Caught offside?Look out!
The following, is worth a read.
Re: Chairman's Corner - Tuesday, September 03, 2002
Why the Gold Cartel Will Fail to prevent a Primary Gold Bull Market
The Real Why They Are Trying to prevent it
Author: By James Sinclair & Harry Schultz
1. JP Morgan/Chase appears as if the main member by accident or by
intention of the Gold Dealers short seller's club.
2. JPM (NYSE Symbol for JP Morgan/Chase) has received, IMO, from Central
Banks, lease agreements, whereby they are able to receive physical bullion
from the central bank paying now 3/4 of 1% per annum. JPM and/or their
clients are free to use or sell this gold in any manner they want. JPM
themselves or on behalf of their clients appear to have used it to sell
violently at key technical points. $312.50 to $314.80 (today) -$315 &
$329.50-$330, thereby depressing the gold price.
3. Recently, Moody's Credit Rating Service downgraded JP Morgan/Chase's
credit rating. Following that Standard & Poors Credit Service downgraded JP
Morgan/Chase's credit standing based on specific derivative positions.
4. The actual figure of derivative positions on the book of JP Morgan/Chase
can be found registered at the office of the Controller of the US Currency.
The Controller of the US Currency reports to the IMF which shares its data
with the BIS.
5. Therefore the positions carried by JP Morgan/Chase is public but the
public has no real idea on how to find it.
6. The total of all derivatives on the books of JP Morgan/Chase on all
underlying assets is $24 Trillion US dollars. Yes 74 Trillion.
7. The size of the Gold Derivatives on JP Morgans/Chase's books is
$46,000,000,000 - $60,000,000,000 depending on valuation methods. Yes, $46
- $60 Billion.
8. All gold derivative dealers use "Risk Control Software" to manage their
gold positions. This program maintains the risk of the gold derivative to
the dealer according to the risk percentage that are decided upon by the
trading management at the inception of the transactions.
9. All the gold derivatives on the books of JP Morgan are short spreads.
That means short of gold. If they were not short spreads then JP
Morgan/Chase would be extraordinarily pleased by the rise in the gold price
and publicly bullish in their reports (which they are not).
10. The size of the total international position of short spread gold
derivatives is US Dollars $300,000,000,000 according to IMF and BIS
reports. If you convert $300,000,000,000 into ounces of gold at present
gold price it equates to 900,000,000 ounces.
11. As gold hit $305, it triggered the logic of the "Risk Control Programs"
to buy gold to maintain the risk exposure of the gold derivative short
spreads for the gold dealers cabal/cartel of which J.P. Morgan is, in my
opinion, a major player, if not the main player. As gold, with the help of
the cartel, dropped form the high $320s "Risk Control Programs" triggered
selling of gold for the same reason. At $302-$305 "Risk control Programs"
returned to neutral. Now you can understand the action of the gold market
clearly.
12. If Gold closes above $330, the "Risk Control Programs" will start to
demand that for each ounce of gold sold short in the short gold spreads the
dealers must own long approximately .623 ounces of gold.
13. At close at/or above $354 the gold dealers cabal/cartel's "Risk Control
Programs" will call for approximately .986 ounces of gold long for each
ounce short on the gold derivative short spreads.
14. .986 ounces is practically one to one - one ounce short to one ounce
long required to maintain solvency by "Risk Control Programs" at $354
gold.
15. If you equate the demand to a number of ounces of gold that would be
created by a close at or above $354 by the "Risk Control Program" used by
all commercial banks, gold banks and gold dealers in the gold derivative
business the number comes out to slightly above 886,325,000 ounces of gold.
That number exceeds all the gold that all the central banks on the planet
have in their possession including all the gold they have leased and not
accounted for. Therefore at $354 gold will have to go ballistic in price or
the greatest bankruptcy in history will occur for the gold derivative
dealers.
16. It is not the gold derivative position that worries the major
investment banks that are the parents of the subsidiaries which are the
exposed gold dealers. It is not the $47 billion to $60 billion in gold
derivatives on the books of JP Morgan/Chase that worries them. It is the
effect of an explosion in the gold derivatives on the balance of the US
Dollar 23.7 Trillion in other derivatives on the books of JP Morgan that
worries JP Morgan/Chase, IMO.
17. This is why J.P. Morgan/Chase and their other gold dealer cartel
members are stopping gold at $312.50 to $314.80 today (as this is written)
with the help, IMO, of central banks.
18. Such a manipulation to prevent the gold market from rising above $354
will fail because History tells us that No manipulation ever attempt could
stop a primary fundamentally driven bull or bear market in anything.
18. The two greatest traders that ever lived, (both expired), Bertram J.
Seligman and Jesse Livermore taught that a successful manipulation must
always be in the direction that the market wants to take fundamentally and
technically. Any other manipulation not only fails. A manipulation against
the fundamental and technical desire of a market will create a coiled
market that goes further in the direction of its intention than it would
have gone in the first place. Therefore the result of the attempt by the
gold cartel to hold the market down will be to propel it higher than it
would have gone in the first place
19. To complicate the problem gold derivatives outstanding today are as
follows:
a. Non-transparent.
b. Unregulated.
c. Unlisted.
d. Not clearinghouse funded.
e. Not market priced.
f. Generally non-transferable as many are specific performance contractual
obligations.
g. Without standard so that closing can't be made at will.
i. Totally dependent on the balance sheet of the granting entity.
j. Granting gold bank entities generally non-guaranteed as to trade debt,
subsidiaries of international investment and commercial banks holding
companies.
k. Now totaling $300,000,000 notional value internationally.
l.Approximately 89% of these transaction have been done with entities that
have nothing to do with them mining industry as counter party to the gold
bank derivative dealer.
Therefore the gold market has come under continued selling by those
entities
(gold banks/gold dealers) who will suffer the most, assuming, and I do that
gold is in a Primary Fundamental Gold Market based on the "5 Fundamental
Reasons" that sustain such an event.
The 5 Keys to a Long Term Bull Market in Gold www.financialsense.com
A. The US Current Account must be in a Deficit position and growing. Yes,
this is a present condition and shows no fundamental signs of reversing for
a significant time. This is the account that measures the amount of US
dollars in the hands of non-US entities. It is usually invested primarily
in US Federal Debt instruments.
B. An intact negative trend in the US Dollar overall must exist. It should
have the characteristics of a bear market. This is in fact true for the US
Dollar today. We have a classic long-term top called a Head & Shoulders
formation, which was subsequently confirmed by price and volume action.
Even the dollar bulls now are looking only for the dollar to stabilize at
lower levels. This criterion is in place for a long-term bull market in
gold.
C. The general commodity market is showing in many ways, both fundamentally
and technically, that it is in a base formation from which one can expect
higher prices. We shall discuss the technical characteristics further to
sustain that this ingredient has begun to support gold long term.
D. Trust in paper assets must be waning for gold to assume an investment
role internationally. We see the recent decision against Andersen, the
comments on GE & IBM accounting practices and Enron as examples of
causative items, which have turned investors away from the absolute belief,
in existence from 1980 until now, that paper assets were storehouses of
value. We believe this ingredient is in favor of gold's long-term bull
market.
E. The momentum in the appreciation of the bond market must be
decelerating. We see this ingredient as positive now to a long-term bull
market in gold.
These five items as they gain in strength will further accelerate the
underpinnings of a long-term market in gold. It was the forming of these
constituents of a long-term bull market in gold that has given rise in the
move of gold from $260 to $330.
Therefore the Gold Cartel is in Harms Way. A bankruptcy of the derivative
dealers who represent, in part, 72 Trillion Dollars of derivative positions
(called by Buffet - "Sewage") of the highest mountain of debt ever created
on Earth is the reason why gold could go to $1450 -- $1700.
when gold reached $887.50 in March of 1980, $900 was the price that would
have balanced the balance sheet of the USA defined as the comparison
between Federal asset gold and external debt obligations. If a derivative
failure was to happen in the next 5 years it would depending on when it
happened produce a number between $1450 and $1700 on gold to balance the
balance sheet of the US as described above.
Harry Schultz can be contacted at HSLmentor@racsa.co.cr or website
www.HSLetter.com
and James Sinclair at www.tanrange.com
Mr. Sinclair will answer all questions addressed to him.
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