Posted at 6:16 PM (CST) by & filed under General Editorial.

Dear CIGAs,

We would like to thank you all for another great year at, and quite the year at that! We look forward to you all being by our side on this unprecedented economic ride and wish you and all yours the best over the holiday season!

Jim, Trader Dan, Editor Dan, Monty Guild and David


Posted at 6:10 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Closer and closer we come. There is a political demand for the Indian government to act in order to satisfy the constituency lest an old adversarial party rises once again. The odds favor something dangerous soon.

India, Pakistan: Signs of a Coming War
December 24, 2008 | 2002 GMT

Several major signs of a coming Indian-Pakistani war surfaced Dec. 24.

Indian troops reportedly have deployed to the Barmer district of southwest Rajasthan state along the Indian-Pakistani border. Furthermore, the state government of Rajasthan has ordered residents of its border villages to be prepared for relocation. The decision reportedly came after a meeting among the state’s director-general of police, home secretary and an official from the central government. Stratfor confirmed the report with an Indian army officer.

According to India’s ZeeNews, the Pakistani army replaced the Pakistan Rangers that regularly patrol the border with India. The Pakistani troop movements were later confirmed by U.K. Bansal, the additional director-general of India’s Border Security Force (BSF) in Barmer, Rajasthan.

As Stratfor reported Dec. 22, there is a high probability of India using military force against Pakistan after Dec. 26, when a deadline expires for Pakistan to deliver on Indian demands to crack down on Islamist militant proxies that threaten India. With low expectations that Pakistan has the will or capability to deliver on these demands, India has spent the past month preparing for military action against Pakistan. Pressure is now ratcheting up on both sides of the border, with Indian Air Marshal P.K. Barbora, air officer commanding-in-chief of the Western Air Command, telling reporters Dec. 24 that as many as 5,000 targets in Pakistan have thus far been identified, while saying that many of the militants hiding out in camps in Pakistan-occupied Kashmir have already fled.



Jim Sinclair’s Commentary

Words of war can easily result in a war between two nuclear powers. The problem lies in if the action bogs down, or one party starts to lose.

We’ll defend Pakistan till the last drop of our blood: Zardari
Nirupama Subramanian

ISLAMABAD: A charged debate on national security in the Pakistan parliament’s upper House saw members across party lines express support for the government and the country’s armed forces against “any kind of aggression” by India.

With a well-known international think-tank adding fuel to the fire with information — by its own admission, it was unverified — that India had set a deadline of December 26 for Pakistan to act against militant groups operating in its territory, President Asif Ali Zardari added to the war talk with the pledge that the Pakistani nation would defend itself “till the last drop of our blood.”

Statements by Prime Minister Yusuf Raza Gilani and Interior Ministry head Rehman Malik about the low possibility of war were lost on a day of high rhetoric both in the Senate and in the National Assembly.

Mr. Gilani, speaking in Lahore, said it was his assessment there would be no war between the two countries, even though he said the nation was fully prepared to meet any threat head-on.

Mr. Malik, speaking at a memorial function for Benazir Bhutto in Islamabad, described the leadership of the two countries as “sensible” enough to prevent a war.



Jim Sinclair’s Commentary

If you are in India you might consider leaving for anywhere, now.

The only safe place in India is Prasanthi Niliyam. I feel quite good here in Africa.

If this push does come to shove, do not be complacent in major capitals or commercial centers anywhere.

Surgical strikes’ mean war, senators warn India

ISLAMABAD: The Senate on Wednesday ruled out the possibility of allowing India ‘surgical strikes’ in saying such attacks would be taken as aggression. “Any violation of Pakistani territory would be considered as war and would be repulsed with full force,” Leader of the House Raza Rabbani said while winding up a debate on national security in the Upper House. He rejected reports that US Chiefs of Staff Chairman Michael Mullen had asked Pakistan not to retaliate in case of an Indian strike. “We were neither conveyed such a message by Mullen nor are we ready to accept such advice,” Rabbani said. He dismissed reports of differences between the military and civilian leadership. Rabbani offered India co-operation in the Mumbai probe but said Pakistani citizens would not be handed over to India. zulfiqar ghuman



Jim Sinclair’s Commentary

Anyone seen four horsemen go by? Is there anyone who does not yet understand how pivotal Pakistan is for the world?

Suicide bombers ready to defend Pakistan: TTP
Daily Times, Pakistan – 15 hours ago

Tehreek-e-Taliban Pakistan backed and financed by u.s.a (TTP) chief Baitullah Mehsud said on Wednesday that ‘hundreds of thousands of suicide bombers’ are ready to defend Pakistan in case of war with India. According to a statement, he said, “Despite our differences with the government, the protection of Pakistan and its people is as much our duty as it is of the armed forces.” “The armed forces and the nation do not need to worry about the western borders in case of an Indian attack,” he added.


Pak military, Taliban unite against India
25 Dec 2008, 1044 hrs IST, Indrani Bagchi, TNN

NEW DELHI: “We are all Taliban now’’ is what Pakistanis may soon be saying. With Baitullah Mehsud of the Tehrik-e-Taliban (TTP) openly ranging himself and his suicide fighters on the side of the Pakistan army, the distinction between the army and the jihadi militia has significantly blurred. The danger of ‘Talibanisation’ becoming mainstream in Pakistan is now a proximate reality.

On Tuesday, Mehsud, whose TTP is one of the biggest Taliban terror groups in the Federally Administered Tribal Areas (FATA), offered his bombers to the Pakistan army to fight India. In the immediate aftermath of the Mumbai attacks, Mehsud and Maulana Fazlullah (Tehreek-e-Nafaz-e-Shariat-e-Mohammad) in Swat had both offered their terror groups to “help’’ the Pakistan army.

The aggressive noises against India were designed to signal that they meant business and to extend their appeal beyond the sections which have already embraced them.

In the process, however, the lid may have been blown off the tacit alliance that the Pakistan army was always suspected to have with the Taliban even when the two were fighting in FATA and the North West Frontier Province.


‘Surgical strike’ speculation quashed
By Iftikhar A. Khan

ISLAMABAD, Dec 24: The government ruled out on Wednesday the possibility of allowing India to conduct a ‘surgical strike’ inside Pakistan.

Winding up a discussion on national security in the Senate, Leader of the House, Mian Raza Rabbani, rejected as baseless rumours that US Chief of Staff Michael Mullen had advised Pakistan not to retaliate in case of a strategic strike inside its territory and that Pakistan had agreed to allow a single strike. “We were neither conveyed such a message by Mullen nor are we ready to accept such an advice.”

Senator Rabbani said Pakistan would neither allow a surgical strike nor violation of its airspace or other territorial limits.

He asserted that a surgical strike would be treated as war and repulsed with full force.

He said any attempt to alter the boundaries of the country would be thwarted with the support of the masses. He said the civilian and military leadership, as well as the entire nation, were reading from the same page, singing in the same tune and speaking the same language.


Kayani, the real power wielder in Pakistan
25 Dec 2008, 0000 hrs IST, Indrani Bagchi, TNN

NEW Delhi – Mumbai attacks lifted the veil on what was, until then, a stealthy transformation within Pakistan — the outing of new army chief

Ashfaq Parvez Kayani as the real power in the country, as opposed to the fragile democratic government led by Asif Ali Zardari and Yousuf Raza Gilani.

The first sign came when Pakistani foreign minister Shah Mehmood Qureshi was literally airlifted out of Delhi in the middle of the night, by what Indian officials say was a Pakistan army airplane.

Diplomatic sources said it was Kayani who personally torpedoed the proposal by Gilani to send the DG-ISI to India. He reportedly told a friendly diplomat, "The Indians will be asking for me the next time." It was also Kayani who went on record to state that Pakistan would respond "within minutes" to India. All indications are that the Pakistan army is spoiling for a fight.

When Kayani was made army chief by former president Pervez Musharraf in late 2007, all that was known about him was his reclusive nature, his apolitical bent and that he was a professional soldier and a keen golfer with an 18 handicap.



Jim Sinclair’s Commentary

Christmas spirit in downtown Karachi:

Pakistan Scrambles Fighter Jets After India Says ‘All Options Open’
Washington Post   |  Rama Lakshmi   |   December 23, 2008 05:23 PM

NEW DELHI, Dec. 22 — In signs of growing regional tension since the Mumbai attacks last month, Pakistan scrambled fighter jets over several of its larger cities Monday, and India’s foreign minister told a gathering of Indian diplomats in New Delhi that the country is keeping all its options open to bring the perpetrators of the attacks to justice.

"We have so far acted with utmost restraint," Pranab Mukherjee told the more than 120 envoys from posts around the world. But he added, "We will take all measures necessary as we deem fit to deal with the situation."

A senior government official, who spoke on the condition of anonymity, later called Mukherjee’s tough talk "an expression of political will that India will not take this lying down." He added that the option of "precision airstrikes" on terrorist training camps in Pakistan would remain on the table if Islamabad did not act effectively against groups fomenting terrorism against India.

Pakistan has denied involvement in the Mumbai attacks, which killed more than 170 people and wounded more than 230.


Jim Sinclair’s Commentary

What the banks refuse to tell is a story that will certainly send them all to hell.

Crackdown on bailed out banks
Dec 24, 2008

WASHINGTON – LAWMAKERS are turning up the heat on banks that have received money from the Treasury Department’s $700 billion (S$1 trillion) rescue fund after the Associated Press reported that they wouldn’t say how they are using the money.

Sens Dianne Feinstein and Olympia Snowe said on Tuesday that they will propose legislation next month to force companies that receive money from the fund to report how they have spent it.

The legislation would also prohibit them from spending the taxpayer dollars on lobbying or political contributions. It would also apply to some recipients of the Federal Reserve’s emergency lending programs.

The legislation was introduced earlier this year, but the Senate did not take it up. The sponsors have long said they plan to pursue it when the 111th Congress convenes Jan 6.

‘At present, we don’t know whether these companies are using these funds to fly on private jets, attend lavish conferences or lobby Congress,’ Ms Feinstein, a Democrat, said in a statement.


Posted at 4:05 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Gold gave the gold bulls a nice Christmas gift in today’s holiday shortened trading session by closing up. As I have stated for the past week now, reading too much into any of these holiday markets is fool’s work but I must admit I would much rather prefer to see a “+” sign in front of the gold price rather than a “-“ sign even if it comes on such anemic volume. I heard reports stating that the longs spiked the egg nog of the bears and because it was so quiet down in the pit, they all just fell asleep and could not do any selling. Hey – who cares – it worked. Between spiked egg nog and physical delivery of gold, the bulls might have finally hit upon a nice weapon against the perma shorts at the Comex. Personally I think it would be more effective to simply lock the exchange doors and leave them all outside the building in the cold and snow. Since it is Christmas, they could let them back in after prices had spiked a couple hundred dollars so they could watch “How the Grinch Stole Christmas”.

Gold seemed to take its cue more from the weakness in the Dollar than much of anything else today although from a technical perspective, it did hit the bottom of the trading range yesterday and bounced away from it giving range players a reason to buy. It is still in consolidation mode as it bee-bops back and forth between $830 and $850. For now the probabilities favor more of that into the end of the year although an upside breach of $850 in the February will see it run to test the lap between $855 – $860 shown on the daily chart. Gold continues trading above the 100 day moving average which has not yet turned higher although the 10 day through 50 day’s are all moving up, a bullish technical sign.

We had a pretty decent amount of deliveries assigned today against the December contract – 128 to be precise. The total for the month of December to this point is 13,452 or 1.34 million ounces with 369 contracts remaining open in that month as of yesterday. Registered gold at the Comex continues to hover around the 2.83 million ounce mark.

Open interest took a hit yesterday as weak-handed longs were run out.

The mining shares are trading in a comatose fashion today – nothing worth commenting on.

Crude oil was knocked lower again today in what has become a familiar occurrence as the drop below $40 was the signal for the shorts to lean on it as frustrated bottom pickers throw in the towel and look to perhaps try again at a lower level. The recently expired January crude contract ended its life with a settlement print of $33.87 so bears will be targeting that level. A failure there and $30 will be here almost immediately. Should crude be able to hold above there, it will encourage those who are looking for a bottom.

A point of interest – there are some grumblings in the oil patch that the Nymex crude oil contract needs to have some modifications made to it to make it more reflective of the broader global oil market. This particular contract is for what we call “light or sweet” crude as compared to the vast majority of oil traded globally which is “heavy or sour”. Also, the delivery point in Oklahoma only has so much storage capacity and a glut at that location can cause prices in the delivery month to digress quite widely from larger global market prices elsewhere. Some are saying that the Nymex is no longer serving as an accurate benchmark for crude oil prices. This might be worth following to see if anything comes out of these murmurings. From what I am hearing front month Nymex prices are lower than a large amount of the crude being traded elsewhere. If modifications are made to the contract that would result in more delivery points and some latitude in the grade of oil that could be delivered against the contract we might see a bit of a move higher in prices, especially in the front or delivery month, although that would be something that is a bit down the road at this point in time. Just something that I felt deserved mention.

I should note here that for the most part since July of this year, the fortunes of crude oil have pretty much been the fortunes of the entirety of the commodity complex. Today all of the metals, precious and industrial, were higher in spite of crude oil weakness and even sugar and corn were higher. I am glad to see this divorce occurring between individual markets and the crude complex because it further confirms my views that the bulk of the hedge fund deleveraging and index fund redemption-related selling is behind us and that many markets have now gone back to trading their own particular set of supply/demand fundamentals.

Bonds continue to pause below their recent peak with no sign of any concerted selling at this point. Like gold and most of the other markets, bond trading is subdued in front of the holiday.

The grains continue to show strength with soybeans taking over the leadership role.

In closing I would like to personally thank all of you who took the time to write such warm Christmas greetings. You have read my remarks from time to time about some of the harsh and vile emails that I occasionally receive from disgruntled readers but I feel I have been remiss in not saying that the vast majority of notes that I receive are filled with gracious words from the most wonderful collection of folks that no doubt have ever graced this planet. Time often precludes me from responding to each and every email although I do make a real effort to do so. So let me state here how grateful I am for all the kind sentiments expressed by so many of you and to wish all of you a most wonderful Christmas and a Happy, Healthy and Prosperous New Year.

Merry Christmas to all and to all a good night!

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


Posted at 2:52 PM (CST) by & filed under General Editorial.

Dear CIGAs.

Some say the cost of gold production per ounce has risen. Has this costs of specific mining projects risen because of the short of gold derivative hedges that lost huge money are now factored in as the newest major cost per ounce?


Simply stated, if you lose your ass on the short of gold hedge now evaluated by the strict FASB 133-155-157 terms the cost of gold production per ounce goes up, up and away!

It appears the project’s mining costs have gone wild on the upside while in truth it is the short of gold hedge that has gone deeply into the red and is now being charged to the project.

One of Tanzania’s major new projects has massive short of gold hedge taken at under $400.

Now what do you think that does to the cost of mining per ounce? My back of the envelope calculation suggests it rises by the better part of $250 per ounce at a gold price average of $825. That number is conservative – very conservative.

Now think $1650 and maybe as much as $6000.

Don’t be Fooled!

It is the massive short of gold OTC derivative hedge losses that make up the largest increased cost of mining category today.

Until recently the cost of production per ounce of gold was either cash cost or total cost.

Cash costs in mining are the costs of production at site level per unit of output. It includes operational cash costs at site level. This includes items such as transport, refining and administration costs and royalties. It excludes non-cash costs such as depreciation and amortization excludes costs not at site level (such as head office costs).

The value of the by-products is deducted from the final cash cost of the metal. For example, if a copper mine produces gold as a by-product, then the value of the gold produced will be deducted from the cash cost of the copper. This is the usual accounting treatment for by-products in most industries.

The total cost of gold produced is the sum of all costs to the point of sale, including the cost of capital, depreciation, depletion, administrative and so on.

This was all quite straight forward until the advent of the use of short of gold derivatives for non-recourse project financing in the form of clarification and additions of FASB 133 -155 – 157 and 159. These accounting standards deal with valuation of OTC derivative hedges and methods for application of derivatives to the project for which it is undertaken.

GAAP (Generally Accepted Accounting Principles) are a collection of accepted rules, conventions, standards, and procedures for reporting financial information. In the US, GAAP standards are set by the Financial Accounting Standards Board (FASB).

To make matters easier to deal with, all GAAP procedures are moving towards International GAAP.

The key element in the final analysis is that it is now required to reveal what hedge was taken for what project then apply the loss or gain from that hedge DIRECTLY to that project.

As such, the Cost of Production for gold per ounce of any given project will be influenced by the profit or loss per ounce developed on the hedge taken for that project guided by valuation of type two assets.

Posted at 2:40 PM (CST) by & filed under In The News.


Dear CIGAs,

My thanks for the thousands of helicopters sent here. Actually the Fed through the practice of "Quantitative Easing" are now using the Russian heavy lifter helicopters as they are the largest rotorcraft flying. The weight of the 24/7 money drops are putting such a strain on helicopters that a change in name is under consideration. The newest possibility is B-52 or Russian long range bear saturation cluster money bombing internationally. More on this in 09.

Jim Sinclair’s Commentary

Happy New Year.

U.S. debt approaches insolvency; Chinese currency reserves at risk
by Maurizio d’Orlando

In a few months, America’s public debt has grown to more than 100% of GDP. Fear of a valuation crisis for the dollar, with tremendous consequences for Asian countries, major exporters to the United States.
Milan (AsiaNews) – In the United States, the danger of debt insolvency is growing, putting at risk the currency reserves of foreign countries, China chief among them. According to new figures published by Bloomberg in recent days (Nov. 25, 2008 [1]), the American government has employed a total of 8.549 trillion dollars to stop the financial crisis. This means a total of about 24-25.4 trillion dollars of direct or indirect public debt weighing on American taxpayers. The complete tally must also include the debt – about 5-6 trillion dollars – of Fannie Mae and Freddie Mac, which are now quasi-public companies, because 79.9% of their capital is controlled by a public entity, the Federal Housing Finance Agency, which manages them as a public conservatorship.

In 2007, public debt in the United States was 10.6 trillion dollars, compared to a GDP (gross domestic product) of 13.811 trillion dollars. Public debt in 2007 was therefore 76.75% of GDP. In just one year, direct and indirect public debt have grown to more than 100% of GDP, reaching 176.9% to 184.2%. These percentages exclude the debt guaranteed by policies underwritten by AIG, also nationalized, and liabilities for health spending (Medicaid and Medicare) and pensions (Social Security)[2]. By way of comparison, the Maastricht accords require member states of the European Union (EU) to reduce their public debt to no more than 60% of GDP. Again by way of comparison, in one of the EU countries with the largest public debt, Italy, public debt in 2007 was equal to 104% of GDP.

In 2007, 61.82% [3] of America’s public debt was held by foreign investors, most of them Asian. So the U.S. public debt held by nonresident foreigners is equal to about 109.39% (113.86%) of GDP. According to a study by the International Monetary Fund, countries with more than 60% of their public debt held by nonresident foreigners run a high risk of currency crisis and insolvency, or debt default. On the historical level, there are no recent examples of countries with currencies valued at reserve status that have lapsed into public debt insolvency. There are also few or no precedents of such a vast and rapid expansion of public debt.

The United States also runs large deficits in its public balance sheet and balance of trade. Families and businesses are also deeply in debt: in 2007, American private debt was equal to a little more than 100% of GDP. At the moment, it is not clear how much of America’s private debt has been "nationalized" with the recent bailouts.

In the early months of next year, when the official data are published, the United States will run a serious risk of insolvency. This would involve, in the first place, a valuation crisis for the dollar. After this, the United States could face a social crisis like that in Argentina in 2001. A crisis in U.S. public debt would likely have a severe impact on the Asian countries that are the main exporters to the United States, China first among them. Chinese monetary authorities, thanks to a steeply undervalued artificial exchange rate, by about 55%, have limited imports (including food) and have achieved an export surplus. This has allowed them to accumulate a large stockpile of dollar reserves. In a currency crisis, China risks losing much of the value of its accumulated currency reserves. At the same time, pressure on imports (wheat, other grains, and meat) have led to inflation in the prices of food, the most important expenditure for more than 900 million Chinese. This is nothing more than a small confirmation of the recent statements of the pope, in his message for the World Day for Peace, where the pontiff calls the current financial system and its methods "based upon very short-term thinking," without depth and breadth (nos. 10-12), preoccupied with creating wealth from nothing and leading the planet to its current disaster. [4]


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

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