Hourly Action In Gold From Trader Dan

Posted: Dec 28 2010     By: Dan Norcini      Post Edited: December 28, 2010 at 2:20 pm
Filed under: Trader Dan Norcini

Dear CIGAs,

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Trader Dan Comments On Soaring Commodity Prices and Plunging Bond Prices

Posted: Dec 28 2010     By: Dan Norcini      Post Edited: December 28, 2010 at 2:03 pm
Filed under: Trader Dan Norcini

Dear Friends,

Thanks to our diligent internet news sleuth, JB Slear, the following story is brought your way.
Tie this story about the fall in US home prices together with what is happening in the commodity sector and the long bond to see where this is headed.
Home prices are falling for one reason – lack of demand coupled with a growing supply due to the wave of foreclosure properties which are adding additional supply to the market.
The market interpreted today’s data release as evidence that the Fed’s $600 billion + QE policy would not be ending anytime soon. That brought another surge of fund related buying into the commodity sector with the result that the CCI (Continuous Commodity Index) has now kissed its former all time high made back in the summer of 2008 long goodbye. It shot above 622 and appears to be accelerating, even at the end of the year when we would normally expect to see profit taking in the sector by longs who have profited immensely in 2010.
I find it astonishing that fresh money is being committed to the sector as the calendar year winds down. This is highly unusual as this time of year is historically known as the time for book squaring. What it is telling us is that fund managers have no intention at this point of abandoning a strategy that has paid handsome dividends to them and will undoubtedly be looking to up their ante at the beginning of the New Year. Look for fresh highs early next year in the sector based on what is occurring in some of the various commodities. Sugar, after putting in a 30+ year high, has shot to yet another fresh high in today’s session. Soybeans registered a 26 month high. Ditto for corn. Copper is now trading at $4.30 a pound! Crude oil continues to hold above $90.
The bond market, after being fiddled with by the monetary authorities in the hopes of hoodwinking the public into believing that inflation pressures are subdued, promptly fell apart plunging a full point as participants are watching with great alarm the surge in the CCI.
This combination, soaring commodity prices which are certain to erode consumer disposable income, and plunging bond prices which are a prelude to higher long term interest rates, are certain to make it even more difficult for would-be home buyers to enter a real estate market already being plagued by a lack of demand. Throw in a good dose of higher gasoline prices at the pump and it becomes all too obvious what we can look forward to in the coming year. I guess we have all been naughty over the past year because it appears that Santa Ben and his band of elves at the Fed have brought us all a gigantic lump of coal.
Trader Dan


Dollar Weakens for 4th Day as U.S. Home Prices Declined More Than Forecast By Catarina Saraiva and Paul Dobson – Dec 28, 2010 7:30 AM MT
The dollar weakened for a fourth consecutive day against the euro as U.S. home prices declined more than forecast, bolstering the case for the Federal Reserve to maintain its program of debt purchases.
The dollar fell versus most of its 16 most-traded peers as the S&P/Case-Shiller Index of property values showed its first year-over-year drop since January. The franc rallied to a record against the U.S. currency amid optimism Switzerland’s growth will encourage its central bank to raise rates. The Canadian dollar strengthened to parity with its U.S. counterpart for the first time since Nov. 11.
“Housing is still obviously a concern,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “We’re still seeing a slight push up in risk.”
The dollar dropped 0.4 percent to $1.3213 per euro at 9:08 a.m. in New York, after earlier touching $1.3275, the weakest level since Dec. 17. The U.S. currency declined as much as 1.2 percent to 81.82 yen, its lowest level since Nov. 12.
The euro pared its gains against the dollar after the European Central Bank said it failed to fully neutralize the extra liquidity created by its bond purchases for a second time since the program began in May.
More…

In The News Today

Posted: Dec 28 2010     By: Daniel Duval      Post Edited: December 28, 2010 at 2:18 pm
Filed under: In The News

Dear CIGAs,

Credit Suisse is forecasting the gold price of $1630 for 2011. Remember how dumb that sounded seven years ago?
I was called every name in the book by the shorts in gold at the $300 and $400 level.
The greatest compliment is imitation. It looks like the hoard of experts that were negative or nowhere to be found up to gold at $1000 are complimenting me like mad.
The real price Angel is $1764. There is no solid analytical way to get to $1650 so those guys are definitely complimenting me.
The Financial Gang is so full of rotten, selfish, amoral chumps.


Jim Sinclair’s Commentary
Not exactly dollar positive.

Boomers Turn 65 in January, Threaten to Bankrupt Medicare Written by Leigh Page | December 28, 2010
The baby boomer generation, which starts turning 65 on Jan. 1, threatens to bankrupt the Medicare program, according to a report by the Wisconsin Rapids Tribune.
As more boomers enter the program, Medicare spending will increase 5.8 percent a year, reaching $929 billion by 2020. When the last of the boomers turns 65 in 2030, the Medicare population will have nearly doubled from 47 million to 80 million.
The combination of more beneficiaries and medical inflation will be disastrous unless the system can be overhauled, an expert at the Commonwealth Fund said. Policymakers will have to figure out how to provide healthcare more efficiently.
Keeping boomers’ Medicare costs low should involve improving their healthcare before they qualify for Medicare, said an expert at National Institute on Aging. Most Americans ages 50-64 experience more than one chronic illness, such as arthritis, cancer, diabetes, heart disease, high blood pressure or high cholesterol. They need expert care because treating one condition could harmfully affect another.
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Jim Sinclair’s Commentary
Peak oil and a weak US dollar underscores gold at $1650 or better.

$5 Gas In 2012, Ex Shell President Predicts
NEW YORK (CNNMoney.com) — The former president of Shell Oil, John Hofmeister, says Americans could be paying $5 for a gallon of gasoline by 2012.
In an interview with Platt’s Energy Week television, Hofmeister predicted gasoline prices will spike as the global demand for oil increases.
More…




Jim Sinclair’s Commentary
The Green Hornet says that although this is under the radar of financial TV, this is one of the biggest dollar risks out there.

US cities at risk of bankruptcy Rhonda Pence, Press TV, Washington
Next to the housing crisis, some economists say cities declaring bankruptcy is the biggest threat to the U.S. economy in 2011 More than 100 cities could go bust in the new year derailing the economy in America.
In Michigan, a small city called Hamtramck says it only has funds to operate until March first. City officials have slashed money for boarding up abandoned houses, cutting grass and no money has been set aside to plow snow from the streets.
Communities across the country are in a similar situation and have cut city employees work weeks down to four-days and have eliminated parks and senior centers.
State officials are fearful if Hamtramck goes bankrupt, it will open the door for 30 other cities in Michigan to go down the same path, including Detroit.
Hamtramck has been more dependent on the auto industry than even Detroit, and with the property values going down, the cities tax base is collapsing.
49;29 without a doubt can if you have failure of one large state New York, Michigan , California it could significantly drag down the whole economy
The problem throughout most of the cities in the US is when money was rolling in , governments were very generous with benefits and pensions. but now the money has dried up and cities have legal obligations to pay up, or they will have to renegotiate contracts or file for bankruptcy.
More…




Jim Sinclair’s Commentary
Class actions always settle before the miscreant has much to lose. Watch for a settlement that does not disclose squat.
Regardless, the proceedings are now bullish for silver.

Class action against Morgan, HSBC specifies silver manipulation mechanism By: Chris Powell, Secretary/Treasurer, GATA
– Posted 28 December, 2010

Dear Friend of GATA and Gold (and Silver):

A Chicago law firm yesterday announced another class-action lawsuit against J.P. Morgan Chase & Co. and HSBC Holdings PLC complaining of silver market manipulation. Interestingly, the lawsuit cites GATA’s silver market manipulation whistleblower Andrew Maguire and U.S. Commodity Futures Trading Commission member Bart Chilton, and specifies mechanisms by which Morgan and HSBC could manipulate the silver market through the use of silver exchange-traded funds.
The lawsuit complains:
"Before the Class Period began, JPMorgan had become the custodian and an authorized participant of the largest known concentration of silver bars, the iShares Silver ETF, which holds in excess of 340 million troy ounces of silver, a sum that equals an estimated 1/3 of the total present global supply of silver bullion. As a result, it had actual knowledge of the precise whereabouts of much of the world’s known silver bar supply.
"In approximately March 2008, JP Morgan acquired Bear Stearns, which held a very large short position in silver. With more of the total short position in silver concentrated in the hands of JP Morgan, it had a further motive to suppress prices.
"Upon information and belief, JP Morgan works together with HSBC, the other dominant player in the silver and precious metals markets. In July 2009, HSBC became the custodian of the SIVR ETF, which meant that it had physical access to and knowledge of the silver held by that trust. Notably, it named JP Morgan as one of the sub-custodians of the SIVR ETF.
More…

Jim’s Mailbox

Posted: Dec 28 2010     By: Jim Sinclair      Post Edited: December 28, 2010 at 1:56 pm
Filed under: Jim's Mailbox

Jim,
Some signs of coming trouble:
-Reliance on stocks in retirement plans is greater than ever in the US; 42 percent of those workers now have 401(k).
-Mortgage debt. Nearly two in three people age 55 to 64 had a mortgage in 2007, with a median debt of $85,000.
-Medical costs. Health care expenses are soaring, and the availability of retiree benefits is declining.
There are many more reasons why the US government cannot choose the austerity exit. QE and hyperinflation looks to be the only way to hide the awful truth.
Best regards,
CIGA Christopher

Baby boomers near 65 with retirements in jeopardyBy DAVE CARPENTER
 
CHICAGO – Through a combination of procrastination and bad timing, many baby boomers are facing a personal finance disaster just as they’re hoping to retire. Starting in January, more than 10,000 baby boomers a day will turn 65, a pattern that will continue for the next 19 years.
The boomers, who in their youth revolutionized everything from music to race relations, are set to redefine retirement. But a generation that made its mark in the tumultuous 1960s now faces a crisis as it hits its own mid-60s.
“The situation is extremely serious because baby boomers have not saved very effectively for retirement and are still retiring too early,” says Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at the University of Pennsylvania.
There are several reasons to be concerned:
• The traditional pension plan is disappearing. In 1980, some 39 percent of private-sector workers had a pension that guaranteed a steady payout during retirement. Today that number stands closer to 15 percent, according to the Employee Benefit Research Institute in Washington, D.C.
More…


Jim,
“U.S. notes and bonds have handed investors a 2.1 percent loss in December, paring the annual return to 5.7 percent, according to figures compiled by Bloomberg and the European Federation of Financial Analysts Societies. That’s the worst monthly performance among 26 sovereign indexes”
The worst?
CIGA BJS

Treasuries Fall Before $35 Billion Government Auction of Five-Year NotesBy Cordell Eddings and Daniel Kruger – Dec 28, 2010 9:14 AM PT
Treasuries dropped before the U.S. government sells $35 billion of five-year securities in the second of three note auctions this week totaling $99 billion.
U.S. debt maturing in more than a year was headed for the biggest monthly loss in the global government bond market on signs of economic recovery. The 10-year note yield increased the most in almost two weeks as a boost in holiday retail sales overshadowed an unexpected drop in U.S. consumer confidence and a decrease in home prices.
“The last auctions of the year face challenges with everyone on vacation and balance-sheet constraints,” said Joseph Leary, an interest-rate strategist in New York at Citigroup Inc., one of the 18 primary dealers obligated to participate in U.S. debt sales. “People are less willing to take risk unless we see more concession.”
The yield on the current five-year note increased seven basis points, or 0.07 percentage point, to 2.09 percent at 12:04 p.m. in New York, according to BGCantor Market Data. The price of the 1.375 percent security maturing in November 2015 fell 10/32, or $3.13 per $1,000 face amount, to 96 21/32.
More…


Jim Sinclair’s Commentary
A day ago the US threatened China with a complaint at the WTO if they did not export rare earths liberally.
Note how afraid China is.

China shrinks rare earths export quotaCIGA Eric
What have you learned from China? They use the media to manipulate expectations to hide their true intentions. Gee, sounds like a familiar Western practice. China (unlike the West) is following a specific long-term plan. This makes them a respectable opponent in “the game”.
The talking heads that suggested that rare earth metals was not a short to intermediate supply problem for the West did an excellent job in misinforming the weak hands. The newswire is a tool. Those that cannot reason, or let others do their reasoning will be susceptible to the tools of the operators.
China is scaling back its exports next year of rare earth minerals used in high tech products, which could be an unpopular move with countries such as the United States and Japan.
Numbers released Tuesday by the Commerce Ministry show export quotas of the rare minerals will be down 11 percent next year as compared to the same period this year.
Source: forbes.com
More…

 
 
Herd Capitulation in Natural Gas?CIGA Eric
Could it be that the specs (hedge funds) and retail funds are being setup by the media tools of the operators? Those that recognize the tools play the game. Those that cannot recognize them also play but not very long.
Connect money continues to increase their net long positions as the headlines provide the intended ‘perspective’ for the weak hands.
Natural Gas ETF and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:
While retail money remains relative bullish, their recent selling represents what I characterize as herd capitulation. In other words, how can I remain bullish when the experts/pros/talking heads remain so bearish? Any retail capitulation on the long side as connected money quietly repositions only sweetens the pot.
Natural Gas ETF and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:
If there’s a technical trigger on this one, watch out.
Headline: Hedge Funds Bet Gas Will Fall in Warm New Year: Energy Markets
Hedge funds raised bearish natural gas bets by the most since October on forecasts that higher- than-normal temperatures in the first weeks of the New Year will reduce demand for the heating fuel.
The funds and other large speculators cut net-long positions, or wagers on rising prices, by 35 percent in the seven days ended Dec. 21, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the largest drop since Oct. 12.
Source: businessweek.com
More…

Another Hole In The Bond Bubble As 30 Year Gets Reacquainted With Gravity

 

NYSE Short Interest Drops To Lowest In 2010

 

As Clearly Forecasted On BoomBustBlog, Housing Prices Commence Their Downward Price Movement In Search Of Equilibrium Scraping Depression Levels


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