Veteran gold investor, Jim Sinclair, posted no less than three of his own comments on the recent gold take-down on his own website, jsmineset.com, yesterday, describing the latest gold price moves, brought on by heavy instantaneous selling on COMEX, as a ‘move of desperation by the Fed’. Sinclair’s view is thus that the selling, which has seen the gold price fall over $100 in around three weeks, is in fact a concerted effort by the U.S. Fed, and its bullion bank allies, to artificially depress the gold price and by so doing hide the true state of the U.S. and global economies and protect the dollar. “You cannot fix the problems of the Western Economic system by breaking the telltale thermometer, which is the price of gold.” he says.
Sinclair has a strong following in the gold investment community and has long held the view that gold is going substantially higher, despite what he, and a number of others, see as a gold price suppression scheme with gold seen as the bellwether of economic stability or otherwise. “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 notes in another comment on his site.
So why would the U.S. Fed be prepared to do this? Well the view of Sinclair and others, which was for a long time ridiculed by many mainstream analysts and by politicians alike, is that in modern day politics perception is everything. Rising gold prices are seen effectively as dollar devaluations, so if you can control the gold price – or at least mitigate its ongoing rise – the perception amongst the general public is that the value of the dollar in your pocket remains reasonably stable. If the gold price is allowed to rise massively then the perception that all is not well in the U.S. economy in particular (for many years the driver of the global economy, so it affects this too) would become apparent to all, which is anathema to those who run the state.
Now whether there is indeed a concerted ploy by the political and financial elite to control the global economic thermometer (gold) as Sinclair puts it, remains to be proven – and probably never will be – but the machinations on COMEX give increasing credibility to the view that someone, with unlimited pockets, is trying to control gold and silver prices. Logic suggests that this can only be accomplished by government – or rather by major financial institutions with tacit government approval and support – or so the theory goes. That this solution is now beginning to gain coverage in some of the the mainstream financial press says much for the distrust of government motives in economic manipulation (as seen in QE, which can only be described as such, etc.).
But back to Jim Sinclair and his particular viewpoint. He certainly doesn’t mince words! “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” he comments.
Sinclair reckons that what this is achieving is to drive gold into Asian hands at bargain prices, thereby ultimately transferring global economic leadership from West to East. This is a process which can only be accelerated by this kind of intervention in the markets (whoever is making them), particularly if one assumes that China is taking this opportunity to build its gold reserves on the way towards making the yuan at least a part of the next global reserve currency. While China is not currently reporting any increase in its official gold reserves, it is widely assumed that it is probably doing so anyway, but just not reporting this, as it has also failed to do in the past. The theory in part is that China recognises that if it does report a big gold reserve increase then this on its own will drive the gold price very sharply higher, thus making additional physical gold accumulations much more expensive. The U.S. has gained huge economic advantages in managing the world’s principal reserve currency for many years now and this has not gone unnoticed by China (which is already facilitating some global trade in yuan rather than in dollars – a process which is likely to grow and grow).
The world order is changing – a process which is being facilitated, Sinclair feels strongly, by the U.S.’s own economic mismanagement leading to an enormous debt burden which has now reached proportions from which there can be no return. Gold is going to $3,500 and above an QE to infinity is his oft repeated mantra.