Gold Climbs in New York as Dollar Pares Gains; Silver Advances

May 27 (Bloomberg) -- Gold prices rose in New York, reversing an earlier loss, on increased demand for the metal as a store of value while the dollar pared gains. Silver advanced.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, climbed 1.9 percent to 1,118.76 metric tons as of May 22, the first gain in seven sessions, the company’s Web site shows. Gold assets held by Zuercher Kantonalbank’s exchange-traded fund jumped to a record 4.603 million ounces last week, the bank said today.

“Investors took advantage of intraday weakness by adding to their long positions,” Tom Pawlicki, an analyst at MF Global in Chicago, said by e-mail.

Gold futures for August delivery rose $4.50, or 0.5 percent, to $959.60 at 12:21 p.m. on the New York Mercantile Exchange’s Comex division. The metal fell as much as 0.7 percent earlier today. Futures for June delivery, the most-active contract until today, climbed $4.30, or 0.5 percent, to $957.60 an ounce on the Comex.

Bullion for immediate delivery in London climbed 0.6 percent, to $957.95 an ounce. The metal rose to $949.50 an ounce in London’s morning “fixing,” used by some mining companies to sell their output, from $945 in yesterday’s afternoon fixing.
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Perez-Santalla: Gold To Fall $200/Ounce !!!

Mike Norman and Perez-Santalla give another perspective on gold claiming that it will fall by $200 an ounce
Santella says : " So in the short term, I could see gold in December coming down to around $700, and at that level the jewelry market will pick up again, so it will buoy it and hold it up between 700 and 800. In the longer term, it should come off, or if there’s inflation, maybe it will hold up around there. Those are harder things to see of course, so I’m just guessing.
as to the three industrial precious metals, which are silver, platinum and palladium. Silver consumption has been brisk and remains brisk, and part of that, I believe, is the jewelry sector, which is that people have turned to silver to buy jewelry. So there’s a lot of jewelry sales in silver, so silver remains brisk at these levels … even right now it’s trading above $13. It can remain there for a while, though I think silver will also trade down because it follows gold a lot of times, as there is also a percentage of people that buy for investment purposes.

Platinum and palladium are being held up by investment money at the moment, but their primary demand is industrial. Once people realize they’re not going to get any earnings if the metals stay stagnant in the price level, they will abandon it, and so I think platinum and palladium can still come off a bit." he added

Gold Battle Lines Drawn at $1,000 Again

By James West
MidasLetter.com
Monday, May 25, 2009

Here we go again. The forces of legitimate money versus the incumbent purveyors of the candy floss economy squared off at the $1,000 an ounce line over which yet another battle will be fought. Arrayed against either side are formidable new elements and tried and true old ones. As usual, the first volley has been catapulted over the walls of the hucksters by the defenders of the essential timeless truth of gold’s naturally stored value against the counterfeit paper currencies.

The liabilities of the enemy have increased, and the short positions in the COMEX market are sufficiently stacked that the big bank defenders simply cannot allow gold to win decisively. G7 governments are allied against gold to a man, while emerging economic behemoths China and Russia stand in opposition.

In particular, China’s revelations that it has been in a continuous accumulation mode for the last several years and is now the fifth largest sovereign reserve of gold has created an impetus in the gold camp that has been seen lacking in the past. Institutional and sovereign investment entities now perceive a floor in the gold price based on this information, and one must beg the question as to why China would make such a revelation when it threatens to undermine the value of its $2 trillion in U.S. debt holdings.

China has also been careful to avoid buying gold on the international market, for fear, it says, of creating a stampede into the precious metals that would immediately increase the cost of its stated intention to continue accumulating gold towards the backing of the yuan (renmibi) as a global reserve currency.

Yet that is precisely what has happened. Ostensibly, the justification for tipping their hand exists in the fact that they’ve resigned themselves to the fact that selling poison toys and pet foods to Americans in exchange for a currency that loses value like light into a black hole is an acceptable if imperfect transaction. With $50 billion a year in interest payments from the U.S., they can hedge the risk buy using it to buy gold.

With the perceived floor arguably at $850, downside risk is limited in gold far more so than in U.S. treasuries, which, if mainstream media is to be taken as remotely credible, is the current favorite of safe haven investors.

‘Safe Haven’ is about to get painted with same fragrant brush as ‘AAA-rated’ investments.

Goldbugs are salivating at the prospect of vindication, but seasoned veterans of the war know that the governments and central banks arrayed against gold are not fair fighters. Since the largest players in the futures market occupy both sides of the contract, and never take delivery of the physical gold, they can orchestrate a perpetual negative sentiment towards gold by driving the future price downward by simply amping up the short positions, thus making gold appear poised for a sell-off. This has been standard operating procedure for the last decade, and it is interesting to note that ever-bigger short positions are having less influence over shorter durations before the bulls shrug off the flimsy performance and take gold higher.

Critics and observers of this U.S. Dollar image management program point to the fact that such activity, while shoring up demand for U.S. Dollar debt in the short terms, effectively undermines the entire global economy, and is among the fundamental causes of financial crises such as the housing collapse and the whole current global financial fiasco.

Proponents of this manipulation, who are increasingly legion in number, correctly predict an inevitable bursting of the damn catalyzed by investment demand overwhelming the short positions, forcing them to buy and cover to limit losses, which will, in itself, stimulate the gold price even further.

With the limited oversight and feeble reporting standards of the CFTC, the ploy is facilitated by complicit (or ignorant) regulators who ensure data is obfuscated and disclosure limited. It has been this collective effort on the part of the Dollar Defenders that continuously defeats gold’s advances, repeatedly castrating the bulls and sending them whimpering to lick their wounds and regroup.

But China is now leading the charge, and the bet is that they’re willing to forgo the lost value of their USD holdings to decisively undermine the global reserve currency once and for all and replace it with the Yuan, a move that would effectively mark the beginning in the shift of the global balance of power from west to east.

The United States, overextended militarily across the Middle East and Asia, with new fronts threatening to open in Iran and Pakistan, is perilously close to an international nervous breakdown. China’s opportunity is to ride to the rescue bearing smiles and steamed pork buns while dividing up what is left of the American industrial asset pool.

Our leadership of the last decade (or more accurately, absence thereof), eager to lubricate the workings of multinational financial interests, have inadvertently played into the patient hands of their biggest creditor by prostituting the national currency shamelessly to the point where every nation in the world can see what used up piece of spent jet trash the old USD has become.

While mainstream media dismisses the idea of the Yuan replacing the dollar as the international monetary standard, those of us who have tuned out at the perception management program on CNN recognize the event as halfway accomplished.

The truly explosive moment for gold will occur when the Chinese, at their discretion, decide to spring the trap, and abandon USD completely in favor of gold, suddenly spiking the price of gold straight north in tandem with the complete collapse of the U.S. dollar.

Don’t pay any attention to the second rate hacks trying to claim credit for predicting the fall…its been predicted repeatedly throughout history from Nostradamus to Roubini. Any student of economic history with 20/20 vision could see this coming, and here it is. “I told you so” is a waste of time. Who’s offering a solution?

Whether or not this particular battle at the Great Wall of $1,000 an ounce is the mother of all battles remains to be seen. Desperate times call for desperate measures, and while G7 governments collude to retain power, the unforeseeable is the greatest threat to gold.

That being said, veteran observers are optimistic, to say the least.

According to Bill Murphy, intrepid soldier of gold wars and standard bearer for the Gold Anti-trust Action Committee,

"The Gold Cartel is giving it all they have no, as evidenced by the sharply rising gold open interest on the Comex ... up some 23,000 contracts on Wednesday and Thursday. They are doing all they can to counter new spec buying.

My hunch is the next time we see $1,000, and that could be very soon, gold ought to take off from there, giving us more upside dynamic daily moves. The reasons to own physical gold are off the charts ... HUGE investment demand, shrinking visible central bank supply (unrelated to the cabal), shrinking mine supply, shrinking dollar, concerns over sovereign wealth debt, a horrible US economy, and a US printing press that is going flat out and will have to for some time to come.

In my opinion, all gold has to do is to stay over $1,000 for a few days, and then all kinds of bells and whistles go off."
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