Posted On: Friday, August 15, 2008, 6:55:00 PM EST

The Case For Much Higher Gold Explained

Author: Jim Sinclair

Dear Friends,

Now you have the case for a much higher price in gold that if I had presented it without an article highlighting the European view, could have been considered simply prejudicial.

Now you know a valid economic argument that addresses the impact of a lower euro as equally positive to the price of gold even if the euro was to rise from here directly back to $1.60.

You also know about the odd Fed statement that the Begging Bowl loan window might open to non-US financial entities. The recent TIC report of Treasury purchases by non-US sources raises the question of whether non-US entities are already at the US Fed Begging Bowl loan window. The reason I say this is that the Begging Bowl pays in US Treasury issues, not cash, in exchange for garbage OTC derivative paper as securitized instruments. That would trigger a TIC positive event reporting that non-US entities have bought US Treasury instruments.

Please click here to read the final few thoughts of the article which should have raised your eyebrows.

?When EU Single Market Commissioner Charlie McCreevy was asked at a dinner what Brussels would have done if the eurozone faced a crisis like Bear Stearns, he rolled his eyes and thanked the Heavens that so such crisis had yet happened.

It will.

Gold bugs, you ain't seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder.?

This means that the euro falling below $1.49 is as threatening to the ECB as the euro at $1.60.

Now it appears that not only is the Fed between a rock and a hard place but so is the ECB, who by law cannot affect the Bear Stearns type rescue. The US Fed would have to step in or the constitution of the EU referencing the ECB?s scope of action would have to be changed. The latter is practically impossible.

I personally like the case for a higher euro because the US is in more trouble banking wise. I feel the US Federal Reserve will step in to rescue major euro zone financial entities threatened by bankruptcy, thereby placing the entire monetization of worldwide financial bankruptcy on the back of US dollar.

Actually it does not matter now if the Euro zone or the US is the weaker entity, nor does the interest rate differential mean much at all.

If the euro rises, gold will move immediately with it. If the euro falls, the problem complicates itself making gold the universal currency of selection above the dollar or euro.

The later alternative will take 90 additional days to form in the focus of markets; the strong euro already is understood as it applies to gold.

All this makes the recent violent drop in gold temporary and $1033 not a top no matter what the gold bears say on Financial TV.

Again please read the conclusion of the argument that seems at first glance contra to my position. It isn?t. It is just another route to $1200 and $1650.

If I have made that statement without raising your eyebrow you might have hung up the phone.

There is no force on the planet that can stop the price of gold from going to $1650 because there is no other means for the monetization of bankruptcy. It matters little if the doers of this evil deed are the US Fed, the ECB, or both. My bet is on the US Fed.

This is why I suggest to you that most commentary on gold comes from people who essentially don?t understand that it is on the road to becoming the primary currency, acting as a storehouse of value as the race to worthless between major currencies clouds the real outcome.

Gold will be at or above $1650 by the second week of January 2011.

Respectfully yours,

Jim

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