Gold – 30 Sep

Gold looks like it is trying to base and reverse and confirmed the swing low on Thursday as a higher high. This neutralizes the chart in the very short term and it remains to be seen whether a higher high can be put in next week and in doing so create a new uptrend. The gap at 1675 has filled and really demonstrates the peril of gaps. I really dislike gaps on a chart. 2 layers of support now exists, one at the swing low of 1585 and the other down at the bottom of the absurd hammer candle that JP Morgan and Blythe masters created, at 1535. This price level is also being supported by the 200 day moving average. Resistance overhead is 1675 and 1705. The COT report shows massive speculative long liquidation which tells us that the weak handed longs have all been shaken from the tree. this is conducive to reversals and I expect the bottom is in.

Think about what has happened from a broad Freegold perspective. Physical gold must flow, we know this from Another, FOA, and FOFOA. Physical gold has been flowing from the West to the East for decades to augment the flow of dollars that have no conceivable limit in supply, and therefore have no limit to the degree that they may be debased. The global financial collapse has forced the Fed to massively increase the supply of dollars around the world as central banks fight to back fill massive debt sinkholes that plague virtually all the Too Big To Fail bank balance sheets. This printing operation is not being offset in any way by the destruction of bad debt from balance sheets. The debt is being marked to model and is being fraudulently shown at a much higher value than the market could or would actually support. The extra cash is being parked as reserves to balance the fraudulent debt. This gives the illusion that the banks are solvent as long as the debt is not marked to market. If the debt is marked to market, what the market would bid, the massive increase in reserves via the Fed paper machine would be woefully insufficient to maintain solvency.

None of this is lost on the East who must take payment in dollars for all goods and services supplied to the West. They understand that a massively fraudulent wave of paper is making itself around the globe and is poised to destroy all currencies, with the dollar dying last in a supernova burst in confidence. When this occurs, gold will be the only money standing. Therefore it is in their best interests to acquire gold with their paper, and to do so in such a way that does not blow up the tiny physical gold market. This is essential because gold operates counter intuitively to other commodities in that the flow decreases with an increase in price. When gold price rises people tend to hoard it and not let it flow to where it is needed. Commodities act differently when price rises. First people tend to use less of the commodity and finally if they can they will substitute some other cheaper commodity in its place. The net effect is to create less demand (less flow).

So the two parties involved with gold, the East and the West, are equally concerned with maintaining sufficient flow of gold. The West understands that its Ponzi paper system requires ever more new gold flow to supplement the ever increasing paper flow, with its inevitable devaluing dollar, to facilitate payment. The East needs gold flow in order for them to go along with the West and pretend that paper holds real value at its grossly inflated state. If the flow of gold is insufficient to the East it must raise the price of its products to make up the difference. This shows up as weakness of the dollar and a loss in confidence in the Fed and its Ponzi machine. That just will not do.

Enter the central banks through direct gold manipulation through swaps and leases where they lease each other gold, multiple times for each ounce, and then inject these fictitious ledger book entry ounces into the market as fresh supply to be sold. Enter bullion banks who who receive this leased gold and then promptly sells knowing they will never be called on to deliver the paper gold back to central banks, for they are the very members of the global central bank cartel and work for the West to East gold flow machine. Price is hammered down hard with selling of paper gold that does not exist. As price falls, confidence in gold is shaken as a risk haven and as a speculative investment. Weak hands that hold paper gold puke up their paper positions and play into the cartels plans to lower the price of gold. Seriously ignorant holders of physical think twice and sell their physical. Potential buyers who were about to turn into gold hoarders themselves back away and are frightened by the spike in volatility. Gold flow that was previously restricted now frees up and begins to flow again. The West sees their dollar and currencies supported and there is a rush to it as the safe haven. The East is happy because there is now physical gold available to plow their paper into. Rinse and repeat.

So what we have here with an insane free fall to 1535 and the 200 day moving average is a necessary and greatly needed intervention to stabilize the the global paper Ponzi scheme known as the US Dollar International Monetary Reserve System. Be glad this pathetically fraudulent exercise is still highly effective and possible. It allows the flow of gold to resume and provides each of us an opportunity to dip into that flow heading East and remove some ounces for ourselves. This fraudulent mechanism isn’t going to be possible forever because gold price simply retreats and is followed immediately by another paper fueled impulse higher where more dollars flow into gold as speculation or as a safe haven. Like stair steps on a staircase, each step is higher than the last. Eventually confidence in paper will be so impaired that it wont be able to lure physical gold out of hiding. The paper futures market will continue to see declines in leverage, finally culminating in a cash market where all leverage is lost and all clearing of trades are in physical gold. In other words, the futures market will disappear. Paper gold supply will be unable to be injected into the market. Price will skyrocket and flow will go to zero.

This is why you should be pleased as a holder of physical or as a potential buyer of physical. You are being handed a gift.

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