Maguire:  “The patient central banks and sovereign size buyers have been able to absorb as many tons of discounted physical (gold) as they were able to into the sell-downs of the June and December 2013 lows.  This central bank buying activity was backed up by daily wholesaler feedback (I was receiving), and flies under the radar for everyone except the well-connected bullion banks who are close to the physical market....

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“Eric, the FOMC data is already known to the Fed and the insider bullion banks days ahead of the public release.  And knowing the report was going to revise down growth and it was going to be much less hawkish than anyone anticipated, gold would have already been in the $1,300s when this bullish gold data was released (had the price not been artificially suppressed).

Now, if gold would not have been counterintuitively sold down into the sub-$1,260s first, gold would have taken off from $1,300+, and almost certainly tripped off large stops above $1,330.  And you and I would be talking right now about how massive short stops  were tripped above $1,350 and about how quickly the $1,400s were reached.

Now, although the paper markets have diverged to a price point in excess of what was reasonably anticipated by any rational expectation, in the bigger picture we are nevertheless carving out a higher stair-step price for the next paper-driven move higher, and this time ignited by short fuel necessary to rebalance the supply/demand fundamentals.

Without synthetic markets roiling the (gold) price, gold would be in a steady uptrend and not so heavily influenced by these derivative games.  But obviously within the larger cycle this has allowed the Fed and the Bank for International Settlements (BIS) to use dilutive paper supply to influence hundreds of tons of gold longs to give up their ETF gold, and to allow the for the bullion banks to change from Comex net short to net long.

Today we saw some official footprints scrambling to try and halt the upside momentum.  However, with wholesale demand aggregated into the $1,300 to $1,350 level, any dips are going to be short-lived from now on, Eric.”

Eric King:  “Andrew, can you give us an idea of the type of tonnage you saw taken out of the markets?”

Maguire:  “Let’s start with China.  There has been lots of talk about the Chinese easing off their buying of gold, and we’ve seen their pace of buying level out, but that’s totally understandable (considering they hit all-time record levels).

Now, I want to explain something more, my Chinese buyers are accumulators, regardless of the price.  When they make their largest investment decisions it’s based upon two things:  While prices are declining, they do seek bargains, but investment bar buying picks up enormously when the prices are rising.

Yesterday’s ramp-up brought in sideline buying which caused premiums in Shanghai to jump and a large move to take delivery in the London markets.  The central banks and the sovereigns are constantly in the market (buying).  When we were sub-$1,300, that was a constant process (sovereign buying).

They (sovereigns) are now (bidding) at the $1,305 level.  The next thing is we want to see the price rise.  Once we’ve cemented this $1,300 bottom, you are going to see huge, huge tonnage come in  (on the buy side), and you are going to see a massive exit of shorts.” Part II of Maguire’s interview will be released within hours.  Also, this is an incredibly important and timely audio interview with London trader Andrew Maguire.  The KWN / Maguire audio interview is available now and you can listen to it by CLICKING HERE. 

© 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.

Andrew Maguire’s trading service has had staggering returns in the gold and silver markets since its inception.  For those who would like to get more information on Maguire’s incredible trading service and to sign up, you can do so by CLICKING HERE.

The audio interviews with Andrew Maguire, James Turk, Jean-Marie Eveillard, Egon von Greyerz, Dr. Paul Craig Roberts, Ben Davies, David Stockman, Bill Fleckenstein, MEP Nigel Farage, Eric Sprott, Art Cashin and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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