The London gold market is facing an unprecedented surge in short-term borrowing costs, driven by a mass movement of gold to the United States.
China is still scrambling for gold:
Not such a barbarous relic now is it?
As for us gold bugs:
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I bet my big brother Jeff (@OrmontUS ) a quarter that the UK will close the gold window if this goes on the way Nixon closed it in 1971.
Wendy
Just to be clear, Gold is not attached to UK currency, Pound Sterling. This is about LME, London Metal Exchange. Many central banks, traders, miners trade here and bulk of the trade is settled cash or the inventory just moves from one name to another, but doesn’t leave LME. For sometime China, India were taking more physical delivery and after Trump’s electoral victory, more gold started moving to US.
About 4 days ago, LME ran out of physical gold!!! The settlement between LME and COMEX (US) is 14 days and between LME and miners and others are 4 to 8 weeks. As long as paper trading was going on, it was not an issue, but now it is an issue.
I have been watching this with interest. The GLD I bought around $190, I sold them around $225, and $GLD kept marching. I was somewhat lucky with $SLV and managed not to sell all of my position and $SLV has declined from $31.8 to $26.4 and started again rallying. Some lucky call trading helped me to reduce my cost basis below $26.
I think $GLD could rally upto $300, because, the large quantity of physical gold move is not because of physical gold demand suddenly going up in US, rather moving the inventory into US, probably some deep pocketed speculator behind that? Also, China has recently introduced gold accounts, i.e, instead of keeping in cash, you can hold your money in bank in gold deposits!!! And this is generating lot of China demands and China is taking more physical delivery and China is moving its gold from UK to Swizz.
Long story short, there are lot of catalyst to push GLD to $300.
I am looking at $295 to $300 Jan 26 spread for $1. This will pay 4x and risk is defined. The reason I am looking at this is, I am worried whether some of this are speculative or long-term trends. Separately, we own lots of physical gold, unhealthy obsession 
.
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It’s just the continuation of the destruction of the West’s paper currency empire. It reminds me of the work of Lenin who saw this coming years ago:
Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.
https://www.economicsnetwork.ac.uk/archive/keynes_persuasion/Inflation.htm
Hemingway put it better:
One day the banks won’t be open for business!
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Fractional reserve banking is a microcosm of the fiat money system. As long as the reserve is large enough that all withdrawals are honored promptly that system works beautifully. Once the word gets around that the bank is overstretched the end comes swiftly.
Bankruptcy builds up slowly, then the bank crashes. Ernest had a way with words! He stayed, incognito, for a few days at my dad’s hotel.
Some years ago countries had a hard time getting delivery of their gold from America. Was Fort Knox doing fractional reserve banking with gold? I suspect so. Paint some lead ingots yellow and no one will ever know.
The Captain
That’s generally not the main problem, as the central banks can always flood the banking system with cash. Trouble is, that at some point, enough people realize that that cash is becoming worthless.
The classic case of this was in Germany in the 1920’s. As soon as people got paid they would rush out and spend the money!
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Worthless cash is the same as no cash.
The Captain
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If it is paper, it is not “worthless”. Cheaper than tp…
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You are right!
The Captain
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