Many gold and silver bar and coin investors are unaware of the impact that Basel 3 regulations have had on the physical market. There has been a huge divergence in the paper gold and silver spot prices and the prices being paid for physical gold and silver bars and coins by retail investors. The London-based bullion company Auronum reports live physical prices for gold and silver bars and coins which is a useful monitoring tool for when the gold market is under stress due to increased physical buying from investors.
A widening spread of higher physical gold prices against the paper gold spot market is something that has been forecast by market insiders for some time, given how the gold derivative market is considered to dilute gold demand and thus suppress the price of assets such as gold bars, gold sovereigns, and gold Britannia coins.
March 2020’s blow-up in the gold price came close to bankrupting the taxpayer-funded ‘too big to fail’ bullion banks which were all at once turned upon for physical delivery of bullion that they did not have and could not obtain at paper-derived prices. Essentially, this silo world of the CME and LBMA, this ringfenced world, actually had been breached for the first time and global physical buyers turned up on the market makers, calling them for physical delivery of gold and silver bullion bars and coins.
If the western central banks had not stepped in to bail out the too-big-to-fail fractional reserve bullion banks that treated gold and silver bullion like it was cash in the bank, if they had not stepped in to bail them out in March 2020 then contagion within the sector could have caused multiple collapses. Some second-tier bullion banks pulled out of the market, with some second-tier Swiss banks confirming that they are not making markets in this anymore.
This is a daisy chain of taxpayer-insured banks that would have imploded, you just need one to fail, and then the lot fail. The reason why they quickly stepped in was that the gold and silver trade was a foreign exchange currency cross.
This is not just a siloed synthetic undeliverable futures contract which can be squared with an opposite synthetic contract where no physical delivery will ever take place. But it had to be accepted that just like any other currency pair like the US Dollar against the pound sterling where one is long on one side and short on the other, by its very nature, and just like the silver and gold crosses, they cannot default. When you have got physical gold and silver attached to one side of that cross, it separates gold and silver from every other commodity.
The problem lies with the fact that a spot foreign exchange gold or silver contract is physically deliverable against the resulting dollar price. When Nixon closed the gold conversion window in August 1971. The Comex paper markets were created with the sole purpose of creating sufficient synthetic paper gold supply just to enable the cash gold markets to be squared with just enough paper gold to keep the spot market to be ever called for delivery.
On March 2020, this gold convertibility window was smashed open, and whilst it has not been realized yet by the siloed speculative traders, this window is open and is being actively pillaged by competing BRICs central banks, which is precisely the reason why the Central bank of all central banks, the Bank for International Settlements, began to unwind these gold leases, forcing them to buy them back from the agent banks who they laid them on the books for. Until Basel 3 NSFR regulation came into force in January 2022, every single central bank began to position to revalue their physical gold reserves higher from the 50% haircut they were getting to a fully cash exchangeable asset. Revaluing gold will enable central banks to pay off massive swathes of debt. This is the longer-term plan not just from a cash asset perspective but also would allow central banks to be on the long side of this inevitable gold revaluation.
Whilst this central bank buying of physical gold is not being recognized by the spec short sellers that are naked shorting gold and silver against a rising dollar with no view into the real physical gold market; all the house insiders are long against them. Not just in the synthetic markets but for their own books. The March 2020 situation was the single historical event that accelerated the inevitable gold price reset, bringing the gold price revaluation forward. It is no coincidence that we can circle back to the effect that the Basel 3 regulations are having, which will be the impetus for the Comex frogs to jump out of the pot before year-end, leaving the speculators to boil.
The NSFR regulations came into effect in January 2022, with many believing that the Bank for International Settlements would need a full year to exit their gold derivative bets. The Bank for International Settlements commenced 2022 with over 500 tonnes of gold swaps and leases.
This is derivative exposure to gold that is on their books. Footprints have recently revealed their gold desk stealth, fully calling in these decades of accrued paper gold liabilities, all of which have been laid on the balance sheet of their agent LBMA banks, who are privileged to hold gold accounts with the Bank of England. Their October gold swaps report in October confirmed there is just a tiny 7 tonnes yet to be called in. This is nearly 500 tonnes that have been repurchased and called back in.
Market insiders advise that these remaining seven tonnes were almost certainly squared on the 30th of November on that dip into the $1680 range. Thus, this cleared the way for them to accumulate a very strong unencumbered position to bolster their accounts ahead of this inevitable global gold price revaluation.
