Gold Market Secretly Decoupling

December 2, 2013

With virtually all “transparency” removed from our hopelessly corrupt bullion markets; it becomes increasingly difficult to glean any indications of what is transpiring from a Big Picture perspective. We know that a supply-deficit continues to exist, due to the rampant demand created by these fraudulent, give-away prices for gold and silver – but we don’t really know how large that deficit is.

We know that supply is declining, but we certainly can’t trust the numbers from either the World Gold Council or the Silver Institute as to the precise quantum. Indeed, in the case of the silver market; we’re told that supply magically equals demand every year – and thus any “supply deficit” at all is impossible in this mystical realm.

Of course more sophisticated readers know that these industry “fronts” are nothing more than puppet-enclaves of the banking cabal, yet more tentacles of the One Bank. The World Gold Council, in particular, is blatantly slavish in its servitude of the bankers, from publishing banker “policy papers” on what they should be allowed to do with the peoples’ gold (if it still exists), to prostituting itself for the bankers in India, where they tried to dupe Indian gold-buyers into buying the One Bank’s fraudulent paper-called-gold products.

We know that bullion inventories are declining, but we have no concrete data at all on what amount of stockpiles are available to replenish inventories, when they go to zero. Is it enough to satisfy demand for two more weeks, or two more years?

We do, however, have anecdotal evidence of the enormous efforts made by the One Bank to destroy gold-demand, and thus reduce the gold-deficit. This alone is proof that we are in the midst of a genuine “inventory crisis”, and the collapse of Comex gold inventories (in particular) is not merely another paper façade.

Here the targets of the One Bank have been in Asia, where buying “gold and silver” means only buying real, physical metal. Thus Asian bullion-demand cannot be diluted by doing what is done in the West: selling Chumps paper, but calling it “gold” or “silver”. Instead the bankers operate by pressuring governments into attacking their own, domestic markets.

The first target was Vietnam. Indeed, ever more extreme restrictions on gold imports into Vietnam going all the way back to 2008 have created an acute gold-shortage and price-decoupling in that nation. Vietnamese people pay the highest prices in the world for gold, assuming they don’t venture into the thriving blackmarket – an inevitable consequence of severe import restrictions on any good.

The One Bank’s next Asian target was India, traditionally the world’s largest gold market, and (until recently) by far the world’s largest importer of gold. Here the banksters’ efforts have been chronicled in several previous commentaries (http://www.gold-eagle.com/authors/jeff-nielson ). When their less-drastic measures were totally ineffective; the One Bank opted for brute-force: a complete ban on all gold imports.

Skeptical readers may be asking themselves how a banking cabal – even one the size of the One Bank, which controls 40% of the global economy – can “pressure” governments into doing whatever it wants them to do. Those readers would clearly not have read my past commentaries on the “economic terrorism” from Wall Street which brought the governments of Europe to their knees (and destroyed the economy of Greece, entirely).

Primarily through the fraudulent manipulation of the credit-default swap market; the One Bank can literally manipulate interest rates on the debt of any nation to any number it desires. With all these Western governments already on the verge of default due to absurd/extreme accumulations of debt; this power amounts to an absolute economic choke-hold over those governments.

In the case of India; the One Bank’s modus operandi was to destroy the currency of that nation (thus creating crippling inflation). This is an especially sadistic means of control, in a nation filled with desperately poor people – where any spike in inflation can literally threaten their survival.

It also “threatens the survival” of Indian politicians, and being the cowards that all politicians are; India’s government caved-in to the demands of the One Bank. Those dubious about the ability of the One Bank to manipulate India’s currency should note that currency-rigging is merely the latest scandal (i.e. scam) of this Crime Syndicate which has now been exposed.

Just recently, an anecdotal report came out of yet another Asian government which has been suppressing gold imports into its own nation: Sri Lanka. That government imposed a “100 percent surcharge” on all gold imports into the country in the middle of this year, with (not surprisingly) the effect of eliminating all official imports into that nation.

Undoubtedly (with greater resources) it would be possible to uncover further examples in Asia (and perhaps around the world) where other governments have been pressured into restricting gold imports into their country. However, rather than hunt for further anecdotes to bolster this particular argument, this analysis will go down a different path: the consequences of these efforts to destroy global gold demand.

All actions have consequences. The One Bank suppresses prices, and demand spikes. The One Bank suppresses official demand (through restricting legitimate imports of bullion), and what happens? Does that demand simply dissipate/disappear? Hardly.

First of all, we must look at the immediate consequence of limiting the supply of anything to any market: it drives up the price. Thus in India at the present time “premiums” on gold purchases have permanently(?) spiked to what are unprecedented levels in that gigantic gold market.

In turn; this has caused some of India’s gold-holders to sell their gold onto the market, foolishly attracted by a “high premium” on a dirt-cheap price, when a year earlier they could have sold the same gold at a much lower premium – but have received 25% more for each ounce.

From the One Bank’s perspective, this is “problem solved”. India’s gold imports have been coercively dragged to near-zero, with the immediate consequence that the market is cannibalizing its own stockpiles to meet short-term demand. But does this really solve the One Bank’s supply/demand crisis in the gold market?

As is typical of human behavior in any sphere, when demand (i.e. desire) in one form is restricted or prohibited, it morphs into a new form. In the case of Indian demand for bullion, as has been well-documented, some of that demand has moved into the exploding Indian black market for gold. Gold-smuggling into India has now regressed to the same levels which existed before India “liberalized” its market – precisely to eliminate the scourge of gold-smuggling.

But much of this demand also simply morphs into “frustrated demand”, pent-up demand; the economic equivalent of a spring being even more-tightly coiled. The desire for the good (in this case gold) remains, and (as with any un-met desire) if anything it increases with the passage of time.

The obvious example here is China. Until the middle of last decade; purchasing gold in any form other than jewelry was tightly-restricted (and nearly prohibited) in China. What happened when China liberalized its domestic gold market?

Despite being the world’s largest producer of gold; gold imports into China have steadily risen, and now will easily exceed 1,000 tons this year. That is double the amount of gold which the central banks used to dump onto the market each year, which by itself was enough to permanently stifle the global gold market. Clearly after being deprived of gold bullion products for many years, the Chinese people are now buying with both hands.

Meanwhile, with central banks themselves now buying (on a net basis) more than 500 tons per year; this alone amounts to nearly a 2,500 ton/year swing in the supply/demand equation – in a world which mines less than 3,000 tons per year (in total), and that number is now in decline.

Now we have pent-up demand being built-up in other traditional gold markets in Asia. Sooner or later the internal problems caused by the brute-force suppression of gold demand will be worse than the threats/coercion of the One Bank, and these gold markets will be liberalized – as is now taking place in Sri Lanka. Then, like the explosion of gold-demand in China, we will see similar (proportional) tidal waves of demand hit the market when these temporarily suppressed markets are liberalized.

But I’ve left the most-important consequence of this demand-suppression for last: the decoupling of prices in these markets. What was previously described as simply higher and higher “premiums” for the purchase of real bullion (but with one price) is now being simply described as two prices for gold.

This is far more significant than mere semantics, and there could be no better illustration of this important concept than a recent headline:

Smuggled gold has its own price in India

As the “premiums” have gotten higher and higher and higher in this artificially distorted market; people now simply talk of “two prices” for gold in India: the increasingly irrelevant “official” price, and the steadily more important blackmarket price for gold.

This is precisely the evolution I predicted in my previous commentary (Decoupling In Precious Metals Markets) back in April:

…decoupling must begin as an unofficial event. It will be a steady drip, drip, drip. Anecdotal reports of large/growing and persistent “premiums” being paid by any Buyers who actually want to end up with real metal in their hands.

At some point those “premiums” become so large and/or so persistent that Buyers simply abandon that semantic fiction altogether, and embrace the more-realistic paradigm of two prices for gold (and/or silver).

Clearly with India having the world’s largest gold market, seeing this unofficial decoupling of prices is of great significance. At the very least it will immediately influence gold pricing with India’s neighbours, from where all the gold smuggled into India must originate. Soon those gold markets will also have two prices for gold: their own, “official” (phony) domestic price, and the “Indian price.”

Such an evolution cannot be halted, except by liberalizing these gold markets again – and fully unleashing the tidal wave of pent-up demand. Today we have the “official price” for gold and the “Indian price”. One day soon; it will simply be the official price for gold and the real price, and then this “secret decoupling” will no longer be a secret.

 

Jeff Nielson

www.bullionbullscanada.com

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 www.bullionbullscanada.com.

A medical study in France during the early twentieth century suggests that gold is an effective treatment for rheumatoid arthritis.

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