That's a Wrap!

Holy Moly! As expected, gold drifted higher in the Globex (post 1:30) session but then, unexpectedly, shot higher at 3:50. Not coincidentally, silver also shot higher at the exact same time, 3:50 EST, reaching a high of 29.49 before settling back to 29.44. Most likely someone or something decided to cover a big short position for fear of losing more come Monday. After today's action, the charts in both silver and gold are extraordinarily fantastic. You and I are clearly not the only ones who have noticed. A note of caution, however. The first order of business for the EE come Sunday evening will be to attempt to claw back those gains so don't be surprised if gold opens $4-6 lower. Don't get nervous. Next week is going to be great fun.

I want to close today with two items. First, is a copy on an email distributed last Friday by Santa (Jim Sinclair). If you're not on this distribution list, why not? Sign up here:
http://visitor.constantcontact.com/manage/optin?v=001QSVz3SN0NaomFDmiczgDGfbv6W0tL_RghTnpGuKMkw8Im_ZaXX8AfIKAPdD4BF-j
This particular note details information on currency wars.

Here's Jim's letter:

Dear Comrades In Golden Arms, What you are witness to is adults acting like children. A currency war solves absolutely nothing whatsoever. A currency war puts extreme strains on exports. A currency war never establishes a currency's value versus its trading partners than can be maintained for any meaningful period of time. A currency war creates currency levels that have nothing to do with reality economically and are unsustainable. A currency war is endemic to QE in the entire Western world. A currency war is destructive to all. A currency war may cause gold to sell off like today in one currency, but it also causes gold to rise in others. A currency war in time elects gold as the only viable currency. A currency war is exactly what will give you levels of the gold price forecasted by Armstrong and Alf that are well above what we have looked at for over 8 years. A currency war is what Merkel declared in her negative speech a few days ago concerning the euro. A currency was is what the children running our monetary affairs have entered into. A currency war is akin to children on the playground playing Keep Away. A currency war's game of Keep Away is to keep away prosperity. 1. Shut down your quote machine. 2. Take a brisk walk. 3. Drink some cold water or whatever. 4. Review my illustration below and Monty Guild's recent comments. Respectfully yours, Jim Also from JSM, I feel I must copy and paste today's chart update from Dan Norcini. Dan touches upon many of the themes I've mentioned here this week, including wheat!! I've gotten to know Dan a little bit over the past year or so. Let me just say he is truly a great guy. More experienced and knowledgeable than just about anyone covering the PMs. On your list of favorite websites, be sure to list JSM. I check it several times per day, particularly after the Comex close when I am looking for Dan's daily words of wisdom. Posted: Dec 03 2010     By: Dan Norcini      Post Edited: December 3, 2010 at 2:15 pm Filed under: Trader Dan Norcini The payrolls number that was released this morning served as the initial catalyst that sent the US Dollar sharply lower and generated a wave of fund-related buying into the commodity complex once again. It would appear that the market focus of today shifted off of the woes in Europe with its sovereign debt crisis and back onto the abysmal state of the US economy. Same story – no jobs. The market is sending a signal to the clueless Administration and current Congressional makeup (which will be changing next month) that its policies are utterly wrongheaded. They are too wedded to ideology however to take the steps necessary to bring about an improvement. Combine that with what seems an almost hopeless paralysis to deal with the worsening US fiscal condition and the Dollar was taken out to the woodshed where it had the stuffing beaten out of it. Please see the price chart I sent up earlier to detail the breakdown from a technical perspective. The fact that the US Dollar was knocked lower only after just seeing the Euro getting slammed earlier this week, is underscoring just how awful the health of both fiat currencies has become. Traders were running into the Dollar early this week out of fears concerning the Euro and its long term stability. Today they are running back into the Euro mainly because they are running back out of the Dollar. What a terrible, horrific mess. The monetary authorities have disgraced themselves but that assumes that such people have a functioning conscience. Their problem is that they have the interests of the big banks at heart first and foremost and the long term interests of the nation second if at all. It also does not help matters any that the political leadership refuses to stop spending money that they do not have. The results are predictable – gold is seeing a huge influx of money from those looking to protect themselves from the monetary authorities of the West. Early this week it made a new all time high in both terms of the Euro and the British Pound and today it came within $15 or so of taking out its lifetime high in US Dollar terms. I should also note here that crude oil is threatening to breakout to the upside on its daily chart as it set a new yearly high in today’s trading session. If its strength continues and it clears the $90 level, gold is going to take out its all time high in US Dollar terms very easily. I have written about this many times here on the site and remarked about it during radio interviews, but it is a sad fact that if the energy markets break out to the upside, the already hard-pressed middle class is going to get slammed with the double whammy of both rising food prices and rising energy prices. The boys who concoct their doctored CPI  numbers will try their magic on convincing us that inflation is tame and that price pressures are subdued but the charts do not lie and they are telling us that disposable income is going to go more and more to securing the essentials of life. Translation – watch for consumer discretionary spending to nosedive as more of the family budget goes to food and energy and wages remain flat or stagnant. Back to gold – the fact that it was able to push through round number psychological resistance at $1400 on its third try this week is friendly to the bullish cause as it sets up a test above the $1420 level of the all time high. If that gives way, gold then targets $1440. Silver is in its own world right now and is very strong on the charts but I want to see a good, solid close above $29.50 to set it up for a push towards $30. The HUI is within striking distance of its recent high near 588. Technically it looks strong on the charts although bulls will need to push it past 590 to negate any bearish divergence signals that are appearing. Keep an eye on wheat prices as it has been on an upward tear this week and is working on targeting $7.50. It is moving higher on fears concerning the Australian crop now. Wheat is an essential food and its price action dictates to a large extent the price direction in the rest of the grain complex. It has been dragging corn prices higher. Unless we get a huge bumper crop next year of both wheat and corn, I am afraid that the days of relatively cheap grains are behind us and that the world has entered an era in which the grains, and the soybeans for that matter, have now achieved permanently higher near plateau levels. The implications are higher meat and poultry costs for us all. What a terror these monetary authorities have unleashed upon us all. Keep in mind this all started when they began to bail out their pals at the damn big banks who created the derivative monster to enrich themselves. History will look back at this era and will spare it no amount of harsh criticism for what began the downfall of the global monetary system. Bonds are experiencing some pre-weekend short covering as bears ring the cash register for what has been a good week for them. Even at that, they are basically flat and not getting much in the way of upside traction. The technical damage to the charts has been extensive with this week’s breakdown so unless bond bulls can take prices back up beyond 129, the path of least resistance looks lower. http://jsmineset.com/wp-content/uploads/2010/12/ComexGoldDec3-10.jpg That's it for now. I'll try to take some time tomorrow to project the week ahead as well as craft a post that details some of the nicknames and acronyms we like to use around here. Have a great Friday evening. Kick back. Relax and smile. We've got the EE on the run!