This May Create A Massive Upside Breakout In Gold

What I am focused on right now is this whole paper gold market and the fact that the gold in the banking system has been hypothecated and rehypothecated so many times that nobody knows who owns what.

We’re seeing more and more evidence that the market is getting tighter and tighter, and I believe there will be a run on physical gold because of this.  When these various people and entities find out they don’t really own the gold they think they do, there is going to be an amazing reaction….

That could be the thing that will conceivably break the gold price wide open to the upside and away from this stranglehold that the paper market has had on it.

People keep asking me, is the bull market in gold over?  This is exactly the kind of mindset they wanted to create with this ridiculous takedown which took place a couple of weeks ago.  That was the most artificial paper smash in history.  It worked in the sense that a lot of people that don’t fully understand the fundamentals of gold are really shaken and wondering if they should remain in the space.

But people need to keep gold as insurance because the financial system will just keep edging closer and closer to collapse.  I see all of these economic numbers emanating from the United States, and the inconsistency is staggering.  The latest one that had me shaking my head on Monday was the report of a massive increase in service spending, and this was in the face of relatively weak disposable income and a collapsing savings rate.

I don’t consider that the least bit bullish.  In fact I consider that catastrophic from the longer-term perspective, because you have to ask yourself how long can that continue?  But the stock market went up and everyone acted like everything was just fine.  Then, on the heels of that report we had the Dallas Fed number which just literally imploded.  It recorded the biggest drop and miss on record.  So there is all of this inconsistency.

But as you know I have believed for the longest time that there is no vitality whatsoever in the US economy.  The only thing keeping it afloat is the US is running trillion dollar plus deficits, the vast majority of which is being monetized at interest rates which are absolutely preposterous given the longer-term risk to paper in the United States.  This is clearly unsustainable.”

Eric King:  “What about the recent action in gold, John?”

Embry: “Gold coming off the lows that were created two weeks ago, it’s impressive in the sense that generally when you take a beating like that it takes a long time to repair itself.  But in this instance the physical buying worldwide was just astounding, and KWN has done a wonderful job reporting on that.

I was particularly fascinated by Keith Barron’s comments about the explosive demand in Japan.  But that makes sense.  When you’ve got a government telling you they are going to double the money supply, and they are going to raise the internal inflation rate to 2%, and your bonds yield nothing, I can’t understand why every Japanese person isn’t selling their bonds and buying real assets like gold.

I firmly believe the bottom is now in, but people are still fussing because of the terrible beating the gold market and the shares took.  But very simply we are talking about dollars on the downside and hundreds if not thousands of dollars on the upside at this point.  So what are people worrying about?