Jim Sinclair cautions on new all-time high for gold price
Posted on 07 October 2009 with no comments from readers
Heed the words of the world’s greatest gold bug Jim Sinclair who warns about the implications of the gold price surge to new highs yesterday:
The gold price is NOT a cause for celebration.
The action of gold in the face of the massive commercial dealers short position means that they have finally taken on a force much stronger than the ordinary trader.
The other side of gold is sovereign buying on all reactions, not seeking one price, but rather taking supply away from the cash market on a step ladder basis.
This occurred twice in the 70s, first when the commercial dealers took on France, and finally in 1979 when they met the Saudis in the market place.
The Fed has no stomach nor should they have to carry on an economic war over gold.
The dollar has changed significantly over the last year, becoming the currency of selection for the carry trade. We know that the propaganda that the dollar was a place of safe refuge is silly in light of the weakness in the recovery. Last Friday that message was delivered to the market loud and clear.
It may even be possible that general equities are being buoyed by the soft dollar in light of Quantitative Easing as there is historical precedent for that.
Clearly the recovery now being predicted by equities is a total fantasy. What we do know is the UN, IMF, BIS, G20, Russia, China, India and Brazil amongst most other major countries have publicly called for an alternative to the US dollar.
Wall Street is clearly out of control if bonuses are a measure of saneness.
The reason why I suggest that today’s market should scare you, and not be a cause for high five because of the implication of the event.
Hyper-inflation has always been a currency event, not an economic event. The currency event has always been, for whatever reason it occurred, a loss of confidence phenomenon. Clearly confidence in the US dollar and its management is slipping. Historically when this currency event comes about the transition is extremely fast.
We have been doing a countdown to the beginning of the end, or that process acceleration. The are 33 days to go.
Gold is then off to $1224, $1650 and then on to Alf’s numbers.
Have you prepared yourself for the implication of such a gold price?
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You can date the end of dollar hegemony from China’s decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.
By Ambrose Evans-Pritchard
Published: 7:33PM BST 06 Oct 2009
Comments 9 | Comment on this article
Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency.
“It’s the tolling of the bell,” said Michael Power from Investec Asset Management. “We are only beginning to grasp the enormity and historical significance of what has happened.”
It is this shift in China and other parts of rising Asia and Latin America that threatens dollar domination, not the pricing of oil contracts. The markets were rattled yesterday by reports – since denied – that China, France, Japan, Russia, and Gulf states were plotting to replace the Greenback as the currency for commodity sales, but it makes little difference whether crude is sold in dollars, euros, or Venetian Ducats.
China is not going to be a winner in a global trade collapse like the one we have seen this year. The export machine has broken down. There has been the mother of all stimulus packages to support China. Meanwhile, trade is still down 25% and there is a massive inflationary bubble in property and stocks waiting to burst. China is the next crisis not the future!!