Our Australian friend, “Turdle”, recently brought all of this to my attention. What we are about to discuss will truly have significant and consequential effects on the global trading and pricing of gold and, by extension, silver. Pondering the potential impacts of the Pan Asia Gold Exchange will require some time and mental clarity. If you feel you currently have appropriate levels of both, then let’s proceed with the discussion.
First, some background. The Turd has been of the opinion for years that the forward-thinking Chinese are not necessarily planning for tomorrow, they are planning for 20 years from tomorrow, 50 years from tomorrow and 100 years from tomorrow. For example, if you listened to the “Time Monk Radio” interview of Jim Rogers, you heard me ask Jim about the possible, future “gold-backing” of the renminbi by the Chinese. I believe that one of the reasons the Chinese central bank is buying gold is to accumulate gold reserves for this purpose. Of course there are other reasons, too, but at some point in the future, China will sponsor a new regional or global currency that will be at least partially backed by gold. As part of this plan, Beijing is currently developing alternative futures and physical metals markets. The Hong Kong Mercantile Exchange is part of this plan. The soon-to-be-opened Pan Asia Gold Exchange is another.
It is this Pan Asia Gold Exchange (PAGE) that is the short term game-changer. By providing the world with a physical settlement and pricing structure outside of the bounds of the current LBMA/Comex scheme, the PAGE may, once and for all, allow for true price discovery of physical metal. The PAGE will make the current pricing system obsolete as global investors seek true physical metal that is unencumbered by leasing, titling and derivatives. A good starting point for your understanding of this concept is this 15-minute video from James Turk’s GoldMoney site. Watch it right now.
Turk went on to have a follow up conversation Richard Poulden. Mr. Poulden is the Director of Power Capital Financial Trading. PCFT is the only private company allowed as an investor in the exchange. It’s safe to say that he knows a little bit about the exchange, its dynamics and its opening date.
Now, I need you to think about what this all means and what the ramifications will be for the price of precious metals in 2012. Many have wondered how gold could ever possibly trade to Santa’s target of $12,000/ounce. Under the current price suppression scheme of fractional bullion banking, it would be a significant, if not insurmountable, challenge for it to get there. If the PAGE succeeds in becoming the preeminent pricing mechanism, $12,000/ounce may prove to be a conservative estimate. No, gold won’t trade to $12,000 in 2012. It might make it there by 2020, however. In this context, consider, too, the news last week that Venezuela was repatriating their gold from London. Does El Commandante want to get his little fingers on his gold before the LBMA house of cards crashes to the ground? It’s what the hell I’d be doing if I were him.
My questions for you are some of the same that Senor Chavez undoubtedly asked himself:
1) Do you own physical gold?
2) Where is it stored?
3) Is it in an “allocated” or “unallocated” account?
4) If it’s allocated, have you ever actually seen it? Have you ever actually touched it? Have you ever tried to withdraw it?
5) Do you own shares of GLD and/or SLV? Are you confident that they “own and hold” all of the gold they claim?
6) Do you trade leveraged paper ETFs like AGQ or UGL? What is your plan should the Comex fail?
My answer to these questions is simple: Physical is physical and paper is paper. You don’t own it unless you hold it. Those relying upon the permanence of the status quo are about to receive a very rude wake-up call. Those of us who own and stack physical metal are about to see the fiat-conversion value of our metals skyrocket. The time is now for you to prepare for this historically transformative event.