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Where does Sinclair see gold in 2006 due to the derivitive crisis?

*Jim Sinclair's MineSet, by James Sinclair, January 3, 2006

“Gold, as I see it, is headed to $682 and then through $750. All the rest is drama.

It doesn’t matter if it happens now or later this year. No one can be absolutely sure of the timing because there is a hidden hand in the market equation called over-the-counter derivatives which supersedes the US Dollar/Gold relationship, the price of oil, the Fed minutes or any other potential motivator.

What is most critical today is what the media refuses to discuss in print or on business television. The code of silence being applied to OTC derivatives is not happening without a good reason.”

“The unregulated broker-dealer unit sure sounds like an over-the-counter derivative granting unit. I imagine that the media will not use the words “over-the-counter derivative” when it is associated with a failure.

The fact that these items are treated in this manner is a clear statement that media and financial officals feel it is so dangerous that the financial public must never be informed. To fully inform would cause fear concerning what these financial weapons of mass destruction are capable of doing to the entire system.

This would explain why there was an effort to hold the assets of one account and not pay it out as was reported last week. This would be an effort not to split the derivative spread transactions with the loss debit in one account from the agreed (either directly connected account-wise or by the wink-wink method) from the offsetting side of the derivative with the credit. A $4.16 billion failure would be quite a small incident in terms of the risk of the OTC derivative spread monster present to all the entities using them.

I imagine that the number representing the size of what appears to be defined as a derivative explosion has one way to go and that is UP! I believe we now are getting a clear indication of the cause of the instantaneous meltdown of Refco

This debacle, which is known to insiders of the derivative trade, motivated the recent move in the price of gold to $552. Those that are presently using derivatives to smooth earnings, beat the corporate tax man or hedge commodities, recognize the danger they are exposed to by a bankruptcy anywhere along the daisy chain of the over-the-counter derivative spread market. All of this represents economic madness, meaning that gold is going to blast higher.

The system can camouflage one explosion, but what happens when the daisy chain of over-the-counter derivatives pulls a few players down together? This is why a meeting was held at the New York Fed concerning interest sensitive derivatives six weeks in advance of its planned date. This is why gold blasted to $552 and will do so again.

The greatest potential risk to the global financial system is over-the-counter derivatives. Expect more debacles in 2006 and 2007.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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