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Maguire:  “People will ask me, ‘With such strong physical demand, how can the price (of gold) be going down?’  The answer is simple.  Physical gold is completely unleveraged.  Synthetic Comex supply is not gold at all, it’s just fake supply, and it temporarily overwhelms the underlying (true physical) demand. 


It’s pretty easy to do if you are the Fed.  The Fed has a complete visibility into the (trading) ‘book,’ and knows exactly how much synthetic gold to dump into the market at any time to overcome the ‘bid stack,’ and ignite the algorithm-driven momentum follow through selling.  It’s their (the Fed’s) game....


Continue reading the Andrew Maguire interview below...  




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“It allows the two primary bullion bank operatives to front-run, on inside information, for their own book too.  And when a single entity instantly dumps, like after the FOMC (Meeting), over 35 tons of synthetic gold into the market, it’s giving the algorithm-driven market a temporary ability to overwhelm any unleveraged physical demand.


This is the last vestiges of the tail wagging the dog, though, as each time they do this physical buyers take the spot price.  They (then) step up into the (London) fix demanding to convert these paper purchases into real bullion.  Speaking of London, Eric, the physical market is where the rubber actually meets the road.


Converting so much paper gold into bullion is stressing out (the existing) between 90 - 1 and 100 - 1 leverage of available supplies.  This was never, ever anticipated to happen (by the bullion banks or the Fed).  The bulk of all LBMA bank accounts are held in unallocated form.  It’s amazing how few institutions even realize this.


That includes billions (of dollars) of pension fund holdings.  What amazes me, Eric, is when speaking to these (pension fund) managers they actually believe they have access to the physical (gold), or (that) they can convert these holdings into allocated form on demand.  That could not be further from the truth. 


When applying for an LBMA bullion account, an investor (or entity) is steered into the lower cost unallocated option on the premise that it’s much cheaper carrying costs than buying bullion in allocated serial-numbered form.  But after reading this ‘boilerplate’ unallocated small print, it becomes absolutely clear there is zero physical to back up these (unallocated) bullion holdings.  In other words, the bullion account is actually set up no differently than a regular bank account where you simply receive a ledger receipt for your cash deposit. 


By default, you (have then) just become a creditor of the bullion bank, and that’s a bank (where) you have zero visibility into their health.  As we know, these accounts are no more than highly leveraged, rehypothecated structures that for decades have completely distorted true supply/demand fundamentals.


China is now poaching -- financing these forward agreements away from these traditional LBMA bullion banks -- ruining their ability to roll forward many of these leveraged positions that (have) kept this Ponzi scheme (at the LBMA) going.  People have to understand this is a game-changer, Eric.  It forces the bullion banks to ‘pay the piper.’  They (bullion banks) have to mark longstanding, over-collateralized, rehypothecated gold and silver positions to market.  This means buying physical to do so.


This starts to bring supply/demand fundamentals to the forefront.  These positions are put on, and over time they were rolled again and again and again, allowing them to be collateralized as we said, 100 times over.  And (at that time) the bullion banks had full control of the US and London markets. 


However, this unanticipated physical demand is removing this underlying physical (gold) out of their control.  This is a big deal.  The high leverage in the paper markets, based upon one ounce for every rehypothecated 100 ounces employed in the market, this ‘anchor’ has now come loose. 


Unfortunately, for the bullion banks leverage works in two ways, and what we are seeing now is the start of a ‘forced unwind’ of these rehypothecated positions.  There is simply not enough physical (gold) for them to cover (their) positions, and that’s why we will see a default (at the LBMA).”


IMPORTANT - KWN will be releasing interviews all day today, including part II with Maguire.


Andrew Maguire’s trading service has returned over a staggering $134,000 for each and every (single) contract traded in the gold and silver markets over the past 16 months.  For those who would like to get more information on Maguire’s incredible trading service and to sign up you can do so by CLICKING HERE.


IMPORTANT - The Andrew Maguire audio interview is incredibly powerful and it covers remarkable information concerning the gold and silver markets, as well as a coming default at the LBMA.  The KWN audio interview with Andrew Maguire is available now and you can listen to it by CLICKING HERE.


© 2013 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.


The audio interviews with Andrew Maguire, William Kaye, Gerald Celente, Dr. Paul Craig Roberts, Michael Pento, Eric Sprott, Grant Williams, Rob Arnott, Art Cashin, Bill Fleckenstein, David Stockman and Jim Grant are available now. Other recent KWN interviews include Marc Faber and Felix Zulauf to listen CLICKING HERE.


Eric King

KingWorldNews.com

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