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  1. 871 Posts.
    Monday, December 01, 2003, 9:38:00 PM EST

    Taking Stock

    Author: Jim Sinclair

    Let’s take stock of where we are in gold which at time of writing is trading around $401.40 in Asia:

    1/ The following entities are short gold:

    COT, now with a $60 loss and in huge numbers.
    The Carry Trade, which is made up NOT of the traditional traders attempting to garner the difference between cash and the forward market, but rather the “Wise Guys.” These are the Hot Shots that realized they could borrow money at less than 1% and profit by being short gold. These people have nothing to do with the gold business but are favored clients of the gold banks’ parent international investment firm’s underwriting departments and possibly the parent international investment banks themselves. They leased gold via the gold bank, sold the gold, and garnered the cashless fees and lease costs of 1% or less and never used market tools to cover the risk of being short. I believe this is the largest of all shorts in gold.
    Gold producer hedgers who apparently never heard of a risk control programs. The assumption that because you produce gold you can short gold without a risk flounders on the fact that your ability to mine gold can only run at 100%. Most producers attempt to run as close to that as possible and the yearly production is hard, if not impossible to increase. There is no such thing as a short position that does not require capital to cover at a minimum the difference between the sale price and market price. Call it whatever you want but it is margin.
    Gold derivative dealers.
    The combination of all this is the largest short position that has ever existed in gold. It is deep in the red and costing immense capital to sustain. There is no precedent for this kind of situation.

    The collapse of European financial discipline in the face of fiscal and monetary stimulus to revive the EU economy have given momentum to gold. The events in the Middle East have driven more and more Middle Eastern funds into gold. The inevitability of an upward float in Asian currencies and the economic implications have driven more Asian investment dollars into gold. Gold has closed over $400 and a lot of vested interests in the marketplace are sweating big time.


    Kenny Adams’ proprietary internal numbers for the gold market are red hot, indicating a nearby bolt to the upside. Regardless of the hit and run tactics of intervention called “stabilization” and executed for the US dollar by the Exchange Stabilization Fund, gold is going to bolt higher.

    I define bolting as successive gap ups (and hard) on the US Comex one after another over multiple days. It could be tomorrow morning but if not it is only days away. As I said in answering a reader this evening, we do not know the extent of this upward bolt but we certainly will as it occurs.

    I believe any attempt to prevent this upward bolt will fail miserably, adding to the momentum of the run up.

    Both Lehman & Merrill have come forth recently with extremely bearish views on the dollar and the Gold Cartel is about to fall apart.

    Short blood is about to run in the streets as gold climbs skyward on its French Curves.

    Stay the course.
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