Posted at 3:14 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Paper gold at the phony Comex continues its disappearing act as more and more longs throw in the towel and close things out for the year. I should note here that volume in the Comex is absolutely horrendous dropping under 100,000 per day over the last few days. Toss in a collapse in open interest and it is pretty easy to see that what we are witnessing is a destruction of liquidity which allows any relatively larger-sized order to move price pretty much wherever the “orderee” wishes things to go. There is simply no one to take the other side of the trade with the result that large air pockets are forming in this market into which prices may drop or, in the event that prices rise, may shoot sharply higher. The same thing is happening in every single commodity complex out there.

There are some fresh short sellers but these are minor compared to the selling originating from speculative longs bailing out in the face of disappointing price action. The fed’s crony pals cap the price on any rise and then stand back and cover those shorts as all the lemmings dutifully abandon ship. Presto – an ATM for the bullion banks courtesy of the weak-handed longs who still try to play the paper game against these insiders.

Technically, you could not get a more classic definition of a washout which is exhausting itself as both shrinking volume and collapsing open interest signal that this is NOT the beginning of a bear trend but rather a technical washout that is winding down. I especially like the fact that volume is so anemic – it indicates no particular enthusiasm for the downside but more of a general disgust type of trade. Every single technical analysis book that I have ever read over the years will tell the shorts to be very careful selling a market in which volume and open interest are falling off – you simply never know when the last long who is going to run has run – when they do, that is it and the shorts then lose since there is simply no one left to sell the market to. For now they are sitting pretty but I suspect many buyers are waiting in the wings and should this market move down to near the $730- $720 level in February, these will emerge and make their presence felt quite strongly. The risk/reward no longer favors the shorts at these levels. What do they have, maybe $60 on the downside at the absolute best?

Still, all things considered, even paper gold is holding very well compared to the carnage in the rest of the commodity markets. For instance, crude topped out near $150/ barrel. Today is dropped below $41. That is nearly a 73% price collapse. December corn hit $8.00 bushel this past summer. Today it broke below $3.00 – the first time in two years it has been below the $3.00 level. That is a price drop of 62%. Platinum peaked at over $2200/ounce earlier this year. Today it was trading at $790 – a drop of a “mere” 64%. Copper is 67% off its peak. Silver is down 56% off its best levels seen this year. Yet gold  is only down 27% off its peak price. Even with all the paper selling at the Comex, gold has withstood the orgy of redemption related selling pretty doggone well. And we know that demand for the real deal, the actual yellow metal is phenomenal, paper games at the Comex notwithstanding.

Support near $770 gave way in New York this morning (gee- what a surprise) setting up a move down to test $740 and then that level that I mentioned above, $730-$720. Resistance is now $770 followed by $790 and then $800. Unfortunately the 10 day moving average in gold has turned down so the short term posture of the market is not particularly friendly. The longer term 40, 50 and 100 day moving averages are all still trending higher however. The late session comeback from off the worst levels of the day is a bit friendly although it is probably pre-weekend short covering by profitable shorts.

On the delivery front – another 274 were taken yesterday bringing this month’s total to a very respectable 12,164 or 1.2 million ounces. Comex is still reporting registered totals at 2.9 million so about 41% of that gold has been taken. The question remains – are these buyers willing to take it OUT of the warehouses and remove it completely? There still remains time for even more deliveries to be taken. Interestingly enough for the first time in some while, Bank of Nova Scotia was a net seller. They issued 263 against stopping of 51. The biggest stopper was once again HSBC. Some of you know that HSBC is one of the authorized warehouses for Comex so whether they are taking this gold in to meet outgoing deliveries is still unclear at this point. The trading arm is in a sense separate from the warehouse folks so we will not know unless we can see the actual warehouse stocks report showing the gold moving out of HSBC’s warehouses at some point.

The mining shares continue to struggle. At least they have managed to bounce a bit off the session lows for now – if they could manage to stay above 205 into the close it would be a psychological victory.. After managing to trade above the 50 day moving average, a significant bullish technical feat, both the HUI and the XAU have broken down below every single major moving average in the last week. The longer term moving averages are still moving lower in both indices but the 10 and 20 day are trending upwards which was a friendly signal. Today’s break below both of those shorter term moving averages means that the bulls choked and surrendered their advantage to the shorts. The longs must  stand their ground and do it quickly. All I can say is to repeat that so much hedge fund money is leaving the markets that nothing is safe until those idiots are finally run out of business. Good riddance to the sorry lot of them.

It looks as if OPEC is content to allow crude oil prices to decline below the $40 level – a level which I thought they would try to defend. So far, not a peep out of them which is quite remarkable. Given the horrendous payrolls number if they do not at least attempt to cut back production so as to mop up some of the extra supply on the market, $40 will come and go and they will then be debating about whether or not to try to keep the price above $30. By the way, you might as well kiss the noisy clamor for alternative energy markets such as ethanol and other “green” technologies bye-bye for a while. As gasoline prices drop to close to $1.00 gallon, one thing you will not hear is the voice of politicians screaming for us to burn our food supplies in the gas tank.

The bond bubble continues with yet another high in the long bond. The frontrunning by firms ahead of the Fed’s intentions to buy Treasuries to keep interest rates low, along with the usual “insane haven” play, has resulted in the bubble being blown even larger. I am sure that the clerks in the pit and the guys manning the digital decks are ready to quit this business and permanently retire after this week.

The yields on Treasuries of shorter dated maturities are comical. I suggested last week that investors buy brass, gunpowder and reloading equipment. This week add to that some Wii’s and the game cartridges that go with them. You can sell those on Ebay and make more money than the stinking ridiculous bottomless abyss  of a Treasury will ever pay you. Better yet, let’s hire some lobbyists to represent us and head to Washington and demand a bailout of $200,000 per family. After all, if we the good ol’ consumer, won’t buy, what’s the point of sending all this money to the banks, the auto industry and only heaven knows who else they plan on donating to. Just imagine all the pent up demand that would be unleashed. Why we are at all, just scrap the entire tax system and declare a year tax holiday. That would surely get things going. After all the government doesn’t need any damn revenue anyway. They can just keep printing more IOU’s and called them a “treasury”.

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

 

December0508Gold1230pmCDT

Posted at 12:49 PM (CST) by & filed under General Editorial.

Dear CIGAs,

1. Today’s news on the cost of mining and infrastructure is in my opinion posturing for meetings between the Chamber of Mines and the Presidential Committee on Mining Revenue next week.

2. High costs can be a product of a company having sold the gold production of their mine forward 10 years in order to obtain non-recourse loans. The price of gold would then be delivered against those sales forward and used in the calculation of income in order to derive costs of mining according to International, Canadian and US Generally Accepted Accounting Principles (GAAP).

3. The infrastructure in Tanzania from Mwanza to Dar es Salaam is excellent.

4. A main high power electrical grid and delivery system exists in the area of Mwanza and can service multiple mines.

5. Gold can be shipped via air. This is most certainly true if you own multiple large aircraft yourself.

6. In my opinion mining costs in Tanzania are among the lowest in the world, especially if you have an open pit potential to finance your future underground operations.

Regards,
Jim

Posted at 9:48 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Linked below are a few charts showing the custodial account treasury holdings and agency holdings. If there is any wonder why the bond market is experiencing a once-in-a-generation bubble, just look at the Treasury Holdings chart. It is going vertical. Meanwhile, the chart showing the Agency debt holdings such as Fannie Mae and Freddie Mac continues its “fall off a cliff” imitation. Foreign Central Banks are dropping Fannie and Freddie debt like a bad habit and rushing into US Treasuries. I keep wondering just who it is that is supposed to provide the capital for Fannie and Freddie to function! The feds supposedly dumped $200 billion into them if I recall correctly but foreign Central Banks have already unloaded $120 billion. At the rate the FCB’s are ditching the debt, it looks like it is a wash and we are back to where Fannie and Freddie were in July.

I read these charts as an indicator as to just how dire is the condition of the world’s current monetary system. If any of these foreign Central Banks balks at buying US Treasuries or even whisper about selling them, Katie bar the door on the US Dollar. Still, I think it is just a matter of time before the US has to devalue the dollar if it ever hopes to make good on these ever-increasing obligations. It reminds me of one of those old biology films we used to watch back in school when the virus would divide and just keep on dividing and dividing and dividing. Maybe we could rename US Treasury bonds to US Treasury viruses – They just keep on multiplying until they suck the life out of their host.

Also, note the yield charts on the 3 month and the 10 year. The three month is effectively at zero. I have not shown them but the one month is at 0.01% and the one year is at 0.61%.

Talk about zero bound… Quantitative Easing, here we come with a vengeance. They have no other choice.

Trader Dan


Click here to view today’s Custodial Holdings, 3 Month Money and Ten Year Treasury charts with commentary from Trader Dan Norcini

Posted at 6:28 PM (CST) by & filed under Jim's Mailbox.

Jim,

I did a little checking about  the memorandum you put up today…"

MEMORANDUM TO ALL AMERICAN EAGLE AND AMERICAN BUFFALO BULLION COIN AUTHORIZED PURCHASERS
SUBJECT: 2008 and 2009-Dated Bullion Coin Products
November 24, 2008

"With the exception of the American Eagle Gold One-Ounce and American Eagle Silver One-Ounce Bullion Coins, all 2008-dated bullion coins have been depleted. Weekly allocations will continue for these two products…."

A very good friend of mine at one of the premier coin and bullion shops in the country says he has not gotten Gold Eagles for at least 2 months.  As far as Silver Eagles,  he says he is getting maybe 500 every two weeks.  My friend says that  compared to the past the availability of Silver Eagles That amount is just a "trickle".  

Your friend,
Greg Hunter

Posted at 5:16 PM (CST) by & filed under General Editorial.

Dear Friends,

First Bernanke then Paulson speaks about helping mortgagees.

During all of this Nardelli of Chrysler was forced to grovel in public for the measly fee of about $14 billion.

The net result was at the end of Motors being grilled by our beloved clueless legislative, the Dow once again regurgitated.

What a difference between how Washington treats Wall Street and Main Street. Wall Street gets the silk glove treatment while Main Street gets the hob nail boot directly in the ass. Talk about irony. The blue collars are the salt of the earth and foundation of this country.

Where was Senator Shelby of the Banking Committee when the bailout of $8.5 trillion was embarked on for financial entities? Senator Shelby said screw Motors but never said screw the banks who also have a crappy business plan. You think the banks are now clear of all busted OTC derivatives? Like hell they are.

Now that this slippery road of bailouts has been taken, not helping Motors get to 2009 is going to result in millions more out of work when you deluge, not trickle, down the line to suppliers, auto retailers, used auto sales and general economic perspective.

The executives of the motor companies, according to markets, are weaklings. The legislative is clueless, Paulson is without market respect and Bernanke is simply ignored.

Not helping Motors will land Obama with a totally insolvable economic problem that will tank his Administration before it even starts.

The dollar is DEAD but simply does not know it yet.

What a mess. God help us all.

Respectfully yours,
Jim

 

 

Truth Be Known:

Hyper-inflation is a currency event – not a velocity of money or economic activity motivated occurrence.

Gold is a currency , not a commodity. Gold was a perfect currency at $248 and will be so at $1650.

UN team warns of hard landing for dollar
By Harvey Morris in New York
Financial Times, 1 Dec 2008

The current strength of the dollar is temporary and the US currency risks a hard landing in 2009, according to a team of United Nations economists who foresaw a year ago that a US downturn would bring the global economy to a near standstill.

In their annual report on the world economy published on Monday, the economists said the dollar’s sharp rebound this autumn had been driven mainly by a flight to the safety of the international reserve currency as the financial crisis spread beyond the US.

The overall trend remained a downward one, however, reflecting perceptions that the US debt position was approaching unsustainable levels. An accelerated fall of the dollar could bring new turmoil to financial markets.

"Investors might renew their flight to safety, though this time away from dollar-denominated assets, thereby forcing the US economy into a hard landing and pulling the global economy into a deeper recession," the report said.

Publication of the annual survey by the UN’s Department of Economic and Social Affairs, its trade organisation Unctad and UN regional bodies, was brought forward by a month in the light of the financial crisis. It was launched in Doha to coincide with the UN-sponsored development financing conference in the Qatari capital.

More…

Posted at 10:46 AM (CST) by & filed under In The News.

Dear CIGAs,

You think the bailed out financial entities are viable businesses in the face of current and future circumstances?

No pleading was required by the good ole boys at the banks and brokerage houses. They were not asked to surrender their first born.

In that sense with the number of job involved in this it is good for motors.

Standing down would be a better approach than begging.

The politicos will panic when they find out the bankruptcy papers have already been written and would have been utilized if it had been a standoff.

What is good for the financial geeks is good for lousy manager’s gander.

GM, Chrysler considering bankruptcy to get bailout report
Thu Dec 4, 2008 8:06am EST reuters

(Reuters) – General Motors Corp and Chrysler LLC are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multi-billion dollar government bailout, Bloomberg reported, citing a person familiar with internal discussions.

In response to automakers’ bailout plea, staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy — negotiated with workers, creditors and lenders — could be used to reorganize the sector without liquidation, Bloomberg said.

General Motors and Chrysler could not be immediately reached for comment by Reuters.

Industry executives and analysts say the immediate carnage from a bankruptcy of General Motors Corp, Ford Motor Co or Chrysler would spread throughout an industry that is bleeding cash in a global slowdown.

More…

 

Jim Sinclair’s Commentary

Another tidbit from Alf Fields:

Commentary From Alf Fields:

Major ONE up from $256 to $1,015 (actually 4 times the $255 low);

Major TWO down from $1015 to $699, say $700 (a decline of 31%);

Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $700 low);

Major FOUR down from $3,500 to $2,500 (a 29% decline);

Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)

We have already blown through waves one and two. Wave three is projecting out to $3500 and wave 5 to $10,000 for an ounce of gold. This is the point. Last year we had a $400 billion deficit. Next year we will have a $2.5 trillion deficit and in the next four years a minimum of $10 trillion deficit. It is not hard now to see why the price of gold would go to $10,000 per ounce.

What this means is that the Federal government will burn the house down printing dollars which will lose value at a dizzying rate. Conveniently, this unbridled printing will allow the US government to pay all its bills domestically and to foreign holdings by simply printing away debt. This will also have a massively negative impact on all our creditor nations. I would not be surprised if they ended up in far worse shape than us.

We have seen it time after time when a big debtor runs its creditors into the ground and ends up smelling like a rose. This is most likely what will happen to the US although the citizenry will also go through some real tough times.

What to do? Find those asset classes which will hold their value during this process. It sounds ridiculous, but it is that simple and you will prosper.

Elliott Wave Gold Update 23
By Alf Field Dec 2 2008 10:39AM
http://www.kitco.com/

 

Jim Sinclair’s Commentary

The source is not exactly the Financial Times, but the idea is intriguing.

DESTRUCTIVE BET HEDGING SCHEMES CONTINUE
By emsnews

Now, everyone is screaming bloody murder and there is only one solution: arrest them all!

More…

Posted at 11:49 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The Comex tells us gold is easily available, like rain in the summer. The US Mint tells us that real gold is scarce.

The manipulators must be taken out to the shed.

Comrades in Golden Arms, take physical delivery.

Just say NO to these demons that inhabit all our markets. It is time to discipline Sodom and Gomorrah, the COMEX.

MEMORANDUM TO ALL AMERICAN EAGLE AND AMERICAN BUFFALO BULLION COIN AUTHORIZED PURCHASERS
SUBJECT: 2008 and 2009-Dated Bullion Coin Products
November 24, 2008

With the exception of the American Eagle Gold One-Ounce and American Eagle Silver One-Ounce Bullion Coins, all 2008-dated bullion coins have been depleted. Weekly allocations will continue for these two products.

The final 2008 allocation for these coins will be provided on Monday, December 15, 2008.

There will be no bullion allocations during the week of December 22, 2008.

2009-dated American Eagle Gold One-Ounce and American Eagle Silver One-Ounce Bullion Coins will be made available for sale via the standard allocation process on Monday, December 29, for pricing December 30 and order pick-up on Friday, January 2, 2009.

Allocations for these products will continue until the United States Mint is able to meet demand.

The quantities of blanks that we have been able to acquire from our suppliers continue to be very limited, while demand for bullion coins remains high. As a result, it is necessary for the United States Mint to delay the launch of other bullion coins until later in 2009. We will continue to monitor the situation and keep you informed as additional information becomes available.

Thank you for your patience and your continued support of the United States Mint Bullion Coin Program.

The above mentioned coins should not be confused with the American Eagle or American Buffalo collector proof and uncirculated versions sold directly on the Mint?s website. However, these coins are also quickly becoming exhausted, as is evident from the chart of gold and platinum coins listed at U.S. Mint Collector Bullion Coin Prices, Premiums and Sales Figures.

Jim Sinclair’s Commentary

One way or another Pakistan will light the fuse that many of our Conservative Christian friends will see as the "End of Days." Let us hope it is not. Pakistan is the fulcrum point of the next major world explosion, as was 9/11. The make believe government of Pakistan is not the miscreant in this equation.

What is to come will be well in place by January 14th, 2011.

Could India-Pakistan conflict go nuclear?
MARTIN SCHRAM

Once again, terrorists struck, slaughtering 174 people in Mumbai in a crisis that may have been malevolently designed to blast the adversarial nuclear neighbors India and Pakistan into war.

Once again, world leaders fear that another conventional war between India and Pakistan could go nuclear — even as both governments utter all the usual assurances that they can keep their nukes under control.

Once again, world leaders need to recall the frighteningly candid words of a former Pakistan Army general who explained to me years ago how in a conventional weapons clash between India and Pakistan, even a well-intentioned, highly-trained general such as he was could inadvertently start a nuclear war. And how the initial nuclear launch would not only be responded to but would instantly escalate tenfold — a catastrophe that would not only obliterate the region but would have severe global consequences

The warning spoken by retired Brig. Gen. Feroz Khan in my interview with him in 2002 reads like a warning call today. We spoke at a time when India and Pakistan seemed headed toward yet another ground war over the disputed bucolic region of Kashmir — after Pakistan-based guerrillas of Lashkar-i-Taiba attacked India’s Parliament. Now India says last month’s Mumbai murderers were trained inside Pakistan by the same militant group, which is linked to elements of Pakistan intelligence.

"Once the conventional war breaks out, the fog of war sets in," Khan said then. "And during war you have deceptions. You have misperceptions. You have communications breakdowns. Things get heated up."

More…