Gold is a risk asset one actually flees to.
It is a liquidity sink in good times.
It is a store of value in bad times.
Ones goes to gold when the system is under stress. One stays in gold when the stress has been relieved using ZIRP and QE. Show me trust and the truth I will sell my gold.




Challenging The Wolfpack Posted: May 09 2010 By: Jim Sinclair Post Edited: May 9, 2010 at 8:01 pm
Filed under: General Editorial
Dear CIGAs,
A nuclear solution to Europe’s debt problems is simply another way of saying "Quantitative Easing to Infinity."
All national debt will be bailed out. All states of the USA will be bailed out.
Paper currencies are headed to dust.
Regardless of the first knee jerk market reaction, gold is going to $1650 and beyond due to nuclear suggestions of adding more debt to entities failing because of debt. This is the EU Helicopter Drop coming up.
Credit default swaps are herein called the "Wolfpack." About that they are totally correct.
Now that they have challenged the "Wolfpack," whatever additional funds might be required will have to be provided or the "Wolfpack" will slaughter the EU.

EU Preps Euro Fund to Fight ‘Wolfpack,’ Debt Crisis By James G. Neuger and Meera Louis
May 9 (Bloomberg) —
European Union finance ministers pledged to stop a sovereign-debt crisis from shattering confidence in the euro as they held an emergency summit to hammer out a lending mechanism that may be worth around $645 billion.
Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed on the backstop yesterday and told ministers to get it ready before Asian markets open. The European facility may be worth around 500 billion euros, said an official familiar with the talks.
“We are going to defend the euro,” Spanish Economy Minister Elena Salgado told reporters as she arrived to chair today’s Brussels meeting. “We think we have a duty for more stability for our currency. We will do whatever is necessary.”
Europe’s failure to contain Greece’s fiscal crisis triggered a 4.3 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. It prompted the U.S. and Asia to urge broader steps to prevent a debt crisis from pitching the world back into a recession.
President Barack Obama spoke by phone with German Chancellor Angela Merkelfor the second time in three days, adding to the international pressure Europe has faced since a hurriedly arranged conference call of Group of Seven finance chiefs on May 7. Obama today emphasized “the importance of the members of the European Union taking resolute steps to build confidence in the markets,” White House spokesman Bill Burton told reporters in Hampton, Virginia.
‘Wolfpack Behavior
“In the night, when the markets are opening, we cannot afford a disappointment,” said Finance Minister Anders Borg of Sweden, one of 11 EU nations not in the euro. “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”
European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the EU’s central authorities with guarantees by national governments. The meeting started just after 3 p.m.
Expectations of decisive action buoyed the euro as trading began in Asia. It jumped more than 1 percent to $1.2897 as of 6:11 a.m. in Sydney, according to pricing from Westpac Banking Corp.
More…



Thoughts For The Day
A euro "save" technically is a pound trading firmly above $1.29. Please note Armstrong’s tome on currency values.
The volatility in gold is about to go ballistic. That is another key for gold at or beyond $1650.

Jim Sinclair’s Commentary
The spin is that the fall is a mystery and therefore an anomaly, not a selloff of significance indicative of further problems.
The truth of the matter is that what you saw here was a combination of computer based flash trading, below the horizon computer based exchanges, and algorithms gone wild.
This event is proof that computer markets lack specialists and are ticking time bombs of illiquidity. This problem is alive and well and looking for more repeat performances.

Plunge in US equities remains a mystery By Michael Mackenzie and Henny Sender in New York Published: May 7 2010 18:49 Last updated: May 7 2010 20:01

The day after $1,000bn was briefly wiped off the market value of US equities, traders were still trying to work out what caused share prices to plunge and then rebound so dramatically in a matter of minutes.
The conventional wisdom held that an incorrectly typed sell order – one that confused “billions” for “millions”, for example – was the likely culprit.
“The trigger for the sell-off was most likely some kind of errant order, a fat-finger typo, which set off a chain reaction of selling,” said Sang Lee, managing principal at Aite Group. “I would be shocked if that was not the case as the fall in stocks was so sudden and extreme.”
However, despite the persistence of this story, officials were struggling to idenfity a specific cause. “We still don’t know what was the initiating signal for the trading activity we saw on Thursday,” said Jeff Wecker, chief executive officer at Lime Brokerage. “The verdict is still out.”
What was clear was the ferocity of the fall. Just before 2.40pm on Thursday, the S&P 500 index, the US equity market’s benchmark, fell from 1,120. Inside six minutes, it bottomed at 1,065.79, a slide of nearly 5 per cent. By 3.00pm, the index was moving above 1,120, although still down 4 per cent on the day before, settling 3.2 per cent lower by the close.
More…

The Subprime Rhyme with U.S. Debt Debacle,

Greek debt crisis offers preview of what awaits U.S.

Freddie Mac Posts First Quarter Loss of $6.7 Billion, Asks Treasury for $10.6 Billion

Britain Must Cut Deficit Fast, Europe Warns

America at the Crossroads and the War on Gold

S&P to Gold Ratio: On Verge of 1.00 Breakdown

The Great Depression of the XXI Century

Debt Crisis: Panic on Wall Street, Stonewalling in Europe

Japan Injects $20 Billion to Calm Markets