-- Posted Thursday, 26 April 2012 | | Disqus

Legendary gold trade Jim Sinclair is seriously suggesting that gold could spike to $3,000 in a short squeeze because of the Chinese decision to pay for oil in gold bullion (listen here). Basically there will be a sudden demand for physical gold that cannot be met and short sellers will be forced to cover and buy gold at higher prices.

He told King World News: ‘You have seen in the last month, a phenomena. If you have eyes in your head, you have to know when the gold banks enter into the gold market, offering more for sale than would be mined in the next five years, they are not in there to sell anything. They are in there to manipulate the price.

Central banks buy gold

‘Well, we’ve seen some V-bottoms during daily operations, where they (manipulators) have forced gold (down) and it just snapped right back. There is no question, it is a matter of record, that multiple central banks around the world have been large buyers of a significant amount of gold in the last two months.

‘As the paper speculators attempt to manipulate the price lower, they have run into the physical buyer who won’t let the physical market follow the paper market. Who is giving gold a chance here? Who’s talking positively about gold, except a very few?’

Mr Sinclair is of course among the very few who understand what is going on here and do give gold a chance. And even his words of wisdom can be somewhat opaque to those who do not follow the gold market on a regular basis.

Big ‘if’

This latest pronouncement is still based on a big ‘if’. For we cannot be sure that China will actually use bullion to buy oil from Iran. The EU may well not impose its oil buying embargo on Iran this summer if it gets material progress in talks on Iran’s nuclear program, and that looked a bit more likely last week.

Then again a switch out of the dollar to buy oil and into a commodity that is a currency is a fairly natural step in the current environment of global money printing. Basically the holders of two commodities are organizing a barter trade to avoid currency risk.

This is already happening at the national level among the BRICS emerging economies who want to trade between themselves in their own currencies rather than the dollar whose current high is probably coming just before a major fall once the US presidential election is done.

However, ArabianMoney is not convinced either that the Iranian oil embargo will go ahead or that spiking the gold price at this point is in China’s best interests as the world’s biggest holder of dollar reserves. Still logic does not always apply in such matters and Mr Sinclair has his hands on experience of the 1970s to call upon.

-- Posted Thursday, 26 April 2012 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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