Gold’s “Day” On Its Way
Gold’s “Day” On Its Way
The Final Wake Up Call By Pete B Meyer Friday 4-18-25
No time left
The global monetary manipulators at the Fed, the central banks, the IMF and the World Bank are playing for time. They need time to achieve long-term fiscal reform. They need time to create the global currency SDRs to be accepted by the market.
They also need time to facilitate the purchase of gold. The problem is that there is no time. A run on gold has already begun before everything is in place and everyone has what they need.
The collapse of confidence in the dollar has begun before the SDR is ready to take its place. The insolvency of the Fed and the central banks is just around the corner. The dollar’s momentum is running out and the red light is flashing.
The potential destabilising factor is that the amount of gold subject to paper contracts is over a thousand times the amount of physical gold backing those contracts.
If large numbers of holders demand physical delivery, the paper market will crash. And as other holders realise that they are running out of physical gold and cannot redeem their contract for bullion, the slide will escalate into an avalanche, a de facto bank run on the gold warehouses that support the exchanges and ETFs.
A similar dynamic began in October 2012, when the spot price of gold peaked at around $1,900/ounce. From there, gold fell to $1,200/ounce over the next six months.
Far from scaring off buyers, the gold crash made gold look cheap to millions of individual buyers around the world. They queued up at the banks, which quickly ran out of supply.
Buyers of standard 400 ounce and 1 kilo bars found there were no sellers; they had to wait almost thirty days for new bars to be produced by the refineries that were working around the clock to keep up with gold demand.
Massive conversions took place in the gold FTFs, not because all investors were bearish on gold, but because some wanted to get billions out of storage before running out of gold.
Backwardation
Gold futures went into backwardation, a highly unusual condition in which gold for spot delivery is more expensive than gold for forward delivery; the reverse is usually true because the forward seller has to pay for storage and insurance. This was another sign of acute physical scarcity and high demand for immediate access to physical gold.
When a gold buying panic breaks out, there is no single gold window to close. Instead, a multitude of contractual clauses, in fine print rarely read by gold buyers, would kick in.
Gold futures exchanges have the ability to convert contracts to cash settlement only and close physical delivery channels. Bullion banks can also settle gold futures for cash and deny buyers the ability to convert to allocated gold.
As a result of the force majeure clauses in the contracts, to be used by banks that have sold more gold than they have in stock, investors will receive a cash settlement up to the contract termination date, but no more. Investors would get some cash, but no gold bars, and would miss out on the price spike that was sure to follow.
Physical gold was already in short supply and high demand in early 2014, and there was no price spike as a result of the manipulation.
Looming disaster
Central banks were still able to suppress the price of gold. But the alarm has been sounded. The ability of central banks to suppress the price of gold has been challenged, while a new demand for gold from paper buyers has emerged.
The entire international monetary system is stumbling on a rope of physical demand for gold. As the price of gold oscillates between the forces of physical demand and central bank manipulation, another greater catastrophe is looming: the Federal Reserve is on the brink of insolvency, if not already over the brink.
This is the conclusion of expert Fed critic Frederic S. Mishkin, one of the world’s most eminent monetary economists and mentor to Ben Bernanke and other Fed governors and economists.
As such, the central bank will have little choice and will be forced to buy up government debt and monetise it, ultimately leading to a rise in inflation.
Mishkin points to another collapse in the making, separate from debt monetisation and inflation. When the Fed buys longer-term debt with newly printed money, its balance sheet suffers large mark-to-market losses as interest rates rise.
The Fed does not disclose these losses until it actually sells the bonds as part of an exit strategy, although independent analysts can estimate the size of these losses based on publicly available information.
Debt monetisation leaves central bankers with a bad choice.
If the country slips into deflation, the debt-to-GDP ratio will deteriorate because there is insufficient nominal growth.
If the country slips into inflation, the debt-to-GDP ratio will deteriorate because of higher interest rates on the country’s debt.
If the central bank fights inflation by selling assets, it will incur losses on bond sales and its insolvency will be exposed.
This insolvency could undermine confidence and in itself lead to higher interest rates.
The central bank’s losses will also worsen the debt-to-GDP ratio, as the Fed will no longer be able to transfer its profits to the Treasury, increasing the deficit.
There seems to be no way out of this sovereign debt crisis for the US or any other country; all roads are blocked.
The Fed avoided some pain in 2009 with its monetary stimulus and market manipulation, but the real pain was saved for another day.
That day has now arrived.
The proof is in: a monetary system based on credit rather than bullion isn’t as good an idea as it may have looked in the first place.
A credit system cannot last in the modern world because as the volume of credit increases, the creditworthiness of the issuers decreases. The more they borrow, the less able they are to repay.
The price of gold is rising. The only scenario that could stop it rising would be if the world achieved real economic growth and stability.
Which is not on the cards for the foreseeable future!
And with only 1% of people owning any kind of bullion, there will be plenty of customers for gold and silver.
Any major black swan event could cause gold prices to rise much sooner.
The truth is that another Lehman-type crisis could be just around the corner, while a change of course won’t be in the cards until it’s too late.
In other words, a rally in precious metals could come sooner rather than later.
https://finalwakeupcall.info/en/2025/04/18/golds-day-on-its-way-2/
