Jim Sinclair: If you are NOT buying gold at these prices, you have NO insurance for what is to come.

Gold Market Overview From An HFT Perspective


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.


To Infinity and Beyond: America is more bankrupt, leveraged and vulnerable than Europe

“More and more is needed, with less and less effect. We believe that the monetary financing of deficits will only lead to more inflation.”

America is more bankrupt, leveraged and vulnerable than Europe. And to finance its debt, one branch of the state (Treasury) borrows money from another branch of the state (the Federal Reserve) and everybody thinks this is the norm – they call it quantitative easing (QE) as the Fed embarks on a third round which could eclipse the first one’s trillion dollar cost pushing America closer to the fiscal cliff on their mountain of debt. America’s debt as a share of GDP excluding the debt of Fannie Mae and Freddie Mac is already over 100 percent. Although the cost of servicing that debt is only 1.4 percent of GDP because of low interest rates, half of America’s debt is in foreign hands and so interest rate levels around the world are important. If America had to pay the rate of comparable sick countries, say six percent, the debt burden alone would exceed the spending on Social Security, Medicare or national defense.


QE3 ? to infinity and beyond

QE3, the “solution du jour” uses debt to create demand propagating the myth that money can be conjured out of thin air. The third round of quantitative easing involves the usual asset purchases aimed at driving interest rates down creating at the same time ever larger artificial markets for government bonds and all of its derivative products, but this time without an expiration date. From infinity and beyond.

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But, how low can we go when interest rates are at record lows? The Fed has tried adding liquidity before and while QE2 had a short lived boost (see chart), the cries for another round of quantitative easing has pushed the US economy into uncharted waters. To be sure, the Fed’s monthly open-ended purchases of $40 billion of mortgage-backed securities ensures that interest rates will stay negative, punishing investors and savers alike. Interest rates are no longer meaningful. What ails the US economy is cheap money and despite near zero rates, the economy remains anemic. Ironically, it was the Fed’s low interest rate policy that caused the last debt driven housing boom, and bust. Rates aren’t part of the problem and therefore can’t be part of the solution. Piling more debt on debt is not the fix.

This is also the case in Europe as Mario Draghi, the president of the European Central Bank promises the bank’s bottomless pockets will be opened indefinitely. The printing press solution was tried less than a year ago and is again found wanting. Yet today, new concerns emerged with both Spain and Greece now caught up in constitutional crises as north-south fractures open up old rifts within these member states. Today, central banks’ promises have become empty promises and while our so-called guardians of money possess unlimited powers to print money, their experimentation and track record of late has also been found wanting. The recent round of monetization of debt even violates the European Central Bank’s own constitution. And still they continue pump more money into the system in addict-like fashion. It is like a drug. More and more is needed, with less and less effect. We believe that the monetary financing of deficits will only lead to more inflation.


Food prices are rising and it’s going to get worse

The cost of the weekly grocery shop has increased by a third since the credit crisis struck, and food inflation is expected to get even worse as a result of poor harvests and rising populations.

Amid the general hand-wringing about the economy, the publication of something as innocuously named as the Food Statistics Pocketbookwent almost unnoticed last month.

But this booklet from Defra, the Government’s agriculture department, tells a story as horrific as any tale recounted around the fireplace this Hallowe’en – a story that becomes very real every time we pull our credit card out at the end of the weekly shop. The pamphlet is an analysis of food prices and their effects on society, and the numbers are stark. The price of food in Britain has risen by a third since the credit crisis began in 2007, and shoppers on lower incomes are compromising on the quality and healthiness of food because of this.

British shoppers have been disproportionately hit by the rises – customers in France and Germany have seen their food costs rise by 13pc in the same period – and are altering their behaviour in order to survive. Defra figures show that those on low incomes have cut down on fruit and vegetables (fruit prices have risen by 34pc since June 2007) and are also cutting back on the total calorie content of the food they buy. Those with incomes in the bottom tenth have cut the calorie content of their food purchases by 9pc since 2007.


TIME TO BUY, BUY, BUY: Monday or Tuesday should be an exceptional buying opportunity as gold moves into it’s final intermediate cycle bottom.

If you aren’t already in, Monday or Tuesday should represent an exceptional buying opportunity as gold moves into its final intermediate cycle bottom.

Now that the 38% retracement has been breached I would look for a final exhaustion move to test the 50% level early next week as we move into the elections.

At that point sentiment should be completely washed out and gold will be set up for an explosive move to test the all-time highs by the end of the year or early January.


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