Jim Sinclair - Why Gold?

During reactions in gold, the degree of gold and gold share holders pessimism is EPIC and without cause.

Why Gold?

1. Gold is a currency.
2. Gold is competitive to paper currency.
3. Gold is not a commodity
4. Gold is a barometer of fear.
5. Gold is a barometer of confidence in government.
6. Gold is insurance.
7. Gold is insurance against government gone mad.
8. Insurance is not something you trade.
9. Gold is the financial high ground when global debt problems exist.
10. Gold in your hand eliminates all counter party risk.
11. Every single currency is paper backed by nothing.

Stay the course. Nothing is solved, nor will it be.

Gold will be violent. Gold is nowhere near fully priced.

Regards,

 
Jim Sinclair

Jewellery in Canada

Gold has formed a bottom at $1535

Today’s hard overrun of MAJOR support at $1584/$1675 and down to a low of $1535 (in spite of Friday’s punch down into that major support on a low of $1631.70), produced a 105 point rally action back up to $1640, and a close of $1630. We did not expect an overrun of 1584 at worst, but today’s rally back and close into the core of the support bracket itself indicates the beginning of a bottom action has begun.

We now expect a bottom action to occur at or above today’s low of $1535. Today’s extreme sell off and hard rally action does make the possibility of a narrow bottom quite possible.

The drop from $1923.70 to $1535 has generated an impressive wall of resistance, but which could be overcome in relatively short order if gold generates a narrow V bottom followed by hard rally action. Even so, the bottom should be visibly resolved here within another 14 to 15 days at most ff we are to have a moderately fast or a fast return to a test of the recent high ($1923.70), and thereafter, higher highs.

Our internal figures remain long term bullish…

- CIGA Kenny, via JSMineset.com

Charms and Beads

Market Violence Will Create Large Bear Trap

This is a repeat of 2009 – actually even more extreme readings than 2009. We are severely oversold today. Anyone not buying here does not believe in the fundamental story. In my opinion, this will be a huge entry point by 2012.

- CIGA Eric, via JSMinset.com

China’s Gold Investment to Top Record: Cheng

Gold investment demand in China is likely to top a record 200 metric tons this year, the World Gold Council said.

The country’s investment demand surged 70 percent in 2010 to an all-time high of 187 tons, said Albert Cheng, the Far East managing director at the World Gold Council.

China’s “investment demand has picked up exponentially,” Cheng said yesterday in an interview in Montreal. “The financial crisis has triggered people to be cautious of anything they don’t understand,” boosting demand for bullion as an alternative asset.

Gold futures have surged 29 percent this year, touching a record $1,923.70 an ounce on Sept. 6. The metal climbed as escalating debt woes in Europe and the U.S. boosted demand for haven assets. India is the world’s top bullion buyer followed by China. The two countries accounted for 54 percent of world gold consumption in the second quarter, Cheng said.

The council has estimated demand from China may double in 10 years. The forecast may be “too conservative,” Cheng said.

The Pan Asia Gold Exchange (PAGE) - This is Huge!

The Pan Asia Gold Exchange (PAGE)

The Pan Asia Gold Exchange (PAGE), backed by the Chinese Government, opens for business in the next few months and is expected to be fully operational by the end of 2011. This development represents an unprecedented challenge to the entrenched institutions that effect the price of gold and at the same time supports Beijing’s ambitions for world currency reserve status. In short, there is a new gold trading market in the wings with the potential to change global supply and demand dynamics and how gold can be traded.

Here’s the background:

PAGE will allow individuals to buy physical gold from their computer at home. Initially, the 200 million or so clients of Agriculture Bank of China will be able to buy 10-ounce mini contracts on the PAGE. Later, non-Chinese will be able to purchase International Spot Contracts through the exchange.

Ultimately, PAGE will provide an alternative playing field for global gold investors who hitherto have had to rely on unsecured gold futures contracts and the bullion banks to determine the price for gold. With PAGE, a gold buyer will be able to receive a 90-day International Spot Contract and actual title to the gold he/she buys, not just a futures contract or an unsecured note from a bullion bank, or an international banking institution. The PAGE gold’s in 10 ounce bars can be delivered to the customer with little effort. The international bullion banks, have been accused for years of manipulating the gold price. Such manipulation will now be more difficult.

PAGE could pose a challenge to the near monopoly on gold price discovery currently held by the members of the London Bullion Market Association (LBMA) that include many large banks.

For years, their practice has included leasing gold often from central banks and then selling it into the market to drive the price down. Leasing and selling of gold has been a profitable game for the savvy players involved. Every game has a loser, however, and in this case it has been less sophisticated gold investors. The selling activity has often created panic among gold investors who sell at the wrong time allowing the short sellers to buy back the bullion at low prices.

PAGE provides an alternative route that bypasses the bullion banks of the LBMA.

PAGE also provides a new way for international investors to own Chinese currency — the Renminbi (RMB). Here’s how: The buyers will purchase gold contracts denominated in RMB. They can then hedge out the gold in the dollar-based gold markets. As a result, they effectively own RMB.

We see here yet another example of multiple Beijing initiatives opening the RMB to world investors. Over time, these innovations will enhance the value of the RMB and create a deeper, more liquid foreign exchange presence for the Chinese currency. PAGE is another internationalization step forward for the RMB in the direction of world reserve currency status.

The advantages of being the world reserve currency, as well as the responsibilities involved, have not been lost in the Chinese government. They won’t rush the process, but they clearly have a long term plan.

- Via JSMineset.com

John Embry interview with James Turk at GATA's Gold Rush 2011

John Embry (http://www.sprott.com) and James Turk, Director of the GoldMoney Foundation, talk about the price of gold and the US debt downgrade.

They discuss Sinclair's $1,764 level and how the majority of observers still disparage gold, even if perception is slowly changing. They explain how the physical gold market is taking charge of gold price discovery and how strong physical demand will drive the price much higher.

They talk about how the price of gold will react in another market meltdown, similar to 2008, and whether there will be a sell-off. They conclude that this time the flight to safety will be more important than the rush for liquidity and that gold is uniquely placed to act as a safe haven, especially with T-bills and other traditional safe assets discredited by US debt issues.

John and James explain how important it is to own tangible asset that are free of counterparty risk. They also talk about some relatively safer currencies like the CAD, AUD and CHF, and conclude that, although better than the US dollar, they also have their flaws.

They talk about mining stocks and how undervalued they are. They mention key levels to watch in the XAU and HUI, as signals of a start to the mining stock rally. They move on to look at sovereign debt issues and how they expect other countries, like the UK, to suffer downgrades soon as well.

John also explains that China, despite its huge potential, is not without issues and he fully expects to see a lot of instability there.

This interview was recorded on August 5 2011 in London.