Kaye:  “There are serious strains in the (gold) system.  I’ve never witnessed such a serious strain in my lifetime in terms of the backwardation of gold, and in terms of the lease rates being negative for such an extended period of time.  This suggests that there are two forces at work:  One is that there are serious strains in the system -- that the bullion banks are struggling to come up with the physical gold for spot delivery that the market demands.  

The second is that trust is also leaving the system....

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“Two major bullion banks have already reneged on their paper contracts to deliver physical gold to their customers -- they will only settle in cash. 

And if you read the fine print of the COMEX contracts, they say exactly the same thing -- that we can declare a ‘force majeure.’  Meaning, that we just don’t have the gold to deliver.  My  belief is that the market already senses this phenomenon, and this is why we are seeing this backwardation and these negative lease rates. 

The setup now is incredibly positive for gold and precious metals.  We’ve already talked about the lease rates and backwardation (in gold).  Every time that we’ve seen this in modern history, this phenomenon has been followed up quite quickly by a significant updraft in the price of gold.

If you go back to 1999/2000, you saw this same phenomenon.  We then had a massive rally for 12 years -- gold went up 7 times (in price from the lows).  Now, the paper market has been under artificial pressure, but our sense is that it’s getting very, very close to game over.

The gold from ETFs, that feedstock is running dry.  We already know that the Bank of England, which had custody of the gold, delivered 1,300 tons into the market.  The Bank of England, like the Fed, is one of the major Western custodians of gold from central banks around the world. 

Now, that (at least 1,300 tons of) gold has left the Bank of England, and there has been no accounting from the Bank of England as to where it went.  This would seem to corroborate several prior interviews that we’ve had, Eric, as to how this smash was orchestrated.

The Bank of England supplied 1,300 tons (of physical gold) -- It’s certainly missing and they can’t account for it.  The ETFs, such as GLD, have supplied an enormous amount of gold, over 600 tons.  They’ve been looted.  This is how this thing has been orchestrated to date.

All of the evidence points in the direction that we are very late in the end game.  I can’t promise you that we have reached the end game, but we are very late in the game.  These guys have reached very deep (into the Western central bank vaults), and the physical gold that they don’t own but that they can get their hands on and lease through the bullion banks, which then sell into the market, and that gold has been largely depleted.  As a result, it’s very close to game over.”

IMPORTANT - This write-up is only a small portion of what William Kaye had to say in his outstanding audio interview.  The KWN audio interview with William Kaye is available now and you can hear to it by CLICKING HERE. 

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Eric King

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