Gold is officially replacing the US dollar on June 28th 2012

Jim Sinclair’s Mineset

Dear CIGAs,

Gold is officially replacing the US dollar June 28th. The cat is out of the bag.

Phil, you are booting any nation that dares to refuse to be legislated by any other body than themselves out of the SWIFT system.

You have officially made gold money. Now what are you going to do, declare economic war on China? They will fire dollars back at you.

You just might end the economic world as you knew it.

The Best Reason in the World to Buy Gold

Have no doubt, emotions generated by short-term price action will be influencing investor decision-making a hundred years from now. We may have substituted iPad for the telegraph over the past hundred years, but we’re still fairly lousy traders as a species. The real world makes decision based on reality rather than perceptions generated by emotions. Well, at least the real world that stays in business. The Chinese are buying gold while the public panics and sells. Nuf said.

Headline: The Best Reason in the World to Buy Gold

“Beijing is planning to avoid U.S. financial sanctions on Iran by paying for oil with gold. China’s imports of the metal are already large, and you can guess what additional purchases are going to do to prices. On the last day of 2011, President Obama signed the National Defense Authorization Act for Fiscal Year 2012. The NDAA, as it is called, attempts to reduce Iran’s revenue from the sale of petroleum by imposing sanctions on foreign financial institutions conducting transactions with Iranian financial institutions in connection with those sales. This provision, which essentially cuts off sanctioned institutions from the U.S. financial system, takes effect on June 28.”



Euro Zone Will Join Fed In QE

View the original post at…
November 04, 2010 12:48 PM

My Dear Friends,

Mark my words, the euro zone will join the US Fed in quantitative easing before this chapter of the darkest days of finance in human history draws to a close.

The US Fed actually snagged the euro zone in what the Chairman sees as necessary. The FOMC vote was almost unanimous for QE. That alone carries a significant message.

The austerity measures in the euro zone are, without any doubt, going to come back and bite them hard in the rear. Did you notice the condemnation of QE quieted today with only China standing tall?

QE is wrong, but there is no other alternative to the powers that be. It is the lesser of immediate economic evils as compared to the austerity of balance sheets thanks to the FASB.

It is the lesser of immediate economic evils as the cause of the entire problem, OTC derivatives, not only have not been addressed, but the damn things have actually gotten larger. This exact technical formation you see today took place just before the geometric rise to $887.50 in gold�s price from mid 1979 to1980.

The gold market has the power here to run to $1444 and even $1650.


European Central Bank Keeps Rates at Record Lows
Published: November 4, 2010

LONDON � The Bank of England and the European Central Bank left their key interest rates at record lows Thursday after recent data showed that the economic recovery was showing some resilience.

A day after the U.S. Federal Reserve moved to pump another $600 billion into the banking system to strengthen the U.S. economy, the Bank of England decided against any new stimulus measures for Britain, leaving its bond purchasing program at �200 billion, or $322 billion. The main interest rate remains at 0.5 percent.

At its meeting, the European Central Bank left its benchmark interest rate at 1 percent. Investor attention was focused instead on anything that E.C.B. President Jean-Claude Trichet might say later in the day about the bank�s plans to tighten monetary policy � even as the Fed moves in the other direction.

The Bank of England had considered expanding purchases of government debt, so-called quantitative easing, last month, but positive economic data released since then alleviated pressure for it to act.

The services sector, including banks and airlines, and manufacturing reported an unexpected growth in October and growth of Britain�s gross domestic product beat economists� forecasts in the third quarter.

The Bank of England would find it �hard to justify further purchases without some evidence,� Jens Larsen, chief European economist at RBC Capital Markets in London and a former Bank of England official, said. �The rebound has been pretty robust and inflation has surprised us on the upside. At the same time there are clearly some big risks facing the economy. Quantitative easing is not off the table.�


How Money Works

View the original post at…
May 27, 2010 04:01 PM

Dear CIGAs,

What makes something a standard is because there is a restricted supply of it.


We have all seen those movies with rooms full of gold. Well this is far from reality. In fact there is very little gold around.

Below is a metric tonne of gold. It is only 15 cubic inches. Only slightly larger than a milk crate!

If you collected all the gold ever extracted from the earth and stacked it up in a column with the same base size as the Washington Monument you would get this. ALL THE GOLD IN THE WORLD!!!

How big is a tonne of gold?
Gold is traditionally weighed in Troy Ounces (31.1035 grammes). With the density of gold at 19.32 g/cm3, a troy ounce of gold would have a volume of 1.61 cm3. A metric tonne (equals 1,000kg = 32,150.72 troy ounces) of gold would therefore have a volume of 51,762 cm3 (i.e. 1.61 x 32,150.72), which would be equivalent to a cube of side 37.27cm (Approx. 1′ 3”).

Gold is measured in Troy ounces and 1 Troy ounce equals 1.0971428571 ounces.

1 metric tonne = 32,150.746 Troy ounces
1 long ton of 2240 lb (UK) = 32,666.667 Troy ounces
1 short ton of 2000lb (US) = 29,166.667 Troy ounces

A cubic centimetre of gold will weighs 19.3 grams.
A cubic meter of gold will weighs 19.3 tonnes.
A cubic inch of gold will weighs 315.2 grams = 10.13 troy ounces = 11.06 avoirdupois (ordinary) ounces.
A cubic foot of gold will weighs 545.225 kilos = 1188.6 pounds (avoirdupois).

approx. 18″ square for the ton

At the end of 2001, it is estimated that all the gold ever mined amounts to about 145,000 tonnes.

If you took all of the gold in the world and put it in one place how much would there be?

It is amazing, but the total amount of gold in the world is a surprisingly small q uantity. Here’s how you can calculate the total amount that is available.

If you look at a page like this one, or if you look it up in an encyclopedia, you will find that the annual worldwide production of gold is something like 50 million troy ounces per year. Gold has a specific gravity of 19.3, meaning that it is 19.3 times heavier than water. So gold weighs 19.3 kilograms per liter. A liter is a cube that measures 10 centimeters (about 4 inches) on a side. There are 32.15 troy ounces in a kilogram. Therefore, the world produces a cube of gold that is about 4.3 meters (about 14 feet) on each side every year. In other words, all of the gold produced worldwide in one year could just about fit in the average person’s living room!

This cube weighs 1,555,210 kilograms (3,110,420 pounds). A recent spot price for gold was $256.10 U.S. — using that number, all of the gold produced in a year is worth $12,805,000,000. That’s a lot of money, but not an unimaginable amount. For example, that’s about how much the Pentagon spent launching the GPS satellite system. NASA’s budget in 1998 was $13.6 billion.

Figuring out the total amount of gold that has been produced by man is a little harder. To get at some kind of estimate, let’s figure that the world has been producing gold at 50 million ounces a year for 200 years. That number is probably a little high, but when you figure that the Aztecs and the Egyptians produced a fair amount of gold for a long time, it’s probably not too far off. Fifty million ounces * 200 years = 10 billion ounces. Ten billion ounces of gold would fit into a cube roughly 25 meters (about 82 feet) on a side. Consider that the Washington Monument measures 55 feet by 55 feet at its base and is 555 feet tall (17 x 17 x 170 m). That means that if you could somehow gather every scrap of gold that man has ever mined into one place, you could only build about one-third of the Washington Monument.


Total Notional Value Of Derivatives Outstanding Surpasses One Quadrillion

Total Notional Value Of Derivatives Outstanding Surpasses One Quadrillion

Author: Jim Sinclair

Dear CIGAs,
The notional value of all outstanding derivatives now totals approximately $1.144 QUADRILLION.
This appears to be Bank of International Settlement Spin to announce the largest gain in derivatives outstanding since they started to report. As of the last report it appeared that both listed and OTC derivatives was under $600 trillion. Now listed credit derivatives alone stood at $548 Trillion. The OTC derivatives are shown as $596 trillion notional value, as of December 2007. One can only imagine what number they are at now.
Well we hit a QUADRILLION. We have more than $1000 trillion dollars in all derivatives outstanding. That is simply NUTS because notional value becomes real value when either counterparty to the OTC derivative goes bankrupt. $548 trillion plus $596 trillion means $1.144 quadrillion.
It would be an interesting piece of research to see what the breakdown is of listed derivatives according to exchange to see if it adds up to the reported number. Spin is now everywhere.
This means that no OTC derivative house can be allowed to go broke. This means that whatever funds are required to rescue failing international investment banks, banks and financial entities will be provided.
Keep this economic law in mind. Monetary inflation proceeds price inflation and is its primary cause in economic history from Rome to present.
Nothing can stop the juggernaut of price inflation heading towards every nation like a runaway freight train down a mountain.
Gold is going to at least $1650. I am probably way too low with that estimate.
The US dollar will trade down to at least .5200 as measured by the USDX.
Gold is the easiest market to trade for the aggressive investor. Sell 1/3 when the market looks like a Rhino Horn which you will see with your French Curves at the point of the rollover.
Buy 1/3 back when the price of gold looks like a fishing line hanging off a fishing rod. Your maximum power down trend line will give you this.

Exchange Traded Derivatives Increased 30%, BIS Says (Update1)
By Liz Capo McCormick
June 9 (Bloomberg) — Trading in derivatives, led by short- term interest-rate futures, climbed 30 percent to a record $692 trillion in the first quarter, signaling a possible easing of tensions in the money markets, the Bank for International Settlements said.
The value of short-term interest-rate futures traded on exchanges rose to $548 trillion during the three months ended March 31, a gain of 32 percent over the same period last year, the Basel, Switzerland-based BIS said today. The contracts are designed to speculate on, or hedge against, moves in borrowing rates. The figures are based on the notional amounts underlying the agreements.
The increased trading “suggests that liquidity conditions in the term money markets might have recovered to some extent after the stressful 2007 year-end,” analysts Naohiko Baba, Patrick McGuire and Goetz von Peter wrote in the BIS’s quarterly review.
The gains were concentrated in derivatives denominated in U.S. dollars and euros, which had undergone a “significant retreat” in the prior quarter, they wrote. Banks were still pressed for cash, according to another part of the report.
A derivative is a financial obligation whose value is derived from interest rates, the outcome of specific events or the price of underlying assets such as debt, equities and commodities. Derivatives include futures, which are agreements to buy or sell assets at a set date and price, and options, which are the right but not the obligation to do so.
Eurodollar Deposits
Turnover in futures and options on three-month Eurodollar deposit rates “picked up sharply” in the period, extending a rise from the previous quarter, said the BIS, a global organization formed in 1930 that monitors financial markets and serves as a bank for central banks.
Eurodollar futures are priced at expiration to the three- month London interbank offered rate, or Libor, for U.S. dollars. Turnover in futures and options on the federal-funds rate fell in the quarter.
The increase in exchange-traded derivative trading in the first quarter erased a 21 percent slide in the previous period, the biggest drop in at least 14 years. Trading had declined as banks hesitated to lend to each other amid mounting losses on securities linked to U.S. subprime mortgages.
Even as conditions in the money market improved in the first quarter, early signs in the current quarter show that banks were still pressed for cash, BIS analysts Ingo Fender and Peter Hordahl wrote in a separate section of the report.
`Extreme Stress’
“Interbank money markets continued to show clear signs of extreme stress from March to May,” they wrote. “Spreads between Libor rates and corresponding overnight indexed swap (OIS) rates, due to counterparty credit risk as well as liquidity concerns, were generally at least as high at the end of May as three months earlier.”
This appears to imply there were expectations that interbank strains “were likely to remain severe well into the future,” Fender and Hordahl wrote.
The difference, or spread, between the three-month dollar London interbank offered rate and the overnight index swap rate, known as Libor-OIS, is 67 basis points today. The spread was 73 basis points on March 31 and peaked last year at 106 basis points in December. The spread averaged 11 basis points for the 10 years prior to August, when the global credit crunch began.
Dollar Swaps
Overnight indexed swaps are over-the-counter traded derivatives in which one party agrees to pay a fixed rate in exchange for the average of a floating central-bank rate over the life of the swap. For U.S. dollar swaps, the floating rate is the daily effective federal funds rate.
Trading in stock index futures and options fell 2.7 percent to $73 trillion in the fourth quarter, compared with $75 trillion in the prior quarter, according to BIS analysts Baba, McGuire and von Peter. Trading rose 22 percent versus the same period a year earlier. The Standard & Poor’s 500 index declined 9.9 percent in the three months to March 31. The Dow Jones Stoxx 600 Index in Europe dropped 16 percent during the same period.
Foreign exchange futures and options volumes advanced in the first quarter, led by trading in the euro, yen and Swiss franc derivatives, the BIS said. These increases offset retreats in currencies that included the Canadian dollar and the U.K. pound.
Trading in currency futures and options rose to $6.7 trillion, a jump of 11.7 percent from fourth-quarter 2007 and a gain of 32 percent from the same period last year, the BIS said.
Currency Volatility
Volatility implied by options among the seven most-traded currencies increased 25 percent in the first quarter, matching the rise in the previous quarter, a JPMorgan Chase & Co. index shows.
Global trading in commodity derivatives grew by 52 percent to 489 million contracts in the first quarter from the year-ago period. The BIS said notional figures weren’t available. Agricultural and energy products led the climb, it said. Commodity trading data is not included in the BIS’s aggregate derivative figures.
Trading in derivatives not listed on exchanges increased during the second half of 2007, led by growth in the credit segment “due possibly to heightened demand for hedging credit exposure,” the BIS said.
The notional value of all outstanding over-the-counter derivatives rose 15 percent in the second half to $596 trillion, following a 24 percent gain in the first half of the year, the BIS said.
The gross market value of credit default swaps, which measures the cost of replacing all existing contracts, almost tripled to $2 trillion in the second half of 2007, compared with a rise of 53 percent in the first half, the BIS said.
Credit-default swaps, which make up the majority of credit derivatives, are financial instruments investors use to speculate on the ability of companies to repay debt or hedge against the risk they won’t.

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