Oldtent Archives 2007 - 2008

Hi Bill:
One of the juniors I’ve been buying is Rainy River Resources. Its price has collapsed.from a high of Cdn$5.95 to under $2 last week. It only has 57.6 million shares outstanding so its market cap fell to about $115m even though it has $34m in cash and 3.7m oz of gold which translates if we subtract the cash to roughly into $22 per ounce.

Given its safe location and excellent drill results this seems more than ridiculous. The company thought so too, thus this announcement today which may scare some of the shorts. Perhaps more juniors should begin defending themselves.

Cheers from Auckland, Ed Wener

“VANCOUVER, BRITISH COLUMBIA–(Marketwire - Aug. 18, 2008) - The Board of Directors of Rainy River Resources Ltd. (TSX VENTURE:RR - News; the “Company”) announced today that it has filed with the TSX Venture Exchange a notice of intention to make a normal course issuer bid (the “Bid”) for certain of its Common shares. Pursuant to the Bid, the Company intends to purchase, through the facilities of the TSX Venture Exchange, up to 2,000,000 of its outstanding Common shares. The Company anticipates that the Bid will commence by August 25, 2008 and will terminate by August 25, 2009. The Company has 57,633,190 Common shares outstanding. The shares that may be purchased under the Bid represent approximately 3.47% of the Company’s outstanding Common shares. The actual number of shares that may be purchased and the timing of any such purchases will be determined by the Company. Purchases pursuant to the Bid will be conducted through Canaccord Capital Corporation, and the price that the Company will pay for the shares will be the market price at the time of the purchase. All shares purchased under the Bid will be cancelled.
Said Rainy River President Nelson Baker, “We believe that recent market prices of our Common shares do not properly reflect the underlying value of the Company. With our positive drilling results to date and a treasury of $34.1 million which we estimate will be more than enough to fund operations for the next two years, we believe that the issuer bid is in the best interest of our shareholders. It will provide some liquidity for those shareholders who wish to dispose of their shares and enhance the potential future value of the shares which remain outstanding.”

-END-

Hi Bill,
I’ve been buying physical gold and silver at a local coin shop in St. Louis for over six years. When I first went, gold was about $325 an ounce. I remember the man telling me that they couldn’t give it away, and they were full up to their ears with inventory.

Throughout all the time I’ve been there, they always had inventory. I wanted silver eagles, no problem, they’d give me as many cases as I wanted. Until yesterday. I went in, and all they had was a partial case. I took it. They had four (4) 1 oz. gold coins. That was the entire inventory.

For weeks, this establishment has been running full page ads in the paper asking people to sell. The manager told me they had 5 buyers for every seller.

People are starting to get it.
Best,
Paul

There’s been no Eagle -type coin silver here in Elko for months, Bill. I went in and cleaned out the remainder of the cheaper Peace Dollars here again, but there were no Silver Eagles or Mexican Onzas or anything available.

Best, Rick

“Craig talked to a buddy of his at Monex and right now you’re looking at more than two months before you can take delivery, but even that number might be extended given the volume of orders they were seeing as the paper metal markets were getting hit.”

Adrian from Dubai…

Bill,
There are bullion shortages in India too! Note that sales in Mumbai have gone up eight fold to 4t per day. If that rate continues then Mumbai alone would be selling 83% of total world gold mine output! What is clear is that price for the paper market can not prevail. Bullion dealers will be standing for delivery on exchanges to replenish stocks. The question will be do the exchanges actually have any significant quantity of unencumbered bullion for delivery? We are going to find out very soon. I think we know the answer!

When investors find no bullion available their only alternative will be to buy shares of mining stocks.

www.thehindubusinessline.com/2008
/08/17/stories/2008081751400300.htm
QUOTE
Price fall leads to gold rush, short supply

Alka Kshirsagar

Pune, Aug. 16 The onset of the Indian festival season and the downward slide in the price of the yellow metal has set off a gold rush that’s quite unprecedented in recent times, leading to what is seen as an “acute shortage of raw gold” across the country.

On account of the sudden spurt in demand, banks dealing in the commodity, are facing a huge crunch, and according to one jeweller, “have run of out stocks”. Consequently, the metal is selling at a premium, as banks as well as dealers have upped their premiums, and are supplying the precious metal only against bookings.

In a cascading effect, jewellers too are making deliveries four to five days after they take orders and payment in advance.

Mumbai sales

In Mumbai, one of the largest bullion markets in the country, daily gold sales have gone up almost eight times from an average of 500 kg to 4,000 kg over the last few days, Mr Suresh Hundia, President, Bombay Bullion Association Ltd, told Business Line.

“Some banks are charging suppliers’ commission of Rs 4,000 per kg of gold, against the normal Rs 500. Dealers’ premiums too have increased sharply, from Rs 2,000 to Rs 30,000 a kg,” he said, adding, t in the coming days, prices may drop further.

Mr Fatehchand Ranka, President, Maharashtra Saraf Mahamandal, an umbrella organisation for 434 jewellers’ associations with a total membership of over one lakh jewellers, confirmed that the tremendous resurgence of interest in buying gold had created a shortage.

“There is currently a tremendous demand for gold. It has been rising for the last 10 days, but has peaked over the last two days. The number of buyers is around thrice as many during normal times and almost every shop is looking like a fish market,” the owner of Ranka Jewellers, one of the city’s largest jewellery store chains, said. He added, “Banks have run out of gold, and are importing more of the commodity. To cope with the situation, we are taking bookings, and giving delivery after four or five days.”

Psychological barrier

According to Mr Saurabh Gadgil, partner in PNG Gems and Jewellery, the psychological barrier for gold purchase is around Rs 11,500 per 10 grams. “Once this has been breached, the demand has spiralled up,” he said, adding that consumers are now buying gold in both biscuit form for investment as well as jewellery. “The approximate percentage is 40:60 respectively,” he said.

END
I am appropriately writing this from “The City of Gold”…Dubai!
Cheers
Adrian

Bill,
It looks to me that India is going to have to go shopping for gold on the global market. You have to love the quote
“As more gold bars were bought at banks, the denomination vanished as the stock was limited.”!!
QUOTE
sify.com/finance/fullstory.php?id=14739470
100 gm gold biscuits sell like hotcakes
Himansh Dhomse / DNA MONEY | Wednesday, 13 August , 2008, 11:00

Bullion markets in Ahmedabad and Mumbai are running out of stock of 100 gm gold bars due to limited supply. With prices falling more than Rs 500 in a single day, traders rushed to banks to buy 100 gm gold bars. Since stock was limited, bookings have started.

“Traders are expecting gold prices to fall further and so bought as many 100 gm gold biscuits as were available. As more gold bars were bought at banks, the denomination vanished as the stock was limited. Traders prefer using 100 gm and 1 kg gold bars for making gold jewellery,” said director of the World Gold Council, Dharmesh Sodah.

This fall was unexpected, and so, the supply was limited. “In July, gold prices were at an all-time high, and so, production of 100 gm bars in the global market was also less. But, the price has suddenly tumbled in the last few days, leading to a heavy increase in demand from traders. Gold coins of 1 gm, 2 gm or 5 gm are easily available, but for 100 gm gold biscuits or bars, one will have to book them one or two days in advance,” said city-based bullion trader, Girish Chokshi. “Traders are now ready to pay a little more than the market price to buy 100 gm bars of gold on premium,” he added.

Even banks did not expect the short supply. “We have enough stock of 1 gm gold coins. But, in the case of 100 gm biscuits, traders will have to wait for another day. As supply is limited, 100 gm gold biscuits are not available on the spot,” said chief general manager of State Bank of India, HC Pattnaik.

In July, gold prices reached an all-time high of around Rs 13,700 in the domestic market.

“The total import of gold in Ahmedabad was around 9 tonnes in July, and when it started falling, the demand increased. In just 12 days of August, gold imports have reached around 13 tonnes,” said director of GSEC Ltd, Samir Mankad. He added that on Monday, gold import was around 4 tonnes.
END
Cheers
Adrian

Kitco Home Page:

IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults.

Bullion Direct Home Page:

High Activity Market Alert

The precious metals industry is experiencing a substantial surge in activity which may increase the possibility of logistical delays; including customer service response time, product processing (incoming and outgoing), and product transport/fulfillment.

Certain silver products are delayed as much as 2-4 weeks. Please review Catalog descriptions for notices regarding such delays.

We are working diligently to fulfill all orders in a timely fashion while maintaining competitive prices.

We appreciate your patience and understanding.
The Bullion Direct Team

As long as demand continues to surge and once the margin liquidation is done I could see a $100 to $120 snap back rally back very quickly. The reason I say that is you know I believe part of the manipulation is centered around the manipulators driving the tech funds through their moving averages forcing liquidation and then getting the tech funds computer models to generate short sales. On December futures I have the 20 day ma @ 892.6. The 50 day @ 913.8 and the 100 day @914.7. It seems to me there is no economic incentive for the manipulators to re-short Gold and Silver until they can make what they consider a guaranteed profit ie shorting it above the moving averages. Disclaimer: I did not see this coming and I have had my worst month in 8 years.

However after a weekend of serious thought I come to the conclusion that as long as physical Gold demand continues to surge the August lows could be one hell of a buying opportunity. I consider just about every other investment possibility lacking. T-Bills are yielding 1.6% with 5% inflation and M-3 & MZM growing above 15%. Real estate prices could be flat to down for many years. Stocks can’t go up because earnings are imploding and the financial crisis is worsening; yet, the manipulators will not allow them to go down either. Therefore, they are not a safe short either. Europe is falling apart and the Euro looks like it is going to be forced into the competitive devaluation camp. Emerging markets have not proven to been a safe haven. Commodities such as oil, grains and base metals could face demand destruction. However, with worldwide money supply surging and worldwide real interest rates negative, they appear to be a dangerous short as well. This is the part of the cycle where Gold is supposed to perform; fear accelerates causing demand for the yellow metal to surge. This appears to be just what we are seeing with the above headlines from Kitco, Bullion direct and as you say the U.S. Mint. If Indian pent up demand kicks in this could be the trading opportunity of the year.
Garic

  Agree with you about the bearishness but I certainly can understand it. I don’t know about anyone else but this has been the worst of any of the major corrections in this market that I’ve experienced. Course what makes it worse is that the juniors have been correcting for over 3 years.

   Charts are broken, the dollar is rallying and the bullion banks are relentlessly destroying the paper markets. Lots of fear and a feeling of fighting an enemy that never dies.

  Your last comment about the “cretins” in the aftermarkets pretty well sums up what we’ve faced for five straight weeks. Brutal.

TOCOM

Good Evening All:
On Friday the seven big gold shorts reduced their net short position by a hefty 8,019 contracts to 36,567 contracts. This is the lowest net short position that they have held since I began recording this data in February 2006. The TOCOM gold standard contract total open interest is also at the lowest level since February 2006.

STDJ also reduced their net short position by 1,101 contracts to 29,202 contracts.

www.tocom.or.jp/souba/gold/torikumi.html

In silver they increased their net short position by 16.50 contracts to 1,373.50 contracts (60kg deliverable equivalent).

www.tocom.or.jp/souba/silver/torikumi.html

Best Wishes,
Scott

Bill,
In the August 15 session on the TOCOM Goldman Sachs COVERED 224 short contracts and sold 2 long contracts to bring their long position to 778 contracts and their net short position to 4,766 contracts. This is a new 30 month record low for their net short position. Last week Goldman told their clients they were turning bearish on gold and expecting $740 in the short term…hmmm! …how incongruous is that??? Surely they couldn’t have deliberately made a wrong call to help them cover their own gold shorts!
Cheers
Adrian

The gold open interest fell 3,109 contracts to 368,528. The silver open interest dropped 954 contracts to 138,940.

The gold COT report is a waste of time in some ways these days, yet still useful as to understanding the big picture regarding what has transpired in the gold and silver markets. The latest figures, compiled as of the close last Tuesday, and released to the public at 3:30 New York time, revealed:

*The large specs decreased longs by 33,215 contracts and decreased shorts by 147 contracts.

*The commercials decreased longs by 900 contracts, but reduced shorts by 44,004.

*The small specs reduced longs by 6,179 contracts and increased shorts by 3,857.

The last two gold COT reports were bullish and very bullish, with specs exiting and commercials covering. This report is extremely bullish, yet the gold price collapsed following the compilation of the report … meaning the price tanked well after the commercials had covered those additional 44,000 contracts.

That said, it does reveal what is occurring, a good deal of which Bud Conrad covered in his superb piece. The Gold Cartel have capped the market, as we all know, and then began their raid, triggering spec sell stops and key technical sell point levels. The bullion banks in the cabal are pros at this and know exactly what to do and when. When the avalanche of spec selling kicks in, they use the opportunity to gradually cover on the way down. This is why the open interest contracts so much.

It is interesting to note the open category which rose was the increased shorting by the small specs, which has to be considered to be very constructive. This is consistent with a number of retail investors pitching their shares into a hole at bargain basement prices.

This report also is helpful in appreciating what a set up we have here for the prices of gold and silver to soar in the weeks and months ahead, as…

Many specs have given up on their long positions due to the severity of the collapse and the general bearish commentary and forecasts from The Gold Cartel crowd (Goldman Sachs and others) along with numerous know-nothings in the mainstream gold world. I would not be the least surprised if GS is buying for its own account, only to change their mind in the months ahead … coming out with an OOPS, after affecting a good deal of investor selling so they could buy on the cheap. What a class act this firm is.

SO…

*The small specs are going short at a noticeable rate.

*The large specs are exiting.

*The commercials are covering.

*Gold and silver retail physicals are reported all over like I have never seen before.

That is not a combination for a bear market … only a bull market raid by a cantankerous Gold Cartel which was effective … one effected because the US financial system is staring at further systemic problems, as evidenced by the widening credit spreads.

It should be noted that gold (and silver) is like no other market from a technical standpoint. After all this buying in recent weeks by the cabal forces and other shorts, the commercials are still short by nearly a 3 to 1 margin (97,743 longs and 253,556 shorts).

James McShirley’s 2% Rule came into play yet again, courtesy of The Gold Cartel. To minimize excitement over gold the cabal forces keep gold to rises of no more than 2% on any given Comex trading day. Exceptions are rare, regardless of the outside market stimulus news.

Corn rose sharply and the CRB gained 2.05 to 384.35, despite the fact oil fell 90 cents to $112.87 per barrel.

The dollar was unchanged at 77.12.
The euro closed way off its highs, rising only .0005 to 1.4694.

The yield on the 10 yr T note fell to 3.81%. The Fed is doing nothing to support the dollar, while the Treasury is doing all it can to orchestrate dollar support via intervention.

More gold goodies:

Welcome back India

India was closed on Friday for Independence Day, perhaps the most scrupulously observed of all the Indian public holidays. In effect, the Bears had a free paw. Some Indian cities will be closed tomorrow as well.

Indian ex- duty premiums today: AM $21.14, PM $11.83, with world gold at $798.70 and $797.90. Astonishingly high: far above legal import point. This was basis Ahmedabad, but the other Indian importing cities showed similar results. The stock market was down 0.53% and the rupee was very soft: closing a $1=R43.59 (Friday R43.01). No commentary says so, but with the oil recovery being so muted it is quite possible the rupee is being moved by gold demand.

The BullionDesk.com has a valuable story explicitly saying that the huge gold demand surge has cleaned out stocks:

“London, 15 August 2008 - Available bars of gold in India have all but disappeared, due to a ‘perfect storm’ that has restored gold’s lustre and forced physical premiums skyward ahead of the peak season for jewelery demand.

“Pretty well everyone is sold out of stock there. We have seen premiums as high as $2.50 an ounce which is unheard of in India. Most refiners are now booked solid through September,” said a senior figure at a bullion bank in London”

See

premium.thebulliondesk.com/news/editorial.aspx?GUID=5808081513131412&V=0

Friday’s $22.40 drop on Comex saw open interest fall only 3,109 lots (9.67 tonnes), less than half gold’s percentage loss. The bears apparently are still willing to sell, possibly short.

Two violent efforts in NY today to reverse earlier gains in Asian and European time were only partially successful. Estimated volume was just short of 111,000 lots with a switch effect of 9,000: not heavy by recent standards. Gold closed up $13.60.

***

….This is as negative as I’ve seen Goldtent…since we started….glad to see it actually

PS the Cretins are at it again….Gold down 11 in the thinest market….early access market….what a crock..

Great article. Seems we are enjoying modern day price controls. The 1000 oz silver bars hold the key.

Gold made it to $804 in overseas trading and silver gained more than 50 cents. That was until The Gold Cartel traders reported for work in London and began to sell at their usual time…

Both gold and silver were never able to make it back over their overseas highs, but both responded positively on the day, rebounding from VERY oversold conditions.

James Conrad of www.seekingalpha.com wrote as fine a piece as you will find on what the gold and silver markets are about these days … one of the most comprehensive and insightful pieces on the precious metals that I have read in the past decade. I urge every Café member to take the time go over it. Some excerpts…

The Disconnect Between Supply and Demand in Gold & Silver Markets

August 18, 2008

There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver. Indian shops are empty of both silver and gold. Even the Indian banks don’t have any gold or silver. The big western bullion banks, based in New York and London, control both the gold and silver trade. Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal….

Contrary to the pundits at CNBC, Bloomberg, etc., the price of gold really has nothing to do with the value of the dollar or the value of oil. It doesn’t matter what the dollar is worth, in relation to euros, pounds sterling or Zimbabwee money. It only matters what supply and demand factors exist for gold….

But we don’t live in a world of free markets. Instead, we are living in an Orwellian 1984 double-speak world. Welcome to the world of Fed/PPT, where 2+2=5, blue is yellow, and black is white. All things are as they say they are, rather than as they really must be…

We have a disconnect between reality markets and fantasy markets. The COMEX and London Metals Exchange are fantasy markets controlled by the big bullion banks. They must be engaged in market manipulation, because nothing can explain a big price collapse, in the midst of widespread shortages and robust demand…

seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets

-END-

For further insight into this painful correction we have endured, Jesse has it:

The Case for the Gold Bull Market

We are experiencing a correction in the gold bull market that is within the bounds of our past experience. In 2006 gold had a correction of -22+% in a breathtakingly short period of time, and then consolidated and retested and starting moving higher to the new highs in 2007.

The correction in 2008 while uncomfortable is still very much in line with this bull market. We seem to have violent corrections every few years with major bottoms reached after capitulation lows. More often we have lesser correction of 10%….

jessescrossroadscafe.blogspot.com/2008/08/case-for-gold-bull-market.html

-END-

There are certain things about the Dow wedge I would like to talk about - not to mention the deflation thing. My email is on IMDB - if you can’t get it there -post and we will find an alternate solution. Also, in talking to mrs aurum I happened to mention that your ideas came from entirely different thoughts than mine - but when we agree it is powerful. She said don’t let that go - she is the big spender you know. Anyway please keep in touch with me via email if not on this site.

Your charts show things I have never seen - I don’t want to lose those very original thoughts.

Thank you.

aurum

Hi Ho y’all…maybe it’s time to fly the Russian flag on a Belize

beach… 

Moggy

Text by Laurence Gonzales

Photograph by Dan Saelinger

Long ago I believed that survival meant having a pack full of equipment that would allow me to make fire and build shelter and trap varmints to eat in the wilderness. But then I kept coming across cases in which someone had survived without any equipment or had perished while in possession of all the right tools. Obviously something else was at work here. After more than three decades of analyzing who lives, who dies, and why, I realized that character, emotion, personality, styles of thinking, and ways of viewing the world had more to do with how well people cope with adversity than any type of equipment or training. Although I still believe that equipment and training are good to have, most survival writing leaves out the essential human element in the equation. That’s why I’ve concentrated my efforts on learning about the hearts and minds of survivors. You can start developing these tools of survival now. It takes time and deliberate practice to change. But new research shows that if we adjust our everyday routines even slightly, we do indeed change. The chemical makeup of the brain even shifts. To make these lessons useful, you have to engage in learning long before you need it—it’s too late when you’re in the middle of a crisis. Presented here are 14 concepts that have proved helpful to survivors in extreme situations, as well as to people trying to meet the challenges of daily life.

http://tinyurl.com/55znel

Mike Shedlock aka Mish has an August 14 article that outlines the case for deflation very well.  Here is a link to it.

globaleconomicanalysis.blogspot.com/2008/08/implications-of-slowing-global-economy.html

Here is a snip:

‘With a weakening global economy, default risk is rising everywhere. Unsurprisingly, the cost of raising capital is also rising. One implication is that junk bond yields and yields on preferred stock of even the highest grades are going to soar. And soaring corporate bond spreads are never good for the equity markets in general, at least over the long haul. A second implication is that treasury yields are poised to fall, not only in a flight to safety scenario, but also because the savings rate in the US can be expected to rise, and with that, internal demand for treasuries in the US will rise.

‘This is of course exactly what one should expect in deflation, with deflation being properly defined as a net contraction in credit and money. Credit, especially credit marked to market (and the latter has a long, long way to go), is contracting rapidly.

‘Those focused on prices and the rear view mirror of the CPI are simply focused on the wrong things when it comes to treasury yields. The important things to focus on are the deflationary forces of sinking asset prices, the effect that bank writeoffs will have on future bank lending, and the lagging effects of the CPI itself.

‘The overall implication is that treasury yields are likely to go lower. And when they do, expect to see still more shouts of intervention and manipulation, especially from market participants who do not understand what inflation and deflation really are.’

====================

My comments:   I have tried to explain my view that the inflation that  we are seeing derives from past actions that date back nearly a century.  Mish thinks as I do that the current forces of deflation will drive the future actions of the markets.

Some would argue that the Fed and other central banks will reflate the economies around the world.  The bond market and other markets are far too large to let any central bank have its way, unless these markets agree.  They control interest rates on the longer term bonds and Treasuries.

…maybe you can sell them some sand ?….probably don have much sand in Moskow