Inflation Stew:

S&P downgrades Japan’s sovereign Debt….Dan Norcini…Jan 27/11

This is why the take down in gold, after yesterday’s nice performance, is so remarkable for its perverseness and why long term oriented holders of the metal should not be the least bit concerned as to the antics taking place in the paper market. Sovereign debt woes are not behind us – the problem lies squarely ahead of us and no amount of wishful thinking is going to change that hard reality.

“what is a safe haven that is actually safe?” Who wants to take the chance of holding a nation’s bonds if overnight they face the real risk of being downgraded?

…For nations already hopelessly in debt, that means borrowing costs begin to rise forcing them to borrow even more money just to keep their heads above water. The whole thing becomes a vicious cycle with rising interest rates compounding the problem.

(More QE and higher interest rates coming = inflation = safe haven gold and silver)

GLD Signaling Gold Is Sold Out Again?

Lance Lewis

January 26, 2011

The GLD gold ETF puked up 31 tonnes (or 2.48% of its bullion holdings) yesterday to bring its holdings down to 1,229 tonnes…these “pukes” of bullion by the GLD ETF have always tended to occur at or very close to important lows in the gold price, and declines of over 2% like yesterday’s have only occurred at major lows, such as the two major lows that were hit in 2008.

Note that one of those lows on September 9, 2008, which is the closest in size to yesterday’s 2.48% puke, also occurred just one day before a five-day short squeeze/meltup of 30% in the gold price that kicked off on September 12, 2008.

Why Gold and Silver Have Declined by Rob Kirby

posted on Jan 26, 11 11:43PM goldseek.com

…It’s my understanding that this rebalancing window effectively closes with the expiration of Jan. Options [Wed].

If I’m correct in my thinking / analysis – this sell off is likely done and we are going to SCREAM HIGHER in both gold and silver…We have just experienced a MASSIVE RECORD reduction in gold open interest reported Tuesday, Jan. 25, ….This tells me that the BIG BANKS [the guys who are naked short all the gold] used their fore knowledge of this rebalancing [forced selling] to cover a good chunk of their massive shorts – most likely because they KNOW they are not going to get an opportunity like this again. Basically, the banks have told us they KNOW they are screwed with their short positions – and are trying to minimize the damage.

Nothing could be more bullish for metals…. the BIG BANKS – owing to this record reduction in Open Interest – appear to have CAPITULATED to some extent – and as this rally gathers steam – I doubt they are going to be “stopping” the rise with another round of indiscriminate NAKED selling – as they have done so many times in the past.

So Where is the CFTC?

Our capital markets are ALL trading in accordance with predetermined, algorithmically controlled outcomes – set by the U.S. Federal Reserve in collusion with the U.S. Treasury Department and executed by the big derivatives trading banks – principally, J.P. Morgan, Goldman Sachs, Citibank, Bank of America and Morgan Stanley.

These banks have “enablers” - principally the Commodities Futures Trading Commission [CFTC]. The individuals at the CFTC who are derelict in their duties to regulate the markets are, Gary Gensler, Chairman, Bart Chilton, Commissioner, Michael Dunn, Commissioner, Jill Sommers, Commissioner, Scott O’Malia, Commissioner.

These are the people who are robbing us ALL – blind

London Trader - Big Money Lined Up To Buy Gold & Silver

posted on Jan 27, 11 07:15AM

From Eric King:Erickingworldnews.com

Ed Steer: …”The precious metals shares [especially the junior silver producers] were proof that there was a feeding frenzy of bottom fishing going on...and that's always a positive sign.

To quote another couple of sentences from Ted's note to clients yesterday..."In short, this was a classic Comex jam-job by the commercials to the downside. Don't be fooled by the now-bearish rhetoric about silver's prospects. News and opinion follows price. Those bearish on silver now, will be singing a bullish tune once prices start to rally.”