Dear CIGAs,

The following COT charts are presented for your convenience. Once again I would like to call your attention to the gold COT chart which is indicative of a strong and healthy bull move as it shows speculators driving the market north by concerted buying while commercial interests are selling. Let me state here for the record that the commercial short category supplied all of the selling this week adding over 20,000 brand new shorts. They absorbed the buying from the new fund longs as well as those funds which got cute and tried to top pick and were forced out of their new shorts as well as the commercial buying which was not insignificant this week. The small specs basically cancelled each other out and were a non issue.

My view of the gold market is the commercial short category, aka the bullion banks or the gold cartel, will fight the rise in price of gold all the way to $1,000 and beyond. We do not want to see them being squeezed right now and forced out since all markets top and end their bull runs whenever we see a commercial signal failure since those are the last buyers. Once they have bought back their positions and close out their shorts, no one else is left to buy and the market collapses from its own weight. I have seen this time and time again throughout my trading career.

Instead, look for them to continue to provide the sell paper at the Comex as they do their worst to try to slow down the rise in gold. These people are not stupid and can read the handwriting on the wall. They know where gold is headed and why perhaps better than many in the gold community who love to do nothing better than sit around and write rubbish detailing why the gold market must collapse because of their “expert analysis” of the COT reports. Mark my words, the bullion banks are NOT NAKED SHORTS in gold – they are long in other venues but use the Comex to attempt to set the gold price as they fight a stalling action to keep gold from a price melt up. Just imagine what gold would have done this week alone (not to mention its stellar performance from today) had not the bullion banks been there to provide the sell paper. The price would undoubtedly be closer to $840 or even $850 where it not for their concerted selling.

Nevertheless, they have lost control of the gold market since gold has entered a different phase in its bull market that began in 2001. It was much easier for them to cap the price when the rise in the price of gold was more or less relegated to dollar terms. Now that gold has made decade plus highs in other currency terms such as the yen, the Swiss Franc, the British Pound, the Russian ruble, etc., they are having to contend with buying that is coming in from all over the globe. No entity is big enough to fight that kind of rising tide. The best they can hope for is to try to catch the tide at “low tide” and press it down a bit hoping to pick off some weak longs and instill some fear into gold bulls. In time past that worked like a charm since they had a pack of ringleaders in the gold community who did their dirty work for them by terrifying you to death with their calls of imminent gold price collapses because the COT did not look pretty enough to them. Please, I urge you all, now that those people have been completely and thoroughly discredited as they well should be, please ignore their ramblings in the future and let this market tell you when it is time for a pause. You will be much happier, much wealthier and much more satisfied by learning to stand on your two feet. You do not need these people. Listen to the market.

The breakout above the $800 level today carries enormous psychological significance. More than a few CTA’s had been waiting for that kind of price action to put their clients into the gold market. Also, momentum based funds had been watching for that signal as well. The ease at which gold took out that level had to have rattled the shorts in this market. Their panic buying is what took the market up so swiftly this morning once $802 was breached. It will be interesting to see how gold handles any price weakness in the days to come especially should it approach the $800 level from the upside.

Enjoy your weekend and savor the moment – you have been waiting for a long time to see this kind of price action in gold and your patience has been rewarded.