GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Intro Golden Nuggets
* Precious Metal Perspective for 2014
* Eurasian Energy Developments
* Gold Settles into Its Throne
* Gold Demand Led by Asia
* Gold Price Like a Coiled Spring
* USEconomy on Death Row

 


HAT TRICK LETTER
Issue #117
Jim Willie CB, 
“the Golden Jackass”
18 December 2013

QUOTES ON GOLD

"My long-term [extremely high forecast price] call on gold is based on the emancipation of physical metal from paper gold. The tool of emancipation is the warehouses of the futures exchanges. For if the warehouses of the futures exchanges cannot be counted on to make normal deliveries, then the exchanges will have to make a change in the contract in order to avoid default. They will make that change to avoid default." ~ Jim Sinclair

"The mantle is being passed. JPMorguen has noticed the gold conduit from London to China as being complete. They noticed the London bankers joining with the Chinese Yuan Swap Facility. They noticed the 15% to 20% arbitrage with Shanghai in gold price. They noticed the new Chinese crude oil futures contract priced in Yuan, which should usher in the Petro-Yuan Era. Game over for the King Dollar, as the Petro-Dollar will suffer sunset and cause enormous impact craters in the USEconomy. JPMorguen has ended its death grip on the Gold market, and has joined the new winning team of China & Gold." ~ the Jackass (inspired by Andrew Maguire)

"Joking aside, not even Bernanke, Yellen, or all the paper Gold Exchange Traded Funds in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demand, especially by China, is still in the hundreds of tons each year." ~ Tyler Durden (editor of Zero Hedge, but in reality the China demand is one thousand tons per month)

"One economic myth is that paper money is wealth. The proponents of big government oppose honest money for a very specific reason. Inflation, the creation of new money, is used to finance government programs not generally endorsed by the producing members of society. It is a deceptive tool whereby a TAX is levied without the people as a whole being aware of it. Since the recipients of the newly created money, as well as the politicians, whose only concern is the next election, benefit from this practice, it is in their interest to perpetuate it. For this reason, misconceptions are promulgated about the MERITS of paper money and the DEMERITS of gold. Some of the myths are promoted deliberately, but many times they are a result of convenient rationalizations and ignorance. Paper money managers and proponents of government intervention believe that money itself (especially if created out of thin air) is wealth. A close corollary of this myth, which they also believe, is that money supply growth is required for economic growth. Paper money is not wealth. Wealth comes from production. There is no other way to create it. Capital comes from production in excess of consumption. This excess is either reinvested, saved, or loaned to others to be used to further produce and invest. Duplicating paper money units creates no wealth whatsoever. It distorts the economy and it steals wealth from savers. It acts as capital in the early stages of inflation only because it steals real wealth from those who hold dollars or have loaned them to someone." ~ Ron Paul (who should mention that monetary inflation kills capital and the destroys the engines of wealth)

"Earlier this year, the Vanguard mutual fund company correctly ascertained that traditional measures of analysis, such as corporate earnings, profit margins, and a country's economic growth rate, had become largely useless when it comes to forecasting stock market trends. The problem is that there are many other factors that are influencing stocks. We find that many commonly cited signals have had very weak and erratic correlations with actual subsequent returns, even at long investment horizons. A country's GDP growth is very different from its stock market outlook. We cannot emphasize that enough." ~ Gary Dorsch (the contradiction is testament to Reich Finance, the false metrics of wealth)

"No matter what kind of data we are going to have going forward, brace yourself for volatility. You may want to look for protection. I hold a substantial part of my net worth in Gold because I do not like anything else out there. It is terrifying to be in stocks in my view, and I sleep much better at night with my gold holdings. Real wages have been stagnant for a decade, when the cost of living has gone up. You have revolutions in the Middle East. You have Occupy Wall Street and the Tea Party in the US. That means less political stability and more government intervention. The only good news in all of this is that policymakers are predictable. That provides opportunity such as shorting the Yen or buying some Gold. The risk is something is going to blow up. But the more likely scenario is that we are going to just keep our heads spinning. We will talk again at Gold $3000, and they are still going to say Gold is worthless. We have less stability in the world. It is a global phenomenon." ~ Axel Merk

"My doctor last week informed me about a trip he made to Los Angeles. He makes the trip there every year. With shock written over his face, he revealed how he witnessed at first hand the countless amount of people sleeping out on the streets. Over the years the amount of such unfortunate people have increased, but not as many as this time. He said the [United States as a] country is finished." ~ JohannM (Hat Trick Letter client in Zurich Switzerland)

"Terrible, but unfortunately true. I was in Los Angeles this summer for the Fourth

of July and the amount of homeless people living on the streets is increasing exponentially." ~KerryP (Hat Trick Letter client from San Francisco)

"In the last year, a new conclusion has been arrived at concerning the Amerrkan citizenry, probably true of most of the Western population. People pursue survival and happiness, but also very importantly comfort with some security. It is comfortable to accept delusions and live under false assumptions which provide even a weird sense of security, especially when confronting very ugly systems replete with truly evil elements. Those who attempt to overturn the delusions and disprove the assumptions can easily be dismissed and called crazy fools or alarmists, then ostracized from groups and families." ~ Jackass (true of my own original family)

## INTRO GOLDEN NUGGETS

◄$$$ ANDREW MAGUIRE DISCUSSED THE CHINESE PETRO-YUAN CONTRACT AND ITS IMPACT, WITH EXTENSIVE FOUNDATIONS ALREADY PUT IN PLACE. THE BULLION BANKS HAVE FLIPPED AND CONVERTED TO LONG GOLD POSITIONS, SENSING THE CHINESE MOMENTUM TO CREATE A GOLD-BACKED CURRENCY. A KEY ELEMENT IS THE BRITISH JOINING WITH THE CHINESE YUAN SWAP FACILITY. $$$

The Jackass obtained a December 1st issue of the paid commentary from Andrew Maguire, through a Hat Trick Letter subscriber. In an effort not to violate his business, but instead to share his message, two important segments are presented from the MetalsTrades Commentary. In it, he discusses the imminent launch of a rolling spot gold contract by the Chinese to compete with COMEX/LBMA and the conversion of the big Bullion Banks. The tide has turned, the game is over, which must be played out. Many technical traders and believers in the NY/London gold related propaganda will be caught in a tremendous squeeze. The following two paragraphs are by Maguire, who is the consummate insider. He provides a glaring view of the future paths in both the Global Currency Reset and the Global Paradigm Shift. Some guidelines for the newer readers are given. BRIC = Brazil Russia India China, ECB = European Central Bank, RMB = renminbi (Chinese Yuan), BIS = Bank for Intl Settlements (primary global central bank), FX = foreign exchange currency market, BB = bullion bank, LBMA = London Bullion Market Assn, OTC = over the counter market, GBP = British Pound currency, ETF = exchange traded fund, POG = price of gold. MSM = mainstream news. Bolds and underscores are mine, not his.

Maguire: The uncertainties caused by the prospect of US default very recently triggered China's official news agency talk for a de-Americanised world, urging the creation of a new international reserve currency. These statements followed several other warning shots recently fired at the USFed. It is a mistake to ignore such warnings as they are not hollow threats. China is increasingly in a position to take centre stage, having already established direct trade agreements with the BRIC's, Japan, Germany, Australia, Chile, and the UAE, and have recently moved to implement direct swap deals with the likes of the ECB and UK. The potential size of these aggregated agreements, are sufficient to loosen the US dollar's anchor. This is a big deal, as it enables very large volumes of international trade to be conducted directly in the RMB without having to convert transactions into the US dollar. One of the statements released from the recent policy meetings was the announcement China is moving to price oil futures in RMB. This piece of news alone news is being grossly under-estimated and all of the above agreements undermine the dollar and are extremely Gold positive, as the FED/BIS will have far less influence diluting the prices of gold and silver with FX and derivative sales.

Maguire: What is flying under the radar and completely unreported, is that the Fed and the insider BB's know that the setting up of an internationally accessible gold conduit will assist China in facilitating this accelerated move towards internationalising the RMB/Yuan, and presents an unanticipated leap forward towards becoming a competing global reserve currency. In just a few short years, China has already cornered the global physical bullion market trade; the next step is competing with the LBMA for a large piece of the cash global gold trading market. The primary tool to facilitate such a radical move is the establishment of a major new conduit here in London to facilitate global access to a brand new Chinese international facing fully backed rolling spot OTC contract. It is no coincidence that the GBP/RMB swap deal was recently implemented. Hijacking a large portion of the global gold market trading will complement China's dominance in the physical markets and shake up the current balance within the over 5 $Trillion FX markets. No one is talking about this, but it is the primary reason the BB's are moving net long in the futures markets while trying to consolidate the disingenuous process of dislodging as much ETF bullion out of the weak hands by continually talking the POG down in MSM appearances and client advisories. We are near the end of this process, as the bulk of the remaining ETF holdings are in strong hands. [more] This is the final straw to break the LBMA's hold on the gold and silver markets. Note this is not being talked about anywhere and will blind side technical sellers. On the other hand, the BB's are stealthily building long exposure to gold and silver.

◄$$$ THE EURO CENTRAL BANK MIGHT BE ON THE VERGE OF ANNOUNCING A QE TO INFINITY ALONGSIDE THE LEAD USFED. HINTS ARE DEPARTING GERMAN HAWKS. THE NEXT GERMAN STEPS DOWN FROM THE EUROCB AS JOERG ASMUSSEN LEAVES FOR DEPUTY LABOR MINISTER POST. $$$

A strong hint of a change in the monetary wind comes from a critical resignation.

German Joerg Asmussen will leave the Euro Central Bank's governing council and executive board. He has been a vocal council member, a monetary hawk not in favor of extreme liquidity measures. He has announed the departure for purely private family reasons. At the same time, concurrently, another outspoken German Jens Weidmann will move on to take a job as Deputy Labour Ministry job in the new German Govt assembled by Merkel. Some struggles are underway for the finance minister post. The bigger surprise is that Asmussen replaced Juergen Stark, who once was expected to be Trichet's successor. Stark dramatically quit the EuroCB over an open dispute over the central bank's bond monetization program. It is in German DNA to find monetary inflation disgusting and abhorrent. The keen observers wonder if these departures are the latest indication that the ECB is finally preparing to roll out a very broad and controversial Quantitative Easing program, as BNP bank analysts predicted. Witness the possible latest extreme policy maneuvers to avoid a credit market breakdown in Europe. The Euro currency stands at risk. The USFed cannot be alone in wrecking the financial china shop. The hyper monetary inflation must be globally coordinated so as to avoid localized distortion, in favor of universal distortion. The Bank of England and Bank of Japan will follow like obedient syndicate doves flying to a destructive tune, knocking over items on the china shop with broad wings. See the Zero Hedge articles (CLICK HERE and HERE).

◄$$$ ZERO BANKER PROSECUTIONS HAVE TAKEN PLACE, LINKED TO THE MULTI-$TRILLION BOND FRAUD THAT EXPLODED IN THE LAST HALF OF YEAR 2008. THE STATUTE OF LIMITATIONS HAS REACHED DECEMBER 2006, THE CLOCK SLOWLY RUNNING OUT. SUCH BOND FRAUD IS DIFFICULT TO PROVE, WHILE MANY ENFORCERS ARE NOT WILLING TO PROVE. $$$

Jed Rakoff of Federal District Court of Manhattan has handled many financial fraud cases. He remarked on the disappointing record to bring the Wall Street perpetrators to justice. In doing so, he outlined three problems. 1) It is difficult to prove criminal intent to defraud when the investor is several levels removed from the designer and seller of the securities. 2) It is difficult to prove that a counter-party was deceived and actually relied on the other side, when the party is sophisticated within the market. 3) An institutional shift is underway toward prosecuting companies rather than individuals within the company, which evades personal responsibility. Rakoff disagrees with the Attorney General that prosecuting for profound high volume fraud would endanger the financial system. The Jackass believes it is the first step toward a solution to the stubborn entrenched financial crisis due to insolvency, bad policy, and fraud, aggravated by rampant inflation on the credit side. The second step in a solution is liquidation of the big banks which operate as criminal organizations, where legal penalties are regarded as mere cost of doing business within the Fascist Business Model. See the New York Times article (CLICK HERE).

◄$$$ ECONOMICS AND FINANCE COURSES CANNOT PROPERLY INSTRUCT STUDENTS IN COLLEGES AND UNIVERSITIES ON THE SHORTCOMINGS OF THE SYSTEM. THEY CANNOT OPEN DISCUSS AND REVEAL ITS FLAWS AND BROKEN ELEMENTS. MODERN ECONOMICS HAS BECOME TOXIC IN EFFECTS AND POLITICALLY CHARGED IN POLICY. IT TOUCHES ON REICH FINANCE WITHOUT THE AWARENESS OF THE MADDING CROWD. $$$

The Jackass has mentioned the story about a superb Carnegie Mellon Univ professor friend who teaches financial derivatives. He had no comment when we discussed corruption in banking and the effect on derivatives, or any role derivatives had in managing the corruption in the bond market. He avoided the topic in his course and stuck with the pure unadulterated theory. The larger issue is that professors cannot talk about a number of things in university level courses in Economics, in Finance, and Banking. Sometimes they are not aware of the broken pieces, being poor students themselves. Other times they deny the existence of major brokenness and hope for the best.

The taboo broken topics are many, like rigged financial markets, the insolvent banks, money laundering that keeps banks afloat, QE bond monetization being a killer of capital (not a stimulus), the conversion of bank account depositors into unsecured lenders to the banks without standing, the absence of job creation for graduates, the cockeyed nature of stock valuations (with focus on FaceBook, Google, Amazon, Groupon, LinkedIn, now online dating Zoosk), the lost industrial core (thus USFed QE has no effect or traction), the doctored economic statistics, the paltry benefit from ultra-low interest rates on bank CDs, the purchased corporate debt ratings, the hidden control mechanisms (like USDept Treasury's Exchange Stabilization Fund), the war economy factor to USEconomy (with destructive trickle down multiplier), the vile burden on USGovt debt (from war and bank welfare), the plethora of foreign parts even in US-made products, the stranglehold of both labor unions and environmental controls, the ownership of news networks and financial media by five groups, socialism and its wrecking ball on the USEconomy, the oversized role of the government sector (from bureaucracy), the reverse effect of higher taxation (lower the rate the greater the total tax revenue known as elasticity). Note the long list of broken economic and financial pieces, in an extraordinarily long sentence. Maybe one or two above thorny topics are actually discussed by progressive professors, but surely they are the tiny minority.

In addition, other political factors might also be widely avoided, like ObamaCare for its oppressive business tax, like the end of 99 weeks for federal unemployment checks, like unrestricted illegal immigrants invasion with labor market effect, like the upcoming reset of home equity lines of credit (HELOC) for the next four years, like corruption in the mortgage market from top to bottom. Thanks for contributions by subscriber JimL from Georgia. Tragically, the US Economics training and discipline is geared to Reich Economics & Finance, as extensions to the Fascist Business Model. The academia sector seems unaware of its role in mis-educating the students with bad Keynesian dogma, while avoiding the corruption and corrosive factors. They urgently need to begin teaching Sound Money principles espoused by the Austrian School of Economics (not a university, but rather a competing school of thought). The old Austrians were too competent and uncorruptible. So they were dismissed by the Wall Street clique.

◄$$$ GOLD SMUGGLERS ARE ADOPTING THE METHODS OF DRUG COURIERS AND MULES. THE INDIAN GOVT RULES OBSTRUCT REGULAR COMMERCE. GOLD IS BEING SMUGGLED INTO INDIA IN EXTREME VOLUMES. THE BOASTED REDUCTION IN THE TRADE GAP IS A MYTH. THE IMPORTED GOLD IS BETWEEN 20% AND 40% MORE THAN OFFICIAL DATA INDICATES. $$$

Innovation in old fashioned transport methods is prevalent as couriers work to sidestep the official crackdown on imports of gold, stashing it in imported vehicles, art works, as well as bulk food shipments like coffee and rice. Gold nuggets are even being swallowed to evade border and airport security. Sri Lanka, Thailand, and Singapore are the latest hotspots as authorities crack down on travelers from Dubai, the traditional source of smuggled gold. Curiously, whistleblowers who help bust illegal gold shipments can win a larger reward in India than those who help catch narcotics smugglers. That is how important maintaining the currency regime of money is. Kiran Kumar Karlapu is an official at Mumbai's Air Intelligence Unit. He said, "Gold and narcotics operate as two different syndicates but gold smuggling has become more profitable and fashionable. There has been a several-fold increase in gold smuggling this year after restrictions from the government, which has left narcotics behind." Indians are smuggling in more bullion than ever, using some innovative methods. It is driven by the country's insatiable demand for the precious metal.

The official data shows a decline in gold purchases. However, the data significantly underestimates the real level of gold flows. The Current Account Gap is not being narrowed, while the black market thrives. The World Gold Council estimates that 150 to 200 tons of smuggled gold have entered India in 2013, on top of the 900 tons of official demand. A 20% addition is not small, but the true addition is likely twice that amount. Between April and September alone, customs officials seized nearly double the amount of smuggled gold it nabbed in all of 2012. See the Economic Times of India article (CLICK HERE).

◄$$$ FRANCE HAS RECEIVED A UNITED NATIONS MANDATE FOR INTERVENTION IN THE CENTRAL AFRICAN REPUBLIC. FRANCE IS IN LINE TO PILLAGE THE NATION FOR GOLD, URANIUM, AND COLTAN. WITNESS A REPEAT EPISODE OF THE PLANNED RAPE OF AFRICAN NATION CHAD. $$$

As preface, recall that France decided to invade Chad in order to cleanse it from its terrorists, which appeared all too conveniently and whose stories were blatant fabrications. More accurately, Chad was marked for exploiting its gold output to meet the German repatriation demands from London and Paris. Next in the line of fire is the Central African Republic. It seems the United Nations saw fit to bless the cleansing of undesired elements in the obscure African nation. Perhaps they received an intelligence report on the nation's mineral riches with attendant terrorists in view. The CARepublic nation is the site of ample gold, uranium, and coltan, all of which the Western nations lust for. See the Irish Times article (CLICK HERE).

The Eastern DRCongo is responsible for 90% of all coltan produced in the world. It is a multi-$billion business. However, think of the blood diamond theme. The DRCongo with its nearly 100 million people has an annual Gross Domestic Product of $20 billion, but where 50% of its children never see their tenth birthday. They die in droves from horrendous conditions or are killed in the endless conflict directed by European colonialists. Most people have not heard of coltan, but it is found in cell phones, laptop PCs, pagers, and other electronic devices. It is important to everyday communication in the United States and the industrialized world, but it is making the conflict in Congo more complicated. Columbite-tantalite (coltan for short) is a dull metallic ore found in major quantities in the eastern areas of the Congo. When refined, coltan becomes metallic tantalum, a heat-resistant powder that can hold a high electrical charge. These properties make it a vital element in creating capacitors, the electronic elements that control current flow inside miniature circuit boards. Tantalum capacitors are used in a great many domestic electronic devices. The recent technology boom caused the price of coltan to skyrocket to as much as $400 per kilogram at one point, as companies such as Nokia and Sony struggled to meet demand. Their overlords organize the Congo wars indirectly, a practice done for at least six decades. See the ABC News article (CLICK HERE).

◄$$$ NEW LARGE SCALE DIAMOND DEPOSITS HAVE BEEN DISCOVERED IN ZIMBABWE. THEY ARE NOT ALLUVIAL, SHOWING HIGHER GEMSTONE YIELDS BUT UNDER HIGHER COST TO PROCESS. $$$

The diamond deposits were found in Zimbabwe. The mining firm DTZ-OZ GEO Limited is responsible for locating conglomerate deposits capable of producing 2.5 million carats of top quality diamonds in the province's Chimanimani area. The company, a joint venture established in 1994 with the Devmt Trust of Zimbabwe, has been doing extensive exploration. The diamonds are smaller but of higher quality than in the Marange region. They yield 40 to 50% in gemstone quality. However, the cost of mining the stones is much higher than alluvial diamonds. The economics can be overcome for the venture. The near-term goal is to locate the Kimberlite pipe in the proximity of the diamond field. DTZ-OZ GEO also has an alluvial gold mining operation in Penhalonga with capacity to produce up to 20 kilograms per month, except it was recently shut down over environment issues. The new diamond mine will add to two diamond producers outside Marange, namely Murowa Diamonds and River Ranch. Seven diamond mining companies currently are operational in Marange, extracting mostly alluvial diamonds. Time is running out on alluvial deposits as viable ventures. The miners have failed to obtain maximum value for their produce, due to embargos against the trade of the Chiadzwa diamonds in Europe and the United States, due to allegations of human rights violations. Think blood diamonds. The global diamond watchdog Rapaport has reported that the first tender of rough diamonds from Zimbabwe to be held in Europe following the removal of sanctions would take place at the Antwerp Diamond Tender Facility in mid-December. The tender offers about 300 000 carats from Anjin, DMC, Jinan, Kusena, and Marange Resources. See the Zimbabwe Situation article (CLICK HERE).

◄$$$ MEXICAN MINE OUTPUT IS BEING HIJACKED. THE MINING FIRMS ARE NOT REPORTING THE THEFTS, BUT INSTEAD ALTER THE FINANCIAL STATEMENTS. ALSO, THE MEXICAN DRUG CARTEL IS INVOLVED IN THEIR COUNTRY'S IRON ORE BUSINESS. THE FORCED CONFISCATION OF IRON ORE OUTPUT COINCIDES WITH GROWING EXPORTS TO CHINA. MINE OUTPUT IS BEING LOST DIRECTLY FROM ROBBERIES AND INDIRECTLY FROM ILLICIT WILDCAT OPERATIONS. $$$

The Jackass had a conversation in late November with a colleague who has made first hand visits to the Mexican mine properties. The man has been a trusted colleague for several years. He had many stories to tell, but this one stuck out. Many Mexican mine output trucks are being hijacked by the Mexican drug cartels. The regular output from mine activity, shipped via routine truck transports are being stolen. It involves mostly silver bar production, but also some gold bar production. The mining firms also refuse to hire Brinks trucks or other high security vehicles, since easily identified as targets for highway thefts. Those are all being taken with hijacks of a more violent nature, the drivers left for dead. He said the Mexican mines are coming up very low on reported output, which has aroused suspicion. The mining firms are not reporting the stolen truck transport of their valuable cargo, the result of projects loaded with devoted capital, extensive worker labor, advanced metallurgy methods, and passage of time.

The mine production in financial statements contains lies and deceptions as deep as the mine shafts as a result. They simply report lower mine output. He did not know the percentage of output from Mexico being stolen. One can only guess it is not a mere 5%, a figure he tossed out. He claims the mining firms are in a panic. He also mentioned that a few Canadian mining executives have been kidnapped. The information is spotty, unclear about details on ransom demands or bodily harm. The entire story is frightening, but indicates a strong motive not to invest in Mexican mining firms. Witness one more reason not to favor mining stocks, in addition to government nationalization, labor strikes, stalls over environmental violations, court battles over title, heavy dilution of stock shares, fast rising costs, and suppressed metal prices.

Mexican drug cartels have expanded their business reach. Long ago they diversified their business into PEMEX oil theft, pirated goods, extortion, and kidnapping. In November, Mexican Govt officials confirmed the cartels have entered the country's lucrative mining industry, exporting iron ore to Chinese mills. The involvement began in 2010. When the Mexican Military took control of the nation's second largest port at Lazaro Cardenas, the move was aimed at cutting off the cartel export trade, as in the point of final sale. The state of Michoacan is in focus. State detectives have been killed and wounded in ambushes during investigations. National publicity has finally come. The Jackass forecasted in summer 2007 that Mexico would become a failed state. The evidence is mounting to confirm the forecast. The Knights Templar cartel and its predecessor, the La Familia drug gang, have been stealing or extorting shipments of iron ore, or illegally extracting the mineral themselves and selling product through Pacific coast ports. The protection racket is also ripe in the region. So deeply entrenched was the cartel connection to mines, mills, ports, export firms, and land holders that it required authorities three years to confront the phenomenon directly. Federal officials decided to crack down on other ports where drug gangs are operating. The ports served as the vulnerable choke point.

Guillermo Valdes Castellanos is the former head of the country's top domestic intelligence agency. His comment attests to a failed state. He said "This is the terrible thing about the cartel taking control of and reconfiguring the state. They managed to impose a Mafia-style control of organized crime. The different social groups like port authorities, transnational companies, and local landowners, had to get in line." Valdez Castellanos confirmed that even back in 2010, the La Familia cartel would take ore from areas under concession to private mining companies, sometimes with the aid or complicity of local farmers and land owners, then sell the ore to processors, distributors, and foreign firms. The government response was to tighten rules on exporters in 2011 and 2012, whereby they were compelled to prove receipt of ore from established recognized sources. The export applications from 13 companies were denied, unable to meet the new rules. The problem went beyond Michoacan or the Knights Templar cartel, extending to the states of Jalisco and Colima. The illegal activity has been encouraged by the great demand for iron by countries such as China. Many trading companies began to build up big stockpiles of legally and illegally obtained iron ore, later shipped for export. Government data shows the amount of iron ore exported to China quadrupled between 2008 and the first half of 2013, rising to 4.6 million tons per year, precisely during the period the La Familia cartel and later the Knights Templar cemented their control over Michoacan.

The seizures of ore are obtained from threats, extortion, direct robberies, and other means. The output turns up in a legal location, a form of laundering. The cartels have also done shakedowns of mining villages like Aquila in Michoaca since 2012. The Knights Templar cartel has demanded that residents hand over part of the royalty payments from a local iron ore mine operated by Ternium, a consortium based in Luxembourg. Alcala revolted and kicked out the cartel, which had also been using hired workers to extract the ore without permit, in secret illegal extractions. Ternium acknowledged the irregular mining near its operations in Aquila. Thus mining firms are losing output directly from robberies and indirectly from illicit wildcat operations. See the StLouis Post Dispatch article (CLICK HERE) and the Mining.com article (CLICK HERE).

 ◄$$$ THE GERMAN WATCHDOG HAS STARTED A PROBE INTO GOLD PRICE FIXING. THE FOCUS HAS BEGUN WITH DEUTSCHE BANK, BUT WILL POSSIBLY EXTEND TO OTHER BANKS IN EUROPE AND THE UNITED STATES. THE VOICE CLAIMS NO DEALS WILL BE STRUCK, NO IMMUNITY GRANTED, NO HOLDS BARRED. A STRONG HEAD-ON LEGAL INITIATIVE HAS BEEN EMBARKED UPON. $$$

Germany's financial watchdog BaFin has started a probe into suspected manipulation of benchmark Gold & Silver prices by banks. The story was reported in the Money War Report. The Voice made a comment on details behind the high level report. He recently repeated his stern warning that BaFin is a very strong reliable body which aids the prosecuting efforts. He wrote, "BaFin is totally independent and reports to the minister of finance in Berlin. BaFin is slow but very thorough once they put their teeth into something. They would never have had that announcement published if they would not have a rock solid case against all the banks. The USGovt tried to quell the investigation but after the NSA spying on the chancellor's phone and the arrogant attitude in dealing with this matter, the US and the UK can rest assured that there will be zero tolerance and no mercy shown. BaFin's head is a no nonsense woman, known not having time for banker pressures. She eliminated the guys the Indian D-Bank Jain CEO tried to bring into top key positions at DB, dismissing them quickly. She just shot them down, one after the other. The proposed risk manager she just put into a meat grinder, now withdrawn. We shall see how this will unfold. No immunity, no deals, as these guys inside the Gold trading offices will go down hard. The decision has already been made. BaFin can pursue pretty much any bank in the European Union and the United States. There is a mechanism for following it in a legal effective course."

## PRECIOUS METAL PERSPECTIVE FOR 2014

◄$$$ FOUR POSITIVES FOR GOLD ARE IDENTIFIED BY ERIC SPROTT. THEY ARE VALID SIGNS WHICH POINT TO SYSTEMIC CHANGE IN CAPITAL FORMATION FOR MINING AND ASSOCIATION WITH INVESTMENT BANKING ENTITIES. $$$

Eric Sprott is an industry icon in the gold world. Several months ago, the Jackass expected two important developments, that valid gold-based investment funds would enter the banking business through extensions to legitimate financial firms, and China would court the North American miners for gold supply. It appears to have begun, demonstrated on the Sprott front. However, the move to traditional commercial banking is nowhere in sight yet. Sprott identified several promising encouraging signals. It appears that Asians might seek a strong supply line to their own central banks for reserves accumulation in both Gold & Silver. The Big Money has been circling the sector for a long time, finally touching down in a real way. See the King World News interview (CLICK HERE). The following are extremely positive signals for gold and its heightened demand.

1)      The Sprott mutual funds are seeing net investor inflows, as opposed to redemptions, for the first time in a long time. The trend has reversed from outflows since 2010, now turned positive.

2)      Sprott recently signed and funded a joint venture with the incredibly large Chinese state-owned mining company. The outbound investment by the Chinese Govt has strong emphasis into the junior mining sector. The Sprott managers are in charge of the liaison role.

3)      Sprott is on the verge of making an announcement for a similar joint venture with another recognized Asian investor name by the end of 2013. The Asian strategic investors have returned to the junior mining sector in earnest.

4)      The Sprott institutional lending fund, which aims to raise $350 million for their lending business, is very close to securing an extremely strong cornerstone input from a name-brand North American institution.

◄$$$ PENTO HAS MADE SOME FORECASTS FOR 2014. HE EXPECTS THE USFED TO CONTINUE QE TO INFINITY, USTBOND YIELDS TO STAY ARTIFICIALLY LOW, AS THE CENTRAL BANK INCREASES ITS BALANCE SHEET FURTHER. THE RESULT WILL EVENTUALLY LEAD TO A GIANT MOVE UP IN THE GOLD PRICE IN YEAR 2014. HE FORESEES NEW HIGHS LIKE OVER $2000 PER OUNCE. THE USFED WILL NOT TAPER ITS BOND MONETIZATION, SINCE LONG-TERM BOND YIELDS WOULD MOVE TO 5% AND WRECK ALL. $$$

Michael Pento is  president and founder of Pento Portfolio Strategies. He is also author of the book entitled "The Coming Bond Market Collapse" about how to survive the coming credit market collapse. The following is a quote from Pento. See the King World News interview (CLICK HERE).

"The reality is that the economy is being artificially maintained and manipulated by our central bank and government. Right now it is an overwhelming consensus on Wall Street that in 2014 the Fed will taper, the economy will grow, and interest rates will rise gradually. They also believe that gold will continue getting crushed as rates rise. That overwhelming consensus is wrong and it will not happen because it is an extremely overcrowded trade. The money to be made is to bet against that overwhelming consensus. Either the Fed will end QE and the economy will fall apart and take down real estate and stocks, or there is no tapering and the gold market will have a major reversal. The inflationary increase in the money supply, which is based on the Fed's balance sheet, has increased from $2.3 trillion to $3.9 trillion today. That is a remarkable 70% increase. So if bond yields are all about the credit and inflation risks associated with owning that debt, then the 4% 10-year Note will be the absolute bottom because the 4% 10-year Note existed before we increased our nation's debt by 46%, and the Fed's balance sheet by 70%.

But the reality is that the interest rate is not going to be 4%, instead it is going to be much closer to 5%. A move on the 10-year Note from 2.75% today to 5%, in rather quick fashion, is not small and it is not gradual. It is going to happen next year if the Fed tapers, and that will crater the entire phony US economy. This is why there is not going to be any significant tapering in 2014. This is also why Gold will begin a dramatic move the upside starting next year as it marches to new all-time highs. This is how betting against that overcrowded trade will show big profits for investors."

◄$$$ VON GREYERZ CITES CHINESE DEBT GROWTH AND GLOBAL DEBT LEVELS AS PRINCIPAL FACTORS BEHIND THE UPCOMING MASSIVE RISE IN THE GOLD PRICE NEXT YEAR. CHINA LEADS THE WORLD IN CORPORATE DEBT LEVELS. LOOK FOR THE MAJOR CURRENCIES TO FAIL AND PUSH THE GOLD PRICE UPWARD IN A DRAMATIC MANNER. $$$

Egon von Greyerz is a fund manager at the Matterhorn in Switzerland, and a Hat Trick Letter subscriber. He lays out many positive factors. He anticipates failing major currencies to be an important story in the new year. He expects to see the paper Gold price continue to plummet, bound by corrupted futures contracts where the bank inventory is fast moving toward zero. He foresees the physical Gold price rising dramatically as a result of the split between paper and metal, the physical market no longer marching to the COMEX dictated price. He describes an arms race but in monetary growth between China and the United States, the destructive effect similar. The following is a quote from von Greyerz. See the King World News interview (CLICK HERE).

"A world built on debt and printed money can never survive in its present form. It is only a question of when things will change. We have discussed many times the problems in the West and in countries like Japan, but there is less understanding of what is happening in China, partly because we do not easily get access to their data. But what is now becoming clear is that China is in a very similar credit bubble to the rest of the world. Chinese banking assets have, since the end of 2008, grown by 166% to (a staggering) $24 trillion. This is an increase of $15 trillion in five years. That is absolutely astonishing, and shows that China has also created an unsustainable credit bubble that is likely to end in tears. During the five years that China grew its banking assets by $15 trillion, the US grew theirs by only $2 trillion. The Chinese banking system is now 2.5 times GDP. In addition, China has this massive shadow banking system and nobody knows the exact size of it. Also, corporate debt in China is the highest in the world, at 150% of GDP. So the Chinese situation is very dangerous for the world, and it is a situation that most observers have not focused on.

The falling currencies in 2014 will be directly reflected in the price of Gold. The 2-year correction in gold is likely to be over, and the bear market in currencies will be reflected in a major bull market in Gold. The problem we have seen with the gold price this year is that the gold paper market, which is up to 100 times greater (in size) than the physical market, has driven down the price of physical gold. But 2014 could be the first year where we see the paper gold market go towards its intrinsic value, which of course is zero. The physical market will become the only real gold market. That will have a massive effect on the gold price which we will see beginning in 2014." The element not discussed is where the true Price of Gold will be posted and published. The Jackass expects it will be displayed in the form of an average spot physical price, extracted from several key locations in the world, much like a LIBOR price but without the collusion and bank participation. In other words, not like the LIBOR at all!

## EURASIAN ENERGY DEVELOPMENTS

◄$$$ UKRAINE SITS ON PRECARIOUS FENCE, A FOCAL POINT FOR THE CAPTURE OF EUROPE. THEY CUT A DEAL FOR GAS IMPORTS THROUGH POLAND AND HUNGARY. THEY PLACATE PUTIN IN RUSSIA BY NOT JOINING NATO AND BY PERMITTING THE RUSSIAN NAVY FULL ACCESS. WITHOUT REALIZING IT OR WANTING IT, THE NATION WILL REVOLVE WITHIN THE RUSSIAN ORBIT POWERED BY NATURAL GAS. RUSSIA REQUIRES THE VAST PIPELINES OF UKRAINE TO SUPPLY THE EUROPEAN MARKET. PUTIN WILL NOT BE DENIED THE VITAL PIECES TO BUILDING THE EURASIAN TRADE ZONE. $$$

In forging two energy deals, Ukraine has not been lost to Russia in a visible sense. Its President Yanukovych completed major deals with Russia and Slovakia, within a complex energy network system. Rather, the Kiev regime is attempting to sit on the fence, where the balance of power is shifting East and will surely win the European prize for Russia. Ukraine will continue to flirt with both East and West, attempting to maintain a semblance of energy independence. Putin might permit the perceptions while enjoying the reality. At end October, giant Gazprom claimed Ukraine owed $882 million, with pre-payment of all gas supplies required if the debt not paid. On November 9th, Ukraine completely stopped all gas imports from Russia and instead has received all its gas from Europe. Putin is angry and wants guarantees that Russian gas can pass through critical Ukrainian pipelines to reach the European market. Tremendous pressure continues to be applied by Russian President Putin, to ensure that Ukraine does not enter into a full association with Europe. The nation is caught in a squeeze and will remain in the pressure spot. The smart observers concluded uniformly and without reservation that the European Union lost on all counts of importance.

The process of turning East begins by the nation to join the Russian Customs Union. Other concessions were made, like suspension of the Ukraine entry into NATO membership, and the extended duration of the Russian Black Sea fleet access until year 2042. At the same time, Ukraine agreed on the conditions for a gas deal with Slovakia for importing European Union gas through the Slovak pipelines. The key is that Ukraine has given itself a second source besides Russia on the natural gas supply. These new flows, including gas from Poland and Hungary, could exceed 10 billion cubic meters annually, enough to meet Ukraine's entire import needs for the domestic economy. The Kiev regime is playing a very delicate game, and must not anger Putin beyond an unclear threshold level. The Kiev officials ponder the adoption of European standards, but must conform to Russia dictates. One is reminded of the Russian proverb about "a smart calf sucking milk from two cows." The important point is that Ukraine might be granted the right to tap Eastern European gas supplies, provided that Gazprom keeps the Ukraine pipeline control to Europe. See the Zero Hedge article (CLICK HERE) and the RIA Novosti articles (CLICK HERE and HERE). The second RIA article pertains directly to the Post-Soviet Customs Union.

◄$$$ CHINA, JAPAN, AND SOUTH KOREA CONTINUE FREE TRADE AGREEMENT TALKS. MANY ITEMS MUST REACH ACCORD. EXPECT A UNIFIED ASIA TO BE THE MOST CRITICAL PORTION OF THE EURASIAN TRADE ZONE. ONCE COMPLETED ON DETAILS, CHINA WILL DRAW IN GERMANY AND THE REST OF EUROPE. $$$

China, South Korea, and Japan have formally begun the third in a series of Free Trade Agreement talks. In 2012, the combined Gross Domestic Product of the three nations reached $14.3 trillion, accounting for 20% of the world total and 70% of Asia's total. They are heavily active in the import & export trade. Nothing will stop the development of the Asian portion of the grand plan in the Eurasian Trade Zone. It will begin with a pan-Asian agreement with possibly a regional currency. Look for the Chinese Yuan to serve the role out of expedience, even momentum from the Yuan Swap Facility. Later on the Europeans will be pulled in, using the powerful Chinese influence, an easy decision when the US & UK & Western Europe will appear in ruins. See the China Daily article (CLICK HERE). Furthermore, South Korea and China are forging closer economic ties. Strangely, it is motivated in part by their shared animosity toward Japan, whose actions over two centuries have been hostile in violent exploit. The USGovt is angry at the unity shown by Asia, the scrutiny shown as clear, but not much the United States can do about it except to wage military war and other violent acts like the Fukushima nuclear events (not a natural event). The dispute over the islands is truly laughable, conjured in Langley offices. See the Bloomberg article (CLICK HERE).

◄$$$ EASTERN ASIA IS BUSY FORGING IMPORTANT OIL DEALS. THE NEIGHBORS TURKEY AND IRAQI KURDS SEALED A SECRET OIL DEAL LIKELY TO ANGER IRAQ AND ITS CONTROLLERS BY THE POTOMAC RIVER. ALSO, ON THE OTHER SIDE OF THE IRAN TALKS, SOME OBSTACLES REMOVED, THE IRAN OIL MINISTER HAS CONDUCTED TALKS WITH WESTERN ENERGY FIRMS. WATCH THE DELIVERY PRESSURE POINTS FOR CONFLICT, SINCE VITAL TO THE EURASIAN TRADE ZONE. $$$

Oil & gas from Iraqi Kurdistan will soon be exported via pipelines through Turkey, after a slew of contracts were signed in secret in late November. The pact was completed between Nechirvan Barzani (prime minister of Kurdistan Regional Govt) and Recep Tayyip Erdogan (Turkish prime minister). The agreement is certain to anger officials in Baghdad and WashingtonDC. That the Turkish leader was a signatory is an extreme slap in the USGovt face, and a kick in the NATO groin. The Iraqi central command still claims dominion over all of Iraqi oil resources. The conflict is tribal, between Sunni Arabs and Kurds with Turkish heritage. The energy deal is regarded as an encroachment on the sovereignty of Iraq. The state-backed Turkish Energy Co (TEC), which Turkey set up to operate defiantly in Northern Iraq, has also signed a contract to operate in 13 exploration areas. See the Al Jazeera article (CLICK HERE).

Iran has begun formal talks with potential investors in its energy industry, according to oil minister Bijan Zanganeh. In the aftermath of the Iran Talks, the irony is that the Western oil firms lust to re-enter Iran to do business. They will be shut out totally. Iran remains a major crude oil export nation, possibly with a brighter energy future than Saudi Arabia. Iran is the location of the richest largest oil & gas reserves. The powerful US energy firms have been barred by the USGovt from entry in Iran for nearly two decades. With sanctions on the way out, Iran will almost certainly turn to Europe, and hope they possess the best technology. The many European giant energy firms will embark soon on multi-$billion investments and tap the Iranian reserves, with zero US energy firm involvement. Watch Iran first settle trade in gold terms, and then sock away trade surpluses in gold bullion, for a combination boxer assault to the US face. Expect Iran to become a key element in the extended BRICS and a primary energy provider to the quickly forming Eurasian Trade Zone. Watch the pressure point of the Suez Canal for Iranian oil delivery to the European market, and watch the other pressure point of the Shiite Gas Pipeline to the Syrian port, also for delivery to the European market. See the Reuters article (CLICK HERE). The conflict in Syria was all about energy pipelines, not chemical weapons, not dictator abuse.

## GOLD SETTLES INTO ITS THRONE

◄$$$ INDIA WILL REVERSE GOLD RESTRICTIONS BY THE POLITICAL REGIME, WHICH INFLUENCES THE CENTAL BANK GOLD POLICY. THE RESPONSE REACTION HAS BEEN POWERFUL. SMUGGLING IS ON THE RISE, WHICH CANNOT BE TAXED. THE RULING PARTY WILL BE SHOWN THE DOOR IN THE NEXT ELECTIONS IN MAY. THEIR PUPPET STRINGS TIED TO THE GOLDMAN SACHS HOUSE WILL BE SEVERED. $$$

The broad-based policy against gold ownership by the Indian Govt and the Reserve Bank of India (central bank) has not resulted in much success. Smuggling and evasion have accelerated. The next important Indian elections take place in May 2014. Word is attaining a consensus that most gold restrictions will be reversed by the incoming BJP (Bharatiya Janata) party, with certain nonsense to be spouted about a success in policy to date. The ruling INC party and its Harvard minions tied to Goldman Sachs offices, who put restrictions on imports, are going to be washed away like a summer monsoon. Anger nationally is very high. They committed a cardinal sin, enraging the religious sects by pursuing temple gold. They will be swept away. The Indian population, especially the wealthy and elite, are very intelligent and determined. They invest in gold, and have done so for a thousand years. As gold owners, they win when the currency is debased. The economists pump out progaganda, but gold has outsmarted the economists. The RBI working group study finds that gold has outperformed stocks and bank deposits in the last five years, more than three times over, and six times over bank deposits and 10-year government bonds. Only gold, more than any other asset, has consistently beaten price inflation. The same is true of US assets like stocks, bonds, housing, and bank CDs. Gold is the ultimate hedge against both unfettered inflation and bank corruption. In fact, for India, no collateral, stocks, or property are as liquid as robustly strong as Gold bars and talens and biscuits and jewelry. They differ distinctly from the United States in this respect.

The economic establishment rails against Gold in defiance but also in futility. It does not obey their disruptive policies based in obstruction. Gold defies government policies because the Indian people love gold, and even revere it. The official policies are founded on the faulty economic theories of the West, which treat gold like any other commodity for trade and profit. The West attempts to conceal its implicit adversarial role to unsound fiat paper money, but Indians comprehend the ploy. The theories that project gold as India's villain might work in the West, but not in India. The Asians generally are leaps and bounds smarter than Westerners when it comes to concept of wealth. The West, in particular the US and UK, is committed to paper wealth built on contract securities without tangible basis.

Gold has emerged as the winner in economics, successfully hedging inflation and currency debasement. India struggles with policy that ensures financial security for the nation and its individual citizens. They strive for a practical and workable policy for gold, including the vast gold import trade. The Jackass view has steadily been that Indian entrepreneurs must seek domestic gold mine output, in order to avoid the risks that have arisen on the trade deficits with direct effect on the Indian Rupee currency decline. As the natives invest in gold to protect themselves from price inflation and political waste to buy votes, they have consequently pulled down the Rupee exchange rate. The result has been more price inflation, and more reason to invest in gold as a hedge. Gold purchases do not weaken India. They defend against the Western financial implosion. But India needs domestic gold production urgently. India accounts for one quarter of the global gold retail market, yet it produces almost nothing in crude gold supply. Imports supply the demand, a serious flaw. EuroRaj does not agree on this point, calling a vast mine enterprise unpractical. It might be difficult, and it might be full of obstacles, it might require a decade to bear gold output, but it is urgently required in my view. A nation cannot import its financial security, plain and simple. It must grow it or build it. Perhaps the Himalayan foothills are declared sacred and off limits, like cows to the food supply. The citizens starve of native gold, like they often starve from lack of food. See the BJP Kanataka article (CLICK HERE).

◄$$$ THE INDIAN GOVT HAS BEGUN TO LAY THE GROUNDWORK FOR JUSTIFYING MASSIVE GOLD IMPORTS WITHOUT OFFICIAL RESTRICTIONS. THE CLAIM HAS BEEN MADE BY THEIR EXPERTS THAT THE NATION CAN AFFORD GOLD IMPORT OF $30 BILLION PER YEAR, HALF THE CURRENT IMPORT VOLUME. THE NATION INSTEAD NEEDS A DOMESTIC GOLD SOURCE. THE CURRENT GOLD IMPORT VOLUME IS ALMOST TWICE THE DESIRED LEVEL. THE STRESS ON THE INDIAN RUPEE WILL CONTINUE, WHEN THE WESTERN BANKER LINKS WILL BE DISMANTLED. $$$

The Indian Economic Advisory Council chief Rangarajan declared that India can tolerate US$30 billion worth of gold imports per year, in a surprising turnaround in official policy. A major factor behind the high Current Account Deficit (CAD) in the last fiscal year was high gold imports. The rationalized statement was laughable, but part of the move away from the Western banker devices and strategy. Rangarajan said, "As inflation comes down and as financial assets become more attractive, perhaps this part of demand for gold can come down and we can probably tolerate USD 30 billion worth of import of gold." The comment was delivered at the Delhi Economic Conclave, an important forum. The nonsense did not evoke laughter, but rather relief, whatever the justification. The audience surely reacted to the implied policy shift, rather than to the bland statement itself.

Earlier at the conclave in a keynote speech, Finance Minister Chidambaram said India cannot finance a CAD as it did in 2012-13. He also said India cannot afford to pay for US$50 billion in gold import without serious damage and nasty consequences. The CAD touched a record high of US$88.2 billion in 2012-13, as a result of extremely high gold imports (845 tonnes) and high crude oil import costs. So India imports huge amounts of black gold and yellow gold. The disruptively high Current Account Deficit led to the sharp decline of the Rupee exchange rate which plunged to an all-time low of 68.85 per USD by end August. The Indian Govt and the Reserve Bank of India took numeous steps to curb gold imports. The measures showed results in the data of a decline of in-bound shipments, but the smuggling volume has risen significantly. By latest data, the Gold & Silver imports declined 80.55% to US$1.05 billion in November year over year. The imports reached a high mark of US$5.4 billion in November 2012. The panel discussion at the conclave might discuss the necessity of restrictions, even the apparent success, but behind the walls is a massive smuggling trade that is understood in private. See the Money Control articles (CLICK HERE and HERE).

◄$$$ TURKEY PREPARES TO EXPORT SIGNIFICANTLY MORE GOLD TO IRAN IN THE NEXT YEAR. AS THE IRAN SANCTIONS EASE, THE EXPORT WILL GROW SHARPLY, INCLUDING FOR JEWELRY (FORMERLY BANNED). $$$

Turkish gold exports to Iran should rise dramatically as Western sanctions against Iran are eased and later removed. Expect a huge increase in gold exports to Iran. More importantly, Turkey will be permitted to export jewelry to Iran, which has been banned by Iran. A big positive effect will come to the Turkish business sector. The Jewelry Exporters Assn is excited at the prospects for next year. The Iran Talks accord will open the doors to commerce. Most sanctions ordered by the USGovt and European Union will be suspended, on a temporary basis for an initial six month period. Turkey exported $6.4 billion worth of gold to Iran in the first nine months of year 2012. However, it closed the year 2012 at only $6.5 billion in gold exports due to the latest sanctions, in a very poor finish. The data is according to the Turkish Statistics Agency (TUIK). Turkey exported a mere $1.6 billion in gold to Iran in the first nine months of this year in 2013. Expect a return to an annual pace of about $8.5 billion in gold exports to Iran. The three nations of Iran, Turkey, and India are of the utmost importance to the physical gold market. They are totally off the US radar, which is focused in mind-numbing manner on the corrupted COMEX. See the Hurriyet Daily News article (CLICK HERE).

Recall that physical gold demand and physical gold inventory and physical gold shortage will break the Western criminal gold cartel devised by Kissinger over three decades ago, when he embarked on the official demonetization of gold. It was the backside to the Petro-Dollar recycle into USTreasury Bonds. The strategy resulted in the systemic failure of the United States, when coupled with the Most Favored Nation status granted to China. Thanks to EuroRaj, who supplies a steady stream of rich information, articles, and opinions from his corner of the world. He provides strong links to the London bank sector as well.

◄$$$ US-BASED GOLD MINE OUTPUT IS DOWN SLIGHTLY IN SEPTEMBER VERSUS SAME MONTH LAST YEAR. THE YEAR TO DATE GOLD MINE OUTPUT IS ALSO DOWN BY A SMALL AMOUNT. THE ARTIFICIALLY LOW GOLD PRICE IS HAVING AN EFFECT, BUT LESS THAN THE JACKASS FORECASTED. $$$

Gold production by US mines declined 5% in September on a sequential basis, which does not carry much meaning. The September mine output was 19,300 kilograms (=620,509 troy ounces). Year over year comparisons are what matter. The Sept 2012 gold mine output was 19,600 kg (=630,154 oz). The decline was 1.5% on the month, year over year. The trend is best compared over several months. According to the most recent US Geological Survey data (post-revision), gold output from January through September in 2013 was 170.0 tons in 2013, versus 173.6 tons in the first nine months of 2012 for strict comparison. The decline was 2.1% for the nine month run,  year over year. The dominant states are Nevada and Alaska with a five to one ratio favoring the robust Nevada. On US output, Nevada boasts 74.1%, Alaska 13.8%, and other states a mere 12.1% together. See the MineWeb article (CLICK HERE). Thanks to SRS Rocco for the last year gold data. To be honest, the Jackass anticipated a big decline in gold output would reflect the much lower corrupted gold price. My error is primarily due to the long lead times in gold industry project management, with contractual obligations even if not profitable.

◄$$$ IN DEEP TROUBLE WITH CASH FLOW, BARRICK IS COURTING CHINA. THE BROKEN MINING FIRM IS CONSIDERING THE SALE OF GOLD OUTPUT AT SPOT TO CHINA. THE DEAL WITH CHINA IS CALLED FOR AS PART OF A VAST RENOVATION. THE NEW CHAIRMAN JOHN THORNTON HAS DEEP CHINA CONNECTIONS. $$$

Incoming Barrick Gold Chairman John Thornton has friends in high places in China, including the country's premier, central bank chief, and anti-corruption czar. He seeks to convert the ties into new business opportunities after several costly setbacks. Outgoing Chairman Peter Munk chose him as his successor for these ties, and persuaded the grant of a US$11.9 million initial bonus to the new chairman. The company is a syndicate cog, and a grotesque failure, a banker playground. It was beset in the last year by $14 billion in project writedowns. Its recent $3 billion share secondary issuance was a flop, intended to defray the gigantic impact crater to its balance sheet.

Thornton arrived in June 2012, and since then has been laying the groundwork with the Chinese. He comes from 20 years at the crime center called Goldman Sachs, with no mining experience (a company requirement). He wishes to tap China and to continue its emphasis in copper mining. Indications are strong that Barrick is posturing to sell its gold directly to China's reserve bank to help increase their gold reserves. Thornton said, "This is just a matter of logic. If the biggest central bank in the world has explicitly told the world that it intends to diversify over time into various asset classes, and if one of those asset classes is gold, and if you are the biggest gold company in the world, ipso facto the likelihood there will be some kind of relationship there." Barrick poses as the biggest mining firm in the world, but it is a colossal failure and wrecked field, steeped in arrogance and replete with banker footprints. Thornton has extended a hand to Zhou Xiaochuan at the Peoples Bank of China only insofaras setting up a working relationship with Barrick. The new chairman plans to build a strong lasting link to China, far beyond any one-off deal for a gold sale. He seeks an approval from shareholders in initial dealings.

Thornton has set sights on Barrick locking in a modest contract with the Chinese, like with a Chinese construction company to handle Pascua Lama in the South American Andes region. The idea is only a concept at this time. In the past, Thornton when at GSax won the contract to take some Chinese government controlled telecom services public in 1998. He had taken British Vodafone public in the late 1980 decade. The former GSax CEO Hank Paulson paved the way on those past deals. Those past successes enabled Thornton to make solid relationships with Politburo Standing Committee leaders in China, after the senior level officials were given promotions to run the country. Thornton resigned from the boards of News Corp and HSBC to become the Barrick chairman. He remains on the boards of Ford Motor and Brookings Institute. With no mining experience, Thornton created waves in the gold sector by saying he was open to practice of forward gold sales once again, justifiying it as wise in locking in price, thus mitigating the downturn in gold prices. Barrick abandoned the practice in 1999, but has suffered several $billion in losses on its hedgebook. It has even conducted a string of fraud-strewn secondary stock issuances to cover the book. They never covered it, lying each time, only covering a small portion. No lawsuits came as a result of the misrepresentation in a clear sequence of securities violations.

Keep in mind that Thornton is a Wall Street banker without a mining background. It was mainly his decision last year to bring in management consultant McKinsey for a formal evaluation of Barrick strategy. The little known CEO Jamie Sokalsky, who took the role in June 2012, has sold off less profitable gold mines, and sold their energy subsidiary. The firm has a long list of assets on their portfolio, many being legacy assets with poor production results. Maybe Barrick can sell China a scad of Evergreen gold contracts, the ones that do not require delivery of gold bars, as in ever. They were popular over a decade ago, primary tools to suppress the gold price. Papa Bush on the Executive Board at the time probably had a key influence.

Conclude that Barrick will try to dump its troublesome Pascua Lama mine project on China. They might try to dump other mine projects in trouble also on China. In return, the Chinese Govt might eventually see a hefty set of gold shipments to lift its already fast growing gold reserves. The Chinese know how to cut deals with foreign nations, with trade offered on the other side of the table, usually with a small mountain of USTreasury Bonds in a dump site. Recall the US banker foundation in Barrick. Any big pact with China might confirm that the banker syndicate will cooperate with China in return for some hidden control of financial direction in the Middle Kingdom. So Barrick will sell gold spot and forward production, mostly to China, and dump some giant properties on China. Conclude that Barrick in all practicality is now owned and operated by China, or will soon be. See the Globe & Mail article (CLICK HERE) and the Bloomberg article (CLICK HERE). In fact, the Chinese asset acquisition binge continues apace. Its buying spree is unlike anything the world has ever seen. Many deals have been cited in past Hat Trick Letter reports. See the Before Its News article (CLICK HERE).

◄$$$ NORTH KOREA IS RUMORED TO BE SELLING LARGE AMOUNTS OF GOLD TO CHINA, FROM ITS RELATIVELY SUBSTANTIAL GOLD RESERVE HOLDINGS. THERE IS PRECEDENT FOR PAST GOLD SALES FROM TWENTY YEARS AGO. $$$

Reports out of South Korea suggest that wayward thug North Korea is actively selling large amounts of gold bullion to China. They are in possession of a surprising amount of gold reserves, even though their economy is a veritable basket case. New agencies with cross border connections reported the sales. The North Korean Govt does not report its gold holdings to the IMFund. However, reports back in 2007 suggested the country held gold reserves of around 2000 tonnes, thus a significant secondary player. Given the traditionally good relations between Pyongyang and Beijing, the PBOC could tap the gold and exploit its neighbor's hardship. History bears that North Korea has a longstanding substantial gold mining industry, going back thousands of years. It is believed that the country's largest gold mine may produce around 8 tons of gold per year, with many smaller mines in active status. The sale of NK gold might actually keep the sick inbred leaders actively engaged in their military weapons program amidst severe economic troubles that keep their population at the edge of starvation.

Some precedent actually can be cited. Back in the 1983-1993 period, around one ton in gold bullion per month was sold through the London LBMA. They raised funds during another global recession period. Again in 2006, a known gold & silver sale was completed with Thailand. However, in the last twenty years, the pathetic deviant nation has kept to its founder's declaration (Kim Il-sung) not to sell any gold reserves. North Korea is actually yet another Asian nation with a strong belief in the gold asset value. If some sales of gold bullion are indeed being conducted with China as buyer, it would suggest severe hardship on the economic front since floating North Korean debt is out of the question. Any gold sales would be executed government to government, on the quiet. See the MineWeb article (CLICK HERE).

◄$$$ SHORTAGE HAS HIT GRAN VALORA AND PRO-AURUM IN NORTHERN EUROPE. THE VAT TAX WILL KICK IN AT A HIGHER RATE NEXT YEAR. $$$

A Hat Trick Letter subscriber FM in Helsinki Finland reported on shortage in Europe. He placed an order with Gran Valora, a small precious metals dealer in Germany, and was forced to settle with a Cook Island bar, since the desired Andorra bar was sold out. The dealer mentioned a 15-fold increase in demand compared to the same time last year. He specifically stated that the mints are not able to cover the demand they see on certain products. When he checked with ProAurum, one of the largest dealer website in Germany, most of their metals products were sold out. The dealer at Gran Valora confirmed the obvious nature of manipulated price linked to feverish demand. Also, a current factor at work in the Value Added Tax. New 2014 VAT legislation in Germany is set to go into effect. At that time, coins and bars, now declared legal tender, will be sold at the higher VAT rate.

## GOLD DEMAND LED BY ASIA

◄$$$ THE GLD EXCHANGE TRADED FUND IS LOSING ITS INVENTORY RAPIDLY. IT IS CALLED CORRECTLY THE BULLION CENTRAL BANK FOR QUICK RAIDS, ITS INVESTORS THE TRUE DIMWITS IN THE CROWD. THE LEVEL HAS SUFFERED A 39% DROP FROM THE DECEMBER 2012 PEAK. $$$

Without this planned reservoir of available gold bars, the COMEX would have defaulted several months ago. The GLD fund, formally known as the SPDR Gold Trust, was created in order to deceive dimwit investors while forming a last ditch inventory of gold bars to supply the COMEX gold market. It is being drained quickly. The expert analyst EuroRaj watches it closely, noting the nature of raids by the big US and London banks. He has concluded that an acceleration will soon occur. It will not be drained faster by departing investors, but rather by more rapid removal to supply both the COMEX and the Shanghai Exchange. The $200 differential is no longer minor with Shanghai. Instead of a linear decline rate, expect a constant decay rate that will reveal the acceleration in drainage. The COMEX shutdown is within view but still not imminent. The Global Currency Reset might have a profound effect on the COMEX, like turning off the lights, or officially converting it to Cash & Carry without any more futures contracts.

◄$$$ PHYSICAL SUPPLY HAS NEVER BEEN TIGHTER AT THE SWISS REFINERS. WITHOUT PRECEDENT, THEY OCCASIONALLY HAVE DIFFICULTY FINDING A GOLD SOURCE FROM WHICH TO SATISFY THE HUGE DEMAND. THE ARTIFICIALLY LOW PRICE IS HAVING AN ENORMOUSLY DISRUPTIVE EFFECT ON THE REFINERY BUSINESS. NEVER BEFORE HAVE THE SWISS HAD DIFFICULTIES IN SOURCING GOLD. SUPPLY APPEARS AS VERY OLD GOLD BARS. THE CHINESE AND EVEN SAUDIS ARE RESPONSIBLE FOR THE OUTSIZED DEMAND. $$$

Alex Stanczyk took a tour of several Swiss refineries with his Ango Far-East staff on an annual scheduled inspection. One refiner in particular has been unable to source gold, which has occurred several times this year. Stanczyk was shocked at the reports he was given. He wrote, "They are bringing in good delivery bars, scrap, and dore from the mines, basically all they can get their hands on. This gentleman has been in the business for 37 years. He was there during the last bull market in the late seventies. I asked him when was the last time this has happened, that he was unable to source gold. He said never. I clarified it, asking: let me make sure if I understand what you are saying to me. In the last 37 years you have worked in the gold industry, this has never happened? He said: this has never happened. There was one other comment that was fascinating. He said sometimes when they get gold in, it is coming from the back corners of the vaults. He knew this because these were good delivery bars marked in the 1960s. This is a huge supply squeeze, worse than anything that has happened in the last four decades. At some point there is going to be a massive squeeze on the price." The 50-year old gold bars indicate extreme shortage.

The stress on the refiner business is enormous. They have expanded their capacity, working three shifts, around the clock 24 hours per day. Some have anticipated a reduction in demand sooner or later. But no, the demand continues. Over 70% of the kilobar demand comes from China. The largest refiner quoted above is sending ten tons per week to Chinese clients. As a group, the Swiss refiners are sending 2000 tons per year to China. Combine the Perth Mint shipments, the domestic Chinese mine ouput, plus all the Chinese owned mining firm output at various locations around the world, and Chinese cumulative demand is exceeding the global mine output, amazingly. They are purchasing the gold bullion for wealth generation and a firm foundation for the next financial system chapter. Lastly, the Saudis are responsible for an outsized demand also. They are gathering more 1-kg bars, and probably far fewer USTreasury Bonds on a marginal monthly. The Swiss are recasting 400-oz gold bars into the 1-kg format for the Saudis. It is becoming widely known that the Saudis are breaking ranks with the USGovt, which is evident in their higher gold demand. Jansen anticipates a gold market squeeze of historic proportions. See the InGoldWeTrust article by Koos Jansen (CLICK HERE). The Voice confirmed, this being the worst physical supply squeeze ever seen in over thirty years, in his words. Refer to Switzerland, London, and New York City

◄$$$ TURKEY'S GOLD IMPORTS AND INVESTMENT DEMAND HIT RECORD HIGHS IN YEAR TO DATE FIGURES. THE GOLD PURCHASE FROM IRAN VIA TURKEY CONTINUES APACE WITH NO INTERRUPTION. THE IMPORTED GOLD DEMAND FROM TURKEY IS RUNNING AT AROUND 145% GROWTH VERSUS YEAR 2012. THE DEMAND IS BEING SEEN IN SEVERAL AREAS, A BROAD-BASED PHENOMENON. $$$

According to the latest figures from Borsa Istanbu, the country imported 270.7 tons of gold during the first eleven months of this year. The year is almost complete. The pace is more than double that of year's 2012 imports of 120.8 tons over the full twelve months. The growth comes to 145% annualized. Turkey seized the lower gold price offered, as part of a sensitive physical market with tradition. Also some pent-up demand had built up, after months and possibly a couple years the consumers had been priced out of the market. The demand is very broad-based. Cameron Alexander, an analyst with Thomson Reuters GFMS, said "Official gold coin demand has more than doubled so far this year; gold investment demand has also more than doubled; and jewelry demand has rebounded by around a fifth this year." The confirmation came from the London based World Gold Council, which stated Turkey gold investment demand hit all time high during January to September. The exceptional momentum of demand has been sustained. The gold investment in Turkey has continued beyond the first half of 2013, as many watchers had wondered about an unbroken pace. Demand for the first nine months of the year is a robust 92.8 tons, a figure that exceeds any annual total since our records began. See the Scrap Register article (CLICK HERE).

◄$$$ OCTOBER CHINESE GOLD IMPORTS FROM HONG KONG REACHED A MASSIVE 131 TONNES. THE DEMAND HAS INCREASED. CHINA IS ON PACE TO EXCEED 1000 TONS IN HK-IMPORTS FOR THE FULL CALENDAR YEAR. AT 2400 TONS FOR CUMULATIVE CHINESE DEMAND, THEY WILL TAKE AT LEAST 80% OF THE GLOBAL 2900 TONS OF GOLD MINE OUTPUT. $$$

Not slowing down, net Chinese gold imports through Hong Kong accelerated in October to 131.2 tons. They have imported over 100 tons of gold from HK for the sixth consecutive month. Low prices stimulate demand, met often by exchange trade funds in the West being drained. The demand strength is in part due to jewelers and retailers who purchase gold to build up stocks ahead of peak season. The rabid volume highlights the conservative figure for Chinese gold imports via the Hong Kong window, estimated at 1000 tons. The full year import total will likely be around 1200 tons. Victor Thianpiriya from the Australia & New Zealand Banking Group in Singapore said, "It is a strong number and it certainly puts China on track to import more than a thousand tons. You do get the usual seasonal pickup towards the last quarter of the year, but a lot of the Chinese were also taking advantage of prices that have been coming off." The total Chinese demand for jewelry, bars, and coins rose 30% in the twelve months through September, while usage in India gained 24% over the same twelve months, according to the London-based World Gold Council. Indeed Chindia is the juggernaut duo, aided by Turkey & Iran to form the Golden Fab Four.

Contrast to the recent story from China's biggest jewelry company Chow Tai Fook, which reported almost doubled sales through the first half of the current year. China also imports through the Shanghai route. Including this vibrant city import, the official full year national importation will crease the 2000 ton level easily. Then add on their likely domestic gold production this year of 420-430 tons. Chinese annual consumption this year appears to be on the order of 2400 to 2500 tons, which amounts to over 80% of the latest estimates of global annual gold output at 2900 tons. Gold continues to move from West to East, at an accelerating rate, given the artificially low price. Either China is bleeding from the big gold ETFunds, or the New York & London bankers are betraying their ETF clients by dispatching their gold in the dead of night. The big new factor will be Western mine output directed to China, bypassing the market entirely, a Jackass forecast made two and three years ago. When the Western banks and citizens finally awaken to reality, and wish to place their own orders for gold, they will be forced to deal with China. Not much gold supply will be left, but worse, the channels will be dedicated to China for shipment, even under contract. Above is the data from the Hong Kong Census & Statistics Dept. See the Mine Web article (CLICK HERE) and the Bloomberg article (CLICK HERE).

◄$$$ ARAB GOLD IS BEING REPROCESSED FOR THE MORE RIGOROUS CHINESE STANDARD, MACLEOD TELLS KEISER. REGARD THE STANDARD CHANGE TO BE PART OF THE DEMISE OF THE PETRO-DOLLAR AND THE RISE OF THE CHINESE FINANCIAL LEADERSHIP. $$$

Alasdair Macleod is the indefagitable analyst at GoldMoney, where as research director he notices key changes. He notes that Arab investors are ordering gold to be reprocessed by Swiss refineries to meet the higher purity in Chinese standards. The trend implies a shift of Middle Eastern economic and political ties from West to East. The trade winds have shifted. The typical London standard bars of 400-ounce gold at .995 purity are being recasted in Switzerland in high volume. They are sent to Arab holders as 1-kg bars at .9999 purity, which meets the higher Chinese standard. Macleod suggests we might be entering a post-Petrodollar world. In which case, USTreasury Bonds could be flowing back into New York and London in pure dollar form and thus cause high inflation. Then again, they might be sopped up with USFed higher QE volume, thus producing greater monetary inflation, the preferred scourge while the economies are left to die on the vine.

Clearly much of the volume shipments are part of the massive Shanghai arbitrage where at minimum a $200/oz price differential is posted and exploited. A suppressed gold price has its inherent disadvantages of a rapid depletion. Host Max Keiser and guest Alasdair Macleod suggest that unless gold markets are rigged, the FOREX and LIBOR rigging will not work. They are all rigged together in grand collusion, and all being broken down together. See the Keiser interview (CLICK HERE) on the Russia Today television network, where Macleod appears at the 15:23 minute mark.

◄$$$ THE CENTRAL BANK OF VIETNAM WILL BUY BULLION GOLD TO INCREASE FOREIGN CURRENCY RESERVES. THEY SENSE RISING INSTABILITY IN THE FINANCIAL SYSTEM. THEY WISH TO PRESERVE THE GOLD PRICE STABILITY WITHIN THE SMALL ASIAN NATION. $$$

Nguyen Quang Huy is Director of the Foreign Exchange Dept of the State Bank of Vietnam. He said the central bank is considering all possible solutions, including the purchase of bullion gold, in order to increase the foreign currency reserves. His justification seems errant. Yet any gold demand is good demand. He perceives the global economy as having made a notable recovery. He expects the USFed to tighten monetary policy. He might be correct in noticing an improvement in the domestic Vietnamese Economy, but his global perspective is mistaken. As the growth with stability returns to his native land, he expects the demand for other assets to grow. Governor of the State Bank Nguyen Van Binh reported that the volume of the bullion gold demand has decreased sharply. Previously, banks and enterprises used to trade 8500 taels of gold per day, but the figure has dropped to 2500 taels per day recently. The consensus opinion among local bankers is to proceed with gold purchases, but with no intention to intervene in the domestic gold market. The gap between the international gold price and the Vietnamese gold price has narrowed. See the Vietnam Net article (CLICK HERE).

◄$$$ US JEWELRY IMPORTS DROPPED BY THE LARGEST AMOUNT ON RECORD. THE CONSUMER WEALTH EFFECT IS HORRIBLY NEGATIVE. PERHAPS SOME DOMESTIC RECYCLING OF GOLD JEWELRY IS AT WORK. $$$

Whatever the reason, according to the Bureau of Labor Statistics, the US jewelry imports in the month of October inexplicably posted their biggest annual drop on record. With genuine curiosity, Tyler Durden posits that BLS seasonal adjustments have not been recently updated. With tongue in cheek, Durden surmises that a massive surge in underground jewelry artisans has taken control in the black market. He also wonders aloud that people might celebrate Bernanke's centrally planned economic renaissance by wearing bones and sporting tattoos instead, or else men and women have forgone such superficial trinkets as necklaces, bracelets, and rings. Obviously Wal-Mart, Sears, and other stores have made some competition. Perhaps a considerable amount of recycled jewelry has been sent to the discount stores. Zales recently announced the shutdown of some stores. In Jackass view, the sign of US diminished wealth is everywhere, in lack of gold demand, empty shopping malls, reduced retail store staff, and legions of homeless people in every major US city. The Eastern Hemisphere is seeing rise in wealth, while the West is seeing a decline in wealth. Note the relinquished factories, widespread bank fraud, engrained unsound money, and pervasive war machinery for the underlying factors. See the Zero Hedge article (CLICK HERE).

## GOLD PRICE LIKE A COILED SPRING

◄$$$ WILLIAM KAYE SENSES THE EQUILIBRIUM WOULD BE ATTAINED FOR THE GOLD PRICE AT $2500 PER OUNCE. A RETEST OF VERY SIMILAR CONDITIONS HAS OCCURRED, JUST LIKE LAST JUNE. THE ENTIRE FRACTIONAL GOLD BULLION BANKING SYSTEM IS IN THE PROCESS OF FRACTURING. THE BIG BULLION BANKS WILL SUFFER THE SAME FATE AS ABN AMRO, CONVERTING TO CASH SETTLEMENT WITH NO GOLD METAL. THE GLD FUND RAIDS INCLUDE THE ELITE CONVERTING THEIR SHARES INTO LARGE GOLD BAR DELIVERIES AT ATTRACTIVE PRICES. THE COMEX IS CLOSE TO FULL COLLAPSE, EVIDENCE BEING THE ABSENT DELIVERY UNDER CONTRACT IN CLEAR VIOLATION. $$$

William Kaye is the bold outspoken fund manager based in Hong Kong, who a long time ago was at Goldman Sachs. He makes a string of good points, which will be related in summary form. They are his thoughts, mostly his words, put in a few paragraphs. Wholesale gold demand has been strong, including from central banks. The bank cartel struggles to find physical metal with which to continue to suppress prices. They are implicitly permitting a massive migration of gold bullion from West to East. Kaye made a stunning comment, "My own feeling is the equilibrium price for gold is probably twice where it is currently trading, and possibly even higher. All other forms of portable wealth that I can identify, none of which have thousands of years of history as money like gold, have already reached or are now approaching all-time highs." The other assets he cited are diamonds, art works, even fine wine, and unusual items like rare maps. The manipulation evidence and footprints are everywhere to be seen. The gold market has entered backwardation once again. The GOFO forward rates have returned into negative ground. The same conditions appeared last June, which could mean a double bottom, useful for a price launch upwards. The horrendously negative sentiment confirms the bottom as well. See the King World News interview (CLICK HERE).

The major bullion banks led by the largest among them, have switched. The #1 US bank is very long gold, positioned as usual with several other major bullion banks for the next major move. The long position as a group indicates a major gold price rise, and soon. They might be creating a grand deception, by using the enormous OTC market to effectively conceal their big net short side. The dark mystery is the ongoing liability from outstanding unallocated gold accounts that JPMorgan, Goldman Sachs, and the other bullion banks possess. Likely they will never be repaid, made more clear by two recent defaults earlier this year. See the ABN AMRO default in April, and their associated Rabobank default, the result being a forced redemption with cash settlement. Major problems are laced throughout the bullion banks, where reckless fractional games are being played, with grand backfires. Kaye made a stunning comment, "My suspicion is the entire fractional reserve gold system, ultimately, probably within the next year, will go the way of ABN AMRO and Rabobank. They will all settle for cash when the market begins to make an important up-move, which could be first quarter or second quarter of next year." He anticipates that people will be scrambling for gold elsewhere as they are denied gold at their own bullion banks. They will not want to hold the cash they receive. He expects the big banks will be declaring force majeure, and the COMEX will simply collapse. The exchange will convert into a cash arena. The gold futures contract might go away, since it will have no deliveries, a situation already upon us since the summer months.

When the gold banking system is visibly wrecked and the major exchange becomes a Cash & Carry arena, Kaye expects the Gold price to hit $3000, $4000, $5000 per ounce. The reason is crystal clear. The supply of available gold bars in existence is not enough to satisfy the 90 to 100 paper claims per ounce of actual gold that exist. He believes insiders are accumulating gold, some using the GLD fund for conversion at very attractive prices. The propaganda from the financial press reports an elite player like Soros exiting GLD shares, when they are converting to metal bars in high volume. They do so in lots of 100,000 shares to walk away with small truck loads of gold bars. Each GLD share is one tenth of a gold ounce. So a 100k block means 10,000 ounces of gold valued at US$12.5 million or so. The deceptions are easy to wade through and to decipher. The paper gold market is being manipulated down, while the physical gold is being hoarded gathered and accumulated at a frenetic pace. An enormous ongoing bull market in physical gold is in progress, which is fueled stronger with every paper market ambush. See the King World News interview (CLICK HERE).

◄$$$ THE BIG US-BANKS ARE STOCKPILING GOLD FUTURES CONTRACTS IN A PAPER ACCUMULATION. JPMORGAN LEADS THE PARADE IN CONVERTING TO A MASSIVE NET LONG GOLD POSITION. THEY CLEARLY FORESEE A GOLD RESURGENCE. IT PRESAGES A GIANT UPWARD MOVE IN THE GOLD PRICE. NEVER HAVE THE CORRUPT BIG BANKS HELD A LONG POSITION IN GOLD UNTIL THIS YEAR. IT HAS GROWN FOR THE JPMORGAN LEDGER ITEM IN THE LAST FEW MONTHS TO ALMOST 70,000 CONTRACTS. THE POSITION GROWS EACH MONTH. IN FACT, AS JPMORGAN BLOCKS DELIVERY TO INDIVIDUALS AND INSTITUTIONS, AND FORCES CASH DELIVERY, IT HOARDS THE GOLD FOR THEMSELVES ON DELIVERY DOMINATION.

ALWAYS BEWARE OF THE STRANGE SCENARIO THAT CHINA HAS TAKEN FULL CONTROL OF JPMORGAN AND IS USING THEM TO GATHER IN GOLD BULLION EN MASSE. THE CLUE WAS THE CHINESE CONGLOMERATE PURCHASE OF ONE CHASE PLAZA (JPM HQ). $$$

The following is from the TF Metals Report and my colleague Mr Ferguson, done on December 7th. His irreverance equals my own, but his work is high quality. He demonstrated the built JPMorguen net long position in gold. His sentences will be taken liberally, with some comments of my own injected. The story is compelling, of how JPM has switched from the perenniel net short gold position to a rather substantial net long position in the last several months. One could surmise that JPM has reacted to the USFed official QE hyper monetary inflation by reversing their position, and betting on a Gold rise past the $2000 level and beyond. After all, gold is the primary inflation hedge, and QE is the epitome of inflation abuse. As first noted in the July Bank Participation Report, a US Bank is now massive long the COMEX gold futures. From our experience, we can safely conclude that due to the sheer size of the position, at 75,000 contracts, it had to be JPMorgan. The conjecture at the time last summer can at last be rather safely demonstrated to be true, the proof easy to detect.


TF estimated that among a net long position averaging 75,000 contracts, probably at least half the position was in the front month Dec13 contract. The position was then rolled into Feb14 contract and the April14 contract, but not without causing some extreme volatility. The JPM House used the sudden price moves to their selfish advantage. Additionally, since JPM issued almost three million ounces of gold to the other big banks through the COMEX delivery process for Feb13, Apr13, and June13 contracts, it was to be expected that JPM House would use their long position to stand for delivery this month in a dominant fashion. They did so. JPM will eventually stand for 7,000 to 8,000 contracts in December, not to break the COMEX just yet. They should stand for the same amount in February and April of next year, provided the COMEX does not suffer a cave-in, or the Global Reset renders the metals exchange as Cash & Carry mart.

Proof of the JPM net long position will arrive in the volume of gold they actually take in delivery during December. A miniscule volume like earlier this year would poke a giant hole in the entire TF analysis, the major JPM conclusion on turning bigtime long gold would be refuted. TF looked for JPM to end up stopping over 90% of the December gold contract for delivery, his record having been clear. The result data on December 4th was breathtaking, in his words. There were 2472 deliveries announced. Of those 2472 deliveries, the JPM House account stopped (took delivery) on a robust 2389 contracts, equal to 96.6% of the total. The data totals for the first five days of the month were:

  • Total Deliveries = 3558
  • Total Stopped by JPM = 3400 (95.6%)
  • Total Issued (thus far) by HSBC = 2216
  • Total Issued (thus far) by Scotia = 787

Next for comparison like a control group, consider three months of full data earlier in the current year. Back in the first half of this year, when JPM was desperately converting a 75,000 net short position into a 75,000 net long position, the big US bank was stuck when deliveries were made against it by the other banks. For the delivery months of Feb13, Apr13, and June13, the data totals for the entire batch of three months were:

  • Total Deliveries = 34,571
  • Total Stopped by HSBC = 13,768
  • Total Stopped by Scotia (including March & May) = 2257
  • Total Stopped by Deutsche Bank = 5918
  • Total Stopped by Barclays = 3596
  • Total Stopped by JPMorgan House = 547
  • Total Issued by JPMorgan (House & Customer) = 31,939

The COMEX data tells a convincing story, as the December month goes exactly opposite to the months earlier this year in our effective comparison. Conclude that JPMorgan wants their gold back fast! They have cornered the COMEX gold market in order to make this happen. They have refused delivery to qualified clients holding contracts, using whatever coercion they can to deny legitimate demands for gold delivery. They have forced cash settlement on those contract holders. JPMorgan was net long around 65,000 to 70,000 COMEX gold contracts, as of the first week of December. Expect the JPM colossus and its best friends to prevail as victorious. Any decline in the gold price of $120, for instance, would cost JPM a ripe $1 billion. With a dominating market position, having cornered the gold contracts, and having denied individual delivery demand, the JPM House will not only prevent any further large price declines, they will engineer the Big Gold Bull Rally. Of course, they might gather in more gold contracts, adding to their dominant position. In the last ten trading days, the gold price has been locked in a tight range, hardly moving, serving as testimony to the rugged JPM position to stymy the market.

Next consider that the JPM COMEX net long position could be a massive hedge for offsetting an equally large net short position at the OTC. This is unlikely. The JPM sudden desire to take delivery in December would not be consistent with such a notion. Given the greedy grab of almost all the December gold deliveries directed to the JPM House Account, one would be way out on an unlikely limb to deduce that JPM was overall net neutral on gold. As footnote, we might all be fools on stage for the big bank. It is possible that all the CFTC and CME data is a grand fabrication with no linkage to reality. The exchange officials have issued a disclosure to deny accuracy of the data. The first JPM net long position came to light in July. It is now playing out in real time, having grown to a very large net long position. That is a long time to manage a silly charade. TF believes the data and story to be accurate. The big bank crime centers do not care about the public perceptions, or whether they catch wind of the great flip by JPM to net long. As TF concluded, "JPM does not give a rat's ass that you and I know this stuff. By the time everybody else catches on, [the gold] price will have already moved and everyone will only look back with hindsight. JPM just wants their gold back before the current fractional reserve bullion banking system breaks, prices skyrocket again, and a new global currency regime takes hold. And now, for the first time ever, they have cornered the COMEX gold futures market in order to ensure that it happens." This is potentially an historic point in time. A grand Global Currency Reset in the West and installation of a Gold Trade Standard in the East would be a fitting followup climax.

The data from the next day on December 5th showed more of the same effect. JPMorgan appeared to be preparing a major squeeze of the Speculators and managed fund lads. The COMEX delivery data showed JPM took another 238,900 ounces, and mostly from one source at HSBC. It is JPM who is cleaning out the COMEX registered gold. Some producers might also be involved. In part the IRS angle might be at work. Some of this gold might be devoted to Germany toward the repatriation. Another possible angle could be that JPMorgan took deliveries, so as to hand them over to China. Recall that China has taken some massive counter-party positions on Interest Rate Derivatives. Rob Kirby has postulated that China was given massive IRS tax flow derivatives years ago, possibly linked to Mao Era gold on lease. With the USEconomy in shitstorm dire straits, the income is much lower, possibly in default of important contractual obligations to China.

Run mind with imagination, which could very possibly be true. The sale by JPMorgue of their headquarters complex in South Manhattan offers another important high stakes clue. If they sold One Chase Plaza to a Chinese property conglomerate last month for half its value at $725 million, then perhaps something extremely large is happening that is part of reshaping the world financial structure and the balance of geopolitical power. Like maybe China has JPM cornered, and is using them to serve as coulees and sherpas to carry the gold bars en masse over the Himalayas to Beijing by way of the COMEX. We could be witnessing the death of JPM and the gold delivery is part of the estate distribution that favors China. Time will tell, or maybe it will not. It has been suggested within the Jackass inner circle that China is in the process of purchasing the Federal Reserve, which would surely include the JPMorgan bank and its headquarter property. In a related exposure of similar events and data, see the Gold Silver Worlds article (CLICK HERE).

◄$$$ THE GOLD PRICE HAS FALLEN BELOW THE CONSENSUS CASH COSTS, AS IT APPROACHES MARGINAL PRODUCTION COSTS. FOR THE LESS EFFICIENT AND LESS FORTUNATE (LOW YIELD) MINING FIRMS, THE MINE OPERATIONS ARE NO LONGER PROFITABLE. AN IMPORTANT MILESTONE HAS BEEN HIT. SUPPLY WILL BE REDUCED IN COMING MONTHS, AS MANY MORE MINE PROJECTS WILL BE SHUT DOWN. THE PROCESS HAS BEGUN. $$$

The intrepid Zero Hedge folks showed back in April that the marginal cost of gold production in 2013 was estimated at between $1250 and $1300 per ounce, including capital expenditures (CAPEX). When some marketing costs are included, it consists of the all-in cost, as now referred. To be more specific, this range level was the 90% percentile among the many mining firms with significant output. Conclude that as of early December, gold has been trading below not only the cash cost, but could soon be approaching the marginal cash cost of $1125 per ounce. The potential repercussions from the coordinated suppression with government collusion are a grand backfire on the central bankers, if not already. Major disruptions are sure to come and soon, like big project shutdowns. They will be delayed due to contractual obligations. Added costs will be absorbed by the shutdowns. The effect on output will be clearly visible. Expect a skein of high profile bankruptcies, job cuts, and some social disorder. Prudent management dictates that projects be taken off-line and mothballed. The banker elite are cornered by their own corruption and massive interference with markets (pretensions with Messiah complex mixed with megalomania and intense greed). The disorder in Africa is gaining attention, where China has devoted significant Foreign Direct Investment. See the Zero Hedge article (CLICK HERE).

Implications to certain companies can be foreseen. Those marginal firms that do not halt unprofitable production will report miserable earnings and experience investor anger. The following mines in the graph display the gold cost curve, one by one. Those firms starting on the right are the high cost producers, certain to fall or fail. Their production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. After more than a century as the world's foremost gold producer, South Africa has slumped to sixth position under the specter of marxism and grotesque mismanagement. The decline of mine output is assured. Worse, this is a dynamic system. The demand rises with lower price, forcing a more rapid depletion. Some instances have already occurred of projects going off-line, or delayed for inception. The lowest cost producers actually deserve an asterisk. Their gold cost is reduced from by-product output like with copper.

Many mining companies have announced plans to shutter mines or reduce operations from Nevada and Peru in the Americas to Papua New Guinea in the Pacific region. The suppression of the gold price (by Wall Street action on COMEX) coupled with the rising costs (from USFed QE bond monetization) has caused mayhem to mining firm operations. Numerous mine projects are being shut down. See the Bloomberg article (CLICK HERE).

◄$$$ JIM SINCLAIR ON AN EXCELLENT REVIEW OF THE GOLD MARKET, THE CURRENCIES, AND BANK POLICY. THE GREAT FLUSHING (IN 2008) WILL BE FOLLOWED BY THE GREAT LEVELING, STARTING NEXT YEAR. HE FORESEES A $50,000/OZ GOLD PRICE, AFTER THE EMANCIPATION OF GOLD FROM THE PAPER COMEX EXCHANGE. $$$

Jim Sinclair shares great wisdom in an excellent review of many very complicated topics, tying them together in relatively simple terms to understand. He explains why the Price of Gold will rise an order of magnitude, when the COMEX removes the connection of futures contracts with gold delivered under that contract. The banks have created the internal rules, whereby deposits have been converted to unsecured lenders with no standing. The bail-in will take over as policy, extracting wealth from bond holders and depositors, replacing the past bail-outs done by the governments. The currencies will adjust according to the individual nations and their respect for gold and its proper accounting. In the next couple years, the Great Currency Reset will take root with the United States not participating properly. The eradication of the US Middle Class is happening in the US, the rest of the process to wipe out the white collar segment of the Middle Class. When the reset occurs, the banks will re-write the home loan contracts (and other contracts) to protect themselves, whereby the balances will be reset higher according to the new devalued currency. Homeowners will face a much higher loan balance, the precedent being firmly established in the Mexican Peso reset of 1994.

The Petro-Dollar is being quickly phased out. As soon as the Saudis accept non-US$ payments for crude oil, the USD index will fall from the 80 level to around 50, and the price of gasoline inside the USEconomy will rise to $10/gallon. The US-DX chart shows numerous Head & Shoulders bearish reversal patterns over the past two or three decades. A breakdown will be catastrophic. Also and curiously in bizarre fashion, Saudi Arabia might be declared a terrorist nation by the USGovt. He clearly states that price inflation in the United States will be a currency phenomenon, not a monetary effect. The price of Gold, emancipated from the paper exchanges, will go to $50,000 per ounce, after a difficult struggle to find the $3200 to $3500 level, according to Sinclair. He is part of some Eastern new system design, like in Singapore. See the USA Watchdog interview with Greg Hunter (CLICK HERE). The Voice is part of the new system design in Russia & China.

◄$$$ CHECK OUT THE SRSROCCO SILVER ANALYSIS WITH CHARTS. $$$

Friend and colleague SRS Rocco provides a fine comprehensive review of the silver market in brief form. He covers the coin sales, silver fabrication, base metal prices, cash cost to produce silver, and silver investment volume. It is well worth the time to read. See the SRS Rocco Report article (CLICK HERE).

## USECONOMY ON DEATH ROW

◄$$$ PERSONAL COMPUTER SHIPMENTS WORLDWIDE ARE IN A TAILSPIN, THE DECLINE IN GLOBAL PC SHIPMENTS WILL BE 10.1% THIS YEAR. BLAME IS GIVEN TO THE RECESSION BUT ALSO A POWERFUL TREND TOWARD HANDHELD PROCESSOR DEVICES LIKE THE I-PAD. $$$

The advent of smart phones, computer pads, and other hand-held devices has made a serious headwind for original purchase and upgrade in personal computers. Interest in PCs has remained limited. The IDC reports that personal computer shipments are projected to fall 10.1% this year, by far the biggest annual decline on record. At IDC's projected sales rates, shipments worldwide will stay at just more than 300 million units through 2017, or barely above 2008 levels. See the Zero Hedge article (CLICK HERE).

◄$$$ THE US-HOUSING MARKET APPROACHES A CLIFF. WEAKNESS IS SEEN IN ALMOST EVERY REGION AND CITY. WORSE, THE WEAKNESS APPEARS DURING THE STRONGEST SEASON. $$$

The signals are countless. Homebuilder company executives have been dumping their shares at a stunning pace. Promoted as a housing market recovery by the financial media, Wall Street, and the Obama Admin, the recovery has been a sham at worst, and a dead cat bounce at best. It is mired in a long-term bear market, with no resolution from multi-$trillion mortgage bond fraud and countless attendant contract case examples, enabled by the fraudulent MERS title database concoction. Both price and transaction volume have been artificially manufactured through the use of direct USFed money printing, USGovt implemented mortgage programs, Private Equity Fund block home purchase programs, and outright bank accounting fraud, even bank operation fraud. The big banks continue to exploit the accounting and regulatory loopholes in order to continue their schemes. The housing market bounce is transforming quickly into a rapid decline. A compelling tagline in the sequential decline for almost every housing market metric is its occurrence in the market's strongest seasonal period. See the Truth in Gold article (CLICK HERE).

◄$$$ THE USECONOMY IS ON DEATH ROW, SEEN IN THREE GRAPHS. IT HAS TRAGICALLY FALLEN AND CANNOT GET UP. THE FASCIST BUSINESS MODEL HAS BEEN DESTRUCTIVE IN A TOTAL SENSE. $$$

As US businesses adapt to difficult economic times, they prefer the part-time worker concept. Lower fringe benefits are given, along with lower wage. They face broad-based cost increases for a wide spectrum of business. The ObamaCare fiasco has induced thousands of companies to reduce hours and to emphasize the part-time worker. This is not a USEconomic recovery.

Since the broad-based offshoring and outsourcing of US industry to Asia, the impact to impact has been profound. The trend began in the 1980 decade. The initial push down in income came in the 1970 decade, with the quadruple in oil prices during the highly disruptive Arab Oil Embargo. Price inflation ravaged worker incomes. The effect of the Chinese industrial rise after given the Most Favored Nation status in 1999 is clear. Income among US workers fell again. The trend is as clear as it is ugly. This is not a USEconomic recovery.

Irony is thick. Since the USFed began its disastrous bond monetization initiatives, QE to Infinity better described, the assault on business is thorough. The adopted hyper monetary inflation kills capital. Since year 2011, the decline in revenues for the major US corporations is clear, or rather the growth rate decline. Soon the growth will go negative, and the USFed QE program will be openly criticized as destructive and hardly stimulus. The trend is as clear as it is ugly. This is not a USEconomic recovery. See the Market Oracle article (CLICK HERE).

◄$$$ INTERBANK LOANS ARE COMATOSE, INDICATIVE OF ZERO RECOVERY IN THE USECONOMY. THE CHICAGO FED NATIONAL ACTIVITY INDEX SLIPPED IN OCTOBER. $$$

A handy comatose meter is found in the Chicago Economic Diffusion index. It fell in October. The more representative three-month moving average improved to 0.06 from  minus 0.02, indicating the economy has leveled off in its coma. The employment indicators fell, as the labor participation rate stands at its most dismal level ever. It is working its way under the magic 60% level. No recovery is evident. The QE to Infinity will be needed in defense and support of the entire system. So conclude that with continued USEconomic deterioration, the tax revenues will be way short. The USGovt deficits will rise above $1 trillion per year again easily. The USFed will be forced to cover the deficits, since national savings is nowhere. The debt issuance will continue from the capital dome helm, covered by phony money coming off the press running side by side. Add to the above factors the wet blanket known as ObamaCare, a massive burden on businesses. This is not a USEconomic recovery.

The De-industrialized Third World awaits the United States for the crimes of unsound money, bank fraud, derivatives sleight of hand, asset bubble dependence, chronic predatory war mongering, bad economic policy, and dispatch of industry to Asia. The adoption of the Fascist Business Model has resulted in systemic failure, precisely as predicted in the Hat Trick Letter since year 2006. The Jackass declares DI3W dead ahead.

◄$$$ FOOD HUNGER IN BRITAIN IS GAINING PUBLIC ATTENTION. FOLLOWING THE UNITED STATES ON THE PROPERTY BUBBLE HAS PROVED TO LEAD TO A SIMILAR SYSTEMIC BREAKDOWN AND WIDESPREAD POVERTY. $$$

Food poverty in the United Kingdom has reached Public Health Emergency levels, having drawn attention to the plight of the public. The United States is not alone in the frightening rise in Food Stamps usage and participation. The latest spotlight to this national tragedy comes via a formal letter scribed by a group of doctors and senior academics from the Medical Research Council and two leading universities, sent to the British Medical Journal. They accused the UKGovt of covering up the problem by delaying a report on the subject. A surge in the number of people requiring emergency food aid, a decrease in the amount of calories consumed by British families, and a doubling of the number of malnutrition cases seen at English hospitals represent all the signs of a public health emergency. They urge preventative action. Chris Mould, chief executive of the largest national food bank provider Trussell Trust, said that one in three of the 350,000 people who required a food bank donations this year were children. See the Zero Hedge article (CLICK HERE) and the UK Independent article (CLICK HERE).

The De-industrialized Third World awaits Great Britain for the crimes of unsound money, bank fraud, derivatives sleight of hand, asset bubble dependence, chronic predatory war mongering, bad economic policy, and dispatch of industry to Asia. The adoption of the Fascist Business Model has resulted in systemic failure, precisely as predicted in the Hat Trick Letter since year 2006. The Jackass declares DI3W dead ahead.

## THANKS

Thanks to the following for charts StockCharts, Financial Times, UK Independent, Wall Street Journal, Zero Hedge, Business Insider, Calculated Risk, Shadow Govt Statistics, Market Watch, and more.