A Sea-Change is Underway in Central Banks Attitude to Gold

“There’s only a small amount of gold backing these markets. Think of an inverted pyramid, with a small amount of gold at the bottom supporting a vast amount of paper gold contracts on top.

So the paper market is not an honest reflection of the physical gold market.

And there’s no question that the paper gold market has been manipulated downwards. That’s not a conspiracy theory. I’ve spoken to expert witnesses in some of the pending litigation involving price manipulation. These are PhD statisticians who’ve looked at 20 years of data and tell me there’s no question that the paper gold market is being manipulated.

Who’s behind it, and their motivation, is a matter of some speculation. But more importantly, gold has been moving higher despite higher interest rates and price suppression through the paper gold market.

That tells me we’re seeing a flight to quality, meaning people are losing confidence in central banks all over the world. They realize the banks are out of bullets. They’ve been printing money for eight years and keeping rates close to zero or negative. But it still hasn’t worked to stimulate the economy the way they want.

So gold has been moving up in what I would consider a challenging environment of higher rates and a manipulated paper market.

…So the Fed’s raising rates in the face of a weak economy. That will become obvious and by April or May the Feds going to have to reverse course.

What’s going to happen when the Fed reverses in April or May?

Gold’s going to go higher again, because people are going to realize the Fed can’t raise rates even though they want to. They’ll have to cheapen the dollar again, and that’s very bullish for gold.

To sum it all up, I’m very impressed with the present gold action because it should be going down based on higher rates and price suppression of the paper gold market. But it’s not, it’s rising.

So I expect gold to really take off in the spring.”

Source.

“…we can be clear about what the Fed won’t do… There will be no big surprise coming from that quarter either: the Fed will only raise rates to the extent that it is irrelevant. In its meeting, the members of the Fed’s policy setting committee, the FOMC, will vote on whether to raise rates one-quarter of a percentage point. We don’t know which way that will go. But we know it won’t matter. Because if it did matter, they wouldn’t do it. That’s really what Ms. Yellen means by “appropriate.” It will only be appropriate if it doesn’t cause or exacerbate a correction; that is, they will only raise rates as long as it doesn’t interfere with the debt bubble. If the Fed’s “data” appear weak… and even a tiny increase might prick the bubble… there’ll be no rate increase.”

“The feds are running up against their debt ceiling.

There again, the sound and fury will sell newspapers. Democrats will fume. Republicans will fret. But it will be essentially meaningless agitprop.

All of the main players are firmly committed to more spending. They won’t let prudent legislation or a $20 trillion deficit stand in their way.

Here’s pseudonymous blogger Tyler Durden at Zero Hedge:

“While in recent weeks there has been a material increase in Fed balance sheet normalization chatter, according to a new report from Deutsche Bank analysts, it may all be for nothing for one simple reason: should the U.S. encounter a recession in the next several years, the most likely reaction by the Fed would be another $1 trillion in QE, delaying indefinitely any expectations for a return to a “normal” balance sheet.”

No return to “normal.” Not voluntarily. Empires don’t back up. And bubbles don’t prick themselves.”

Source.

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“Most exporting nations accumulating foreign currency reserves are turning into sellers of dollars. This is either for strategic reasons, such as in the case of Russia and China, or because their commercial interests are becoming increasingly aligned with Sino-Russian trade policies. China, Russia, Japan and the Middle East are therefore all future sellers of the dollar, and of the underlying US Treasuries and T-bills in their possession. All other central banks will also be aware of these developments by now, and should be re-examining their exposures accordingly.

The coming months will almost certainly see a further deterioration of the Eurozone’s survival prospects, and an objective analysis must embrace the consequences of its demise and that of the whole euro financial system. The only way capital flight within the system can be reconciled is by a systemic collapse. That puts two major reserve currencies on the sell list of most central banks: the dollar and the euro.

Together, they are the world’s reserve currency and the currency for the world’s next largest economic area. They account for 40% of the world’s GDP, the part that represents the world of yesterday. Therefore, there is a sea-change underway in nearly all central banks attitude to gold, if only because other than the yen, yuan, sterling and the Swiss franc, what else is there?”

Source.

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