Pedal to the Metals

In an interview with The Gold Report, Casey Research’s Louis James, who recently wrote about a family member’s gold awakening, touts the virtues of physical gold and silver, including the American Buffalo gold coin, and discusses some unorthodox storage strategies.

He also contends that  “In spite of the news that gold has made, it’s not seen as an important instrument of investment by most people. If you’re a gold bug or you’re somebody who is already interested in the sector, you see advertisements on the Super Bowl and say, ‘Oh, wow, this is really catching on! This is going to be like the ’70s and the wave is coming.’ … I believe there will be a wave. But I am not sure we’re even in the beginning stages of that crest yet.”

Related Links:

FX Street:  Safe-haven buying buoys gold ahead of U.S. job numbers

MarketWatch:  Silver closes at its highest since March 2008

Reuters:  Time to buy silver, a safe-haven Cinderella

Tim Iacono:  SLV silver holdings nearing record high

Expected Returns:  Is silver ready to explode?

Mineweb:  As silver consolidates above $19/oz technicals look bullish

King World News:  James Turk – Big money buying pullbacks in gold & silver

Bullion Vault:  Gold bullion ignored & dismissed by Western media near record highs

BloggingStocks:  Will gold rally to $1,500 per ounce?

FMX Connect:  This may be the only chart that matters for gold 2 weeks from now

Seeking Alpha:  A correction would be good for metals

Washington Post:  IMF ponders the improbable: Will U.S. default?

Minyanville:  Why saving is right and economists are wrong

Zero Hedge:  The world is flat – and getting flatter

Bloomberg:  Landowners shout ‘bingo’ as West Australia’s mining towns boom

With Tuesday’s action in silver prompting speculation that JPMorgan covered more short positions, a Got Gold Report analysis of last week’s COT report, finds that “the more mercenary of the COMEX commercial traders, the traders the CFTC classes as Swap Dealers, had actually turned slightly net long silver with silver in the $18.30s.

From August 17 to August 24 the SDs covered or offset 3,329 short positions turning from 2,134 contracts net short to 1,195 contracts net long.  Of course since then silver has rallied more than a buck, and both the swap dealers and the producer/merchants had ample ammunition to fire from their pre-Labor Day holiday bunkers.”

The analysis also cautions that “It will take buying pressure and lots of it for silver to well and truly challenge the long-time resistance,” but we “believe that silver is gaining popularity once again and is overdue for a new definition move to the upside.”

Related Links:

GoldSeek:  Gold and silver fall slightly, stocks gain over 2%

Jesse’s Café Américain: Gold daily and silver weekly charts

Mineweb:  Silver and gold showing upside promise and still the best safe havens

Forexyard:  Gold testing all-time high, again

Bullion Vault:  Top gold price analysts raise targets

Bullion Bulls Canada:  Commodities: Hoarding versus shorting

Bloomberg:  IMF gold assets fall 16.85 tons as Russia adds to its holdings

New York Sun:  The gold audit

MarketWatch:  Howard Ruff’s Ruff Times riding major market trend

Gold Scents:  Can the markets crash?

SafeHaven:  Bernanke out of bullets, but not bombs

Financial Times:  Beware those who think the worst is past

Economic Policy Journal:  Was the Great Recession just a precursor to an even worse downturn?

The Daily Capitalist:  Good is bad, bad is good

The cover story in the latest issue of Business Week is on “Gold’s Evangelist,” Thomas Kaplan, arguably the world’s biggest gold bull.  “I’m not a goldbug, but there are times when I feel like an evangelist for it,” says Kaplan, who heads the Tigris Financial Group:  “To my amazement, it’s a hard sell. The conventional wisdom is that gold is for primitives. That derision shows me that contrary to the notion we’re in a bubble, we haven’t yet begun the real bull market.”

Related Links:

AP:  Gold, silver rise as investors seek safer assets

Coin News:  Gold and silver prices soar in August, gold tops $1250

MarketWatch:  Consumer staples, gold and silver round out September

Kitco:  Comex gold hits 2-month high, closes at technically bullish monthly high close

The Golden Truth:  Boom goes the dynamite:  Metals explode higher

Numismaster:  Questions arise about GLD gold trust

Seeking Alpha:  Gold and silver market suppression failures flash buy signal

Jesse’s Café Américain:  JPMorgan shutting down proprietary commodity trading operation

Calafia Beach Pundit:  Gold leads commodity prices, and both respond to monetary policy

Bullion Vault:  Japan’s new stimulus: Good for gold

Commodity Online:  Gold to gain from India’s growth story

UPI/Martin Walker:  Back to bad old ways

MarketWatch:  Gauge of Wall Street worries rockets in August

Reuters/Chris Whalen:  Memo to Obama: time to break the refinance strike by the big banks

New York Times:  Why Wall St. donors are deserting Obama

GoldCore sees “value buyers accumulating silver” at the current gold-silver ratio of 65, citing the belief of “most analysts,” that “the gold-silver ratio will fall over time.” It goes on to suggest that “Silver’s safe haven credentials have been seen in recent months and silver appears to be increasingly trading like a currency rather than simply as a commodity. Should this trend continue, which seems likely, then silver’s ratio to gold could return to the levels seen in the 1970s – between 40 and 15.”

Related Links:

Commodity Online:  Is managed money driving silver market?

The Street:  Silver’s bullish rise to continue

SilverSeek:  When will silver prices explode?

Reuters:  U.S. gold ends up on uncertainty, Wall St. decline

SafeHaven:  Gold bullion likely to pullback then rocket higher

Expected Returns:  Profiting from the next gold rally

Sacramento Bee:  Economy no excuse for gold price gouging

The Hill:  Ron Paul questions whether there’s gold at Fort Knox, NY Fed

Wall Street Pit:  Jim Rogers to Bernanke:  Stop the printing press!

Richard Russell:  Fiat money to meet its end

Daily Reckoning:  The summer the recovery went missing

Paul Farrell:  Seven lean years: No recovery till 2016

Seeking Alpha:  A closer look at bullion-buying in China

New York Times:  China fortifies state businesses to fuel growth

Washington Post:  Top China bank official’s defection rumors quashed

Pragmatic Capitalism:  Stratfor CEO:  “China will collapse“

As an “overnight gold fund” is proposed to address discrepancies in intraday trading, the Financial Times, in an extensive report on “The True Value of Gold,” which gives ample space to both sides of the price suppression debate, concludes that “even those who take a skeptical view of GATA still appreciate that the law of supply and demand could support the gold price, which hovered around $1,220 this week, for some time to come. The volumes being extracted by miners in South Africa, Australia, China and the western United States are falling. At the same time, central banks, pension funds and people on the high street are badgering bullion dealers for more.”

Related Links:

Commodity Online:  Why gold price is rising

Seeking Alpha:  The seven sins of GLD

Hard Assets Investor:  The emotional side of gold buying

Got Gold Report:  Silver shines following Tuesday “outside reversal“

The Golden Truth:  Silver poised to explode

IBTimes:  Why I’m betting on silver

Mineweb:  Fear stalks the markets and gold and silver benefit

New York Times:  Policy options dwindle as economic fears grow

Bloomberg:  Bernanke faces skepticism on monetary-policy tools

Zero Hedge:  Confirming “dumb money’s” resilience to Wall Street’s siren song

Newsweek:  How Obama got rolled by Wall Street

Telegraph:  Obama could kill fossil fuels overnight with a nuclear dash for thorium

The Big Picture:  Periodic table of Wall Street criminal elements

Market Ticker:  Banks find a new ripoff – “professional cards”

New York Times:  Just one new U.S. bank in 2010, but it’s a double-wide

Washington Post:  Volcker-led economic panel pushes lawmakers to simplify U.S. tax code

Coin News:  Collectors and dealers urged to help repeal new 1099 requirements

As gold prices “eke out gain“ of $9 for the week, “silver prices soar,” rising $1.04 and closing Friday at their weekly high of $19.03, reports Silver Coins Today, citing a quote by one market analyst, that, “It’s trite to say it, but silver really is performing as the poor man’s gold right now.” Writing at Coin Update News, Patrick Heller asks:  “What happened to create such a large increase and to have it happen exactly when it did?”

And while GATA explains that Ted Butler will no longer be giving his weekly metals wrap interview with King World News, the most recent COT report saw the commercial U.S. banks decreasing their short position in silver.

Making the case for why “the next leg of this ‘W’ shaped recession we’ve been warning about for some time is already baked in the cake,” Casey Research’s Louis James also writes of being struck, during a recent visit to Wall Street, by the sight of “not one, but two guys with sandwich-board placards announcing ‘WE BUY GOLD‘ — for different companies.

Just afterwards … my sister—a conservative, mainstream banker — called and asked me how to go about buying physical gold. I knew that day was coming, just as I knew the Soviet Union was destined to collapse sooner or later from the weight of its own economic stupidity, but it was still a shocker when it happened.

And yet, if you ask your neighbors, you’ll most likely have a hard time finding any who own gold. My New York adventures are signs of an approaching gold mania, not a present one. But I believe more firmly than ever that it’s coming.”

Related Links:

Jesse’s Café Américain: Gold and silver charts

Reuters:  Gold steady; market quiet as Bernanke speech eyed

Coin News: Gold and silver prices drop slightly

Patrick Heller:  Thinking of buying gold or silver? Now what?

The Street:  The top 5 reasons gold prices move

SilverSeek:  Silver prices now rising faster than gold

Bloomberg:  Silver purchases spur drop in gold-silver ratio

Commodity Online:  Silver to shine on emerging industrial demand

Kitco:  Will silver break through key resistance of $18.50 per ounce?

Mineweb:  Why hasn’t gold hit $2,000/oz? Doug Silver blames U.S. dollar

Zero Hedge:  Citi says QE2 would be end-game for the USD

Financial Times:  Banks back switch to renminbi for trade

Bloomberg:  Bank of Korea ‘under pressure’ to buy gold, Oh says

Bloomberg:  Gold demand to surge in Vietnam as dong, stocks slump

ProPublica:  Bank’s self dealing super-charged financial crisis

AP:  Fact check:  Stimulus assessments overly optimistic

The Dylan Ratigan Show:  An economic fork in the road?

AL.com:  Alabama city not so sure about claim of gold beneath its streets

What you see in these two charts, explains Ed Steer, “was collusion by the bullion banks to rig the prices down to the pertinent moving averages in both metals, starting at the Far East open on Tuesday morning, and ending with the spike down at 8:30 a.m. in New York…. The price spike was most likely JPMorgan covering short positions in all these metals.  Platinum and palladium, too.”

Steer reprints what Ted Butler wrote in a letter to his subscribers: “What was special about silver was that it first plunged below the last remaining big moving average, the 200 day, before reversing dramatically higher to trade above all the moving averages. I’m not a technical trader, but the specific term for this abrupt move from below all the moving averages to above is, I believe, a ‘golden cross.’ I’m not sure of the significance of this price reversal, but to my knowledge I don’t think it has occurred in silver in such a short time frame, namely, within a couple of hours.”

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Reuters :  Regulators seek input in race to regulate Wall St

Coin News:  Gold nears 8-week high, silver tops $19

David Morgan:  Silver market up before Thursday’s options expiration

Expected Returns:  Are gold and silver breaking out?

Minyanville:  Silver, gold breaking out as safe haven buying continues

Zero Hedge:  World Gold Council says gold demand surges 36% In Q2

Bloomberg:  India gold imports may reach 2009 level this month

Mineweb:  Interview with World Gold Council’s managing director

Silver Coins Today:  U.S. Mint sales: Silver coins rebound, Bullion eagles gain

SilverSeek:  How financial instruments suppress silver’s value

Daily Reckoning:  The nonsense recovery

Tim Iacono:  Mainstream media grapples with home sales plunge

MarketWatch:  Bernanke’s helicopter could move to new altitude

Reuters:  U.S. millionaire index turns sharply bearish

Running the Silver Institute’s numbers on investor demand for silver, and M3, the measure of money in U.S. banks, Silver Stock Report’s Jason Hommel calculates that “less than 1% of 1% of money in U.S. banks is being spent on silver as an investment each year.”

He goes on to hypothesize that “by the time that 1% of money in U.S. banks recognizes inflation as a problem, and tries to buy silver to protect itself from monetary destruction, silver demand by investors will be 100 times higher than it is today. What will that look like, when $180 billion, instead of the current $1.8 billion, tries to buy silver in one year? And what will that do to the silver price?”

Related Links:

GATA:  Silver and gold explosive, Hinde Capital’s Ben Davies tells King World News

Jesse’s Café Américain: Ben Davies: Market trend ready for silver up days of two, three, four dollars

The Golden Truth:  Boom goes the silver dynamite

Coin News:  Gold, silver[2.1%] and platinum prices gain

Reuters/MarketWatch: Gold bounces from lows as homes data hits dollar

Expected Returns:  Housing sales plummet, gold spikes:  Get the point yet?

Seeking Alpha:  How hedge funds are setting gold up to fall

Kitco:  Ron Paul calls for audit of U.S. gold reserves

MarketWatch:  Crash and burn:  How bearish is the Hindenburg Omen?

Daily Reckoning:  Barry Ritholtz:  We’re in economic purgatory

Calculated Risk:  More negative news flow coming

Pension Pulse:  Are pensions the next AIG?

Seeking Alpha:  How to survive a ‘zombie economy‘

Zero Hedge:  David Rosenberg’s advice for living in a Japanese-style economy: Get small

The above graph from Got Gold Report illustrates that “With gold in the $1,220s the LC’s (the COMEX combined commercial traders) are a lot less confident in lower gold prices than they were in nearly all of 2009 as gold traveled from the $820s to the $1,100s roughly speaking.”

The analysis concludes that “the COT action for gold is neutral to slightly more bearish than bullish very short term, but we remain of the view that significant dips should be well bid just ahead.  Longer term the Great Gold Bull marches on.”

And while silver “has been unable to crack the developing $18.50s resistance … We still think that a meaningful surge above the $18.70s could trigger a dramatic short covering spike and we will remind everyone that August [historical charts] is notorious for wild, large percentage moves in silver – in either and sometimes both directions – seemingly out of nowhere.”

Related Links:

Economic Times:  Gold dips on firm dollar but haven demand supports

Gold Scents:  Why the dollar is key

Wall Street Journal:  Getting ready for a dollar collapse?

Mineweb:  Silver demand picks up in India

Kitco:  GDP data could be next catalyst for gold prices

SafeHaven:  79 common sense reasons for a gold standard

Mineweb:  Have faith in gold and not in government rhetoric

Bloomberg:  Bernanke must raise benchmark 2 points in latest Rajan warning

Wall Street Journal:  Fed split on move to bolster sluggish economy

New York Times:  Debt’s deadly grip

Zero Hedge:  Marc Faber And Peter Schiff take on the bond bulls

Business Insider: Obama is failing because he doesn’t understand that he can’t create jobs

SafeHaven:  Why hasn’t the stimulus been more stimulative?

Tim Iacono:  Hubris incarnate with a fatter wallet

Jim Sinclair’s MineSet:  Mainstream media is crushing public confidence

The Daily Bell:  Rise of the neo-authoritarian intelligentsia

Newsmax:  Angry Ron Paul defends Ground Zero mosque/CNN interview

Russia’s central bank bought 500,000 ounces of gold in July, reports Ed Steer, “bringing their total holdings to date up to 23.3 million ounces… or 724.7 tonnes. So far this year they have socked away 2.8 million ounces of the stuff… over 10% of their entire holdings in just the last seven months!”

And with their vehicles also getting wrapped up in gold, see what else Russians are conspicuously consuming, in a Global Post article that describes how Italy has become the “Land of the rich Russian.”

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James Turk:  Manipulating the silver market

The Big Picture:  Is gold a shadow currency?

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Commodity Online:  India on the cusp of gold boom

Zero Hedge:  After finally covering massive retail outflows, NYT also “discloses” Nanex crop circle mystery

Economic Policy Journal:  Understanding the fear in markets

Pension Pulse:  Welcome to the wolf market?

Telegraph:  America no longer needs Chinese money, for now

Casey Research:  Foreign buyers of U.S. government debt are changing

AP:  Bond bubble fear returns as investors flee stocks

Wall St. Cheat Sheet:  Bonds are most certainly not in a bubble

The Golden Truth:  Huh?  No inflation?

Reuters:  Clouds over Jackson Hole for central bankers meeting

NPR:  Post-mortgage meltdown, where do we go now?

Spiegel:  The erosion of America’s middle-class

Pragmatic Capitalism:  How we get through this mess

Minyanville:  Seeking solutions in an uncertain world

Following Friday’s release of the latest COT report, Ted Butler tells King World News that “what we’re seeing in the last few weeks is that the relative Commitment of Traders’ structure in silver is improving, by virtue of its rotten price action, relative to gold, because the gold price action has been better. When you’re looking ahead, you want to have the strongest Commitment of Traders’ structure that you can have, and that’s the case in silver right now.”

And responding to what interviewer Eric King characterizes as “the pessimism in silver,” Butler says that he’s not surprised, since “at major market bottoms, nobody feels good,” while  “at major market tops, everybody’s feeling deliriously happy.  I don’t know how severe the negative sentiment is in silver, but I agree that it’s not positive.  But on a contrary indicator basis, which sentiment measures always are, you want to have it as gloomy as possible…. If you’re telling me everybody’s feeling bad about silver, I say that’s real good.”

BullionVault features a review of  “Alchemists of Loss:  How modern finance and government intervention crashed the financial system,” — excerpts here — by economic writers Kevin Dowd, and Martin Hutchinson, who authors the Prudent Bear’s “Bear’s Lair” column, and is a contributor to Reuters Breaking Views:

“Dowd and Hutchinson show beyond all reasonable doubt how the financial centre of the economy has become one massive rent extraction machine where gains are privatised and the losses are socialised — paid by the likes of you and I, the hapless taxpayer. The bailouts are unquestionably the biggest examples of this. No other industry on the whole planet would get this treatment.”

And they conclude “that excessive bails outs funded by deficit spending leads to government debt crises, which is ’solved’ by either monetisation of the debt (inflation), or straight forward sovereign debt default.”

Related Links: Goldman, Gold, and Silver

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Wall Street Journal:  How the CFTC got power in financial regulation bill

Coin Update News:  A recap of consumer protection information for trading gold and silver

Coin News:  Gold and silver prices inch higher

Bloomberg:  Billionaire Slim digs for gold in Mexico as metal’s price gains

Mineweb:  World No. 1 silver miner reports record silver, gold production

The Street:  Silver, palladium stocks: likely second-half favorites

Uncommon Wisdom :  2 charts on the dollar and 1 on gold

The Golden Truth:  Has the dollar bear emerged from a brief hibernation?

Los Angeles Times:  U.S. home foreclosures reach record high in second quarter

Global Economic Analysis:  Kicking the budget-deficit can “Texas Style“

“What are the facts?,” asks Investment Rarities’ Jim Cook. “I’ve put such a large percentage of my assets into silver that it’s a cause for worry.  Not so much because I think it might go down, but will it go up to the extent I anticipate?  I’m looking for something really big, but will it happen?  I reassure myself that it will by frequently reciting the facts.”

And in a Numismaster article, Patrick Heller describes what he sees as “strange developments with COMEX gold inventories,” which he likens to “a run on COMEX silver inventories since June 16.”

Related Links:

Bloomberg:  China to further open gold market to trading, imports

Mineweb:  The gold market is shifting eastwards?

iStockAnalyst:  China’s silver bull market

Coin News:  July 2010 U.S. Mint Silver Eagle sales: Top 10 month, best July ever

Coin Update News:  July 2010 U.S. Mint:  One ounce Gold Eagles in demand

SafeHaven:  Gold’s gravy train technicals

FT/Alphaville:  The secured lending boom (through gold-tinted glasses)

Zero Hedge:  Granite Fund spends 15 pages to explain why gold is not a buy … or a sell

Jesse’s Café Américain:  JPMorgan’s commodities trading head to troops: “Don’t panic“

Pragmatic Capitalism:  Regarding those “strong” corporate balance sheets

CNBC:  Fed printing may create ‘final crisis‘: Marc Faber

Mises Daily:  Can the Fed successfully exit?

Puru Saxena:  Debunking deflation

About the World Gold Council’s just-released 2nd quarter digest,  Zero Hedge sees that “A modest bout of profit taking in gold, in big part driven by hedge fund liquidations at the end of Q2, has pushed the spot price by less than 7% from the all-time high, and a variety of bears have crawled out of the woodwork screaming the end of the gold bull market. In the grand scheme of things this is rather myopic.

It was precisely the same quantitative easing that provided the impetus for gold’s straight line rise from just over $800 to $1270 in the span of a year … that will serve as the springboard for the next major move higher: and with the Fed now days away from announcing some iteration of its brand new monetization scheme, the days where gold can be purchased cheap may be ending.”

Related Links:

Casey Research:  Gold meltdown or mania – Batten down the hatches

Bloomberg:  Gold rises, caps longest rally since November, on China outlook

Mineweb:  Beware the Dragon’s gold teeth

Wealth Daily:  Why you should buy gold before China does

Commodity Online:  World looks towards India for jewelry boom

GATA:  Pierre Lassonde: Investment, central banks replace jewelry as gold price driver

MarketWatch:  And now, the main event — inflation vs. deflation

Bloomberg: Pimco’s El-Erian says chance of U.S. deflation is 25%

Financial Edge:  Why prices never really go down

Daily Reckoning:  A world of phony prices and twisted numbers

Mish’s Economic Analysis:  ADP vs. BLS job reports – Who to believe?

USA Today:  Jobless rates no factor for stimulus money

After Barrick Gold Corp.’ founder Peter Munk told Reuters that “What most large companies do now, they look for mixed-metal mines, where gold is a part of other metals and other minerals,” Jeffrey Lewis, in a Commodity Online article, suggested that the concept of peak oil could extend to gold:

“While there is still plenty of gold and silver to be found, the simple fact that these mixed metal mines are even on the radar indicates that the days of rampant production are over, and mines are being forced to look for smaller and smaller deposits of multiple types of metals to remain consistent in their growth rates. All in all, the supply of gold and silver in the ground is becoming freakishly low.”

And Marketwatch columnist Paul Farrell weighs in on Business Week’s recent cover story that called commodity ETFs “America’s worst investment.”

“Worst? Add toxic, deadly, evil. Commodity ETFs are rapidly becoming a malicious virus breeding chaos in the global markets pricing all commodities: food, farm lands, metals, oil, natural gas, livestock, water and other natural resources are the assets under commodity derivatives and their ETFs, pricing that’s now controlled more by Wall Street speculators than the weather, adding wild swings in volatility and trillions in global derivative risks.”

Related Links:

GATA:  Real gold or paper gold — which do you own?

FOFOA:  Relativity:  What is physical gold really worth?

Coin News:  Gold marks 7th day of gains, silver advances

MarketWatch:  Gold crawls back – radical bugs vindicated?

Mineweb:  Gold on a fast boat to China

Motley Fool:  China opens the flood gates for gold and silver

The Gold Report:  Shadow Stats‘ John Williams:  Approaching the abyss

Reuters:  Jobless claims raise doubts about economy

Chart Porn:  AP map measuring financial stress across the U.S.

Fox News:  Record number of Americans receiving food stamp benefits

USA Today:  Golf clubs suffer in recession as membership dwindles

Matt Taibbi:  Wall Street’s big win

Reuters:  An August surprise from Obama?

Following a week in which silver and gold rose 2.6% and 1.8% respectively, Ted Butler says that what stood out in August’s Bank Participation Report, released Friday, was that the big U.S. bullion banks, in essence JPMorgan, are covering their short positions,” which are now at their lowest “since May of ‘09 in COMEX silver futures, about 26,000 contracts net, and that’s down about 8,000 contracts” from May. See the reports for August and May of this year, under CMX Silver – Short Futures.

He contends that it has “broken ranks to a certain extent with the other commercials,” and “my premise would be that going forward, it’s very unlikely that JPMorgan would increase their short position if they’ve been given the word to close out.”

Butler does however speak of a “deterioration in silver” by almost 6,000 contracts in the latest COT report, with commercial selling coming “mostly from the ‘raptors’, the smaller commercials who sold out net long positions to the tune of about 3,500 contracts.” But gold saw an “overall improvement of about 5,500 contracts, particularly among the big four.”

Click to enlarge the above graph that illustrates the concentration of short contracts from the latest COT report for the four and eight largest traders, vs. the days of world production to cover those contracts. The number of days for silver and gold is about 90 to 165, compared to only 30 to 50 for the next closest commodities.

Ed Steer explains that “the Commercial net short position in silver sat at 262.7 million ounces. The ‘8 or less’ bullion banks that ‘do the dirty’ inside this category were short 359.3 million ounces… and hold 71% of the entire silver short position in the Commercial category. Guess who controls the price? Preposterous, isn’t it?”

He describes a similar situation in gold, “Which, in a nutshell, means that if these eight bullion banks weren’t there, the rest of the traders in the Commercial category are net long, so these bullion banks are the only thing standing in the way of much higher gold prices. And that, dear reader, is exactly why the are there. Ditto for silver… except in silver, the situation is beyond grotesque.”

Exploring a related theme, Patrick Heller asks:  “Why did the price of almost everything rise against the US dollar in the past month or so, except for gold and silver?“

Related Links:

Gold Scents:  Silver:  Something big is brewing

Silver Coins Today:  Silver prices mark first week of August with gains

Got Gold Report:  China driving the bullion bus likely means a Chinese “put” in play

Seeking Alpha:  Why today’s deflation won’t kill gold

Expected Returns:  Gold permabears never learn, nearing extinction

GATA:  Gold council CEO helps The Economist put investors to sleep

New York Times:  The Economist tends its sophisticate garden

Daily Capitalist:  What the weak unemployment numbers mean

Investment Postcards:  Charlie Rose: Face to face with Rogoff and Wessel

Telegraph:  Commodity spike queers the pitch for Bernanke’s QE2

Mish’s GETA:  Will quantitative easing spur inflation? Job creation? credit expansion? Do anything?

Financial Times:  The crisis of middle-class America

The Weekly Standard:  The end of the American dream?

“This economy is probably headed down for years,” says The Daily Reckoning’s Bill Bonner, in a wide-ranging interview with The Daily Bell, in which he calls the euro “more solid than the dollar,” and predicts that the latter “won’t last for another 10 years” as a paper money standard.

He also suggests that the Chinese economy may be “doomed to a crash,” and believes that if deleveraging “is calm and orderly as it was in Japan during that country’s ‘Lost Decade,’ then we will probably see somewhat lower gold and silver prices, at least for some time. Of course, it could become disorderly, which would be messy.”

And he thinks Obama “seems like a nice enough guy” who’s “totally out of his depth. Would somebody else be better? I doubt it. I think it’s kind of a hopeless situation. This is not politics, anymore; this is economics. He doesn’t know anything about it. He has advisors who don’t know anything about it. If the Republicans get into office, it won’t make a darn bit of difference. They have the same stupid advisors, the same ideas and they are ideologically in the same trap.”

Related Links:

Tim Iacono:  The Fed placates the market – QE II begins

FMMF:  Market pleased with confirmation of QE lite

Naked Capitalism:  Fed signals continued willingness to throw money at flagging economy

Coin News:  Gold, silver prices surge after Fed policy shift

Bloomberg:  Gold declines as dollar regains ground after Fed’s debt plan

Gold Scents:  U.S. dollar still a bear

The Automatic Earth:  Stoneleigh takes on John Williams:  Deflation it is

Mises Economics Blog:  In defense of deflation

Phoenix Capital Research:  Is gold crash proof this time around?

Seeking Alpha:  Gold market repeating pattern of 2009

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Bullion Bulls Canada:  Inventory fraud increases in silver market

Mercenary Trader:  Strip mining the U.S. economy

With Gold Scents sensing that “something big is brewing under the surface in silver,” Ted Butler, in an interview with Investment Rarities’ Jim Cook, advocates switching from gold to silver.

“Do you know how much egg you will have on your face if gold goes up and silver doesn’t?,” asks Cook.  “I don’t worry about that,” says Butler. “Do I have egg on my face for informing the world that silver was manipulated, or rarer than gold, or that JPMorgan was the big silver short?”  He goes on to predict that “they will be writing about the coming price events in silver for centuries.  If you don’t have silver but you own gold a switch makes a lot of sense to me.”

Related Links:

Jesse’s Café Américain:  Why the official antipathy to gold and silver?

James Turk:  Is silver ready to move higher?

Kitco:  Speculators hike silver long positions considerably in CFTC data

Seeking Alpha:  Silver spikes and power struggles

Jim Rickards:  Fed preview - Between the rock of deflation and the hard place of hyperinflation

Reuters:  Gold slips on dollar rise ahead of FOMC

U.S. Global Investors:  Ready, set, gold: Best months are just ahead

Expected Returns:  Gold:  The next 6 months

MineWeb:  China pushes for gold; India follows suit

New York Times:  Economic pessimists gain cachet

MarketWatch:  Bond bubble vs. tech stock bubble

Wall St. Cheat Sheet:  Are we moving toward a perma-temp workplace?

The Atlantic:   Explaining bizarre robot stock trader behavior

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Analyzing “U.S. banks positioning in COMEX futures,” Got Gold Report’s Gene Arensberg concludes that “the largest of the largest commercial ‘hedgers’ and short sellers for gold and silver, the big, reporting U.S. bullion banks, like JP Morgan Chase and HSBC, have opted to reduce their net short positioning for both precious metals recently.”

In Bank Participation Reports from June to August, the drop is about 28% in gold, and going back to December 2009, “the biggest of the Big Sellers of silver futures have reduced their net short exposure for silver by 16,843 contracts or a whopping 39%,” with about 8,000 shed since May.

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Seeking Alpha:  Gold and deflation: The never-ending discussion

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Reuters:  Unemployment drives more home sellers to cut price

Wall Street Pit:  One more futile attempt to “stabilize” housing

The U.S. Mint sold almost 3 million 2010 Silver Eagles in July, a record for that month and the seventh-best month ever for the coin, reports Silver Coins Today, and “Indications are that the 2009 record will be blown out of the water by this year’s numbers.”

Making the sales gains “even more interesting,” notes the article “is the fact that the U.S. Mint is still throttling the sales of the strikes. Unable to obtain enough blank planchets to keep up with potential orders, the Mint has its network of authorized purchasers on an allocation system, meaning it may ship only a portion of the requested orders based on availability and the buyer’s past order history.”

And a BBC report looks at why the U.S. is still minting the $1 presidential coin, which “people hate and won’t use.”  The coin, which is piling up in warehouses, has the potential to save $500 million per year in printing and paper costs.

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Fresh Air: ‘Vanity Fair’ writer: Is Washington beyond fixing?

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About the COT report released Friday, Ted Butler says that it’s in keeping with his “strong conviction that we’ve seen the last of JPMorgan increasing its massive concentrated short position in silver.” And while it showed that “the net dealer short position increased by about 9,000 contracts in gold, in the one through four category we had the opposite take place, in which the big four actually reduced their net short position by 10,000, a pretty strong paradox….  If it is JPMorgan, as I suspect, not only are they gearing up for a pretty good up move in silver, they may be gearing up for a pretty big up move in gold too.”

Butler also believes that people are increasingly coming to realize that the new financial regulatory law “is a real game changer,” and he’s “very excited in what I see” regarding position limits in gold and silver. And while he contends that “The process is working.  We will have position limits,” his optimism is called into question.

James West, publisher of the Midas Letter, is asked by The Gold Report, “Are there any circumstances under which gold is not a good investment?“

“Oh, absolutely,” says West.  “Let’s say we have a world full of economies that shepherd their currencies responsibly and circulate only money that is essentially the equivalent of their GDP and their asset base divided by their population. There would be no reason to own gold. The systems that issue money should own the gold. If we lived in a world where our governments and our financial institutions and systems were trustworthy, there would be no reason to own gold and invest in gold.”

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“Those transfixed by gold topping the $1,200 level again have been missing the real action in silver,” declares the Mad Hedge Fund Trader, pointing out that it has risen 24% since its February low, compared to gold’s 15%:  “I have been a raging bull on silver all year, grabbing you by the lapels and shaking you senseless if you didn’t buy. It is nothing less than owning gold with a turbocharger.”

But Investment Rarities’ Jim Cook warns that “No matter how well silver does in the next few years, most of those who invest in it will only make a small amount of money or even lose money.” Why? Because “they don’t want to own physical silver and take it into their possession.”

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“Quietly and with little fan fare, gold has made a major change in its status,” begins a  Seeking Alpha post from Phoenix Capital Research, which dates the change to November 2009, when “The sovereign debt crisis began in earnest with Dubai asking for a six-month extension on $60 billion worth of debt.”

At that point, “Gold officially became a ‘flight to safety’ play on par with the reserve currency of paper money: the U.S. dollar. In plain terms, Gold is no longer a U.S. dollar hedge, it is a sort of reserve currency of its own, tracking its paper money counterpart, the U.S. dollar.”

This change in status continued when the crisis “shifted from Dubai to Greece, crushing the euro….Indeed, when you look at the chart above, it is clear that the end of 2009 represented the end of Gold’s correlation to the euro as an anti-dollar hedge, and the beginning of its status as a standalone flight to safety play akin to the U.S. dollar.”

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As “Beijing goes for gold in a big way,” a New Yorker correspondent, in a blog post headlined “Why the long face?,” reports that China overtaking Japan to become the world’s second largest economy, “has sent China into a frenzy of self-flagellation in the hope of reminding people that it is still home to a lot of very poor people.” He notes that “Beijing is not averse to crowing about certain superlatives,” so, “why be especially sensitive about something that everyone already expected?”

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Hinde Capital received a great deal of attention last week for its report on “Precious Metals ETF Alchemy,” which Hinde’s CEO Ben Davies discussed in an interview with King World News.  In its August letter to investors, Hinde looks at “Silver Velocity- the Coming Bullet,” concluding that “The coming silver bullet just may be approaching faster than we could imagine.”

From the letter:

“Although the current gold/silver ratio at 65 looks to be the mean of a severe financial crisis and boom time, we believe this will become the upper band (cheaper end) of the spread. At this point in the monetary cycle we envisage the silver spread narrowing to nearer 50 or tighter this fall…. Should we see more monetisation of silver then this spread will narrow dramatically and sooner.

We believe the near term catalysts for an outperformance of silver are a pick up in monetary velocity (notably Asia), a potential cessation to excessive ‘manipulative’ silver Comex shorts by a very concentrated number of bullion banks (namely two), positive seasonals, and a trend ready silver bullion market. We believe the narrowing in the gold silver spread will be based on a superlative break out to nominal new highs.”

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