Eric King:  “Bill, what’s the set up now from these guys?  What are they (banks) up to next (in the gold market)?”

Kaye:  “What we do know, and this is very bullish, major bullion banks led by JP Morgan, which is the largest player, are now very long gold....

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“This is good because it would appear that the major bullion banks, who typically position themselves ahead of the next major move in either direction, are increasingly long, and on paper (they are) very net-long.

The bearish news is we are not sure what their total picture is.  By that I mean there is an enormous OTC market which is extremely opaque, and so it is very possible that they are net-short, and possibly very short in a very highly-levered but opaque OTC market.

Another area that we have very little vision into are all of these unallocated gold accounts.  I’ve been unable to find anything that estimates the ongoing liability from the IOU’s that are outstanding from all of these unallocated gold accounts that JP Morgan, Goldman Sachs, and the other bullion banks possess.

What these unallocated gold accounts amount to are (just) massive IOU’s that I suspect can never be repaid.  Now, there is reason to believe my suspicion is accurate because we already have had two defaults earlier in the year.  The first was ABN AMRO defaulting in April, and subsequently their sister-bank, Rabobank, precisely because they had issued IOU’s for which they did not have physical gold.  So they simply forced everyone to settle in cash. 

What that tells you is you have major problems with many of these bullion banks, two of which have already defaulted.  You’ve got major problems with this unallocated gold system, which is nothing more than a very highly-levered fractional reserve system for gold, in which the banks possess just a tiny fraction of the gold.

My suspicion is the entire (fractional reserve gold) system, ultimately, probably within the next year, will go the way of ABN AMRO and Rabobank.  They will all settle for cash when the market begins to make an important up-move which could be first quarter or second quarter of next year, and people will be scrambling for gold because they are going to be forced out for cash, and they are going to want to put themselves in a position they thought they were in (owning physical gold).

They are going to want to get exposure to gold, only this time it will have to be in the physical market because the banks will be declaring force majeure, and the Comex will simply collapse -- they will force everybody out for cash, which their contracts allow to happen, and there will be this massive scramble for gold.  At that point gold hits, $3,000, $4,000, $5,000 an ounce, because there simply isn’t enough available gold out there to satisfy the 90 to 100 (paper) claims (on actual gold) that exist.”

Kaye added:  “There are insiders here who are in a position because of their inside knowledge to benefit from this intentional manipulation that is ongoing.  These people, I suspect, are accumulating physical gold at artificially depressed levels.

Certainly we’ve noticed some of these suspects converting at very attractive prices their holdings of GLD into physical.  This typically gets reported in the mainstream media as Soros, or name another elite, selling or reducing their stake.  And this just isn’t right.  For the most part these entities are converting their (paper) gold into physical (gold) in lots of 100,000 (shares of GLD).  They have the wealth to do that.

So that’s the real picture, and of course that’s not a bearish activity, that’s bullish.  But the mainstream media continues this propaganda of gold being in a bear market, when the reality is it’s paper gold being manipulated down, and it’s physical gold that is being hoarded at a frenetic pace.  There is an enormous ongoing bull market in physical (gold) which exactly matches the manipulated paper bear market that we are seeing on the Comex.”

IMPORTANT - Part III of Kaye’s fascinating interview series will be released within hours.  Also, this is incredibly powerful audio interview with William Kaye covers the war in gold, the Rothschilds involvement in the gold market, as well as the increasing desperation on the part of Western central planners.  The KWN William Kaye audio interview is available now and you can listen to it by CLICKING HERE.

IMPORTANT - Due to the price action, KWN will be releasing interviews all day today.

© 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 William Kaye, Michael Pento, Andrew Maguire, Gerald Celente, David Stockman, Art Cashin, Dr. Stephen Leeb, John Hathaway, Bill Fleckenstein, James Turk, Eric Sprott and Jim Grant are available now. Other recent KWN interviews include Marc Faber and Felix Zulauf -- to listen CLICK HERE.

Eric King

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