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Gold and Silver Prices Poised to Rise Dramatically

— James West

It’s been two and a half years since the bank-coordinated reversal of the bull market in gold and silver began on September 7, 2011, the day after gold touched an intraday high of $ 1923.70 . Since then, there have been repeated coordinated operations that have seen gold taken down to the $1,100 level.

But now, the gold price is insistently yearning upward through its technically significant $1,260 level, despite a mis-regulated futures market that annually supplies imaginary gold on a virtually unlimited basis to the sell side in the form of future sales of gold that are rarely if ever settled with physical gold.

Conspiracy Becomes Reality

Of course, such theories are dismissed by mainstream financial commentators and other market participants who sneer at them as just so much conspiracy theory. However, given the recent revelations of manipulation of interest rates, and the multitude of un-prosecuted crimes among financial titans such as Jon Corzine and Steven Cohen, the possibility that such a conspiracy exists carries incrementally more weight with each passing year.

But I’m not here to debate the existence of such a conspiracy today. To me, the overwhelming evidence confirming that it does indeed exist and is in fact relied upon by the United States government to perpetuate the illusion of viability of the rapidly depreciating U.S. dollar, is impossible to discount.

In fact, the continuing ability of the futures market to dictate a depressed and compromised gold price to the spot market has been rendered possible by the transfer of a portion of the $85 billion per month in Tier 1 assets fabricated from thin air by the United States Federal Reserve to duplicitous futures market participants who clear contracts using cash supplied from this scheme in lieu of gold.

I know, I know. It’s impossible. It’s insane. It’s outrageous. The government of the United States could not possibly coordinate such a complex scheme involving the nation’s top banks, when both are constitutionally mandated to act in the best interests of the citizens of the United States.

Citizen’s interest notwithstanding, however, if such a conspiracy was in fact behind the ability of the futures market to suppress the prices of gold and silver to convey to the financial world the superiority of United States denominated assets over precious metals, then that ability and the scheme itself would be weakened by the reduction of Quantitative Tier 1 Asset Fabrication, as the supply of fractionally extrapolated credit and capital available would be reduced proportionally.

Thus, tapering the production of phony assets must needs constitute the tapering of the effectiveness of the suppression of gold and silver prices by futures market participants.

The Fed Miscalculates

The Fed has demonstrated a propensity to consistently miscalculate the effect of their statements and actions on markets. While the swoon of emerging markets instigated by the repatriation of capital to the United States in anticipation of a diminishment of free money was to be expected, the Fed erroneously assumed that the capital would flow into U.S. equity and bond markets, thus mitigating the effect of the withdrawal, to some degree, of the government largesse.

You will remember the market tumble that was inspired by Ben Bernanke’s allusion to the idea of tapering in June 2013. The Dow Jones dropped 206 points, or 1.4 percent, the S&P 500 lost 22.88 or 1.4 percent, and the NASDAQ dropped 1.1%.

At the time, Bernanke rushed to emphasize that there would be no tapering at that time, but he did caution that the plan was to begin tapering in late 2013 and to completely end the quantitative counterfeiting program by mid-2014. He caveated that with the warning that stimulus might resume or even increase if economic data suggested weakening a reversal of recent gains.

You may also recall that other candidates for the roll of Chairman were passed over for holding a hawkish stance toward QE, (where they were mostly against it), while Janet was selected for her “dovish” attitude toward QE.

“Monetary policy is likely to remain highly accommodative long after one of the economic thresholds for the federal funds rate has been crossed,” she said in November last year during testimony.

That suggests the Fed has adopted a reactionary stance, and could easily reinstate an $85 billion per month rate of asset fabrication, or even more.

One thing is certain: if the fabrication of Tier 1 assets is integral to the futures market’s ability to skew pricing in precious metals to the downside, tapering will be short-lived, if gold and silver prices continue to pressure upward.

The Fed’s Rock and Hard Place

The idea that gold and silver could actually benefit from a withdrawal of Quantitative Asset Fabrication is contrary to the mainstream financial media message, who uniformly reports that the taper will result in reduced demand for precious metals.

That simply isn’t happening.

What’s worse, if the demand for gold and silver remains intact or strengthens in the face of tapering, then the perception will be that the U.S. market and GDP numbers that are being pointed to as a sure sign that the economy is on the mend in the U.S. is in fact a case of the Fed drinking its own Kool-Aid, and that the systemic problems in the U.S. economy are in fact deep and persistent. Which will undermine demand for U.S. bonds, unless there is a rise in interest rates to offset it.

That, in turn, will demonstrate just how hyper-inflated the money supply is in the U.S., and while hardening skepticism toward USD, it will re-establish gold and silver as the pre-eminent safe-haven refuge during economic crises, which will resume as the U.S. scrambles to resurrect the QE flow. But this time, that will optically be perceived as desperation, and in keeping with tradition, the Fed will have miscalculated just how undesirable their bonds have become. Again, gold and silver will be the natural beneficiaries of such sentiment.

Physical gold and silver demand continues to rise

Among the side-effects of delusion monetary and fiscal policy such as that practiced by the U.S., China, Japan, Europe and the U.K., is that the performance of gold and silver prices as driven by futures markets underscores the fallacy of such pricings’ reliability, and confirms their irrelevance in real terms. Considering that all of the world’s physical gold and silver is being purchased in spot markets, and increasingly hoarded in Asia, then relative to the vast amounts of new money being conjured up by these nations, there should be a correlative rise in the prices of precious metals on a strictly nominal basis. Gold and silver production remain flat, but fiat currency production is rampant. Thus, it’s simple economic logic that, in a free and uncompromised market, the prices of gold and silver should be rising.

This chart courtesy of Sprott Corp., shows clearly the excessive demand for physical gold relative to mine supply.

This chart courtesy of Sprott Corp., shows clearly the excessive demand for physical gold relative to mine supply.

A second coincident outcome of coordinated precious metals price suppression is that the demand for physical gold and silver is actually amplified by the suppressed prices, as investors in gold and silver understand through simple math that the current prices, while not relevant to real demand, nonetheless provide an opportunity to accumulate physical gold and silver at bargain prices This despite the reality that North American bullion dealers are demanding anywhere from 10 to 25% premium for buyers of actual physical gold bullion above the futures market driven spot price – another piece of evidence in the case for widespread price suppression of the metals through unlimited fabrication of paper gold in futures markets.

Germany Believes in the Conspiracy Theory

On January 17, 2014, an article in Bloomberg reported that Germany’s top financial regulator, Elke Koenig had warned of “possible manipulation of currency rates and prices for precious metals” being far worse than the Libor-rigging scandal, a conspiracy theory that became historical fact in the last couple of years.

“Firms including Barclays Plc (BARC) and UBS AG (UBSN) have been fined for manipulating Libor and related rates. The European Union fined six firms, including Deutsche Bank and Societe Generale SA (GLE), a record 1.7 billion euros ($2.3 billion) in December for rate-rigging. Ten people have also been charged in parallel U.S. and U.K. criminal investigations into the matter,” according to the article.

Deutsche Bank announced the same day that it would withdraw from the daily setting of the gold and silver benchmark price, citing the investigations by European regulators. And it comes as no surprise that these are the very same banks, along with ScotiaMocatta and HSBC, who are involved in fixing the daily gold.

Germany’s central bank Bundesbank announced in January that it would like to repatriate 300 tons of gold from vaults held in New York by 2020 – an indication of a lack of trust among central banks, according to a tweet by Bill Gross of PIMCO, one of the world’s largest fixed-income asset managers, in mid-January that was subsequently deleted.

The Return of the Gold Bull

While all of this evidence does not rule out the possibility of some new coordinated effort to suppress a rising gold price, the conclusion one can draw from analyzing the growing physical demand data, compared to the ineffectiveness of QE in ameliorating systemic weakness in the U.S. economy, is that the ability to suppress the gold price is breaking down.

And if the trend continues, it may just be that gold will finally throw off the shackles of U.S. dollar interest suppression, and resume the upward surge of the decade preceding 2011.

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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  • Hrisc February 8, 2014

    Global PM demand likely will remain and even more likely continue rising…supply will continue falling (global mining output peaking in 2014, scrap continues falling, ETF’s are nearly bare cupboards (or maybe not nearly?) …Comex, LBMA, again, bare cupboards @ these prices…hard to see (absent some major bail-ins) how the printing doesn’t escalate.

    The only answer to resolve the above issues would be higher price…but the longer it goes down, the greater the ultimate adjustment.

  • FrankTrades February 8, 2014

    Great summary!

  • Robert P. Bailey February 8, 2014

    It doe’s not matter what the modern day financial ” Masters of the Universe” do, either they continue to lie about the fundamentals of low production of precious metals especially Au and Ag which has been made due to spot price maniuplation with paper gold and silver derivatives The global demand of these two metals from the emerging markets like China, and India will not stop!

    The main reason being is that US dollar has lost its global rulership due to the US huge debt burden, so we see the constant migration of Precious metal from the vaults of the west to the east! The Western economies have nothing to fall back on to support their collective soverign debt mountains. The only course for the role of the central banks is to flood their balance books with cheap credit from the printing presses. Fiat currency has only been in history for just over four hundred years, while real money like Gold and Silver has a track record of over 5,000 years. So the real question is which would you trust and put your faith and confidence in ?

    The store of value of Gold and Silver or the boom and bust and bubbles of this sad experiment of the idea of John Law on a global scale,is truly sad indeed! Mr.Kenyes,if he was alive today, would throw himself of a tall building in London, as well if he could see would his macro-economics has produced in the western world’s economies.

  • bruce February 8, 2014

    My opinion on this script is negative

    the central banks decide
    and lately they print too

    they can move huge amounts of money
    we cannot
    we can do nothing

    they can do everything
    they can buy everything
    the make the price of everything

    they can sell as much gold as they want and send the price of gold eventually event down to $ 100,00
    yes, they can

    no chance that we can make the price go higher if they dont want to

    • Shark Krishna February 18, 2014

      If that was the case, bruce, then why did they ban gold imports in India? Why did they allow gold to rise from 250$ to 1900$?

  • Charles February 8, 2014

    “Conspiracy Becomes Reality.” Nice to see clarity instead of the obscure word “cabal.” Ever hear of The Pilgrims Society? They are the top financiers of The City of London and Wall Street for over a century, organized into a phalanx to gouge the entire world by “seizing wealth,” their own words (documented at link).

  • Alexander Sandro Frei February 22, 2014

    From my understanding it was not Germany’s central bank that stipulated that the gold was to be returned by 2020. Rather it was the US Fed who said that they would only be able to return the 300 tons by 2020! Just another sign that the Fed are pulling the old fractional reserve trick on the reserves themselves!

  • Spartacusstoo September 8, 2014

    Well, hooray, I guess. So demand is exceeding supply by ample margins! So, why then are prices declining. Oh, I get it, that same money is swarming into Facebook now at 200 billion, gosh, 200 billion for social fluff while gold and silver lanquish.
    I am chagrin here. Caught in the most horrible of horribles for an investment where the prices keep going down and if I am to sell, well smacko, I lose. And then being bolstered with the notion that soon, real soon the metals are going to soar. Really?
    And if in fact the metals are suffering because of suppression then with demand being so high why the hell are the premiums not going up, at least appreciably?
    So, my question is: who is pulling who’s leg?????


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