WILL INDIA REALLY HAVE MUCH IMPACT ON GOLD PRICES IN 2017?

Written by: Avery B. Goodman

There seems to be some new, seemingly crazy, action by the PM Modi administration in India every day. Last month, for example, they capriciously demonetized the primary forms of cash used commercial transactions in India. It was a stupid thing to do. At the least, it was carried out in a very incompetent manner. It led to chaos, as banks and citizens ran out of cash. Some truckers were even unable to find sufficient cash to pay for fuel and had to abandon deliveries. It was a bit crazy… and economists now expect the demonetization of 86% of India’s money supply to cost several GDP percentage points. Not the smartest way to a run a country. Certainly not a wise method of developing one.

Once someone gets a bad reputation, like that, it is easy for people to believe the worst about him. Whether he deserves it or not, Indian PM Modi has gained the reputation of a madman, or a fool in some western business circles. Naturally, therefore, that has made it easier to plant stories in the business news media hyping up some additional alleged madness. The Indian Finance Ministry, in a show of determination, stated on December 1st that new rules would require that gold be purchased out of income disclosed on prior tax returns, or using exempt income that isn’t taxable (like agricultural income), or using reasonable household savings, or must be “legally inherited from explained sources.”

Contrary to the hype, the supposedly “new” rules actually change nothing. No doubt, the Indian government will become more aggressive in enforcing the law. However, the “new” rules are merely a restatement of old rules that already existed. It has never been legal to defraud the Indian government of taxes. It has never been legal to buy assets, be it gold or anything else, with the proceeds of tax fraud. The newly announced rules are essentially a “press release”, a public relations notice, designed to appeal to less wealthy Indians, who have long been irritated by the ostentatious displays of wealthier neighbors.

In truth, the Indian government has added protection that didn’t exist before. For example, each married woman is protected from being required to show how she managed to get up to 1/2 kilo of gold, worth about $18,000. That’s a huge amount of money in India. Each unmarried woman has the right to not be questioned about up to 1/4 kilo or $9,000 worth of gold, also a huge amount for the country. Each man has the right to keep up to 1/10th kilo or about $3,600 worth. No questions will be asked about such amounts, even if the stuff really was bought with black money. On top of that, an unlimited amount of inherited gold can be kept, free and clear, and tax policemen now have the discretion to “look the other way” at even higher amounts.

Obviously, the Modi government cannot hope to win reelection if it terrorizes the whole Indian population. Even if it wanted to do that, India’s constitutional protection against illegal search and seizure, while not as strong as in the USA, is still substantial. The government does not have an unfettered right to invade people’s homes, businesses and safe deposit boxes simply because it wants to. It faces the same problem as tax authorities in the USA and elsewhere. It must justify such a search and obtain a warrant in all but the most unusual situations.

Indian law can be summarized as follows:

“Legislative intrusion [into the right of privacy in India – AG] must be tested on the touchstone of reasonableness as guaranteed by the Constitution and for that purpose the Court can go into proportionality of the intrusion vis-à-vis the purpose sought to be achieved. (2) So far as administrative or executive action is concerned it has to be reasonable having regard to the facts and circumstances of the case. (3) As to judicial warrants, the Court must have sufficient reason to believe that the search or seizure is warranted and it must keep in mind the extent of search or seizure necessary for protection of the particular State interest. In addition, as stated earlier, common law did recognise rare exceptions for conduct of warrantless searches could be conducted but these had to be in good faith, intended to preserve evidence or intended to prevent sudden anger to person or property.”

Under Indian law, like that of the United States, people are deemed innocent until proven guilty.  The state must prove that black money was used to buy gold before it can be permanently seized. Don’t get me wrong. I have little doubt that Indian tax police will target and be unfair toward certain people, especially ostentacious rich ones who support the opposition. It will also target businesses that are washing demonetized notes, especially those exchanging them for gold. But although the flamboyantly rich, and black market traders, buy what seems like ridiculously large quantities of gold, the vast majority of gold demand comes from tens of millions of average middle class people. The government won’t be bothering them. It also won’t be bothering rural farmers who purchase about a third of the gold imported into India each year. I might add that the income of the farmers is agricultural income and exempt from tax.

Indian tax authorities have always sought warrants to search and seize gold from targeted people. It has been doing that for decades. For example, all the way back in 1996, under the now-opposition Congress Party, it seized 28 kg. worth of gold, allegedly purchased with black money acquired through bribery. The gold bars were in possession of the ostentatious widow of the late Tamil Nadu chief minister J Jayalalithaa at the time of seizure. The case is still pending in the very slow Indian court system.

The idea that the Indian government will terrorize a lot of middle class Indian families, looking for illicit gold, is ridiculous. The announcement is being intentionally used for its shock value and has been deliberately misconstrued. Remember, misinformation is one of the most powerful tools used during major market manipulation events. Misinformation can and is used to panic people, especially over-leveraged gamblers. If they swallow the nonsense, and it appears gamblers in NYC and London are swallowing it right now, the open interest in gold derivatives can be reduced at a minimal cost. That lowers the exposure of casino banksters to higher gold prices.

Once you look at the what is really going on, you see a very different picture from the one that is hyped by naive western speculators who spread the stories, and the manipulators who invent them. In truth, India recently scrapped disruptive requirements that required 20% of all imported gold to be re-exported. According to a highly placed Reuters’ source, they will scrap other gold import limitations next week. It will soon be considerably easier to import gold into India. If not for the demonetization that reduced the money to buy with, demand would immediately rise. As it is, demand will still rise, though it may fall marginally in the short term. Let’s face it, after the recent actions of the Indian government, few law abiding (or non-law-abiding) people are going to be saving rupees.

It is important to take the trouble to carefully calculate the true Chinese gold demand, because once you do that, everything becomes crystal clear. You need to correct for the intentional or unintentional, but nevertheless massive, multiple under-count errors made by GFMS. Once you do the numbers, you’ll find that the end result is a huge gap between worldwide gold demand and supply. It is so large, in fact, that not even the complete elimination of the 800 tons of gold that India might normally be expected to buy this year, would fill it.

In other words, even if India somehow didn’t buy one more ounce of the yellow metal, there would still be an unfilled gap of nearly 1,000 tons at prices below $1,200 per troy ounce. Notably, this demand calculation does not include the possibility of increased demand for gold in Turkey. Its citizens have just been instructed by their President Erdogan to “buy gold and lira”, not foreign currencies. The numbers also exclude next year’s probable increase in Islamic gold demand now that the “Shariah gold standard” has finally been set. No consideration is also given to the probability that instability in Europe, especially due to the upcoming election in France, could massively increase demand in that nation.

Gold prices will begin to climb sharply once the current manipulation event runs its course. An objective look at the real numbers makes it clear that some entity has filled a huge and growing supply gap for at least 4 years running. That not-so-mysterious entity, in all probability, is the US Treasury, which is accomplishing it mostly through arrangements with the Bank of England. There is little question that very large swap liens, taken against gold reserves held at Fort Knox, have been deployed to fill the gap.

Things are changing. First of all, even if the willingness to piss away America’s gold were still there, at the current burn rate, the entire gold reserve will be gone within a maximum of 2-3 years. However, the new Trump government includes several highly placed gold standard supporters, most notably the man who is shaping up to be the single most powerful influence on President-elect Donald J. Trump, Vice President-elect Mike Pence. The speed by which casino bankers lose unfettered access to America’s gold will be based primarily on how fast Trump can reverse the Obama era executive orders.

The quasi-secret order, allowing access to America’s gold reserves, was probably signed on April 11, 2013. As soon as they get to it, it will be reversed. The Obama era, during which our golden treasure was foolishly pissed away in profit-making schemes, concocted by NYC and London banksters, is now over. That is the fact that will dominate pricing in 2017 and beyond, not whether India changes its gold imports by a few 100 tons of gold, more or less. It is impossible to know the exact bottom in a market manipulation. However, now or soon is the time to buy, not sell. For a more detailed explanation of what is happening with respect to the Trump administration and our gold reserves, click here.

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WHAT HAPPENED TO GOLD & THE U.S. DOLLAR AFTER ITALY’S “NO” VOTE?

Map-Europe emphasis Italy

Written by Avery B. Goodman

If natural market forces were permitted to run free, naive folks would win the game. Insiders would lose a fortune, and independent gambling speculators would make a killing at the expense of well-connected casino operators (a/k/a derivative-issuing bankers). What possesses otherwise intelligent people to believe that this would ever be allowed? Was anyone naive enough to expect anything other than a major intervention by central planners to support the Euro?

There are always ridiculous excuses given. From technical analysis, to astrology to Elliott waves, it is all nonsense. What we saw was pure market manipulation and nothing but that. When you see the Euro rise when it should fall, you can bet that two institutions are involved. I am talking about the European Central Bank (ECB) and the Bank of International Settlements (BIS). I didn’t mention the U.S. Treasury or the Federal Reserve. No doubt, they had some peripheral involvement as they always do, but mostly, they were probably observers.

European institutions have the kind of open, obvious and blatant disregard for honest markets that no equally corrupt American institution could ever get away with. In fact, the BIS has gone as far as touting its gold and currency manipulation prowess! For example, back in 2008, it issued a brochure for consumption by central bank policy-makers, and on page 17, it advertised that “our products” include “Gold & Forex Services — Interventions”!  In other words, they blatantly offered to rig gold and currencies upon request! This document came to light only by virtue of the hardworking and ever-watchful sleuths at GATA.

That was a long time ago. Let’s fast forward to now. The Euro’s exchange value has moved upward in direct opposition to the real market forces that should be weighing it down. The “no” vote in Italy has serious ramifications on the continued existence of the Euro currency, and its exchange value should have dropped like a stone. Instead, it went up. In contrast, the exchange value of the US dollar and gold, to the amazement of some (but not my readers) went down.

The reason is simple, and it has nothing to do with a sudden increase in confidence or desire to hold Euros. Just the opposite. However, a group of bureaucrats want the public to think otherwise. They want to bury the Euro on a schedule they create, not on the one that is determined by market forces. In order to do that, they hired some banksters, probably through BIS, paid them a lot of money, and watched as market “magic” was done. The exchange value of important non-Euro currencies, like the dollar and gold, suddenly came under attack. The now-zombie Euro, in contrast, rose against all odds.

This situation is a little more complicated than the usual manipulation. The same bankers are (were) engaged in inducing a dollar short squeeze not too long ago. The upward dollar manipulation has probably not quite run its course. It doesn’t matter. The juicy profits stemming from a day to a few days of government subsidies combined with an opportunity to front-run a sure-thing more than makes up for any delay. There is nothing like big covert private profits to go along with a fat payment for services rendered.

None of it should worry gold investors in the medium to longer term. Brussels does not wield the kind of market power that Washington D.C. does. It is a host of different nations, often jealous of one another. Each has its own, often conflicting economic view, and each has separate control over separate gold reserves. The European globalists don’t need to be as powerful or ambitious as their American counterparts. They don’t need to control the gold or dollar currency markets for very long.

Brussels’ bureaucrats simply want to keep their zombie currency going even in death, just a little longer. If they can just keep things moving long enough, the transition into what is coming will be smoother, and can occur at a time when well-connected players are ready for it. The banksters are those well-connected players, and a day or two respite from their dollar short squeeze activities doesn’t harm them. In fact, it gives short position holders a respite to make the mistakes that will soften them up for more attacks.

In a month or two, the dollar really will fall against the Euro. You may think that’s an amazing statement, given that I just called the Euro a zombie currency. But, none of it really matters until the very end. A zombie can still attack a living human and eat his brain. It doesn’t matter that the zombie is dead. These interventions are significant because they will convince folks that the Euro isn’t going away (even though it is). The Euro will disappear from the world in 2 – 4 years, but that doesn’t mean it can’t rise against the dollar beforehand. We’ll discuss that another day. For now, let’s just say there will be a lot of rising and falling before the zombie is buried.

What matters most now is market rigging. I don’t have space to describe how it’s done. If you are interested, read “The Synod” and find out.  Recommend it to friends and family. Lend your copy to others. Express your enthusiasm by leaving a review on the book’s Amazon.com and other book retailer sales pages, as well as by writing on blogs, Facebook, Twitter, etc. Word of mouth and the power of the pen all help to popularize ideas. A lot more people read fast-moving thrillers than intense financial articles like this one. Yet, everyone will be critical when it comes time to broaden the discussion of honest money and markets.

In any event, the recent “no” vote in Italy should have pounded the last nail into the Euro coffin. That hasn’t happened.  The ECB will now distribute sufficient new cash to keep most Italian banks from failing. However, it doesn’t have the resources to mount attacks on the yellow metal for long periods of time. Unlike in the USA, the constituent central banks of Europe are separate. Many are acutely aware that gold reserves will be critical to insure public confidence. European governments will not willingly sell their reserves. Financial Eurocrats, thinking about supporting the Euro by pissing away national gold reserves, should remember that Europe is the birthplace of the guillotine.

At any rate, the market manipulation of the euro’s exchange rate has been a success. The intervention was designed to prevent a sudden and complete collapse. It was not designed to make a long term impact on the propensity of investors to choose gold or even the U.S. dollar. The main factor in gold pricing, going forward, is going to be the closure of the US gold reserve as I discussed in my prior article. Gold prices should begin to rise by late December, 2016 or before, as the cutoff of US government gold draws near.

Going forward, remember that it is easier to manipulate the paper gold market upward than downward. That is because of the physical delivery that comes into play when you manipulate it below the equilibrium between supply and demand. Therefore, watch carefully as government-subsidized downward manipulation is replaced with privately financed upward manipulation. For example, if bullion banks know that supply/demand meets at $1,600 (a guesstimate), they may push prices to a $1,700 floor (where no deficit will exist) and then on to $2,100. Then, they can take short positions, letting prices plummet back to $1,700. Rinse and repeat, over and over, upping the floor and the top, depending on what their algorithms suggest, as the willingness to buy at higher prices deepens with time.

What should a person who is concerned about saving for the future of himself and his family do? We live in an uncertain world, and unless you are tightly connected to the powers that make big financial decisions, you should not engage in leveraged speculation in anything. Yet, amid the confusion, one certainty stands out. In the very long run, fiat currencies always devalue. Thus, a certain percentage of your savings should be in gold, silver and platinum, rather than in Euros or dollars. These assets should be bought after big price declines, not big price increases. Now is a good time to pick them up on the cheap.

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The Synod is a conspiracy of 8 large international banks who seek to control gold, stock, bond and commodity markets all over the world. Jack Severs runs for his life when he learns too much, as the most sophisticated surveillance system ever built is deployed to track him down. As the ever-tightening noose closes, he struggles to uncover evidence to save himself and his world from collapsing! An exciting, fictional, fun and educational thriller about the banking cartel. Learn about the methods used to manage the price of gold and every other market on the planet, and how this affects business, politics and daily life in both the fictional and real worlds.

A perfect gift for the holidays!