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Gold price takedown a plot by the Fed and the bullion banks says veteran gold bug Jim Sinclair

Posted on 22 December 2012 with 3 comments from readers

The year-end slump in the gold price by around $100 in three weeks is a plot by the Fed and the bullion banks to disguise the true state of the US economy, argues veteran gold bug Jim Sinclair on his website this weekend. Sell now and you are being caught in their trap.

Mr. Sinclair has the gold price shooting to $3,500 and higher in the near future. His predictions have been very accurate for more than a decade now. However, even if he gets the long-term trend right, there is no accounting for the manipulation by the Fed and the bullion banks.

Market manipulation

‘There is not one professional who does not know sales in extreme volume at a time of low activity internationally have but one purpose, and that is to reduce the price of gold,’ he explains. ‘You cannot fix the problems of the Western Economic system by breaking the telltale thermometer, which is the price of gold.’

He adds: ‘The idea that the patient (Western financial system) will recover because Dr. Strangelove [we assume he means Ben Bernake] of the Fed jumped up and down on the fever thermometer (the gold price) is the height of rank, blatant, foolishness and ignorance I thought the Fed leadership was not even capable of. They did this in the 1970s and it failed as miserably as this act of desperation will also.’

Buying opportunity

Mr. Sinclair points out that all this achieves is to drive gold into the hands of China where eager buyers will snap up this insurance against the coming devaluation of the US dollar. Many global central banks, particularly from the BRICS nations will do the same.

ArabianMoney would also note that we faced exactly the same crisis of confidence over gold and silver prices this time last year (click here). Could it not also be a bit of profit taking by hedge funds at the year-end? This year prices took off nicely in January after many predictions of the end of gold towards the end of 2011.

So often with gold it is a case of deja vu all over again. What we have not seen is the massive price spike that would indicate an end to this bull run. Then we would be looking at Mr. Sinclair’s $3,500 an ounce and everybody would be talking about gold going much higher.

Posted on 22 December 2012 Categories: Gold & Silver

3 Comments posted by readers:

Comment by John - 22 December 2012

Times change, and it’s possible that gold is beginning to act like a normal commodity rather than a mystical store of value. Forget the runes – sorry, charts – the only thing which is likely to push the gold price towards $3,500 an ounce is widespread panic – which may occur, but not anytime soon.

Ed Note: You just have not understood the money printing have you? This is already happening at panic levels and is on the way up globally, not down… gold will get much higher than $3,500 because it is a money that cannot be printed… got it?

Comment by John - 23 December 2012

Dear Ed. I understand money printing, I just disagree with your interpretation of its effects.

Its effects depend where the new money goes – you seem to assume that it is all going straight into the general economy, leading to currency debasement and consequent rise in the gold price. But it isn’t. Most has been hoarded by banks and governments (via their central banks) – it’s dead money.

I agree that eventually there will be an increase in inflation, once the current deflationary background abates. But there’s nothing inevitable about a huge spike in the gold price.

Comment by Saint - 24 December 2012

It wouldn’t be that surprising for the Fed to try and manipulate the market: everyone is trying not to be the first economy to implode, and thus receive the blunt of the blame for a meltdown.

Of course, the US has an advantage in that it doesn’t actually need the gold on a macro scale: it has the natural resources to be functionally independent economically, though at a significantly reduced standard of living. The same isn’t true for most countries: they’ll need every asset they can get to protect themselves until the crisis is stable (it may never actually end).

And that is the real problem: if gold is treated as a national asset instead of personal one (a move that would be very popular amongst most voters), people who invest in gold could easily be ruined by high taxes or outright nationalization of such assets. Sure, responsible folk can come up with reason upon reason why that would be a terrible idea, but they will always be in the minority. Imagine $3,500 an ounce with a “fair” tax of 70% on every transaction…that is the real risk of gold.

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