Dow Theory’s Richard Russell: Gold $1,880

As the gold price doggedly trades above $1,600, the Godfather of stock market newsletter writers, Richard Russell, recently wrote that he’s targeting $1,880 for the king of currencies, gold.

“There isn’t much clear and defined in this market except for gold,” stated Russell, the author of The Dow Theory Letters.   “How much of this is based on the Washington shenanigans I don’t know, but once the debt boost is solved the test will be whether gold tends to hold its gains.  By the way, the P&F [Point & Figure] chart shows a price objective of 1,880.”

Incidentally, according to, the technical rule for a breakout price objective for gold suggests a target of $1,910.

Nevertheless, today’s GDP report only buttresses Russell’s assessment for the future direction of the gold price.  Friday’s GDP report came in at a dismal 1.3% rate for the second quarter, while the real shocker in the Commerce Department announcement was the drastic downward revision for the first quarter to 0.4% from the initially published pace of 1.9%.

Plunging GDP and jobs puts the Fed in a situation not dissimilar to the summer of 1933, but, back then, the debt levels were a mere fraction of Boston University Professor Laurence Kotlikoff’s estimate of $200 trillion in today’s unfunded federal liabilities—which is an amount too unimaginable for creditors to anticipate anything other than a some form of default.  Under that scenario, gold could be just beginning to gather additional steam.

“I’ve studied bull and bear markets for over half a century,” added Russell.  “In my experience, great extended bull markets, such as the current ten-year bull market in gold, don’t die with a wheeze and a whimper.”

The gold market is telling Russell the American public has yet to fully comprehend the no-win policy decisions yet to be made in Washington and at the Fed, as well as much higher food and energy prices in store for Americans during the second half of 2011 due to the Fed’s QE2 (inflation) program—a prediction made this week by Euro Pacific Capital’s Peter Schiff.

And like Schiff, the older Russell relies upon his more than 50 years of acquired instincts for anticipating another gold craze he thinks is destined to be launched by the retail investor—a craze he’s stated in the past could dwarf the gold mania of 1979-80.

“They [gold bull markets] die amid excitement, torrid speculation and finally the wholesale entrance of the retail public,” continued Russell.  “I’ve yet to see any of those characteristics in the current gold bull market.  Therefore, I’m trusting history, and I’m sitting (in) the gold bull market.”

Russell also sees the possibility for a divergence in the Dow and gold, which, from the start of the rebound in both assets off the March 2009 lows have moved in tandem between a ratio of as high as 10:1 and 7.8:1.  But this week, the Dow-to-gold ratio has fallen through the 7.8 level to the 7.5 level—a sign that gold has usurped the dollar as the premier safe haven asset.

“Wait, does it make sense for the Dow to sink while gold moves higher?” Russell asked rhetorically.  “Under one scenario it does.  Here’s the scenario.  Bernanke continues to stimulate, but the newest stimulation (like the old ones) don’t work, and the declining stock market is already discounting Bernanke’s continuing failure.”

And what does Russell say about this year’s rage of the precious metals—silver?

In his latest edition of his daily newsletter, he wrote, “Silver broke out above both its 50-day and 200-day moving averages, and its MACD has turned bullish.”

Growth in gross domestic product — a measure of all goods and services produced within U.S. borders – rose at a 1.3% annual rate. First-quarter output was sharply revised down to a 0.4% pace from a 1.9% increase.

Economists had expected the economy to expand at a 1.8% rate in the second quarter. Fourth-quarter growth was revised to a 2.3% rate from 3.1%.

Midway in Play: Gold Penny Stock worth Tracking

As gold asserts its role as money amid the battle across the Atlantic, for which currency is more flawed, early birds to the coming explosion in gold penny stocks may find themselves as the new millionaires in the coming years.

It might be wise to begin the due diligence process and add the very best prospects to your portfolio, keeping in mind that these stocks are high risk.  But when the juniors start to fly, there’s no higher high than a gold rush.

Because the choice of hundreds of gold pennies is difficult to narrow down to, say, five to ten stocks to watch, a competent analysis who’s done his homework may be good place to start.  And one analyst who’s reputation is among the highest on the Street, Louis Navalier, already published his picks on March 31.

After researching the performance of his six picks, four of the six stocks have traced a similar path to the gold junior mining index (GDXJ).  One of Navalier’s stock picks truly stands out as an explorer that’s gaining the Big Mo, Midway Gold Corp. (AMEX: MDW).

Exploration-stage company Midway Gold stock has skyrocketed to 175% gains year-to-date, and a monstrous 463%, year-over-year.  The stock currently trades at $2.31, well above its 13-week and 52-week moving averages of $1.96 and $1.28, respectively.

Midway’s properties, located in Nevada and Montana, include the Midway, Spring Valley, Pan, Gold Rock and Golden Eagle.  Of the five properties, the Pan, located at the northern end of the Pancake mountain range in western Nevada, approximately 22 miles southeast of Eureka, has been where the action is, as the company has to date reported drill results of 21 holes, some results were so-so, some pretty good, and a couple of drills flew off the charts.

The latest drill result, the most impressive of them all, was reported on June 13, popping the stock 7.4% to $1.87 from the previous trading day close of $1.74 as well as triggering a 32% rally to day’s $2.31 print.

“Drill hole PN11-09 contained the longest and highest grade gold intercept yet encountered at its 100% controlled Pan Project, White Pine County, Nevada,” the company stated in the June 13 news release.  “This 30 meter intercept of 3.15 grams per tonne (gpt) gold includes a zone of 13.7 meters of 5.79 gpt gold which also includes a 1.5 meter interval of 10.1 gpt gold.”

And, two weeks later, on July 27, MDW announced that it has been added to the Russell 3000 Index.  Initially, the stock sold off a bit after the run up on the 24th, the day MDW was added to the Russell 3000.  Then it traded sideways for a couple of weeks before rallying as high as $2.89 on July 18.  The stock has since succumbed to profit-taking back down to the $2.30 level.

According to yahoo Finance, MDW has attracted 16 institutions.  Two investors hold more than $35 million worth of shares, of which, half of 15.5 million shares held by the two investors was recently been purchased by Hayward Securities.

Marc Faber makes his Case: Gold is “Inexpensive”

Speaking with King World News (KWN) earlier this week, Marc Faber said when compared to the Federal Reserve’s monetary base, today’s gold is “inexpensive.”

As physical buyers of the yellow metal trounced the paper shorts in yesterday’s option expiration trading, taking the gold price to $1,620 at the close, the typical price smack down, followed by a rally, and then, a subsequent smack down wasn’t evident throughout the day.  If Asian buyers were stepping in to pick up the new shorts, the operation went off seamlessly.

It appears that something very different is going on in the flow to safe haven buying this month.

The ponytailed, Swiss-born, eccentric money manager, who calls Thailand and Hong Kong his stomping grounds, sees the simultaneous fiscal woes in Europe and the United States leaving investors little choice in the duck-and-cover maneuvers since the collapse of Bear Stearns in March 2008.

“Well I think investors are gradually realizing that it’s unusual, with all of the problems in Europe that the euro is actually relatively strong against the U.S. dollar,” said Faber.  “They are realizing U.S. holders don’t want to hold euros because they don’t trust the euro and the Europeans don’t want to hold dollars because they don’t trust the dollar.”

At the open of European trading at 3 a.m. EST, significant dollar weakness could be seen across a broad range of currencies.  In earlier Asia trading, the Aussie dollar broke through 1.10, the Swiss franc cracked 1.25, the NZ dollar reached 86.6, and the Canadian dollar as well as the Malaysian ringgit both trounced the greenback to finish strongly at the close.

Traders fleeing the dollar have been diversifying into “Canadian dollars, Australian dollars, New Zealand dollars, Singapore dollars and so forth,” said Faber.  “But, basically, the ultimate currency and the ultimate safe asset,” he said, “is gold and silver.”

At the open of trading in New York, the Dow-to-gold ratio had breached the 20-year support at 7.8 ounces of gold to buy the Dow.  Except for a brief breakout (to the downside) in the Dow-to-gold ratio during the panic of March 2009, the 7.8 level has been a base of long-term support since 1991.

In 1992, the U.S. economy emerged from recession and simultaneously reinvigorated the bull market in stocks and resumption of the bear market in gold until the peak in the ratio of above 43 was achieved in the second half of 1999—the year the NASDAQ popped.

Since 1999, the Dow-to-gold ratio has moved in a downward trend, with many analysts forecasting a 1:1 ratio when the gold bull market ends.

Investors fearing they missed the boat on the gold trade may take solace in that Faber believes the rally in the gold price is actually still in the early innings.  In fact, when calculated in terms of the Fed’s balance sheet (monetary base), today’s gold price is a comparative bargain.

“I just calculated if we take an average gold price of say around $350 in the 1980s and then we compare that to the average monetary base in the 1980s, and to the average U.S. government debt in the 1980s,” explained Faber.  “But if I compare this to the price of gold to these government debts and monetary base, then gold hasn’t gone up at all.  It’s gone actually against these monetary aggregates and against debt it has actually gone down.  So I could make the case that probably gold is today very inexpensive.”

According to St. Louis Fed statistics, the Fed’s balance sheet stood at approximately $150 billion, compared with the latest report which shows that the Fed’s balance sheet has reached $2.7 trillion, or an expansion of 18 times in 31 years.  If gold topped out at $850 in 1980, a rough estimate of gold’s potential climb in terms of the Fed’s balance sheet could take the world’s ultimate currency to more than $10,000—a number, by the way, that jibes with Jim Sinclair’s $12,500 gold price prediction.

Today’s Silver Price Critical, says James Turk

With silver hanging ruggedly firm above the $40 battlefield, the naked silver short cartel could completely lose control this time, James Turk told King World News  (KWN).  But today is a critical day, as the cartel typically throws everything they’ve got at the paper market before the August options expiration of July 26.

The result of that expected struggle will be telling, he said.

“The fact that we are breaking through $40 [for silver], which has provided overhead resistance for so long, is a clear sign that the shorts are losing control,” Turk told Eric King of KWN.  “The upper hand is shifting to the buyers of physical silver.”

Coincidentally, signs of another break from the correlated moves up and down in the Dow and the precious metals market are evident in the Dow-to-gold ratio, which has been teetering on collapsing below the 7.8 mark this week.  If broken, as it was in the panic month of March 2009, the precious metals could attract buyers of the metals this time around and trigger another short squeeze, especially in the razor-thin silver market.  In 2009, the rush to liquidity took the gold price down.  Today, the problem in the global financial system is solvency—not liquidity.

“My near-term target is still something in the mid $40s, but if gold starts moving higher, as I expect, silver will be testing that $50 level by next month,” said Turk, who has warned of that scenario nearing reality all year.  “That is going to spoil the summer vacations of many of the silver shorts who will be left shocked and in disbelief as they buy hand over fist to limit their losses.”

Several bullion experts have expressed disbelief that the Commitment of Traders report (COT) indicates subdued bullish sentiment in silver under the circumstances in Europe and the U.S.  It appears that possibly the large speculators (specs) have mistaken the summer of 2011 as any other summer of the past 29 years, according to Turk, and may not fully appreciate why this summer could be one for the record books.

“I’m surprised by all of the bearish sentiment, particularly in view of the fact that both metals look ready to rocket higher,” Turk continued in the interview.  “The summer is just getting started and this is already looking more and more like the summer of 1982 when gold was up 50% in three and a half months.”

The continuing crisis in Europe and renewed weakness in the U.S. dollar against the commodities producing nations of Australia and Canada, as well as the record print against the Swiss franc, could indicate the dollar’s morphing status from safe haven to one of just another currency in line for trouble after the euro and sterling.  With the euro under threat of unraveling, the dollar, remarkably, still trades at near 1.44 against the dollar, or only $0.16 off its all-time high before the crisis began.  At this time last year, the dollar traded at near parity, and has lost approximately 25% against the Swiss franc within those 12 months.

Is the Swiss franc’s strength foreshadowing the summer rally in the metals?  Today’s silver price action could give traders a clue as to the possibility of such a rally.  If the price of silver can struggle to trade above $40 amid the expected cartel onslaught, Turk could be spot on with his analysis of a breakout and test of the $50 mark.

“So tomorrow [July 26] is shaping up to be an interesting battle between the option sellers and the physical buyers,” he said.

Expect $85 Silver, says Legendary Market Technician

As Asia continues to report soaring CPI statistics, with Vietnam’s 22% inflation rate as the most recent evidence of the Fed’s QE2 “liquidity” rippling through the world’s economies, legendary technician Louis Yamada told King World News (KWN) the precious metals are set to takeoff again as a result of Bernanke’s monetary actions.

Yamada’s fame as the market technician with a track record of “getting it right,” began as director and head of technical research at Smith Barney (now of Citigroup (NYSE: C)).  After being voted as the leading market technician in 2001-2004, she went off to found her own research group, Louis Yamada Technical Research Advisors, in 2005.

“Gold continues to be in an uptrend in our work,” Yamada told KWN.  “You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475 … Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective … we could see $5,200 on gold.”

Yamada is the latest of a raft of highly credible analysts, money managers and bullion dealers coming out during the past two weeks to tell KWN and other news organizations of the imminent explosion in the price of precious metals.  James Turk, Jim Sinclair, John Taylor, Ben Davies, John Embry, Peter Schiff, and Jim Rogers (who announced he is adding insult to injury to the U.S. dollar fiasco by shorting U.S. Treasuries) have all advised to go long the anti-dollar trade.

The lone hold-out of considerable import to the precious metals market is Marc Faber, the favorite go-to guy for the most steamy of quotes and anti-establishment rhetoric of all hard money advocates.  His forecast for this summer is for the monetary metals to succumb to the 30-year track record of weakness and relatively thin volume.

As gold makes new highs above $1,600 and silver makes its way past $40 amid a fierce “250 million ounces of silver in 1 minute” smack down attempt by the cartel last week, according to Precious Metal Stock Review’s Warren Bevan, the majority of our favorite talking heads, so far, have it right, and Marc Faber has it wrong.  But the summer isn’t over yet, and Faber hasn’t budged from his forecast for the metals.

Yamada, who, incidentally, didn’t offer a time frame for her targets for the gold and silver price, said her next target for silver is for a double “over time” from the $40 print.

“We hit part of our silver targets at $50, (expect) $65, even $80, $85 over time,” speculated Yamada in the KWN interview.  “We had an 88% rally in a very short period of time from January and a one third retracement, 34% down, so that was pretty normal. We saw some support at $33 and would loved to have seen it go sideways a little bit longer to be honest with you,” noting considerable dollar weakness in light of the  sovereign debt crisis with the PIIGS of Europe has revealed the dollar’s diminished status as the world’s safe haven currency.

“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!” she said.

“In other words you had a rally in 2009 that carried 25%,” Yamada explained.  “Then, in early 2010, the rally was only 19%.  And the second one in 2010 was only 7%.  And this time, you haven’t even seen 7% with the crisis that has evolved.  So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven.”

While the systemic problems with the euro and dollar come fully into focus, we should be mindful of U.S. Treasury Secretary Tim Geithner’s recent comment on Meet the Press of July 10, when he said, for a lot of people, “it’s going to feel very hard, harder than anything they’ve experienced in their lifetimes now, for a long time to come.”  Bloomberg reported that Geithner may step down from the head of the Treasury.

As of 12:36 in New York, gold trades at $1,612.79 and silver at $40.05.

Citigroup’s call for the Silver Price

Here comes yet another prediction for the precious metals.  This time, Citigroup Global Markets chimes in with its price prediction for the most popular “thing” to front run the coming full-blown repudiation of paper money in our future—silver.

“If the final rally in the last bull market repeated then we can expect $100 over the long term,” Citigroup’s (NYSE: C) Tom Fitzpatrick and two other analysts wrote in a research report of July 15. “While the high so far this year was at the same level as the peak in January 1980, we are not convinced that the long-term trend is over yet.”

Fitzpatrick’s mention of January 1980, the month of panic, mania and silver’s meteoric rise to $50 on the backs of the Hunt Brothers, takes us back to a time when Jimmy Carter was president, Abba and the Bee Gees dominated the music charts, and a new home could be built for $76,400—though, the median-size of a new home back then was approximately 20% smaller than today’s, according to U.S. Consumer Financial Protection Bureau Special Advisor to President Obama, Elizabeth Warren.

Nevertheless, a comparison of some reasonable benchmarks between 1980 and today reveals some food for thought regarding the ultimate price silver can achieve during a riot rally soon to spark in gold’s kissing cousin.

In 1980, the Dow reached a high of $903.84 on February 13, 1980, and a low of $759.13 on April 21, 1980. The average close of the Dow 30 Industrials in January 1980 was $860, about the same price as an ounce of gold at that time, and 17 times the peak price of silver at $50.

For the same ratio to be reached between the Dow and the silver price, today, silver needs to climb to $735 per ounce, the Dow must drop significantly, or the two must meet somewhere in the middle—or, in the deep out-of-the-money hyperinflation scenario, the Dow and the silver price could add a bunch of zeros to today’s levels.

As the federal debt limit talks move into the bottom of the ninth inning in Washington, the Tea Party pushes Republicans to make the $14 trillion federal debt an issue during the upcoming 2012 political campaign.  Similarly, in 1980, Americans were up in arms regarding a federal budget nearing the, outrageous at the time, $1 trillion mark.  A few years later, Ronald Reagan became the first $1 trillion president during his first term in office (1981-84).

Using the federal budget as a comparative metric, the peak price of silver at $700 wouldn’t seem that crazy.  In fact, some pretty intelligent and steady-handed bullion analysts have suggested numbers not too far off that number.

In 1980, U.S. GDP reached $2.8 trillion, while federal spending topped $590 billion at the end of fiscal 1981.  Fast forward to today, and we find Washington spending $3.6 trillion, which includes interest on $14 trillion of accumulated debt.  The silver price when compared with federal spending and total federal debt (not including more than $150 trillion in unfunded liabilities, according to B.U. professor, Laurence Jacob Kotlikoff and economist John Williams), calculates to $305 and $250, respectively.

In terms of the Fed’s monetary base statistics, the monetary base in 1980 stood at $133 billion, compared with the $2.7 trillion at the close of business on July 17, according to Federal Reserve statistics.

“The price of silver would have to reach $980.57 before it is in 1980 bubble territory,” according to CQCA Business Research, the firm that posted on its Web site the calculations when comparing the Fed’s monetary base and a $36 silver price.

Using 1980s peak price of $50, the silver price of $1,325 would look like today’s gold price at the end of this bull rally.

Back to Citigroup’s research report.  The boys at Citi feel the nosedive decline in the silver price, which began in May, is now over, giving investors the green light to back up the truck and load it up with silver.  A less gutsy call than James Turk’s call for a bottom (presumably) when silver was still in free fall as it hit the $33 level.

“The move down from the April high this year has come to an end and the double bottom is a good platform for a turn back up,” the three Citigroup analysts said in their report.

At today’s price of $40 the ounce, silver has already soared 650% from the average price of $5.33, set in 1999.  If investors had hooked onto the likes of James Turk, Jim Sinclair, Peter Schiff, Richard Russell, and the raft of bullion experts and old hands frequently interviewed on King World News, the massive profits could have already been made in silver.

But, after reviewing the particularities between the years 1980 and 2011, Citi’s call for $100 silver isn’t quite going out on the limb.  Jim Sinclair’s call for $12,000 gold and, presumably, $600+ silver (given the historical ratio between the tow metals at their peak prices), is, indeed, a bold call—but not an unreasonable one.

Look who’s predicting $1,900 gold by October

Predictions of lofty prices coming from regular hard-money advocates and gold bugs are certainly not hard to find.  Predictions of $2,000, $5,000, $10,000 and $100,000 targets for the top in the gold market are numerous.  But when a mainstream money manager of the highest esteem projects a major move higher in Wall Street’s most despised asset—gold, traders should sit up and take notice.

Speaking with Bloomberg on Wednesday, FX Concept’s founder, John Taylor, the man who pioneered the analysis of foreign exchange cycles, expects the gold price to soar to $1,900 by October, or a 20% rally from today’s price within a time frame of between 11 to 14 weeks.

Taylor sees gold as the ultimate safe haven asset while the developed nations deal with crushing debt loads; but he singles out the euro as the more likely currency in the U.S. dollar/euro cross to devalue against the other on the way down against gold during the next leg down in the global debt crisis, which he said could begin “within three or fours weeks time from now.”

Taylor also sees the euro dropping to $1.15 against the dollar during the next down leg.  And, if correct, then, he expects the gold price in euros to achieve 1,650 euros per ounce by October, which calculates to a nearly 50% jump in euro terms.  And it gets worse for the euro.  By next year, the euro is going to par with the dollar, he said.

When asked why the euro has held up so well up til now, Taylor quipped, “because the dollar is so weak.”  But as the euro zone flounders in the handling of Greece’s sovereigns, it will eventually become apparent that “the euro has to be restructured, and not just a little restructuring, but very, very significantly restructured to make it work,” he said.

But after the fireworks of new highs in gold in every currency, he expects the rally to turn ugly, as the second leg of the global debt crisis takes every asset down in a heap, including gold.  And how far will the gold price drop as the U.S. and Europe plunge back into a deeper recession?  Taylor believes gold will touch $1,100, a target which may seem incomprehensible during the gold mania, but will be the result, he said, of institutions and hedge funds scrambling to get liquid to meet redemptions.

Hold your Gold! Persian “Gray Swan” lurks

With so many threats to an already tipsy global currency regime lurking within the balance sheets of every sovereign nation of meaningful size outside of China, another potentially catastrophic event could take investors by surprise—including, of course, a Black Swan Event—but also an event, which Nassim Taleb refers to in his book, “The Black Swan,” as a gray swan, an event which could have been  foreseen.

Buried under the ever-growing tantalizing news stories of critical budget meetings in Europe and the U.S., gazillion-dollar hedge fund managers predicting fiscal Armageddon by 2012, 2013 or 2014, clarion calls for a renewed gold standard by marquee writers in the financial business, and a verbal sparing in Congress between a champion of free money and his villain at the Fed, lies an equally threatening event to the markets:  War.

But not just any war, whereby a bunch of Western counties pick on a “dictator” or a “terrorist” political party harboring other “terrorist” in a part of the world where few in a U.S. high school class can point to on a world map, but the real biggy—with Iran.

Attack Iran?  How’s $200+ oil (for openers) for a dying U.S. economy to digest?  How would the already-bogus budget deficit projections fair as the U.S. economy collapses into, not a Depression, but a comma?  The double-whammy of deficits soaring as GDP plunges would bring Greece to the U.S. much sooner than 2014.

Can the Fed call on the autonomous and clandestine Exchange Stability Fund (ESF) to fix that?  The $600 billion of currency swaps released by the Fed a  couple of years ago to come to the aid of Europe, as the scheduled ticking time bomb was set to explode in the counties comprising the PIIGS, will turn out to be mere token gesture of support.  The $5+ trillion stimulus already injected into bank balance sheets, as well as into the coffers of Keynesian government spending, will be laughed at as “soooo 2011.”

Giving the story about proposed plans for an attack on Iran was given legs to run wild on the Net thanks to our friends at, who recently posted a news story from news source Al Jazeera about a former CIA agent assigned to the Middle East who paints a rather frightening scenario he sees coming into focus for September.

According to an Al Jazeera report, former CIA agent Robert Baer told KPFK Los Angeles that hardline Israeli Prime Minister Benjamin Netanyahu is “likely to ignite a war with Iran in the very near future.”

“ . . . there is a warning order inside the Pentagon to prepare for war,” said Baer. “There is almost ‘near certainty’ that Netanyahu is planning an attack [on Iran] … and it will probably be in September before the vote on a Palestinian state. And he’s also hoping to draw the United States into the conflict.”

Never mind sending floating flotillas to the Palestinian people, start planning on sending them to the U.S. if this story is not a COINTELPRO operation by a former spook.   If true, the 44 million people presently on food stamps in the U.S. will be considered the early birds to the come wave of additional public trough money if Washington goes along with Netanyahu on this Armageddon plan.

No doubt, reports from the likes of a Robert Baer a decade ago indicated that Iran had equally ambitious plans to Iraq’s escape from U.S. dollar hegemony through the sale of its oil in other currencies besides the dollar.  How else, then, did Iran achieve the enviable Axis-of-Evil member status?  Was it because of Iran’s “nuclear weapons” program?  Did George Bush mistakenly confuse Iran for Iraq when he said Iraq was hiding “weapons of mass destruction?”

Here’s the link to the original October 2000 Reuters piece regarding a UN approval of Iraq’s “request” to accept the euro as payment for Iraqi oil.

Fast forward to today. just released an article entitled, “Iran Opens Oil Borse – Harbinger of trouble in New York and London?”  It’s author, John Daly, wrote that the three-decade long U.S.-led sanctions on Iran has been long enough (that is, as long as the dollar was an acceptable exchange for Iranian oil).  Apparently Mahmoud Ahmadinejad, too, wants change he can believe in.  He, too, wants an end to the decades-long dictatorships of North Africa and Middle East.  And the U.S. is the tool of his enslavement.

“Iran is working a program, that, if it succeeds, could help undermine the dollar’s preeminence as the world’s reserve currency more effectively than a Republican filibuster,” stated Daly. “Iran’s sly weapon against the Great Satan’s currency? An oil bourse on Kish Island in the Persian Gulf, which has now begun selling high-grade Iranian crude oil.

Mohsen Qamsari, the Iranian National Oil Company’s deputy director for international affairs Mohsen Qamsari commented, “The commodity stock exchange has been pursuing a mechanism for offering crude oil on the stock exchange for a long time, and it has taken the preliminary steps, to the extent possible.”

He added, “Considering the existing banking problems, foreign customers are not expected to be taking part in the first phase of offering crude oil on the stock exchange, and this will be done on a trial basis. Today Bahregan heavy, high quality, low sulfur crude oil with less sourness will be offered on the stock exchange for the first time. In the first phase, a 600,000 barrel shipment will be offered.”

Let freedom reign.  Sounds like another U.S. serf stepping out of line, doesn’t it?  Well, it gets a little sticky.

“China, the world’s largest buyer of Iranian crude oil, has renewed its annual import pacts for 2011,” continued Daly.  “In 2010, Iran supplied about 12% of China’s total crude imports.”

As far a China is concerned, making nice with the Dalai Lama at the White House is one thing; cutting off oil supplies to its rapidly growing industrialized nation is another.  Wasn’t the straw that broke the back of the Japanese start (some suspect) serious animosity between the U.S. and Japan prior to the attack on Pearl Harbor?  It appears that the same old U.S. playbook is being used to execute yet another war, using Israel as its post-WWII tool, again.

Some (pretty intelligent analysts) say the threat of WWIII isn’t imminent; it’s already begun, and is being rolled out, appropriately, in an easy pain-free installment plan.  But this time, both the U.S. and China import much too much oil whose cheap supply is running out.

It’s a them versus us game being played.  Or, as George Bush put it following the 9-11 attacks, “You’re either with us, or against us.”  And what a great way to get out in front of a dollar collapse.  Blame it on the Axis-of-Evil.

Spectacular Short-squeeze in Silver Price coming, says James Turk

Our friends at King World News recently posted two interviews from two blue-chip sources, who report the possibility of an imminent and massive short covering by the government-supported cartel in the gold and silver markets.

As the premiere Web site for breaking interviews from the best informed in the gold and silver market, Eric King’s King World News (KWN) has been atop the drama and inside ball in the metals as it breaks.

James Turk, a frequent guest of KWN, as well as the founder and president of Goldmoney, got word (confirmed by the KWN’s anonymous London trader) of a massive short squeeze potential developing.  If gold and silver were to achieve prices north of $1,600 and $40, respectively, and hold above these benchmarks for a day, or two, many of the oversized number of short contracts will have to cover to cut losses from the adverse move higher—a move, said Turk, that could rival the monster rally of August through April.

“I wouldn’t be surprised to see $2,000 (gold) very quickly,” Turk speculated  in his KWN interview.  “It’s just a question of how the European bank crisis unfolds or the U.S. debt limit unfolds or any one of these number of trouble spots around the world unfolds. Any one of those could light a fire under the gold market and you could see $2,000 very, very quickly.  You could also see silver over $50 very quickly.”

Brief panic set in the Italian 10-year note at the close of trading in Asia today, which culminated in a sell off in the 10-year to above a 6% yield.  Last time Italy’s 10-year reached the 6% handle, an emergency gathering of Italy’s upper legislative body was assembled to vote on Finance Minister Giulio Tremonti’s austerity package to ward off a Greece-like run on its sovereign debt.  The passage of Tremonti’s plan occurred last week, briefly triggering a rally in the 10-year.

But here we are again at the precipice of another sovereign debt collapse, in no less than a week’s time from the last threat.  As the EU fights the bond vigilantes of Italian debt, the gold price correlated strongly with the yield on the 10-year following the NY close.

As the 10-year punched through 6%, gold and silver surged to intraday highs of 1,609.92 and $40.85, respectively.  But as buyers (central banks?) aggressively bought the notes above 6%, the yield fell back to 5.72%, taking down gold and silver to the $1,600 and $40.15 levels, respectively.

All of that comes on top of a PM market already tight from the escalating buying since the aftermath of the March 2009 meltdown.

“Because the market is so tight still, any kind of huge buying of physical metal is going to send these prices much higher,” added Turk.  “Then if you add in what the London Trader is talking about, short-covering coming in, it’s got the potential for an upside explosion.”

And to add another pinch of drama to the ongoing bullish story for silver, Reuters reported Monday the Hong Kong Mercantile Exchange is set to launch a silver futures contract on Friday, in the hopes of tapping into the “growing demand for the metal in China.”

The contracts will trade in lots of 1,000 ounces, as apposed to the 5,000-ounce contracts traded on the Chicago Mercantile Exchange.

Eclipsing a 17% increase in global demand for silver, China’s 67% rise in demand for the gray metal will enable Chinese investors an additional market to trade 2011′s hottest metal without falling prey to rapid-fire CME margin hikes and other maneuvers to protect the JP Morgan-HSBC price suppression scheme.

“The new contract will enable buyers and sellers in China to trade effectively with their counterparts across the world, while at the same time, allowing investors to gain exposure to silver price movements and broaden their investment portfolio,” said HKMEx president Albert Helmig in a statement.

Some analyst say the HKME is another nail in the coffin of the Anglo-American monopoly of the silver market, and that the HKME’s extended hours session will pose an additional problem for the manipulators of the silver price at customary 10 a.m. attack.

Though, typically a seasonally slow period for the precious metals market, this summer has been anything but slow.  Turk believes a perfect storm is on the horizon, and expects moves in gold and silver to rival the 1982 blastoff in the metals during the Mexican debt crisis.  Gold soared approximately 50% during that summer.

And if the previous 177% run in silver during the 25%  rally in gold between August and late April is any indication of things to come for silver, a blow up of the shorts could trigger another breathtaking rally in silver.  A similar move to the last silver rally calculates to $100 silver.

“People are looking for the safety of gold and exiting national currencies,” Turk said. “Exiting the dollar, exiting the euro, exiting the British pound, gold is at record highs against all three of those currencies.”

“It’s all very positive Eric, it’s still within my bigger point of view that the summer is going to be spectacular.”

Economist John Williams: Hyperinflation by 2014

Ridiculing Europe’s handling of the financial crisis has become a popular go-to talking point for the dollar bulls.  Yes, there are still some diehard old timers on Wall Street (Art Cashin, not among them) who cannot image their Wall Street careers without the benefit of a credit bubble gravy train.  Those same tired cheerleaders also tell us that a rebound in the U.S. economy is inevitable “because we always bounced back before” in the hopes of sucking the public into the markets one more time in order to make those bonuses.

The U.S. may bounce back in nominal terms, priced in dollars, but not in real terms, argues economist John Williams of  Williams told listeners of Financial Sense News this weekend he believes the March 2009 collapse is merely a precursor of even more grave consequences for an already battered dollar following the $5+ trillion of stimulus the Fed has injected into the financial system since the start of QEI during the spring of 2009.

“Hyperinflation in the United States will be particularly painful,” said Williams, noting that the U.S. has no backup currency to the dollar in the event of a sudden panic out of the dollar, which he believes will be not later than 2014.  At least in Zimbabwe, he said, commerce continued via a black market settled in U.S. dollars.  But in the U.S., “we don’t have a backup system here,” he said.

Williams acknowledges the hesitancy among central bankers to trigger a run on the U.S. dollar until they’ve diversified enough dollars into other currencies (such as the euro, some of the hard currencies, and gold) to weather the coming collapse.  That is especially true in the case of the Bank of China, which has on numerous occasion complained about U.S. monetary policy and the effects on food and energy prices in the People’s Republic of China.

Moreover, China’s state-sponsored rating agency has already stated that the dollar is systematically being devalued, and has lowered its rating of U.S. Treasury debt.  The Chinese want out of the dollar.

“They [the Chinese] want to get out of the dollar as quickly as they can,” said Williams.  “No one wants to create a panic.  Everyone wants to get out as whole as possible.”

Williams expects the inevitable fate of the dollar will shock the world. It’s going to zero—in real terms, in purchasing power.

“Gold is the primary hedge against what’s happening here and what going to happen to the purchasing power of the U.S. dollar, which is eventually going to decline to zero,” he warned.

As far as the timing of a dollar collapse, Williams told FSN’s Jim Puplava it could happen at any time.  There are numerous possibilities or surprises lurking that could trigger a panic, precipitated by politicians or a Black Swan event.  But the outside of his timetable for a dollar collapse is 2014; but he gives a better than 50 percent chance of the event happening sooner.

3 Gold Stocks to Watch

Yamana Gold Inc. (NYSE: AUY)

Goldcorp Inc. (NYSE: GG)

Barrick Gold Corp. (NYSE: ABX)