Posted at 4:59 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

According to the US Treasury/Federal Reserve Board, as of September 2008 US government debt was held by the following countries.

The biggest three owners of US Treasury bonds are:

1. China – $585 billion
2. Japan – $573 Billion
3. United Kingdom – $338 billion

In this light the announcement that was made today in the English language official organ of the Communist party, the China Daily, is particularly thought provoking. "China’s increased purchase of US Treasury securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis…”

This follows an announcement made about 2 weeks ago by the head of China’s sovereign wealth fund to the effect that the current high value for the US dollar might not continue.

Perhaps the Chinese are sending a warning that might be attended to.

Your pal,
Monty Guild
www.GuildInvestment.com

Posted at 4:51 PM (CST) by & filed under General Editorial.

Dear Friends,

To be politically correct, I pinched this from CIGA Green Hornet.

Best wishes for an environmentally conscious, socially responsible, low stress, non-addictive, gender neutral celebration of the winter solstice holiday, practiced with the most enjoyable traditions of religious persuasion or secular practices of your choice with respect for the religious/secular persuasions and/or traditions of others, or their choice not to practice religious or secular traditions at all.

I also wish you a fiscally successful, personally fulfilling and medically uncomplicated recognition of the onset of the generally accepted calendar year of 2009, but not without due respect for the calendars of choice of other cultures whose contributions to society have helped make our country great (not to imply that Canada, USA, Mexico is necessarily greater than any other country) and without regard the race, creed, color, age, physical ability, religious faith or sexual preference of the wishee.

By accepting this greeting, you are accepting these terms:

This greeting is subject to clarification or withdrawal. It is freely transferable with no alteration to the original greeting.

It implies no promise by the wisher to actually implement any of the wishes for her/him or others and is void where prohibited by law, and is revocable at the sole discretion of the wisher. The wish is warranted to perform as expected within the usual application of good tidings for a period of one year or until the issuance of a subsequent holiday greeting, whichever comes first, and warranty is limited to replacement of this wish or issuance of a new wish at the sole discretion of the wisher.

The best of the holidays to everyone,

James E. Sinclair,
Signed in blue ink.

Posted at 4:10 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

We had gold prices going one way today and mining shares going the other way once again in a repeat performance of yesterday’s play only this time it was the mining shares going up while the gold itself was going down (or should I say the paper gold). Considering the weakness in the broader equity markets, the mining shares performance at this point looks pretty impressive especially given the fact that Comex gold was knocked down quite a bit today.

Trading was lackluster today at the Comex as was expected with reports from the pit stating that traders were sitting around working crossword puzzles. Holiday trade is here without a doubt as volume was so anemic yesterday that I had to do a double take when I first saw the numbers thinking that it might have been a reporting error by the wire service! The next thing you know we will be getting reports from the pit telling us that traders are betting on cockroach races.

That is why you cannot read too much into price action this time of year – there simply is not enough liquidity to get a real price discovery mechanism in place. Most of the trade consists of pit locals just shoving prices around in the path of least resistance hoping to pick off a few stops or to scalp a few ticks out of the market to buy their kids that GI Joe with the Kung Fu grip. Air space both above the below the market is the current weather forecast.

Technically gold is chopping in a range. Another way of saying this is that it is consolidating and marking time. The top of the range is near the $850 level while the bottom is near $830.

A point of interest – the spread between the December gold contract and the April gold contract is a mere $2.00 which is pretty tight. It is only a bit over a $1.00 between the Dec and the February. If anything changes further in this regard I will let us know but for now the tightening is quite interesting. I think that the spreads will actually tell us more about gold this time of year than the outright price action in the lead month to be honest.

Bonds floated higher today but remain below their recent peak. It is when the deflationary mindset eventually gives way that the bonds will break with a vengeance. When that occurs is anyone’s guess but it most certainly will. The Central Banks dread deflation more than anything else and will do everything in their power to slay that dragon no matter what the longer term consequences might be. Count me out of the group that believe that the mortals manning the helm at the Fed will be able to withdraw all the liquidity that they are injecting into the system to prevent a huge surge in inflation in the future and a loss of confidence in the Dollar.

On the delivery front, another 59 contracts were assigned in the December gold contract bringing the total for this month to 13,325 or 1.33 million ounces. There are only 413 contracts left open in the December so internet chatter about a short squeeze in that month have been proven to be unfounded. Bear in mind that we have never advocated, “busting the Comex” at this website. We have advocated serious gold buyers who are looking to obtain the metal to go to the Comex and take delivery so as to reduce the amount of registered gold available and level the playing field by making this market an honest one. Those who insist on playing the paper game with the bullion banks will never win unless they force the shorts to respect the fact that they might be required to make good on deliveries. That is the only way to prevent these parasites from preying on the unsuspecting dupes that actually believe the Comex is a freely traded market. Like I have said many times, the hedge funds are not known for original thinking, being unable to wean themselves from their computer algorithms like the mindless droids that they are. If they spent a mere fraction of the money that they use in purchasing long positions at the Comex and actually rode enough of those longs into delivery, they could give the shorts a trip to the woodshed that they would never forget. The question is do they have the savvy to do so and the will to actually stop relying on their black boxes to do their thinking for them. I seriously doubt it but perhaps I might be surprised.

At this point it does look to me like the index fund redemptions and most of the hedge fund deleveraging trade has finished up with only pockets of that sort of selling remaining. We will have to see what they do with the advent of the new year. Obviously the fate of the Dollar will be the determining factor in nearly all of the commodity markets moving forward into 2009. The grains should be quite interesting as the low prices have many farmers in the position of having gone from what could be considered boom times to almost bust times in the matter of 4 months. That being said, it still looks to me like they have bottomed out which bodes well for the entire commodity sector.

So far the verbal intervention by the Japanese monetary authorities last week seems to have succeeded in shoving the year away from its lofty levels. It will be interesting to see how the yen fares early next year. I should note here that if the yen were to rally back up to its recent highs, especially next week, with liquidity being so low, the monetary authorities could inflict all kinds of damage on it should they choose to do so. The particularly could get a lot more effect from any actual intervention when the volume is so low.

Crude oil basis February broke below the $40 level yesterday paving the way for a move down to $35 or even $30. Keep in mind that many projects that were originally profitable when crude was trading above $75 – $80 are no longer so and those projects will never see the light of day at current levels. Oil companies are not going to punch holes in the ground to bring out oil and lose money on it. They will simply idle the drillers. The old adage that the best cure for low prices is low prices will hold true for crude oil. Eventually the excess supply will get mopped up and crude prices will recover.

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

December2308Gold1230pmCDT.jpg

Posted at 1:29 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The following is John Embry of Sprott Investment Management’s latest. In his report he discusses what we have been saying here for some time with regards to leveling the Comex playing field.

The following is an excerpt from the article:

"Jim Sinclair, an American precious metals maven, and a man who’s forgotten more about gold than most of us will ever know, recently explained how these ridiculous circumstances could end.

He believes it’s axiomatic that most of the time, the most leveraged market (i.e. the futures market) sets the price in the cash market – something that’s certainly been the case here.

However, this only applies as long as the COMEX gold warehouse isn’t significantly depleted by the holders of long gold contracts demanding delivery at settlement.

Traditionally, less than one per cent of contracts are settled in this fashion, but as conditions in financial markets deteriorate this may change.

Mr. Sinclair believes that the price will not be able to be manipulated on the COMEX much longer. He says this because the large gold buyers in Asia recognize the dangers inherent in financial institutions and are channeling their business into cash bullion.

When this market inevitably proves insufficiently large for their needs, they will move into markets like the COMEX and stand for delivery, thereby depleting the inventories.

I agree with Mr. Sinclair completely and believe that this event is much more likely to occur than most people realize."

U.S. Calls The Tune As Gold, Silver Plunge
By John Embry

Now that physical shortages of gold and silver are more pronounced, the theatre of the absurd continues to play out, as the paper price of both metals plunge.

The sharp drop in price should come as no surprise to anyone who is aware of what is really occurring in gold and silver.

Put simply, the entire fiat money system is in crisis – perhaps a terminal one – judging from the calls for a new Bretton Woods agreement by European leaders.

As a result, the powers that be in the US appear to be prepared to do virtually anything to obscure this reality from an increasingly terrified populace – one that’s now seeing its savings destroyed by the carnage in real estate.

In the eyes of the authorities, gold and silver must not be seen as attractive alternatives to financial assets; thus, the prices of both metals are crushed.

As I have said many times, it’s actually very easy to manipulate gold and silver prices in the paper market because the bad guys (i.e. the anti-gold cartel) have a lot more muscle than their adversaries.

More…

Posted at 1:17 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

If you have put on your New Year’s resolution list to obtain Paper Certificates for your investments, either personal or IRA, you will be TOO LATE. You have until December 31st to make this request and even that can be declared too late.

How much of the road to protection have you taken?

If you held certain Reserve Fund Money Funds more than your weekend was ruined.

My perfect Christmas present from you would be to know that you have to the fullest degree possible fully protected you and yours.

Make me happy, please. Take your physical certificates while you still can.

Money market funds reel as yields near zero yields
By Deborah Brewster in New York
Published: December 21 2008 19:12 | Last updated: December 21 2008 19:23

Money market funds, an increasingly popular place to park cash, will need to raise fees or close to new money to remain profitable as yields hover at near-zero, according to industry managers.

The funds, which manage $3,800bn and have seen big cash inflows, are reeling from frozen credit markets, subprime exposure and a crisis of confidence triggered by one fund “breaking the buck”, or returning investors less than they paid in.

The US Federal Reserve last week cut its target interest rate to between zero and 0.25 per cent, from one per cent.

Jim McDonald, who runs taxable money market funds for T Rowe Price, said: “You can’t make money in this situation. If short-term interest rates stay where they are, it’s virtually impossible to run a government [bond] fund and make any money. You can close the fund, that’s one option.”

Vanguard last week closed two of its money market funds to institutional investors, while Credit Suisse said it would quit managing money market funds in the US and liquidate $8bn in assets across its three funds.

David Glocke, a portfolio manager at Vanguard, said: “It just doesn’t make any sense to take in money in this environment, it would dilute yields for existing investors.”

More…

Jim Sinclair’s Commentary

Remember this?

Money market funds wait anxiously for rescue by Fed
By Deborah Brewster in New York
Published: November 12 2008 02:00 | Last updated: November 12 2008 02:00

Investors have pulled more than $400bn from money market prime funds in the past two months, leaving the funds waiting urgently for a Federal Reserve rescue plan to help them sell commercial paper to meet redemptions.

The Fed said on Monday that it would begin the rescue plan on November 24, a few weeks later than planned. Money market funds are low-risk, lowreturn fundsthat normally invest heavily in commercial paper, a type of debt used by businesses to meet short-term funding needs.

The funds currently manage a total of $3,600bn (£2,335bn, €2,900bn) and have been struck by high redemptions and illiquid markets, making it difficult for them to sell their paper to pay out investors.

The Fed plan, announced on October 21, will see it buy up to $600bn in certain companies’ short-term debt, as a way to provide liquidity in the credit markets and help money market funds find it easier to sell their commercial paper. Money market funds will be able to sell short-term debt issued by 50 financial institutions to the Fed programme, called the money market investor funding facility.

The Fed said the programme might over time be extended to buy debt from other investors besides money market funds.

A separate Fed programme to buy commercial paper in the markets has already begun operating.

More…

 

Jim Sinclair’s Commentary

I am hearing this from too many good sources to dismiss the possibility that India will soon move against Pakistan.

Stratfor Geopolitical Diary: Countdown to a Crisis on the Subcontinent

The week began with a series of signals from New Delhi that India’s restraint in taking military action against Pakistan is no longer guaranteed. In fact, such action could very well be imminent.

In a press conference Monday, Foreign Minister Pranab Mukherjee said that while India “has so far acted with utmost restraint,” it will “explore all options” in pressuring Pakistan to deal with Islamist militancy. The same day, Indian media reported that Indian troops and the air force’s Quick Reaction Teams had deployed along the border with Pakistan, with commandos reinforced at airstrips in Jaisalmer and Uttarlai in Rajasthan and Bhuj in Gujarat. The Pakistani military, meanwhile, reportedly went on a heightened state of alert, with reports of air force jets scrambling in Islamabad, Rawalpindi, Lahore and Muzaffarabad, the capital of Pakistan-administered Kashmir.

Over the past few weeks, India has played a complex diplomatic game, issuing a series of statements that seemingly downplayed the likelihood of military action against Pakistan in response to the Nov. 26 Mumbai attacks, while making a point in the public sphere that New Delhi was focused on using diplomatic tools to pressure Islamabad. While New Delhi’s behavior led many to believe that the threat of war had subsided, Stratfor maintained that Indian military operations were being prepared, and that New Delhi’s plan was first to exhaust its diplomatic options before engaging in any kind of military action. India’s restraint, in large part, was attributed to its talks with the United States, which would much rather not see the nuclear-armed rivals come to blows when the Americans are fighting an uphill battle against al Qaeda and Taliban forces in the region.

But time is running out for Pakistan.

Reliable sources -— whose information on this issue cannot be verified at this time -— have told us that in the wake of the Mumbai attacks, New Delhi relayed a message to the Pakistanis via the United States, saying they would be given 30 days to crack down on Islamist militant proxies on Pakistani soil that continue to threaten India. While India used the time to prep its military forces, the United States came down hard on Pakistan behind the scenes, making clear that if Islamabad did not deliver, Washington would not be able to stand in New Delhi’s way if and when the time came for India to act. The Pakistanis carried out a few raids targeting militant leaders and Pakistani intelligence operatives, making a few arrests, but did nothing that substantially reduced the threat to India, from New Delhi’s point of view. And even if Pakistan’s government was prepared to accede to India’s demands in full, it could go only so far in placating New Delhi before its eff orts to avoid an international crisis created a domestic one.

More…

 

Jim Sinclair’s Commentary

Today in Pakistan:

Pakistan asked to accept responsibility
* WP editorial says ‘Pakistan not acknowledging truth’, ‘excuses must come to an end’
By Khalid Hasan

WASHINGTON: The Washington Post on Monday urged Pakistani civilian leaders to face up to their country’s responsibility for the Mumbai attacks.

In a hard-hitting editorial, the newspaper pointed out that by now, “the evidence that the terrorist assault on Mumbai was planned and directed from Pakistan is overwhelming.” The lone surviving attacker, a Pakistani national, has signed a statement describing how he was recruited and trained by the Lashkar-e-Tayyaba group. Intelligence officials say cell phone intercepts show that the attackers were communicating with Lashkar commanders in Pakistan during the attacks. During a visit to Islamabad, British Prime Minister Gordon Brown spoke for the West when he openly blamed Lashkar-e-Tayyaba for the siege and added that “the time has come for action, and not words,” from Pakistan.

The Post said, “Stunningly, however, Pakistan’s civilian government is refusing to acknowledge the truth. In an interview with the BBC last week, President Asif Ali Zardari claimed that there is still no proof that the attackers came from his country.

Several days earlier, he told Lally Weymouth of Newsweek and The Post that ‘I don’t have any specific information’ showing that the terrorists were trained in Pakistan.

More…

India Gives Pakistan Letter Said to Be Gunman’s
By SOMINI SENGUPTA
Published: December 22, 2008

NEW DELHI — India on Monday gave Pakistan what it called proof of Pakistani involvement in last month’s terrorist attacks in Mumbai. The move built public pressure on India’s neighbor, where the senior-ranking member of the American military arrived for talks for the second time since the attacks.

The Indian Foreign Ministry announced late Monday that it had given Pakistani officials here what it described as a letter from the lone surviving attacker. In the letter, the Indian ministry said, the gunman, Muhammad Ajmal Kasab, said he and his nine accomplices were “from Pakistan.” India did not make the specific contents of the letter public.

Pakistan’s Foreign Ministry acknowledged receipt of the letter, saying only that “the contents of the letter are being examined.” The government in Islamabad, Pakistan’s capital, has denied any links to the terrorist attacks and pressed India to offer proof. American officials have in turn pressed Pakistan to do more to crack down on terrorist groups operating within its territory.

India and the United States have attributed the three-day attack on India’s financial capital to Lashkar-e-Taiba, a banned group based in Pakistan that has fought Indian forces in Indian-controlled Kashmir for years.

More…

Posted at 10:50 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

Saturday’s issue of Shadow Government Statistics (www.shadowstats.com)  by John Williams had several interesting tidbits:

“The St Louis Fed’s adjusted monetary base in the two weeks ended December 17,2008 was up 97.5% from the year before.”

“The bulk of M3 components surge at an Annualized 39.3% for the last 3 weeks… The good news is that the system may be starting to return to normal functioning. The bad news is that the cost of systemic salvation remains higher inflation…”

I certainly agree with Mr. Williams. There will be higher inflation, and the numbers as compiled by Mr. Williams and others indicate that the rate of growth of the components of money supply is fast. In our opinion, it is just a matter of time before this turns into recognizable inflation of a substantial nature.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

 

Dear Monty,

I agree with you fully. I anticipate that with fiscal stimulation and quantitative easing set without limits, we will see economic effects, a 1930s type equity rally of some sort, and without any doubt whatsoever on my part, the currency event known as hyperinflation.

With my deepest respect,
Your ole pal Jim

Posted at 10:45 PM (CST) by & filed under Guild Investment.

I AM WRITING THIS ON THE NORTHERN HEMISPHERE’S SHORTEST DAY OF THE YEAR

Personally, I am a lover of daylight, so I am hoping for more and more light as the solstice passes and days begin to lengthen.  Let us also hope for some enlightened behavior by banking functionaries and banking system users in coming months.  Our friends in the southern hemisphere are reaching mid summer, may you enjoy these pleasant times full of daylight.

NEW CAPITAL NEEDED BY WORLD BANKS

We have commented on this subject before.  The solution has not been found.  TARP and other government relief plans have done some of the job.  However, if all bad paper were marked to market, it would take trillions more in relief to provide enough capital for the world banking system to function properly.  How will this be accomplished?  Stock markets will need to recover.  We estimate that world markets have lost about $30 trillion in value in 2008.  The banks can raise money through equity offerings, but may have to wait until markets recover.  This can account for part of the recapitalization.

The government is now providing stop-gap capital, which can be replaced by new equity and debt capital if and when the crisis passes.  As we know, all industry and finance depends upon capital.  There is no question on this.

THE GOOD NEWS IS THAT BOND MARKETS ARE BEGINNING TO FUNCTION…IN SOME SMALL WAY.

Perhaps 5% of the natural functioning has returned, aided by the artificial liquidity from the Fed (providing commercial paper financing and other recently assumed government funding facilities).  5% is modest, but it is a start.

Let us hope that this modest start is going to snowball and create a good liquid banking system to replace the currently crippled and frozen system.

The Federal Reserve on December 16, 2008 took a major step (and it is a step that gives us direction for our investments for months to come).

1.  The Fed cut the Fed Funds Rate to 0.25%, the lowest it has ever been.

2.  More importantly they stated that it would "stay there for some time".  This is a key announcement.

3.  Another stunning announcement is that The Fed said they would increase their purchases of non U.S. treasury paper into more and more unfamiliar and speculative territory.  They will buy mortgage related securities, and possibly more Treasury securities in order to lower borrowing costs for borrowers of all stripes (mortgage and business borrowers especially).  This is in addition to previously announced purchases of the debt of Fannie Mae and Freddie Mac, the effectively nationalized mortgage agencies with the scandalous history of creating much of the mortgage crisis.

Our translation:  In our opinion, it means that the Fed sees inflation as a long term problem, and they will not worry about it now.

Currently, the Fed plans to work to re-liquefy the banking system and avert a deflationary psychology from taking hold.  Inflation rates are currently falling due to falling commodity prices.  Disinflation and possibly short term deflation may be experienced in the U.S. over the next few months.  This will be followed by inflation over the longer term.

The Fed knows that we must strengthen the banking system, and do it soon.  Before the lower commodity prices lead us to a deflationary national psychology where there is very little spending, a huge increase in saving, and fear of the future.  All of these variables will diminish risk taking, and the entrepreneurial spirit that causes the formation of new businesses.  It is well known to all economists that almost all employment growth in the U.S. in the last decade has come from small businesses.  Large business organizations have been laying people off for a decade or more.

IT SELDOM HAPPENS THAT YOU GET THIS CLEAR OF A SIGNAL FROM GOVERNMENTAL AUTHORITIES ABOUT THEIR PSYCHOLOGY

The above announcements have given such a signal.  The U.S. Government approach is to ignore inflation and quantitatively ease (substantially increase the amount of money and credit available).  Thus, the plan is to 1) create more money and credit, and 2) prop up prices or bonds by government purchase and keep the cost of bonds or borrowed money low.

Milton Friedman would argue that this will create inflation.  As he put it "Inflation is always and everywhere a monetary phenomenon."

THESE EVENTS, AND THE VEHEMENT LANGUAGE THE FED USED IN MAKING THE ANNOUNCEMENT ARE SIGNIFICANT

"The Federal Reserve will employ all available tools…"(Quantitative Easing)"…to promote the resumption of sustainable economic growth and to preserve price stability." To discuss price stability in this sentence is to engage in wishful thinking, in our opinion. Price stability will be gained in the short run.  A deflationary price spiral will not develop, and liquidity will be increased.  Longer term, it is our opinion that inflation will develop…and it will be politically difficult to tell the public that the low interest rate party is over.

Now comes the hard part.  Let us say that they are successful in their objectives, liquidity is pumped into the system, credit is created, many people benefit from lower mortgage rates, and lower borrowing costs.  Eventually, the economy of the U.S. begins to recover, but probably not before 2010.  The stock market begins to rally, perhaps sometime in 2009, primarily due to the fact that prices have been beaten down to attractive levels.

Mr. Obama’s voting record shows that he is at home with populist, socialist, redistribution of wealth thinking as exemplified by his pledge to create three million jobs within two years.

The chances for his infrastructure plans to even get organized within two years are uncertain.  How will he gainfully employ three million people doing this type of work within two years?  It is a pipe dream; a pleasant and hopeful one, but a dream nonetheless.  May I suggest that within two years Mr. Obama will be far behind on achieving his infrastructure goals and people will agree that they were unrealistic?

In our opinion, the following scenario may develop. Mr. Obama will eventually be faced with the problem of rising inflation and a need for higher interest rates.  This will not be popular with his socialist minded constituency, which likes the government jobs and government social hand outs.  Interest rate increases will be delayed, because they are politically unpopular, and we will be back in a new inflationary environment. Although we cannot guarantee that this will be the course of events, it appears to us to be the most likely outcome over the next few years.

AS HAS BEEN PROVEN BY NUMEROUS SOCIALIST EXPERIMENTS WORLDWIDE FOR THE LAST 80 YEARS…

Even well managed socialism can not, and does not provide the same rate of economic growth as free market capitalism.  If growth is important to rapidly achieving social goals, then slower growth will provide slower achievement of socialist goals.  This is well documented by hundreds of economic studies over the decades.

SUMMARY

The Fed’s actions have given a green light to a lower dollar, and a higher price for well managed foreign currencies.  Since many foreign currencies are not well managed and suffer from the very same problems as the U.S. dollar, many investors will choose gold to supplement their currency holdings.  A further support to foreign currencies will be the fact that the U.S. must float about $2 trillion in new bonds within a year or two, creating an excess supply of U.S. bonds.  As supply increases and demand stays the same, then the price must fall…these bonds are priced in dollars.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 3:57 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Today’s comments will be brief as we are in full holiday mode trading and that generally means that most action must be treated with a bit of skepticism since so many large players are out and liquidity tends to shrink resulting in exaggerated moves.

Gold found buying support overnight which continued into today’s session as the dollar gave up its gain from last Friday. Many markets were mixed today with neither bulls or bears able to gain much of an edge and trading resolving into a grab bag for locals who absolutely LOVE this time of year. They jerk the markets around in whatever direction the paper flow provides and seek to push prices into stops to allow for some quick profits. Failing that, they play a range trade and basically scalp the market. Gotta do something to pay the bills…

Technically gold looks like it might have found a short term trading range before Christmas that it feels content to bounce around in. Unless we get some sort of geopolitical event or wild move in the Forex arena, the probabilities favor more of this chop. Next week should probably see the same sort of thing as well. I prefer to see the technical price action in the first full week of trading after the New Year begins to get a better feel of where the market wants to go. By then you have a full complement of players back and more volume to work with.

Resistance at the top of the range is near $850; support is near the bottom of the range at $830.

Open interest indicates the slide late last week was indeed caused by short-term oriented longs bailing out.

December deliveries continue with another 60 being assigned this morning. The total for the month so far has been 13,266 or 1.327 million ounces. There still remain 326 contracts open in December gold.

The HUI and XAU are more interested in following the broader equity markets this AM which are down, rather than following gold which is up. The HUI still looks okay technically but the recent price action shows upside momentum has stalled out for now. Price will have to take out 300 and stay there to get the momentum players interested in buying again although the value based guys will be watching for a support level to form to give them confidence to step in on a dip.  They buy dips – momentum guys buy anything that moves and buy it at any point – they don’t give a hoot about anything else.

The February crude oil contract is now the focus after the foray by the January into the “3” handle region. Feb was reluctant to move lower after OPEC announced their production cuts but today it seems to be focusing back on the weak demand as prices slide down almost $2.00 at one point. If it takes out $40 to the downside, it will promptly be at $35 in a heartbeat. Wholesale gasoline prices at the board were down to .935 at one point today as they continue to slide lower – one of the few bright spots in the economy for the consumer.

Bonds still refuse to move significantly lower as dip buyers come in time after time on the least bit of weakness. The yield on the Ten year is 2.14% as I pen this.

I don’t know about you but I sure am glad we have all this global warming to deal with. Wind chill readings would probably be closer to minus 50 degrees instead of the current minus 40 degrees that we are getting in Chicago… Instead of 4 feet of snow in Spokane, we would probably be seeing 5 feet!  I want to therefore personally thank all you folks out there who are doing your fair share to aid in enlarging the size of your carbon footprint. Those of us who do not like the Siberian winters are most grateful for your efforts to keep us snug as a bug in a rug.

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

December2208Gold1230pmCDT