Friday, April 01, 2005, 8:49:00 PM EST
Gold and Dollar Market Summary
Author: Jim Sinclair
Dear CIGA:
Wisdom cannot be dated as its character is eternal. No matter what the times, many people will still deny the existence of wisdom only to discover that denial runs directly in the face of stark reality.
One quote that applies directly to the US dollar comes from the Chinese philosopher, Mencius. When asked by a disciple, “Now the whole kingdom is drowning; how is it that you do not save it?” he replied: “A drowning kingdom must be rescued by right principles, not like a drowning person by the hand.”
Authoritarian Free Enterprise, our new economic system in the US, requires the powers of the Oval office to be near absolute. Near absolute power occurs when all functions of the government officially or unofficially answer to the Oval office. An example of this is the new Pentagon private intelligence unit with no oversight body. It has been established under the civil head of the Pentagon and answers only to the Oval office.
The argument regarding the necessity of this method, which takes its basis in a fight against terrorism, has logical merit but the end result is the same. A king need not be a singular person but can be in the form of an ideology run by third party motivators (behind the scenes king makers) functioning as the ultimate unseen hand.
New faces can appear in the same office but a kingdom has been established nonetheless. Such a political arrangement is required for the prosecution of the new system now in place which is Authoritarian Free Enterprise - not Capitalism or Free enterprise. Authoritarian Free Enterprise as an economic system eschews the economic theory of the “Unseen Hand” where each individual works for the good of the whole and adopts Federal intervention in market. It is argued that such a system is infinitely more predictable therefore infinitely more profitable.
I have explained to you why the decimation of the US dollar fits perfectly into the establishment of this new system. Since Authoritarian Free Enterprise totally lacks social consciousness, it cannot function when paying for it. In order to rid itself of all social obligations formed since Roosevelt came into office, a crisis in the dollar would serve to raise the level of fear in society and ease the passing of legislative action to cancel all entitlements.
It is by this method that the architects of the new system plan to reverse the dollar. They will also put gold back into the monetary system as a modernized revitalized Federal Reserve Gold Certificate Ratio but not as an antiquated formula tied to interest rates. This time the link will be to world liquidity starting at the level of liquidity then existing calling it 100 for a new scale of measure.
Those that deny this simply demonstrate their ignorance of what gold is all about. Convertibility will never come again. It is antiquated by the simple size of world trade and that is all there is to it. Then all those who are building the system of Authoritarian Free Enterprise will own most of the dollar and gold and will wish both to be quite strong.
If I had to point to a place of origine for Authoritarian Free Enterprise, I would wager that the BIS was its parent as it is a world phenomenon in which President Putin is deeply involved. Even the dismemberment of the CIA is required in order to fulfill the plan for a more orderly economy world wide benefiting the "haves."
The major flaw in this plan is that the ego mania of the architects of Authoritarian Free enterprise actually believe that they know exactly how to handle all markets and therefore all economic situations. This is the exact order of how the transition is to be accomplished: You have been told this by no less than the Chairman of the Federal Reserve, Mr. Greenspan.
The other weakness of this approach is the fact that once the madness of the crowd is unleashed, it cannot be brought back into order with ease.
The last weakness of this approach is the outrageous size of the US dollar market trading internationally which if panicked will eat every central bank on the planet and may well not recover.
The US dollar is the symbolic banner of the new US Kingdom, underpinned by the ideology of Authoritarian Free Enterprise. Since a lower dollar is desired, you can be sure that no new policies will be adopted in order to reduce the triple deficits of US Budget, Trade and Current Account.
A modern day Mencius would say that "right principles are right economic policies that have a known history of reversing the triple deficits" as opposed to measured ¼ point rate increases trailing inflation. There are no such right actions contemplated now or in the near future. The hand that will not help the Kingdom is all the spin and interventions that take place by the Federal entities as coordinated statements such as Greenspan's now famous “Dollar Bottom.”
Because of this, the US dollar will again fail to meet the upside projections of the present short covering rally and break down below .8150, staring its trip to the low 70s and potentially to the low 50s as measured by the USDX. This will test the concepts of the economic planners behind the spinners. Either way it is good for gold.
So why buy the US dollar or short gold? The risk you take is not being there when out of the blue the dollar drops and gold's rise begins. If you must trade use the tool given you by buying gold on WEAKNESS when TA correct and selling it on STRENGTH when TA correct - never unloading more than 1/3 of your position.
Better still, buy what you can afford without credit of any kind and check in every few weeks to see where you are.
When the dollar breaks, the depreciation following that break will appear as if it is a straight line down. Gold will be a straight line up. I recall the trading days when gold would move up over $100 and it will again. No one knows that day but every square price of the gold puzzle is now in place. Therefore it could be tomorrow.
To see an example of the relationship in trading between the US dollar and gold take a look at chart #1 and chart #2. For a weekly review of the center of the investment universe, the US dollar - and therefore gold - click here.
Today took the newest market madness to a spiritual level as economic reports ran at 180 degree differences between concepts of inflation and a weakening economy. To add to the madness, other participants, namely equities, reacted manically to the strength of oil.
Dollar Gains After U.S. Factory Prices Rise, Services Expand
April 1 (Bloomberg) -- The dollar advanced against the euro and rose to a five-month high versus the yen after an industry report showed prices paid by U.S. manufacturers jumped last month and services industries expanded at a faster pace.
The figures, one of which was accidentally released early, sparked a rally in the U.S. currency after it initially declined following the Labor Department's monthly U.S. payrolls report. Employers added 110,000 workers in March, barely half the number economists expected. The euro fluctuated almost 2 cents against the dollar in less than two hours.
``A lot of players established short dollar positions at bad levels,'' said Tom Benfer, vice president of foreign exchange in New York at the Bank of Montreal. ``As the market turned stronger for the dollar, it turned into a blood bath.''