Author: Geoff Candy
The poor outlook for the dollar continues to provide good prospects for the price of gold.
According to Jim Sinclair, chairman at Tanzanian Royalty Exploration, the price of the yellow metal could reach as high as $1650 by the end of 2010 and moving into the beginning of 2011. But, the man admits that, given recent happenings, this could be a bit of a low estimate.
“My thesis is that gold is a contra to the US dollar and recent statements out of the Federal Reserve that interest rates will remain extremely low until 2012 is really a go ahead signal for gold to continue to perform as it has until at least 2012.
Speaking to Mineweb Radio, Sinclair explained his reasoning: “If you look at the way US foreign debt is just about touching $3 trillion and our economy is not responding as China has, we have very serious systemic problems that have resulted in high levels of unemployment and I can’t buy in to a new normal economic recovery devoid of hiring people.”
He adds that the US is now beginning to apply fiscal stimulus, which has “a habit of sucking inflation out of monetary expansion”.
“I do think we are going to see the currency influenced inflation event that is hard for people to understand, given the difficult conditions in the job market and with the only booming business being Wall street.”
Given his view of gold’s relationship to the dollar, Sinclair was asked about the dollar’s continued status as the reserve currency.
“We can clearly see the dollar is no longer the universal reserve currency it was back in 2000; currency values come from momentum so you don’t need heavy selling of a currency for it to decline you just need less buying.
“I would think that the dollar will always be around at whatever value the market makes for it and it will always be part of reserves but it won’t be the universal reserve currency. You have a super sovereign currency unit, which is really like the dollar index that will be part and parcel of the IMF which I believe is becoming the central bank.”
He adds that, national strength and influence socially and politically has always followed the strength of currencies and it is very clear Wall Street is no longer the financial centre of the world, Asia is rising very sharply and nations that can produce gold at reasonable prices will find out that they are actually mining money.
All Things Considered….. John’s Commentary
Gold is decoupling from the dollar. The outlook for the yellow metal remains strong. A poll in early November 2009 of about 370 delegates at the London Bullion Market Association’s annual conference predicted that gold would reach $1,181 in 12 months’ time. The poll included 368 traders, analysts, miners and central bankers. As I write this commentary on December 2, 2009, gold’s spot price is $1,211. It didn’t even take 1 month to surpass their predicted spot price. $2,000 gold is a lock.
Now… it’s going to be a wild ride. Bull markets repeatedly attempt to “buck off” anyone who rides them. You have to hold on tight. THIS MARKET WILL CORRECT AT SOME POINT BEFORE IT RESUMES ITS UPWARD JOURNEY. We just don’t know when. You have to be in this investment for a minimum of 3 to 6 years. Don’t worry if it corrects – just buy more if you are able. We are nowhere near the top. You would think I’m nuts if I tell you my ultimate price predictions!
Gold appears to be on a course to break $1,300 for a multitude of reasons. Please call – I would enjoy discussing those reasons with you. The bottom line is that all of the empirical evidence indicates that we can expect much higher prices for gold.
