With gold vaulting nearly $200 since this call to within tics of $1900, Davies has significantly moved up the timeframe for his $2,100 call to within WEEKS!
The reason: Davies believes Hugo Chavez' repatriation of Venezuela's gold is a GAME CHANGER, and we couldn't agree more.
The handwriting is on the wall for the cartel, and this time it is not the Medes and the Persians draining the Euphrates River, it is Chavez draining the gold from the BOE and JP Morgue.
Chavez holds 365.7 tonnes of gold overseas, mostly in Western Central Bank vaults, such as the Bank of England. Some 100 tonnes of Venezuelan gold is held there. We believe a transfer of the full amount; most is held overseas, would be one of the largest known physical transfers of gold this century, if not the largest.
The question is: do these vaults still have all the gold? According to GATA’s work much of Central Bank gold has been leased, swapped or just plain sold into the market. Central banks did this to assist governments in maintaining the illusion that their currency was not being debauched by oversupply.
GATA believe, as we do, that the gold market is run like a ‘fractional reserve bank’. This means each troy ounce has been lent or swapped out many times over, and should gold holders request the return of their gold en masse, we could get a proverbial ‘gold bank’ run.
There is just not enough readily available supply of physical bullion to facilitate such an event. We point you to our June presentation given at Mines and Money in Beijing:
Chavez, loose cannon or not, just reminded us all that possession is 9/10ths of the law. This will get other governments (central banks), and financial institutions who hold their gold abroad to reconsider their gold holding locations. We could see further repatriation of gold home. Maybe the Europeans will ask for a return of their gold. Remember last time a European did that? August 15th 1971 and Nixon’s closing of the Gold Window was the response. And the rest is history.
In keeping with our power law theory we love to espouse so much, if 20% of the holders want to have their gold returned, then we are at a critical point, whereby gold will rise at an exponential rate. We are witnessing this now to some extent.
This could inspire all individuals to shun paper constructs in favour of the physical. Global demand is rising day by day, and will only get stronger into the seasonal buying period. The strain on the refiners and vault owners will manifest itself in much higher gold prices, as readily available gold will not be forthcoming.Read more from KWN: