The last time gold and silver moved like a freight train was in the 2011. One country triggered the RUN on gold and silver. Overnight, supplies of gold and silver dried up; and mints worldwide ran out of deliverable bullion.
In less than nine months, gold and silver made new highs. Gold rose $600; silver climbed 160%. Silver was just as scarce as gold. (Silver was $9 Sept. 2005; $50 April 2011.)
A LITTLE GOLD HISTORY FOR THE BIG PICTURE
When the leading currencies were backed by gold, the United States exported more than 40% of all manufactured products used by the world. While today the U.S. is the greatest debtor nation, fifty years ago, America was the greatest creditor nation. Back then, other countries needed sufficient gold to buy made-in-America products.
AP photo by David Karp
INTERNATIONAL GOLD RESERVES
To make foreign exchange easy (and to keep their gold safe during World War II), nations stored a large percentage of their gold reserves at the Federal Reserve’s vaults in New York. From transaction to transaction, the 400 oz gold bars did not move. The central bank simply transferred the numbered bars from the account of one country to another – on paper.
After the dollar’s tie to gold was severed in 1971,
countries were content to keep part of their gold
reserves “safely stored” in New York..… until 2011.
THE RUN ON SILVER AND GOLD IN 2011
In that year, Venezuela rocked world markets by its highly-publicized demand for delivery of its gold reserves. Venezuela was the catalyst for the worldwide run on precious metals that drove silver to $50/oz and gold to $1,900/oz.
Venezuela’s demand for physical delivery of 210 metric tonnes proved the gold was not safely stored and allocated (about half had been stored in the Bank of England). Gold markets in London and New York went crazy in the ensuing four months until “bullion banks” could locate the gold bars for shipment to South America.
Venezuela took delivery of 17,000 “good delivery”
bars. Each bar weighed between 350 and 430 ounces.
REHYPOTHECATION
After the 2011 run on gold, citizens of other countries began to question whether their own numbered bars of gold had been “rehypothecated” — lent, leased, swapped, shipped, sold, resold (the same bars sold to multiple owners), or pledged as collateral multiple times. How many owners would claim title to their gold?
“REHYPOTHECATION is the practice of using the assets held as collateral for one client in transactions for another. This allows the prime broker to re-lend client securities (or gold) held as collateral… COLLATERAL is used by investment banks for their own purposes.” Financial Times Lexicon.
REQUESTS FOR GOLD REPATRIATION
When Germany requested gold “repatriation” in 2012 (150 metric tonnes), the Federal Reserve would not allow them to verify the gold was there. Deutsche Bundesbank was denied auditing rights to check serial numbers on their bars.
In 2013, Germany tried again (requesting 300 tonnes). The Federal Reserve told Germany it would have to wait seven years for the return of only 300 of their 1,536 metric tonnes “stored” in New York. The watching world began to lose confidence, and the trend for “repatriation” gained momentum.
Central banks and many gold-owning nations decided they wanted their gold transferred to their own countries: Ireland, Netherlands, Ghana, Iran, Switzerland, Romania, France, Ecuador, Iraq, Libya,Mexico, Azerbaijan, Portugal, Belgium, Finland, and others made requests to the Federal Reserve to return all or part of their gold.
By the end of 2013, Germany had received
only 5 of the 450 tonnes it had requested.
The next year only 85 tonnes were repatriated. All of the gold returned to the Bundesbank came in the form of re-poured bars with brand-new serial numbers. In June of 2014, it was reported Germany would not pursue further repatriation of its gold (1,447 tonnes). Six months later (Nov.), the Dutch central bank (De Nederlandsche Bank) announced it had secretly repatriated one fifth of the Netherlands’ gold (122.47 tonnes).
IN ALL, THE FEDERAL RESERVE HAS RETURNED
ONLY A FEW HUNDRED TONNES OF GOLD.
The Federal Reserve has failed to satisfy repatriation requests representing thousands of tonnes of gold. Many believe the central bank has denied on-site inspections and engaged in delay tactics because the allocated, numbered bars have been rehypothecated.
The Federal Reserve is the custodian of a large portion of the world’s gold reserves (including 1,225 tonnes of Italy’s gold).Will sovereign nations and powerful families eventually discover their 400 oz bars have been “rehypothecated” to suppress the price?
GOLD & SILVER ARE MONETARY METALS.
From 1933 to today, a $20 Gold Piece is up 6,000% against the dollar (from $20 to $1,280). In 1971, 1 dollar was worth 1/35th of 1 oz of gold; 1 dollar is now worth only 1/1,304th of this new 1 oz coin. Compared to all gold coins, the dollar has gone down about 2,700% in 44 years.
People think gold has gone up 2,700%;
actually the dollar has lost that purchasing power.
DUMPING DOLLAR RESERVES for GOLD RESERVES
Since 2008, foreign central banks and countries around the world (especially in the Eastern Hemisphere) have been exchanging their dollar reserves for gold reserves. Gold purchases have been unprecedented. In a quiet and systematic way, banks and nations have been accumulating gold faster than occurred just before the U.S. went off a gold standard (1971). The massive draw-down of warehouse inventories (in America, Canada, and England) has depleted gold and silver supplies.
THE WEST IS VIRTUALLY OUT OF DELIVERABLE GOLD.
The relentless draw-down of inventories has reduced bullion bank supplies of ‘good delivery’ bars (400 oz bars) to all-time lows at the COMEX (Commodities Exchange) and for “GLD,” the gold ETF (Exchange Traded Fund).
There are more than 100 claims for every
1 oz of PHYSICAL gold at the N.Y. COMEX.
We are in uncharted territory. During our lifetimes, public debt has grown exponentially. Now, Emerging Market currencies are in free-fall; and the global debt bubble is deflating. BUT ALL CURRENCIES WILL BE AFFECTED… and the mega banks know it. That is why they have been purchasing gold by the tonne since 2008.
A confidence-shattering event is going to
shock the world... and it will happen overnight.
During financial panics, two things always disappear: LIQUIDITY and PRECIOUS METALS. Leading up to the 2008 financial crisis, silver and gold shortages showed up big-time. On January 5, 2006, gold was at $525/oz. During the crash, gold went to $1,000 for the first time (March 14, 2008). Gold had doubled in only two years because of physical shortages.
HIGHER HIGHS, HIGHER BOTTOMS
Over the last forty-five years, there have been six major upside moves in gold and silver which were followed by prolonged periods of price consolidation. Each time, gold and silver hit higher highs and established higher “bottoms.” After four years of price consolidation, precious metals are poised in 2016 for ferocious price moves that will take out former highs.
VERY LITTLE DELIVERABLE GOLD IS LEFT IN THE WEST. Acute supply shortages will trigger panic buying and the next run on gold and silver. “Hedge” your portfolio (like the mega banks) with at least 10% to 20% in actual precious metals.
TAKE DELIVERY of physical coins. Gold, platinum, and silver in your possession will give you control over that portion of your capital — with no third-party risk.
By Denise Rhyne
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♦ On June 16, 2015, even the State of Texas got in line to “repatriate” their gold from the Federal Reserve.
♦ Goldman Sachs is currently negotiating with cash-strapped Venezuela to ‘claw back’ the gold hoard from South America. (By 2016, Maduro shall have sold the entire amount of gold Chavez returned to Venezuela in 2011. To meet debt payments, about 1/5th of the gold was sold in 2015 alone.)
♦ The last complete inventory of America’s gold reserves was made in 1953. For sixty years, the Federal Reserve has denied Congress auditing rights for on-site inspections of all the gold stored at Fort Knox and West Point. Were 8,000 tonnes of U.S. gold rehypthecated?
24 karat gold (.9999 fine) kilo bars are popular in Asia.
Canadian Maple Leaf 1/10th oz gold (.9999 fine) coins (below)
“Things go from perfectly stable to completely unstable very quickly… When you see things like Argentina, Greece, Cyprus, Ireland, Italy – you see how fast things go from perfectly stable to completely unstable… We have always had a position in gold… I just view gold as another currency. It’s that simple.”
Kyle Bass, Bloomberg TV.
GLOBAL DEFLATION WILL LEAD TO
CREDIT COLLAPSE / CURRENCY FAILURES.
Save SILVER dollars, not PAPER dollars.
Editor: I have seen first-hand what happens to prices when shortages of PHYSICAL bars and coins are extreme. During the January 1979 to January 1980 short-squeeze, gold and silver prices quadrupled. Supply shortages are much worse today. The lion’s share of the West’s gold has traveled to the Eastern Hemisphere and the U.S. silver stock-pile is gone (more than two billion ounces gone since WW II).