Zeev's Turnips Patch-No Politics (ZEEV)

[Ken2]

<< I have given you a solid argument based on supply and demand ... >>

Zeev,

Sorry to barge into the fray, but I would really appreciate your thoughts on some comments that Jim Sinclair made on his website this weekend. He is perhaps the most outspoken bull for the gold community and he supports his views with strong technical and fundamental arguments.

http://www.jsmineset.com/s/Home.asp

He posted four very provocative articles this weekend:

1. On the Road to Zero Bound

He provides documentation of what Bush, the Secretary of the US Treasury, and Greenspan can and cannot do for the economy. The conclusion of the article includes the following:

<< Therefore, the top in the 30-year bond is either at hand or near. The rally in the US dollar is severely limited and the downside below .92 is wide open. Gold is near its bottom right now and will take out $400 as the Fed, the ESF and the President begin to take actions within legal limits and limiting market factors.

The fact is that a higher gold price is the friend of the President, Secretary of the Treasury and Chairman of the Fed for one simple reason: There is no way out of Zero Bound except by inflation. If there is no action to cause inflation, there is going to be a change of regime in the United States by the lawful practice of an election in November of 2004. >>

His arguments seem strong, but I am neither as intelligent nor as well-informed as you on such topics. Can you see a hole in his arguments? Do you find them convincing?

2. Malaysia Advocating Switch to Euro

Obviously good for Euro and bad for dollar ... and hence good for gold.

3. Q&A - The Interest Rate Paradox

Conclusion:

<< Expanding economies need an expanding monetary base. A 3% annual rate of expansion of the monetary base and a 2% rate of inflation helps everyone and hurts no one.

Zero Bound is deadly and that is where the Fed is heading. >>

4. 53 Card Pickup

He starts off:

<< In today's piece, I'd like to present a chronology of what I think may constitute the biggest mistake any Federal Reserve Board has ever made - along with its implications for the future. >>

Part of his conclusion includes:

<< Yes, if the Fed has bragged itself out of business, then gold is in business for a very long time to come. Could that be what the new investment professionals are thinking, the same view that resulted in this new area of demand bidding up the leading gold stocks such as NEM & RGLD in a down gold market? I think it is. >>

My comments:

Zeev,

I find it very interesting that on 5/30,
POG closed at 364.50,
and on 6/27,
POG closed at 345.50,
DOWN $19,

but on 5/30,
XAU closed at 73.46,
and on 6/27,
XAU closed at 77.54,
UP 4.08,

and on 5/30,
HUI closed at 141.52,
and on 6/27,
HUI closed at 146.50,
UP 4.98.

Who would have guessed a 5.2% DROP in POG
would be accompanied by a 5.5% RISE in XAU
and a 3.5% RISE in HUI ???

Am I missing something or is this divergence somewhat significant?

By my reckoning, the downtrend line from the XAU top in 2/96 and 6/02 is now below 79. We had a false breakout 2 weeks ago. A real breakout could be explosive.

Likewise, HUI is in a one-year+ ascending triangle, and perhaps a six-year reverse H&S bottom, both with a "neckline" of around 155. Again, we had a false breakout 2 weeks ago. A real breakout could be explosive.

Might Jim Sinclair be right that the bottom is near in POG and $400+ POG will come sooner rather than later?

I would really appreciate your thoughts on the points that he lays out in the three articles. I hate trading against you, but I am long several gold stocks at the moment.

Best regards - Ken

P.S. These articles will get archived as he adds new articles to the link I provided.