Quotes of the Day

Important gold news -- Holders of gold contracts on the Comex are taking delivery of their gold, big time. Inventories of Comex gold for delivery are sinking fast, and my guess is that all this newly available gold is being shipped overseas. See the story on "Seeking Alpha on Comex gold." Russell advice -- hang on to your physical gold and even buy more! I believe this is the beginning of a worldwide move by various nations (China, Russia?) to accumulate physical gold.

- Richard Russell, Dow Theory Letters 

These HFT crooks (mainly JPMorgan in my opinion) have set us all up so perfectly that the market (if we can call it that) now waits for the crooks to set prices first and then transact business for the rest of the day at the prices the HFT crooks have dictated. I think we've all lost our minds to allow this. I don't think the regulators at the CFTC or the CME have lost their minds, just any sense of what's right and what they are responsible for. I also don't think that JPMorgan has lost its mind, as the intent behind the sudden takedowns is the enable the bank to buy as much gold and silver as possible and the record clearly indicates that is exactly what these crooks have done.

 - Silver analyst Ted Butler, Butler Research, July 6, 2013

Remember what I have written here more times than I care to recall at this point - calling market bottoms and tops is a fool's errand for those with egos that need to be fed. A profitable and successful trader can make a fine living just catching 60- 70% of a trending move.

What will eventually take gold higher will be that shift in sentiment from one of deflation or benign inflation to one of concerns about a resurgence in inflation. That is what we are watching for signs of. When it does, we will know it from the price action!

 - Dan Norcini, July 8, 2013

- With Fed Monetization of Treasury Debt at 90.5%,

- Money Supply Growth Patterns Suggest Banking-System Stress

- Using Consistent Seasonals, June Payrolls Rose About 160,000

- Full-Time Employment Plunged by 240,000 in June

- Economic Issues Accounted for 75% of Gain in Part-Time Employment

- Number of Short-Term Discouraged Workers Increased by 247,000

- June Unemployment: 7.6% (U.3), 14.3% (U.6), 23.4% (ShadowStats)

"No. 540: Updated June Employment and Unemployment, Money Supply M3"

- John Williams, Shadowstats.com, July 8, 2013 

The fundamentals have not changed in recent years, other than events keep moving towards the circumstance of a domestic U.S. hyperinflation by the end of 2014. 

- John Williams, Shadowstats.com

Beginning to Approach the End Game.  Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system.  The financial system still remains in the throes and aftershocks of the 2008 panic and near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government.  Further panic is possible and hyperinflation remains inevitable.  

- John Williams, Shadowstats.com

I think a great deal of money is going to be made as Europe recovers from its economic crisis.

From David's Desk 

David Schectman

Gold Is a Good Alternative

Both Edelson and DiGerogia work for Weiss. Their views on Europe are polar opposite. There is no longer consensus on anything economic. Is gold up or down? Is the stock market up or down? Is the dollar up or down? This is one tough economic landscape to navigate. Everyone has tough choices to make and you will have to rely on your "gut" feeling. Mistakes will be made, and they will be big ones. Now is the time to think logically about the markets and decide what offers value. Do you buy stocks that have been rising for five years or do you buy gold that has been greatly oversold and plunging for two and a half years? Will Europe's economy implode, as suggested by Edelson or will it recover as suggested by DiGeorgia? Will the dollar rise with Europe's problems or will it fall in the economic crisis as envisioned by DiGeorgia? Russell thinks the bull market in stocks is getting long in the tooth and it is starting to worry him. Edelson is strong on the stock market. A weak stock market usually is good for gold since the money that exits will be looking for a new home and gold is a good alternative. But Edelson expects a strong rise in the stock market and at the same time, gold to move into a super-bullish cycle. Do you see what I mean? No easy choices, no consensus. You are on your own (as usual) and these are very difficult and I say dangerous times. Not a good time to make a major mistake. Personally, I like gold and silver, but I am very loyal to this industry and I still cannot imagine this will turn out bad, but I also have a few year timeframe in mind too. Which way things go in the next few weeks/months are anyone's guess, but I do believe that Bernanke will keep the markets as calm and steady as possible until he leaves office at the end of the year. He surely would like to leave on a high note, not with the economy in distress and that suggests more QE and more "talk" about austerity, but no action. Whoever replaces Bernanke has one hell of a job on their hands.

John Paulson has dropped a bundle in his bullion-based hedge fund, but he is not throwing in the towel and takes the "sensible" long-term view, like we do. We think he is correct and admire his strength of conviction!

From Bloomberg:

John Paulson, the billionaire hedge-fund manager seeking to rebound from losses tied to bullion, posted a 23 percent decline in his PFR Gold Fund last month, according to a letter to investors.

The drop brings losses in the strategy, formerly known as the Paulson Gold Fund, to 65 percent since the start of the year, the firm said in the July 3 letter, a copy of which was obtained by Bloomberg News. The fund, which consists mostly of Paulson's own money, is the smallest strategy of the $19 billion money manager and the only one to post losses this year.

The firm reiterated its commitment to investing in bullion and stocks of gold producers for protection against currency debasement as central banks pump money into the global economy. Gold dropped 12 percent in June, the most since October 2008, after Federal Reserve Chairman Ben S. Bernanke said he might start reducing bond purchases that have fueled gains in financial markets globally.

"Although the timing is uncertain, if you have a long-term view we believe the funds offer the potential for outsized returns," the firm wrote in the letter.

-Zero Hedge, July 8, 2013

And finally, a few words from Richard Russell - and we agree with every word that he writes:

Thanks to Benny and the Feds -- you've inflated the price of everything, you've killed the common man's savings via collapsing buying power, you've killed the Treasury market, you've created bubbles in various assets (art, cars, collectibles), and you've driven the dollar higher, hurting our exporters. Finally, in your frenzy to halt deflation, you've screwed up most of the markets with your QE, Twist and ZIRP. I hope you've saved enough in spare notes to buy the gas needed to fill up your jets.

-Dow Theory Letters, July 8, 2013

Dow Theory Letters

Sincerely,

David Schectman

Miles Franklin

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Jim Sinclair (www.jsmineset.com)

In The News Today

Posted July 9th, 2013 at 9:38 AM (CST) by Jim Sinclair

Jim Sinclair's Commentary

Looking for a low in gold? It has already come, or will come on this.

Bernanke to make July 10 speech on Fed's policy record

WASHINGTON | Wed Jul 3, 2013 4:19pm EDT

(Reuters) - The Federal Reserve said on Wednesday that Fed Chairman Ben Bernanke would make a speech in Cambridge, Massachusetts, next week on the central bank's 100-year history, its policy record, lessoned learned and prospects for the future.

The announcement of his appearance on July 10 at 4:10 p.m. EDT (2010 GMT), at a conference hosted by the National Bureau of Economic Research, was released in a regular update of the Fed's schedule for upcoming official events.

Financial markets are on red alert for any hints on the direction of monetary policy after the chairman said on June 19 that officials expect to begin scaling back monthly bond purchases later this year from a current $85 billion pace, provided the economy develops as they expect.

That sent stock markets plunging and put sharp upward pressure on bond yields, which was stemmed only after other Fed officials pushed back hard in speeches last week, saying investors were over-reacting to Bernanke's remarks.

The Fed said Bernanke would answer questions from the audience after delivering his speech next Wednesday, which is taking place several hours after publication of the minutes of last month's policy-setting meeting.

More...

China's gold imports still at unprecedented highs With net gold imports through Hong Kong again exceeding 100 tonnes in May, China looks like heading to absorb over 50% of global gold output this year - and rising. Author: Lawrence Williams

Posted: Monday, 08 Jul 2013

LONDON (Mineweb) - Figures for net Chinese gold imports through Hong Kong in May have now been released, and, while they did not quite come up to the record level seen in March at 136 tonnes, at 108.8 tonnes they were still the second highest total on record, and comfortably in advance of April's 80 tonnes.

In April, it is thought that the level of net imports could have been far higher but traders were taken by surprise following the exceedingly high March import figures which had used up their quotas and a subsequent rundown of stocks that month which had not been fully replaced by the time of the big April 12 gold price fall which had appeared to stimulate huge physical demand.

In retrospect, the scenes of crowds stampeding the dealers to try and secure gold that month may have been exacerbated by what is now known to be a shortage of stock which forced price premiums to almost unprecedented levels.

The initial very steep price fall on April 12 hugely stimulated demand throughout the East in particular, although there were also reports of high levels of physical demand elsewhere too.

Gold's price performance since then falling even further has perhaps diminished the huge demand surge.  In addition, India's draconian measures to try and cut gold imports on the face of things seem to be being successful in keeping volumes down - at least official volumes are seen to be sharply lower, although smuggling, which won't find its way into the official statistics may mitigate this fall-off a little in reality.

More...

Gold Pops Higher In Asia

Posted July 9th, 2013 at 9:39 AM (CST) by Dan Norcini & filed under Trader Dan Norcini

Dear CIGAs,

Gold jumped in overnight trading during the early Asian session when China released its version of the CPI. June CPI came in at +2.7% on the year where the market was looking for +2.5%. Apparently there was a rush to grab gold when the data hit the wire. Prior to that gold was relatively quiet with a slight bias to the upside.

As you can see on the chart, volume is miniscule however. The big test will be what the metal does when it enters European trading but more importantly, New York trading.

The weakness in the gold shares today (Monday) is generally a bearish sign when the metal and the shares go their own separate way so call me a skeptic until proven otherwise. Asia still loves gold while the West seems to despise it; until the West comes around to falling back in love with the metal, it will be up to Asian buying to do the heavy lifting in the metal.

I have noted an overhead chart resistance zone, which basically extends from last week's high at $1267 - $1269. Bears will be complacent unless this region is taken out with strong volume; otherwise they are going to look to sell into this rally. If the mining shares were strong, that would make them second guess so we will have to see how that sector trades during Tuesday's session.

I have also noted a region between $1210 and $1185 on the downside which was the price range delineated by very strong volume. Most of that volume was short covering after the $200 plunge where bears rang the cash register on what was one of the most profitable gold trades in a very long time. There was some bottom picking as well but compared to the extent of the short covering, it was insignificant.

LeMetropole Cafe (www.LeMetropoleCafe.com)

7/8 Gold Leads Silver Higher, But Who Are Those Guys?

Surprise, surprise? Japanese investors are dumping U.S. Treasurys

One of the big surprises of 2013 may not actually be so shocking once you take a close look at the numbers.

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Sprott Group (sprottgroup.com)

Silver... Light at the End of the Tunnel?

July 9, 2013

by David Franklin (dfranklin@sprott.com) and David Baker (dbaker@sprott.com)

Silver's year-to-date performance has been the worst among all commodities, falling 35% from January to June 30th this year. It's been a rough ride for those who have held on, but recent news should give silver investors a reason for some renewed optimism.

The news relates to recent filings that have revealed a dramatic change in the positioning in the silver futures market and ownership of the iShares Silver Trust (SLV).

In the COMEX futures exchange, the "Commercials" category of traders, made up of large banks, has traditionally held significantly large "short" positions - which means that the banks are either hedging an existing silver position or betting that silver will depreciate. The recent COMEX disclosures have revealed a staggering drop in the "Commercials" outstanding short positions, however - representing a decrease from 259 million ounces in February 2013 to 20 million ounces as of the last Commitment of Traders ("COT") report released June 25th.¹ This represents a significant change in the positioning of the silver futures market, and also suggests that previously 'short' participants have exited the "short silver" trade altogether. This drop actually represents the cumulative purchase of approximately 240 million ounces of 'long' silver contracts to cover the previously mentioned short positions, so despite silver's price decline, the silver futures market has actually seen an abundance of buying.

Unfortunately, the COT and Bank Participation Reports don't name the largest holders of futures contracts, but it has been alleged that one of the largest commercial 'short' contract holders is JP Morgan. JP Morgan has long been questioned by silver investors who suspect that the bank may be manipulating the price of silver for its own benefit. This speculation has also been fueled by the fact that JP Morgan acts as the physical custodian for the largest silver ETF, the iShares Silver Trust (SLV), which has just over $6 billion in underlying assets.

The culmination of these suspicions resulted in a nationwide investors' lawsuit that was launched against the bank back in 2011. In that suit the plaintiffs alleged that JPMorgan held "significantly more net short COMEX silver positions than the next three largest traders on COMEX combined." The Plaintiffs also asserted that, based on their analysis of CFTC Bank Participation Reports and a CFTC "Commitment of Traders" Report, "from August 5, 2008 forward, JPMorgan held approximately 20-30% of the total short open interest in all COMEX contracts."²  The suit was recently dismissed this past March, however, when plaintiffs could not prove that the bank "intended to cause artificial prices to exist".³

Interestingly, in addition to the drop in 'Commercial' short positions (which may or may not involve JP Morgan), recent filings have also revealed that JP Morgan has dramatically increased its ownership in the SLV ETF, for which it acts as physical custodian. The bank has purchased close to 5 million units of the ETF over Q1 2013, representing an increase of 500% as reported in regulatory filings submitted April 25, 2013.⁴

The most common interpretation of this shift is that the large bank (presumably, but not directly confirmed as JP Morgan) has closed out its silver short positions (at a nice profit, no doubt), and is now positioning itself for a bullish silver reversal. This is certainly what the bank appears to be doing in the futures market, although its participation through "paper" products based on silver's spot price, rather than on the underlying metal itself, makes it difficult to know for sure. JP Morgan's role as SLV custodian may also be involved in the recent changes, as the SLV has, surprisingly, not seen much in the way of net outflows over the past six months, despite silver's lackluster performance over the same period. Contrast this to the GLD gold ETF that has lost close to 23% of its underlying gold holdings since the beginning of the year.

Also noteworthy is the fact that the latest COT report for gold, as reported by Bloomberg, shows that the 'Commercials' have reduced their net short gold position to 35,200 contracts. The 'Commercials' haven't carried this low a net short position in Comex gold futures for more than 10 years. Could it be that the banks most active in shorting precious metals are preparing for gold and silver to start moving in the opposite direction?

With silver ETFs holding strong and large commercial buyers repositioning their books to the long-side, we could be witnessing a reversal in investment demand and, in turn, a potential bottom in silver prices. We will have to wait and see how the silver price responds to these changes in positioning.

Casey Research (www.caseyresearch.com)

Egypt: The Petrodollar's Latest Battleground

By Marin Katusa

About a year ago, on June 30, 2012, Mohamed Morsi took his oath of office to become the first democratically elected president in Egypt. Though barely eking out a victory over Ahmed Shafik with 51.7% of the vote, Morsi acted as if he and his Muslim Brotherhood allies had a clear mandate from the people to rule as they wished. The troubles began brewing back in November of last year, when Morsi decreed that all decisions he made since June of that year are not subject to appeal of any other authority. As we mentioned in a past Casey Daily Dispatch, he essentially showed democracy the middle finger and was poised to establish himself as the next dictator of Egypt.

He might have succeeded in doing so, however, if it was not for the fact that he managed to anger his army with some reckless statements-possible Egyptian participation in the overthrow of Syrian leader al-Assad being one of many. To say that he mismanaged the economy would also be an understatement, as he was unable to make most of the reforms needed to pull Egypt into prosperity. In fact, Egypt's economy was floundering under Morsi, and the government was forced to take loans out from its Gulf neighbors just to stay afloat.

The calls for Morsi's resignation grew by the day, and millions of people flooded into the streets to voice their opinion at Tahrir Square, the place where anti-Mubarak protests gathered during the Arab Spring. Finally, on June 30, the military issued an ultimatum to Mohamed Morsi: Come to a suitable solution with the opposition, or the military will do it for you. Morsi chose the latter, which led to the military ousting Morsi, suspending the Constitution (which was being drafted by Morsi), and imposing an interim government.

Was this really a case of Egyptians rising to overthrow an unpopular leader? Or is there something bigger behind the scenes?

Consider the implications of an Islamist Egypt, particularly if the country were to become more fundamentalist. Morsi's policies before he was ousted certainly indicated that the Muslim Brotherhood indeed has plans to push Egypt away from secularism and toward a greater dependence on Sharia law. As Egypt is one of the most important cultural influences in the Middle East, the rise of Islamist ideology in the country could easily spread to nearby countries, such as Turkey and Libya... perhaps even Saudi Arabia, where the populace has been grumbling that the opulence of its leaders contrasts greatly with the teachings of the prophet Muhammad.

An Islamist Egypt would pave the way for other Islamist regimes or groups to rise up all over the Middle East, many of which would harbor anti-American ideals fueled by decades of unwanted American intervention in Middle Eastern affairs. These Islamist regimes would waste no time to squeeze the US out of the global energy picture by hitting where it hurts: the petrodollar.

An increasingly Islamist Middle East-along with Russia and China-would jump on the idea of trading oil in currencies other than the US dollar. For Americans, this would be disastrous, as prices in the United States would begin skyrocketing the day it stops being the world's reserve currency. It is understandable, then that the United States will stop at nothing to preventing this from happening.

And if it means that the US has to topple a government that is not aligned with its interests, that's just too bad. The US may have won this battle for the petrodollar, but this is definitely not the last time the very foundation of America's economy will be threatened.

What does this mean for the rest of us, particularly those trying to profit from the situation? It means that as the war over petrodollars continues to rage, we will continue to see political instability in the Middle East-which means volatility in the oil markets. In order to minimize the new political risks, investors will begin to flock toward companies that are in safe jurisdictions and have a stable amount of production.

About Miles Franklin

Miles Franklin was founded in January, 1990 by David MILES Schectman.  David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991.  Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry.  In November, 2000, we decided to  de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle.  Our timing and our new direction proved to be the right thing to do.

We are approaching $200 million a year in precious metals sales.  We are rated A+ by the BBB.  We are recommended by many prominent newsletter writers including Doug Casey, David Morgan, Ron Hera and LeMetropole Caf�.  Our reputation for service, education, quality product and pricing is outstanding.

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