Wednesday, 9 April 2008

1980 top in gold at 887.50 in detail. 2007-11-04

Sunday 4th November 2007: 10.30pm

Well, nearing Guy Fawkes' Day tomorrow, most people in our English town have had their fireworks parties over this weekend already. Gold managed some real fireworks of its own last week, especially on Friday with a $15 pop to end at $806 and change at the Friday spot market close. Gold has sliced through $800 like a knife through butter on a hot day.

One fact that I have not heard mentioned is that there were only 2 (yes, TWO) days back at the high in 1980 that the 'London Fix' gold price was higher than gold's current trading level. These days were Friday 18th January 1980 and the following Monday, 21st January 1980, the all-time high. They were the extremes of a spike up followed by a precipitous fall at the very top of a panicked market. This time, we seem to be in the midst of a sustained uptrend (6 years in duration so far). Michael Nystrom on showed two charts (see 1980 chart) from the book 'Schwager on Futures' (Amazon UK) that showed gold in 1979 and 1980, with the 'island top' touching $895 in the April 1980 gold futures contract on 21st of January of that year. This article can be seen here: and the clear picture seems to indicate 4 possible days when this futures contract was over $800. Jim Sinclair has said that he clearly remembers seeing a print of $887.50 on the tape that day.

The fact that we had only 2 to 4 days in 1980 (by different measures) higher than our current level, already sustained for several days, is highly significant, I think.

Gold also reached over £385 Sterling. I think that is a new all-time high in Sterling, beating the previous high around £384 in May 2006 and a clear tenner above the 1980 high around £374.

The Fed issued $41 billion in funny money on 1st November to try to save its Wall Street buddies and stave off further meltdowns in the debt markets. Jim Sinclair on is adamant that this is "the big one" and we will see a continuing meltdown of the mortgage backed securities and derivatives, followed by a much larger meltdown in the credit default derivatives arena. Jim's commentary is always worth a read and a think afterwards. He is urging us investors to minimise the number of intermediaries between us and our assets, by taking paper certificates for shares and also by taking delivery of any hard assets, such as gold and silver as far as possible. Starting this Monday at the latest! He obviously feels strongly that there is truly serious trouble to come.

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