From Le Metropole Cafe:
"We have often talked of THE PERFECT STORM when it comes to outside markets fueling the prices of gold and silver. The clouds continue to darken on the horizon and are pitch black at Goldman Sachs and JP Morgan Chase, the key players in The Gold Cartel. For the dollar to be sinking, while US interest rates are making new highs for their moves, means all is not well in US financial market land. Planet GATA has seen this coming for some time. Planet Wall Street has a few shocks coming its way.
Meanwhile, as far as the gold market action is concerned, it could also not be worse for The Gold Cartel. Gold traded today like copper has for some time … going up steadily and VERY QUIETLY. Specs are somewhat hesitant to follow the move up, but there are few sellers. What is occurring is The Gold Cartel, led by GS and JPM, are trying to cover shorts, so there is not much for sale since they were the ones doing much of the selling for so many years. The other usual sellers in years past, the hedgers, have also withdrawn from selling (for the most part), so you have the bad guys trying to cover in somewhat of a vacuum.
This is exactly what MIDAS pounded the table on for a long time. This is what HAD TO HAPPEN at some point and it is occurring as Frank Veneroso predicted at the GATA AFRICAN GOLD SUMMIT in Durban, South Africa on May 10, 2001:
Facts, Evidence and Logical Inference
A Presentation On Gold Supply/Demand, Gold Derivatives and Gold Loans
Frank A. J. Veneroso
This is the key to the gold price at the moment and the main reason for why it is moving up so much. The Gold Cartel, and others, borrowed approximately half of the gold in the vaults of the world’s central banks, sold it into the marketplace to suppress the price, and invested the proceeds in various manners. They leased the gold from the central banks. The gold is technically owed back to those same banks.
The problem is there is a 1,500/2,000 tonne annual supply/demand deficit, which can only be met by MORE central bank selling, or leasing. But instead of selling, the bad guys are trying to cover shorts, adding to their own precarious situation. They are trapped and cannot cover their shorts without driving the price WAY, WAY UP. That is the process, long predicted by the GATA camp, which you see unfolding.
When you actually work with the numbers, what lies ahead is STAGGERING. How does one cover more than 10,000 tonnes of gold when mine supply is less than 2500 tonnes per year, and scrap supply is probably running around 800 tonnes per year, and the deficit is running at least 125 tonnes per month? YOU CANNOT … which is why the price of gold could do anything to the upside at any time.
Now, what the GATA camp does not know is how much of this 10,000 tonnes must be paid back with physical gold versus payments allowed to be made with cash. We also don’t know which central banks will demand they be paid back with physical gold, as they might be petrified to let their citizens know their gold is gone in the coming gold mania environment.
Yet, either way, the shorts have to cover short positions in the derivatives markets because their losses are MOUNTING. Whether they able to account for the leased gold by paying cash, or with physical gold, they want to stop the price bleedingof the short positions on their books, which is considerable and growing. Better to cover between $640 and $800 per ounce, than at $1800, which they might have to do in part anyway.
What we are looking at is unprecedented … a market that has a short position that is 4 to 7 times the annual supply for that market."