Posted On: Friday, August 15, 2008, 12:37:00 PM EST

The Olympic Medal For Gold Price Indecisiveness

Author: Jim Sinclair

Dear Friends,

Goldman gets an Olympic gold medal for lowering their gold target for 2008. This is now a world record three changes within 12 month. I am waiting for the fourth change which will be back to an estimated four figures.

The USA and Poland decide to really get Putin angry. It would seem that this might be asking for a major confrontation almost immediately.

Pakistan is getting hotter by the day which will require a Coalition of the Willing to once again remove the nuclear hardware as the Taliban working with the Pakistan Army and Intelligence increase their control.

Everything is just dandy in US economics as an increase in automobile manufacturing is reported, regardless of the fact they cannot sell them. It is always nice to see the dealer's lots filled.

Fannie and Freddie, who are under critical financial strain, get the go ahead to back and buy more mortgages. They therefore get to securitize more debt instruments, even the huge but scary no paperwork Alt A types.

JP Morgan has its debt downgraded as there is no loosening of credit conditions.

Moody fired a significant number of top executives over miscalculation of ratings. You can be sure that ratings for many financial entities will now tank as they should have already

A major reason for the follow through weakness of the euro is an assumption of increased interest differentials favoring the dollar over the euro because of assumed inflation fighting on the part of the US Fed as the US economy improves. There are multiple and critical holes in that reasoning which I will cover today on www.JSMineset.com.

You are witnessing violence in the gold market that is but a starter lesson. This violence has as its basis the first major coordinated currency intervention in the euro. The dollar as a mirror image of the euro rose with absolutely no economic basis. Gold fell as it is an inverse currency of the US dollar. Certain hedge funds went broke on other items. They were holding gold and the last of that was thrown into the market to sell after cash gold broke $800. Margined gold holders went in mass into negative cash positions which resulted in them being sold out last US evening as every commodity house now operates in the 24 hour market with computer margin real time valuations. All the gold and commodity bears are being dragged out for media exposure because it fits the agenda of the moment.

This is the prime example (as I told you a thousand times!) any margin in gold anything is a financial death wish.

As gold hit its lows last evening over $40 off I am told the Chinese entered the cash market to take the layoff in cash gold off the bankrupt hedge funds and negative value sellouts in the paper market.

You have seen massive involuntary liquidation last US evening. That type of a situation is common to lows. The bull market in gold will not be broken because fundamentally the problems will not obey and go away.

Please review the following interesting article:

Stage two of the gold bull market is just beginning

Tuesday, August 12, 2008, 07:28 PM GMT

A war breaks out in the Caucasus, pitting Russia against a close ally of the United States. Inflation reaches a new peak in the euro-zone. The CPI reaches the highest in Britain since Bank of England independence. Rampant inflation sweeps the developing world.

Yet gold crashes. It has failed to deliver on its core promises as a safe-haven and inflation hedge, at least for now. Why?

Four possible answers:

1) Nobody seriously believes that Russia will over-play its hand. The world could not care less about Georgia anyway. Ergo, this is a bogus geopolitical crisis.

2) The inflation story is vastly exaggerated in the OECD core of countries that still make up 60pc of the global economy. The price of gold is already looking beyond the oil and food spike of early to mid 2008 (a lagging indicator of loose money two to three years ago) to the much more serious matter of debt-deflation that lies ahead.

3) The seven-year slide of the dollar is over as investors at last wake up to the reality that the global economy is falling off a cliff. Indeed, the US is the only G7 country that is not yet in or on the cusp recession. (It soon will be, but by then others will be prostrate). As an anti-dollar play, gold is finished for this cycle.

4) The entire commodity boom has hit the buffers. Looming world recession (growth below 3pc on the IMF definition) trumps the supercycle for the time being.

Gold has fallen from $1030 an ounce in February to $807 today in London trading. It has collapsed through key layers of technical support, triggering automatic stop-loss sales. The Goldman Sachs short-position that I have been observing with some curiosity has paid off.

More?

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