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The London Trader continues:

“They (bullion banks) hold that little bit of physical gold and claim they are backed up on their position to the CFTC.  I have all my large buyers now going to producers and saying to them, ‘Look, don’t sell it to the bullion banks, we’ll buy it from you.’  So we are buying directly from the producers and this includes some sovereign entities which are doing the same thing. 

We’re struggling to get the physical out of these guys (producers) because they have so many people banging on their door, saying, ‘Sell it to us direct.’  What these buyers are doing is essentially taking gold out of the system, which means the bullion banks can’t leverage that gold anymore.

So this is a huge, dynamic shift that wasn’t there before.  Now we are working on one other thing.  We’re beginning to offer them forward contracts.  If you are a sovereign entity, what you are saying to these producers, especially on new projects, is, ‘Why don’t you sell the gold to me in 12 months?  Here’s the cash, just provide it to me 12 months from now.’ 

These buyers are now cutting off future gold supply from the bullion banks.... 

Continue reading the London Trader interview below...


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“This is a huge, tectonic shift in price dynamics going forward because it is taking price discovery away from the bullion banks.  These large Chinese buyers and sovereign entities which are doing this are going to have a massive impact on the market.

Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold.  They don’t understand what is happening in the physical market.  The bullish fundamentals I just described to you have enormous implications. 

We are making a historic bottom right now.  The paper gold, or virtual gold market, has diverged so far from the physical market that it’s no longer a credible marketplace.  That’s the key thing that came out of a very important meeting I was in yesterday where we had some serious players.  The people I was meeting with are all on the buy side and have been since the lows last week.

There are massive physical orders, sitting, waiting for any more discounts, and yet everyone else seems to be short.  So you have huge fuel for a rally here. 

You have to keep in mind this recent plunge was orchestrated with borrowed gold and that borrowed gold is now gone.  That’s why gold can’t go much lower.  Any dips in price will be aggressively purchased.  As I said earlier, right now we are witnessing a historic bottom.”

The London Trader previously told KWN on October 21st that China had purchased a massive amount of physical gold at the lows of the October 20th session.  That marked the dead low for the price of gold in October and gold rallied roughly 10% in the following 8 trading sessions.

© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

Eric King

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