sinclair - central bank gold selling

  1. 9,081 Posts.
    James Sinclair:

    "Also, please see my commentary below on why recent reports of gold sales by central banks is positive for gold.

    Asian Interest Buys $373,615,200.00 Worth of Gold

    Media Reports Central Bank Sells 30 Metric
    Tons of Gold in the week ended February 21st.

    In time, the Gold Community will learn that the most positive action for the price of gold during a gold Bull Market is for central banks to sell gold. Right now the community is assuming the media report on central bank gold sales is negative for the price of the metal.

    Large, single-priced, off-market sales actually work as an invitation to major bullish interests because they provide a welcome. That welcome is the ability to buy large amounts of physical gold at singular prices, usually discounted, away from the market. Rather than depressing the trend, they sustain the trend by permitting a significant increase in position by those entities that are responsible for the trend in the first place.

    To consider that such activities could exhaust the buy interest is a misconception. The demand for gold is a product of the outflow of US dollars, which is measured by the Current Account. Only a major reversal of the bear market in the US dollar could affect the bull trend in gold. Dollars are moving into the coffers of non-US central banks and private accounts that fuel the demand for gold.

    China has added USD$74 billion in 2002. That brings the total dollars held by China to USD$286 billion. Other Asian countries, not counting Japan, added USD$153billion in 2002 to bring the total dollar amount held by other Asian countries to USD$927 billion. Japan holds USD$460 billion. In total,
    that is a whopping USD$1,673 billion - all of which has lost 20% of its
    dollar value as gold at $350 has gained in the same period, 29.1%. Is it any surprise that Asian interests, who officially are the lowest percentage holders of gold, would sell dollars and continue to buy gold?

    So please understand that there is a distinct difference between the implications of central bank selling of gold in a bear market from their selling gold in a bull market.

    The proof (a gold price above $400) is not far off. I firmly believe that such an occurrence is coming in the not-too-distant future. Certainly anyone who thinks that the sale of gold in the week of February 21st is a negative occurrence simply has not experienced previous selling of a similar nature on the last great bull market for gold."
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