Upside potential is explosive, according to Jim Sinclair:
The attempt to keep (the gold market) from moving higher, creates, by nature, a spring, a coil as it were in markets. If the spirit of the gold market could have been broken, it certainly would have been broken down at the $1,500 level. This thing is turning into a spring, into a coil, and when it goes it’s going to be something to behold on the upside. Both in the shares and in gold itself.
When you feel the worst, when you get to the point where you say, ‘I can’t take it anymore,’ toughen up. Everything that you are doing you are doing for good, right and logical reasons.
Unleveraged positions can wait it out. Don’t use leverage.
But it’s going to be quite different than what happened in March of 1980. Right now gold is heading into the system and in the period going into March of 1980 that phenomena didn’t exist.
In gold shares, going into that phenomena (in 1980), you didn’t have huge short positions being managed by hedge funds. You’ve got them now. When you go into an overvaluation in the price of gold, you are going to see gold shares change their character from one day to the next because of the huge legal and illegal short positions in the shares.
Capitulation is a normal character of the bottom in anything. In truth, do you think a major (gold producer) wants to see the value of a junior rise, when it can be obtained at a significant discount to the value of its mineable inventory? The answer is no.
It’s a play of the industry. It’s a play of the hedge funds and it falls into a pleasing (situation) for governments, but it’s not a government play. This is a market play. As all market plays change, as everyone begins to get this feeling of I can’t take it anymore, we are (already) very close to, if not past the point of (directional) change.”
The market is different, it is more competitive, more accessible. There was no internet, no CNBC, and no ETrade during the last gold bull market. Hedge funds were non-existent, those short positions did not exist. There has been a great disconnect between the price of gold and miners, with miners underperforming. This is a indicator of negative sentiment. And provides a better base from which to have the next leg of the bull rally in gold and gold shares.