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...They Lit The First Candle

Financial Commentator & Former Stockbroker

April 19, 2016

Many of us have waited for today, April 19, as we anticipated the new Chinese daily gold fix and the opening of the ABX physical exchange. Some may be disappointed, others, ecstatic. I will say I am personally pleased because it was almost exactly as I suspected.

Much has happened over the last couple of weeks -- and a lot of it has to do with "truth" being exposed. The "markets" are no different. China, in my opinion, is simply trying to aid in markets determining prices of gold and silver.

Last Friday we got horrifying (from a contrarian standpoint) COT numbers with nearly record numbers for commercial shorts. With history as any guide, gold and silver should have already been slaughtered, they have not been. In fact, we now have silver and gold at nearly one-year highs and mining equities exploding. Yesterday saw a dozen or more juniors up 25%++ for the day!

As I have maintained, I believe today's action will become more frequent with the Shanghai physical demand pushing prices higher. I believe they lit the first candle of truth today, other candles will follow until the light switch gets flipped on. COMEX/LBMA will either go along in price or they will be arbitraged completely out of inventory. As I wrote several weeks back, "what good is a contract that cannot perform"? It is very possible China will let this "stew" for a while and allow the markets time to adjust to real and free pricing ...only then do I see China coming out with a gold backed yuan. If they were to do that today, it would be a declaration of war on the U.S. hegemon, if they wait, they can have cover and say "hey, it was global free markets that pushed gold out of sight".

As mentioned above, commercials are very short gold and silver now…and they have lost $billions just today. Maybe they continue to throw paper at gold and silver, but Shanghai ain't buyin' it! No matter what the apologists say, COMEX can and will default when they can no longer deliver metal. They say "cash settlement" is not a default ...who are they kidding? This is the rally you never sell ...until you are offered a different "paper" (one that is backed by something, anything) that can be trusted. China may be making this offer in the near future!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome [email protected]

Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration. Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.