Posted at 8:17 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Linked below are some charts of gold priced in currencies other than the US Dollar. As you can see from the charts, gold is either making new highs or is close to previous highs. What this reveals in picture form is a loss of confidence in paper currencies.

This is gold reverting to its historic, age-old role as a safe haven for wealth preservation.

Trader Dan

Click charts to enlarge in PDF format

Gold in assorted foreign currencies 4-2010_Page_6 Gold in assorted foreign currencies 4-2010_Page_1 Gold in assorted foreign currencies 4-2010_Page_2 Gold in assorted foreign currencies 4-2010_Page_3 Gold in assorted foreign currencies 4-2010_Page_4 Gold in assorted foreign currencies 4-2010_Page_5

Posted at 2:06 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is a statement out of EU today. QE to infinity!

"According to a European Commission spokesman, the 16 countries that use the euro decided not to allow any euro-zone nation to default on its debt, refuting growing speculation that Greece might default."

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Jim Sinclair’s Commentary

All the Fed did was change the date on their last action statement and re-issue it.

The instant drop in equities today when the 3rd EU downgrade came more than likely insures (as was said here) that no sovereign EU default will be permitted.

That means QE to infinity.

Even Merkel did a moon walk today.

Federal Reserve Maintains Low Interest Rates
By SEWELL CHAN
Published: April 28, 2010

The Federal Reserve on Wednesday kept short-term interest rates near zero and maintained, as it has for nearly a year, that rates would stay at that level for “an extended period.”

Despite intense market speculation, the central bank disclosed nothing about the fate of the $2.3 trillion balance sheet it accumulated as it acquired mortgage-backed securities in an effort to prop up the housing market.

The Fed reiterated its expectation that the benchmark fed funds rate would remain “exceptionally low,” as it has since December 2008, for some time, despite growing concerns among policy makers that the stance was too constraining.

Several Fed policy makers have expressed increased doubts about the wisdom of sticking with that time frame for too much longer. And making matters even more complicated, the Fed’s policy making arm, the Federal Open Market Committee, said at its previous meeting, in March, that the “extended period” language did not really mean anything specific, and that the Fed could act at any time if it felt conditions warranted it.

“Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit,” the committee said in a statement. “Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth.”

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Jim Sinclair’s Commentary

Let’s cut the crap. The US deficit is 10.3% of GDP. If the US was part of the EU there would be a call for them to be thrown out, just like Greece.

Regardless, the rating agencies and media plow on with the public following them like the sheeples they are.

In other news JP Morgan is ceasing the funding of tax returns. Do they think the Fed and State governments are going to default on the obligation?

 

Jim Sinclair’s Commentary

It is coming here in the US. The EU is the straw man

This is the beginning of the end!

Banks Bet Against U.S. Cities, States
First Posted: 04-27-10 01:53 PM   |   Updated: 04-27-10 03:01 PM

Amidst growing pessimism about the financial condition of U.S. cities and states, investors are increasingly buying financial instruments that essentially allow them to short sell – or bet against – cities and states, says a Wall Street Journal report.

Offered by banks like JP Morgan, Bank of America, and Citigroup, the so-called municipal credit default swaps can be used by investors to bet that insurance contracts protecting holders of municipal bonds will default.

Some states say the derivatives not only scare away potential buyers of municipal bonds by creating a perception of risk, but ultimately drive up states’ borrowing costs. Others contend that the instruments are traded too thinly to affect municipal bond markets or a state’s credit rating.

The California treasurer is just one of a number of state treasurers that have launched a probe into the sale of these derivatives and the sale of municipal bonds by big Wall Street firms that might reveal "speculative abuse of CDS in the muni market," says one regulator.

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Jim Sinclair’s Commentary

All sovereign debt in the condition of immediate default will be rescued.

Greece is out of cash as we speak. Maybe they will try IOUs as California did.

Hyperinflation now seems to be a situation that will be introduced by an "All World Currency Crisis" in confidence. That is what Gold is saying.

ECB may have to turn to ‘nuclear option’ to prevent Southern European debt collapse
The European Central Bank may soon have to invoke emergency powers to prevent the disintegration of southern European bond markets, with ominous signs of investor flight from Spain and Italy.
By Ambrose Evans-Pritchard, International Business Editor
Published: 7:09PM BST 27 Apr 2010

Greece’s fortunes were dealt yet another blow as Standard & Poor’s slashed its credit rating to junk status – BB+ – the first time that has happened to a euro member since the single currency was created, pushing yields on 10-year Greek bonds up to a record 9.73pc.

The credit-rating agency also cut Portugal’s sovereign debt ratings by two notches to A-, as the swirling storm hit the country with full-force.

“We have gone past the point of no return,” said Jacques Cailloux, chief Europe economist at the Royal Bank of Scotland.“There is a complete loss of confidence. The bond markets are in disintegration and it is getting worse every day.

“The ECB has been side-lined in the Greek crisis so far but do you allow a bond crash in your region if you are the lender-of-last resort? They may have to act as contagion spreads to larger countries such as Italy. We started to see the first glimpse of that today.”

Mr Cailloux said the ECB should resort to its “nuclear option” of intervening directly in the markets to purchase government bonds.

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Jim Sinclair’s Commentary

Please note my office bodyguard Freddie and office lookout Blueberry.

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Jim Sinclair’s Commentary

Here is a revealing question.

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Jim Sinclair’s Commentary

The headline should read that when the British stop giving away low cost money that can be utilized at higher returns, the core business is in the crapper.

Then the problem starts.

RBS Says Impairments Likely to Remain High in 2010
By Andrew MacAskill and Jon Menon

April 28 (Bloomberg) — Royal Bank of Scotland Group Plc, Britain’s biggest government-controlled bank, said non-core impairments and writedowns are likely to remain high this year and will “once again” weigh against strong core operating profit.

“RBS has begun its transition from problem to opportunity – an opportunity for the U.K. government, without whose decisive support we would not be here today,” RBS Chairman Philip Hampton said in a statement released before today’s annual shareholder meeting in Edinburgh.

“Even if the economic outlook is both clearer and I think better than it was a year ago, we are under no illusions that we are out of the woods,” Hampton said in the advance copy.

RBS has surged more than 90 percent since the start of the year, pushing the government’s 45.5 billion pound ($70 billion) bailout investment into profit. The government, which owns about 83 percent of the bank, has a paper gain of about 4 billion pounds in the bank.

“I am confident that when we meet again next year to review our performance in 2010, I will be able to report that RBS is a long way down the road towards leaving the ‘problem bank’ label behind,” said Hampton.

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Jim Sinclair’s Commentary

EU problems are significantly less than the US and Great Britain.

Any financial problem anywhere is creating purchases in the physical market for gold that appears to, in the main, ignore the CRIMEX.

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Greece gets junked, Portugal downgraded.
Ratings agency S&P cut Greece to junk status and lowered its long-term sovereign credit rating to BB+ with a negative outlook. The cut sent Greece’s bond yields and insurance costs to new records, with S&P suggesting that bondholders may recover as little as 30% of their investments if Greece restructures its debt. S&P also downgraded Portugal on "amplified fiscal risks," cutting the country’s rating two notches to A- with a negative outlook. The news exacerbated fears of a debt contagion and raised the possibility that policymakers may need to widen a bailout package beyond Greece. European markets went into atailspin yesterday, with the euro falling to a new one-year low against the dollar. European markets are still taking a beating today (7:00 ET): London -0.7%. Paris -2.5%. Frankfurt -1.6%. Ratings agency S&P cut Greece to junk status and lowered its long-term sovereign credit rating to BB+ with a negative outlook. The cut sent Greece’s bond yields and insurance costs to new records, with S&P suggesting that bondholders may recover as little as 30% of their investments if Greece restructures its debt. S&P also downgraded Portugal on "amplified fiscal risks," cutting the country’s rating two notches to A- with a negative outlook. The news exacerbated fears of a debt contagion and raised the possibility that policymakers may need to widen a bailout package beyond Greece. European markets went into atailspin yesterday, with the euro falling to a new one-year low against the dollar. European markets are still taking a beating today (7:00 ET): London -0.7%. Paris -2.5%. Frankfurt -1.6%.

IMF may expand Greek aid.
The IMF may increase its contribution to the Greek rescue package by €10B ($13.2B) amid growing fears that the current €45B commitment won’t be enough to prevent Greece’s debt from spiraling out of control. Expectations for the size of Greece’s three-year rescue have increased to at least €70B, said policy specialists, though European officials continue to insist a default is "out of the question" and debt restructuring is not under consideration. Earlier today, Greek authorities placed a temporary ban on short selling as investors showed their growing doubts by dumping Greek stocks.

Debt crisis quotables.
"It’s not a question of the danger of contagion; contagion has already happened," said OECD Secretary General Angel Gurria in an interview today. "This is like Ebola. When you realize you have it you have to cut your leg off in order to survive." The Greek crisis is "contaminating all the spreads and distorting all the risk-assessment measures. It’s threatening the stability of the financial system."

Jim Sinclair’s Commentary

The world is waking up to Gold. Next there will be a rush to the bullion market.

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Jim Sinclair’s Commentary

Wow. CNBC actually comes out in public with what we have known for years.

The discussion on gold and silver is around the 1:40 point of the video.

This is courtesy of CIGA Green Hornet.

Gold Is the ‘Only Currency’: Strategist
Published: Monday, 26 Apr 2010 | 11:41 PM ET


Gold is "the only currency" worth investing in as it is a good hedge against the eurozone’s fiscal troubles, said Mathew Kaleel, co-founder & portfolio manager, H3 Global Advisors.

"Gold, and every currency, is going up. It’s going up a lot more than (the) euro and sterling," Kaleel said on CNBC Tuesday.

He believes Europe’s fiscal issues have not ended as yet, saying the International Monetary Fund’s package for Greece is "literally a band-aid solution."

"We’re going to see other countries (facing) the same kind of difficulties in Europe. That’s going to be negative for the euro," Kaleel said.

Gold is a very good form of insurance as there’s limited supply in terms of increased mine output, so that’s a really good way to hedge yourself against euro issues, he continued.

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Posted at 1:59 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Hat’s off to the gold bulls who were able to overpower the bullion bank line of selling at the $1162 level. After being initially repulsed from that line in yesterday’s New York session when the banks seemingly threw everything but the kitchen sink at the metal, even on a day in which widespread commodity selling was the norm, the longs refused to run instead digging in their heels and fighting back. Open interest indicates the fierce contest that took place as it surged over 6,600 contracts in the most active June contract. That feat enabled them to push the closing price right up to the resistance line on the technical charts that the Comex bears had been attempting to enforce. Today, when both Euro gold and British Pound priced gold went on to make brand new all time highs today at the London PM Fix ( €880.613 and £764.218 respectively), that strength was enough to give the bulls the force necessary to finally make a decisive breakthrough of the Maginot line at $1162.

There is one more test standing between the Gold bulls and a run at $1200 and that is $1172 – $1175 (today’s session high). If the longs can take price up through that and hold it there for at least another couple of hours, that should push out some more of those shorts on the fund side who have been siding with the bullion banks as well as bring in another wave of momentum based buying. With the gold shares also moving higher, both cylinders are firing in sync which means the advantage goes to the bulls.

I should note that while yesterday’s session witnessed a “risk aversion” move in the currency world, with both the Dollar and the Yen the beneficiaries of “safe haven” flows, today is seeing the Dollar higher in a continued move away from Europe but also widespread selling of the Yen. The result is that Yen priced gold has gone on to make another new high on the charts. Gold is soaring in terms of just about all of the major currencies (I will provide some updated charts this afternoon detailing this). As stated here before, it is this continued surge of gold priced in alternative foreign currencies which is making the life of the bullion banks quite uncomfortable right now and leading to sustained buying on dips in the Dollar price as well as attracting further money flows from the Managed Money side of things.

The reason for this is obvious, gold is trading as an alternative currency and a safe haven given the turmoil and gnawing fears clawing at the stomachs of investors, especially as they wait for the next shoe to drop. Yesterday it was a downgrade of both Greece and Portugal; today it is Spain. Tomorrow could it be Italy? Then what happens when the ratings guns get trained on some of the US States or municipalities? Combine this with the fact that such occurrences will lead to continued need for accommodative monetary policies (read that as low interest rates and lots of money being printed) and you can understand why managed money is actively seeking out a store of wealth and is becoming suspicious of paper debt. Would you want to be stuck holding the general obligations of any nation (or state for that matter) when there is a very good likelihood that such debt is going to be downgraded causing your wealth to evaporate overnight? If that were not bad enough, then the currency that the debt is issued in gets sold down giving you a double whammy. Gold starts looking very, very attractive; no let me rephrase that, essential rather, if you are going to attempt to preserve the fruits of your life’s labors. Translation – there is a growing loss of confidence towards paper currencies and a move towards gold.

This is where the derivatives kings have brought us all. Now that these shamans have conjured up indices in which they can place bets on whose debt is going to get whacked next, they can just about wave their magic wands, mouth some incantations and then short the hell out of the debt causing a self-fulfilling prophecy. They make billions while their target gets crushed. It should be obvious by now that these damn derivatives contrary to Alan Greenspan’s near incessant blatherings while he was Fed Chairman, are not enhancements to productivity but are rather tools of the devil that bring only destruction and misery in their path. They provide no economic benefit to anyone but the big banks who spawned these damnable monstrosities for their own pleasure.

Back to the gold shares, the HUI is attempting to confirm an upside breakout on the weekly price chart from a 5 month long triangular consolidation pattern drawn off the November 2009 high and the February 2010 low. It broke above that formation early this month but then pulled back to retest the top of the breakout line last week. Today’s session high near 455 is the key to a trending move from a technical perspective. Bulls are pushing hard to close price over this level at the end of the week and hold it there. If they can accomplish this, it bodes very well for their prospects next week and beyond and should set the index (and of course the individual stocks that comprise the index) on course for a run towards the mid January 2010 high. That is the last technical level on the weekly chart before a test of the November 2009 high becomes possible.

Click charts to enlarge today’s hourly action in Gold and the HUI in PDF format with commentary from Trader Dan Norcini

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Posted at 12:25 PM (CST) by & filed under Jim's Mailbox.

Jim,

Your note about JP Morgan ceasing the funding of tax returns struck me. When I submit my Colorado Tax Withholding on my payroll I go to a JP Morgan website which collects the payment on behalf of the state. I’m sure they aren’t the only service but it seems to me it gives them significant inside information on payroll withholding – probably across the country. Information that nobody gets but them!

I bet you they have seen a dramatic reduction in withholding that confirms their views on unemployment…

CIGA Mr. T

Gold Stocks relative to Stocks
CIGA Eric

Perception must not blind you from the truth. Many investors have the perception that gold stocks have and will continue to under perform the stock market. While gold stocks have been grinding higher since 2003, they will soon accelerate relative to stocks. This will be illustrated by a sharp downward push in the U.S. Large Cap Stocks Capital Appreciation Index to S&P Gold Ratio. The downward push will resemble those of 1929-1932, 1932-1938, 1970-1974, 1976-1980, and 2000-2003.

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to S&P Gold Ratio (GPM)*:* S&P Gold from 1945, Barron’s Gold Stock Index from 1939-1945, Homestake Mining
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Posted at 9:53 PM (CST) by & filed under In The News.

Thought For The Day:

Problems anywhere are now being reflected in the physical gold market that seems to have gained power over the paper gold market.

This development makes a new high in the price of gold certain.

 

Jim Sinclair’s Commentary

Keep your eyes on the golden ball. Do not let yourself get derailed by the EU problems.

Any fear of failure of debt anywhere increases gold buying.

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Jim Sinclair’s Commentary

It is coming here in the US. The EU is the straw man

Banks Bet Against U.S. Cities, States

First Posted: 04-27-10 01:53 PM   |   Updated: 04-27-10 03:01 PM

Amidst growing pessimism about the financial condition of U.S. cities and states, investors are increasingly buying financial instruments that essentially allow them to short sell – or bet against – cities and states, says a Wall Street Journal report.

Offered by banks like JP Morgan, Bank of America, and Citigroup, the so-called municipal credit default swaps can be used by investors to bet that insurance contracts protecting holders of municipal bonds will default.

Some states say the derivatives not only scare away potential buyers of municipal bonds by creating a perception of risk, but ultimately drive up states’ borrowing costs. Others contend that the instruments are traded too thinly to affect municipal bond markets or a state’s credit rating.

The California treasurer is just one of a number of state treasurers that have launched a probe into the sale of these derivatives and the sale of municipal bonds by big Wall Street firms that might reveal "speculative abuse of CDS in the muni market," says one regulator.

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Jim Sinclair’s Commentar

Mark my words. This is the beginning of the end.

States Bristle as Investors Make Wagers on Defaults
By IANTHE JEANNE DUGAN
APRIL 27, 2010

As U.S. cities and towns wrestle with financial problems, investors are finding a new way to profit on their misery: by buying derivatives that essentially bet municipalities will default.

These so-called credit default swaps are basically insurance contracts that have long been available to protect holders of corporate bonds against default. They became available a few years ago for municipal debt, allowing investors to short sell—or bet against—countless cities, towns and bridges, and more than a dozen states, including California, Michigan and New York.

The derivatives are still thinly traded, but their existence has the potential to make investors skittish about the issuers of the bonds that underlie them. That has been the case for issuers ranging from Greece to Bear Stearns and Lehman Brothers during the financial crisis. When the price of this insurance goes up, nervous investors have sold off securities issued by these entities.

The proliferation of the derivatives is angering treasurers around the country, who say the derivatives are sending a negative message and possibly driving up their costs of borrowing at a time when they need all the help they can get. California planned to send out letters as soon as this week to big Wall Street firms that sell its bonds, seeking in-depth information about their roles in selling derivatives.

"Firms that are underwriting our bond sales are then telling the purchasers maybe they need to buy a CDS reflecting some risk," California Treasurer Bill Lockyer said in an interview. "They are speaking with two tongues, and we want to find out whether that impacts us in an adverse way."

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Jim Sinclair’s Commentary

This is the setting up of plausible denial for the failure of stimulus, both monetary and fiscal, to reverse the negative economic trends camouflaged within skewed statistics.

Bernanke: Cut Deficit Or Do ‘Great Damage’ To Economy

WASHINGTON — Failing to curb federal budget deficits would do "great damage" to the U.S. economy in the long run, Federal Reserve Chairman Ben Bernanke warned Tuesday.

Bernanke again urged the White House and Congress to come up with a credible plan to reduce the nation’s red ink, which hit a record $1.4 trillion last year.

Failing to do so would push interest rates higher – not only for Americans buying cars, homes and other things – but also for Uncle Sam to service its debt payments, he said.

All that would sap national economic activity and could cause employers to cut back on hiring, Bernanke said.

The Fed chief made his most urgent call yet to get the nation’s fiscal house in order. His plea came in prepared remarks to the first meeting of President Barack Obama’s commission to tackle the soaring deficit.

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Jim Sinclair’s Commentary

Of course it will. That is the final Pillar in gold.

Sinclair16

Bernanke Says Budget Gap Might Raise Interest Rates (Update1)
By Joshua Zumbrun

April 27 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said a failure to reduce the federal budget deficit may push up interest rates over time and impair economic growth, putting the recovery at risk.

“Achieving long-term fiscal sustainability will be difficult, but the costs of failing to do so could be very high,” Bernanke said in a speech today to a White House commission on the budget deficit. “Increasing levels of government debt relative to the size of the economy can lead to higher interest rates, which inhibit capital formation and productivity growth — and might even put the current economic recovery at risk.”

Budget deficits may eventually erode the confidence of bond investors in the management of U.S. fiscal policy, driving yields higher on Treasury borrowing, raising the cost of lending in the economy and slowing economic growth, Bernanke said.

The Obama administration estimates budget deficits will total $5.1 trillion over five years and hit a record $1.6 trillion in the year ending Sept. 30. The $1.4 trillion deficit in 2009 was equal to 9.9 percent of gross domestic product, the largest share since the end of the World War II.

Bernanke spoke to the National Commission on Fiscal Responsibility and Reform, established by President Barack Obama to identify policies to reduce the deficit to a sustainable level.

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Jim Sinclair’s Commentary

What the OTC derivatives do not do to international investment firms, litigation will.

Law Offices Bernard M. Gross, P.C. Filed a Class Action Lawsuit Against Goldman Sachs Group Inc. — GS
April 27, 2010, 11:08 a.m. EDT

PHILADELPHIA, Apr 27, 2010 (GlobeNewswire via COMTEX) — Law Offices Bernard M. Gross, P.C. commenced a class action lawsuit in the United States District Court, Southern District of New York, on behalf of all persons who purchased or otherwise acquired the common stock of Goldman Sachs (GS), between October 15, 2009 and the time it was publicly revealed on April 16, 2010, inclusive (the "Class Period"), against Goldman and certain of its officers and/or directors for violations of the 1934 Act. If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from April 26, 2010. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of its choice, or may choose to do nothing and remain an absent class member. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Deborah R. Gross or Susan R. Gross at 866-561-3600 or 215-561-3600 or via email at debbie@bernardmgross.com or susang@bernardmgross.com. A copy of the complaint can be viewed on the Law Offices Bernard M. Gross, P.C. website at www.bernardmgross.com.

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Jim Sinclair’s Commentary

Nice to see that this producer has it right regarding the price of gold.

African Barrick Gold Bullish On Gold;Eyes Growth-CFO
Posted on: Tue, 27 Apr 2010 06:04:18 EDT
By Alex MacDonald

African Barrick Gold PLC (ABG.LN) is bullish about gold prices and has the financial muscle to boost production capacity in Tanzania and elsewhere in Africa by expanding existing mines, exploration and acquisitions, the company’s chief financial officer said Tuesday.

"We are very bullish about the gold price and optimist about the future," Kevin Jennings told Dow Jones Newswires in an interview following the release of its first-quarter results.

ABG has $320 million of cash and cash equivalents and no debt, said Jennings. It is investing in four brownfield expansion projects at its existing Tanzanian gold mines as part of plan to boost production to 1 million troy ounces in 2014 from 850,000 ounces in 2010, Jennings said.

The newly London-listed miner is also purchasing the remaining shares it doesn’t own in a Tanzanian exploration joint venture that has the potential to add "significant ounces" to the company’s production in the medium term, Jennings said.

Beyond Tanzania, the company is looking to purchase advanced stage gold projects elsewhere in Africa, but not Sudan, he added.

Separately, Jennings said the new 2010 Minerals Bill passed by Tanzania’s Parliament Friday may affect its new projects but not its existing operations.

African Barrick Gold, the result of a spinoff in March by Canadian miner Barrick Gold Corp. (ABX), holds four gold producing mines in northwest Tanzania–Bulyanhulu, Buzwagi, North Mara and Tulawaka. Barrick Gold Ltd. retains a 74% stake.

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Jim Sinclair’s Commentary

What is the true rating of California, Illinois, New York and others?

Debt Ratings Are Lowered for Portugal and Greece
By JACK EWING
Published: April 27, 2010

FRANKFURT — Europe’s debt crisis deepened still further Tuesday after the ratings agency Standard & Poor’s downgraded Greek and Portuguese debt, investors sold off government bonds amid fears of a default, and workers in the two countries took to the streets to protest austerity measures.

S.&P. downgraded Greek government debt to junk status, saying in a statement, “Greece’s economic and fiscal prospects lead us to conclude that the sovereign’s creditworthiness is no longer compatible with an investment-grade rating.”

The ratings agency also downgraded Portuguese government bonds, but they remain well above junk status.

“This thing is getting more and more urgent and tense,” said Robert Barrie, head of European economics at Credit Suisse in London. He predicted, though, that markets could settle down once Greece manages to refinance €8.5 billion, or $11.2 billion, in bonds that mature in May. “But it’s anything but calm at the moment,” he added.

As transport workers in both Portugal and Greece went on strike against austerity measures Tuesday, the risk premium on Greece’s bonds set new records even before S.&P. announced the downgrades.

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Jim Sinclair’s Commentary

Never disturb the social order is the basis of MOPE.

There are going to be some very disturbed people here. Pension plans are Wall Street’s so far very quiet and deeply injured dumping ground.

Let’s hear it for our social minded OTC derivative manufacturers and distributors.

Pension Pains: States Cut Benefits to Skirt Massive Funding Shortfall
Illinois Teachers Complain; California Latest State to Push for Pension Reform
By DALIA FAHMY
Apr. 26, 2010

Dan Montgomery doesn’t have many kind words for his elected officials. The high school English teacher from Skokie says Illinois politicians spent years neglecting their obligations to the state’s public pension funds and now want workers to foot the bill.

"It’s terrible," said Montgomery, who has been teaching for 17 years.

Illinois recently cut benefits and raised retirement ages for public employees in order to cover a $78 billion shortfall in its public pension fund.

"We really fought it, but in the end they did it anyway," Montgomery said.

States around the country are beginning to face the necessity of reforming their public pension systems, after the financial crisis took a bite out of already inadequate savings and put a seemingly insurmountable gap between assets and the benefits that governments had promised their workers.

Illinois is one of the most recent states to tackle its shortfalls, with a reform that the government says is expected to save taxpayers more than $200 billion over 35 years.

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Jim Sinclair’s Commentary

I place the number much higher than what is being admitted.

You will recall the early estimates that before this is over it will cost the West $17 trillion.

It is quite far from over. All this camouflage happened in the 30s.

Bernanke Admits Printing $1.3 Trillion Out Of Thin Air
By Greg Hunter
USAWatchdog.com

Fed Chairman Ben Bernanke admitted the central bank created $1.3 trillion out of thin air to buy mortgage backed securities. This shocking admission came from the Joint Economic Committee hearing on Capital Hill last week. I was dumbfounded when I saw Bernanke shake his head in the affirmative as Representative Ron Paul said, “Well, where did you get the money? You created this money. So you did monetize debt, and that went into the banking system.” I was amazed he admitted this. I looked up the original hearing on C-Span to make sure the clip was not edited. It was not.

What is even more shocking is I could not find a single mainstream news agency that covered this revelation. Congress just finished voting on the bitterly contested Obama health care bill that is supposed to cost nearly a trillion dollars over ten years. (Some contend it will be more than twice that amount.) The mainstream media doesn’t even bat an eye over the Fed creating $1.3 trillion in a little more than a year to buy worthless debt no one else will touch. I do not get it. I guess we could have asked the Fed to print up a trillion dollars to pay for health care and avoided that drawn out battle in Congress.

Then, Rep. Paul brings up printing another $105 billion to bailout Greece. Bernanke answers by saying, “. . . I think one of the agreements that the G20 leaders came up with was sort of a mutual commitment to put more money into the IMF as a way of addressing the financial crisis around the world. . .” Notice how Bernanke used the term “mutual commitment.” I think what that really means is an agreement between all the G-20 nations of a “mutual debasement of their currencies.” I think this is why gold has been rising in price around the globe. I have been saying for months that we are going to have some very big inflation. (Real inflation is already at 9.5% according to shadowstats.com.) I wrote about this last November in a post called “The Fix Is In.”

I think Bernanke just opened the Fed playbook and revealed money will be printed to fix all financial problems. I don’t think he’s even trying to hide it anymore. Rep. Paul also brought up the big debt trouble coming soon with many, many bankrupt cities and states such as Los Angeles and California. I think they will all be bailed out one way or another by the printing press.

New York Fed President William Dudley seems to be on the same page as his boss. Dudley recently said, “The fact that our foreign indebtedness is for the most part denominated in our own currency is a huge advantage in the event the dollar were to come under significant downward pressure.” (Zero Hedge has a complete text of Dudley’s speech, click here) Is Dudley making a not so subtle hint about devaluing the U.S. dollar? Once again, I say yes.

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Posted at 5:24 PM (CST) by & filed under Jim's Mailbox.

Hi Jim,

The Gold Currency Index closed sharply higher today, breaking out to a new all-time high.  Although gold in US dollar terms does not yet reflect it, gold as an international currency is now trading at a new high for the secular bull market from 2001.  The next technical objective of this move would be a strong weekly close on Friday, as that would confirm the recent long-term breakout on the weekly chart.  Technical indicators on the daily and weekly charts are becoming increasingly bullish, so a continuation of this rally is likely.

Best,
CIGA Erik

Prometheus Market Insight
http://www.prometheusmi.com

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Posted at 2:40 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The huge increase in earnings is amazing now that the stupid short of gold OTC derivatives have been covered. I suspect the next numbers will show a significant decline in the cost of production.

GAAP requires that derivative losses be charged along with hefty administrative costs to the specific project. It amounts to digging a hole in somebody else’s country and not sharing a meaningful amount or paying any taxes in that country even though you export a billion dollars worth of gold as an industry.

That worked with crooked governments where leaders took chump change funds for themselves. It does not work with an honest government seeking the best for their country.

The producers in Africa that practice this need to reconsider their colonialist approach.

Amazing how producers are having a huge bounce in earning now that the dumb short of gold OTC derivatives have been covered. I suspect the next number will show a significant decline in the cost of production.

Newmont Mining net income nearly triples
By Barbara Kollmeyer

MADRID (MarketWatch) — Newmont Mining Corp. (NEM 52.77, -0.42, -0.79%) on Tuesday said net income attributable to shareholders nearly tripled in the first quarter at $546 million, against $189 million in the year ago period. On a per share basis, the company earned $1.11 in the period against 40 cents a year ago. The company’s adjusted profit was 83 cents a share. A survey of analysts at FactSet Research was estimating earnings of 79 cents a share in the quarter. The company said its average realized gold price rose 22%. The company is sticking to its previously announced 2010 outlook for equity gold production of 5.3 million to 5.5 million ounces and costs applicable to sales of between $450 and $480 an ounce. (Includes adjusted profit.)

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African Barrick Gold earnings rise 143pc in first quarter
African Barrick Gold (ABG) said first-quarter earnings jumped 143pc in its first results since being spun off from the world’s largest gold miner, Barrick Gold.
Published: 11:20AM BST 27 Apr 2010

ABG, which listed on the London Stock Exchange last month, said earnings before interest, tax, depreciation and amortisation (EBITDA) increased to $100m from $41m a year earlier, as gold prices and production increased.

The miner, which has four gold-producing mines in Tanzania and seven main exploration prospects, said output rose 40pc to 177,095 ounces, helped by the start of production at Buzwagi and an increase of almost 5pc at Bulyanhulu, its biggest mine, despite a three-day suspension in operations following a fatal rock fall.

It said a new mining law passed by Tanzania’s parliament on Friday – increasing the royalty paid on minerals such as gold to 4pc and requiring the government to own a stake in future mining projects – should not affect its current mines.

ABG produced 716,000 ounces of attributable gold last year and aims to boost annual output to over 1m ounces within four years. It plans to spend $20m on exploration this year.

Greg Hawkins, chief executive, said: "We are starting life as a LSE Main Market listed company with a strong balance sheet, and we now have the operational flexibility to achieve our full potential. We have four high quality operating assets located in Tanzania and today’s results confirm our optimism for the future."

ABG completed an IPO of approximately 25pc of its issued ordinary share capital on the London Stock Exchange on March 24 at an offer price of 575p per share.

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Posted at 2:12 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Market moving news today was the downgrade of Portugal’s debt rating by S&P from “A” to “A-." That sent the Euro tumbling back down after it looked as if it might have been making a short term bottom on fading Greece concerns. Voila! To add insult to injury, they also cut Greece’s sovereign credit ratings to junk level and the “fade” on Greece quickly morphed into a panic! That sent global equity markets into a tizzy and down they all went with bonds shooting sharply higher as money was quickly sucked out of equities and jammed into “safe haven” bonds.

The result – safe haven flows on the Continent into gold which continues to display strong buying interest on dips in price in Euro terms. This strength is feeding directly into Dollar based gold buying allowing gold bulls to mount a run into the bullion bank resistance line just above the $1162 level. As expected, they are fighting like hell to try to prevent a technical breakout on the charts.

The bullion banks have the computer algorithms at their back today as the swooning Euro is triggering rather broad-based commodity selling by the hedge funds. Witness the big drop in crude oil , soybeans, corn, copper, etc. When you get this sort of thing occurring, gold also gets sold by these programs but even in spite of that, there is sufficient buying occurring that is not only precluding a sell off in the gold market but is also allowing it to work higher against the tide. It does however make it more challenging for the gold bulls to beat back the selling that the Comex gang is hurling their way. That is why you have to be the more impressed by the tenacity of the gold bulls who are counterpunching and making quite a battle royale at this critical technical juncture on the price chart.

Remember how back in February through March, the banks were capping the rise in gold at the $1130 level? Gold spent more than a month knocking up against their selling before it finally kicked down that door and then went on the climb past $1170 before retreating a bit. Now these same banks are trying to hold the metal at the $1162 level in order to prevent a climb past $1175 which will open the door for a run at $1200. As long as gold continues climbing higher in terms of other various foreign currencies, the gold bears will have their work cut out for them.

The HUI (gold and silver shares) is following the broader equity markets lower but is also seeing a fair amount of buying tied to the performance of gold with the silver issues getting tugged lower due to silver’s downdraft today. Once gold can take out $1175 and begin a push towards $1200, the gold shares will follow it higher irrespective of what the broader equity markets are doing.

Back to the bonds for a moment – the huge surge of money into the sector enabled the long bond to break out above last week’s high on what looks like pretty decent volume so far. The level near 118^20 has been formidable resistance on the charts and it appears to be holding even now. However, should it give way before the day’s trading is wrapped up, bonds have a good chance to take a run to this year’s high near 119^20. One thing appears to be certain for now, the bond vigilantes are going into hiding having failed to take out the bottom end of this year’s trading range. If the bulls can take price through that February high, they will more than likely be able to set up a charge towards 124. Needless to say, the feds are LOVING this right now as they can issue more and more debt and still have the market buy the crap even as the Dollar moves higher. Who says that someone else’s misery is not another’s blessing? Obama and Bernanke should both be genuflecting towards Europe each and every day and giving thanks for its misery. Were it not for that, both would be watching bond sales plummeting and the Dollar swooning.

The Dollar is winning the “which currency stinks the least” race for today. It has to close through 82.50 to give it another leg up on the charts and the potential to run towards 83.15 or so.

Considering the broad weakness in the stock market and the fears circulating in many of the pits today, crude oil is hanging in their rather surprisingly. Let’s see if does move lower from here and if so, whether it can maintain its footing above $80. That will tell us whether rising gasoline prices are going to be with us for May.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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