‘Yea, though I fly through the valley of the shadow of death, I shall fear no evil, for I am at 80,000 feet and climbing.’ – SR 71 Blackbird Pilot’s Credo
The Lion of Persia
Sometimes reality is a tough S.O.B. Back in July 2015, Iran signed an historic agreement with the P5+1 nations, otherwise known as the five permanent members of the UN Security Council (China, Russia, France, the U.S., and the UK) plus Germany. This agreement, called the Joint Comprehensive Plan of Action (JCPOA), marked two tremendous turning points. First, the deal brought an end to the West’s economic sanctions. Second, it hammered another nail firmly into the coffin of the petrodollar.
The first phase of the JCPOA deal went into effect on January 16th with little fanfare, but woe to those who ignore it! The JCPOA ties diplomatic loose ends into the foundation of the New Silk Road, Eurasian Trade Zone, and what The Guerrilla likes to call “OPEC 2.0,” the nations of Russia, Iran, UAE, Egypt, Venezuela, Libya, and Iraq.
You see, my friends, Iran has been the tip of the spear when it comes to making dollar-alternative transactions. The Iranians have arranged non-dollar currency swaps, they’ve traded gold-for-oil, and they’ve formed close relationships with other nations in the Eurasian dollar-averse bloc. In this sense, Iran’s moves have acted as a beta test model for the East. They have proven that the dollar dominated financial system with its SWIFT financial network can be undermined, by-passed, and ignored.
Now Iran is cooperating with the Russian petro-pincer move The Guerrilla outlined in his article Beware! The Russian Bear Hibernates No Longer, a move that fits nicely with the gold-pincer move being orchestrated by China. Taken together, the two prongs of this pincer will cut the gonads off of the dollar, leaving it a weakened and worthless eunuch.
China’s Pincer: Using Gold to Break the Dollar
The Guerrilla’s last article detailed the weakness of the petrodollar, including its dependency on oil producing nations that are no longer major players in the game. Likewise, the London Bullion Market Association and its gold price fixing operation (separate from the LBMA’s certification activities) is made up of five banks that have no gold.
They are filled to the brim with fraudulent paper, providing an opportunity for the Chinese to undermine them from within. This is an opportunity that the Chinese have not squandered. The full-on transfer of the gold price fix from the West to the East is underway and the disruption to the established order will be massive once the process is completed. Here is how it came about.
First, Chinese banks were allowed to join the London price fix, starting with the Bank of China. They joined the almost 100 year old London fix, founded in September 1919, to learn its inner workings because they planned to launch their own price fix. What they learned is that the London fix is not about setting the price of gold. It is about controlling the flow of gold, the physical kryptonite that will burn the western banksters’ paper empire to the ground!
The Chinese understood that the old system needed to be brought down and so in a relatively brief span of time their involvement in the fix brought an end to Gold Forwarding Rate (GOFO) reporting. This was a move so momentous to The Guerrilla that he leapt onto his desk in simian joy, for it signaled that the criminal paper game was up!
GOFO This, GOFO That
GOFO reporting revealed information that was very important to the REAL price of gold. Picture, if you will, a balance. On one side of the scale is dollar demand for gold. This is called positive GOFO. On the other side is gold demand. This is called negative GOFO.
(insert GOFO chart)
Keeping things really simple, the higher the demand for dollars, the higher into the positive the GOFO rate jumps. Conversely, when the demand for physical gold goes up, the GOFO rate dips sharply negative. These moves measure total market demand for gold in spite of the arbitrary spot price fixed by the London bankers. The GOFO rate thus realistically reflects the premiums paid on gold every given day, week, or month. GOFO is the rate that is used for gold/U.S. dollar swap transactions. Basically, it breaks down like this: if you own gold and you need to borrow dollars, you can use your gold as collateral and pay a much lower rate of interest to borrow the cash. These transactions were then reported in the public GOFO rate.
Under typical (aka bankster Kool-Aid) market conditions, the GOFO rate is always in contango, meaning the price of gold futures contracts is higher than the spot price. In GOFO terms this means the GOFO rate curve is positive and shoots up with the duration of gold/USD swaps. On rare occasions, however, when the quants forget to turn on the price suppression algos, the GOFO rate goes negative, indicating that someone is willing pay a ridiculous amount of interest to borrow gold by using dollars as collateral.
In fact, a negative GOFO rate means that a higher value is being placed by the market on gold in hand vs. dollars in hand. Read that again. A negative GOFO rate means that the market is placing a higher value on gold in hand vs. dollars in hand. Couple this with higher demand for physical delivery than for gold paper contracts and a negative GOFO screams that the physical market for gold has reached a bottom and a strong price move up is coming.
Think about it. The only reason a negative GOFO would occur is if someone desperately needs to get their hands on physical gold. A negative rate out to three months tells us that there are major delivery shortages and bullion banks and large investment funds are willing to pay an asinine interest rate to borrow gold and put up dollars as collateral. It also tells us that gold today is worth more than gold re-delivered out to three months in the papers futures (i.e., the fraudulent, fictional market).
The Guerrilla has been hearing countless reports of big shortages of deliverable gold into Asian markets, specifically Hong Kong and Shanghai, as well as Turkey and Dubai. Evidence is pointing to unusually high premiums to the spot price being paid in those markets. For example, the Emirates NBD – the largest banking group in the Middle East – issued this comment in regard to GOFO back in 2013 when things really began to heat up.
“The physical side of the gold market looks strong, with shortages and rising premiums very much visible. The professional physical trading community in Dubai is looking to secure quicker, more immediate available supplies in order to satisfy the strongly growing order books.
A significant amount of gold in form of large 12.5 kilo bars is being shipped from gold accounts held in Zurich and London, in order to get re-melted and re-casted into Dubai Good Delivery (DGD) 1 kilo bars. However, a lot of flights are already fully booked for valuables and delays are appearing to become more common.
The premium achievable for immediate same day delivery of kilo bars in Dubai has risen from US $2 to US $3.50 per troy ounce.”
The GOFO rate went negative multiple times over last three years it was reported, indicating the desperation of bullion banks and hedge funds that are short COMEX futures and LBMA forwards to secure gold bars for delivery to legitimate buyers in the East.
It means the physical shortage of gold that The Guerrilla and others have been warning about is very real. I have been hearing about this personally, too. My major gold contact in Hong Kong is in one of the most powerful gold trading/allocation/logistics firms on the planet and he has been upfront with me that certain types of bullion are on multi-week and multi-month waiting lists.
But back to the GOFO. Before GOFO reporting was suspended on January 30, 2015, the rate was spiking in favor of gold, exposing the entire paper charade. On top of this, the curves were in such a downward trend that it was only a matter of time before the negative GOFO rate would have broken the paper spot market. So what did the intrepid criminal banksters do? They did the what they did with the M3 money supply, real GDP reporting, real labor statistics, and every other “REAL” metric of reality? They got rid of it.
The truth the GOFO told was becoming too dangerous, a truth exacerbated by the fact that the Bank of China and China’s ICBC (the world’s largest investment bank), which purchased Deutsche Bank’s gold fix seat and the largest gold vault in London, had begun to muscle their way into the gold fix to record the criminal activity AND to crush it from within.
It will come as no surprise to anyone reading Rogue Money that China has been accumulating tons and tons of gold. The Guerrilla and Team RM have carefully explained how China is bluffing when it comes to the total amount they have accumulated. Unofficial counts place that total at between 20,000 and 40,000 metric tons of the yellow metal.
The City of London and Wall Street are absolutely hemorrhaging gold to the East as India, China, and Russia stack it in their vaults via the refining hub of Switzerland. The opening of the Shanghai Gold Exchange (SGE) was the next major shot heard around the world. This monster gold exchange is so massive that is has become the world’s largest gold exchange, dwarfing the COMEX by a magnitude of fifty times!!!
Now watch this well played maneuver and keep in mind that the Chinese have been buying thousands of tons of gold through their banks, central bank, sovereign wealth funds, private vaults, corporations, and institutions. Remember that China has accumulated anywhere from 20,000 to 40,000MT of gold. Remember that they just purchased the largest gold vault in London. Remember back in 2014 when The Guerrilla broke the news that JPM sold its New York HQ, including its private gold vault (the largest in the world), for a paltry $700 million when those assets were valued at more than $5 billion.
Just like the Russians set up shop in petrodollar trading by acquiring offices in NY, London, and Singapore, China has done the same thing with gold. They are getting ready to break the back of the world’s reserve currency!
China’s next step in its gold-pincer movement is to demand that all bullion banks participate in their upcoming gold price fix in April 2016 or lose their purchasing/participation rites in the Chinese gold market, the largest such market on the planet! Do you see the beauty of this well played move that has The City and Wall Street losing all bowel control?!
Here’s Reuters on China’s gold-pincer masterstroke:
“China has warned foreign banks it could curb their operations in the world’s biggest bullion market if they refuse to participate in the planned launch of a yuan-denominated benchmark price for the metal, sources said.
The world’s top producer and consumer of gold has been pushing to be a price-setter for bullion as part of a broader drive to boost its influence on global markets.
Derived from a contract to be traded on the state-run Shanghai Gold Exchange, the Chinese benchmark is set to launch in April, potentially denting the relevance of the current global standard, the U.S. dollar-denominated London price.
In a trial run for the fix in April 2015, some foreign banks participated along with many major Chinese banks. Traders at those banks said earlier that while they were interested in the benchmarking process, their legal and compliance teams may be reluctant.”
If this move isn’t a SWIFT kick in the nuts of the western banktards, I don’t know what is. They are keeled over in pain and as the days grow closer to the April opening of the new Chinese gold fix that pain in the gonads will turn into a testicular cancer that will castrate the most vicious creatures human history has ever known. Will the COMEX break? It might, but there is also a chance that this maneuver will drive out the fraud by forcing the players to engage in just weights and measures. One thing is certain, paper gold will never again dictate the physical price. The hard reality of “Economic Mother Nature” will break back of the U.S. dollar once and for all.
Words of Wisdom
I recently had a nice talk with my intelligence cohort and good friend “W”. He left me with a quote used by SR-71 pilots that he reworded to encourage those of you who read it not to live in fear. I must remind you, dear readers, of something The Guerrilla has repeated many times. The greatest number of millionaires and billionaires ever created made their fortunes during the Great Depression.
Yes, the livelihood of millions was destroyed, but in that process wealth became concentrated; and as W said, it is time to concentrate. The greatest transfer and concentration of wealth is about to take place. Do you want to be one of those who benefits or do you want to eat cat food and hide in the Great American Redoubt scared of your own shadow? It’s time to put our brains to work, to develop skills, and be smart. Together we can do this! I wish you godspeed and leave you with W’s credo.
“The Lord prepares a table before me of bitcoins and Karatbars to give me and mine the ability to obtain sustenance and comfort in the presence of our enemies. Though I walk through the dark and deathly scary valley of dollar collapse I shall fear not for myself and loved ones, for the gold and silver coins in my pockets are real and climbing. Amen.”