“The important thing which every investor needs to understand here is that the Fear based buying potential of the Gold space today is the sum of all the previous expansions, which is [now] potentially the greatest Bull market in human history attempting to fit into one of the smallest and [potentially] explosive markets in human history…physical Gold is now quite rare, it is under constant buying pressure globally, it has circumstances surrounding it where excessive leverage and duplication of contracts (rehypothecation) can add explosive pressure to the upside, and it sits surrounded by a market which is either completely oblivious to its merits, or has been utterly brainwashed to believe otherwise.
It is actually staggeringly difficult to picture all these aspects at one time; the capacity to buy and the potential force of the buying. This is why I have repeatedly stated that, sequel to a Bull Run on the physical Gold space, a Gold price of $134,000 per ounce, in today’s Dollar terms, is more than just possible, it is highly likely.”
-“TwoShortPlanks”, TwoShortPlanksUnPlugged.blogspot.com.au, May 21 2013
I came across this quote and believe that you should read it several times and break it down into its parts. I wrote something similar for the first time back in 2007 or 08 though not as eloquently or expansively. I wrote back then, “All of the fiat monies, debt and derivatives that have been cumulatively created since going off of the gold standard…will in the end accrue back into the valuation of gold (and silver).”
Let me explain, since going off of the gold standard (whether you choose unofficially 1933 or officially 1971 does not rally matter) “money” has been created out of thin air. Debt and derivatives have also been created in the same manner. NONE of this newly created “capital” had…or has any “backing” to it. To the extent that this capital was created over and above the stocks of above ground bullion…eventually when the system is collapsing will seek its way BACK INTO BULLION.
In layman’s terms, “money” has been over created and it is fake to boot. Once the panic starts, ALL of this “money” will seek refuge in REAL money. The massive “value” of fake money that has been printed and conjured up over time will try to fit itself inside the very finite and relatively miniscule market capitalizations of the gold and silver markets. At today’s prices, this cannot be done. There is simply not enough metal that can be bought to accommodate the buying.
“TwoShortPlanks” wrote “where excessive leverage and duplication of contracts (rehypothecation) can add explosive pressure to the upside, and it sits surrounded by a market which is either completely oblivious to its merits, or has been utterly brainwashed to believe otherwise.” He is talking about “fake” (paper futures contracts, ETF’s and warehouse receipts for non-existent) gold and silver that investors only “think” that they have. This of course is/will be future demand for the real product and in my opinion be the second “major thrust” to the bull market. We are right now witnessing unprecedented current physical demand, call this “thrust #1.”
The next thrust will be from those who believed that they owned metal but in fact do not. This second thrust is being readied right now as firms like ABN AMRO, various major Swiss banks and even exchanges like the HKMEX (Hong Kong Metals) discourage, back pedal, renege and default on the delivery of metal. The third and final thrust will occur when the common man comes to the realization that his fiat holdings will have no future value. THIS is where Niagara Falls will not nor can possibly fit through a garden hose. In other words, to accommodate the global wave of purchases, gold and silver must be priced at MUCH higher. Currently we are watching as the COMEX, LBMA and GLD are being raided along with shortages in India, Asia and Europe. Mints and refineries are also being overwhelmed into 24/7 work.
The amount of “time” between the frantic end days of “thrust #2” and the beginnings of “thrust #3” may possibly (probably) blur and become coincident or become “one in the same.” What I am saying is this, ALL of the makings of an outright buying panic are in place currently. This buying will occur at the same time that sellers (and probably even including miners themselves) decide “I’m not selling” which will add further stress to the supply and demand situation.
All of the above in “street lingo?” The bright guys are buying hard right now and taking delivery. When the “scamsters” are finally found out that they don’t (and probably never did) have the metal, all hell will break loose. Once this happens, everyone including the biggest dummies around will want to get rid of their cash before it won’t spend anymore. All of this will happen at the same time that people who already own gold won’t sell it for any price. …and the $134,000 per ounce part? I’m not buying it, maybe someone will let go of an ounce at this price to extinguish a past debt but there is far more debt, derivatives and cumulative money supply sloshing around than $134,000 for the ounces that will be available for sale…in my opinion.