-- Posted 31 October, 2008 | Digg This Article |

The Metals:

Gold fell $16.60 to $721.05 by late trade in Asia before it rallied see a slight gain at $740.83 in New York, but it then fell back off into the close and ended near its new session low of $716.55 with a loss of 2.51%.  Silver dropped $0.55 or 5.6% to $9.20 by late trade in Asia and then rallied to as high as $9.96 in New York before it fell back off into the close and ended with a loss of 0.21%.

Euro gold fell to about €564, platinum lost $12 to $810.50, and copper fell over 4 cents to about $1.84.

Gold and silver equities fell over 4% at the open before they rebounded back to unchanged by mid-afternoon, but they then fell back off into the close and ended with over 4% losses.

The Economy:

Personal Spending fell the most in four years and Michigan Sentiment reported the largest monthly drop since the survey began in 1978.

All of this week’s economic reports:

Next week’s economic highlights include Construction Spending and the ISM Index on Monday, Factory Orders on Tuesday, ADP Employment and ISM Services on Wednesday, Initial Jobless Claims and Productivity on Thursday, and October’s jobs data, Pending Home Sales, Wholesale Inventories, and Consumer Credit on Friday.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil spent most of the day slightly lower on continued demand worries, but it then spiked higher in the last minutes of trade and ended with a decent gain as traders positioned themselves for the end of the week and month.

The U.S. dollar index rose as the euro fell on the continued view that Europe is worse off than the US going forward.  The Bank of Japan gave mixed indications with its rate cut.  Their policy board was split 4-4 on the decision and the central bank governor’s vote in favor carried the motion to cut its base lending rate 0.20% to 0.30%.  Three of the four dissenting votes came from board members who had sought a larger cut of 0.25%, but it leaves the door open for another cut of 0.20% to 0.10% to avoid going all the way to 0% if/when another cut may be needed.

Treasuries fell as the Dow, Nasdaq, and S&P followed European shares higher despite disappointing economic data.

Among the big names making news in the market Friday were Ford, Chevron, Washington Post, and Burger King.

The Commentary:

“Dear Friends,

There is absolutely no question in my mind that gold will trade at $1650 on or before (probably much before) January 14th, 2011.

Regardless of what financial TV or popular analysts claiming never to have made an error say, we are correct.

Stay the course. Do not let your guard down. Protect yourself as the most significant dislocation economically in world history for major nations is at our doorstep. In fact it is one foot through your door already. Are you prepared?

You ask why? Then read on!

There seems to be some degree of assumption that each action by the Fed brings the credit lockup closer to being corrected.

There are many challenges to this assumption.

Will banks use funds to patch up their pillaged balance sheet or actually start loaning in a progressive manner? The answer is balance sheet as they really have no alternative.

As in the case of AIG below, is any cash bailout enough to bail out losers? We need to remember that what OTC derivatives do not do to financial or any other entity, the drop in earnings will. Whatever is left over litigation will pick the bone clean of.

Regulators went from 12 to 1 leverage to 40 to 1 leverage where a 2-½% change in total asset value would bust financial institutions. The losses taken are not bookkeeping, but are hard and real.

The only thing bookkeeping did was allow these losses to be maintained in full value because they were OTC derivatives, not listed derivatives with a clearinghouse guarantee.

Clearinghouses demand losers pay in and winner are paid out daily while there is no such facility for OTC derivatives. Because of no clearinghouse function, banks and other entities carried the declining value in OTC derivatives at full value at 40 to 1 leverage.

The bailout funds are simply putting a thumb into the leak in the dyke as more holes open up from earnings declines, slow business and serious litigation.

The TIC report is looking quite bad, indicating that dependence on non-US entities to finance a budget deficit that is about to go ballistic cannot be depended on.

All that we have seen is emergency action without limits to hold financial zombies from being discovered by the general public.

The US Fed is in fact holding up the entire world that is near and dear to them. One of the methods is through swaps, which are a form of OTC derivatives and just like the disease, are off balance sheet items.

There is no limit to what the US Fed and Treasury will do in the next few months. It will be discovered in the not too distant future that the US dollar has moved into critical oversupply. At that point expect to the see the US dollar drop like a stone and gold trading at $1200 and $1650.

The US dollars will see.72 again prior to .62 and .52.

The limiting factor to the present terminal financial condition under the Fed and Treasury bandage bailout is the US dollar. There is no escaping the event of publicly recognized dollar oversupply, the ineffectual nature of bailouts and the appearance of hyper-inflation in the midst of non-recovering business conditions.

Keep firmly in mind that retired Chairman Volcker has described this situation as "We have a failed financial structure." He went on to describe the condition of the financial situation as "Code Blue."

What you see now is only the beginning of a great economic drama, out of control and nowhere nears its end.

This is it. It is now!

Gold is the only entity that has the capacity of insuring your future buying power, maybe even more.

Enough said.

Respectfully,”- Jim Sinclair, JSMineset.com

“December Gold closed down 20.3 at 718.2. This was 0.7 up from the low and 21 off the high.

December Silver finished down 0.055 at 9.73, 0.02 off the high and 0.43 up from the low.

The gold market waffled around both sides of unchanged on Friday but it was clear that outside market forces were generally favoring the bear camp. With the Dollar remaining strong and a host of physical commodity markets generally remaining under pressure, the fear of deflationary selling always seemed to be waiting in the wings. However, the bull camp in gold was at least temporarily cheered by the fact that Personal Income for September came in better than expected. It also seemed like the mid morning recovery in the stock market provided the gold bulls with the resolve to push up prices temporarily.

For a portion of the trade the silver market outperformed the gold market and typically divergence between gold and silver prices hints at a lack of definitive resolve. Clearly the silver market was held back by the strength in the Dollar and periodic weakness in gold prices but seeing silver try to forge a positive session had to embolden the bull camp. In fact, the silver bulls were probably also heartened by the strength in the platinum market. In the end, the silver market seemed to be forced to carry the weight of weaker gold, energy and copper prices.”- The Hightower Report, Futures Analysis and Forecasting

GATA Posts:

GMAC aims to become bank, tap U.S. Treasury for cash

IMF denies selling or leasing gold this year

Fed official can see interest rates close to zero

Japan's desperate bid to kick-start economy

AngloGold, Newmont CEOs cite gold production decline

The Statistics:

As of close of business: 10/30/2008

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: Change in Total Tonnes from yesterday’s data: The ASX subtracted 0.05 tonnes.

COMEX Gold Trust (IAU)