Saturday, July 21, 2012

London Trader - The LBMA Gold Price Fixing Scheme Is Over
It is now beginning to be discussed, openly, that the unallocated gold is not at the banks.  This is definitely the case with many of the allocated accounts as well.  The reason I’m pointing this out is you have a more ‘open’ disclosure that’s taking place with regards to this.

As this scandal is brought to light, that the unallocated gold and silver are not there, and much of the allocated gold and silver is not at these banks either, and as you see these naked short positions unwound, the world will witness a massive price rise in in both gold and silver.  The move in gold and silver, at that point, will literally frighten most people.  They simply won’t understand what is happening.

When someone goes to a bank and deposits money, if you look at the small print, you don’t actually own that money, you’ve simply loaned it to the bank.  The banks will then turn right around and lend ten to one or whatever leverage they determine to use with your cash.  Well, when there is a run on the banks, as there has been in Europe, the money is printed by governments and given to the customers to calm things down.

The underlying problem here is that when the run on physical gold and silver begins, how will the banks print the gold and silver?  It’s not possible.  So something is brewing here.  There’s no smoke without a fire.  The reason this information is beginning to be discussed more openly is because of legal reasons.  They need to be able to say, ‘We disclosed to people that the gold and silver wasn’t there.’ 

Yes, this will include a scandal at the LBMA in those unallocated accounts.  The paper leverage in the LBMA system is off the charts.  Investors believe their gold and silver is sitting in those unallocated accounts, and they will be in shock when they find out it isn’t there.

We are talking here about a run on the bullion bank.  As this unfolds there will be a failure.  These people will only receive the fixed price before trading is halted.  This will not be called a default.  Then there will be a massive gap in the price of gold and silver.  But the bullion banks will not be allowed to go bankrupt during this process.  There is a ring of counterparties here.  If one of them fails, the whole system can fail.  So they will not be allowed to fail.”

“I would also add that demand for gold from China is unceasing.  The Chinese not only want to diversify out of dollars, but now they also want to diversify out of the euro as well.  They are trying to do this in size.  They want out of those currencies, and what they are doing is exchanging them at the fixes in London for gold, and this will surprise some people, but we are beginning to see it in silver as well. 

Gold is the primary focus, but very recently, and on every dip, we are seeing significant purchases of silver in size.  So yes, demand from China, it’s unceasing.  They want out of these debasing currencies.  I would add that they are buying anything that’s tangible, land, timber, mines, art, etc.. 

It is absolute nonsense when people speculate the Chinese may stop buying gold and silver.  When you see 315 tons of gold was purchased by China in the first five months of the year, that’s just the tip of the iceberg.  That 315 ton figure that was recently reported is patently false.  That’s just what they can’t hide.  The actual amount of gold China has accumulated is many times that 315 ton figure.

The buying is relentless.  It’s every single fix, every single day.  The Chinese are eventually planning to have gold back their new currency, which is going to replace the dollar as the reserve currency.”

“It’s not just Chinese demand impacting the physical markets.  It’s the Middle-Eastern countries and Russia and so on.  Investment demand for silver is also picking up at these levels.  Demand is coming from the Middle-East, and India has also become a bigger buyer of silver.

I would also add that you see a great deal of negative press regarding gold.  Many are saying, ‘Look at 2008, they are going to sell gold along with everything else and it’s going to crash.’  What people don’t understand is gold is on its way back into the financial system.

We had the recent proposal to have gold categorized as a Tier-1 asset.  This moves the risk weighting from 50% to 0%.  Most people have not grasped the full significance of this proposal.  This will change the entire mechanics of the gold market when there is a time of stress, such as the one we witnessed in 2008.

This is one of the major reasons why those calling for a collapse in gold are going to be proven wrong.  Yes, in 2008/2009 we did see a significant correction in the price of gold, and that was a result of the liquidity drying up.  But in 2008, because gold was not considered a Tier-1 asset, it forced the banks to sell their only remaining liquid asset in order to raise cash.  This was done to meet margin requirements.

There was so much gold hitting the bid all at once that it was like a huge bottleneck.  This instigated a $200, waterfall-type decline, that amounted to a roughly 20% correction in gold in just 30 days.  This took place against tremendous fundamentals for gold.  In fact, the fundamentals for gold were so strong, that when gold bottomed in 2009, it only took just over 30 days for gold to break back above the level where the waterfall decline first began.

The difference this time around is that gold may be considered a Tier-1 asset, and what that means is that it will be equal to cash or Treasuries.  So there will be no need for banks to liquidate gold in order to meet margin requirements.  You may, instead, see fresh new money entering the gold market.  It’s going to provide a bid where there was no bid in 2008.”

No comments:

Post a Comment