Assessing Sinclair’s Great Monetary Reset And Implications For Gold And Silver

August 21, 2016

Sinclair’s Monetary Reset

Jim Sinclair is a legendary expert on gold and monetary matters.  He is also known as Mr. Gold for his uncanny predictions of gold price in 1970’s.  We visited his public website over the last few years. In 2013 he put forward his concept of a great monetary reset, because of the massive and unconstrained printing by Federal Reserve.  His thesis is that we cannot print ourselves into prosperity without real economic growth.  Since 2013 all major developing countries have been engaging in this printing exercise.  This situation will result in the great monetary reset, where the gold price will be reset overnight to a very high level.  In 2013 Sinclair put the reset gold value at $50,000 per oz.  Since then he suggested that this reset value may be even higher.

In this article we examine Sinclair’s gold reset value based on our analysis of three historical charts, sometimes known euphemistically in some financial circle as the charts of the century. References for our generational analysis and the detail on monetary reset are given at the end of this article.

Ratio Of Gold To Monetary Base Chart

This chart shows the value of gold which is a tangible asset as compared to the intangible US paper currency base from 1920 to current quarter of 2016.

  • Note the ratio of gold to monetary base reached its lowest level in 2015 over a period of 95 years!
  • Twice before, namely in 1930 and 1980, the ratios rebounded to a reset ratio of 5.
  • Based on our Fourier cycle analysis given below, we expect this 3rd ratio reset to reach 5 again in the middle of 2018.  However he timing for the monetary reset may be sooner than 2018 due to increasing global turmoil.

Sinclair may well be correct when he said that the great reset can happen any moment overnight, given the dire debt situation.  When people lose confidence in fiat currencies, including US dollar, this will trigger the monetary gold reset, as the only solution…and there is no other monetary alternatives. 

Fourier Cycle Analysis On Reset

The following chart shows our cycle analysis based on the quarterly gold price versus M2 monetary base. The data comes from Federal Reserve databank.

Ratio Of GDP To Monetary Base (Monetary Velocity) Chart

The next chart of the century compares the economy GDP with the monetary base over more than 100 years. The chart indicates how fast the generated paper money circulates in the economy. 

  • If the economy stagnates as it is now, we will get a low monetary velocity value as shown in the chart.  Even though Federal Reserve keeps printing for credit expansion, the general public recognizes the stagnant economy and are not willing to spend.
  • The current 2016 money churn is the lowest since 1960.  The current situation is more like the 1930’s rather than 1970’s.  This is labeled with A and B in the chart.
  • From our Fourier cycle analysis, we expect the critically low value of monetary velocity value 1.45 will turn around soon and start to accelerate upwards in the near future.  Depending how fast the rate of velocity will climb, we may get either high inflation or hyper-inflation in 2018 time frame.  This is in line with the very high monetary gold reset level discussed in the previous section.

Fourier Analysis Of  Monetary Velocity

Our cycle analysis of monetary velocity is included in the following chart.  The data also comes from Federal Reserve databank.

Implication For Gold And Silver Prices

We update here our previous analysis of gold to silver ratio incorporating the monetary reset.  The key points from the following chart and table are:

  • The reset gold price will be $35,000 per oz, which is 25 times the current gold price.
  • The reset silver price will be $1,750 per oz, which is 80 times the current silver price.

Hence the monetary reset poses a great opportunity for investment if one understands the rationale for the reset.

Summary

Our technical cycle analysis has shed light on the timing and value of hard assets like gold and silver under the scenario of the monetary reset as put forward by Jim Sinclair.    Therefore, it behooves ordinary citizens like us to get ourselves prepared financially during this unchartered period, when the Fed and the other central bankers in the world continue to adopt massive credit expansion  together with zero and negative interest rates. Do these officials have any plan?

“For I know the plans I have for you," declares the LORD, "plans to prosper you and not to harm you, plans to give you hope and a future.”  Jeremiah 29:11

A Word of Caution:  we are not professional portfolio managers.  Investors will need to do their own research and consult many fine fund managers for personal investment advice.

References:

Mary’s Generational Rule for Astute Investors, 6-5-2016

Jim Sinclair: Gold Will be $50,000 per Ounce, Gold Confiscation, Dollar Gets Hammered and More 2013

Mike Maloney: $2,000 or $5,000 Gold is Absurdly Low - Gold Price Will Double the Dow 2016

F.T. Dao is a private investor and recently left the corporate world for technical analysis of stock markets.  He holds a PhD degree in physics and has done technical analysis of the market on the side for many years.  He welcomes constructive discussion and can be reached at:  ftdao245@gmail.com  , ftdao245@comcast.net

China is the world’s biggest gold producer with more than 355 tons annually. Australia is second.