Monthly triangle is forming, and prices have managed to hold the 20-month this week. Historically, the 20 has been a very good - outside of the late-2008 correction that managed top hold the 40 . tends to bottom around the 50-level on these corrections - which is close to where it is at present. The probabilities favor that this current test of the 20 will be succesful. The alternative would be for prices to clear break the 20 and fall very quickly towards the 40 at $1470/oz.
GERMAN GOLD REPATRIATION MOST SIGNIFICANT GOLD EVENT IN 50 YEARS, BEGINNING OF END OF US DOLLAR AS RESERVE CURRENCY
When gold traded at $1918 it was setting up for a challenge of a very important round number, $2000. The sell off was a product of long liquidation in an anticipation of $2000 in a fast market. Gold did fall on its own weight into the $1800 area, however the body block at $1800, $1775 and $1750 was a product of the Exchange Stabilization Fund operating as an account of a major Gold Bank. Seeing that, this gold bank went to the short side for the account of its hedge funds and not wholly owned trading arm. This gold bank issued a public statement that the gold market was dead as a doornail, finished and completed.
On the level of central banking there are no secrets. The long term plan for the currency war between the euro and the dollar is a derivation of the Free Gold Thesis. That means a significant change in the percentage of fiat currency versus gold at market value held by Euroland as reserves. This thesis has a target for cooperating Asian central banks for gold holdings at no less than 15% at market value. I question some of the thesis of Free Gold thinkers, but much of it has been in my writing for more than a decade on what the end game recovery will look like.
I am told that the parting shot to break gold’s back by the Exchange Stabilization Fund was considered a direct attack on the Euro strategy for what the end game recovery will look like. The Free Gold thesis requires significantly higher gold prices to work and to elevate the euro back in reserve by choice category.
The German reaction was not political but rather a direct warning that they could demand return of their gold just like DeGaulle of France did in the 60s by making a direct and immediate demand for conversion of the US dollar holdings into Gold .
A major will not insult another major unless it is an act of financial war. It has not come to that yet, but it is not that far away. It is 2015 to 2017 and not 2020.
The reason that gold is relatively firm after the media leak and release on the night of the 14th is that I am not the only person who knows the real story. The price of gold will go to and beyond $3500. Gold will be market to market by the majority, if not all, major central banks. This will balance the of the many and major debtor nations and will provide the platform for recovery after unwinding.
Bundesbank intention to repatriate a portion of their gold reserves held in foreign vaults is the beginning of the next phase of not only the gold bull market but the global currency war that began last year when the Swiss pegged the Franc to the Euro ( FXE ) and China dumped more than $100 billion in U.S. Treasuries on the market. Do not believe the talk for a second that the Bundesbank is bowing to local political pressure with this scheme. That is simply a cover story for the real one - that the Gold suppression scheme has tried the patience of the U.S.'s allies in the same way that happened back in the 1960's when Charles DE Gaulle began redeeming France's trade dollars for gold because the U.S. didn't maintain the Dollar peg to Gold .
From Wikipedia, the free encyclopedia
The Exchange Stabilization Fund (ESF) is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention. This arrangement (as opposed to having the central bank intervene directly) allows the US government to influence currency exchange rates without affecting domestic money supply.
As of October 2009, the fund held assets worth $105 billion, including $58.1 billion in special drawing rights (SDR) from the International Monetary Fund.
The U.S. Exchange Stabilization Fund was established at the Treasury Department by a provision in the Gold Reserve Act of January 31, 1934. 31 U.S.C. § 5117. It was intended as a response to Britain’s Exchange Equalisation Account. The fund began operations in April 1934, financed by $2 billion of the $2.8 billion paper profit the government realized from raising the price of gold to $35 an ounce from $20.67. The act authorized the ESF to use its capital to deal in gold and foreign exchange to stabilize the exchange value of the dollar. The ESF as originally designed was part of the executive branch not subject to legislative oversight.
The Gold Reserve Act authorized the ESF to use such assets as were not needed for exchange market stabilization to deal in government securities. The Fund had no statutory authority, however, to engage in other activities that it began to undertake. The principal such extraneous activity it devoted itself to was lending dollars to politically favored governments.
In 1938–40, the director of the Division of Monetary Research, Harry Dexter White, worked on a proposal for loans to Latin America and participated in plans for an Inter-American Bank, which did not materialize. The plan for an Inter-American Bank, however, inspired White’s first draft of the subsequent plans for the International Monetary Fund and the World Bank that White prepared in 1941 at Secretary of the U.S. Treasury Henry Morgenthau’s direction.