Monday, October 26, 2009

Don't Blink!

The break lower we have been "expecting" in the Precious Metals finally materialized this morning. Within minutes of the PM London Gold Fix being put in at 10AM est, the US Dollar mysteriously caught a bid, and the slow descent of the Precious Metals began.

Is it just me, or does this Dollar bid smell strongly of a currency intervention? Or was it simply a short squeeze of the US Dollar shorts set in motion by confusion over remarks out of China regarding it's US Dollar reserves?

China central bank official downplays dollar remarks
HONG KONG (MarketWatch) -- A researcher at the People's Bank of China downplayed on Monday comments that the Chinese central bank should rebalance its reserves away from the U.S. dollar, after the remarks sent the greenback plunging.

Zhou Hai -- a Harbin, China-based member of the central bank's financial research department -- was cited Monday in a PBOC-affiliated publication as saying that, while the dollar should remain the principal currency in China's $2.27 trillion foreign-exchange reserves, the proportion of euros and Japanese yen should increase.

Zhou also said China should reduce pressure from foreign-exchange inflows by gradually improving the yuan exchange-rate mechanism and promoting some capital outflows.

The remarks sent the U.S. dollar to a fresh 14-month low against the euro. See Currencies.

The central bank researcher later told Reuters that the statements were "purely my personal view."

Still, Reuters said that other central-bank have expressed similar views.

"While the move has garnered the market's attention and stands out on a short-term basis, there does not appear to be any practical reasoning behind today's move other than what started as a short-term correction that gained momentum as dollar shorts started to cover their positions resulting in a short squeeze," wrote Robert Pavlik, chief market strategist banyan partners.

Whatever the case may be, today's currency moves were used by the Gold Cartel in an attempt to break Gold's rise over $1000 and set the market up for this weeks options expiration's.

I would suggest that a dollar rally, lower euro and gold is more than just good luck with option expiration's and the largest of all US Treasury auctions this week.
-Jim Sinclair

It may have done little more than offer investors an opportunity to get into the Precious Metals at a discount. The charts above pretty much tell a simple story. The Dollar is at resistance. The YEN and EURO are at support. Gold and Silver have come into near support, and are tempting investors and traders to buy them at a discount. patience by traders hoping to get into these markets at a price are being rewarded. With options expiration Tuesday, a further dip at the open may be in the offing. Be nimble and be quick if opportunity at a price presents itself.

Why the Rise in the Gold Price is Different this Time.
by Julian D.W. Phillips
For over more than 18 months we have watched the gold price churn below $1,000 and in the process forming three tops, before breaking out to above $1,050 in early October 2009. Why will it not fall back to well below $1,000 and possibly as far as $850 this time?

For many months now too, while traders played the gold price against the U.S. $ the gold price has been precise in its inverse correlation to the $. We believe that this has mistakenly led commentators to place far too much emphasis on the $, as the inverse measure of gold.

We say this because the moves occurred at a time when many facets of the gold market were absent from the gold market, such as investment demand, low jewelry demand and central bank demand. Traders held sway over the gold price and it is they that decided that the moves of the $: € decided the price of gold. This lacked a reasonable basis to it. Why should the gold price be tied to the €? Such a relationship implies that the $ in isolation, is the most important factor in the gold market. We counter that and say, yes COMEX is a U.S. market and such traders do have enormous pricing power, but when the full force of all sides of the gold market come into play, COMEX diminishes in importance, just as the waves of the sea are of less important than tides are, to where the sea will climb on the shoreline.

Yes, the state of the $ is important in pricing gold and it is the ‘hub’ of the currency world, but to gaze at it alone is to ignore the much bigger world of gold in its entirety, acting together in synthesis, in deciding the gold price.

This is amply demonstrated by the fact that the U.S. $ is sitting not far off the same place, against the €, as it was when gold was just below $1,000. We now foresee a larger de-coupling from the $ by gold, as we move forward. Yes, the waves of the $ will ebb and flow and continue to cause traders to move the gold price against the $ as before, but the tide of investment demand and other factors in the gold market will flow and dominate these moves over time.

...while the facts of the article in the Independent [British] newspaper, informing the market that France, China, Russia and select Persian Gulf oil producers were going to price oil in a ‘new’ currency were denied, the market is convinced that this will happen in time, even if it takes another decade. The reaction in the gold market was to bring in new investment demand via bullion itself, to prompt heavier central bank selling, to slow scrap sales and to cause traders to add some more gold to their holdings.

On top of the consolidation phase the gold price has been going through over the last 18+ months, this was a breakout pointing to an end of that phase. Now it sits on top of the $1,000 level, which forms a huge support to the price.

The point for gold is that even central banks are wary of the U.S. $ and consequently expect uncertainty to spread like the plague through other dependent currencies, as they try to keep their exports competitive in the world market. Despite it being money in earlier times only, gold remains the only money that can be exchanged when confidence is lost and still hold its value. This reality is rapidly rushing at us and is why gold is rising in price.

When the Titanic sank, there was a point in time, when the ‘unsinkable’ ship in the passenger’s minds, changed to a sinking ship. The breakout in the gold price was just such a point in time.

The ailments hitting the U.S. $ can affect other currencies, all of which are controlled ultimately by their central banks and governments. If the U.S. Administration can’t hold financial confidence why should any other currency do so? The road down for the $ will eventually lead to something that cannot be debauched by governments. The actions of the Chinese and Russian central banks, tells us that they trust a ‘basket of currencies’ [which minimize the impact of any individual government] and, to some extent, gold.

The Defining Moment
By Bix Weir
The following are some of the important converging events that, in retrospect, will have foretold the end of the Banking Cabal that controls EVERYTHING in our lives today.

1) The CFTC has finally made the decision to limit concentration positions and, according to Chairman Gensler, will implement the position limits sooner rather than later.

2) China and India are actively promoting gold and silver purchasing to their population in advance of the price explosion.

3) The media has begun to focus attention on the banking cabal ...

4) The Federal Reserve is being dragged before Congress with the people publically demanding to look "behind the curtain".

5) Leveraged lending has destroyed the Tier 1 capital at EVERY bank around the world. A bank that leverages its assets 20-1 loses 100% of its capital base when those asset values drop only 5%.

6) Almost all US States are bankrupt and in need of massive bailouts. With rapidly falling tax revenues the ONLY way out of this problem is to crash the system and start fresh.

7) The “Public Healthcare Option” is back on the table and will be included in the health care reform package.

8) The US Citizens are on their knees in debt to the banking cabal. Mortgages, credit cards, school loans, small business loans, gas cards…you name it! The bankers have twisted the laws in their favor so you can NEVER get out from under their grip.'s their own fault for signing the debt contracts but did you ever ask where the bankers got the money to lend you in the first place? THEY CREATED IT OUT OF THIN AIR! (ps -your "Credit Rating" is truly a sick and twisted invention by the bankers to make you feel obligated to transfer your wealth to them in exchange for their paper.)

Boiling Point
By Warren Bevan
There are three obvious stages to a bull market, smart money
accumulation being the first. That stage is just winding down now. We are only
at the beginning of the second stage where gold climbs the so called wall of
worry as institutions and funds accumulate before telling their clients to get
into the market.

It may still be years away from the blowoff top which will see gold priced
in the many thousands of dollars and silver in the hundreds. It’s been a slow
and rewarding journey so far, but the real fun is just beginning.

All that being said this coming week is the Comex options expiry for gold
and silver. These expiries have been plagued by weakness in the past. I expect
the metals to come under major pressure right off the bat Monday, but the
kicker will be whether the buyers have enough conviction and cash to keep
prices stable or even move them higher. This week will without a doubt be the
most important week of this century when referring to the precious metals.
Don’t blink.,%202009%20pdf.pdf

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