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Monday, February 17, 2014

The price of Gold is dependent on one thing:

There's currently a lot of talk about the end of the gold "bear market."  Gold is now back above its 200 day moving average.

The Love Trade Endures in the East: In January, 246 tons of gold were withdrawn from the Shanghai Gold Exchange, as China continues expressing its love for the precious metal. This marks a record level of gold deliveries on the exchange as well as a significant increase over the same time last year.

In addition, you can see on the chart below that January’s total also exceeds world mining production for the month.

Chinese Demand for Gold Remains Robust

 And, of course, the Fed continues to print money at unfathomable rates

 All this is great for gold.  And yet, and yet, and yet:

All this also misses the point of what drives gold.  What drives gold is so simple, yet so impossible to quantify.  What drives gold is a concept not a number.  What drives gold is impossible to trade against.  But what drives gold is easily the most powerful force in all the markets, and has been so throughout the history of trade.

What drives gold is TRUST.

As long as the Central Banks along with the media outlets which they control, (which is to say all major print and television outlets), can perpetuate the story that THEY are firmly in control of the world economy. and that they can and will ensure that the entire first world banking/trading institution is basically sound, gold will not reach new highs.

But once there is a real crack in the Trust that the First World Banking Cartel can and will ensure a stable lifestyle for the majority of First World citizens, gold will resume its relentless rise which will not culminate until Trust has been completely abandoned and then slowly regained.

When will that happen?

My guess is it won't be all that long from now.  But that's just a guess.  Trust was breached in 2008, and then the breach was papered over with tens of trillions of dollars of taxpayer money.  The paper was supported by the spinning of an absurd narrative that this massive transfer of wealth to the wealthiest was restoring a foundation of comfort and well being for all.

I don't control all the world's media outlets so I can't say with any surety when  the absurd narrative that they perpetuate will eventually be rejected.

It will probably take another exogenous event that shakes mass Confidence and puts a crack in that blind Trust.

But events occur all the time.  You only need to read a little history to put your trust in the likelihood of a disruptive event that exposes a mass delusion.

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