People should quit paying attention to the price of their stocks and start paying attention to the underlying value of their money.–Ray Dalio of Bridgewater Associates
The best way to destroy the capitalist system is to abort the currency. By the process of ongoing inflation, governments can confiscate secretly and unobserved an important part of the wealth of their citizens.–Vladimir Lenin – former Premiere of the Soviet Union
Last week, the bullion banks raided gold and silver once again. And once again, gold bounced right back, rallying $100oz off its lows. Since this latest manipulation was so obvious and aggressive, a number of smart minds are starting to believe the bullion banks might be getting desperate. Why? Because the imposed Basel 3 deadline of January 1, 2022 is forcing all banks trading in London to start buying back their paper short derivatives and instead own the actual physical metal. Forcing the paper prices down allows the bullion banks to cover their short paper contracts at lower prices and this was confirmed on Friday when the weekly COT report showed the bullion banks bought back a whopping 27,000 gold contracts. In addition, the Central Banks added 26,000 contracts to their long position, confirming their concerns regarding a failing fiat system. And lastly, the COT report revealed the “Large Speculator” category shorted 33,000 silver contracts. When large short positions are taken at relatively low prices (especially at a time when the fundamentals are very bullish), the potential for a short squeeze (the buying back of paper shorts) is very real.
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As mentioned last week, the public is currently not excited about gold and silver. (Which is often the case at major bottoms). With inflation rising and endless dollars being printed, this lack of bullishness might seem odd, but markets can be “irrational” at times. In effect, gold and silver prices are currently deeply discounted, thanks to the artificial selling by the bullion banks. However, this gift of lower prices appears to be on its last legs, as the banks are being forced to buy back their paper shorts over the next four months, in compliance with the Basil 3 regulations. There is a light at the end of the tunnel and those with strong conviction and a little more patience will be well rewarded.
In his own right, one of the brightest minds in the business of gold and silver belongs to Alasdair Macleod, out of the United Kingdom. Macleod states, “The whole point of Basel 3 is to reduce risk in the banking system. This means reducing risky derivatives held by the banks. The trend of selling paper gold and silver is coming to an end. Fundamental changes are in place. Replacing derivative shorting will be a greater focus on real physical. Hyperinflation is inevitable because more printing will be necessary to finance the growing deficits.”
As only Macleod can put it, the current opportunity to own physical gold and silver is a “lovely market situation.” Also mentioned is the recent signing of a further one trillion dollars of stimulus AND another 3.5 trillion of infrastructure spending is being debated. Simply put, Macleod says, “They are spending without limitation. Fiat currency should be avoided, as it is being destroyed. Get into real sound money to get out of risk. This is a time to seek personal protection from some very, very large events to take place in the machine.”