Iran; Sitting in the Catbird's Seat
Jim Sinclair

Today’s market summary is not as simple as reporting and commenting on the market’s performance. In actual fact, it is considerably more complex.

The President of the USA said two correct things today: Firstly, that Americans have spoken and, secondly, that his administration has received a firm mandate from the people.

He has earned political capital in this election and he intends to use it - there can be no argument with that. There is, however, at least one significant implication contained herein that the market - most certainly the equity markets - have largely missed.

I strongly recommend that you re-read my two recent articles on the Gold Dinar, paying particular attention to the assertion that a financial war is being waged against the US by Islam. It is also my view - and the view of others in high places whose opinions I respect - that the United States was goaded into war with Iraq and Afghanistan with the ultimate objective being to bankrupt this country. 

There is an axiom in human relations that says there is always a third party motivator between two aggressive combatants. This axiom has proven itself true from the time of the Stone Age until today. The hidden third party motivator behind the Iraq and Afghanistan wars is Iran. In proper detective work, it always pays to follow the money trail and in political conflict you always try to determine who benefits the most.

Iran has had two major competitors removed from the world stage in the form of the Taliban and Saddam Hussein. Their removal was not at any cost to Iran and the Coalition of the Willing (Bullied?) took care of it for them.

There has been significant commentary on Mr. Chalabi as being an Iranian agent and helping to bring about this result. Others characterize Mr. Chalabi as a great salesman and buffoon who simply said what the US wanted to hear. I prefer the Iranian agent theory as the most plausible explanation. The result, however, is the same whatever Mr. Chalabi really is.

It is now becoming clear why Iran has had the audacity to stand up to the world on the nuclear issue. Having succeeded in eliminating both of its major enemies at not cost, Iran has accepted the economic overtures of Russia and China.

Economic investment in an area carries with it an implicit promise of military protection for those investments - especially when the investor is a superpower like Russia or China.

Both these countries have a great deal to gain from this relationship. For Russia, it fits in perfectly with the ascendancy of the ruble over the US dollar and the reversal of the Volcker affect which caused communism in Russia to fail. In the case of the Chinese, its appetite for oil could be satiated if the theocracy of Iran ends up the power broker in the Middle East.

As far as North Korea is concerned, China's traditional relationship will come to the fore should the US consider a preemptive strike against this nuclear capable power as the product of failed talks. Incidentally, "talks" are just another way of saying to North Korea, "How much will it cost us to stop you from developing nuclear weapons?"

So where do we go from here? Iran is protected and so is North Korea by powers of significance. Terrorism is a strategy that has no real location in geographical terms. The only way to describe the battlefield for terrorism is that it's everywhere.

The result is that leadership of the US has received a mandate from the majority of Americans to fight a war against terrorism to protect them against this threat. The threat is erroneously seen to be limited to Iraq and Afghanistan - maybe even only to the city of Fallujah - if you were to believe the 6 PM televised news.

Since you can be assured that terrorism is a strategic tool of a much larger economic conflict - with stakes so high that world economic order is at risk - we are on the threshold of some big surprises in military and economic terms.

All of this will be transmitted into the value of the US dollar which hangs precariously near the "bearish neckline of all time." That being said, I honestly believe that no one in Washington has a clue concerning the dangers associated with the president's mandate and the political capital he has in fact earned in this election.

I am not claiming any particular genius but simply pointing out that there are very few people who have lived their entire business lives in the currency market.

Gold is a currency that has been a big part of my life as a trader and most of you know that I haven't done too bad in this business. Few others can really make that claim because it wasn't all that common a profession during the 60's and 70's.

It wasn't until the 80's that non-professionals found their way into currencies and of course now everyone is a pseudo-expert with a chart but no significant career history behind them.

I have long held that there is more serious and actionable intel in the marketplace than all the spooks on earth can garner from pillowtalk or any other method.

Now here is the icing on this complex cake: 

"China signs biggest oil & gas deal with Iran."  China's state-owned Sinopec Group is the entity that has contracted to develop major oil and natural gas properties in Iran. This agreement also speaks to long term sales of gas and oil to China. Other negotiations are reported to be taking place for additional Chinese investment in Iran.

News reports from Iraq indicate that significant evidence that was to be used in the trial of Saddam Hussein has gone missing. Keep in mind the suggestion I made to you in the past that Saddam might not be tried for a long time and in fact might eventually run for president because it was only him that prevented Iran from achieving its aim of domination in the Middle East.

Conclusion:

Since the mandate given to the administration is more of the same, it is reasonable to assume a growth of the triple deficits.
Gold trades with the dollar and not with oil. Oil impacts the dollar in terms of its valuation but it is not the sole ingredient. So the direction of gold is and will continue to be a product of the action of the US dollar.

Since I feel the bearish neckline of all time in the US dollar will shatter on the downside soon, I have to hold the opinion that gold will take out the $433.30 level and go through $440 and thence to $480 and above.