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Ing:  “Right now I am focused on the ongoing financial implications of the Russian annexation of Crimea.  We have dueling sanctions, and frankly that is ineffectual.  But the market is still not grasping the financial implications....

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“What worries me is that Ukraine owes something like $73 billion of debt and has $12 billion of debt coming due this year.  Neither Russia or the West is really holding up their hands and saying, ‘We’ll take care of it.’

Also, these dueling sanctions are doing nothing for the Middle Eastern policy, which is festering away.  The lack of resolution in the Middle East and what that means for oil prices is a growing concern.  With what is happening here geopolitically, the energy market will become a pawn.

Finally, with Yellen speaking last week, it’s no coincidence that interest rates are nudging up in places like New Zealand.  So while this past week the gold market has taken a breather, I think this pause is related to the dramatic run-up we saw where gold almost touched $1,400.  

This is the necessary technical pullback, but we have to be aware that the gold market now has the ‘golden cross,’ where the 50-day moving average breaks through the 200-day moving average.  This is an incredibly bullish event in the gold market. 

I am also watching the 65-week moving average near the $1,400 level.  The reason this is important is that the last time the 65-week moving average was broken was February last year, when gold was at around $1,600  As we know, gold then plunged to $1,180.  So a break back above the 65-week moving average will also be a major buy signal for gold.

Year to date, gold has been the best performer, outpacing both bonds and the S&P.  Next week, I believe, the geopolitical uncertainty will continue to provide a solid bid under the gold market.

We also have the Chinese still consuming at the rate of 100 tons of gold each month.  That would be on pace for 1,200 tons of gold imports for the entire year.  This would be an even further increase from the record levels of Chinese gold imports in 2013.  Even though China is the largest gold producer in the world, they are still importing lots of gold, and that provides a second underpinning.”

Eric King: “John, the West’s continued price suppression of the gold market, and the fact that they’ve had to surrender so much gold to China to push prices down, is that something that’s going to continue, or is that game over?”

Ing:  “The ETFs are not a factor anymore.  I think a lot of the hot money has left, and the levels of gold in ETFs are actually edging up now. But it’s interesting now, Eric, that there is talk of possible central bank selling -- a resumption of the old quota.

But I think this is just noise (propaganda) and jawboning because of the desperate need for physical gold.  I don’t see European central banks selling gold.  In fact, I see them buying gold in the face of problems in Europe.  And of course we know the Chinese have been buying all the gold their domestic producers have been producing.

So further tightness in the physical gold market is expected.  I think this is one of the reasons why the gold stocks, even though they have corrected, have not corrected very much.  We are seeing ‘bought deals’ that are oversubscribed.  So there is plenty of money coming into the gold market.”

Eric King:  “The London Gold Pool was eventually overrun in the 1960s.  They just ran out of physical gold to supply to the market.  That’s going to happen this time to the West, where the last bar of gold they are willing to part with is gone.  Are we nearing that point?”

Ing:  “We know from last year that there was a huge naked short position in gold.  This has been partially corrected, but if you look at the Chinese deliveries, they are still socking away a lot of physical gold.  Today was a fairly benign ‘triple witching’ day, but one of these times we will come into an expiry and there will be a default or a shortfall.  There is just not much physical gold around, so with all these gold shorts, this is an accident waiting to happen.  This is going to mean a dramatic and disorderly move up in gold.”

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