The Normalcy Of Violence In Gold

Posted On: Wednesday, July 23, 2008, 10:23:00 PM EST
Author: Jim Sinclair

Dear Friends,

I apologize for the late email and postings, but corporate responsibilities took up the day. I had an important meeting in the Sharon, CT office today.

My job here on www.JSMineset.com is to speak my opinion on a daily basis to the substance of gold as a certain medium of insurance against the unstoppable forces of a financial system that is broken.

Dan speaks as a man who supports himself and his family by trading markets.

Dan uses charts to make his point, but please do not assume that just because he charts a gold share for you that he is making any specific recommendation of investment in that issue.

I have been asked if the gold securities that Dan charts are his favorites. The answer is hell no. They are simply situations from different groups within the definition of gold shares.

Now let’s look at today’s gold market. My take is that today was nothing new. Gold is a currency. It reacts in a direct relationship now to the euro. All other ingredients that are assumed to create the gold price work into the dollar vs. euro relationship.

Because of this we could and many are tonight writing tomes on energy prices, the equity market, interest rates and other commodities.

I like simplicity. That means I look At THE EURO TO KNOW WHAT THE GOLD PRICE IS DOING AS THE DISTILLENT OF EVERY OTHER FACTOR OUT THERE.

Reactions happen in every market. When it comes to gold violence is its name.

This is a forced reaction because when the euro hit $1.5980 the panic alarm sounded in the dollar vs. euro relationship. A freefall was destined to occur.

Crude to gold works only via its impact on the dollar vs. euro action.

If we must speak about crude it is a black box barf reaction, and not the end of a major bull. The worst-case scenario under $125 is major, major buying interest that will wait for $110 to $115, but not for long before it steps up.

Nothing has changed fundamentally for the key element in gold, the dollar. The panic alarm went off as the dollar threatened a free fall. The greatest show on earth went to maximum TV exposure at maximum volume. The margin traders bailed and the rest of the public gamblers were sold out the next day in commodities.

Nothing whatsoever has changed. Gold is headed to $1200 this year and $1650 on or before January 14th, 2011. The euro will trade above $1.60 on its way to $2 plus.

Gold buyers now are at $910 to $915 and they will move up if not satisfied this week. My next buy is at $912.

The odds do not favor a gold price under $900.

I have traded gold backwards to how you should do if speculating in general commodities. In gold I have bought every reaction in a stepladder fashion, selling exactly the same way. It has worked ever time even though I have seen my life pass through my eyes on a few occasions.

The only selling that should be done is if you approach a margin call. Cover the call yourself before the session close. Do not wait for a margin call, and once you have covered, stay away from margin! If you have upcoming other needs for your funds, make sure you have completed the necessary actions to deal with them.

Other than margin or other financial needs, jump back into the hole we dug years ago, pull the same rock over your head and peak out in a week to see where we are.

Respectfully yours,
Jim