Posted at 3:19 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

There was a disconnect between the Comex gold price action and the action of the mining shares. Comex went one way – down – while the shares went the other way – up.

Rollovers are occurring in the Comex world as February is getting ready to take its place as the lead contract with December going into the Delivery process. Remember, if you want to secure gold in size and want to avoid the high premiums currently being charged on the one ounce bullion coins, buy the December and take delivery of the gold and then keep it out of the warehouses.

Comex gold was taken lower today in front of the holiday period particularly with the dollar showing some signs of strength as dollar longs are attempting to prevent the technical price chart of the USDX from turning ugly. You can tell that the funds are doing the buying in the USDX because it bounced EXACTLY at the 40 day moving average level, a favorite level for this particular group to play at. Still, the bearish divergence on the USDX chart is a warning to the bulls that unless they quickly can push that index back above the 87.20 level, reinforcements for their side are going to be hard to attract. Stay tuned on this one…

The commodity markets were generally a mixed affair today with the energies all higher, particularly natural gas, while the metals were mostly lower with the exception of copper. Grains too were mixed. Generally, reading too much into the price action near a holiday is pretty much a waste of time so I am going to avoid that today as too many traders look to even up and take some time off.

Technically gold has met resistance near the 100 day moving average level that it has so far not been able to best while dip buyers continue to make their presence felt near the $805 level, which is right in the middle of the former resistance zone. Below this level, stronger support comes in near the $790 level and then the $770 level. I suspect that we will see very good buying should gold drop down to $770.

I should also point out that once again open interest saw another sharp drop in yesterday’s session. We are now down to a piddly 276,567 contracts as both longs and shorts continue to move out. Generally speaking, trading conditions begin to thin out from this point forward as we go into December and the year winds down with a corresponding lack of liquidity which tends to greatly exaggerate price moves. I can already see the effect in the spread between the bids and offers.

The HUI and the XAU charts are looking much improved. The HUI has now seen the 10 day moving average make an upside bullish crossover of the 20 day with both of those moving averages now trending higher. Those are a sign that the trend has now turned up. The actual index itself is fighting at the 50 day moving average which is near the 235 level. A close above that will get some of the specs excited. Also, the index managed to close above horizontal resistance near 225 and is closing in on downsloping trendline resistance which comes in near 250. One more thing, the bullish divergence that had been showing up in the technical indicators has now been fully confirmed. All in all, a lot of bullish signs are lining up technically.

To our American readers, enjoy your Thanksgiving Day holiday with your family and loved ones. We all have much to be thankful to God for! To those of our readers who abide outside our country – we will make sure to have an extra helping of pumpkin pie just for you!

Dan

Click chart to enlarge today’s 12 hour action in gold in PDF format as of 12:30 pm CDT with commentary from Trader Dan Norcini.

November2608Gold1230pmCDT

Posted at 12:20 PM (CST) by & filed under General Editorial.

Dear CIGAs,

As you know, it was Chairman Volcker who predicated the Hunt loan on my presence to advise on liquidation of the Hunt metal position.

I know him to be a brilliant realist.

In 1979 he had a totally different situation and the full backing of the Administration.

This time his job is the absolute opposite of what it was in 1979–1980.

This time I know his advice will be friendly to gold and most certainly on the subject of FRGCR. This I know!

Gold was a major items used in the 30s for many reasons, one of which was an attempt to take the deflationary perspective out of the public mind.

1. His assignment is to fight DEFLATION.

2. Obama spoke profusely of differences of opinion in his economic communication today.

3. There is no chance Obama will listen to Volcker other than when it supports administration goals and policies

4. After 7.1 trillion dumped into the economy there is no chance anyone can avoid the consequences.

5. Don’t be a fool and worry.

6. Worry only if you are not protected and insured against what is to come.

Volcker issues dire warning on slump
Paul Volcker, the former chairman of the US Federal Reserve, has warned that the economic slump has begun to metastasise after a shocking collapse in output over the past two months, threatening to overwhelm the incoming Obama administration as it struggles to restore confidence.
By Ambrose Evans-Pritchard
Last Updated: 10:39PM GMT 17 Nov 2008

"What this crisis reveals is a broken financial system like no other in my lifetime," he told a conference at Lombard Street Research in London.

"Normal monetary policy is not able to get money flowing. The trouble is that, even with all this [government] protection, the market is not moving again. The only other time we have seen the US economy drop as suddenly as this was when the Carter administration imposed credit controls, which was artificial."

His comments come as the blizzard of dire data in the US continues to crush spirits. The Empire State index of manufacturing dropped to minus 24.6 in October, the lowest ever recorded. Paul Ashworth, US economist at Capital Economics, said business spending was now going into "meltdown", compounding the collapse in consumer spending that is already under way.

Mr Volcker, an adviser to President-Elect Barack Obama and a short-list candidate for Treasury Secretary, warned that it is already too late to avoid a severe downturn even if the credit markets stabilise over coming months. "I don’t think anybody thinks we’re going to get through this recession in a hurry," he said.

He advised Mr Obama to tread a fine line, embarking on bold action with a "compelling economic logic" rather than scattering fiscal stimulus or resorting to a wholesale bail-out of Detroit. "He can’t just throw money at the auto industry."

Mr Volcker is a towering figure in the US, praised for taming the great inflation of the late 1970s with unpopular monetary rigour. He is no friend of Alan Greenspan, who replaced him at the Fed and presided over credit excess that pushed private debt to 300pc of GDP.

"There has been leveraging in the economy beyond imagination, and nobody was saying we need to do something," he said. "There are cycles in human nature and it is up to regulators to moderate these excesses. Alan was not a big regulator."

Even so, he said the arch-culprit was the bonus system that allowed bankers to draw forward "tremendous rewards" before the disastrous consequences of their actions became clear, as well as the new means of credit alchemy that let them slice and dice mortgage debt into packages that disguised risk.

More…

Posted at 3:02 AM (CST) by & filed under General Editorial.

Dear CIGAs,

Numerous members of the community have reported dealers asking $100 or more above spot price for gold!

1. Coin dealers are in the main all related to Pirate Pete and Black Beard. There are no Mother Theresa’s there.
2. If you can afford 100 ounces you never need to pay even one cent above spot.
3. You can buy the COMEX gold contract in the delivery month at the first notice day for delivery.
4. You take delivery of the gold, which will be hallmarked and registered, saleable ANYWHERE WITHOUT RE-ASSAY, EXCEPT THE COMEX.
5. That quirk is only to dissuade you from taking delivery.
6. 100 ounce bars taken delivery of can, if you wish and in the light of day, legally be shipped to a Swiss free zone depository. I will have more information on costs, segregation and so on shortly.
7. You do not need gold certificates or mints anywhere. You do it all yourself therein eliminating all financial agents or certificates.
8. The only way to remove paper gold manipulation is to remove gold from the COMEX warehouse.
9. I am sure that the gold dealer asking $100 or more above spot for gold will not buy any at even $5 above gold’s quoted bid. If they did you could take delivery and with some effort and proper procedures sell to the coin dealer.

"Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. "Stand and Deliver or Go Home" should be the rallying cry of the gold longs to the paper gold shorts." –Trader Dan Norcini

Jim,

There were 11,554 deliveries for the month of October. Thus far for November there have been 1228 deliveries. November is a rather unknown quantity as a contract so I expect to see a very significant number of deliveries as December goes into its delivery period.

Total registered category ounces – 2,804,270

Total eligible ounces 5,713,922

Trader Dan

Dear CIGAs,

To make the taking of delivery meaningful, it must be removed from the COMEX warehouse.

Harry Schultz once told me I was a general without an army because of the principle that you cannot herd cats.

I replied to Harry that I felt that in the main the gold gang were not pussies.

Are you, those who can afford 100 oz?

Regards,
Jim

Posted at 6:27 PM (CST) by & filed under Jim's Mailbox.

Gentlemen,

When I saw those infamous words “In essence it is creating new money” I thought of the big helicopter drop and had a good laugh. Inflation? This should be called counterfeiting.

CIGA Marty

Fed bets $800 billion on consumers
Central bank and Treasury announce a massive plan to jumpstart lending.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: November 25, 2008: 2:33 PM ET

NEW YORK (CNNMoney.com) — The Federal Reserve and Treasury Department on Tuesday unveiled a plan to pump $800 billion into the struggling U.S. economy in an attempt to jumpstart lending by banks to consumers and small businesses.

The government hopes that these initiatives will enable more money to flow to consumers in the form of loans than has occurred so far in previous bailout plans.

One program will make $200 billion available from the Federal Reserve Bank of New York to holders of securities backed by consumer debt, such as credit cards, car loans and student loans.

In addition, the Federal Reserve, announced it will purchase up to $500 billion in mortgage backed securities that have been backed by Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae, the three government-sponsored mortgage finance firms set up to promote home ownership. It will also buy another $100 billion in direct debt issued by those firms.

Together, the programs from the Federal Reserve and the New York Fed are more than Congress approved in October for a bailout of the nation’s banks and Wall Street firms. The Fed said the money will come from an increase in its reserves — in essence, it is creating new money.

More…

Posted at 4:15 PM (CST) by & filed under General Editorial.

Dear CIGAs,

1. Gold is a currency.

2. Hyperinflation is a currency event

3. Hyperinflation builds slowly then explodes. See the chart of any of the currencies of all the many historical periods of hyperinflation given you in previous missives on www.JSMineset.com.

4. All periods of currency events that birthed the explosion of hyperinflation occurred during extremely depressive to depressionary economic conditions.

5. The key element of the event preceding the loss of confidence was the failure of the liquidity or coin clipping programs capped by forms of Quantitative Easing. Secretary Paulson this morning and the Federal Reserve three weeks ago said that they were embarking on this program.

6. The loss of confidence during the depression to come will be the failure of all programs to reverse a meltdown of OTC derivatives.

7. The world is looking towards the US dollar for the rescue, bailout and airdrops to include them.

8. The dollar is the prime monetary inflator and therefore the confidence to be lost is in the US dollar.

Posted at 3:01 PM (CST) by & filed under In The News.

Dear CIGAs,

See the section I bolded below – Now we know who is going to step up to the plate and buy Fannie and Freddie debt seeing that the custodial account reports have shown that Foreign Central Banks have been disgorging nearly $100 billion worth of their paper since July of this year! I find it no coincidence that is the exact amount the Fed has announced that they will purchase!  We knew it was just a matter of time before the Fed had to come in and buy FNM and FRE debt since no one else was willing to do so – without that debt having a market there is no way to backstop home mortgages!

Dan

Fed Commits $800 Billion More to Unfreeze Lending (Update2)
By Scott Lanman and Dawn Kopecki

Nov. 25 (Bloomberg) — The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.

The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.

“They’re trying to put funds into the system, trying to unfreeze these markets,” said William Poole, the former St. Louis Fed president, in an interview with Bloomberg Television. “Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.”

The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae, the statement said.

Help for Housing

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.

Fannie and Freddie bonds rallied. The yield premium on Fannie Mae’s five-year debt over similar-maturity Treasuries tumbled 21.5 basis points to 114.7 basis points as of 8:35 a.m. in New York, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

More… 

 

Jim Sinclair’s Commentary

You know it is worse than this. They know it is worse than this. It is almost embarrassing to report to you what we all know is pure fabrication.

FDIC Shows Massive Growth In Problem Banks, But The Data Is Still Wishful Thinking

Today, the FDIC issued banking data from the third quarter ended September 30, which showed that the number of insured institutions on the FDIC’s "Problem List" increased from 117 to 171 and the assets of "problem" institutions rose from $78.3 billion to $115.6 billion during the quarter. The FDIC said this is the first time since the middle of 1994 that assets of "problem" institutions have exceeded $100 billion.

The FDIC said during the third quarter 73 institutions were absorbed in mergers, and 9 institutions failed. This was the largest number of failures in a quarter since the third quarter of 1993, when 16 insured institutions failed. Among the failures was Washington Mutual Bank, an insured savings institution with $307 billion in assets and the largest insured institution to fail in the FDIC’s 75-year history. The number of insured commercial banks and savings institutions fell to 8,384 in the third quarter, down from 8,451 at midyear.

The FDIC data also showed that net income of $1.7 billion was the second-lowest since 1990, and loan-loss rates rose to a 17-year high. On a positive note, net interest margins registered improvement.

Like it was in the second quarter (they left-out WaMu), the data the FDIC is issuing on the problem bank assets in the third quarter is misleading. We all know now that Wachovia (NYSE: WB) was near failure at the end of the third quarter and at the very start of the fourth quarter it was merged with Citi (NYSE: C) then later Wells Fargo (NYSE: WFC). Wachovia’s assets base would have easily surpassed the $115.6 billion the FDIC mentioned as the total in the problem list. In addition, yesterday Citi (NYSE: C) needed a U.S. government rescue plan. How can it be that this data is so wrong? Is it the fear factor that they feel would be created if they were truthful. Maybe certain institution don’t qualify as "troubled" but should. They need to look at how they qualify a troubled bank. Assets of troubled institutions should be in the trillions not $100 billion.

More…

Jim Sinclair’s Commentary

FDIC will guarantee even for a day? Their cash is crashing. They can’t.

They haven’t got the money, just like credit default derivatives guaranteed without any chance of performing.

Who IS FDIC kidding? You?

Goldman to sell $2 billion in FDIC-backed bonds: source
Mon Nov 24, 2008 5:25pm EST

NEW YORK (Reuters) – Goldman Sachs (GS.N) plans to sell at least $2 billion of new debt that will be guaranteed by the Federal Deposit Insurance Corp, with pricing expected Tuesday, according to a market source familiar with the sale.

The debt will mature no later than June 30, 2012, the source said. Goldman Sachs is the sole bookrunner, while Citigroup and Morgan Stanley are joint leads, the source said.

The debt is guaranteed under the FDIC’s Temporary Liquidity Guarantee Program, and investors are watching the deal as a test case for demand under the new program.

The new debt is expected to price at 85 basis points over midswaps, plus or minus 3 basis points, the source said.

Goldman is expected to be the first firm to tap the FDIC’s new program. The FDIC on Friday approved a program to guarantee to banks’ new senior unsecured debt, potentially allowing the firms to issue debt with top "AAA" ratings.

More…

Jim Sinclair’s Commentary

Don’t compare what is happening now to the Japanese zero bound conditions.

What is below did not happen in Japan on any scale near what has already occurred in the USA and is bound to grow by orders of magnitude.

That comparison is total nonsense that reveals ignorance, not intelligence.

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit (Update2)
By Mark Pittman and Bob Ivry

Nov. 24 (Bloomberg) — The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

“Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

More…

Posted at 2:53 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

The 100 day moving average near the $832 level provided the overhead selling resistance in today’s gold session. The chatter was that $100 worth of gains in gold over the past three trading sessions was enough of a move to bring in some short term profit taking. That is probably true although I would not be surprised to learn that the bullion banks showed up at the $830 level trying to draw another line in the sand. Dip buyers are appearing however which is a good sign as the technicals have flipped to friendly with the turn higher in the 10 and 20 day moving averages and the consistent trade above the 40 day. Thus far gold has managed to maintain its footing above the 50 day as well which comes in closer to the $800 level.

It looks as if we are oscillating around the 50% retracement level from the October peak. If gold can maintain a general consolidation-type trade around this level, it will be constructive. We are headed into a holiday shortened period in which liquidity can dry up some – that leaves the market vulnerable to wide swings in price on even relatively small orders.

Technically, a closing trade above the $835 level should enable gold to run to $850 before it encounters anything much in the way of overhead resistance. Stops are building just above today’s session high. Support lies at today’s lows and then the $790 level. Open interest numbers remain very, very low which does give me a bit of concern. Figures from yesterday reveal that a large amount of the buying was indeed short covering. It is constructive to push the shorts out as no doubt happened when the market pushed into stops that were located above the $800 – $810 level but we need fresh buying, not just short covering, to sustain prices at these levels and set things up for an extended push higher.  We must see a continued increase in open interest (an end to the deleveraging) before we can mount a sustained rally.

Interestingly enough, the Euro-Yen cross was knocked lower today even in the face of the newly announced Fed plan to buy up FNM and FRE debt. Stocks initially greeted the plan with happiness but then moved lower mid-morning. That took the cross lower and as it faded, so too did gold but as that cross began to recover off its lows, so too did the gold price.

The HUI managed a close above the horizontal resistance level near 225 yesterday but could not manage (thus far) to get a second consecutive close above that level. It will need to do so in order to bring in more technically based buying into the mining shares. So far the selling in the HUI and the XAU has not been unmanageable.

The Dollar (USDX) did dip below the critically important 85 level in today’s session but it managed to claw its way back above that by mid-morning. Watch that level closely as two consecutive closes below it will begin to push the concentrated speculative long side positions into liquidation. Right now the USDX is bouncing from its 40 day moving average which tells me that the fund longs are attempting to defend their positions. If they cannot hold it there, they will be forced out and a top will be confirmed on the technical charts. Their exodus will bring the 83.50 level into play quite quickly. They know that and so do we.

Click chart to enlarge today’s 12 hour action in gold in PDF format as of 12:30 pm CDT with commentary from Trader Dan Norcini.

 

November2508Gold1230pmCDT