‘Mr. Gold’ on Gold: Toughen Up! Forge Ahead! (GLD, PHYS, IAU, SLV, AGQ)
Dominique de Kevelioc de Bailleul: As an apparent gesture to lend a helping hand to Sprott Asset Management John Embry’s call for seasoned gold professionals to coach rosy-cheeked newcomers through the treacheries of the gold market, as witnessed so far this month, Mr. Gold, Jim Sinclair, posted an Open Letter for the weak-of-heart among his flock to ignore mainstream media, stare down that empty-chambered pistol of the Fed, and “forge ahead.”
“Please make an effort to stay balanced. Greed is a condition of lack of balance similar to fear,” the 40-year gold market veteran Sinclair stated in his Open Letter of May 16. “Fear is being fanned from within the gold community as much or more than from outside. When people who know gold is seriously under priced talk temporary bear, they kick good people when they are down.” Get my next ALERT 100% FREE
Echoing Embry’s comments in an interview with King World News (KWN) on May 15, Sinclair directed the reader’s attention to the heart of the financial crisis—the more than $1 quadrillion worth of derivatives, armed and ready to explode anywhere, and at any time. And sure enough, the most likely culprit of reckless trading of those synthetic time bombs (by assets held), JP Morgan, last week began warning the bank’s stockholders of a $2 billion loss from its “hedging” activities for the current quarter.
And not surprisingly, this week, Bloomberg reports the loss estimate at the nation’s largest bank now stands at $3 billion—creeping higher over time—which has become a familiar pattern among the banks of, first, low-balling the initial announcements, then ratcheting up to the true losses incrementally by the time of quarterly reporting.
Bloomberg’s Dawn Kopecki said on Bloomberg Television’s ‘Inside Track‘ that JP Morgan’s initial estimate of a $2 billion loss from its European mortgage bonds trading represents only the “tip of the iceberg,” and that Jamie Dimon’s characterization of the trades as a “hedges” is a lie. Under FASB rules, the loss is the result of a gamble, not a hedge, and Dimon knows it. Therefore, can shareholders trust Dimon’s estimate of the total trading loss?
“The problems of OTC derivative just brought into the headlines by Morgan is alive and well, guaranteeing QE to infinity,” Sinclair continued—as he again reminds his flock of the JSMineset.com mantra: “QE to infinity.” And as the banks trade in wild speculation in an attempt to dig themselves out of the derivatives hole, Dimon and his banking cohorts know the Fed will bail them out if they lose the bets.
And again, it appears Sinclair is correct. The “QE to Infinity” works like a charm.
Thursday, Bloomberg reports the Fed Minutes of the April FOMC Meeting, which revealed that several Governors said further money printing will be forthcoming if the U.S. economy stalls or if “downside risks to the forecast became great enough,” signaling to traders in its typical obfuscatory language that the Fed fears an exploding derivatives market and that the European solvency crisis will take down the financial system in another Lehman-like swan dive. It’s ready to open the money spigots.
“You must make your decision in present time, neither fearful or greed-ful of the future,” Sinclair said. “Look at every factor of gold and list them as bullish or bearish.”
One of the many of the gold market’s bullish factors comes out of Asia, where GoldCore executive director Mark O’Byrne told Bloomberg the appetite has not waned during the entire decade-long gold bull market.
“There has been significant buying particularly out of Asia in recent days,” said O’Byrne. “In Hong Kong and Singapore there have been reports of tightness in the marketplace and premiums have remained robust on gold buyers of those markets.
“So, this has been a pattern we’ve seen for the past 10 years—that the Asian markets seem to be a little bit more price sensitive and they tend to buy . . a little bit more savvy on their buying, and they tend to buy on the price dips as we’ve seen in the past 10 years.”
Given the 10 years of professional gold buying out of Hong Kong (China’s supplier of overseas gold) and Singapore on significant pullbacks, Sinclair told KWN on April 2 that the only remedy for the amateur jitters is to . . . well . . . “toughen up” and trust that “everything that you are doing you are doing for good, right and logical reasons.” That’s what Asian professional buyers are doing.
Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), ProShares Ultra Silver ETF (NYSEARCA:AGQ), iShares Gold Trust (NYSEARCA:IAU), Sprott Physical Gold Trust (NYSEARCA:PHYS).
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