Dear Jim,

You have been telling us for years that IMF and Central Bank gold sales never see the open market, and that announcements of IMF gold sales always coincide with major gold bull markets.

Best regards,
CIGA Richard B.

IMF Gold Holdings Declined 15.25 Tons in May as Russia’s Assets Advanced
By Nicholas Larkin – Jun 30, 2010

The International Monetary Fund’s gold holdings fell 15.25 metric tons in May, according to figures from the Washington-based lender’s website.

Russia’s gold assets increased 22.46 tons in May to 703.1 tons, the data show.

More… ^[1]

The Illusion of Fiat
CIGA Eric

While the talking heads sell the strength in the U.S. dollar via the U.S. dollar index as a destination for safe haven capital flows, they ignore the reality that it’s value represents relative and unbalanced comparison against only fiat money. The world’s premier currency – gold is completely ignored. Any comparison to gold would break the illusion so easily sold to the public.

U.S. Dollar Index:
^[2]

The safe haven status of the dollar is an illusion based on the premise that it is the best of the worst within a fiat system. When components of the U.S. dollar Index are compared against gold, the sharp, accelerating up trends reveal the extent of the illusion.

U.S. dollar Gold:
^[3]

Euro Gold:
^[4]

Yen Gold:
^[5]

Pound Gold:
^[6]

Canadian Dollar Gold:
^[7]

Swedish Krona Gold:
^[8]

Swiss Franc Gold:
^[9]

More… ^[10]

Dear Yra,

Not only the Germans.

Regards,
Jim

Notes From Underground: German presidential election is a litmus test for Frau Merkel…
Yra | June 30, 2010 at 9:56 am

The revelation: she leaves a sour taste in the mouths of Germans.

Chancellor Merkle’s hand-picked candidate for German president, Christian Wulff, did not receive a majority of votes in the 1,244-member assembly of federal lawmakers–similar to the electoral college in the U.S.–and will have to go on to further ballots. Wulff had 600 of the needed 623, thus keeping the opposition candidates alive. If any of the candidates fail again to achieve the needed majority, then the process goes to a third ballot in which the candidate with most votes wins.

We believe that Merkel’s candidate will prevail but the failure on the first vote is a slap at the chancellor. The meaning of this slap is that it makes the German Government bailouts of the PIIGS that much more problematic as the German public is growing tired of sending its money to the profligate. The internal opposition to further bailouts is the real threat to sovereign solvency within the EU. It is not the strikers in the peripherals, as significant as that may be, but the rise of opposition in Germany to sustained money transfer. We continue to say that the real TEA PARTY people are in Germany and there in lies the rub. We also note that the EURO has held up very well today in spite of this news. However,  one day on month-end/quarter-end doth not make a trend but does reflect on the U.S. DOLLAR. The problems in the developed world are immense –no nation seems to have escaped. It’s just a matter of what seems to be the flavor of the day.

More… ^[11]

 

Sectors Relative Strength Analysis
CIGA Eric

Sector relative strength analysis not only reveals market leadership (or lack thereof) but also the underlying drivers of the stock market trend. I find relative strength analysis an important and critical tool that reveals the complexion of the trend.

In my June 27th commentary, I suggested that the gold shares were displaying dominant relative strength ^[12].

The following charts, displaying sector relative strength to both stocks and gold, clearly illustrate this dominance.

Relative Strength to U.S. Stocks:
^[13]

Relative Strength to Gold:
^[14]

On May 19th I implored investors to stand your ground ^[15], or face the big boot upon resolution of this breakout. The big boot still waits at the end of this breakout for those that cannot withstand the headline fear.

Big Boot:
^[16]

More… ^[17]

Jim Sinclair’s Commentary

The first sentence says it all.

"The Gold ETF is an excellent conduit to redirect physical demand into paper."

Gold ETF Swells To Pass $50 Billion Milestone
CIGA Eric

The Gold ETF is an excellent conduit to redirect physical demand into paper. The Gold ETF is similar to a fractional reserve bank. As long as customers don’t fear for their money, the bank can service the cash demands for a small percentage of its customers. A run on the bank develops when too many customers request their cash at once. A large ETF holder, fearing for the return of their gold, will demand delivery as stated in the prospectus at some point. If the fear spreads beyond a small group, a run on the ETF will occur. Unfortunately, unlike banks, there’s no such thing an ETF holiday, or Federal Deposit Insurance Corporation. The market price and revised investors expectations towards its holdings will be quickly discounted into the share price.

Amid all the market doom and gloom, the world’s largest gold fund is quietly celebrating another major milestone: SPDR Gold Shares, an exchange-traded fund backed by physical bullion, has recently surpassed $50 billion in assets.

Source: blogs.wsj.com ^[18]

More… ^[19]

Jim,

Here is some more coming from the makers of OTC derivatives.

CIGA BJS

New York Fed probes Wall Street exposure to BP say sources
Joshua Schneyerand Kristina Cooke
Mon Jun 28, 2010 4:24pm EDT

(Reuters) – The Federal Reserve Bank of New York has been probing major financial firms’ exposure to BP Plc to ensure that if the oil giant buckles under the costs of the Gulf oil spill, it won’t put Wall Street or the global financial system at risk, according to two sources familiar with the matter.

More… ^[20]

 

CIGA Eric,

When you use credit or the resetting of mortgages as incentive, basically bankrupts, you end up bankrupt.

Kicking the can down the road ends up with the kicker getting it in the can.

Regards,
Jim

Nearly 1 in 3 first-quarter home sales a foreclosure: report
CIGA Eric

As the report suggests, this is a significant number that reflects the extent of the distress in the real estate market.

Nearly one out of every three U.S. home sales in the first quarter was a foreclosure property as steep price discounts boosted demand for distressed real estate, RealtyTrac said in a new report on Wednesday.

Foreclosure homes accounted for 31 percent of all residential sales in the first quarter of 2010, with the average sales price of properties that sold while in some stage of foreclosure nearly 27 percent below homes that were not in the process, Irvine, California-based RealtyTrac said.

"In a normal market, only 1 to 2 percent of home sales are foreclosures, so this is certainly a significant level," Rick Sharga, senior vice president at RealtyTrac, said in an interview.

Source: finance.yahoo.com ^[21]

More… ^[22]

Hello Jim,

I wonder what the shock ratio is between gold bugs and dollar bulls (aka paper pigs) after reading the headline below?

"It" in this case means the USA.

CIGA Dan

Scrap dollar as sole reserve currency: U.N. report

(Reuters) – A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.

More… ^[23]