the Futures or precious metals share
market. Outrage is too insignificant a word to describe my disgust at these
creeps. This is nothing less than a criminal operation which makes a
mockery of the notion American financial markets are fair play.

Back to the markets. The dollar closed at 87.24, up .70 and the euro fell
1.22 to 124.91. The 30-year long bond fell 26/32 to 110 28/32. The DOW was
clobbered, falling 142, to 10,500, which includes a late 30-point rally.
The pricey DOG fell 39 to 2077. The crooks knew the stock market was to be
hit hard and did not want gold and the gold shares to move up to give any
impression of a potential financial market problem. This has been their
modus operandi for many years.
___________________________________________________________

Time to take a deep breath and look at what is going on:

*Mike Bolser has been telling us to look for a stock market setback based
on his repo work. In other words the Fed wanted the market to go down.

*The US stock market is way overvalued and overbought. There was no fear
out there and this is when you get surprising hits like this.

*The economic news was disappointing today and not dollar supportive. The
dollar rally should be short-lived. To go up because of a Fed-wording spook
and not because the Fed actually raises rates is somewhat of a joke.

*A stock market rout should be gold/gold share friendly, not bearish.
Financial market concerns are reasons for gold to go up, not down.

*The Fed's statement indicated greater inflation fears, which was the
reason for the changing of the wording in their statement. This is gold
friendly, not gold negative.

*The devious capping of the gold price rise today and the blatant selling
of the gold shares prior to the Fed announcement was orchestrated by The
Gold Cartel.

*The Fed and PPT are doing what they can to hold the deteriorating US
financial system together with smoke and mirror rhetoric and maneuvers. To
come out in the open like they did with the gold shares today suggests the
first sign of serious concern, perhaps even the first signs of a touch of
panic.

*The serious gold buyers know what we know and must be laughing at The Fed
and the PPT for giving them the opportunity to buy cheap gold again, a
commodity which looks more valuable to own by the day.

*An overbought and overpriced US stock market ought to take it on the chin
in the weeks ahead, while gold and silver should rebound from early
setbacks tomorrow and challenge $430 and $7 respectively by mid-February.
________________________________________________________________________

Talk about contradictory technical developments. After the key technical
gold and silver reversals to the upside yesterday, the HUI did the reverse,
putting in a outside key reversal day to the downside. It made a high of
231.77, then closed at 219.46, down 6.47 and below 220 key support and
yesterday's low. Regardless, those dumping shares at these prices are going
to be very unhappy campers in the weeks to come. The XAU sank 2.37 to 96.30.

HUI
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hui&sid=0&o_symb=hui&freq=1&time=8

In the Access market, gold gave up all its gains during the Comex session
and silver dropped 11 cents. This is all nuts. Gold and silver should be
great buys tomorrow anywhere near these prices. The US gold market con has
gone too far and is too obvious. The biggest money in the world will
continue to want in on the coming gold and silver plays. Having money
elsewhere is going to be too scary as time goes by.

GATA BE IN IT TO WIN IT!

MIDAS

Appendix
by Martin Hutchinson

The Bear's Lair: Drowning in liquidity
By Martin Hutchinson
Published 1/26/2004 8:15 AM

WASHINGTON, Jan. 26 (UPI) -- Much to commentators' surprise, the United
States Treasury bond market has been strong over the last few weeks, with
the 10 year bond's yield declining to 3.94 percent Thursday and mortgage
originations for home purchase setting a new weekly record Wednesday. Happy
Days, it is generally felt, are Here Again. High liquidity, like alcohol,
generally has this effect -- but leads to a nasty hangover afterwards.

Signs of high liquidity are apparent throughout the world, with the partial
exception of Europe. Spreads on emerging market bank debt have narrowed
continually, so that even debt of the near-bankrupt Turkey and the
socialist-ruled Brazil now yield only a few percent above Treasury bonds,
compared to yields of 15 to 18 percent above Treasury bonds in late 2002.

Margin debt on the New York Stock Exchange, announced Friday, at $173.2
billion was up almost 30 percent in the last year, a sure sign that small
investors are once again in a frenetically speculative mood.

Emerging stock markets, with the notable exception of China, were up hugely
during 2003, with India up more than 100 percent from its low, and such
deadbeats as Argentina and Brazil doing even better in dollar terms. In
China, the money has gone into bank lending, with bank loans to the Chinese
corporate sector, mostly to prop up losses in state owned companies and
invest in dubious real estate projects, up by over 30 percent of gross
domestic product in 2003. My colleague Ed Lanfranco wrote Thursday about
China's automobile market, where automobile sales rose 34 percent in 2003,
to 4.35 million vehicles, even though Chinese automobile prices remain
above world levels. China has become the world's third largest automobile
producer, behind the United States and Japan and ahead of Germany. This is
of course wonderful news for the future prosperity of the human race
(albeit less so for oil prices or global warming) -- it does however
suggest that in China too there may be an economic overheating problem.

The dollar has dropped by more than 30 percent against the euro since early
2002, the gold price has risen above $400 an ounce and crude oil is trading
close to $35 -- all of which suggests that there are too many dollars
around for the amount of economic activity going on.

Only Europe and Japan are exempt from the tidal wave of easy money. In
Japan, nominal interest rates remain low, but the economy is close to
deflation, with consumer prices dropping as competition shakes out the dead
wood in the Japanese distribution system.

In Europe, the European Central Bank under Wim Duisenberg pursued a
cautious and sensible monetary policy, taking account of economic
conditions in all the Euro member countries including inflationary Spain
and Ireland. Since in the real world no good deed goes unpunished, he has
now been replaced by a more inflation-prone Frenchman, Jean-Claude Trichet,
and Europe has been plunged into a prolonged. albeit not particularly deep
recession, made worse by the continual slide in the dollar, and the
consequent difficulties for Euro zone exporters.

To add insult to injury, European policymakers are besieged by a Greek
chorus from across the Atlantic, pointing out mysterious European
"structural problems" that supposedly condemn Western Europe to an eternity
of minimal productivity growth and economic stagnation. In reality,
Europe's "structural problems" of high taxes and heavy social costs are no
worse and in some respects better than they have been for the last 25
years; there is a demographic problem approaching when the post-war baby
boom retires, but we are half a decade away from that yet. It is little
wonder that the modestly reforming French and German leaders, lumbered with
an ever-appreciating currency that decimates their export markets and
attracts a flood of under-priced Asian imports, find the moral lectures of
the wholly un-reformist Bush administration hard to bear.

Britain shows what might be happening to the U.S. if it had pursued the
fiscal but not the monetary side of the Bush/Greenspan U.S. policy. There
the government deficit is widening rapidly, but the currency remains strong
and the trade deficit, always a weak point of the British economy, is
nowhere near crisis level. In Britain, unlike in the United States, the
housing bubble appears to be beginning to deflate, but confidence in the
economy is very much lower, with an economic optimism index currently
registering minus 26, an excess of pessimists over optimists.

There's no question that we are in a place without roadmaps -- this
particular combination of circumstances has not as far as I know been seen
before. In 1929-33, the Federal Reserve pursued a tight monetary policy,
with catastrophic results in terms of bank failures, making the Great
Depression far deeper than would have been necessary as a result of the
Wall Street crash. In Japan in the 1990s, the authorities pursued a loose
fiscal policy similar to that being followed by the Bush administration,
but the Bank of Japan, while allowing interest rates to decline, pursued a
monetary policy considerably tighter than that followed by Greenspan since
2001.