http://www.zerohedge.com/news/2013-01-29/silver-eagle-sales-surge-all-time-record-january
Submitted by Tyler Durden on 01/29/2013 20:37 -0500
http://www.gata.org/node/12189
http://www.caseyresearch.com/gsd/edition/jeff-thomas-disappearing-gold
The dollar index opened at 79.74 in New York on Sunday evening...and by 8:30 a.m. in New York the following morning, it had reached its 'high' of 79.91...and then fell back to unchanged half an hour later. From there it just chopped around in a tiny range, closing at 79.77...basically unchanged from Friday's close.
In case you hadn't noticed...the dollar index has done precisely nothing of consequence during this engineered price decline in both gold and silver that began last Wednesday at the Comex open. This has all been a paper affair in the Comex futures market as per usual. Nothing has changed in the real world. Here's the 5-day dollar chart that includes all four days of that event.
and......
By Antal E. Fekete
Silver Eagle Sales Surge To All-Time Record In January
A massive 7.4 million Silver Eagles were purchased from the U.S. Mint in January,considerably higher than the previous record from early 2011. After halting Silver coin production/sales for over a week, the Mint re-opened yesterday and demand once again surged. Having almost doubled from the first week in January, there remains two more days before the book is closed on January's sales. At 140,000 ounces, the Mint has also sold the most ounces of gold in January in almost three years, suggesting the rising 'currency wars' are stoking people's ongoing rotation from paper-to-physical assets as their 'wealth' slowing loses its value.
http://www.gata.org/node/12189
Germany's gold at NY Fed may be impaired, Centennial's analysts agree
Submitted by cpowell on Wed, 2013-01-30 00:47. Section: Daily Dispatches
7:42p ET Tuesday, January 29, 2013
Dear Friend of GATA and Gold:
Repatriation of Germany's gold from the Federal Reserve Bank of New York may be so limited and slow because the gold is tied up by leases that will require years of unwinding, three market analysts at Centennial Precious Metals in Denver agree in a panel discussion broadcast today. The analysts -- Peter Grant, Jonathan Kosares, and George Cooper -- also discuss the U.S. Mint's erratic production of silver eagle coins. The discussion is a half hour long and can be viewed at Centennial's Internet site, USAGold.com, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
http://www.silverdoctors.com/bill-murphy-gold-cartel-unleashing-financial-market-terrorist-attacks-on-gold-silver/
BILL MURPHY: GOLD CARTEL UNLEASHING FINANCIAL MARKET TERRORIST ATTACKS ON GOLD & SILVER!
Bill Murphy Founder of GATA sat down with Bridgitte Anderson during the Cambridge House Vancouver Resource Investment Conference.http://www.caseyresearch.com/gsd/edition/jeff-thomas-disappearing-gold
Jeff Thomas: The Disappearing Gold
Jan
29
"This price management situation will come to a head...and it's the dénouement that I await with great interest."
¤ YESTERDAY IN GOLD AND SILVER
Monday was another day of "slicing the salami" to the downside...as Ted Butler so often says when JPMorgan et al are in the process of one of their countless engineered price declines.
The gold price traded flat until mid-afternoon in the Hong Kong trading day...and then headed lower going into the London open shortly after that. The London low came minutes after 11:00 a.m. GMT...and the absolute low [$1,651.00 spot] came at 8:45 a.m. in New York.
There was a slight spike to the upside once the London p.m. gold fix was in...but by lunchtime in New York, the price got sold off about five bucks from that high tick...and from there gold traded sideways into the 5:15 p.m. close of electronic trading.
The gold price traded flat until mid-afternoon in the Hong Kong trading day...and then headed lower going into the London open shortly after that. The London low came minutes after 11:00 a.m. GMT...and the absolute low [$1,651.00 spot] came at 8:45 a.m. in New York.
There was a slight spike to the upside once the London p.m. gold fix was in...but by lunchtime in New York, the price got sold off about five bucks from that high tick...and from there gold traded sideways into the 5:15 p.m. close of electronic trading.
All in all, it was a nothing sort of day...as gold traded within a ten dollar price range...but most importantly, set a new low for this move down.
Gold closed at $1,654.50 spot...down $4.80 on the day. Gross volume was monstrous...a bit over 293,000 contracts...but with the February roll-overs netted out, the volume shrank to a very tiny 72,000 contracts.
Of course it's always silver that "da boyz" are after...and yesterday was no exception. Like gold, silver traded sideways up until around 3:00 p.m. in Hong Kong before getting sold down to its low of the day shortly after 11:00 a.m. local time in London.
The subsequent rally got smacked at the 8:20 a.m. Comex open as it broke through $31 to the upside. From that point it traded around that price until shortly before lunch in New York...and then got taken down to its New York low towards the end of their lunch hour. The tiny rally after that got snuffed out as the silver price once again approached the $31 spot mark.
Gold closed at $1,654.50 spot...down $4.80 on the day. Gross volume was monstrous...a bit over 293,000 contracts...but with the February roll-overs netted out, the volume shrank to a very tiny 72,000 contracts.
The subsequent rally got smacked at the 8:20 a.m. Comex open as it broke through $31 to the upside. From that point it traded around that price until shortly before lunch in New York...and then got taken down to its New York low towards the end of their lunch hour. The tiny rally after that got snuffed out as the silver price once again approached the $31 spot mark.
The low in London was in the $30.70 spot range...and the New York low printed $30.66 spot...at least according to Kitco...but it sure didn't look like it got that low to me.
Silver closed at $30.84 spot...down 34 cents from Friday. Volume was decent...around 39,000 contracts.
[Here's the New York Silver Spot [Bid] price so you can see the New York action in more detail. Silver's N.Y. low of $30.66 spot must have been very brief, as there's nothing to indicate that it got anywhere near that price on this chart.
Silver closed at $30.84 spot...down 34 cents from Friday. Volume was decent...around 39,000 contracts.
The dollar index opened at 79.74 in New York on Sunday evening...and by 8:30 a.m. in New York the following morning, it had reached its 'high' of 79.91...and then fell back to unchanged half an hour later. From there it just chopped around in a tiny range, closing at 79.77...basically unchanged from Friday's close.
In case you hadn't noticed...the dollar index has done precisely nothing of consequence during this engineered price decline in both gold and silver that began last Wednesday at the Comex open. This has all been a paper affair in the Comex futures market as per usual. Nothing has changed in the real world. Here's the 5-day dollar chart that includes all four days of that event.
* * *
With the January delivery month winding down, the CME Daily Delivery Report showed that only 89 gold contracts were posted for delivery on Wednesday from within the Comex-approved depositories...and I'd be prepared to bet that we've see the end of the deliveries for this month. Here's the link to the activity...and with the exception of 1 contract issued by JPMorgan...the 'Big 3' gold shorts were nowhere to be found.
By the way, the 'Big 3' gold shorts are also the 'Big 3' silver shorts as well...JPMorgan Chase, Bank of Nova Scotia...and HSBC USA.
First Day Notice for delivery into the February gold contract will be posted on the CME's website late on Thursday evening Eastern time...and I'll have that data for you in Friday's column.
Over at GLD yesterday, there was another withdrawal...the 13th in January so far. This time it was 58,086 troy ounces. SLV reported a withdrawal of 822,067 troy ounces of silver.
The new report short positions for both SLV and GLD were posted on Friday by the good folks over at shortsqueeze.com...and I forgot all about them in my Saturday column, so here they are now. As I mentioned last week, the big 18.3 million ounce deposit into SLV came on the January 16th...the day after the cut-off for this report...so we still don't know whether that deposit was made to cover that short position...or for a new large buyer that has now entered the fray. This is Ted Butler's theory on what's going on in SLV at the moment...if it's not short covering...and he talks about it at great length in his Saturday commentary to his paying subscribers.
By the way, the 'Big 3' gold shorts are also the 'Big 3' silver shorts as well...JPMorgan Chase, Bank of Nova Scotia...and HSBC USA.
First Day Notice for delivery into the February gold contract will be posted on the CME's website late on Thursday evening Eastern time...and I'll have that data for you in Friday's column.
Over at GLD yesterday, there was another withdrawal...the 13th in January so far. This time it was 58,086 troy ounces. SLV reported a withdrawal of 822,067 troy ounces of silver.
The new report short positions for both SLV and GLD were posted on Friday by the good folks over at shortsqueeze.com...and I forgot all about them in my Saturday column, so here they are now. As I mentioned last week, the big 18.3 million ounce deposit into SLV came on the January 16th...the day after the cut-off for this report...so we still don't know whether that deposit was made to cover that short position...or for a new large buyer that has now entered the fray. This is Ted Butler's theory on what's going on in SLV at the moment...if it's not short covering...and he talks about it at great length in his Saturday commentary to his paying subscribers.
But, having said all that, it was no accident that this big deposit was made on the date specified, precisely so that it wouldn't show up in the short interest data last Friday. Now we have to wait until about February 10th to find out. As JPMorgan et al do with the Tuesday cut-off for the weekly COT report, they are obviously now doing with SLV. But whatever they're up to, it will remain hidden until about that date.
Anyway, the short interest in SLV increased 4.99% for the first half of January...and in GLD the short interest jumped a whopping 24.58% over the same period. As a percentage of shares issued, the percentage of each ETF that has no physical metal backing it is as follows...in GLD it's 5.05%...and in SLV it's 5.32%.
Despite the fact that the U.S. Mint was going to start shipping silver eagles again this week, it obviously didn't sell/ship any yesterday...as there was no sales report from them.
Over at the Comex-approved depositories on Friday, they reported receiving 928,840 troy ounces of silver...and shipped 41,411 troy ounces out the door. Almost all of the silver disappeared into HSBC USA's vaults. The link to that activity is here.
Anyway, the short interest in SLV increased 4.99% for the first half of January...and in GLD the short interest jumped a whopping 24.58% over the same period. As a percentage of shares issued, the percentage of each ETF that has no physical metal backing it is as follows...in GLD it's 5.05%...and in SLV it's 5.32%.
Despite the fact that the U.S. Mint was going to start shipping silver eagles again this week, it obviously didn't sell/ship any yesterday...as there was no sales report from them.
Over at the Comex-approved depositories on Friday, they reported receiving 928,840 troy ounces of silver...and shipped 41,411 troy ounces out the door. Almost all of the silver disappeared into HSBC USA's vaults. The link to that activity is here.
Here's a chart that Washington state reader S.A. sent me on Saturday that I just know he stole from a Zero Hedge story...and it's self-explanatory.
(Click on image to enlarge)
Here's another chart...this one courtesy of Paul Laviers. He 'borrowed' it from John Williams over at the shadowstats.com Internet site and, it requires no further comment from me, either.
and selected news and views.....
Hagel Warned Obama Of Rogue Pentagon Leading A 'New World Order'
As Chuck Hagel seeks support for his nomination to become Secretary of Defense, Bob Woodward has released a story about a White House trip the former Senator made in 2009.
The Washington Post reports: According to an account that Hagel later gave, and is reported here for the first time, he told Obama: “We are at a time where there is a new world order.
"We don’t control it. You must question everything, every assumption, everything they” — the military and diplomats — “tell you. Any assumption 10 years old is out of date. You need to question our role. You need to question the military. You need to question what are we using the military for."
Hagel warned the president about getting "bogged down" in Afghanistan and voiced concern over the deployment of 51,000 additional troops sent at the time to fight in the war.
No surprises here...and a must read as far as I'm concerned. I thank Roy Stephens for today's first story. It was posted on the businessinsider.comInternet site just before lunch Eastern time yesterday...and the link is here.
The Washington Post reports: According to an account that Hagel later gave, and is reported here for the first time, he told Obama: “We are at a time where there is a new world order.
"We don’t control it. You must question everything, every assumption, everything they” — the military and diplomats — “tell you. Any assumption 10 years old is out of date. You need to question our role. You need to question the military. You need to question what are we using the military for."
Hagel warned the president about getting "bogged down" in Afghanistan and voiced concern over the deployment of 51,000 additional troops sent at the time to fight in the war.
No surprises here...and a must read as far as I'm concerned. I thank Roy Stephens for today's first story. It was posted on the businessinsider.comInternet site just before lunch Eastern time yesterday...and the link is here.
Treasury Gets a Citibanker
There was a time when you had to be successful on Wall Street to become secretary of the Treasury. Now along comes presidential nominee Jack Lew, whose only business credential is a stint at the most troubled too-big-to-fail bank.
During the darkest days of the financial crisis Mr. Lew served as the chief operating officer of Citigroup's Alternative Investments unit (CAI). When Mr. Lew took this job in January 2008, the unit was already infamous for overseeing "structured investment vehicles" that hid mortgage risks outside Citi's balance sheet. It also housed internal hedge funds that were in the process of imploding.
CAI no longer exists. At the end of Mr. Lew's first quarter on the job, the unit reported a $358 million loss. Things got much worse after that but Citi stopped breaking out CAI results in its earnings releases. The unit was eventually shuttered and many of its assets were sold.
There probably weren't many laughs at Citi during the market panic in 2008. But if someone had said that a CAI executive would be the secretary of the Treasury within five years, the line would have brought the house down.
Another item from the top drawer of the "You Can't Make This Stuff Up" filing cabinet. I thank Washington state reader S.A. for this story. It was posted onThe Wall Street Journal's website on Sunday afternoon...and the link is here.
During the darkest days of the financial crisis Mr. Lew served as the chief operating officer of Citigroup's Alternative Investments unit (CAI). When Mr. Lew took this job in January 2008, the unit was already infamous for overseeing "structured investment vehicles" that hid mortgage risks outside Citi's balance sheet. It also housed internal hedge funds that were in the process of imploding.
CAI no longer exists. At the end of Mr. Lew's first quarter on the job, the unit reported a $358 million loss. Things got much worse after that but Citi stopped breaking out CAI results in its earnings releases. The unit was eventually shuttered and many of its assets were sold.
There probably weren't many laughs at Citi during the market panic in 2008. But if someone had said that a CAI executive would be the secretary of the Treasury within five years, the line would have brought the house down.
Another item from the top drawer of the "You Can't Make This Stuff Up" filing cabinet. I thank Washington state reader S.A. for this story. It was posted onThe Wall Street Journal's website on Sunday afternoon...and the link is here.
JPMorgan Chief Risk Officer Hogan to Take Temporary Leave
JPMorgan Chase & Co. Chief Risk Officer John Hogan, whose tenure included the bank’s worst-ever trading loss, will take a temporary leave for personal reasons beginning later this month, he said in a memo to staff.
“I’m looking forward to taking this time off to spend with my family and friends,” Hogan wrote in a memo obtained yesterday. Deputy Risk Officer Ashley Bacon will fill in until Hogan returns this summer, he said. Hogan discussed his plans with top managers including Chief Executive Officer Jamie Dimon, he said.
Hogan, previously chief risk officer for the investment bank, took his post a year ago, about three months before the New York-based company disclosed a large and illiquid trading position at the chief investment office. The holdings lost more than $6.2 billion in the first nine months of last year and JPMorgan’s market value dropped more than $50 billion in the weeks after the so-called London Whale episode become public.
This sounds like a repeat of the John N. Mitchell saga when he resigned fromCRP/CREEP during the Watergate scandal. The more things change, the more they stay the same. This story was posted on the Bloomberg website late on Friday evening Mountain Time when very few people were around. However, they couldn't hide from West Virginia reader Elliot Simon...and the link is here.
“I’m looking forward to taking this time off to spend with my family and friends,” Hogan wrote in a memo obtained yesterday. Deputy Risk Officer Ashley Bacon will fill in until Hogan returns this summer, he said. Hogan discussed his plans with top managers including Chief Executive Officer Jamie Dimon, he said.
Hogan, previously chief risk officer for the investment bank, took his post a year ago, about three months before the New York-based company disclosed a large and illiquid trading position at the chief investment office. The holdings lost more than $6.2 billion in the first nine months of last year and JPMorgan’s market value dropped more than $50 billion in the weeks after the so-called London Whale episode become public.
This sounds like a repeat of the John N. Mitchell saga when he resigned fromCRP/CREEP during the Watergate scandal. The more things change, the more they stay the same. This story was posted on the Bloomberg website late on Friday evening Mountain Time when very few people were around. However, they couldn't hide from West Virginia reader Elliot Simon...and the link is here.
Illinois’ credit rating downgraded; state drops to worst in the nation
A warning came Saturday morning from state treasurer Dan Rutherford (R) IL State Treasurer. The Standard and Poor’s downgrade from A to A-minus puts Illinois last on the list– and means a higher cost to borrow money.
On Wednesday, the state will issue $500 million in new bonds to pay for roads and other transportation projects. Rutherford says the credit downgrade will cost taxpayers an additional $95 million in interest,
When compared to a perfect triple-a bond rating enjoyed by other eleven states including neighboring Indiana, Iowa and Missouri.
“Our problem in Illinois is that we have not substantively and fairly addressed the state public pension issue.”
This article was posted on the wgntv.com Internet site on Saturday...and it's courtesy of Scott Pluschau. The link is here.
On Wednesday, the state will issue $500 million in new bonds to pay for roads and other transportation projects. Rutherford says the credit downgrade will cost taxpayers an additional $95 million in interest,
When compared to a perfect triple-a bond rating enjoyed by other eleven states including neighboring Indiana, Iowa and Missouri.
“Our problem in Illinois is that we have not substantively and fairly addressed the state public pension issue.”
This article was posted on the wgntv.com Internet site on Saturday...and it's courtesy of Scott Pluschau. The link is here.
Iceland banking in the news: Two Stories...both must watch/reads
The first story/video is from Zero Hedge...and it's headlined "How Iceland Overthrew The Banks: The Only 3 Minutes Of Any Worth From Davos". This absolute must watch video clip runs for 2:58 minutes...and I thank 'ChasVoice' for digging it up on our behalf. The link is here.
The second [and very short] story about Iceland was posted early this morning on the irishtimes.com Internet site. It's headlined "Iceland's refusal to repay depositors, legal". It's definitely worth the read as well...and it's courtesy of Roy Stephens. The link is here.
The second [and very short] story about Iceland was posted early this morning on the irishtimes.com Internet site. It's headlined "Iceland's refusal to repay depositors, legal". It's definitely worth the read as well...and it's courtesy of Roy Stephens. The link is here.
ECB Warns of Euro-Zone Risk: Draghi Clashes with Berlin Over Aid to Cyprus
European Central Bank President Mario Draghi confronted German Finance Minister Wolfgang Schäuble last week to criticize his stance on Cyprus and said failure to bail out the island nation could threaten the euro zone.
At a meeting of EU finance ministers last week, Draghi contradicted Schäuble's view that Cyprus was not "systemically relevant," a term that implied it wouldn't endanger the euro zone if it went bankrupt.
Draghi told Schäuble that he often heard that argument from lawyers, even though the question of whether Cyprus was systemically relevant or not was not one that lawyers could answer.
And you thought the situation in Greece was bad! If Cyprus pulls an Iceland...look out! This article showed up on the German website spiegel.deyesterday...and it's also courtesy of Roy Stephens. The link is here.
European Central Bank President Mario Draghi confronted German Finance Minister Wolfgang Schäuble last week to criticize his stance on Cyprus and said failure to bail out the island nation could threaten the euro zone.
At a meeting of EU finance ministers last week, Draghi contradicted Schäuble's view that Cyprus was not "systemically relevant," a term that implied it wouldn't endanger the euro zone if it went bankrupt.
Draghi told Schäuble that he often heard that argument from lawyers, even though the question of whether Cyprus was systemically relevant or not was not one that lawyers could answer.
And you thought the situation in Greece was bad! If Cyprus pulls an Iceland...look out! This article showed up on the German website spiegel.deyesterday...and it's also courtesy of Roy Stephens. The link is here.
At a meeting of EU finance ministers last week, Draghi contradicted Schäuble's view that Cyprus was not "systemically relevant," a term that implied it wouldn't endanger the euro zone if it went bankrupt.
Draghi told Schäuble that he often heard that argument from lawyers, even though the question of whether Cyprus was systemically relevant or not was not one that lawyers could answer.
And you thought the situation in Greece was bad! If Cyprus pulls an Iceland...look out! This article showed up on the German website spiegel.deyesterday...and it's also courtesy of Roy Stephens. The link is here.
European Central Bank President Mario Draghi confronted German Finance Minister Wolfgang Schäuble last week to criticize his stance on Cyprus and said failure to bail out the island nation could threaten the euro zone.
At a meeting of EU finance ministers last week, Draghi contradicted Schäuble's view that Cyprus was not "systemically relevant," a term that implied it wouldn't endanger the euro zone if it went bankrupt.
Draghi told Schäuble that he often heard that argument from lawyers, even though the question of whether Cyprus was systemically relevant or not was not one that lawyers could answer.
And you thought the situation in Greece was bad! If Cyprus pulls an Iceland...look out! This article showed up on the German website spiegel.deyesterday...and it's also courtesy of Roy Stephens. The link is here.
China tells U.S. to slow money printing presses
A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.
Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."
Jin said he was confident that the Obama administration and Congress would ultimately solve the debate over the so-called fiscal cliff, "but of course the printing machine will have to slow down for people to have full confidence in the dollar".
This Reuters piece was filed from Davos on Friday afternoon Eastern Time...and I borrowed it from yesterday's edition of the King Report. The link is here.
Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."
Jin said he was confident that the Obama administration and Congress would ultimately solve the debate over the so-called fiscal cliff, "but of course the printing machine will have to slow down for people to have full confidence in the dollar".
This Reuters piece was filed from Davos on Friday afternoon Eastern Time...and I borrowed it from yesterday's edition of the King Report. The link is here.
South Korea central bank questions Bank of Japan easing
South Korea's central bank governor on Saturday questioned the efficacy of Japan's decision to ease monetary policy, saying its decision to start buying assets in 2014 could have unintended long-term consequences.
The move by the Bank of Japan was also done in a hasty manner and would lead to large movements in the foreign exchange market, said Bank of Korea Governor Kim Chong-soo.
"What they did created a couple of problems," Kim said in an interview at the World Economic Forum in Davos. "One is that the level (of the currency) is affected, and the pace of change is also a problem. They did it too hastily."
Key for the Bank of Korea is a stable exchange rate, Kim added.
This is another Reuters story from Davos...this one filed Saturday morning Eastern time...and the second story in a row that I lifted from yesterday's King Report. The link is here.
The move by the Bank of Japan was also done in a hasty manner and would lead to large movements in the foreign exchange market, said Bank of Korea Governor Kim Chong-soo.
"What they did created a couple of problems," Kim said in an interview at the World Economic Forum in Davos. "One is that the level (of the currency) is affected, and the pace of change is also a problem. They did it too hastily."
Key for the Bank of Korea is a stable exchange rate, Kim added.
This is another Reuters story from Davos...this one filed Saturday morning Eastern time...and the second story in a row that I lifted from yesterday's King Report. The link is here.
Yi Warns on Currency Wars as Yuan Close to ‘Equilibrium’
China’s foreign-exchange regulator urged Group of 20 nations to improve collaboration to avoid any so-called currency wars while signaling he’s comfortable with the value of the yuan.
On a global level, there needs to be “better communication and coordination” on foreign exchange among the G-20, Yi Gang, who is also a deputy governor of China’s central bank, said in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland, on Jan. 26. “Right now, it is pretty much close to the equilibrium level,” he said, referring to the Chinese currency’s exchange rate.
Japanese Economy Minister Akira Amari said in Davos that his nation is trying to defeat deflation rather than weaken the yen, after Prime Minister Shinzo Abe’s push for laxer monetary policy sparked a slide in the currency. His comments on Jan. 26 followed a week in which German and Canadian policy makers joined a worldwide chorus highlighting a recent plunge in the yen as a worry.
“A currency war, a series of tit-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong, who previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.”
The stories from Davos just keep on coming. This Bloomberg item was posted on their Internet site late on Sunday evening Denver time...and is courtesy of Elliot Simon. The link is here.
On a global level, there needs to be “better communication and coordination” on foreign exchange among the G-20, Yi Gang, who is also a deputy governor of China’s central bank, said in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland, on Jan. 26. “Right now, it is pretty much close to the equilibrium level,” he said, referring to the Chinese currency’s exchange rate.
Japanese Economy Minister Akira Amari said in Davos that his nation is trying to defeat deflation rather than weaken the yen, after Prime Minister Shinzo Abe’s push for laxer monetary policy sparked a slide in the currency. His comments on Jan. 26 followed a week in which German and Canadian policy makers joined a worldwide chorus highlighting a recent plunge in the yen as a worry.
“A currency war, a series of tit-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong, who previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.”
The stories from Davos just keep on coming. This Bloomberg item was posted on their Internet site late on Sunday evening Denver time...and is courtesy of Elliot Simon. The link is here.
Bank probes find manipulation in Singapore's offshore FX market - source
Internal reviews by banks in Singapore have found evidence that traders colluded to manipulate rates in the offshore foreign exchange market, according to a source with knowledge of the inquiries.
The discovery widens a global lending rate scandal into new markets, as fallout from the Libor case puts banks under added scrutiny and spurs both regulators and institutions to reconsider how certain key interest and currency rates are set.
The probes found evidence showing that traders from several banks communicated with each other over electronic messaging about what rates they were going to submit for the local banking association's fixings for non-deliverable foreign exchange forwards (NDFs), aiming to benefit their trading books.
"Traders were talking to traders, saying: 'I need you to help me today, I need to fix low,'" said the bank source, who asked not to be identified due to the confidential nature of the reviews.
What else is new? This Reuters piece was filed from Singapore on Sunday evening Eastern time...and then picked up by the yahoo.com Internet site. I thank Scott Pluschau for sending it...and the link is here.
The discovery widens a global lending rate scandal into new markets, as fallout from the Libor case puts banks under added scrutiny and spurs both regulators and institutions to reconsider how certain key interest and currency rates are set.
The probes found evidence showing that traders from several banks communicated with each other over electronic messaging about what rates they were going to submit for the local banking association's fixings for non-deliverable foreign exchange forwards (NDFs), aiming to benefit their trading books.
"Traders were talking to traders, saying: 'I need you to help me today, I need to fix low,'" said the bank source, who asked not to be identified due to the confidential nature of the reviews.
What else is new? This Reuters piece was filed from Singapore on Sunday evening Eastern time...and then picked up by the yahoo.com Internet site. I thank Scott Pluschau for sending it...and the link is here.
Seven King World News Blogs/Audio Interviews
1. James Turk: "Historic Move by the U.S. has Just Guaranteed Hyperinflation". 2. Rick Rule: "What to Expect After This Week's Gold and Silver Smash". 3. Ron Rosen: "2 Key Charts and the Big Picture for Gold and Silver". 4. John Embry: "Powerful Entity Now Battling the Silver Manipulators". 5. Michael Pento: "Fed to Create Gold Rally and Bond Plunge Next Week". 6. and 7. The two audio interviews are with Jean-Marie Eveillard...and Rick Rule. The links are here and here.
Jeff Clark...Casey Research...Two Chess Moves Away from Capital Controls
This commentary by Jeff was contained in the Monday edition of the Casey Daily Dispatch. There's lots about gold in here...and it's worth your time. The link is here.
Chris Martenson interviews James Turk about the central bank war against gold
On Saturday, market analyst Chris Martenson interviewed GoldMoney founder and GATA consultant James Turk about gold market manipulation by U.S.-allied central banks, which, Turk says, are losing their war against gold.
I borrowed the above paragraph, plus the headline, from a GATA release on Saturday...but the first person through the door with this interview was actually Marshall Angeles. The interview is about 27 minutes long...and is posted as audio at Martenson's Internet site peakprosperity.com. The link ishere.
I borrowed the above paragraph, plus the headline, from a GATA release on Saturday...but the first person through the door with this interview was actually Marshall Angeles. The interview is about 27 minutes long...and is posted as audio at Martenson's Internet site peakprosperity.com. The link ishere.
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¤ THE WRAP
As the Founding Fathers knew well, a government that does not trust its honest, law-abiding, taxpaying citizens with the means of self-defense is not itself worthy of trust. Laws disarming honest citizens proclaim that the government is the master, not the servant, of the people. -- Jeff Snyder
With options and futures expiry in gold for the February delivery month upon us, it should have come as no surprise that JPMorgan et al would take down the price so that all those contracts would finish out of the money and expire worthless. They're quite good at that...and I've seen this sort of price action countless times over the last thirteen years or so.
Couple that with the FOMC meeting going on today and tomorrow...and also throw into the mix the job numbers coming out at 8:30 a.m. Eastern time on Friday...and the rest of the week from a price point of view, is really up for grabs. I know for sure what precious metal prices should be doing...but will JPMorgan Chase et al allow it?
After another day of "slicing the salami"...the silver and gold charts look like this.
The other thing I get tired of mentioning...and I'm sure you get tired of hearing...is that how high and fast the next price rally goes, depends 100 percent on whether or not the bullion banks go short against the new technical fund longs that come back into the market once the price has broken above key moving averages. If they do, it will be the same price pattern we've been looking at for the last twenty-five years or so.
With options and futures expiry in gold for the February delivery month upon us, it should have come as no surprise that JPMorgan et al would take down the price so that all those contracts would finish out of the money and expire worthless. They're quite good at that...and I've seen this sort of price action countless times over the last thirteen years or so.
Couple that with the FOMC meeting going on today and tomorrow...and also throw into the mix the job numbers coming out at 8:30 a.m. Eastern time on Friday...and the rest of the week from a price point of view, is really up for grabs. I know for sure what precious metal prices should be doing...but will JPMorgan Chase et al allow it?
After another day of "slicing the salami"...the silver and gold charts look like this.
(Click on image to enlarge)
(Click on image to enlarge)
And even though we're below the 200-day moving average in gold...and kissing the 200-day moving average in silver, neither metal is close to being in oversold territory. I get tired of saying it...but can we go lower in price from here? Sure...but will we?The other thing I get tired of mentioning...and I'm sure you get tired of hearing...is that how high and fast the next price rally goes, depends 100 percent on whether or not the bullion banks go short against the new technical fund longs that come back into the market once the price has broken above key moving averages. If they do, it will be the same price pattern we've been looking at for the last twenty-five years or so.
But if they don't, then you won't have to ask whether this is the big move or not, because as Ted Butler has pointed out to me many times over the years...it will be self-evident. Sooner rather than later, this price management situation will come to a head...and it's thedénouement that I await with great interest. Of course there's always the possibility that one should be careful what one wishes for. The reason I say that is because when the big day comes, I can pretty much guarantee that there will be other things going on in the world that will be far less pleasant.
In Far East trading on their Tuesday, all four precious metals rallied a bit...but at, or soon after the London open, the selling pressure began anew. Gold volume is monstrous, but once you subtract the roll-overs and spread trades, the net volume is virtually nothing. I believe that today is the last day for the big traders to roll out of the February contract...and that fact is more than obvious in the volume figures as of 5:13 a.m. Eastern time. Silver volume is pretty decent as well. The dollar index is doing nothing...just like it has been doing for the last week.
Before signing off for today, I'd like to remind you of the expressions "buy the dips"...or "buy when blood is running in the streets." Well, what you have before you is right out of theInvestment 101 textbook...and I'll leave it at that.
As many at Casey Research [and elsewhere] have been pointing out, the precious metal stocks have never been this cheap versus the price of gold itself. So I'd like to remind you one more time that there's still an opportunity to either readjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and Irespectfully suggest that you take out a trial subscription to either Casey Research'sInternational Speculator [junior gold and silver exploration companies], or BIG GOLD[large producers], with all our best [and current] recommendations...as well as the archives. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.
That's more than enough for one day...and I'll see here tomorrow.
In Far East trading on their Tuesday, all four precious metals rallied a bit...but at, or soon after the London open, the selling pressure began anew. Gold volume is monstrous, but once you subtract the roll-overs and spread trades, the net volume is virtually nothing. I believe that today is the last day for the big traders to roll out of the February contract...and that fact is more than obvious in the volume figures as of 5:13 a.m. Eastern time. Silver volume is pretty decent as well. The dollar index is doing nothing...just like it has been doing for the last week.
Before signing off for today, I'd like to remind you of the expressions "buy the dips"...or "buy when blood is running in the streets." Well, what you have before you is right out of theInvestment 101 textbook...and I'll leave it at that.
As many at Casey Research [and elsewhere] have been pointing out, the precious metal stocks have never been this cheap versus the price of gold itself. So I'd like to remind you one more time that there's still an opportunity to either readjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and Irespectfully suggest that you take out a trial subscription to either Casey Research'sInternational Speculator [junior gold and silver exploration companies], or BIG GOLD[large producers], with all our best [and current] recommendations...as well as the archives. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.
That's more than enough for one day...and I'll see here tomorrow.
and......
http://www.larsschall.com/2013/01/28/american-bases-in-germany-and-the-gold-basis/
AMERICAN BASES IN GERMANY AND THE GOLD BASIS
Januar 28th, 2013 2 Comments
Germany is neither independent nor sovereign, prevailing pretences notwithstanding. It has American troops on her soil for reasons unexplained and unexplainable after all Soviet occupying troops were withdrawn almost 25 years ago. Equally significant is the fact that the lion’s share of the German gold reserve is in American custody. If the Bundesbank asked for the repatriation of a token part of that gold over a long period of time, we may take it for granted that it was done on American instructions.
By Antal E. Fekete
The following article gets published here at LarsSchall.com for the first time worldwide with the personal permission to do so given by Prof. Fekete.
Professor Antal E. Fekete, who was born in Budapest, Hungary in 1932, is a renowned mathematician and monetary scientist. In 1958 he was appointed Assistant Professor of Mathematics and Statistics at the Memorial University of Newfoundland, Canada. In 1993, after 35 years of service, he retired with the rank of Full Professor.
In 1974 Professor Fekete delivered a talk on gold in Paul Volker’s seminar at Princeton University. Later, Professor Fekete was Visiting Fellow at the American Institute for Economic Research and Senior Editor for The American Economic Foundation. In 1996 his essay, Whither Gold?, that can be found under this link:
was awarded first prize in the international currency essay contest sponsored by Bank Lips, the Swiss bank.
For many years an expert on central bank bullion sales and hedging, and their effects on the gold price and the gold mining industry itself, he now devotes his time to writing and lecturing on fiscal and monetary reform with special regard to the role of gold and silver in the monetary system.
AMERICAN BASES IN GERMANY
AND THE GOLD BASIS
Antal E. Fekete
New Austrian School of Economics
Germany is neither independent nor sovereign, prevailing pretences notwithstanding. It has American troops on her soil for reasons unexplained and unexplainable after all Soviet occupying troops were withdrawn almost 25 years ago. Equally significant is the fact that the lion’s share of the German gold reserve is in American custody. If the Bundesbank asked for the repatriation of a token part of that gold over a long period of time, we may take it for granted that it was done on American instructions.
But why would the Americans ask the Bundesbank to request the return of a part of German gold from the ‘safety’ of the basement of the Federal Reserve Bank of New York in lower Manhattan? Surely not because the vaults are bulging with American gold and they have to make room for more.
It’s all grand theater. There is a hidden agenda that has to be camouflaged. The best way of doing it is to put up a show. The public is fascinated by images of shuffling central bank gold.
One reason, perhaps the chief reason for this exercise is that the managers of the global fiat money system are preparing for the coming showdown, the final curtain on what some years ago I dubbed The Last Contango in Washington. In other words, policymakers are preparing for (or trying to fend off) permanent backwardation in the world’s gold futures markets that is threatening to rip apart the present shabby make-belief payments system of the world.
Contango is the normal condition of the gold futures markets when the spot price of gold is at a discount relative to the price of futures contracts. It demonstrates that plenty of gold is available to satisfy present demand. People are confident that promises to deliver gold will be honored. The condition opposite to contango is called backwardation that obtains when the futures price loses its premium relative to the spot price and goes to a discount. In the gold market this condition is highly anomalous because, on the face of it, it allows traders to earn risk free profits. They sell spot gold at a premium, and buy it back at a discount for future delivery. However, risk free profits are ephemeral since the very action of traders will instantaneously eliminate them. What this suggests is that permanent backwardation in gold could never happen by the very nature of the case.
Yet unknown to the general public a very great danger is looming, the like of which has not threatened the world since the collapse of the Western half of the Roman Empire more than fifteen hundred years ago. This danger, should it materialize, would mark the end of our civilization and the beginning of a new Dark Age. I am talking about a threat of the sudden and complete collapse of world trade. It would be heralded by permanent gold backwardation, something that allegedly could never happen. Hard on its heels would follow the collapse of the dollar payments system. Barter, of course, would take place between neighboring countries, but world trade as we know it would disappear altogether.
The metric whereby the turning of contango into backwardation can be measured is called the gold basis. It is the premium on the price of gold for future delivery as per the nearby contract relative to the spot price. Thus negative gold basis is tantamount to backwardation. We have scarcely a forty-year history for the gold basis to go by, because there was no organized futures trading for gold before America defaulted on her international gold obligations on August 15, 1971.
Futures trading started out with a robust gold basis. Contango was at its peak. The gold basis cannot be higher than the full carrying charge (also known as the opportunity cost of holding gold, the major component of which is interest). But soon enough the gold basis started eroding, and erosion has continued to this day. This was an ominous process that was ignored by all politicians, economists and financial journalists.
The vanishing of the gold basis is all the more curious since it has been taking place against the background of a steady advance in the gold price. Textbook economics teaches that an advance in price always and everywhere calls out new supplies. However, textbook economics is helpless when it comes to gold. For gold the exact opposite is true: an advance in price makes supply contract; and a very large advance may make supply disappear altogether. The reason for this paradox is that gold is a monetary metal. All the bad-mouthing of gold by economists in the pay of governments won’t change that fact. By now the decay has gone so far that the gold basis is practically zero, with occasional dips into negative territory.
Academia ostensibly avoids researching the gold basis, pretending that it has as much bearing on the world economy as the basis for frozen pork bellies. The public is kept in total ignorance. Yet you can ignore the gold basis only at your own peril. It is the only indicator available showing the progressive deterioration of the fiat money system. As is well known, there has never been a successful experiment with fiat currency in all history. Nor was it for lack of trying. Every such experiment was either abandoned as enlightened governments decided to return the currency to a metallic basis, or it ended in utter fiasco causing tremendous economic pain to people as the fiat currency was rapidly losing all its purchasing power.
The relentless contraction of the gold basis means that gold available for future delivery is fast disappearing. Gold is constantly moving into strong hands that hold on to it and will not relinquish it even in the face of steeply rising prices. Eventually the gold supply dries up and sporadic backwardation gives way to permanent backwardation. Gold mines refuse to take paper money for their product. If you want to have gold, you will have to have recourse to barter.
Permanent backwardation means that confidence in fiat paper currency and government promises to pay has evaporated. After all, considering their origin, irredeemable bank notes are nothing but dishonored promises to pay gold. Once confidence is shattered, all the king’s horses and all the king’s men cannot put Humpty Dumpty together again. Permanent backwardation is like a black hole. There is no way out of it. Not even a light ray can escape from its clutches. That’s how black holes earn their name. ‘Permanent backwardation’ is not as suggestive as the name ‘black hole’, but it can gobble up the world economy nevertheless.
The gold basis is akin to the efficiency of bribe money. At first the bribe is taken with no questions asked. But as it becomes a regular feature of gold trading, effectiveness is lost. In the end the bribe is refused when it is realized that the objective is to cheat the holder out of his possession of gold. A trading system built on bribe is a house of cards. It is dishonest. It depends on deception and false-carding.
This brings me back to the German gold reserve. As sporadic backwardation in gold becomes ever more frequent, the gentlemen in charge of running the world’s fiat money system get alarmed. The only way to pacify the market is to release more and more central bank gold. Physical gold. The beast must be fed. Paper gold will not do (although, of course, these gentlemen will keep trying to flood the market with it).
Releasing American gold to the futures market directly from the Fed is out of the question. It would confirm the suspicion, already rampant, that the dollar is a colossus of clay feet standing in knee-deep water. So let the client states of America do the releasing. The Germans have a reputation of favoring hard currency. They are reluctant to join the currencies’ ‘race to the bottom’. Germany is the natural choice to feed the gold futures markets in an effort to protect the dollar against the last assault that is shaping up.
For a long time America has been twisting the arm of other countries, including the U.K. and Switzerland, making them sell hundreds of tons of central bank gold, while America was not selling one ounce. “Do as I say, not as I do!” During all this time Germany was not selling either. The appearance was maintained that this decision was made in Germany. It wasn’t; rather, it has the mark “made in U.S.A.” German gold is the last defense of the dollar. By now practically all central banks ignore the siren song from America. From sellers they have become buyers of gold. According to the American master plan Germany is the last fort of the crumbling global fiat money system. Germany will not defect: that is the purpose of keeping American troops on German soil. Germany will dutifully do the job of feeding the futures market with gold in an effort to fend off permanent backwardation. The repatriation of a part of the German gold reserve is a trial balloon. If markets get scared and panic selling occurs before the Bundesbank starts selling, so much the better. But if false-carding fails and the world-wide march of gold into private hoards continues unabated, then let the Bundesbank, not the Fed, bleed gold. America’s gold must be spared at all hazards.
On such tricks and deception is the international monetary system grounded.
* * *
What, then, is the solution? How can sudden death in world trade be averted? Fortunately, there are still upright politicians around. Godfrey Bloom of the European Parliament, MP for Yorkshire and North Lincolnshire ridings in the U.K. suggests thatGermany should repatriate ALL of its gold and reinstate a golden deutsche mark.
The underlying cause of the world financial crisis is runaway debt. Gold is the onlyultimate extinguisher of debt. Since its expulsion from the international monetary system total debt in the world can only grow, never contract. To stop the cancerous growth of debt gold must be reinstated in its former position as the guardian of the quality of debt.
If, defying American wishes, Germany took the initiative in creating a gold mark and opening the German Mint to gold where all comers could convert their gold ingots into gold coin, the course of world history would be changed. It would be Germany’s finest hour. Civilization will have been saved and the onset of a new Dark Age averted. The gold mark could circulate side-by-side with the irredeemable euro and dollar. Let the people decide whether they want to get paid in crisis-prone fiat currencies or, perhaps, they prefer the time-honored stability of the gold coin. It is hardly in doubt what the choice of the people would be.
The German initiative will set off a chain reaction of similar virtuous acts by the major central banks of the world, in order to prevent the fatal depreciation of their currencies against the gold mark. The latter will be well on its way to become the most coveted currency in the world for international trade. The financial system will be saved from the ordeal of competitive currency devaluations and from the corrosive effect of ever-expanding government deficits. Governments will be forced to face reality and live responsibly within their means like everyone else. Farmers will no longer be paid for not farming, and able-bodied workers for not working. Youth unemployment, in particular, will be a thing of the past.
There is a precedent. In 1948 Germany defied the occupying force when it created the Deutsche Mark without bothering to ask for permission in Washington.
But is the gold standard not deflation-prone? In the 1930’s the international gold standard collapsed because of this very fact, did it not?
As the father of the Deutsche Mark, Wilhelm Röpke (1899-1966) said: it is not the gold standard that failed, but those in whose care it was entrusted.
and.......
http://www.larsschall.com/2013/01/28/is-the-washington-agreement-on-gold-a-device-of-price-control/
Is the Washington Agreement on Gold a device of price control?
Januar 28th, 2013 No Comments
Was the Washington Agreement on Gold, which was first implemented in 1999, meant to intervene in the gold market, or even to rig it? I have asked Edwin M. Truman about it, a former official of the U.S. Federal Reserve and U.S. Treasury.
By Lars Schall
A few days ago, I saw this article at the web site of the Gold Anti-Trust Action Committee (GATA) related to the Washington Agreement on Gold: “Washington Agreement is another gold rig, former Fed and Treasury official admits“. In order to find out more about it, I wrote to the press department of the Peterson Institute for International Economics, where Mr. Truman serves as a Senior Fellow.
Here’s the request that I sent out yesterday via e-mail:
Dear Mr. Reil, dear Mr. Weisman,
my name is Lars Schall, I am a freelance journalist for finance from Germany (for example, Asia Times Online). Would you be so nice to forward this media request to Mr. Edwin M. Truman, please? Thank you!
Dear Mr. Truman,
recently I came ascross your remarks at the Fourth Joint BIS–World Bank Public Investors Conference in Washington DC, 3–4 December 2012. During your speech you were talking about the Washington Agreement on Gold. Related to this topic, I would have five questions for you.
a) You seem to say that the Washington Agreement is a tool of intervention in the foreign exchange and gold markets. Is this indeed what you want to say?
b) The Gold Anti-Trust Action Committee (GATA) goes a step further by saying that indeed the Washington Agreement on Gold was put in place in order to rig the gold market. What’s your comment on that?
c) Are you absolutely certain that the U.S. Government via the U.S. Federal Reserve / U.S. Treasury Department / Exchange Stabilization Fund hasn’t intervened in the gold market for more than 40 years, as Mr. Paul A. Volcker told me?
d) You have called for more transparency in your speech. Does this call for transparency also apply to the gold reserves that central banks are holding — for example, related to swap and lease arrangements?
e) Do you think that the gold market is an entirely free market?
Thank you for your attention, Sir!
Kind regards,
Lars Schall.
Today, I have received these answers from Mr. Truman:
Dear Mr. Schall,
Please find answers to your questions, to the best of my ability, below.
Ted Truman
a) IT WAS A FORM OF COOPERATIVE INTERVENTION IN THAT MARKET DESIGNED TO LIMIT OFFICIAL SALES.
b) I WOULD NOT AGREE WITH THAT VIEW. IN ORDER TO “RIG” THE MARKET A LOT MORE THAN LIMITING SALES WOULD HAVE TO HAVE BEEN INVOLVED.
c) FIRST, THE FEDERAL RESERVE DOES NOT HAVE THE POWER TO OPERATE IN THE GOLD MARKET. SECOND, MR VOLCKER IS NOT QUITE RIGHT: THERE WERE US SALES OF GOLD INTO THE PRIVATE MARKET IN THE MID-1970S AND LATE 1970S. I KNOW OF NO OTHER SALES OF CONSEQUENCE SINCE THAT DATE. I SAY “OF CONSEQUENCE” BECAUSE THE US TREASURY DOES MAKE SMALL PURCHASES AND SALES IN CONNECTION WITH MINTING COINS.
d) CERTAINLY!
e) AS LONG AS THERE IS A SUBSTANTIAL OVERHANG OF OFFICIAL HOLDINGS OF GOLD, THE GOLD MARKET CANNOT BE ENTIRELY FREE.
After I received those answers, I’ve asked Mr. Truman one more question in order to avoid any kind of misunderstanding:
Your speech likened the Washington Agreement to the London Gold Pool, which was very much a device of price control. May I ask you if you agree that the Gold Pool was a device of price control and if you meant to liken the Washington Agreement to a device of price control?
Mr. Truman’s answer to that question was:
Dear Mr. Schall,
In my view there is no real comparison between the London Gold Pool in the 1960s and the Washington Gold Agreement, which was in 2000, I think. The first was an attempt to support the Bretton Woods monetary system by containing the increase in the gold price (private and official) relative to the “official price” of $35 dollars an ounce and at the same time to limit (to a minor degree) reductions in the US gold stock. The second was an attempt to limit excessive, short-term downward pressure on the price of gold in the private market which would have implications for the valuation of official gold stocks that was unattractive to some large official holders. The context was entirely different — gold had effectively been pushed aside in terms of its role in the international monetary system — and the objective of the Washington Agreement was much more limited. The Washington Agreement was interference in the private market, which was one reason why the United States chose not to participate, but that interference was minor and inevitable given the large official stocks of gold which themselves were an interference in the private market then and now.
Ted Truman
Yet unknown to the general public a very great danger is looming, the like of which has not threatened the world since the collapse of the Western half of the Roman Empire more than fifteen hundred years ago. This danger, should it materialize, would mark the end of our civilization and the beginning of a new Dark Age. I am talking about a threat of the sudden and complete collapse of world trade. It would be heralded by permanent gold backwardation, something that allegedly could never happen. Hard on its heels would follow the collapse of the dollar payments system. Barter, of course, would take place between neighboring countries, but world trade as we know it would disappear altogether.
The metric whereby the turning of contango into backwardation can be measured is called the gold basis. It is the premium on the price of gold for future delivery as per the nearby contract relative to the spot price. Thus negative gold basis is tantamount to backwardation. We have scarcely a forty-year history for the gold basis to go by, because there was no organized futures trading for gold before America defaulted on her international gold obligations on August 15, 1971.
Futures trading started out with a robust gold basis. Contango was at its peak. The gold basis cannot be higher than the full carrying charge (also known as the opportunity cost of holding gold, the major component of which is interest). But soon enough the gold basis started eroding, and erosion has continued to this day. This was an ominous process that was ignored by all politicians, economists and financial journalists.
The vanishing of the gold basis is all the more curious since it has been taking place against the background of a steady advance in the gold price. Textbook economics teaches that an advance in price always and everywhere calls out new supplies. However, textbook economics is helpless when it comes to gold. For gold the exact opposite is true: an advance in price makes supply contract; and a very large advance may make supply disappear altogether. The reason for this paradox is that gold is a monetary metal. All the bad-mouthing of gold by economists in the pay of governments won’t change that fact. By now the decay has gone so far that the gold basis is practically zero, with occasional dips into negative territory.
Academia ostensibly avoids researching the gold basis, pretending that it has as much bearing on the world economy as the basis for frozen pork bellies. The public is kept in total ignorance. Yet you can ignore the gold basis only at your own peril. It is the only indicator available showing the progressive deterioration of the fiat money system. As is well known, there has never been a successful experiment with fiat currency in all history. Nor was it for lack of trying. Every such experiment was either abandoned as enlightened governments decided to return the currency to a metallic basis, or it ended in utter fiasco causing tremendous economic pain to people as the fiat currency was rapidly losing all its purchasing power.
The relentless contraction of the gold basis means that gold available for future delivery is fast disappearing. Gold is constantly moving into strong hands that hold on to it and will not relinquish it even in the face of steeply rising prices. Eventually the gold supply dries up and sporadic backwardation gives way to permanent backwardation. Gold mines refuse to take paper money for their product. If you want to have gold, you will have to have recourse to barter.
Permanent backwardation means that confidence in fiat paper currency and government promises to pay has evaporated. After all, considering their origin, irredeemable bank notes are nothing but dishonored promises to pay gold. Once confidence is shattered, all the king’s horses and all the king’s men cannot put Humpty Dumpty together again. Permanent backwardation is like a black hole. There is no way out of it. Not even a light ray can escape from its clutches. That’s how black holes earn their name. ‘Permanent backwardation’ is not as suggestive as the name ‘black hole’, but it can gobble up the world economy nevertheless.
The gold basis is akin to the efficiency of bribe money. At first the bribe is taken with no questions asked. But as it becomes a regular feature of gold trading, effectiveness is lost. In the end the bribe is refused when it is realized that the objective is to cheat the holder out of his possession of gold. A trading system built on bribe is a house of cards. It is dishonest. It depends on deception and false-carding.
This brings me back to the German gold reserve. As sporadic backwardation in gold becomes ever more frequent, the gentlemen in charge of running the world’s fiat money system get alarmed. The only way to pacify the market is to release more and more central bank gold. Physical gold. The beast must be fed. Paper gold will not do (although, of course, these gentlemen will keep trying to flood the market with it).
Releasing American gold to the futures market directly from the Fed is out of the question. It would confirm the suspicion, already rampant, that the dollar is a colossus of clay feet standing in knee-deep water. So let the client states of America do the releasing. The Germans have a reputation of favoring hard currency. They are reluctant to join the currencies’ ‘race to the bottom’. Germany is the natural choice to feed the gold futures markets in an effort to protect the dollar against the last assault that is shaping up.
For a long time America has been twisting the arm of other countries, including the U.K. and Switzerland, making them sell hundreds of tons of central bank gold, while America was not selling one ounce. “Do as I say, not as I do!” During all this time Germany was not selling either. The appearance was maintained that this decision was made in Germany. It wasn’t; rather, it has the mark “made in U.S.A.” German gold is the last defense of the dollar. By now practically all central banks ignore the siren song from America. From sellers they have become buyers of gold. According to the American master plan Germany is the last fort of the crumbling global fiat money system. Germany will not defect: that is the purpose of keeping American troops on German soil. Germany will dutifully do the job of feeding the futures market with gold in an effort to fend off permanent backwardation. The repatriation of a part of the German gold reserve is a trial balloon. If markets get scared and panic selling occurs before the Bundesbank starts selling, so much the better. But if false-carding fails and the world-wide march of gold into private hoards continues unabated, then let the Bundesbank, not the Fed, bleed gold. America’s gold must be spared at all hazards.
On such tricks and deception is the international monetary system grounded.
* * *
What, then, is the solution? How can sudden death in world trade be averted? Fortunately, there are still upright politicians around. Godfrey Bloom of the European Parliament, MP for Yorkshire and North Lincolnshire ridings in the U.K. suggests thatGermany should repatriate ALL of its gold and reinstate a golden deutsche mark.
The underlying cause of the world financial crisis is runaway debt. Gold is the onlyultimate extinguisher of debt. Since its expulsion from the international monetary system total debt in the world can only grow, never contract. To stop the cancerous growth of debt gold must be reinstated in its former position as the guardian of the quality of debt.
If, defying American wishes, Germany took the initiative in creating a gold mark and opening the German Mint to gold where all comers could convert their gold ingots into gold coin, the course of world history would be changed. It would be Germany’s finest hour. Civilization will have been saved and the onset of a new Dark Age averted. The gold mark could circulate side-by-side with the irredeemable euro and dollar. Let the people decide whether they want to get paid in crisis-prone fiat currencies or, perhaps, they prefer the time-honored stability of the gold coin. It is hardly in doubt what the choice of the people would be.
The German initiative will set off a chain reaction of similar virtuous acts by the major central banks of the world, in order to prevent the fatal depreciation of their currencies against the gold mark. The latter will be well on its way to become the most coveted currency in the world for international trade. The financial system will be saved from the ordeal of competitive currency devaluations and from the corrosive effect of ever-expanding government deficits. Governments will be forced to face reality and live responsibly within their means like everyone else. Farmers will no longer be paid for not farming, and able-bodied workers for not working. Youth unemployment, in particular, will be a thing of the past.
There is a precedent. In 1948 Germany defied the occupying force when it created the Deutsche Mark without bothering to ask for permission in Washington.
But is the gold standard not deflation-prone? In the 1930’s the international gold standard collapsed because of this very fact, did it not?
As the father of the Deutsche Mark, Wilhelm Röpke (1899-1966) said: it is not the gold standard that failed, but those in whose care it was entrusted.
and.......
http://www.larsschall.com/2013/01/28/is-the-washington-agreement-on-gold-a-device-of-price-control/
Is the Washington Agreement on Gold a device of price control?
Januar 28th, 2013 No Comments
Was the Washington Agreement on Gold, which was first implemented in 1999, meant to intervene in the gold market, or even to rig it? I have asked Edwin M. Truman about it, a former official of the U.S. Federal Reserve and U.S. Treasury.
By Lars Schall
A few days ago, I saw this article at the web site of the Gold Anti-Trust Action Committee (GATA) related to the Washington Agreement on Gold: “Washington Agreement is another gold rig, former Fed and Treasury official admits“. In order to find out more about it, I wrote to the press department of the Peterson Institute for International Economics, where Mr. Truman serves as a Senior Fellow.
Here’s the request that I sent out yesterday via e-mail:
Dear Mr. Reil, dear Mr. Weisman,
my name is Lars Schall, I am a freelance journalist for finance from Germany (for example, Asia Times Online). Would you be so nice to forward this media request to Mr. Edwin M. Truman, please? Thank you!
my name is Lars Schall, I am a freelance journalist for finance from Germany (for example, Asia Times Online). Would you be so nice to forward this media request to Mr. Edwin M. Truman, please? Thank you!
Dear Mr. Truman,
recently I came ascross your remarks at the Fourth Joint BIS–World Bank Public Investors Conference in Washington DC, 3–4 December 2012. During your speech you were talking about the Washington Agreement on Gold. Related to this topic, I would have five questions for you.
recently I came ascross your remarks at the Fourth Joint BIS–World Bank Public Investors Conference in Washington DC, 3–4 December 2012. During your speech you were talking about the Washington Agreement on Gold. Related to this topic, I would have five questions for you.
a) You seem to say that the Washington Agreement is a tool of intervention in the foreign exchange and gold markets. Is this indeed what you want to say?
b) The Gold Anti-Trust Action Committee (GATA) goes a step further by saying that indeed the Washington Agreement on Gold was put in place in order to rig the gold market. What’s your comment on that?
c) Are you absolutely certain that the U.S. Government via the U.S. Federal Reserve / U.S. Treasury Department / Exchange Stabilization Fund hasn’t intervened in the gold market for more than 40 years, as Mr. Paul A. Volcker told me?
d) You have called for more transparency in your speech. Does this call for transparency also apply to the gold reserves that central banks are holding — for example, related to swap and lease arrangements?
e) Do you think that the gold market is an entirely free market?
Thank you for your attention, Sir!
Kind regards,
Lars Schall.
Lars Schall.
Today, I have received these answers from Mr. Truman:
Dear Mr. Schall,
Please find answers to your questions, to the best of my ability, below.
Ted Truman
a) IT WAS A FORM OF COOPERATIVE INTERVENTION IN THAT MARKET DESIGNED TO LIMIT OFFICIAL SALES.
b) I WOULD NOT AGREE WITH THAT VIEW. IN ORDER TO “RIG” THE MARKET A LOT MORE THAN LIMITING SALES WOULD HAVE TO HAVE BEEN INVOLVED.
c) FIRST, THE FEDERAL RESERVE DOES NOT HAVE THE POWER TO OPERATE IN THE GOLD MARKET. SECOND, MR VOLCKER IS NOT QUITE RIGHT: THERE WERE US SALES OF GOLD INTO THE PRIVATE MARKET IN THE MID-1970S AND LATE 1970S. I KNOW OF NO OTHER SALES OF CONSEQUENCE SINCE THAT DATE. I SAY “OF CONSEQUENCE” BECAUSE THE US TREASURY DOES MAKE SMALL PURCHASES AND SALES IN CONNECTION WITH MINTING COINS.
d) CERTAINLY!
e) AS LONG AS THERE IS A SUBSTANTIAL OVERHANG OF OFFICIAL HOLDINGS OF GOLD, THE GOLD MARKET CANNOT BE ENTIRELY FREE.
After I received those answers, I’ve asked Mr. Truman one more question in order to avoid any kind of misunderstanding:
Your speech likened the Washington Agreement to the London Gold Pool, which was very much a device of price control. May I ask you if you agree that the Gold Pool was a device of price control and if you meant to liken the Washington Agreement to a device of price control?
Mr. Truman’s answer to that question was:
Dear Mr. Schall,
In my view there is no real comparison between the London Gold Pool in the 1960s and the Washington Gold Agreement, which was in 2000, I think. The first was an attempt to support the Bretton Woods monetary system by containing the increase in the gold price (private and official) relative to the “official price” of $35 dollars an ounce and at the same time to limit (to a minor degree) reductions in the US gold stock. The second was an attempt to limit excessive, short-term downward pressure on the price of gold in the private market which would have implications for the valuation of official gold stocks that was unattractive to some large official holders. The context was entirely different — gold had effectively been pushed aside in terms of its role in the international monetary system — and the objective of the Washington Agreement was much more limited. The Washington Agreement was interference in the private market, which was one reason why the United States chose not to participate, but that interference was minor and inevitable given the large official stocks of gold which themselves were an interference in the private market then and now.
Ted Truman
and.....
RUSSIAN GOLD RESERVES UP 8.5% IN 2012 – PALLADIUM RESERVES “EXHAUSTED”
Russia, Kazakhstan and Turkey expanded their gold holdings in December, seeking to diversify their foreign reserves and protect from currency devaluation risk.http://www.silverdoctors.com/gata-closing-in-on-secrets-behind-gold-cartel-gatas-chris-powell/
Chris Powell of GATA sat down with Bridgitte Anderson during the Cambridge House Vancouver Resource Investment Conference to chat about the Gold Anti-Trust Action Committee’s efforts to flush out the truth behind the gold price.
Jeff Thomas: The disappearing gold
Submitted by cpowell on Mon, 2013-01-28 19:17. Section: Daily Dispatches
2:17p ET Monday, January 28, 2013
Dear Friend of GATA and Gold:
Financial writer Jeff Thomas today shows that central bank gold swaps and leases and the massive naked short position they underwrite are starting to get figured out. Thomas' commentary is headlined "The Disappearing Gold" and it's posted at International Man's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Alasdair Macleod: Bank of England gold -- the doubts remain
Submitted by cpowell on Sun, 2013-01-27 17:26. Section: Daily Dispatches
12:20p ET Sunday, January 27, 2013
Dear Friend of GATA and Gold:
GoldMoney's Alasdair Macleod today deduces evidence that if central bank gold reserves are really intact, a primary custodian, the Bank of England, should be vaulting more gold than the 5,738 tonnes it reports. Macleod's commentary is headlined "Bank of England Gold: The Doubts Remain" and it's posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
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