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Gold Bears Ignore Supply Contradictions

June 20, 2013

As we see gold and silver prices plunge lower (again) today; it becomes an especially good idea to step back, and look at the Big Picture of these markets. Why? Because nothing happened today.

What is the official propaganda today from the Corporate Media on why precious metals prices have fallen?

…Federal Reserve Chairman Ben S. Bernanke said stimulus may be reduced later this year as the economy recovers.

The problem here? B.S. Bernanke (aka “The Boy Who Cried Exit Strategy”) has been saying this every day for 4 ½ years. There was literally not one word that was new. It could have all been copied-and-pasted from one of his 2009 scripts. Simply calling this “news” is a perversion in and of itself. So nothing happened today in bullion markets.

With today’s price-action having no connection with the real world, and with any Bernanke “prediction” of an Exit Strategy having no connection with sanity; it behooves us to look at the actual supply/demand dynamics for bullion markets – something never attempted by the Corporate Media itself.

Here we see yet another fundamental contradiction by the “bears” of the propaganda machine. While we have these Chicken Littles relentlessly making absurd price-predictions for the gold market; these bashers are simultaneously spreading at least as much doom-and-gloom on their “predictions” for the mining companies which supply these metals.

Herein lies the contradiction. You can’t (rationally) be “bearish” on both the price of gold and the supply of gold. If one is low; this implies the other will be higher. More emphatically; you can’t be bearish on both the price and supply of gold at a time when there is already a 1,500+ ton per year supply deficit in this market.

Let me explain the mechanics here, for any/all readers to whom this is not obvious. Let’s start with plummeting prices; precisely what the Banksters have manufactured in bullion markets today. What is the consequence of these lower prices?

To get that answer, we need only refer to the propaganda from Basher Central; more commonly known as Kitco:

…“Everyone thought at $1,600, $1,800 and $1,900 (that) all the mining companies were making profit hand over fist, but the reality is that the capital costs of construction had escalated so signficantly that the margins of production and the margin of operation were still tight,” Gray said.

“$1,300 is not a sustainable gold price…”

Let me translate that remarkable statement. When all of these very same gold-bears were writing their drivel about “a gold bubble” for the past four years; they were all lying. Gold priced toward $2,000/oz was nothing more than the minimum price needed to sustain some semblance of health in the gold-mining sector.

And having gotten that much of a mea culpa, we get the remainder of the confession: $1,300/oz is not a “sustainable” price for gold today. Thus we have a collection of Serial Liars acknowledging that informed investors should not have listened to anything they were saying about the gold market over the past four years (at least).

Now these same Serial Liars are “predicting” many dark days (and even lower prices) ahead for the gold market; because the Boy Who Cried Exit Strategy has cried “exit strategy” for the 1,000th time. And we’re supposed to be convinced by this “prediction”; from these esteemed analysts?

But let’s assume that they were correct. In fact, let’s assume that the King of the Buffoons is correct and the price of gold will be manipulated to $1,000/oz. What then?

If the gold-mining industry isn’t sustainable (at all) with gold priced at $1,300/oz; what would happen with gold at $1,000/oz? A collapse in supply…in a market which already has a greater-than 1,500 ton per year supply-deficit. A deficit already 60% greater than annual mine-supply.

Yet this is precisely what we see with all of the shrill, irrational gold bears. Out of one side of their mouths, we hear these sages “predicting” much lower sustained prices for gold. Out of the other side of their mouths; we have the bears explaining how most of the companies who produce that gold will be unable to remain in business even at current prices.

How can a market sustain low prices with a large, existing supply-deficit; and supply (supposedly) about to collapse? It can’t. Even when the gold sector was relatively robust and supply was expanding; we had the Banksters acknowledging there was $100 of paper for every dollar of actual, physical gold which existed in those markets.

Even a small decline in physical supply implies that paper-to-gold ratio going to astronomical levels; unless the paper market contracts by a similar 100:1 ratio. Thus any decline at all in mine-supply doesn’t simply create even more extreme supply/demand imbalances on the gold market; it radically increases the leverage (and thus instability) of the Banksters’ entire paper-bullion fraud empire.

It is certainly not gold investors who “cannot withstand” further weakness in the phony, official price for gold (and silver). For us (and two billion people in India and China alone), it simply means being able to buy real metal even cheaper – while supplies last.

It is the bankers (on one “side” of this industry) and the miners (on the other) for whom today’s fantasy prices are not remotely sustainable. Both the Suppliers of gold and the Traders of gold are about to simultaneously experience their own “no mas” moment. That they cannot tolerate the current phony/fraudulent prices for one more day.

And what happens then? What happened in the Spring of 2009; after the last manipulation-insanity had washed over bullion markets? We had the longest/strongest rally of this entire bull market.

Many notable differences exist between that bear-bottom and the present insanity:

1)    In 2009; few suspected that Western governments (and their banks) were already insolvent.

2)    In 2009; bankers hadn’t yet openly begun stealing paper out of their clients accounts.

3)    In 2009; governments hadn’t openly begun stealing bank deposits (and making ominous statements about “precedents” being set).

4)    In 2009; gold demand by the Chinese population had just begun to heat up.

5)    In 2009; the miners weren’t attempting to endure their second (severe) Depression in five years.

6)    In 2009; the Banksters’ paper-fraud market hadn’t already begun to collapse.

7)    In 2009; the Banksters hadn’t yet confessed to their $500+ trillion LIBOR fraud.

8)    In 2009; we didn’t have the U.S. and EU both simultaneously committing to “unlimited” money-printing.

Note that B.S. Bernanke had previously “promised” the paper-traders to keep his pedal to the metal with his money-printing (and bond-buying) until at least 2015. Which promise are we supposed to believe: his promise to continue the money-printing; or his 1,000th “promise” to slow it down? We know which “Bernanke” Jim Rogers believes.

In short, in 2009 the supply-side of the market was significantly more-robust. Demand had not grown/matured to present levels. And the Banksters (and our own governments) hadn’t even begun to show their “true colours” in terms of stealing any/every paper asset we leave within their grasp.

This means that when the current madness subsides we will have a market with much stronger demand than in 2009, much weaker supply, and where the alternatives to insuring our wealth with bullion have never looked riskier/less-attractive.

Given these obvious parameters; one does not have to be a gold-market analyst to “predict” that the Mother of All Rallies is coming to the gold and silver market when the current, very temporary assault on bullion markets runs its course. Clearly these tortured markets have now been brought to the point of rupture.

Either we will have a near-term explosion higher in gold and silver prices; or we will have a near-term implosion as one or both of these markets suffers some sort of decisive default or “decoupling” event. Either way, prudent bullion-buyers will be buying their (real) bullion sooner rather than later – as “cheaper prices” are not of much good to us if there is no actual metal to be purchased at such prices.


Jeff Nielson

Jeff NielsonJeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is

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