Every unbacked paper monetary system in the world has failed. 100% No exception. It appears that the western world’s unbacked fiat system is well on its way to destruction. One monetary system stands out as a beacon and that is the use of gold, either directly or as a fully exchangeable backing to a paper system.

According to Egon Von Greyerz the Debt market now totals two quadrillion dollars and growing. For how long is this sustainable? In my opinion, not very much longer.

Gold at present is hugely under owned by the public, having been removed from school and university syllabi and at every level, in order to make paper currencies, (particularly the dollar), the de facto trading base.

The importance of gold I believe has been deliberately hidden and its function as a monitor of bad policy and profligate spending has been suppressed by using the derivative and paper markets to overwhelm the trading markets whenever the price tends to go higher. 

As most countries trade with the US it is imperative that they price their currencies so that they are competitive from a trading perspective with the dollar. As the dollar is devalued, they are forced to devalue as well. As a result we do not see a difference in the foreign exchange cross rates. If gold and silver were allowed to perform their function, we would see their prices compensate for the real depreciation in the currencies. The powers that be cannot allow this or people would abandon the depreciating currencies and move to hard tradable assets, hence the concerted manipulation downward of both gold and silver.

Currently as the currencies weaken against the dollar and more risk is taken in the market and interest rates rise, the costs of holding the enormous derivatives positions rises and puts the banks, mostly large international banks, pension funds and insurance companies at risk. As a result of this, last week, the Bank of England warned pension funds to close their positions in these markets as they would no longer support them. They supported them to the tune of GBP 65 billion to avoid default. ($73.86 Billion).

The Swiss banks have not been doing very much better as it appears that at least seventeen Swiss banks are in need of material financial assistance. It appears that the Swiss National Bank using currency swaps from the FED has received eleven billion dollars in order to assist (save?), the banks.

This is what we are allowed to see. Is this just the tip of the iceberg? This is where I start to worry about all the “bail in” legislation that has been passed in many countries around the world. When I Googled to find exactly how many countries have done this I could only find a Reddit article saying they could not find any list at all, only a reference to the EU prompting eleven member countries to adopt such legislation. The fact that this is nowhere to be found is even more scary to me.

Bullion Star has written an article  where they discuss the physical silver stock disappearing from the COMEX warehouse. The point will come, if this continues, where no more silver is available for delivery and real pricing will be the only way to extract silver from its current holders. At that point, my guess is that one will be paying over $150.00 per ounce and the mining shares will skyrocket.

“… COMEX operator CME does not know how much of the ‘eligible category’ silver in the COMEX approved vaults is held as ‘long term-investments’. Why does CME even assume that 50% of the eligible silver is part of deliverable supply? Why not say 40%, or 30%, or 25% is available of deliverable supply?” 

The situation may be more dire than we are being told!

For a full rundown of the seriousness of this situation, please read the Bullion Star article here.

Gold’s low of the week was $1,638.00 and the high was $1,676.00, now trading at around $1,663.00.

The monthly chart for Gold is negative. The possibility of $1,561.00 is still in play. The weekly chart is neutral showing signs of life. The daily chart is neutral but almost a buy.

The low for Silver this week was $18.80 and the high $19.78, trading around $19.60 at present.

Silver on the monthly chart is neutral with positive indications. On the weekly chart the buy signal almost immediately reversed to neutral and now looks more positive again. On the daily chart, yesterday gave us a new buy signal.

On the Stockcharts.com charts, the blue vertical lines are our proprietary system buy signals and the red vertical lines are system sell signals – for information purposes only.

Please contact us to arrange the purchase and storage of your gold and silver requirements in a safe, insured, location outside of your jurisdiction.

This is my interpretation of the market and is not to be taken as financial advice. Before making any buy or sell decisions I recommend that you consult with your professional financial advisor.