Posted at 2:54 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

I mentioned yesterday in my commentary that it would not be unexpected to see a bit of a respite in the savage Dollar mauling that has been taking place over the last week. Markets rarely tend to continue in moves of such extent without a bit of a pause for players to pocket profits unless they are in a parabolic blow off phase such as what we are seeing in the bond market. It should come as no surprise then to learn that last evening the monetary authorities of Japan began to surface after having been in hibernation for some time now only to make their usual noises about “excessive movements in the Forex markets”. That is code speak for “we do not like the strong yen”. Of course, that was enough to send yen buyers to the sidelines in a big hurry. I personally love the Japanese monetary authorities because they are so predictable. When you do not hear from them you begin to wonder if something is wrong with the universe.

Either way, their “verbal intervention” served to temporarily derail the yen which also seemed to take the steam out of most of the major currencies as well taking some off their best overnight levels and actually bringing some into negative territory. That was the signal for short-term oriented gold day traders to use the $880 level hit to go ahead and exit and book some paper profits. The selling there confirms $880 as the resistance level which will need to be bettered in order for gold to run to $900 or above. For now it is serving to cap upward momentum. My guess is that the bullion banks have surfaced at that level and some guys decided not to press them without a much weaker dollar especially with crude oil crashing down through the $40 level. OPEC had better attempt something fast or crude will be at $30 in a heartbeat. The good thing for the rest of us is that we can go out and buy some gas guzzlers again ( you know – those vehicles which actually can seat a normal family without shaping them into something resembling a can of packed sardines). Maybe this cheap gasoline can be the new bailout package for the auto industry.

The bond bubble continues expanding with no end in sight as traders are convinced that the Fed is going to be buying along the outer end of the curve. With support like that below the market, the path of least resistance is higher. Whether or not the Fed actually does such a thing is immaterial at this point – the very suggestion that they are going to do so is enough to actually accomplish their intentions. Doesn’t it amuse you how easily grown, “sophisticated” investors can be herded around by these pestilential central bankers? That crowd prides themselves on being able to decipher obtuse financial and economic signals unlike the rest of the ignorant peasants and dolts who constitute the mere working class. Yet it is this same smug and oftentimes arrogant crowd that are rounded up like witless sheep and sent off in the direction that their shepherd masters intend them to go. Oh well, it really doesn’t matter much as long as they can make money off of it so I suppose the image of being driven around like mindless idiots doesn’t particularly prove troublesome to them.

December gold deliveries continue with another 127 being issued and stopped this morning. That brings the total for the month to 13,170 or 1.317 million ounces. Warehouse supplies showed a sizeable drop yesterday which is nice to finally observe. Registered was down to 2.8 million ounces. Keep in mind that playing the paper gold game and expecting to beat the bullion banks at it is a fool’s dream. Unless the gold is removed and taken out of the warehouses, the Comex will never be a freely traded market. We know full well that the CFTC has been asleep at the wheel for a long time now so do not expect any help from that quarter. The only thing that the paper shorts fear and respect is a lack of physical metal –everything else is blithely and I might add, safely ignored. Hedge funds looking for a way to beat these parasites have the strategy laid out in front of them do so – the question is will they actually leave their black box algorithms long enough to think about this and implement it. Another Fifteen to Twenty thousand contracts taken and stopped would put an end to the bullion bank reign over the sand box. That is chump change in today’s markets especially when you consider that at one time the hedgies had well over 240,000 long positions early this year. The margin necessary to carry positions of such size is proof that the financial resources necessary to take delivery of the physical gold exists – the only question is whether or not the will do so does. The down side of things is that the hedgies have never proved to be resourceful or clever – how can they be when they have long ago delegated their thinking to their computers?

Many of you have no doubt seen the article about unprecedented gold demand in Europe – demand so great that the refiners in Switzerland cannot keep up with it. Reports like this, of which we have seen so many in recent weeks, just serve to underscore how completely disconnected from reality the Comex paper gold market has become. Gold bulls – are you listening….

Technically paper gold has confirmed resistance at the $880 level with support near $850 and below that at $838 – $835 basis February. A breach of $880 that can be maintained for more than a couple of hours targets $900 and above.

Open interest saw a sharp increase yesterday which reveals the presence of plenty of new buyers. However, most of those are sitting on a paper loss after this morning’s move lower. If enough dip buyers surface, they will be okay.

The mining shares followed through on their late day weakness in yesterday’s session as selling was evident from the opening bell this morning. The HUI and XAU have closed higher for the last 7 out of 8 days so a setback is not that big of a deal. I do want to see where the buying support on this dip emerges however as most of the major moving averages are trending solidly higher. There is some support in the HUI at 257 and again near the 247 level. The HUI remains above the 100 day even with today’s down session.

Next week volume and liquidity will probably begin to dry up meaning that the ingredients for lots of volatility will be in place. Get used to it between now and the beginning of the New Year.

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

December1808Gold1230pmCDT

Posted at 2:09 PM (CST) by & filed under General Editorial.

Jim Sinclair’s Commentary

From an anonymous Swiss friend:

"Just for your information I have until now been able to buy 100 gram bars through my Swiss Banks.

Today the major Swiss Banks are also out of stock of the 100 gram bar. I can still buy 1 kg and 12 kg bars, but for how long?

As you have read the Swiss mints are working around the clock and seeing unprecedented demand.

With dwindling supply and very strong demand combined with the very favourable economic fundamentals for gold, it can only be a matter of time before the gold price explodes.

Also, the current move in gold is only against weak currencies such as the pound and the dollar. When the real move starts, gold will move up also against the Euro and Swiss Franc and this will be due to gold strength not just dollar weakness."

Posted at 2:04 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

After a significant reduction of US presence, you can count on this.

Up to 25 Iraq government officials accused in plot
By QASSIM ABDUL-ZAHRA and SINAN SALAHEDDIN, Associated Press Writers Qassim Abdul-zahra And Sinan Salaheddin, Associated Press Writers

BAGHDAD – More than 20 employees of Iraq’s Ministry of the Interior have been arrested on allegations that they were plotting to revive Saddam Hussein’s outlawed Baath party, government officials said Thursday.

Interior Ministry spokesman Maj. Gen. Abdul-Karim Khalaf told reporters that 23 people, most employees of the ministry’s traffic department, have been arrested over the past five days but he dismissed suggestions they were plotting a coup.

A security official put the figure at 25 and said a brigadier general in the traffic police was the highest-ranking figure. Most of the others are low-level ministry employees, he said.

The official, who has access to the investigative file, spoke on condition of anonymity because he was not authorized to speak about the matter to the media.

Another security official said those in custody were believed to have links to al-Awda, or "Return," a Sunni underground organization founded in 2003 to try to restore Saddam and the Baath party to power.

More…

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.

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