Paper Markets To Disappear As Gold War Rages

Today legendary trader Jim Sinclair predicted the paper markets would disappear as the gold war intensifies.  Sinclair also spoke with King World News about the “end game,” how various countries are positioning themselves, and how this will impact the gold market.  Below is what Sinclair, who has been actively trading the markets for over half a century and whose father was business partners with legendary trader Jesse Livermore, had to say about what is now taking place as the gold war continues to rage.

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Jim Sinclair: “The market character has now changed for gold and very few recognize that.  Gold is a trading market which involves sovereign entities, very serious sovereign entities such as China and Russia.  Recently you can even see the minor central banks such as South Korea purchasing gold. 

The price fixers can manipulate or play the futures or paper markets, but it’s the physical market which will determine the price of gold.  Physically is monetarily.  Paper is casino.  Because the monetary nature of gold is what’s going to create a significant increase in price, the futures markets will start moving towards cash markets....

“As gold rises now from the lows that I believe we are already in, towards the $3,500 mark and above, you will have the futures exchanges increasing margins until they get to where they were when they thought the Hunts were going to take delivery.  That was 100% margin.

A 100% margin is a cash market.  The futures market is not going to explode, it’s simply going to disappear as the futures markets become cash markets.  This will take place as the price of gold rises to $3,500 and above for sound reasons.

These powers that are out there working these markets we would both agree must be respected.  They can make a market sing and dance any time they want.  But there is the offset against the physical demand which has expanded significantly as the market came down, even at the coin level for mints.

The numbers that come out of the mints are hard numbers.  They are not manipulated like other government releases.  It’s also indicative of the physical market.  There are entities in this physical market that are bigger than all of the gold banks put together.

If the US got Putin angry you would see something happen in the gold market.  Russia, China, and other central banks know what the end game is.  They know that gold is going to balance the balance sheets of the major deficit spending nations.

Now those deficit spending nations like the US, which would like to protect the dollar, see gold as competitive.  They may well be dragged to this conclusion yelling and screaming and causing volatility all of the time (in the gold market).

But the end game for all of this will be a significantly higher price for gold, and a market that will remain within 5% to 8% of that high price.  In the years to come this will balance the balance sheets of the errant central banks who are kicking and screaming all the way to the very end.”

Sinclair also added this regarding the changing nature of the gold trading pattern:  “I believe because of the physical market, even the type of announcements we have seen recently where South Korea bought a significant amount of tonnage, I think what we see now is a total change in the character of the market. 

The Friday $20 knockdowns have disappeared.  Where are the early morning straight down and holding the price down trading patterns for gold?  You can’t deny that Mondays are a little nicer than they were, the last two Mondays in fact.  You can’t deny that the well-timed, twice-a-day $10 drops have stopped taking place.

You now notice that the market is popping back from selloffs, where it hadn’t been doing that before.  So the character of what you see, which means the momentum of what you see, is changing.  When momentum changes price changes.  And if momentum changes it certainly is a very significant indication that the maximum downside price has been accomplished in any item.  So I firmly believe the bottom is in, and if it isn’t it’s coming very fast.”

Sinclair also added:  “The character of what’s in this gold market is so different from the bull market of the 1970s.  The bull market of the 1970s was mostly traders and some central banks, but there wasn’t a huge sovereign interest.

What you are dealing with now is China and Russia, who are doing what they are doing in terms of accumulating gold because they know the end game.  The manipulators of the market will come face to face with that physical reality.  When they mess with these markets now they are playing with China and Russia.

Any takedowns that occur will be brought to an end when the physical market fails to fall away as the paper market trades lower.  This is something that can be seen when volume in the physical market swamps the futures markets.

This is the time when nations take positions.  Remember, every one of these nations can create money when they choose to.  So don’t they have unlimited ability to purchase gold if they know the end game is in gold’s favor?  The answer is yes.  The bears will lose and the bulls will win before this war is over.”