Jim,
I'm sure your mailbox is inundated with letters, so I'd like to help. Feel free to post this if you think it will relieve some of the pressure. Thank you for all you have done for gold.
Here is an overview of market action for gold longs from a HFT perspective. If you plan to trade on my information, then the trade is: Buy physical gold. Any HFT worth their salt (or silicon) already knows what I have written here.
TAKE HEART GOLD LONGS, THE PAIN IS ALMOST OVER. The next leg of our journey takes us to $1800 and over, probably in time for Christmas. The best advice I ever received in gold is: "Your emotions are always wrong." This was from a highly skilled trader named Jim Sinclair. Thank you, Jim.
Here is what is going on:
Market releases are important, and NFP is the most important.
NFP (non-farm payrolls) is the most volatile of all data releases. Every HFT (algo and human) trade it. The high risk trade is to short bonds or long S&P prior to the release. The HFT method is to close your position pre-release and have your finger on the mouse ready to pounce. Failing that, the human method is to fade the spike and profit from mean reversion.
On a ladder, you can see 1 min before a data release that orders are pulled and volume is barren. As the data is released, algos get it first. They slam orders into the market. A second (or less) later, humans add to these orders at market and the algos sweep their profits. This drives the price as stops are crossed and slow traders enter.
For this NFP release, everyone knew the data release would be the same as October. It's an election year. The number may be revised in a week or 2, but that won't matter after the election.
Knowing in markets is a powerful thing. Most trading is guessing and hoping, so knowing is a comfort rarely experienced.
When the release happens, the gold market got slammed. The previous day, traders were pulling their longs from $1725, causing the price to drop. For the release, the shorts know that longs have stops under $1700. This is a human "line in the sand". So the goal is to cross $1700. You can see the stops trigger to $1696. From there, longs feel the pain and close positions, allowing the shorts to hit the price again into the next level $1678. These were the levels in my last email, and nothing has changed. The short goal is $1650, but won't get a chance to push $1650 and here is why:
China demand. The Chinese government has encouraged it citizens to buy gold. This is a saving culture with little faith in governments and currency. These avid savers have already bought large amounts of gold and will be buying more under the assumption that "If the price was good at $1750, then it's great at $1700!" This is how value buying works.
Come Monday, Asian value buyers will be into the market. Some may want to try to get $1650 prices or wait until Tuesday to get a better price, but will quickly snap up gold as they see the price start to go up. These physical buyers will be buying on as the price starts to press $1700 for fear of missing this BREIF pullback in price.
CIGAs should also be value buying at these levels.
On Monday, shorts will try to breach $1678. They may get it to fall (briefly) but that level won't hold. Spec shorts will be closing positions and adding longs at these prices. Spec shorts don't want to get caught behind the wave of big money value buyers. High volume VALUE traders will be back into the market on Wednesday, after the election smoke clears. These traders will be snapping up every pullback of gold, knowing they can reap a big profit before the end of the year. This starts the gold run to $1800 (short term, ie Christmas) and $2000 close behind. $2000 is a low estimate with a looming fiscal cliff and rabid money printing.
It is an election week. All eyes (news coverage) will be on the election, with real news hidden in the folds. No matter who wins, nothing will change.
If Obama wins, Bernanke will continue QE as normal, secure in his job. If Romney wins, Bernanke will increase QE in an attempt to keep his job. Either way, the printing press rolls on devaluing in the dollar and increasing the book price of hard assets. Markets know this. Knowing something in a market is a strong motivator.
There is NO scenario short of an election coup d'état of congress that can stop the presses.
If you are NOT buying gold at these prices, you have NO insurance for what is to come.
If you are long physical gold, turn off the tape and come back to it on Thursday when this paper BS is over.
Jim, thank you for all of your wisdom and advice.
Cheers,
CIGA Henry (HFT)
Another payrolls report
today; another down day in the precious metals. Not much of a surprise
here as that has been the norm for many a year. In one sense, it really
did not matter what the number was as there was more than likely going
to be bearish selling pressure no matter what.
When it comes to silver,
if the number was a poor one, the bears would point to the fact that
the QE3 was already baked into the cake and so was a non-factor. They
would then point to the fact that the poor number was sign that the
economy was still muddling along without any risk of inflationary
factors due to the sluggish growth. Silver MUST HAVE AN INFLATIONARY
ENVIRONMENT if it is to mount any sort of SUSTAINED rally.
If the number was
considered friendly, then the bears would cry up the idea that the QE
was not going to be continued as long as some were initially thinking
since the economy was mending.
In other words, Heads, I win; Tails, you lose.
Either way, take a look at the
following chart of the Continuous Commodity Index or CCI and notice that
it has broken out of the recent congestion pattern. The breakout
however was to the downside. Guess what; silver also broke out to the
downside of its recent consolidation pattern.
I have pointed this link out to
readers here for some time now - Silver is inexorably tied to the hip of
the broader Commodity markets and will remain so into the foreseeable
future. Next stop for the metal is today's low near $31.25 followed by a
test of $31.00 - $30.80 should that previous level fail to stem its
decline.
The fact that the open interest in
silver refused to sharply decline during its descent was a warning that
the stubborn bulls were vulnerable to a breach of chart support. There
were just too many stale longs in this market which had not experienced a
good and necessary cleansing. We are now finally getting that which is
what this market needs in order to generate a more lasting move higher
when the conditions are correct for such an event.
Note on that CCI chart,
that the red support line which has been violated came in very near the
important 38.2% Fibonacci Retracement level. If the index cannot rapidly
recover this support level by climbing back above it and holding, it
implies a subsequent test of the critical 50% level is in store.
With this in mind, observe the
silver chart and note how similar the pattern is to the CCI. As stated
above, the two are linked together and will generally rise and fall
together.
Notice also how silver has lost
support at the bottom of the recent congestion pattern which also was
rather close to its 38.2% retracement level. If it cannot reverse the
decline and get back above the 32 level, it will more than likely drift
first towards psychological round number support near $31 and stronger
chart support down near $30.70 - $30.75.
林毅夫：要改美元儲備貨幣
原世界銀行副總裁、著名經濟學家林毅夫表示，要避免金融危機的再次爆發，就要改變以美元為儲備貨幣的格局。
2008年爆發的金融危機不在於人民幣幣值被刻意貶低，而在於美國的過度消費，各國貨幣儲備對美元依賴過大。
在當天開幕的2012北京論壇上，林毅夫發表《國際貨幣體系和全球金融危機》的演講時做上述表示。
關於21世紀頭10年出現的經濟不平衡問題，學術團體里存在很多爭議，最流行的失衡原因分析有三：一是包括日本、韓國、中國大陸和台灣地區出現了外匯儲備暴漲；二是新興經濟體的出口策略；三是人民幣被刻意低估。
林毅夫說，三種假說都認為東亞經濟體要為美國貿易逆差負主要責任。尤其是第三個假設被媒體炒熱後更為引人注目。事實上全球經濟失衡在2002年就浮出水面，2003年中國就被指責壓制人民幣升值。「實際情況是中國2003年的貿易盈餘比1997年金融危機時還要低。而97、98年時人民幣幣值是被高估的，怎麼可能貿易盈餘下降幣值還會被低估呢？」
林毅夫認為，不能把全球經濟失衡歸結於東亞經濟體的發展，金融危機爆發的根本原因在於美國實行寬鬆的貨幣政策。2001年互聯網泡沫破滅後，美元利率從6.5%降至1%，這無異於鼓勵投機，投機產生了過度消費，過度消費產生了巨大需求，加上美國政府因伊拉克戰爭、阿富汗戰爭財政赤字不斷擴大，貿易逆差也不斷擴大。
林毅夫認為，發展中國家通過外貿掙錢換美元提高外匯儲備，再拿外匯買美國國債，這才是美國金融危機蔓延全球的根本原因。要避免危機必須改變以美元為儲備貨幣的格局。
林毅夫預計，未來幾十年可能出現美元、日元、歐元、人民幣共同承擔儲備貨幣的功能。但這些國家都有結構性問題，使用任何一種單一貨幣作為儲備貨幣都有可能導致投機。因此他主張，用國際貨幣主權機構發行的紙黃金代替美元行使儲備貨幣職能。紙黃金可以同黃金掛鈎。
這一思想英國經濟學家凱恩斯曾於1944年提出過，但由於當時美國經濟份額佔世界一半以上、世界經濟對美元過分依賴而未被採納，如今情況已然不同。林毅夫預計，再過10到20年，美國佔世界經濟份額將降至20%以下，中國、歐元區各有可能佔20%，可以考慮用新的全球性貨幣體系來代替美元中心。
林毅夫認為，以紙黃金為中心的貨幣體系對全球不論是發達國家還是發展中國家都將有利。
