Gold the only hedge against US treasuries says Jim Sinclair
Posted on 27 July 2011 with 5 comments from readers
Gold super-bug Jim Sinclair, a veteran of the 1970s’ boom says there is ‘no functional hedge against the downgrade of US Treasuries that is sure to come with or without a default except gold.
‘The cat is out of the bag. The political opposition can back the present administration into a corner on the most important issue, debt. If that is the case with debt, then what else could they do it with.
‘To assume there will be a default is extreme, however within a week we will know. There are those in the political opposition that might go to any length to cripple the present administration.
‘The only conclusion that I can come to is that you should NOT take your gold hedges off. At $1,764 a runaway gold bull market becomes an exponential run away gold bull market.
After $1,754 Alf and Armstrong become the predictors of note for Gold at $3,000 to $12,500.’
Mr Sinclair’s predictions have been spot-on for the past decade, ArabianMoney thinks he will be right again this time.
5 Comments posted by readers:
can anyone explain the MMT crowd’s inability to understand the underlying problem with human nature and an asset that is produced at will from thin air?
peter-can you explain this number? is this valid?
http://www.businessinsider.com/feds-16-trillion-dollar-secret-slush-fund-props-up-our-way-of-life-2011-7#ixzz1TJ4Kkz90
I much enjoy your daily comments — among the best-written stuff on the Net. As to quoting Sinclair for justification of an exponential rise in the price of gold, you don’t need to do that. If you look at the price curve since 1999 then its best-fit line (apart from the 2008 shock and recovery) has been as close to a perfect exponential curve as is possible to imagine in human affairs. This can only mean that one of the various sorts of buyers is either accelerating in *numbers* or buying in exponentially increasing *quantities*. There can’t be any other explanation.
So who are the buyers doing this? It could be one or more central banks, I suppose — the Fed, or India, or China. But none of them could have had a smooth consistent policy all through the years. As for big investment funds, pension funds, hedge funds, they hardly buy much gold anyway (at present).
It can only be buyers of coins (and small bullion), however small their purchases might be. Even if they were thin on the ground in 1999, and even if they buy only on a few occasions and in modest amounts, then if doubts about ordinary investments are rippling circumferentially from these individuals to friends and colleagues then, however low key, the total sales will be growing — not just growing but growing exponentially.
The astonishing fact is that if the curve keeps to its present track it will actually start to approach the vertical by mid-2012. It won’t be long before the gold-sceptic will start to say that it’s a case of panic buying. But it won’t be (at least not to start with!). It just means that the circumference of gold buyers is continuing to grow outwards in the face-to-face way that opinion normally does.
Once the curve starts to become vertical — or very closely so — then it will have the same sort of superficial appearance as the panic-buying spike of 1980 when big investors turned away massively from the dollar. And then (mid-2012), of course, it might well turn into a panic spike — this time not to be brought down by a Volcker-like decision to raise interest rates!
(Very speculatively I wonder whether it is this that lies behind the recent decision of the Soros fund? It may not be the regulations at all. It may be that the Soros family wants to buy gold privately and don’t want to draw attention to this in order to prevent a premature rise.)
Prof. Bert Bartlett: “The greatest shortcoming of the human race is our inability to understand the exponential function”.
Gold’s growth since 1999 has been linear not exponential. Jim Sinclair and others predict that it will go exponential.
Check out some great charts on this site, especially the DOW/Gold ratio and the Gold/Silver ratio.
http://gold.approximity.com/gold-silver_watch.html
@ Keith:
Your premise, as stated in your last paragraph, may likely be the correct one!
Prof. Bert. Bartlett: The greatest shortcoming of the human race is our inability to understand the exponential function.
Gold’s growth since 1999 has been linear not exponential. Jim Sinclair and others predict that it will go exponential.
Some great charts here:
http://gold.approximity.com/gold-silver_watch.html
My favourites are the Dow/Gold ratio and the Gold/Silver ratio.