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It was just 2 weeks ago that Gold and Silver were still stuffed in their boxes below $1,630 and $29 with no volatility and “little hope” as sentiment was as poor as I can remember.  As James Mac has been following closely, the new cap for Gold was 1% and a 2% move hadn’t been seen in quite some time.  About 3 weeks ago however, the action changed for those who were watching closely.  We actually had several days where the metals were down overnight or first thing in the morning and made lower lows early in trading.  This was no different, what was different was that the metals dug in their heels and would end the day unchanged or even slightly up on the day.

Another pattern that has changed is that Gold and Silver until recently would make their highs of the day in the first 30 minutes of trading and then be forced sideways for the rest of the day.  There have been 5 instances in the last 3 weeks where the metals either chopped around or jumped higher early, only to grind higher for the rest of the day.  THIS is huge in my mind because you can go all the way back to the beginning of this bull market and not see this sort of action.  SOMETHING has definitely changed!

Another area that has not only changed but done a complete 180 degree turn are the central banks.  Go back to the beginning, some 12 years ago and you’ll remember that the European central banks “limited” themselves to selling ONLY 500 tonnes collectively.  Fast forward to the present and China on it’s own has already purchased nearly 400 tonnes in the first half of the year.  Then add in the various other central banks and you’re probably somewhere well north of 1,000 tonnes total from the entire official sector.  This reversal represents a swing from central banks being sellers to now buyers, the swing from being suppliers to demanders is at an absolute minimum 1,500 tonnes.  To put this in context, the total global production of Gold is only about 2,500 tonnes in TOTAL!  “At the margin”, this is enormous!

Please recall the work of Frank Veneroso of the late 1990’s, he had total global production at 2,500 tonnes with demand of 4,000 tonnes.  Run this supply deficit forward 14 years or so and better than 20,000 tonnes have been chewed up, MINIMUM!  …And this is out of official  figures given of total central bank Gold at 32,000 tonnes, clearly the ability to supply the market with physical metal is running on fumes!  I would like to add that I find the “timing” of the Gold audit at the NY Fed to be highly suspect because it is being portrayed as an audit of “our” Gold reserves.  I believe this not to be the case, if I had to guess, I believe that this audit is probably an audit of Germany’s Gold.  If you remember 10 years ago, James Turk suggested that Germany agreed to swap 1,800 tonnes of their “good delivery” Gold for an encumbrance of West Point “coin melt” Gold.  I am “suspect” of the timing of this audit because as you know, I fully believe that a reset or “mark up” of Gold reserves is the ONLY feasible escape route for central banks.  Why now, all of a sudden is an audit being done?  If it were US Gold, we would be hearing about Ft. Knox, West Point, Denver and San Francisco, we are not, this is an audit at the NY Fed who is custodian for Gold owned by foreign central banks.   If you mentally go through this, why would foreign central banks want an audit?   …Now, after all these years without ANY fanfare at all?  If you as a central bank or consortium of banks had decided to bite the bullet and prepare to “re collateralize” your coffers by marking up Gold, you would want (the world) to know just how much Gold you really have…right?  It’s just a thought.

Lastly, this past Friday was the end of a week and the end to a month.  Gold and Silver finished at multi month highs.  “Normally” (and there is nothing normal these days), a breakout of multi month consolidations that make weekly and monthly closing highs on the charts mean something…something BIG!  As a side note, I cannot remember but 2 or 3 times in the last 10+ years where the metals were allowed to run hard, really hard into any 3 day or holiday weekend.  Call me paranoid or whatever, the metals are NEVER allowed to run “into” a holiday as a way of tamping down the spirits of the longs.  Check out the charts for yourselves, holidays are almost always preceded by a cartel attack and not only didn’t that happen, we ran hard to the upside.

In any case, the action in the metals has changed drastically.  Sentiment has been very poor and with the recent rally, some bulls have crawled out of their caves and are now forecasting the whopping high prices of $1,750-$1,800 before year end.  I will say that the action “should” by all rights see the metals making all time highs by the end of the year.  As always, I still believe that trying to put a “Dollar price” on the metals as to where they will peak out is a mugs game and you can pretty much bet that any number that you read will be far too low when all is said and done.