Friday, February 14, 2014

This Is Why The Gold & Silver Shorts Are So Terrified Today

"Today the man who has been one of the most accurate in the world at calling movements in the price of gold spoke with King World News about the ongoing war in the gold market and why the shorts are on the run today.  William Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, also spoke with KWN about physical demand for gold and why the price is migrating higher right now.

Eric King:  “Astonishingly, sentiment in the gold market remains more bearish today than it was at the bottom of the 2008/2009 collapse -- your thoughts on gold.”

Kaye:  “The gold market is looking better.  I think it’s looking better primarily because at these levels demand is just insatiable in China....

“The cartel has demonstrated they will continue to manipulate the paper or electronic market for gold.  That is where their power lies.  

When you have a digital printing press, which the Fed and the BIS both have, and you’re backstopping massive banks that are your agent banks, like JP Morgan and  Goldman Sachs, in a market where almost no one stands for delivery, such as the Comex, essentially you can abuse and manipulate virtually at will.  This simply requires that they don’t mind violating rules, and these guys don’t mind.  This is why they are constantly being charged with illegal behavior.  They’ve admitted to a number of different counts already.  

So if they want to try to take the gold market significantly lower, they can do so by showing up with a naked 400 ton short sale order.  Of course no one has 400 tons of good delivery bars that they can deliver, but let’s not let that fact get in the way.  There is absolutely no anyone in the private sector, including JP Morgan, within the net capital rules would be able to create an order like that, but that order actually hit the market in April of last year. 

The main argument for that not occurring again at these levels is the off-take in China is enormous at the moment.  For the suppression scheme to succeed, there has to be an ability to deliver gold that is under the control of the cartel from places like London and Switzerland, to Shanghai and Hong Kong, and to be able to do it in reasonably short order.

So my take on why we’ve seen this retreat by the cartel is that at these price levels demand for physical is simply too great.  It strains their ability to meet these obligations if they try to keep the price below $1,300 any longer.  So the bias I have at the moment is gold will continue migrating higher until some of these strains get removed.

In the near-term, the GOFO lease rates have gone negative and gold has stayed consistently in backwardation territory for the last several weeks and even months.  So unless some of these strains get removed, gold will migrate higher to the low-to-mid $1,400s before it becomes a vicious battle again.”


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