James Turk - There’s a Raging Battle in Gold Below $1,800 [c'est flagrant !!]
“We have an interesting battle going on, Eric, there is a lot of pressure to get gold under $1,800 an ounce. Every time we go into the $1,700s, there is extraordinary underpinning of the market because of massive physical demand, just as your London source related to you yesterday.”
“But the real story is playing out in the interest rates. On each push below $1,800, gold’s interest rates go out of whack. What’s happening, in effect, is gold is moving toward backwardation every time it moves below $1,800. I don’t think you can rely on the GOFO rate, the gold forward rate, any longer for an accurate picture of gold’s interest rates.
All of this, of course, relates to yesterday’s Fed announcement, which confirms they are going to keep dollar interest rates exceptionally low through mid 2013. In this present low interest rate environment, it is very easy for gold to slip into backwardation, and clearly central banks don’t want that outcome. Everybody knows that when gold goes into backwardation, it’s game over for national currencies.
Every once in a while you see a moment in the gold market when all of the factors impacting the gold price are screaming, ‘Buy now!’ Each and every time gold breaches the $1,800 level to the downside, we see one of those rare moments. While we may move sideways for a few more days until everybody reads the writing on the wall, I think we should be preparing for much higher prices. So I am sticking to my $2,000 target before the end of October.”
Backwardation (wiki, engl.)
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