Dear CIGAs,

I wonder if Johannes Gutenberg, the inventor of the printing press, ever realized that his marvelous device which ushered in a new era of knowledge dissemination, would someday also be used to create wealth out of thin air. Apparently he did not for if he had, it is doubtful that the world of his day and future days would have ever experienced economic hardship or ruin again.

Witness the marvelous effect of the newly created Fed “wealth” as it makes its way into the equity markets and the commodity markets, at the horrific expense of the Dollar, which has now crashed below the critical 80 level and looks like it is on its way down to 76.

There was a literal fund orgy of buying across almost every single market today shoving prices north as the reflation trade was on full display for all the world to gaze at in admiration. “Who is like the Fed and whom else may we bow down and worship” comes the cry from the investment world which is swimming in a sea of liquidity with future consequences to the generation to come being damned. All it cares for is a rising equity market and a short-sighted “feel good” psyche.

The sinking Dollar is even negating to a certain extent the massive intervention efforts of the Bank of Japan to curtail its rise. Last evening there was a bizarre event with the Yen which suffered a massive drop in price leading to rumors that the BOJ had come back into the Forex markets and sold yen. When the rumor was not confirmed by the finance ministers of that country, hedgies wasted no time and bid it right back up again completely erasing the losses and even adding more on to it just to apparently insult the BOJ.

The yen is becoming a serious political issue in Japan with politicians facing increasing pressure from their constituent businesses for the government to take action to force a drop in the currency. AS it now stands, the rising yen is crushing what little is left of the Japanese economy and is eliciting howls of protest from leading Japanese exporters who are furious over what is happening to their market share. The comments are all almost unanimous from the heads of business: “We are mired in a deflation and our economy is stagnant and there is no reason for the Yen to be rising so sharply. Speculators are leading the nation to ruin and the Bank of Japan must act now”.

I expect we are going to see them do just that as soon as next week. If they do not, the market has called their bravado and their reputation will be ruined seeing that they have made repeated statements that they intend to hold the line on the yen. Quite frankly, I am amazed at the boldness of the hedge fund crowd which continues to defy their intentions. Then again, maybe Chinese buying of Japanese bonds is too large for the Bank of Japan to deal with. I am not sure but after watching these Forex markets for years, I will be shocked if the BOJ does not foray forth and give the new Yen longs a severe butt whipping. If they do not, and the yen takes out its recent high, the BOJ will be finished as a market force.

The problem that they face is that the Fed is attempting to outdo them in ruining currencies and has printed trillions into existence. That is a lot of Dollar supply. The BOJ will simply have to print more than the Fed. Any wonder why gold is doing what it is doing and commodities are being siphoned into the holdings of big funds and institutions?

That brings us to the technical action in the metal – it is being stymied at $1300 by its enemies even as the rest of the commodity world goes beserk to the upside and silver makes a 30 year high! The same damn hedge fund ratio trade continues to lean on the mining shares in spite of record high prices in both metals. While the broad stock market is enjoying rip-roaring gains, the mining shares are languishing as if the metals were trading 20% of their peaks. You can thank the conjurers of those much heralded gold ETF’s for all this for they have siphoned off money that used to go into the shares into another paper gold market. Still, do not despair as gold and silver miners are making enormous profits on their chief product. It is still profits that drive stock prices even in this brave new world of hedge fund algorithms and the sadistic HFT crowd.

Gold will have to push above $1300 and hold that level to prevent some long liquidation as we are up near record levels on the open interest. We should be because we are at record levels in price. Momentum however rules the markets these days so it is up to the bulls to dislodge the perma bears (bullion banks) from behind their fortifications at $1300 if they hope to force a retreat to a new and higher level, closer to $1312- $1315.

Support still first lies near $1285 on any setback in price followed by better support at $1260. I would like to see how price acts on any setback to get a better feel for future price action.

Silver ran past its peak from early 2008 notching a 30 year high in the process which is simply breathtaking for the speed of its ascent. Should it be able to post a strong close above $21.50, look for it to make a runs towards $23. It has light chart support near $21 and better support back near $20.50 on the charts.

Nothing has changed for the HUI – it still needs to best the 520 level to see the shares accelerate higher. It is however working on its best weekly close since March 2008. It needs to hold above 493 to accomplish that task.”- Dan Norcini, More at http://www.goldseek.com/email/lt/t_go.php?i=2770&e=MzM0MTg=&l=-http--www.jsmineset.com/">JSMineset.com