Jim Sinclair now predicts that gold will be at $50,000 sometime in 2020. This is all over the Web.
With gold at about $1330 an ounce these days, the price would have to multiply by a factor of 38 to reach $50,000.
Let me the be the first to say that this is not going to happen. I say this as a gold bug out of the early 1960’s.
There are far better sources of both profits and income for investors than gold at $50,000 an ounce. Nobody is going to pay you or anyone else $50,000 for your Krugerrand.
If you can take four one-ounce gold coins, sell them for $200,000, pay your income taxes, and buy a debt-free investment house for $150,000 that will generate 10% per annum, why would you hold onto the coins? You would not hold onto the coins if you had 100 of them, or 300 of them. You would sell most of them. The population of the United States is going to go to 400 million people by 2050. These people will have to live somewhere. Why would you hold gold coins, when you could buy a debt free house just by selling four coins? Sit back and collect your rental income for the rest your life, and watch the value of your houses go up.
With housing, you get capital gains tax benefits. With gold bullion, you don’t. You will pay twice the tax rate.
He says that hyperinflation is going to hit the United States before 2021. Not mere inflation. Hyperinflation. Yes, you have heard that before. You heard it in January 1980, when gold was at $840 for one day. Will people be paying 38 times what today’s homes cost? Is the median price going to be $200,000 times 38? Do you really think the typical house will cost $7.6 million? If so, buy investment houses, not gold coins. You can buy homes with owner-financed debt. You can leverage your investment by at least ten to one. The renters will pay off the mortgages. Meanwhile, you can depreciate the homes. You can write off the mortgage interest payments as business expenses.
If hyperinflation is going to raise prices by 38 to one, get some leverage. Gold coins will not give you any leverage.
Mr. Sinclair needs to lie down, put a cool washcloth on his forehead, and take a nap. Senior moments happen to us as we get past age 70. We get over them. Usually.
Here is his position.
Renowned gold expert Jim Sinclair says financial calamity is just around the corner for America. Sinclair contends, “We are facing the annihilation of currency. We are facing the shift of America as the leading and most influential nation of the world to some form of banana republic. . . . If it wasn’t for food stamps, we would be facing long lines of people waiting for free food.” For gold, everything hinges on the U.S. dollar, and Sinclair says, “I think the dollar gets hammered. I believe we are headed for hyperinflation.” One of the many black swans, according to Sinclair, is the possible abandonment of the U.S. dollar by Saudi Arabia. If Saudi Arabia stopped selling oil only in U.S. dollars, what would that do to the buying power of the buck? Sinclair says gasoline would be “$10 a gallon very soon, without a doubt.”Sinclair predicts retirement funds and bank deposits are going to be taken by the government. How much of your money could you lose? Sinclair says, “In Cyprus, it was a total of 83%. . . . Cypress is the blueprint, and it’s what we are going to experience here in the United States.” Jim Sinclair, who has just accepted the position as Chairman of the Advisory Board for the establishment of the Singapore Gold Exchange, says, “The exchange will trade physical gold only and not future gold. . . . You have to make delivery.” Meaning, there will be no naked short selling or manipulation of this new market. Sinclair says, “This will emancipate gold from the paper price.” How high will gold go? Sinclair predicts, by 2016, “Gold will be $3,200 to $3,500 an ounce.” By 2020, Sinclair predicts, “Emancipated gold will be $50,000 per ounce.”
In April 2008, he predicted gold at $1650. That was a good call. Gold hit $1650 twice: going up and going down.
First and foremost, contrary to Mr. Sinclair’s prediction, we are not facing annihilation of any major currency. There has not been an annihilation of any currency in any Western, industrial nation above the equator for two centuries, unless it has lost a major war. Germany’s hyperinflation in 1921-23 was the result of Germany’s loss in World War I. The same was true of Austria and Hungary. The reason why those forecasters who predict hyperinflation in the West appeal to this example is this: there are no other examples. They took place over 90 years ago. Nothing like this has taken place since.
If World War II did not produce hyperinflation in the United States, Great Britain, Canada, Australia, and New Zealand, why will today’s crony capitalist crises create it?
He is saying that something that has not happened since the French Revolution’s assignats in 1794 is going to happen before 2121. I have heard this forecast for 50 years.
(For the rest of my article, click the link.)