Wednesday, October 6, 2010
Silver has hit news highs in Hong Kong and London of US$23. Many pundits, myself included, posited that paper traders would take profits at the $22 level bringing the price down to approx $20. But even though the MACD is shouting overbought the desire for mankind's oldest and most used precious metal has continued unabated. Could it be after 100yrs of silver price control and manipulation we are seeing the first signs that the physical demands of industry and investors are overwhelming the futures markets' ability to create pre-determined price discovery points?
James Turk is interviewed by Eric King in regards his recent predictions of Gold at US$1335/oz, Silver at US$23/oz and the gold silver ratio at 58. Note this interview was recorded on the 5th Oct, James is disappointed that his predictions had not come to pass - well what a difference a day makes! Currently gold is US$1346, Silver spot on $23 and the gold silver ratio 58 and change.......listen here
The Bank of Japan may have acted first in a new round of central bank action to prop up the global economy as recoveries in industrial nations falter.
The unexpected decision by the Japanese central bank yesterday to drop its interest rate to “virtually zero” and expand its balance sheet follows the U.S. Federal Reserve’s move toward more unconventional easing. Bank of England officials will consider further stimulus tomorrow, while the central banks of Australia, Canada and New Zealand are among those now holding fire on further interest-rate increases.
The renewed push for easier monetary policy comes as the International Monetary Fund warns growth in advanced economies is falling short of its forecasts ahead of its annual meetings in Washington this week. The dilemma for policy makers is that their actions may do little to revive growth and end up roiling currency markets.
“The Bank of Japan is at the head of the pack,” said Stewart Robertson, an economist at Aviva Investors in London, which manages about $370 billion in assets. “It looks like a lot of others will follow. Whether it’s right or not is another matter.”
Group of Seven ministers will gather Oct. 8 in Washington, on the sidelines of the IMF meeting. Currency issues will be discussed, Canadian Finance Minister Jim Flaherty, who will chair the meeting, said this week. Japanese Finance Minister Yoshihiko Noda said he’s ready to explain his country’s actions at that meeting.
The Bank of Japan cut its overnight call rate target from 0.1 percent and established a 5 trillion yen ($60 billion) fund to buy government bonds and other assets. It moved as the yen’s surge to a 15-year high last month hurts exports and damps economic growth. The yen traded at 83.27 per dollar yesterday, close to a Sept. 15 record of 82.88.
Bank of Japan Governor Masaaki Shirakawa may not be alone for long in taking action and Daiwa Institute of Research argues he’s now engaged in a “vicious spiral” of monetary easing with the Fed as both compete to bolster their economies.
“The BOJ’s next moves will depend on the Fed,” said Maiko Noguchi, an economist at Daiwa in Tokyo. “The bank will have no choice but steadily take easing measures.”
Fed Chairman Ben S. Bernanke and his colleagues have signaled they may announce the purchase of more Treasuries as soon as their next policy meeting on Nov. 2-3 in an effort to boost growth and reduce an unemployment rate stuck near 10 percent for the past year.
“The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the U.S. economy and causing chaos for the rest of the world,” Joseph Stiglitz, a Nobel Prize-winning professor at New York’s Columbia University, said today in New York.
Bernanke said on Oct. 4 that the Fed had aided the economy by buying $1.75 trillion of mortgage debt and Treasuries from August 2008 through March 2010. Pacific Investment Management Co. says a new round of quantitative easing, the policy of creating money by enlarging the central bank’s balance sheet, is “likely.”
“The bottom line for the U.S. is a growth trajectory so slow you’d nearly call it stalled,” Paul McCulley, a portfolio investor at Pacific Investment Management Co., wrote on the company’s website this week.
Steven Englander, New York-based head of Group of 10 currency strategy at Citigroup Inc., said he anticipates the dollar will continue to fall, with the euro likely to pass through $1.40 from $1.37 yesterday. The dollar has already dropped 7 percent against the euro since the start of September.
At the Bank of England, policy maker Adam Posen made the strongest call yet on Sept. 28 for the U.K. central bank to resume asset purchases after keeping its bond-buying program at 200 billion pounds ($317 billion) for the past 11 months. That proposal lays the ground for the first three-way split when the Monetary Policy Committee meets tomorrow, with member Andrew Sentance advocating higher interest rates.
“At the present time, the growth threat is more of a danger than inflation,” said Graeme Leach, chief economist at the Institute of Directors, a London-based business lobby group. “Yes, inflation is above target now. But a double-dip recession would raise the specter of deflation.”
The revival of quantitative easing is a reversal from earlier this year, when central banks were halting stimulus or debating how to tighten policy. What’s changed is the loss of momentum in industrial economies.
John Lipsky, the IMF’s No. 2 official, said on Sept. 27 that global growth in the second half of the year will fall short of the fund’s 3.75 percent forecast. The Washington-based lender revises its outlook today.
While not yet looking to buy assets, some central banks are suspending their interest-rate increase campaigns.
After embarking on the most aggressive policy tightening in the Group of 20, the Reserve Bank of Australia unexpectedly left its benchmark rate unchanged yesterday at 4.5 percent for a fifth straight month. Bank of Canada Governor Mark Carney, who has overseen three rate hikes this year, said Sept. 30 that “the unusual uncertainty surrounding the outlook warrants caution.”
Not all policy makers are changing course. The central banks of Israel and Taiwan raised borrowing costs in the last ten days and the European Central Bank, whose Governing Council convenes tomorrow in Frankfurt, has indicated it wants to continue withdrawing liquidity support for banks.
The ECB will be forced to postpone tighter policy as European exports fade and investors continue to fret about peripheral euro-area economies such as Portugal and Ireland, said Silvio Peruzzo, an economist at Royal Bank of Scotland Group Inc. in London.
“The ECB’s exit strategy is fully on, but the business cycle will turn against them,” said Peruzzo. “The communication will then be adjusted to consider downside risks greater than what they have anticipated.”
The ECB last week stepped up its government bond purchases as the cost of insuring against default on Portuguese government debt surged to a record and Irish bond spreads soared to euro- era highs.
The question for those central banks leaning toward buying more assets is whether doing so will actually bolster expansion, said Charles Dumas, director of international research at Lombard Street Research Ltd., a London-based consultancy.
“Is quantitative easing going to cause people to spend more? I don’t think so,” he said. “It does add value in reducing the risk of a downward spiral in markets.”
Another risk is that the use of unconventional monetary policy is viewed as an effort to weaken currencies to boost exports, rising competitive devaluations and protectionist responses, said Eric Chaney, chief economist at AXA Group in Paris. Japan, Switzerland and Brazil are among the countries that have already intervened in markets to restrain their exchange rates.
“This is close to a currency war,” said Chaney, a former official at the French France Ministry. “It’s not through exchange-rate manipulation, but through monetary policies.”
New York 05/10/2010 - Gold on the Comex division of the New York Mercantile Exchange jumped on Tuesday morning following the overnight announcement that the Bank of Japan is likely to adopt more monetary policies aimed at stimulating its economy
Gold futures for December delivery recently traded up $21.40 to $1,340 per ounce, an all-time record high.
"Gold is much firmer with the Japanese quantitative easing and interest rate package serving as the biggest factors in the rally," Sterling Smith, market analyst at Country Hedging, said. “Also, firmer US equities are leading to a weaker US dollar.”
The policy board of the Bank of Japan unanimously elected to lower the nation's interest rate to between 0 percent and 0.1 percent from 0.1 percent. It is also considering the possibility of a quantitative easing (QE) programme worth around 5 trillion yen ($60 billion).
"Money has essentially become free in Japan," a US-based metals trader said. "The Bank of Japan is quickly running out of bullets so the next step is a healthy dose of QE. This also serves as a bit of foreshadowing of what is going to happen if the US undertakes a second round of QE."
In fact, some QE is already happening in the US. The Federal Reserve Bank of New York purchased $5.19 billion in Treasury bonds on Tuesday and will reinvest cash from maturing mortgage-backed securities and housing agency debt back into the bond market to spur economic recovery.
"As long as that continues... money is going to seek out tangible assets, like gold," Smith added.
The dollar resumed its slide on Tuesday, with the dollar index dropping 0.8 percent to 77.79, close to an eight-month low. The greenback was battered by some positive European manufacturing data along with the increased expectation that the Federal Reserve will inject additional monetary stimulus into the economy.
Additionally, new buyers came to the market after Comex gold dropped by a dollar on Monday.
"All the corrections have been pretty short-lived; just minor setbacks that lead to new buying opportunities," Smith said.
The metal markets remain in "buy-the-dip" mode, Ed Meir of MF Financial added. Despite somewhat overbought conditions, there does not seem to be a serious enough trigger to induce a more enduring round of selling.
Buyers came in $1,321.30 and the next target is $1,350, which could be reached this week, Larry Young, president of Covenant Trading in Chicago, said.
"There's both technical and fundamental support for this upward movement," Young said.
But when gold does pull back there is the strong possibility of a washout with so many investors now buying at the highs, Young warned.
"It won't take much to wipe out a lot of people unless they are playing it very tight or as a long-term investment," he said. “But it's certainly going to be a dynamic fourth quarter.”
By Peter Souleles:
There is no shortage of predictions and opinions, experts and forecasters, theories and ideas. Despite this, certainty is in short supply and chaos threatens to become the new norm.
Jobs, wealth, sanity and values are constantly at risk as imbalances between supply and demand, expectations and sacrifice and performance and rewards are creating dysfunctional individuals, families, corporations, economies and societies.
One of the most disturbing developments is that everything seems to be taking on the appearance of a guess followed by a bet, rather than a vision followed by a strategy and action. In short, it seems that profit is pursued for profit’s sake.
It is for this reason that I find the constant guesses about the future price of gold or silver to be disturbing. An individual who really understands the value and role of gold and silver in a historical context is never overly concerned about their fluctuating price. The person who is fixated on price tends to forget that banks might close their doors, that corporations can go broke, that governments can break promises but that gold and silver can never do such things.
Do you want a prediction about the price of gold? How about the one given by none other than Paul Walker the CEO of GFMS Ltd back in September 2008 at the convention held in Denver?
As you can see, Mr Walker made not one but three predictions about the price of gold in 2010. The lowest price was around $630 and the highest was around $930. Not much of an expert on the face of it even though Mr Nadler of Kitco gives him star billing in his column of October 1, 2010.
The point of using Mr Walker and his predictions is not to ridicule the man but to emphasise how markets that are constantly being interfered with will make fools of all of us and our predictions when we choose to base them on the expectation that governments will pursue logical strategies rather than insane interventions. The writer who predicts $7,000 is also mistaken in believing that a functioning dollar could still be circulating at that level of gold price.
What we all need to understand is that gold and silver silently and without assistance, track the sum total of all financial, economic, political and sociological developments even when they are buried in the ground or stashed in some safe. Gold in particular is a strange chimera that is part mirror, part canary, part thermometer and part armour. In short, the only expert on gold is gold itself just as nature is the only true expert on nature.
Mr Walker, with all due respect to you and your friend Mr Nadler, I must voice some serious reservations with your observations as noted by Mr Nadler. In short my position is as follows in relation the summary of your position provided by Mr Nadler:
* The fall off in jewellery demand and the take-off in investment demand is nothing more than the welcome rediscovery that gold is in effect wealth that requires no legal system or contract to survive both time and human folly.
* Investment demand is not fickle. In fact one must understand that the true level of gold purchases for jewellery is not what is paid for raw gold but what is paid for retail acquisition of jewellery itself. People are belatedly realising that buying gold bullion will give them more bang for their buck than buying jewellery.
* You say that investment demand must inevitably turn negative within the next five years. I agree, but only if nations give up massive operating deficits, reverse gargantuan national debt piles, make social security and Medicare promises sustainable and reduce unemployment to under 7%. How possible are these changes?
* The bull case for gold will not be over until governments allocate to gold a meaningfully functional role in the world’s financial system. The ongoing persistence by governments to ignore and debone gold is only securing its upward ascent despite the occasional pull back. Moreover, one wonders why governments place greater trust in QE.
* If and when the US Fed decides to return to positive interest rates this will be more of a threat to housing and the accumulated national debt than it is to gold. Your belief that the US economy will return to growth in the next two to three years does not recognise the true level of growth that is needed to reverse years of economic ineptitude and damage. The US will have to destroy debt to reverse its predicament and all debt is in paper. Gold however, is not paper and cannot be destroyed.
* People will not stop buying gold until a nation’s currency is once again a store of value and is not subjected to concerted efforts to devalue it by its own government. The dollar has not been a store of value since the Fed came into existence almost 100 years ago. Do you honestly think it will become a store of value in the middle of efforts to write-off debts by debasing currency?
* You acknowledge that you have no problem with gold going over $1400 given the current economic mess. The next step will be to understand the worsening mess that awaits us once QE2 works its magic.
* You have a suspicion that positive real interest rates will return sooner than most of us think but you do not explain what will happen to the rest of the economy including housing, the national debt and unemployment. Perhaps you need to view the recent 8 minute You Tube video by Congressman Alan Grayson explaining the US Foreclosure Fraud Crisis.
Gold is ignored by the establishment in the same way that many capable human beings are ignored for higher positions. The masters of the system have a vested interest in maintaining the status quo and for this reason gold will also have to wait for its day to well and truly return.
I repeat dear readers: if you find the developments in this world to be confusing, frightening and illogical and have problems deciding on a strategy, then place a decent percentage of your liquid and paper wealth in precious metals and get on with the rest of your life. Gold and silver after all, are not magic bullets for everything that afflicts humanity, but they sure do beat the leeches in government and banking that are trying to drink our blood.
By Rosanne Lim:
In his book, Inflated: How Money and Debt Built the American Dream, former Fed chair Paul Volcker said that “We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself”. This is very significant because the issue does not lie in a single country on the verge of a recession but the whole world.
The United States and Britain has been debasing their currencies to alleviate the pressure of debt burdens and to help their export industries. On the other side of the world is China. It is also depreciating its currency to offload manufacturing capacity to other countries. Its trade surplus a month with the US amounts to $20 billion.
Unfortunately, it looks like no one is willing to bulge. Some experts even predict that a currency war may be looming if trade imbalances are not resolved soon. For China though, revaluating the yuan doesn’t seem like an option. Premier Wen Jiabao said that Chinese social order is based on its economic prowess – based on a suppressed currency. A 20% increase can potentially be disastrous.
Premier Wen said, “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs”. His pleadings are falling into deaf ears. As the US continues to battle the threat of recession, they are looking for ways to improve the country’s competitiveness. Congress is getting ready to vote on the Currency Reform for Fair Trade Act which is designed to make it much more difficult for the Commerce Department to avoid “remedial tariff”.
But even as the United States and China battle it out, other countries are trying to secure their own industries’ competitiveness. Brazil has taken action last Friday to weaken the real. Switzerland has been weakening its currency for months by accumulating reserves that is equal to 40% of GDP. This is in an attempt to stop capital flight from the rest of Europe.
Meanwhile, Japan has also stopped the strengthening of the yen for fear for fear of deflation but the country is still enjoying a trade surplus. There are some suspicious in Tokyo that China’s purchase of Japanese debt last June and July are not completely friendly. Some analysts believe that it was intended to harm Japan’s competitiveness at a time of escalating tension on territorial rights in the Pacific.
The ultimate goal of currency debasement for many countries, especially China, is employment. But unemployment has to end somewhere. In Europe, Greece, Spain, Ireland, Portugal, and other parts of Eastern Europe are suffering from high unemployment and gaping trade deficits even as Germany enjoys a trade surplus of $179 billion or equivalent to 5.2% of their GDP.
Given all these considerations, it comes as no surprise that countries around the world are trying to get as much demand from other countries as they can or are trying to stop them from stealing their structural competitiveness. Majority of global demand as late as 2007 were due to deficits and they came from three countries: US ($793 billion), Spain ($87 billion), and the United Kingdom ($87 billion). These have shrunk to $431 billion, $75 billion, and $33 billion respectively since then.
Devaluation – Is It the Only Way to Fight Back?
While it’s true that countries like China, India, and Brazil have replaced some of the demand, it is still not sufficient to drag the world’s economies safely out of recession. The East seems particularly incapable of compensating the austerity in the Western world. Many reasons have been attributed to this including the lack of welfare safety net in China, savings ethics, and mercantilist habits. Whatever the case, the world cannot look to East Asia to solve their economic woes.
When surplus countries hoard money instead of recycling it, devaluation in deficit countries will cause these surplus states to revalue. In 1933, the US reflated their currency while in the case of France, the system basically collapsed. It is possible that a variant of this strategy will be seen today. If China insists on holding down its currency, it will need to keep on importing excess US liquidity. Overtime, its economy will overheat and the country will lose its wage competitiveness anyway.
The latest signals from the Fed indicate that the dollar may be weakened further. Many analysts expect that they will attempt to stop inflation from falling below 1.5% through quantitative easing (QE2). There are more details about quantitative easing in our Premium Updates.
If a weaker dollar is the ultimate purpose of these machinations, then Ben Bernanke surely succeeded. Several weeks ago, the Swiss franc strengthened dramatically, even smashing parity. However, this will not go on much further. While the Swiss franc is seen as a safe refuge, its continual appreciation might destabilize Switzerland itself if it is not controlled.
Gold May Reach $1,500 Relatively Soon
On the other hand, gold is not bound by such limits. The precious metal certainly does not have any “intrinsic” value because its price is subject to supply and demand. In fact, we can see from history that its price can hit rock bottom when new gold mines are discovered. Gold lost 90% of its value around a decade ago when central banks started selling their bullion. But it has since regained its lost value and more.
The precious metal is likely to maintain its current momentum until the end of the year.
The new target for gold is $1,500. It seems poised to reach this figure in the next three moths – based on a Fibonacci projection analysis and a bullish wave pattern. In the chart above, (courtesy of http://stockcharts.com), it seems likely that gold will first reach a local top before going through a quick consolidation. This will increase the odds that a further rally will be sustained.
There’s something amiss today. China and India are both hoarding gold. Industrialized countries including the United States, Japan, and many countries in Western Europe have soaring public debts. And all the four major currencies seem to be in trouble. Both the US and Britain have clipped their currencies, the European Central Bank are buying bonds of EMU debtors, while Japan just completed a two trillion yen worth of “unsterilized” intervention. Meanwhile, gold is still on its way up.
October 4, 2010
Cockeyed thinking in the conventional camp
Conventional thought concludes that gold must be overvalued, since it has appreciated so forcefully against the professionally managed dollar (and all other central bank controlled fiat currencies) the past 10 years. The basic premise supporting this thinking is fundamentally and fatally flawed. The foundation for this belief lies in a blind devotion to the idea that the US dollar, cast as ultimate and omnipotent medium of exchange, has achieved a state of permanence. In reality, such a position could only be ascribed to a medium of exchange far less vulnerable to the misguided policies of error prone men. Further, this myopic US dollar centric mindset demonstrates a dangerous lack of appreciation for history.
Not a 70's gold bull replay
True, gold's last bull run gave way to 20 years of price erosion, ratcheting down to the lowly exchange rate of $255 per ounce. Regardless, the US and global economic landscape of 2010 is vastly different than that of 1980. Today's exponential growth of sovereign debt is straining confidence in faith based currencies, particularly one which holds the mantle of world's reserve currency. This current debt differentiator, in conjunction with a myriad of other issues inhibiting US economic growth, is substantial enough to reasonably assure investors of a strikingly different course and conclusion to this gold bull.
Observations from a natural resources expert
Striving to keep my ideas in check, I seek to consult with others tasked with understanding the global financial markets. As such, I posed the basic question of whether the gold price is in bubble territory to Tom Winmill, president and portfolio manager of the Midas Fund (www.MidasFunds.com). Tom's response; "Whether gold is in a bubble depends on your currency point of view. In Zimbabwe dollars, definitely not. In Chinese renminbi? Maybe. In U.S. dollars? That's what at Midas we call the 62 trillion dollar question. Sixty-two trillion dollars is the approximate amount that some, including David Walker who served as the U.S. Comptroller General from 1998 to 2008 , estimate is the total debt of the United States in explicit obligations and unfunded promises. The question then becomes is "how is the United States ever going to deal with this unimaginably huge sum?"
Exploding debt and politically expedient solutions
Strip away all the trappings, and the US dollar quandary is easy to understand. Huge debt, growing debt, and no politically feasible way to resolve it. With history as a guide, and political attitudes as they are, the road ahead for the dollar is somewhat predictable. More debt and more dollars, which should be supportive of gold's ongoing long term price assent, followed by US debt saturation and dollar repudiation, potentially sending gold prices parabolic.
The chart below provides a good illustration of the accelerating national debt. Similar acts of financial self destruction were simultaneously performed by a large swath of individual households in tandem with state and local government. Note the irony in regard to the close time proximity whereby national debt accumulation began its aggressive ascent and gold commenced its 20 year odyssey in the financial wilderness. As the debt seeds were being sown, gold was squelched by investors heeding the siren song of "this time it's different, debt doesn't matter." Of course it doesn't matter, until it does. Come 2001, gold ceased to remain mum on the soon to emerge global financial crisis and resumed its role as financial early warning system.
Greenspan comes clean on gold and fiat currency
Speaking to the Council on Foreign Relations on September 15, 2010, Alan Greenspan advised central bankers that they should be paying attention to the price of gold. "It signals problems with respect to currency markets, " said Greenspan. "Central banks should pay attention to it."
Responding to a query by the Council as to the forces driving the price of gold, the former Fed Chairman replied, "Fiat money has no place to go but gold," as reported by economist David Malpass in The New York Sun. Malpass further noted that Greenspan admitted to thinking a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities "simply don't pan out." Greenspan's conclusion, as characterized by Malpass, "gold is simply different."
Gold bubble or debt bubble leading to currency crisis? If blind allegiance is pledged to a faith based currency, and unswerving trust is bestowed upon its guardians, than gold must appear to be trading at absurd levels. Conversely, if the actions of the Fed, Treasury, and Congress continue as they have, and no credible indication to the contrary has been remotely telegraphed yet, than history may prove the most astute forecaster. In such an environment, gold may not only not be in a bubble, but in the preliminary stages of a monumental bull market leading to the unthinkable. And the last point may be that when priced in future dollars, as when measured in Zimbabwe dollars or Weimer Republic Mark notes, whatever price level gold ascends to could be a point of permanence.
From the UK Telegraph:
On a Vancouver stage last Thursday, a young Irish computing expert gave a filmed presentation showing how the world could end with the pop of a balloon. The presentational qualities are, well, geek-like, the sound quality poor, and the whole experiment has the air of a Year 7 science project. Nevertheless, the YouTube video is spreading like wildfire from one software blog to the next.
In the past few days, the expert, Liam O Murchu, has become the new star of Geek Universe, quoted from PC World to the Washington Post. But unlike most such young men, his impenetrable analyses of computer coding have a frightening relevance to physical realities. Hence his experiment, performed at the Virus Bulletin 2010 conference in Canada.
Murchu was demonstrating how a computer worm called Stuxnet had effects that went beyond blowing up your computer screen. It could blow up real things, too. Stuxnet has infected operating systems on equipment manufactured by the German industrial giant Siemens and has, as he puts it, "real-world implications beyond any threat we have seen in the past". It could attack oil pipelines, power stations, even nuclear plants.
To prove the possibilities, Murchu set up a basic air pump, controlled by a Siemens system, on the stage in front of him. The pump delivered a timed burst of air into a balloon, which inflated moderately. O Murchu then infected the system with Stuxnet, pressed a button, and hey presto! The pump pumped, but did not stop. The balloon went on inflating till it burst.
Imagine if the balloon were, in fact, an Iranian nuclear power station. For that, in essence, is the possibility that has brought Murchu's name to public attention.
Stuxnet has been around since last year and its workings were first described four months ago. But such was the size and complexity of its coding that only more recently has its true nature become fully clear. What scores of analysts like O Murchu, who works for the anti-virus firm Symantec, have found is that it targets the industrial infrastructure that underlies our everyday lives. They have also found that the country worst affected is Iran, which by last week had reported around three in every five infections worldwide.
It has not taken long for the implications to be spelt out. Ralf Langner, a German analyst with detailed knowledge of Siemens systems, had this to say on his personal blog: "Can we think of any reasonable target that would match the scenario? Yes, we can. Look at the Iranian nuclear programme. Strange – they are presently having some technical difficulties down there in Bushehr."
Bushehr is a nuclear power station which has been built by Russia for Iran and which, within a fortnight of Mr Langner's posting, confirmed that its opening had been delayed by two months, to January. Mr Langner even found a photograph taken inside the plant showing a computer screen – configured, he said, to run a Siemens operating system affected by Stuxnet and, moreover, configured wrongly so that it was vulnerable to bugs.
Iran has subsequently confirmed that computers run by Bushehr scientists have been infected, though it insists the plant itself is undamaged.
Another German analyst, Frank Rieger, went further. Bushehr is disliked by Iran's enemies, but not nearly as much as its separate uranium enrichment programme, which the West believes is part of a nuclear weapons programme. Since last year, mystery has surrounded its main facility at a place called Natanz, where the number of working centrifuges, the main enrichment devices, suddenly fell by 15 per cent – at the very time Stuxnet is first thought to have hit Iran.
As analysts reverse-engineering the code commented to Mr Rieger: "This is what nation states build, if their only other option would be to go to war."
Israeli officials, governed by security laws, rarely reveal military secrets but are skilled at alluding to them in veiled ways. In July last year, Mr Rieger noted, a few days before Natanz's problems were leaked, a retired member of the Israeli security cabinet and a veteran of Shin Bet, the Israeli secret service, briefed the Reuters news agency on what an Israeli cyber-warfare attack might look like.
Following a security drill that had revealed how a hacker could explode an Israeli fuel depot, the Shin Bet veteran said, cyber-warfare teams set about developing technologies that could employ this knowledge.
The briefing made clear that they had succeeded. "In retrospect, the piece sounds like an indirect announcement of a covert victory to allies and enemies," Mr Rieger said.
In the past week, attention has focused on O Murchu's discovery of a trace of a keyword in Stuxnet's instructions: Myrtus. Myrtus, or Myrtle, in Hebrew becomes Hadassah, and Hadassah was the birth-name of Esther, the Jewish biblical heroine married to a king of Persia. Esther discovered that a courtier was plotting the murder of all of Persia's Jews, and persuaded her husband to allow them to rise up pre-emptively to slaughter their assailants.
Could this be a further clue as to Stuxnet's origins? It is already thought that defective parts have been deliberately fed into Natanz through imports of "dual-use" technologies slipped past the international sanctions imposed on Iran.
"This is a technology war that has gravitated into a cyber attack," says Theodore Karasik, research director at the Institute of Near East and Gulf Military Analysis. "It's not new but it's getting more ferocious."
Some analysts poo-poo the theory. One commentator points out that Myrtus could simply stand for My Remote Terminal Units.
A blog on the website of Forbes magazine refers to the diplomatic struggle between China and India. In July a glitch on a satellite used by most of India's satellite television stations blacked them out, forcing operators to turn to a Chinese competitor. The Indian space programme uses Siemens operating systems.
We may never know for sure. The odd thing is that Stuxnet, so far, hasn't actually been proved to have done anything. Stuxnet contains a "switch" believed to target one very specific, tailored Siemens system – but no one knows which one, or what the switch is intended to do.
Stuxnet "master controllers" have been traced to computer servers in Malaysia and Denmark, and the two security certificates that allowed the worm to infect systems were stolen from Taiwan. Thereafter the trail goes cold.
Israel has little to gain from denying or confirming anything. It cannot own up to what some see as a monumental act of irresponsibility – the creation of a worm that could attack any sensitive system anywhere in the world. On the other hand, its struggle with Iran is also psychological, and it does it no harm to be thought capable of disarming a nuclear programme without launching a missile.
Truth is the first casualty of war, but in a real war, the battlefield can only be obscured for so long. In Second World War prisoner-of-war camps, inmates traced on hand-drawn maps the overwhelming victories claimed by Japanese radio broadcasts and watched gleefully how
the "victories" took place ever closer to the Japanese mainland.
In cold wars, the process of deduction runs in an opposite direction. Spy agencies reveal the failures – the defecting Philbys – and only when they become more insignificant do we know victory is approaching.
Who knows the names of the spies who triumphed? Iran will never admit, and Israel may never say, if it was Stuxnet that damaged Natanz. There is one further hint, though. When Stuxnet does triumph, it leaves a number imprinted on its new host: 19790509. That number, Mr O Murchu says, seems to be a date – May 9, 1979.
Many things could have happened on May 9, 1979: it may just be someone's birthday. But newspaper archives also tell us it was the day Habib Elghanian died. Who was Mr Elghanian? He was the first Iranian Jew to be hanged for spying by the new Islamic Republic. And as we all know, revenge is a dish best served cold.
Ankara and Beijing conducted the drills in Turkey's Central Anatolia region last month.
The war games, codenamed the Anatolian Eagle, were the first involving Turkey and China. Turkey had previously carried out Anatolian Eagle maneuvers with the US and other NATO members as well as Israel.
Turkish F-16, Chinese Su-27 and Mig-29 fighter jets took part in mock dogfights during the drills.
The maneuvers come ahead of a planned visit by Chinese Prime Minister Wen Jiabao to Turkey.
Turkey and China took their first step in military cooperation in the late 1990s with joint missile production, manufacturing weapons with a 150-kilometer range, the Hurriyet daily reported on its website.
The multinational Anatolian Eagle exercise is hosted by the Turkish Air Forces and is aimed at boosting aerial cooperation and training. The exercises have been performed since June 2001
4 October 2010
At the present time the price of gold does not seem to be intimidated by the large COT "net short' number, as in the past. Could it be that the hedge fund operators and large investors sense a possibility that the commercials are 'on the ropes'? Some of these commercial traders have carried a large short position for many months. All of these short positions are now 'under water'. Every time gold rises, the holders of short positions have to raise margin money or buy back a losing position. The upward pressure on price is due to fundamentals for gold that are extremely bullish and these include:
- The US money supply is today twice as large as it was just a few years ago.
- The Obama administration is without a clear economic policy - three out of four members of the economic team have just resigned - and the fourth, Tim Geithner, has never held a position in the business world aside from being involved in the banking business at Goldman Sachs. The man can't even keep correct personal income records.
- Worldwide money supply is expanding at an average rate of 10%.
- The US dollar is in a long-term decline against gold (see chart below).
- The Euro is in a long-term decline when measured in gold (see chart below).
- Gold is rising not only in US dollar terms but also as expressed in a number of currencies - this reflects a 'flight to safety from fiat currencies.'
- Gold production is declining, despite higher prices.
- It takes longer (due to regulations) to build a gold mine than ever before, and the rising cost of materials and fuel makes it very expensive to build a mine.
- The period between US Labor Day and Christmas is usually the most gold-bullish period of the year. In seven of the last eight years gold rose during this period.
- The expiration of options on August 26th did not have a negative effect on the gold price, compared to options expiration days in June and July. This proves strong underlying physical demand.
- China is buying up local gold production, thus withholding it from the market.
- Russia is buying up local gold production, thus withholding it from the market.
- Gold ETFs are more popular than ever before, drawing bullion away from the market.
- The US gold supply that is stored at Fort Knox has not been audited since 1953 and is most likely all or partly gone. It has either been sold or leased.
- Central banks have stopped selling gold and some have become buyers.
- Gold thrives when 'real interest rates" (US T-bill rate less CPI) is negative - as now. (People who are earning less than 7% per year on an investment are actually going backwards because of the inflationary effect which is currently 7% and rising!) Gold on the other hand has been rising at an average +20% per year for the past five years. Since 2001 gold has risen 400%!
- Gold thrives during periods of price inflation and we are witnessing the beginning of increased price inflation: Wheat, corn, oats, barley, oranges, cattle, hogs, salmon, copper, iron ore, cotton, sugar, coffee, palm oil, health care, education are just some of the categories that are rising in price.
- read on