Jim Sinclair - the central banks vs hedge funds
Posted On: Saturday, June 10, 2006, 3:26:00 PM EST
Harry Versus The Volcano
Author: Jim Sinclair
The multilateral and simultaneous increase of short term interest rates among central banks was no coincidence. It was a message stating all major central banks will close ranks against the inevitable impact of the Professor Bernanke Electric Mayhem Helicopter Drop of Liquidity into the international monetary system. Never before Professor Bernanke acted has there been so much liquidity injected into a multilateral system over such a short period of time with no means of drainage.
The message has been delivered, but what was the urgency, and who is the opposition this message was directed at?
The answer is contained in an article that has nothing to do with this subject, yet it is there.
The week, June 9th, www.money.com, a Scripps publication ran an article titled “Emerging –Market Hedge Funds Take Hit.”
This missive has in it the following quote; “The news service sites Brad Duncan, managing director at the Boston based Emerging Portfolio Fund Research Funds. His company tracks 15,000 Hedge funds with more than $7,000,000,000,000, yes seven trillion dollars.”
That number buries all central banks put together yet the article is not clear if that is all hedge funds or just emerging market hedge funds. I will look at this as all hedge funds to be conservative (if seven trillion can be considered conservative). It is down right SHOCKING in the hand of mad ladies and men.
We know every one of these hedge funds has some sort of computer based trading tool, mostly in the form of black boxes. Some may however use normal TA.
Regardless of what system they use, the final analysis is all based on moving averages that are massaged almost to death. This means this mountain of money, mostly a product of an international monetary system awash in liquidity, will descend on the market of choice.
If you add all central banks together there isn’t enough gold to depress the price assuming that conditions result in a fierce run away move with technical conviction behind it. We know from history the degree that interest rates must rise to blunt the same type of gold move (1968–1980) would have to be so high that it would bury business so deep the world economy would come to a halt.
The BLUFF of the Bank of England, Fed, and Euroland will have less impact each time it is pulled until it has none at all.
They should have never raised interest rates, together giving away their plans. The Fed should have left the Bank of England alone in their effort to save the LME from being trashed because of the copper carry trade. The central banks are now totally out of the closet. Their plan is crystal clear but the central banks simply lack the ammunition to oppose the hedge funds in the market place.
Slowly traders will catch on until such efforts are sterilized. Fundamentals will propel the gold price as the plan of the central banks has no legs with out policy change abhorrent to the present Administration. The Fed is as independent as new born child.
As this is recognized, each bluff will fall shorter than intended and then the black boxes will be totally in charge.
Gold is going to $1650.
Originally posted by Loantech here:
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