Fiat Money Has No Place To Go But Gold: Alan Greenspan

YESTERDAY IN GOLD AND SILVER

Well, dear reader, you’ll notice that there have been a few changes to this column… and there are a few more to come before it’s all done with.  The changes are due largely to reader feedback… and the computer geniuses behind the scenes doing all this stuff, hope you like it.  First off, I’d like to draw your attention to the “Feedback” link located on the far right hand side of the page.  This feedback link is only available [and visible] in the ‘on-line’ version of this column… so you’ll have to go there to say what you think… and the Casey Research computer wizards would appreciate hearing from you.  Coming soon will be the ability for all readers of this column to submit comments on what I write about each day.  Plus any bugs that are present will have to be sorted out as well… as this is the first day we’ve gone ‘live’ with this new look.  So bear with us. – Ed
Gold didn’t do a thing on Wednesday anywhere on Planet Earth… and couldn’t even manage to best its Tuesday high, as its only attempt to do so shortly after 11:00 a.m. in New York, ran into one of the usual not-for-profit sellers.  That’s all the action there was.  Tuesday’s high [$1,272.70 spot] and low [$1,262.50 spot] of the day came within 30 minutes of each other.  I’m not going to bother posting the 24-hour gold graph, as all the action was in New York… and here’s that chart.

Silver’s price activity was somewhat more exciting.  The price was basically unchanged by the time Far East trading was over… but the moment that Hong Kong closed for the day, the price began a slow decline to its low of the day [$20.31 spot] shortly after 8:30 a.m. in New York.  From there, its price began a spirited rally that ran into a brick wall at the London close at precisely 11:00 a.m. Eastern time.  And that, as they say, was that.  The 11:00 a.m. sharp price cap was also silver’s high of the day at $20.64 spot.  We’re still about a dollar away from the highs of early 2008.  Will we make it before JPMorgan et al pull the pin… or will they finally get over run?

Volume in gold for Wednesday’s trading day was moderate.  The same with silver.  September open interest in silver is now down to 1,093 contracts that either have to be sold or delivered into.
Here’s the 2-day graph of the world’s reserve currency.  The waterfall decline on Tuesday is the number one outstanding feature… and about nine hours after that came the intervention by the Bank of Japan starting around 9:00 p.m. on Tuesday night in New York… Wednesday morning in Tokyo.  Now that more than twenty-four hours have gone by… I’d say that their attempts to drive down the value of the yen was less than successful… and that’s being kind.

Like gold, the HUI didn’t do much… and closed the day down a smallish 0.27%

Well, the CME Delivery Report showed that there were deliveries in four Comex traded metals yesterday… even gold put in an appearance for a change.  There were 100 gold along with 33 silver contracts posted for delivery on Friday.  In silver, JPMorgan was still trading for both their clients and their house account… so proprietary trading is still going on in the Comex metals.  The link to yesterday’s action is here.
GLD, which added around 198,000 ounces of gold on Tuesday, showed a withdrawal of 127,038 ounces on Wednesday.  Considering the price activity, It beats me why that would be the case.  On the other hand, SLV reported adding 1,174,143 ounces of silver.
The U.S. Mint had a tiny sales report yesterday.  They sold another 5,000 ounces of gold in their gold eagle program… along with another 1,500 one-ounce 24K gold buffaloes.  But it was a pretty busy day over at the Comex-approved depositories on Tuesday, as every warehouse showed in-and-out activity.  By the time the fork lifts were parked for the day, the warehouses reported a net decline of 13,402 troy ounces of silver.  The report, which is worth a look, is linked here.

CRITICAL READS

To start with, I have several stories about the U.S. dollar and other world currencies to lay on you.  The Bank of Japan’s intervention in the currency markets has caught the attention of Ambrose Evans-Pritchard.  The story, posted yesterday evening in London, bears the headline “Bank of Japan riles U.S. with yen move“.  As you know, Japan has launched a huge intervention in the foreign exchange market for the first time since 2004 to stem the rise of the yen and head off a deflation spiral, prompting harsh protests from top US Democrats on Capitol Hill.  The link to this must read story is here.
Here’s even more very ugly fallout from Japan’s intervention in  the currency markets yesterday.  In the wee hours of this morning, long after I’d written this part of the column, I received the following story from reader ‘David in California’.  It’s posted over at the businessinsider.com website.  The headline is a shocker… and reads “Yen Intervention Fans Flames of Anti-Japanese Rage Across China“.  It’s only a handful of paragraphs, but definitely worth your time… and the link is here.
It’s not only Japan… but Columbia, Brazil and Peru that are also making every attempt to prop up the dollar and prevent their local currencies from appreciating.  Here’s a Reuters story headlined “Columbian Central Bank Busy Dollars, Peso Falls“.  As the world’s reserve currency heads for the nether reaches of the earth, the world’s central banks are printing and selling their own currencies to prevent their countries exports from being price out of U.S. markets.  It’s a no-win situation for all countries in the end… and the link to this story is here.
Here’s the 1-year dollar chart that shows you what the world’s central banks are up against.  Wednesday’s waterfall decline and Thursday’s intervention by the BoJ stand out prominently.  You will note that the U.S. dollar’s 200-day moving average was pierced dramatically to the downside on Tuesday… which is what probably prompted the BoJ to enter the market about nine hours later during their Wednesday morning.  I seem to remember that both stories I ran yesterday on hyperinflation mentioned that it would begin with a scenario something like this.

Inflation [or the beginnings of hyperinflation?] is on the rampage once again in Argentina… and I thank reader Scott Pluschau for sending me this Bloomberg offering headlined “Argentines Buy Now as Inflation Outlook Buoys Sales“.  Argentines are stepping up purchases of cars and televisions in a bid to beat inflation that consumers see accelerating to 25 percent, the second-highest in the world after Venezuela.  The link to this story is here.
Yesterday I mentioned the fact that there was going to be a vote in the Senate about “Form 1099“.  Well, there were two different proposals to repeal the 1099 reporting requirement of the healthcare overhaul law that requires businesses to file a 1099 form to every business or individual from which it purchases more than $600 in goods or services.  Both proposals failed to pass, but we certainly haven’t seen the last attempt to kill this part of the healthcare bill.
Here’s another unhappy story about state pensions.  It was a Bloomberg story sent to me by reader Scott Pluschau. U.S. state pensions such as Illinois, Kansas and New Jersey are in a “death spiral,” with assets at many insufficient to cover benefits, payouts consuming a growing portion of resources and costs rising twice as fast as investment gains.  Less than half the 50 state retirement systems had assets to pay for 80 percent of promised benefits in their 2009 fiscal years.  The headline reads ‘Death Spiral’ Besets State Pensions Benefits Grow.  This story is definitely worth your while… and should be no surprise to anyone.  The link is here.
Stocks are hanging by an ever thinner thread these days… and reader U.D. sent along the following story from zerohedge.com yesterday to make his point.  The headline sarcastically reads “Stocks Surge To Celebrate Unprecedented 19th Sequential Equity Outflow, $10 Billion In September Redemptions“.  It’s a very short story with a couple of nifty graphs… and it’s definitely worth the read… and the link ishere.
Along with the previous story… here’s another offering from reader Scott Pluschau that proves the point that not only are traders exiting the market… the real traders in the market are also trading a lot less.  The headline from this marketwatch.com story reads “E-Trade daily average revenue trades dip 36% in August“.  The story is only one paragraph long… and deserves your undivided attention… and the link ishere.
Reader Roy Stephens sent me the following story from yesterday’s edition of The Telegraph out of London.  The European Commission has proposed radical curbs on short selling and derivatives trading in a bid to bring the multi-trillion dollar market in from “Wild West territory”.   The headline reads “EU plans curbs on short selling, derivatives“.  This is worth the read if you have the time… and the link is here.
I only have two gold-related stories for you today.  The first one was sent to me by Nick Laird… and is an editorial out of yesterday’s edition of the New York Sun. Please read this very carefully… “Alan Greenspan spoke at the Council on Foreign Relations earlier today, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,” the former Fed said at the Council.”  Needless to say, this entire editorial which isn’t too long and is headlined “Greenspan Warns on Gold“… is well worth your time… and the link is here.
Lastly today is this brief essay written for King World News. In it, Hinde Capital CEO Ben Davies argues that central bank money creation will keep stock markets elevated in nominal terms even as they lose value amid inflation. Real assets, including gold and silver, will outperform as inflation debases asset class indexes, Davies writes. His essay [which I stole from a GATA release] is headlined “Gold Will Outperform Many-Fold” and you can find the essay linked here.

THE FUNNIES

THE WRAP

Fiat money has no place to go but gold. – Alan Greenspan, 15 September 2010
Well, the world is well down the slippery slope now… with all the stories pointing to the slide getting faster and steeper almost on a daily basis.  There is nothing [except revaluing the price of gold] that will save us now.  As Alan Greenspan so correctly pointed out in his speech to the Council on Foreign Relations yesterday, it’s the only safe haven from paper money that’s left.  So I advise you once again, dear reader, to load the boat with all the physical precious metals [and their shares] that you can afford.
Not much is happening in Far East or early London trading as of 4:54 a.m. Eastern time as I write this paragraph.  Gold volume is very low, but silver volume is pretty decent.  I’m sure that we’ll have to wait until New York starts trading to see any major moves in either metal again today.
As I mentioned in my opening paragraph, if you have the time, the guys and gals that designed this spiffy new web page would certainly appreciate any beefs or bouquets that you may have regarding it, so don’t be shy about expressing your opinion.  But you have to click on the on-line version to get to it.
See you on Friday.