Posted at 3:51 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold hit the magical number of “$1,000” in today’s trading session in the front month April contract at the Comex and immediately registered newswire flashes across the various services. This is something guaranteed to garner the attention of that section of the public who  are still somehow oblivious about the metal not realizing its role as a safe haven and the ease with which it may be bought or sold. Perhaps they have been too busy lining up waiting for the government handouts that are proliferating faster than the flu virus in winter. Either way, those who have been attempting to hold back the metal, got what they did not want – headlines and interest!

Keep in mind that this is only the second time in its history that gold has shot up above the $1,000 level. Generally short-term oriented traders like to book profits when such things occur so it will not be unexpected to see a bit of a pullback from here.

I know this does not sound like the words of an inspired market genius but one of two things will happen here. We will get the scenario that I just outlined or the market will shoot sharply higher. If it is the latter, it will be quite telling as it will reveal just how determined, eager or downright terrified people are becoming. Market action of that kind of nature speaks thusly: “get me in at any price – I simply don’t care – I want in”.  Or in the case of trapped shorts: “Get me out at any price – I am terrified of getting wiped out”. In other words, the latter scenario will give us a measure of market intensity. The former will show that there is not yet any panic buying occurring in the gold market even though overall demand is very strong.

If the market does set back, I do not expect any subsequent price retracement to very deep this time around – things have changed since last March 2008 ( a year ago), the last time gold was over $1,000. The price rise this time has been measured, it has been steady, and most importantly, it has not been driven by a rush of hot fund money into the market. The open interest is 60% of what it was the last time the price of gold peaked – while there is a sizeable long position in the Comex gold market, it is well off the levels it reached at that last peak. Also, the reported holdings in the gold ETF, GLD, show that investment money is steadily flowing into this sector. The last time gold was over $1,000 back in March, the reported gold holdings were only 663 tons. As of yesterday, holdings were reported at 1029 tons. Obviously a much larger share of the public is moving into gold. I am hard-pressed to see a reason why all this money would suddenly decide to abandon gold unless of course an economic miracle recovery were to immediately commence. Perhaps the Obama administration will discover a new method of creating money that sees it miraculously fall out of the heavens so deep around us that we do not even have to bend over to pick it up. First time something like this occurred, it was quail. At least you could eat that. Paper does not sound particularly appetizing to me.

I should note here that gold priced in British Pound terms and in Euro terms has set brand new all-time highs the last four days in a row. BP gold is closing in on the 700 level and was fixed at 690.353 while Euro-gold is steadily heading towards the €800 level as it was fixed at €782.437 today. Both charts are absolutely stunning to behold. Europe has reached the point where you might say that confidence in paper money has been lost.  Eastern Europe is still a major overhang and fears about a regional default are probably not out of line.

Also, we are not yet through the month of February, but gold is on track to put in its highest monthly CLOSE ever. Coincidentally, that occurred back in February 2008 when the front month closed at $975. Next Friday’s close is going to be interesting to say the least. One more thing – gold in inflation adjusted terms is still well off its all time high which on an inflation adjusted basis is over $2,000. The case could me made that even at current levels, gold is not particularly expensive.

Last night Japan’s TOPIX set the lowest close in that index in 25 years. The “buy Japan” when it comes to the Forex markets took a direct hit for while the Yen did indeed move higher in the usual knee-jerk risk aversion trades, the news out of the land of the rising Sun was so gloomy, that even yen buyers were put off and the currency faded well off of its session highs. The reason I mention the yen is because this flight into the Yen has made it one of the few major currencies in which gold when priced in those terms has not set a brand new all-time high, in contrast to what the yellow metal has been doing when priced in just about every other major out there. Japanese investors are probably still rushing into what they perceive to be the safety of their bonds but one has to wonder how much longer that will be the case. You have to look at the Japanese stock market to realize just how bad things could deteriorate over here. Their broad stock market has never recovered from the bursting of its bubble back nearly 2 decades ago. Imagine – almost 20 years later, the stock market there, the Nikkei, has not even managed to stay recapture half of its losses!

Around mid-morning, something quite remarkable occurred in those same Forex markets, something which could quite possibly portend a major sea change in sentiment towards the Dollar. I cannot explain why but the Euro and then the other major currencies suddenly reversed course and shot sharply higher of their lows after being down sharply overnight and early in today’s morning sessions. Could it be that the Dollar is beginning to finally anticipate what the spending orgy that this nation is embarking upon is going to do to it? Remember how long it took for the bonds to realize that you cannot create gazillions of the things and then expect supply not to overwhelm demand. We had to sit through a bubble in that market where knee-jerk safe haven buying originating out of stock market fears gave way to supply side fears. This tug of war can still be seen in the bonds as they once again shot up sharply today but look how far off their bubble peak they are now sitting. I think we will eventually see something similar with the dollar, although I do not know the timing. It is interesting however that today’s move in the Euro and in the Dollar came on no news that I can see whatsoever. Those kinds of moves are always, always, the most significant ones. Right now, it sure as heck looks to me that the Dollar might have finally topped out. A weekly close below the 86.60 level will give us the technical signal that a short term top is indeed in. It is still too early to say a longer term top is in however.

The only commodities that I could see that were up today were gold, silver and platinum, with platinum having gone back to trading as a precious metal. Some guys are looking at it being priced very close to the price of gold and are wanting to own it. Every other commodity was down, and down hard. Grains got whalloped with beans leading the way lower. Crude oil gave up its gains from yesterday failing at the $40 level and now heading back down to near that magical $33-$34 level once again. Natural gas is getting the snot beat out of it as the glut of the stuff in supply continues to weigh down the market. It now has a “3” handle in front of it. Talk about cheap…. I only wish I had lots of spare salt domes to store the stuff so I could resell later after the inflation tidal wave that is coming arrives.

The mining shares are proving to be go to investments in the equity world as those who bought them are finally seeing them respond to the higher gold price. They are still well off the highs they made the last time gold prices were above $1000 however. To give you some perspective – The HUI was over 500 in March 2008. Currently it is near 325. The 50% retracement level on the weekly chart comes in near 335 so the HUI is definitely within gunshot of that. Large institutional investors will be monitoring that level with interest. If the HUI can mount a convincing climb above that level, they will move in. I should also note that the 50 week moving average also comes in near 341. To say that the HUI is at a critical level is an understatement to say the least. It is time for the bulls to perform if they want to break the back of the mining equity perma shorts. To a certain extent, some of the miners might be seeing selling pressure from guys just blowing completely out of stocks and selling everything. Other than that, I cannot see much other reason to sell them. When you get violations of major lows in the broad stock markets, that sets off a sort of random computer generated selling process and a lot of good stuff gets tossed out until the dust settles and guys who actually think before they pull a “buy” or “sell” level move in.

You will notice on the daily chart below that I have now made the switch back to the daily or in today’s case, the weekly chart. Gold is now at levels that we cannot see resistance levels on the short term charts until we get some more consolidation type price action. Until we do, I will not be using the 12 hour charts.

One last thing – on the delivery front – JP Morgan has gone to becoming a seller the last three days after taking 1,498 contracts out of the total 4,611. Goldman however took the lion’s share of deliveries once again stopping 611 out of 680 contracts. They have taken 2,162 February’s out of 4,611 or nearly 47% of all the gold. That has definitely caught my attention. Obviously someone for whom Goldman is acting was well informed about the gold market.

Enjoy your weekend and what is left of our once glorious country now that the Feds have decided to raid the productive class in the name of “fairness”.

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 2:45 AM (CST) by & filed under Jim's Mailbox.

Jim,

I always follow the money flows. As of last week the money flows into the Swiss Franc are bullish and have increased in intensity (15% for a lack of a better description is the acceleration factor).

CIGA Eric

Click chart to enlarge in PDF format

February1908-Eric.jpg

Posted at 2:40 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

It is rumored that Mr. Madoff was released on his own recognizance, and in the general area at the time of this incident.

Girl Scouts robbed as they sell cookies outside store
Reported by: Aubrey Mika Chancellor
Last Update: 4:43 pm

Two little girls and their troop leader were robbed outside a North Side store Wednesday night. The Brownie troop leader became emotional as she told News 4 WOAI how she witnessed the thief steal from the two 3rd graders.

"They didn’t take it from me. They took it from my girls," the troop leader said.

The 9-year-olds had set up and sold their cookies at the Walgreens in the Medical Center several times before, and everything had been fine. But Wednesday night, a man stole all of their hard-earned money.

"We were finishing up our shift and we were packing up our cookies," explained the girls’ troop leader.

That troop leader, who doesn’t want to be identified, said a man then walked up to their table.

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Jim Sinclair’s Commentary

The heartless SOBs that caused all this suffering simply will not stop!

When is enough, enough?

Jobless hit with bank fees on benefits
By CHRISTOPHER LEONARD

-First, Arthur Santa-Maria called Bank of America  to ask how to check the balance of his new unemployment benefits debit card. The bank charged him 50 cents.

He chose not to complain. That would have cost another 50 cents.

So he took out some of the money and then decided to pull out the rest. But that made two withdrawals on the same day, and that was $1.50.

For hundreds of thousands of workers losing their jobs during the recession, there’s a new twist to their financial pain: Even when they’re collecting unemployment benefits, they’re paying the bank just to get the money — or even to call customer service to complain about it.

Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan  Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what’s on the card.

"They’re trying to use my money to make money," said Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M. "I just see banks trying to make that 50 cents or a buck and a half when I should be given the service for free."

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Posted at 8:03 PM (CST) by & filed under General Editorial.

My Dear Friends,

Please be advised on the following concerning the Swiss Franc:

1. There is an ongoing battle between the US/GB and Switzerland over the full disclosure of the total 19,000 names on the books of UBS wherein tax evasion is said to have been solicited and abetted. In truth, very few of these accounts have been fully revealed and the US/GB wants all 19,000.

2. Since hedge funds pry on each other we are getting few very fat international hedge funds. They play the currency market in a big way as it is one of the few markets now able to absorb their interest.

As a result of both number one and two much of the media and expert commentary on the Swiss Franc is the use of media for dirty tricks as this is the major tool of these large funds and governments in conflict.

I would suggest in this case decision on the future of the Swiss Franc is better made on the 35 year technical price analysis. A short seeking to cover, which generally seems quite correct now amongst the weak versus dollar units, should and is taking place.

Negative media and short covering has gone hand in hand in this bear market. Was it not the same in all recent major market failures?

Why should currency be any different?

Respectfully,
Jim

Posted at 5:54 PM (CST) by & filed under General Editorial.

Dear Friends,

We have received over 300 requests so far to attend Jim’s gold presentation in Toronto. As a result, we are cutting off requests for seating effective 3 PM Eastern Standard Time. Anyone that has applied for seating before this cut-off time is welcome to attend. We have no way of telling the exact number of participants so it would be wise to arrive at the hotel a bit early. Meeting particulars are as follows:

Location:

Le Royal Meridien King Edward Hotel
Sovereign Ballroom
37 King Street East (Heart of Financial District)
Toronto, Ontario
Phone: (416) 863-9700

Meeting Time:
Thursday, February 26, 2009
12:15 PM to 2 PM (Toronto time)

Posted at 5:52 PM (CST) by & filed under Jim's Mailbox.

Jim and Team,

Yes, OTC derivatives have killed us all; some more than others. Even Paul Volcker can’t escape their deadly grip.

The following quote speaks the awful truth of the human and financial toll on Man, Country and Nations Worldwide:

“One of the saddest days of my life was when my grandson – and he’s a particularly brilliant grandson – went to college. He was good at mathematics. And after he had been at college for a year or two I asked him what he wanted to do when he grew up. He said, “I want to be a financial engineer.” My heart sank. Why was he going to waste his life on this profession?

A year or so ago, my daughter had seen something in the paper, some disparaging remarks I had made about financial engineering. She sent it to my grandson, who normally didn’t communicate with me very much. He sent me an email, “Grandpa, don’t blame it on us! We were just following the orders we were getting from our bosses.” The only thing I could do was send him back an email, “I will not accept the Nuremberg excuse.”
–Paul Volcker

Paul Volcker: The banking world needs more Canadas
Posted: February 17, 2009, 1:15 PM by Kelly McParland

I really feel a sense of profound disappointment coming up here. We are having a great financial problem around the world. And finance doesn’t work without some sense of trust and confidence and people meaning what they say. You take their oral word and their written word as a sign that their intentions will be carried out.

The letter of invitation I had to this affair indicated that there would be about 40 people here, people with whom I could have an intimate conversation. So I feel a bit betrayed this evening. Forty has swelled to I don’t know how many, and I don’t know how intimate our conversation can be. But I will, at the very least, be informal.

There is a certain interest in what’s going on in the financial world. And I will disappoint you by saying I don’t know all the answers. But I know something about the problem. Let me just sketch it out a little bit and suggest where we may be going. There is a lot of talk about how we get out of this, but I think it’s worth remembering, or analyzing, how this all started.

This is not an ordinary recession. I have never, in my lifetime, seen a financial problem of this sort. It has the makings of something much more serious than an ordinary recession where you go down for a while and then you bounce up and it’s partly a monetary – but a self-correcting – phenomenon. The ordinary recession does not bring into question the stability and the solidity of the whole financial system. Why is it that this is so much more profound a crisis? I’m not saying it’s going to get anywhere as serious as the Great Depression, but that was not an ordinary business cycle either.

This phenomenon can be traced back at least five or six years. We had, at that time, a major underlying imbalance in the world economy. The American proclivity to consume was in full force. Our consumption rate was about 5% higher, relative to our GNP or what our production normally is. Our spending – consumption, investment, government — was running about 5% or more above our production, even though we were more or less at full employment.

You had the opposite in China and Asia, generally, where the Chinese were consuming maybe 40% of their GNP – we consumed 70% of our GNP. They had a lot of surplus dollars because they had a lot of exports. Their exports were feeding our consumption and they were financing it very nicely with very cheap money. That was a very convenient but unsustainable situation. The money was so easy, funds were so easily available that there was, in effect, a kind of incentive to finding ways to spend it.

More…

Hey Jim,

I’m sure you’ve seen this by now but just in case you haven’t … enjoy!

Your pal,
CIGA Peter

Click here to see a visualization of TARP…

Posted at 5:51 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

True to their mentor, the Obama Administration moves forward.

“It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”
–Franklin D. Roosevelt

Please watch the present method by clicking here…

The result of the $7.5 trillion that entered the world monetary system prior to the election of President Obama is as follows:

clip_image001

The impact of the pork ridden Fiscal Stimulation bill is ambiguous at best. The following programs in the US and GB are relevant to those in the above illustration that have inherited the bailout of Wall Street in the form of a family anvil to be passed from generation to generation.

Bush Gardens

To cope with food shortages and food rationing during World War II, masses of people planted “Victory Gardens.” As America moves into the Greatest Depression, the need to put food on the table will again oblige people to grow their own…

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How To Get Your Own Allotment Plot
12:45am UK, Thursday February 19, 2009

It’s healthy, it’s cheap and you could even meet your next dream date – so what’s stopping you from starting up your own allotment?

As the National Trust announces another 1,000 allotment plots, Sky has teamed up with the National Society of Allotment & Leisure Gardener’s Limited to offer the ultimate guide to get you started.

* Don’t lose the plot- there’s currently a waiting list for many allotment plots so don’t waste any time. First port of call could be your local council. Some plots are owned privately and information on where to find them can be found in your local library. The National Trust today announced 1,000 new plots.

* Pay the rent – Rent levels vary from £1 to £70 a year but typically you will be paying around £25 a year for a plot of 250 square metres.

* Play detective – Visit several suitable sites to check whether they have problems with vandalism or trespassers and see whether they seems well-managed. Many sites have active associations which offer their members a trading hut and a members hut for socialising.

* Get competitive – Why not get involved by taking part in allotment competitions and fund-raising events. Taking part means you’ll meet new people – who knows plants may not be the only thing to blossom…

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