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Friday, April 23, 2004, 9:53:00 PM EST



Friday, April 23, 2004, 9:53:00 PM EST

Gold Market Summary

Author: Jim Sinclair





The last nine trading sessions add up to a grandstand attempt by COT professionals (using their pals at the Central Bank of France and Switzerland) to depress the gold price so they can reverse their losing gold short positions to long positions.



I am an old warrior and know all the tactics. When I tell you a seller is out there to affect a lower price and is not really a legitimate seller of gold, you can wager you are hearing the truth. There is nothing much new on the face of the earth nor is there anything new in the gold pit. From these 9 Days of COT quasi- supremacy in the gold market, we will begin the ascent to and above $480.

The reasons are as follows:

1. UBS did not inform their best clients that the Bank of Japan was a buyer of gold without having confidence in their position. That fact will show up in the May 8th-May 12th period, suggesting they believe 100% in the veracity of that statement. COT knows that the Bank of Japan is a buyer and someone leaned on the Central Bank of Switzerland and the Bank of France to announce their selling intentions to counter the news of Japanese buying.

2. For Asian nations to bring themselves up to only 5% gold reserves, they would require the majority of gold held by the French and Swiss central banks. That totally erases any negative for gold from any central bank selling.

3. Inflation is back. You need only to see the chart I posted this afternoon on the annual rate of growth of the Core CPI to know that the downtrend from 1992 is broken to the upside. The Annual rate of Growth of the core CPI has broken out of a triangle with a measured move possibility of almost a 6% annual rate of growth before all this is over. COT knows that. COT understands that history says INFLATION is the most powerful driver of the gold price.

4. Govenor Bernanke may well have crashed and burned on the unique use of Japan as the liquidity giver to the world. If standard means could have been used and monetary aggregates were expanded dramatically, they could as easily been contracted. All that would be needed in that case to withdraw the liquidity would have been for the Federal Reserve to have placed Treasury bonds in the accounts at the Fed’s member banks and drawn out member bank cash and IOUs. Reserve requirements could have been gradually increased.

Now the Fed is in a world class pickle. The Bernanke Electronic Money Printing Press used the Japanese yen intervention mechanism that ended up purchasing US treasuries directly from the marketplace. Now that liquidity cannot be drawn out of the world economic system because the transaction cannot be reversed unless you want to see the US 30 year bond back at its 1981 level of 56 cents on the dollar. That is a quote of 56. COT knows this and therefore knows that the world is in for an explosion of inflation the likes of which few have witnessed in their lifetimes.

Bernanke could have been the next Chairman of the Fed but you can be sure that the disaster so caused is going to land on his not Greenspan’s front door. Chairman Greenspan will now resign before his tenure is up due to personal reasons. COT knows this.

5. The Chinese are going to float their currency up somewhat prior to the US elections to help the incumbent save some face. However, that upward float absolutely means that the Chinese will not be enthusiastic buyers of US Treasuries as they have been in the past to maintain a grossly artificial relationship between the Chinese currency and the US dollar. This will remove more demand from the US Treasury market further injuring the US bond market and therefore the US dollar.

6. The US dollar rally is tired and has today made a negative crossover of its MACD, indicating that the momentum of this rally is deeply tired. The uptrend line is coming soon and there is a possible bearish up wedge forming.

So it was time for a grandstand play to depress the price of gold by using the probability of increased interest rates as a lever. Talking heads and international investment firm analysts labeled the upcoming increase in the cost of the shortest term money as bad for gold. ABSOLUTE HOGWASH!

So do not fall for it. Send this missive to any gold analyst that says otherwise. They are simply WRONG. Gold will sustain me by beginning its rise NOW from the recent 9 day COT onslaught and move above $480. That is how I see it right now and firmly believe I am right. There is no hedging here.

Click here to see the US dollar and the potential of 2 Bearish Up Wedges with a negative crossover on the MACD.

Click here to see a bullish potential Down Wedge in the euro which if broken to the upside could on a measured move return the euro to 1.235 to 1.2400

Click here to see a completed bullish Down Wedge Break Out to the upside that has a measured move price objective at $428. May I add on its way to and above $480?

Click here to get the guidance of Carlo Fibonacci on gold for next week and potentially beyond.

Click here to see a long term monthly chart on gold which shows a classic breakout to the upside of the neckline of a Reverse Head & Shoulders formation or, if you prefer, a Tea Cup With Handle pullback and perhaps a move away and up that reads a measured move to $522.

I hope for the sake of humanity that $522 is enough for now. More means financial conditions would be intolerable for the average person.

On that thought have a pleasant weekend.