Notice the reference to consolidation and re-organization in a manner not apparent to those fixated on the existing cockamamy corrupted system that is permitted by loyalist regulators. The officials in the LBMA, COMEX, USDept Treasury, and elsewhere are struggling to maintain the current system, and reportedly are not in step with awareness of the newly devised structures coming into place. In the background, far from view, new systems are being fabricated from scratch. Some involve complex barter systems soon to emerge and hit the scene with a splash, with impressive vertical integration. At the same time, new currencies for usage are still undergoing planning, foundation setup, contract latticework, and more for actual implementation.
"There is going on a lot more than meets the eye. The physical system is actually consolidating bigtime and is organizing itself with lightning speed, totally hidden from pretty much anyone, even the so-called insiders. The paper precious metal market and the physical precious metal market have defacto disconnected. The paper and physical gold markets currently operate in parallel universes. The outflow of physical metal from bank vaults is happening at a mind bending pace."
Many are the background factors to gold. The principal story comes from Europe. The default of sovereign debt is assured to all but the experts, for Greece, for Spain, for Italy, for Portugal. Germany walks a fine line, as they pretend to prevent the breakdowns. They eagerly push for defaults, along with expulsions from the European Monetary Union, that group sharing the Euro currency. The Euro experiment has been a failure to Germany, ransacked of $400 billion each year in savings for a full decade. That tally is $4 trillion to Germany, which wants the Southern European fat trimmed off completely. The Euro currency decline will continue until clarity comes to the expelled member nations and to the new structure in the aftermath. The current Euro will continue to flounder in confusion, seen as a queer benefit to the USDollar.The flip side to this important price reaction factor is the demand inelasticity. When on the upslope, the phenomenon is called Gold Fever. A rising gold price prompts a rising demand for gold. Imagine a 50% increase in the price of televisions resulting in lines forming to buy more costly TVs. Never. But such is normal for gold. When on the downslope, the phenomenon works in reverse. A falling gold price, in particular for the paper gold price dictated by brutal gold futures contract pressures, often not reinforced by the presence of gold bullion, results in a gradual darkened gloomy sentiment for gold. People do not rush to buy more gold since it has been offered at a cheaper price. Rather, they are trapped in margin calls when leverage is applied. Rather, they give up and sell out, dump their gold, and lick their wounds. These are the legion of dummies and risk junkies. These are the vast hordes who do not exercise patience and prudence, fully aware of the gold exchange distress. They will return, but when they do, they will purchase gold at a price 50% higher than when they abandoned the precious yellow metal. They will double up when the gold price has doubled.
A great disconnect exists in the gold market between the exchange futures contract price (the paper price) and the gold bullion paid price for transactions (the physical price). The differential in price is growing wider, enough to place tremendous pressure on the gold market itself. Look not to the gold premium paid for purchases, but to high volume purchases in the tens of million$. In mid-December, almost every demand for gold contract delivery was matched by a cash delivery, complete with 25% bonus premium offered. The officials even produced a new ledger item called 'Cash For Delivery' that was necessary to balance their badgered books. It prompted little attention. Some call it a basic bribe. Others call it a technical default.
DIVERGENCE TOWARD COLLAPSE
My expectation is when the breakdown comes, several key locations across the world will post and publish their actual transaction prices without names. They will vary somewhat. Even today, the Hong Kong gold spot price differs from the London gold spot price by $10 to $20 per ounce. This is standard, and reflects different demand levels against different supply levels. However, in the not too distant future, several key locations will herald their actual gold prices, which will be averaged, thus enabling the first true gold prices in a few decades. That day is coming, and those who stubbornly hold their physical gold & silver, do not yield to pressures, do not react to phony paper prices, they will be rewarded.
People who expect that day to be accompanied by unaltered political and economic landscapes are badly misguided. Think ugly! In fact, some ugly developments already have begun to crop up. A new USGovt rule requires that any large volume gold purchase must satisfy strict anti-money laundering guidelines. So further restrictions have come. Maybe the day will come also for declaration of any American owning a foreign bank account to be illegal. Think desperation!
Gold is hostage to the European reconstruction and the USCongressional revolt. At the same time, the paper gold market and the physical gold bullion market have finally separated. Divergence and havoc come next. The paper gold price might find the 1080 level to serve as a base for the next upward leg in recovery. Be sure to know that gold has entered the Twilight Zone, along with the major currencies. The USDollar and the Euro currencies float adrift in the FOREX seas of confusion, as fiat money is more openly doubted. What is the value of the Euro if suddenly two, three, or four nations must end its usage, default their debt in its denomination, revert to older drachma, peseta, lira, complete with devaluation? Who knows? Gold will benefit from the chaos and confusion. The USDollar appears to benefit. The USGovt is much like a desperate gambler in Las Vegas, who is doubling down as the bust looms large. The main tool used by the USGovt to finance its debt is the hidden Printing Pre$$. So far in the last twelve months, credit must be given not by creditors, but instead credit must be given to the Inflation Engineers who have managed to keep the vast monetization of USTreasury debt off the pages of the financial press and off the air of the financial networks. For every dollar financed by actual bond bids and purchases, three to five dollars are financed by Printing Pre$$ kept as hidden as possible. The levitation of the USDollar in such an environment is a very temporary situation.
The true gold price might very soon become unknown, an extremely positive development. Telltale events such as bankruptcy, lawsuits, and arrests are likely to come, all in time, since the breakdown in order has led to extraordinary reactions. Right now, we see extremely strong tactics using naked gold short contracts at the London metals exchange (LBMA) and the COMEX in the United States to drive down the gold price. It is all illegal and permitted. Margin calls have hit, forcing further selling of paper contracts. Gold investor sentiment among the naive and less informed has been dragging, ever since early December.