Sep 14, 2010.

1. Gold Juniors Geyser! Gold is spurting higher this morning as I write this at 4am from Vancouver, the Gold Juniors headquarters of the world! At 630am Vancouver time, you may see your accounts get a substantial injection of black ink, as the North American stock markets open up. Hands up anyone who doesn't want to see that action!
2. I want to emphasize, in neon, the critical importance of both components that all investors must operate with, in all markets. The trading and core positions. When markets move sideways, or down, for time, those holding only long term core positions can get disheartened or even mentally broken.
3. Price can gyrate sideways not just for weeks or months, but for many years. When you are underwater for years, or worse, underwater while being diluted by management, it is extremely difficult to maintain a positive mindset, let alone to make a profit.
4. Allocating up to 1/3 of your risk capital on a gold stock to short term trading has the twin benefits of improving your mental spirit as you "ring the register", and can really add black ink to your bottom line account statements. Notice I said 1/3, not 99%. Keep that in mind, at all times.
5. You can't really know how the market will trade in advance. Will it begin a long term move higher with little or no correction, or enter a trading range/sideways chop with an upwards bias? You need to be prepared for either scenario, before it occurs. Many "long term investors" dumped stocks they bought in 2006, as the gold market melted in 2008, and even recently as price climbed back "towards break-even".
6. On the other side of the coin, many traders have no core positions. They believe they can trade their way through any market environment. I don't agree with that outlook, and time has proven that most traders fail to build any real wealth. For every Paul Tudor Jones success, there are another 999 destroyed trading accounts, closed down in failure.
7. When you use only technical indicators, you can get sell signals on all your indicators very early in a trending move (like the current one) that could run vastly further than the technicals are indicating. You end up sold out, standing in line with all the other top callers, as you continue to wait for a correction, while those with core positions are watching their positions grow, and grow, and grow!
8. How many traders would trade their eye teeth, all their gold trades, to simply have bought gold at $400, and still be holding it now? I would argue the number exceeds 90%.
9. Corrections can be years in length, or only days.
10. Gold traders have an obsession with being in on every move in the gold market, and long term investors have an obsession with making monster money on a "supermove". Balance what you want, with what you can mentally handle.
11. No trader should have zero core physical gold. That's madness. At the same time, long term investors should focus more on what is really happening with gold's fundamentals, here and now, and less on what they want from gold personally. Gold is a control mechanism used to increase/decrease the amount of debt outstanding and the increase/decrease the value of paper money.
12. Those believing the system is out of control now are not really correct. The system is bankrupt and broken, but not out of control. When the system becomes out of control is when the dollar begins to fall and drastically higher gold prices have no effect on the ability of debtors to service their paper money debts. That is the kindling and gasoline required to create a forest fire of hyperinflation. This is a subtle point and I should repeat it; it is not the falling dollar itself that signals the system is out of control, but rather a falling dollar that has no real effect on helping debtors service their debts.
13. We are a fair ways off, likely at least a number of months, from being in a situation where the US Central Bank would, at least privately, admit the failure of Quantitative Easing and move on to Gold Revaluation, as official policy, to reduce the difficulty of debtors to pay what they owe.
14. Because the "nuclear weapons" of Fed/Treasury Policy (gold revaluation and all-out money printing) have yet to be taken out of the toolbox), there is no way to argue the situation is out of control. Iphones are being built, people are having dinner, life is going on fairly normally, for the most part, for most people.
15. There is another, far more ominous issue to consider. The question, as you are now aware, is not how high gold is going. The question is: What level of gold price is required to make debt service practical? The answer to that question depends, horrifically, on the velocity at which the banksters are marking OTC derivatives to market.
16. With Lehman Brothers, you saw a one-time marking to market of a big block of OTCDs. A lot, yes, but only a few percentage points of the total outstanding number. While it appears that the decision has been made to mark to market in a more orderly flow, you cannot be 100% sure of what is in the minds of those who control that flow from mark to model to mark to market.
17. Subscriber GoldLion's partner has calculated the latest numbers for the price of gold to balance all the major debt outstanding, and the numbers are coming in close to $100,000 an ounce. While the value of gold could legitimately be termed $100k an ounce, in the practical world, price itself does not have to go there. A pegging of gold at perhaps $5000 an ounce could perhaps suffice to create a situation where new debt issued is coming online at a lower velocity than old debt paid. That is the essence of gold as a control mechanism, in action.
18. I'm sorry to say, but the gold price is in the hands of the banksters and Tim "the terminator" Geithner, head of the Treasury. It's not about the comex or the LBMA. The Govt, Treasury, and Central Bank all want gold higher in price, way higher. So, guess where the price of gold IS going?
19. Correct. WAY HIGHER.
20. The story of gold's price in this bull market is not so much about supply or demand, although they have been factors up to this point. The main gold price story is, and always has been, about control of gold. The govt has legal power to control gold, and will not hesitate to exercise that control, via gold revaluation and perhaps money printing, if they believe such control is required. The biggest debtor is the US govt, and you can bet your bottom (paper money) dollar they want the dollar vastly lower against gold, so they can service existing debts, and retain the ability to issue more.
21. I started this update at 4am with a statement that by 630am we could go ballistic in the gold stocks. Well, it's 630am. Here's the bottom line on GDX, the gold stocks ETF: GDX Runaway Gap! Look at the gap today in today's action, the last bar in the chart! So much for team "non confirmation".
22. Same for GDXJ: GDXJ Runaway Situation! Any trader with no core position is now starting to freak out. Some are rushing to "rebuy". Big mistake. Hold your core positions, but don't chase price. The banksters see all the leveraged positions in the market and will seek to hit price from time to time, just enough to destroy the leveraged traders.
23. Here's silver. Silver Same story. The crowd thought silver was "failing to confirm" gold bullion's move higher. Wrong. Celebrate the strength, but don't chase it!
24. Gold, via the SGOL fund, is at a new high this morning. Bye bye bears! Gold Bullion New High! All those who sold out waiting for 1130 or lower are now in "freak out" mode. If you are in, and most of you are, enjoy the ride with your core positions. This is payoff time! It is also, sadly, time for the paper money fan club to meet the gold punisher, and the question is: Are You Prepared?

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