Eric King:  “Grant, as you know James Turk told KWN that gold is in the deepest backwardation we’ve seen in 8 months.  What’s happening in the gold market?”


Williams:  “Eric, this gets back to the difference between physical metal and paper.  We’ve seen this increasing demand for physical gold out of Eastern countries in the last 18 months, particularly China, and that demand for physical is showing itself on a short-term basis in the negative (GOFO) rates we are seeing....

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“The fact that those negative rates are persisting just tells you that it’s not simply a case of that differential being arbitraged away.  Meaning, there is real demand there in the short-term for entities to get hold of physical gold in a hurry, and it’s not being tempered by the arbitragers selling into it.


So the physical gold market is very, very tight.  We’ve known this for a while.  It continues to be tight, and at some point it will resolve itself.  But for now we have another options expiry week, and we’ve seen the price get slammed in the paper markets before that options expiry.  I think we’re all pretty used to that by now.


As thin as these markets are, it just meant that the selloff was more pronounced.  But I am on record as saying that I believe the bottom is in.  I believe that $1,187 level will hold, and I suspect over time that gold is going to move higher once we clear out the weak paper longs.”


Williams added:  “The Russians never announce their monthly positions in gold futures.  The Russians announce their monthly purchases of physical gold.  There is a reason for that:  To the entities who want to own gold, the paper markets are an irrelevance.  If anything the Western price suppression scheme has been a big help to the East because it has helped to keep the price down.


We saw some negative press recently from the Western mainstream media saying that stagnant Chinese demand (at all-time record levels) means the price is going to go lower.  That’s nonsense.  We saw insatiable demand out of the East last year and bizarrely enough we saw a gold price that fell almost 30%.  It doesn’t make sense.


It doesn’t make sense because there is a clear disparity between the price being quoted in paper, and the demand being in physical.  Let me be clear about this:  When you are talking about the paper gold price, you are not talking about the real price of gold.  But this is why the Eastern central banks are going to continue on their path of accumulating more gold.


We have about 2 1/2 thousand tons of gold each year getting pulled out of the Earth.  Keep in mind that this activity is taking place at ever-increasing levels of difficulty and at an ever-increasing cost.  And much of this gold - as well as that being dishoarded by the West - is being squirreled away in places in the East from whence it’s not going to return.


This is now a game of patience by those who can run the numbers and who mathematically comprehend that this price suppression simply cannot go on forever.  This second London Gold Pool will be overrun just like the first one was.  At some point this disparity between paper prices and physical demand is going to resolve itself, and when it does it will mean an explosion of the gold price to the upside. 

That move will coincide with the rest of the world coming to understand that which many Eastern countries have figured out - that the West has essentially created an artificial market in a paper instrument overlaying an ever-dwindling supply of physical metal.  The collapse of what is, in effect, just another Ponzi scheme will drive gold prices to levels not thought possible by those who don’t understand the tenuous dynamics of both the gold market and Western Central banks’ ability to dictate outcomes.”

UPDATE - KWN has many more interviews being released today.

© 2014 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 James Turk, Victor Sperandeo, Dr. Philipa Malmgren, Grant Williams, Dr. Paul Craig Roberts, Bill Fleckenstein, Gerald Celente, Dr. Marc Faber, Egon von Greyerz,  Ben Davies, Art Cashin and Eric Sprott are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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