I'm prepared to make a bet. You keep your U.S. dollars...and I'll keep my gold. We'll see which one goes to zero first.

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Jim Sinclair - Shorts Are About To Get Mauled In The Gold Market

March 11, 2013, at 6:07 pm
by Eric King

Courtesy of KingWorldNews.com

Dear CIGAs,

Today legendary trader Jim Sinclair told King World News that when it comes to gold, "... the crowd has an opinion, the crowd is bearish, and the crowd is never right." Sinclair also stated that the crowded short position in the gold market is going to get mauled. 

Eric King:  "Jim, the situation that's going on right now in the gold sector, it really reminds me of when Warren Buffett purchased a large stake in the Washington Post in the 1970s.  The press ended up going to him after about 18 months because he was down 40% on his investment in the Post, and they asked him, 'What are you going to do now?'  If I remember correctly Buffett said, 'Nothing.'  It turned out to be one of his greatest investments of his life.  Buffett's gain at one point in the Washington Post was a staggering 15,336%.  I wanted to ask you today how Buffett's experience relates to what is happening in the gold market?"

Sinclair:  "It's a mirror image.  Buffett knew what the true value was.  He knew what the long-term prospects were, and he knew without a doubt that he was going to do extremely well on that investment.  This is especially true of a man who is holding a long position and says something like that in response to a question from the press.  And of course Buffett knew what he was talking about....

"Let me say this, eventually the gold companies will become like utilities as the gold price is moving towards its final destination.  These quality gold companies will pay big dividends the same way the utilities have always paid big dividends.  If the company has the gold, the mineable ounces, and the ability to finance, then what are you worried about?  It's going to be fine."

Eric King:  "Jim, you called for this changing nature of the way this gold market is now trading, and Friday's action surprised a lot of people, but not you.  The reason you were not at all surprised by Friday's rally in gold is you had been noting the changing nature of this market.  What about gold going forward?"

More...

_________________________________________

In The News Today

March 11, 2013, at 4:41 pm
by Jim Sinclair

Jim Sinclair's Commentary

This will be seen in the future as a move mastermind. North of Europe has the potential of being a monetary game changer.

Norway Fund Flees Currencies Tainted by Stimulus Addiction

By Mikael Holter on March 11, 2013

Norway's $713 billion sovereign wealth fund is turning away from the world's biggest currencies and their debt-laden governments as policy makers undermine their exchange rates through unprecedented stimulus measures.

The Government Pension Fund Global, the world's largest wealth fund, cut its holdings in French and U.K. government bonds by almost half last year as it raised its share of government bonds in emerging-market currencies to 10 percent of its fixed-income holdings by adding investments in Turkey, Russia and Taiwan.

"It's what we perceive as a risk-reducing investment strategy," Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a March 8 interview in Oslo. Cutting dollar, yen, euro and pound investments is a "prudent" move, he said. "These four major currencies all have structural issues, with regards to government debt, to private sector debt, to unconventional monetary policy, and to growth and the demographic profile of the countries."

At issue is how central bankers across the globe will eventually unwind the uncharted stimulus measures enacted to prop up global growth since the onset of the financial crisis in 2008. Debt levels have soared for governments across much of the developed world. In Europe, political leaders are trying to save the region from a fiscal crisis now in its fourth year.

Monetary Easing

Federal Reserve Chairman Ben S. Bernanke and other policy makers have signaled they will continue to act to boost sluggish economic growth, potentially setting the stage for another round of "Great Monetary Easing" according to Morgan Stanley. The International Monetary Fund predicts the world's developed economies will grow 1.4 percent this year, half the average pace of 1994 to 2003.

More...

Jim Sinclair's Commentary

Worth your consideration.

Gold price in Dollars (yellow, left scale) and the US debt ceiling (trillions $, right scale)

Source: wealthcycles.com.

$1,000 daily price swings and $3500 gold - Sinclair's dire predictions 'Mr. Gold', Jim Sinclair, who has a huge following amongst the pro-gold sector, propounds some interesting views on where the global economy and the gold price are heading

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March 12, 2013

Russell's comments -- It seems as if some one or some party has been putting pressure on gold during the past few weeks. I can't prove it, but today the pressure seems to be (mysteriously) off. Gold is up 13.70 as I write this morning with the gold mining stocks (at last) showing signs of life! The next step is to get April gold above 1600 and staying there! Is the long 17-month correction in gold and gold miners coming to an end? If we're not there, I believe we're close.

Below, GLD, my proxy for gold. Gapping above the descending trendline, and the histograms are turning bullish. RSI is also turning up. GDX and GDXJ are both higher this morning.

The Fed, the Bank of Japan, and Britain's central bank are all creating and spewing forth their respective fiat currencies. Can money "manufactured out of thin air" buoy the economies of the developed nations? Can a loan backed by thin air be worth anything in the long run? Where is the Fed's "exit strategy"? Will the next Fed head curse Ben Bernanke? Can you levitate the stock market on a diet of thin air? Why are the central banks (at last) buying the substance they despise -- gold.

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A Moment of Clarity

Theodore Butler | March 11, 2013 - 9:38am

This is excerpted from the weekly review of March 9, 2013 -

Every once in a while, someone utters a statement that suddenly galvanizes the issue at hand. In the fable "The Emperor's New Clothes," Hans Christian Andersen tells of two weavers who convince the emperor that their special clothing for him is invisible only to those unworthy. When the emperor parades in front of his subjects wearing the special clothing, a child cries out the obvious, "he isn't wearing any clothes at all." That's the first thing that came to my mind when I read of the US Attorney General's words before a Senate hearing this week.

Asked why the government hadn't pursued criminal charges in a case where a large bank admitted to money laundering for drug interests, Attorney General Eric Holder said: "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy." A senator admitted to being stunned by the frankness of the response. While Mr. Holder's no-nonsense answer got the widespread attention it deserved, it should have resonated most loudly with silver investors, or at least with readers of this service.

In a blinding moment of clarity, the answer to the whole "why isn't the CFTC doing anything about the silver manipulation and JPMorgan's stranglehold on the price" question flashed for all to see. Mr. Holder's words couldn't be any clearer and fit perfectly with the now-consensus view held by those who know that JPMorgan is manipulating the price of silver. The reason the CFTC is allowing JPMorgan to continue with their illegal behavior in silver is because the bank is too damn big and powerful to rein in for fear of the unintended consequences. Not only is this the most plausible explanation for the hands off treatment for JPM, countless specific facts unique to silver also reinforce this view.

There is no reason for a US federal agency that spends four and a half years investigating a simple question about market concentration not to find the answer, other than intent not to find it. Clearly, the CFTC won't conclude the silver investigation because of the fear that charging JPMorgan with criminal charges for manipulating the price of silver could have extremely negative consequences for the bank that could radiate throughout the financial system. Throw in that certain guarantees and assurances were most likely given to JPMorgan by the US Government at the time of their assumption of Bear Stearns' concentrated short position and the most plausible explanation becomes more obvious. I never represented that this manipulation business was anything but a very serious circumstance being played out at the very top of the financial and regulatory food chain. It's hard to imagine the Attorney General's words being more applicable than to the silver price manipulation by JPMorgan.

I had this discussion with a friend the other day when the story first broke and he raised the obvious point that this would seem to extend the life of the silver manipulation indefinitely. After all, if the regulators were reluctant or afraid to force JPMorgan to cease manipulating silver, then that gives the green light for JPM to do so forever. I can understand that sentiment. Understand, yes. Accept? No. While I think that the growing general awareness that some banks are too big to fail or even be sued and, specifically, that JPMorgan is manipulating the price of silver would argue for a quicker end to the manipulation than otherwise, but that's different than the main point I would make.

Many conclude that the termination of the silver manipulation will arrive only in some long from now timeframe, given the power of JPMorgan and the regulators' temerity in confronting the biggest of the too big to sue banks. Often, this sentiment is aligned with thoughts that so as the government's ability to create money and debt appears unlimited; so can JPMorgan sell unlimited amounts of paper silver contracts short to control the price. This is an easy analogy to make and brings me to my main point, namely, there is a world of difference between the creation of new money and the creation of new short silver contracts. The key is in knowing why they are different.

I agree and stipulate that JPMorgan has always sold as many new short contracts as it found necessary to cap and contain the price of silver. We've seen stark proof of this on two recent prior occasions, on the two-month $10 silver rally from the end of 2011 and in the $8 silver rally from last summer into early winter. On both occasions, JPMorgan, as the sole new short seller, single-handedly stopped each silver rally from progressing further. And truth be told, I can't rule out JPMorgan not being the sole new silver short seller on the next price rally. That's precisely the most important consideration for the future price of silver. So, what I'm saying is that yes, the dirty rotten crooks at JPMorgan have single-handedly stopped silver in its tracks in the past and may do so again. But I am also saying JPMorgan can't do it forever and maybe not even once again, because of something else.

The something else concerns the specific nature of the instrument through which JPMorgan is controlling and manipulating the price of silver. By selling short heretofore unlimited quantities of COMEX silver contracts to control the price is, at the same time, also obligating the bank to the actual delivery of physical metal, under very easy to imagine circumstances. The Federal Reserve can buy $45 billion a month in securities or $450 billion worth, the consequences of which are impossible to determine with accuracy. On the other hand, the short sale of a regulated commodity futures contract that calls for physical delivery at the option of the buyer has an easy to determine outcome if that commodity moves into a physical shortage. COMEX silver is such a physical delivery futures contract.

What this means is if silver does move into a pronounced physical shortage, something I see increasing signs of, then it will only be a matter of time before cash physical silver buyers begin to demand actual physical delivery on COMEX futures contracts. That's because the COMEX has ascended to the pinnacle of the silver-pricing world. Along with that silver-pricing ascendency has evolved unintended consequences (why are there always unintended consequences for things that shouldn't have occurred in the first place?). For COMEX silver contracts, one unintended consequence is that most silver market participants, including industrial users and large investors, know that in a pinch, they can get physical delivery by accepting and paying in full for actual metal on a futures contract.

Yes, I know that only a very small percentage (1% to 3% or less) of all futures contracts on physical commodities ever end in actual delivery. Left unsaid is that's because only in a very small percentage of the time is a physical commodity ever in an actual shortage. In an actual physical commodity shortage it must be expected that, depending on price, there will be a great demand for delivery for the item in a shortage and an equally great reluctance by futures contract sellers to make delivery; otherwise there would be no shortage to begin with. This is the problem in silver, namely, that the biggest short seller, JPMorgan, has driven the price so low that, if a physical silver shortage develops, you can be sure many more buyers of silver futures contracts will demand physical delivery and expose JPM's inability to deliver. Of course, we'll only learn this after the fact when JPMorgan proves incapable of delivering physical silver. That's when the federal regulators and the crooked self-regulators at the CME will pronounce that a special problem has suddenly emerged that necessitates a contract default. The truth is that the problem already exists today in JPMorgan's crooked concentrated short position and the only thing that must emerge is recognition of a physical shortage. In a play on the expression "it's all over but the shouting," in silver, it's all over but the shortage.

That we have come to the point in this country where the leading federal law enforcement official acknowledges that the Department of Justice is reluctant to file criminal charges for fear of the fallout explains why the CFTC has not cracked down on JPMorgan in silver. But that explanation has nothing to do with what will occur when the silver shortage hits with full force. Nothing that the Attorney General, the CFTC, JPMorgan or any other entity in the world says or does will deter the worldwide buying force that will rush into silver when the shortage is exposed.

One final note - there has been increasing talk of a silver and gold shortage leading to a COMEX contract default of some type. I don't know where this talk of a gold shortage comes from. Gold is not industrially consumed and that makes it virtually impossible for it to develop into an actual physical shortage. I understand that silver and gold are manipulated in price by virtue of COMEX game playing, but I think it's important to distinguish between the two based upon the facts. Yes, gold can go higher, even much higher than I anticipate, but a physical shortage is a completely different animal. It is the prospect of a silver shortage that lies behind my switch from gold to silver mantra.

Ted Butler

March 11, 2013

For subscription info, please go to www.butlerresearch.com

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Gold Still Appears To Be the Ultimate Currency

Posted Monday, 11 March 2013

The Dow Jones Industrial Average climbed a steep wall of worry and last Tuesday returned to its all-time high from late 2007. The Dow finished at 14253.77, topping the previous record set in October 2007 and is already up 8.8% for the year. The Fed's expansive monetary policy to prop up the economy has kept stocks climbing higher despite a less than glowing global economy. By pumping trillions into the financial system, the Fed has convinced investors it will provide a safety net for future shocks. In addition, by keeping interest rates extremely low, the Fed is forcing investors to seek higher returns in the stock market.

The financial press is hailing it a historic day.

But we suggest stopping a moment before chilling the champagne. Despite reaching its all-time high, the stock market has provided investors with zip, zilch, zero return over the last five and one-half years. The Dow has just gotten back to where it was in October 2007 and many investors are still struggling to make up their losses after the credit crisis that erased $37 trillion from global equity values. When the housing bubble burst in 2008 the DOW plunged 34 percent in 2008 for the worst performance in 77 years.

During the five and a half year period since the crisis, gold has provided a return of approximately 119%.

We don't mean to dump cold water on the celebration. We just want to keep things in perspective. Once we factor in inflation over the past few years, the all-time high looks less convincing. With consumer-price increases removed, the Dow has not been in real record territory in more than 13 years. A Wall Street Journal article contends that the last real, or inflation-adjusted, Dow record was on Jan. 14, 2000. Since then it looks like the Dow has risen 22% if you don't take inflation into account. But if you do, Tuesday's high is still more than 10% below that record.

Tuesday's close is just 9256.38 once inflation is removed. That doesn't even match the inflation-adjusted high of 10194.80 hit in 2007 - and we're only taking the official inflation numbers into account here. And it is far from the real record of 10424.28 hit Jan. 14, 2000, according to calculations by Bespoke Investment Group.

Inflation is definitely something to take into account when investing to meet future needs. Central bankers can print all the fiat currency they like but they can't manufacture gold. Its supply is more or less fixed (discoveries are made, but you can't suddenly increase gold production by 500% and you can do that in case of fiat currencies). It cannot be inflated by central banks, which is why it is considered an inflation hedge and the ultimate alternative currency (or the only true one).  The reason a glass of soda cost a penny in the beginning of the last century and now costs several dollars is not that soda water was cheaper then, but rather that the dollar had more value.

Some of the big hedge funds still are betting on the price of gold, even though a large number have sold most in the last quarter of 2012 (who knows if that happened in the past few weeks when volume was so high...), if not all, their shares in SPDR Gold Trust ETF (GLD -0.09%). Hedge fund manager John Paulson and his firm, Paulson & Co., remain solidly in the gold camp.  Paulson continues to hold the largest position in GLD with nearly 22 million shares, worth an astonishing $3.344 billion.

Let's see what's next. We'll start the technical part of today's essay with the analysis of the USD Index medium-term chart (charts courtesy by http://stockcharts.com.)

The important thing to discuss here is the head-and-shoulders formation. This trading pattern has bearish implications for the USD Index and the question now is whether the formation is still present given the recent rally. We feel the answer is "yes", because even though the index is now higher than the level of the left shoulder, the full formation is simply a bit skewed.

Local bottoms have been a bit higher each time so it is perhaps quite natural for the second shoulder to be above the first shoulder. Consequently, the formation could still be completed - though not yet - the other shoulder has yet to form. Declines in the index are needed for this to happen, and we feel this could still be seen.

Let's take a look at the intermarket correlations to see how this rather bearish outlook for the dollar could translate into gold and silver prices.

The Correlation Matrix is a tool, which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector, (namely: correlations between gold and other assets). The precious metals and the USD Index show a strong, negative correlation for the past 30 days. In the last several days however, gold prices did not continue their decline, that is, did not respond to the USD Index strength. This is a bullish combination and provides an indication that gold prices will rally if the dollar declines significantly (!). It also suggests that additional small (!) daily rally in the USD Index may not really hurt the price of gold (just like it was the case on Friday).

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The Three Charts Traders Need to Watch This Week

By Jeff Clark
Tuesday, March 12, 2013

Finally, look at this chart of the U.S. dollar plotted along with its 14-day relative strength index (RSI)...

The RSI is a momentum indicator that measures overbought and oversold conditions. Buy signals - which are marked by the blue arrows on the following chart - occur when the RSI drops below the 30% line and then starts to rally. Sell signals happen when the RSI rallies above 70% and then turns around and starts falling. It looks like Friday's action in the dollar triggered a sell signal...

Precious metals and other commodities tend to respond well to a falling dollar. So if the dollar continues lower this week, that increases the odds of at least a short-term rally in the commodities markets.

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You are not thinking properly if you are hanging on to physical gold coins and not trading them in for physical silver coins. I'm not saying that gold is not manipulated, it is. What I am saying is that in an "unmanipulated world" gold will rise 2x-3x whereas silver will rise 20x-30x or more! That's how important it is to make the trade YESTERDAY!

It looks like a Silver Eagle MANIA of sorts has already kicked in because the first full week of March saw sales going gangbusters hitting a record 1,562,500 ounces. From what I hear there are NO signs of Silver Eagle purchases letting up.

http://www.usmint.gov/mint_programs/american_eagles
/?action=sales&year=2013

Some of this can be blamed on the current (and likely permanent) shortage of pre-1965 silver coinage as SAE's are the next best thing. Some can also be blamed on the fact that a Silver American Eagle is actually MONEY issued by the United States Mint and NOT a "Federal Reserve Note". Get your SAE's while they still allow you to buy them!

OZ UPDATE: I'm getting great emails about the OZ movie analysis as people are seeing the underlining meanings throughout the movie. Everything from SILVER melting the witch to the massive hidden gold stashes waiting to be released to this "wizard" is NOT being Alan Greenspan (as I thought it may be). Turns out I think it's another very visible player for the Good Guys that I had alluded to in the past...any guesses? :-)

Not sure when I will have a full analysis ready as it's still a little foggy as to who some of the main characters represent but the movie clearly has an ALLEGORIC MESSAGE with many hidden meanings!

Please be prepared for anything in the days and weeks ahead as time is very, very short.

Watch for the price of silver to lead the way...FINALLY!

My the Road you choose be LINED WITH SILVER!

Bix Weir

wwwRoadtoRoota.com

Subscribe to Bix Weir's RoadtoRoota.com for the full article.

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Fed Injects Record $100 Billion Cash Into Foreign Banks Operating In The US In Past Week

Submitted by Tyler Durden on 03/09/2013 12:50 -0400

Those who have been following our exclusive series of the Fed's direct bailout of European banks (here, here, here and here), and, indirectly of Europe, will not be surprised at all to learn that in the week ended February 27, or the week in which Europe went into a however brief tailspin following the shocking defeat of Bersani in the Italian elections, and an even more shocking victory by Berlusconi and Grillo, leading to a political vacuum and a hung parliament, the Fed injected a record $99 billion of excess reserves into foreign banks. As the most recent H.8 statement makes very clear, soared from $836 billion to a near-record $936 billion, or a $99.3 billion reserve "reallocation" in the form of cash - very, very fungible cash - into foreign (read European) banks in one week.

Furthermore, as we first showed, virtually all the "reserves" created by the Fed end up allocated as cash at commercial banks operating in the US: both domestically-chartered (small and large), but more importantly, foreign. And of the $1.884 trillion in very fungible cash parked in various domestic and international US banks, just half of it, or $949 billion is actually allocated to US banks. The other half, or $936 billion, is parked within, again, very fungible cash accounts of foreign (read European) banks operating in the US. This is shown in the chart below (green area is cash of foreign banks), and what is also shown is the total change in the Fed's excess reserves, which proves, once more, that the Fed continues to fund European banks with hundreds of billions in cash on a week-by-week basis. And what is perhaps most important, is that of the $250 billion in new reserves created under QEternity, all of it has gone to foreign (read European) banks.

It may anger American to learn that by the time the Fed is done with QEternity (if ever), all of the newly created cash will have gone to mostly European banks. Because with every passing week, whatever new reserves are created by the Fed in exchange for monetizing the US deficit, end up as cash solely at European banks: a sad reality we have seen non-stop since the advent of QE2 when US bank cash balances remained relatively flat in the ~$800 billion range, and every incremental dollar went straight to Europe.

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"Sorry, No Gold Today...we sent it to China"- dailyreckoning.com

By Addison Wiggin | 03/11/13

"The central banks' gold is likely gone, and the bullion banks that sold it have no realistic chance of getting it back" Eric Sprott tells us.

He also says that these "bullion bank" intermediaries are probably turning around and selling their gold to China.

China, by the way, is the mostly likely catalyst to set off the "zero hour" scenario we told you about on Friday...

We've chronicled China's ongoing gold grab here at Agora Financial - going all the way back to April 24, 2009, when the People's Bank of China announced its gold reserves had grown to 1,054 tonnes - up from 600 in 2003. And that's the last official word.

Continue reading on DailyReckoning.com

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