Let's consider who has both the motivation and means to drive gold prices upward. Well , none other than your friendly Russian oligarchs for one. Collectively, the largest producers of gold, they announced a little over a week ago they would be adding about 400mt of gold to their cb reserves. They could have quietly gone about just scraping it up in cheap bits and pieces, but their announcement was not subtle. The Russians are quite unhappy about what they regard as manipulation of the oil markets by the west to unreasonably low short term levels. We have been accustomed to think of them as poor cousins when it comes to gold, but being a major swing producer of a commodity with a very marginal supply gives them enormous ability to take the price on a long upward road. Any help needed from a number of gold majors will be readily forthcoming since many of these are active in Russia as well. This is now a physical balance issue, so unless the ECB, BOE and Fed want to take the high visibility route of dumping physical gold, it is going higher. If the Western central banks were to dump cheap gold at this point, it would simply bring more physical buyers into the market. The more likely western strategy would be to allow a controlled ascent in the price over say a 12 to 18 month period. That ascent will gradually reduce binge buying as prices get higher. I expect strong gold prices but with a gradual ascent. Hopefully, Windfall is able to establish a meaningful resource , in which case NOT can well become the gold play we are all hoping for.
