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

Posted at 3:08 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold caught one heck of a tailwind this morning knifing through one resistance level after another as if they did not exist. It is evident from the ferocity of the climb that the shorts were squeezed in a big way with a plethora of buy stops being touched off in the relatively low volume trading conditions. Here is another example of that lack of liquidity I have been referring to over and over again with the declining open interest creating huge pockets of air both above and below this market. A few well placed orders, either on the buy side or the sell side, and the cascade or upside catapult ensues.

One look over at the currency boards and it is easy to see why the gold shorts were in trouble this morning. The euro took off to the upside, the euro-yen cross soared, crude oil moved up and away from the $40 level and back came the “risk” trades. The “risk aversion” trades were reversed or halted as traders latched onto the auto bailout news and attempts by the Central Banks globally to inject liquidity as a signal to plow back into the commodity sector. Nearly every single commodity quote on my board was once again in blue. Even if anyone did not understand the exact nature of the computer algorithms that these black box hedgies are employing, it does not take much in the way of observation to grasp the fact that those things are geared to movement in the dollar and the equities. That is why the signals always produce the exact same effect in the markets. They are all basically using the same computers to do their thinking for them. Hedge funds are basically mindless traders and if they are all using the same signals, then the result will be that they plow into and out of markets all at the same time. Nowadays this is referred to in the investing world as “genius”; that is, until the hedge fund goes belly up and shuts its doors.

Suffice it to say that today is the “reflation trade” –

Nonetheless, gold has had an undeniably strong technical performance. It is trading well above its 50 day moving average and peaked today right on its 100 day moving average. That level is very close to the downsloping trendline of the recent wedge formation on the daily chart. Should gold be able to muster the strength to take out the 100 day and then horizontal resistance from late last month near $830 – $833, it has the very strong possibly of beginning a trending run. Keep in mind that levels of open interest are  low and the market is relatively illiquid so we will still want to see new fresh buyers coming in and not short covering alone. Light support  moves up to near the $790 level followed by stronger, more substantial support near $770.

I am a bit hesitant to say with complete confidence that the mining shares as indicated by the HUI and the XAU have completed a complete separation between themselves and the broader market but they gave the first solid hint of that yesterday. Today they furthered the amicable divorce. Even as the broader market indices came off their best levels of the session, the HUI and the XAU seemed very hesitant to give up their gains. Yesterday the HUI and the XAU managed their second consecutive close above the 50 day moving average. That is generally enough to turn the technical posture into a bullish one. Sure enough the shorts began running today with indices easily breaking through their respective horizontal resistance levels at the late November highs. That translates to roughly the 250 level in the HUI and the 101-102 level in the XAU. To give you an idea how improved the HUI chart has become, the 100 day moving average on its daily chart comes in near 277. That is less than 20 points away from today’s session high.

The grains are looking more and more like they are forging a bottom although so far that cannot be confirmed with certainty. They are meeting up with selling resistance near the 10 day moving average in the corn and the beans. I still have my eye on this complex as I will feel much better about the overall commodity sector once the grains bottom. So many prices have been beaten down to levels that I believe were not justified fundamentally but went there nonetheless in a technical washout from the hedge fund deleveraging trade and the index fund redemption related selling. Just like that crowd overdoes things on the upside, they do the same on the downside. The trick is trying to figure out when enough is enough. Just about the time you are convinced that the blind selling is over, another outbreak of selling appears and down it goes once again. What I keep looking for is the time when traders are paying attention to supply/demand factors that are particular to each commodity market instead of just wave after wave of selling. That will tell us that informed traders and big money is moving back in to take advantage of “value”. I believe we are seeing that in gold but I want to see it in more than one market but would prefer to see it across several of them. Up until recently, no one, and I mean no one, has been willing to step in front of the fund selling and take on any serious long positions. That makes sense since if you are inclined to buy, why not wait until you can get it even cheaper. When you see the prices have fallen to the point where others besides yourself are licking their chops in anticipation of the deal, then you begin moving in as well. But you have to know that you have some reinforcements on your side to take on the hedgies who are busy throwing everything out the window without looking at what it is.

Incidentally, I heard some reports about guys in the oil patch buying the front month futures contracts, taking delivery of the crude and storing it in empty tankers with plans to sell it next year because of the degree of contango in the futures markets. The selling has knocked the front months down to levels that are out of whack with the premiums that the board is giving the back months. Those that know the oil patch very well and know where relative value is are taking steps to make a nice tidy sum of money thanks, once again, to the mindless hedge funds. Too bad we all don’t have some spare supertankers hanging around our back yards.

For a while it seemed as if the bonds were going to drop and drop hard. Yet, like they have done time and time again recently, they bounded up from their lows. That thing sure seems to me to be setting itself up for one heckuva fall but fighting the trend can be quite expensive unless you are very, very nimble.

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

December1008Gold1230pmCDT

Posted at 2:32 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

Today is the first day of US Treasury Bills sales to finance the coming deficits connected with the banking system bail outs. The rate paid for 4 week paper was zero percent. Thus people are looking for gold. Why not buy gold with a zero percent yield? In our opinion, it is at least as safe as T-bills with the same yield, and it has not been rallying like the US dollar has. In our opinion, professionals are buying gold, while the public buys T-Bills.

By the way, this is the first of a great many large auctions of US government securities. These auctions will increase the total amount of US government debt outstanding by about 22% or $2 trillion in the next 2 years. When this much new debt is floated, why will buyers not demand higher interest rates? If the US cannot tolerate higher rates due to their need to keep rates low for the bailout to proceed, then buyers will demand a currency discount to buy US bonds. In our opinion, the US dollar has seen or is very near its highs and major foreign currencies and gold are very near their lows.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Posted at 2:27 PM (CST) by & filed under In The News.

News Alert: House Passes Auto Rescue Bill
By DAVID M. HERSZENHORN and DAVID E. SANGER
Published: December 10, 2008

WASHINGTON — The House voted on Wednesday to approve a $14 billion government rescue of the American automobile industry, but the bailout plan, which would provide emergency loans to General Motors and Chrysler, was in jeopardy because of strong Republican opposition in the Senate.

The House approved the rescue plan by 237 to 170, mostly along party lines, with 32 Republicans mainly from states heavily dependent on the auto industry joining 205 Democrats in supporting the measure. Voting against were 150 Republicans and 20 Democrats.

The White House so far has failed to generate support among Senate Republicans, who have the power to kill the bill.

General Motors and Chrysler have said they cannot survive much longer without the federal aid, while Ford Motor Company, which is in better shape than its competitors, has said it will not seek the emergency loans.

As an amendment to the auto rescue plan, the House approved a measure that would require banks receiving assistance from the Treasury’s $700 billion economic stabilization program to detail new lending activity each quarter.

More…

Jim Sinclair’s Commentary

Warm, hot, hotter, boom

Pakistan: We’re ready for war with India
Pakistan warned it is ready for war with India if it is attacked following the strike by the Mumbai terrorists.
Last Updated: 12:13PM GMT 09 Dec 2008

The remarks by Pakistan’s foreign minister, Shah Mehmood Qureshi, who also insisted he would not hand over any suspects in the Mumbai attacks, come amid mounting tensions between the nuclear-armed neighbours.

India has said it is keeping all options open following last month’s carnage by the Mumbai terrorists, who killed more than 170 people.

"We do not want to impose war, but we are fully prepared in case war is imposed on us," said Mr Qureshi.

"We are not oblivious to our responsibilities to defend our homeland. But it is our desire that there should be no war."

Indian officials say the hardline Lashkar-e-Taiba (LeT) group, which is based in Pakistan despite being banned by the government, is behind the bloodshed, and Indian media have suggested there could be Indian strikes on militant camps.

More…

Posted at 9:57 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

Can you comment on the rumor published on reliable sites that the IMF is going to pummel the gold market down to the $455 levels tomorrow at 12:22 PM?

CIGA Arlen

Dear Arlen,

That rumor is nothing more than RAVING BULLSHIT!

Jim