As we get ready to enter the final day of trading for this summer, here is a fascinating note on Pierre Lassonde, $10,000 gold, the BIS, and a desperate gold swap dealer short position.
KWN reported the following on August 11…
Trouble For Major Swap Dealer Short The Gold Market
King World News was informed today by one prominent gold trader that this historic run in the gold market has created enormous problems for entities who have been aggressively shorting gold. The trader stated that one major swap dealer, who is way upside down on gold short positions, is now in serious trouble and the authorities can’t assist. The question becomes: If the price of gold continues to surge, will some of the entities who are over-exposed short the gold market go insolvent? Or will the price of gold be brought down so the troubled shorts can regroup?
On August 12, the BIS intervened in the gold market…
Today it was reported that $5 billion of panicked paper gold futures selling occurred right after the physical market closed in London. But what really happened? Was it really panic or something else?
BIS Intervention In Gold Market To Aid Battered Gold Shorts
In fact, this was the Bank for International Settlements (BIS) intervening in the gold market to assist the battered commercial and swap dealer shorts. What has taken place in the gold market has indeed been historic. Commercials banks (acting as agents for the Federal Reserve) have been aggressively shorting the gold market at all-time record levels. But the Fed and the commercial banks did not anticipate that global demand for gold would skyrocket the way it has. … It will be very interesting to see how the price of gold trades in the days and weeks to come.
The most interesting thing about the recent trading action was that the government backstops the heavy short positions held by the banks in the gold market because the bullion banks act as agents for the Federal Reserve, but they don’t officially backstop a large swap dealer who is in trouble. So KWN was particularly interested in seeing if the advance in gold would be brought to a halt and the price driven lower because of a swap dealer’s deeply underwater short positions…
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We now have our answer regarding the gold market. From the time of the BIS intervened in the gold market, the price of gold has worked its way lower in a very controlled manner. The mainstream media is chipping in to help out the gold shorts. Bloomberg ran the story and headlined their site with the following: “Central Banks Get Tired of Gold as Lower Exports Cut Cash.” This was a typical hit piece on gold. Gold is also nearing the critical support points highlighted by top Citi analyst Tom Fitzpatrick. If the support zone fails to hold, the decline may accelerate.
The bottom line is a decision was made at a very high level to halt the advance in gold and drive the price lower. Now we just have to wait and see how gold holds up prior to the seasonally strong time of year which kicks off in the fall. For the time being, KWN readers around the globe should keep their eye on the big picture and remember what legendary Pierre Lassonde told KWN on May 26:
“We are in a very dynamic gold market, and first let me say that we have started the next leg of this gold bull market…What I am saying is that the top of this gold bull market will certainly be in the 5-digit area — like $10,000+, and I think it ($10,000 gold) is going to happen in the next 5 years.” — Pierre Lassonde, (KWN) May 26, 2016
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