Posted at 7:20 PM (CST) by & filed under Jim's Mailbox.

Dear Monty and Dan,

I think this is very important. An ex-Fed bigwig sees the solution as revaluing the gold on the books. I have not seen this commented on and thought it would be of interest.

The Gold comment is about 8 minutes into the video.

Click here to view the video…

He says not to worry about the Fed’s balance sheet because they can just revalue their "gold certificates." This comment is at min. 11:20

This is very interesting coming from an ex-Fed big wig. Gold revaluation is beginning to be discussed…

Thanks,
CIGA Andrew S.

Dear Dan and Monty,

This video has good things in it and not only on gold. It should be reviewed by serious students and investors in gold and the US dollar from the moment it starts until the very end.

Think "Federal Reserve Gold Certificate Ratio, Revitalized and Modernized," and not tied to interest rates but rather to a measure of international liquidity. This would require gold be re-valued to market prices.

It seems to me we will draw closer and closer to a US dollar FRGCR backstop being called on as we near the .62 to .52 range on the USDX.

Respectfully yours,
Jim

Jim,

For your information..

Global interest cuts:
Korea cuts rates 100bps to 3%, 50bps was expected;
Taiwan cuts rates 75bps to 2%, 50bps was expected;
South Africa cuts rates 50bps to 11.50%, expected;
Switzerland cut rates 50bps to 0.50%, expected;

Anthony R. Danaher
www.guildinvestment.com

Jim,

I own several warehouse receipts for numbered allocated silver bars but am concerned after reading Dr. Fekete’s recent warning:

"Item 6: Even allocated and segregated metal account gold is not safe. The temptation on the account providers to default will be irresistible. They are not going to release the gold until expressly ordered by the courts, and will make sure that no gold will be left by then."

Do you believe that this is correct and also true for silver? If so, what safe storage options are there for relatively bulky silver in the United States?

Your insights on storage options for precious metals and degrees of safety would be greatly appreciated.

CIGA Ron M.

Dear Ron,

This week on www.jsmineset.com I gave you a total review of how to take delivery, how to transport precious metals, how to store precious metals safely and even provided a person to help you do it.

My reasons are different from Dr. Fekete’s take, but the remedy is the same.

All the best,
Jim

Click here to read the original article…

Posted at 3:37 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Are you tired of those Gold banks that specialize in stealing your gold price lollypop on a daily basis, as they did once again today? I am.

There is only one way that we can permanently corral these costly nuisances.

If you can afford to buy 100 ounces of gold, buy it as the near trading month future on the Comex and then take delivery. Please move your gold bar or bars out of the Comex warehouse. You will have no problem reselling a bar like a Johnson Matthey or some other major refiner registered serial numbered bar.

The Comex requirement of re-assay before sale is simply a means to dissuade you from removing your gold from their warehouse. It only applies to sales on the Comex.

The entire process can be handled at every point with you by CIGA JB Slear. He has promised not to solicit you but only to serve you.

CIGA JB Slear can be reached at the following:

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104
Please for all of us, and certainly for your best interest, do the necessary.

There is no other means of defense against these grinches. It is the only way to stop our pockets being picked daily as the Comex sees itself being moved toward a cash exchange by the longs.

If you have the financial capacity to do this and do not then do not moan when these knuckle dragging apes knock a few hundred dollars off gold from time to time while the physical market is devoid of gold due to massive demand (like now).

Comex Gold Surges As Dollar Falls, Oil Soars
Thu, Dec 11 2008, 19:38 GMT
By Allen Sykora

Gold futures hit a seven-week high Thursday as the dollar tumbled, crude oil rallied sharply and investors turned to the metal as an alternative to low or non-existent yields in the Treasury markets, analysts said.

Nevertheless, gold stalled around chart resistance and some profit-taking set in after a sharp run-up in recent days.

February gold rose $17.80 to $826.60 an ounce on the Comex division of the New York Mercantile Exchange.

"We broke some major technical levels on the dollar index, which is going to be supportive for gold going forward," said Rob Kurzatkowski, futures analyst with optionsXpress.

The dollar index fell as far as 83.282, its weakest level since Oct. 30. And the euro hit a high of $1.3403 that was its strongest level against the greenback since Oct. 20. Traders often turn to gold as a hedge against dollar weakness.

"The dollar looks like it has broken out of its trading range and we may have seen a top in the dollar for a while," said Bill O’Neill, one of the principals with LOGIC Advisors.

More…

 

Jim Sinclair’s Commentary

The Comex gold bear manipulation must be stopped. Demand today in the physical market was immense yet the Comex knocked $20 off the gain.

Fear triggers gold shortage, drives US treasury yields below zero
By Ambrose Evans-Pritchard
Last Updated: 9:26AM GMT 11 Dec 2008

The investor search for a safe places to store wealth as the financial crisis shakes faith in the system has caused extraordinary moves in global markets over recent days, driving the yield on 3-month US Treasuries below zero and causing a rush for physical holdings of gold.

"It is sheer unmitigated fear: even institutions are looking for mattresses to put their money until the end of the year," said Marc Ostwald, a bond expert at Insinger de Beaufort.

The rush for the safety of US Treasury debt is playing havoc with America’s $7 trillion "repo" market used to manage liquidity. Fund managers are hoovering up any safe asset they can find because they do not know what the world will look like in January when normal business picks up again. Three-month bills fell to minus 0.01pc on Tuesday, implying that funds are paying the US government for protection.

"You know the US Treasury will give you your money back, but your bank might not be there," said Paul Ashworth, US economist for Capital Economics.

The gold markets have also been in turmoil. Traders say it has become extremely hard to buy the physical metal in the form of bars or coins. The market has moved into "backwardation" for the first time, meaning that futures contracts are now priced more cheaply than actual bullion prices.

More…

 

Jim Sinclair’s Commentary

This is a global event caused by a singular scam. That scam is OTC derivatives. OTC derivatives have turned a normal economic correction into a global disaster.

Financial life has met its global killer and will not survive.

Until the focus of fixing looks at OTC derivatives as the only culprit, no solution can be anticipated ever.

The longer it takes for derivates to take the problem limelight, the less chance there is for anyone to do anything but sit back and watch the world implode.

Globally at the instant this started, all OTC derivative of all kinds should have been drafted into a Resurrection Trust, taking the profits from the profit makers and loses from the loss makers.

All the derivative makers should have been arrested and their assets seized. Those entire assets would be credited to the Resurrection Trust.

All tax havens and bank secrecy states would have to cooperate only where the OTC derivative culprits are concerned or their banks would get no part of the pie. Actually if you had done that the math would have worked.

The only problem with this plan is then there would not be jails big enough. The District of Columbia would be a wasteland and country clubs would have been decimated. The Columbus Club would be empty and there would be no more bridge games at Jimmy’s condominium mansion.

BOJ’s Nishimura Sees No End to Financial Turmoil (Update1)
By Mayumi Otsuma

Dec. 10 (Bloomberg) — Bank of Japan Deputy Governor Kiyohiko Nishimura said there’s no end in sight to the global financial crisis that began with the collapse of the U.S. home mortgage industry last year.

“The turmoil in financial markets and the financial system, which was triggered by the U.S. subprime loan problems, continues to spread worldwide,” Nishimura said in a speech in Tokyo today. He said Japanese banks are becoming more wary of lending to small businesses as the economy stagnates.

The credit crunch in the U.S. and Europe has spread to Japan, as investors grow reluctant to lend cash on concern companies won’t be able to repay debt. Japan’s first recession since 2001 is deepening as companies including Sony Corp. and Toyota Motor Corp. cut production, jobs and spending.

“With the global economic slowdown prolonging, it’s becoming increasingly clear that Japan is slipping into a severe recession,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The Bank of Japan will be forced to take more policy action eventually.”

Nishimura said that while being more prudent about lending may seem reasonable to individual banks, if they all hoard cash at the same time that would worsen the economic slowdown.

More…

 

Jim Sinclair’s Commentary

This is a global event caused by a singular scam. That scam is OTC derivatives. OTC derivatives have turned a normal economic correction into an irreversible global disaster.

Heavy withdrawals hit Gaisano bank as more banks close

CEBU CITY — Alarmed by the bank holidays declared by rural banks under the Legacy Group, depositors have flocked to a Gaisano-owned bank since Wednesday in a bid to withdraw their money.

Three of the seven branches of the Rural Bank of Subangdaku (RBS) in Metro Cebu and one in Dumaguete City in Negros Oriental suffered from heavy withdrawals since Wednesday, said spokesperson and administrative manager Maritess Obenza.

Despite this, she assured that they had no plan to declare a bank holiday in any of the affected branches.

"The board (of directors) is still meeting on how to address the withdrawals although we have contained these because we were able to explain to our depositors and convince them that there’s no need to panic," Ms. Obenza said.

RBS depositors panicked after rural banks under the Legacy Group declared bank holidays. The affected RBS branches are located near the Legacy banks.

More…

 

Jim Sinclair’s Commentary

Here it comes on a global basis. That is Quantitative Easing plus Fiscal Stimulation at the same time. QE means saturation bombing the world with newly minted money.

U.K. May Expand Toolkit to Halt Recession Slide (Update3)
By Gonzalo Vina

Dec. 10 (Bloomberg) — The U.K. government and central bank are considering plans to pump billions of pounds into the economy as the bank rescue package and the lowest interest rates since 1951 fail to halt a slide into recession.

The Bank of England and the Treasury are weighing a strategy known as “quantitative easing” where authorities increase money supply to boost bank reserves. The initiative was last used by Japan at the start of the decade.

Prime Minister Gordon Brown’s government is frustrated that banks are rationing credit after tapping the Treasury for cash and guarantees to prop up their own balance sheets. Policy makers both in the U.K. and the U.S. Federal Reserve are looking beyond traditional interest-rate tools to revive the economy.

“The Bank of England has to step up to the plate,” said Neil Mackinnon, chief economist at ECU Group Plc in London. “They are thinking hard about quantitative easing. But they probably won’t announce anything until the next quarter, and they’ll follow the Fed.”

A U.K. Treasury spokesman said it is prudent for the government and the central bank to consider all options as the Bank of England’s benchmark lending rate approaches zero. He denied that a decision has been made and declined to be identified in line with government policy.

More…

The unthinkable has happened
Posted by Tracy Alloway on Nov 10 15:49.

Just two weeks after Deutsche Bank issued a note discussing the possibility of Japan-style quantitative easing in the US, it’s happening.

DB’s previous note was titled “The unthinkable.” This one is “Losing control of monetary policy.” From the note:

We are already close to a zero interest rate policy and quantitative easing, given the recent behavior of the effective fed funds rate and reserve balances.

Monetary policy has become more stimulative than indicated by the fed funds target, implying increasing loss of control of monetary policy.

FT Alphaville discussed most of the ins and outs of this last week. Deutsche Bank adds more meat to the argument today:

More…

Jim Sinclair’s Commentary

I am much too conservative at $1650. I believe Alf Fields has nailed it. Kudos to Alf.

RETURN TO $11-$13 SILVER?
Trend of gold as store of wealth ‘may start to snowball’–ScotiaMocatta
Deep-rooted global financial problems will escalate the demand for gold as a safe haven.
Author: Dorothy Kosich
Posted:  Wednesday , 10 Dec 2008

RENO, NV – In its December Metals Matters report, ScotiaMocatta suggests that global financial problems "seem so deep rooted that demand for gold as a safe haven is expected to escalate."

On silver ScotiaMocatta advised, "Investors remain key to silver’s fate, but its monetary attributes should keep investment demand strong."

Their analysis also noted that low PGM prices, especially for palladium, are "likely to rebalance the PGM markets before too long-thus providing long term investment opportunities.

Gold

Although ScotiaMocatta remains bullish for gold "we are concerned that gold prices are not considerably higher given the current bullish climate. "

"We see two possible reasons for this. Firstly, funds and investors have been in liquidation mode and industrial commodities have been hard hit. As gold is a component in commodity baskets, which were popular investment vehicles in the commodity boom, gold has been sold as investors have sold their commodities. "

"Secondly, gold has traditionally been bought for a ‘rainy day’ and many hedge funds and other institutional investors have indeed been having a ‘rainy day,’ according to ScotiaMocatta. However, as central banks’ measures to tackle the financial rout start to work, the level of redemptions is likely to slow and that should provide less selling pressure in gold."

ScotiaMocatta’s analysis revealed that gold lease rates have been soaring and "likely to put an end to the gold carry trade, at least for a while. With interest rates falling, the profit margin on gold carry trades has diminished significantly. This means that as former carry traders come to the end of their term, gold will be withdrawn from the system and returned to central banks."

"As carry trades are closed the pressure on the spot market will switch from selling pressure to buying pressure," they advised.

If people lose faith in the financial system and their currencies, ScotiaMocatta forecasts "the growing trend in wanting some gold as (a) store of wealth may start to snowball."

More…

Posted at 3:36 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

People have been incredibly slow to look ahead but the announcement today of a budget deficit of over $180 billion for the month of November 2008 (one month), seems to have spurred them to action. They have been selling the dollar and buying gold and iron ore (which benefits the infrastructure spending in China and the US). By the way, 12 times $180 billion is $ 2.16 trillion. That amount sounds to me like a good guess for the next 12 month’s budget deficit.

Respectfully yours,
Monty Guild

Fed Weighs Debt Sales of Its Own
Move Presents Challenges: ‘Very Close Cousins to Existing Treasury Bills’
By JON HILSENRATH and DAMIAN PALETTA

The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.

Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.

Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter.

It isn’t known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn’t explicitly permit the Fed to issue notes beyond currency.

More…

Posted at 2:59 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold shot through another level of overhead resistance in convincingly fashion before it was capped near the $830 level. The selling at that level was quite incongruous with the massive upside move in the Euro and the nearly $6.00 move higher in crude oil. With the Dollar falling completely out of bed as wave after wave of speculative sell stops were touched off, it made the obvious defense of $830 in gold by the bullion banks all the more laughable. Gee fellas, nothing like being discrete is there? Then again, they do not even bother to trying covering their footprints any more. Anyone with a lick of chart reading knowledge can see their handiwork Seriously, no amount of paper gold market shenanigans by these people can change the fact that the market seems to be coming to grips with the near infinite amounts of dollars which the feds insist on throwing at any business entity that can afford to hire enough lobbyists to endlessly recite why it is too big to fail. The rush into Treasuries, creating one of the biggest bubbles I have seen in that market and probably will not see again, has dropped yields to zero and in some cases below zero. With that kind of backdrop, it makes perfect sense for investors looking for a safe haven to move into gold considering that dollars are going to be dropping out of the sky.

It should be noted that the move higher in gold is not confined specifically to gold priced in Dollar terms alone. Gold priced in euros, or Euro-Gold as I prefer to call is, came in solidly above the 600 level today at the PM Fix with the price set at €624.011. Gold priced in pound sterling set another new all time high being fixed at 554.495. I will try to get some gold charts priced in various currencies up later today if time permits.

When you have gold moving higher in terms of all the major currencies plus the mining shares moving higher, it is always a positive. Keep in mind that tomorrow is Friday and after a move of the magnitude that gold has shown us this week, it is not to be unexpected that some profit taking by short term oriented longs will occur as they see the bullion bank selling appear.

Open interest saw a very good increase in yesterday’s big upmove; something which is technically friendly. We just might have finally bottomed out in the open interest after dropping from nearly 594,000 contracts to a low point of 261,000. That is one helluva market flush. We need to see a steady increase in this number to support any upside trending move. I have no doubt that a good number of those funds who had chased momentum lower and were selling into the weakness are now effectively out of the market after yesterday and today. Their buying helped propel prices higher as it was the sell stops that they had in place that were touched off. Fresh buying now must carry the load against what we all know will be the endless paper selling by the banks. Don’t forget – the best way to deal with these people is to continue taking delivery of physical gold and taking the gold OUT of the warehouses.

I think it important to note that the selling of the Dollar was broad based today in a fashion that we have not seen for some time now. What I mean by this is that we have been accustomed to seeing the Dollar and the Japanese Yen basically moving in sync. They go up as risk aversion rises and they go down as the appetite for risk returns. Today, they went in totally different directions. The Yen was higher along with all the rest of the major currencies while the Dollar was beaten with the proverbial ugly stick. Whether today’s balance of trade numbers sparked the whipping that the Dollar took is unclear but it sure did not help matters any to see the deficit shoot sharply higher, much higher than just about anyone was expecting. It should not have come as a surprise however  given the weakness in crude oil and the strength in the dollar. The last thing that US export related businesses want to see, especially in the ag sector, is a higher dollar. It is already seriously choking off agricultural commodity export business. Expect to see more political pressure arising from the US against China on the issue of the yuan and its valuation. Then again, how does one expect to deal with the fellow who loans you all the money with which to feed your profligate spending habits?

The bonds continue in their bubble – no doubt a lot of the support in that market is guys continuing to front run expected purchases by the Fed against the longer end of the curve as they work to push down interest rates to try to jump start the real estate sector. That is why dips continue to be bought. At some point guys will realize that they are throwing their money into a rat hole but for now, the trend is their friend. The question is how long does “for now” last?

The price of spot gold climbed above the price of platinum today for the first time since 1996.

I will not be writing a commentary tomorrow or Monday as I have some other engagements that call me away but should be able to get some comments or charts on Tuesday of next week. If I can get anything together over the weekend I will.

Click chart to enlarge today’s action in Gold as of 12:30pm CDT with commentary from Trader Dan Norcini

December11087Gold1230pmCDT

Posted at 12:07 AM (CST) by & filed under General Editorial.

Dear CIGAs,

There is a great shift in the gold market that is being consistently leaned against by the Gold Banks. You can be sure they will be back to rip us all off. Please do me and yourselves a great favour: No matter where you are on this planet if you can afford a 100 ounce bar buy the nearby month gold on the Comex, take delivery then remove the delivered gold from the warehouse.

CIGA JB Slear will walk with you the entire way if you want the complexity transmuted into simplicity.

Fear triggers gold shortage, drives US treasury yields below zero
The investor search for a safe places to store wealth as the financial crisis shakes faith in the system has caused extraordinary moves in global markets over recent days, driving the yield on 3-month US Treasuries below zero and causing a rush for physical holdings of gold.
By Ambrose Evans-Pritchard
The Telegraph, London
Wednesday, December 10, 2008

"It is sheer unmitigated fear. Even institutions are looking for mattresses to put their money under until the end of the year," said Marc Ostwald, a bond expert at Insinger de Beaufort.

The rush for the safety of US Treasury debt is playing havoc with America’s $7 trillion "repo" market used to manage liquidity. Fund managers are hoovering up any safe asset they can find because they do not know what the world will look like in January when normal business picks up again. Three-month bills fell to minus 0.01 percent on Tuesday, implying that funds are paying the US government for protection.

"You know the US Treasury will give you your money back, but your bank might not be there," said Paul Ashworth, US economist for Capital Economics.

The gold markets have also been in turmoil. Traders say it has become extremely hard to buy the physical metal in the form of bars or coins. The market has moved into "backwardation" for the first time, meaning that futures contracts are now priced more cheaply than actual bullion prices.

It appears that hedge funds in distress are being forced to cash in profits on gold futures to cover losses elsewhere or to meet redemptions by clients. But smaller retail investors — and perhaps some big players — are buying bullion in record volumes to store in vaults.

The latest data from the World Gold Council shows that demand for coins, bars, and exchange-traded funds (ETFs) doubled in the third quarter to 382 tonnes compared to a year earlier. This matches the entire set of gold auctions by the Bank of England between 1999 and 2002.

More…

Posted at 6:48 PM (CST) by & filed under JSMineset Editor.

Dear CIGAs,

Jim will be leaving for Africa this coming weekend with a planned return on the 10th of January.

While postings may be slightly less than usual, Jim will not be out of contact with the community at any time whatsoever.

Regards,
Dan Duval
JSMineset.com Editor

Posted at 6:32 PM (CST) by & filed under General Editorial.

Dear Friends,

From the Dow Jones high in 1929 it took until 1932 to establish the absolute low. From the establishment of that low point in 1932 low it took 25 years to regain the 1929 high (1954).

It was no coincidence that Roosevelt went to fiscal stimulation in 1932 – 1933 in the form of jobs creation by proxy, such as the Civil Conservation Corp (CCC) and other make work programs. Roosevelt proposed conservation and other work programs as the means of unemployment relief during the 1932 presidential campaign. Senate Bill 5.598, the Emergency Conservation Work Act; was signed into law on March 31, 1933. This initiative is still on the books, having not been funded since 1941.

This is why liberal President Elect Obama will embrace fiscal stimulation with a vengeance, possibly as soon as at the Swear In Ceremony.

I am told that $1 trillion is only for starters.

Today is so different in substance than 1929 – 1932 even if it is a mirror image in unfolding chapters.

Monty is spot on regarding the total final cost of the Sin of OTC derivatives, saying that it will reach only $20 trillion if we are lucky.

CONSEQUENCES my friends. Consequences cannot be avoided.

While the Fed and Treasury take their lead into action from what went wrong with 1929 anti deflationary policies, no one is considering the consequences of their present economic acts that will go infinitely more wrong than any boo-boo in the 1929-1932 period.

Gold is going much higher than $1650. Alf Fields is right in his studies. My estimate of $1650 that I have held since 2000 is terribly conservative.

Be strong. Stop looking for why you are wrong and start knowing why we are right.

Bert Seligman taught me a simple truth:

“The weak succumb, the strong survive.”

Be strong in your commitment. Don’t let some wackjob with a second hand laptop and a bottle of cheap gin cause you to lose sleep.

Respectfully yours,
Jim

Click charts to enlarge the Dow action from 1900 onward in PDF format

djia1900s djia19201940s

Here are some questions to exercise your logic:

If there are $8.5 trillion of losses in OTC derivatives is there not a corresponding profit in cash or position value somewhere?

When the Federal Reserve buys all this so called toxic paper does the Federal Reserve not become the counterparty of obligation to the OTC derivative with humongous losses?

Why is there so much Washington noise about TARP, a program totalling $700 billion, and total silence on the subject of $8.5 trillion?

It was a stroke of genius when they named him BARNEY.

Posted at 4:42 PM (CST) by & filed under General Editorial.

Dear Friends,

I believe through the $2 trillion of fiscal intervention stimulation, a number I hear from the inside, the 8.5 trillion total so far is going to $20 trillion. Before this is all over the tremendous liquidity will transmute into inflation without precedent.

That is what you heard from Gold today.

The general equity rally in the early 30s was a humdinger so expect that rally to occur in the USA.

The only difference is when the monetary cat is let out of the bag by fiscal spending that Fat Cat will not go back into the bag. Gold will be launched into a multi-year phase of the long term bull market even when the equity rally in this bear equity market completes itself.

That encapsulates all you need to know concerning gold and the US dollar.

Respectfully yours,
Jim