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Newmont Mining Corporation Message Board

  • arnoldj882003 arnoldj882003 Feb 20, 2004 12:10 PM Flag

    Sinclair

    Friday, February 20, 2004, 10:28:00 AM EST

    Morning Gold Update Author: Jim Sinclair

    In plain English, gold is weaker because of a short term improvement in the US dollar versus the Euro and Yen. It is the end result of the non-traditional tools being employed by the Federal Reserve in addition to the Bank of Japan�s major sell out of the island nation�s long term interests. This act is clearly inflationary and Japan is setting itself up for just that and also to become China�s punk.

    Comet Jesse has been keenly watching the "Federal Reserve Custodial Account" (see chart below) that acts as a money fund for its primary client, the Bank of Japan. That means all those dollars involved in Yen intervention ($72 billion last month alone) flows into the New York Federal Reserve and is applied in the US bond market.

    1/ You will note that the close of the Dow last evening was hard on the downside.
    2/ You will also note that the Yen was firm in Asia last night.
    3/ You will also notice that the Dow futures are up slightly before the US open.
    4/ You will note that the volume of trading in US shares before the US open is minuscule.

    Increased intervention in the Yen/Dollar relationship brings more money into the NY Fed with which to make bullish passage over the entire range of maturities in the management of the float. (This is exactly what the Fed would do if monetary aggregates were rising year-on-year in order to liquify the system). Equities are and have always been a product of liquidity. Therefore, like a ballooning money supply, a ballooning "Federal Reserve Custodial Account" greases the wheels of a positive equity market. It is also the grease of commodity inflation which we are seeing right now.

    Now let�s move into a novelistic but probably correct rendition of a call from the New York Fed to Japan about early this morning:

    Hello Yoki, how are you this morning? Yoki, we had a sorry day in general equities here yesterday and could use a minimum 20 billion wire transfer to the FRC Account. Can you assist? (Al-Son)

    Certainly, Al-Son. We will just give the Yen a goose. It is 107.06 right now. I would imagine if we sell the US equivalent of $20 billion in Yen we can shove it to 108. Stand buy, you will have the $20 billion in a few hours. (Yoki)

    Thanks, Yoki. You know when your boss needs us we are here for you. (Al-Son)

    We know Al-Son. Give my personal regards to your Boss. (Yoki)

    Conclusion:

    The intervention is obviously having some impact on the Dollar but it all boils down to the fact that there is no direction but lower open to the Dollar, save short covering rallies from time to time. I will add that the cost of all this by December 1st, 2004 will be a bill that no one will be able to pay. This is a generational bull market in gold and bear market in the US dollar.

    In the latest week ending Wednesday the 18th, foreign Central Banks kicked in another 16 Billion to support the Dollar, or 3.2 billion per business day in order to allow the NY Fed to buy Treasuries and agencies on their behalf and hold them at the Fed.

    No question in my mind now about the intervention last Friday and yesterday. It was almost twice the usual amount. Projections in the chart show that the Central Banks will have to add another 300 billion US by mid year to maintain the current pattern in US interests rates and the Dollar decline.

    As a result of this, gold will continue to chop into the window of positive opportunity now one to three weeks in front of us.

 
NEM
19.39+0.89(+4.81%)Dec 18 4:00 PMEST

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