The Metals: Gold fell $32.90 or 4.6% to a new 13 month low at $681.15 by midday in London, but it then fiercely rallied back higher in New York and rose to as high as $749 before closing with a gain of 2.2%. Silver dropped 86 cents or 9.1% to $8.63 and rose to see an over 1% gain at $9.587 by early afternoon in New York before it fell back off a bit in the last hour of trade and ended with a loss of 2.3%. Euro gold rose to about €576, platinum gained $4.50 to $793.50, and copper fell another 12 cents to about $1.68. Gold and silver equities rose over 5% by late morning and remained nicely higher in afternoon trade despite substantial losses in the major indices. The Economy: Next week’s economic highlights include New Home Sales on Monday, Consumer Confidence on Tuesday, Durable Goods Orders and the fed’s policy statement on Wednesday, GDP and Initial Jobless Claims on Thursday, and the Employment Cost Index, Personal Income and Spending, Chicago PMI, and Michigan Sentiment on Friday. The Markets: Oil pretty much ignored OPEC’s 1.5 million barrel production cut and instead followed world equities lower on global recession fears to close at its lowest since May 2007. The U.S. dollar index continued to receive safe haven inflows along with the yen. The dollar saw most of its gains versus the British Pound and Euro as a negative Q3 GDP reading for the UK reinforced the view that Europe and surrounding nations are even worse off than the US heading forward. The European Central Bank and Bank of England also have much more room to cut interest rates than the fed before they get to 0% as the fed is already at just 1.5% while the ECB is at 3.75% and the BoE is at 4.5%, but one wonders what will happen down the road if more stimulus is needed when the central banks are already at 0%. What, if anything, can be done then? When thinking of it that way it seems as if the US and its currency is in a much tougher spot than other nations. Having more room to cut may have a short term negative impact on the respective currencies as differentials between different bank rates narrow should more cuts come from the ECB and BoE than the Fed, but unintended and long term consequences certainly need to be considered as has been shown by unforeseen developments following the introduction of so many exotic and previously unheard of programs rolled out over the last few months in attempts to solve the credit crisis. Treasuries fell despite their typical role as a safe haven asset as worries persist over inflation down the road and also the need to issue more and more debt to fund programs aimed at solving the credit crisis while buyers of US bonds seem to becoming more and more sparse. The Dow, Nasdaq, and S&P again saw massive losses along with most of the rest of the world on concerns over a global recession or worse. Futures were halted before the US market open as they were all limit down, but stocks did open relatively orderly and the major indices hit new 5 and ½ year lows before they closed over 3% lower on the day when all was said and done. Among the big names making news in the market Friday were Chrysler, AIG, PNC and National City, Ingersoll Rand, Sony, T. Rowe Price, and GE. The Commentary: “The most difficult concept for the professional public to understand is that hyperinflation can exist along with a totally disastrous economic environment. Hyperinflation falls flat because it fails to take into account the infinite velocity of money that a Weimar creates during a depression economy as a product of throwing monetary discipline at the wall. When you pay people three times a day to keep up with prices, consider the mammoth daily increases in all private and business transactions in terms of the total number of currency units. What happens to the velocity of money? The turnover increases with the rate of inflation until both are hyper creating an unstoppable spiral. Few understand that monetary inflation proceeds and sustains price inflation. For this reason world business in a rat hole with credit still jammed up will lead to hyperinflation in 2009-2010. If world business is perceived to have bottomed and credit flows are re-established, this will bring hyperinflation in 24 hours. We have heard both Russia and China chime in today on their clear perception of the pre-election falsely valued US dollar and government interference in not only gold but energy and food. The PPT is working overtime on those index spreads but they only have a short time (13 to 88 days) before they have to throw it into what is most likely inexperienced hands. Yes, a planetary Weimar is on the menu. Russia, the Middle East and China may just be the top survivors. Africa might just come into its own in such a scenario due to the amount of raw material and gold resources they have. Respectfully,”- Jim Sinclair, JSMineset.com “December Gold closed up 15.6 at 730.3. This was 28.8 up from the low and 16.7 off the high. December Silver finished down 0.205 at 9.295, 0.185 off the high and 0.435 up from the low. After a rather significant initial washout in gold prices early Friday morning the market was able to forge a pretty impressive recovery bounce. While some players suggested that the recovery in the stock market provided profit taking incentive to gold, other traders suggested that some longs were looking to establish long plays for the weekend. In fact, with the gold at times managing a rise of roughly $70 an ounce in the face of a mid afternoon equity market slide, one got the sense that weekend flight to quality buyers were doing some bargain hunting buying late on Friday. Clearly the gold market was at least partially supported by the better than expected US scheduled data flow on Friday morning, but perhaps the gold market was also attempting to factor in a possible upcoming US interest rate cut. The silver market clearly didn't get the same kind of lift as the gold market did in the early afternoon trade. In fact, the silver market seemed to favor a tight positive correlation with the equity market regardless of the action in the Gold market. Certainly strength in the Dollar and weakness in a host of physical commodities left the silver trade fearful of more deflationary selling, but some in the bull camp had to be discouraged by the lack of a meaningful short covering effort in the face of this week's declines. Some might suggest that the silver washout of roughly $1.53 per ounce was tame compared to the slide in gold and copper prices.”- The Hightower Report, Futures Analysis and Forecasting

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