Jim’s Mailbox

Posted at 7:51 PM (CST) by & filed under Jim's Mailbox.

Hello Mr Sinclair,

I loved your dog and pig picture.  I wrote 4 possible captions for the picture which you might find amusing.

A) DOG: Hey Babe, I love how you smell like bacon, but you’re just not my type.
B) DOG: This is the absolute last time I let Mr Fred set me up on a blind date.
C) PIG: Tell me again of how I remind you of Angela Merkel.
D) PIG:  I just love how you explain rehypothecation.




Invisible Hand Pushing At Silver Again

Silver, a smaller and less monetary-driven market than gold, feels the effects of the invisible hand more violently than gold. A falling lease spread composite since late March reveals the hand’s reemergence around $31.75. Negative lease spreads tend to reverse into weakness unless the trend becomes uncontrollable.

Chart 1: Silver Lease Spread Composite (SLSC) and Silver Price, USD


Fear not, the invisible hand has been accumulating both gold and silver into weakness since late 2011. The upward drift in silver’s net long as a percentage of opening interest NL%OI near all-time highs since late February reflects it.

Chart 2: Silver London P.M Fixed and the Commercial Traders COT Futures and Options Net Long As A % of Open Interest




Dear Jim,

Does this possible trend toward fiscal responsibility concern you?

CIGA Wolfgang

Dear Wolfgang,

Not in the least, because it is the basis of my “why” gold.

There is no political will for what has been forced on the euro and the chances of avoiding QE3 because of this is zero.


Vital Signs: Falling Government Spending
By Conor Dougherty
April 30, 2012, 8:50 AM

Government’s contribution to gross domestic product is slipping. Government consumption expenditures and investment fell by $51.7 billion to an annualized $2.462 trillion, the fifth consecutive quarter of year-on-year declines. A fall in government spending, which was driven by defense cuts, was a big reason for the slower pace of gross domestic product growth in the first quarter.




Dear Eric,

Just as in the period of 1968 to 1980, the people who made the greatest profits over the shortest period of time will be the gold banks on the long side as they deal with the accumulative giants that have no plans to change their tactic of cleaning up the physical market in statistical secrecy every time the Paper Plotters take the Crimex lower.


The Invisible Hand Executes The Weak Gold Policy

Gold and silver’s surging diffusion indices (DI) illustrates strong accumulation into weakness since 2011. Statistically concentrated readings above 60, either single or clustered, reveals the presence of of what is often referred to as the invisible hand on Insights and what Jim recently described as the weak gold policy.

We also have a weak gold policy, which is not to depress the price of gold but to intervene in the gold market so it doesn’t start screaming to extreme prices.

Accumulation by the invisible hand during emotionally vulnerable points in the cycle (ABCD) represents execution of this policy.  The gold community was scared to death in 2008 after a strong double cluster of 88 and 97.  The gold community is scared to death as the slower but still potent triple cluster of 70, 70, and 66 unfolds today.

Chart 1: Gold London P.M Fixed and Gold Diffusion Index (DI)


Chart 2: Silver London P.M Fixed and the Silver Diffusion Index (DI)


The sharp divergence in CWA and NRWA illustrates how the invisible hand coldly buys weakness while others panic and sell in fear (see chart 3 and chart 4).  The spread between commercial buying and retail selling is greatest in silver right now.  If the invisible hand which wishes not to depress but rather control the price continues to withdrawal from gold and silver in the coming weeks, the price response in silver could be explosive in comparison.

Chart 3: Gold London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Chart 4: Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest