"The US Dollar Is The Truth Machine" Author: Jim Sinclair
"The COT raiders under the cover of increased interest rates in China have loudly declared that the commodity market rally is over and therefore gold must go lower.
There is, however, a TRUTH MACHINE operating out there by the name of the USDX. If COT can do the almost impossible task of bringing the dollar back into its up channel and holding it there then I am temporarily toast. If they cannot, then they are permanently toast.
The hardest market to fool for any significant period of time is the currency market. In order to fool the currency traders you will have to convince them against all odds that the following axioms aren 't true:
1. Increased interest rates as a product of inflationary expectations are positive to the gold price.
2. ln the presence of the triple US deficits of Budget, Trade and Current Account - and devoid of any policy changes to reverse that condition - a rally in the US dollar is a counter productive element that sows the seeds of its own demise.
For COT to win this grandstand gold play using chart painting as its tool of market manipulation to cover their short positions at an average price of $354.50 and then shift to the long side before taking gold to $529, COT will have to convince the currency crowd that the following is UNTRUE:
1. The act to restrict bank lending to corporations in China will not affect the level of manufacturing there because it is primarily for export. As such, only a deceleration of those economies demanding their export products will slow down manufacturing in China.
2. The history of Stagflation shows that commodities appreciate for two reasons: First they rise due to demand and dollar debasement. Secondly, commodities continue their rise due to dollar debasement alone. Stagflation is a period of stagnant business activity and inflation combined.
Conclusion: '
In order to hang onto the gain that COT created in painting the gold chart as a possible Head & Shoulders with a neckline break today via brute strength and disinformation concerning the implication of higher interest rates in China, COT will have to manipulate the USDX at least back into its Up Trending Channel and hold it there. That is a huge undertaking and may well be beyond COT's ability or that of the Exchange Stabilization Fund for that matter.
The battle lines are drawn and COT is not facing the Gold Community which is nowhere to be found. They are either tapped out or scared and are not a factor right now. It is COT versus the Islamic and Asian interests right at the moment.
Japan is said to be a buyer of gold and that may be known as early as May the 8th. Whatever COT advantage has been established at present is limited by two elements: The first is the US dollar action and the second is May 8-12, assuming the UBS comment on the Bank of Japan is correct.
Relative interest rates on currencies in this triple deficit world with inflation awakening is irrelevant to currency selection."
http://www.jsmineset.com/home.asp?RQ=EDL,1&ARFG=1&GID=0&linkid=6 ================================ Form your opinion. Note the disclaimer below.
