The trading action in the paper gold markets of London and NY this week further convinces me that gold is being pushed down in price by the western Central Banks similar to the take-down in the paper price that occurred in 2008. The motive is to prevent a soaring gold price from signalling to the markets that a big problem is percolating in the global economic and banking systems.
Once again, in the early morning the price of gold was slammed just after the London a.m. price Fix (3 a.m. EST) and again at the open of the Comex gold pit (8:20 a.m. EST) – click on image to enlarge:
This pattern has been persistent over the last two months. It’s not about gold being “pinned” to the SDR, as Jim Rickards is now promoting. And it’s not about some mystical gold peg to the yuan. It’s about western Central Bank desperation to keep the dollar alive in order to defer the inevitable collapse of the record level of dollar-denominated debt and the associated derivatives.
It’s no coincidence that Rickards has floated this theory about the gold price and the SDR recently. Rickards was rolled out several years ago to promote the idea that the SDR would be the next reserve currency. The Deep State knows the dollar’s life-span is limited. The U.S. dollar is 58% of the SDR, making the SDR the best replacement of the dollar which thereby enables the U.S. Deep State to maintain some semblance of global hegemony.
For the time being, gold is trading almost in perfect inverse correlation with the dollar. The dollar currently is rising vs. all fiat currencies. Therefore, of course it might look visually like gold and the yuan or gold and the yen are trading in tight correlation. But at the root it’s all about the dollar and the effort to prevent the dollar from collapsing.
As for the brewing collapse of the financial system, here’s an interesting chart comparing Deutsche Bank’s stock price with the gold since the beginning for February. The idea here is that the Fed/ECB/BoE began to work on the gold price when it became obvious that the world’s most systemically dangerous bank was in a state of collapse:
Certainly the mining stocks are generally “skeptical” of gold’s price action since April:
And has anyone checked gold lease rates lately? Currently the lease rate curve for gold and silver in London is inverted. In fact, lease rates gold from 3 months to a year are negative. Negative lease rates mean the Central Banks will pay bullion banks to lease gold and silver. Long-timers like me know that this means there’s an immediate and anticipated shortage of physical gold and silver available for delivery, where “delivery” means the metal is removed from the London vaults and shipped to the entitled buyer.
Both gold and silver are backwardated. It took 11 iterations in the LBMA p.m. fix on Tuesday to balance out the heavy demand for physical gold from bidders. 11 iterations is rare occurrence. 5-6 iterations is rare. 1 or 2 is typical. Metal is tight in London.
If you are monitoring the Comex Hong Kong kilo bar vaults, you are aware that the movement in and out of the vaults there suggests that metal is also tight in Hong Kong, which means it is likely tight in Shanghai.
The point here is that the paper price behavior of gold right now is not what it seems. I’d be more worried about the motives behind the take-down of the gold price using derivatives than I would about where the price of gold will be in 3-6 months. I’ve always said that the occurrence of events triggering the price of gold to soar will make life unpleasant for everyone.