Deposit Flight at European Banks Raises Risks
CIGA Eric
Money is flowing from European deposits to gold and a lesser degree US Dollars. This is the reason why early US bond shorts must have deep pockets. Money always flees when confidence is shaken. If it’s shaken badly, and old-fashioned bank run will emerge without warning.
Headline: Deposit Flight at European Banks Raises Risks
European banks are losing deposits as savers and money funds spooked by the region’s debt crisis search for havens, a trend that could worsen economic and financial conditions.
Retail and institutional deposits at Greek banks fell 19 percent in the past year and almost 40 percent at Irish lenders in 18 months. Meanwhile, European Union financial firms are lending less to one another and U.S. money-market funds have reduced their investments in German, French and Spanish banks.
While the European Central Bank has picked up some of the slack, providing about 500 billion euros ($685 billion) of temporary financing, banks are cutting lending, which could slow growth in their home countries. They’re also paying more to keep and attract deposits — or, in the case of Italy, selling bonds to retail customers for five times the interest they offer on savings accounts — which will erode profitability.
Source: bloomberg.com
Consolidation Within A Secular Trend Cannot Be Problem Solved
CIGA Eric
Another consolidation within a secular down trend of the US Federal budget (i.e. Jim’s Formula) cannot be embraced as problem solved. Why do you think gold is rallying? It’s all about confidence. Confidence already weak and teetering on the edge will be tested again once the consolidation pattern breaks to the downside. The previous break in early 2008 foreshadowed the onset of the sovereign debt crisis.
US Federal Budget (Surplus or Deficit As A % of GDP, 12 Month Moving Average) and Gold London P.M. Fixed: 
Headline: U.S. posts $134.15 billion August budget deficit
(Reuters) – The United States racked up a $134.15 billion budget deficit in August, the U.S. Treasury said on Tuesday, marking a sharp increase from a year earlier that was due mainly to calendar shifts of payments and one-time adjustments in the August 2010 period.
The cumulative deficit for the first 11 months of fiscal 2011, which ends on September 30, came to $1.234 trillion, down slightly from $1.260 trillion in the same period of fiscal 2010.
The White House on September 1 forecast the federal deficit at $1.316 trillion for fiscal 2011, compared to an actual fiscal 2010 deficit of $1.293 trillion.
Source: reuters.com
Silver’s Bearish Paper Setup Likely To Produce A Bullish Outcome
CIGA Eric
When paper control of the trend falters, bearish setups can turn unexpectedly bullish. Look no further than gold as example of this inversion. Gold’s DI was turning bearish in July 2011. Then sovereign debt crisis intensified and the gold market rallied despite the negative paper setup.
Gold London P.M Fixed and Gold Diffusion Index (DI) 
Could the loss of paper control in gold spill over to the silver market? If it does, a setup inversion or bearish setup produces a bullish outcome, is quite possible.
Silver London P.M Fixed and the Silver Diffusion Index (DI) 
Open interest or participation in silver has been dramatically reduced since April 2011. These reductions are illustrated as toilet flushings in the chart below. Participation “Flushings” are bullish and have preceded all the major rallies since 2001.
Silver London P.M Fixed and the COT Futures and Options Open Interest Stochastic Weighted Average 
Eric,
I understand the long term technicals are favorable for silver but what about the short term technicals? How close are we to a set up like the gold difusion index you showed today which makes gold look like it is ready now ?
I sense more sideways till way into Nov…is that possible?
Thanks,
Denny
