“Gold and silver have turned!” I bet you have heard that one before. In fact, I said this almost 12 months ago at the end of last June. Back then we had another 2 day waterfall event which became common events throughout 2013. As it turns out, that event was the (a) “retest” of $1,180 in gold and $18 in silver. I believe that last June really was the bottom in price. We have chopped since then and had a good little rally to start this year off only to be pressured down again…but I believe that things have now changed.
So why did the metals soar on Thursday? Was it because Janet Yellen and the Fed were “dovish” as is commonly thought? Maybe, but haven’t they been dovish since 2008? Didn’t we have QE’s 1, 2 twist and then QE3? Hasn’t the Fed, the BOE, BOJ and ECB all flooded the markets with cheap and nearly free currency? Yes they have, but all we have for their efforts is more debt, inflated markets and stagnant economies where it costs the average person more each day to live and survive. Six years after the fact they are still using the word “recovery” when during a normal business cycle we would have had another recession, a second recovery and already be in a 2nd growth phase.
The list of “potential” reasons for gold to have exploded out of its “2%” lasso is many. As mentioned above, a dovish Fed is one theory. Zero Hedge speculates that the financial games played to depress gold in the face of record physical demand are reversing because missing collateral has become evident. Andrew Maguire believes that the market got very short recently and the move is the beginning of a massive short squeeze. Fundamentalists believe that this is the result of gold and silver trading at or below the costs of production. Others are talking about the drawdowns in the COMEX, LBMA, and GLD inventories as scraping the bottom of the barrel and supply is just drying up.
I believe “all of the above” but most of all I believe that what has just started is only the very beginning of a wide and long planned out “trap” if you will. I believe that long ago, foreigners figured out what GATA has been trying to inform the public about for what seems like forever. First off, if GATA figured out that gold and silver prices have been manipulated and suppressed, so have others. Not only can “others” figure it out on their own. GATA has made all of their information 100% public and available. They have sent evidence everywhere imaginable. They have tirelessly sent evidence to the press, the newspapers and TV stations both here in the U.S. and abroad. They have sent evidence to the CFTC, the SEC, regulators of foreign nations, senators, congressmen and women, you name it, and GATA has sent it.
My point is this, the information is out there for anyone with half a brain and their “door” slightly cracked open for the information to get through. The fact that gold’s price has been suppressed has got to be known as a fact in my opinion by nearly all foreign governments. The Germans and Austrians now know. The Saudis know the Swiss can see it first hand. The Chinese and Russians know, literally everyone knows but until now it was like the crazy uncle in the basement that everyone knew about but wouldn’t talk about.
It is my opinion that up until now, no one was willing to go out on a limb like Charles DeGaulle did in the late 1960’s. No one “overtly” called on gold but through backchannels have been placing their bets and taking delivery. This would explain the physical demand that we’ve seen. I use the word “overtly” because until now I don’t think anyone wanted to feel the wrath of the U.S. so they went about their business behind the scenes and done so quietly. I also believe that if there were say 3,000-5,000 tons left to accumulate a year ago, then why would you pull the plug until the last ounces were vacuumed up? So they have waited… until the time was right.
So here we are today, one year after the bottom and what has happened? Well, the “buyers” bought and have been taking delivery of huge weights of gold while…the U.S. has gone another $1 trillion++ in debt, the Fed added another $1 trillion to their balance sheet, corporate and individual America has gone further into debt, more manufacturing has left our shores and apparently so has some gold whether it’s been ours or someone else’s. I think that we have arrived at the point where foreigners feel “strong” enough and see us as weak enough to all stand up in unison and say “enough.” The amount of deals done in the last 2-3 months alone that exclude the use of dollars is staggering. Just this past week, Britain inked a deal with China on “direct” trade between the two in sterling and Yuan. A deal like this could never have been even contemplated just a few short years ago. Remember, this was Great Britain who did this, supposedly our number one ally and friend with what has been described as a very “special relationship.” For Britain to do this it tells me that it’s not just smoke in the back rooms where the deals are being done, no, it’s a raging fire.
I think that as of now, most all of the pieces are in place for the world to collectively stand up to and financially knock the U.S. off of our pedestal. This past Thursday may have been a “test shot” to see what we have left. It may have been “jockeying for position” or positioning before the announcement. Like I wrote above, if I know this, if GATA knows this, then they also know. If it were me leading the troops into this battle, I would set off a string of announcements. Each and every one of them aimed at the dollar, our financial system and our economy. The Russians would do the heavy lifting militarily. The Chinese might announce their intent to “reallocate” (sell) some of their U.S. Treasury hoard. They might also announce something like an 8,000 ton current holding of gold as a kicker. The Saudis would announce that they will accept Yuan, rubles and euros but no longer dollars for their oil. Trade and financial arrangements might be altered by the Europeans as their arms are twisted with withheld natural gas supplies. This list is by no means complete but quite easily coordinated.
Before finishing I’d like to mention one other thing that is happening. The open interest in silver has grown and grown and grown over the last several months and rests very close to the all-time highs of 3 years ago when it was priced at almost $50. The open interest is now roughly 165,000 contracts. The July month alone has almost 60,000 contracts open with just 8 trading days before 1st notice day. This represents about 300 million ounces. The dealer inventory only totals 57 million ounces and when customer held inventory is added, the total is 174 million ounces. Clearly, if these July contracts stood for delivery then the COMEX would be cleaned out entirely. It has been my theory that the Chinese have been accumulating silver contracts through various proxies for months on end. I originally believed this a year ago until the open interest then diminished but here we are again.
If I am correct about my “giant trap” theory, you can bet your bottom dollar that the paper silver market is also a part of it. The July contracts open currently amount to a whopping (sarcasm) $6 billion worth of silver and the amount available for delivery is less than $1.2 billion. COMEX inventory in total is only $3.5 billion worth of silver. Why would the Chinese not turn over $6 billion worth of Treasury bonds to bust the COMEX wide open? If they did not ultimately do this, I would be shocked. Actually if you think about it, the Chinese could do this all on their own and for “free” (only $6 billion) destroy the Western financial system by exposing the amount of metal available for delivery to be insufficient. Why would they not just do this all on their own? Easy, have you ever studied a pack of dogs or wolves? While one dog may be scared away easily, when there is a pack involved there is no scaring them away. Unfortunately, the U.S. has angered so many nations that several packs are now easily formed. All you need to do is use a little bit of common sense to connect the announcement “dots,” new alliances and partnerships to see that the world is collectively turning into a “pack.” Maybe I am seeing things but it looks to me like what is about to happen has and was pre planned for many years and by many parties.