Obama's New Iran Sanctions: An Act of War

With the U.S. closed for the long weekend yesterday, not much happened in the gold market on Monday… although gold came under a bit of selling pressure starting at 1:00 p.m. in Hong Kong.

Every commentator I read yesterday said that the Comex was closed yesterday… and maybe it was… but someone was trading both gold and silver after London closed yesterday.  And whoever it was, stopped trading at 1:15 p.m. New York time yesterday afternoon.

Volume in gold was virtually nothing when I got up yesterday morning around 11:00 a.m. Eastern time… under 10,000 contracts.  But that little closing spike in the last half hour of 'Comex trading' tacked another 9,000 contracts onto the open interest in a real hurry.  Don't know what to make of that.

Silver's price path was similar.  Volume was under 3,500 contracts.

With the markets closed, there was no trading in HUI stocks.  But here in Canada, the TSX Gold Index was down less than half a percent.

The U.S. dollar gained about 15 basis points during Monday's trading.

With the U.S.A. shut tight yesterday… there was no CME Delivery Report… and nothing from GLD , SLV, the U.S. Mint… nor the Comex approved depositories.

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You very well may ask why I'm writing this commentary if the U.S.A. was in holiday mode yesterday.  Technically, I don't have to… but I just want to post the stories I have in my in-box that some of my readers sent me over the last three days… as I know I'll have a whole new batch for you by tomorrow morning.  And, except where noted, reader [and fellow Canadian] Roy Stephens sent me all of today's stories.

I have two gold-related items today… and this is one that I dug up.  It's posted over at the mineweb.co.za on Monday… and is filed from Mumbai.  The headline reads "How does China really view gold?"  Author Shivom Seth offers his opinion on the subject.  It's a bit of a read, but does offer comfort to us gold and silver bugs… and the link is here.

The second one just arrived in my in-box just moments ago.  It's courtesy of Australian reader Wesley Legrand.  It's a posting over at the bullionvault.comand bears the headline "Gold Price Bull Market "No Wonder", Says Strategist".  It's only a handful of short paragraphs, but is definitely worth your time… and the link is here.

Here's a story that was in last Friday's edition of The New York Times.  The headline reads "Illinois Stops Paying Its Bills, but Can't Stop Digging Hole".  “We are a fiscal poster child for what not to do,” said Ralph Martire of the Center for Tax and Budget Accountability, a liberal-leaning policy group in Illinois. “We make California look as if it’s run by penurious accountants who sit in rooms trying to put together an honest budget all day.”  And, to top that off, the state's last elected governor, Rod Blagojevich, is on trial for racketeering and extortion.  It's Greece on Lake Michigan.  The story is a 3-page must read… and the link is here.

The next story is from the Saturday edition of The Telegraph in London.  The headline reads "Goldman Sachs warns on global economic slowdown".  Better late than never, I suppose… but this new is sort of ancient history by now.  You may find that to be the case as well, dear reader… but read the first half dozen paragraphs anyway… and if it begins to sound like something you've read before somewhere else, then move on.  The link is here.

Last week Nick Laird at sharelynx.com sent me the graph below… updated as of June 30th… and I ran it in my July 1st commentary.  An updated version [Friday, July 2nd] arrived in my in-box in the wee hours of this morning… and here it is.  As my Thursday headline read… "The Dow is Ugly".  This chart… which goes back to the start of 2002… is even more ugly with another two days worth of data added.

Hard on the heels of a story I ran in Saturday's column about the plane loads of cash being flown out of Kabul, Afghanistan… comes this similar story from the German website spiegel.de.  The headline reads "Corruption in Afghanistan: US Cuts Aid After Millions Siphoned Off to Dubai".  It's a much shorter story… and it also goes into more behind-the-scenes detail.  It's certainly worth the read… and the link is here.

Here's another story of interest posted over at spiegel.de.  The headline of this article reads "Export Optimism, Financial Fear: Bank Balance Sheets Could Torpedo Recovery".  It's a well-known fact that the European banking system [along with everyone else's] is basically insolvent… with trillions of euros worth of assets worth only pennies on the dollar… if that.  There was a secret meeting about that last Wednesday… and although Germany's economy is doing quite well at the moment, Germany's bank balance sheets are in dire straits.  This story is a couple of pages long… but I think it's worth your while… and the link ishere.

Europe is also having problems with China at the moment.  A story that was posted over at The Telegraph in London late Sunday evening bears the headline "EU clashes with China over trade 'barriers’ to rival firms".  China and Europe are entering into a destructive trade war as EU officials vow to “get tough” over China’s bureaucratic barriers against foreign investment and trade.  This is a short, but really interesting story, which is definitely worth reading… and the link is here.

The European Union isn't the only one having problems with China.  Here's a story posted this morning over at bloomberg.com… and the headline reads "China Sentences U.S. Geologist to 8 Years Over State Secrets".   He was convicted of violating the state secrets law by selling a database on the country’s oil industry.  The case highlights China’s use of the law to protect economic information, three months after the jailing of four Rio Tinto Group executives strained relations with Australia.  The U.S. congress is already up in arms about China in other areas… and this turn of events will only inflame the situation.  I thank Australian reader Wesley Legrand for sharing this with us… and the link is here.

Lastly today is a story that was forwarded to me by Casey Research's resident economist, Bud Conrad.  This item appeared on Saturday… posted over at globalresearch.ca… and this is what Bud had to say about it… "On the 4th of July I am haunted by winds of war, rather than comforted by the ideals of our forefathers in declaring our independence from the monarchy of Britain. Patriotic tunes with military overtones do not bring warmth to my heart, but rather remind me how the US spends half of what the planet spends on military. Our imperialist baiting [of] the Middle East is accelerating… even as we are failing.  This article is from a Canadian web site [and] is more critical than anything allowed in our main stream media. For those of us that thought Obama would bring a different direction to America' foreign policy… I am not just saddened, but becoming angry. I can foresee a time when such criticism will be outlawed, and that could fall on writers of newsletters, as well."

The article reminds me of a book that I read some years ago… which I believed I mentioned just recently in this column.  The title reads Day of Deceit: The Truth About FDR and Pearl Harbor by Robert Stinnett… and what the author states in this article is exactly what is discussed at length in the book.  A series of sanctions against Japan, which included the Export Control Act, giving the President the power to prohibit the export of a variety of materials to Japan, including oil. This gave Roosevelt the legal stance he needed to implement an oil embargo, an obvious act of war. Japan’s attack on Pearl Harbor simply brought the war out of the economic realm into the military sphere.  Now Iran is facing the exact same situation.  Will China and Russia refuse to follow the U.S. 'lead'… or is there a war in our very near future?

The article is headline reads "Dangerous Crossroads in World History:  Obama's New Iran Sanctions: An Act of War".  It's a short read… but it's anabsolute must read… and the link is here.

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. – Earnest Hemmingway

With the official start of summer in the northern hemisphere, it will be interesting to see how gold and silver perform this time.  2010 is an entirely different animal than prior years… but the obvious intervention by the bullion banks on July 1st means that the 'summer doldrums' are being shoved down our throats by brute force.  If the bullion banks weren't painting the tape in this area, it's obvious that gold, silver and their respective shares would be away to the races.

Price action in Far East and early London trading could only be described as choppy… even though the world's reserve currency did a face plant earlier this morning.  Volume is not particularly high… but, as always, what matters most is what JPMorgan et al do when they start 'trading' in New York this morning… and we'll find out soon enough.

See you on Wednesday.