Bond Market Implosion & Gold Tactics

Graceland Updates

By Stewart Thomson

              

1.      “I cannot overemphasize the critical importance of factoring the bond market into any analysis of the crisis now.”  That was the sentence I started yesterday’s update with, and it’s probably the sentence I should start every update with, for the next six months!    

2.       I see a lot of gold analysts trying to gauge the “gold market correction” but they are seemingly unaware that the bond market just imploded, and Bill Gross basically issued a massive sell signal on his own fund, the world’s largest bond fund.  For the past few months I’ve urged you to understand that when the bond implodes, there would be initial weakness in gold followed by tremendous strength.  Here and now, the words “Gold” and “Bond” must be mentioned in the same sentence, or you are out to gold market analysis lunch.

3.      The conventional view in the public, and a view held by many institutional money managers, is that lower rates produce higher gold prices (correct), and higher rates produce lower gold prices.  Well, sometimes, yes.  Sometimes, no.  Sometimes higher rates produce an upside gold parabola.

4.      On the second situation, higher rates and gold, in a commodity demand-related gold bull market, higher rates are a negative for the price of gold.  In such a situation, gold functions as a commodity, and the economy gets higher prices as demand for goods increases.  The cost of borrowing increases as the demand for loans increases because business conditions are solid.  As the cost of borrowing rises, that hurts demand.  Prices (int rates) for money and the price for goods both fall.

5.      Look out your market window.  Do you see a booming economy, or potential economic Armageddon?  My message to you: the new bankster game is in play, and it’s a big one; the bond market.  Bond market chaos that could send gold stocks parabolic on the upside.  Here’s why:

6.      I coined the term, “The Institutional Awakening”.  The awakening is a bankster game to create a mass mindset of terror amongst institutions, a mindset that further QE won’t work to continue the markets recovery, and instead further QE will see bond market prices stagnate or even fall, while the US dollar falls like a rock.  All in all, a nightmare situation, given the backdrop of the marked to model OTC Derivatives quadrillion dollar.  Marked to model is:  Marked to Lies.

7.      In practical terms, meaning flows of liquidity by institutions, what the institutional awakening means is a mass panic out of bonds and into…?

8.      What the gold community needs to understand is the LAW.  Institutional money managers have written mandates as well as unwritten mandates on what they can and cannot do with their assets.  Pouring money into gold is not on their “oh yeah, let’s do it!” list.   It’s on their “if we dump our assets into gold, then our investors pull out, we get no pay, and we could get charged with securities violations” list.

9.      The history of institutional money flows in a currency and bond panic is a massive flow of liquidity into the stock market.  Having said that, what do YOU think happens to the Gold Price Thermometer of global financial health what that occurs, or is thought to be about to occur?  I don’t think most in the gold community really understand what just happened to the bond market, and what this event means for gold. 

10.  I know that because, other than Bob Moriarty at www.321gold.com and Trader Dan Norcini at www.jsmineset.com, almost nobody is even mentioning the imploding bond market, yet they are conducting one study after another as to why gold “could be in a correction”.  Translation:  “Here’s all the reasons why I just sold all my gold and you should do the same.”  Thanks, but no thanks.  In regards to the bond market, to quote John “Sir Johnny” Templeton, who uttered these words after the first phase of the markets crisis began in 2000,
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