"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Thursday, March 13, 2014

China Woes Becoming Mainstream News

I have made no secret of the fact that I am most concerned about a wave of credit/debt issues coming to China sooner rather than later. As a matter of fact, Dr. Copper has been accurately forecasting this for longer than many of the so-called expert analysts.

While I view this development as a deflationary force globally, which should pressure certain key commodity markets, it also seems to be one of the factors bringing some safe haven buying into the gold market at the current time.

My own view is that if there were another deflationary wave that might threaten to engulf the world economy again, gold would struggle in such an environment. This view is based off of what happened to the metal during the outbreak of the credit crisis here in the US in the summer of 2008.

However, back then the Dollar was the recipient of strong safe haven flows. Thus far we are not seeing that and that is why gold continues to remain resilient in the face of these deflationary news. For now, gold is benefitting from nervous equity investors seeking a safe haven from unsettling winds that are buffeting the global economy.

Here is the headline from the article I suggest you read:

China's Li Keqiang warns investors to prepare for wave of bankruptcies
World's second largest economy is facing 'serious challenges' and many companies with high debts are being forced to the wall



  1. I really enjoyed this post but was wondering if you had any advice for those who use Typepad as their blog platform? Thanks!

    Commodity Tips

  2. Copper, weekly time unit, flirting with support area 2.90....
    still forming a descending triangle.

  3. OK, here is my trade on silver :


    I am back 100% long since yesterday's sell, from the moment we broke through the downwards short term resistance (on 4 hours candlecharts) around 21.30.
    The range 19 - 20.60 - with symetry 22.20 played beautifully its role in my anticipated targets, as you can see prices bounced like on a nice stairway on those levels.
    So basically, it allowed me to enter back long on silver at 20.60 lately, and now I benefit from a nice andew's pitchfork going up quickly, and an MACD daily which may also bounce up on its propagation level.
    So I have warning indicators on price and MACD here to get out of position quickly if silver decides to go down instead.

    Silver depends on Copper and copper is also testing an important support area right now on a weekly time unit, which means that copper may also choose to bounce up and help silver's case.
    I'm watcching Copper on a weekly time unit, so I'm not anticipating the break through of the support area down yet. To me, it is still active and has a chance to repell prices.
    Here again, if copper keeps going down, I'll have one more warning about my long position on silver.
    As usual, I'm ready to react very quickly and abandon the boat if things go wrong :) :) but I'm betting on the remote possibility of a big bullish extension on silver soon, towards 22.20 once more.

    On the EURUSD, the chart seems very simple, with this kind of rising wedge. I'm also watching the Fibonacci levels in parallel.


  4. Dan:
    Great catch. Thisis serious knews and I expect the Gold Perma-bulls over on KWN and other such sites to make hay out of it. "The Dollar and World are ending, buy now while it's on sale."
    I one truely beleived that; buy bullets, bandages and beans.

  5. Mike,

    Unfortunately, there is a lot of the KWN stuff I actually believe. I, however, believe they SENSATIONALIZE everything to a point they are not credible. It's amazing how those clowns spout off how the Fed and banks are not credible when KWN has lost all credibility.

    I would like to point out to the readers of this blog that JS has ALWAYS said Gold is manipulated on the upside as well as the down (there are many that bash perm bulls for being absent the "manipulation rant" when gold rises). This is the reason I have more trust in Jim than any of the other perm bulls. Plus, jim backs up his statements with some facts from various news sources (some of which are biased and not credible). KWN just says stuff and NEVER backs it up...

    BTW, you still want gold and silver for a medium of exchange in the above scenario as we would want to rebuild a CIVILIZED society... and no, I don't think it will come to that!

  6. Something to watch imo is the platinum/gold ratio. Late Jan plat was +$220 over gold; Today now down to +$95. Usually not a good sign for a continuation of the rally; feels a little spooky; sparks

  7. Steve,

    Hate to say it, but everything sounds spooky right now. We are in uncertain times. I firmly believe our leaders (or lack thereof), are severely underestimating Putin's resolve. Who knows what is really going on in China, and the USD is falling precipitously... it is times like this that I am actually starting to think JS was spot on...

    1. Of course. When its a matter of when, not if, and if 1900 to 1200 doesnt have any effect on your life, then of course it will be spot on. My only concern is for those whose lives were greatly affected by the 1900 to 1200 scenario. When there is the greatest drop in history in gold, it needs to be stated right up front, this is a very very long term play. That should play out as JS envisions. But it wont help anyone who didnt have that long term perspective and wasnt in gold from the start of the run. 1900 to 1200 is a killer.

    2. arnie;

      yes it is, a loss of nearly 40% ( more on some of the individual miners) over that time span is devastating. I have received more than my fair share of emails, many from older folks who are either close to retiring or are retired, who fear that they may not live long enough to ever see their losses erased on those mining shares.

      keep in mind that any rise in the price of gold, based solely on geopolitical events, can abruptly reverse if said event resolves...

      many buy on fear and sell once the details on the ground become more clear and events fizzle out. If events escalate, then those who bought on the first rumor are happy but they had best have a fast finger in case their luck changes because every dog out there is going to be hitting the sell button at once.

    3. Arnie,

      Believe it or not it had a HUGE NEGATIVE impact on my life (enough to make anyone throw up to be honest). Having said that, two things:

      JS has been chided as the biggest perm bull on his blog (rightfully so, I might ad). However, he has said over and over it is MANIPULATED HIGHER as well as LOWER. Which means he believes it is ALWAYS manipulated to some degree. We are now seeing proof via mainstream media now saying they believe it has been manipulated for a long time. This is just an OBJECTIVE observation that there are some perm bulls who do CRY manipulation on the upswing.

      JS has always said buy PHYSICAL and quality miners. If you did this AND didn't sell, you haven't lost YET. Of course you could have bought more if you waited, so you lose to opportunity cost associated with it, but technically you haven't lost. I believe we will be well above the 1900 in relatively short order.

      I don't really know why I defend JS like I do, as I have lost a LOT by gambling based on the "low is in" at $1550, but had I not gambled in longer term options, I would be really no worse for the wear at this juncture. I gambled on his price prediction and lost. My fault, no one else's.

    4. For full disclosure I have never met JS, and my first PM buys were at $1760 and $44 for GLD and SLV...

      Yep, ouch.

    5. I can't believe that it's in anyone interest to start a war over Ukraine. Everyone has so much to gain, but much much more to lose. Based on that, this crisis will have to wind down and the mucho rhetoric will have to fizzle out. At that point, unless there's some other event to support gold (like Syria or Iran), there is a big danger of the floor being opened under gold's feet. I intend to thread the water very gently.

    6. Nate;

      Jim is a dear friend of mine but he has no business making price predictions just like no one else does either. Here is the simple truth. NO ONE KNOWS. End of story. Why? Because we have never had a situation quite like this in our lifetimes. Every single one of us is learning. Only the most arrogant among us will refuse to admit that.

      That being said, markets move lower and markets move higher. People need to stop throwing the word, "manipulation" around. I can easily make the case that the soybean market is being manipulated. I can also make the case that the same is true with wheat, or hogs. What occurs is simple - those on one side of the market can attempt to push price in their favor. If they are big enough and can recruit enough additional players to go with them ( very easy to do nowadays because computers are running the show) they can move price to benefit them. If you want to define that as "manipulation" then fine, but it is the reality of how markets work.

      Additionally., your comments about the mainstream media running stories as PROOF the gold price is manipulated are simply comparing apples to oranges. The stories are talking about the London fixes. that is a completely separate process from the futures markets. Also, the stories are about CLAIMS that the big banks engaged in nefarious activities to benefit them during the FIX. It says nothing about the futures market nor do its provide proof. That is for the courts to decide.

      I would caution you to avoid implying guilt merely because a lawsuit has been filed. Anyone can sue anyone over anything.

    7. Dan,

      You are correct. I should not have used the word PROOF. And no one should be touting price points as no one knows (my 1900 was personal opinion and very far from posting a positive statement). The guy who keeps posting gold to $2000 by end of 2014 no matter what bothers me, as does others touting his credibility. His credibility was blown away last April. I pity those that paid for that service. I can honestly say I have NEVER paid for subscription service as I agree with you whole heartedly that they must sell subscriptions because they cannot trade:) Again, I was new (to PM) and stupid... Not this time around.

      Again, my ONLY reason for posting was to point out that there are perm bulls that believe PM are manipulated on the upswing.

  8. I first met js in london asked questions on trx and it was clear to me jim was not tellng the truth and it was also clear that he understood that i knew that. I sold 100.000 shares trx in the perion thereafter just before.is lost another 60% plus. Stopping listening to jim was the best decision ever made.

  9. I have a funny story. I still like and listen to Kwn, however, after one of my trades I had an extra 70 bucks and bought colossus minerals. Looking at my acct today I am down 98.97% I went with Marc faber' recommendation and bought Iag, nem, abx. Those are doing fine but I'd have to say Jr miners must be the riskiest asset class there is!

    1. Yes, Alex. Unfortunatelly, I had to learn that fact the hard way too. Boy, did those things (juniors) burn me.

  10. perhaps , one should have always taken KWN with a grain of salt … to make an investment decision based solely on some interview in some web site , its just non sense … To now blame Jim Sinclair , for trying to catch a falling knife , its childish , Jim was wrong to try and pick a bottom , but come on , we don't have to crucify him for that . He is a trader at hart after all . Now , to come out and say that he was lying in regards to Tanzanian Royalty , is just plain bull shit . I have been holding that stock for a loooong time , and I added some in the past year .. This is a very small company , in Tanzania , with trust worthy people at the helm , but thats about it , they have good assets , they have a road map to production , and one has to be extremely patient , my bet is wether this company will go under or not . I don't expect it to suddenly become the next Newmont mining . In any case , my point is , there is very little one can lie , or hide from TRX , so I think to come her and called him a lier because TRX its getting clobbered together with most of the universe … in my opinion is making fire of a fallen tree … If you ask me , and taking into account that Van Ek took them out of the index last year having sold 7 million shares at 3 …. They are doing quite well given the circumstances … in any case TRX is a very speculative play , inside a very speculative industry … I think Jim Sinclair has a spotless curriculum regardless what TRX ends up doing .

  11. There us a large gtoup if people that will worship jim no marter what he sais or does. Jim told me in londin he would be producing on 2013. He told me production cost is 250 tp 350 dollar. He was clearly lying about both. Thus it the person that announced the purchase of 3 100 tom machines un 2010 which were never purchased and raied he salarues by 300 percent after raising 30 million dollar in 2011. But it is the way jim posted it: " the sheep thoiroughly enjoy the sheering.

    1. 300% depends where you start from and if it was agreed that salaries would be increased.
      In a start-up, you don't get paid until you raise funds.
      People make a lot of sacrifice, then accept a very low salary for months or years in the hope that they will eventually make their way to the IPO.
      So after the fund raising, it is a bit normal that salaries increase, and sometimes dramatically depending on the level of sacrifice pre/ raise.
      What does the current salaries correspond to in terms of average salaries in the sector and the country, after the raise? Did this raise come as a total surprise and in contradiction to what was promised before the fund raising? Do you mean the Business Plan consisted in saying they needed 30 million $ to purchase 3100 machines which they never purchased, and they spent all the money in bonus and salaries instead?

    2. Jasper, Jim Sinclair is no god … I definitely don't worship anyone … least of all a metals trader and CEO of a gold mine in Tanzania . Having said that , if I want to put some of my money to work , I like the package , and I stick to it . 2013 has been a horrible year for miners , like I said before , I am amazed they are still rolling , which makes me think they are quite resilient … lets wait and see if they come close to production as they say before year end , that would mean TRX is trading almost for free. There is a a massive spec short at around this levels , and I don't think is going to let it go much higher … but , lets see. Anyway , I understand you left the boat with a sore ass , and it hurts , just like everybody else . I just don't think Jim Sinclair is a liar or a cheat . Mining is a very difficult business , and this is a very difficult environment to operate . Nevertheless , they just made a deal with a holding company in Dubai , and they are getting ready for production within a couple of quarters , lets wait a few months , before we take the guillotines out . The fact you sold , doesnt mean is over .

  12. Hubert: 550 thousand for the cfo up 500 percent since 2011. The corporate secretary gets paid well over 200 thousand.

    Anon. I left the boat at nearly teo dollar higher then where the stock is trading now when it became clear js fits twains definition of a miner to the t.

    I can give dozens of proof he is not to he trusted whuch us not to say he will not succeed. He will and thr market will pay the price. For now its smoke and mirrors uneconomical deposits undelivered promises and a ceo that sold most of his stake.

    The dubai deal is worth nothing. Dont watch the moving hand.

    1. look Jasper , I am not going to discuss TRX on this blog , but I will say this .. It is way to easy to crucify a man that has been keeping up to date with all that is going on in the gold market for a long time now . He is bullish , thats no secret , and apart from trying to call the bottom , he hasn't hurt anybody , stole any money , etc … which is already a lot if compared to the average wall street bankster . BTW he doesnt charge for logging on to his blog , just like Dan . And finally , you talk about smoke and mirrors , uneconomical assets , etc … well I completely disagree , in any case not that it matters any more … you just need to get a good look at TWTR . Anyway , I appreciate your opinion regarding your investing … I just don't think you are being fair to Sinclair . Thats all . Good week end .

    2. Jasper,
      I think your point is valid. I know this is a technical (mas o menos) oriented blog. But I need to vent It is in fact downright sick that pundits who were talking about saving people from financial ruin were directly or indirectly touting the juniors as a safe investment. Equivalent of pumping reverse merger/IPO China stocks.

      That said, I've been down the rabbit hole with the juniors & so at least can trade a bit w/ my hard earned knowledge. When looking at an companies, especially Jrs. industry comparison is key, as the financials difficult are to interpret (aside from general liquidity and capital). Eg.
      -what are the industry comps. in terms of compensation? Easy enough to check on C level salaries from Morningstar. CFO is a pretty easy job at a company w/o operations and so the reward should be options.

      -how does company stack up in terms of grade of gold, size of deposit, rough idea of cost to mine, jurisdiction, etc. etc. (and what are the sensitivities)

      -Another huge benchmarks for juniors is how they fare against their own exploration timelines--Are they making material progress, actually digging & extracting gold or silver or do they only have agreements an press releases? Do they use low gold prices as an excuse for not moving forward? Like the guy on the corner who lives in a shack and doesn't cut his grass--"Fix my house? Not in this lousy market!" If miners have indeed bottomed, there is a pretty darn good paper trail of companies that were able to show real management in terms of ability to batten down the hatches & still move forward toward their production goals in a financially sound way.

      -Does management eat their own dogfood? A few companies out there actually had management teams that bought in the open market real quantities of their companies in the darkest day (not many mind you).

      -Does management get a pass with options? Were options repriced while the little fish suffered?

      There's a list of quality companies out there, but it is small.



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