The Golden Catalysts

The comments above & below is an edited and abridged synopsis of an article by Jim Rickards

The physical fundamentals are stronger than ever for gold. Russia and China continue to be huge buyers. China has banned the export of its 450 tons per year of physical production.

Gold refiners are working around the clock and cannot meet demand. They are also having difficulty finding gold to refine as mining output, official bullion sales and scrap inflows all remain weak.

Private bullion continues to migrate from bank vaults at UBS and Credit Suisse into nonbank vaults at Brinks and Loomis, thus reducing the floating supply available for bank unallocated gold sales.

One of this year’s flash crashes was caused by the rapid sale of gold futures contracts equal to 60 tons of physical gold, which the world’s largest bullion banks couldn’t do if they had months to source the gold.

There are compelling reasons why gold should outperform in the future: Geopolitical risks are piling up from Russia, to North Korea, to Saudi Arabia, to the South China Sea and beyond.

A weak dollar is the Fed’s only chance for more inflation. Getting a weak dollar means delaying rate hikes indefinitely. A weak dollar means a higher dollar price for gold.

The stock market is on edge and a substantial market correction may be in the cards. Acute shortages of physical gold have also set the stage for a delivery failure or a short squeeze.

Any one of these developments is enough to send gold soaring. The only force that could take gold lower is deflation, and that is the one thing central banks will never allow.

Get ready for an explosion to the upside in the dollar price of gold. Make sure you have your physical gold and gold mining shares before the breakout begins.