Williams:  “The setup for gold is positive.  We do need to break out of this base.  If gold can climb above $1,250 that would be an incredibly positive sign in the short-term.  We should get some momentum above that level....

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“We have to be wary of this $1,180 level.  There are a lot of sell-stops there, and a lot of technical damage can be done if gold breaks that level.  But it feels like there is a renewed appetite for physical gold and I’m extremely positive going into 2014 after what’s been a very, very tough year.”

Eric King:  “Grant, can you update KWN readers around the world as to what’s happening with paper claims vs available physical gold?”

Williams:  “The chart below is one of those classic charts, Eric.  A chart like this doesn’t matter to anybody until the one day it matters to everybody.  And when that day comes, it’s going to be very, very interesting to watch.  What we effectively have here is over 80 paper claims for every ounce of gold that’s being held in the Comex warehouse.  This is not yet a disaster for the month of January, but February is a big delivery month.

So we will have to wait until the next delivery month to see what happens to that structure.  The pressure is certainly building in the Comex warehouses.  There is gold in the Comex warehouses, but it’s not available at these prices.  Most of this gold is not available for delivery and to shake that gold loose we are going to have to see materially higher prices.

It’s certainly shaping up to be important.  This chart shows elevated levels for six or seven months and there is a degree of complacency now.  People think everything is OK, but nothing could be further from the truth.”

Eric King:  “Ron Rosen has been around these markets for six decades.  Is he correct when he says the West is literally  destroying itself with this war against gold?”

Williams:  “Gold is wealth.  People say gold is ‘money,’ but gold is really wealth.  It’s cultural (that belief) here in the East.  People understand that owning gold is owning wealth.  They also understand that owning fiat money which is being inflated away every day doesn’t make you wealthy.

So there is a tidal wave of gold moving from the West to the East.  It would have been OK for a period of time if the West wanted to give over a little bit of gold to the various entities in Asia.  That’s fine.  But I don’t think the guys trying to manage these markets fully understand what they are doing.  They are letting a ‘Genie’ out of the bottle and they don’t fully understand how powerful it is.  Once they realize it, it’s going to be too late.  And the gold is going to be squirreled away in the hands of people and central banks in Asia. 

The ETF is a perfect example:  We’ve seen 500+ tons of gold liquidated from the GLD.  Everyone in the mainstream media says this is a terribly bearish thing.  Well, that gold is not coming back to the West.  That gold has gone to places where it will not be sold.  So that gold is off the market.  That’s 500 tons of gold that we are not going to see again.  They can’t sell that from the ETF again.

That’s extraordinary.  That’s 4 years of gold flows into the GLD ETF gone in just one year.  We can see the gold flying East in the data.  And if the West sends physical gold into cultures where they don’t sell it, where they hand it down from generation to generation, it’s not coming back to the West.

But when you’ve got an enormous leveraged short position in gold, in a situation where the physical gold is now gone and will not be returned to the West, those entities have a massive problem waiting to happen.  Meaning, when this problem erupts there won’t be anyone ringing a bell.  Instead, we are going to see this imperceptible fear as various entities rush to move from paper gold to physical gold.

The Bundesbank started this process back in January of last year.  They have only managed to get 37 tons of their enormous gold hoard back which is supposedly stored in the US.  This is frankly laughable.  But as this process picks up and feeds on itself there will be an inevitable tipping point where entities start to panic.

When that happens, you tell me, where is the gold?  Where is the gold going to come from?  At these prices it’s not there.  It might be available at $5,000 an ounce.  But if we go screaming up to $5,000, you know what people are like -- they get greedy.  So they might want to hold out for $6,000, $7,000, or even $8,000 an ounce.  Who knows?  There’s a price for it, but it’s certainly not $1,200 an ounce.”

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