Little Doubt! $3,500 Gold Price, a Minimum

By Dominique de Kevelioc de Bailleul

To the ‘man on the street’, a price target of gold $3,500 must sound to him like the typical hyperbole of gold peddlers.  It must; sentiment of the gold-market-ignorant American public of the future price of gold still remains  low.

As Bill Murphy’s GATA has said, “They don’t even know how to spell gold.”

That’s because the public really has to see the effects of the Fed’s QEs.  In fact, a relatively few Americans haven’t an idea what so-called ‘quantitative easing’ truly means to him, personally, just as few understood similar Fed monetary practices orchestrated by Arthur Burns and William Miller during the inflation-roaring ’70s.  But he sure will see how inflation is eroding his lifestyle in the coming months—starting with a much higher oil price, and his coincidental savior, gold.

But something convenient for the monetary ‘authorities’ just happened.

A day before Bernanke pulls the trigger on indefinite purchases of mortgage-back debt, anti-American sentiment suddenly flares up in the Middle East and North Africa.

Coincidental?

The thinking behind the “there’s no such thing as a conicidence” may be driven by the assumption that Bernanke and his handlers knew that during the aftermath of the collapse of Lehman, AIG and the rest, the talking point, that the threat of another dip in the housing market will lead the U.S. economy into ‘deflation’ can only be told for so long.  Bernanke knew that food and energy prices are poised to soar faster than these dollar-sensitive ‘things’ rose during the 1970s.

Thinking that the Fed believes its own BS regarding the living costs of the average American reveals profound ignorance of the Fed’s real mandate, especially at this late stage of the Kondratiev debt cycle.  That mandate is: to protect its member banks.

And protected they will be.  With the Fed coming in at the last moment to cope with the mess at JP Morgan and Morgan Stanley, the effects of an addition of $1.3 trillion (estimated by the close of calendar year 2013) expansion of the central bank’s balance sheet in the coming months will necessitate a new mantra from the Fed and MSM to now explain rapidly increasing food and energy prices during a global recession.

This time, China, alone, can no longer be blamed for stubbornly high oil prices.  Its economy is dropping like a stone, too.  Therefore, a new scapegoat for the future price of $150 to $200 per barrel of oil will emerge in the Middle East and North Africa, instead.  It will be called, either the “Arab Fall” or “WWIII”.

With the latest Fed announcement, it should be abundantly clear by now: the Fed is intentionally debasing the dollar, and it appears that the central bank will continue to debase the dollar until it fears a currency collapse—a course that Ron Paul said is a “detachment from reality,” after hearing of the press release of Fed’s FOMC meeting decision, Friday.

The Fed lives in reality, and it knows what it’s doing many months ahead of a carefully coordinated plan of public distraction.

There’s little doubt; gold will take off and begin the final stage of this tremendous secular rally.  Today’s low sentiment among mom and pop for holding gold will change this year and accelerate in 2013, taking gold to great heights.  Gold has reached new highs against the Indian rupee and near-highs priced in euros.

As far as the dollar, an ultimate price target for the gold price of $2,000 will turn out to be much, much too low.  It’s much more likely that Egon von Greyrz’s target price of $3,500 to $5,000 within 18 months will make much more sense, in retrospect.

Here’s why.

The following chart provides a rational for a target gold price of $3,500.

As an example of the Swiss economist and money manager Marc Faber comments about the effects of inflation, the chart (above) shows that inflation doesn’t manifest in all markets at the same time.

In the chart, the data show inflation had flowed into the oil market months following the peak in the gold price at the end of 2011 through to today.  The expected next rally in the gold-to-oil ratio is poised to test the Aug. 2011 high of 24.  But, instead of oil surging while gold was coming off its Apr. 2011 all-time high, today, both ‘commodities’ are expected to move much higher as a result of QE++, with the gold price outperforming the oil price by a considerable clip.

With predictions of a minimum oil price of $150 as a result of the Fed’s new QE-to-no-limit plan (to north of $200 in the event of an attack on Iran) and the multiple of the all-time high gold-to-oil ratio of 24 applied to the oil price, the gold price calculates to $3,600.  In the event of a $200 per barrel handle, $the target price moves up to $4,800.

Gold & Silver: Explosive 2010 Rally Poised to Repeat

By Dominique de Kevelioc de Bailleul

“The precious metal markets feel just like the summer of 2010,” Goldmoney Chairman James Turk told King World News, Monday. With European woes presently the primary focus among investors, as it was at about the same time in 2010, Turk suggested the monster rally that began in the summer of 2010 is overdue for a major move to well past $2,000 and $50 for gold and silver prices, respectively.

In the summer of 2010, gold and silver prices took 31 months to recover and eventually breakout to new bull market highs following the Lehman collapse.

It’s been 14 months since the brutal correction in PM prices from the April 2011 highs, but Turk believes the corrective phase may have run its course, with “sentiment being at rock bottom” as an historically reliable hint of an imminent market about-face to higher prices.

To illustrate Turk’s point, in order to match today’s abysmally low market sentiment in the precious metals, we have to go back to October 2008, the month of panic from the post-Lehman debacle.

During that month of impending doom, which coincided with the absolute bottom of the silver crash of $8.50, off from the high in March 2008 of $21, Bloomberg wrote, “It looks like we’re on the edge of a bottomless pit in precious metals … Confidence is at rock bottom. No one wants to be long any commodity.”

From Reuters, a month later, in November 2008, “Fears of a global recession will continue to weigh on silver prices. Globally, we’re in a new paradigm. It’s difficult for anyone to know exactly where the bottom is.”

Fast forward to the summer of 2010, Turk famously predicted a seasonally-unusual late-summer rally in the precious metals—a rally which, in retrospect, was the result of market participants front-running an expected announcement of further ‘quantitative easing’ from the Fed.

It turns out, the front-runners were correct. On Nov. 3 2010, the Fed announced QE2, the buying of $600 billion of U.S. Treasury securities. Gold and silver prices soared, with gold jumping from $1,175 to $1,920 and silver soaring from $17.50 to nearly $50 throughout a 13-month rally in the precious metals.

Today, the market is on the cusp of another monster rally, according to Turk, and the “eery” feeling he has of a replay from the Fed, the catalyst for the entire bull market rally in the monetary metals, could be gleaned from post-FOMC comments as well as speeches and writings of Fed ‘officials’ of late. The latest speech comes from San Francisco Fed President and CEO, John Williams, who attempts to condition the markets to incorrectly conclude that the Fed’s QE initiatives don’t correlate to consumer price inflation—a point also, coincidentally, made by the Tokyo Rose of the gold market, Jon Nadler, in an interview with Bloomberg Television on Jun. 22. See BER article, Jon Nadler, Another Fed Whore

In a speech by the Fed’s Williams, Tuesday, titled,Monetary Policy, Money and Inflation, he stated, “In a world where the Fed pays interest on bank reserves, traditional theories that tell of a mechanical link between reserves, money supply, and, ultimately, inflation are no longer valid.

“Over the past four years, the Federal Reserve has more than tripled the monetary base, a key determinant of money supply. Some commentators have sounded an alarm that this massive expansion of the monetary base will inexorably lead to high inflation, à la Friedman. Despite these dire predictions, inflation in the United States has been the dog that didn’t bark.”

Economist, John Williams (the other John Williams) of ShadowStats.com, disagrees. According to the ShadowStats.com website, Williams published (see chart, above) how the Fed attempts to divorce Fed actions from market effects by jury-rigging consumer price data. ShadowStats Williams’ CPI model of 1980 reveals inflation running at nearly 10 percent, not the 2.1 percent published by the Fed.

According to Goldmoney’s Turk, investors of precious metals should buy during these phases of very low market sentiment and lulls in Fed policy, because when the Fed actually makes the announcement for more ‘quantitative easing’, a good amount of the move in the precious metals will happen before the announcement, as was the case in 2010.

The silver price, for example, climbed nearly 50 percent to $25, leading up to the day of the QE2 announcement of Nov. 3, up from its summer 2010 low of $17.33. After the Fed QE2 announcement of further U.S. Treasury buying of $600 billion, silver doubled in price within six months.

Turk expects another big move, like the one that began in the summer of 2010, and he urges investors to accumulate more metals before the formal announcement of QE3, not after.

Peter Schiff’s Latest Comments About Gold and Gold Stocks

With the dismal performance of gold stocks testing the patience of even hardcore gold bugs, Euro Pacific Capital CEO Peter Schiff believes investors should not panic and sell, but hold on, the bottom in the gold mining stocks is probably in.

And if the bottom is not in, hold on anyway.

“We could see another 10% pop in a week or two in the mining shares,” Schiff told King World News on May 23.  “There’s a very good chance that the bottom is in, especially if we can get a rally in gold.”

At this time, it may be worth repeating a famous quote from economist John Maynard Keynes: “The market can stay irrational longer than you can stay solvent.”  On the way up and on the way down, markets can mis-price assets to ridiculous levels for longer periods of time than appears rational.  Today, it’s the U.S. dollar, U.S. Treasury market and gold, which have been mis-priced for so long.

“Right now the U.S. dollar has been rising because of worries about Europe, but the dollar is sicker than the euro,” Schiff said.  “So both currencies should be falling against gold and gold should be taking off here.”

To put into better context how “sick” the U.S. dollar really is, consider an article penned by USA Today journalist Dennis Cauchon, who outlined in his May 23rd piece the horrific fiscal shortfalls in Washington—a fiscal debacle so large that economist John Williams of ShadowStats.com expects hyperinflation in America some time in 2014 as global investors might eventually witness 100 percent Fed monetization of fresh U.S. Treasury debt.

Under the Generally Accepted Accounting Principles (GAAP) rules of reporting financial disclosures, “the [U.S. budget] deficit was $5 trillion last year under those rules,” stated Cauchon.  “The official number was $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was not registered on the government’s books.”

Whether investors are aware of the fraudulent U.S. Office of Management and Budget (OMB) accounting, or not, the reality of millions of baby boomers retiring each year and the growing budget deficits that come with an aging population will reach an inflection point, whereby investors of all stripes come to expect money printing as a way of life and begin trotting, then running, to gold and the gold shares in an effort to protect from a Greece-like financial collapse.

And the quick-fix to Washington deficits through Fed ‘stimulus’ and the higher tax receipts that result from a U.S. “bubble economy” has finally reached that ‘Minsky Moment’, according to Schiff.  After trillions of dollars of Fed stimulus since 2009, the economy just isn’t responding like it had for nearly 70 years of Fed intervention—a prediction made by 20th century economists Hyman Minsky and Ludwig von Mises, among others, of the ramifications of chronic central bank money supply injections.

“The market is just rolling over, as it’s coming to grips with the fact that the fantasy they believed in is just that: fantasy,” Schiff said in an earlier KWN interview of May 18th, referring to the recently reported poor economic numbers from Washington and private sources.  “It’s not reality.”

Schiff went on to say that gold—and by extension gold shares—will rise “as investors realize that QE3 [quantitative easing] is coming, because the Fed has already said that.  If the economy needs it, it’s going to get it.  And the economy is addicted to it [stimulus].  I mean, this economy needs QE like a heroin addict needs another fix.”

Back to the May 23rd interview:  Schiff suggested that the relative strength of the HUI index of mining shares to the gold price so far this week indicates to him a bottom is in and a buying opportunity is at hand.   As far as the gold mining shares, “we could have a pretty serious up-move in the gold stocks in a very short period of time.”

Marc Faber Fears Stock Market Crash

Marc Faber, editor of the Gloom Boom Doom Report, and the man who said in early April he expects “massive wealth destruction” ahead for investors, also expects a 1987-style stock market crash if U.S. stocks continue to rally without further Fed stimulus.

“I think the market will have difficulties to move up strongly unless we have a massive QE3,” Faber told Bloomberg’s Betty Lui on Friday.  “If it moves and makes a high above 1,422, the second half of the year could witness a crash, like in 1987.”

Faber’s comments about the market’s dependency upon further Fed ‘quantitative easing’ come off the heels of TrimTabs CEO Charles Biderman statement of Apr. 30, when Bidrman said in a weekly update, “It’s the Federal Reserve that controls the market” and “we play with their money that they print or stop printing.”

The wealth effect of record U.S. housing prices, robust credit-driven consumer spending, an employed workforce, and an economy fueled by ever-increasing debt has disappeared for the most part, leaving investors with little money to buy stocks.  And if there is money left over, the retail investor is buying bonds or parking extra cash in money market accounts in fear of the next show to drop in Europe, with fallout across the Atlantic anticipated to spill over to the U.S.

Collective market wisdom says that stocks have risen due to a natural rebound from oversold conditions in March 2009, relatively high dividend yields compared with Treasuries, and massive liquidity provided by the Fed.  But Faber feels that earnings expectations are too high and could disappoint, and that many companies paying out dividends from earnings could level off, be cut, or eliminated by some companies all together.

“If the market makes a new high, it will be a new high with very few stocks pushing up and the majority of stocks having already rolled over,” Faber continued.  “The earnings outlook is not particularly good because most economies in the world are slowing down.”

In mid-November of last year, Faber began speaking about the connection between easy Fed monetary policy and rising stock prices, by he also became concerned that, despite record global central bank stimulus the world economy was rebounding at a rather anemic rate compared with previous recovery cycles.

Faber told the Taiwan’s Taipei Times, “A third wave of quantitative easing by the U.S. Federal Reserve is just a matter of time,” as economic data showed, then, sluggishness in real employment rates, capital spending and global trade.

By December, Faber warned of at least a 10 percent correction for February—which never materialized.  In a subsequent interview, however, he admitted that calling market bottoms is far much easier than calling market tops.

Today, parallels can be made between 2012 and 1987, with both years starting out “strong” followed by a “correction,” he said in response to a viewer e-mail to Bloomberg.  “If we have a rally into August it could resemble 1987 with a crash in the fall.

But a formal announcement by the Fed of further stimulus may change his outlook, Faber said.

Smart Money Banking Big on Gold & Silver Prices to Soar

Short positions positioned by the smart money stand at the lowest level since the start of gold’s near-double in price and silver’s near-triple price surge of 2009.

In the most recent release of the Commitment of Traders (COT) report, the data show commercial traders now expect gold and silver to stop falling.  But more to the point, historical data suggest that when commercial traders, the ‘smart money’, cuts back on their short positions to low levels on a relative basis, precious metals prices have risen, and sometimes, and most recently, in a violently manner.  Sign-up for my 100% FREE Alerts

For week ending Apr. 24, 2012, gold market commercial traders reduced their short position to 316,231 contracts, an amount not seen since gold’s historic breakout above the $1,000 mark in Sept. 2009.  Gold, then, proceeded to rally 92 percent throughout a 23-month rampage, as traders fled to the metal during the Federal Reserve’s ‘Quantitative Easing’ policies of QEI, QEII and ‘Operation Twist’.

Silver prices, after struggling below the $15 level in 2009, broke out to the upside to test the $20 mark in Aug. 2010 for a 33 percent gain, before surging through $20 in Sept. 2010 on its way to a continuation of a breathtaking 232 percent rally from the initial breakout above $15.

“ . . . large commercial traders have greatly cut back their short positions in gold and especially in silver,” global precious metals specialists GoldCore wrote in an open letter to traders.  “This has often been a sign of a bottom and suggests that they do not expect gold and silver to fall much further.”

GoldCore went on to state that, for the week ending Apr. 2012, COT data show that speculators (dumb money) have reduced their net long positions to 107,600 contracts, a meager amount not registered at the CFTC since Jan. 2009.  At that time, gold and silver traded calmly at $900 and $12.50, respectively.  Then came the fallout of the Lehman collapse and QE announcements from the Fed that followed.  That’s when the fireworks began.

As Europe teeters on the brink of a Lehman collapse “times 1,000”, a threatening financial Armageddon of proportions never witnessed in modern times, expectations for more QE to match the magnitude of a Lehman-times-1,000 event grow each day, according to precious metals expert Keith Barron.

“Spain is in a tremendous amount of trouble right now.  They have had a lot of their major banks downgraded,” Barron told King World News, Monday.  “The country’s debt has been downgraded, yet again . . .

“The unemployment rate is now almost one in four people, it’s just over 24%.  If this place was in South America, they would be verging on revolution right now . . .  Maybe that’s coming.

“Greece is certainly not out of the woods.  We know that Portugal is in big trouble too.  The fear is that things are going to start spreading to Italy, that’s the big shoe to drop….”

And that shoe could make investors of precious metals rich, according to legendary newsletter writer Richard Russell of Dow Theory Letters.  He said the rich have been buying precious metals in preparation of the collapse of the Europe Union—and by extension the United States, as the two largest economies of the world have never, and will not, decouple from each other—a point grossly underplayed by mainstream media financial programming.

In essence, Europe’s $16 trillion economy will in the end mostly likely serve up to be the United States’ PIIGS.  As far back as the Greatest of Depressions, the 1873-1896 Depression, the Panic of 1907, the mini-Depression of 1921, and the Great Depression of the 1930s, Europe and the US have always collapse together after mutual economic prosperity and asset-price inflation.

That historical context may easily explain the urgency by the Fed to egregiously open currency swap lines with Europe to the tune of more than $500 billion and fund the International Monetary Fund in a backdoor bailout plan for Spain, Portugal, Italy, and again, Greece—providing concrete evidence to support Jim Sinclair’s “QE to infinity” mantra.

Richard Russell sees it that same way as Sinclair—mutual destruction on both sides of the Atlantic and central banker policy response to match.

“Technically, both the US and Europe are dead broke, and their GDPs would have to run wild on the upside to make the debt to GDP ratio more acceptable,” Russell penned in his daily commentary to investors of last week. “How will it all end?

“It will end with the central banks churning out junk fiat inflation-adjusted ‘money’ in order to service the debts.  Meanwhile, the precious metals and other tangibles are being bought up by millionaires and billionaires as they await their turns to feast on the remnants.”

But unlike the Great Depression of the 30s, Russell sees Fed Chairman Ben Bernanke and other central bankers from the G-6 nations inflating in an effort to avoid systemic price deflation—a scenario which Bernanke vowed will never happen under his watch.

“During the Depression [of the 1930s] wealthy individuals husbanded their dollars, and later got rich buying the battered remains of the Jazz Age of the twenties,” Russell ended his piece.  “It may not be that easy and cut and dried this time around.  This time history may not Rhyme.

In other words, don’t count of a Bernanke-led Fed to withhold the monetary spigots of ever-more money printing.  The smart money is banking big on it.  Sign-up for my 100% FREE Alerts

Insiders Tell Jim Sinclair, $17 Trillion in QE Coming

No matter how the Fed tries to manipulate the markets through its orchestrated communiques, more ‘quantitative easing’ is coming, says ‘Mr. Gold’ Jim Sinclair.  And this time, $17 trillion more of Sinclair’s mantra “QE to infinity” is a done deal, according to him. Sign-up for my 100% FREE Alerts

How does he know?

“How does anyone know an answer to a question?  By being told.  By having sources,” Sinclair revealed to King World News, Friday.  “I’m half a century in the business.  I’ve constantly kept up my contacts in a very unique and focused way.  Quantitative easing was made clear to me, prior to Bernanke’s speech to the Washington group, prior to quantitative easing.”

The 50-year-plus veteran of the gold market first came to use the term “QE to infinity” back as early as the summer of 2009, suggesting he knew all along that the Fed had finally reach a liquidity trap and that it was inflate or die from then on.

Nearly three years later, there’s been no chink in that assessment, as evidenced by the Fed’s subsequent QE2 program, bogus currency swaps schemes as well as the most recent backdoor bailout of Europe through the Troika earlier this year.

“The next step in the formula is the fatigue of Asia in supporting bad Western monetary habits and QE to infinity to protect the long term 28 year up-trend line in the 30 year U.S. Treasury bond market,” he said in a Jul. 2, 2009 post.

A look at a 20-year chart of the 30-year Treasury reveals the trend line Sinclair had spoken of.  Investors seeking clues to the dollars next major move could find in the chart of the 30-year bond.

Both the MACD and Slow STO indicate intermediate-term technical topping in the 30-year bond, and the trend line has held ever since the Jul. 2009 post.

As far as the outlook for the gold market, Sinclair is as bullish on gold as he’s as sure of more QE from the Fed.

The battle, he said, for the Fed is to fight the rise in the gold price for as long as possible prior to the next formal announcement of further Fed expansion of its balance sheet.  A move through “$1,764 and they [Fed] lose control.  That begins the move which is exponential.

“It’s a formidable challenge (keeping gold below $1,800).  The true range of gold is $1,700 to $2,111, but these guys are going to try to fight it like nobody’s business.”

However, the fight will be lost and the breakout above the $1,700 to $2,111 range is inevitable following the next QE announcement by the Fed on the way to trillions more.  That, Mr. gold has no doubt.

He concluded, “If we’ve done over $17 trillion already, do you think we won’t do another $17 trillion?  Of course we will.” Sign-up for my 100% FREE Alerts

Bernanke with ABC’s Diane Sawyer; Do You See What I See?

ABC news released a video on its site of Diane Sawyer’s interview with Federal Reserve Chairman Ben Bernanke, aired on Tuesday.  Aside from the light moments of the conversation with the veteran journalist of 60-Minutes fame, Bernanke appeared obviously strained, tired and defeated in response to Sawyer’s pointed questions regarding U.S. jobs, the economy and inflation.

A look at the written transcript of the interview reveals nothing newsworthy from Bernanke.  However, after watching the Q&A, the viewer should come away with a sense that Bernanke knows he’s lost control—a sense that market forces and politics have become too strong at this juncture of the Kondratiev cycle to avert a catastrophe.  He also knows he’s lost credibility with the international financial community. Sign-up for my 100% FREE Alerts

Watch the Diane Sawyer interview, then contrast Bernanke’s tenor with his demeanor during his Dec. 6, 2010 interview on CBS News 60-Minutes, when he assured the world of his ability to halt inflation within 15 minutes if inflation appeared to run out of control.

Notice in the Dec. 6 interview the power and confidence in his voice and posture as he confronts the question regarding the future risks to inflation from the $600 billion “quantitative easing” program embarked upon by the Fed’s QEI program in 2010.

In contrast, in his March 2012 interview, there’s an obvious lack of any noticeable confidence to any statement he makes about key points of the financial crisis, jobs or inflation.

The most telling part to Bernanke’s presentation during the ABC News appearance came late in the interview, when he was reminded by Sawyer of the statement he made on the Dec. 6 interview with 60-minutes regarding his ability to stop inflation as a result of the Fed’s expanding balance sheet.

DIANE SAWYER: You said at one point in an– in 60 Minutes interview awhile back that you felt you could control it 100%. [emphasis added]

BEN BERNANKE: No, I didn’t say that. What I– the question was– did we have confidence in the tools that we have to unwind the large balance sheet increases for example that we’ve done. And– and I– I do have 100% confidence that when the time comes to unwind– the actions we’ve taken– that we would be able to do that.

Yes, he did say that!  And he said it forcibly and in a manner intended to instill confidence with the public in the Fed’s ability to control consumer prices as a potential consequence of its ‘quantitative easing’ program.

Bernanke responds to journalist Scott Pelley during the Dec. 2010 on 60-Minutes:

SCOTT PELLEY: Can you act quickly enough to prevent inflation from getting out of control?

BEN BERNANKE: We can raise interest rates in 15 minutes if we have to . . .

SCOTT PELLEY: You have what degree of confidence in your ability to control this?

BEN BERNANKE: 100%

Maybe Bernanke isn’t so sure, after all.

Back to Sawyer.  When asked if he would accept another term as Fed Chairman, Bernanke appeared somewhat flatfooted.  He came across as if to say, “I want out.  I’m tired, and this thing isn’t working.”

DIANE SAWYER: So if– a president, whoever it is in 2014 asks you to stay–

CHAIRMAN BERNANKE: Well–

DIANE SAWYER:—would you think about it?

CHAIRMAN BERNANKE: –I’ll– I’ll– I’ll think about anything, but– basically– it’s just– too hypothetical at this point. Sign-up for my 100% FREE Alerts

Max Keiser Tipped Off to Gold’s Next Major Move

In a recent episode of the Keiser Report, Max Keiser’s nose for bank fraud demonstrates, not only how the Fed and its 21 primary dealer network steal via insider trading throughout the U.S. central bank’s ‘Quantitative Easing (QE)’ programs, but that record purchases of Agency debt by these 21 banks of the last two months tip him off that another QE announcement is around the corner.

Keiser quotes Pento Portfolio Strategies’ Michael Pento, who told King World News on Mar. 17 that banks have purchased suspiciously high amounts of Treasuries and Agency debt during the first two months of 2012—amounts that are so large, it can only mean that the Fed’s member banks have already been told of the Fed’s next move regarding its ongoing QE activities, according to Keiser.  Sign-up for my 100% FREE Alerts

“Commercial banks have purchased $78.2 billion in Treasury and Agency debt in January and February of 2012,” Pento told KWN.  “That’s already more than the entire amount of purchases made in all of 2011 . . . “

Keiser wisely points out Pento’s observation of the Fed’s market operations and its deleterious effects upon American consumers, especially the poor, who see food and energy prices soar as a result of the Fed’s QE programs.

But the clever means by which the Fed “gifts” these 21 member banks through its camouflaged money printing operation also “telegraphs” the Fed’s next major announcement regarding QE, according to Keiser.

“The word has gone out to the hedge fund community that the next round of Quantitative Easing, they’re going to buy back this agency debt for par, for 100 cents on the dollar.  And so, it’s another gift to the banks and the hedge funds; they’re telegraphing what they’re going to do.  It’s insider trading—again—for the banks.”

Moreover, along with the financial fraud at the Fed, the media has lent a helping hand by heralding an economic recovery in the U.S. as a means for dropping the gold price so that other central banks are able to acquire the yellow metal at lucrative price points.  In its part to dupe investors, the Fed claims deflation, not inflation, should be feared, though food and energy prices have continued to move higher throughout the crisis, which began in 2008.

“So certain people are telling us that deflation is the problem and yet gas, food and import prices are all showing significant inflation,” Pento said in a KWN interview of Feb. 22.  “Oil is now trading over $105.  So right now we have the highest price for gasoline ever at this time of the year.

“Yet Bernanke is telling you there is no inflation and that deflation is a problem.”

As unsuspecting gold investors sell out their holdings in the belief of chronic media-driven deceptive communiques from the Fed, official holdings of the precious metal, on the other hand, continues to rise each year.

Financial Times of London reported:

In a note to clients this week, Credit Suisse referred to “aggressive central bank buying seen last Friday”.

The Bank for International Settlements, which acts on behalf of central banks, has been buying significant quantities of gold on the international market amid falling prices, traders said.

According to several estimates, the BIS bought 4-6 tonnes of gold, worth roughly $250m-$300m at current prices, in the over-the-counter physical market last week, with purchases particularly strong at the end of the week. The total purchases over the past three or four weeks were likely to be as much as double that, the traders added.

Central banks have definitely been looking at gold as an asset class much more closely ever since European central banks stopped selling,” a senior gold banker said. “There has been a huge interest.  Emphasis added.

Keiser told his viewers, the evidence is clear.  Gold is going higher and the central bankers are loading up before the big move higher.

Market volatility in the next two years is expected to run extremely high, a condition in which gold performs very well, according to Keiser, adding that investors should opt out of the fraudulent financial system (operated by “psychopaths”) and profit from the ongoing crisis by owning gold.

“The only way you lose [lower gold prices] is, if things go like it’s like 1955 again and Eisenhower is the president,” Keiser began an information-packed rant for which he has become famous.   “It’s the only way you lose. So unless Eisenhower is coming back to become president of the United States, gold is going higher.  That’s your risk, that Eisenhower is reanimated and stuffed and put in the White House, and it’s ‘I like Ike’ and we went backwards in time.  That’s your only risk in owning gold.”  Sign-up for my 100% FREE Alerts

Strike on Iran, a Green Light from Washington

Reports of the USS Enterprise aircraft carrier battle group setting course to join battle groups USS Lincoln and Vinson in the Arabian Sea and today’s back-to-back announcements regarding the complete termination of Iran’s financial transactions through SWIFT, as well as the announced joint agreement between the U.S. and the UK to release strategic oil reserves into the oil market spells war with Iran. Sign-up for my 100% FREE Alerts

After 30 years of various sanctions and hostile rhetoric aimed at Iran, for the U.S. to turn back now, it would have to admit defeat, thus sending a powerful signal that U.S. dollar hegemony is imminently unraveling.  Allowing Iran to make the rules concerning payment for its oil will surely embolden other oil producers to follow in step—a step other OPEC members would gladly take if it meant ridding themselves of the hopelessly inadequate U.S. dollar as recompense.

William R. Clark, author of Petrodollar Warfare: Oil, Iraq and the Future of the Dollar, cites an anonymous source during research for his book.  In his essay of 2003, titled, Revisited — The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth, Clark penned:

The Federal Reserve’s greatest nightmare is that OPEC will switch its international transactions from a dollar standard to a euro standard. Iraq actually made this switch in Nov. 2000 (when the euro was worth around 82 cents), and has actually made off like a bandit considering the dollar’s steady depreciation against the euro. (Note: the dollar declined 17% against the euro in 2002.)

The real reason the Bush administration wants a puppet government in Iraq — or more importantly, the reason why the corporate-military-industrial network conglomerate wants a puppet government in Iraq — is so that it will revert back to a dollar standard and stay that way. (While also hoping to veto any wider OPEC momentum towards the euro, especially from Iran — the 2nd largest OPEC producer who is actively discussing a switch to euros for its oil exports).

Iran has stopped discussing accepting euros for its oil, but has instead leapfrogged to a more egregious policy of now accepting yen, rials, rubles, renminbi and gold in exchange for its crude.  In fact, the Iranians went a step further in January, as to intentionally insult the U.S., by making the announcement that included a gratuitous statement that the policy change in Tehran was suggested by the Russians.

Within days of the shocking Iranian communique, Russia Today reported that India had agreed to pay with gold for Iranian oil.  Then, reports of Japan, Korean and China discussing or making similar arrangements began hitting the news wires.

“India has reportedly agreed to pay Tehran in gold for the oil it buys, in a move aimed at protecting Delhi from U.S.-sanctions targeting countries who trade with Iran,” RT reported.  “China, another buyer of Iranian oil, may follow Delhi’s lead.”

Moreover, Russia and China followed through with vetoes against Iranian sanction at the United Nations Security Council vote, which elicited a strong response from U.S. Ambassador to the UN, Susan Rice.  Japan and other nations also expressed opposition to U.S. aggression towards Iran now that oil supplies are targeted.

As to the timetable for an Iranian attack, it’s been suggested that domestic politics have played a role within the Obama administration to, not only enhance his re-election chances, but to aid the Federal Reserve in its dilemma, as well.

Further so-called ‘quantitative easing’ and the ramifications of inflation has not gone unnoticed by the American people, aided by the popularity of presidential candidate as well as the most threatening opponent of the Fed, Congressman Ron Paul of Texas.  Paul has also gained support from voters with his message of returning American troops and closing U.S. military bases worldwide.

“The U.S. government will likely not raise on this busted flush because Ron Paul’s success in the primaries, despite the concerted efforts of the corporate media, the GOP, and Israel, has sent a clear and unambiguous message to the status quo that starting yet another war for Israel is going to cost incumbents their jobs come November,” influential blogger Michael Rivera of WhatReallyHappned.com wrote in a Jan. 16 post.
Now, two months later, that the Republican primaries have moved past Super Tuesday, with establishment candidate Mitt Romney of Massachusetts garnering a significant lead in the delegate count, conjuring up a scapegoat for the expected rise in oil prices following an attack on Iran serves as a neat and direct connection between a closing of the Straits of Hormuz and soaring gas prices.

A geopolitical event of that magnitude will provide a narrative for the Fed, whose  remarkably low interest rates though direct purchases of U.S. Treasuries must continue.  Otherwise, higher interest payments on $15 trillion of U.S. debt will blow out an already massive budget deficit.  The dollar would fall.  But a shock-and-awe war with Iran, a proxy war with Russia and China, the dollar may actually gain strength in a timeout from the risk-on trade and flight out of the U.S. dollar.

Following last week’s FOMC meeting and Fed Chairman Ben Bernanke Congressional mildly hawkish testimony, not surprisingly, the interest rate on the U.S. 10-year Treasury has suddenly shot up 30 basis points within three days, smashing through key technical levels and rising rapidly.  Traders of sovereign paper wonder who will buy the new U.S. debt issuance if the Fed doesn’t intervene with more primary dealer direct purchases, a point famously made last year by PIMCO’s Bill Gross.

“U.S. Treasuries extended their rout on Thursday, with the 10-year yield hitting a fresh 4 1/2 month high . . . ,” Reuters reported on Thursday.  “The 10-year yield has broken above key technical level of 200-day moving average, at 2.25 percent on Thursday, for the first time since July.”  Each percentage point of U.S. Treasury interest adds approximately $150 billion to the U.S. budget deficit—a deficit that has already been projected to shrink for fiscal 2013.

With Ron Paul marginalized, for now; a Fed that desperately needs an excuse for further monetary easing (Bernanke will say that high oil prices threatens the alleged recovery of the U.S. economy); a diversion from the connection between easy money and higher energy prices; and the political support an incumbent president typically receives during a ‘justifiable’ war against a ‘rogue’ nation, the White House will most likely strike Iran and gamble on a jump start to WWIII. Sign-up for my 100% FREE Alerts

Hey Silver Bugs, Start Buying!

As silver continues to slide from Wednesday’s mini massacre, with today’s trade already dropping silver below its 20-month moving average of $32.74, accumulators of the white metal should immediately begin scaling into the metal in preparation for the next assault on $50, according to precious metals bulls.

The brightest minds of the bullion markets agree that a coordinated take down of the PM complex was orchestrated in advance of an upcoming big event—or two.  James Sinclair, Goldmoney’s James Turk and Sprott Asset Management’s Eric Sprott agree that central banks were behind Wednesday’s assault. Sign-up for my 100% FREE Alerts

Moreover, many within the PM community, as well as those outside of the relatively small bullion market clique, believe that the recent rally from last December’s lows foreshadows something big anticipated this year.

Marc Faber of the Gloom Boom Doom Report and Jim Rogers of Rogers Holdings place strong odds that Iran will be attacked—but, by whom and when, are unclear.  But an attack is “almost inevitable,” Faber told Reuters on Tuesday.

Two weeks ago, Rogers told India-based Economic Times an attack on Iran is “madness” on the part of the U.S. or Israel, as a threat to the world’s fifth-largest oil by the West (or allies) would most likely escalate a confrontation with Iranian allies, Russia and China.  Crazy? Yes, “but it looks like it will” happen, he said.

Though Iran’s threat to close the Strait of Hormuz could soar oil to $200, taking already-disintegrating Western economies down harder, still, both Faber and Rogers believe that the Fed and ECB would then be forced to openly announce more ‘quantitative easing’—though Rogers has said on several occasions that the Fed hasn’t stopped QE2.

“Say war breaks out in the Middle East or anywhere else, (Fed chairman) Mr Bernanke will just print even more money.  They have no option; they haven’t got the money to finance a war,” said Faber.

Roger’s hasn’t offered a plausible reason for the U.S. (or Israel) to attempt a geopolitical move against Iran so outrageous as to characterize it by him as “madness.”

But Faber does proffer a strong enough motive to make sense of such a bizarre plan—a plan that threatens to draw two Asian nuclear powers in defense of Iran.

“The Americans and the Western powers know very well they cannot contain China economically, but one way to contain China is to switch on and switch off the oil tap from the Middle East,” Faber said.

The lesser-discussed issue in the Middle East, which, by proxy, would most likely draw Russia and China into a military confrontation with the West, revolves around Syria and its known reciprocal defense treaty with Iran.  An attack on Syria equates to an attack on Iran—which brings back again the likelihood of Russia and China as defenders of Syria.

Last week at the United Nations, Russia and China vetoed proposed sanctions by Europe and the U.S. against Syria.

“Some countries submitted a draft resolution to blindly impose pressure and even threatened sanctions against Syria. This would not help to ease the situation,” Chinese foreign ministry spokesman Ma Zhaoxu said, according to Agence France-Presse (AFP)

Russia’s envoy to the United Nations, Vitaly Churkin, said the UN draft was “based on a philosophy of confrontation,” and added that sanctions imposed on Syria were “unacceptable” to Russia.

In response to the veto from Security Council members, Russia and China, American Ambassador Susan Rice said she is “disgusted” at Russia and China’s decision to veto the UN resolution to sanction Syria.

Russia’s Churkin struck back.  “Unfortunately, some of our colleagues choose to make rather bizarre interpretations of the Russian proposals,” said the Russian UN Ambassador.

After last week’s war of words between the U.S., Russia and China over the U.S. Security Council vetoes, Faber cannot help but to believe that the next step could include unilateral action by the U.S. in the region.

He told Reuters, “I happen to think the Middle East will go up in flames,” and added, “You have to be in precious metals and equities . . .”

On Friday, Faber told The Gold Report, “If you don’t own any gold, I would start buying some right away . . . ” Sign-up for my 100% FREE Alerts