LBMA Implosion By Reversal of its Own Gold Leverage

By: David Jensen | Fri, Dec 5, 2014
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MP3: Discussion between Jay Taylor and David Jensen on Monday December 3, 2014.

Discussion notes:

1. Gold Market: GOFO negative, surging gold lease rates, gold price backwardation

  • 1-month GOFO or Gold Forward rate (GOFO = LIBOR - gold lease rate) has been negative for 30 days now and 6-month GOFO has been negative for 14 days for the first time on record.

  • 1 month gold lease rate surged from 0% on Sept 17 to 0.72% on December 1 - indicator of physical gold shortage both in London and NY.

  • Price backwardation, where the gold spot price is higher than the near-dated forward contract price, was theoretically argued not to be possible because of high gold stock-to-flows ratio (i.e. 5+ billion gold ounces already above ground).

- Gold should immediately be sold on spot market and bought with forward contract to extinguish the backwardation to secure guaranteed dollar profit - yet this isn't happening.

Gold price backwardation is a condition where gold is not bidding for dollars - guaranteed profit should be taken in dollars - an indication we are building toward currency crisis.

"... This is the key to EVERYTHING!!! It is not "gold liquidity" that the bullion banks create... it is DOLLAR LIQUIDITY. Dollars bidding on MSFT stock set the value of that stock. If dollars are frantically bidding on MSFT (high velocity), the stock skyrockets. If dollars stop bidding for MSFT all at once (low velocity), the price falls to zero. This is true for everything in the world except gold.

Gold bids for dollars. If gold stops bidding for dollars (low gold velocity), the price (in gold) of a dollar falls to zero. This is backwardation!

Fekete says backwardation is when "zero [gold] supply confronts infinite [dollar] demand." I am saying it is when "infinite supply of dollars confronts zero demand from real, physical gold... in the necessary VOLUME." So what's the difference? Viewed this way, can anyone show me how we are not there right now? And I'm not talking about your local gold dealer bidding on your $1,200 with his gold coin. I'm talking about Giant hoards of unencumbered physical gold the dollar NEEDS bids from.

Think about it. You can't make it cold in July by simply rigging the thermometer....

2. Gold market trading volume

3. Leverage in the LBMA will destroy the LBMA

4. Deflationary Collapse and John Exter's Warning




Author: David Jensen

David B. Jensen, P.Eng., LL.B., MBA
Vancouver, BC

David Jensen

David Jensen, P.Eng., LL.B., MBA, is a Professional Engineer with a degree in Engineering from the University of Waterloo in Canada (1987). He worked through 1993 on the F-5 Fighter Overhaul program and the Bombardier Regional Jet programs. Mr. Jensen then graduated with a LL.B. degree in corporate and commercial law from the University of Calgary (1997) and an MBA from Univ. of B.C., majoring in Logistics and Supply Chain Management (1999). Returning first to aviation then, after reading Austrian School Economics, Mr. Jensen transitioned to the mining industry from the aerospace industry in 2004 first through his mining industry consultancy, then as Vice President of Corporate Development for Western Copper Corp., and most recently as President and COO of Skyline Gold. Mr. Jensen currently serves as President and COO of a private mining company and provides strategic, operational, risk assessment, and precious metals consulting services through his consultancy, Jensen Strategic.

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