The Smack-Down in Gold

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If you have seen the Kevn Spacey movie named ‘Margin Call’ then you have a fair idea what went on by the insiders (ie Bullion Banks) to the price of gold during April 2013. Here we look at the April and June 2013 gold smack down

First some reference material.

The Chinese Shibor Rate shock sent Chinese banks looking for cash, they had to sell a their most liquid assets. Gold was an immediate first choice. Second, Nick Barisheff talks about gold in general and the selling of gold during April 2013.

Video via Peak Prosperity

The GOLD ETF GLD Chart below, the play book.



Of course the Financial TV media sees a drop in gold price and sound the alarm of ‘deflation’ and that gold is a silly yellow metal with no income stream. Deflation may be coming, however this will be bullish for gold not bearish.

This is the true formula for gold fundamentals: change in debt to change in oil price to change in gold price.

Every government has a hedge against there bond market risk, the hedge is a percentage of gold, this hedge is required to buy oil during a time of bond market crisis. No oil means extreme crisis in a petrochemical world! (Now the reader knows gold is money). Therefore if the oil price and or the debt level increases then so must the gold position. This means gold, oil and debt are highly correlated over time.

Therefore when risk factors change in either the bond, gold or oil market all three asset types are effected as the government portfolio requires adjustment.

The facts

– US government debt explosion from 2007 $8 trillion to 2013 $16 trillion at ZERO interest rates

– The bond market must be hedged with gold to allow the US to buy oil in time of crisis

– Oil price is not falling

Just imagine if interest rates rise and the only way to pay the interest is to print more treasury bills. In this case an increase in interest rates is bullish for gold for the simple reason government debt (including the FED balance sheet) is rapidly increasing and so is the risk. Also imagine if there is a deflationary recession the massive stimulus response to escape deadly asset price deflation is also a debt increase and bullish for gold.

What is truly bearish for gold is when the US can supply itself with 100% of all oil demands. Some say the oil shale boom will achieve this, however this will not eventuate as the US is using oil at a faster rate than it can be extracted.

The true fundamentals for gold remains very bullish.

Also you can expect more bear raids by naked short selling via the COMEX exchange as the COPS are in the pocket of insiders and or government. Extreme volatility will be accompany the gold investor in the years to come.

Some folks do all three of Jeremy Irons business advice.