In The News Today

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Jim Sinclair’s Commentary

I have not read a better encapsulation of conditions nor have I seen a better reason to get insured immediately if you are not in gold. If you are not insured, prepare to suffer the extraordinary loss of lifestyle you are accustomed to, if not your existence itself.

Let’s call our writer "CIGA Pedro the Informed."

A View From Abroad by an American in Brazil

We are witnessing the end of a very long phase in history. As a result there is a mass insecurity amongst the dominant nations of the past 300-years that is bordering on hysteria. This insecurity manifests itself in many different ways and markets are reflecting this. Gold prepares to soar, reflecting this insecurity, as gold is a barometer of fear.

Within the English-speaking world it is evident that “foreigners” are to blame. In the UK it is both the Poles and the “Pakis”. In America it is initially revealed via a general population  viewing the Kyoto Protocol as a Chinese-led trick to destroy our economy. Then it is the belief that Mexicans are “invading” and Arabs are trying to kill us all. One has to stop and ask what the root of this paranoia really is.

As the American power structure tries to prepare for “inevitable conflict” with world Islam (c.f. Huntington, Clash of Civilizations) it also tries to hide its obsequious relationship with the Saudi Royal Family, which is incestuous at best, and perhaps more symbiotic than most would want to know. The financial population cannot reconcile this anymore than they can the fact that (perhaps apart from Jim) the accurate, unblended analysis of this crisis seems to have been foreshadowed by a two people with names: Nouriel Roubini and Naseem Taleb. People remain confused by the fact that the American power structure lacks patriotism and seems to favor its own interests over the interests of the country. They lash out at everyone, including, now, their own leaders. People don’t know whether to “blame” Obama’s socialism or Bush’s self-serving capitalism. Their foreign policies seem different but the rest appears the same. Major banks appear to have more control than we thought….even while teetering on bankruptcy.

This is reflected in markets. Currencies gyrate wildly. As Jim has noted many times, anybody trying to fathom the FX markets and trade them is likely to be carried out of the pit on the proverbial trader’s stretcher with a coronary. First the Euro is finished – its break-down elucidating thoughts of its demise – but then the belief that jettisoning the PIGS (Portugal, Italy (Ireland?), Greece, Spain) might be causing it to rise. The markets are schizophrenic. They don’t know what to think. The dollar and sterling take the brunt. There are reasons for this.

This is a system headed for breakdown. The established historical order is drifting to a close, and nothing can stop it. Changes in policy are manifestations of history – alter it they cannot. Gold’s rise becomes inevitable as countries who have ruled the Imperial phase of history try and resist their diminishment in status. Markets are manipulated as they try and hold on to power, while history shifts under their feet. China and Brasil cut deals that don’t include the USA and UK…the UAE starts to view separate currency arrangements with Russia, foregoing overtures by Saudi Arabia for a Gulf wide (GCC-led) monetary regime. Riyadh’s relationship is too close to Washington. Washington is yesterday’s news. (So much for the conspiracy of Islam.)

The end of an era is upon us. That is the era of the Global hegemon. The first phase took place in Britain, the second in the Soviet Union, and the third in America. Fukayama’s theory of history’s end is immolated on its very alter. The debacle of Iraq, as well as Afghanistan stand as testimony. The dominant powers simply cannot draw borders they way  they did at San Remo in 1920 or via the Red-lines which economically created Kuwait. We seem to be unsure if we should break Iraq up, or let it be unified. Is it even our business, or has history out-run us and we have failed to acknowledge it?  As the global hegemon is characterized through the Imperial phase of history, now draws to a close, people stand confused and amazed. The rulers of the dominant nations appear ready to sell them out…and this appears as “news” to educated observers.

Nobody can be sure of any currency regime any longer. The markets gyrate wildly. As fear and insecurity mount, Gold prepares for take off.

Jim Sinclair’s Commentary

I told them this would happen, but only received a note that my personally paid for advertising on the subject of short of gold derivatives selling by producing companies was no longer welcome. This was in the London Mining Journal & Mining Monthly.

The big guys are still stuck with derivatives in the indenture of the development loans as well as on the books.

The egotistic hedge funds have no idea how stupid it is to be short of the up and comers who are "back to basics" and "royaltied."

AngloGold stumbles over hedges

The cost of betting on the gold price is now all too clear, writes Jim Jones

Back in the mid-’90s, when Anglo American’s gold division (AngloGold, as it came to be called) was more or less happy to be a South African company, management strategy was simple. The idea was to hedge about 10% to 20% of annual gold production forward for each of the coming five years. Annual revenues would be protected from a fall in the gold price and, should gold rise, the company would benefit from the rise on 80% to 90% of its output.

The company’s hedge book was then in the region of 100 tons of gold against annual production of about 200 tons.

But international expansion entered the picture. Under Bobby Godsell, AngloGold started heading out of South Africa.

By 1999 that expansion had introduced a sophistication that had lifted AngloGold’s total hedge book to 11.9 million ounces, stretching out 10 years and approaching almost twice the group’s annual production of 6.9 million ounces.

The suits running the show could congratulate themselves because, while the gold price was slipping, hedging gave the company a couple of percentage points on top of the spot gold price — 6/oz when spot gold was averaging 300/oz.

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Jim Sinclair’s Commentary

The mindset of taking your gold home is a factual criterion of gold as insurance.

It is also the first movement of a TRUTH MACHINE because much of the gold, even sold at these levels, is paper gold.

The sale is agreed to, but the seller does not have all or sometimes any of the gold granted to the buyer. Receipts are issued, sometimes even with serial numbers.

Paper gold is purchased as a hedge but only in a ratio determined by the volatility.

As gold is called for in physical form on all levels, even at the COMEX, the true price of gold will emerge.

You can be sure that Hedge Wizard Paulson owns paper gold.

DMCC vault may store region’s gold reserves
By Shashank Shekhar  on Wednesday, May 13, 2009

Much of the region’s gold that has so far been held in London may soon return.

The new vaults of DMCC will be a home to the gold allocated to the Dubai Gold Securities (DGS) Exchange Traded Funds (ETFs). The vault may also become a natural choice for storage of gold reserves by central banks in the regional market, analysts said.

While the gold allocated to DGS is kept at HSBC’s vaults in London, the gold reserves held by GCC’s central banks are held by various other vaults in London, market sources said. Gold vaults have existed in London for more than 150 years.

DMCC’s new vault became operational on April 26 this year. "We want to bring the gold held under DGS ETFs at the HSBC vaults in London to Dubai. What has been holding us back is the difference in gold specification between London and Dubai," a DMCC official told Emirates Business. Until May 11, the total number of DGS traded stood at 15,200. Each security approximately amounts to one-tenth of an ounce of gold.

Though DMCC officials have declined a direct comment on the matter, a spokesperson with the centre said that ample care has been taken to make the vault "better than the others".

Another DMCC official said that the vault will also be used to store precious metals associated with the ETFs that may be launched in Dubai later this year. At a press conference organised recently, senior DMCC officials had disclosed that they plan to launch new "precious metal ETFs" in Dubai. The ETFs will be traded at Nasdaq Dubai, the Dubai-based regional security exchange where the DGS trades.

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Jim Sinclair’s Commentary

All major US social and economic events start on the West Coast, moving quickly East. So will this according to the Formula you received here in 2006.

California faces its day of fiscal reckoning
May 22, 6:25 PM (ET)
By JULIET WILLIAMS

SACRAMENTO, Calif. (AP) – The day of reckoning that California has been warned about for years has arrived. The longest recession in generations and the defeat this week of a package of budget-balancing ballot measures are expected to lead to state spending cuts so deep and so painful that they could rewrite the social contract between California and its citizens. They could also force a fundamental rethinking of the proper role of government in the Golden State.

"The voters are getting what they asked for, but I’m not sure at the end of the day they’re going to like what they asked for," said Jim Earp, executive director of the California Alliance for Jobs, which represents the hard-hit construction industry. "I think we’ve crossed a threshold in many ways."

California is looking at a budget deficit projected at more than $24 billion when the new fiscal year starts in July. That is more than one-quarter of the state’s general fund.

This week, voters said they no longer want the Legislature to balance budgets with higher taxes, complicated transfer schemes or borrowing that pushes California’s financial problems off into the distant future. In light of that, Republican Gov. Arnold Schwarzenegger has made it clear he intends to close the gap almost entirely through drastic spending cuts.

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