{"id":40100,"date":"2013-07-16T23:22:49","date_gmt":"2013-07-17T03:22:49","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=40100"},"modified":"2013-07-17T07:16:32","modified_gmt":"2013-07-17T11:16:32","slug":"with-gold-dont-miss-the-top","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/07\/16\/with-gold-dont-miss-the-top\/","title":{"rendered":"With Gold, Don\u2019t Miss the Top"},"content":{"rendered":"<p>By <a href=\"http:\/\/www.MoneyMorning.com.au\" target=\"_blank\"><u>MoneyMorning.com.au<\/u><\/a> <\/p>\n<p>During a  recent interview, we couldn&#8217;t let Jim Rickards (author of <em>Currency Wars<\/em>) go without asking him about our &#8216;Zero Hour&#8217;  scenario. <\/p>\n<p>As you&#8217;ll  recall, Zero Hour is the moment the <strong>price of physical gold <\/strong>starts to run away  from the &#8216;paper price&#8217; you see on CNBC&#8217;s ticker<\/p>\n<p>The most  likely catalyst is a chain of events that goes like this&#8230; <\/p>\n<ul>\n<li>Western central banks have leased  their gold to commercial banks like JPMorgan Chase at an interest rate of less  than 1%\n<\/li>\n<li> The commercial banks have sold that  metal and ploughed the proceeds into assets that earn more than 1%\n<\/li>\n<li>The chain of custody on gold bars has  become so cloudy that a major exchange like the Comex in New York is liable to  &#8216;default&#8217; on a gold contract &#8211; settling in cash, instead of metal\n<\/li>\n<li> A rush for real metal would then be  underway, with its price far outstripping the paper price.<\/li>\n<\/ul>\n<p>It&#8217;s a  scenario Jim Rickards finds entirely plausible. <\/p>\n<blockquote>\n<p><em>&#8216;How  many people in the gold market &#8211; whether it&#8217;s LBMA standard contracts, forward  gold, allocated, unallocated, Comex &#8211; think of all the players who would raise  their hand and if you say to them do you own gold, they say yes I do, and then  when you press them you find out they don&#8217;t own physical gold &#8211; at all. Not  even close. They own some claim of some kind. People don&#8217;t read contracts, they  don&#8217;t read the exchange rulebooks &#8211; I actually have. <\/em><\/p>\n<p><em>&#8216;People  don&#8217;t understand leasing,&#8217; <\/em>he adds.<em> &#8216;They somehow think that if the federal government leases gold to JPMorgan,  that JPMorgan backs up a truck and drives away. That is not what happens. The  gold stays where it is. The gold doesn&#8217;t go anywhere. The gold&#8217;s in Fort Knox,  the gold&#8217;s at West Point, the gold&#8217;s at the Federal Reserve. <\/em><\/p>\n<p><em>&#8216;When  you look at all this, it&#8217;s very clear that the losers are not going to be the  banks and the government. The losers are going to be the institutions and the  individuals who think they own gold and don&#8217;t.&#8217;<\/em><\/p>\n<\/blockquote>\n<p>Even the  banks aren&#8217;t totally safe. <\/p>\n<blockquote>\n<p><em>&#8216;If  I&#8217;m a contract holder and I have read the fine print, and I have allocated  gold, and I insist on physical delivery and I won&#8217;t take anything else and I  come in with my pickup truck and back up the truck and say give me my gold, the  banks are going to be the ones that are embarrassed. Because it&#8217;s likely the  government will be calling back its gold at the same time in this kind of  super-spike high-stress atmosphere. <\/em><\/p>\n<p><em>&#8216;And  the banks are going to find they don&#8217;t have it. So the banks are going to be  the ones that come up short. Because remember, it never left the vaults. If I&#8217;m  the Fed, or I&#8217;m the Treasury, and I&#8217;ve leased my gold to you, and I call it  back, and you can&#8217;t deliver to me, you can&#8217;t honor the contract, I&#8217;ll just  terminate the contract, keep the gold, reconvert title to my name and send you  a bill. <\/em><\/p>\n<p><em>&#8216;Everybody&#8217;s  going to default on everybody else. The banks will default on their obligations  to their customers&#8230;and to the government. The people who had the paper gold,  who thought they were protected, are going to find out they participated in  part of the price increase &#8211; but not the whole thing. They&#8217;ll get a nice  run-up, they&#8217;ll get a nice check, but in this environment, gold will continue  to surge way beyond their contract price. They&#8217;ll get closed out at a lower  level and miss the top.&#8217;<\/em><\/p>\n<\/blockquote>\n<p align=\"center\"><strong>Three More Experts  Weigh In&#8230;as Comex Inventories Plunge<\/strong><\/p>\n<p>Several  other distinguished experts shed additional light on the Zero Hour scenario as  new developments unfold.<\/p>\n<p><em>&#8216;There has been considerable throughput of  gold in Western capital markets, with substantial buying from all round the  world following the April price crash,&#8217;<\/em> says Alasdair Macleod from  GoldMoney. <em>&#8216;The supply can only have come  from two sources: the general public, or one or more governments.&#8217;<\/em> <\/p>\n<p>That is, for  all the metal that&#8217;s exited exchange-traded funds like GLD this year &#8211; it&#8217;s  nowhere near enough to meet the staggering demand for physical metal in China  and India. <em>&#8216;Physical demand cannot have  been entirely satisfied by ETF liquidations,&#8217;<\/em> Macleod says, <em>&#8216;confirming governments are involved.&#8217; <\/em><\/p>\n<p>Tocqueville  Gold Fund manager John Hathaway agrees. <em>&#8216;Since  the beginning of 2013,&#8217;<\/em> he writes in his latest shareholder letter, <em>&#8216;physical gold held by ETFs such as GLD has  dropped by 586 tonnes.<\/em><\/p>\n<div align=\"center\"><a href=\"http:\/\/portphillippublishing.com.au\/images\/MPR20130717b.jpg\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/portphillippublishing.com.au\/images\/MPR20130717b.jpg\" width=\"421\" height=\"326\" border=\"0\" \/><\/a><br \/>\n<em><a href=\"http:\/\/portphillippublishing.com.au\/images\/MPR20130717b.jpg\" target=\"_blank\">Click to enlarge<\/a><\/em><\/div>\n<p><em>&#8216;Where does the liquidated gold go? The  final destination is impossible to know, but the first stop is into the  accounts of &#8216;authorized participants,&#8217;<\/em> aka, bullion dealers such as  JPMorgan and Goldman Sachs. <\/p>\n<p><em>&#8216;There are quite a few dots to connect  here,&#8217;<\/em> Hathaway concedes, <em>&#8216;but in our  opinion (and it is admittedly our speculation), a historic short squeeze is  looming, and the insiders (bullion dealers) see it coming. By using the paper  market to crush the price of gold, they have attempted to shake loose physical  gold to reduce their short exposure in order to minimize the damage from what  lies ahead.&#8217; <\/em><\/p>\n<p><em>&#8216;I suspect that the Western central banks  have surreptitiously been supplying the market,&#8217; <\/em>concurs Sprott Asset  Management&#8217;s Eric Sprott &#8211; who did much to help us flesh out the Zero Hour  scenario earlier this year. <\/p>\n<p>He points to  a telling figure: Gold inventories at the Comex in New York have plunged from  11 million ounces to 7.6 million in recent months. <em>&#8216;It seems to me that people are finally taking their gold out of the  system&#8217;. <\/em><\/p>\n<p><em>&#8216;I&#8217;m a huge believer that you should own  physical,&#8217;<\/em> Mr. Sprott reiterates. <em>&#8216;I  don&#8217;t like the fact that someone with a lot of money can affect the price in  the short term when I see the fundamentals for physical gold as very positive.&#8217; <\/em><\/p>\n<p>In other  words, when Zero Hour arrives, you don&#8217;t want to be one of the people Jim  Rickards says will &#8216;get a nice cheque&#8217; owning a vehicle like GLD. You want the  real thing. <\/p>\n<p><strong>Addison Wiggin<\/strong><br \/>\n    <strong>Contributing Editor<em>, Money Morning<\/em><\/strong><\/p>\n<p>    <strong><a href=\"https:\/\/plus.google.com\/106516983215198267222\/about\" title=\"Join Money Morning on Google Plus -- and read about the things we can't always fit into our regular essays\"><u>Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n<p><strong><em>From  the Archives&#8230;<\/em><\/strong><\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20130712\/dwaves-quantam-computers-why-its-time-to-believe-the-unbelievable.html\" title=\"Permanent Link to Quantam Computers &ndash; Why It&rsquo;s Time to Believe the Unbelievable\" target=\"_blank\">Quantam Computers &#8211; Why  It&#8217;s Time to Believe the Unbelievable<\/a> <br \/>\n12-07-2013 &#8211; Sam Volkering <\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20130711\/red-alert-why-this-stock-market-rally-is-a-trap.html\" title=\"Permanent Link to Red Alert: Why This Stock Market Rally is a Trap\" target=\"_blank\">Red Alert: Why  This Stock Market Rally is a Trap<\/a>  <br \/>\n11-07-2013 &#8211; Murray Dawes <\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20130710\/why-oil-could-be-the-one-commodity-to-defy-the-doom.html\" title=\"Permanent Link to Why Oil Could be the One Commodity to Defy the Doom&hellip;\" target=\"_blank\">Why Oil Could  be the One Commodity to Defy the Doom&#8230;<\/a>  <br \/>\n10-07-2013 &#8211; Dr Alex Cowie <\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20130709\/gold-breaks-a-record.html\" title=\"Permanent Link to Gold Breaks A Record\" target=\"_blank\">Gold Breaks A Record<\/a> <br \/>\n9-07-2013 &#8211; Dr Alex Cowie <\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20130708\/time-to-plan-for-the-year-end-stock-rally.html\" title=\"Permanent Link to Time to Plan for the Year-End Stock Rally?\" target=\"_blank\">Time to Plan for  the Year-End Stock Rally?<\/a> <br \/>\n8-07-2013 &#8211; Kris Sayce <\/p>\n<div class=\"feedflare\">\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=D4u0Qqes9yA:KeQVwfY6j7c:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=D4u0Qqes9yA:KeQVwfY6j7c:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?i=D4u0Qqes9yA:KeQVwfY6j7c:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=D4u0Qqes9yA:KeQVwfY6j7c:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?i=D4u0Qqes9yA:KeQVwfY6j7c:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/MoneyMorningAustralia\/~4\/D4u0Qqes9yA\" height=\"1\" width=\"1\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By MoneyMorning.com.au During a recent interview, we couldn&#8217;t let Jim Rickards (author of Currency Wars) go without asking him about our &#8216;Zero Hour&#8217; scenario. As you&#8217;ll recall, Zero Hour is the moment the price of physical gold starts to run away from the &#8216;paper price&#8217; you see on CNBC&#8217;s ticker The most likely catalyst is &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/forex-news\/2013\/07\/16\/with-gold-dont-miss-the-top\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;With Gold, Don\u2019t Miss the Top&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-40100","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/40100","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=40100"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/40100\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=40100"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=40100"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=40100"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}