the most explosive story in the gold market ev

Posted at LeMetropoleCafe - Sorry the charts haven't posted

THE MOST EXPLOSIVE STORY IN THE GOLD MARKET EVER

By Adrian Douglas



By far the BIGGEST story affecting the supply of gold since the advent of Central Bank loans, swaps and sales is the Power Crisis in South Africa. It is getting very little coverage but it is HUGE news AND I CAN’T EMPHASIZE THAT ENOUGH. Imagine if Saudi Arabia said that it had power problems and its oilfields were shut down what would happen to the oil price! South Africa IS the Saudi of the gold industry.

The SA government has been disingenuous about the cause suggesting it is because they failed to accurately predict the good economic growth! You can find the true story here which is not pretty.

http://www.politicsweb.co.za/politicsweb
/view/politicsweb/en/page71627?oid=85789&sn=Detail

The old ESKOM management who were experienced has been replaced over the last decade. ESKOM is now managed by people who have almost no experience in electricity generation and they have implemented a policy of purchasing from companies who have implemented Black Economic Empowerment irrespective of their ability to supply coal, or coal of high quality. They have also run down their coal stock piles from 60 days in 2000 to just a few days in 2007. The use of poor quality coal has led to maintenance issues such as leaking boiler tubes. A large proportion of the grid is offline due to maintenance because there is a lack of spare parts.

The crisis is without doubt a monumental tragedy of mismanagement. This problem will not go away easily particularly because it is politically incorrect to say what the reasons for the crisis really are. Until the real problems are recognized they can not be fixed.

The power shortage is not going away any time soon. ESKOM has pledged 90% of power requirement to the mines but the mines in South Africa are very deep, up to 4 Km below ground. They need 50% of their electricity requirement just to refrigerate them and pump out the water. A 10% reduction in power will lead to at least 20% reduction in mine output from the traditional world’s biggest supplier (China has just become the number 1 producer but only due to SA output decline). Anglogold made announcements about going to deeper operations at 6 km below ground. Such efforts and any other mine expansion will now be on hold.

Here is what has happened to platinum since the problems started. Platinum is not held by Central Banks.



And here is what has happened to gold which is held by central Banks.



Gold has tried to rally like Platinum on this MASSIVELY BULLISH news but the gold cartel have tried to put it in concrete shoes.

Look at this BNP-Paribas analysts comment in this Reuters article today

http://www.reuters.com/article/goldMktRpt/idUSL0625136520080206

QUOTE

"There has been a good clean-out of the weak longs in recent days and profit-taking after all the South African and Chinese production problems. I see limited downside in the short term," said David Thurtell, metals analyst at BNP Paribas.

"Gold is getting some safe-haven flows as the equity market outlook is very poor."

END

Now how did that “good clean-out of the weak longs” happen? The Gold Cartel cleaned their clocks for them. Note the statement “profit-taking after all the South African and Chinese production problems” …after all the South African production problems suggests they have now gone away! They are only just getting started.

I can not stress how monumentally important this SA electricity crisis is. This is the most bullish scenario you can imagine SQUARED! This happens at a time when the Cartel is low on CB gold ammunition, when the Cartel needs gold on a massive scale to try to keep all the market manipulations from falling apart, as physical demand is raging and last but not least as GATA shines a light on the nefarious gold world operations.

The shenanigans of the last few days is a CLASSIC explosive move up play orchestrated by the crooked insiders. Just when there is about to be a quantum leap for very good reasons there is a counter-intuitive sell-off that mysteriously “cleans out the weak longs”. Bill Murphy knows all about this in the copper market.

Bobby Godsell took early retirement from Anglogold last year which was extremely well timed for a coincidence. The new CEO has just declared they are reducing their hedge book to ZERO. Imagine having sold 9 million ozs forward at less than $400 and not being able to produce them due to force majeure! I would imagine they have been trying to find them in the options and futures market.

Those café members who are bummed out need to take heart. I consider what is coming is bigger than even the most bullish among us imagined. Don’t expect the mainstream press to report the correct reasons until the move has about run its course!

Cheers

Adrian