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Jim Sinclair thread (News & Views)

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http://jsmineset.com/2010/09/09/improving-...n-a-guestimate/

...

Gold has the exact appearance that it had in the 70s when it battled around $400. When the bulls prevailed gold went directly to $887.50.

 

I was carrying a considerable long position then. Someone at Bache, who cleared for my firm at the time, revealed my account balance and the locals pounded me. Since I never let the margin man call me, I called myself by liquidating 9000 contracts to stay financially whole.

 

As they were pounding me, much like today, Deutsche Bank who was then representing the Saudis came in as a big buyer at $389. I immediately stepped ahead of Deutsche Bank, buying back the 9000 contracts I had sold and a few more for good luck, therein putting the price of gold above the $400 mark for the third time. As I recall, Yra Harris and his famous father Lenny were handling my buying in Chicago as my floor team bought the Comex in New York.

 

This was a lesson I learned, via Bert Seligman, from a great bear, "Sell-em Ben Smith." It works on both the long and short side. When bravado is unleashed on you the weak hand is the other side. If you get real company on your side then take your position back and double it as a long or as a short. Today the Gold Banks are operating on bravado based on fabricated statistics.

 

In 1929 Bert and Sell-em Ben Smith were short the market immensely. Bert was a bit edgy as they were two weeks early. Ben told Bert that for every share he was bought in on to sell 200 shares more. Ben Smith and Bert did very well in the crash that followed.

 

Respectfully,

Jim

 

goldusd.png

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Gold "battling" here? :blink:

 

By that logic [and by the chart above] if it broke out and spiked then a persuasive argument would be to sell [if the chart above is the template you're using then the price could crash].

 

But this bull market in gold looks nothing like the 70s. Looking at today's chart, the gold price is showing a steady long term strengthening to the upside. No alarms, no surprises, no huge parabolic spikes or crashes. Buy and hold should see you right for the next decade or so.

 

It would be interesting to see a longer term chart covering the whole seventies.

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Gold "battling" here? :blink:

 

By that logic [and by the chart above] if it broke out and spiked then a persuasive argument would be to sell [if the chart above is the template you're using then the price could crash].

 

But this bull market in gold looks nothing like the 70s. Looking at today's chart, the gold price is showing a steady long term strengthening to the upside. No alarms, no surprises, no huge parabolic spikes or crashes. Buy and hold should see you right for the next decade or so.

I agree, and I also don't think that this exactly is what Sinclair means. But he seems to expect a major quick move up sometime soon.

 

It would be interesting to see a longer term chart covering the whole seventies.

http://gold.approximity.com/since1968/Gold_USD_LOG.html

Gold_USD_LOG.png

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Nice chart. What interests me is the different nature of the rise in the bull markets. The 70s look fevered and parabolic. In contrast, the recent rise looks a lot steadier and "controlled".

 

I agree, and I also don't think that this exactly is what Sinclair means. But he seems to expect a major quick move up sometime soon.

'aint that a surprise. :D

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Nice chart. What interests me is the different nature of the rise in the bull markets. The 70s look fevered and parabolic. In contrast, the recent rise looks a lot steadier and "controlled".

I think it really goes to show that there is no real panic/speculative buying in gold yet from the side of sovereigns/central banks and pension funds. Or, expressed differently, there are no signs of a properly inflating bubble yet. But it will come, and what Sinclair might want to tell us here is possibly that we're close to this next stage.

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I think it really goes to show that there is no real panic/speculative buying in gold yet from the side of sovereigns/central banks and pension funds. Or, expressed differently, there are no signs of a properly inflating bubble yet. But it will come, and what Sinclair might want to tell us here is possibly that we're close to this next stage.

Do you really think gold could become a bubble?

 

Bubbles belong to assets. If gold is the strongest symbol of money [and a prime currency], which will come to provide a basis for pricing assets [and perhaps even currencies], how can it become a bubble itself?

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Do you really think gold could become a bubble?

 

Bubbles belong to assets. If gold is the strongest symbol of money [and a prime currency], which will come to provide a basis for pricing assets [and perhaps even currencies], how can it become a bubble itself?

If gold will not re-enter the currency realm then, yes, it could simply become one ginormous bubble. The after bubble level I would expect to be much higher than now, obviously depending on the amount of inflation that we would see.

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For all the "you-can't-eat-gold"-idiots.

 

http://jsmineset.com/2010/10/31/the-utility-of-gold/

The Utility of Gold

Posted: Oct 31 2010 By: Jim Sinclair Post Edited: October 31, 2010 at 5:18 pm

 

Filed under: General Editorial

 

Courtesy of CIGA Pedro

 

Dear CIGAs,

 

A popular argument against the utility of Gold at times of crisis is regularly offered up through the rather facile statement that it can’t be eaten. This is then given as reason why, in times of great crisis Gold will not “perform” the way food stocks and other inferior alternatives will. Even the Financial Times’ excellent journalist, Gillian Tett recently sang this refrain. It’s becoming a tiresome argument, and it needs to be deconstructed.

 

It is welcome that people are beginning to see the dichotomy between paper and hard assets. The predominant paper asset is (un-backed, fiat) currency. Hard assets, of course, are many and varied.

 

But if people believe that wealth preservation can be reduced to a simple juxtaposition between paper representations of wealth and tangible wealth, they are misguided. That is only a partial explanation. There are other issues. One of them is the issue of portability.

 

In times of economic disaster you can stock-pile food, yes, but what happens if you have to abandon your dwelling due to security issues. What happens if your “home garden” and livestock have to be defended? It is not a nice thought. In preparation for possible dislocations it is unwise to think that you may be able to remain in one place. This is one of the undervalued aspects of Gold. You can pack it up in a small case. Your wealth is mobile. At today’s prices, half a million (USD equivalent) is easily portable. In a years’ time a million or two may be just as easy to cart off in your hand. Things like paintings (especially miniatures) and gems perform a similar function. During a serious crisis like social-breakdown or war, it is not reasonable to assume you will be able to take all of your canned goods, water-filters, generators et al with you, in a vehicle that needs constant refuelling and repair… you’re going to have to be lean, mean and fast on your “feet”. Not weighed down by encumbrances. Ever wonder why people escaping Nazi Germany chose diamonds? Maximum wealth with smallest possible mass and weight. Quite simply, these “you can’t eat Gold” theories, that supposedly undercut Gold’s value, do not hold water.

 

When people live in crisis situations, one usually finds not that goods aren’t available – but that they are expensive. Fantastic food, caviar champagne and other “accoutrements” were available all over the Soviet Union (Mostly in hard-currency “bereoska”); a bottle of whiskey could even be found in remote American barracks during World War II – but the price, then, depending on location, was about a crisp $100 bill. (Then! … Not now.) Hoarding resets prices when demand goes up and supply crashes. Gold, a hoarded, not consumed, vehicle, performs perfectly in an environment when sought after goods are being restricted from the market and more so if paper currencies are under attack.

 

Let’s take the consumable issue one step further. If you buy a one lot of European barge delivered (ARA) gasoil, you can, theoretically, take delivery. But how, exactly does a non-configured layman deal with that reality? With great difficulty is the answer. Leaving aside the configuration issues of delivery (which are significant if you’re not a professional oil product transport or storage entity), are you going to transfer it and then store it on your own while meeting legal safety and environmental requirements so that you don’t (literally) blow up the neighbourhood? That’s unlikely. Your parcel will likely become distressed and no one is going to even pick up the telephone to talk to you about how to get rid of your 100 tons of gasoil. Moreover, the owner of the much larger parcel your piece is consigned within will demand that you meet all sorts of other regulations to siphon off your little piece. (Doesn’t this sound a little like sawing off your corner of that 400oz. London Good Delivery bar you were told by some Gold pool was “yours”?). It’s no different in coffee, cocoa and sugar, the grains and other “softs”. You’ll never be able to store in proper condition, and even if you did, deterioration would set in after a few weeks/months. So you’d have to unload it quick, which defeats the whole purpose for which you took delivery. Commodity professionals have noses like bloodhounds for distressed parcels – so you will have your financial eyes gouged out when trying to get rid of your inventory. In something less than a perfect environmental regime, your physical will become worthless and you’ll probably have to pay to get rid of it.

 

What should additionally be evident from the above is the inherent price potential for physical Gold if delivery demands rise. Not many people are going to know what to do with a one lot of gasoil, coffee, wheat, etc., if they want it delivered. But one hell of a lot of people know EXACTLY what to do with a 100oz bar of Gold. Namely: Hold on to it – i.e. store it. This is what gives the possibility for a delivery squeeze in Gold such massive price outcomes – delivery and storage does not rely solely in the realm of the professional. The amount of people who could demand delivery of paper contracts, and feasibly take delivery is potentially massive. Of course, by the time such demands become manifest, it is unlikely paper claims will be honored. Just the scent of a delivery squeeze (as we learned from the Hunt Brothers experience) can cause mayhem.

 

Lastly – for the “you can’t eat Gold” crowd – how the logistics of an economic implosion play out vis a vis Gold are already evident in Zimbabwe. The forlorn and starving, including the elderly and sick, spend much of their day panning rivers and streams to amass the miniscule amounts of raw, unrefined, Gold, which is the only thing the hoarders will accept in exchange for the foodstuffs necessary to stay alive. For those who would like a real-life, current example of the “You can’t eat Gold” theory in practice, go to You Tube and search under: “Gold for Bread – Zimbabwe”, for a very harsh dose of reality (the video is not suitable for children and the faint of heart – it is, however, reality).

 

CIGA Pedro

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My Dear Friends,

 

Tomes have been written this week about quantitative easing, many written by those who didn’t know what QE meant twelve months ago. Tomes are silly as very few actually read them. Those that do read are comatose by the end. We do not do tomes here. We present conclusions.

 

QE to infinity means the economic can gets kicked down the road again at the cost of the dollar’s value and therefore sparks the event of accelerated currency induced cost push inflation.

 

No QE means a violent collapse of general business within 90 days. That takes the camouflage off of the following:

 

1. False balance sheets of financial entities, thanks to the sale of the FASB’s soul to political pressure, are exposed.

 

2. Further collapse of tax revenue to states brings about a financial crisis much larger than anyone presently anticipates.

 

3. The malaise in the US destroys what little is left of general confidence in the austere Euro region.

 

4. The rape of pension funds is exposed.

 

Gold will go to a figure equal to all foreign debt of the USA divided by the number of ounces that the US is assumed to have. This is how you can calculate the potential price. ($15,316)

 

If moderate levels of QE are utilized, that means the can gets kicked down the road once again at the cost of the dollar and therefore the event of accelerated currency induced cost push inflation. It might in this case take a few days before the markets figure it out. If moderate QE is announced that means QE to infinity but only revealed a little at a time or not revealed at all. To do QE to infinity without revealing it violates the tool of communication recently discuss by the Fed which means MOPE. It will be revealed.

 

 

 

 

 

 

 

 

 

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Gold will go to a figure equal to all foreign debt of the USA divided by the number of ounces that the US is assumed to have. This is how you can calculate the potential price. ($15,316)

That bit jumped out at me, too. I presume this lowly price assumes the US has all the gold she is professed to have? I wonder? Maybe the Fed know how little they have got in the US and hence don't revalue the gold asap, preferring QE instead?

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Jim Sinclair writes:

Gold will go to a figure equal to all foreign debt of the USA divided by the number of ounces that the US is assumed to have. This is how you can calculate the potential price. ($15,316)

Below is is the implemented Jim-Sinclair model for everyone to follow it "live".

Up-to-date chart: http://gold.approximity.com/since1970/Exte...Gold_Price.html

Theory explained: http://gold.approximity.com/gold_price_models_sinclair.html

External_Debt_Equilibrium_Gold_Price.png

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Below is is the implemented Jim-Sinclair model for everyone to follow it "live".

Up-to-date chart: http://gold.approximity.com/since1970/Exte...Gold_Price.html

Theory explained: http://gold.approximity.com/gold_price_models_sinclair.html

External_Debt_Equilibrium_Gold_Price.png

 

Gf does this work for GBP also,(ie uk external debt divided by gold reserve) and if so do you have any idea of the implied price?

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Gf does this work for GBP also,(ie uk external debt divided by gold reserve) and if so do you have any idea of the implied price?

I guess you could apply that model to the UK as well. Whether or not plays a role that the US has the reserve currency - I guess it does in Sinclair's rationale, so maybe he would not apply that model to the UK.

 

http://www.statistics.gov.uk/cci/nugget.asp?id=277

At the end of March 2010 general government debt was £1000.4 billion, equivalent to 71.3 per cent of GDP.

The question though is how much of it is external debt. I don't have this exact information. However, this BBC source here implies it could be something £200Bn external debt (potentially more now).

 

Apparently, the UK has 310.3 metric tonnes of gold reserves.

 

This makes the target UK gold price approximately £20,045.11/oz.

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Here is a gold:GDP chart. That puts things into perspective too.

 

http://gold.approximity.com/since1968/Gold-GDP-Ratio.html

Gold-GDP-Ratio.png

GF. This chart reminds me of your Gold in Yen chart-which incidently sticks out from the other currencies like a sore thumb.. (Sorry I cant put it up for comparison.) Perhaps gold is doubly cheap buying in Yen which would explain why there are so many rich Brazilians buying gold here now :blink:

Must have money to burn. :lol:

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GF. This chart reminds me of your Gold in Yen chart-which incidently sticks out from the other currencies like a sore thumb.. (Sorry I cant put it up for comparison.) Perhaps gold is doubly cheap buying in Yen which would explain why there are so many rich Brazilians buying gold here now :blink:

Must have money to burn. :lol:

Striking similarity indeed.

http://gold.approximity.com/since1971/Gold_JPY.html

Gold_JPY.png

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This makes the target UK gold price approximately £20,045.11/oz.

Gosh, snuffle, snort, grunt. Does this mean I'll be able to pick up an average house for-licks chops-12 and a half ounces? (thats presuming no nominal falls either).

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Gosh, snuffle, snort, grunt. Does this mean I'll be able to pick up an average house for-licks chops-12 and a half ounces? (thats presuming no nominal falls either).

You might even see nominal house price inflation picking up again if such a price came to pass.

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Got this in an email from Jim this morning:

 

The key to running the short position for any junior starts with success on the ground. A junior must move to the producer category if it is going to hang the shorts out to dry. If the junior cannot make this leap then it will not fly with the eagles. However that alone is not enough.

 

The management of your junior gold producer will have to work for their shareholders. This is what Durban Deep did in the late 1960s and Homestake in the 1930s. That is why Durban Deeps went from $0.36 to $36.00. It is also why Homestake was the shining example in gold during the 1930s. Homestake's strategy was to dividend out a huge majority of its net profits to their shareholders.

 

It did not hurt that the Hearst family was a major stockholder in Homestake. But even today that is simply not enough.

 

The junior has to dividend something to its shareholders that the short does not want. A good example of this, albeit in a different market sector, was Canada's Schenley Distilleries in the 1940s. Schenley offered a dividend to shareholders in cash or in warehouse receipts for deliverable whiskey.

 

Applying the Schenley example to the junior gold producer, such a company could offer their shareholders dividends in cash or gold bullion much like Durban Deep and Homestake did in the past. Now the party shorting the junior producer will also be short of gold bullion in various amounts according to the wishes of the shareholder of the company.

 

There is no way to beat these destroyers of wealth other than to strategize retaliatory actions within a historical context - perhaps adding a Schenley wrinkle.

 

Send this to your junior mining and exploration company management. You will find out fast if the management is working for themselves or the shareholders.

 

This is where the rubber will meet the road in 2011 and thereafter.

 

My best performing junior (Gold Resource Corp - GORO) have been paying a dividend for the last 5 months and I recall an interview with Frizzers I think where the Reids said they would happily pay a dividend in bullion. Lovely stuff can't wait for that to materialise!

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I find it a little weak that Sinclair didn't come out on Friday (Jan. 14th) evening, and wrote: "Look guys, I was wrong, lost the bet. Anyway, let's move on now and make even more money than before." I mean, there should have been a statement on Jan 14th IMHO.

 

Anyway, the rest of the (ir)relevance of this event has been discussed elsewhere.

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I find it a little weak that Sinclair didn't come out on Friday (Jan. 14th) evening, and wrote: "Look guys, I was wrong, lost the bet. Anyway, let's move on now and make even more money than before." I mean, there should have been a statement on Jan 14th IMHO.

 

Anyway, the rest of the (ir)relevance of this event has been discussed elsewhere.

Here's an article I probably should have finished and posted on FS or Seeking Alpha:

 

 

Missing the $1650 Gold price target

Was it a "magnet too far"?

========================

 

Many who invest in gold will know that a well-known Gold guru, James Sinclair - who is sometimes referred to as "Mr.Gold" made an amazing forecast years ago when the price was close to $500. Like Babe Ruth, who pointed to the bleechers before hitting his famous homerun, Mr. Gold pointed to the sky, and said, the price is going there, "Gold will be $1650 (or higher) on January 14, 2011." That target date is now less than two weeks away.

 

Since that forecast, gold has had an amazing run, and anyone who heard the forecast early on and bought Gold thinking there was a chance Mr Sinclair would be correct, is probably very happy. They have made loads of money. But now as we head into the final part of the last inning, there is a very real chance the forecast will be a fairly hefty "miss."

 

As I write this, gold is trading near $1400, and that's about 15% below $1650. So what? some gold bulls will say, the metal is headed higher.

 

I remain bullish on Gold for the long term, but I think there's a chance that the missed forecast could be one of several factors triggering a substantial correction, perhaps the largest price slide we have seen since 2008.

 

A Miss like as big as 15% may undermine the shared certainty that some members of the gold owning community have grown into. Some one on my website, GlobalEdgeInvestors, a popular forum that attracts gold bugs and non-bugs as well, has said that some parts of the gold community behave as if they were in a church. Sinners, who have not yet seen the golden light, must be converted. Those who stray from the course of gold-owning risk hellfire and damnation.

 

XX

 

As prima facie ...

(MISSING)

 

======================

Jim Sinclair's $1650 "S-Point" - A magnet too far?

 

QUOTE (DrBubb @ Jan 4 2011, 07:50 AM)

BTW, if you have a link to his "retraction of $1650", I would be interested to read it.

There have been various times since the Low in the summer of 2008 (which I have indicated with "L-'08") when it looked as if gold traders were gunning up towards Jim Sinclair's famous $1650 target, which I have labeled as the "Point-S".

 

In fact, the price was making an almost exact beeline for that figure for months since "L'10", the Gold low that I have marked, in the summer of 2010:

 

 

 

The forecast was well-known and well-promoted online amongst the Gold buying community.

 

I cannot believe that there will not be many disappointed Gold owners when they become sure that the target is unreachable.

The next question is this:

Will those who feel disappointed that S forecast is not reached decide to SELL, to take their profits and run?

 

I recall back in 1980 many had a $1000 target for gold's big bull run. But instead, it faltered at $850, 15% lower. If we discount Jim Sinclair's $1650 target by 15%, we get $1403, not far from where gold is right now. After that miss of $1000 back in 1980, many who were sitting on huge profits turned sellers.

 

If prices stabilise or fall from here ($1420), then Gold Bears, like Tom Obrien, who spoke about selling when Gold was back at $1100 or so may not "miss" by as much as the well-known "Mr Gold" Sinclair. But as many on my website have pointed out, at least Sinclair's high number have kept many in what has been a very good and profitable trade. But will their confidence begin to waver now that the JSteam of angels look as if some of the feathers in their wings are made of wax?

 

Personally, I think this "miss" may prove healthy for balance of buyers and sellers within the gold market. Recently the community that invests in gold has behaved like a church community, where no one was allowed to whisper the word "sell" within earshot of one of the preechers for fear of being struck down. In fact, that I have suffered some abusive comments on my own website for daring to suggest that people lighten up along the way. Restoring some doubts into the community might bring back a two way flow of money and and out of the metal, rather than pushing it towards a single pre-agreed price, which might lead to a massive all-at-the-same-time price dump. I see merits in gold too, but prefer it when there is healthy two-way trading, and not a single choir of bulls.

 

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I see merits in gold too, but prefer it when there is healthy two-way trading, and not a single choir of bulls.

It comes all down again to trading versus investing, it seems.

 

I am not sure I understand what "healthy two-way trading" is. If I am convinced that something will go up a lot, why would I risk trading out at the wrong time? If I have a good model for my targets, and an exit strategy, possibly even a stop somewhere way down at the breakeven price, and the fundamentals are clearly on my side, why should I trade at all?

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