Gold:
The integrity of the Fibonacci support line has held firm. Gold moved up from the Friday shenanigans of the floor traders for our Gold Cartel of Common Interest competitors. A move above $354.50 would get us back into the game in a significant way. Regardless, the Friday afternoon markdown did not follow through, which has to be a significant let down for those floor players.
US dollar:
The fundamental negatives, or better said the lack of fundamental positives, have made it difficult, if not impossible, to stage a rally of significance in price or duration to the greenback. You have to give the US Treasury some recognition for the dickens with the US Balance of Payments Deficit and the US Current Account. Lets get the boss elected college try dollar rally. The problem is that it is an advertisement to big people who can think of a lack of economic leadership in the US and therefore medium term counterproductive. This dollar rally does not have duration now.
The Euro:
There could well be a bear trap set here. With a reverse head and shoulders formation, this indicates the recent high will be achieved in the not to distant future. So far the first Fibonacci support line has maintained its integrity, and today's close of the US trading session at $1.1338 puts the Euro back into the uptrend.
30 year US Treasury Bonds:
This is the good credit compared to MBS which is the culprit in the dog house. I am wondering out loud if a small pull back from the downtrend in its present wildly over-sold condition might produce a killer head and shoulders. Time will tell, but the underlying fundamentals suggest it could.
S&P:
What a fight the equity boys put up. This rectangle formation, which I feel is a distribution operation by the big guns, is an operation to behold. We dropped under 970 for a while, but worked back into the rectangle. We need a close under 970 to feel comfortable with the short side other than trading. The pivot point of 991.50 still has served me well, as it has you, I hope.
Newmont:
NEM certainly has done its thing against the gold price on balance over the last week or so. I put this up for you to chart.
RGLD:
Not as note worthy as NEM but still no slacker. This is for you to work on if you wish.
Um abraço
jota
Mon Aug 4, 2003
Special Note
Author: Jim Sinclair
Mr. Buttery
Mr. Mak
Mr. Skih
I have answered your fax and wish to send you the material you requested, but your fax number is either missing, wrong or is a phone fax not set on fax mode.
Mon Aug 4, 2003
Special Q&A Editorial
Author: Jim Sinclair
Q: Jim, please explain to me in English "All the gold you can own cannot protect you fully."
A: The implication of any event that has the capacity even to shake the derivative pile is so disturbing to the future of the financial world that, IMO, although you can make money in gold, the future in both political and social terms will be so set on their heads that the surrounding conditions will be unpleasant. All the money you have if you live in unpleasant conditions result in some comfort, but not a good situation.
Q: If the government undertakes to guarantee MBS (I believe that most people mistakenly think they are already government guaranteed), it would appear to be a stronger backed mortgage than currently. I understand a great percentage of the mortgages are presently underwater. I am sure the governments hide this. The current holder of MBS take the hit as the public always does.
A: Your question requires some interpretation on my side. Here is the answer to what I believe you are saying:
First: the public here is many of the big boys. Other government and major holders of export US dollar have purchased MBS rather than US Treasuries as they were running in tandem risk cost-wise in the market place for a significant period of time.
I do not believe that the government or anyone else really understands the over-the-counter derivative mismatch money cost-versus-time factor. Derivatives have no standards anywhere. Each over-the-counter derivative is a special performance contract arrangement reflecting the unique nature of the mortgage asset underlying the OTC derivative. In order to quantify this risk, every OTC derivative would have to be examined and calculated not against a computer simulation, but in terms of the real market values. Such a calculation has never been done before and is a task of such dimension that it will never be done.
The Federal Reserve only recently elected a lady to the board that is a derivative expert. However she loves OTC derivatives, so it is unlikely the Fed realizes the scope of the problem, or the inherent rot in the mountain of OTC derivative paper. I doubt her report to the board on the risk of the OTC derivatives attached within MBS can be objective.
For review one more time here are some of the highlights of OTC derivates such as are in question:
1. OTC derivatives have no regulator.
2. OTC derivatives are not clearinghouse funded. Clearinghouse funding pay out to the winner every evening and the loser must pay in before the opening of the next trading session.
3. OTC derivatives financial integrity of a derivative of this nature depends on the balance sheet of the loser.
4. OTC derivatives are not transparent.
5. OTC derivatives are valued by computer simulations, not market transactions.
6. OTC derivatives are not registered on an organized exchange.
7. There is no record of prices or volume for OTC derivatives.
And it only gets worse, as the above are their best attributes. Up till now, the Federal Reserve has praised these instruments for having transferred risk from the few to many. If it transfers anything it will be to the Government of the USA.
Q: You mention extreme volatility in gold. Do you suggest this from current levels or that it will occur much higher?
A: I believe that the volatility defined as the total number of points gold's up & down move transverses in one session will increase sharply above $391.80. I also suggest that the difference between the transactions in open outcry will also increase sharply until it may well be one to four dollars between trades, just as it occurred in late 1979 and early 1980. This will cause high blood pressure in those that are trading. Margin requirements will rise until they reach total cash on hand before a transaction (no margin granted), and this will not stop the increasing volume of transaction of volatility. The Comex will become an upfront total payment futures exchange in gold and silver before it is over.
Q: Will not the firing up of Gov. Bemanke's Electronic (Electric Mayhem as in the Muppets take Washington) Printing Press increase the price of gold and most commodities?
A: The line of march is as follows: The increase in dollars sure to be entered into will put significant down pressure on the value of the dollar in international market. This will take place not only for the reason why the dollar is produced in the first place, but also on the "More Apples for sale in a Weak Apple Market, value example."
Regards,
Jim
Mon Aug 4, 2003
Newmont President Predicts New Surge In Gold Price
Author: "West Australian" July 4th, Kalgoorlie, Australia
The gold price was set to soar as high as $US450 per ounce in the next 12 months, Newmont Mining Ltd President Pierre Lassonde said today.
Key to the rising gold price was the unsustainable $US550 billion United States' trade deficit, Mr Lassonde told the Diggers and Dealers mining conference in Kalgoorlie.
The only way to re-achieve balance was to have the US dollar continue to depreciate against a range of other currencies, he said.
"Therefore the gold price will continue to go up in US dollar terms, and our view is that in the next 12 months you're going to see it up to $US450," Mr Lassonde said.
At last year's Diggers & Dealers conference, Mr Lassonde predicted the gold price would rise to its current levels of around $US350 an ounce.
He said today that recent signs of a US recovery were politically induced would not last beyond the next US election.
"For the next 12 months it will seem things are OK in the US, but can't be sustained."
The low US dollar was good for Newmont's business because 70 per cent of its mine operations work in US dollars, he said.
The industry as a whole was not benefiting from the weaker dollar, but needed only a small rise in gold price to improve, he said.
"The gold industry to make a decent rate of return probably needs a closer to $US360 gold price to make a 10-12 per cent rate of return.
"While Newmont is doing very well on an industry basis, another $US10 to $US12 would bring the industry about where it should be."
"Companies that could not make a decent return at those prices should not be in the business" he said.
Mr Lassonde said dehedging also played a part in increasing the gold price.
"For every 100 tonnes that is dehedged, you're looking at something like a $US5 increase in the gold price," he said.
Newmont had led the charge in dehedging, and would have reduced Normandy's 10 million ounce hedgebook to nothing within 18 months.
Newmont has 22 operations around the world. Most are in Nevada, Peru, Australia and Indonesia.
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