13 Reasons Why Gold Will Hit $5000/oz - Jim Willie

By: Jim Willie CB, GoldenJackass.com / GoldSeek.com

Back in November 2003, before the Hat Trick Letter was hatched and launched, a seminal article was written about 25 reasons why Gold will rise. It was updated afterwards, around 2008 with a couple more reasons. Given the extreme situation in the last few months, the entire outlook has changed. The gnarly intractable crisis began in late 2008 when Lehman Brothers failed, Fannie Mae was nationalized, and AIG was given a nationalist prop. In the last several months, the crisis has entered a new elevated level of perma-crisis and constant tension, widely recognized as something more serious, dangerous, and risk-filled.

The key changes that mark a quantum change in the global environment for Money, Banking & Gold are many. Taken collectively, they are truly impressive and mindboggling. The new normal is deep constant crisis without resolution, nor the attempt to resolve anything. The banker power structure refused to endure liquidations. They will forced upon them, consequently. The elevated sense of urgency, greater degree of distress, and higher risk of systemic breakdown are the result of many developments. They are largely due to:

• ZIRP Forever & QE to Infinity (hyper monetary inflation forever)
• Negative Gold Forward Rates & Futures Contract Backwardation
• Arab Spring & Instability across Middle East & North Africa
• Bail-in Plans for Western Bank Account Confiscation
• Monthly Gold Market Ambushes
• COMEX Vaults Going Empty
• Exposure of Derivatives as Bank Sector Point of Vulnerability
• Constant Pressure for Intervention & False Support of Financial Markets
• Draghi Bond Solutions Declared Invalid
• Unresolved Debt & Deficits in Southern Europe
• Recognized Dysfunction of USGovt Spending
• Infiltration of Chinese Yuan Swap Facilities into Western Nations
• Renegade G-20 Meetings with Gold Trade Settlement as Key Project
• Birth of EurAsian Trade Zone with Pipeline Infrastructure
• Revelation of Widespread Security Eavesdropping

The entire world has changed with respect to money, banking, investments, and the rules that govern wealth. The Hat Trick Letter is not concerned about legal matters, nor politics. The newsletter is focused on matters that affect the USDollar, major currencies, sovereign bonds, banking systems, economies, trade, and precious metals. No serious analysis can proceed on Gold & Silver without analysis of the other concepts, since all are integrated.

SHORTAGE

The following factors are directly relevant as to why the Gold Price will rise to $5000 per ounce, then higher. At the same time, the Silver price will rise multiples higher. The gains for Silver will most likely be a greater multiple than seen on the Gold price rise. The shortage for Silver is astounding and obvious to analysts and experts, except those who work for banks. The shortage for Gold is more subtle, as thousands of tons have been leased illicitly. Therefore the accounting is replete with double counting and outright missing accounts in false reporting. The most egregious ledger item is the USGovt gold reserves, listed as deep storage gold, translated to mean some scattered Barrick Gold ore bodies buried in mountain ranges.

GOLD PRICE FACTORS

1. Interest Rate Derivative Meltdown & Damage Effect from Rising TNX

The London Whale of JPMorgan’s London office is responsible for giving it publicity. The Interest Rate Swap is a key device used to control interest rates, especially the long maturities. It is a complex mechanism. Final demand is artificially created. Morgan Stanley has served as the Wall Street harlot for years, executing the IRSwaps, fabricating USTreasury Bond rallies out of thin air. The leverage within the device is between 50:1 and 100:1 in usage. Small moves in the bond yield (like 30 to 50 basis points) can cause great disruption. We have seen a 130 basis point move in the USTreasury 10-year yield since May. Some big derivative accidents with ten whales will be sighted soon. The safer haven is the nemesis Gold bullion.

2. Reversal of USTreasury Bond Carry Trade & Convexity Effect on TNX

Since year 2009, the Fed Chairman Bernanke encouraged the big US banks to replenish their balance sheets with easy leveraged carry trade. They borrowed the free money on the short end near 0%. Then they invested in the 10-year USTreasurys. The Excess Reserves held at the USFed itself obscured the central bank’s insolvency, obtained as profits from the carry trade. Now with rising bond yields, the damage is enormous, as the losses are approaching catastrophic levels (hidden), the process in reverse gear. The losses are magnified by leverage. The big US banks are in a rush to unwind their USTBond carry trade, which relied upon futures contracts for leverage. The easy money has converted into massive losses. The better investment is the nemesis Gold bullion.

3. Indirect Exchange: USTBond Returned to Sender & Eastern Infrastructure Build-out, the Inflation Finally Imported after 30 Years of its Export

In numerous large projects, the payment between two parties is turning out to be in the form of USTreasury Bonds more often. This is true for Rosneft acquisitions and African asset purchases, along with numerous smaller projects. The Brazilian OGX liquidation will see more of the same pattern. The payments in USTBonds are then converted to cash to the party selling the asset. The USTBonds are returned to sender, usually a New York or London bank. The exported inflation from the United States Govt avoided any direct strong effect on price inflation for the USEconomy, since exported debt. When it returns after 30 years, the inflation will be an imported effect, a massive delayed effect. The Gold price will respond to the USTBond being dumped, the rising bond yields, and the price inflation caused by the USDollar devaluation. The true inflation hedge is the nemesis Gold bullion.

4. Bank Bail-in Executions & Private Account Confiscation

The Cyprus bank confiscations provided the adopted model for the Western banking world. The Bail-in will in no way restore the solvency of big banks, whose derivative losses are typically 50 to 100 times larger than private accounts held in deposits. When the United States and Western Europe, along with Great Britain, impose the bail-in confiscations at whatever percentage for account reductions, the fury and panic will be very visible. People will realize that private funds held in insolvent broken corrupt banks are not safe. They will remove money from accounts, whatever is left, and seek Gold instead. The true safe haven is the nemesis Gold bullion.

5. Fall of House of Saud & Demise of Petro-Dollar & Rise of NatGas Coop

The Saudis are special in their command post at OPEC, and for colossal trade surplus recycling into USTreasury Bonds, US bank stocks, and US property. The Saudi regime has become unstable, due to many factors. Cite price inflation (food in particular), lack of reforms tied to Islam rules, targeted appropriation thefts by the princes, diminished national surpluses from the oil business, and a basic problem with succession of power. Apparently King Abdullah has recovered from a coma, his condition uncertain. The conditions for oil purchase being in USDollar payments cannot be assumed to continue much longer. The OPEC itself might fall victim to the Arab Spring disruptions, and bend toward other currencies in oil payments. The rise of the Natural Gas Coop is the biggest energy related geopolitical story in decades, linked integrally with the pipeline constructions, battles, and controversy. As the Petro-Dollar defacto standard falls to the wayside, the true standard in trade will be the nemesis Gold bullion. Arabs including the Saudis, in particular the Persian Gulf oil producers, will chase Gold with a passion, when they discard the USTreasury Bonds and pay homage to the new protector, China with Russia beside it. The longstanding favorite form of wealth held by Arab has for centuries been Gold bullion.

6. BRICS Bank as Gold Trade Central Bank & USTBond Conversion to Gold (G-20)

It was born as the BRICS Development Bank for construction projects extending from the alliance of Brazil, Russia, India, China, and South Africa. It later changed to the BRICS Bank. It will eventually become known as the Gold Trade Central Bank, the main processing center for supplied USTreasury Bonds accumulated by the emerging nations, converted to Gold bullion. At this point, the BRICS Bank is gathering in funds, typically in USTBond form. The details will be revealed in time, but this bullion bank will become a behemoth, and the core to global trade stability. The member nations will direct their FOREX reserves, largely USTBonds, into the BRICS Bank. The ruse is that infrastructure projects is cited in order to divert attention from US & UK attacks. The conversion of USTBonds for Gold bullion will make for a historically significant event in the Paradigm Shift for commerce and eventually banking, in brutal fashion, as USTBonds are redeemed (liquidated) for Gold.

7. USDollar Devaluation & Global Split by Defiant Foreigners

As the USTBonds are discharged from Eastern banking systems, the effect on the USTreasury yield will be pronounced. Whether for basic diversification of banking and FOREX reserves, or for payment of large project acquisitions, the effect will be the same. The USDollar must adjust in its exchange rate, and be devalued. In order to prevent staggering global price inflation, the foreign held USDollars must split to create a foreign USD and domestic USD. Foreign institutions will balk and object and resist a forced devaluation, having no part of it. The devaluation effect will be isolated to the USEconomy. The foreign defiance will reject the notion of a devalued USD outside the USGovt jurisdiction control and policy. The USD split will lead to the birth of a domestic USDollar, devalued by 30% at first, then later another 20% or 30%. The price inflation inside the USEconomy will be obscene. The true inflation hedge is the nemesis Gold bullion.

8. Banking System Meltdown & Default of Sovereign Bonds

The big Western banks have been insolvent for five years, actually since Lehman failed. The damage from Mortgage Bond investments was staggering across the world. The altered FASB accounting rules allowed the big US banks to operate as zombies, with doctored gimmicked balance sheet accounting. The cratered sovereign bonds of Southern Europe was the second major blow. The final blow is the combination of USTreasury Bond losses, tied closely with bank derivatives. Many derivatives are FOREX currency swaps, but ironically using Gold as a currency under contract. But the deadly damaging derivative is the Interest Rate Swap. The lost control of the USTBond is a big bank death knell. The best secure asset held in a bank or elsewhere is Gold bullion, seen slowly in new Basel Rules

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