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

It Will Be a Happy New Year for the Gold Community

Jim Sinclair, Jan 1/03

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I am not saying this to you as a simple greeting. What I am telling you that it will be a Very Happy New Year for the Gold Community. 2003 may be a totally blissful experience. Certainly there will be challenges but at the end of 2003 there will have been major rewards.

As far as our 2002 year end gold reaction is concerned it is having an awful time just trying to get seriously started. We have IMO, Thursday, Friday and Sunday evening and Monday US session as a maximum time period before gold takes off again. That gold take-off will better the $354.50 and start its ascent towards $372 as the next major target before it closes above $400.

So far I have not had one taker from the loyal Elliott Wave counters on my offer of a $100,000 wager that gold will close above $400 in 2003. I am absolutely serious. If you believe that ELLOITT Wave Analysis guarantees you gold at $200 before it sees $401 please take my money. Fax me at 860 364 0673 weekdays or 860 364 1019 weekends and evenings. That wager is no different from a short position you might take and the long position I already have. Maybe some gold producer will like a little more hedging and therefore take my wager.

Please consider my suggestion that you now go into the Candy Store business as per my last memo to you of December 29th, 2002. Now, I am switching my advice to you that upon reaction you increase your position above core size and selling that position now taken on weakness into the next period of strength.

Yes, this is a more aggressive stance towards trading the gold trend but it is based on the bullishly resolved Golden Teacup base now standing as a firm foundation for $372 and then a close above $400.

We are beginning the mark up period in gold and that will be a mark down period for the gold hedger producers. There is no such thing on earth as a no risk hedge. There is no such thing on earth as a hedge position that cannot lose. At the least the hedger will lose interest on enormous money required to service the short side of the hedge and will have sold your gold at a great discount to future earnings. That is the best case scenario.

I have heard that a key person at NEM labeled me an alarmist concerning their now invisible accounting-wise hedge position. Well, remember that title. I may use it as a personal recommendation some time in the future.

Here are my New Years Gift to You:

Thursday, Friday or Monday do the following:

Buy 1 February Comex gold and take delivery.
Buy 1 Euro and roll it forward at maturity
Buy 1 Platinum and roll forward at maturity.
Buy 1 Silver on a stop order $4.89 and roll forward at maturity
Buy 500 shares of each of the front running 5 gold shares
Buy 5 out of the money listed call options at least three months forward on each of the 5 front running gold shares

Adjust these suggestions according to your funding. Assume no more than a 50% margin in free cash versus the settlement price of your Comex Gold, Euro, Platinum & Silver.

The US Dollar (USDX)

We had a small presence Monday of the Exchange Stabilization Fund as the dollar took its first peek under 102. Again today there was a small touch by the ESF that gave us a momentary 102.65. However late weakness set in and back we went to a close of 102.26.

A Major Currency Development That You Must Grasp

You need to understand what has happened in the big picture. The world has now broken down into two major currency camps. There is the Dollar Camp and the Euro Camp. The Euro was introduced only to immediately fall on its face after a short honeymoon. This was a testing period. That period has concluded and the Euro is stepping into an important place alongside the dollar. However that is not the end of the story.

As much as many do not wish to hear it the big boys of the Oil Block have announced their intention now to speed up the development of the ARAB Dinar. The Arab Dinar is not the Malaysian Dinar I have informed you of in detail. The ARAB DINAR is a new currency proposal of the six Big Oil nations. This new Dinar will be a mix of the Euro and the concept of the Malaysian gold settlement.

As a result of the failure of the US Dollar Reserve Standard the economic world in on a path to a three currency camp. The Dollar, the Euro and the so far two Dinar. This is long term negative for the US dollar.

Now back to the Dollar chart. It looks like a terminal patient to me. Being kind to the dollar, I have posted on the chart the minimum and maximum potential of just the move we are now in. It is still not a pretty sight.

It reads, IMO, a minimum of .862 to a maximum of .79 on this move down. The Head and Shoulders is now broken down, as is the very long term up trend.

Gold:

My offering here is a nine minute chart of gold for your review. That means each bar is nine minutes of trading showing the opening, high, low and last of that time phase of trading in the US Comex session. I like nine-minute period for intra-day trading and prediction of short- term moves.

We have a completed reverse head and shoulders formation reading an intention of gold to move in the short term to $351. This if it occurs will be more chopping at the high side during this reaction. That type of reaction would indicate $354.50 will fall soon as will $372.

Heads & Shoulder Formations:

I offer for your review two illustrations from "Technical Analysis of Stock Market Trends" by Edwards & McGee. This is a book that you must have if you desire a thorough knowledge of the language of prices and how they can be understood to foretell the future. Please obtain this book.

Much of the technical research that Kenny Adams and I do is proprietary to us. It is to be found in no text anywhere nor will we publish it. Yes, it fine-tunes and reveals items not visible generally. However what I offer to you is a sufficient guide for your participation in this bull market maximizing hopefully the result thereof.

Click to view Edwards and McGee material:

http://www.tanrange.com/i/misc/tnx-chair-dec312002-chart.jpg

Conclusion:

The Big Lie now being told on financial TV and in the establishment media is that the rise in gold is primarily a product of the Iraq and North Korean situation. Yes, there is a premium in gold for these potential problems but it is basic economics that is the Golden Teacup or pricemovement foundation of this gold move. This is not a cyclical move but rather a generational event.

The time has come to alter our strategy with a more aggressive technique oftrading gold bullion and shares. You have that strategy given in yesterday and today's community memos. Think about and we will discuss it. Ask the question you need so that you understand the concept clearly and can if you wise apply it.

Word & Phrase Clearing:

It is important as a discipline that in the learning process and for daily reading that you never pass a misunderstood word or phrase. By following from now on all Heads Up, VIP and Technical Review posting you will be receiving an ongoing dictionary of terms. If I fail to define my meaning or you cannot locate a satisfactory definition then you must ask me making your email or fax subject line "definition."

"Out of the Money" Call Option is the right to receive but not the obligation to take 100 shares of stock, in the case I refer to. The out of the money characteristic means that the strike price is above the market price. The strike price means the price that the option specifies it will deliver the shares to you in the future.

At Least Three Months Forward in reference to the out of the money call option means it should mature in February or March if such is offered.

Maturity refers to the date upon which the agreement lapse if not exercised.

Lapse means ENDS.

Exercises means taking deliver of the underlying shares.

Underlying means the share that the option represents.

Dollar Reserve Standard means the practice of holding US dollar denominated bonds by central banks around the world, which represented a significant portion if not the majority of their reserves.

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