Friday, May 22, 2009


FROM JSMINESET.COM (THE SOURCE OF TRUTH AS OUR WORLD ENDS DURING OUR LIFETIME) Hourly Action In Gold From Trader Dan Posted: May 22 2009 By: Jim Sinclair Post Edited: May 22, 2009 at 1:50 pm Filed under: Jim's Mailbox Dear CIGAs, While we are primarily a gold-oriented web site, I cannot omit from today’s commentary some remarks concerning the collapse in the long bond. Quite frankly, its weekly price chart has become a technical train wreck. It is less than a full point away from the 100 week moving average. Please note that I wrote, “100 week” and not “100 day”. The weekly chart provides us with the long term trend of a market and I must say, that this market’s price action terrifies me. Since October of 2007, the US long bond has traded just below the 100 week moving average only for a brief period during two separate months before finding buying support and rallying upward. On both occasions we did not get TWO CONSECUTIVE WEEKLY CLOSES BELOW THAT LEVEL. While the technical indicators indicate a market that is severely oversold, its downside momentum looks to be accelerating. This market bears very close scrutiny as a breakdown below this level that is unable to recapture support would indicate that the market has now finished completely with the deflation scenario and is focused on the upcoming and anticipated wave of inflation unleashed by the mass creation of nearly unlimited amounts of paper US Dollars. In such an environment, gold’s rise will be unstoppable, bullion banks’ selling notwithstanding. I should also note that while come of the immediate demand/supply fundamentals of various commodity markets are not particularly bullish, the fact is that the big funds are looking past all of that and are rushing in to buy across the board based on inflation expectations. The grains in particular are attracting huge money flows from the investment funds with wheat now trading above $6.00 a bushel. Perhaps I am dating myself, but I am accustomed to seeing soft red wheat trading closer to $3.50 - $4.00. Then again, soybeans above $10.00 used to be considered expensive. They are trading closing to $12.00 with corn back above $4.00 once again. The laggard is natural gas which continues to be overwhelmed by its massive supply glut but one has to wonder how much longer that market is going to trade so cheaply with all the money flowing into the commodity sector. Simply put – our monetary authorities and the present Administration have unleashed the forces that will usher in the downfall of the US Dollar and set in motion the advent of a severe hyperinflationary event. I keep waiting for some sort of official sector gimmickry to attempt to stem the freefall in the US Dollar but it would seem by their absence that they have no problems with the weaker Dollar. As a matter of fact, they are probably secretly welcoming it in the hopes of gaining some competitive advantage on the export market front. The commodity currencies are on a tear north as is the Euro, the rise of which must no doubt be attracting the attention of the European monetary and business leaders who cannot be especially pleased seeing this once again. With the Euro back above 1.40, I suspect we are going to be hearing some noise from that sector soon. Then again, with traders focused on the plethora of dollars being printed into existence to fund the US bailout of everything and anything that moved, or no longer moves, what price level on the Euro/Dollar is appropriate? Who knows – maybe at some point, Euro/Dollar at 1.60 will look cheap… As it is, the Dollar is trading less than 80 points above its 100 week moving average. If that gives way, it is going to 76 for starters. While as a long time holder of gold, I am of course pleased to see the price of the precious metal moving higher, I am also deeply disgusted by those charged with the stewardship of our national currency have done to it. This is our nation’s future we are talking about here and our very quality of life that is being ruined by these short sighted parasites. Back to gold – looking at the price chart you can see that it knifed through the light resistance level shown there and now has a clear shot at the last line of defense for the bears near the $970 level. Should that level give way on a pit session closing basis, look for the upside move in gold to accelerate as funds will pile in and attempt to shove price back to the $1,000 level. Keep in mind what I have been saying for some time now, the inexorable and relentless rise in the Continuous Commodity Index (CCI) presents the gold bears with a formidable problem. It is difficult to shove the price of gold down for long when the entire commodity world is rising. When you throw in the fact that the Dollar has broken down technically as well as the long bond, it makes the gold price suppressors’ work even more difficult. My guess is that were it not for the holiday weekend and the bout of profit taking from shorter-term longs that surfaced in gold today, it would have made a run to $970. You can see the profit taking in the mining shares occurring judging by the move off their session peaks in both the HUI and the XAU. If silver can trade in the after hours above $14.80, it stands a good chance of making a run at $16.00 It is fading a bit off its best levels during the pit session trade but is still above $14.60 which is a plus.

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