With
many global investors still concerned about the recent price action in
gold and silver, today King World News interviewed the “London Trader”
to get his take on these markets. The source told KWN that “... the
LBMA’s price fixing scheme is coming to an end.” The source also said
that because of this, the eventual “move in gold and silver will
literally frighten most people.”
Here is what the source had to say: “It
is now beginning to be discussed, openly, that the unallocated gold is
not at the banks. This is definitely the case with many of the
allocated accounts as well. The reason I’m pointing this out is you
have a more ‘open’ disclosure that’s taking place with regards to this.”
“This tells me there is something major that is happening behind the
scenes. It tells me that the LBMA’s price fixing scheme is coming to an
end. You have these naked short positions, that are incomprehensible
to most people, in both gold and silver....
“As this scandal is brought to light, that
the unallocated gold and silver are not there, and much of the allocated
gold and silver is not at these banks either, and as you see these
naked short positions unwound, the world will witness a massive price
rise in in both gold and silver. The move in gold and silver, at that
point, will literally frighten most people. They simply won’t
understand what is happening.
When someone goes to a bank
and deposits money, if you look at the small print, you don’t actually
own that money, you’ve simply loaned it to the bank. The banks will
then turn right around and lend ten to one or whatever leverage they
determine to use with your cash. Well, when there is a run on the
banks, as there has been in Europe, the money is printed by governments
and given to the customers to calm things down.
The underlying problem here
is that when the run on physical gold and silver begins, how will the
banks print the gold and silver? It’s not possible. So something is
brewing here. There’s no smoke without a fire. The reason this
information is beginning to be discussed more openly is because of legal
reasons. They need to be able to say, ‘We disclosed to people that the
gold and silver wasn’t there.’
Yes, this will include a
scandal at the LBMA in those unallocated accounts. The paper leverage
in the LBMA system is off the charts. Investors believe their gold and
silver is sitting in those unallocated accounts, and they will be in
shock when they find out it isn’t there.
We are talking here about a
run on the bullion bank. As this unfolds there will be a failure.
These people will only receive the fixed price before trading is
halted. This will not be called a default. Then there will be a
massive gap in the price of gold and silver. But the bullion banks will
not be allowed to go bankrupt during this process. There is a ring of
counterparties here. If one of them fails, the whole system can fail.
So they will not be allowed to fail.”
The London Trader also stated:
“I would also add that demand for gold from China is unceasing. The
Chinese not only want to diversify out of dollars, but now they also
want to diversify out of the euro as well. They are trying to do this
in size. They want out of those currencies, and what they are doing is
exchanging them at the fixes in London for gold, and this will surprise
some people, but we are beginning to see it in silver as well.
Gold is the primary focus,
but very recently, and on every dip, we are seeing significant purchases
of silver in size. So yes, demand from China, it’s unceasing. They
want out of these debasing currencies. I would add that they are buying
anything that’s tangible, land, timber, mines, art, etc..
It is absolute nonsense
when people speculate the Chinese may stop buying gold and silver. When
you see 315 tons of gold was purchased by China in the first five
months of the year, that’s just the tip of the iceberg. That 315 ton
figure that was recently reported is patently false. That’s just what
they can’t hide. The actual amount of gold China has accumulated is
many times that 315 ton figure.
The buying is relentless.
It’s every single fix, every single day. The Chinese are eventually
planning to have gold back their new currency, which is going to replace
the dollar as the reserve currency.”
The London Trader also added:
“It’s not just Chinese demand impacting the physical markets. It’s the
Middle-Eastern countries and Russia and so on. Investment demand for
silver is also picking up at these levels. Demand is coming from the
Middle-East, and India has also become a bigger buyer of silver.
I would also add that you
see a great deal of negative press regarding gold. Many are saying,
‘Look at 2008, they are going to sell gold along with everything else
and it’s going to crash.’ What people don’t understand is gold is on
its way back into the financial system.
We had the recent proposal
to have gold categorized as a Tier-1 asset. This moves the risk
weighting from 50% to 0%. Most people have not grasped the full
significance of this proposal. This will change the entire mechanics of
the gold market when there is a time of stress, such as the one we
witnessed in 2008.
This is one of the major
reasons why those calling for a collapse in gold are going to be proven
wrong. Yes, in 2008/2009 we did see a significant correction in the
price of gold, and that was a result of the liquidity drying up. But in
2008, because gold was not considered a Tier-1 asset, it forced the
banks to sell their only remaining liquid asset in order to raise cash.
This was done to meet margin requirements.
There was so much gold
hitting the bid all at once that it was like a huge bottleneck. This
instigated a $200, waterfall-type decline, that amounted to a roughly
20% correction in gold in just 30 days. This took place against
tremendous fundamentals for gold. In fact, the fundamentals for gold
were so strong, that when gold bottomed in 2009, it only took just over
30 days for gold to break back above the level where the waterfall
decline first began.
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