Kaye: “Wholesale demand for gold has been very strong. We have also seen central bank demand for gold very strong at these levels as well. Quite frankly I’m surprised we haven’t seen a bifurcated market yet....
“What I don’t know at this point is how much gold the central planners have access to in order to continue to try to hold prices at depressed levels. The other question is, ‘Why would central banks in the West knowingly and intentionally allow this massive migration of physical gold from West to East at such depressed levels?’
The answer to that is a real mystery, but it continues. My own feeling is the equilibrium price for gold is probably twice where it is currently trading, and possibly even higher. All other forms of portable wealth that I can identify, none of which have thousands of years of history as money like gold, have already reached or are now approaching all-time highs.
If you look at diamonds, including pink diamonds -- all-time records. Look at the art market, including art that’s really not that special, that’s also hitting all-time highs at the auctions. I enjoy wines, but what I don’t like is having to pay twice what I had to pay two years ago for fine wines. That’s what has been happening. Every two or three years the fine wines of France and Italy are doubling.
It’s the same story with rare maps. To me this is all very fascinating because every other identifiable form of portable wealth has done extremely well this year, with most hitting all-time highs. And yet gold and silver are languishing well below the highs that were reached in 2011. It’s really nonsensical except for the fact that the manipulation footprints are clearly present.
We are seeing backwardation in the gold market once again, and this seems to be the case now on a daily basis. We have GOFO rates which had been mildly positive, but now, particularly in the near-term, they have also crept back into being negative.
These are the same types of things we were discussing at the end of June, early July, when conditions were tremendously strained and prices for gold and silver were particularly low and deeply suppressed. As you may remember, gold rallied subsequently roughly $250 off of those lows.
So, again, we have now returned to those conditions that we saw prior to the significant rally in gold, and I think the question for the KWN readers around the world should be, ‘Is this a double-bottom?’ It certainly looks like a classic double-bottom to me. On top of that we are now seeing the same bullish indicators in place that launched the last massive rally in gold.
So that’s where we are, and, again, just like June and July, the investor sentiment in the sector has recently reached new lows. The bottom line here is all of this suggests that the gold market will go significantly higher from here, and quite possibly much, much higher. Meaning, it looks as though we have now seen the end of the cyclical bearish phase in gold and the wind should now be at the backs of the longs.”
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