Gold Price entering Phase 3 of Bull Market: Jim Sinclair

$1,764.  That’s the demarcation price for gold’s move into the next phase of the bull market, the third and most exciting phase, characterized by widespread participation by the mainstream investor, according to Jim Sinclair.

As one of the world’s foremost “scholars” on the subject of gold and money, Sinclair believes the long-awaited awakening of the retail investor to the dollar endgame lies just ahead.

Phase 2 of the gold bull, he said, began at $524.90, and has now ended.

“$1764 has the same significance as $524.90 because it represents phase 3, the point when a runaway price market for gold would gain exponential properties,” stated Sinclair, on his Web site, JSMineset.com.

Anecdotal evidence of increased traffic at bullion dealers in the U.S. have been streaming in, as investors there already see the handwriting on the wall for the dollar, and want to front-run a replay of 1979.

Certainly, in Europe, the reports of periodic bank runs in Greece, Ireland, Spain and Italy (with the latter two through electronic withdrawals) have been well-reported since 2010, leaving Americans anxious for refuge as the back-end of the eye of the currency storm reaches the shores of the U.S.

So far, the assets of choice at this stage of the global financial crisis have been deep government paper markets, the Swiss franc, yen and gold, with most of the scared money presumably bypassing reasonable (and not so reasonable) facsimiles of money, and moving straight into gold.

“Some of the finest minds in gold anticipate a very short but brutal reaction in price,” added Sinclair. “The dollar market seems to not agree with a gold correction here.”

“Market wise, the Fed has thrown the U.S. dollar into the wind. Under .7400, the dollar denies a reaction in gold at these levels.”

Sinclair’s $1,764 marker for the price of gold is a key point in the bull market, he has repeatedly stated over the years.  That is the price where the most dramatic devaluation of the dollar begins, with a target north of $10,000 per ounce as a projected peak price for the metal, following the final months of the predictable mania period of phase 3—a phase much similar to the 100% move in the Nasdaq during the last six months of the tech bubble of 1999.  But, first, the fight for entry into phase 3 rages on before the real fun begins for holders of gold, according to Sinclair.

“Because $1,764 is such a significant number, you can expect one of the more serious price battles before the price departs to Alf Fields’ and Armstrong’s predictions,” he stated, referring to five-digit projections for the gold price from fellow hard-money advocates, Alf Fields and Martin Armstrong.

With price targets above $10,000, $1,764 gold is a screaming buy, according to the JSMineset think tank.

“To sum up the situation, you haven’t seen anything yet,” exclaimed Sinclair.

3 Gold Stocks to Watch

Goldcorp Inc. (NYSE: GG)

 

SPDR Gold Trust (NYSE: GLD)

Yamana Gold Inc. (NYSE: AUY)

 

 

 

Get ready for explosion in gold and silver, says James Turk

James Turk again asserts that gold and silver will soar this summer, citing his conviction that at least a hint of a QE3 announcement is just around the corner.  The last time a hint of a Fed policy move in the direction of monetizing debt was uttered, the risk-on trade to dollar weakness that had ignited the precious metals sector last summer will return with a vengeance this summer.

“When they [Fed] start QE3, the U.S. dollar index will plunge to new lows,” Turk told Eric King of King World News.

In agreement with PIMCO’s Bill Gross, who said Bernanke is likely to at least hint of a QE3 at next month’s Jackson Hole meeting, Turk expects the Fed will make some kind of overture to the markets before the summer is out.

Jackson Hole is an annual central banking conference where central banking policymakers meet to discuss the global banking system.  Last year, Fed chairman Ben Bernanke said U.S. policymakers were contemplating an expansive debt purchasing scheme if the U.S. economy and asset markets warranted further stimulus, which is Fed parlance for preparing the market for the official announcement in the near future.

Following Bernanke’s speech in August 2010, gold rallied $400 and silver skyrocketed more than $30 before settling back off the highs set on May 2.

Curiously, the dollar hasn’t rallied to hold above the 76 level (a critical juncture, according to the Richard Russell of the Dow Theory Letters) during all the turmoil in Europe and the euro, according to Turk.  He thinks that ominous sign of profound underlying dollar weakness will become more apparent to all now that much of the euro’s weakness has been discounted throughout the latest crisis in Greece and its implications for Portugal, Ireland and Spain.

Another sign that the market is calling Bernanke’s bluff can be gleaned from last week’s powerful equities market, Turk suggested.

“I think the dollar chart basically confirms my point that quantitative easing will be started again soon,” he said.  “Last week’s big jump in the major stock market indices is basically saying the same thing.  All we need now is an indication from policy makers that QE3 is imminent.  The effect this will have on gold and silver will be nothing short of spectacular given how sold out both of the metals have become during their correction over the past two months.”

Moreover, the budget battle regarding the U.S. debt ceiling won’t be won by the Tea Party, according to Turk.  The stakes are truly too high.  Many prominent economists claim that the effects on the global banking system and the world economy would be catastrophic and most assuredly usher in a deeper Great Depression than the one during the 1930s.

Instead, the democratic system will be subverted to prevent a U.S. treasury default, according to sources in Washington close to Turk.

“The scary thing is they are going to shove through this debt limit increase one way or another,” concluded Turk.  “If there is an impasse in Congress with Tea Party Republicans holding the line, word has come from Washington that President Obama will use the 14th amendment to declare the debt limit as unconstitutional.  By removing this last piece of discipline, that will open the floodgates and will be the tipping point to send the dollar into oblivion and gold and silver into the stratosphere.”

George Soros dumps his Gold— was it too early?

Soros has sold his gold.

Anytime a famous billionaire investor makes a significant position move in his clients’ portfolio the tag-along investors sifting through SEC form 13-Fs for clues to the thinking of the rock stars of finance will know about it—though with a time lag, as the required filings are submitted quarterly.

The latest musings among financial writers and investors have focused on the disagreement between Soros and another bigger rock star, John Paulson, regarding the outlook for the monetary metal—gold.  Soros is out, and Paulson is apparently holding for the big move.

So who’s right?

Arguments for the end of the decade-long gold rally generally fall into four theses, a combination of the four, or all of them.

1) The Fed is done with so-called “quantitative easing.”

So Bernanke implies—for now.

Unless Fed chairman Bernanke can find a buyer of a trillion dollars of U.S. Treasuries each year, or is willing to face derailing a U.S. economy on the brink of another full blown Depression brought on by more than $2 trillion deficits, which will then include soaring interest payments of more than $100 billion for each 1% rise in rates—then Bernanke is bluffing, again!

Bond king, Bill Gross, asked the question of many investors in his PIMCO March Outlook letter:

“Who will buy Treasuries when the Fed doesn’t?” Gross asked rhetorically.  If the Fed has been buying up to 70% of new issuance by Treasury, who will takeover the massive buying?

So the Morton’s Fork Bernanke faces is to either continue debasing the dollar to “grow” into the unserviceable U.S. debt levels, or face a collapse of the U.S. Treasury market as higher yields blow out an already blown out federal budget deficit, creating a negative feedback loop.

That Morton’s Fork favors gold.  Gold is primarily an alternative to the debasement of fiat paper money AND a place to park capital during times of uncertainty or a deflationary collapse.

2) Inflation is low and will remain low

Does anyone but the Fed chairman and his groupies believe inflation has been low?  That’s one of the big lies from the Fed.  (See Shadowstats.com)

“To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then when it becomes necessary again, to draw it back from oblivion for just so long as it is needed. …”

George Orwell, 1984

3) In the end, the U.S. dollar will eventually become stronger than the euro

That may be true.  But does it matter if the euro falls faster than the U.S. dollar on its way to the “currency graveyard” as James Turk of Goldmoney has said?  Both central banks are debasing their respective currencies.  In fact, the world’s top two currencies have been devaluing against all widely-traded commodities, (except natural gas) what appears to be, in a coordinated manner.

And Bernanke’s suggestion, which he made in his speech in Atlanta yesterday, that soaring commodities prices have little to do with Fed policy of a dollar devaluation rings, at best, conveniently incomplete and hollow, and at worst, another lie—through omission by the Fed chairman of widely-know correlations documented between a currency’s purchasing power against a basket of commodities over time.

4) Everyone’s in gold.  It’s a bubble.

That’s probably the weakest argument of all.

Marc Faber, editor and publisher of the Gloom Boom Doom Report, was asked by CNBC’s Joe Kernen in April if he thought there was any truth to the gold bubble thesis.

“If it [gold] were a bubble, a lot of people would have gold.  The whole world would be trading gold 24 hours a day,” said Faber. “But I don’t think it’s really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252.”

Faber also said he routinely assesses sentiment among investors regarding gold at his speaking engagements.  Usually, he counts less than five percent of the audience who raise their hands in favor of gold as an investment. Sometimes he sees no hands raised, he said.

“And my daughter, she lives in Germany. She walks by a shop when she goes home from work. She said people are lining up to sell gold—the jewelry. So, I don’t think that it’s a gold bubble,” Faber added.

Following Soros’ investment themes may be better than most fund managers of his size.  But investors should remember that another investor legend, who may be more well-know—and liked, Warren Buffett, sold his monstrous stake in silver at approximately $8 per ounce.

Unless Soros is waiting for a big drop in the price of gold (or is pondering buying physical metal, instead), he’s most likely far too early in calling for a long-term top in the gold price.

Wasn’t he who said in June 2010, “We’ve have entered act II” of the crisis, referring to Greece’s sovereign debt problems and the potential flight out of the euro experiment.  When did that crisis get resolved?  And how does the U.S. (indeed, the world) come out smelling like a rose if the euro collapses while U.S. and untold other foreign banks, who are joined at the hip with European sovereigns and banks, become insolvent?

London Gold Market Report: Dismal Jobs Data good for Gold

An unexpected bad print in Friday’s Labor Department’s non-farm payroll report for May is gold bullish, according to premiere bullion storage service BullionVault.

After successive months of hobbling, yet hopeful, job creation in the U.S. (though many economist doubted the overall quality of the new jobs added from the depths of the initial shock to the U.S. economy), the Labor Department laid an egg for May when it was revealed that only 54,000 jobs were created, far less than the mean estimate range of 150,000 to 190,000 by analysts.

Those investors, believing that the Fed may pull off a slow recovery, could be rethinking that premise and instead begin fretting about the possibility of a double-dip recession, while others—who never believed that the U.S. economy ever emerged from recession in the first place—may fear an all out 1930s-style depression and food and energy price inflation to make matters worse.

But for gold and gold stocks investors, the latest data are good news, according to Swiss precious metals firm MKS.

“Speculations of a generous third quantitative easing (QE3) package will grow” if a string of subsequent depressed data come in, MKS told BullionVault. “Expectations in the market suggest that gold prices will benefit in the short term by the belief that slowing growth in the U.S. will prompt the Federal Reserve to maintain favorable monetary conditions.”

That means some form of QE3 by the Fed could be inevitable by as early as the third quarter some economists speculate, which will result in a further expansion of the U.S. monetary base and put a strong bid under the yellow metal.

“This is gold-friendly data,” said Credit Agricole analyst Robin Bhar. “In the worst case scenario, we could have a double-dip in the U.S. economy and possibly deflation, which would also help gold.”

The showdown in Greece over its failure to achieve budget metrics attracted safe haven buying of the metal throughout the past two to three weeks, taking the Euro from the high of 1.49 in May to approximately 1.41 against the dollar as well as providing ammunition for firming gold prices above $1,520.

Following the Labor Department’s disappointing jobs number on Friday, however, the euro soared against the dollar to a one-month high of $1.46, or a 2.3% again, before retracing some of the day’s earlier gains.

“The turning point was Greece, and we can suggest Greece is out of the way for the short term,” said Kurt Magnus, executive director of currency sales at Nomura Holdings, referring to reports that the European Union (EU) and the International Monetary Fund (IMF) have agreed to extend the next installment of last year’s €110 billion bailout to Greece.

Now the focus among traders has shifted to the dollar and its lingering problems accentuated by Friday’s dismal economic data and the partisan stalemate in Washington regarding the U.S. federal budget deficit and debt ceiling.

At 11:40 a.m. in New York, gold trades at $1,552.03, up $10.43.

A Gold crash coming?

If you’re loaded up on gold, silver and commodities, congratulations, you’re in good company.  Mega hedge fund managers John Paulson, David Einhorn, and George Soros (rumored to have sold his GLD for gold stocks) are with you.  Iconic investors and gurus, Marc Faber, Jim Rogers, Jim Sinclair, James Turk and Richard Russell are on board the gold train, as well, along with many more lesser-known brilliant investors.

So, should the above-mentioned investors be frightened by articles published by Reuters, entitled, “Gold crash: What could trigger the inevitable”?  That’s the title of a piece posted on the news agency’s Web site over the long weekend.

From the start, the premise of the article’s title, that a gold crash is inevitable, is flawed.  Long-time gold expert Jim Sinclair, Richard Russell of the Dow Theory Letters, James Grant of Grant’s Interest Rate Observer, and World Bank president Robert Zoellick would most likely disagree with a gold crash theory, as these three men suggest highly that some form of a gold-backed currency, including a gold-backed U.S. currency, or not, must eventually become part of the new international monetary regime.

Under that scenario, as outlined on many occasions by James Sinclair, gold would most likely trade within an elevated band (instead of fixing the price) as central banks become locked in a gold-backed regime that loosely resembles the articles set forth at Bretton Woods in 1944.

The inevitable gold crash?  It’s much more likely that a crash in the U.S. Treasury market should be assessed as inevitable.  PIMCO’s Bill Gross would be loaded to the gills with U.S. Treasury notes bonds if gold was destined to crash.  Gross is not. In fact, the Bond King has no bonds in his BOND fund.

Can you imagine McDonald’s not offering hamburgers?

The article goes on to suggest that betting on the dollar’s next direction is akin to gambling.  In the short run, the author is spot on.  But, as a long-term investors, which the author believes is the only way to play this financial debacle, betting on the dollar’s demise is for the foolhardy—better yet, for the “nervous Nellies.”

“The clearest threat to gold’s reign as the reserve currency of nervous Nellies is a possible rebound of the dollar,” according to Reuters. “Given the congressional wrangling over the debt limit, budget and growing inflation, betting on the buck is like trying to figure out whether a racehorse will finish. They often pull up lame.”

The author suggests that a miracle is in the offing and that politicians who know that shutting down the U.S. Government to save the dollar is political suicide (the 1992 Congress comes to mind) and will miraculously learn the meaning of noblesse oblige and do the right thing for the country.  But, until we see Ben Bernanke and Ron Paul scheduled to a duel on the White House front lawn, the author may be onto something.

Holders of gold will take the other side of this author’s bet in a New York second, and have, by betting on a racehorse that’s come in first, without except, for more than 5,000 years. And not only have the heavy weights of finance mentioned above taken that bet, but central banks around the world, who have collectively become net buyers of gold, are increasingly placing that bet, too.  According to another Reuter’s article published in April 2010, central banks have become net buyers of gold in 2009, a first since 1989.

And as far as the author’s points regarding a “strengthening U.S. economy and rising interest rates . . . derailing the epic yellow metal mania,” they are as flawed as the title of the piece.

Mania?  This Reuters writer originally suggested that gold investors are nothing but “nervous Nellies,” which is quite the opposite mindset to the greed thesis characterized by manias?  So, which is it? Is fear or greed driving the decade-long gold price rise?

Reuter’s point that a strengthening U.S. economy will save the day and stop the embarrassing ascent in the gold price may well be true in a relativistic context, but not in real terms, however, which is the whole point of the Fed’s zero interest rate policy (ZIRP) and the investor revolt into the gold market.  Real interest rates at, or below, zero propel the gold price, not nominal GDP.  So, the notion that gold doesn’t throw off income is a species one within today’s financial environment of near-zero Treasuries at the short end while food and energy prices soar well past the double-digit mark.

And as far as the case that higher stock prices presage an economic turnaround in the U.S. economy has less to do about a real strengthening economy, but has more to do with institutional investors locked into the bond/stocks allocation charters betting on a devaluation, a la Zimbabwe—wherein the Zimbabwe stock market, in one year, outpaced the returns of the S&P over its entire history as an index.

And lastly, higher interest rates, as Swiss money manager Marc Faber has stated, mean nothing if the rate of inflation is higher than the Fed’s federal funds rate—as during the 1970s. Maybe the author was too young to remember that golden decade of wealth destruction, which in real terms eclipsed the the wealth destruction of the Great Depression.

And since this present crisis is expected to dwarf the financial pain of the 1970s, it makes a lot of sense for investors to become “nervous Nellies”—and fast.

Yamana Gold Inc. (NYSE: AUY)

Gold Corp. Inc. (NYSE: GG)

Barrick Gold Corp. (NYSE: ABX)