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Thread: Gold Trading Principles by Jim Sinclair: How a metal dealer works.

   
   
       
  1. #1
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    Gold Trading Principles by Jim Sinclair: How a metal dealer works.

    I don't understand a word he's saying. Keeping it here for future reference.

    http://www.jsmineset.com/2012/10/19/...-dealer-works/

    My Dear Extended Family,

    Jim,

    Happy to have brought a smile to you yesterday. Days can be long and trying at times, so a laugh is welcomed. I have hesitated for weeks to write this but I am not in sync, so here I go.

    The action in the 'Crimex' this week was not unexpected. The political demands and possible (a hair's breathe from) commercial signal failure, meant the paper gold printing machines would be pushed to emptied toner cartridges. As said, not unexpected. Temporary but not unexpected.

    My head scratching comes from the question, where does the 'physical' metal come from to satisfy the growing buy stops hit as price comes down? And to piggy back on this question, do foreign entities, Central Banks , and investors 'take' delivery; in other words, leave the Bullion System with the metal? Or does it sit in their care? (lol)

    Realizing they are 'Bullion Banks', could you step through how they receive their physical metal from miners/refiners and the mechanism used to arrive at that price (I am familiar and understand the 'FIX'). But it appears that the industry 'allows' these banks to paper push the price paid around based solely on the Bank's own contract positions.

    This is where I scratch my head , WHY The miners hold the commodity and are at the mercy of the Bullion Banks for their very survival, as it appears to me . Where am I wrong?

    CIGA Earl

    Dear Earl,

    Many are asking themselves the same question.

    In order to explain to you the proper answer to this question I need to ask you a question. What is the "Strong Dollar Policy" of the US Treasury? The answer is it is a policy of support of the dollar at key technical points so that the dollar will decline in an orderly fashion. This has been in place since the dollar was trading in the mid one hundred and twenty-five area on the USDX. In comparison the "Weak Gold Policy" has been in place since $248 which means gold's appreciation will not be an insult to the dollar by spiking to $3500 and beyond, but rather rise in an orderly fashion. How could you not have noticed this in both the dollar and gold? This opens the bonanza to the metals dealer to run what looks like a huge short but rather to operate their business where I was pleased to make one half a dollar unwinding the spread (a long position versus a short position offsetting between my buying product from the producer versus Comex short).

    Today the metals dealer want to make fifty dollars, not 50 cents on that spread.

    I owned a metals dealer here and in London. I made a cash market for gold. I know about what I speak. There might be outside of the gold banks less than five people who understand the big short that is always being screamed about by the so called gold experts, and COT is a crock. You are looking at least seventy-five percent at a managed spread position. What happened at $1800 then at $1775 and again at $1750 was the long side of the spread was dropped, leaving the short side exploded and the gold banks pounding the market to make a 50% profit by putting back on the long side of the spreads, locking the huge physical long versus the Comex short into a no risk position that reads on COT like the greatest short in human history. The same is true of silver. In this financially debased world, with the rules of a metal dealer's company and a little help for standard financial fraud and you will never find this in the COT numbers.

    I am telling you the truth. I am telling you how a metals dealer works. I know because I was successful in the entire 1970s gold bull market play against this game.

    Here comes the "Golden Truth." When the gold banks perceive that the gold market is about to go ballistic, just like any bull market does, they need only reverse the strategy in place from $248 called "The Weak Gold Policy" in how they handle the 75% risk-less spread. Now when gold falls you takes off the short aside of the spread with gusto and let the long run. The biggest money I ever made was when my very interesting partner and I went into the Sinclair Global Arbitrage Company and asked them how many ounces of gold and silver they had in a spread position. When they told us the huge number over 15,000 contracts spread we told them follow our instruction. Take every short off the spread making us naked long. This was when the gold price broke $400 the second time over, running like a bunny to $887.75.

    You must note how central banks are either buying or protecting their gold reserve positions now. This is total about face two years ago. There is another change coming which is a replacement monetary system and the need for some asset on central bank's balance sheets to have positive value, especially in the USA. Soon all that is required is a change in spread management by the gold banks and you will have whatever price the gold banks want from $3,500 to $12,400.

    All the COT numbers are nonsense and a means of operating the markets. COT experts give buy and sell signals which help the physical metals dealers profit on their spread trading. The COT experts help this spread trading looking for immense profit to profit immensely. Nonsense makes markets so the COT analyst looks like a genius while really interpreting nonsense when he/she is being duped into a tool to help the metals dealers spread position profit.

    I have told you 1000 times that the greatest profit over the shortest period of time will be made by the gold bank physical dealers.

    Because I know.
    Because it requires only a shift in spread trading tactic handling of the spreads.
    Because it is simple.
    Because in truth the gold banks are simple.
    Because I did not get named "Mr. Gold" in the seventies because I wrote on gold.
    Because in the 70s I ran the gold market and the gold price by attacking the dealer's spread position which no one has done so far in this market.
    Because attacking a spread position is simple. You simple run the opposite spread tactics with major balls and major PR.
    Because I like keeping it simple.
    Because the proof on this is that the gold banks got pissed. Both I and my partner were brought before the board of directors of the exchange under the accusation that we two running huge spreads between us, thereby manipulating the world's gold markets.


    Wake up experts, you have been had and your comments to the community are helping make sure they are had. You are tools of the gold banks and do not even know it. Your sage comments when I hear them from readers makes me sick because it is ignorant of the business.

    Now I know this is going to cost me big, but you must understand what I am teaching you above. If you do not understand ask me the questions but no tomes please, all in at least 24 font, no other "expert" articles please. Just write me on what you are stuck on and I will try to clear your understanding of what you own or trade.

    Please do not argue with me because you will only be demonstrating your ignorance, not your knowledge.

    If you are convinced the decorated professor is a turkey, guess who really is the turkey.

    Respectfully,
    Jim
    py

  2. #2
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    Prometheus Market Insight
    www.prometheusmi.com

    Dear CIGAs,
    The following is a question and answer segment on today’s eblast, "How A Metals Dealer Works."
    Question: In your posting "How a Metals Dealer Works", you mention the spread trade the metals dealers have. Is that the spread between buying physical from the miners/refiners and the Comex?
    Answer: It is selling on the Comex or any forward contract on any exchange.

    Question: When they take their longs off, do you mean that they are selling their physical into the market?
    Answer: Wherever the longs are and in any form they are in.

    Question: Given the size, that seems a lot of risk exposure as they are becoming naked short.
    Answer: When you are crashing the market you take the exposure. These guys you all think are idiot shorts are not. They are geniuses with only one purpose: to pick your pocket to make money. Do you really believe that these great names hire jerks as traders and sit out horrible position? It is you who are mad.

    Question: Are you arguing that this risk is mitigated because they know that if they can push gold through some stops, they are confident that they will be able to replace the physical they sold with (i) either more physical or (ii) futures contracts by those that are puking them out?
    Answer: They are whacked out wild risk takers utilizing spreads to camouflage their tactics.

    Question: That seems a little risky if the market decides to absorb the gold they are selling and push it higher – that would result in them getting short squeezed, correct? Is that what happened when Sinclair Global Arbitrage advised the metals dealer to take off the short side of their 15,000 contract spread trade? I was 35 years old and indestructible. I still believe me.
    Answer: It was fish in a barrel and yes I risked bankruptcy as well.

    Question: If so, then who has deep enough pockets and the guts to do that in today’s market?
    Answer: Deep pockets? Have you never heard of margin up the the ass?

    Question: I could see a central bank doing it, but it seems unlikely that a metals dealer would do it (because they would be fighting the rest of the metals dealers community – i.e.. it would take a lot of size, would ostracize them from their peers, and would break the profitable cartel that the metals dealers enjoy).
    Answer: It is done conspiratorially and no dealer is fighting any other dealer. Remember I used to be one of these guys as a kid and they are my family relations. I had a billion in position when I might have had a few million behind it. Risk was my food. I could not live without it. I was born Jesse Seligman


    Jim,
    If banks can control the market downward and can do just the opposite, why does it seem they are more interested in the downward side? Is it from collusion with government that does not want gold to go up? And if so, how do they lose control? Just trying to make sense of this…
    Thanks, as always,
    CIGA Kirk

    Dear Kirk,
    Here is where you miss the point completely. The market price of gold has risen from $248 to the present $1720. This game may appear when it happened as if the gold banks are wild ass bears, but they are not. They are grabbing $50 and $75 today where if I made $0.50 I was happy. They use fear and MSM to reduce the risk they do take when they open the spread.
    If I use any words like spread that you might not understand on www.jsmineset.com, www.investopedia.com has a financial dictionary available to readers on it.
    Regards,
    Jim

    ............

    Jim,
    Thank you for describing how the dealers work. I read it 3 times, sketched it out, and understand it. It is very similar to Stewart Thomson’s up to 30% shorts strategy in allocating capital to markets.
    Like you said, it is simple. And based on my roller coaster plop and wait involvement in the two markets over the last 7 years, I can see how effective the strategy is. Plus it can help with maintaining one’s sanity.
    All your readers have to do is read and reread your article, understand the structure and tactics you have described, then employ them. It is that simple.
    You also described currency managers as having the ability to manage POG from 3500 to 12000 just by adjusting their spread. You’ve mentioned the next real level up from 1650 being 3500, but I haven’t seen the 12000 upper range estimate by you before. Would the 12000 number be an unlikely potential number, or are you thinking that 3500 to 12000 will represent the likely future currency-managed trading range at some distant time? If it is a future range, there sure are a lot of opportunities first to get there, then to live in that range.
    Thanks again,
    CIGA Louise
    Dear Louise,
    Speaking fundamentally, $12,400 is the price gold would have to trade at to balance the international balance sheet of the USA.
    That is the true function of gold, to balance the US balance sheet. This is the fundamental Angel of the gold price.
    Jim
    py

  3. #3
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    Becoming clearer now.

    Don’t Try To Be A Spread Trader


    October 22, 2012, at 6:23 pm
    by Jim Sinclair

    My Dear Extended Family,

    Teaching you via jsmineset.com what the gold industry does as spread traders to rig the market for private gain now has a very serious purpose. That is not to make you spread traders. I teach you this so you know why I have had and still have the courage to ignore the manufactured reactions.

    That recent 32,000 long contract sale that drove the market lower in minutes was not some major investor getting out because he/she feared the end of the gold market. That sale was the Hammer of Thor type selling of the long side of a spread opening up the short side at risk for gain. That 32,000 sale was the industry picking your pockets, knowing full well gold was going higher.

    The commercial signals are tool of the commercial spread traders. That is why they have been right. You make them right by following them religiously. That is all this present reaction is about.

    It is a total charade that in the 1970s I personally turned right on its ass. Someone will soon realize the illusion that the manipulator makes and then flip them on their rear end by a reverse spread tactic. Someday soon 32,000 gold contracts will come in selling like the Hammer of Thor. The reverse spread will be ready for them, having announced their plans in the COT. The manipulators, being smart as it gets, will join the bull side manipulating gold to at least $3500, but maybe $12,400. That is what happened in the 1970s and will happen now. I know because I did it and broke gold for the second time above $400. It never looked back until $887.50.

    My spread was 22,000 contracts. There are people in the community that offer bearish opinions who are widely read who are sponsored by the gold industry spread traders. They buy subscriptions, and hire consultants.

    Respectfully,
    Jim
    py

  4. #4
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    Manufactured Market Drama



    October 24, 2012, at 6:36 pm
    by Jim Sinclair in the category General Editorial | Print This Post | Email This Post

    My Dear Friends,


    1. The entire reason that I launched into the explanation of spread trading was to demonstrate how it is used to manipulate markets.
    2. Recognizing the multiple blocks at $1775 and $1800, it was obvious a line was being drawn in the sand.
    3. In that market situation a reaction was reasonable to anticipate.
    4. I wanted to drive home to you the fact that all the market drama as seen today is manufactured by the gold banks.
    5. QE cannot stop or the economic implosion would blow up your computer screen.
    6. If some nitwit Chairman tried to stop QE you would have a few days of dollar strength followed by a collapse of the currency based on the economic implications.
    7. Then gold’s highest possible estimates would come into focus as the downward spiral already in place in the Western world did in fact present itself as a black hole.
    8. The event horizon to a total collapse is QE to infinity, as was anticipated.
    9. QE’s focus is to prevent financial balance sheet collapse both privately and publicly internationally.
    10. Jobs are only created the way Roosevelt did it, and that was by Federal invention of jobs if required when conditions are as they are now. Remember the conservation corp and all the make-work jobs that were invented in the 30s?
    11. The thought that any candidate can change the present situation is intellectual garbage of those who do not even know there is economic law. Once violated, those laws brings consequences.
    12. This, like all reactions, will be completed when it is completed, and that will be soon.
    13. You could see the spread cartel working all day.
    14. Do not be stampeded into turning over your gold investments to the greedy shorts now open mouthed and waiting like a wolf for its prey.
    15. Simply ignore this, taking my hand in the knowledge that this is no different from the many similar plays made by exactly the same people all the way from $248 to the $1900s.
    16. Email me if you are confused or simply need my help.
    17. I will personally return your communications, answering your questions.
    18. Gold is going to and through $3500 and those that find this humorous are the same people that laughed and scorned me at $529.40 when I told you that the very long term breakout had occurred, the strongest magnet among all was $1650 and gold would trade there and above.


    Please shut off your quote machine and email me before your emotions drive you wild and directly into the mouth of the wolf, the short spreader.
    Respectfully,
    Jim

    py

  5. #5
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    From Sinclair's last post, gold dropped to nearly USD1000/oz. Those who don't have the cash to hang on, had to go through a lot of pain in selling at a loss. That's life.


    Jim Sinclair

    Dear Comrades in Golden Arms,

    I was there and considered by some to have been the largest gold trader from 1968 to March 1980. I recall every day of it like it was yesterday.

    NOW:

    • I do not believe that gold has registered its all-time high by a long shot.
    • I do not accept the recent decline from above $1900 as a gold bear market.
    • I believe all accepted tools for market timing will fail in the long-term super bull market.
    • I believe the recent long decline to be but a reaction in the giant bull gold market.
    • Into a new New Normal, all previous relationships between gold and anything will not apply.
    • The basic motivator of new gold prices to come finds it basis in the physical gold market, not in the paper gold market.
    • The 1% are not stupid or in the main would not have the positions that they have if market jerks.
    • Knowing without any doubt what is about to occur, they have been for 8 years cleaning out the physical market.
    • China and Russia are not gold speculators, but know exactly what is about to occur, having made it a policy to accumulate gold on a continuing basis.
    • Like China and Russia, the right time to buy gold and therefore silver is when you have spare cash to do it.
    • The demand for physical gold will eventually overcome the physical market, forcing deliveries to be taken on all the world's paper markets and demanded in the forgotten large OTC derivatives of gold, written naked.
    • The sign that this is taking place will be the ever-increasing margin requirement of paper gold until it hits 100%.
    • At that point the paper exchange is no longer a paper exchange but rather a physical exchange because physical gold supply will trade at a large premium to paper gold.
    • This is the point in time when the question will be asked what is the value of a metals contract that cannot perform, the paper gold contracts.
    • The answer to a non-performing contract is that its value is zero.
    • Paper gold will trade down to the value of the paper it is written on, zero.
    • At that time the value of physical gold will be whatever the major owners of physical wish it to be.
    • The value of gold producing companies still functioning will be determined by their over the ground stored physical at full gold value and its underground gold at a modest discount to the stockpiled gold.
    • Very few gold miners can grasp that concept. Investors do not have a clue.
    • Talking heads seem to be getting a hint that something has changed in gold but have no clue as to why.
    • This transmutation of what gold is, is happening right now, not some time in the future.
    • The gold market is reflecting this in this minor recovery, making all fishing line market movements a great buy while gambleholic traders still can sell modestly into Rhino horn moves up.
    • I do not think trading is correct because the final change will come overnight. You will go to sleep in one financial market and wake up the next day in the new New Normal financial world where gold, not paper, is King.
    • The 1% makes this one of the first choices of assets to own on their decision tree.
    • This explains the strange action of gold with the manipulators to the dirty work of their masters.
    • As the paper price of gold is capped, the 1% are the major buyers on the physical metals, mostly direct from refiners and producers.
    • This means that trillions of paper dollars need to be covered.
    • The USDX may well be the most useless indicators of the value of the dollar.
    • The value is not to be registered against other fiat currency, but rather in buying gold versus gold.
    • As such, the USDX falls out of its traditional relationship to gold. This also reduces the SDR to a joke.
    • Therefore the 1% is on the bull side of gold in the physical market while the Banksters have been on the short side of the gold price via paper.
    • Time is running out for the short of paper gold to be a riskless trade with the Federal Reserve at its back. The intrinsic value of the silver and gold contract is zero and zero cannot fulfill the contract obligation of the paper gold contract. That is how the paper metals exchanges go boom. Therefore zero value for a delivery month on paper gold or silver is zero profit to the short of gold and silver paper contracts.

    All those long gold anything will have the wind at their back for a long and deserved change.
    py

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