Jim Willie: Gold Breakout: Three Major Factors
By: Jim Willie CB / GoldSeek
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.
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THE US-UK BANKSTERS HAVE FINALLY CREATED THE USTREASURY BOND AS THE GLOBAL SUBPRIME BOND. THIS IS THE RESULT OF Q.E. ABUSE.
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.
INTERNAL – QE
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.
EXTERNAL – SGE
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.
If the USD weakens versus the CNY, then the entire sets of foreign holders of USD assets (stocks, bonds, property) move to exit these USD assets. Gold moves in the opposite direction. The weaker USDollar also would indicate price inflation as a standard signal, leading to more Gold demand as hedge. Amidst USD price declines in a broadbased manner, the USD-based financial markets begin to experience a collapse, while panic rises. In turn, the masses are encouraged and directed into the safe haven of Gold. The run on bullion bankrupts the LBMA.
The introduction of the SGE CNY-Gold window in Shanghai has guaranteed the bankruptcy of the LBMA. The ruin and bust of the US-UK Gold market, steeped in corruption, is assured. There is not enough gold at current price to satisfy demand. In fact, the demand can only be met with a higher Gold price which destroys the USDollar as a Global Reserve Asset. The ongoing operation of the SGE CNY-Gold window, compounded by its rising volume, has signaled the end of the USD as a global currency reserve and the death of the LBMA. It also means China can buy all commodities in CNY terms and can run a monetary policy independent of the USFed. China no longer needs to acquire more USTreasurys, or to hold them in reserves. They are spending their USTBonds in great volume in the funding of third party projects, called Indirect Exchange. It has been a major dumping exercise for the last four or five years. After accounting for USTBond swaps, the Chinese rank behind the Japanese in USTreasury holdings.
The Chinese will observe the US-UK bankster tagteam struggle sweat and squirm. As the USFed, with approval by the London banker set, embark upon the QE FOREVER policy, the Chinese will dictate the terms of the Gold market. It is simply a case of when not if the USD and LBMA die a slow death. China can go about its business while observing the process, since it has made all the requisite steps in Shanghai. The Gold Price will enjoy an enormous lift, with the full adoption of trade payment systems led by China, to be executed in Gold terms. The entire Eurasian Trade Zone, integrating the entire Belt & Road Initiative with its $4 to $6 trillion in projects, has no more linkage to the USDollar orbit. In this next episode, the Gold Trade Note will become a standard. It will be first seen in the energy trade payments, then in commodities generally, and finally in consulting service work.
SYSTEMIC – BIS (Basel Rules)
The new Basel rules make physical Gold a Tier-1, riskless asset starting the end of March. The impact will be realized on big bank balance sheets. For years, a ban has been in place on Gold as a reserve asset. No more!! Combined with the substantial accumulation by central banks in gold reserves over the last 12-18 months, the signal is clear. The insolvent central banks have a plan. It is not a new plan, but rather one promoted by Zijlstra and White, two heavyweights at the Bank for International Settlements (BIS) in Basel Switzerland. The Dutch-born Jelle Zijlstra served as the chairman from 1967 to December 1981. William White was the BIS Chief Economist in the last decade. The elite and highly respected chairman wrote books on monetary policy. In Zijlstra’s second book, “Per Slot Van Rekening,” one sees a very candid man, even a contrarian who would win favor from Von Mises at the Austrian School of Economics. Zijlstra gives a very precise description of how central bankers conduct their business and maintain their independence from government interference. Whereas conventional monetary debasement is described in polite terms, Zijlstra explains what central bankers actually do in policy actions. Zijlstra acknowledges that the Gold price is kept far too low. Consider his pronouncements as blasphemy from Basel, in opposition to the US-UK bankster crowd. The Jackass believes Basel will not permit its own failure, in order to follow the Anglo-Americans down the path to ruin. Over a year ago, Basel began to refuse to supply London its endless demands for gold bullion. Instead, the Vatican has satisfied the large demand which keeps the ruinous game going.
In going much further, Zijlstra explains his perceived role of Gold in what he eloquently calls the international Monetary Cosmos. He stated that “Gold functions like the sun, with all currencies as planets orbiting around it, with only the sun in fixed position. It is perhaps nice to get into the role of Gold and its meaning in the time before the monetary cosmos collapsed into more chaotic conditions. Throughout centuries Gold was a protection against [natural] disasters, arbitrariness, and persecution. Because natural production levels hardly allow overproduction with substantial depreciating values as result. Because it does not rust and, once produced, never perishes, excessive scarcity can never occur. That is why Gold developed its image of solidity, stability, and reliability. [In reference to monetary policy during past crises…] A good solution would have been to drastically raise the price of Gold, since it was extraordinarily peculiar that in the post-World War II world, in which everything became more than three to four times more expensive than in the 1930s, the price of Gold remained the same. Actually, two things had to be done. The official Gold price in all currencies had to be raised and, besides this, the official dollar price of Gold had to be raised extra, to allow the dollar to devalue against all other currencies.” The Americans rejected his proposals, finding his ideas like high pitched swearing in a cathedral church. They refused to permit the USDollar to become of second rank to Gold.
Zijlstra and White have written about the Basel Plan for restoring the financial health of the major central banks. They are now hopelessly insolvent, having served as buyers of last resort for sovereign bonds which the market rejected. No buyers were found. As chronic blind bond buyers of junk, the central banks built gigantic toxic paper waste centers. Due to their unending bond purchases, they have accomplished two things. They have rendered their institutions insolvent. They have forced the situation where Gold must bail them out. The major central banks, according to the Basel BIS Plan, must accumulate large volumes of Gold bullion, count it as reserves, build the solid foundation, then permit (push) the Gold price to rise 3-fold, then 5-fold, then 10-fold. In doing so, the Gold price will compensate finally for the fast rise in the USD money supply from the last decade. The result will be the revitalization of the central bank balance sheets, the exit from insolvency, and the restoration of their financial health. In short, if the central banks do not endorse Gold and lead the path to a $5000 Gold price, then later a $10,000 Gold price, then these same central banks will be destroyed and with it the banker cabal power. THE MOVE TO MAKE GOLD A TIER-1 ASSET IS THE FIRST STEP TO EXECUTE THE END GAME PLAN. Then comes large volume accumulation by the entire central bank franchise system. They will sell USTreasury Bonds and buy Gold bullion, but quietly with no fanfare or publicity. Then they will assist in the significant rise in the Gold price. It is written in the Basel BIS manual. It will be done.
BULLISH GOLD CHARTS
The Gold price is showing a strong bullish pattern in the short term, the intermediate term, and the long term. All charts are bullish. Except for certain rigged USTreasurys, the asset Gold was the best performing of all global assets in full year 2018, gaining good attention. The current Gold charts are showing strength in USD terms, but also in EUR terms, in British Pound terms, in Swiss Franc terms, in Japanese Yen terms, and in Canadian Dollar terms. The perfect storm is aligning to produce a wonderful year for Gold, with global recognition that it is the center of the solution for the blossoming global financial crisis. The USTreasury Bond will lose its safe haven status, and Gold will capture it. The Chinese must take the leading role in pushing up the Gold price. The trade war and growing Eastern consensus will enable China to take this role with enthusiasm, gusto, and vigor.
The intermediate Gold chart shows a clear Cup & Handle reversal bullish pattern. It is a highly reliable pattern. The target is $1520, bolstered by the bullish crossover of the Moving Averages. Expect a battle for consolidating gains at this right side of the handle, which could last another month. Refer to the $1320 to $1350 interval. Then comes the breakout to jump past $1400 and sure to attract global attention. The intermediate term is the dominant perspective at this time.
The very short-term Gold chart is a stair-step rise. It is justified by the bullish Moving Average crossover seen in early January. Technical traders lock on such signals, with confirmation of daily MA seen in the weekly MA also. The pennant pause pattern in January resulted in a fall but quickly a powerful rise, as fundamentals coincided with the technical pattern. The bull flag pattern in February resolved easily in the upward direction. It is not clear what comes next. Therefore expect some consolidation, before further upward movement.
The long-term weekly Gold chart offers some very good clarity. The Cup & Handle reversal will provide the lift for overcoming the $1365 resistance, which has several touch points. When it is overcome, the lift will thus be powerful. The longer-term look is dominated by the bullish triangle formed in the last three years. It has a sizeable 250-point potential, which indicates a target of $1600. It is a reliable pattern also. Watch the fundamentals accelerate in the confirmation process, as the King Dollar loses its luster, as its integrity is undermined by unbridled debt, as war with sanctions are the primary defense mechanisms. The USDollar is no longer defended by economic strength, or banking integrity, or industrial vitality, or even political leadership. In fact, no nations pay much attention to what the US Government says anymore, their policies largely ignored. Gold will take center stage in 2019 and 2020.
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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free newly revamped website to find articles from topflight authors at www.Golden-Jackass.com. It now has a hyphen in the URL address. For personal questions about subscriptions, contact him at [email protected].
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Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. The historically unprecedented ongoing collapse has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury Bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
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