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Silver Stuff

Trader Dan at Trader Dan's Market Views - 9 minutes ago

I wanted to post a few comments about the Silver market for some of those who have been asking me to do so. As mentioned in previous posts here, silver is finding itself caught in a war between those running out of risk trades who are selling commodities and equities, and those who are buying it as a safe haven metal. That tug of war has prevented it from surging alongside of gold but nonetheless, even in the face of such selling, it has been attracting enough buyers that its technical chart picture is slowly but steadily improving. I want to first note that it has regained its foot... more »

 

 

Since It Is Now Cool To Downgrade The US, JPM Just Became Da Fonz: Feroli Cuts Q1 2012 GDP Forecast To 0.5% From 1.5%

Now that even Joe LaSagna is no longer imbibing the Kool Aid, and is scrambling to regain some credibility by enunciating such occult (for his mouth) words like "recession" and "downturn", it has become all too obvious, that just like in August of 2010, right before Jackson Hole 1.0, the scramble for who can downgrade the US in the most unique, bizarre and sadomasochistic fashion is on - these people need to get paid after all, and without the Fed cutting checks, they may all have to face comp committees that demand to see performance. Alas with everyone on Wall Street missing today's Philly Fed by eight unbelievable standard deviations, base comp is all said economists can hope for. In other words, and as predicted over and over and over, the scramble to make the baseline case a recessionary one, is here. And since it is now cool to be pessimistic again, here is JPM's Michael "Fonzarelli" Feroli who just projectile vomited all over the US' growth prospects...two short weeks after he did precisely the same: "Growth in the current quarter looks only moderately softer than our previous projection, however the risks to our previous projection for 2.5% growth in Q4 are now very clearly to the downside and we are lowering forecasted growth in that quarter to 1.0%. We are also lowering 12Q1 growth to 0.5% from 1.5%. In sum, over the next four quarters we don't see growth that is much faster than the growth that took place in the first half of this year." Translation: "help us Obi Ben Bernanke, you are our only hope."

 

 

 

We are inches away from DEFCON I/ gold skyrockets to $1818/silver hits 40.691.00

Harvey Organ's - The Daily Gold and Silver Report - 29 minutes ago

Good evening Ladies and Gentlemen: Rumours were flying all over the place this morning.  We heard that two Italian banks, Unicredit, the largest bank in Italy and Intesa bank were both insolvent.  Last night I also provided to you the zero hedge article which suggests that a bank went to the ECB for a handout to the tune of 500 million dollars as it could not get funding anywhere.  This morning,

Panic Resumes: Gold To New Highs, Treasury Yields To New Lows, WTI About To Break $70 And Futures Sliding

The "panic" trade had a few hours to eat dinner, and now it's back to business. As Asia opened, the kneejerk reaction to Europe closing is that, naturally, Europe will open in a few short hours, this time however with fresh fears of what the SNB might be cooking if it needs Fed assistance to sustain its local banks' dollar margin calls. The result: gold hits new all time record highs, bonds drop to intraday lows, crude is about to reenter the critical 70's, so very necessary for QE3, and ES, well, you get the picture.

Guest Post: It Sure Looks Like 2008

Now I believe it is time to fast forward to the fall of 2008. Once again the 2008 market is a road map of how human emotion reacts when credit events happen. When economic data deteriorates at an exponential pace. When the unthinkable becomes reality. The volatility skew relative to the vix captures market sentiment very well. Overlay any such chart with the SPX and the similarities are without question. So for all those pundits who say this is not 2008 I present the following chart. Once again markets are pricing in the unthinkable. In 2008 history witnessed the failure of Lehman, AIG and the GSEs. Today history is bearing witness to sovereign nations on the brink of failure. In 2008 there was the threat of bank runs. Today there is the threat of currency runs. In 2008 there were government bailouts. Today there are central bank bailouts.

Guest Post: Economically Sleepwalking

The sleepwalking during the last 24 months is all the more remarkable, given that the economy has been treated with the biggest dose of monetary and fiscal stimulants ever administered in U.S. history. Why the continued weak pulse? Each recession has its own story – how long it lasts, how deep it gets, industries worst hit, particular bubbles burst. But in every recession, the heart of the problem is the same, namely, an imbalance in the market for cash. Every recession begins when the aggregate amount of cash that people want to hold (given their wealth and the other things they want to own) is more than the amount of cash actually in existence. That imbalance – the demand for cash exceeding the supply – depresses the entire economy because the flip side of the market for cash is the market for everything else. All markets and all industries are hit, and most of them contract because most people are trying to sell more than they buy... which is the only way for anyone to increase his cash holdings and which is impossible for everyone to do at the same time.

Comprehensive interview with Eric Sprott at King World News

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Mining Share Ratio To Gold Back At Pre-QE1 Levels

August 18, 2011, at 5:59 pm
by Dan Norcini in the category Trader Dan Norcini |  Print This Post |  Email This Post

Dear CIGAs,

The following ratio chart says in a picture just how severely undervalued the gold stocks are in relation to the price of bullion.
You might recall that as the credit crisis erupted in the summer of 2008 with the failure of Lehman Brothers and subsequent meltdown of other large financial firms, stocks and commodities plummeted as the Yen carry trade unwound and deflationary fears escalated.
The rumors began to circulate as the crisis deepened that the Federal Reserve was getting ready to implement some unorthodox policies in an attempt to stave off the deflation and prevent a credit market lockup. That was when the phrase, "Quantitative Easing" first began making the rounds in the markets.
So confident were traders that the Fed was not going to sit idly by while the entire US financial system imploded that they began covering shorts and bidding up the price of equities and commodities ahead of what was then announced with certainty in November of that year.
Look at the chart and you can see that while the HUI/Gold ratio is not at the depths it reached during the peak of the credit crisis, after today, it is now at levels last seen just before the QE1 was actually implemented.
If you look across the chart to the left and note the blue line reaching back to the end of 2001, you can see that the mining shares relation to gold had actually plummeted to levels last seen near the VERY BEGINNING of the now decade + long bull market in gold. That is how cheap the shares had become to gold bullion in the third quarter of 2008.
Quite frankly, we are not all that far off from levels seen at that time with today’s round of selling across many of the mining shares. This has occured in spite of the fact that we have spent more than $2.5 TRILLION between QE1 and QE2 and seen the gold price leap from $700 in November 2008 to over $1800 as of today’s close.
Based on this fact alone, either the price of gold is going to have to plummet quite sharply from current levels or the shares are going to be at levels last seen in relation to the price of gold bullion when the bull market in gold began and that was at a price level of $270-$290 gold. While gold may correct at any time from its strong rally, why in the world would the gold price be the one moving lower given the current state of the global economy and particularly with all the implications regarding the integrity of the currencies of many nations in the West? The only way to correct this glaring imbalance is for a very sharp and incredibly swift rally in the mining sector.

I have been detailing the ratio-spread trade being employed by the hedge funds across the mining sector for some years now. As a trader I understood the rationale behind that trade – why risk issues related to mines such as management changes, labor disputes, environmental lawsuits, hostile laws and regulations, aging mines, etc. when you can get leveraged exposure to gold by using the ETF’s instead. One could buy the ETF or Comex gold and sell short some of the weaker gold shares and laugh all the way to the bank. As an investor myself in the gold shares, I was not happy to see this trade but I could understand it.
I must say that it has now reached a point where those who ply the trade are treading on very thin ice. There is no longer a fundamental case that can be made to justify the trade at current levels of the shares in relation to the price of gold. Smart traders will run a trade as long as they can but they will leave the last 20% for the foolhardy and the novices who think that they are clever enough to pick exact tops or bottoms in markets. The pros do not practice such stunts – if they do, they do not remain pros for much longer but soon become, "EX" traders.
The first hedge funds out the door of this trade are the ones who are going to make the money in it. They will take their profits and they begin looking for another golden goose that may lay yellow eggs for them. The ones that stick around and think they are quick enough to exit before getting run over by all the rest of the funds in such a crowded, lop-sided trade will be the ones who overstayed their welcome and end up losing big when they could have retired the trade with decent profits had they not been so mindlessly greedy.
The first inkling we get of any acquistions by a major gold mining outfit of a quality junior and it is game over for this trade.
Wake up hedgies – the trade to have been in for the last few months was to be long the miners and short the broader markets. There was your money maker. How many times on this site did we mention this trade and urge you to get out of the wrong one? Stop relying on your damned computers and do some thinking and analysis on your own.

For more from Trader Dan check out his blog at www.TraderDan.net

 

 

In The News Today

August 18, 2011, at 5:56 pm
by Jim Sinclair in the category In The News |  Print This Post |  Email This Post

Jim Sinclair’s Commentary

When we suggested this in 2005 all the nasties sent their emails.

Central Banks’ Demand For Gold Quadrupled In 2nd Quarter By Rhiannon Hoyle
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)–Central banks are topping up their gold reserves, quadrupling their total purchases from the market in the last quarter as they seek to reduce their dependence on traditional reserve currencies such as the U.S. dollar.
Even with gold prices at record highs, emerging markets’ central banks have revived the official sector’s gold-buying interest. They are diversifying their foreign exchange reserves, which have grown along with their export industries. More recently, they’ve also bought gold in reaction to the persistent sovereign-debt crises affecting traditional reserve currencies, like the dollar and the euro. Analysts say this trend is likely to continue.
"We expect to see additional demand support from official-sector purchases as numerous influential countries are becoming bearish on the status of the U.S. dollar as a reserve currency," said analysts at Swiss bank Credit Suisse.
Central banks bought 69.4 metric tons of gold in the second quarter, more than four times the 14.1 tons reported a year earlier, the World Gold Council said Thursday.
During the first half of the year, central bank gold purchases totaled 192.3 tons, more than 2 1/2 times the 72.9 tons bought in the first six months of 2010, the council said.

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Jim Sinclair’s Commentary

This is called currency induced cost push inflation.

U.S. Consumer Prices Rise More Than Forecast By Shobhana Chandra and Alex Kowalski – Aug 18, 2011 2:08 PM MT
The cost of living in the U.S. climbed more than forecast in July, which could make it harder for Federal Reserve Chairman Ben S. Bernanke to convince colleagues to immediately act to spur growth after manufacturing in the Philadelphia region plunged in August.
The consumer-price index increased 0.5 percent from June, more than twice the 0.2 percent median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The Philadelphia Fed’s general economic index dropped to minus 30.7 this month, the lowest since March 2009, when the economy was in a recession.
Stocks slumped and gold prices soared to a record as the data showed the world’s largest economy was in danger of shrinking even as inflation picked up. Another report showed fewer Americans on average filed claims for unemployment benefits over the past month, indicating the job market is holding up for now.
“There’s a tremendous loss of momentum,” said John Herrmann, senior fixed-income strategist at State Street Global Markets LLC in Boston, who projected manufacturing would contract. “Increasing evidence that the economy is drifting closer to a recession could prompt Chairman Bernanke into action before year-end,” Herrmann said. At the same time, Herrmann said, the cost-of-living data may limit his options: “The inflation figures don’t yet give the Fed the ammunition to roll out a new round of non-conventional monetary easing.”

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