Last night both gold and silver went sharply higher at the Asian market open, and the USD was driven lower. I believe that was the true market response to the crisis that has affected Japan. However it appears there are other players in this market that did not want to see gold and silver break away under any circumstances and the action today across the board confirms that for a short term intervention the Cartel is still very much in charge. Paper trumps bullion and even if the actual bullion inventory is running thin, and the underlying fundamentals remain extremely bullish, the crooks will still be able to over power the short term action and drive the metals lower.

What is more important to me is if they can sustain this intervention. History tells us they can not. There were several other lower magnitude raids that have been reversed in the last couple of months. The Cartel does not want to let silver set new highs and they have tried many times to drive the spot price lower but it has not been able to accomplish more than a short correction so far. Even if there had not been a quake overseas, I think the Cartel playbook had a severe raid scheduled for this week due to triple witching. I think the shorts were going to hammer the mining stocks no matter what.

The selling may have provoked some long liquidation in the metals and the juniors but the shorts will try to cover during this price weakness too. Tuesdays have been strong days for the metals because the Cartel covers shorts so they do not appear in the weekly COT data - short on Friday, cover on Monday afternoon and tuesday morning, and the weekly numbers show no net position change. The mining share shorts get covered after options expiry for the march settlement month, next week.

Lower prices will draw in more buyers. There are down gaps all over the sector that will be filled on a recovery once the irrational selling blows over. I still think we have at least one strong bull run ahead before the spring seasonal weakness kicks in. IF the Cartel was strong enough to reverse the uptrend for the sector, they would have done so already. So I think the positive fundamentals will win the day. A few specs will be gone from the party, and the crooks will make some easy money, but the stocks and metals have upside to go yet. IMHO...

cheers!

mike