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

Dear CIGAs,

Gold is on its way back into the monetary system. That is certain.

It is also certain that one method being examined at the highest level is the Federal Reserve Gold Certificate Ratio, Modernized and Revitalized and no longer directly connected to interest rates.

If you are one of the gold gang that fears Volcker as an advisor to Obama, then you are ignorant of Volcker’s previous position on gold early in his career. I believe he is this time pro-gold because of the Mother of All Crises – his description of the conditions now.

Volcker does not waste words, nor is he glitzy. This is the Mother of All Crises, settlement of which demands a gold criterion which is the FRGCR.

The price will float but around a pivot point of $1650 (or higher). It will more than likely be within $200 based on expansion or contraction of a measure of US international debt.

Stable Money Is the Key to Recovery
How the G-20 can rebuild the ‘capitalism of the future.’
NOVEMBER 14, 2008

Tomorrow’s "Summit on Financial Markets and the World Economy" in Washington will have a stellar cast. Leaders of the Group of 20 industrialized and emerging nations will be there, including Chinese President Hu Jintao, Brazilian President Luiz Inacio Lula da Silva, King Abdullah of Saudi Arabia and Russian President Dmitry Medvedev. French President Nicolas Sarkozy, who initiated the whole affair, in order, as he put it, "to build together the capitalism of the future," will be in attendance, along with the host, our own President George W. Bush, and the chiefs of the World Bank, the International Monetary Fund and the United Nations.

When President Richard Nixon closed the gold window some 37 years ago, it marked the end of a golden age of robust trade and unprecedented global economic growth. The Bretton Woods system derived its strength from a commitment by the U.S. to redeem dollars for gold on demand.

True, the right of convertibility at a pre-established rate was granted only to foreign central banks, not to individual dollar holders; therein lies the distinction between the Bretton Woods gold exchange system and a classical gold standard. Under Bretton Woods, participating nations agreed to maintain their own currencies at a fixed exchange rate relative to the dollar.

Since the value of the dollar was fixed to gold at $35 per ounce of gold — guaranteed by the redemption privilege — it was as if all currencies were anchored to gold. It also meant all currencies were convertible into each other at fixed rates.

Paul Volcker, former Fed chairman, was at Camp David with Nixon on that fateful day, Aug. 15, when the system was ended. Mr. Volcker, serving as Treasury undersecretary for monetary affairs at the time, had misgivings; and he has since noted that the inflationary pressures which caused us to go off the gold standard in the first place have only worsened. Moreover, he suggests, floating rates undermine the fundamental tenets of comparative advantage.

"What can an exchange rate really mean," he wrote in "Changing Fortunes" (1992), "in terms of everything a textbook teaches about rational economic decision making, when it changes by 30% or more in the space of 12 months only to reverse itself? What kind of signals does that send about where a businessman should intelligently invest his capital for long-term profitability? In the grand scheme of economic life first described by Adam Smith, in which nations like individuals should concentrate on the things they do best, how can anyone decide which country produces what most efficiently when the prices change so fast? The answer, to me, must be that such large swings are a symptom of a system in disarray."


Posted at 3:31 PM (CST) by & filed under In The News.

Gold May Spike to $2000 in Medium Term

Gold can easily go up to $1500-$2000 in the medium-term, says Johann Santer, MD at Superfund Financial Hong Kong. As such, he tells CNBC’s Martin Soong that gold at $710 is a good entry point.

Click here to view video…

Jim Sinclair’s Commentary


President Bush says that TRANSPARENCY is very important.

Will the Federal Reserve yield the secret details of the two trillion dollar bailout?

Health Care:

More than 90 percent of reasonably sized cities and towns in the USA would be insolvent if they were required to put up the cost of their commitment to provide health care for retired employees. TRANSPARENCY anyone?

Jim Sinclair’s Commentary

If they are making applications to the Fed it says loud and clear:

1. They cannot finance in the commercial paper market.

2. They are in trouble to some degree.

3. The commercial paper market still stinks and Lie-bor does not reflect much.

Textron, AEP Ask for Access to Commercial-Paper Fund (Update1)
By Robert Schmidt and Bryan Keogh

Nov. 14 (Bloomberg) — A group of companies including Textron Inc., Nissan Motor Co. and American Electric Power Co. is pressing the Federal Reserve to expand purchases of commercial paper to include them.

The coalition wants the Fed to go beyond top-rated paper and buy debt with the second-highest grade, two people said on condition of anonymity. American Electric Chief Financial Officer Holly Koeppel said the group is seeking to add more companies and preparing a letter to outline its case.

While accepting lower-grade debt could reduce borrowing costs for a broader group of companies, it would also expose the taxpayer to greater risk. The request is one of a number of attempts to get a share of federal rescues, with industries from automakers to heating-oil retailers seeking funds.

“We are really creating a mindset where no one fails,” said Adolfo Laurenti, a senior economist at Mesirow Financial Inc. in Chicago.

Second-tier issuers of commercial paper, debt that matures in nine months or less and is a form of IOU for day-to-day expenses such as payrolls and rent, argue they’re disadvantaged by the Fed’s new Commercial Paper Funding Facility.


Jim Sinclair’s Commentary

Sounds reasonable to me.

Iran switches reserves to gold: report
Sat Nov 15, 2008 3:14am EST

TEHRAN (Reuters) – Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world’s fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency…the country’s money reserves were changed into gold so that we wouldn’t be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.


Posted at 7:48 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Linked below is a set of charts detailing the latest Commitment of Traders reports from the CFTC. I have included some comments on the charts as is my custom but there are several things that stood out enough for me to mention separately.

First of all – – the commercial shorts (the bullion banks) now hold their smallest number of outright short positions in nearly 3 1/2 years. One has to go all the way back to August 2005 to find a lower number. They have liquidated a mind-boggling 220,000 contracts since the beginning of this year but even more importantly, they have covered 190,000 shorts since July of this year. From a peak of 358,802 in July, before the gold market fell apart, they have now reduced their outright shorts down to a mere 167,614 contracts.

Why is this important? It tells us that the selling in the Comex gold market has not been coming from the bullion banks. They have been buying since July. Now they might sell on occasions as the market rallies into a resistance zone and provide the intraday capping but they are not adding to those shorts. Instead they are taking them off immediately as soon as the market begins to sell off.

Who then is doing the selling at the Comex? The answer is provided by looking at the data. The commercial long category has liquidated 52,000 longs since September 9. Lumped within this category are some of the giant index funds. At this point we have no way of knowing exactly how much of the selling in this category is specifically related to the index funds but I would guess that at least 50% of it is. The trading funds have sold out 124,000 of their existing longs since July with the small spec category unloading 33,000 longs over that same period (Note – these numbers are all rounded off). Not to be forgotten, some of the trading funds have gone short.

What we are therefore witnessing is confirmation that the selling pressure in the paper gold market is coming from hedge fund deleveraging and index fund redemption requests alongside of the general public who have been abandoning the commodities sector. How much longer this selling can continue is open for debate but at some point the bulk of the redemption request selling will end as those who wish to get out of commodities will have done so. At that point the paper gold market will bottom. I submit that this will occur at or near the same time that the grain markets put in a concrete bottom. A bottom in the crude oil market will be further confirmation. When these things occur, the commodity markets will begin to trade their own specific set of fundamental factors instead of the one sided selling avalanches that have buried nearly all of them irrespective of their own supply/demand factors. Right now, the dynamic that marks the commodity world is money related selling irrespective of fundamental factors. Simply put – it is all a money game that we are currently witnessing. These things happen fairly regularly in the futures markets although not to the extent and scope that we are now observing. I have seen enough of this sort of action in my trading career to know that eventually fundamental factors reassert themselves but only after the money issues are exhausted.

Trader Dan


Click here for today’s Commitment Of Traders charts with commentary from Trader Dan Norcini

Posted at 4:54 PM (CST) by & filed under General Editorial.

Dear Friends,

Let today be your answer to the many question concerning whether gold will ever rise again. The answer is it will to $1200 and then onward to $1650.

I suspect that we could soon have a financial/felony experience that could land on the dollar like a piece of lead.

I suspect that the instant the USDX breaks its present up-trend line from .72 to about .89, it will look like the dollar stepped into an elevator door and found no elevator there.

I suspect that the next move in gold will witness the massive short covering in all variety of shares, both majors and juniors.

Under no circumstances give away your insurance (gold and all things gold) and if you have then for your sake buy your insurance policy back ASAP (gold and all that is gold).

Gold is a currency that you will see perform as the currency of choice. There is no doubt we are headed into a planetary Weimar experience to some degree.

Dollars are being created faster now than in any other period in history. The Fed and treasury are guaranteeing everything from money market funds to large corporate entities in one way or another.

The first valuation of worthless OTC derivatives via a public sale of these at .0875 to .02 cents shocked anyone with a brain. Now the downturn in business is hitting financial entities and shortly litigation will smoke whatever is left.

The FDIC is already yelling for additional and significant funding from congress as their capital contracts on every Friday’s bailout and their responsibility to cover now goes to GE, a non-bank with no depositors.

People expect things to return to normal in 2010. That is a fairy tale.

All these bailouts and Federal guarantees on credit items constitute a white wash on a falling economic structure going out of control and soon.

The out of control point of major planetary dislocation is between today and 66 days from now.


Gold is the only viable insurance. The US dollar is not viable insurance because there is simply too much of it and that amount is growing every day. That makes the US dollar untrustworthy.

Gold is the only viable insurance. Clearly equities (with the exception of precious metals shares) are not.

Gold is the only viable insurance. US Treasury bills are not because the yelling at all the rating agencies in Washington today just might get US credit downgraded.

General commodities have been viable, but by nature they are too wild and from now on will be selective until Pakistan implodes and Weimar appears

Banks cannot offer insurance as they are in the main bankrupt.

Insurance companies cannot offer you sound insurance as they are now broke by OTC derivatives.

Money market funds are not insurance, making gold the only viable insurance.

Retirement programs are no longer insurance and with Motor’s bankruptcy pending they can simply disappear into Chapter 11.

Pensions are simply too large for the government agency to insure.

Jobs are no longer insurance as companies are run by lawyers and accountants.

Equity in your home is not insurance because it simply does not exist.

Your family is no longer insurance because they have the same problems you do.

The assumption your kids will take care of you in your old age is not viable insurance no matter what you think.

Gold has no liability attached to it and is therefore the only viable insurance as honest money.

Gold is universally exchangeable, making it the only viable insurance.

Gold has historically performed perfectly in maintaining buying power, making it the only viable insurance.

Gold is the only viable insurance because it is Honest Money without liability or agenda.

Since gold is the only viable insurance and because everyone needs it, gold will trade at levels of at least $1200 and $1650.

I could go on but gold is all there is that will protect you from the White Wash being applied to the Walking Dead entities by the Fed and Treasury on a structure that is in fact in a free fall.

I am not the least concerned about gold and believe you should not be either as long as you have no margin and understand what gold really is: the only honest currency and only historically functioning insurance policy. There is no other viable insurance in this most unusual situation.

Please review the Formula as the US Federal Budget is going ballistic as the TIC report contracts like a turtle into its shell.

Jim’s Formula:
September 1, 2006

  1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
  2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella – Goldilocks situations.
  3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
  4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.
  5. Lower profits leads to lower Federal Tax revenues.
  6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
  7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
  8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit)
  9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
  10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
  11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
  12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.
I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.

Respectfully yours,

Posted at 4:36 PM (CST) by & filed under Guild Investment.

Dear CIGAs,


A few weeks ago many thought I was out of my mind.  I had the temerity to state that I thought that we were going into a depression, not a recession, and that the economic decline would last for two to three years.  Now, it looks like a few others are coming around to my view.  The chairman of Goldman Sachs recently said we are facing a banking crisis worse than the Great Depression.  The former chairman of the New York Stock Exchange said it is comparable to the Great Depression.

More and more are willing to admit the magnitude of the problem.  We continue to see a few Pollyanna types who want to see everything as sunny.  For them, we have the following outlook.  In our opinion, things will get sunny and big buying opportunities will periodically develop, but they will be interspersed with big declines, and a lot of hand wringing.


Unfortunately, we do not believe that this is not the end of the derivative problem.  A bigger problem looms on the horizon.  Derivatives are still being created everyday.  Often, they are created by people who are just as greedy and self deluded, as those who created the mountain of mortgage derivatives that have brought the system to its knees.  If the current unexploded mountain of derivatives were to implode, (as those derivatives connected to mortgage bonds did) the crisis could become much worse.


Derivatives and bonds connected to mortgage assets have collapsed, bringing the world banking system to its knees.  Many other types of derivatives have not imploded, but may do so.

In the case of mortgage bond derivatives, they exacerbated an already serious collapsing mortgage bubble.  The mortgage derivatives caused the destruction of the PACKAGERS OF MORTGAGE DERIVATIVES, also known as INVESTMENT BANKS, who drank the poisoned wine along with their clients.

In one year, the entire industry of large investment banks dissolved.  They failed and/or were forced to become bank holding companies.  This is the most astounding effect imaginable.  It happened because the investment banks, believed the absurd valuations that they and rating agencies, had given to toxic assets (mortgage derivatives) which they held.

Eventually, some investors started to listen to analysts like Jim Sinclair, myself and others.   A few investors began to grasp the absurdity of the mortgage derivative valuations, and the extent of the self delusion that investment banks and their clients were living under.


This new problem stems from bonds (and derivatives on bonds) connected to consumer loans.  Just as they did with mortgages, investment banks packaged pools of AUTO LOANS, CREDIT CARD DEBT, and STUDENT LOANS into derivatives.  In our opinion, these too will eventually implode when the weak economy causes many borrowers to default on their loans.  It is no mystery why Secretary Paulson yesterday announced, that he wanted to help consumer finance companies.  The obvious reason is that bad debts on auto loans, credit cards, etc., are the next bond and derivative bomb waiting to explode.


A third type of derivative is based on commodities and stocks, and speculation in commodities and stocks.  These are known as options and futures on stocks and commodities.  In many cases they are transparent and the underlying assets are liquid.


The rating agencies are another immense scandal.  They operate in a field filled with conflicts of interest.  We predict that they will be dismantled, sued, and may be hounded out of existence.


The U.S. stock market peaked in October 1929 at about 381 on the Dow Jones Industrial Average.  It bottomed 2 years and 9 months later in July 1932, at about 41…a decline of almost 90%. 

Then a rally began.  Over the next four years, the Dow went up over 300%.  In our opinion, we should be looking for a big long term bottom sometime in the next year.  From that bottom, we believe that the market could rally for prolonged period and rise substantially.


In our opinion, during the correction phases, and when the market gets cheap over the next year or more, investors should search for value globally, and buy: growth stocks in several countries, gold shares, undervalued currencies, and commodities.


Thanks for listening.
Monty Guild and Tony Danaher

Posted at 3:22 PM (CST) by & filed under Uncategorized.


The graphical representation of the Formula illustrates an accelerating down trend. Yet despite this fact gold investors, possibly CIGAs, continue to display fear and lack of conviction. It is this fear and disorganization that allows bullion banks to pick our pockets regardless of the fundamentals. Anger turned inward makes for easy prey. Anger turned outward creates formidable opposition.

You two are the conduit for turning that anger outward. I just handle the Z scores.

Have a nice evening,

Click charts to enlarge in PDF format



Dear Mr. Sinclair,

Is this at all possible? Could you comment please?

Thank you,

The G-20’s Secret Debt Solution
by Larry Edelson   11-13-08

If you think this weekend’s G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks … think again.

Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.

I’ve been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I’m about to tell you now is not on the G-20 table this weekend.

Furthermore, I believe the end result will make my $2,270 price target for gold look conservative, to say the least. You’ll see why in a minute.

First, the G-20’s motive for a new monetary system: It’s driven by and based upon this very simple proposition …

“If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”


Dear CIGA N,

Maybe not in this form, but at some time this will happen. Gold will basically be a control factor. That is a form of FRGCR.

I rather doubt that the G20 will do much other than yell and scream at each other for more Quantitative Easing from Washington in their area of economic concern.

I have learned never to say never with respect to other’s opinions.

I doubt it, now.