The importance of the June 28 for gold must not be underestimated. Whilst there is still uncertainty around The BIS delaying Basel III, for every day that elapses it makes prolonging it far more byzantine. This is further reinforced by Andrea Enria, one of the most senior individuals in the ECB who recently stated when quizzed on the subject:
“I am hearing calls for the initial date of implementation to be further postponed. Let me be very clear on this. We do not see any benefits in further delays.”
This June date has been on the minds of every gold bug across the globe, may not actually cause that much of an initial price move in gold. What a lot of people are forgetting, is the way gold is reclassified is only minutia in the bigger picture of the latest accords and if we were to repackage the information relating to it, we could probably cover two pages against the thousands of information provided by the BIS. Banks have a lot more to pull into line to meet the deadline which for 100% clarity is 28th June 2021 for Europe, July 1 2021 for America, India NSFR is Oct. 1 2021, and the UK Jan. 1 2022.
However what the June 28 date does represent is the bigger picture and that is The BIS would have set the ball rolling for Europe, with the line in the sand being sufficient for ramifications for the LBMA to throw in the towel. Once the NSFR is implemented there is no turning back for London and its 95% unallocated shady paper trading games should come to an end towards the end of 2021.
When one considers whose interest it would be in for this date to be implemented as soon as possible, we can look no further than the powerhouses of China and Russia, who are both already compliant by the way. They have spent years since the announcement stacking gold with rumoured stockpiles soon to be disclosed, and a dramatic shift in power from the West of the globe to the East. Make no mistake, these two nations want the dollar out. The Shanghai exchange is already the world’s biggest physical gold exchange and the removal of paper gold is very much in their interest to strengthen their position of wealth and power.
The Bank of England is second to only the Federal Reserve in New York for its gold holdings, yet it is having disputes with some countries on repatriation of gold. It took Germany nearly seven years to get their gold back worth around $31 bn at the time, from mainly New York. So why so long? The question has to be asked whether all this exists in allocated form. One step ahead in the case of China and Russia as they hold it almost exclusively on their land. If you don’t hold it, you don’t own it. A phrase recently linked to the numerous outflows of dubious unallocated ETFs insisting on delivery.
So with stockpiles of the yellow metal high in the sky, what do the East intend to do with it – after all, we are still led down the narrative that Gold is a relic of the past in a digital age and has no use in modern day society. Ironically it’s the banks still pedalling this drivel yet stocking gold out of your peripheral view. We’ve been saying for months now, that it is going to be in the interests of banks across the world to want an increase in the price of gold – perhaps even a minimum price. With all the possibilities that could play out our view based on the research and current information available is as follows:
If The BIS do implement on the 28th June, then there is a possibility that gold price could initially dip. The extent would be very short term, and dips wouldn’t last long before they are bought. There is no logic to this statement, however it is a classic trick to shake out the weak longs, and we know by this time it has to be from LBMA banks. We believe this may occur several times in the short term in early Q3. It is then our belief the price of gold will creep up towards the end of Q3, again with any dips bought quickly and aggressively. If the date of Jan. 1 2022 is implemented for London, then we would expect seriously volatility in Q4 of this year as there is a massive battle to exit unallocated short positions ahead of the deadline. This smashing will likely occur between opening and closing of major exchanges, or bank holidays when liquidity is thin.
From here we see gold price around the $2400 level as a minimum by the end of the year. This is a conservative target albeit gold’s trajectory and percentage increments since it’s bottom could project higher if it remains in the fairly narrow uptrend band. We would also expect the dollar to behave inversely proportionately to that of gold, following Basel III announcements with little doubt that if the worldwide plan is for gold to become stronger, it will only make the dollar weaker. If inflation continues to run out of the Fed’s control this figure could easily be north of $2500.
From Jan. 1 2022 (assuming implementation) we see gold beginning leg two of a three legged step up in price. By early 2022, the derivatives situation should be fully known and if paper gold no longer exists or exists in opposite ratios to current physical/paper, then this trajectory of price could steepen considerably. At this juncture is our belief that technical indicators (if people still use them) in this phase of the bull run will be useless. We believe this move higher will be driven by the physical markets in the East of the globe who at this point will almost have a monopoly. In January 2023 when Basel IV rules are due to be implemented, after Basel III total compliance we would expect gold to begin leg three of its final run higher. As we all know in bull markets, the final leg up is the most explosive. How high it goes depends strongly on the dollar and whether it exists as the world reserve currency at this point in time. By mid 2022 we also predict that gold and by association, silver will be extremely difficult to purchase as physical supply dwindles, and premiums on any available metals will be huge. Placing a price on what gold could go to we will not be doing until we see these scenarios play out.
The Basel III implementation has the potential to send gold and silver prices considerably higher, destroy the dollar and shift power from West to East across the globe. It’s design was primarily to prevent another banking collapse like we experienced just over a decade ago. Notwithstanding this, I would find it difficult to fathom the bigger picture wasn’t part of that original design when world debt was beginning to spiral out of control.