Gold prices are going to rise this year, predicts veteran commodities trader Vince Lanci, founder of Echobay Partners.
“The last three days have reconfirmed my commitment to a much higher gold price in 2018. We are making higher lows for the year – the recent behavior made me nervous, but something very telling happened in the last three days,” Lanci said in a December interview with The Street.
If his predictions are right, gold will hit $1,700 an ounce or higher in 2018, a $400 rally from the current level of $1,300 an ounce.
“On Tuesday we had a short covering rally. And Wednesday there was a 10,000 contract increase in December – that’s very unusual, that is an over 2.3 percent increase in open interest,” Lanci explained in an interview initially printed before the Christmas holidays.
Gold prices were down in December, as investors chose more stocks because of US President Donald Trump’s tax plan nearing completion.
Many investors in gold say the price of the precious metal is artificially curbed because of the paper gold trading on Western exchanges.
According to Claudio Grass, of Precious Metal Advisory Switzerland, the total trading volume in the London Over-the-Counter (OTC) gold market is estimated at the equivalent of 1.5 million tons of gold. Only 180,000 tons of gold have actually been mined up to today.
“The paper scams in London and New York will either blow up when the paper price of gold drops to zero or when just a fraction of investors insists upon receiving physical gold in return,” Grass told RT.
BRICS countries led by Russia and China are considering launching a gold standard based on physical gold.
“This will present a viable challenger that could over time lead to a break up of the current system since the West will likely still trade paper gold in the meantime,” said Grass.
US gold of low purity & that’s why audit of reserves will never be allowed
The United States doesn’t let anyone see its gold reserves. Even if the Treasury has the number of billions it claims, they are not tradable, warns Singapore’s BullionStar precious metals expert Ronan Manly.
The US government claims to hold 8133.5 tonnes of physical gold in its official reserves. Fifty-eight percent is reportedly held in Fort Knox, Kentucky, 20 percent at West Point in New York State, 16 percent is said to be at the US Mint in Denver, Colorado and five percent is held at the NY Fed.
“The entire story around the US gold reserves is opaque and secretive. There has never been a full independent audit of the US gold reserves, and the custodians of the gold, the US Mint and the Federal Reserve of New York will not let anybody into the vaults to view the gold or to count it,” Manly told RT.
However, despite the numerous accusations against the US Treasury that it has much less gold than it claims, there is another reason, according to the expert – US gold is of bad quality.
“Even the details that have been provided on the supposed US gold holdings show that a majority of the gold bars are low purity and in weights that don’t conform to the industry standard ‘Good Delivery” gold bar specifications,” says Manly.
“So even if the US has the amount of gold it claims to have, most of this gold would not be acceptable for trading on the international market, and could only be used in swap transactions with other central banks that wished to swap Good Delivery gold bars for low purity and unusual weight US held gold bars,” he added.
“Firstly, proof of lower US gold reserves than claimed would add pressure for a full independent audit of all US gold reserves. It would also put the spotlight on the gold reserves of other major trading blocs such as the eurozone and China and Russia, and open up a debate as to what is the role of gold in the international monetary system. Which is something the US government constantly tries to avoid,” the expert says.
“It would also then refocus attention on international holders of US dollars pre-August 1971 when Nixon closed the gold window because after all those outstanding dollars held at the time by foreign central banks are still technically convertible into gold at the official gold price of the time,” he added.
Moreover, if the US Treasury gold holdings are falsified, it would put additional pressure on other central banks around the world, which have gold in the United States.
A proper check of the US gold reserves should include weighing all gold bars, checking assays, and publishing a full weight list in the public domain; the audit would have to be conducted by an entirely independent auditor. It will never be allowed by Washington, Manly says.