Do NOT Let Weakness in Gold & Silver Paper Markets Lead Your Wealth Preservation Strategies Astray

A week ago, I wrote an article titled, “Do NOT Let The Strong US Dollar Illusion Lead Your Wealth Preservation Strategies Astray.” Today, I am releasing the corollary to that article with this one. I strongly emphasize that just as you should not be fooled by an illusion of a strong US dollar, you should not be fooled by the pro-USD banking cartel similarly-created illusion of weak gold and silver prices in paper markets. While true that I have held a long-term bullish outlook regarding gold and silver, my immediate-outlook in recent months has been markedly bearish in gold and silver as stated on my blog, and in much greater detail in my client research reports. At the very end of last year, I wrote an article “All the Big Banks are Saying Gold Will Crash in 2014, But That’s Not What Will Happen”. Observing my specific comments in that article, I stated “a gold collapse to $800 or $400 a troy ounce, as ScotiaMocatta’s Simon Weeks predicted would happen in 2014, was patently ridiculous.” Today, with gold still above $1,220, I still stand by that comment I made 9-months ago, as an additional 34% to 67% collapse in gold prices in the last quarter of this year would be necessary for Simon Week’s prediction to come true.

Furthermore, in that article, I stated, “Instead of a gold price crash to start the year, we almost certainly will see some significant rebounds in the price of gold and silver.” Gold prices indeed rose $188 an ounce, or by a substantial 15.6%, from the end of last year to March 17th. And even now, at $1220 an ounce, gold is still above its closing price of $1204.80 at the end of 2013, so the many big bank analysts that said gold would crash in 2014 and descend sub-$1,000 an ounce are still wrong year-to-date. But listen to the mass media and you would think that they were right, as published an article yesterday titled “Gold Crashes and is Now Tarnished For Good” on their homepage. Again, in what world is a year-to-date gain a crash? Granted, gold may experience some further short-term weakness, yet but I guarantee you that we are going to see some strong moves higher after gold’s limited downside at this point finishes its descent. Furthermore, I’ve been short-term negative on gold and silver for the last 10 weeks now, and though this has admittedly been another year of waiting for gold and silver investors thus far, when gold and silver turn higher again, the reversal will no doubt catch the vast majority of investors off-guard. Why? The majority of most investors focus on paper markets and obsess over paper prices instead of focusing their outlook on physical markets which reveal the true story about gold and silver.

What Do US – Russia Tensions Have to Do With Gold?

So what is the geopolitical aggression between NATO countries and Russia all about ? Simply put, it is 100% about the Western banking cartel’s desire to continue enforcing USD hegemony on China and Russia so that they can continue to manipulate all capital markets for the purpose of transferring wealth from all of humanity to themselves, and thereby bankrupt humanity in the process to usher in another level of control. For Americans that blindly support USD hegemony, realize that less than a paltry 400 Americans now possess $2 trillion of wealth, or as much wealth as 50% of all Americans. Bankers enforce USD hegemony NOT for the BENEFIT, but to the DETRIMENT of all Americans. Of course there are those that will state that they only support USD hegemony because their savings and salaries are denominated in USDs, but this is hardly a legitimate excuse. Those that support USD hegemony for this reason have been fooled by their enemies again into believing they must support their enemy because of a lack of options. However, many legitimate and BETTER options to all fiat currencies exist at the current time. It is often said that the most foolish of all fools are those whom the enemy are able to manipulate to fight on their behalf. All of those that publicly support global USD hegemony right now fall into this category.

An investigation into why Russia and China have become Public Enemy #1 to all pro-USD bankers will further reveal that USD hegemony has ZERO to do with the sovereignty of the Republic of America and the economic health of its residents but everything to do with the narcissistic desire of Federal Reserve bankers to control and manipulate all global capital markets for their benefit only. There is no doubt in my mind that Russia and China have accumulated massive amounts of physical gold ever since the onset of the financial crisis in 2008. Though the IMF reports that Russia has aggressively increased their gold reserves by nearly 11% in the last year from 996.6 tonnes to 1,105.4 tonnes, this figure is almost certainly wrong, far underreporting Russia’s true gold accumulation. For one, Russia, like China, does not export any of their gold. In 2013 alone, Russian mining companies produced 220 tonnes of gold. Thus, the application of simple mathematics reveals that the “official” increase in Russia’s reserves over the last 12-months is only about half of Russia’s stated gold production with zero consideration of Russia’s gold imports.

Secondly, anyone that believes “official” reported gold data is without doubt a neophyte to the gold world and does not understand the stakes at hand. There is absolutely zero transparency in the global gold markets because in the political world series of poker that is the unfolding currency war, no intelligent state official is going to show their hand to any other nation at the current time. It is a well-known fact that current Russian President Vladimir Putin was a member of the prestigious X2 unit of the KGB, in which all officers underwent Zevsebia (or “chess think”) training under the supervision of Russian grand masters in chess, competing in chess matches under extremely physically taxing conditions such as sub-zero and boiler room temperatures. Yuri Nodov, in his 2008 book “The Circle”, noted that six Zevsebia graduates are part of Putin’s current “inner circle” of advisers. And who graduated at the top of the Zevsebia program? According to Nodov, it was Putin.

zevsebia, putin

Add to Putin’s sharp strategic acumen his devotion to sambo, kyokushin kaikan karate (6th dan) and judo. To this day, Putin continues to practice judo and is head of the Yawara Dojo in St. Petersburg. Thus, whether you like or despise his politics, given the necessity of rapidly thinking strategically on your feet as a serious martial arts practitionar and of thinking 12-steps ahead when mentally sparring with famous Russian chess grandmasters, there is little doubt that Putin is a world-class strategist. Thus, he would never show his cards before absolutely necessary, and this is likely why he has not publicly made any comments yet about the weakness of gold prices that are devaluing Russia’s considerable gold reserves. Consequently, I would not be surprised if Russian gold reserves are currently three to six times as much as Putin and the Russian government “officially” report. Putin has allegedly stated that the break up of the former Soviet Union was one of the greatest geopolitical disasters of the 20th century, and he will no doubt sacrifice weak gold prices now for strategic moves later to accomplish his goal of returning Russia to the respected glory of days past.

What Do US –Sino Tensions Have to Do With Gold?

And what about China? China comically reports that its “official” gold holdings are even less than Russia’s at a mere 1,054 tonnes, unchanged since April, 2009. At maalamalama, we were one of the first to discuss the fraudulent nature of all publicly reported gold reserves with our Platinum Membership clients, questioning the validity of China’s official static number of gold reserves of 600 tonnes from 2003 to 2009. Even when China reported that their gold reserves nearly doubled in 2009 to 1,054 tonnes, we again questioned the validity of these numbers, believing the official numbers to perhaps have already exceeded 2,000 tonnes back then.

Today, I am 100% certain that China is officially reporting hugely underestimated figures of their true gold reserves, and I would not be surprised if China held anywhere from 6 to 10 times+ as much gold as their “officially” reported reserves at the current time. Regarding the gold import numbers that a handful of analysts often extract from Hong Kong customs reports as a proxy for how much China’s sovereign gold reserves are increasing, these numbers, reported by the Shanghai Gold Exchange (SGE), likely reflect private retail Chinese accumulation versus sovereign accumulation. In seeking the best possible prices for extremely large volumes of gold bullion, the People’s Bank of China (PBOC) would be much more inclined to purchase gold at better price levels than available through the SGE. Furthermore, as gold denominated in yuan and yen is selling at higher premiums than gold denominated in US dollars, the PBOC would likely seek to purchase gold in USD as well.

As Shanghai Gold Exchange’s (SGE) Xu Loude reported demand through the SGE to be 1,540 tonnes for FY 2013 this past May, and this demand likely represents only Chinese retail demand, one would assume that the PBOC’s sovereign gold purchases would far outpace the demand of the Chinese retail sector. Thus, it’s not difficult to extrapolate that China’s sovereign gold accumulation has far exceeded 1,504 tonnes per year, every year, at least for the last several years. But what about stories from Western media like Reuters about Chinese gold demand falling to 4-year lows, and data reported by the World Gold Council in their “Gold Demand Trends” report of collapsing year-over-year Central Bank demand in 2013? According to the WGC, Central Bank gold demand fell precipitously year-over-year by 32% to from 544.1 tonnes to 368.6 tonnes last year. Obviously given the numbers supplied by SGE’s Xu Loude this past May, which we can use to impute a far higher PBOC sovereign gold demand in 2013, none of the WGC’s reported data holds water or adds up. Again, the Western banker reported data about gold demand simply does not reconcile at all with gold data hinted at by BRICS nations’ officials.

Thus, I can only conclude that Western bankers are merely fudging their data to correspond with their manufactured narrative of falling global “gold” demand so they can assist the narratives of $400 to $800 gold publicized by ScotiaMocatta’s Simon Weeks. Finally, not only does the falling global gold demand narrative put forth by the WGC and the Western mass media fail to reconcile with real data of Chinese sovereign and retail gold demand, but it further fails to reconcile with the shortage of gold supply reported from Swiss refineries that happen to refine 70% of all global gold supply. Swiss refiners, which include four of the largest nine gold refineries, reported in 2013 that in order to keep up with surging global demand, they increased their refining volumes by 77% year-over-year, and that even with this increased capacity, that they still failed to satisfy Chinese demand. Thus, the only thing that Western-produced falling gold demand data seems to reconcile with is the perpetually negative stream of lower gold price predictions from Western bankers.

As Russia and China’s Appetite for Physical Gold (and Silver) Has Grown and Their Appetite for the USD Has Diminished, Western Bankers Have Intensified Anti-Russian and Anti-Chinese Propaganda

Recall this article I wrote earlier this year in which I stated my belief for the reasons behind the increase in anti-Russian propaganda, titled “The Photo That Reveals Why US and EU Bankers Despise Russia’s Putin So Much” However, if we really want to go back to when I predicted that NATO nations would slander Russia and China in a geopolitical war that would serve to conceal a far more underlying serious currency war, let’s refer to a partial transcript of the narrative I released to my Platinum Member clients on June 14, 2008:

“In April, 2008, U.S. Secretary of Treasury Hank Paulson met with Chinese President Hu Jintao and urged China to open up financial markets to the West, claiming that ‘until they have efficient, competitive capital markets, their people will not receive adequate returns on their savings.’ [Former Goldman Sachs CEO Paulson’s] faux concern for the returns of Chinese investors on their investments is laughable, as if any sane person would actually believe that Paulson’s desire for Western access to Chinese financial markets is based upon his concern that Chinese people should receive better returns. What’s the true story behind Paulson’s visit? My guess is that the new cold war between the West and the East revolves around financial markets. The East has too much control now over U.S. financial markets and the U.S. dollar (through ownership of U.S. stocks and U.S. dollars). However, this unfortunate “nuclear option” as it has been described in the press is one that can directly be traced back to the U.S. Federal Reserve’s deliberate debasement of the U.S. dollar for decades.”

“The West, as a counter, now needs some semblance of control over Eastern capital markets as well to serve as leverage and to allow for retaliation as the economic cold war between East and West will intensify. Although this topic is entirely a subject matter that could easily fill another 20 pages, mark my word that some of the prior subjects I have written about in my Platinum alerts and modules will now come to prominence. For example, I believe it was a couple of years ago that I first discussed U.S. Congress’s decision to block China’s attempted purchase of U.S. oil company Unocal. Undoubtedly, this will now have repercussions in China’s decisions to consider Paulson’s request to open up their financial markets to Western powers. I guarantee you that rhetoric and political posturing will intensify between China and the U.S. in coming years as the Paulson struggles to gain leverage in Eastern financial markets in order to save the U.S. dollar.

I first predicted the development of the current environment of tense relations between China and the US over six years ago, and the worsening relations between Russia and the US are playing out today for the exact same reasons. Of course, if you live in the West, and are bombarded by Russia demonization stories daily, it is much easier to fall victim to and believe this propaganda. However, as I spend the vast majority of my time in Asia now, I can unequivocally state that the typical Asian’s views towards Putin is nowhere as negative as the typical Westerner’s view towards Putin. In fact, I would state that the typical Asian’s view towards Putin is neutral to positive. I am not so foolish as to believe all the Russian-generated propaganda, but neither am I foolish enough to embrace the mountain of Western-generated anti-Russia propaganda either. I have found that in nations that are moving away from the US dollar, citizens seem to have a favorable view of Russia and China, whereas in nations whose fates are still tied to the US dollar, citizens seem to have a negative view of Russia and China. Because these views are distinctly polarized and align perfectly with a nation’s choice to keep the USD versus dump it, this should serve as a warning that bankers are successfully manipulating and controlling the opinions of much of the world’s citizens towards nations, as they demonize nations that move away from the USD, and paint in a favorable light, those that continue to cling to the USD.

Overall, How Will the BRICS Nations Shape the Price of Gold in the Future?

Let’s look at the economics of the BRIC nations and what this portends about the current gold and silver price slam, and when it may end. By 2015, the estimated population of the BRICS nations will be 3.08 billion, or well over 40% of the world’s population.

BRICS, global populationclick here for a larger image

Three BRICS nations are currently among the top 6 world gold producers and are responsible for more than 28% of annual global gold production. Again, because there is so little transparency in gold data, if Russia and China are deliberately underreporting gold production, then this percentage may even be considerably higher. Given that the massive land mass of Russia spans 9 time zones from UTC+03:00 to UTC+12:00, there is a distinct possibility that the Russian government has not reported new gold discoveries and/or considerable upgrades in proven and probable gold reserves within the past several years. Remember that the same goes for silver as well. Though hardly spoken of as much as gold due to faltering prices this year, global silver demand clocked in at over 1 billion ounces last year according to figures released by the Silver Institute. Given China’s growing appetite for silver both as a monetary metal and as an industrial metal (especially if China pushes solar energy to clean up well publicized recent bouts of extreme air pollution in Shanghai and Beijing) the physical demand of BRICS nations for silver could lead to quite a massive rebound in silver prices as well as physical determinants overwhelm bullion banker paper price manipulation. Having spent considerable time in both Shanghai and Beijing and having experienced trouble breathing during both my stays while there, I would assume that clean energy growth in China has to be a top priority.

Next, let’s look at global GDP figures. Again, though every country misreports their true GDP figures, using the “official” figures, BRICS nations comprise about 25% of the world’s GDP.

BRICS, GDPclick here for a larger image

Even though the BRICS nations engage in fudging economic statistics as well, because the economies of the EU and the Americas are in deeper trouble than the economies of the BRICS nations, this statistic may grow more deeply in favor of the BRICS nations in future years. Remember that the real economic picture is always vastly different than what the mass media reports, and that Russia and China make their moves in gold and silver markets not for concern about tomorrow’s prices but for concern of what prices will be years down the road and out of concern for their long-term futures. Thus, the economic picture between East and West is likely to dramatically diverge over the next decade.

How Growing Ties Between GCC and BRICS Nations Will Impact Gold & Silver Prices

To conclude this article, let’s look at the close and growing ties between the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) or GCC nations and the BRIC nations, and what this portends for gold and silver prices in the future. Four years ago, in 2010, bilateral trade between GCC nations and China and India had already surpassed bilateral trade between GCC nations and the US. Furthermore, because Russia controls about 33% of the world’s natural gas reserves, is the world’s 3rd largest oil producer, holds the top 3 reserves in lead, tin and iron ores, is the world’s leading producer of palladium and may hold as much as 20% of all important global natural resources, deals such as the 2010 $500MM deal between Russia and the Qatar Investment Authority and the $800MM deal between UAE companies Damac and Crescent Group and Russia will undoubtedly increase in both size and volume in future years. Four years ago, in 2010, the GDP per capita of the GCC states was already more than half of the GDP per capita of the USA at 56.56%. As all states manipulate GDP numbers and the US GDP is likely manipulated much higher than the GDP figures for the GCC states, this figure is likely even greater than 56.56% today. For example, just follow this link that explains why annualized GDP in the United States was really closer to -9.0% versus the annualized -1% “official” US government rate released in Q1 of this year. Shadowstats, which backs out all the chicanery and deception from US banker released key economic indicators projects that annualized US GDP will be more than -7.0% this year as their true GDP stats show US GDP to be -3.51% through H1 2014.

Gulf Council Cooperative, BRICS, end of petrodollar, petroyuanclick here for a larger image


Why is this all critically important to future gold and silver prices? Because with Saudi Arabia threatening to dump the petrodollar for over a year now and also forging closer ties with BRICS nations than with the Americas, all of these bilateral trade agreements are likely to cut out US dollars completely from the international trade agreements of half of the world’s population in future years. If Asia’s percentage of global GDP continues growing and America’s continues to fall, these deals could signal as much as 33% of the world’s GDP in the near future moving entirely away from the petrodollar. Furthermore it’s not just the BRICS nations that have been moving away from US dollar dependency but EU stalwarts like Germany and smaller players like Bangladesh, Indonesia and Iran have also struck bilateral trade agreements that signal their movement away from the US dollar as well. Consequently, as more and more State leaders make the decision to move their countries away from the US dollar to protect the wealth of their citizens, this will only increase global gold and silver demand for at least half the world’s population, and not decrease it, as is the narrative of Western bankers at the current time.

Quite simply, what is the conclusion about gold and silver price weakness at the current time? One should never look to paper prices of gold and silver assets to understand whether or not gold and silver are a good investment for the future and have low-risk, high-reward potential at the current time. Instead one should look to data available in physical gold and silver markets and continuing bilateral trade agreements that support the thesis that at least half of the world’s population is moving away from the US dollar. Bankers can invent an infinite amount of paper gold and paper silver to slam paper gold and paper silver prices as is their motive, but as I’ve proven in this article, the physical world of gold and silver paint a distinctly polar opposite story from what declining paper gold and paper silver prices portray at the current time. Currently, determinants of physical PM markets are not yet influencing physical prices that are so far ridiculously removed from paper prices (including palladium and platinum as well). Eventually, when the determinants of dwindling global physical gold supplies and soaring global physical global demand become mainstream knowledge, bullion bankers will no longer be able to sell the emperor, or the retail investor, the pile of invisible clothes known as paper gold and paper silver, and the entire multi-decade scam will implode upon itself. Again, do not be fooled by the illusion of weak paper gold and paper silver prices, for this illusion will soon end as all the above roads I’ve discussed will intersect in spectacular fashion to drive gold and silver prices much higher.

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