Posted at 8:33 PM (CST) by & filed under General Editorial, Greg Hunter.

Dear CIGAs,

As I watch the News out of Washington today, I see the heads of our nation’s biggest banks being grilled in Congress on the causes of the economic problems we are facing. None of those guys can say they are there because their bank is flush with cash and great investments. The banks and the economy are in the shape they are in because of greedy incompetent bankers who paid lobbyists to erase all regulation to allow them to make reckless highly leveraged investments into toxic assets.

Now taxpayers are being asked to clean up the mess and pick up the tab.

Many people are asking what is going to happen next?

One of my jobs as a journalist is to break things down so people can understand what is going on. I don’t always hit the mark, but I can sure appreciate people who can do that task well. What is going to happen next was brilliantly summed up recently by Martin Armstrong an investment pro. He says, “We are headed into the debt tsunami that is of historical proportions unheard-of in history.” Succinctness and clarity all rolled up into one sentence. That is the simple truth.

A lot of that tsunami is coming from distressed homeowners facing resets of mortgage payments. Last year while I was working for CNN, I asked a 76 year old woman whose mortgage was resetting to higher payments why in the world she agreed to an adjustable rate mortgage when she knew the resets would force her into foreclosure. She told me the mortgage lender promised when the higher payments came she could simply refinance. Multiply that logic by millions of Americans and you can see where the flood of bad debt is coming from. The simple truth is best summed up by Richard Benson,” We got here because far too many loans were priced based on the probability of being refinanced and not the ability of being repaid! As long as liquidity was flowing, bad loans could be rolled over into bigger bad loans, but now the music has stopped for refinancing these loans.”

To address the economic crisis we are facing, the new Treasury Secretary Tim Geithner is proposing the taxpayer to commit up to a trillion dollars for the Fed to guarantee more illiquid loans. He admitted to Brian Williams this week on CNBC he did not know how much money it would take to fix the financial problem. Geithner has been widely criticized for announcing a “plan” this week with few details on how it would work. I did not find the simple truth in anything Geithner said this week. I just saw deep black water.

At the same time the bankers were being grilled to well done on Capitol Hill, the House and Senate were putting the final touches on a “stimulus bill” that is now headed for the President’s desk. Susan Collins the Republican Senator from Maine was one of three who broke ranks with the GOP and negotiated a compromise with the Democrats. She announced the bill was only “789 billion dollars” which was billions less that the House or Senate versions. Then with a straight face, she said the bill was “fiscally responsible.” Fiscally responsible is how the biggest single spending bill in history is characterized. I hear water.

Posted at 4:57 PM (CST) by & filed under Jim's Mailbox.


This my view of our current set of Politicians and their banker buddies. They are stocking up on tax money for the long depressionary winter to come that they themselves caused…



The same intellectual laziness that characterises the SEC characterises the American Public and therefore your readership. They deserve their fate. What they don’t deserve is you having to not only guide them through the darkness of these dangerous times, but to take every goddman last individual (supposed adults) by the hand and teach them how to read a F*!"ing map! There is enough on JSMineset to keep anyone busy from dawn to dusk WITHOUT having to badger you on the phone to repeat yourself ad infinitum


I want you to know that three of us, from London, Singapore and New York spent a good hour on a conference call yesterday just discussing the Armstrong PDF, the theories behind it, and the timing of how it might play out, after spending a good two hours or more reading it and doing background research associated to it.

None of this could have happened without you. Nobody would be properly protected without your help. Many of my friends, (all educated at top tier Universities, and allegedly intelligent) have made massive changes to their assets which have SAVED THEIR ASSES, solely because they started reading you. YOU were the one who gave us Armstrong. YOU were the one who turned us on to Harry Schultz. YOU were the one who said, years ago, that it would all end this way.

Gratitude will never be enough. Jim, you have played a significant role in saving the future of my family… of my children! I don’t really think I can say that about anyone else I know. I remain indebted, and at your service completely. I only wish there was a way to repay you.

Since you have intimated that you need deck-hands scanning the news, please know you have at least THIS researcher who works not only for himself, but is scanning the information network 7 days a week, in the hope that he may, in some small way, pay back the enormous debt he feels is owed to you.

These people leaning on you are Bums! They are like the SEC!


Your students are here Jim. We DO read. We DO study. We know our future survival depends on paying attention… especially to JSMineset. This is no abstract intellectual process, this crap is for real and believe me, some of us are very gravely aware of that… and very grateful for what you have bestowed.

I remain, Sir, your most humble and obedient servant.

CIGA Pedro

Dear Pedro,

I take immense joy in your, your family, and friends having protected themselves.

This has been our mission here.

You have made me very happy on a flu filled day.

Thank you,

Dear Mr. Sinclair,

I hope you are well! Did you see this article from the Wall Street Journal on February 12, 2009?

Senator Greg Walker has introduced a bill to Authorize the exchange of goods and services with gold and silver in the state of Indiana by the end of 2009. See the link below.

Click here to view the article…

Will other states follow?


Dear Juan,

Counting on the greatest conspiracy in human history, stupidity, the answer is no.


Hi Jim,

Did you notice that Britain is now beginning to use the D word? They can only get out the first syllable so far. It’s kind of like the Fonz trying to apologize but can only get out sor…

CIGA Bernie

Bank may start printing money to reverse ‘deep’ downturn
February 12, 2009

The Bank of England’s Governor admitted yesterday that Britain is now in “deep recession” and signalled that it is ready to start “printing money” as soon as next month in aggressive, last-ditch moves to limit the slump.

Mervyn King indicated that the Bank is poised to move beyond relying on further interest rate cuts to combat recession. It will give a green light within weeks to a strategy of “quantitative easing”, the modern equivalent of printing money, he made clear.


Dear Mr. Sinclair,

In this video Michael Greenberger, a University of Maryland Law Professor discusses "naked" credit default swaps and makes a recommendation to have them banned.

Mr. Greenberger appears visibly nervous however he does not waver in his message and his criticism of the CDS market.

Best Regards,

Dear Marc,

What is the difference between a naked credit default OTC derivative and what I think the ETFs are doing in gold? The answer is there is no difference.


Dear Editor Dan,

Here is an important piece of research for you.

Find out for me (ASAP) the reported amount of gold every Gold ETF has on the planet as of their last reporting period.

I smell a massive fraud that could easily collapse on a rising price of gold by the failure of the sellers to deliver anything.

The Madoff equation is saying that none of this gold is paper gold on a clearinghouse exchange. It can’t based on its size be real bullion, leaving only toxic paper (OTC derivative) gold.

I believe I know exactly how it is being done and by whom.

It is totally legal but so are OTC derivatives.



I am working on it now. More on what I find out  soon…

Editor Dan



In your posting, entitled "Where Do All The Gold ETFs Get Their Bullion From?", you wrote the following:

"Don’t you think it is about time GLD and all the other popular international gold ETFs told its owners exactly what kind of gold they claim to own? …

"This begs one major question: From where did all the gold claimed to be owned by all the gold ETFs come from?"

I agree with what you wrote regarding the GLD ETF in the United States.

However, the "ETFS Physical Gold" Exchange Traded Commodity (ETC) Fund in the United Kingdom (UK) actually appears to provide some of this information on the ETF Securities web pages at and

I suggest that you click on the underlined URL link entitled "Click here to view the list of allocated metal bars held by the Custodian" on either of these two web pages, which will download an Excel spreadsheet at I do not know if this list of allocated metal bars is accurate or not, but this list is publicly available for anyone to download and study or criticize.

If you download this bar list, you will discover that it also contains a list of all of the physical Platinum bars held by the "ETFS Physical Platinum" ETC Fund at, a list of all of the physical Palladium bars held by the "ETFS Physical Palladium" ETC Fund at, and a list of all of the physical Silver bars held by the "ETFS Physical Silver" ETC Fund at

All of these ETC Funds managed by ETF Securities claim to be "Shariah compliant"! I do not know what it means for these Funds to be "Shariah compliant".  However, if this means that the underlying precious metals must actually exist, and each physical bar held be publicly accounted for, then I’m all for having ETF and ETC Funds that are "Shariah compliant".

The US GLD Fund does not claim to be "Shariah compliant", and does not make available any kind of similar list of all of its alleged Gold bar holdings.

There is one other point to consider:  In October, 2008, "ETF Securities Limited, the innovator and pioneer of Exchange Traded Commodities (ETC), has formally completed the acquisition of the world’s first gold ETCs – Gold Bullion Securities listed on the London Stock Exchange (LSE: GBS) and the Australian Securities Exchange (ASX: GOLD)."

See the ETF Securities press release at for further information.

The "Gold Bullion Securities" Exchange Traded Commodity (ETC) Fund is shown on the ETF Securities web pages at and However, this Fund does not claim to be "Shariah compliant", but it does now make available a separate public list of its of its Gold bars. The latter web page for the "Gold Bullion Securities" ETC Fund also contains the same above referred to URL link entitled "Click here to view the list of allocated metal bars held by the Custodian", but this link takes you to a separate PDF document at I do not know if ETF Securities intends to make its "Gold Bullion Securities" ETC Fund "Shariah compliant" sometime in the future. However, making the above list of its Gold bars publicly available might be a preliminary step in this direction.

The bottom line is that the GLD ETF Gold Fund in the US appears to be very different from its above two counterpart Gold Funds in the UK, the latter of which do make publicly available purported listings of all of their physical Gold bar holdings.

CIGA Richard

Dear Richard,

In today’s Madoff world who cares if the gold, claimed to be held in a vault, is claimed to be divinely compliant?

Thank you for all the reference material.

Respectfully yours,

Hi Jim,

Where Do All The Gold ETFs Get Their Bullion From?

You are wise to raise these questions.

Analysis complied by work done by James Turk

Taken from the prospectus:

"The Custodian is not liable for the acts or omissions of its subcustodians".

In other words, if the subcustodian does not have the gold, ETF:

"Shareholders cannot be assured that the Trustee will be able to recover damages from subcustodians…for any losses relating to the safekeeping of gold by such subcustodian". This means that "Because neither the Trustee nor the Custodian oversees or monitors the activities of subcustodians who may hold the Trust’s gold, failure by the subcustodians to exercise due care in the safekeeping of the Trust’s gold could result in a loss to the Trust."

These prospectus disclosures raise the question of does the gold owned by ETFs really exist? Why is the objective of the fund to provide investors with the opportunity to own gold rather than simply track the price?

“The Trust’s independent auditors may…visit the Custodian’s premises in connection with their audit of the financial statements of the Trust."

In what appears to be a glaring omission, the prospectus fails to disclose the important risk that the independent auditors will not visit the vaults of the subcustodians and sub-subcustodians, and more to the point, that the BoE does not allow auditors into its vault, even though the prospectus allows for the possibility that all of the fund’s gold may be stored in the BoE.

Taken from 10-Q Filings:

The asset reported on ***’s balance sheet says: "investment in Gold". It does not say just: "Gold." By declaring ***’s asset to be an "investment", it is an easier hurdle to meet for auditing purposes.  Investments in gold can be nearly anything gold related, and for example, include gold certificates and other promises to pay gold. All *** has to do to satisfy the auditors therefore is to show them a bank statement of the Bank of England for example, or any other subcustodian (i.e., a piece of paper) that says gold is stored with them.


Posted at 4:47 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Many of you have asked how anyone can give a date and a price as if it came from throwing bones or reading tarot cards. That is not how it works.

The amount of work is mindboggling.

Before you phone, write or email asking how can anyone be so outrageous as to say that gold will trade at any specific price on or before any specific day, read the following how to guide.

The following is an article written by Martin Armstrong and outlines exactly how such things are done. Good luck reading it.


Click here to read the PDF file (4.5mb)…

Posted at 4:37 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Japanese Yen down hard; Euro up strongly; US Dollar sharply lower and Bonds absolutely obliterated – translation – risk is back in for today even with the broad equity markets down once again.. Under the current market psyche, risk being in means gold is not needed and so the usual chatter about profit taking becomes the explanation for today’s weakness at the Comex.

From a technical perspective, gold ran just shy of very strong resistance at $960 yesterday before encountering heavy selling pressure which took it down late yesterday and into today’s session. You will note on the chart that it bounced right off of the top of the uptrending channel but it did find buying coming back in near the top of the former resistance zone between $930-$920 which is now serving as initial support.

Gold gained about $26 for the week in the process of its $62 range from low to high. The price gain pulled the 10 week moving average above the 40 and 50 week moving averages and was the highest weekly close since early August of last year. The climb higher and the strong close also put it above the weekly swing high from October 10 which puts the market firmly in a technically bullish posture to begin the following holiday-shortened week.

As far as I am concerned, the big market news today is not so much gold, but is the bond market. Its price action is horrendously bearish and is signaling a collapse could very occur if the 125^00 level gives way next week. The bonds had experienced a bit of a bounce to relieve the very oversold condition of the market. In the process they ran exactly to the 20 day moving average and abruptly puked. They are now sitting right on the 100 day moving average again just as they were last Friday. You might recall that Monday of this week, they violated that 100 day average intraday but managed to close back above it which was taken as a short term buy signal by some traders. Now all of those short covering related gains have evaporated and they are perilously poised right on top of that same moving average once again. It is evident that bond bears are deadly serious about attempting to take this market sharply lower. And why shouldn’t they? Who in their right mind would want to lock up their money for 3.5% for 30 years given what we know is coming down the pike? Bonds are signaling that rates must move higher to compensate buyers. Whether or not the safe haven buyers who mindlessly rush into the things at the release of every single bit of bad economic news will be sufficiently large enough buyers to offset the supply-minded sellers who are seeing a tsunami of paper flooding the market in the days, weeks and months ahead remains to be seen but judging from the bearish chart action, it does not appear to be so. If the Fed is going to actually follow through on their talk of buying out along the long end of the curve to keep long term rates artificially low, they are going to be put to the test quite soon it would appear.

I am not sure what percentage of the gargantuan sized, humungous, indeed obscene amount of indebtedness that the reckless spenders in Washington DC are going to foist upon the next two to three generations is going to be financed from issuing long term debt but the rising rate of interest that they are going to have to fork over to potential buyers is just going to make paying down this debt all the more impossible. I guarantee you that we will see a massive attempt to inflate away this debt by a devaluation of the dollar and that devaluation is going to occur with gold being officially revalued at upwards of $1,650 quite easily. There is simply no other way except outright default and that is not going to happen. Devaluation is the only way out short of scrapping the Dollar altogether. Heaven help us for we have been ruined by these short-sighted fools parading as statesmen in Washington D.C. Indeed one of the New York Senators at the middle of this had the audacity to state that Americans do not care about “pork” and welcome the spending orgy. And people wonder why the bond market is collapsing! I am sure the Chinese are reassured that all will be well with their dollar-denominated reserves with this kind of statesmanship.

Crude oil moved down to within 30 cents of its major low and then sharply rebounded gaining more than $3.00 barrel as I write this. So far it is continuing to work within that broad trading range between $33 on the downside and $50 on the topside. It really does look like a low in crude is in but that does not mean it will begin a trending move higher. It just looks like it has found a region where buyers see value in the low $30’s. It could meander around sideways in that range for some time until something happens to change the current supply/demand balance. If crude has indeed found a bottom, that is going to put a floor under the entire commodity complex which will encourage money flows to begin coming back into the entire sector, something which I noted yesterday has already slowly begun. It will ramp up this trickle and increase its speed.

I might note here that a fair amount of gold/crude spreading has been going on – some of that is being unwound today as the ratio has really moved on up. That is putting some pressure on gold and propping up crude. That has been a good trade and some guys are booking profits on those spreads.

The HUI and the XAU are weaker today but are still poised to put in their best weekly close since October of last year.

Those of our readers in the States, enjoy your holiday Monday.

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


Posted at 3:44 AM (CST) by & filed under General Editorial, Guild Investment.

Dear CIGAs,

It has come to our attention from some accounting professional friends that metals ETFs in general have a tax treatment that should be carefully considered. To quote from the SPDR Gold Shares prospectus, “Under current law gains recognized by individuals from the sale of ‘collectables,’ including gold bullion, held for more than one year are taxed at a maximum rate of 28%, rather than the 15% tax rate applicable to most other long term capital gains.”

This quote comes from the prospectus of the ETF with the symbol GLD. We suggest you check with your tax advisors and not take our word for it. If the information that we have gleaned from the company documents is correct, for tax purposes it would be wiser to make long term investments in common shares of gold mining companies rather than owning gold ETFs in taxable accounts.

Respectfully yours,

Monty Guild.



ETF’S and paper Gold

I read an article last month reviewing ETF contractual documentation, a significant weakness was discovered in that provisions to audit the keepers contracted by the ETFs to store ‘’Gold’’ were expressly excluded and that the ‘’Gold’’ held need not necessarily be the Element Gold atomic number 79 on the periodic table.

One has to ask why an ETF would agree to such terms if it were not intentional to engineer a weak link in the audit trail apparently absolving the ETF’s management of responsibility at this point. If ‘’Gold’’ is in fact kept as paper then it would surely be in the interests of the keepers so as to profit at the time of redemption and to invest so as to drive the price of Gold down.

CIGA Peter

Posted at 8:06 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Don’t you think it is about time GLD and all the other popular international gold ETFs told its owners exactly what kind of gold they claim to own?

Can you imagine a situation where a person buys a gold ETF to own “non-gold” but finds out that they in reality own OTC derivatives on gold? That would be an investment in the same type of financial instrument (not gold) that one owns gold bullion to protect against.

The failure to unearth the Madoff scandal becomes incredible when one understands that the returns from the market claimed on the size of the hedge fund were logically impossible.

The exact same reasoning screams bloody murder when applied to the many Gold EFTs in terms of what it is they really own.

This begs one major question: From where did all the gold claimed to be owned by all the gold ETFs come from?

Where did funds such as GLD get their additional 45 tons in the last month?

We certainly can forget about that gold coming from the Comex. 12 deliveries would stand out like a sore thumb.

This concept and record keeping eliminates all exchanges around the globe as the source of bullion delivery in any size to all Gold ETFs.

The physical market is so tight that coin minting has all but closed down compared to what it was one year ago. It is hard to accept that the Gold EFTs can buy what the mints can’t.

A read of the original prospectus removes any thought that the gold is leased, but leaves one to invite probability.

That probability is that the claimed gold can only be OTC derivative long positions. If that is so then the financial reliability of the paper stands on the foundation of the balance sheet of the granting counter party to the OTC derivative. This is true regardless of whether it is a mine or naked speculator.

Don’t you think it is about time the gold ETFs told their owners exactly what kind of gold it is that they claim to own?

Can you imagine a situation where a person buys a gold ETF to own “non-gold” but finds out that they in reality own OTC derivatives on gold? That would be an investment in the same type of financial instrument (not gold) that one owns gold bullion to protect against.

I think you own an ETF of derivatives, not of gold!

If I am correct then there is no clearinghouse guarantee for the OTC derivative to function.

Like so many other surprises of the last two years the Gold ETF shareholder may actually have no gold at all.

A perfect Ponzi scheme would allow you to surrender shares for bullion. You need only think about it.

Posted at 4:16 PM (CST) by & filed under In The News.

Dear CIGAs,

The following are two observations of mine today:

  1. Talk about gold stocks outperforming gold on this move with charts and diagrams is on financial media and should get some attention from all those illegal, legal and pool gold share short sellers.
  2. The newest SPIN is the conversation of if the banks will pay back the Federal money they have received in order not to be subject to events like yesterday’s severe public dressing down. How the hell can they pay it back? They are broke.

Jim Sinclair’s Commentary

The press is alight with articles declaring that European financial institutions are up to their eyeballs to the tune of $24 trillion in Toxic Paper known as failed OTC derivatives.

This may be so, but the writer has no way of fact checking that assumption.

The bottom line of this as it pertains to the dollar/euro price is who bails out those institutions.

So far the producer of the capital to bail out Euroland financial institutions has not been the ECB, although they applied the money.

It has been the US Federal Reserve via swaps with the ECB that has provided the paper (money for lack of a better name).

The answer to all these question is always, "Follow the Money," not “Read the headlines.”

Three men went to jail for the invention of the exact vehicle, the OTC derivative, but not one of the insider financiers is suffering one second of incarceration or loss of their own trillions.

This reaffirms my sad conclusion that the best investment a man can make with $1,000,001 in the past many years has been a donation of $1,000,000 to the success political party.

European bank bail-out could push EU into crisis
A bail-out of the toxic assets held by European banks’ could plunge the European Union into crisis, according to a confidential Brussels document.
By Bruno Waterfield in Brussels
Last Updated: 3:50PM GMT 11 Feb 2009

“Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent – of asset relief could be very large both in absolute terms and relative to GDP in member states,” the EC document, seen by The Daily Telegraph, cautioned.

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems.”

The secret 17-page paper was discussed by finance ministers, including the Chancellor Alistair Darling on Tuesday.

National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors – particularly those who lend money to European governments – have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.

The Commission figure is significant because of the role EU officials will play in devising rules to evaluate “toxic” bank assets later this month. New moves to bail out banks will be discussed at an emergency EU summit at the end of February. The EU is deeply worried at widening spreads on bonds sold by different European countries.


Chinese Dollar Holdings:

Concerning China making sales of dollar denominated instruments they hold in reserve, that is most unlikely. What is more likely is that the momentum of Chinese buying will fall sharply. Any opportunities the Chinese Central Banks have to offload dollars for things or lend dollars to their industry will be taken advantage of as that is the way to decrease their holdings without overt impact on the US dollar market. Any sales of gold by the IMF would offer just such an opportunity.

Posted at 4:07 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Once again gold scored brand new record all time highs when priced in both Euro terms and British Pound terms at the PM Fix. Euro gold was fixed at €740.094 while BP gold was set at 663.746. Canadian Dollar priced gold notched another all time high yesterday over 1,170 and is on course to score yet another today. Aussie priced gold is perched just below its record all time high. Ditto for Russian ruble priced gold. Can someone say world-wide currency devaluation?

Meanwhile, back in the States, Dollar based gold pushed further away from the trendline break that occurred yesterday moving up to and then slightly beyond $950 before selling hit it again but that was not enough to derail the bulls. Dip buyers are quite active today.

I suppose we should have expected to see it coming but isn’t it pathetic to see these desperation tactics coming out of officialdom whenever gold manages any sort of technical breakout that guarantees it to make news or garner the attention of the financial press. Once again the old soldier is pathetically trotted out of his barracks to show his face, rattle his saber and flourish his musket in what is no doubt supposed to impress uninformed observers and fill them with awe and trepidation. Unknown however is the fact that his saber is rusted into its scabbard and his musket has no powder.

I am referring of course to the announcement by the IMF of a sale of some 400 tons of gold which was to have the effect of stampeding the longs into abandoning ship. What a laughable, pathetic, pitiful display of weakness. Do you think any of that gold, should it even be approved for sale which is still uncertain, will make the least bit of difference to the gold market? That gold will never see the light of day. The Chinese will buy it all in one fell swoop. If they do not, the Arabs will.  Instead of having to scour for bits of gold here and there and hither and yon, they get the convenience of being able to get it all in one place and at one time at one price. For that matter, any of the Eastern Central Banks whose countries are holding massive amounts of Dollar-denominated reserves will be more than anxious to bid for this gold. That way they get a wonderful opportunity to rid themselves of the greenback without disrupting the Forex markets and at the same time buy an asset to protect themselves somewhat against its devaluation which is now a given thanks to the recklessness of our monetary authorities and the spendthrift political class.

From a technical perspective, gold is sitting right at the top of the uptrending channel shown on the price chart below. It is moving closer to the next chart resistance level near the $960 level. That level looks to me to be about the only thing standing between it and $986- $990.  Initial support has now moved to near the former resistance zone between $930 – $920. Below that is $910 – $908.

Volume was heavy in yesterday’s strong move higher which is a positive sign.

Incidentally, the major gold ETF, GLD, reported an increase of 40 tons in its holdings yesterday bringing that number to a new record at 935 tons. That is pretty remarkable demand in terms of money flowing into that entity. Too bad more of that money is not directed into the Comex futures markets and specifically into deliverable gold.

Their charter prevents many big investment funds from investing in the futures markets so the ETF enables them to play gold via the ETF, but that is still a paper entity for all but the largest players who can take positions large enough to actually demand physical delivery of the reported gold holdings. Who knows, maybe some of those guys will actually do so but I am not holding my breath waiting.

The drama surrounding the deliveries in the February gold contract continues with Goldman Sachs and JP Morgan Futures once again the big stoppers. Out of 145 deliveries, Morgan and Sachs took all but 12 of them. They currently have taken 70% of all gold delivered in February. Interesting indeed. One thing makes this unclear however. In order to take delivery, one has to be LONG gold. We know that the bullion banks are themselves short gold so technically they cannot be taking the gold directly for themselves through this arrangement. That leads me to continue to believe that this gold is for clients although I will be the first to admit that I am purely guessing here. Either way, it is quite intriguing watching this unfold.

Open interest registered an increase of only 5800 contracts yesterday. Considering the extent of the move up and the big volume, it is evident that a large degree of short covering was involved in the surge higher which is no surprise seeing that a huge number of buy stops were targeted and destroyed by longs who pushed hard to reach them and were successful in beating back their opposition. If the index funds decide to start returning to this market, the shorts are in serious trouble. They had been in the process of liquidating longs across a wide spectrum of the commodity markets, including gold but within the last couple of weeks, look to be starting to return. I am not quite sure about this but my gut tells me that a fair number of them are indeed returning to commodities. The price action in many of the markets I track and trade is showing their footprints. The combination of returning index funds and momentum chasing hedge funds should be enough to take gold above $1000 once again rather easily. The key is how much selling the bullion banks are willing to do in order to absorb this kind of potential buying. It is going to have to be quite substantial.

The mining shares are seeing the same kind of selling that has prevented them from outperforming, much less keeping up, with the performance of gold bullion for a long time now. Technically they refuse to break much lower but they are also unable to blow the shorts out of the water either. They are maintaining most of yesterday’s gains, a real plus, but cannot seem to advance much beyond these same regions which have so far thwarted their upward progress. The bulls will have to prove their convictions and demonstrate some resolve to push the perma bears out of the way.

Bonds look to have run into a brick wall precisely at the 20 day moving average. They touched that level earlier in the session and then took an abrupt about-face. They are still holding above yesterday’s low however so the bears have not yet regained the advantage but certainly are threatening to do so. Bond bulls are fighting to keep alive any hope of a temporary bottom.

Don’t ask me to explain the price action in the Dollar. Supposedly it is up due to an unexpected rise in retail sales for January and the fact that it is perceived to be less risky than other majors. That is basically the same thing as saying that risk aversion is back in. Only problem with that is the Japanese Yen is not particularly strong today. Frankly we have reached the point where all of these paper fiat currencies are devaluing against gold at the same time. They will all eventually revert to their true intrinsic value until gold is brought back into the monetary system in some form to support them. How anything can be said to have “value” when it can in effect be conjured into creation out of mid air in unlimited quantities defies all sense and sensibility. I might as well head down to the beach, put some sand in a bottle and call it money based on the current money creation orgy taking place. What’s the difference when you sweep aside all the fancy economic terms? How much is that nifty plasma TV? 300 bottles of sand.

Andy Jackson and Thomas Jefferson were right to despise the international banking class and their pet national bank. Unfettered power over a nation’s currency contains within the seeds of destruction of that currency and the freedom and well-being of its citizenry. That is precisely what gold in the monetary system was designed to prevent. Those who subverted this check and balance are ignorant of human nature as well of history.

Speaking of Central Bankers, news hit the wires today that the Fed will begin buying US Agency debt beginning February 13. This was inevitable as their own data shows that foreign Central Banks have been throwing away this junk like a bad habit. There really is no one left to buy them. I have some old baseball cards that I was going to auction off – I think I will just submit a price that I want to the Fed and tell them to send me some money for them. They are buying just about everything else in sight. Maybe I could sell them some of my magic sand that turns into money….

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