Bullion Bulls Canada

Almost precisely one year ago, I wrote a commentary outlining “two, short-term scenarios for the gold market.” While I acknowledged that there was still the possibility of a mid-summer sell-off, if there was no sell-off by the end of July, I stated that we should expect the “fall rally” to commence earlier than usual, leading to “a run-up to at least $1200/oz”.

In fact, there was no sell-off, the gold rally did start earlier than usual – and it ended (for the time being) with a spike above $1200/oz. As I stated in that commentary, I don't make a lot of “short-term predictions” with respect to precious metals, for the obvious reason: “predicting” the movements of a highly-manipulated market is generally a fool's game. However, there are times when market factors and fundamentals stack-up so heavily on one side (or the other) that we can act with reasonable confidence.

With this commentary being roughly two weeks later in the year than last year's commentary, I see the possibility of a mid-summer sell-off to be much more unlikely than when I wrote last year's commentary, however, even if there should be some unlikely weakness in the gold market, as investors we must take a stand with regard to risk/reward, and I would argue that such an analysis clearly favors accumulating bullion now.

I remind readers that there was still the usual chorus of bears (and sheep) arguing that we should “sell in May, and go away” this year - the standard mantra in the gold market, back when it behaved in clear, seasonal patterns. However, as I wrote back in March, in “Gold: The End of Seasons”, supply/demand fundamentals have changed so drastically that such “seasonality” can no longer be rationally justified.

I would argue that the performance of the gold market has validated that conclusion, even though we haven't seen the “break-out” to a new price-level, which has appeared imminent on several occasions. Instead, I suggest that the simple fact that there has not been a significant sell-off justifies a “buy and hold” strategy for bullion.

All sophisticated precious metals investors know where gold (and silver) is heading over the long term. The question which any sane investor must ask himself is: do you really want to risk getting caught with much of your money on the 'sidelines' when gold has its next break-out – simply to try to eke-out a 10% swing-trade?

Obviously, “risk/reward” analysis would reject such a foolhardy strategy. Unlike the sheep, who willingly allow themselves to he “herded” in one direction, and then herded in the opposite direction a few weeks later, true “investors” must learn the lesson of patience. As I have stressed on a number of occasions, unlike most equities and various forms of banker-paper, when it comes to precious metals, “buy-and-hold isn't dead.”

For those who didn't read the earlier commentary on gold's “seasons”, there are two basic reasons why gold will no longer exhibit the seasonal patterns of previous years. First of all, the gold market is no longer dominated by India – and the previous seasonal pattern in the gold market was, in fact, the exact buying-pattern of the Indian gold market.

Indian gold-buying commences with its fall religious festivals. It continues on into the spring – which is the traditional Indian “wedding season”, where gifts of gold for the wedding couple are a long-held tradition. When Indian wedding-season ended, their gold-buying would stop, the entire global gold market would stagnate for four or five months – and then the whole pattern would repeat itself the following autumn.

Having received several comments and questions from readers about the future of China's monetary policy, which “pegs” the price of the renminbi to the U.S. dollar, that usually serves as a good indicator that this is a topic worthy of a more detailed discussion.

The general attitude I have encountered (which is obviously fueled by how the mainstream media chooses to report this issue) is that China's government is likely to retain the dollar-peg either because a) that has been its policy throughout the last decade; or b) that China is somehow “trapped” into maintaining the “peg”. I firmly believe the exact opposite: that China's government is very close to abandoning the dollar-peg, and (in fact) has made a multitude of preparations to do so.

Obviously, the first and more simpler basis for believing the dollar-peg will continue is easiest to address, so I will begin with that. While it can always be seen as simplistic to conclude that some trend will continue, simply due to some form of “inertia” (or just habit), we live in a universe where inertia is one of the most dominant forces.

Thus, the “inertia” argument must always be considered carefully. I would argue that the appropriate way to conduct such an analysis is to look at what caused a particular event/trend (in the first place), and whether those causative factors still exist. Once any particular trend (especially an economic trend) is no longer being driven by anything other than “past practice”, than the probability that such a trend is about to end rises considerably.

Looking back to when China first chose to link its currency to the U.S. dollar in this manner, in April of 1994, there are several obvious factors to list. First of all, China had a much less-mature economy. It was a smaller economy, in absolute terms. It was much earlier in the major transition from a primarily agricultural, peasant population to a much more urbanized, 21^st century society.

Because of this, it lacked the population centers and distribution networks which must be present before a stronger, more consumer-oriented domestic economy can take hold. In turn, lacking a large domestic economy, its rapid industrial expansion was inevitably dependent on continued strength with its exports.

What China already did have was a population with rapidly rising incomes, large pools of savings, and a manufacturing base that has clearly established it as the new, global leader in many categories of production. In other words, China possesses many of the same characteristics today as were seen in the U.S. economy – just before it became a global, consumption-juggernaut.

While dogmatic idealogues may choke on the notion that China is “following in America's footsteps”, China has long since stopped being a “communist” nation in any remotely literal sense. Unfortunately, many of the people who insist on using labels, use the wrong ones, time and time again.

“Communism” and the sort of breath-taking industrial expansion currently taking place in China are simply not compatible. While “communism” may not prevent the leading Communists from setting aside a larger piece of the pie for themselves, it has always prevented the amassing of large personal fortunes through open commerce – which is officially anathema in any true, communist society.

By now, any and every reasonably knowledgeable precious metals investor knows about the emergence of a bona fide “whistle-blower” - with respect to the rampant fraud and market-manipulation which takes place every day in the precious metals market. His name is Andrew Maguire, and his first public interview was with the now-famous “King World News” program.

Because there is so much to say on the many issues that emerged from that interview, I'm going to take the time to do my own summary of that content – so that when I refer to this material in future commentaries there will be an easy reference point for readers to return to for clarification, or to refresh your memories.

To begin with, Mr. Maguire is an independent metals-trader, meaning that he was not working as a “foot soldier” for the anti-gold cabal. However, he was in regular, personal contact with those individuals, and (according to Maguire) they were never the least bit hesitant to brag about their “exploits” in the gold and silver markets – especially JP Morgan's precious metals 'assassins'. When you own the (so-called) “regulator” (the CFTC), it does tend to create an attitude of arrogance.

Mr. Maguire was joined in the “King” interview by Adrian Douglas, director of GATA – who provided additional context for the subject matter, as well as his own observations of the significance of Mr. Maguire's revelations.

Prior to the commencement of yet another round of farcical, CFTC “hearings” (a strange word, for a group of individuals doing their best to “hear” nothing), Mr. Maguire approached the CFTC as a volunteer “whistle-blower”, especially with respect to JP Morgan's rampant manipulation of the silver market, which he described as even more severe than the manipulation occurring in the gold market.

There are two reasons we should not be surprised that Mr. Maguire identified silver-manipulation as being more egregious. First, the silver market is much smaller (making price-fixing easier); and second, as I have often discussed, the silver-shortage is much more acute than the gold-shortage – due to the fact that most of the world's silver has literally been “consumed” in an ever-growing number of industrial applications.

Mr. Maguire provided the CFTC with two anecdotal examples of silver-manipulation – in exquisite detail. One example was the brutal take-down of silver (and gold) which occurred immediately after the Wall Street-contrived “crisis” of 2008. At the same time that global demand for gold and silver was spiking to the highest level in decades, the price of the two metals was plummeting straight downward.

When I first heard the story from the Bank of International Settlements about the supposed laundering of 380 tons of gold, I reacted in the same manner I do to all “news” of such stature (such as “alien autopsies”) - I totally ignored it. However, upon observing that the media propaganda-machine intends to continue to “pump” this wild rumor, and treat it as serious “news”, I can see that I must address this nonsense.

The first point to make here is that the Bank for International Settlements operates outside of, and above the laws of every nation on Earth. Not only has it avoided anything remotely resembling an “audit” during its entire history, but it operates as its own “sovereign nation”, meaning that no one is allowed to even set foot on its premises without the prior consent of one of two, bank officials.

This is an institution which was created for the sole purpose of facilitating illegal arms shipments to Hitler before (and during) the Second World War. With the Cold War ending, the “profits” available from acting as the world's principal “black market” for illegal arms sales has cooled-off. Thus, in recent decades, these “bankers” have branched into “laundering” the countless, annual $billions of “drug money” from the various, global drug cartels.

Because this institution operates under a veil of total secrecy and “immunity” (thanks to the Swiss government), no unintentional “rumors” could ever emanate from this institution. Indeed, being above the laws of all other nations, it could immediately execute anyone spreading an unauthorized rumor – and there wouldn't even be the pretense of an investigation. Given how easy it could make whistle-blowers “disappear”, this obviously means that this rumor was started by the BIS, itself.

Two questions immediately arise. First, why would anyone attach any credence to any rumor started by a group of people who (even among bankers) represent the lowest forms of life on our planet? Second, what is the motive of the BIS in spreading such a rumor?

Readers already know how I answered the first question. I totally ignored this nonsense, just as I would an unsubstantiated rumor from the Mafia or Al Qaeda - especially given that no one has actually seen a single ounce of this alleged "gold". The second question is a much more interesting topic.

The immediate answer to that question is clear: the BIS started the rumor to try to create the impression in the minds of market-sheep that someone, somewhere still had some gold which they were willing to dump onto the market. Let's put this into perspective with numbers.

During the years in which the price of gold tripled, from $250/oz to nearly $750/oz, Western central banks were dumping 500 tons of gold onto the market every year – with virtually no official buying taking place among central banks. Contrast that scenario to today. While “officially” Western central banks are still allowed to dump 400 tons of gold per year onto the market, during the first nine months of this fiscal “year”, those banks had only sold 1.8 tons, and almost all of that was needed for the minting of coins. Meanwhile, the IMF has only 150 tons remaining of the 400 tons of gold it sold – which was supposed to “frighten the market”. On top of this, central banks are now buyers of gold, rather than sellers.

Obviously, this current scenario of no official “sellers” of gold (and none on the horizon), while official buyers line-up along-side legions of other gold-hungry investors is not very supportive of the activities of the anti-gold cartel. This becomes especially worrisome now that we know (thanks to Jeffrey Christian) that these banksters have leveraged their massive short positions by somewhere around a factor of 100:1.

So, the banksters were desperate to start a rumor that some gold was about to enter the market. Of interest, none other than Jeffrey Christian has already told us that the banksters routinely spread fake-rumors of gold sales back in “the good old days”. Thus, once again I must ask: why would any rational adult attach the slightest credence to this intentionally-spread rumor?