The European core with Germany and Benelux nations at its nucleus has firm fundamentals, a fact to emerge soon. European leaders benefit from a lower Euro valuation, as export trade can be encouraged in an economic stimulus, but more importantly as US$ reserve assets rise in value for bank support. Dubai started the process of debt intolerance. The Euro has embarked on a death-birth process, the end of the Broad Euro and the beginning of the Core Euro. The new Core Euro currency will resemble the old Deutsche Mark, whose return will coincide with other nations reverting to their former domestic currency. Except the new DMark will be strong and the reversion currencies will be trashed 25% to 40% lower. Unless and until Germany emerges with a solid plan with a new Super-Trim Euro currency, the US$ will benefit at the Euro's direct expense. The Euro usage as a secondary global reserve has caused suffering. It was not designed for that purpose. Reversal is demanded. Gold faces competing forces to both lift its price and harm its price.
Gold is unique as a market, as far as its tendency to seek equilibrium from matched supply and demand. Since the year 2005, my analysis has pointed out the unique condition of gold as far as supply inelasticity is concerned. My forecast over four years ago was to expect less gold output from the mining industry, even with higher gold price. That forecast was correct. In addition to more difficult mine projects, deeper ore bodies, thinner gold veins, and more costly projects, other paradoxical factors have been at work. The industry projects surely translate greater challenge into lower output. Introduce the lunatic management of the Marxist leaders in South Africa concerning electricity production. Dirty coal at power plants and higher mining firm taxation assure much lower gold output from the industry's former leader. Numerous are the reasons for lower gold output in the current year, even with high gold price. The industry is in decline. Ultra-rich ore bodies are long gone.The world is approaching a climax event. Sure, many analysts have made such a claim for months. But with Europe in flux, the USCongress in flux, the Persian Gulf in flux, the US-China trade battles escalating, and USTreasury debt finance recognized more and more as monetized printing press activity, we are truly approaching a climax event as gold metal has exited the London market. The trigger event is unknown. It will likely not be directly related to the above event fronts. It will probably be a typical garden variety event pertaining to the far from ordinary stresses tied to the ongoing crisis in the credit market, gold market, and currency market.
PARADOX OF INELASTICITY
Another important event occurred, this in December. A clearinghouse held a Letter of Intent to supply the London metals exchange with 250 metric tonnes of gold bullion. The contract was interrupted. The method used to disrupt and derail the contract is a story unto itself. Little is known in verifiable form. The point is that London bankers were denied an important channel of gold in supply. At the same time, demands came from private billionaires to take back possession of their gold in allocated accounts. They are often called in the gold industry the 'sovereigns' politely. When pressed for details, my sources tell of their Chinese background. In recent weeks, the billionaires have been joined by others from Central Europe, in particular from Switzerland. So London is being drained of gold and not being resupplied, from the front door and from the back door. A breakdown is coming, and accidents assured. Gold is the ultimate vulnerability. It underpins the USDollar, competes with the USTreasury Bond, while the USDollar remains buttressed by the Petro-Dollar defacto standard. That too has been served notice. See the Saudi announcement last May 2009, with Russia, China, Japan, and Germany at their side. Eventually, crude oil sales will not be fulfilled in US$ settlement.
The hitmen came in two types. The first were contract holders who drained the London Bullion Market Assn of its gold in late autumn, especially December. Many were wealthy Chinese billionaires, demanding return of their own gold bullion, forcing return with legal action and hired attorneys. Others more recently were Swiss wealthy individuals, whose demands confirm suspicion of illegal and illicit practices, like leasing from gold accounts for sales. Now secondly have come the inspectors, hired by individual billionaire account holders who could soon demonstrate improperly leased gold. The inspectors are the HITMEN!! They actually began arriving in early December but have widened their scope of work. The metals exchanges cannot stop them from performing their inspections and verifying hundreds of million$ in gold account holdings, sometimes billion$. Gold bullion has improperly been leased. Exchange officials should be worried about lawsuits and claims of contract fraud, as well as prosecutions and middle level employees offering state's evidence. They might be more worried about angry billionaires defrauded of their gold bullion, who hold mere paper certificates. Such men indeed have hefty budgets to hire professionals to do some dirty work in the shadows. Eric deC might actually see contract hits if patient enough.
Fast approaching is the event of GAME OVER for London, a condition that has already reached critical level, according to a key reliable source of information with London connections and direct experience with its market events. How long can a major metals exchange sell contracts but have miniscule supply of gold in their vaulted possession? The paper gold market and the physical gold bullion market have finally separated in a practical manner, meaning actual gold has almost no role anymore in London paper contract settlement. The absence of gold in London requires extraordinary tactics to settle contracts and to obtain gold bullion. Red tape procedures delay delivery for individuals, and bribes accompany gold delivery demands as standard practice. The London Bullion Market Assn has almost zero gold, its supply having been drained in high volumes since early December, a process currently in acceleration. The opportunity to convert fiat money into precious metal at prices considered reasonable is also vanishing. The London gold banker said,