Because gold is held by many central banks, once as a reserve currency but now as an inventory currency, it functions as a swing asset to balance the International Balance sheet of the US.
Central banks are sellers of dollars but still hold, by default, large dollar inventories.
China has hedged its dollar position 50% through commitments to long term dollar commercial agreements, pay in, mineral, and energy deals internationally. That is an act of pure genius.
We can assume other central banks still hold 90% of their reported dollar positions, on average unhedged by commercial obligation positions.
In crisis times, the US dollar price of gold ALWAYS seeks to balance the International Balance Sheet of the USA.
Take 90% of international US dollar debt less China and then add 50% of the US debt owned by China. Then divide that number by the ounces supposed to be owned by the US Treasury. The result is where gold wants to go.
In 1974 this gave me $900 gold. Now you do your homework, and submit your analysis to me. Do this, and I will give you Angels going to that price by a little known technique of Jesse Livermore that only works on gold after it has broken to a new high above all resistance.
Little by little I am passing on all that I have learned from Jesse through Bert to those that read every day in thanks for your support of me and mine.
- Jim Sinclair of JSMineSet.com