The bigger story than the decline of gold is what’s actually happened to the gold. You could go into a vault in London a couple of years ago and they were packed to the rafters with gold and the gold would trade from me to you to somebody else. You could walk into those vaults today and they’re virtually empty. All that gold has been transferred out of London, 26 million ounces. It’s gone to Switzerland where it has been recast into a higher grade, shipped off to Hong Kong and then into China, never to return. So the most interesting thing, especially as we look into 2014, is if there ever is interest in gold again…and I’m not saying there is or isn’t…that gold is just not there anymore. It’s really amazing. They’re building these 2,000 metric ton vaults for gold all over Asia and the Chinese, they don’t want to have U.S. dollars anymore, they want to have gold.”
So, please allow me to summarize:
- The paper price plunge of 2013 led to insatiable “Eastern” demand which not only depleted the GLD, it emptied the gold vaults of London.
- The big fear of the bullion banks becomes “if there ever is interest in gold again, that gold just isn’t there anymore”.
- Western demand for anything…stocks, real estate, gold, anything…keys off of a rising price. Therefore, the key to managing western gold investment demand is maintenance of the price downtrend begun in late 2012.
- When the multi-year bull market resumes, “western” physical demand will return with it.
- Demand for physical gold from a bullion banking system which doesn’t have any is a significant problem.
- And how does a bank, desperate to survive and perpetuate the current system, manage paper price and by extension, western physical demand?
January 7, 2014. Price $1229. Open interest 383,021. Total bank position NET LONG 32,895 Comex gold contracts.
January 5, 2015. Price $1219. Open interest 394,021. Total bank position NET SHORT 72,835 Comex gold contracts.
And again, by “adjusting” their net position by nearly 106,000 contracts, The Banks give you a chart that looks like this:
 CLICK TO ENLARGE
So what will 2015 bring? No doubt more of the same, at least for now. However, paper price clearly found a physical floor in November of last year, below $1180 and near $1150. Soon, support in this area will intersect The Banks’ brutally enforced downtrend line. Before/when this happens, expect fireworks and tremendous volatility. Which direction price ultimately breaks will set the tone for remainder of this year.
As you might expect, my money is on a break UP and forward in price. That said, we’ve all learned that The Banks are dangerous and cagey villains…particularly when cornered. Therefore, remain alert and stay vigilant.
However, if the gold vaults are truly empty and if we did in fact find a physical floor to price late last year, then the price of gold is set for a massive rebound in 2015 as the market for physical gold finally wrests pricing control from the paper charade of the bullion banks. Be ready for an exciting and eventful year and prepare accordingly.
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