Will The Cartel be unwilling or unable to effect any more significant sustained Takedowns due to the increasing “Sunlight” and increasing Buying of Physical Precious Metals?

Consider that in spite of all the aforementioned, The Cartel still remains Potent. Today’s (April 16, 2010) $25 Takedown shows they can still create a “One Day Takedown Story”.

And we should not fail to recall the fact that The Cartel generated $50 down days for Gold in early December, 2009 and early February, 2010 -- still strong evidence that The Cartel can still affect the Precious Metal prices (albeit with increasing difficulty).

But can they sustain a Takedown for a month, or even a week? We are increasingly skeptical.

And, given their Increasing Media Exposure, do they Dare even attempt to implement another Major Sustained Takedown, say to the $800 to $850/oz level as we earlier forecast?

Last week we wrote, “For us the price performance in the next few days or very few weeks will provide the Answer. A convincing Breakout over the previous nominal high – that is a breakout into at least the upper $1200s/oz for Gold would suffice.

But subsequent events have caused us to conclude that other recent events (e.g. Media Exposure) also support being less concerned about sustained takedowns.

Most Salient, exposure of The Cartel has continued to widen from the New York Post story to quite wide and negative Mainstream Media Coverage. And Goldman Sachs, widely regarded as a leading member of The Cartel has just been accused of Civil Fraud by the SEC for failing to disclose a Conflict of Interest in mortgage securities.

Even the normally Devoutly Mainstream MoneyNews.com has posted a story: “Gold Trader: Fed Keeping Gold Prices Low” (April 12, 2010).

And well-connected Newsletter writer Dennis Gartman – no friend of “Gold Bugs” -- has recently recommended going long Gold.

But most telling regarding the issue of Cartel Potency are two New Developments:

1. Open interest totals on all Gold contracts shot up from 467,000 on March 30 to 521,000 on April 8. This means the Cartel has met paper Demand with paper Supply. But one wonders how many delivery demands will be made and how many deliveries will actually be made. Reportedly, a major Wall Street Firm recently defaulted on delivery of January mini-Silver Contracts!
2. The Allegation that the London Bullion Market Association has only 1/100 the Physical Gold that they claim they do, is being circulated among the World’s largest Purchasers (or at least they believed they were the world’s largest purchasers of Physical). If the allegations are true they may own only paper promises. This should lead to greatly intensified demands for actual physical.

We conclude that the aforementioned developments, considered together, will tend to put a higher floor under Precious Metals prices, notwithstanding any Cartel Takedown attempts. And of course the Precious Metals’ Upside Potential is enormous.

http://www.financialsense.com/fsu/editorials/deepcaster/2010/0416.html