Posted at 11:20 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Four so far this week.

Bank Closing Information – May 14, 2010
These links contain useful information for the customers and vendors of these closed banks.

Midwest Bank & Trust Company, Elmwood Park, IL
Southwest Community Bank, Springfield, MO
New Liberty Bank, Plymouth, MI
Satilla Community Bank, St. Marys, GA

http://www.fdic.gov/

 

Jim Sinclair’s Commentary

The risk is not the euro. It is whatever the target of the CDS OTC derivative gang is at any time.

This statement only complicates the situation and assists the problems of the euro.

Volcker Sees Euro ‘Disintegration’ Risk From Greece (Update1)
By Simon Clark

May 14 (Bloomberg) — Former Federal Reserve Chairman Paul Volcker said he’s concerned that the euro area may break up after the Greek fiscal crisis that sparked an unprecedented bailout by the region’s members.

“You have the great problem of a potential disintegration of the euro,” Volcker, 82, said in a speech in London yesterday. “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”

European leaders pledged a rescue package of almost $1 trillion this week to counter a mounting debt crisis and restore confidence in the currency. Former U.S. Treasury Secretary John Snow said this week the euro may need a common fiscal policy to survive, a comment echoed by Norman Lamont, who was U.K. finance minister when Britain opted out from the euro in 1992.

“Will economic and financial distress finally be resolved by looking toward more integration in a closely integrated Europe, politically as well as economically?” said Volcker, who chairs President Barack Obama’s Economic Recovery Advisory Board. “I do have my hopes, as a believer in the euro.”

The aid package also involved the European Central Bank, which intervened in debt markets after a rout in bonds across the euro region’s periphery. The European Commission in Brussels said it would “strengthen” its deficit oversight and “align national budget and policy planning” under a system of economic policy coordination.

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Jim Sinclair’s Commentary

There is no country or currency that can survive the wrath of an attack on their debt, the foundation of value, by credit default swaps. None.

Furthermore, all major currencies will all be attacked over the next 24 months.

Greece Considering Legal Action Against U.S. Banks
By Timothy R. Homan

May 15 (Bloomberg) — Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said.

“I wouldn’t rule out that this may be a recourse,” Papandreou said, in response to questions about the role of U.S. banks in the crisis, in an interview on CNN’s “Fareed Zakaria GPS.” The program, scheduled to air tomorrow, was taped on May 13. Neither Papandreou nor Zakaria mentioned any banks by name.

U.S. stocks fell and the euro slumped on concern that Europe wouldn’t be able to contain the debt crisis stemming from Greece. The Standard & Poor’s 500 Index declined 1.9 percent yesterday, while the euro fell below $1.24 for the first time since November 2008.

Papandreou said the decision on whether to go after U.S. banks will be made after a Greek parliamentary investigation into the cause of the crisis.

“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here.”

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Jim Sinclair’s Commentary

This fear has been in the marketplace all last week. Publishing on it only accelerates it.

Morgan Stanley fears German exit from EMU
Morgan Stanley has warned that the Greek debt crisis is setting off a chain of events that may prompt German withdrawal from the eurozone, with grim implications for investors caught off-guard.
By Ambrose Evans-Pritchard
Published: 6:12PM BST 15 Apr 2010

"The backstop package for Greece and the ECB’s climb-down on its collateral rules set a bad precedent for other euro area states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness, and higher inflationary pressures over time," said Joachim Fels, head of research, in a note to clients.

The US bank said a bail-out for Greece may be necessary to avoid a crisis for Europe’s financial system, but warned that it also "sows the seeds for potentially even bigger problems further down the road".

Mr Fels said weak states cannot easily leave EMU because they would pay a stiff penalty in higher rates, would be stuck with euro debt contracts, and might need controls to stem capital flight. It is a different calculus for Germany, which would see lower rates and might view EMU exit as the only way to ensure monetary stability.

"Obviously, we have not reached the end game yet. However, with the latest developments, such a break-up scenario has clearly become more likely. The risk is far from negligible and the consequences for financial markets would be very severe. Investors ignore the break-up risk at their peril," he said.

Jürgen Stark, the European Central Bank’s chief economist, vowed on Thursday to resist pressure to help spendthrift governments out of their troubles by resorting to easy money. "Let me stress that any call to reduce the real value of public debt through higher inflation will be firmly opposed by the ECB," he said.

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Posted at 11:15 PM (CST) by & filed under Jim's Mailbox.

Greetings Jim,

The Gold Currency Index weekly chart closed at another all-time high yesterday, and the rally continues to strengthen as technical indicators such as momentum and oscillators trend higher. Gold in US dollars also moved up to a new all-time high, confirming the long-term breakout that occurred last week.

Best,
CIGA Erik

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

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Posted at 6:53 PM (CST) by & filed under In The News.

Dear CIGAs,

The joke of the day was nailed by Yra Harris when he said:

"Trichet said today that the ECB purchasing of European sovereign debt was not quantitative easing. Our only response is similar to Bill Clinton’s indiscretion is not sex."

 

Jim Sinclair’s Commentary

Please support John’s excellent service.

- Retail Gain Statistically Indistinguishable from Contraction
- Revisions Enhance Production Reporting
- Trade Deficit Remains Economic Negative
- Budget Deficit Widens Despite Gimmicks

"No. 296: Retail Sales, Production and the Deficits "
http://www.shadowstats.com

 

Jim Sinclair’s Commentary

Everything will be bailed out. That includes every state and all sovereign debt as quantitative easing goes to infinity.

Gold will trade on this leg at a minimum of $1650. More than likely it will reach much higher.

Obama Administration Backs $23B Bill to Save Teacher Jobs
Up to 300,000 Public School Teachers May Lose Their Jobs This Year Due to Local Budget Cuts
By MARY BRUCE
May 14, 2010

The Obama administration came out Thursday in support of emergency education funding legislation that would provide $23 billion to preserve teacher jobs in the face of massive impending layoffs across the country.

"We are gravely concerned that ongoing state and local budget challenges are threatening hundreds of thousands of teacher jobs for the upcoming school year, with estimates ranging from 100,000 to 300,000 education jobs at risk," Education Secretary Arne Duncan wrote in a letter to House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev.

"Without swift action, millions of children will experience these budget cuts in one way or another through reductions in class time; cuts to early childhood programs, extracurricular activities, and summer school; and reduced course offerings as teachers are laid off," the letter continued.

Duncan’s letter, which received White House support, urged Congress to include the emergency funding in an upcoming supplemental spending bill to fund military operations and other expenses.

"We know that economic prosperity and educational success go hand in hand, which is why the Obama administration is concerned by looming state and local budget cuts that threaten the jobs of hundreds of thousands of teachers across the country," Domestic Policy Director Melody Barnes wrote in a blog posted yesterday to the White House website.

More…

 

Jim Sinclair’s Commentary

The bailout of US states is coming. 33 are in trouble.

Illinois deep in debt, doesn’t pay bills
Crisis pushes businesses, organizations to edge of bankruptcy
By CHRISTOPHER WILLS
updated 1:43 p.m. MT, Thurs., May 13, 2010

SPRINGFIELD, Ill. – For 35 years, frail senior citizens in southern Illinois could turn to the Shawnee Development Council for help cleaning the house, buying groceries or any of the chores that make the difference between living at home or moving to an institution.

No more. The council shut down the program Thursday because of a budget crisis created by the state of Illinois’ failure to pay its bills.

Paralyzed by the worst deficit in its history, the state has fallen months behind in paying what it owes to businesses and organizations, pushing some of them to the edge of bankruptcy.

Illinois isn’t bothering with the formality of issuing IOUs, as California did last year. It simply doesn’t pay.

Plenty of states face major deficits as the recession continues. They’re cutting services or raising taxes or expanding gambling to close the gap. But Illinois is taking the extra step of ignoring bills.

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Jim Sinclair’s Commentary

Will the Sheeple remain comatose to the filth in finance?

These are the people that the Fed bailed out. Therefore these are the people your children and grandchildren will pay for plus interest.

Newest Wall St. probe focuses on muni bets.
The latest in a string of Wall Street inquiries is focused on municipal bonds. The SEC has reportedly opened a preliminary investigation into possible conflicts of interest among firms that sold municipal bonds and then set themselves up to profit if the bonds failed. The probe also seeks to determine whether firms used their own money to bet against the bonds and, if so, whether that fact was properly disclosed to investors. Several states are investigating the issue as well, including California, the country’s largest bond issuer. California’s inquiry is focused on Bank of America (BAC), Barclays (BCS), Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM) and Morgan Stanley (MS).

Jim Sinclair’s Commentary

The Formula will prevent all Western States from successfully pursuing austerity.

Eventually QE to infinity will be multiplied by itself.

Risks weigh heavy as eurozone tightens its belt.
Following a similar announcement from Spain earlier in the week, Portugal announced new austerity measures, including higher taxes and a wage cut for government employees. However, the eurozone’s stability plan still faces challenges: A lack of growth is making it difficult for many countries, particularly Italy, to escape their huge debts; the possibility of rising inflation rates could become a problem; many industry players still doubt that Greece will be able to repay its debt; and, former Fed Chairman Paul Volcker said yesterday that the current fiscal crisis carries the risk of a "potential disintegration of the euro."

Posted at 6:36 PM (CST) by & filed under Greg Hunter.

Dear CIGAs,

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Recent headlines coming out of the financial world have been jaw dropping.  Here are a few: US faces same problems as Greece, says Bank of England (The Telegraph), World markets rattled by Goldman fraud (The Economic Times), Goldman Sachs faces criminal investigation (Guardian UK), Government Probe into Wall Street Sales Widening (Fox Business), SEC expects early findings on dramatic, 1,000 point market drop next week (The Hill), Feds probing JPMorgan trades in silver pit (NY Post), Federal Reserve lends bucket to EU bailout (Politico),and NY AG investigates if banks misled ratings agencies (WABC).   

My favorite headline is Major Wall Street firms face criminal probe (Reuters), because the article goes on to name all of the big players.  The Reuters story says, “. . . preliminary criminal probe is being conducted with U.S. securities regulators and involves JPMorgan Chase, Citigroup, Deutsche Bank, UBS, Morgan Stanley and Goldman Sachs Group Inc.  The person said the investigation included mortgage-bond deals, that it was in an early stage and that it might not necessarily lead to criminal charges against all of the firms. The person spoke anonymously because the probe is ongoing.”

None of the financial institutions named above have been convicted of any wrongdoing. They all basically say they did nothing wrong.  Can all this negative press just be a big overblown mistake?  Mind you, the above headlines are recent, as in the past week or so.  I say when you put all the headlines together, it sure looks to me like the financial system is corrupt.  The financial markets are a rigged game.  The game is played to enrich the big fat cat trader and rip-off the little guy of his hard earned savings.

Rigged games are doomed to fail.  Eventually, everybody realizes the only money walking out the door is in the pockets of the house.  In this case, the house is the big Wall Street banks.  In my mind, the negative headlines all point to one thing–the rigged game is coming to an end.

Printing money out of thin air to bailout every bank and country in the Western World is increasing risk according to NYU Professor of Risk Engineering, Nassim Taleb.  Taleb said this week, “The problem is debt, and you don’t cure debt with debt.”  Taleb, who wrote the runaway best seller, “The Black Swan,” says he’s worried about a “failed (Treasury) auction.”  He thinks the government will eventually be forced to buy its own Treasuries because no one else will buy them.  He is also worried about “hyperinflation” caused by all the government money printing for bailouts.    Please watch this very informative video below.  It doesn’t get interesting until about a third of the way in:

Link to full article on USAWatchdog.com…

Posted at 6:21 PM (CST) by & filed under Jim's Mailbox.

Jim,

The very temporary MOPE illusion right now is that the most stable base of currencies in the pyramid scheme collapse is the US dollar and therefore where you should flee for safety. Unfortunately the sheeple who fail to study history don’t understand that gold is the only currency that has no liability and cannot be printed by the kingmakers. The writing is on the wall and this is it! Do not trade away your insurance for speculation. Hold your gold in hand and not in paper promises.

CIGA "The Gordon"

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The Road to Default
CIGA Eric

Follow the capital flows, people. As money flees from the European bond market, it runs to the safety of US debt, stocks, and gold. The race to the fiat bottom, however, ensures that it’s only a matter of time before the US devalues again and capital begins to flee the safe haven illusion of the US bond market.

Greece needs to borrow from everyone else to cover it budget deficit. Excuse me, but are we not doing the same thing when we go hat in hand and sell our debt to China and Japan? What is happening is that capital is starting to notice we are in the final stages ready for major default?

Source: martinarmstrong.org

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Posted at 6:09 PM (CST) by & filed under Guild Investment.

THE EUROPEAN ECONOMIC CRISIS

Earlier this week, the markets cheered the announcement out of Europe of a bailout package by the European Union nations and the International Monetary Fund, and a decision by the European Central Bank to begin buying sovereign debt of weaker states.  This bailout plan protects the sovereign bond markets for the short term, but does not solve any of the longer term problems in European bond, stock, and currency markets.  In fact, they allow the problems to grow and fester without being addressed.

As we have repeatedly stated, the answer to the European problem is simple.  Do not allow any social programs, especially entitlement programs to begin or continue unless there is money in hand to pay for them.  The ability to borrow is NOT money in hand.

The specifics of the three-year aid package consist of 60 billion of emergency lending available quickly from the European Commission, 440 billion pledged by the finance ministers of  sixteen Euro nations, plus a commitment from the IMF of at least half the European contribution (250 billion).

A European government struggling to refinance its debts could first tap into the €60 billion Euro emergency fund.  If that proved insufficient, it could borrow from the €440 billion fund guaranteed by other euro-zone governments.  The IMF’s pledge of €250 billion is viewed by many as a last resort.  In addition, the ECB began buying debt of weaker euro-zone countries in bond markets on Monday.

Even the U.S. got involved.  The Federal Reserve reactivated a program that allows foreign central banks to swap their currencies for U.S. dollars, thus giving European nations access to more liquidity.  Also, as the largest shareholder of the International Monetary Fund, the United States can also participate indirectly in loans the IMF makes to Greece and any other European country.

The nearly $1 trillion EU and IMF safety net announced has another name.  It’s called quantitative easing…whatever the cost.  In our opinion, the costs will be huge.  The policymakers’ message is, to borrow from Marie Antoinette, “Let the future generations eat cake.”

OIL AND GOLD

Why is oil falling while gold is rising during the European sovereign crisis?  Gold is rising because the quantitative easing is long term highly inflationary and destructive to the standard of living of every citizen of the developed world, especially Europe.

Oil is falling as investors fear the austerity measures that are required in Europe will shrink economic demand.  No one disputes that oil is volatile, but it will in the long term rise very high from the current levels.  We have a view that there is plenty of reason to use any short term decline to your long term advantage.  Buying oil on dips below $70 per barrel seems wise in our opinion.

Demand for oil will not slacken in Asia.  Demand will continue to grow rapidly. New autos, new electrical facilities, new heating, transportation, new construction and new manufacturing all require energy in China, Brazil, India, and many other locales.

This European episode only hastens the handover of economic power and influence to the Chinese, Indians, and others in the developing world.

IN OUR OPINION, THE RECENT EVENTS IN EUROPE ARE:

I.  Bullish for gold short, medium, and long term.
II. Bullish for precious metals including silver, palladium and platinum short, medium, and long term.
III. Bullish for oil in the intermediate and long term.  Investors should use the short term price declines to buy. 
IV. Bullish for the currencies and stocks of countries which have strong and conservative fiscal policies over the intermediate and long term.

Why is the above bullish short term for everything except oil, currencies and stocks of conservatively managed growing countries?  THE MARKETS TODAY ARE DOMINATED BY COMPUTER MODELS, WHICH LACK THE CAPACITY TO THINK.  THEY ARE PROGRAMMED TO REACT BASED UPON PAST PATTERNS AND EVENTS, THEY ARE NOT PROGRAMMED TO ANTICIPATE FUTURE ECONOMIC EVENTS.

Over the short term, many quantitative / technical / derivative traders who lack a long-term analytical framework will sell oil, foreign markets, and currencies; while buying U.S. dollars or U.S. treasuries.  They believe that the U.S. dollar is a safe haven and that economic growth in much of the developing world will stop when Europe has a problem.

This developed country centric model is incorrect today, as it was in 2007 through 2009 when China and India grew very rapidly while the U.S. and Europe declined.   This developed country centric model is the underlying thesis for most derivative driven trading models. We predict that once again this quantitative/technical/derivative model will prove incorrect.

IN OUR OPINION, HOLDING GOLD IS VERY WISE

Point #1:
There will be no economic meltdown.  Quantitative easing, which is being implemented in Europe, supplemented by the QE which is already taking place in the U.S. and many other parts of the developed world has highly predictable consequences. 

When banking systems begin to perform their normal functions, the supply of money in circulation and velocity of money rise and the risks of deflation diminish.  In the world outside of Europe, a resurgence of inflation is much more likely than an economic meltdown. As we write this memo, inflation is appearing in fast growing Asian countries.  India currently has inflation in the high single digits.  Brazil is fighting inflationary trends, and China has seen resurgence to nearly 4 percent in recent months.

Point #2:
The public is catching on to the old and oft-repeated notion that you have to pay for what you get…and that borrowing from future generations to spend lavishly in the current period is irresponsible, unwise, and even inane.

To confirm this point, I am including a link to a thoughtful and lengthy article from the May 12th NY Times. The article is entitled “Greece, Debt and a Lesson”   by David Leonhardt.

New York Times Article

The New York Times has been seen by many to be a bastion of liberal economic thinking.  This is one reason that we find the article interesting.  It mentions repeatedly that the U.S. must come to grips with its deficits, and it further mentions that even liberal thinkers are aware of the need to cut spending.  The writer favors higher taxes most voters prefer decreased government spending.

Mr. Leonhardt points out that Robert Greenstein, who is a leading liberal budget expert is recognizing this necessity.  Here is a quote from the article.  “Mr. Greenstein’s politics make him sympathetic to the worry that all the deficit talk will become and excuse to pull back on stimulus spending while unemployment remains high or to gut social programs.  But he also knows the numbers well enough to understand that our Greece moment, whether it takes the form of a crisis or not, is coming.”

Clearly, the message is getting through to the public.  More austerity and much more rationality in spending will be coming to a country near you.  However, it may be some time before the needed rationality reaches even the august halls of the U.S. Congress.  Senator Gregg of New Hampshire stated yesterday on TV that Congress did not yet understand the severity of the problem.  Once they do awaken to the problem, further months or years will be wasted while they dither and debate before they take action to cut deficits.

In the interim, may we make a suggestion to you?  HOLD ON TO YOUR GOLD, and buy more on any dips.  The other parts of Europe and the U.S. will all have their ‘Greece Moment’ in the coming months and years.  When they occur, you will be very grateful for the gold holdings that you possess.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 1:50 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold priced in Dollar terms made a brand new all time high in overnight London trade before coming into New York where the sellers tried their luck at taking it lower as the equity markets fell apart and the Euro plunged further into the abyss. Sadly for the sellers, once the initial knee-jerk selling response across the entire commodity sector was initiated and gold moved lower, buyers came back into the yellow metal and took it higher. There still appears to be a “buy the dip” mentality in gold which is providing support for the metal and allowing it to shrug off some of the algorithm Dollar related selling.

You have to feel a bit of sympathy towards the European monetary authorities (not really – my concern is for the citizens of these various countries and not the monetary officials or some of the political leaders). The poor guys dithered and withered while the Euro was crashing around them finally coming up with what they believed was their own financial version of “Shock and Awe”. The gargantuan sum of money they announced to shore up Greece and defend the Euro in the process turned out to be more of a Fizzling Fireworks Fiasco.

The Euro is now deeply below the level that it had reached prior to their announcement of the rescue package. If the Euro takes out the 2008 low, it is going all the way to 11600. If it cracks that, it could end up trading at parity with the US Dollar. German exporters seem thrilled about its demise – for now – but wait until the inflationary effects of a collapsing currency begin being felt. Be careful what you wish for; you are liable to get it!

The result of all this – Euro gold is closing in rapidly on the €1000 level as it was fixed at €993.971 at the afternoon in London. British Pound gold is moving up the scale towards £900 as it was fixed at £848.662. Both are new record high prices. I am not sure if we are yet seeing panic buying of gold in Europe but based on good reports, dealers are having trouble keeping coins and bars in stock. While that may not qualify officially as panic, it seems to me that the potential for such is increasing with the passing of each day and another new low in the Euro. These things can get rapidly out of hand and the speed at which a panic can ensue should not be underestimated.

Watch and see how the rivalries between the various countries that comprise the Euro zone, which were plastered over when the European Monetary Union was first concocted, now come to the forefront and nationalistic tendencies reassert themselves.

It reminds me of the former USSR. You had a situation where countries with different ethnic backgrounds, customs, religions, traditions, etc. and oftentimes little in common, were formed into a “union” and held together by the sheer force of military might. Once that restraint was taken out of the way, the forces that under normal circumstances would have prevented such a union from being viable, came to the forefront and ripped the entire thing apart. Perhaps what we are seeing in Europe is a similar thing. I do not know but trying to cobble a disparate set of countries together with oftentimes little but geographical nearness the only thing they share in common, seems to me to be an attempt to defy history. We will soon see.

The US Dollar on the technical charts now looks like it has a clear path up towards the 89 – 90 level. That should prove to be a very tough nut to crack. However, should it be able to do so, it would portend an unraveling of the Euro. In such a case, gold will still be strong as it will move higher against all fiat currencies, including the greenback. While gold is still being influenced somewhat by the Dollar, namely because the algorithms are programmed to sell it on dollar strength (those things are soon going to have to undergo some modifications to adjust them), there will be sufficient safe haven demand for gold against sovereign debt contagion, to power the metal higher even as the Dollar moves higher. At some point then the Dollar itself would come under attack since its fundamentals are no better than some of the countries comprising the Euro zone. Were that to happen, gold will then accelerate very sharply to the upside.

Besides, you have to consider, exactly what is the “value” of the Dollar? When we look at the USDX it is being measured against a basket of currencies with the Euro holding over a 50% weighting. If the Euro fails, what good is an index containing a currency that no longer exists? In other words, the USDX is merely a tool comparing one fiat currency against others. I might look like one strong dude if I bench press 200 pounds (please have someone standing by to lift the barbell off of my crushed chest) but what is that compared to a guy who can bench press 380? In other words, it is all relative. The Dollar may look strong compared to the Euro and the Pound, but so what. Both are rapidly becoming junk. All this means is that the Dollar is gaining value against two paper currencies headed to the toilet but it says nothing whatsoever about the intrinsic value of the Dollar on its own merits. Gold is telling us that the Dollar isn’t worth squat and that is the true and final estimation of the greenback’s merits.

The HUI is being influenced by weakness in the equity markets more so than strength in gold, although the weakness in silver is not helping the HUI any. I mentioned a few days ago that we might see some hedgies institute some new spread trades where they buy the miners and sell the broader equity markets. They might be doing some of that today based on what I can see from here. Such a strategy would tend to provide some support for the shares in the event of a further meltdown in the broad markets with the mining sector eventually decoupling altogether and moving higher along with the metals. For now it is evident on the charts that the HUI is experiencing pretty solid selling resistance near and just shy of the 500 level. Once it cracks that level, it should easily move towards 520. Support appears near 440.

Silver was caught in a tug of war today. It was pulled lower by the collapse in the base metals such as copper and weakness in the PGM’s, but was pulled higher by the stability in gold. It will now need to put in a close above 19.66 or a strong intraday push through that level to kick off the next leg higher.

Gold seems to have established some resistance near the psychological even number of $1,250. It has been up near there twice and been unable to breach it for now. Such is a common occurrence for the yellow metal. It likes these round and even numbers for some reason. The fact is that it is still well bid and holding support on the charts quite well. I want to see a weekly close above the former high at $1227 to really paint that particular chart strongly bullish as it would unequivocally pose an upside breakout. It is evident to me that there are entities present at the Comex who are attempting to prevent just that based on the way they are going after the bids here on the closing bell for pit session trade. A close above $1240 sets it up for a run towards $1280.

Crude oil continues to be pummeled both by the one-two punch of the stronger Dollar and the fading equity markets. It dropped below $72 today and looks poised to head low enough to test critical chart support near $70 – $69. If it fails there, it will be at $65 before you can change your socks. At least drivers and transportation related firms are smiling although how would you like to be member of OPEC trading your valuable black gold for paper currencies which are falling apart? Something tells me that a great deal of gold buying is coming out of the middle East these days.

Bonds, here they go again! After spending all of this week moving lower in a continuation of the peaking move once the stock market rout of last week finished its course, they are back where they closed the previous week as I write this. Further weakness next week in the equity markets and bonds will make another run at 125^00. The home mortgage crowd is crowing about how good this is for home sales. Yep – nothing like more cheap money to fix the problems created by more cheap money.

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

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Posted at 12:21 PM (CST) by & filed under Jim's Mailbox.

Dear Friends,

Some commentators are talking a euro at par to the dollar. I assure you that would be the end of the union and the beginning of the attack on the dollar that is certain to come.

If you have the emergence of national European currencies as a result of the failure of the union, the mirror image strength of the dollar would instantaneously disappear. Credit default swaps would turn their vengeance on the dollar. The Drachma would be incinerated. The Swiss and DM would be the stronger units.

If the EU fails so does the USDX. With no mirror image to hold up the dollar artificially, the US dollar will fall faster than Greece’s credit.

Dear Jim,

You said that if the European Union breaks up there will be no USDX index to mirror image the euro.

I don’t understand.

Regards,
CIGA Arlen

Dear Arlen,

The USDX would be around, but no longer reactive to the euro. The euro would be replaced with the original currencies of member states in various percentages as a synthetic euro, but the demise of the euro in the USDX would be complete. Further shorting would not be met with the same reward.

The attack of the US dollar would commence immediately.

Respectfully,
Jim