The Miner's Manual :: A resource for the mining professional

From the prospector comes the salt of the earth

"From the prospector comes the salt of the earth." -- WJ

Gold $355.80 February Delivery Comex Contract

by James Sinclair, Jan 10/03

Return to Mining News List

What today's commentators seem not to recognize is that $350 is not an important number in this drama of gold. If there was any number that was critical, it was the first close of gold over $305. Next it was the close over $324.50 which launched gold to current levels. The real focus of attention should be the Golden Teacup, which has a duration of 3 or 4 years depending on how you view it. The rule in the language of markets is that the longer the base the stronger the move. Four years qualifies as a most respectable base formation. If you lived in it, you would swear it was 40 not 4 years.

So as a community, let's not make too much of the short-term picture and miss the major gold market move. Certainly I will give the traders guidance but now that the 4-year base is finished, my heart is with those in the community that view this endeavor as an insurance payoff. We have come out of the accumulation phase, which was eight years in the cash market and four years in the spec market. The Islamic/Asian community absorbed every ounce of the gold hedged, every ounce of the carry trade shorts, and all of the central banks' sales. Now gold is in the mark-up phase. So when we see some hesitation in the gold price, keep this Churchhill comment in mind.

"This is not the end. This is not the beginning of the end. It is merely the end of the beginning" Winston Churchill

Gold is out of its base and now has moved into its Bullion mark-up phase. The gold community must understand the beginning has ended and we are in a new period for gold so they must adjust their strategy accordingly.

Review of today's market:

Both gold and silver today traded right into the cash drawer of those that make their living through speculation, as I have been rumored to do from time to time.

Silver:

Today's silver was like shooting fish in a barrel. It traded the box perfectly. Rather than taking you by the hand, look at the box and assume you had the inclination, experience and finances to be playing silver and you traded the box today - $4.815 on the low and $4.88 on the high. You grabbed yourself at least 7cents intra-day. That is a reasonable payday on say 10 to 100 contracts which is normal size for a professional trader just passing the time without a specific bullish or bearish view.

Gold:

Gold was somewhat more difficult as it required a ruler and a pencil. Look at the simplest trendline trading of gold intra-day today. It was more fish in the barrel. I have noted the most simple trendline buys and sells today for you.

What you need to keep in mind!

In this market, $357 to $359 is serious hard resistance for this gold move. The front running gold shares smell it but gold so far is not reflecting it in such an obvious manner. Professional traders in gold should not carry full positions into this region unless it slices through it like a hot knife into soft butter.

So here is what I am saying. I prefer to hold every share I have. I prefer to hold every ounce of physical gold I have but in my spec position on the Comex, I will reduce between $357 and $359 and did so today. As a speculative trader, I will re-buy starting at $351 or on a close above the resistance area. This is not for investors. Investors usually do quite well by stopping trading activity in the mark-up phase. Those that prefer some trading, would lighten up in the $357 to $359 range but not as much as 1/3.

The US Dollar: USDX

Yesterday the dollar yawned loudly at the Bush economic rescue plan for good reasons. Almost to a program, the plan will weaken the common share of the USA, the Dollar, in world markets. Maybe there will be good from it June of 2004 but we will see then. The problems are immediate and the plans are long term. The rub is those initiatives that would help those in need immediately are socialistic and long term disasters. The dollar is creeping along the over-sold side of its present downtrend and nearing points of support at 100.5 and 101 on the USDX. Careful now on shorting unless it bounces from these support areas.

Concluding comments:

We need to focus on the evaporation of the social net that was out there. It isn't any longer. That has safety, political and social implications that cannot yet be measured, most certainly if the inflationary figures go negative. We also need to tell the talking heads to stop their celebration as inflation approaches the zero level. The Zero Inflation Policy so heralded by the Federal Reserve was always faulted in failing to recognize that flirting with that event horizon of deflation was negative for most everybody everywhere including the debt markets. Those that felt that deflation was negative to gold simply never studied the history of gold in the 30s. If you haven't, then please review my article on "The Gold Cover Clause AKA the Federal Reserve Gold Certificate Ratio" with attention to the comments made by the 1999 Nobel Prize winner in economics, Robert Mundell. This is a "must read" for the gold community.

For you investors, lean back and enjoy the fruits of your labors. For the modest traders out there, do not be afraid to buy the dips and swells the rise almost like clockwork. For the significant speculators, take caution as we are into multiple heavy layers of overhead resistance in gold between $357 and $359 that will take a lot of market energy to penetrate.

Have a good weekend and see you back in the battle Sunday night when Hong Kong opens.

Click on following link to view full editorial and associated charts: http://www.tanrange.com/s/ChairmansCorner.asp?ReportID=47166

Return to Mining News List

top of page