gold commentary ~ jim sinclair

Tuesday, April 20, 2004, 11:37:00 AM EST

Morning Gold Commentary

Author: Jim Sinclair

Gold sales by the French and Swiss National Banks represent a singular most BULLISH event. In the 1970 gold bull market, every ounce offered for sale at the time was purchased. In this latest case, the buyers will be Islamic and Asian and the sales will memorialize the shift of economic influence away from the dollar and the euro into gold.



These kinds of sales allow singular buyers of huge amounts of gold to enter the market and/or expand their positions at singular prices. As such, these offerings invite bullish interest rather than dissuade it. It can be said that the central bank selling of the 1970's made the bull market possible in terms of the huge price advance it had off the base. That is fact not speculation.

There is no question in my mind that inflation is awake and growing. It is becoming more and more evident in daily life. Also, there is no question that the dollar will remain weak on balance because no policy changes are on the horizon to reduce the triple deficits of the USA. That being said, the US dollar will go lower on balance and will not cease its decline until policies emerge under new managers to combat these deficits.

The combination of inflation and a weak dollar is the formula that will push gold to $480 and in time to $529 and beyond. So the action of the French and Swiss central banks demonstrates a recognition of the above and is simply an act of total desperation to support their friends at COT who are doomed to severe loses.

COT will turn bullish just as they did in 1979 by purchasing a central bank offering to long side spread hedge their short positions. Yet the COT figures will never tell you this because they are structured to be used by COT to their advantage.

The end result of both the French and Swiss Central bank selling will be to shift the timing of the break above $405.50, $419.70, $430.30 and beyond $480 by 5 trading days. Rather than launching this week, it will happen during the first week of May.

For you speculators out there, it now means that emphasis should be put on the August $430 calls because the June calls, which mature in late May, will now be squeakers to get in the money.