Thursday, May 3, 2012

Jim Sinclair has something to say

Jim Sinclair is not simply a gold bug; he successfully has called every major move in the precious metal — both up and down — over a generation. But he is not merely a market guru either. Sinclair has had a love affair with markets for 50 years. He has owned brokerages, clearing firms, mining companies and a precious metals dealer. His Sinclair Group of Companies, founded in 1977, offered brokerage services in stocks, bonds and commodities operating in New York, Kansas City, Toronto, Chicago, London and Geneva until he sold them in 1983. At one time he was considered the largest gold trader in the world, but today he is running his African-based Tanzanian Royalty Exploration Company and the MineSet web site that provides unique macroeconomic information to his loyal followers. Sinclair is a good person to listen to.

Futures Magazine: You have been right on gold for years. How?
Jim Sinclair: Gold has been a primary focus of mine for 50 years; I’m 71, if you put enough time into a subject you probably ought to get to know it. It became obvious to me that gold had performed extraordinarily well as a currency vs. the dollar; it performed very well in the 1980s and it performed very well on the downside. It was obvious to me that a turn was coming in 2001 and we reached a high in the U.S. currency and accordingly I felt we reached a low in gold.
FM: As opposed to some gold analysts, you have not been a perma-bull.
JS: There was an article in The Wall Street Journal in the 1980s that said “Bull takes off his horns,” which dealt with my feeling that the gold market had maximized its price and for at least 15 years it would not be central to investor interest. I put an ad in Barron’s in 1974, which they had a hard time with but finally accepted that [stated] “Gold at $900.” My call over the past 10 years or so has been $1,650. It has gone beyond that; I put it as a minimum it would trade at in 2011. My calls in gold have had reasons and so far have been accurate.
FM: You have done so many different things; talk about your background.
JS: I was a general partner at two New York Stock exchange firms. I have owned my own brokerage firm, clearing [members], arbitrage firm, minor metals dealer in London, and I began my sale of those when I called the top in 1980. I felt that the markets had to be approached in a different way and the things that I had done in the 1960s through 1980 weren’t applicable. I was rumored to be the largest gold trader in the world back in the ‘68 to 1980 period and that was a great compliment. Not necessarily true, but I was a significant trader and bear in mind I was a kid and I had no eraser on my pencil and didn’t believe I could be wrong. As you mature you find out you can be. Carrying the type of commitment I carried in those days right now would put me in the hospital if not the emergency ward because of the volatility of the markets. The ownership of the gold companies was simply a different way of approaching the gold market. I am a CEO and president of a public company that is involved in businesses in Tanzania, East Africa.

FM: The bear market in gold that began after the 1980 peak lasted 20 years. Where are we in the lifespan of the current bull market?
JS: My first prediction was 15 years, so I was wrong, it lasted 20 years. Right now, in Gann terms, we are at the beginning of the fifth wave. I would say in terms of time, the first possible period for maximizing a price on gold is early 2015. [Currently the market] simply might be the same as when gold went over $1,000 the first time and went back down to $750-$800. That was a shift in Gann terms; we may be in a similar shift right now.
FM: Gann?
JS: I am primarily a fundamentalist, but I have a tremendous respect for timing and timing is technical.
FM: What are the factors that are affecting gold? Do you look at traditional supply and demand factors, or is gold being moved by larger geopolitical concerns?
JS: You have to look at traditional supply/demand first, but the question is, are we dealing with a commodity or are we dealing with a currency? Historically gold has been a currency; [currently] gold is acting as if it is a currency. The price that gold went to [on its low] at $248 per oz. was perfect performance in terms of a currency. The price that gold is now, $1,660, is perfect performance in terms of a currency. We were in a unique period of time where we may very well be changing our monetary system as a product of the various strains and as a product of the means of meeting these crises in the marketplace. The great default was handled magnificently in terms of public relations and in terms of financial underpinnings to the point that it almost became a non-event. Yet it is an event, and the failure of sovereign debt is something that factors into all currencies, not only the currency of the debtor who failed. This period we are going through now, which I believe is a pause similar to the [one] that took place the first time it went over $1,000, is not terminal in terms of the market having maxed out its price but rather a shift during a period of psychology where the means to overcome the problems have, in a market sense, been successful. Yet, everything has consequences and the consequences for the means of overcoming the problems are yet to be faced.
FM: What do you mean by changing our currency status?
JS: Well, government moving more into the system than away from the system; more into central banks than out of central banks. We are not making a voluntary change, but circumstances are bringing about a change. There was a meeting of the BRICS (Brazil, Russia, India, China and South Africa) [recently] that discussed setting up their own [International Monetary Fund] and also their own currency bloc. The euro is inexplicable right now above $1.30 if you heard all of the bearishness on it. The euro is probably going to be with us for a very long time and will come through change solidly. The dollar was the reserve currency of choice and became the reserve currency by default, meaning you just had it and it has recently begun to be replaced by other currencies as an international settlement mechanism.
FM: Our last profile suggested it would take at least 20 years to replace the dollar as a reserve currency.
JS: I think that is wrong. The dollar isn’t going to be replaced; [it] always will be there, but as far as a settlement currency, weekly, almost daily, you see the dollar mechanism for settlement being replaced by other currencies. Especially by the internationalization of the Chinese currency. Nothing is going to replace the dollar, but it is the utilization and value that factor into markets.
FM: Will it be replaced as a global reserve currency?
JS: [It is] a global reserve currency by default. If the dollar was a global reserve currency by choice, international purchasing of U.S. Treasury instruments [would] be rising, not falling. All these headwinds against the dollar do not change it as a reserve currency but take it from a reserve currency of choice to a reserve currency by default. We are going to break down into three trading blocs: the yuan bloc, the euro block and the U.S. bloc. You already can see that by the Swiss having attached their currency to the euro instead of the dollar. That is the beginning of a currency bloc.
FM: You also mentioned the Brics having a bloc.
JS: The Brics [met on March 29] in India. According to the release on the meeting [they were] to discuss their own bank of an IMF type and also look toward increased settlement in contracts in their own currencies. Now the dollar will remain a major settlement currency, but the question of value deals with momentum of utilization, not with political opinions.
FM: How will that affect the U.S. economy?
JS: The net effect in the change of settlement is a mirror reflection of the emerging economic impact of others. I am not suggesting the U.S. goes down, I am only suggesting that when you have billions of citizens and you enfranchise a very small percentage of those in the position of consumers, you get the tremendous economic impact that you’ve noticed in China. China and India are headed to leading the world economies with the United States. Now who is going to be first, second and third is something that can be argued but the three major economic powers in the world are going to be the U.S., India and China.
FM: There are benefits to having the reserve currency. How will that change?
JS: There is a serendipitous but huge demand factor that a reserve currency enjoys as the settlement mechanism for international contracts. That is the dollar weakness now. Part of that demand factor will be going away as a result of utilization of other currencies that didn’t exist prior to the machinations that we just have gone through since 2008. It will take away some of the predominance--politically, socially and economically--that is inherent with a reserve currency and with sound monetary management of that reserve currency. This is what gold is all about. Gold is the currency of choice. The difference between gold as a currency of choice is that gold has no liabilities attached to it. It owes nobody anything, while every currency has liabilities attached to it that have to be [considered] in its international valuation through the market mechanism.
FM: Are you talking for individuals or for governments?
JS: It’s both. The period we just have come through has shown an increase in public interest in gold through central banks who see selling and began accumulating. It also has shown a significant alternative investment that very large investors have selected and participated in.
FM: Is it in periods of stress that gold changes from a commodity to a currency?
JS: That is one viewpoint, but gold was perfectly valued at $248 in terms of the U.S. dollar. When you get down to price of production it is rare than any commodity can exist for a significant time below the cost [of production]. The argument that gold was a commodity at $248 has its basis in the cost of production but the argument that gold is a commodity is a failure to compare it to its currency role, which it was performing perfectly by declining for 20 years.
FM: What about silver?
JS: Silver is not money for one practical reason: It is too heavy. Gold is extremely portable. If you wanted to buy a pick-up truck you could put the money in your lefty pocket in gold but if you wanted to buy it with silver even at today’s prices you would need a pick-up truck full of silver. Silver is not as monetary as gold.
FM: You have gone from a gold trader to a producer with your involvement in Tanzania American International. Talk a little about the company and your plans for it.
JS: My plans haven’t changed since 2001. My game plan back then and now is to accumulate as much gold as I can in minable form in the ground for extraction.
FM: How is owning a mining company different than just owning gold?
JS: Owning gold is the most conservative and least risky type of play. Owning gold is preferable to owning gold shares for a person who doesn’t seek leverage or risk. In the ‘80s I would be 25,000 contracts long if I [were] bullish. If I did that today I probably would be talking to you from the emergency room of the local hospital. I had 45 guys on the floor of the exchanges wearing my colors; I couldn’t possibly do that today.
Owning a clearing [member firm] is the riskiest business on earth because you don’t control your future; your future is controlled by the capability of your clients. I would rather dig for gold than run a clearing firm, and I did.
FM: In 2006 you put out an economic formula with some scary consequences, Can you explain it?
JS: The formula simply says that as business declines, it impacts government. It impacts government in terms of taxes received and the [affect] on government becomes a multiplier factor on the problem, because once the government becomes fiscally tight, [it] as a business begins to contract. The contracting business called government prevents a significant recovery [for] the general public and it is formula that feeds on itself until there is a point of intervention. When the intervention comes, be it a natural turn in economics or the civil conservation corps, you begin to have a significant turn in business. The fact that our recovery and our reaction to crisis has been to save the financial world but not to do much in terms of fiscal stimulation has resulted in bottom-bouncing rather than a significant economic recovery.
FM: The formula states rising interest rates will lead to geometric increases in U.S. debt to an eventual downward spiral “of unparalleled dimension.” 
JS: That occurs when you are not doing QE (quantitative easing). If you are not buying 62% of U.S. debt, which the Fed has done in the last 12 months, the cost of money would be astronomical. So you are forced into QE, that factors into gold.
FM: So they turned your theory around by intervention in interest rates?
JS: Artificial non-economic buying of government debt. If the Fed was not in the market doing what they are doing, rates would be wild. That is why some of the greatest names in the bond market have failed when they went bearish in bonds last year and they are more cautious this year. There are reasons to be bearish, but you can’t be bearish in light of QE. You don’t fight the government or fight the Fed. If you do that you stand in front of a locomotive, a locomotive [currently] dedicated to keep interest rates low.
FM: Is that a good thing?
JS: It is a necessary thing. Anybody who says that Bernanke or the U.S. Fed acted ineptly is not a practical person. They did what they had to do. If they had not performed as they did and as they are right now, circumstances would not be tolerable. They did what they had to do.
FM: Is it sustainable?
JS: No. Historically debt has to be paid and if you have financial difficulties, you can inflate your way out of it or deflate your way out of it. Historically inflating your way out of it has been the method chosen because of political prerogatives. The whole theory of kicking a can down the road is, economics will recover in order to heal the balance sheet problems, therefore making the methods used in monetary stimulation self-canceling.
Bernanke has done exactly what he had to do. If I was given the job of saving the financial industry in 2008 there was no other alternative. The whole thesis of that alternative is you do save business, and business turns. And because of the positive nature of the underlying business having turned, the liquidity can be drained practically without stopping the forward progression. That point hasn’t been reached. You are trying to play a symphony and if we [have] an economic recovery of significance, the symphony can be played. The reason gold is at a pause point is because there is an assumption that business activity is reaching a point that is take-off speed for recovery. That is the psychology of the marketplace. Gold is a reflection of that as a currency in competition with the U.S. dollar. Gold has a mind of its own, and it is to balance the international balance sheet of the United States or whatever the reserve currency is.
FM: What is it telling us now?
JS: What gold telling us now is the concern over [the] crisis is somewhat less, yet the underlying necessity of an economic recovery, which would be self-canceling in terms of liquidity injected into the economy via balance sheet repair, has yet to surface fundamentally. That battle will be fought in the relationship between the dollar and gold, and it will be determined in 2012, one way or the other. The bottom-bouncing we have been doing is not sustainable for a full year. One side of the team is going to win and one side of the team is going to lose. The swing factor is U.S. economics. If U.S. economics were to significantly improve, then there would be balance sheet repair. Then the dollar would be in a macro sense repairing itself, not requiring injections of liquidity to maintain the status quo. When the liquidity comes in only to fill a hole of loss in a banking system, net net zero. That is not going to make those banks lend anymore to individual businesses.
FM: You called cutting Iran out the Swift system of interbank funds an “act of economic war.”  Our readers generally understand sanctions but perhaps not this particular action. Why is it so important?
JS: The Swift system (The Society for Worldwide Interbank Financial Telecommunications) is called international bank wire. If you are trading commodities now and you are calling out your excess you are bank wiring in or bank wiring out, depending on whether you are losing or winning. This is the way the world moves in terms of settlement of obligations. We don’t write checks anymore. We bank wire. We have become used to issuing and receiving wires. Clearing checks is 1950s. If you eliminate either an individual bank or group of banks from the Swift system, you push them back into the 1950s where they can’t meet their obligations or receive the payments, so the Swift system has been used both selectively and country-wise. Why did the Swiss banks give up secrecy? Because if they didn’t they would be locked out of the Swift system. The company is called Swift, it operates in Belgium. It has stockholders and it seems to do whatever the consortium Western nations feel is required in a political sense. It is the singular transmission method for money. It has annual general meetings, stockholders, but then so has the Federal Reserve. The Federal Reserve is not a government operation; the Federal Reserve is a private corporation with stockholders.
FM: How does the U.S. affect the policies of Swift?
JS: Apparently the only way you can affect the policy of Swift is either be a member of the board of directors or be a major stockholder. Swift is not officially part of the sanctions but it is the means of enforcing [them]. If you shut people out of the ability to receive payments it basically stops their operation. Officially a private company is honoring the consensus opinion of Western governments. If you are locked out of Swift you are locked out of business today. You are out of business, you can’t receive funds and you can’t issue funds in the accepted method.
FM: Is the U.S. government a major stockholder?
JS: If it is it certainly doesn’t show itself. But then tell me who the stockholders of the Federal Reserve are because they are not public either. Officially a private company is honoring the consensus opinion of Western governments. If you are locked out of Swift you are locked out of business today. China is in the Swift system, Russia is in the Swift system. Are they going to lock Russia and China out? This is gargantuan because it has such an impact. It has become pervasive in its used and replaced the standard method of international check clearing.
FM: You have talked about threats to other nations using Swift.
JS: Public threats. I am not talking about private information. Read the Times of India and their reaction. If [India] continues to deal with Iran like they have been, the major banks of India will be shut out of the Swift system. Now what is India’s first reaction? Basically no, we will not be threatened by that. Now all of a sudden you start to see India starting to make announcements about cutting back on their dealings with Iran. Being thrown out of the Swift system is nuclear in terms of economic impact and therefore is a very powerful weapon. FM: We saw that you were selling your Connecticut farm.
JS: I have lived here for 30 years. I live alone now, my primary business is in East Africa where I own a home and I have a home in India as well. I need to spend more time in Africa because my business has succeeded, so keeping this place operating without being here would be nuts.
FM: In a recent interview you referred to the International Swaps and Derivatives Association (ISDA) as one of the most powerful organizations in the world.  This even though more OTC products will be cleared. Explain?
JS: It has proven to be so because they are the ones who declare whether a default is a default. Unless they declare it as a default the credit default swaps don’t function. If you have the power to determine whether something is a credit event or a default and the market for CDSs according to the Bank for International Settlement is $37 trillion then you are an economic entity more powerful than the Federal Reserve at a point of a Greek crisis because you are the guys who say whether a CDS functions.
FM: Would they retain this power for products that are cleared?
JS: As more of these things go to a clearinghouse there still has to be an arbiter over an event. Could the arbiter change? Yes, but it is unlikely because this organization is made up of the seven banks that have issued most of the CDSs.
FM: Is this dangerous?
JS: It is necessary. What is dangerous is the concept itself, because if a firm is making a living by issuing insurance policies but is not governed by an insurance regulator, how do you know a firm has the equity to meet their commitments if a default takes place? The dangerous item is an unregulated insurance company, which the brokers that issue the CDSs are. Right now it is the seven largest banks that issue the CDSs that are acting as insurance companies without insurance regulation.
FM: Have CDSs proven to be a fundamentally flawed product?
JS: Yes, but [they are] still out there to the tune of $700 trillion (meaning all OTC derivatives). The flaw is that they are specific performance contracts, unfunded. Unfunded specific performance contract is the definition of an OTC derivative. Now as an organization who rules $37 trillion worth of it and will decide if a credit event or a default has occurred, whether it is a CDS written on a major corporation listed on the New York Stock Exchange or whether it is written on Greek debt, according to the BIS the total amount outstanding is $37 trillion.
FM: How should they be regulated?
JS: How do you regulate what is already written? Now new ones can be put together with regulations with better definitions and could be cleared on an exchange. But in a crisis there has to be funding available to the writer to be able to perform on the contract. And nobody is proposing that they trade at 100% margin.
FM: Aren’t these binary products that should require 100% margin?
JS: It is impossible in the marketplace, and it would never be required on an exchange. If I make a contract with you to stand on my head in a clown suit if General Motors trades at $100, how are you going to regulate that? I am going to have to go out there in a clown suit. New ones could be written differently, older ones you could be stuck with. According to the Bank of International Settlements (BIS) the notional value of outstanding OTC derivatives was $1.144 quadrillion ($1,144,000,000,000,000) so they changed the method of valuation to values to maturity and took it from [that figure] to $700 trillion. This is the reason why QE must exist. Why the meltdown that was a product of the bankruptcy of Lehman Brothers and why the Treasury provided liquidity to the counterparties so that the derivatives could perform.
There is $37 trillion in [credit default swaps], both industrial and government issued. There is one body that will decide if any of those are called into performance. That body is the ISDA, that is the most powerful organization in the world. There are no rules. There may be rules defined by how a contract is written but there are no regulatory rules. The master agreement says the determination committee of the ISDA will determine if the event is a [default]. That is one hell of a powerful committee made up of the greatest names in finance.
FM: Should that be changed?
JS: How do you change what is already there? You can go forward in a new direction and hope what is behind you doesn’t drag you down. Generally when it comes down to change an OTC derivative, you can either buy a contract out or put on another derivative on the other side to hedge the risk. Therefore the potential for the total notional value of derivatives to ever change is impractical. This could have been done prior to the [failure] of Lehman Brothers. You could have had a bad derivative bank. A bad derivative bank before the failure of Lehman would have approximately equaled the other side. If you netted them all out the winners would have screamed bloody murder and the winners would have voted you president, but it could have been done. Once Lehman broke you had bankruptcies that legally couldn’t be papered over. You can’t unlock a spread when certain contracts in that mix have experienced bankruptcy. When [Lehman] walked away that was the beginning of the end. This is all why gold; it is why QE. QE is not a decision, it is an absolute necessity. Whether it happens through the front door or the back door is irrelevant. QE existed when the Fed granted close to $600 billion swap lines to the IMF who granted it to the ECB who granted it to the member banks, but it was the Fed who provided the money. QE must remain unless the problem is solved because the derivative problem is not over with, the derivative problem right now is managed.
FM: Will the economic crisis come to a head this year?
JS: Either we do get a recovery or we don’t. A recovery is required in order to have a practical method for draining liquidity and not going into significant inflation. The operative [phrase] is ‘if there is a practical method.’
FM: Can’t we just maintain this moderate recovery?
JS: Carry-on of a moderate recovery would keep us doing this great choreographer’s financial dance that might work, but it doesn’t take us out of a situation where there are significant risks. When you put this much money [into] an economy, you should get a recovery much stronger than we have. That is why Bernanke was so surprised it didn’t occur. The reason why it didn’t occur is because the money went into the banks to fill a black hole or to make a derivative perform when the counterparty was insolvent. Anybody who says Bernanke is a dope or didn’t react properly is a fool. He did what he had to do.
FM: Was the situation that dire?
JS: It was dire beyond your wildest imagination. The recovery they made from that dire moment at the insolvency of Lehman is an accomplishment few people recognize. It would have been worse than [the Great Depression]; $1.144 quadrillion according to BIS in unfunded liabilities. Skeleton contracts floating around the earth. The reason we haven’t had a significant recovery is budget deficit restrictions forbidding the use of fiscal stimulation. You had Roosevelt go out and build roads, build trails, build [dams]. He did everything he knew to put a chicken in every pot. We have done nothing on that side because we can’t afford to, our deficit is too big. So all that could be done is what Bernanke did. His tool box you could have put in your vest pocket. It is called quantitative easing--there is no other tool.
FM: Isn’t there the risk of hyperinflation?
JS: If everything went wrong? Yes, but that is the extreme. The 62% of U.S. debt bought by the Fed in the last 12 months is debt monetization; debt monetization is the mechanism historically in every hyperinflation since Roman times. In order to keep rates low what do you do? You have to buy your own bonds. What is it called? Quantitative easing. What is quantitative easing? Debt monetization.
FM: What is the strategy to prevent hyperinflation?
JS: There is none. There is only one exit strategy and that is a significant economic recovery in which there can be practical means to drain the liquidity. If balance sheets of banks, individuals and businesses are improving because of earnings then if you drain liquidity from those balance sheets you wouldn’t bust them. All of this is a balance sheet consideration.
FM: So how do you drain liquidity?
JS: You would have many means of draining and they all would be ok because you wouldn’t bust the recovery; you might mute it. You might not go into the great bubbles we’ve gone into of asset values. You might have a feel of what 1950 to 1970 felt but for those of us who lived and did business in those times, it wasn’t so bad. This is the strategy. It is not a decision, it is an absolute necessity. There is no other way to keep interest rates down.
FM: We have been dancing around QE3; is it coming?
JS: It already happened: In December when the Fed did the [approximate] $600 billion in swaps that went to the ECB, [and] went from the ECB to the major banks of the ECB. The Fed had basically debt monetized the euro. Quantitative easing comes in many different ways. But there is no program for drain. The method of applied economics since Nixon is management of perspective economics: If the public perceives business is improving it will improve. Therefore, you can keep equity markets high, you should be able to manage the economic perspective of economic decision-makers.  The new school of economics is MOPE, management of perspective economics, and it is practiced everywhere.
FM: What if political pressure on Bernanke prevents him from continuing QE?
JS: That is why Ron Paul can’t win. The desire to do the right thing would be absolutely the wrong thing. The explosion you would hear economically, you would hear on Mars. The right things only can be done in conditions of economic ease. You can’t have a gold convertible currency. You can’t at this point in time violently drain the system. That whole mountain of notional value will descend on us all. The idea that we are going to have a change in administration, in an extreme sense, isn’t going to happen. The other candidates that have any possibility of being able to [beat] President Obama wouldn’t make much change. The only one in there who would make great change — and it would be wonderful intellectually and horrible practically — [is Ron Paul]. We are in a box, there is one way out, there is only one tool available, quantitative easing.
FM: Your equation that compares U.S.  external debts to  the value of U.S. gold reserves to calculate an indicative gold price has been used to give a potential gold price of more than $13,500 an ounce.
JS: That is how I [predicted] $900 in 1974 for that bull market. I don’t like to discuss it now because the debt has grown so much, but if you do the figures on international debt and say that the amount of gold that the U.S. says it has, times the price of gold would equal international debt, you’d be talking about $12,400 per oz. for gold.
FM: Is that still viable?
JS: It is not viable because of the environment. Every tool known to mankind would be used to prevent that from happening.
FM: Your web site, MineSet, includes a pretty eclectic group of international stories and commentary. Your motto is “Who will watch the watchers?” What does that mean?
JS: Who really sees what we talked about today? Do you recall that the BIS reduced the value of the notional value of the entire OTC derivatives from 1 quadrillion 144 trillion down to $700 trillion simply by changing the computer model for valuation? That is watching the watchers. The Swift system is a tool of combat that can disable a country economically with a flash of a delete button. It is so powerful that we scared the hell out of the Indians; they are already starting to talk accommodation.
FM: What are you trying to accomplish by it?
JS: I have a wealth of knowledge. I’ve made 35 OTC markets.  I’ve traded all my life. Markets run in my blood. Should I die with this knowledge or should I publish it? It’s not brain surgery, it’s called attention. I don’t have a lot of outside interests; I love my business and I love trading. I think this all of the time.
FM: Are you still trading?
JS: Of course. I can’t stop. Anything that is attractive at the time: From soybeans to rice to gold.
FM: Where is gold going this year?
JM: I am looking for the real range for gold, post-June, being $1,700 on the low end and $2,100 on the high end. We have a strong dollar policy that is interpreted as not allowing the dollar to drop precipitously but intervening to moderate the decline. We also have a weak gold policy, which is not to depress the price of gold but to intervene in the gold market so it doesn’t start screaming to extreme prices. The primary level it must not go above is $1,764 but that will fall in time and the next level after $1,764, I assure you, is $2,111 it must not go above. That is the weak gold policy and you do have the legal intervention in those markets by the Exchange Stabilization Fund and other entities. The Exchange Stabilization Fund is run by two people, the President of the United States and the Secretary of the Treasury.
What you don’t want gold doing when you are trying to calm the system, is go ballistic. Our entire world is a sea of algorithms and the people who intervene in the markets are more savvy than your general hedge fund industry. So the weak gold policy is not a policy to decrease the price of gold but a policy to prevent it from being a tattletale at the wrong time. Right now they think $1,764 is tattletaling and that has been the swing point for gold ever since it broke over $1,650.


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