Bill Murphy writes.....From lemetropolecafe.com:
The Fed and Treasury and the rest of the crooks running the US financial system must be desperate to trash gold like they are doing. The only logical explanation that makes any sense for the gold bashing the past week is that the Fed must decide what to do with US interest rates Wednesday and all their options are lousy:
*If they do nothing, the stock market will swoon as expectations are dashed.
*If they cut the Fed Funds rate a quarter of a point, it will leave them room to go further, but a good number of market participants will bark they should have done more, especially after the Washington Post story last week predicting a half-point cut. There will be disappointment.
*If they go 50, the expectation game will be over, the reality game will kick in and the economic reality for the US is UGLY!
Regardless of their decision, they must be petrified of the aftermath of their decision and need to pummel gold to allay any kind of fears they aren’t being prudent. Gold, as simple as it is, remains the easy-to-spot barometer of how the financial system is running. A sharply rising gold price suggests trouble and they know it, so they force it down. Today was a classic Gold Cartel day. Gold was higher even though the dollar was strong. The stock market took a bit hit, the dollar weakened, and yet gold collapsed out of nowhere.
Now shift to the US financial/economic sectors to get a better understanding of the Fed desperado’s predicament:
*The stock market is selling at a P/E ratio of about 32, a number which historically says it is a bubble, one that could burst at any time.
*The bond market is a bubble that could be in the process of bursting.
*Which may also be the case for the US real estate market, another bubble. From the Dallas Morning News this Sunday:
"Wealthy buyers hunting pricey homes have plenty of choices in the current market . While overall sales of preowned homes are down 5 percent this ears, purchases of luxury homes - $600,000 and up – have fallen by 15 percent. And never have there been so many ultra-priced homes on the market. At the end of May, there were more than 700 preowned homes for sale in the Dallas-Fort Worth area at $1 million or more, an increase of 40% from two years ago. Four homes are offered at more than $10 million, the most ever in this price range."
More from the King Report:
"The Chicago Sun-Times reports that US rental vacancies rose to 6.8% in Q1, the highest level since 1989. The Fed’s desire to inflate housing is deflating rental properties, which also are leveraged. The problem for the Fed is after a busted bubble, efforts to push the US economy is like pushing on a water bed – it just creates dislocations and problems elsewhere. The Fed can lower interest rates to lower interest expense, but they lower commensurately interest income, which is larger than consumer interest expense. And due to the bubble, capex is kaput, so the lower rates actually hurt the economy."
Then throw Iraq into the picture. How much is that blunder going to cost?
"In Baghdad, the first U.S. Senate delegation to visit Iraq cautioned that Americans should expect their forces to remain in Iraq for as long as five years.
"I don't think the American people fully appreciate just how long we are going to be committed here and what the overall cost will be," said Chuck Hagel, R-Neb., after meeting the head of the civil administration, L. Paul Bremer.
"I predict as much as five years," added Richard Lugar, R-Ind., the chairman of the Senate Foreign Relations Committee."
It doesn’t get any better after that. The American public has never been more in debt, most of the states cannot balance their budgets, or are broke, and the jobless picture is not improving. Twelve rate cuts have not helped that much, except for the real estate/housing sector. The coming one won’t do much either. All it will signal is a desperate Fed has essentially reached the end of the line with its rate cutting maneuvers.
The prognosis for the US economy is bleak and the bad guys running the US financial system know it. As is their way, they will exhaust all measures to "delude" the investing public that all is not that bad, that all is well and getting better. One of those measures is to manipulate and subdue the price of gold. They won another battle in those efforts today, but they will lose their war – a pathetic and sad war that will hurt the average American a great deal before it is over.
The Gold Cartel is huffing and puffing, doing all they can to take gold down and away from danger’s door above $370. It’s not going to work. The fundamentals are just too strong.
IN LATE: there was huge physical market buying today on the break out of India and the Middle East. They thank the "investment bank" sellers very much.
The good news for the day was gold held support right above $350 and closed well off its lows ($2.60). One can make a case the bullish flag formation is growing. However, as mentioned in the last MIDAS, gold must turn around quickly for that to be so. Otherwise, the cabal will send their crush team to take gold below $350 and turn the specs bearish.
Gold
https://futures.tradingcharts.com/chart/GD/83
The Gold Cartel and friends are really a bunch of sickos. Silver was allowed to go up a few cents because gold was tanked. How many times have I reported this to The Café? This is just not natural action. The funds were sellers today and the riggers and company were the buyers. The silver riggers cover their shorts often when gold is wallopped.
..........
In Barron’s this weekend – more evidence from a central bank that they don’t have the gold the public thinks they have?:
Monday, June 23, 2003
INTERNATIONAL TRADER - EUROPE
By VITO J. RACANELLI
Double-Cross of Gold at Belgian Central Bank?
ONCE, PAPAL BULLS HELD SWAY on the Continent, but now a few words from a central bank governor suffice to send markets into a frenzy. Central banks love to pronounce economic solutions that make front-page headlines in the financial press. When it comes to keeping their own houses in order, however, it seems they don't like to listen much.
Take the Banque Nationale de Belgique, the central bank of Belgium, a limited-liability company whose shares happen to trade on the Brussels Stock Exchange. The bank, which is 50% owned by the Belgian government, is locked in a battle with minority holders.
Confiscation is the issue, opines Erik Bomans, a partner at Deminor, a Brussels-based shareholder-rights group. "We claim that the bank has transferred to the state a substantial part of its gold and foreign-currency reserves without compensation for the bank or shareholders," he says. Deminor, along with at least one other group, has sued BNB in the Belgian courts over this, with the latest filing coming in April. Deminor represents shareholders with a total of about 12,000 shares, or 6% of the free float.
On Aug. 2, 2002, the Belgian Parliament adopted a provision regarding BNB, stating that one of the bank's missions is administering the official currency reserves "of the Belgian state." Looking at BNB's balance sheet, one can see that law transfers about 40% of the bank's assets to the state and deprives shareholders of the entire net asset value, Deminor contends. This past February, when the bank's 2002 annual report was issued, it referred to gold and currency reserves as "of the Belgian state," unlike the previous year's report, which said the gold and reserves were "of the bank."
This is property of the bank and not the state, Bomans insists. The bank's articles of association expressly stipulate that each share confers the right to a proportional and equal part in the ownership of the bank's net assets and profits, he says. Deminor also suggests in its quarterly newsletter that "if the bank has no legal title to these reserves, its solvency ratio may go under the statutory and legal minimum," compelling a general meeting to vote on the liquidation of the bank.
Naturally, BNB strongly disagrees with Deminor's position. In response to queries from Barron's, a spokeswoman wrote: The Bank continues to own its gold and foreign-currency reserves but without having free disposal of them. It is legally required to allocate these assets to the tasks entrusted to it in the general interest, in particular monetary and foreign exchange policy. The law of Aug. 2, 2002 does not entail a transfer of these reserves to the state. However, a shareholder with 5% of BNB's shares doesn't own 5% of the bank's gold and foreign-currency reserves. The shares entitle him a dividend, not to the reserves.
Since the country's silverware isn't about to be sold off to the highest bidder, this might seem a semantic issue, but BNB's share-price action belies that. After years of sleepy movements, the shares began to skyrocket in the second half of last year as this fight hit the courts. Friday, they closed 90 per share, up from 00 less than a year ago. Meanwhile, Deminor's Bomans claims that if BNB's reserves were distributed to shareholders, then the shares would be worth anywhere from 47 to 087 each, depending on what assets are excluded. At the heart of the issue of shareholder rights is what assets legally belong to the bank.
BNB isn't the only central bank to tussle with shareholders; the case echoes one between minority holders and the august Bank for International Settlements in Basel, sometimes called the central bank for central banks, and on whose board sits Federal Reserve Chairman Alan Greenspan. As noted here in 2001 and 2002, BIS was sued by minority shareholders, accused of a making a low-ball bid for the 13.7% of its shares then still in public hands. Eventually BIS had to cough up more cash to take itself private. A court in The Hague ordered BIS to pay 23,500 Swiss francs per share, a 30% discount to the bank's net asset value, up from 16,000 francs offered, a 53% discount.
Our best guess on the Belgian case is that the market is speculating that, should minority shareholders win their case, the government might be forced into taking the bank private -- to have a free hand in BNB's activities -- and pay the minority holders a pretty penny for it. If BIS is any guide, look for another battle to decide what that price might be. In the meantime, the shares aren't for the timid. Trading is illiquid and a court reversal could send the stock plunging. A final court decision could take up to another 12 months.
The final irony is that this brouhaha is taking place in Brussels, the headquarters of the European Union, which is hard at work trying to improve minority shareholder protection around the Continent.
-END-
James Turk’s take:
Bill
This Barron's article on the Belgium central bank relays some important information. Here's the key part of the Barron's article:
quote
In response to queries from Barron's, a spokeswoman wrote: The Bank continues to own its gold and foreign-currency reserves but without having free disposal of them. It is legally required to allocate these assets to the tasks entrusted to it in the general interest, in particular monetary and foreign exchange policy.
unquote
How can you own gold and NOT have "free disposal" of the gold? Ownership entitles you to do whatever you want with what you own.
Also, note how she buries her reply in double-talk and further confuses by associating gold with their foreign currency holdings. "Allocate these assets to the tasks entrusted to it in the general interest..." The task of gold is to act as a reserve by sitting in the central bank's vault. When it sits in the vault (for example, like the French central bank's gold), the gold is performing its most fundamental task, not "tasks" as the Belgian central bank spokeswoman replied.
Taken at face value I would conclude that substantially all of the Belgian gold is out on loan. If it wasn't, the central bank would have "free disposal" of its gold, i.e., there would be no restrictions placed on it.
By the way, Belgium is one of the central banks that duplicitously reports "Gold & Gold Receivables" as one line item.
Regards
James
p.s. - Also, why didn't Barron's put the response of the spokeswoman in quotes? Was this a paraphrase or was the reply in French and this was Barron's translation? I wonder what the rest of the reply said?
Belgium is supposed to have 258 tonnes in its vaults. Until recently, Portugal was thought to have 609 tonnes. Recent revelations reveal it has only 545 tonnes, of which 80% is either lent or swapped out!!!!!! How many other banks are in the same boat? Australia only has 3 ½ tonnes not lent out and Canada is just about out. It would not be hard to come up with the GATA’s camp 15,000+ number at all. THE GOLD IS GONE!
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