Decoupling Likely in Precious Metals Markets

VANCOUVER, Canada (Bullions Bull Canada) -- As massive supply-deficits and vanishing inventories lead to greater and greater stress in our totally corrupted precious metals markets, these dynamics push us toward one of two potential "implosion" events.

One of these gruesome endings is obvious: a formal default in the gigantic futures markets for precious metals, which now completely dominate the real, legitimate markets.

The other path toward implosion is less direct, less obvious and thus much less discussed. However, for forthcoming reasons it is also (by far) the most likely manner in which the phony/fraudulent "paper" markets for gold and silver will be discredited, and (more or less) exposed for what they really are.

This second path is a "decoupling" between the paper prices for gold and silver and the real price for gold and silver in legitimate, "physical" markets.

Why is this more likely? A better way to answer that question is to itemize the list of reasons why the Establishment in general (and the Bullion Banks) in particular would want to avoid a formal default in their cherished, paper markets -- at any/all costs.

These reasons all ultimately trace back to a single theme: a formal default would expose all of the corruption and crime in these markets, and (equally important) legitimize/validate the growing voice that has been clamoring about the blatant corruption and manipulation in the paper bullion markets.

With this clamor having now begun to spread to the mainstream media itself, the threat to the Bullion Banks who manipulate these markets has never been greater.

What does a formal default in these markets imply?

To begin with, it would expose a massive campaign of lies. How many (mainstream) articles have been written claiming that precious metals markets are amply supplied with physical inventories, if not oversupplied?

How many mainstream articles have been written alleging that gold and/or silver are "overvalued"? How many more descend all the way to the hyperbolic absurdity that these (grossly underowned) assets are "in a bubble"?

Asserting the precise opposite of reality, countless thousands of times is not "innocent mistake"; it is malicious propaganda. And it is conduct for which the banksters themselves are on the record to confessing.

In "The Great Gold Debate" which occurred in 2010, former Goldman Sachs banker and present head of the CPM Group Jeffrey Christian publicly confessed that the spreading of malicious propaganda was a regular tactic of these Bullion Banks going as far back as the 1990s.

The particular example cited by Christian was the disastrous sale by the Bank of England of roughly half of its gold reserves at under $300 an ounce. Legions of critics accused the BoE of undermining its own gold sale by announcing in advance its intention to dump all this gold onto the global market in "one gulp."

Christian defended the Bank of England. He pointed out that the Bullion Banks at that time were regularly (and maliciously) spreading rumors that various governments were "about to dump gold" onto the market, in order to manipulate bullion prices lower. Christian asserted that this "forced" the BoE to announce its sale in advance, in order to thwart more of this rumor-mongering by the banksters.

Naturally, a formal default in any bullion market would expose the fraud/corruption of the current generation of banksters as well as the pseudo-regulators who have facilitated this corruption.

A formal default indicates a market that has literally blown up, much like the same cabal of banksters blew up the global financial system in 2008 (via more massive fraud/corruption).

Lastly, a formal default would necessitate substantial (if not total) reforms of any future "futures" market, which the banking cabal would inevitably attempt to cobble together out of the rubble of their past crimes. It is, in every respect (for the bankers) a worst-case scenario.

This brings us to "decoupling." What is this? It is a single (corrupt) market splitting into two markets: a discredited/phony paper market and a legitimate market trading real metal at legitimate prices.

Understand that either a default or a decoupling is absolute proof that we have been dealing with totally artificial prices for gold and silver. No one is asserting that "there isn't any" gold or silver left to mine out of the Earth's crust.

Quite the opposite: Dozens and dozens of mining companies are withering on the vine because despite having proven reserves of gold and/or silver, they can't get financing to turn those deposits into mines because metals prices are far too low (to bring adequate supply to the market).

A default or decoupling would prove beyond any doubt that those "low prices" were fraudulent prices. This brings us to our final topics for analysis: How would/could a decoupling occur; and do we have any evidence it is occurring?

The precise evolution of a decoupling event cannot be predicted, because there are too many variables and permutations involved. However, one thing we know we certainly will not see is to wake up one morning, open the newspaper and (suddenly) see two "official" prices for gold/silver: the "paper price" and the "real price." Such truth in advertising is not what we have come to expect from the Corporate Media (which owns all of the newspapers).

In other words, decoupling must begin as an unofficial event. It will be a steady drip, drip, drip: anecdotal reports of large/growing and persistent "premiums" being paid by any buyers who actually want to end up with real metal in their hands. This would/could be combined with opposite anecdotal evidence of large/growing and persistent "discounts" for "paper bullion" products.

In fact, a decoupling would/could evolve from exactly the sort of anecdotal reports we are now seeing today, on a daily basis.

One cannot read any article on the gold market without seeing reports of "soaring physical demand" leading to multiyear highs or even all-time records in the "premiums" being paid in order to obtain real bullion.

Simultaneously, we read of "growing discounts" in the paper-bullion markets.

Perhaps most important of all, we now have the mainstream media implicitly declaring that we already have "two markets" for gold. What is the latest antigold talking-point from the Corporate Media? That gold is now "in a bear market." Really?

By definition, high demand is a bull market -- the bulls stampeding into a market, with such demand being the empirical proof. Yet in the same Bloomberg article asserting "a bear market in gold," we see the following quote (and several others that echoed it):

"Physical demand has been tremendous in a way I haven't seen for a number of years," said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc.

Clearly, we currently have a bull market for physical gold (and silver). So when Bloomberg (and all the rest of the Corporate Media) yammer on about "a bear market in gold,;what gold market are they talking about? That's right: their own paper market -- empirically proven by the recent collapse in demand for paper gold.

It is the Corporate Media itself that is now presenting unequivocal evidence that we already have "two markets" for gold (with similar rhetoric/evidence in the silver market). So let's attach some numbers to this decoupling.

As of this writing, the largest of the paper-gold funds, SPDR Gold Shares ( GLD), is trading at approximately a 3.5% discount to the spot price, while the largest paper-silver fund, iShares Silver Trust ( SLV), is trading at roughly a 4% discount.

Meanwhile, anecdotal reports of still-increasing premiums for real metal continue to flow in: Newly minted Silver Eagle coins are selling at a 24% premium to the silver price right now. ... Even though silver is selling for $23 per ounce right now, it will cost you almost $29 per ounce. ... A few months ago we could buy silver for just 4%-5% over the spot price.

Decoupling between the paper markets and the real markets is now approaching as much as 30% in the silver market, with the gold market not far behind. Equally important, this spread has soared by as much as 20% just in the past couple of months.

Decoupling is coming. The only question is, is it already here?

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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