Stage two: the Fitzpatrick numbers.

It might be useful to divide the developing situation into 3 stages.

Stage 1: the breakout of the precious metals. See recent posts.

Stage 2: The Fitzpatrick numbers.

Tom Fitzpatrick read the charts and predicted the following: a) if gold closes above 1,672 then it will rally to test 1,910.

b) if silver closes above 31.70 it will then test 33.

Today was a good day for the PMs and gold closed at 1,687.6 (above the Fitzpatrick number), but silver moved to 31.77 then sold beck down to 31.442. Still, it is close.

Most everyone believes that the PMs responded to Bernanke's speech at Jackson Hole, Wyoming. Bernanke hinted strongly (again) that the FED may ease if the numbers don't get better.

We have a busy schedule coming up, which I believe will set the stage for testing Larry's numbers. If that happens (and I believe it will) we will enter Stage 3.

Schedule of important events:
Sep 6, next week Thursday. ECB meeting. Expect bond purchase announcement.
Sep 7, Friday. US employment numbers.
Sep 13, FED monthly meeting. I believe the FED will announce more easing.
Sep 12, German Constitutional Court rules on legality of using German funds for bailouts.

China has already eased. Some Traders expect the ECB to purchase Portuguese and Spanish bonds. The Market expects the FED to ease. Bernanke is expected to be replaced by Romney (if he wins), so Bernanke has nothing to lose by easing now, i.e. between now and Sep 13.

Risks:
1. German Court ruling;
2. American fiscal cliff.
Here are the most recent graphs:

Spanish bank moves.

Spain has announced the restructuring of its banks. Here are the moves:

1. Troubled assets will be swept into a "bad bank"
2. The "bad bank" will have 10-15 years to liquidate them, esentially converting private bank losses into public debt.
3. Lending rules will be tightened.
4.Will be financedmostly from private capital.
5. Core requirement (good asset) raised to 9%.

Outflow from Spanish banks totaled E220B.

To ease or not to ease; that is the question.

There is an interesting article about how the FED and the ECB fake printing to influence the Markets:

http://seekingalpha.com/article/836411-beige-book-and-revised-gdp-make-more-qe-unlikely?source=email_the_daily_dispatch&ifp=0

What brought up this speculation? The immediate precursor for the article is the revised report that the economy grew by 1.7% instead of the previously reported 1.5%. The conclusion of the Author is that things are not bad enough to ease. Really? The growth needed for full employment is 3%. A growth of 1.7% is not much better than 1.5%.

We have heard speculation about QE3. So far, it is speculation aimed at sustaining the Stock Market.

How gold and silver are manipulated.

I have said in one of my posts that I will share with you what I find out about how the govt manipulated silver and gold price. Here is an important piece on how the govt is authorized to do it.

"streetmoney21 Comments (186) It's one thing to execute margin hikes in a timely manner to protect the market. It's manipulation when you have 5 margin hikes in one week where that has not happen[ed] for any other commodity (please correct me if I am wrong). If the COMEX had any integrity the margin hikes would have been done in a measure[d] way to not disrupt the market. In addition, the move by the CME was telegraphed to the banks as they shorted the market on the way down.




The gold and silver markets are highly manipulated and I challenge anyone to come up with a legitimate counter backed with tangible proof that can be seen by the public to the point I am about to make. No one has been able to do it so far and the highly believe the author of this article will not be able to come up with an intelligent response to my claim.



The Fourth Coinage Act was enacted by the United States Congress in 1873 and embraced the gold standard and demonetized silver. Silver was demonetized at the will of the Bank of California as they had key interests in controlling silver mines in the US and there is physical proof that money was paid to members of congress to include legislation in the act to in fact demonetize silver. This was the first key step to enslave every american citizen to a fiat currency. Gold became the only metallic standard in the United States, hence putting the United States de facto on the gold standard. Then in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins.The nail in the coffin was the United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury.The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in United States Bullion Depository at Fort Knox and other locations.Then the US government perpetrated a crime upon its citizens because the act changed the nominal price of gold from $20.67 per troy ounce to $35.



Profits were used to fund the Exchange Stabilization Fund to use such assets as were not needed for exchange market stabilization (protecting the US dollar).The Exchange Stabilization Fund (ESF) is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention (market manipulation). This arrangement (as opposed to having the central bank intervene directly) allows the US government to influence currency exchange rates without affecting domestic money supply (A.K.A. Market manipulation).The Gold Reserve Act authorized the ESF to use its capital to deal in gold (SHORT THE GOLD AND SILVER FUTURES MARKET) and foreign exchange to stabilize the exchange value of the dollar. PROVE MY WRONG!



The ESF as originally designed is part of the executive branch not subject to legislative oversight. Decisions of the Secretary are final and may not be reviewed by another officer or employee of the Government. This means that the CFTC has no authority to monitor or regulate any transactions executed by the fund on the open market nor it's agents who execute the transactions for them (JP Morgan) hence the FT article about the silver manipulation case being dropped by the CFTC was recently published (done so in error).



Consistent with the obligations of the Government in the International Monetary Fund on orderly exchange arrangements and a stable system of exchange rates, the Secretary or an agency designated by the Secretary, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit (GOLD AND SILVER FUTURES CONTRACTS) and securities the Secretary considers necessary.



The markets are being suppressed to protect the dollar, which is being used by banks to rob american citizens of their wealth through inflation and income tax, all sanctioned and supported by the US government. Gold will be a tier 1 asset next year and commercial banks will be able to buy gold without having to keep reserves for it because it is consider[ed] zero liability. When banks start buying gold to use as collateral the price will soar and QE has nothing to do with this (China does as they continue to quietly stack 100's of tons of gold). People are waking up and understanding what is really going on hence the growing demand for physical gold and silver as the same crime is being committed globally.



This is why the CMEgroup allows gold and silver contracts to be settled in cash with details of the transactions not disclosed. If deliveries were mandatory prices would be a lot higher.



As crushing debt pushes US society deeper into serfdom gold and silver will continue to rise with no end in site out of the reach of ordinary citizens. Gold and silver are very misunderstood by many who try to write about it. Gold is more than just a metal and you have to [have a] deep and in depth knowledge to write good articles about gold."   AJ adds: The US and British governments control the price of gold and silver in order to be able to print fiat currency and engage in deficit financing. Buying on margin, shorting  and paper contracts allow the govt to rip us off.

Argentina: a land of learning disability.

Argentina is a land, a people that can not learn from the past. The country flirted with Peronist Socialism and when Juan Peron died, his wife Evita continued with running Argentina into the ground.

OK, u say, every country is entitled to make one bad a$$ mistake (haven't we elect Obama?). True, but Argentina is repeating the mistake. Like Evita Peron, Cristina Fernandez rose to power by being married to the President. In Gonzalez's case, the President was Nestor Kirchner (by keeping her maiden name, Fernandez signaled that she was a Left-winger).

During her first term, things went reasonably well. The Argentine economy grew fast and the consequences of an interventionist and Socialistic direction were covered up by growth. Fernandez was re-elected and had a popularity rating of 64%. That's when the ripples from Obama downsizing America started hitting Argentina. The economy slowed, unemployment began to rise and money printed to stoke the economy led to a rate of inflation of 20% annually. The government response? Forbidding private economists to report on inflation other than the government's phony numbers.

Gonzales' popularity sank by 30% this this August. Maybe Argentinians are learning to recognize the results, even if they are unable to avoid the mistake of electing a Leftist.

Stage is set for gold to soar.

It is getting hard to keep the lid on the news. And the news all points to gold moving up....unless the FED is content to watch deflation devour the US economy just before the election. Gold prices, IMO, can be stopped only by massive deflation.

Here is the case for gold increasing in price:

1. The technical breakout of gold and silver was massive.

2. Economic fundamentals. Europe's manufacturing and service index fell for the seventh straight month. Even Germany is barely growing. US Capital goods index contracted 3.4% in July, the largest decrease since 2009. The ECB has pledged to prevent the Euro unraveling and Bernanke promised further easing unless the economy showed some real improvement. It hasn't.

One caveat. The Markets have factored in some form of QE and if the QE is too small, the Stock Market will tumble. Maybe even the PM markets.

3. The political fundamentals. The Greek soap opera is on again. While PM Samaras pleaded for more time for Greece, the French President closed ranks with the Germans to reject further delay for Greece to implement agreed upon austerity. So, here comes the next bump in the soap opera. Germany's Economic Minister Roesler (who is head of the Free Democrats coalition partner of Chancellor Merkel) and Finance Minister Schaeuble all agree that Greece will get no further delay. However, the Greek coalition is held together by the promise that the government will ask for such conscessions.

Who will blink first?

Syria: part of a larger war.

While the Saudi king seeks to sooth the unrest among the general population by adding more government benefits, he will not grant any concessions to the eight percent of the population that is Shia. He takes seriously the warning by King Abdullah of Jordan back in 2004 of the danger of a Shia Crescent that would extend from the coast of Lebanon to Afghanistan. Hezbollah in Lebanon, Assad in Syria, and the Shia controlled government of Iraq form the links in the chain.




When the Arab Spring reached Syria, the leaders in Riyadh were given the weapon to break the chain. Appeals from tribal leaders under attack in Syria to kinsmen in the Gulf States for assistance could not be ignored. The various blinks between the Gulf States in several Syrian tribes means that Saudi Arabia and its close ally Qatar have connections that include at least three million people out of the Syrian populations of twenty-three million. To show how deep the bonds go, the leader of the Nijris Tribe in Syria is married to a woman from the Saud Family.



It is no wonder that Saudi Foreign Minister Prince Saud al-Faisal said in February that arming the Syrian rebels was an "excellent idea." He was supported by Qatari Prime Minister Hamad bin Jassim al-Thani who said, "We should do whatever necessary to help [the Syrian opposition], including giving them weapons to defend themselves." The intervention has the nature of a family and tribal issue that the prominent Saudi cleric Aidh al-Qarni has turned into a Sunni-Shia War by promoting Assad's death.



The Saudis and their Qatar and United Arab Emirate allies have pledged one hundred million dollars to pay wages to the fighters. Many of the officers of the Free Syrian Army are from tribes connected to the Gulf. In effect, the payment of wages is paying members of associated tribes.



Here, the United States is not a welcomed partner, except as a supplier of arms. Saudi Arabia sees the role of the United States limited to being a wall of steel to protect the oil wealth of the Kingdom and the Gulf States from Iranian aggression. In February of 1945, President Roosevelt at a meeting in Egypt with Abdel Aziz bin Saud, the founder of modern Saudi Arabia, pledged to defend the kingdom in exchange for a steady flow of oil.



Since those long ago days when the U.S. was establishing Pax Americana, the Saudis have lost their trust in the wisdom or the reliability of American policy makers. The Saudis urged the U.S. not to invade Iraq in 2003 only to have them ignore Saudi interests in maintaining an Iraqi buffer zone against Iran. The Saudis had asked the U.S. not to leave a Shia dominated government in Baghdad that would threaten the Northern frontier of the Kingdom, only to have the last American soldiers depart in December 2011. With revolution sweeping across the Middle East, Washington abandoned President Mubarak of Egypt, Saudi Arabia's favorite non royal leader in the region.



Worried by the possibility of Iranian sponsored insurrections among Shia in the Gulf States, the Saudis are asserting their power in the region while they have the advantage. For thirty years, they have been engaged in a proxy war with the Islamic Republic of Iran. Syria is to be the next battlefield, but here, there is a critical difference from what were minor skirmishes in Lebanon, Yemen, and elsewhere. The Saudis with the aid of Qatar, and the UAE is striking at the core interests of Tehran; and they have through their tribal networks the advantage over an isolated Islamic Republic.



Tribal and kinship relations are being augmented by the infusion of the Salafi vision of Islam that is growing in the Gulf States. Money from the Gulf States has gone into the development of religious centers to spread the fundamentalist belief. A critical part of the ideology is to be anti-Shia.



Salafism in Saudi Arabia is promulgated by the Wahhabi School of Islam. The Wahhabi movement began in the eighteenth century and promoted a return to the fundamentalism of the early followers of the Faith.



The Sauds incorporated the religious movement into their leadership of the tribes. When the modern state of Saudi Arabia was formed, they were granted control of the educational system and much else in the society in exchange for the endorsement of the authoritarian rule.



When the Kingdom used its growing wealth in the 1970s to extend its interests far from the traditional territory in the battle against the atheistic Soviet Union, the Wahhabi clergy became missionaries in advancing their ideology through religious institutions to oppose the Soviets. More than two hundred thousand jihadists were sent into Afghanistan to fight the Soviet forces and succeeded in driving them out.



There is no longer a Soviet Union to confront. Today, the enemy is the Islamic Republic of Iran with what is described by the Wahhabis as a heretical form of Islam and its involvement in the Shia communities across the region. For thirteen centuries, the Shia have been kept under control. With the hand of Iran in the form of the Qud Force reaching into restless communities that number as many as one hundred and six million people in what is the heart of the Middle East, the Saudis see a desperate need to crush the foe before it has the means to pull down the privileged position of the Saud Family and the families of the other Gulf State rulers.



The war begins in Syria where we can expect that a successor government to Assad will be declared soon in the Saudi controlled tribal areas even before Assad is defeated. The territory is likely to adopt the more fundamentalist principals of the Salafists as it serves as a stepping stone to Iran Itself. It promises to be a bloody protracted war that will recognize no frontier and will know no limits by all of the participants.



By. Felix Imonti for Oilprice.com



You can reach Felix at: feliximonti@gmail.com



AJ adds: When I first read about this escalating conflict, I thought the Author was nuts. However, subsequent events added to the analysis. The Shia and the Sunni are at war with each other. From a strictly geopolitical calculation this has short term benefits: Islam will maybe split and the Jihad will turn on itself internally. However, war is never good and the participants can unite against the rest of us. The Salafis are brutal thugs, same as the Shia nutcases.

What is alarming is the lack of understanding in Washington in dealing with Islamic countries. Jimmy Carter had conveyed Iran into the hands of the Shia nutcases led by the Ayatollah Khomeni. George Bush had left a Shia-dominated Republic in Iraq and O'Bungle contributed to the rise of the Muslim Brotherhood in Egypt. Leaving Iran to develop atomic weapons is a sure way of promoting atomic war in the Middle East.

To us non-Muslims, it is almost incomprehensible that the Shia and the Sunni should fight over who should have been Muhammed's successor centuries ago. I suppose that Muslims found the religious war between Catholics and Protestants just as incomprehensible.