Posted at 12:14 AM (CST) by & filed under General Editorial, Guild Investment.

Dear CIGAs,

IT IS NEVER WISE TO INSULT YOUR BIGGEST CUSTOMER, ESPECIALLY WHEN YOU PLAN A BIG SALE OF PRODUCT THAT YOU WANT THEM TO BUY. Even if you have political debts to large donors who do not care about what is best for the average American, they care only about what is best for them.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

Chinese Ministry Denies Geithner’s Currency Claims
JANUARY 25, 2009, 9:35 P.M. ET
By IAN JOHNSON and SHEN HONG

BEIJING — A Chinese ministry Saturday strongly denied Obama administration claims that China "manipulates" its currency, as the first contact between the new administration and China takes a markedly sour tone.

On Thursday, President Obama’s nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, "backed by the conclusions of a broad range of economists — believes that China is manipulating its currency." No Chinese official of Mr. Geithner’s standing has fired back — a move analysts say shows that China doesn’t want to overreact to the statement — but Saturday morning an official from China’s Ministry of Commerce said "we never have used currency manipulation or exchange-rate manipulation as a mains to gain an advantage in international trade." The statement, provided by an official from the ministry’s news department, also said China would not "rely on devaluations" of its currency, the yuan, to promote exports.

Some Chinese commentators say the verbal sparring is a sign of greater trade friction to come with Washington. They noted that both sides’ comments were written, not spoken — and therefore should be taken as a serious view of intent.

"This is the first communication by the new president’s team to China and it is provocative," said Shen Dingli, professor of international relations at Fudan University in Shanghai. China’s official Xinhua news agency also weighed in Friday evening, saying that Mr. Geithner’s claim "fans Sino-U.S. trade fears," alluding to concern in Beijing over protectionism in the new administration.

Chinese officials are deeply concerned that the global economic downturn could spur protectionist moves in the U.S. and elsewhere that could further damage China’s trade-dependent economy. Mr. Geithner’s comments marked a significant escalation in U.S. criticism of China’s exchange-rate system.

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Posted at 3:36 PM (CST) by & filed under General Editorial.

JimsAdvisors

 

Jim Sinclair’s Commentary

#28 and counting!

First Centennial Bank of California Shut by Regulator (Update1)
By Margaret Chadbourn and Ari Levy

Jan. 23 (Bloomberg) — First Centennial Bank of Redlands, California, was seized by a state regulator, the third U.S. bank to fail this year, as the recession deepens and the slump in the housing industry sends home foreclosures to records.

First Centennial, with $803.3 million in assets and $676.9 million in deposits, was shut by the California Department of Financial Institutions and the Federal Deposit Insurance Corp. was named receiver. First California Bank, based in Westlake Village, will assume deposits. The failed bank’s 6 offices will open Jan. 26 as branches of First California, the FDIC said.

“Depositors of the failed bank will automatically become depositors of First California,” the FDIC said in an e-mailed statement. “There is no need for customers to change their banking relationship to retain their deposit insurance coverage.”

Regulators closed 25 banks last year, the most since 1993, draining money from the FDIC deposit insurance fund, which had $34.6 billion as of Sept. 30. National Bank of Commerce in Berkeley, Illinois, and Bank of Clark County in Vancouver, Washington, were shuttered by regulators on Jan. 16.

First California will buy about $293 million in assets and will pay a premium of 5.3 percent to assume the failed bank’s insured deposits, the FDIC said. The cost to the deposit insurance fund, supported by fees on insured banks, will be an estimated $227 million, the agency said. First Centennial had about $12.8 million in deposits that exceeded insured limits, the FDIC said.

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Posted at 6:05 PM (CST) by & filed under General Editorial.

My Dear Friends,

Everyone is looking for where and when the top in gold will come. Will it be Jim’s $1650 or Alf Field’s $10,000 plus before it comes back down?

To put it nicely, you are all wrong. Gold is going up and STAYING up.

There is no top to look for because like all things people strive for, the top does not exist.

Gold will trade within $200 of a given point as a product of the Master of the Financial Universe, Paul Volcker, taking control when all this is totally out of control. He will instate the revitalized and modernized Federal Reserve Gold Certificate Ratio, not gold convertibility, and not tied to interest rates as an automaticity.

The Gold mining business will then be the best business there is and the highest dividend paying monetary utility.

Respectfully yours,
Jim

Posted at 3:58 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

“The battle for Helms-Deep is over; the battle for Middle Earth has begun”!

So says Gandolph the Wizard in the second of Lord of the Rings trilogy, “The Two Towers”.

Gold has beaten back the Orcs and Uruk-Hai to regain the critical $880 level and must now deal with the Ringwraiths (the bullion banks) and Sauron (the monetary lords) as they attempt to defend Mordor (the unbacked paper money system – the root of all economic woes in the global universe). If Frodo can just make it to the fires of Mt. Doom and throw the golden ring of power into the volcanic flow (reintroduce gold into the monetary system), the system will topple freeing the masses from the tyranny of the money masters!

Okay – so it’s a bit melodramatic but gold has smashed through the level which all of the technical studies point to as being the lynchpin of the monetary authorities’ defense – the $880 level. That level marks the upper boundary of the bullish wedge formation I mentioned in yesterday’s commentary as well as the horizontal resistance level which has held it in check since the middle of last December. Bulls were able to take it through this barrage of bullion bank selling who not unexpectedly were attempting to absorb all of the bids and force it back down. The battle could be seen on the 5 minute charts where for a while they were successful at defending their position but a strong wave of buying stormed into the market and effectively routed them out. They were then forced back to $900 where they are regrouping.

Once again gold has defied the action in the Dollar keying off the banking crisis now occurring in Britain as the British Pound disappears into a black hole while the Euro continues to swoon as confidence in the economic fortunes of Euroland disappears like the morning mist. Gold is seeing strong safe haven flows from Europe, which as all the regular readers of this site have known for some time, has generally been the scene of bear raids on gold commencing around the 2:00 AM CST hour. Not so any longer – there is real fear gripping Britain and Europe. Gold has again made yet another all time record high in terms of Sterling at the PM Fix coming in at 641.012 while Euro price gold did indeed set a brand new all time high at the Fix, coming in at €682.420. Euro gold looks like it might be making a run towards €700. At the risk of being repetitive – it certainly appears that a loss of confidence in the European currencies is occurring with the resulting rush into gold being led by European investors. New York is keying off of that as momentum players now move in on the long side.

Overhead resistance now becomes $900 which is near today’s session high followed by more stiff resistance near the $935 – $940 level. Support initially emerges back near $880 and then near the downsloping trendline at the top of the wedge formation which comes in near the $870 level. Oftentimes markets will break up and out of such a formation and then come back down to the broken trendline where they should find buying support and bounce back higher if the breakout is a bona-fide one.

The HUI and the XAU look like they have finalized a divorce from the broader equity markets after their trial separation period which began early this week. The HUI is closing in on former double top resistance near the 310 – 312 level which if it can best that should put it on path to target the general region near 350. The XAU appears to be the stronger looking of the two indices as it closes in on 127, again, a double top that has been in place for the last 5 weeks. A breach of that level and it has a good shot at making a run towards 138 – 140.

I should point out that the major gold ETF, GLD, reported a surge in gold investment demand driving reported tonnage to a new record high of 819 tons. You all know how I feel about that particular entity but nonetheless it still remains a good barometer for gold investment demand.

Keep in mind that this drive higher in gold has been occurring against a backdrop of relatively very low open interest. After making a peak above $1000 last year, open interest in gold reached to almost the 600,000 mark, topping out at 593,953 nearly a year ago to this exact date. Yesterday’s open interest number was a paltry 342,088 or 57.5% of the peak. This comes with gold around $110 or so away from reaching the $1000 level again. Clearly, there is a great deal of room in the paper gold market should momentum players begin returning in size. I would still suggest to some of these managers that they consider standing and taking delivery of some of the gold contracts that they are buying and help pull down the Comex warehouse stocks further. Even so, I wonder what the price might be should another 100,000 new longs move into this market…

Bonds continue to sink as excessive supply fears overwhelm any flight to safety buying that might be occurring. I am certain the Fed does not like seeing interest rates going in this direction especially since they were hoping to push longer dated yields lower by announcing potential plans to buy along the long end of the curve in an attempt to stimulate the housing sector.

Stocks have moved into positive territory as I finish this commentary. That is only helping put additional strength into the HUI and the XAU.

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

January2309Gold1230pmCDT.jpg

Posted at 3:03 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Maybe nationalized? Who are you kidding, they are!

The Economist Of The Year award is going to Lenin.

Citigroup, Bank of America May Look ‘Nationalized’ (Update1)
By Ari Levy

Jan. 23 (Bloomberg) — The U.S. government’s decision to pledge billions of additional dollars with strings attached to Citigroup Inc. and Bank of America Corp. may be nationalization by another name, according to former bankers and regulators.

Faced with pressure from lawmakers, banks have shaken up management, eliminated executive bonuses and staff and canceled conventions. They’ll be forced to do monthly reports on how they’ve boosted lending while slashing quarterly dividends to one cent a share for three years.

“When the Treasury tells a bank to pay a penny a share vs. its old dividend, you know who’s calling the shots,” said Jon Bruss, a 40-year industry veteran and founder of Hartland, Wisconsin-based Fortress Partners Capital Management Ltd., which invests in banks. “It may not be de jure nationalization but I think it’s de facto nationalization.”

While avoiding steps taken by the U.K., which this week acquired a 70 percent stake in Royal Bank of Scotland Plc, U.S. regulators are no longer passively injecting capital into the nation’s biggest banks. Investors have fled, sending Citigroup and Bank of America down by more than 50 percent this year, on concern that tougher U.S. oversight is coming after the government takeover last year of mortgage financers Fannie Mae and Freddie Mac, and insurer American International Group Inc.

Citigroup, based in New York, tumbled 56 cents, or 15 percent, to $3.11 yesterday on the New York Stock Exchange. Bank of America plunged 97 cents, or 15 percent, to $5.71. The 24- company KBW Bank Index has dropped 38 percent in 2009, following last year’s 50 percent decline.

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Jim Sinclair’s Commentary

My apology to those that object, but I believe there are three human rights.

1. Potable Water
2. Health
3. Education

A society that fails to provide this is not a society but simply a grouping of people.

I firmly believe that these requirement come before Bernard Madoff hedge fund rescues, any Administration, declaration of preemptive wars and rampant white collar theft.

Having said that the following cannot be funded without a resort to inflating away old debt, NOW. Too bad.

House Committee on Ways and Means
For Immediate Release:
Thursday, January 22, 2009

Ways and Means Passes Economic Recovery Legislation

Bill would provide critical tax, health and unemployment benefits for families, gives incentives to create jobs

WASHINGTON, D.C. – The House Committee on Ways and Means voted today in support of a comprehensive economic recovery package to provide tax, health and unemployment relief to families while also encouraging businesses to create new jobs.  The legislation, H.R. 598, passed the Committee by a party-line vote of 24 to 13.  The legislation will now be combined with other components of the recovery package from other House Committees into H.R. 1, the American Recovery and Reinvestment Act for consideration by the full House of Representatives next week.

“This legislation will provide critical benefits and incentives to middle-America, poor-America, and businesses, large and small, who are struggling during this economic downturn,” said Chairman Charles B. Rangel (D-NY).  “This plan will go a long way to help relieve the pain these families and businesses are experiencing so that we can restore some confidence and economic security and help America maintain its prominence in the global marketplace.  Simply put, the American people cannot keep the engine of our economy running if they don’t have money to spend and this package provides tax relief and critical benefits to help them take home a little more each month and help the economy grow.”

Critical Benefits to Families, Businesses, Incentives to Create New, Green Jobs:

The Plan, as passed by the Committee will provide critical tax relief to working families and assistance with healthcare costs as well as extended and enhanced unemployment benefits for those who have lost their jobs during the economic downturn.  The Plan would also give businesses, large and small, tax incentives to invest in plants and equipment and expand to hire new workers, helping to strengthen our economy and create new jobs.   In particular, the Plan would help create new, green jobs by making a critical investment in renewable energy and energy efficiency.

Important Health Benefits, Improvements to Care:

The Plan would also provide payment incentives to encourage the widespread adoption of Health Information Technology (HIT) and establish standards for interoperability and privacy.  The investment in HIT is a critical step toward modernizing American healthcare, cutting red tape, eliminating redundant care and reducing health insurance premiums for millions.

Finally, the Plan would provide temporary subsidies to help families who have lost their jobs maintain their healthcare coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA).  This benefit will be of tremendous assistance to families struggling to find new work and maintain economic security during the downturn.

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Jim Sinclair’s Commentary

It is really never going to happen in absolute terms. Wait until you see what gold does as the dollar treasuries reveals themselves to not be a safe haven.

DJ MARKET TALK: Higher Comex Gold Decoupling From Dollar

1426 GMT [Dow Jones] – Comex gold is decoupling from its normal inverse relationship to the U.S. dollar, says Bart Melek, global commodity strategist with BMO Capital Markets. Despite a stronger dollar, February gold is up $21.70 to $880.50 an ounce as investors turn to the metal as a safe haven and monetary asset, he says. He also describes the market as tightening physically, with mining output down lately but strong investment demand for physical gold and holdings rising in ETFs. Metal that is backing the SPDR Gold Trust, the world’s largest gold ETF, rose 13.15 metric tons Thursday and now stand at a record 819.11 metric tons. March silver is up a more modest 21 cents to $11.575. (ALS)

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Jim Sinclair’s Commentary

Do you really think that the US and GB are going to avoid social unrest? Wait until you see how politicians react to these upcoming events.

It will be physically nasty, and the balance of payments together will be expensive.

Iceland Is Burning — Day 2
Iris Erlingsdottir
The Huffington Post
01-23-09

The extensive protests that shook Iceland Tuesday have continued into Wednesday and are beginning to have an effect on one of the two political parties making up Iceland’s coalition government.

Late Wednesday night, as thousands of protesters re-lit a large bonfire in front of the Parliament, the Reykjavik chapter of the Progressive Party voted to recommend to the party’s national representatives that they withdraw from the ruling coalition, and called for new elections in May 2009. As the night wore on, though, matters descended into violence. Around 1:30 am, police dispersed the crowd with tear gas, the first time tear gas had been used against Icelanders in 60 years. The crowd soon reformed and pelted riot police with stones. One officer was severely injured by a cobblestone, the newspaper Morgunbladid said.

Although the leader of the Social Democratic Alliance, Foreign Minister Ingibjorg Solrun Gisladottir, was out of the country, Prime Minister Geir Haarde, leader of the Independence Party, told reporters that he believed she remained committed to the current ruling coalition. He insisted that the government was "functional" and that holding elections this spring would result in nationwide chaos.

The rank and file members of the Social Democratic Alliance appear to differ, however. Calls for the current representatives within the Party to step aside were widely applauded at tonight’s meeting, as were calls for spring elections and a new coalition.

The protests have been sparked by Iceland’s catastrophic economic collapse over the past three months, and the failure of the government to call for immediate elections or to investigate the rumored widespread malfeasance by the country’s leading bankers, businessmen, and politicians. "It should be clear to everyone that a government that has failed as utterly as the Icelandic government has can neither investigate, nor clear up the past, nor forge a new path into the future," said retired professor Njörður P. Njarðvík.

Wednesday morning began with angry protesters throwing paint at the government building and surrounding Prime Minister Geir Haarde’s car. They banged on the vehicle’s windows and pelted it with eggs for several minutes before his bodyguards and police pushed them away. The protesters gathered in front of the Parliament building banged on pots and pans while shouting "Unfit government!" "You’re fired!" and more creative insults. Although the racket calmed down to show respect to mourners at a funeral in the neighboring Reykjavik Cathedral, a mourner encouraged them to "produce enough racket to be heard across the country" when it was over.

Iceland has come to expect little change from the members of Althingi, the elected representatives, who have been widely criticized for being little but a rubberstamp for the conservative government agenda, but they claim they are getting the message. "So why aren’t the protests getting through to you, why hasn’t there been any change?" a state television reporter asked a Social Democratic Alliance representative. "We very clearly noticed the protests, and we get the message that people want change," he said without elaborating. The Conservative Party Representative’s reply to the question painfully demonstrated whose interests the Icelandic Althingi represents: "Well, representatives are just representatives," Ms. Ragnheidur Rikhardsdottir, said, "and ministers are ministers, and theirs is the power."

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Posted at 2:56 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

Thought you’d like this quote:

"The word "credit" derives from credo, i.e. faith."

CIGA Marty

Jim,

The new policy is in place. The focus is Pakistan…just as you said.
Best,
CIGA Pedro

"A suspected US drone missile attack has killed nine people in north-western Pakistan, local witnesses say."

Pakistan drone attack kills nine

A suspected US drone missile attack has killed nine people in north-western Pakistan, local witnesses say.

At least one missile hit a house in a village near the town of Mirali in North Waziristan, a stronghold of al-Qaeda and Taleban militants.

A second suspected drone attack has now been reported in South Waziristan but there is no word on casualties.

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Jim,

Well, everyone keeps dissing the dollar. How come the dollar doesn’t know it’s supposed to tank? I keep seeing all these predictions about the dollar’s downfall. Well where is it? My gosh, things are going to hell in a hand basket here. Is it because things are going there faster o’seas? In that case, where is the stable currency? Gold and silver?

I really would like a response from one or more of you because I have been a CIGA for 10 years.

Dick

Dear Dick,

You think I am a dick because the dollar hit directly on .7200 and has rallied since? Your viewpoint is a short term one. I am unchanged on what the future of the dollar will be regardless of your being a CIGA for 10 years while I have only posted for less than seven. I would advise that rather than sending poetry designed to deride, you simply put all your money quickly into 30 year US government bonds and maybe a few US financials and be quietly happy. How about full available commodity market margin?

All the best Dick,
Jim

Posted at 11:55 PM (CST) by & filed under General Editorial, Trader Dan Norcini.

Dear Friends,

Please examine the following set of charts of gold as priced in various major currencies. As you can see, it is either making new all time highs or just right off of those levels when viewed in several of these currency valuations.

Keep this in mind whenever you read some of the deflationist arguments about why the price of gold has to go lower in a deflationary spiral. Gold is a currency—something those who adhere to that particular economic view seem to have forgotten.

Also – just a side note – I mentioned in my midday commentary that gold in Euro terms had made a new all time high at the London PM Fix of today (1-22-2009). That was incorrect. The all time high is 646.590 made back in October of last year. I apologize for missing that one.

Also, please note the gold/long bond ratio chart which is also shown to give you an idea which of the two is performing better as a safe haven.

Dan

 

Click here to view today’s charts of Gold in various major currencies with commentary from Trader Dan Norcini

Click here to view today’s Gold/Bond Ratio chart with commentary from Trader Dan Norcini

Posted at 3:41 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

The British Pound continues its horrid decline falling to a 23 year low against the US Dollar as events in Britain are rapidly spiraling out of control. The monetary authorities’ plan to rescue the banks there has been met with skepticism by investors while a genuine, and I might add, well-founded, fear of just who it is that is supposedly going to buy all this debt that the government is issuing which is blowing the fiscal budget deficit to kingdom come. We have a combination of a government spending itself into the drink while its stagnating economy produces fewer tax receipts. This point has not been lost on gold which once again today made yet another all time record high in terms of sterling.

One has to look at what is happening to the Pound with a great deal of sadness. Consider the once mighty British Pound, also called Sterling because it was at one time as good as silver, was the global reserve currency when Britannia ruled the seas. Its decline, which is completely due to its feckless political leaders who like ours here cannot seem to restrain spending their citizenry’s money and that of those not yet even born, is a frightening harbinger of what greets the US Dollar should we continue on our current course. From what I can see regarding the new Administration’s policies, coupled with a Congress completely taken over by those who are salivating at spending upwards of another $1 trillion, the US Dollar is doomed to follow the same course of Sterling. To say that it was inevitable is to allow those responsible to escape the blame. All of it was completely avoidable but it would have required statesmen who had the long term interests of the nation’s monetary future in mind rather than gutless politicians who lacked the courage to do what was right for the LONG TERM, even if it cost them their seats in the halls of power because of the hardship that it would inflict in the SHORT TERM.

“I will make mere lads their princes and capricious children will rule over them”. (Isaiah 3:4)

There is increasing chatter coming out of the Forex arena of intervention possibilities by both the Swiss monetary authorities and those of Japan. Both the Swissie and the Yen have been the beneficiaries of carry trade unwinding made possible because of ultra low interest rates in those respective nations. As hedge funds shed risk due to the deteriorating global economic news, these trades are being reversed or unwound with the result that players have been forced to buy Swiss Francs and Japanese Yen to repay the loans that were borrowed in terms of those currencies which were then used to purchase securities denominated in other currencies that paid a higher yield. It was a money making ATM machine while it lasted. The result has been to push both of these currencies strongly higher at the very same time that monetary authorities all around the globe are wanting to see their currencies weaken in an effort to maintain their export-related business. I am not sure how much damage the Swiss could inflict on the specs in regards to the Franc but I am under no illusions whatsoever when I say that the Bank of Japan is not to be trifled with should they decide to come from their lairs and punish the spec longs in the Yen. “Been there, done that,” is my motto and that has come from getting taken out to the woodshed by these guys once too often. So far, it is just rumors but only a fool would ignore it.

The Euro is struggling with those sovereign debt downgrades of Greece, Spain and now Portugal. That continues to feed the move to gold which is occurring in Europe as today the gold price in Euro terms hit a new all time record at the London PM Fix coming in at €663.376.

The Dollar is going to have its own issues to deal with as investors who were stuffing themselves full of US Treasuries recently are now disgorging them at an alarming rate. Today’s catalyst for the bond sell off was comments by the Obama Administration’s Treasury Secretary designee, Timothy Geithner, who accused the Chinese of manipulating their currency. Note to Geithner – you do not accuse your biggest creditor of doing the things that your own government has been doing and expect them to continue using their savings to buy your too-numerous-to-number debt issuances.

IF you have not taken a look at the long bond chart, do yourself a favor and see what happens when supply overwhelms demand. Bonds have now broken down below their 50 day moving average and appear headed down to the 100 day unless they can reverse course very quickly. The weekly chart shows a solid topping formation in place with the next level of support near 125^12. The bonds have been very tricky to call because anyone with a lick of sense knows that they were in a bubble but gauging when exactly a bubble has popped is sometimes a bit more difficult than it would seem mainly because it is easy to underestimate the effect produced by fear on a market. Markets are anything but rational – do not ever forget that.

I should also point out that the Gold/Bond ratio, a measure of investor’s preference for a safe haven choice, has been decidedly in favor of gold over the last couple of weeks. I will attempt to get an updated chart up later today for your reference. No doubt serious-minded investors are looking at the Treasury International Capital Flows data as well as the coming US government spending orgy alongside of these Euro zone debt downgrades and are saying to themselves, “the Hell with paper”.

Meanwhile, Russia appears to be burning through its share of reserves with the speed of a wildfire as they attempt to put a floor beneath the disappearing ruble. I will get a Gold in ruble terms chart up today later on – it too is amazing.

This brings me to another point – I see one way only for those nations which are cranking up the printing presses to warp speed to avoid complete and utter insolvency – they will have to devalue their currencies against gold and inflate the debt away. I am not a statistician or a mathematician, but I cannot wrap my mind around the amount of debt being created by so many nations and envision any other scenario in which any of it has a snowball’s chance in hell of ever getting repaid. Either that or the current monetary system collapses and a new Bretton Woods type accord replaces it. When we talk about a soaring gold price we are in effect talking about the devaluation of paper currencies – it is one and the same thing for all practical purposes.

All of this is serving to put a strong floor of support beneath the gold market which’s resiliency is beginning to resemble that of a cork’s. It keeps bobbing up to the surface after getting pushed down by bullion bank selling at the Comex.

The wedge formation which is revealed on the daily gold chart that begins with the July 2008 high and the mid-October 2008 low appears to be attempting to resolve itself in favor of the upside with the top of that line coming in near the $880 region. That level is taking on more and more significance as a technical barrier and should gold be able to punch through the selling that the bullion banks are throwing into its path here near the $860 level, they will be pushed back to that line as a defense. If they can be pushed off of that hill, gold will have broken out in US Dollar terms into a trending move. Expect a battle at that level therefore by the gold haters. Momentum indicators on the daily gold chart are all positive with the price above all of the major moving averages. The only bit of a fly in the ointment is that the 10 day moving average remains below the 20 day but it has turned higher which is a plus. The last reaction in gold a few trading sessions ago took it down into the confluence of the 50 day and 100 day moving average from which is sharply bounced, a very strong technical signal.

Equities are falling apart with news from Microsoft about job layoffs hitting stocks hard. After all, if the darling Tech Sector cannot even escape the carnage, what can? Quick answer – check out the mining sector which again is putting in a valiant effort to divorce itself from the broader equity market action. The HUI and the XAU are both in positive territory as I write this. Whether they can hold onto their slim gains is unclear at this point in the session but the fact that they are remaining afloat even with a lead anchor tied to their feet is at least somewhat encouraging. I might add that should the HUI be able to clear the 288 level, it has a good shot at 305-310. The XAU has short term resistance near the 120 level and if it can best that should go on to test 125-127. Momentum indicators on the daily charts of both indices look positive but if we get a move higher, I would want to see the RSI get above the 75 level.

Gold deliveries in the expiring January contract reached 161,700 ounces with today’s assignments while registered warehouse stocks have actually shown a decline below the 2.8 million ounce mark (Someone needs to the call the Comex guys and have them reign in that fellow who reported the drawdown – what was he possibly thinking?).

After bouncing yesterday, crude oil bounced back down today. To a certain extent, its welfare is tied to that of the equity markets where as a general rule, lower stock prices have been sucking it lower while higher prices have been encouraging bottom pickers. Anytime we see weakness in crude oil, many of the other commodity markets do tend to soften as this plays into the deflationist camp’s views which still have a wide following out there. For the sake of clarity, I do not agree with the view of those in that camp who predict gold getting pulled lower as a result of deflation. My reason is that their view fails to see gold as a currency and not a commodity. That is the reason I continue to send charts up from time to time detailing the price of gold measured in other currencies besides the US Dollar. The deflationists are narrow-minded in their view of gold considering it only in US Dollar terms. How one can say that the price of gold is going to weaken because of a deflationary environment while at the exact same time the yellow metal is soaring into new all time high in terms of the British Pound, the Ruble, the Euro, the Australian Dollar, the Canadian Dollar and so on? It seems to me many of the proponents of this view have some serious “splaining” to do. Hint – gold is a currency guys – stop looking at it like it was a commodity.

Lastly – trading volume and open interest in the February 2009 contract will be waning as April will take on most active month status.

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

January2209Gold1230pmCDT.jpg