Jim Sinclair says dollar weakness and gold strength will follow any euro crisis resolution in 2012

This is the time of year for bold thoughts about the future in general and 2012 in particular. In one of his last messages to his followers of this year veteran gold trader Jim Sinclair has issued a reminder that dollar weakness will follow fast on the heels of any solution of the eurozone crisis:

‘There is a certain extremely important market reality that must be kept in mind as you listen to all the bearish gold predictions. What is good for the dollar is bad for gold.

‘This is wrong because it depend what dollar related factors are giving a positive dollar price action. If the good for the dollar was strong US economic activity, sound balance sheets in the US financial industry and a US consumer ready and credit able to expand, the answer would be yes if these activities were for the long term. That strong dollar would not be good for gold.

‘However there is only one dollar positive out there. That is the largest currency market on the planet is the dollar vs. euro market in which the so called vigilantes (international investment banks) are shorting the euro to infinity. That downward pressure on the euro creates a mirror image of dollar strength but give that strength no greater legs than the euro problem.

After the euro?

‘What happens the third week post a euro settlement, be that a changed euro or no euro?

‘There will be an end to the euro’s problems one way or another sometime sooner than later as that is the nature of failing euro hopes as today and fruitless euro financial programs as every proposal has been so far. That process brings you closer to a crisis rather than further away. Even if there was a miracle that saved the euro at today’s price, the soap opera then ends.

‘Within three weeks from whatever date is the final act in the euro soap opera the US dollar will be the primary focus of the vigilantes via US dollar and long bonds. There is enough knowledgeable money sources that know if any resolution is coming will begin to prepare for it. That preparation may be why at in this din of gold bearishness gold still may well be resolving the accordion chop…

‘It is time for a glass of cold water and a long walk. Traders will be guided well now by the Angels. Up to $1,764 the Angel has and will continue to herald the market. After that and the gold price move goes in the $2,000s things will be somewhat more difficult, if you can imagine more difficult.’