General Editorial Tuesday, March 15, 2005, 8:38:00 PM ESTGold...

General Editorial




Tuesday, March 15, 2005, 8:38:00 PM EST

Gold and Dollar Market Summary

Author: Jim Sinclair





Dear CIGA:

The TIC report helped the US dollar but not by much. In fact, the dollar did not even move above yesterday’s intra-day high.



The net income of $91.5 billion, if you look at the figures closely, had a great deal to do with inflow from anonymous tax shelter locations such as the Caribbean. That is where the money that speculates in energy hides from world-wide tax collectors. Inflows from London, where somewhat legitimate funds operate, also helped the TIC. Keep in mind that January was a very big month for crude oil speculators. Volume rose significantly as did price.

Diminished selling of US Treasuries by non-US entities plus an increased inflow into US equities pumped the figures. God help TIC if the US equity recovery, which is already quite mature, in time falls into a serious counter trend down side reaction. It will be even worse if the equity upturn turns out to be only a major rally in a bear market as occurred in the 30s.

Any thought that the international investment and central bank community is going to continue to finance the huge $58 billion shortfall in the US Trade deficit as per the recent reporting month borders on establishment wishful thinking.

TIC figures can gyrate violently and are subject to significant adjustments in retrospect. However, the stand the dollar took at the new line drawn in the sand at .8150 could have only occurred due to either reading this site or more likely inside information of the TIC report.

Since the pros bought on what was a totally terrible US Trade report let’s see if they fade the dollar market by taking their profits into the TIC report. I would say that was in fact already happening as a result of the extremely modest reaction the dollar had today.

It is important to keep in mind that the cost of financing the US deficit, which is on the shoulders now of non-US entities, grows in size day by day. What was in the $40 billion per month range not that long ago is now in the $50s and will in time grow much higher if the US recovery fails to regain momentum.

The dollar has nowhere to go on balance but down as long as no proven policies are put in place to reverse today’s deficits back into surpluses.

Therefore gold will, IMO, not only reach the $480 mark but will seek $529 and after a time will begin its procession to $1,650 or better.

There is no question that in today’s world people understand a fist better than a smile. That is a sad comment on world affairs but as I have said often it is better to recognize what is fact even though you’d prefer the reality of life to be somewhat different.

My friend used to say that everyone in his employ thought he was a SOB but a fair one. He liked it that way. By the way, I understand that his present associates now have dropped the “fair” moniker.

The same transitional phenomenon might well be happening as a result of the fist shaking the US is doing today not just in the Middle East but outside of that volatile area as well.

It is important now to focus on two major appointments to the present Administration who have a history of actions that would certainly put South and Central American countries on notice.

How many of you know that the US Navy and Marines staged maneuvers off Curacao, Venezuela? How extreme minded are the Venezuelans to get excited about something like that? Do you really believe that the US would get excited if Venezuela flew its F-16 or Mirage fighter jets towards US border under the guise of “maneuvers?” You know the answer as well as I do!

Now clearly all this had nothing to do with the 5th largest supplier of crude oil stating its wish to do more - not less - energy business with China at the expense of its oil trade with the US.

Apparently, we can also discount Venezuela’s increased oil income being used to purchase high tech weapons. We are told that they cannot keep their fighters in the air so why worry if Chavez acquires brand new, high tech, long range fighter bombers to replace his obsolete aircraft?

Is it surprising that Chavez visited with Mohammad Khatami his Iranian counterpart. There is some talk in knowledgeable circles that Khatami delivered from Iran’s Russian friends a statement of support for Venezuela should push come to shove over oil between the US and Venezuela.

Eliminate the 5th largest supplier of energy to the US and the price of oil is headed to a supply and price crisis. Only the major world oil interests will benefit from this. Be assured that the major item that would suffer is the US dollar.

Dear Jim:

The following watershed event was announced by the financial media today. What does this mean?

Yours,

CIGA Arlen

“A judge ordered Barrick Gold Corp. and J.P. Morgan Chase & Co. to try to settle a two-year-old lawsuit filed by coin dealer Blanchard & Co. to avoid a 10-day trial scheduled to start in July. Blanchard accused the miner and the banker of illegally profiting from the manipulation of gold prices. Judge Helen Berrigan in New Orleans scheduled a meeting to negotiate a settlement with the companies March 30. "The court feels that the record has developed sufficiently to allow for meaningful settlement discussions."

Dear CIGA Arlen:

It’s quite common in litigation in the US courts for a judge to order the litigants to “seek” not make a settlement. It means nothing because the litigants might seek and fail to settle. Then the trial goes forward. Watch all the web-based gold commentators go wild on this modest at best development.

Regards, Jim

Jim Sinclair’s Commentary:

One month the price is down and OPEC is going to cut production. Now the price is up and they are going to increase production, albeit not enough according to the market’s reaction.

This looks a lot like slapstick comedy with the oil ministers playing Charlie Chaplin but with kuffiyehs, proving that the people who know least about any commodity are just the ones that produce it.

Oil Rises on Signs OPEC Output Boost Insufficient for Demand

March 15 (Bloomberg) -- Crude oil advanced to within 27 cents of a record on speculation that OPEC won't increase production enough to meet rising demand as refiners prepare for the peak gasoline-use season.

``There is agreement among all of us that we need to increase production by 500,000 barrels a day or more,'' the Kuwaiti minister and OPEC president, Sheikh Ahmad Fahd al-Sabah, told reporters today. The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil, meets tomorrow in Isfahan, Iran.

``The market isn't that impressed by the OPEC moves,'' said Phil Flynn, vice president of risk management with Alaron Trading Corp. in Chicago. ``OPEC is doing too little too late. Worldwide oil demand is growing so strongly that it will outpace production even with an OPEC increase.''

More…

Jim Sinclair’s Commentary:

If you are amused by the incorrectness of OPEC on the future of energy prices try this one out on the US dollar. If the Chairman really wishes to improve his performance on the Fed’s predictions regarding the direction the US dollar, I will be happy to send him a copy my CD and a free straight edge ruler.

Greenspan – “Very Hard to Forecast Dollar Movements.”
March 15th, Reuters



“We at the Federal Reserve have expended an extraordinarily large amounts of resources to try to forecast the path of the dollar in foreign exchange. What we’ve determined is that it is exceptionally difficult thing to do and, as I like put it, we have been no more successful than the odds we get in tossing a coin.”