Observations on the Current Situation in the Dollar and Gold

May 19, 2003
Jim Sinclair

1/ Major US establishment banking organizations in Europe forecast a Euro at 1.45 per US dollar.

2/ US Treasury Secretary Snow says that the US Treasury is not concerned over the decline in the US dollar.

3/ Snow says that currency values are better determined by the market place, signaling that the absence of the Exchange Stabilization Fund from the dollar market for five consecutive sessions last week (which is under Snow's management) is not a single week's aberration but rather the ESF's obedience to the instructions of its boss.

Forex traders interpret absence of market intervention by the Exchange Stabilization Fund as the official abandonment of the US strong dollar policy.

4/ Terrorists in Pakistan, who have made 21 attacks on businesses, announce that they are targeting US interests. In the last week, three attacks are clearly al Qaeda and two possibly look like al Qaeda with one major terrorist event in Israel. One need not be a rocket scientist to see that the Iraq War was only the "End of the Beginning of the World War Three," the War on Terrorism.

5/ Gold is trading on the continent at $360. Gold is coming into the US market now at $359.50 bid, $360 offered. The gold producer hedgers are looking at some "Hum Dinger" losses on their hedges. The Gold Cartel of Common Interest is dead meat waiting to be road kill. The next objective for gold is $380 as per the maximum break out target from the April 4th down wedge.

Conclusion:

If the decline in the dollar, which is only one of the major methods of fighting DEFLATION, is an example of the strategy of the Bush Administration to avoid losing the presidency in 2004, God help us all when the Fed turns the FOMC loose with its "Electronic Money Printing Press."

There is hope in Washington that a super weak US dollar will turn the economy around but that is purely economic whistling in the dark. Europe is in more trouble than the US with the super low US dollar. Who is going to buy all our Fords and Chevrolets, the Saudis?

The major impact of the "Snow Super Dumper Dollar" is going to be in the commodity market, primarily for edible commodities and of course metals. It is there that necessary commodities for human consumption and the manufacturing process are being offered at a 30% discount.

If the European Citicorp Forex department is correct in their prediction for the Euro, the discount might reach 40%. Therefore, any one of those commodities that might be in a neutral position with regard to supply and demand is going much higher. Gold bullion is wearing a $380 price tag on it now. That is before gold puts on its $410 $416 price tag.

Remember all the bearishness on April 3rd? How about all those Elliot Wavers dragging out their hero again on April 3rd to forecast $200 gold. How many of you believed that he might be right? Come on be honest. My emails certainly were not love letters from April 1st through April 9th 2003. One of these messages even spelled "idiot" wrong and that email was not referring to Mr. Prechter. But who am I to chastise anyone else's spelling?

I thought I was straining human sensitivities when I suggested to you when the Euro was well under 1 to the dollar that it would reach 1.20 to 1.23 to the dollar.

Now the "establishment banks" that laughed at me for such a wild prediction then are now predicting 1.43 Euro to 1 US dollar.

Looks to me like not only is the Exchange Stabilization Fund ordered out of the dollar support business but friendly international US banks are talking the dollar deeper into the dumper.

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