Gold Breakout: Three Major Factors


by Jim Willie, Gold Seek:

The Gold suppression game appears finally to be coming to an end. A Perfect Storm is hitting the Gold market, with an internal factor (QE), an external factor (SGE), and a systemic factor (Basel). These factors can be identified, each very powerful, each with a very new recent twist to alter the landscape. All three forces are positive in releasing Gold from the corrupt clutches of the Anglo-American banker organization. They have been willing to destroy the global financial structure and many national economies, in order not just to maintain the political power, but also to continue the privilege of granting themselves $trillion free loans. The owners of the US Federal Reserve, Euro Central Bank, and Bank of England have granted themselves free money in gifted pilferage for a full century. As the saying goes, a nation needs a central bank like an oyster needs a piano. In the last ten years since the Lehman Brothers failure, all systems have undergone the same reckless treatment that the mortgage bonds endured. They saw corrupted underwriting, corrupted title database, and corrupted demand functions.


The perfect storm in the Boston area involves three storm masses hitting the New England coast at the same time from different angles. One of the most beautiful sights in my 20 years in Boston was seeing a Nor’Easter slamming the coast with white snow laced with blue algae, visible in the sunlight angles. The perfect financial storm will be at least three times worse than the 2008 financial crisis that engulfed the subprime bond market. This time, the entire global bond market has been wrecked. The USTreasury Bond market has almost no legitimate buyers, has suffered massive dumpings in abandonment, and depends upon banker derivatives to fabricate phony demand. The corporate bond market is turning gradually into a BBB junk bond yard, after years of abused bond issuance devoted to share buybacks and executive options. The malinvestment has been astonishing and universal. The Emerging Market bonds have been kept afloat by Western banks, as they lent money to service the badly impaired debt. It can actually be stated with accuracy that the entire global bond market is subprime, led by the USTBonds.

Harken back to 2012, when the Swiss decided to install the 120 Euro-Swiss Franc peg. The publicly stated monetary policy was cover for a grand Gold price scheme which involved the USDollar, the Euro, and the Swiss Franc currency. It was very successful in bringing down the Gold price from its $1900 high, with full Euro Central Bank collusion, joined by massive USDollar Swaps. Together with the Quantitative Easing (QE) monetary policy from the US Federal Reserve, the Gold price has been stuck in a rangebound interval. However, an impasse has been reached, and the roadblock is being cleared.

In the last ten years, absolutely nothing has been fixed, no remedy even attempted, while all the errors, crimes, and reckless monetary policy that created the Lehman fiasco with the Global Financial Crisis, have been repeated on a global scale.

The Emerging Market debt is ready to explode. The Petro-Dollar has been largely dismantled, no evidence better than the crude oil price which cannot find its way above the $60 to $65 mark. Therefore, Wall Street energy portfolios, stuck with shale sector debt, are also set to explode. The corporate bond market is set to turn into junk, with GE, General Motors, and Deutsche Bank leading the parade of perhaps $1 trillion in corp debt into junk territory in the next year. But the grandest of the big stories is that the USTreasury Bond has become the global subprime bond.

Three factors will work to force the Gold price much higher, as a new chapter is unfolding. The factors are internal with QE, external with the SGE in Shanghai, and systemic with the BIS in Basel. One must always recall that the Gold price for almost a century had followed the money supply in a tight correlation. For the last ten years, the USD-based money supply has almost tripled. The process created a coiled spring. The Gold price is due to triple, making up for lost time. It just needs some internal, external, and systemic pushes.


The stage is set for another heavy big important Quantitative Easing (QE) initiative. The official monetary tightening has been a disaster. Next comes a reversal of policy, and resumption of extreme easing with heavy volume bond purchases. Maybe this time, it will include all types of bonds, from sovereign to bank bonds to general corporates to mortgages, even to energy sector bonds. A new wave of securitized bonds could occur, to facilitate monetization of debt, enabling the central banks to purchase them efficiently. Witness the dawn of the everything bond bubble yielding to the everything bond QE purchase program to save the Western financial system. It has been called the QE FOREVER bond initiative, which might be called upon to monetize the entire Western banking system. To be sure, the Gold price will respond with upward jettison to the conclusion of the full ruination of money. They masters must prevent a full banking system collapse.

The world’s financial system has become dependent on huge central bank balance sheets. Yet the assets of central banks around the world have begun to contract notably, relative to Gross Domestic Product, for the first time since the 2008 crash. This is important to understand and a dangerous risk for both financial markets and real economies because of the key role played by central banks in the funding system. The USFed expanded its balance sheet in a tremendous burst over the last ten years. It grew from $900 billion in 2008 to $4.3 trillion in 2018. They built a dangerous credit dependence as they staved off collapse. The USTBond lost the majority of its investors. The official tightening in the last year has caused financial market convulsions. A change in the Fed Open Market Committee winds has been duly noted in recent several weeks. They will not only be flexible, but they anticipate QE to become a permanent policy. The United States is freed to embark on a new course, and to avoid further damage from the tightening and lost trade. China did not succumb to the tightening. Next comes the inevitable loosening of monetary policy by the USFed. Welcome QE FOREVER.

Expect to see another round of central bank asset purchases, which many call QE4, far sooner than many expect. The Jackass calls it QE to Infinity again or perhaps QE186 in jest. Others call it QE FOREVER, which might be the best name of all. Next comes the inevitable loosening of monetary policy by the USFed. They must avoid an economic downward spiral. They must avoid a financial system breakdown. The consequences will be severe. The policymakers will permit more inflation, both in monetary flows and in price structures. They must monetize the uncontrolled debt and perhaps even the banking system. The result will be a powerful upward move in the Gold price. They will make the painful decision sooner or later, since global collapse is the alternative. THE KEY POINT IS THAT THE US FEDERAL RESERVE HAS NO CREDIBILITY ON THE GLOBAL STAGE. THEY ARE ON THE VERGE OF ANNOUNCING A FULL BLOWN Q.E. TO INFINITY. THEY MUST RESCUE EVERYTHING WITH Q.E. FOREVER. The USTreasury Bond will be widely recognized as the global subprime bond. It will rally from orchestrated pursuit of safe haven, but later break down in a grand default. The default type will be a restructured debt. The Gold Price will enjoy an enormous lift, with the Silver price rising in lockstep. In this next episode, the safe haven will be globally recognized as Gold, since the USTBond is subprime, supported by fraudulent derivatives, and dumped the world over.


The China Gold window has set a trap for the USDollar. A stronger dollar means the Chinese accelerate their conversion of USDollars to Gold, even as their trade surplus grows. A weaker dollar means the entire globe abandons USD-based assets. Amidst the panic, the Gold safe haven is discovered and embraced. By opening the Gold-RMB window, China has assured the death of the toxic USDollar and the death of the corrupt LBMA Gold market. The sunset of the entire Petro-Dollar defacto standard has arrived in full force. The cooperation, collusion, and support from Saudi Arabia is fast vanishing. The entire OPEC oil cartel is moving under the Russian Rosneft umbrella, outside the USD control. The East is shifting quickly away from the USD sphere, and toward the RBM arena, which should act as a caretaker toward passage into the full implementation of the Gold Standard.

Since March 2018, in a hidden manner, the USDollar has become captive to the Shanghai futures contracts that control the Gold-Oil-Yuan. The result is a slow death for either the USDollar or the Gold Market as we know it, namely the LBMA in collusion with the COMEX. During these four decades or more, the USDollar has reigned supreme as the global reserve asset. In recent years, the USD has faced direct challenges with an enormous volume of USTreasury Bonds having been discharged by the entire set of central banks. China strives to achieve more independence from the USD, no longer willing to operate in the King Dollar shadow. Rather than displace the USD and win equal global reserve status for the Chinese Yuan (CNY) currency, they have employed a different strategy, and it will be successful. China had to open the CNY-Gold window to internationalize the CNY, which will drain the USDollar power.

The Chinese Yuan is not backed by Gold, a common error that most analysts and investors make. It means that nations with credits from the Chinese are given a choice. They can hold the CNY as currency or convert it to Gold, but only at the Shanghai Gold Exchange. This was the first step that China had to take to convince the energy (oil & natgas) exporters to accept CNY and thus to initiate the Petro/NG-Yuan trade. Call it the Petro-RMB trade. It is expanding very quickly in volume, to overtake the Brent crude oil trade. Nations will accumulate RMB in the energy trade, from gigantic Chinese oil & gas purchases. They will be led to convert to Gold, and to refuse holding USTBonds. China will only sell Gold in their domestic currency (Chinese Yuan) at the SGE. They will not sell Gold in any other currency. This opening of the SGE CNY-Gold window has essentially trapped the US, USD and LBMA. Various alternative paths are presented.

If the USD strengthens versus the CNY, then the Chinese and other nations rush to the LBMA in London to purchase Gold in USD terms. They bankrupt the LBMA and wreck the Gold Market, which is corrupted by Western paper contracts. The other nations would suffer economic turmoil from the continually rising USD, and then turn to Gold as refuge. Worse, the cheaper Chinese CNY currency leads to continued outsized US trade deficit with respect to China. In turn, China will convert its growing USTreasurys stash won in trade to Gold holdings even faster.

Read More @