Posted at 6:08 AM (CST) by & filed under Guild Investment.

Dear Jim,

Today’s New York Times spells out in stark black and white the government plan.

IN OUR OPINON THIS PLAN IS A VERY POSITIVE CATALYST FOR GOLD AND FOREIGN CURENCIES TO CONTINUE TO RISE FOR A PROLONGED PERIOD.

May I quote From a front page NYT article entitled “In A Bold Action, Fed Cuts A Key Rate To Virtually Zero”

“…Of much greater practical importance, the Fed bluntly announced that it would print a much money as necessary to revive the frozen credit markets and fight what is shaping up as the nation’s worst economic downturn since World War 2.”

THAT SAYS SOMETHING LOUD AND CLEAR

May I translate: In my opinion, they are saying we want to liquidify the banking system, and we want to do it now. We know that there will be consequences such as a lower US dollar and more inflation. We are just as happy that the dollar is falling – this will help with exports. We are not happy that inflation will rise, but that is a necessary side effect of bringing liquidity back to the banking system so be it. We will deal with the inflation problem later.

Of course dealing with inflation after it becomes imbedded may be another equally intransigent problem.

Your pal,
Monty Guild
www.GuildInvestment.com

Posted at 2:49 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Today’s action in nearly every single market that trades can best be described by one phrase – “It’s all about the Fed”. Their decision to basically print as much money as needed to liquefy the financial system is a signal that the Dollar be damned as far as they are concerned. They will create as many of those little green things as they feel is necessary to free up the logjam in the credit markets. The Forex markets wasted no time whatsoever in administering a sound “arse whooping” to the greenback as it has utterly collapsed. We have been saying at this site for years now that the Fed would burn the dollar to the ground rather than allowing the stock market and the general economy to slump into a depression. That prediction has been vindicated I think it is safe to say. It really did not take a rocket scientist to figure this out; one merely had to read Chairman Bernanke’s own writings where the strategy is laid bare for anyone who wanted to see it. The only question in my mind at this point is exactly how fast the monetary authorities are prepared to let the dollar fall since it is no longer a matter of “IF” it will fall – they want it down. No one is going to want the dollar to drop off the face of the earth – what they ideally want is a “controlled descent” if such a thing is possible now that any fundamental support beneath the dollar has been eliminated.

When you throw in the fact that the incoming administration has made it clear that their intent is to create a government works project modeled after the New Deal of the 1930’s, the whole thing has an eerie, surreal feeling as if we have been here before. Budget deficits into the future as far as the eye can see coupled with free money being thrown into the system is a recipe for the demise of the Dollar. All this translates to much higher gold prices especially with the absolutely pathetic yields that investors can now hope to obtain on US Treasuries.

The mining shares are higher today building on yesterday’s impressive late session power move higher. The 100 day moving average is below the HUI’s session low with the last barrier up near the 200 day moving average around the 350 level. That same moving average comes in near the 148 level for the XAU. It too is trading above the 100 day moving average with the 10, 20, 40 and 50 day all now moving up. The charts are clearly in a bullish technical posture. On the weekly HUI chart, prices have moved above the 38.2% Fibonacci retracement level off the early 2008 peak and the October low. A key test will be the 50% level near 334. A close above that and the shorts are cooked. I am interested in seeing where support emerges on any dips in price. The fact that this move is coming so late in the month and year is noteworthy as generally this is a period in which liquidity tends to dry up and most investors do not commit to anything of size as far as positions go. They are generally reducing positions and getting ready to take off until the new year. That alone tells me that this is not an ordinary move; rather a great deal of distress is taking place and emotions are very strong.

Back at the paper gold market known as the Comex – open interest is indeed rising – a bullish technical signal but the rather small extent of that rise is a sign that a great deal of short covering has been occurring. The jump in open interest in the very distant months is a sign that the spreaders are also at work. With open interest still at very low levels and all of the technicals now generating bullish signals and upside momentum, the room for a very large build in speculative long positions is quite ample.

Bonds are moving vertically, a sure sign that a market is in a parabolic blow off run. That market is a giant bubble but only the very brave or very, very quick will be able to get in front of it. When it pops, and it will, great will be its fall. In the meantime, the trend is higher as the many traders are simply buying the long end with flattening trades and could care less how high they push it.

Back to gold – deliveries for December gold have been continuing with 500 contracts still left open in the December. Those of you who have been taking delivery  – nice work – those of you who are financially able and wish to secure more physical gold – how about joining the effort to level the playing field against the bullion banks. Do not leave the gold in the warehouses if you stand for delivery. Physically remove it.

Technically gold has run all the way to the technically significant level near $880. If it can clear this level and shrug off the selling that we saw come in today near there, it will be at $900 the next day. With the huge move in the dollar the last few days, it would not be unexpected to see a bit of a pause in the Forex arena which might stir some short term longs to book a few profits in the gold. Then again, one can just look over at the bond market and see a market which really is not pausing a helluva lot. The psychological damage that was inflicted on Dollar bulls by the Fed’s decision yesterday was simply enormous. The nearest I can come to describing the experience that the Dollar bulls went through would be to defenders inside a castle learning that their reserves intended for reinforcement had just thrown open the huge gates from the inside and laid down a red carpet with the words, “Welcome” inscribed on it.

Those of you who are interested can take a look at the CCI index. If it can get back above the 370 level on two consecutive closes, the commodity complex might have bottomed as a whole.

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

December1708Gold1230pmCDT

Posted at 1:07 PM (CST) by & filed under Guild Investment, Jim's Mailbox.

Dear Jim,

Please note this Reuters memo from yesterday. Norway has the safest bonds while Germany is also safe.

Your pal,
Monty

Norway safest govt debt investment, Ecuador riskiest -study
Tuesday, December 16, 2008 2:14:06 AM (GMT-08:00)
Provided by: Reuters News

LONDON: The country least likely to default on its sovereign debt in the next five years is Norway and the country most likely to is Ecuador, according to a study by data provider CMA Datavision.

Using an "industry standard" model and its own credit default swap (CDS) pricing data, CMA Datavision says the cumulative probability of default (CPD) for Norway over the period is three percent, and 93 percent for Ecuador.

The United States’ CPD is six percent, making it the sixth most financially stable sovereign behind Norway, Japan, Germany, France and Finland.

Argentina, Ukraine, Pakistan and Venezuela all have a CPD of 80 percent or higher, according to the study.

The cost of insuring against governments defaulting on their debt has ballooned in recent months as the global economic downturn has forced them to announce heavy borrowing plans to pay for large-scale fiscal packages of spending and tax cuts.

The CDS rates on US, UK and most euro zone sovereign debt have hit record highs recently. Looking at CDS pricing in isolation, investors are paying more to insure against the UK government defaulting than McDonald’s.

More…

Posted at 1:01 PM (CST) by & filed under General Editorial.

Dear Friends,

Now that the wind has turned on both gold and gold shares we must not cease in our fight for what is right – a level playing field as mentioned in point 1. If we do not do our duty, your duty, both the Comex short side manipulators and the naked/pool shorts will be back again.

Respectfully yours,
Jim from Africa

 

Comrades in Golden Arms (CIGAs),

I call upon you for positive action.

We need 100,000 emails to Cox using the data of #2 below.

1. The Comex must be stopped. I know there are two of you reading this that can by yourself stop the Comex without the need of anyone’s assistance. If I have helped you now it is time to return the favor.

Please stop the Comex. Reduce their warehouse by only 50% and the short manipulators are done.

We do not wish to break the playing board, we only wish to equal the advantage between the public and the up to now pocket picking short gold bank manipulators.

2. The short pools and naked short sellers have caused us unprecedented and undeserved losses of capital value. The total capital value loss in junior gold exploration, development and producer shares is well over $50 billion.

Let us use their Mea Culpa on Madoff to say that the SEC has blown another one by supporting the useless thieves who violate the law daily using Canada as the jitney into the US as naked and pool short sellers. This is so blatant, so clear, so evident that we can only assume that the SEC is purposely looking the other way.

S.E.C. Issues Mea Culpa on Madoff
By ALEX BERENSON and DIANA B. HENRIQUES
December 17, 2008

The Securities and Exchange Commission said Tuesday night that it had missed repeated opportunities to discover what may be the largest financial fraud in history, a Ponzi scheme whose losses could run as high as $50 billion.

The commission said it received credible allegations about the scheme at least nine years ago and will immediately open an internal investigation to examine why it had failed to pursue them aggressively.

The S.E.C. issued the statement hours after Bernard L. Madoff, the 70-year-old Wall Street executive accused of operating the scheme, discussed the fraud with federal authorities at a meeting in New York on Tuesday, according to people briefed on the meeting.

Mr. Madoff kept several sets of books and false documents and lied to regulators when they questioned him in previous examinations of his firm, Bernard L. Madoff Investment Securities, said Christopher Cox, the chairman of the S.E.C.

Investigators never used subpoena powers to obtain information, but rather “relied on information voluntarily produced by Mr. Madoff and his firm,” Mr. Cox said.

When he was arrested last week, Mr. Madoff estimated that investors lost as much as $50 billion in the fraud, according to court filings. Mr. Madoff has said the scam was a Ponzi scheme, a type of fraud in which early investors are paid off with money from later victims, until no more money can be raised and the scheme collapses.

More…

Posted at 12:48 PM (CST) by & filed under In The News.

Dear CIGAs,

If you feel gold is free of Madoffs you are dreaming.

Jim Sinclair’s Commentary

Gold will go to $1200 and then $1650 on its way to Alf’s lofty levels.

Quantitative Easing and Fiscal Stimulation guarantee that.

After rate cuts: The Fed’s new ball game
With rate cuts doing little to help boost the economy, the Fed has begun to print money to finance its liquidity programs. But that could spell disaster down the road.
By David Goldman, CNNMoney.com staff writer
Last Updated: December 15, 2008: 5:08 PM ET

NEW YORK (CNNMoney.com) — After what is likely to be the last in a long series of interest rate cuts Tuesday, the Federal Reserve is expected to continue its new, perhaps more effective monetary strategy: printing lots of money.

The Fed traditionally uses its rate-cutting tool to encourage lending and boost the economy. But despite a staggering 4.25 percentage points of cuts since September 2007, the economy has not improved – in fact, it has gotten worse, drifting in to a recession last December.

Economists expect the Fed to produce one more cut to its benchmark funds rate at the conclusion of its Federal Open Market Committee meeting Tuesday, trimming the rate to 0.5%, the lowest level on record. Whether one last rate cut will help stimulate economic growth remains to be seen.

At any rate, the Fed will likely continue to use its new favorite tool, quantitative easing, "Fed-speak" for pouring new money into the economy.

More…

Jim Sinclair’s Commentary

Stop the Comex and I promise you $1250 in gold immediately!

RPT-FEATURE-Nervy investors spur rush at Swiss gold refiners
Wed Dec 17, 2008 8:04am EST
By Arnd Wiegmann and Lisa Jucca

MENDRISIO/ZURICH, Switzerland, Dec 17 (Reuters) – Sealed off by grey concrete walls and barbed wire, the workmen in protective glasses and steel-toed boots at this smelter cannot work fast enough to meet demand from the nervous rich for gold.

This refinery near Lake Lugano in the Alps is running day and night as people worried about recession rush to switch their assets into something that may hold its value.

"I have been in the gold business for 30 years and I have never experienced anything like this," said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world’s three largest.

"Production has dramatically increased since the middle of the year. We cannot cope with demand," said Schnellman, wearing a gold watch on his wrist.

Spot gold hit a record $1,030.80 an ounce on March 17. It fell below $700 in late October, partly because investors sold their holdings to cover losses in equity and bond markets hit by the credit crisis, and is now around $830 an ounce.

More…

Jim Sinclair’s Commentary

For the real numbers subscribe to www.shawdowstats.com. The real numbers push events after the spin has spun itself out as it has now.

Treasury Reports 2008 Federal Deficit of $1.009 Trillion (GAAP-Based), 
$5.1 Trillion Including Social Security/Medicare
Total U.S. Government Obligations at $66 Trillion
Against what had been the recently publicized, cash-based "official" fiscal 2008 (year-ended September 30th) federal deficit of $454.8 billion, and similar $161.8 billion deficit in 2007, the U.S. Treasury reported this afternoon (December 15th) that the 2008 deficit [change in net position] was $1,009.1 billion, versus $275.5 billion in 2007, using generally-accepted accounting principles (GAAP). Since 2002, the Treasury has been reporting the government’s finances using annual statements prepared using accounting standards similar to those used in corporate America, but the statements typically have minimal, if any, following in the popular financial media.

The new numbers, however, still do not account for the annual change in the net present value of unfunded Social Security and Medicare liabilities. Counting those changes, as a corporation would for its pension and healthcare liabilities for retirees, the 2008 annual deficit was $5.1 trillion, versus $1.2 trillion in 2007. Such showed total U.S. obligations – gross federal debt outstanding plus the net present value of unfunded liabilities – at $66 trillion, roughly 4.6 times the level of reported U.S. GDP, and greater than total estimated global GDP.

These numbers remain unsustainable, already are deteriorating severely for fiscal 2009, and eventually will doom the U.S. dollar to hyperinflation, as discussed in the Hyperinflation Special Report at www.shadowstats.com.

I have not had a chance to review the statements in careful detail, yet, and there apparently have been some minor accounting changes that do not alter the picture meaningfully. A more complete analysis will follow in the upcoming newsletter. The full financial statements, including the GAO’s auditing comments, are available at: http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

More…

Posted at 3:47 AM (CST) by & filed under Guild Investment.

Dear CIGAs,

Policymakers have a duty to “Eliminate as completely as possible all of the inbuilt elements that are amplifying the booms and busts,” a quote in today’s Financial Times by Jean-Claude Trichet, the President of the European Central Bank.

Let us hope that Mr. Trichet is speaking of derivatives and not just excessive leverage. If derivatives continue to be manufactured we will have more busts and more booms. Derivatives which amplify leverage must stop being created and must be transacted through a documented clearing intermediary. Derivative sellers must use only strong and viable counterparties.

We believe that today was a major cycle turn day and the rally in gold was a result of dollar weakness. Today’s price action demonstrates to us that the dollar strength has ended and a new downtrend in the US dollar was established about 8 trading days ago. In our opinion, this is bullish for gold.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Posted at 3:12 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

I am just returning from a short trip and am unable to put together much of a commentary on today’s market action so please reference the chart for the technical picture. I do want to note however that the HUI is trading above the 100 day moving average, a significant technical achievement. The XAU has not quite mustered the strength to best that level but the session high from yesterday and its current session high is right on that level so it is attempting a breakthrough. Should both indices manage two consecutive closes above that level, especially with the 10, 20, 40 and 50 days all turning higher, it will be difficult for even the most die-hard gold bear to argue against the move.

The fact is that the US Dollar’s horrendous fundamentals have caught up with it. The bear market rally caught a tremendous amount of speculative longs on the wrong side as the bottom fell out of it. We have remarked in the past that the rally in the dollar had NOTHING to do with fundamentals or safe haven buying as the talking heads in the press would have you believe but was rather the effects of a short-lived but massive repatriation of investment funds from abroad by US based hedge funds looking to deleverage, cut losses and meet margin calls and redemptions. I am particularly interested in what it is going to do after the new year begins as that will be the key to many other markets.

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

December1608Gold1230pmCDT