Jim Sinclair: $2,000+ Gold “Coming Soon”

In Thursday’s post on JSMineset.com, Jim Sinclair reminded investors of his long-standing slogan for the global financial crisis: QE to Infinity Sign-up for my 100% FREE Alerts!

“QE to infinity – there is no other choice,” the life-long gold market consultant stated.  “There is no other functional tool in anyone’s toolbox to stop camouflaged runs on the bank.”

Therefore, he wrote, “QE to infinity in the Western financial world is assured. As a result, gold in the $2,000s is coming soon.”

How can Sinclair assure this outcome?  Well, no one sees into the future with anything resembling crystal clarity, but Sinclair is studied on matters of central banking, money printing and the psychology of politicians and the most likely social consequences of their actions during financial crises.

For the most part, Americans believe that as the sole superpower of the world, the U.S. is not subject to the same rules as foreigners must abide by.  During the first half of the 20th century, the German people, too, believed that they were special.

In his book, When Money Dies: The Nightmare of the Weimar Collapse (1975), its author Adam Fergusson describes the events, attitudes of politicians and public as well as the consequences of Weimar Germany’s monetary policies following WWI which led to the collapse of the Reichsmark.

There are some parallels to today’s crisis with the financial catastrophe of 1919-23 in Germany (and Austria) to support Sinclair’s thinking up to this point.

“The Chancellor [Karl Wirth, 1921-22] would accept no connection between printing money and its depreciation. Indeed, it remained largely unrecognised in Cabinet, bank, parliament or press. The Vossische Zeitung [German newspaper] of August 16 declared that the opinion that the flood of paper is the real origin of the depreciation is not only wrong but dangerously wrong.”

—When Money Dies

“S&P has shown really terrible judgment and they’ve handled themselves very poorly. And they’ve shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement.”

—Treasury Sec. Timothy Geithner on S&P downgrade of U.S. debt

 “In Berlin the Majority Socialists and the Independent Socialists joined forces in a demonstration to protest ‘against the enemies of the Republic’”

“July 24 produced demonstrations against profiteering, capitalism and Fascism in Frankfort, where inoffensive citizens were molested, windows were broken, and one man kicked to death.”

—When Money Dies

“The ‘Occupy Wall Street’ movement has resonated around the world . . . Unlike some of the ‘anti-capitalist’ and ‘anti-globalisation’ movements that have sprung up and died down over the past couple of decades, this is directly linked to a sense of failure of capitalism itself. It is also intimately linked to working class discontent and rage at the conspicuous enrichment of the super-rich continuing through an enormous decline in working class living standards, unprecedented since the 1920s.”

—Red Scribblings – A blog for socialists politics, critical analysis and debate

 “In spite of his robust common sense, the man in the [German] street is beginning to believe what some interested industrialists are telling him, so that he seems almost readily to subscribe to the false doctrine that it is good for trade that a government, by inflationary finance, should habitually spend more than its income.”

—When Money Dies

 “O’Neill [Treasury Sec. Under President Bush] said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. ‘You know, Paul, Reagan proved deficits don’t matter,’ he said, according to excerpts. Cheney continued: ‘We won the midterms (congressional elections). This is our due.’ A month later, Cheney told the Treasury secretary he was fired.”

—Issues2000.org

“I will not support any plan that puts all the burden of closing our deficit on ordinary Americans.  We are not going to have a one-sided deal that hurts the folks who are most vulnerable.”

—President Barrack Obama

Clearly, the US is not at the stage of 1922 Germany, but the stage for a replay to some extent has been set in that U.S. budget deficits of 10% of GDP (not including unfunded liabilities, which exceed a projected $1.6 trillion cash-basis shortfall) is the first step toward a Weimar scenario.  A first step!

No one knows how the endgame will play out in resolving unsupportable debt levels, but it’s sure not going to include the Chinese continuing the game of mopping up debt issuance from Treasury.

Morgan Stanley’s Global Head of Economics Stephen Roach dismisses the notion that China’s $1 trillion-plus holding of Treasuries provides the needed disincentive to the Chinese to sell the bonds.

“After all, where else would they place their asset bets? Why would they risk losses in their massive portfolio of dollar-based assets?” Roach asked rhetorically. “China’s answers to those questions are clear: it is no longer willing to risk financial and economic stability on the basis of Washington’s hollow promises and tarnished economic stewardship. The Chinese are finally saying no. Read their lips.”

Recent data from the Fed’s H.4.1 shows a meaningful decline in Treasuries held by foreigners at the Fed.  The trend line of increased holding throughout the crises has finally been broken; holding are now beginning to decline at a time when holdings must increase at the same rate as the Treasuries are issued and rolled over.

For those interested in following Treasury holding by foreigners (not broken down by country), zerohedge.com provides a link and commentary on the Fed’s H.4.1 reported, issued weekly.

Jim Sinclair says gold’s going to $2,000 and beyond, with a final target price well above $10,000 as the crisis in Europe eventually makes its way to the U.S., ground zero.

Expect $85 Silver, says Legendary Market Technician

As Asia continues to report soaring CPI statistics, with Vietnam’s 22% inflation rate as the most recent evidence of the Fed’s QE2 “liquidity” rippling through the world’s economies, legendary technician Louis Yamada told King World News (KWN) the precious metals are set to takeoff again as a result of Bernanke’s monetary actions.

Yamada’s fame as the market technician with a track record of “getting it right,” began as director and head of technical research at Smith Barney (now of Citigroup (NYSE: C)).  After being voted as the leading market technician in 2001-2004, she went off to found her own research group, Louis Yamada Technical Research Advisors, in 2005.

“Gold continues to be in an uptrend in our work,” Yamada told KWN.  “You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475 … Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective … we could see $5,200 on gold.”

Yamada is the latest of a raft of highly credible analysts, money managers and bullion dealers coming out during the past two weeks to tell KWN and other news organizations of the imminent explosion in the price of precious metals.  James Turk, Jim Sinclair, John Taylor, Ben Davies, John Embry, Peter Schiff, and Jim Rogers (who announced he is adding insult to injury to the U.S. dollar fiasco by shorting U.S. Treasuries) have all advised to go long the anti-dollar trade.

The lone hold-out of considerable import to the precious metals market is Marc Faber, the favorite go-to guy for the most steamy of quotes and anti-establishment rhetoric of all hard money advocates.  His forecast for this summer is for the monetary metals to succumb to the 30-year track record of weakness and relatively thin volume.

As gold makes new highs above $1,600 and silver makes its way past $40 amid a fierce “250 million ounces of silver in 1 minute” smack down attempt by the cartel last week, according to Precious Metal Stock Review’s Warren Bevan, the majority of our favorite talking heads, so far, have it right, and Marc Faber has it wrong.  But the summer isn’t over yet, and Faber hasn’t budged from his forecast for the metals.

Yamada, who, incidentally, didn’t offer a time frame for her targets for the gold and silver price, said her next target for silver is for a double “over time” from the $40 print.

“We hit part of our silver targets at $50, (expect) $65, even $80, $85 over time,” speculated Yamada in the KWN interview.  “We had an 88% rally in a very short period of time from January and a one third retracement, 34% down, so that was pretty normal. We saw some support at $33 and would loved to have seen it go sideways a little bit longer to be honest with you,” noting considerable dollar weakness in light of the  sovereign debt crisis with the PIIGS of Europe has revealed the dollar’s diminished status as the world’s safe haven currency.

“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!” she said.

“In other words you had a rally in 2009 that carried 25%,” Yamada explained.  “Then, in early 2010, the rally was only 19%.  And the second one in 2010 was only 7%.  And this time, you haven’t even seen 7% with the crisis that has evolved.  So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven.”

While the systemic problems with the euro and dollar come fully into focus, we should be mindful of U.S. Treasury Secretary Tim Geithner’s recent comment on Meet the Press of July 10, when he said, for a lot of people, “it’s going to feel very hard, harder than anything they’ve experienced in their lifetimes now, for a long time to come.”  Bloomberg reported that Geithner may step down from the head of the Treasury.

As of 12:36 in New York, gold trades at $1,612.79 and silver at $40.05.

Advice from 60-year Market Veteran Richard Russell

What is the man who publishes the longest running investment newsletter thinking right now?  In his June 30 missive, Richard Russell of Dow Theory Letters offered his overview of the equities markets, and isn’t too sanguine on the idea of jumping aboard.

At this time, the stock market has been giving clues about the dollar’s next move, while the dollar has been giving clues about the next likely move in stocks, recons Russell.

The La Jolla, Calif-based octogenarian is no fan of the U.S. dollar in the long run, and has repeatedly opined of its progressive failure as the world’s reserve currency.

Russell watches stocks for a heads up to any impending doom for the dollar.  We can surmise from Russell’s latest letter that he’s bullish on stocks as the dollar devalues, but is bearish on equities if the dollar is expected to fall too far, too fast.  So far, nothing he sees in stocks has him concerned about the dollar.

“Currently, the Averages had every opportunity to break below their last secondary lows,” wrote Russell.  “The Averages refused to break down — instead both Industrials and Transports rallied above their preceding June highs. I took this action to be bullish, and with a bow to the advertisers of ‘The dollar crash’  I can say that a dollar crash is not going to occur any time in the near future. If the crash was near, the D-J Averages, in their uncanny wisdom, would have sensed it and given us the news by breaking below their June lows.”

According to Dow Theory, Russell believes stocks are in a bull market, but he doesn’t want to buy any for reasons of valuation.  Analysts citing historically cheap stock valuations relative to bond prices (going back to 1958) don’t fool Russell.  He was busy writing his first newsletters in 1958, but doesn’t remember a Fed buying 70% of newly issued Treasuries to artificially lower interest rates during Ike’s second term.

Instead, Russell looks to the dividend yield of the markets 30 bellwethers.  The current dividend rate of under 3% in the Dow “is far away from the bargain counter” in his assessment.

“So is it really a bull market? I think it is,” added Russell.  “Then shouldn’t we be up to our necks in stocks? I choose not to be, mainly because I don’t like the values. Dividend yields are low in my estimate, and I’m in no hurry to rush into the arms of an anxious and waiting Wall Street.”

Like a salesman who senses a deal is closing too easily to be true, Russell smells something foul from Bernanke’s scripted economic outlook for the remainder of the year.  The WWII veteran has seen too much to be lulled into “some believable fairy tale” told by the Fed and the perma-bulls on Wall Street.

“It bothers me that it’s all so pat and so widely accepted. So far, the Treasuries are acting according to script and so is gold,” mused Russell.  “The stock market is acting as if something better is riding on the winds of the future. Could something be amiss with the accepted scenario? Could Bennie Bernanke have it right? And why is Treasury Secretary Geithner ready to say ‘bye’ to the administration? What can he see ahead that he doesn’t like? Geithner’s been Obama’s leading economic confidant. Certainly, an unusual time to exit.”

When Russell is convinced of a low-risk/high return trade, he states it flat out.  But today’s market prevents him from giving the green light on stocks.  Instead, he’s on the sidelines with his gold and cash until the stock market true fundamentals match the technicals.

With debt levels in the West remaining at record levels as percent of GDPs, Europe still in a quandary with the PIIGS, and a deadline for raising of the U.S. debt ceiling still a month away, a game-changing event could be just around the corner.

“June went out like a lion and today another powerful 90% up day,” wrote Russell. “As the old song goes, ‘Who could ask for anything more.’ Hopefully, today’s [June 30] verdict of the Averages are a forecast of better times ahead. But in this business, it’s always wise to stay alert. With the planet staggering under the greatest load of debt ever seen in human history, anything can happen and probably will.”