-->Gold Market Review

Author: Jim Sinclair





1. Gold as a currency rather than just gold.

We cannot interpret gold any longer as gold. It is a pure currency and trading with the same velocity as other currencies such as the dollar, yen etc. Any position to the contrary at this time is trashed by the marketplace which underscores my position. Therefore to know gold now you have to a currency trader as I am.



2. The present war of words is focused on a growing weakness in world equity markets.

The currency related war of words has accelerated markedly in the past seven trading days. It is my opinion that the equity wise present administration fears a growing weakness of the general equity market and therefore a potential challenge to the incumbent. The recent forward looking expectation statistical weakness has clearly gotten the attention of the administration. It seems that Greenspan and Snow have made daily TV appearances proclaiming the strength of the US economy. Isn't it perfect choreography to have their friend Gerhard Schroeder offer more ammunition in the war of words with his offer to cut interest rates as a tool to reduce the value of the euro. This suggests that the recent good figures in economic activity in Euroland will not eclipse US figures thereby helping the dollar and hurting the euro verbally. With interest rates almost non-existent, they themselves will not significantly influence currency selection. However, with everything tradable having been made into a pure casino, make s
ure you’re ready for 5 to 10 cent moves in the euro within 12 months.

3/ Gold's window of bullish opportunity

By approximately March 15th, all of this casino reaction to the war of words will be simply exhausted and behind us. The greatest opportunity of course would be to have price and time come together just before that date. But with the wild character of markets today we will need to review the major support areas in gold so as to be prepared if low prices occur sooner than later.

Support in gold right now is strong at the following points:

$390 to $393
A band of strong support between $387.00 and $390.50
$383
However, time now is more important in my opinion than price. I expect this chop to continue wildly at times, abating as we approach mid-March after which I expect a sustained rise.

4/ The perfectly choreographed news release on Bloomberg:

Dollar Rises After Schroeder Says ECB Should Consider Rate Cut

By Monee Fields-White

Feb. 25 (Bloomberg) -- The dollar strengthened against the euro for the first day in three after German Chancellor Gerhard Schroeder said the European Central Bank should consider an interest-rate cut to curb the 12-nation currency's advance. Schroeder said the ECB should ``intensively address'' how the euro's 17 percent gain against the dollar in the past year has affected Europe's economy, DPA newswire reported, citing an interview with the regional broadcaster NDR. The dollar extended gains after Federal Reserve Chairman Alan Greenspan said the U.S. economy is in a ``more vigorous expansion.''

More…

5/ The real gold challenge now.

As I have said before, the real challenge now is to determine the end of this bull market. What’s happening at this moment presents no long term challenge to the bull market in gold whatsoever. This is very much a short term phantom situation which I believe has a maximum duration that should not last beyond the middle of March. This is not a systemic weakness nor need it mean significant lower lows than present. It is the type of situation that will certainly result in more wild chops that unnerve those that have no fundamental view and depend 100% on standard technical analysis as the only way to understand a market.

6/ Your real challenge now.

I can only imagine the negative comments on the gold market and stern warnings being prepared on the laptops of those gold advisers who do mouth service to being bullish but have been issuing negative warnings since $342 all the way to $430.

Personally, I feel what we are experiencing now - if you have no margin requirement or no overt requirements - is meaningless except for about 14 or less trading days.

I would suggest that you do not let yourself be stampeded out of the market by the gushing bearish missives of the gold advisors that are being prepared as I speak.

PS:
Also doch: Gold remains se(6)y!