Sinclair & where gold is goingSinclair is a reliable source. You've heard the saying, "Follow the money"--well, the real money is gold, so to understand events, you have to follow the gold. In 1944, at the start of Bretton Woods, the U.S. held 90% of "official" or central bank gold. Since then, U.S. gold reserves have dropped well below 30% of CB gold, and what remains is heavily leased to bullion banks for short sales. How did the U.S. lose 70% of their gold reserves? It was sold to help finance wars and social programs. Where did it all go? It flowed east, to Europe and Asia (mainly Japan). So the directional flow of gold sales is crucial. Today's gold sales are moving gold steadily from weak hands to strong hands: central banks in fiscally weak countries are selling gold to countries with positive trade balances that are accumulating gold reserves. Mining production is flowing to private hands in western post-industrial nations as well as rural Indian buyers of jewelry and Chinese nouveau-riche and middle class. As Sinclair notes, all gold sales are not equal. He comments that hedgies don't understand the gold investors. Hedgies think that gold investors will take a profit when gold rises 20% or breaks some psychological barrier, like $700. But they won't sell. Bullion investors are not making a trade, they are protecting their wealth and standard of living against eroding fiat money. As long as inflation threatens, private gold holders will only buy, never sell. I'm still sitting on bullion coins I bought in the 1980's. The US dollar is in deep trouble. It has been debased drastically over time, but more devaluation is needed to resolve debt overhangs. If the terribly oversold yen rises substantially against the dollar, a credit crisis will result. One look at the JPY chart below should send you scurrying to Bullion-R-Us. Just my opinion.
