“Now, due the very fact that China and much of the East are rapidly increasing their bullion inventories in an escalating move to ‘de-Americanize their economies,’ there is a resultant scramble in the West to repay rehypothecated bullion from both unallocated and allocated LBMA bullion accounts.
This includes the Fed and the BIS (Bank for International Settlements), who are unable to even repay current requests by the likes of Germany to repatriate just a fraction of their gold. And it should be noted here, Eric, that the amount requested to be repatriated will take seven years, but is less than half the gold cleared by the LPMCL (London Precious Metals Clearing Ltd.), amongst the LBMA members every single day here in London.
The BIS and the Fed are providing leased gold into the market, but, importantly, laying the liability directly upon the bullion banks who are no longer receiving any bullion, just credit ledger entries. This most recent attempt to force producer hedging is the final stage of being able to milk future supply out of the market, as GLD is about tapped out of the weak hands, and will in the future be much more difficult to dislodge from increasingly strong hands.
Eric, one has to ask oneself, ‘Where is the risk/reward now?’ We are not at $1,900 gold, with the ‘hot money’ long. We are here now with gold (around) $1,200, below the cost of production, a strong physical market, the ‘hot money’ all-in short, the bullion banks going long, and the bullion game changing forever in 2014.
I’ll leave it up to your informed listeners (and readers) to decide (what to do). I’m doing what Goldman Sachs is doing: I’m positioning myself long with a very low cost delta put protection.”
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