Sinclair says hold gold, Marc Faber says price to fall for three months
Posted on 25 June 2011 with 10 comments from readers
Two of the investment leaders of the current precious metals boom sharply disagree over the direction that gold and silver prices will take over the next three months. Dr Marc Faber says they will go down. Gold superbug Jim Sinclair says they will go up. Somebody is going to be proven wrong.
The warning posted on Mr Sinclair’s website is very clear:
Be prepared for a reversal of the decision to curtail QE at the end of June.
Be prepared for a snap back at a greater percentage of QE with a different name.
Be prepared for covert QE between July 1st and late August when stimulation goes wild.
Be prepared for gold to take out $1,650 on the upside as magnets at $12,544 come into play.
Be prepared for the Inflationary Depression of all time. Stand firm on your gold positions.
Dr Faber, on the other hand, remains committed to gold and silver but says ‘they will go down over the next three months or so’. He warns: ‘Not to own gold is to trust central banks and that you do not want to do!’
His reasoning is apparent from this video from Bloomberg, and he predicted the two-month correction in stock markets correctly. Now he is seeing a three-month continuation of this sell-off including gold and silver.
ArabianMoney does not have a crystal ball, although last December we did say to buy silver because there would be a $50 spike early in 2011 (click here) and we maintain that silver will be the best performing major asset class over the whole of 2011 (click here). Silver should close the year substantially up on that $50 spike.
QE3?
Marc Faber thinks Ben Bernanke will wait until later in the year before starting to print money again and that will push precious metal prices back up again. This fits with the recent ArabianMoney column suggesting that a sell-off in stock markets will last until a climactic sell-off in late October (click here).
Last week US stocks closed slightly lower again and the yield on treasuries hit a new low. That pushed up the value of the US dollar and pulled precious metal prices down. Silver fell to $34 and gold dipped below $1,500 an ounce.
If this trend is extrapolated for the next three months then the S&P 500 could well be down 20 per cent or more. But we doubt whether gold will go much below $1,450 and silver $30 an ounce as the investment demand remains from those positioning for renewed dollar weakness when the Fed resumes its money printing as it must for an election year.
10 Comments posted by readers:
Dear Peter Cooper,
i have also my bet and suggest the following:
- take on stocharts.com the weekly chart of $gold, 3 years long, with PPO, RSI, and MA 30. what do you see?
you’ll see 5 points with PPO on 0, RSI on 50, supports on MA30 and then a reliable entry point for gold. Thats why in the last years, i was three times right on buying gold on a bottom. not so bad, right? look at hte next coming point. (1450 end of july?)
- unfortunatly, studing the silver courses is much more difficult, but i suggest something less reliable, but still interesting: weekly chart of $silver:$xsf, 3 years long with PPO and RSI. with graphical analysis, i could expect a strong support end next month on 0.23, if the gold timing is right.
As i already told, silver study is hard and not so reliable, it’s much easier with gold. as a conclusion, i always read your articles with interest and pleasure. go further! Yves
Ed Note: You should be reading our monthly newsletter for more of our ideas – buying silver is already in the next month’s edition (and before this comment!) and we have a great way to do it (but nobody will if the price is down to 23 cents… the best opportunitities are always missed!).
gotta go with marc here,peter.
some BS temporary greece paper-over slows euro metal buying…..everyone on extended vacation over there….dollar drifts up.
historically,there’s something about that first blast of cold air blowing down wall street in oct. ……takes it til nov. to get to me in florida, but it changes my perception of everything watching squirrels burying nuts…..reality sets in.
Seems like everyone is in the “prediction mode” here; like boatman, I gotta go with Marc Faber here also, Peter!
Next Two Months: (… for Frances’ benefit)
- USD strength wanes a little, but then picks up again
- S&P drops, with increased volatility (1075 to 1125)
- Gold volatility increases; fluctuates between $1430 to $1510
- Silver fluctuates wildly as JPM makes big money both ways ($30 to $34)
(very tough to predict silver, since it’s rigged to a greater extent)
- Euro weakens gradually, courtesy of the fake “paper fix” with Greece
- Ireland, Portugal, Spain, Italy bonds sink (rates continue to rise)
But beware the ides of September when all hell breaks loose; gold and silver rally strongly, while equity markets continue to weaken
Jim Sinclair has a lot of face to lose because of his timed predictions regarding the re-introduction of QE. He says that the reversal of the decision to curtail QE will occur within the next week. That’s a brave prediction! Exciting but risky!
And a covert QE in July to late August. These predictions are much clearer than Marc Faber’s of a fall in gold and silver over the next three months or so.
I like Jim Sinclair’s clarity and incisiveness and, in view of the global financial position and especially in Europe over Greece, I don’t think that this is going to be a normal summer of falling bullion prices. I feel it’s going to be different this year, which means a price rise in July and August.
Lets not try to be too clever. Step back a bit and you will see part of a bigger picture.
Silver and Gold have ‘got to come down down and stay down’ for as long as possible in order to allow some very big players on both sides of the ‘rigged fence’ to sort out thier positions. Also, Gold and Silver ‘must not under almost ant circumstance become seen as safe havens’ for the ‘masses’ (the ordinary citizens) money in this time of very fragile global currencies. The masses moving thier cash out of the banking system and in to hard metal assets will, in its self, seriously destabalise all fiat currencies and bring about an uncontrolled demolition of the Dollar and Euro (and other fiat currencies to a greater or lesser extent). Only the most astute of investors can currently see that fiat currency (most notably the dollar and euro) in its current form is in trouble. Some very big players indeed (which does include governments) will ensure that it stays that way for some time yet, certainly for the next few months, but basically for as long as they can get away with.
Something very big indeed is going on below the surface and it does look like gold and silver are involved. There have been many more ‘meetings’ of global financial leaders and ‘players’ than one could reasonable expect if all was well.
In this great period of uncertainty only a fool would part with any physical gold or silver in thier posession. However one point to remember is that all through history Gold has been regarded as the money of kings, emperors, and of governments, and as such has been ‘removed’ from the general population by crook or by hook at many points in history. Silver has traditionally been the money of the people and is indeed emerging as such again today – if the vast number of ’small scale’ but global physical purchases of coins and bars are anything to go by.
Telegraph Sunday – China pledges Euro debt bail out.
Like I wrote here a few days ago.
Big US stock market rally coming, starting Monday?
What ‘concessions’ will they get? More latest technology transfer?
Ed Note: see today’s article on this.
I tend to agree with Faber. Mohammed El Arian believes that the end of QE2 will be a larger event than the market anticipates. He points out that there insuffficient buyers of treasuries to compensate for the 70% that the Fed has been purchasing. As such interest rates will rise, to entice buyers, the dollar will strengthen, and commodity prices will drop, including gold and silver. However, if interest rates move too high, it will begin to strangle an already fragile economy and housing market, and QE3 (or a reasonable facsimile thereof) will be necessary to bring rates back down. 3 months seems like a reasonable period of time for that to occur.
@ The Old Man: Very true, Old Man!
Other remarks from readers here are also worthwhile.
P.S. I’m in Turkey for the next several weeks; the “sense” here among Turkish investors is similar: something big is brewing this summer, with some sort of climax in the fall 2011.
wow, obie…….turkey’s really been on a chinese-style run lately,huh?
@ Boatman:
Yes, Turkey is one of the fastest growing economies in the world; China is first, followed by India, and in third place is Turkey.
What surprises me is that most westerners are not aware of the investment opportunities in Turkey. But what I truly like about Turkey more than anything else is the genuine hospitality and friendliness of the Turkish people. Istanbul is a very big city and certainly there are some merchants there (shop owners, taxi drivers, etc.) who will try to rip off the westerner. But go to a small city and it’s a different picture.
It’s a great place to visit and to vacation.