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The World Gold Council released its most recent statistics on (official) central bank activity in the global gold market, and in doing so made it very clear what the “game plan” is for the IMF in dumping its gold.

The WGC numbers are nothing less than shocking. The same European Central banks which were foolishly dumping 500 tons of their gold per year onto the market (and who knows how much they dumped unofficially?), have sold only only 1.8 tons in the first nine months of the newest “sales agreement” of those central banks. And virtually all of that gold was expressly for the minting of gold coins – to satisfy surging investor demand.

Consequently, with the anti-gold cabal having clearly exhausted all the gold reserves which those central bankers were willing to squander, nothing remains but a dwindling pile of IMF gold – the remnants of the 400-ton sale. This one sale has been announced and re-announced so many times over the last 2+ years, that I'm sure many casual observers to the gold market assume that there have been several such sales.

After allowing India to scoop-up half the 400 tons in one “gulp” (and seeing the bullish reaction in the market), the IMF bankers were given strict instructions by the anti-gold cabal: no more large, private sales. Instead, all gold must be dumped onto the market in a manner designed to do the absolute maximum amount of “technical damage” to the market (i.e. just like all the other central bank gold).

In that respect, we have the following data. Eric Sprott, the respected head of Sprott Asset Management (who recently started-up his gold-trust “PHYS”) tried to buy the last half of the IMF gold – but was refused, without explanation. It was widely rumored that China's government had also tried to buy this gold.

What has the IMF actually been doing with that gold? Since the middle of February, it has dumped 38.7 tons of gold onto the market, according to the World Gold Council. This leaves the IMF with somewhere around 150 tons remaining. Let me put that into perspective. Instead of the market expecting 500 tons of central banks' gold to be made available every year, the market now sees a mere 150 tons – and no more on the horizon.

This is occurring as central banks have switched to become net buyers, themselves, for the first time in decades, and last year they purchased (on a net basis) the most gold in 50 years. Regular readers will recall that I have frequently written on this subject – both the (absurd) IMF propaganda, and the significance of central bank behavior and the new “sales agreement”.

With retail investors buying gold by the ounce, while central banks buy by the ton, a surge in demand by retail investors can cause the price of gold to rise by hundreds of dollars per ounce. Obviously, with the scale of purchasing by central banks, they can move the price up by thousands of dollars per ounce with even greater ease.

Most reputable gold commentators fully expect the price of gold to rise to somewhere between $3,000 and $10,000 per ounce. However, now that the new trend of central bank behavior has been firmly established, many of these same commentators (including myself) are now being much more emphatic that the “big move” to these higher price-elevations is something to be expected in the months ahead (if not weeks).

It is rare for investors to be presented with a scenario where both the fundamentals for a particular investment and the behavior of major “players” in the market are so unequivocally bullish – yet the investment itself remains at a “bargain” price. In this one respect, we can “thank” the manipulation by the bankers, as they have allowed investors who have been late to understand the necessity of precious metals in every investor's portfolio to still enter the market at very attractive prices.

As a reminder, using “official” inflation numbers, the price of gold would have to more than double – just to equal the 1980-high (at a time of much less favorable fundamentals for gold). However, when we use real inflation numbers (i.e. those supplied by John Williams of Shadowstats.com), gold would have to rise to $7,500/oz to equal the1980 record.

With the debt-markets of both Euro-zone and U.S. economies obviously highly-stressed, none other than Marc Faber bluntly stated recently that “all Western governments are bankrupt”. Those still gambling their wealth by holding banker-paper, rather than protecting their wealth with precious metals are simply deer, paralyzed by the approaching “headlights”.

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written by Jeff Nielson, June 19, 2010

Paxjds, essentially there is no "price" we can arbitrarily assign to gold (or silver) at this point - since we can only express those prices in terms of what are arguably worthless currencies.

A few years ago, a "target" of $2,000/oz seemed reasonable. As you point out now, putting a zero behind that number no longer seems outrageous. A few years from now, if continue down the road toward hyperinflation, adding ANOTHER zero would likely seem reasonable.

More than anything else, it is this inability to properly price assets in our watered-down currencies which leads me to believe the death of these fiat abominations will come sooner rather than later.

The sudden decision by China's government to end the peg seems to indicate that government is forming a similar opinion.

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written by paxjds, June 19, 2010

The real inflation figures as produced by shadowstats I total trust, even the Failing US government does not even challenge Shadowstats for accuracy. The $7,500 an OZ for Gold to match the 1980 figure I totally agree with.
But we need to realize that the government printing presses that created the old gold high(Now $7,500) was based on a lot less government deficit spending. They never came close to several Trillion dollars in debt in 1.5 years. Obama has dumped several trillion in just a year and a half, with several trillion more to be printed out of thin air by 2012 when he should be trounce out of office. Scaling out for these trillions of fiat printed around the world by 2012, can $30,000 an OZ be a resonable estimate for Gold. And $2,000 an OZ for silver! I would not bet against this by 2016.

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written by Jeff Nielson, June 19, 2010

Of course, Sinclair's original target (and that of a lot of other precious metals commentators) was perfectly reasonable when he first made it. It's the BANKERS and POLITICIANS who have been so recklessly destroying our currencies since that time that all precious metals commentators have had to boost their price-targets dramatically.

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written by PRice, June 19, 2010

Jim Sinclair's target of $1,650 by January 2011 is in the bag. When he made the call five years ago, $1,650 was ridiculous. Pretty soon, $1,650 will be viewed as conservative.

So much for using the $ as a measuring stick.

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