Hong Kong Mercantile Exchange's 1 Kilo Gold Contract To End Comex Gold Futures Trading (And "Bang The Close") Monopoly 

Submitted by Tyler Durden on 05/08/2011 14:40 -0400

30 years ago, Bunker Hunt, while trying to demand delivery for virtually every single silver bar in existence, and getting caught in the middle of a series of margin hikes (sound familiar), accused the Comex (as well as the CFTC and the CBOT) of changing the rules in the middle of the game (and ws not too happy about it). Whether or not this allegation is valid is open to debate. We do know that "testimony would reveal that nine of the 23 Comex board members held short contracts on 38,000,000 ounces of silver. With their 1.88 billion dollar collective interest in having the price go down, it is easy to see why Bunker did not view them as objective." One wonders how many short positions current Comex board members have on now. Yet by dint of being a monopoly, the Comex had and has free reign to do as it pleases: after all, where can futures investors go? Nowhere... at least until now. In precisely 9 days, on May 18, the Hong Kong Mercantile exchange will finally offer an alternative to the Comex and its alleged attempts at perpetual precious metals manipulation. 

Key Events In The Upcoming Week: US And China Trade Balance And Inflation Data 

Submitted by Tyler Durden on 05/08/2011 15:21 -0400

The week begins with the China – US Strategic and Economic Dialogue (Monday and Tuesday), which will be held in Washington, DC, and will no doubt once again include discussion of the pace of appreciation of CNY against US$. The week also brings a slew of China data, including the trade balance, where consensus expects a small surplus (far below the historical average surplus), and CPI inflation for April, which we see at 5.1% yoy, slightly below consensus. The week ends with the US CPI, where we expect another unfriendly CPI report, with headline CPI rising by 0.39% mom in April, essentially in line with consensus.

Iraq Slashes Projected Crude Output By Half Over Next 5 Years 

Submitted by Tyler Durden on 05/08/2011 16:20 -0400

And another huge hit to future oil supply. After Goldman released a report on Friday, backtracking on its April recommendation that clients sell crude, instead warning that "critically tight supply-demand fundamentals" will likely cause oil prices to "return to or surpass the recent highs by next year", "should Libyan oil supplies remain off the market", which it now appears they will considering Gadaffi is winning the Libyan civil war against the West-backed rebellion, here comes a stunner out of Iraq which has just slashed its 2017 oil production estimate from 12 million barrels to just 6.5-7 million bbpd. Oddly enough, Iraq is being rational: "Baghdad believes it would not be in its interests to try to achieve the 12 million target by 2017 because boosting global supply would depress prices." Who would have though a cartel would think of itself first... Surely, this is great news for Saudi Arabia which will promise to hike oil production and replace the missing output only for it to be discovered a few months later that not only did it not to do that (as we just discovered now following the whole Libya fiasco), but that it just does not have the excess capacity. And, of course, "speculators" will be blamed once they take WTI from $97 to $140 daring to discount the future price of oil in a (inflationary) world in which demand increases by 50% over a decade, even as supply continues to trickle down with each passing year. In other words, the CME margin hike crew is actively studying how many margin hikes it will take to break the back of the recently record number of non-commercial net specs... for at least a week or two, especially once the Chairman goes to town with the printer Turbo button. And elsewhere, the upcoming scarcity of lubricating petroleum byproducts is about to be felt through the entire supply (and demand) chain.

In The News Today

Posted: May 07 2011     By: Jim Sinclair      Post Edited: May 8, 2011 at 12:37 am
Filed under: In The News

Jim Sinclair’s Commentary

$1764 is on the menu after some technical repair.




Jim Sinclair’s Commentary
Paul Volcker, Master of the Universe, is clearly a dollar bear!

Volcker warns of danger from U.S. deficits By Sarah N. Lynch
Fri May 6, 2011 10:15pm EDT
WASHINGTON (Reuters) – Former Federal Reserve Chairman Paul Volcker warned on Friday that trillion-dollar deficits posed a threat to the stability of the U.S. economy and the dollar, and said he is frustrated by the gridlock in Washington.
Speaking before the World Affairs Council of Oregon, Volcker said that "prolonging trillion dollar deficits can’t be a reality" and that the United States is on course to have its public debt exceed the size of its gross domestic product.
"One way or another, we do have to return to a balanced budget," he said in prepared remarks.
Volcker’s speech came on the same day that the Congressional Budget Office said the U.S. budget deficit had totaled $871 billion for the first seven months of the year, which is significantly above the previous year’s pace. On Thursday, Vice President Joe Biden led a bipartisan meeting in an effort to strike a deal with Republicans on cutting the growing federal deficit and averting a default.
They face an August 2 deadline to raise the country’s $14.3 trillion debt limit.
Volcker, who stepped down early this year as the chairman of President Barack Obama’s Economic Recovery Advisory Board, said he was concerned about how the U.S. consumes and borrows "to the point that China, Japan and other foreign countries hold more than 5 trillion dollars of U.S. government obligations."
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Gold & Silver: The Path To Concentration of Funds 

CIGA Eric


The probability of higher-order trend acceleration increases once the upper channel resistance has been breached. Money has been supporting the breakout by repositioning from short to long as previous resistance is tested as support. This suggests that "Three Taps and Out" should be resolved and confirmed by June 2011.
Gold London P.M Fixed And Gold Diffusion Index (DI)
By way of comparison, silver’s trend accelerated substantially with the breach of its 2003 upper channel. This acceleration (breakout) is marked by the green circle below.
Silver London P.M Fixed and the Silver Diffusion Index (DI)
While the headline analysis and Street chatter the new flavor of the day – fear, they always miss the quiet movement of money. Money continues to reposition against the grain of consensus. That is, rather than long from short, money is moving from short to long. The devastating decline yet to be recorded in the COT data should extend the formation of the bullish setups already underway.
Strong hands continue to aggressively cover their shorts.
Silver London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest
Money flows are beginning to show concentration. It’s not statistically extreme, but it’s close. Concentration of funds by ‘strong hands’ will provide the fuel for the next advance.
Silver London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Net Long As A % of Open Interest
Example of Flavor of the Day Headline
Headline: Talking Numbers: Silver Loses It’s Luster
It’s been a volatile week for commodities and Russ Koesterich, BlackRock iShares Group says silver may still be overvalued despite its steep decline.
Source: custom.yahoo.com
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Jim Sinclair’s Commentary

From 2011 to 2015 this is absolutely correct. It is called currency induced cost push inflation. That is what hyperinflation is.

JIM ROGERS ON COMMODITIES: The Bull Market Will Go Up, Consolidate, Go Up, Consolidate, Go Up And Consolidate For Years 

Gus Lubin | May 7, 2011, 8:56 AM
Jim Rogers didn’t buy or sell anything during last week’s commodity sell-off.
He says he isn’t good at market timing. What he does believe is that we’re in the middle of a commodity bull market where everything will go up for years.
Rogers tells the Economic Times:
"5% correction in gold is meaningless. These things correct 10-15-20-30% every year. Nothing unusual about that. That is the way the markets work. I do not see anything unusual. I expect there would be more correction during the course of the bull market. I hope that the bull market goes up, consolidates, goes up, consolidates, goes up and consolidates for years to come. That is my expectation for all commodities.
"I have not sold any commodity. I own all my commodities. We are in a flexible bull market. I hope I am smart enough in the entire 15 years to realize when the commodity bull market is finally coming to an end, I am probably smart enough to sell. This commodity bull market will probably end in a bubble. Most bull markets and most sectors, whether it is stocks, real estate, whatever it happens to me, lands in a bubble. We are far-far-far from a bubble so far."
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