There are many reasons that could cause gold prices to go higher. Collectively, these reasons could help gold soar past $5,000/oz. The entire world is changing with respect to money, banking, investments and the rules that govern wealth. The same factors that will push gold higher will also help the silver price rise multiples higher.
by Jim Willie
August 23rd, 2013
Back in November 2003, before the Hat Trick Letter was hatched and launched, a seminal article was written about 25 reasons why Gold will rise. It was updated afterwards, around 2008 with a couple more reasons. Given the extreme situation in the last few months, the entire outlook has changed. The gnarly intractable crisis began in late 2008 when Lehman Brothers failed, Fannie Mae was nationalized, and AIG was given a nationalist prop. In the last several months, the crisis has entered a new elevated level of perma-crisis and constant tension, widely recognized as something more serious, dangerous, and risk-filled.
The key changes that mark a quantum change in the global environment for Money, Banking & Gold are many. Taken collectively, they are truly impressive and mindboggling. The new normal is deep constant crisis without resolution, nor the attempt to resolve anything. The banker power structure refused to endure liquidations. They will forced upon them, consequently. The elevated sense of urgency, greater degree of distress, and higher risk of systemic breakdown are the result of many developments. They are largely due to:
-ZIRP Forever & QE to Infinity (hyper monetary inflation forever)
-Negative Gold Forward Rates & Futures Contract Backwardation
-Arab Spring & Instability across Middle East & North Africa
-Bail-in Plans for Western Bank Account Confiscation
-Monthly Gold Market Ambushes
-COMEX Vaults Going Empty
-Exposure of Derivatives as Bank Sector Point of Vulnerability
-Constant Pressure for Intervention & False Support of Financial Markets
-Draghi Bond Solutions Declared Invalid
-Unresolved Debt & Deficits in Southern Europe
-Recognized Dysfunction of USGovt Spending
-Infiltration of Chinese Yuan Swap Facilities into Western Nations
-Renegade G-20 Meetings with Gold Trade Settlement as Key Project
-Birth of EurAsian Trade Zone with Pipeline Infrastructure
-Revelation of Widespread Security Eavesdropping
The entire world has changed with respect to money, banking, investments, and the rules that govern wealth. The Hat Trick Letter is not concerned about legal matters, nor politics. The newsletter is focused on matters that affect the USDollar, major currencies, sovereign bonds, banking systems, economies, trade, and precious metals. No serious analysis can proceed on Gold & Silver without analysis of the other concepts, since all are integrated.
The following factors are directly relevant as to why the Gold Price will rise to $5000 per ounce, then higher. At the same time, the Silver price will rise multiples higher. The gains for Silver will most likely be a greater multiple than seen on the Gold price rise. The shortage for Silver is astounding and obvious to analysts and experts, except those who work for banks. The shortage for Gold is more subtle, as thousands of tons have been leased illicitly. Therefore the accounting is replete with double counting and outright missing accounts in false reporting. The most egregious ledger item is the USGovt gold reserves, listed as deep storage gold, translated to mean some scattered Barrick Gold ore bodies buried in mountain ranges.
GOLD PRICE FACTORS
1. Interest Rate Derivative Meltdown & Damage Effect from Rising TNX
The London Whale of JPMorgan's London office is responsible for giving it publicity. The Interest Rate Swap is a key device used to control interest rates, especially the long maturities. It is a complex mechanism. Final demand is artificially created. Morgan Stanley has served as the Wall Street harlot for years, executing the IRSwaps, fabricating USTreasury Bond rallies out of thin air. The leverage within the device is between 50:1 and 100:1 in usage. Small moves in the bond yield (like 30 to 50 basis points) can cause great disruption. We have seen a 130 basis point move in the USTreasury 10-year yield since May. Some big derivative accidents with ten whales will be sighted soon. The safer haven is the nemesis Gold bullion.
2. Reversal of USTreasury Bond Carry Trade & Convexity Effect on TNX
Since year 2009, the Fed Chairman Bernanke encouraged the big US banks to replenish their balance sheets with easy leveraged carry trade. They borrowed the free money on the short end near 0%. Then they invested in the 10-year USTreasurys. The Excess Reserves held at the USFed itself obscured the central bank's insolvency, obtained as profits from the carry trade. Now with rising bond yields, the damage is enormous, as the losses are approaching catastrophic levels (hidden), the process in reverse gear. The losses are magnified by leverage. The big US banks are in a rush to unwind their USTBond carry trade, which relied upon futures contracts for leverage. The easy money has converted into massive losses. The better investment is the nemesis Gold bullion.
3. Indirect Exchange: USTBond Returned to Sender & Eastern Infrastructure Build-out, the Inflation Finally Imported after 30 Years of its Export
In numerous large projects, the payment between two parties is turning out to be in the form of USTreasury Bonds more often. This is true for Rosneft acquisitions and African asset purchases, along with numerous smaller projects. The Brazilian OGX liquidation will see more of the same pattern. The payments in USTBonds are then converted to cash to the party selling the asset. The USTBonds are returned to sender, usually a New York or London bank. The exported inflation from the United States Govt avoided any direct strong effect on price inflation for the USEconomy, since exported debt. When it returns after 30 years, the inflation will be an imported effect, a massive delayed effect. The Gold price will respond to the USTBond being dumped, the rising bond yields, and the price inflation caused by the USDollar devaluation. The true inflation hedge is the nemesis Gold bullion.
4. Bank Bail-in Executions & Private Account Confiscation
The Cyprus bank confiscations provided the adopted model for the Western banking world. The Bail-in will in no way restore the solvency of big banks, whose derivative losses are typically 50 to 100 times larger than private accounts held in deposits. When the United States and Western Europe, along with Great Britain, impose the bail-in confiscations at whatever percentage for account reductions, the fury and panic will be very visible. People will realize that private funds held in insolvent broken corrupt banks are not safe. They will remove money from accounts, whatever is left, and seek Gold instead. The true safe haven is the nemesis Gold bullion.
5. Fall of House of Saud & Demise of Petro-Dollar & Rise of NatGas Coop
The Saudis are special in their command post at OPEC, and for colossal trade surplus recycling into USTreasury Bonds, US bank stocks, and US property. The Saudi regime has become unstable, due to many factors. Cite price inflation (food in particular), lack of reforms tied to Islam rules, targeted appropriation thefts by the princes, diminished national surpluses from the oil business, and a basic problem with succession of power. Apparently King Abdullah has recovered from a coma, his condition uncertain. The conditions for oil purchase being in USDollar payments cannot be assumed to continue much longer. The OPEC itself might fall victim to the Arab Spring disruptions, and bend toward other currencies in oil payments. The rise of the Natural Gas Coop is the biggest energy related geopolitical story in decades, linked integrally with the pipeline constructions, battles, and controversy. As the Petro-Dollar defacto standard falls to the wayside, the true standard in trade will be the nemesis Gold bullion. Arabs including the Saudis, in particular the Persian Gulf oil producers, will chase Gold with a passion, when they discard the USTreasury Bonds and pay homage to the new protector, China with Russia beside it. The longstanding favorite form of wealth held by Arab has for centuries been Gold bullion.
6. BRICS Bank as Gold Trade Central Bank & USTBond Conversion to Gold (G-20)
It was born as the BRICS Development Bank for construction projects extending from the alliance of Brazil, Russia, India, China, and South Africa. It later changed to the BRICS Bank. It will eventually become known as the Gold Trade Central Bank, the main processing center for supplied USTreasury Bonds accumulated by the emerging nations, converted to Gold bullion. At this point, the BRICS Bank is gathering in funds, typically in USTBond form. The details will be revealed in time, but this bullion bank will become a behemoth, and the core to global trade stability. The member nations will direct their FOREX reserves, largely USTBonds, into the BRICS Bank. The ruse is that infrastructure projects is cited in order to divert attention from US & UK attacks. The conversion of USTBonds for Gold bullion will make for a historically significant event in the Paradigm Shift for commerce and eventually banking, in brutal fashion, as USTBonds are redeemed (liquidated) for Gold.
7. USDollar Devaluation & Global Split by Defiant Foreigners
As the USTBonds are discharged from Eastern banking systems, the effect on the USTreasury yield will be pronounced. Whether for basic diversification of banking and FOREX reserves, or for payment of large project acquisitions, the effect will be the same. The USDollar must adjust in its exchange rate, and be devalued. In order to prevent staggering global price inflation, the foreign held USDollars must split to create a foreign USD and domestic USD. Foreign institutions will balk and object and resist a forced devaluation, having no part of it. The devaluation effect will be isolated to the USEconomy. The foreign defiance will reject the notion of a devalued USD outside the USGovt jurisdiction control and policy. The USD split will lead to the birth of a domestic USDollar, devalued by 30% at first, then later another 20% or 30%. The price inflation inside the USEconomy will be obscene. The true inflation hedge is the nemesis Gold bullion.
8. Banking System Meltdown & Default of Sovereign Bonds
The big Western banks have been insolvent for five years, actually since Lehman failed. The damage from Mortgage Bond investments was staggering across the world.The altered FASB accounting rules allowed the big US banks to operate as zombies, with doctored gimmicked balance sheet accounting. The cratered sovereign bonds of Southern Europe was the second major blow. The final blow is the combination of USTreasury Bond losses, tied closely with bank derivatives. Many derivatives are FOREX currency swaps, but ironically using Gold as a currency under contract. But the deadly damaging derivative is the Interest Rate Swap. The lost control of the USTBond is a big bank death knell. The best secure asset held in a bank or elsewhere is Gold bullion, seen slowly in new Basel Rules.
9. Discovery of Allocated Gold Account Thefts & 40,000 Missing Gold Tons
The demands for official gold account repatriation, first by Venezuela, lately by Germany, has caused a global problem for both governments and elite families. The exposure has extended to bullion banks and elite wealth funds, supposedly safe in accounts for the former, and supposed backed by redeemable gold for the latter. The gold is not there. The gold is not safe. The gold is not redeemable. The Backwardation in Gold futures pricing and the negative GOFO forward rates are glaring symptoms of the broken COMEX. For over 20 years, the major central banks of the United States, England, Switzerland, and Western Europe have colluded to lease and sell the official accounts and to abscond with private bullion accounts. My source The Voice estimates the missing illicitly leased gold from Allocated Accounts is at least 40,000 tons. The redemption demands will escalate. He calls it the climax scandal in banking that will catapult the Gold price to its proper value, at least $5000/oz and more likely to $7000/oz. The central banks and their accomplice bullion banks will be required to replace the improperly accessed gold for the official accounts and elite private accounts. The catapulting Gold price will reveal the beginnings of the true value of Gold bullion.
10. Discovery of Western Central Bank Fractional Gold Management, Contrasted with Gigantic Eastern Central Bank Gold Reserves
For decades, the known function of banking systems has been to use fractional methods. Between $10 and $20 is extended in credit, for every $1 held in deposits. The new money has collateral in the bank deposits. The dirty secret is that the central banks and their partner bullion banks have carried out fractional bank methods in the gold storage business also, against the wishes of clients (both government official accounts and private individual accounts) in illicit manner. They have replaced the leased gold bullion with gold certificates of dubious value, since the leased gold was used to suppress the Gold price by massive systematic dumping. As the gold bank practices become better known, as Andrew Maguire pointed out with 100:1 ratio of certificates versus physical bars with serial numbers, the Gold price will skyrocket. Meanwhile, the Eastern central banks are accumulating far more rapidly their gold reserves than they admit, since they wish to lie to the Westerner Bankers and their Government poodles after enduring so much fraud. The scramble is on for gathering the gold bullion, which has true value, made abundantly clear during the collapse of the sovereign toxic bonds that support government debt in the West. Gold is the true wealth, not subject to fractional tomfoolery.
11. Movement away from the Traditional USDollar Trade Settlement &Widespread Adoption of Yuan Swap Facilities in Bilateral Trade& Climax in Gold Trade Settlement with the new Gold Standard Adoption
The USDollar is actively being avoided in many trade flows. The Iran sanctions only served to hasten the USD alternatives in development. The Chinese trade partners have been using Yuan currency in settlement on a net basis among the designated large banks on a bilateral basis. In doing so, the Yuan Swap has permitted much of the world to be weaned off the USDollar. In the last year, new partners to the Yuan Swap Facility have been Australia, England, France, Switzerland, and the latest Germany as the Euro Central Bank site, hardly Eastern enclaves. The G-20 Nations are busily putting the platforms, cables, and wiring for a new peer-to-peer system, a de-centralized trade settlement system where trade is settled on a net basis with gold bullion. The G-20 Meeting has shown defiance, determination, and dedicated agenda to build the required platforms in gold trade settlement. The system will use Gold Trade Notes as letters of credit, and rely upon gold banker intermediaries such as Turkey to settle trade by participating nations. As the Gold Standard is returned via trade, the banks and FOREX will be forced to follow suit. Gold will rise in a grand ascendance to retake its proper place, from Eastern directives with the Gold Trade Standard.
12. Rise of EurAsian Trade Zone & Expansive Energy Pipelines
The skeleton is coming into view in the form of energy pipelines, vast networks to delivery crude oil and natural gas. In addition, several important liquefied natural gas facilities dot the ocean ports. The core is to be Russia & China & India, along with Japan and South Korea and Taiwan, as well as the entire Pacific Rim. They are banding together. They do not wish to save in USTBonds. They do not wish to settle trade in USDollars. They wish to relax tariffs and inspection methods. The Asians are in a unique hidden battle to capture Europe as a gigantic trade partner. Europe is the global grand prize. The United States is locked in a struggle to retain its European allies, firm trade partners for 60 post-war years. However, US banker fraud and a certain dose of ill-willed hegemony with power politics have tilted Europe toward Asia. Heavy railroad lines have been completed from Russia to Germany. Numerous Russian Gazprom pipelines will ensure British and Western European cooperation. The diverse pipelines have displayed the sour motives of the US & UK tagteam fascists. The core to Eurasian trade will not include the United States, and will be centered in gold as the medium of exchange and saving.
13. Explosive Growth in Demand for Coins, Bars, Jewelry across Entire World
The growth for various forms of precious metals at the retail level had been brisk before the turn of 2011 when Quantitative Easing was introduced. The bond monetization is hyper monetary inflation by any other name. The zero bound interest policy kept the pressure on retail Gold & Silver sales across the world, including in the United States and Europe. The Swiss refineries could turn out to the be final breaking point in the interventions that prevent Gold from taking its exalted position in banking and currencies. Since QE became the norm, and after it became clear that QE to Infinity would be the permanent policy, the growth for retail precious metals has turned exponential. The most recent jet assist to retail demand has come on the back end of the April and June Gold market ambushes, where naked shorting is more understood to be the main method of price suppression. Demand has risen in direct response to both lower price and vanished trust in the system, including gold futures contract delivery. Like all Gold bull markets in the past, the investment demand breaks the spine of the illicit gimmicks and banker conmen criminal set. The population will demand Gold & Silver bars, coins, talens, biscuits, and jewelry. The people will pay whatever price eventually, and certainly premiums, until Gold is properly priced an order of magnitude higher. The equilibrium in the gold market will come when Gold is above $5000 per ounce.
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