$IRX

If you go back to yr. 2000, the change in the $IRX brought about a major change in the valuations of stocks and the gold price. The benefactor of these changes were the gold miners, who saw their gold stocks either maintain their value or appreciate against gold. After the stock market crash in the Nasdaq was fully wrung out, then you had an impressive rally in all equities, which gold mining stocks were again the benefactor. We should be seeing something very similar in the coming weeks and months.

The difference will be that the $IRX will go even lower, or into the negative, propelling the gold price even higher. Back in the day, gold was several times lower in price, but by now the gold price is so advanced to make every gold miner look like a good business proposition. The skepticism in the markets about gold is doubly focussed on the gold miners as being a very risky bet. People seem to have totally forgotten that the miners are the main suppliers of gold to the markets.

Truly, it only takes one denouncement by interested parties to a bureaucracy before a gold miner will find their environmental license revoked. But the gold miners just simply will not recognize that environmental fallout causes the concern, which they so blatantly ignore, or give mere lip service to. A tailings impoundment license is a fundamental document for moving forward. (this is perhaps contributing to sluggishness in GBN.V stock.)

But not even the miners themselves consider the importance of gold as an asset in the financial world, since Netolitzky as a typical example, will have hedged against a collapse in the gold mining sector with the use of equity swaps, either believing the gold bull market has seen its best days, and therefore doesn't have long to go, or that some other outside influence such as a massive fraud will smash the gold sector.

Netolitzky is bound by agreements made years ago, prior to the stock market crash of 2008, to issue news on the eve of gold price corrections, or with rises in the discount rate, so as to advantage the financial sector sell-side broker arbitraging in the stock price. This I call deferring to the bond-holders' interest. The sell-side broker who is the bigger player arbitraging the stock price since several years now, is probably the supplier of the schedule for gold price corrections,(having inside information) and will be the determinant in news releases for GBN.V with the rise and fall of the discount rate in the U.S.

There are two things that Netolitzky, primarily a land flipper, and the sell-side brokers can't control, and that is the direction of the gold price, and the direction of the discount rate. Its a bet that can and will go wrong. The difference now being that the sell-side broker has no choices left should the $IRX go lower or get pegged into the negative, and gold prices go higher. There was a time when you could say the $IRX or short term interest rates have a long way to go before things get interesting, but now we are an inadvertent move away in the discount rate from desperate moves in the equity markets, especially if rates go negative.

What occurred in the intervening weeks to raise the discount rate and primarily put downward pressure on GBN.V stock, was jawboning on the Yuan, and record amounts of debt being sold to the markets. They are literally throwing everything and the kitchen sink at averting negative interest rates, with only marginal success. A decline of the discount rate in the U.S. will force net settlements in GBN.V shares, and rally the gold price. Two things that the sell-side broker would most hate to see. (I presume that a decline of the $US will help things along.)

A negative interest rate in the $IRX will mean the onset of deflation. That also implies critical mass for the bullion market. Two benefactors of this scenario are gold, and gold miners who both have massive short positions weighing on the bullion price and share prices of miners, mostly generated by sell-side brokers in the banks. Bear in mind that the interest rate outcome may take months.

According to the TRIX, we are very much on the threshold of the 'cross of death:'

supersize: http://www.flickr.com/photos/11747277@N07/4779458117/sizes/l/

stockcharts.com

Sprott Enters The Picture and Why Its So Important

Now, with Netolitzky about to totally lose his shirt on his equity swaps, Sprott enters the picture with a form of financing usually reserved for very large corporations, that is Senior Secured Financing.

This settles the question of bond holder interest in the form of equity swaps (nobody will realize this), since these equity swaps in the form of credit default swaps may actually have no equity in them, except interest rates and thus are naked. Sprott is now the senior lender with secured financing, while the sell-side broker is typically unsecured. The secured lending is tied to the gold price, while the equity swaps, which are probably some naked form of credit default swaps, are tied to interest rates.

Netolitzky turned down several offers of financing, but accepted this one. He would not do so unless backed into a corner. With this financing, Netolitzky, a shareholder himself, has merely chosen the lesser of two evils. But note also that he has chosen to minimize exposure to debt, but also minimize the project.

This game still has a few steps to play out before its done. Credit derivatives are somewhat like a chess game, but your opponent can interchange their chess pieces into a queen, while you are obliged to play with unchangeable pieces.

http://www.goldenbandresources.com/html/news/press_releases/index.cfm?ReportID=203203

Short Term Rates In Canada

Now, short term rates in Canada have risen, as they have in the UK. Bear in mind that a fair number of gold mining companies listed in the world are listed in the UK or in Canada. Now banking in both countries is probably very similar, thus the similarity in short term rates and the policy rate.

I speculate that should the discount rate decline in the U.S., and those short term yields in Canada and the UK as well, then this would imply that every gold miner which has large naked short positions held against their share price and tied to interest rates will see a rush into net settlements. Here is the consensus on policy rates from the various banks:

POLL-All Canadian dealers see July, Sept rate hikes

1 hour ago via Thomson Reuters

* All 12 dealers see 25 bps hikes in July, September

* Five of 12 dealers see pause in October

* Year end rate seen between 1.0-1.50 percent

TORONTO, July 9 (Reuters) - Canada's primary securities dealers all predicted on Friday that the Bank of Canada would raise interest rates this month and again in September, but some forecast a pause later this year on uncertainty about the pace of global economic growth.

The poll was conducted after domestic jobs data on Friday showed the Canadian economy added 93,200 jobs in June, far exceeding market forecasts of a 15,000 gain, in a report that was hailed by market watchers as "blockbuster" and "shockingly strong."

All 12 of Canada's primary dealers, surveyed by Reuters, forecast Canada's central bank would raise it key interest rate in July to 0.75 percent and again in September to 1.0 percent.

Seven of the 12 dealers forecast rates will rise in October. Year-end forecasts ranged between 1.00 percent and 1.50 percent.

COMPANY JULY SEPT OCT

ACTION ACTION ACTION

BOA-MERRILL LYNCH UP 25 UP 25 NO MOVE

BMO CAPITAL MARKETS UP 25 UP 25 NO MOVE

CASGRAIN & CO LTD UP 25 UP 25 UP 25

CIBC WORLD MARKETS INC. UP 25 UP 25 UP 25

DESJARDINS SECURITIES UP 25 UP 25 UP 25

DEUTSCHE BANK SECURITIES LTD UP 25 UP 25 NO MOVE

HSBC SECURITIES UP 25 UP 25 UP 25

LAURENTIAN BANK SECURITIES UP 25 UP 25 UP 25

NATIONAL BANK UP 25 UP 25 UP 25

Note: There is no recovery. And we have a housing bust, finally.

source: http://www.bankofcanada.ca/en/rates/tbill.html

A Wide Variance Of Opinion:

http://www.bloomberg.com/video/61249934/

Treasuries Very Rarely Get Reported In Canada - Its World Top Secret

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The reason why treasuries the Canada and the U.S. look so different, is that naked shorting is not allowed in the U.S., though it has been occurring. So I assume that treasuries are so oversold its not funny in Canada and the UK, though there is no convenient chart to show that it might be so.

-F6