On the heels of of the disclosure that China will buy oil from Iran using gold, legendary trader and investor, Jim Sinclair, told King World News that the massive paper gold shorts are now trapped and may see gold gap up to $3,000 if a vacuum in the physical market develops. Sinclair described this event as “historic.” But first, here is what Sinclair had to say about the recent trading action in gold: “You have seen in the last month, a phenomena. If you have eyes in your head, you have to know when the gold banks enter into the gold market, offering more for sale than would be mined in the next five years, they are not in there to sell anything. They are in there to manipulate the price.”
Jim Sinclair continues:
“Well, we’ve seen some V-bottoms during daily operations, where they (manipulators) have forced gold (down) and it just snapped right back. There is no question, it is a matter of record, that multiple central banks around the world have been large buyers of a significant amount of gold in the last two months.
As the paper speculators attempt to manipulate the price lower, they have run into the physical buyer who won’t let the physical market follow the paper market. Who is giving gold a chance here? Who’s talking positively about gold, except a very few?
(Listening to Martin) Armstrong and financial TV, you would imagine that gold didn’t have a chance. Yet every time the manipulators come in to reduce the price they are running into significant physical buying....
“At the same time, gold will be upgraded by its use in settlement by China and Iran. This is a very significant change.
The physical market is overcoming the paper market, and gold is being used in huge amounts by a giant (China) in international commerce, in commercial settlement. That’s news. This is something that will go down in the history of gold, that very few have properly analyzed or understood at the present time.
There is a possibility that the physical market for gold, on the sell-side, meaning the ability to buy the physical market to cover against a paper short, might actually evaporate. The people who are buying gold in the physical market, are not buying it for selling it tomorrow.
If you have $100 million, you would want $50 million in gold. If you have $1 trillion, like some of our over the counter derivative specialists that got their money through TARP and the other programs, you might not want to keep all of that $1 trillion in paper. Being the perps of worthless paper, they should certainly know the foundation of fiat currency, for their personal wealth, is a very weak foundation sitting in sand.
The type of buyers that central banks have been, could actually create a situation where the only supply coming in for gold would be new mining supply. You could then get into an exogenous event, Israel versus Iran, there are many possibilities on this planet right now for an event coming out of nowhere with significant political implications.
You might be trading somewhere around $1,650. How do you know you couldn’t open at $3,000 the next day if there was no way for this enormous paper short to cover itself (because) the physical market went into a vacuum? The physical market is constantly in off-take, it’s not in supply.
You move toward a position where the risk of being short the metals is so high, that it’s untenable. You’ve got the possibility of an exogenous event simply by mistake. Would you want an exogenous event to create a shortage in the physical market (for gold), against a huge paper short (position), at a time when currencies, thanks to the use of SWIFT as a weapon, don’t really look like they have universal acceptability?
That’s right, they don’t have universal acceptability if you can’t transfer them. This is one heck of a mess. This is a huge development. It’s something that is historic in the evolution of gold to the reserve currency of choice.”