By Dominique de Kevelioc de Bailleul
Waiting for the rally in gold to begin? Don’t. Global policymakers plan to institute the vital element of surprise to trap unsuspecting investors into bearing viscous currency devaluations.
As reported by King World News’ Anonymous London Trader, the 515 tons of paper gold dumped onto Chinese buyers of the ‘physical’ within an hour before, and during, Fed Chairman Ben Bernanke’s testimony to Congress illustrates the desperate nature of central banks to dupe the public into complacency and inaction to an epic global financial crisis in progress.
The thinking goes: if the gold price isn’t making a bullish pattern on the charts, then there’s no need to buy it right now.
Veteran money manager John Hathaway of Tocqueville Asset Management proffers in a letter to clients a scenario in which investors could be waiting for a scheduled bus that never will arrive—a financial mistake that could be the biggest of their lives.
Under a scenario whereby policymakers refuse to preempt a global crisis via some form of a Bretton Woods II (to include the emergence of some form of a gold standard as its pillar), “a new round of QE will most likely be triggered by emergency conditions in the financial markets and be seen as both an act of desperation and a tacit admission by policy makers that they really have no answers,” Hathaway stated in his letter. “In such a moment, we would not be surprised by a leap in the gold price approaching several hundred and possibly thousands of dollars an ounce in too short a period for significant capital to enter.” [Emphasis added]
As the crisis takes shape, overnight fascist-like policies will become less surreptitious and more overt during the escalation of bank failures and failed sovereign debt auctions. A tipping point will be reached when investors begin witnessing frequent and wild fluctuations in currencies, bond and equities markets. Emergency actions will be taken akin to the Lehman meltdown but on a much larger scale. By then, everyone will know the bus isn’t coming. No gold will be offered.
Remarkably, institutional money manager, like Hathaway, believe politics of austerity will trump the power of central banks to deal with a crisis that has no solution other than to debase currencies further to ward off repercussions more severe than public reaction to cutbacks on government transfer payments.
And when that critical moment of awareness that the talk of austerity is just that, talk, Hathaway told KWN in a separate interview this week, investors will become alarmed “at the readiness of policy makers to resort to radical, ad hoc measures to buy time” and stated in his letter to clients a day later, “My feeling is the absence of QE is priced into gold here.”
The surreal complacency by institutional and private investors to the imminent dangers of a chaotic event, which could take gold to monstrous heights, as Hathaway suggests, is glaringly apparent when compared with a recent announcement from OANDA fxTrade that trade restrictions will be in force—an omen of things to come globally.
As reported by zerohedge.com:
Due to the extreme volatility some market analysts foresee could result in the coming days, OANDA fxTrade will not accept any trading activity from 6:00 AM EST until approximately 3:00 PM EST, on Sunday, June 17, 2012. OANDA believes the convergence of a major market event during off-market hours represents a potential trading risk and has taken this rare step to protect traders from excessive rate fluctuations.
And while some professional currency traders brace for an ‘event’, zerohedge also reports that the Fed has become blatant in its monetization of 30-year bonds. The big reset may not wait until Jim Roger’s post-election nightmare scenario.
“The Fed has just bought $2 billion in 30 year bonds just two hours before the Treasury sells $13 billion in 30 year paper,” penned Tyler Durden, Thursday. “The ponzi has become so glaring they don’t even care to hide it any longer.”
Few buyers in the 30-year Treasury market could turn into no buyers at any time if the contagion of Europe quickly spreads to the US during a force majeure in the gold market.
“The life expectancy of faith based currencies is, in our opinion, quite short,” stated Hathaway. “Whatever path the loss of faith takes is impossible to know, but the result will undoubtedly, in our opinion, be the permanent re-pricing of gold in terms of defunct paper currencies.”
And the emergency and permanent backstop to a collapse of the global financial system can only come from the repricing of gold, which according to Goldmoney’s James Turk, would come in around $10,000+ per ounce at the time of a rest back to a Bretton Woods II. That scenario, coupled with global currency controls could happen overnight through emergency measures crafted to trap as many dollar-holders as possible. China is aware of this and has pushed its gold accumulation into overdrive as recent Hong Kong gold export statistics to China go hyperbolic.