It's good to see another friend of Gold joining the ranks even if I don't trust the ruling government in general. So if we are to believe recent news reports, then Saudi Arabia purchased (and took delivery of) 150 tonnes and now Iran has bought a substantial amount, likely multiples of 150 tonnes. It is possible these two entities alone purchased as much Gold in the past couple of weeks as the Gold Accord participants would be willing to part with in the final years of their sales agreement. So why hasn't the POG reacted to this spectacular demand?

In a paper-driven market, the Cartel will never let these guys take delivery from futures market stockpiles and without large drawdowns that Sinclair says is necessary, how are we ever to believe the paper POG will ever reflect massive inflation in world physical demand? Western Central Banks will only sell so much of their personal hoards in under-the table deals to large purchasers before saying "no more." So where will all this physical Gold come from to satisfy burgeoning demand going forward, after the CBs have closed the vault doors?

I believe that when this time comes - and it is getting closer with these recent sizeable offtakes - the Saudis will have no alternative but to begin making public takeover bids for the largest producers because that will be the only way to secure supplies over the long haul. The Cartel will have a difficult time blocking any takeovers without having to fess up in the process why they must remain majority-owned domestically, namely to protect the Dollar and keep new investors out of Gold by suppressing price.

At any rate, this is one possible outcome that could rear it's head tomorrow morning, next week or sometime in 2009, and must be considered when figuring out what to do with one's PM stocks today. I'd say Coach is definitely on the right track holding because the small caps are also going to react quickly when the large producers get swallowed up.

Isn't it interesting how many people are jettisoning their small cap miners because they don't believe any Large Producers will be buying any time soon, when the real trigger for the next major thrust will come from a different angle in the form of direct takeovers of the large producers themselves. I can guarantee you that when the Golden Genie pops out of the bag, the new owners & friends of Gold & Silver, will not waste any time bidding in ernest for smaller producers & other well-developed deposits, and this effect will quickly trickle down to the explorers as well. For this reason I doubt we will have to hold anywhere for a couple of years before our small caps return to more logical values.

As I wrote earlier this week, I expect the Middle East will remain large Gold buyers as long as Wall St henchmen keep the Price Of Oil artificially low ($55 is breakeven according to Puplava's research), so I will be watching the POO closely for clues. Chances are the Large Gold Producers will be bought out sooner than later if Oil remains at current levels or lower, and now the Iranians are creating a whole new demand dynamic as they seek to diversify reserves. The Saudis have a ten year plan to revitalize their economies before the Oil runs out and no Wall St paper pushers will stop them from making the profits required to assure future prosperity for their own citizens.