My understanding of Jim Sinclair's gold certificate ratio concept is that it is what the USD should turn into.
What I'm getting is that the current **nature** of the USD will cease to exist. That its nature will change. That its **quantity** at some point, what ever it is at that point, will stabilize. Therefor the USD measured purchasing power (real) gains of gold will for the most part stay in place. Unlike after the last gold bull market where gold gave up most of its 400% real gain in USD prices, using the PPI for figuring.
"This time it's different" is one of those phrases I'm leary of. If they fundamentally change the nature of the USD, then it could be different this time. "it" being gold holds most of its USD priced purchasing power gains.
That this could possibly mean that we don't have to be on the edge of our seats looking for gold to break a 10-12 year or so french curve/straight power uptrend line to lock in real gains.
If this were to occur, I should think that other governments would be forced to do the same thing.
Will the USD remain as the reserve currency for the world's central banks? I don't know. It could lose that function on the way to its bottom.
Silver could be a bit different. Its supply (really low) relative to present and future demand (could be quite high) is different than gold since there is a large amount of industry use for it in addition to probably growing demand for it as real money. Very high priced silver, say USD 200/oz, 300/oz or more, could produce an amazing spike in silver that slowly goes down year after year as ultra high silver prices produce a *lot* more silver over the years compared to the amount that is being mined now a days. As time goes by we'll get a better handle on that.
So what is the price of gold going to top out at in USD prices?
My understanding of what Sinclair is saying is that foreign holders of US government debt are going to value the total of their government debt holdings this way:
They're going to say that the total USD par/face value of their debt should be valued so that it does not exceed the USD value of the total gold owned by the US federal government.
It should not be too hard for the world to figure out the USD par/face total of US debt held by foreigners. So that can be considered a given on one side of the equal sign in the equation.
The next thing for the world to figure out is how much gold the US government actually has. ** GATA (also available in Chinese) ** says it has less than one half of what it says it has. US federal government gold has not been audited since back in the '50s. If the nature of the USD changes radically and gets turned into a gold certificate ratio, then the true amount of US government owned gold would have to come out into the open, could no longer be kept secret.
Once the amount of gold is known, then a USD total value can be arrived at. The amount of gold will have to be multiplied by a high enough USD price to equal the total par/face value of the foreign held US debt.
Sinclair is saying about USD 1650/oz. I think a much higher price is possible because I think the US government has far less gold than it says it has.
Because of Sinclair's history, going back to when he was young, his knowledge and his contacts, I have to place a fair amount of weight on this possible scenario.