Why gold bugs have got the jitters

For thirty years, gold traders have doomsaid - now we should listen, says philip delves broughton

Gold traders are a curious, quixotic sub-breed of the financial world. Spend any time in their company these days and you will quickly hear that the United States economy is going down in flames. There are no parachutes left, no more hope of a 'soft landing'. We are, in their opinion, heading towards a hideous conflagration fed by trillions of worthless dollars.

The more extreme of the 'gold bugs' are predicting a situation akin to the Weimar Republic or Zimbabwe, with uncontrollable inflation and rising interest rates consuming the US economy.

For most of the past 30 years, it has been easy to dismiss them. They have earned a bad reputation in the financial community for their wishful pessimism and conspiracy theories. One of their more popular theories is that the US government has conspired with banks for years to sell gold in order to

The gold bugs predict a Weimar Republic situation with runaway inflation breaking the US economy

support the weak dollar. Gold prices rise in times of economic insecurity, so it is in the bugs' interest always to imagine the financial world heading for the rapids. This time, however, they may well be right.

Most prominent among the gold bugs is Jim Sinclair, a veteran precious metals and commodities trader, who famously sold a huge store of gold at its peak price in 1980. It took 27 years for gold to return to the same price. On his blog, Mineset, Sinclair has accurately predicted gold's recent surge to well over $800 and now anticipates it doubling in the months to come.

Central to his argument is the truth that whenever people lose confidence in currencies and financial institutions they rush for the tangible - gold in particular, but also gems, classic paintings, and seaside properties. It happened during the 1970s and it is happening again now.

Not only is the dollar plunging, but a growing number of people now concede that a beast may still be lurking in the credit markets, threatening to make the past few