Responding to a reader inquiry, the legendary Jim Sinclair has suggested that the grouping of cycles indicates that the time to consider taking profits in gold and silver may be 2015. Will we see the final, 3rd stage public mania in gold and silver play out over the next 3 years?
There is a question I would like to ask you about the current bull market in gold that you say we are in. As all bull markets eventually end, my question to you is not, "if" there will come a day to take profits, but when to take profits and what to do with those profits. For example, I would think of myself as a bad investor to ride the gold market from its lows clear up to its highs and back down to its lows again. If gold goes to $2,000 or $5,000 or $10,000 dollars per ounce at what point should one sell the physical metal? Hypothetically if gold were to go to $5,000 dollars per ounce or achieve a 1:1 price ratio with the Dow Jones Industrial Average, does one actually sell the physical coin for U.S. dollars (knowing the U.S. dollar is just another fiat currency)? Should one wait for an alternative currency to arise and sell the physical metal for that currency?
I hope I have been clear in what I am asking. Basically if one is holding wealth in gold/silver at what point does one take profits, and what does one roll those profits into at the end of the bull market in gold/silver? You might think my question premature as there are possibly years left in this bull market in gold, but I don’t want to be the last man standing who just watched the bull market profits disappear. (I call to your attention the gold price action of the 1980s when gold soared to $800 per ounce only to settle for the next decade between $200-$300.)
I would appreciate any advice and insight you might have.
CIGA Luke
Dear Luke,
You have presented the most difficult of questions. Last evening, I answered that via a graph of emotions that finds tops, but not necessarily with the definition of the long term top appended.
I do not think a ratio to the Dow is the answer.
The model answer is when gold sells (per ounce) at the value that equals the total dollar value of US foreign debt divided by the assumed number of ounces of gold the US government has, gold is full priced.
The reason for that is because at that price the international balance sheet of the USA and therefore the dollar is in balance. However, that number, which was $900 in 1980, is now slightly above $12,400.
If grouping of cycles is of any use time wise, that suggests 2015.
Regards,
Jim
From JSMineset:
19 comments:
This will certainly be an interesting one as John Williams is giving this same time-frame of 2015 for hyperinflation in the US Dollar. Just because the bull market cycle is ending doesn't mean I would trade my metals back into a doomed currency.
F.
When Gold is $12,400/oz, what will the price of a loaf of bread be?
@Mammoth
Exactly, most people are thinking that the dollar will still be of value but if gold goes that high the dollar will be worthless.
So one of the writer's questions still remains - what exactly do you convert your PMs into when they reach the peak? Personally, I think maybe cashing half your holdings out into whatever FIAT is in use at the time and then buying as many tangible assets as you can with it (property, machinery, furniture, etc). Keep the rest for when it goes back up again and/or when things really start to collapse.
anon, you hold your metal until after the transition. We're talking about the devaluation of the world reserve currency. Hyperinflation in all goods - who knows what a loaf of bread will cost.
Look at other hyperinflations - if you held gold/silver but sold while the currency was being devalued, still worse off than selling the gold/silver until the devaluation was complete.
This will not the ordinary hyperinflation - in the past, it's been country X or country Y. We're talking about the world reserve currency and the effects this will have on every other country. Japan, UK are just two countries that will also hyperinflate along with US. Who else?
I have a better answer: when those in charge of the money start being responsible.
@Mammoth. Good point. If someone only maintains there number of ounces, they are not getting wealthier in absolute terms. They are only getting wealthier relative to others who are getting poorer due to dollar devaluation.
In order to get wealthier in absolute terms you gotta. . . keep stacking and increase the number of ounces.
Recall reading earlier this year a note by one of the pm gurus that the time to sell your pms would be when we once again get real interest rates, ie roi>cpi/rpi or whatever your measure of inflation is.
I agree with you guys.. 2015 just seems way to soon IMO.. That should be the time when Hyperinflation is in process.. makes no since to liquidate unless it's a little but to liquidate fully psshh yeah right.. Personally I rather wait till mines are fully tapped. Then it should get interesting...
SS.
I like Churchhill's assessment of the rise of Hitler and WWII. He looked at the arc of human progress and saw that violent period of time as a short term blip in a very long time line.
If, as Jim says, the gold bubble pops in 2015 then there will be a reason. Currency reforms and the reassertion of a normal economy and rules of law will tell you that it's time to rotate into another set of assets.
As bad as events have been in the past, we do get past these rough patches. I do not think our problems in this country or world wide will be remedied by 2015 There are way too many problems on the horizon including a real probability of war(s) and economic strife in our future to be confident that 2015 is the magic year. The world economies have spent 50 years getting into the shape we are now in. 3 more years is not going to fix those problems.
It could take a decade or more until things return to normal, whatever normal might look like then. And it will be very different in that future time period.
Our present upward economic cycle began about 1995 starting with the wholesale debasement of loan underwriting which result in the hijacking of housing prices. This false economic boost eventually got us into the mess we are now in. Deficit spending world wide, but particularly here at home, has eroded our standard of living through debt slavery. The Mooch Class is still growing and will get much larger as the wheels of banking and government fall off, pushing even more of the middle class into insolvency.
My guess would be that since the Great Collapse started about 2007 and is much worse than the recession of 1991-1993, this downward cycle will end around 2015 and start upwards, regaining its former level around 2020.
If the upward cycle started in 1995 and crunched in 2007, then another 12 years will transpire until we get back to where we were earlier this decade.
I hope I'm wrong because this could be a long slog. Gold and silver ownership starting today will provide some comfort, security and protection to those who see the wisdom of buying these assets.
Re: Anon 12:05's comment, it just seems the way to get though Hyperinflation would be to cash out your silver stacks piece by piece to get the money to buy needed goods DURING the Hyperinflation, while sitting firmly on your gold holdings until AFTER we are finally past the Hyperinflation period and money has been revalued.
Sometimes it's difficult to follow Sinclair. For example, recall his "gift". The "gift" was not $1650, it was...
2008-12-28: A Gift From Jim
January 14th 2011 to June 21st, 2012:
The best part of this gift is not the one you already know, which is January 14th 2011 (reference to $1650), but rather the date that a new currency form will replace the form of the US dollar as you know it today which is the third week of June 2012.
Don’t laugh! Write this down and do not forget about it!
Happy (sort of) New Year,
Jim
What everyone fail to understand or at least acknowledge is that any recovery, (scarc on) will be limited to the lack of ROI!
We have reached peak oil, ladies and gents. This recovery will be tepid at best and poor at worst. We have simply reached peak everything, mines are declining, food production, oil, seafood, you name it, it peaked, peak credit!
Look, I'm a huge fan of Jim (Santa) his prescience in predicting movements in a manipulated market are incredible.
But, the fundamentals going forward with declining metals mining due to lack of credit, low ore grades, increased investment demand, and future return to real money!
I'm not selling shit! 2015 or no! A 25% PM back currency may do, but until the not a fucking chance!
I say by 2015 it is full-on GOLD FEVER.
I say Gold overshoots what everyone thinks it will hit - likely going to somewhere around $30,000 an ounce and silver will be around $4000, but likely higher as the public becomes aware that there is less silver than gold now and the general public won't even be able to buy ONE ounce of gold, so they will surely turn to silver.
The GOLD mining shares will go to insane valuations as most people won't be able to afford even one ounce of gold - so they will chase the stocks and buy whatever they can.
SLV and GLD will be dead by then.
Merry Christmas!
I will sell all my gold and silver in 2015 and buy SEVERLY DISTRESSED homes. I will buy many homes in cash for pennies on the dollar - and ride that wave until the next one comes along - equities??
Wealthcycles baby.
lets all get wealthy, we're smart individuals.
All these figures and estimates are all assuming one thing; that we do not have a game-changer. In that I mean the US does not declare war on Iran, North Korea does not declare war on the south, and Russia and China are not brought into a conflict against NATO. There is every reason to think that all of the above are more than just possibilities, and if they all happen concurrently then whatever plans you thought you had, scrap them because your all the charts and formulas you had will be mean zilch!
@anon 2:16.
Let's all get wealthy? The siren song of the housing bubble, eh? I'm not sure if you're being sarc or not, but if everyone gets wealthy, who do we get to do any work?
Just sayin'.
I had 2016 in my cycles to sell... 2015 could be... I have 2017 as a year of MAJOR volatility in metals...
mammoth, you got it but that's just my opinion as to what will be revalued in the new system. Silver for spending, gold for wealth.
The problem with forecasts - 2015 or whatever - is no one, no central bank or gov't can control peoples mindset - they can control the supply side ie printing money but they cannot control confidence - that is up to those who hold dollars. If on January 3 people woke up and finally smelled the coffee and realized they are holding worthless dollars and they'd rather buy real stuff with their dollar savings, this demand would buy up real stuff like we've never seen before. It is the confidence that keeps the system running and this loss of confidence is what will be the deciding factor. This can happen anytime - 2008 crisis, MFG collapse...
MFG should be a large red flag. It has had an effect but as each day passes, it is business as usual. We are talking about status quo to the extreme for the vast majority of society. The people that read these blogs view things a little different than the person next to them at the christmas party. How many times have we let family and friends in on what's going on only to be told we're crazy or that will never happen. There's a lot of pieces to the puzzle for oen to understand; I suspect many on here are a curious lot. That's why gold hitting $2000 will be such an eye opener for people just like it was when it hit $1000. But as gold continues to break through barriers, more and more people wonder why it continues to rise. But as the metal prices are managed, more metal is purchased by the big buyers worldwide get it. So it's a catch 22.
But it is confidence that slowly but surely continues to erode. People will realize wealth is not what the paper in their wallet or the credit of their bank account/investments says it is. They will realize this one way or another and perhaps after it is too late.
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