Jim Rickards Says “Get Ready For Price Explosion”

Tuesday, August 15, 2017
By Paul Martin

August 15, 2017

Jim fills us in on this stealthy little detail…

By Jim Rickards from the Daily Reckoning

The Coming Gold “Break Out”

Gold has conducted what some are calling a “stealth rally” over the past month.

After bottoming at $1,206 per ounce on July 10, gold is at $1,286 this morning, a healthy 6.5% gain in just over one month.

The has been welcome relief for gold investors after a series of “flash crashes” on June 14, June 26 and July 3 contributed to a gold drawdown from $1,294 per ounce to $1,206 per ounce between June 6 and July 10. At that point it looked as though gold might fall through technical resistance and tumble to the $1,150 per ounce range.

But the new rally restored the upward momentum in gold we have seen since the post-election low on Dec. 15, 2016. Gold seems poised to resume its march to $1,300 after the paper gold bear raids of late June.

The physical fundamentals are stronger than ever for gold. Russia and China continue to be huge buyers. China bans export of its 450 tons per year of physical production.

Gold refiners are working around the clock and cannot meet demand. Gold refiners are also having difficulty finding gold to refine as mining output, official bullion sales and scrap inflows all remain weak.

Private bullion continues to migrate from bank vaults at UBS and Credit Suisse into nonbank vaults at Brinks and Loomis, thus reducing the floating supply available for bank unallocated gold sales.

In other words, the physical supply situation is tight as a drum.

The problem, of course, is unlimited selling in “paper” gold markets such as the Comex gold futures and similar instruments.

One of the flash crashes was precipitated by the instantaneous sale of gold futures contracts equal in underlying amount to 60 tons of physical gold. The largest bullion banks in the world could not source 60 tons of physical gold if they had months to do it.

There’s just not that much gold available. But in the paper gold market, there’s no limit on size, so anything goes.

There’s no sense complaining about this situation. It is what it is, and it won’t be broken up anytime soon. The main source of comfort is knowing that fundamentals always win in the long run even if there are temporary reversals. What you need to do is be patient, stay the course and buy strategically when the drawdowns emerge.

Where do we go from here?

August and September are traditionally strong seasonal periods for gold. This is partly due to proximity to the wedding and gift season in India, when strong buying prevails.

Yet there’s more to the gold demand story this year.

The Rest…HERE

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