http://www.caseyresearch.com/gsd/edition/lawrence-williams-how-the-bankers-crashed-the-gold-market-again/
( Casey Report for Wednesday - news and views and data from Tuesday.... )
It's possible to make a bullish or bearish argument out of this shortage. The bullish argument is simple: demand is strong. The bearish argument is small investors are a contrarian indicator just as they were with silver in January.
I am not taking a short-term stance one way or another, so don't ask. I do like my chances longer-term as I explained at the Wine Country Conference. See Mike “Mish” Shedlock: A Brief Lesson in History.
Shortage of Physical Gold?
Some writers have spun this story into the message there is a shortage of physical gold. No there isn't. There is a temporary shortage of certain coins, no more no less.
Divergence Between Physical Gold and Paper Gold?
Other writers have noticed the price premium on small denomination coins and concluded there is some sort of "divergence between physical gold and paper gold".
Once again, that's nonsense. Premiums on small denomination coins is not the same a general premium on physical gold itself.
How do I know?
Easy: If I went to buy or sell at GoldMoney (and GoldMoney only deals in physical metals with allocated, audited storage), I would pay the same small markup as before, based on the current futures price.
Here is another way to tell. Go buy or sell a one ounce bar and see how much it costs or how much you can get. Here's a hint: your selling price will not fetch $1900 as it once did, nor would it cost you over $1900 to buy.
Smackdown by Naked Shorts?
Many claim blatant manipulation by naked shorts. Mercy! Under this theory, shorts piled on to the tune of 163,000 gold futures. Really?
Keith Weiner tackles that theory for the Acting Man Blog in The Last Contango. Here is the pertinent chart.
Weiner asks "If someone had sold 163,000 futures to cause the price to drop, then wouldn’t the open interest [in futures] have risen? If Santa went down chimneys, wouldn’t there be soot on his red and white uniform?"
The answer to both questions is of course "yes". Instead, the chart shows a 16,000 open interest drop in gold futures and a 12,000 drop in silver futures.
Ignore the Hype in Both Directions
Bulls blame every drop on manipulation and frequently tout preposterous price targets. Bears cite jewelry demand and other nonsense as if it's important (and it isn't).
It is best to ignore the hype and silliness on both sides.
Fundamentally, what has changed? I suggest nothing.
Mike "Mish" Shedlock
http://www.tfmetalsreport.com/blog/4667/gold-delivery-or-default
Dave Kranzler of Dave from Denver from the Golden Truth discusses the above default:
(courtesy Dave from Denver/the Golden Truth)
Something else that has been extraordinarily overlooked, or intentionally ignored by the media, is the fact that about 80% of the recent price hit in gold/silver has occurred during Comex trading hours, after the physical buying markets in the east (China, Russia, India, et al) have gone to sleep or home for the weekend. Please note: the Comex is a paper trading market. The Comex may have enough metal to settle about 5% of the entire open interest of gold and silver, if the entities long the paper contracts decided to stand for delivery. Typically less than 1% stand for delivery each delivery month.
So when you hear accounts that 100's of tonnes of "gold" were dumped on the Comex market last Monday, please understand and know that this was "gold" as represented by a paper Comex gold futures contract. On the Comex gold grows on trees - everywhere else in the world that wants to own gold, physical gold has to be delivered.
And while that thrift shop mannequin some call "Attorney General Eric Holder" will never require that the big banks which control Comex explain why a paper bomb representing 100's of tonnes of paper gold was dropped on the Comex, the rest of the world - including the thousands in this country trying to take advantage of the price drop by buying U.S. minted silver eagles - either can not actually buy phsyical gold/silver for delivery or have to pay substantial premiums over the spot price in order to get something delivered. Go ahead, call your local coin dealer and ask them to sell you some 1 oz. silver eagles. You'll either hear "we're out" or you'll be offered something at around $7-8 over the current spot. Note that the price where you can buy silver eagles - silver eagles that you can take home with you as opposed to rely on some counterparty for delivery - will cost you about the same price as it would have before the take down in the metals this past week.
Even more significantly are the reports from around the world of precious metals counterparties failing to deliver physical metal. It started a couple weeks ago - and not coincidentally right before the price hit started - when big Dutch bank ABN/AMRO notified its clients who had invested in a "gold bullion" account that the bank would no longer make physical delivery of the gold that was supposed to be in the account and that all accounts would be settled in cash: LINK
This morning we woke up to an interview with Jim Sinclair, who reported that "a person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank. They told him the amount was in excess of 200,000 Swiss francs and the central bank had instructed them not to do it because it has to do with anti-terrorism and anti-money laundering precautions" LINK. Sorry, that excuse does not hold water.
As you can see, and as originally predicted by GATA, the purveyors of paper gold/silver are now having trouble delivering physical gold/silver at the stated spot price. Where is it you might ask? Look to China (and other eastern hemisphere gold buying countries: "Asia is witnessing one of the strongest waves of physical gold buying in 30 years, with bargain hunters using the drop in prices to secure jewellery and gold bars." (Financial Times).
In the aftermath of last week's paper price smash, demand for gold in the markets in the world that REQUIRE physical delivery has gone parabolic. I could link dozens of reports from Reuters, the Indian Economic Times, the Financial Times, etc, but you can google it if you are interested. And what I do know for sure is that, ultimately, physical delivery on the Comex is not required. There's a force majeur clause in Comex contracts that states contracts can be settled in cash if necessary.
I can recall getting on the phone with my business partner last Monday and the first thing he said was "this may well be the first stage of the end game for paper gold." Since then, several highly respected bullion market professionals have made similar comments. The crux of the problem for the Too Big To Fail/Prosecute Banks is that amount of paper gold outstanding in the world - including OTC derivatives - is somewhere between 50 and 100 times amount of actual physical gold/silver that can be delivered. If enough counterparties stand for delivery, the global physical bullion market will freeze up - prices will go beyond parabolic.
This brings me back to the issue of why the U.S. will require seven years - at least - to return 300 of the 1800 tonnes of German gold being held - allegedly - in the basement of the NY Fed. 300 tonnes. Supposedly 100's of tonnes were sold on Monday. GLD has liquidated several hundred tonnes since January. And yet, the U.S. can't produce Germany's gold on demand.
I'll leave off with a comment from a recent interview with Kyle Bass - manager of the Texas State Teachers retirement fund - who recently took physical delivery of roughly 19 tonnes of gold bullion being held on behalf of the pension fund:
Grant Willliams weighs in the gold and silver smash last week: (courtesy Grant Williams/Hmmmm.....)
Mark Lundeen...
It appears the current trend of gold flowing from the COMEX is accelerating.
Since April 01, COMEX gold stocks have declined from 21% to 25% from their all-time high seen in July 2011. But noticeably most of this decline began in October 2012, around the time the cartel began placing pressure on the gold and silver market.
Here’s the chart for gold stored at the COMEX in thousands of ounces, the same data used to construct the BEV chart above. It’s pretty obvious that since 1974 nothing like this has ever happened before at the COMEX’s gold storage facilities; seeing over two million ounces of gold exit from the control of the COMEX in such a short time.
The timing for the transfer of this gold this is pretty suspicious. In a world where every ounce of gold held by banks appears to have been sold to one hundred different people (as per Jeffrey Christian of the CPM Group), are people in the know taking gold out of Dodge City before the other ninety nine “owners” (who believe this gold belongs to them too) lineup in front of the COMEX? It could be!
This situation bears watching.
Mark
Just in case someone is wondering what is happening with the COMEX’s silver stocks, here is the chart. I haven’t a clue why COMEX silver stocks are rising as their gold stocks are going down.
Mark
end
Peter Munk out and Goldman Sach's Thorton is in:
(courtesy Bloomberg)
( Casey Report for Wednesday - news and views and data from Tuesday.... )
¤ YESTERDAY IN GOLD & SILVER
Looking at that Kitco gold chart below, the gold price action on Tuesday looked very similar to the gold price action on Monday, except for the fact that the price was transposed about fifteen bucks lower...and that event occurred in the thinly-traded Far East market starting about an hour or so before the London open, which was something that I pointed out in 'The Wrap' section of yesterday's column.
Once London trading began, Tuesday's price action was a virtual carbon copy of the Monday action...right up until the close of electronic trading at 5:15 p.m. in New York. The low of the day came at the London p.m. gold fix...and Kitco recorded that as $1,404.10 spot. The high was slightly above $1,430 spot in late Tuesday morning trading Hong Kong time.
Gold closed at $1,413.60 spot...down $12.70 from Monday. Gross volume was very heavy...around 239,000 contracts. Ted Butler pointed out...and I agree...that volume levels in both gold and silver are much higher than they ever used to be. Virtually all of it is coming from the high-frequency traders as they spoof these markets.
It was more or less the same in silver, where the low of the day [a bit below $22.60 spot] came just minutes before 9:00 a.m. BST. The subsequent rally ran into resistance at the noon London silver fix...and the silver price wasn't allowed to do much after that.
Silver closed at $22.94 spot...down 48 cents from Monday's close. Volumes, net of roll-overs out of the May delivery month, was 44,000 contracts.
The dollar index closed on Monday at 82.65...then fell briefly to 82.54 shortly after the London open...and then blasted higher, breaking through the 83.00 price mark a bit more than an hour later. From there, the index chopped around that mark, closing the Tuesday trading session at 83.02...up 48 basis points on the day.
The moon-shot rally in the dollar index shortly after the London open had no visible impact on precious metal prices.
Once again the CME's Daily Delivery Report wasn't updated by it's usual time, but when it finally was, it showed that 271 gold and zero silver contracts were posted for delivery on Thursday from within the Comex-approved depositories. JPMorgan Chase was the short/issuer on all 271 contracts...and Barclays was the long/stopper on 199 contracts, with Canada's Bank of Nova Scotia a distant second with 68 contracts stopped. The link to yesterday's Issuers and Stoppers Reportis here.
GLD's inventory continues to head lower, as another 241,782 troy ounces were withdrawn by an authorized participant yesterday. There was a huge chunk of silver withdrawn from SLV yesterday as well...4,249,995 troy ounces to be exact. Based on the price action over the last three or four days, this was not a plain-vanilla withdrawal...and I would guess that it's the buyer that Ted Butler keeps mentioning that has been quietly accumulating SLV shares and then redeeming them for physical metal so that they never violate reporting requirements.
Over at Switzerland's Zürcher Kantonalbank, they reported that, as of the close of business on Monday, their gold ETF had a withdrawal of 105,679 troy ounces...and their silver ETF actually showed an increase of 80,112 troy ounces.
There was another decent sales report from the U.S. Mint yesterday. They sold 8,500 ounces of gold eagles...4,000 one-ounce 24K gold buffaloes...and 164,000 silver eagles.
Reader David Ball sent me a Kitco story yesterday saying that the mint was..."suspending the sale of one-tenth ounce American Eagle gold bullion coins. The coin will go back on sale once inventories have been replenished. The Mint said that 85,000 one-tenth ounce coins were sold in April, the second strongest month for sales this year behind January. “While the one-ounce gold bullion coins remain the most popular, demand for the one-tenth ounce coins has remained strong too, with year-to-date demand for these coins up over 118% compared to the same period last year.” A Reuters story about it is linked here.
Over at the Comex-approved depositories on Monday, they reported receiving 649,306 troy ounces of silver...and shipped 391,932 troy ounces of the stuff out the door. The link to that activity is here.
The gold warehouse stocks declined by a further 198,536 troy ounces on Monday, with all of it coming out of JPMorgan Chase, Canada's Bank of Nova Scotia and HSBC USA. In other words...the Big 3 short holders in silver...and probably gold as well. If these three bullion banks disappeared out of the Comex futures market tomorrow, the remaining Commercial traders in all four precious metals would be net long the market. The link to that activity is here.
Things slowed down a bit at the bullion store yesterday, but what was lacking in customer volume was more than made up for in order size. We are currently selling small silver bars and rounds again, but its strictly limited to 50 oz. of silver in total per customer on a cash-and-carry basis...although there are no such limits on 100 oz. silver bars. There were no wholesalers taking orders again yesterday...and neither were any of the mints that we deal with. I would suspect that when we do get some delivery dates we can work with, they will be late July or early August...because deliveries were already late June when the wholesalers stopped taking orders last week.
selected news and views....
Republicans Say Fed ‘Willfully’ Withholding Documents
Two House Republicans have threatened to subpoena the Federal Reserve for nonpublic documents on how the central bank plans to wind down its more than $3 trillion bond portfolio without harming the nation’s economy.
In a letter viewed by The Wall Street Journal, House Oversight Chairman Darrell Issa (R., Calif.) and Rep. Jim Jordan (R., Ohio) told Fed Chairman Ben Bernanke that they were frustrated at the lack of response to a February request demanding more details on the central bank’s strategy to unwind assets purchased during years of its easy-money stimulus programs. The lawmakers say Mr. Bernanke continues to “willfully withhold” sensitive documents the committee has requested.
“The American people have a right to know the true risks associated with the expansion of the Federal Reserve’s balance sheet,” the lawmakers wrote in a letter dated April 22. “The Fed’s obstruction and lack of transparency must stop.”
These are the only three paragraphs posted that you can read in this subscriber-protected story that appeared in The Wall Street Journal yesterday. It not only GATA that can't get answers out of the Fed...and I thank Washington state reader S.A. for sending it.
E.U. governments get cold feet on transactions tax
Prospects of an EU tax on financial transactions have been put into question by confusion on how it would work and a legal challenge by the UK.
A six-page-long memo drafted by civil servants in the EU Council last week - seen by EUobserver - indicates cooling enthusiasm among the 11 EU countries which supported the introduction of a financial transactions tax (FTT).
The officials say the FTT, which includes a 0.1 percent levy on bonds and shares and 0.01 percent on derivative products, would hit repurchase agreements on sovereign bonds, forcing up the cost of financing government debt.
This article, filed from Brussels, was posted on the euobserver.com Internet site on Monday morning Europe time...and it's also courtesy of Roy Stephens.
Four King World News Blogs/Audio Interviews
The first interview is with Richard Russell...and it's headlined "Frightening, Historic and Unprecedented Times". The second blog is with Gerald Celente...and it's titled "Sneak Peek at New Trends Journal and Boston Tragedy". Third comes Jim Sinclair. It bears the headline "Full-Blown Panic as People Ask "Where is the Gold?". The audio interview is with Andrew Maguire.
Economist Polleit acknowledges gold market rigging
Yesterday, investment banker and economist Thorsten Polleit acknowledged to financial journalist Lars Schall, writing for Matterhorn Asset Management's Gold Switzerland Internet site, that the gold market is anything but free.
"A free market means that there is a free supply of and a free demand for gold that determines its purchasing power," Polleit says. "However, government-sponsored central banks also play a role in affecting the supply of and demand for gold through, for instance, lease transactions. In that sense market conditions are influenced, and at times greatly so, by government interference -- and therefore do not correspond with the principles guiding a free market."
Schall's interview with Polleit is headlined "It Isn't Capitalism That Has Caused the Crisis" and it's posted at the goldswitzerland.com Internet site. I thank Chris Powell for wordsmithing the above two paragraphs of introduction.
Lawrence Williams: How the bankers crashed the gold market – again!
There have been all kinds of theories as to the cause of the huge drop in the gold market over last weekend, and the best I have seen to date has come from Bill Downey – proprietor of the internet site www.goldtrends.net and long term student of the gold and silver markets.
Interestingly, the driving down of the price may not have directly involved the Fed (although there could perhaps have been some collusion) – but relates initially to a drawdown in physical stocks of gold on COMEX and in the JP Morgan vaults (and perhaps others too) to levels which could seriously damage the short position holders in the metals. While the analysis is yet another theory on what actually happened, its parallels with the gold price take-down of December 2011 are too close to be ignored – even down to the assumed possibility of a total breakdown of the computer systems allowing trading of physical gold at a critical point in the price action. Too unlikely perhaps to be a coincidence.
The crashing of the gold price would probably not be possible without the computer trading systems which dominate the market today with trigger points for stop-loss trades which come in at specific levels – and themselves drive the price down in a continuing spiral once the key trigger points are reached. It is the market manipulation to bring the prices down to these trigger points which is key to the whole scenario.
This longish commentary by Lawrie is definitely worth reading. It was posted on the mineweb.com Internet site yesterday...and it's courtesy of Matthew Nel.
¤ THE WRAP
Central banks are no longer central banks. It gets dangerous when they lose sight of the basic function of central banks. – Paul Volcker, CNN...08 April 2013
It should be obvious looking at the Kitco charts for both gold and silver that the prices were managed...especially once the London silver fix was in at noon local time. On both Monday and Tuesday, that spelled the end of the rallies in both metals.
Ted Butler pointed out that these markets are very illiquid, as there islittle legitimate trading going on...and a very large percentage of the volume is high-frequency traders...and that is especially noticeable in the Far East markets. Ten years ago, overnight trading volumes were microscopic...literally. The advent of the high-frequency traders and the blatant price management scheme in all four precious metals has changed all that, as HFT didn't exist back then.
Yesterday, at the close of Comex trading, was the cut-off for this Friday's Commitment of Traders Report...and it remains to be seen what kind of report we're going to get, as last week's numbers [in the Commercial and Non-Commercial categories] were simply not believable based on the price action during the reporting week. Will the numbers be 'correct' this week? Beats me, but it will be the first thing I look for when I click on the CFTC's website on Friday afternoon at 1:30 p.m. Eastern time.
With any moving average worth mentioning still miles above the current spot prices in both gold and silver, the nowgrotesque short positions that the Non-Commercial traders hold in both metals will not have to be covered. So until these moving averages fall low enough, or prices rise to meet them, I'm not expecting a lot to happen in the precious metals arena...as anyone with an 'agenda' can do what the wish with the price until that event becomes imminent. But I'm always on the lookout for any surprise that may come out of left field.
Here's the 6-month silver chart as an example...with both the 20 and 50-day moving averages...and you can see the huge gap that exists between the spot price and the first moving average of importance...the 20-day. If it's technical fund short covering that will drive the next rally, it's going to take a while before they're forced to begin covering.
(Click on image to enlarge)
Of course there's always the chance that the physical market may trump the paper market, but it will be impossible to see that coming until the moment it arrives. And if it does, it will be evident in the price immediately.
I've been very impressed with the broad understanding now becoming moreapparent in the gold and silver world that the big price declines in all four precious metals was a bullion bank-led operation...and that there was nothing free market about it. It goes without saying that these commentaries that you and I are reading, are also being read inside the precious metal mining community itself. But it remains to be seen if they actually develop gonads large enough to raise their voices singly, or in unison, to put an end to the constant raping of their industry, their individual companies...and their long-suffering stockholders. If I had to bet a large sum of money, I could bet it with total confidence knowing that they will do nothing. How has it come to this?
In Far East trading on their Wednesday, both gold and silver rallied in fits and starts...but both rallies did not go unopposed, as there wasbig associated volume. As London begins to trade at 3:00 a.m. Eastern time, gold is up about fourteen bucks...and silver is up 26 cents.
And as I hit the 'send' button at 5:10 a.m. Eastern time, the rallies in both gold and silver got sold off a bitas soon as London began to trade...and half the gains that silver made in Far East trading have vanished, although gold is still up over ten bucks. It remains to be seen how the rest of the Wednesday trading session unfolds once we get past the noon London silver fix, as that point was the end of the rallies in both metals on Tuesday. Volumes are pretty high for this time of day considering the price action...and the dollar index is up a handful of basis points.
See you on Thursday...Friday west of the International Date Line.
Wednesday, April 24, 2013 1:21 AM
U.S. Mint Runs Out of Smallest American Eagle Gold Coin; Is There a Shortage of Physical Gold? Coordinated Smackdown by Naked Shorts?
Demand for gold coins has surged following the record price plunge in gold last week. Demand is so high that the U.S. Mint Runs Out of Smallest American Eagle Gold Coin.
The U.S. Mint ran out its smallest American Eagle gold coin after demand surged following the biggest drop in futures prices in 33 years.Bullish or Bearish?
Sales of the coins weighing a 10th of an ounce were suspended after demand more than doubled in 2013 from a year earlier, the Mint said today in a statement. Total sales of American Eagles in April have almost tripled from a month earlier, according to Mint data on the website.
On April 15, gold futures in New York plunged 9.3 percent, the most since 1980. Retail sales and jewelry demand soared in India, the world’s top buyer, and China, the second-biggest. Coin sales also surged in Australia.
The Mint also sells 22-karat American Eagle coins of 1 ounce, half an ounce and a quarter of an ounce.
The U.S. Mint suspended sales of silver coins in January for more than a week because of lack of inventory. Sales of the coins jumped to a record that month.
It's possible to make a bullish or bearish argument out of this shortage. The bullish argument is simple: demand is strong. The bearish argument is small investors are a contrarian indicator just as they were with silver in January.
I am not taking a short-term stance one way or another, so don't ask. I do like my chances longer-term as I explained at the Wine Country Conference. See Mike “Mish” Shedlock: A Brief Lesson in History.
Shortage of Physical Gold?
Some writers have spun this story into the message there is a shortage of physical gold. No there isn't. There is a temporary shortage of certain coins, no more no less.
Divergence Between Physical Gold and Paper Gold?
Other writers have noticed the price premium on small denomination coins and concluded there is some sort of "divergence between physical gold and paper gold".
Once again, that's nonsense. Premiums on small denomination coins is not the same a general premium on physical gold itself.
How do I know?
Easy: If I went to buy or sell at GoldMoney (and GoldMoney only deals in physical metals with allocated, audited storage), I would pay the same small markup as before, based on the current futures price.
Here is another way to tell. Go buy or sell a one ounce bar and see how much it costs or how much you can get. Here's a hint: your selling price will not fetch $1900 as it once did, nor would it cost you over $1900 to buy.
Smackdown by Naked Shorts?
Many claim blatant manipulation by naked shorts. Mercy! Under this theory, shorts piled on to the tune of 163,000 gold futures. Really?
Keith Weiner tackles that theory for the Acting Man Blog in The Last Contango. Here is the pertinent chart.
Weiner asks "If someone had sold 163,000 futures to cause the price to drop, then wouldn’t the open interest [in futures] have risen? If Santa went down chimneys, wouldn’t there be soot on his red and white uniform?"
The answer to both questions is of course "yes". Instead, the chart shows a 16,000 open interest drop in gold futures and a 12,000 drop in silver futures.
Ignore the Hype in Both Directions
Bulls blame every drop on manipulation and frequently tout preposterous price targets. Bears cite jewelry demand and other nonsense as if it's important (and it isn't).
It is best to ignore the hype and silliness on both sides.
Fundamentally, what has changed? I suggest nothing.
Mike "Mish" Shedlock
http://www.tfmetalsreport.com/blog/4667/gold-delivery-or-default
Gold: Delivery or Default?
Jeez, Louise. Where does the time go? It's now 12:08 EDT and I'm just getting started. Where to begin? How do I put all of the stuff that's swimming around in my head into some kind of coherent format?
Primarily, I'm trying to connects these dots with the idea that "history doesn't necessarily repeat but it does rhyme":
- Strong physical demand
- Declining Comex reserves
- The draining of the GLD, with "inventory" now down 18.16% YTD
- Paper price raids with attendant margin hikes
- Lease rates and cash vs futures backwardation
- Bullion bank default
You see, I've come to the conclusion that the current situation is far more complicated than I had expected it to be. Rather than a simple sell-stop washout, it seems that there is something considerably more serious lurking just behind the scenes and out of our field of vision.
Yesterday, I had a conversation with an old friend. He's a sharp guy who has been in financial services industry for over 20 years. He reads this site and has come around to the idea of "market management", not just in the metals but nearly everywhere. He asked me two simple questions:
- How? How did the big banks get in this position of being so heavily short?
- Why? Why are they heavily short and what are they trying to accomplish?
Because we were trying to get caught up after after having lost track of each other for several months, I only had the time to answer a part of the two questions...the "why"...and forgetting that, as an industry veteran, he's far more sophisticated than the average person who asks "why". But this got me thinking. In fact, this whole exercise of dot-connecting has been rolling around in my head ever since. I'm typing this up today, not because I've solved the puzzle but because I'm hoping that the sheer exercise of typing will help the thought process.
So I suppose I should start by revisiting my friend's question. The bullion banks are short for a number of reasons, one of which is this: For the longest time, leasing gold and selling it into the market was free money. You borrowed some gold from the BIS. You sold it at 100:1 leverage on The Comex. You took the cash from the sale and bought something else. Stocks. Bonds. Whatever. And you kept the spread. Pretty simple. And when the time came to repay the leases, you bought some gold back or simply rolled the contracts. As long as physical demand stayed low, you could theoretically play this game ad infinitum. These "bets" got larger and larger and eventually more and more banks joined the fray. And now, in some sense, here we are.
The banks have leased, hypothecated and rehypothecated just about every ounce of gold that they can get their hands on. And again, from their point of view, all should be well.
BUT, ALL IS NOT WELL.
And the problem is...Physical Demand. Again, as stated two paragraphs ago: "As long as physical demand stayed low, you could theoretically play this game ad infinitum". But the jig is up. The cat is out of the bag. The wrench is in the works. And it all goes back to debt and quantitative easing.
You see, the game is over. The Banks don't want to believe this but you know it's true. I know it's true. Millions worldwide know it's true. High Net Worth individuals trying to protect their assets know it's true. Sovereign Wealth and Pension funds know it's true. And, most importantly, Creditor Nation Central Banks know it's true. All of us are demanding physical gold (and silver) and it is putting incredible strain upon this current, highly-leveraged, fractional reserve bullion banking system.
So now lets get back to trying to project the future by connecting the dots of the past and present.
- Strong physical demand. Where do I start? 1000 mts delivered through Shanghai YTD. 15-25 mts allocated and delivered in London each day. Feb13 and April13 Comex contracts totaling deliveries of 2.5 million ounces. Sales records at the U.S. Mint. I could go on and on with links galore but you get the picture.
- Declining Comex reserves. Registered gold reserves at the Comex have fallen to multi-year lows. As of yesterday, registered reserves were only 2.28 million ounces or enough to settle just 22,800 contracts or 5% of the total open interest. http://www.cmegroup.com/delivery_reports/Gold_Stocks.xls
- The draining of the GLD, with "inventory" now down 18.16% YTD. As you know, we've been watching this closely and with amusement. Yesterday alone, the GLD shed 18.35 metric tonnes. That's 590,000 troy ounces or 1,475 London bars. Back on April 11, 2013 the GLD had "inventory" of 1,181.42 metric tonnes. As of yesterday, it was just 1,104.71. This means that since the recent paper price beatdown began seven trading days ago, the GLD has shed 76.71 metric tonnes of gold. For all of 2013, a total of 245.21 metric tonnes of gold has egressed from the GLD. That's 7,883,684 troy ounces or 19,709 London bars. (I could C&P all of the pallets necessary to hold these bars but I don't want to crash my servers.) Note the numbers, however. Almost 8MM troy ounces have been withdrawn ytd. As of yesterday, the total Comex warehouse stock of eligible (unallocated, non-deliverable) and registered (available for delivery) gold was just 8,781,909 ounces.
- Paper price raids with attendant margin hikes. This next link isn't very much fun to read but I ask you to review it, regardless. You'll even find a comment in there from yours truly. (I like the "Franz Ferdinand" analogy...it just didn't work out that way...yet.) In trying to get this point across, though, reading this old story and considering it from the perspective of current events is helpful. Note the date it was written. Think about what happened next. Then think about what has happened over the past two weeks. http://www.zerohedge.com/article/how-comex-lost-20-its-registered-silver-one-week-or-where-theres-smoke-run-theres-probably-r
- Lease rates and cash vs futures backwardation. Now this is where it gets really interesting. Back in the late 1990s, Gordon Brown ordered the liquidation of a vast amount of English gold. He's since been ridiculed for selling at the low which has subsequently been called "Brown's Bottom". But was he really just blindly and foolishly dumping gold or was there something far more significant taking place behind the scenes? Please stop here and read this:http://fofoa.blogspot.com/2010/07/red-alert-gold-backwardation.html You see, once again the "public story/narrative" is nowhere near the truth. We now know that Brown was actually forced to sell England's gold in order to stave off a bullion bank collapse, a collapse that posed a systemic risk to the global financial system. Gold was delivered for the purpose of covering Goldman Sachs' grossly mismatched leases. Deliveries were made and the system was saved. Physical demand subsided as the dot-com and real estate bubbles were inflated. With the goal of avoiding a repeat of this near-disaster, the banks began to actively manage an ascending gold price in order to keep supply and demand in some sort of equilibrium. It worked pretty well until 2008. It really began to get away from them in 2009, with the advent of overt quantitative easing. Then, in September of 2011, with the U.S. downgrade and the Swiss Franc devaluation, it was decided that price must be crushed (a plan which continues to this day) in the hopes of controlling demand. To the bankers dismay, demand for metal did not decrease. After slowing in 2012, it has increased significantly since the QE∞ announcement last autumn. Crushing price only served to buy time. And now it appears that time has run out.
- Bullion bank default. Which then brings us to this. About four weeks ago, the Dutch bank, ABN AMRO, declared that it would no longer deliver physical gold to its clients.http://www.zerohedge.com/news/2013-03-24/another-gold-shortage-abn-halt-physical-gold-delivery & http://silverdoctors.com/dutch-bank-abn-amro-halts-physical-gold-delivery/ &http://forexmagnates.com/abn-amro-halts-physical-gold-delivery-another-sign-all-trading-is-simply-for-pieces-of-paper/ Now combine those three articles with these two bits of analysis, written in just the past 24 hours: http://redgreenandblue.org/2013/04/22/james-howard-kunstler-where-the-hell-did-all-the-gold-go/ & http://www.zerohedge.com/contributed/2013-04-22/why-western-banking-cartel’s-gold-and-silver-price-slam-will-backfire-and-how. We also hear anecdotally how both Andrew Maguire and Jim Sinclair know of contacts who have recently been denied delivery of supposed "allocated" gold from their bullion bank accounts:http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/22_Maguire_-_Elaborates_On_The_LBMA_Default_%26_Ensuing_Panic.html &http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/23_Sinclair_-_Swiss_Bank_Just_Refused_To_Give_My_Friend_His_Gold.html
OK, so now it's 3:08 pm EDT and what have I accomplished. Are the dots connecting? Can we draw any conclusions or even educated guesses as to what might happen next? You know what...I don't know. But I do know this:
The current situation has many parallels to past events. Is there enough evidence to conclude that the end of the fractional reserve bullion banking system is right around the corner? Perhaps "conclude" is too strong of a word. Put it this way: Is there enough evidence to infer that its a near-term possibility? Yes. Absolutely, yes.
So what do we need to watch going forward? How about these seven items:
- Physical demand. If it begins to wane in the days ahead OR if it declines or ceases after the next price drop, then the banks will likely be able to buy more time.
- Lease rates. If the gold lease rate spikes positive like it did in 1999 or how silver did in 2011, you'll know that supply is getting extremely tight.
- The CoT structure. Though they haven't been able to pull it off yet, the banks may try to cover shorts to the point of being net long, thereby transferring the "short risk" to the Specs.
- Paper price. Do the banks dare rig price even lower, risking an even greater surge of physical demand and an increase in the rate of inventory depletion.
- GLD "inventory". Someone in the previous thread made mention of something that FOFOA noted recently. The GLD is down 245 tonnes YTD. It took over two months to "lose" the first 100 tonnes (1/2/13 - 3/7/13). It took about 6 weeks to lose the next 100 tonnes (3/8/13 - 4/16/13). And we have now lost 41 tonnes in the four days since. Will this acceleration continue?
- Comex warehouse inventories. They currently hold enough gold to settle and deliver the June and August contracts. Then what? From where will they get their gold to replenish these stocks.
- Global tonnage demand. Not through New York but London, Shanghai and Dubai. Does the pace of these allocations and deliveries increase or decrease with price?
So, I've given you a lot to think about today. (Welcome to my world!) I hope I've left you with the impression that things are extremely complicated at this moment. Far more complicated than what you're being told, where the "mainstream" opinion claims that gold is declining because of a lack of global inflation or the sunny prospects of economic growth. That analysis seems a little shallow now, don't you think?
To me it seems that the banks have once again walked the world to the precipice. If physical demand continues unabated, the fractional reserve bullion banking system will likely collapse as member firms and exchanges are eventually forced to default. Rest assured, we'll keep our eyes wide open, looking for additional clues and warning signs. For now, though, just continue to practice your primary safety drill: Buy metal, take delivery and add it to your stack. While you still can.
TF
And.......
http://harveyorgan.blogspot.com/2013/04/jim-sinclairs-blockbustergold-and.html
Tuesday, April 23, 2013
Jim Sinclair's Blockbuster/Gold and silver raid today.
Good evening Ladies and Gentlemen: (amended to include updates on GLD/SLV
CENTRAL FUND OF CANADA/SPROTT)
Gold closed down $12.40 to $1408.60 (comex closing time). Silver fell by 51 cents to $22.81 (comex closing time).
As I promised you, the chances for a raid were very high due to the falling gold and silver equities and the lower silver price.
In the access market at 5 pm gold and silver reversed course and rose northbound:
gold: $1414.10
silver: $22.98
At the comex, the open interest in silver rose sharply to 157,264 contracts as it is still holding firm at elevated levels . The open interest on the gold contract fell by 252 contracts to 416,581. Generally, I would say that 390,000 OI would be rock bottom for gold but in this environment anything goes. The total amount of gold ounces standing for April rose slightly to 34.26 tonnes as silver also had a slight increase to 3.770 million oz standing.
The big news in the physical markets was reported by Jim Sinclair. His close friend could not retrieve his allocated gold stored in Switzerland due to "concerns of money laundering and terrorism". First we had the Amro story where customers were paid cash instead of receiving gold on delivered contracts. Then Andrew Maguire reported yesterday that customers who had leased gold for a "return" on their stored gold could not get their gold back. And today, the Jim Sinclair story (see below...Jim Sinclair/Dave from Denver)
The USA mint announced late tonight that the lowest denominated gold bar the 1/10 oz has been halted due to lack of supplies.
Goldman Sachs closed out their gold short this morning.
In paper news, the Chinese PMI report was terrible causing the Shanghai composite to tumble 2.57%.
European PMI's on both manufacturing and service were equally bad but do not worry, We had the Fed and Japan printing massive QE and they are buying up everything in sight.
Then the uSA flash PMI was also reported and it was weak as well.
We will go over these and other stories but first.........................
Let us now head over to the comex and assess trading over there today:
The total gold comex open interest fell by 252 contracts today from 416,833 down to 416,581, with gold rising by $25.70 on Monday. The front April OI fell by 26 contracts from 585 down to 559. We had 42 notices filed on Monday so we gained 16 contracts or 1600 gold oz will not be standing for the April gold contract month. The next non active contract month is May and here the OI fell by 103 contracts to 1402. The next big contract month is June and here the OI rose by 402 contracts from 254,602 up to 255,004. The estimated volume today was huge at 211,950 or 21.195 million oz. The world produces around 70 million oz ex China ex Russia. Thus Tuesday's volume equates to around 30% of global annual production. The confirmed volume on Monday was also huge at 200,998 contracts (approx 625 tonnes of gold).
The total silver comex OI rose by 1442 contracts from 155,815 up to 157,264. It still looks like we still have some stoic longs who seem impervious to pain as the OI in silver continues to remain elevated. The front non active delivery month of April saw its OI fall by 2 contracts from 28 down to 26 . We had 10 delivery notices filed on Monday, so in essence we gained 8 contracts or 40,000 oz of additional silver will stand for delivery in April. The next big delivery month for silver is May and here the OI fell by 5154 contracts to stand at 38,960. We are less than 2 weeks away from first day notice for the May silver delivery month. The estimated volume today was huge, coming in at 102,602 contracts which equates close to 513 million oz of silver. The world produces 700 million oz per year ex China ex Russia so in essence today's volume equates to 73.3% of annual silver production. We had confirmed volume on Monday at 72,072 contracts which is a huge volume day . (.360 billion oz or 51.4% of annual silver production)
CENTRAL FUND OF CANADA/SPROTT)
Gold closed down $12.40 to $1408.60 (comex closing time). Silver fell by 51 cents to $22.81 (comex closing time).
As I promised you, the chances for a raid were very high due to the falling gold and silver equities and the lower silver price.
In the access market at 5 pm gold and silver reversed course and rose northbound:
gold: $1414.10
silver: $22.98
At the comex, the open interest in silver rose sharply to 157,264 contracts as it is still holding firm at elevated levels . The open interest on the gold contract fell by 252 contracts to 416,581. Generally, I would say that 390,000 OI would be rock bottom for gold but in this environment anything goes. The total amount of gold ounces standing for April rose slightly to 34.26 tonnes as silver also had a slight increase to 3.770 million oz standing.
The big news in the physical markets was reported by Jim Sinclair. His close friend could not retrieve his allocated gold stored in Switzerland due to "concerns of money laundering and terrorism". First we had the Amro story where customers were paid cash instead of receiving gold on delivered contracts. Then Andrew Maguire reported yesterday that customers who had leased gold for a "return" on their stored gold could not get their gold back. And today, the Jim Sinclair story (see below...Jim Sinclair/Dave from Denver)
The USA mint announced late tonight that the lowest denominated gold bar the 1/10 oz has been halted due to lack of supplies.
Goldman Sachs closed out their gold short this morning.
In paper news, the Chinese PMI report was terrible causing the Shanghai composite to tumble 2.57%.
European PMI's on both manufacturing and service were equally bad but do not worry, We had the Fed and Japan printing massive QE and they are buying up everything in sight.
Then the uSA flash PMI was also reported and it was weak as well.
We will go over these and other stories but first.........................
Let us now head over to the comex and assess trading over there today:
The total gold comex open interest fell by 252 contracts today from 416,833 down to 416,581, with gold rising by $25.70 on Monday. The front April OI fell by 26 contracts from 585 down to 559. We had 42 notices filed on Monday so we gained 16 contracts or 1600 gold oz will not be standing for the April gold contract month. The next non active contract month is May and here the OI fell by 103 contracts to 1402. The next big contract month is June and here the OI rose by 402 contracts from 254,602 up to 255,004. The estimated volume today was huge at 211,950 or 21.195 million oz. The world produces around 70 million oz ex China ex Russia. Thus Tuesday's volume equates to around 30% of global annual production. The confirmed volume on Monday was also huge at 200,998 contracts (approx 625 tonnes of gold).
The total silver comex OI rose by 1442 contracts from 155,815 up to 157,264. It still looks like we still have some stoic longs who seem impervious to pain as the OI in silver continues to remain elevated. The front non active delivery month of April saw its OI fall by 2 contracts from 28 down to 26 . We had 10 delivery notices filed on Monday, so in essence we gained 8 contracts or 40,000 oz of additional silver will stand for delivery in April. The next big delivery month for silver is May and here the OI fell by 5154 contracts to stand at 38,960. We are less than 2 weeks away from first day notice for the May silver delivery month. The estimated volume today was huge, coming in at 102,602 contracts which equates close to 513 million oz of silver. The world produces 700 million oz per year ex China ex Russia so in essence today's volume equates to 73.3% of annual silver production. We had confirmed volume on Monday at 72,072 contracts which is a huge volume day . (.360 billion oz or 51.4% of annual silver production)
April 23.2013 April gold.
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
198,536.285 (HSBC,JPM, Scotia)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
42 (4,200 oz)
No of oz to be served (notices)
517 (51,700) oz
Total monthly oz gold served (contracts) so far this month
10,499 (1,049,900 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
26,484.136 oz
Total accumulative withdrawal of gold from the Customer inventory this month
605,604.27 oz
We had good activity at the gold vaults.
The dealer had 0 deposits and 0 dealer withdrawal.
We had 0 customer deposits:
total customer deposit: nil oz
We had 3 customer withdrawals :
i) Out of JPM: 80,838.443 oz
ii) Out of HSBC: 32,231.695 oz
iii) Out of Scotia: 85,466.147
total customer withdrawal: 198,536.285 oz (6.17 tonnes of gold removed)
We had 1 adjustment:
Out of the Scotia vault: 1102.65 oz was added to the dealer's account (registered) and this came from the customer account.(eligible account)
The following is very scary!!!
Thus the dealer inventory rests tonight at 2.281 million oz (70.9) tonnes of gold.
The total of all gold declines again at the comex and rests at 8.583 million oz or 266.9 tonnes.
The comex is slowly losing its gold .
The CME reported that we had 42 notices filed for 4200 oz of gold today. The total number of notices so far this month is thus 10,499 contracts x 100 oz per contract or 1,049,900 oz of gold. In order to establish what will be the total number of gold ounces standing, I take the OI for April (559) and subtract out Tuesday's delivery notices (42) which leaves us with 517 contracts or 51700 oz left to be served upon our longs.
Thus we have the following gold ounces standing for metal:
1,049,900 (served) + 51,700 oz (left to be served upon ) = 1,101,600 oz or
34.26 tonnes of gold.
we gained 1600 oz of gold standing for the April gold contract. This is turning out to be a very big delivery month!1
Silver:
April 23.2013: April silver:
Silver
Ounces
Withdrawals from Dealers Inventory nil Withdrawals from Customer Inventory 391,932.55 oz (CNT, Delaware,Scotia) Deposits to the Dealer Inventory nil Deposits to the Customer Inventory 649,306.085 (CNT, JPM) No of oz served (contracts) 11 contracts (55,000 oz) No of oz to be served (notices) 15 (75,000 oz) Total monthly oz silver served (contracts) 739 (3,695,000 oz) Total accumulative withdrawal of silver from the Dealers inventory this month 2,473,081.4 oz Total accumulative withdrawal of silver from the Customer inventory this month 4,713,637.4
Today, we had good activity inside the silver vaults.
we had 0 dealer deposits and 0 dealer withdrawals.
Out of Scotia: 598,655.29 oz leaves the dealer and no doubt most of this left all registered comex vaults.
We had 3 customer withdrawals:
i) Into CNT: 33,134.37 oz
ii) Into HSBC: 41,011.532
iii) Into Scotia; 29,348.13 oz
Total withdrawals: 103,494.03 oz
We had 2 customer deposits:
i) The huge withdrawal yesterday from Scotia of 598,655.29 oz landed in the customer account of JPMorgan today.
ii) Into CNT: 50,650.795 oz
total customer deposits: 649,306.085 oz
we had 1 adjustments:
Out of the Scotia vault: 10,177.30 oz was adjusted out of the customer account and back to the dealer account at Scotia
Registered silver at : 39.146 million oz
total of all silver: 165.813 million oz.
The CME reported that we had 11 notices filed for 5,000 oz of silver for the non active contract month of April. In order to calculate the number of silver ounces that will stand, I take the OI for April silver (26) and subtract out Tuesday's notices (11) which leaves us with 15 notices or 75,000 oz left to be served upon our longs.
Thus the total number of silver ounces standing in this non active delivery month of April is as follows:
3,695,000 oz served + 75,000 oz to be served = 3,770,000 oz
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
nil
|
Withdrawals from Customer Inventory in oz
|
198,536.285 (HSBC,JPM, Scotia)
|
Deposits to the Dealer Inventory in oz
|
nil
|
Deposits to the Customer Inventory, in oz
| nil |
No of oz served (contracts) today
|
42 (4,200 oz)
|
No of oz to be served (notices)
|
517 (51,700) oz
|
Total monthly oz gold served (contracts) so far this month
|
10,499 (1,049,900 oz)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
26,484.136 oz
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 605,604.27 oz |
We had good activity at the gold vaults.
The dealer had 0 deposits and 0 dealer withdrawal.
We had 0 customer deposits:
total customer deposit: nil oz
We had 3 customer withdrawals :
i) Out of JPM: 80,838.443 oz
ii) Out of HSBC: 32,231.695 oz
iii) Out of Scotia: 85,466.147
total customer withdrawal: 198,536.285 oz (6.17 tonnes of gold removed)
total customer deposit: nil oz
We had 3 customer withdrawals :
i) Out of JPM: 80,838.443 oz
ii) Out of HSBC: 32,231.695 oz
iii) Out of Scotia: 85,466.147
total customer withdrawal: 198,536.285 oz (6.17 tonnes of gold removed)
We had 1 adjustment:
Out of the Scotia vault: 1102.65 oz was added to the dealer's account (registered) and this came from the customer account.(eligible account)
The following is very scary!!!
Out of the Scotia vault: 1102.65 oz was added to the dealer's account (registered) and this came from the customer account.(eligible account)
The following is very scary!!!
Thus the dealer inventory rests tonight at 2.281 million oz (70.9) tonnes of gold.
The total of all gold declines again at the comex and rests at 8.583 million oz or 266.9 tonnes.
The comex is slowly losing its gold .
The total of all gold declines again at the comex and rests at 8.583 million oz or 266.9 tonnes.
The comex is slowly losing its gold .
The CME reported that we had 42 notices filed for 4200 oz of gold today. The total number of notices so far this month is thus 10,499 contracts x 100 oz per contract or 1,049,900 oz of gold. In order to establish what will be the total number of gold ounces standing, I take the OI for April (559) and subtract out Tuesday's delivery notices (42) which leaves us with 517 contracts or 51700 oz left to be served upon our longs.
Thus we have the following gold ounces standing for metal:
1,049,900 (served) + 51,700 oz (left to be served upon ) = 1,101,600 oz or
34.26 tonnes of gold.
we gained 1600 oz of gold standing for the April gold contract. This is turning out to be a very big delivery month!1
Thus we have the following gold ounces standing for metal:
1,049,900 (served) + 51,700 oz (left to be served upon ) = 1,101,600 oz or
34.26 tonnes of gold.
we gained 1600 oz of gold standing for the April gold contract. This is turning out to be a very big delivery month!1
Silver:
April 23.2013: April silver:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | 391,932.55 oz (CNT, Delaware,Scotia) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | 649,306.085 (CNT, JPM) |
| No of oz served (contracts) | 11 contracts (55,000 oz) |
| No of oz to be served (notices) | 15 (75,000 oz) |
| Total monthly oz silver served (contracts) | 739 (3,695,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 2,473,081.4 oz |
| Total accumulative withdrawal of silver from the Customer inventory this month | 4,713,637.4 |
Today, we had good activity inside the silver vaults.
we had 0 dealer deposits and 0 dealer withdrawals.
Out of Scotia: 598,655.29 oz leaves the dealer and no doubt most of this left all registered comex vaults.
We had 3 customer withdrawals:
i) Into CNT: 33,134.37 oz
ii) Into HSBC: 41,011.532
iii) Into Scotia; 29,348.13 oz
Total withdrawals: 103,494.03 oz
We had 2 customer deposits:
i) The huge withdrawal yesterday from Scotia of 598,655.29 oz landed in the customer account of JPMorgan today.
ii) Into CNT: 50,650.795 oz
total customer deposits: 649,306.085 oz
Out of Scotia: 598,655.29 oz leaves the dealer and no doubt most of this left all registered comex vaults.
We had 3 customer withdrawals:
i) Into CNT: 33,134.37 oz
ii) Into HSBC: 41,011.532
iii) Into Scotia; 29,348.13 oz
Total withdrawals: 103,494.03 oz
We had 2 customer deposits:
i) The huge withdrawal yesterday from Scotia of 598,655.29 oz landed in the customer account of JPMorgan today.
ii) Into CNT: 50,650.795 oz
total customer deposits: 649,306.085 oz
we had 1 adjustments:
Out of the Scotia vault: 10,177.30 oz was adjusted out of the customer account and back to the dealer account at Scotia
Out of the Scotia vault: 10,177.30 oz was adjusted out of the customer account and back to the dealer account at Scotia
Registered silver at : 39.146 million oz
total of all silver: 165.813 million oz.
The CME reported that we had 11 notices filed for 5,000 oz of silver for the non active contract month of April. In order to calculate the number of silver ounces that will stand, I take the OI for April silver (26) and subtract out Tuesday's notices (11) which leaves us with 15 notices or 75,000 oz left to be served upon our longs.
Thus the total number of silver ounces standing in this non active delivery month of April is as follows:
3,695,000 oz served + 75,000 oz to be served = 3,770,000 oz
Thus the total number of silver ounces standing in this non active delivery month of April is as follows:
3,695,000 oz served + 75,000 oz to be served = 3,770,000 oz
we gained 40,000 oz of additional silver standing.
This is also turning out to be a very good delivery schedule for what is usually a quiet month as April is a non active month for silver.
This is also turning out to be a very good delivery schedule for what is usually a quiet month as April is a non active month for silver.
April 23.2013
Another 7.5 tons fly out the door today....
Another 7.5 tons fly out the door today....
Tonnes1,097.19
Ounces35,275,711.20
Value US$49.648 billion
TUESDAY, APRIL 23, 2013
Is This The End Game For Paper Gold/Silver?
The real market in gold/silver is what is going on in the markets where physical delivery is REQUIRED. That would be China, India, Russia, Middle East and the U.S. retail minted coin market - The Golden Truth, April 22, 2013To go along with my statement above, I find it interesting that the United States' is going to take 7 years to deliver 300 tonnes of gold back to Germany. Seven years. I find it even more interesting that not many people have scrutinized this situation. After all, it took Venezuela only about 4 months to get 200 tonnes of its gold repatriated from London and Switzerland. Hugo Chavez may be remembered by many as a crackpot, but I have a feeling the world will soon understand why one of his last moves before he died may have been his most brilliant. After all, Venezuela now has possession of its foreign-stored gold - Germany does not.
Something else that has been extraordinarily overlooked, or intentionally ignored by the media, is the fact that about 80% of the recent price hit in gold/silver has occurred during Comex trading hours, after the physical buying markets in the east (China, Russia, India, et al) have gone to sleep or home for the weekend. Please note: the Comex is a paper trading market. The Comex may have enough metal to settle about 5% of the entire open interest of gold and silver, if the entities long the paper contracts decided to stand for delivery. Typically less than 1% stand for delivery each delivery month.
So when you hear accounts that 100's of tonnes of "gold" were dumped on the Comex market last Monday, please understand and know that this was "gold" as represented by a paper Comex gold futures contract. On the Comex gold grows on trees - everywhere else in the world that wants to own gold, physical gold has to be delivered.
And while that thrift shop mannequin some call "Attorney General Eric Holder" will never require that the big banks which control Comex explain why a paper bomb representing 100's of tonnes of paper gold was dropped on the Comex, the rest of the world - including the thousands in this country trying to take advantage of the price drop by buying U.S. minted silver eagles - either can not actually buy phsyical gold/silver for delivery or have to pay substantial premiums over the spot price in order to get something delivered. Go ahead, call your local coin dealer and ask them to sell you some 1 oz. silver eagles. You'll either hear "we're out" or you'll be offered something at around $7-8 over the current spot. Note that the price where you can buy silver eagles - silver eagles that you can take home with you as opposed to rely on some counterparty for delivery - will cost you about the same price as it would have before the take down in the metals this past week.
Even more significantly are the reports from around the world of precious metals counterparties failing to deliver physical metal. It started a couple weeks ago - and not coincidentally right before the price hit started - when big Dutch bank ABN/AMRO notified its clients who had invested in a "gold bullion" account that the bank would no longer make physical delivery of the gold that was supposed to be in the account and that all accounts would be settled in cash: LINK
This morning we woke up to an interview with Jim Sinclair, who reported that "a person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank. They told him the amount was in excess of 200,000 Swiss francs and the central bank had instructed them not to do it because it has to do with anti-terrorism and anti-money laundering precautions" LINK. Sorry, that excuse does not hold water.
As you can see, and as originally predicted by GATA, the purveyors of paper gold/silver are now having trouble delivering physical gold/silver at the stated spot price. Where is it you might ask? Look to China (and other eastern hemisphere gold buying countries: "Asia is witnessing one of the strongest waves of physical gold buying in 30 years, with bargain hunters using the drop in prices to secure jewellery and gold bars." (Financial Times).
In the aftermath of last week's paper price smash, demand for gold in the markets in the world that REQUIRE physical delivery has gone parabolic. I could link dozens of reports from Reuters, the Indian Economic Times, the Financial Times, etc, but you can google it if you are interested. And what I do know for sure is that, ultimately, physical delivery on the Comex is not required. There's a force majeur clause in Comex contracts that states contracts can be settled in cash if necessary.
I can recall getting on the phone with my business partner last Monday and the first thing he said was "this may well be the first stage of the end game for paper gold." Since then, several highly respected bullion market professionals have made similar comments. The crux of the problem for the Too Big To Fail/Prosecute Banks is that amount of paper gold outstanding in the world - including OTC derivatives - is somewhere between 50 and 100 times amount of actual physical gold/silver that can be delivered. If enough counterparties stand for delivery, the global physical bullion market will freeze up - prices will go beyond parabolic.
This brings me back to the issue of why the U.S. will require seven years - at least - to return 300 of the 1800 tonnes of German gold being held - allegedly - in the basement of the NY Fed. 300 tonnes. Supposedly 100's of tonnes were sold on Monday. GLD has liquidated several hundred tonnes since January. And yet, the U.S. can't produce Germany's gold on demand.
I'll leave off with a comment from a recent interview with Kyle Bass - manager of the Texas State Teachers retirement fund - who recently took physical delivery of roughly 19 tonnes of gold bullion being held on behalf of the pension fund:
Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand. If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass. LINKThe average U.S. investor is starting to understand the difference between buying gold/silver for physical delivery and owning a paper surrogate like GLD or SLV. That would explain why the recent price take down stimulated an unprecedented amount of demand and shortages for U.S. mint 1 oz silver eagles and other silver products. It also means that the end game for paper derivative gold and silver has started and the price take down on the Comex we just witnessed is one giant bluff by bullion banks who have nothing in their hand but crappy paper cards.
Sinclair – Swiss Bank Just Refused To Give My Friend His Gold
Dear CIGAs,
Today legendary trader Jim Sinclair stunned King World News when he revealed that a dear friend of his who is very affluent just had a Swiss bank refuse to return his large hoard of gold when he asked for it out of an allocated account. Below is what Sinclair, who was once called on by former Fed Chairman Paul Volcker to assist during a Wall Street crisis, had to say in this remarkable and candid interview.
Eric King: “Maguire spoke on KWN yesterday about the fact that one of his clients went to the LBMA to get the metal from them and could not get it. They told him he would be cash settled. This is what you have been talking about is the failure of the physical markets.”
Sinclair: “A person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank….
end
Gold futures default underway and Fed will reimburse bullion banks, Maguire says
Submitted by cpowell on Tue, 2013-04-23 01:27. Section: Daily Dispatches
9:20p ET Monday, April 22, 2013
Dear Friend of GATA and Gold:
London metals trader Andrew Maguire reiterates to King World News tonight that a commodities exchange default in gold is underway, that concealing it was the objective of the gold price smash in the futures markets, that cash settlement of contracts will be imposed, and that the Federal Reserve will issue as much money as necessary to make the defaulting bullion banks whole. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Grant Williams says 'Hmmm' about gold crash
Submitted by cpowell on Tue, 2013-04-23 02:14. Section: Daily Dispatches
10:12p ET Monday, April 22, 2013
Dear Friend of GATA and Gold:
In the latest edition of his "Things That Make You Go Hmmm..." newsletter, Grant Williams of Vulpes Investment Management in Singapore joins the lengthening line of market analysts who think something is fishy about the recent gold price plunge, a line almost as long as the lines in front of gold shops in Asia.
Williams writes: "During my 30-odd years in finance, I have somehow weaved my way through many crashes, beginning with the 1987 stock market crash and including LTCM, NASDAQ, the Asian Currency Crisis, the Mexican Tequila Crisis, 9/11, and everything in between, and I can promise you that not a single one of those crashes, collapses, or crises ended up with retail investors stampeding to buy the asset that was supposedly cratering."
He adds: "Now, far be it from me to suggest that the central bankers of the world had any sort of hand in crashing the gold price -- I mean they are all such fine, upstanding servants of the public good and are definitely not short physical gold -- but said crash certainly doesn't hurt their desire to amp up the printing presses. ..."
Williams' letter is titled "Bulls Hit" and it's posted at the Mauldin Economics Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Mark Lundeen on the fast disappearing comex gold:
(courtesy GATA/Mark Lundeen)
COMEX Gold Still Declining
It appears the current trend of gold flowing from the COMEX is accelerating.
Here’s the chart for gold stored at the COMEX in thousands of ounces, the same data used to construct the BEV chart above. It’s pretty obvious that since 1974 nothing like this has ever happened before at the COMEX’s gold storage facilities; seeing over two million ounces of gold exit from the control of the COMEX in such a short time.
This situation bears watching.
Mark
end
Yet silver inventories are rising:
(courtesy Mark Lunden)
Mark
Peter Munk out and Goldman Sach's Thorton is in:
(courtesy Bloomberg)
http://www.zerohedge.com/news/2013-04-23/guest-post-physical-gold-vs-paper-gold-ultimate-disconnect
Guest Post: Physical Gold vs. Paper Gold: The Ultimate Disconnect
Submitted by Tyler Durden on 04/23/2013 21:29 -0400
- Central Banks
- China
- Commitment of Traders
- ETC
- Exchange Traded Fund
- Futures market
- George Soros
- Goldman Sachs
- goldman sachs
- Gross Domestic Product
- Guest Post
- LIBOR
- MF Global
- Precious Metals
- Purchasing Power
- Sovereign Debt
Submitted by Bud Conrad of Casey Research,
How can we explain gold dropping into the $1,300 level in less than a week?
Here are some of the factors:
- George Soros cut his fund holdings in the biggest gold ETF by 55% in the fourth quarter of 2012.
- He was not alone: the gold holdings of GLD have contracted all year, down about 12.2% at present.
- On April 9, the FOMC minutes were leaked a day early and revealed that some members were discussing slowing the Fed $85 billion per month buying of Treasuries and MBS. If the money stimulus might not last as long as thought before, the "printing" may not cause as much dollar debasement.
- On April 10, Goldman Sachs warned that gold could go lower and lowered its target price. It even recommended getting out of gold.
- COT Reports showed a decrease in the bullishness of large speculators this year (much more on this technical point below).
- The lackluster price movement since September 2011 fatigued some speculators and trend followers.
- Cyprus was rumored to need to sell some 400 million euros' worth of its gold to cover its bank bailouts. While small at only about 350,000 ounces, there was a fear that other weak European countries with too much debt and sizable gold holdings could be forced into the same action. Cyprus officials have denied the sale, so the question is still in debate, even though the market has already moved. Doug Casey believes that if weak European countries were forced to sell, the gold would mostly be absorbed by China and other sovereign Asian buyers, rather than flood the physical markets.
My opinion, looking at the list of items above, is that they are not big enough by themselves to have created such a large disruption in the gold market.
The paper gold market is best embodied in the futures exchanges. The prices we see quoted all day long moving up and down are taken from the latest trades of futures contracts. The CME (the old Chicago Mercantile Exchange) has a large flow of orders and provides the public with an indication of the price of gold.
The futures markets are special because very little physical commodity is exchanged; most of the trading is between buyers taking long positions against sellers taking short positions, with most contracts liquidated before final settlement and delivery. These contracts require very small amounts of margin – as little as 5% of the value of the commodity – to gain potentially large swings in the outcome of profit or loss. Thus, futures markets appear to be a speculator's paradise. But the statistics show just the opposite: 90% of traders lose their shirts. The other 10% take all the profits from the losers. More on this below.
On April 13, there were big sell orders of 400 tonnes that moved the futures market lower. Once the futures market makes a big move like that, stops can be triggered, causing it to move even more on its own. It can become a panic, where markets react more to fear than fundamentals.
Having traded in futures for over two decades, I want to provide some detail on how these leveraged markets operate. It's important to understand that the structure of the futures market allows brokers to sell positions if fluctuations cause customers to exceed their margin limits and they don't immediately deposit more money to restore their margins. When a position goes against a trader, brokers can demand that funds be deposited within 24 hours (or even sooner at the broker's discretion). If the funds don't appear, the broker can sell the position and liquidate the speculator's account. This structure can force prices to fall more than would be indicated by supply and demand fundamentals.
When I first signed up to trade futures, I was appalled at the powers the broker wrote into the contract, which included them having the power to immediately liquidate my positions at their discretion. I was also surprised at how little screening they did to ensure that I was good for whatever positions I put in place, considering the high levels of leverage they allowed me. Let me tell you that I had many cases where I was told to put up more margin or lose my positions. Those times resulted in me selling at the worst level because the market had gone against me.
The point of this is that once a market moves dramatically, there are usually stops taken out, positions liquidated, margin calls issued, and little guys like me get taken to the cleaners. Debates rage about the structure of the futures market, but my personal opinion is that a big hammer to the market by a well-heeled big player can force liquidations, increase losses, and push the momentum of the market much lower than the initial impetus would have. Thus, after a huge impact like we saw on April 13, the market will continue with enough momentum that a well-timed exit of a huge set of short positions can provide profits to the well-heeled market mover.
Moving from theory to practice, one of the most important things to keep your eye on is the Commitment of Traders (COT) report, which is issued every Friday. It details the long and the short positions of three categories of traders. The first category is called "commercials." They are dealers in the physical precious metals – for example, gold miners. The second category is called "non-commercials." They include hedge funds and large commercial banks like JP Morgan. Non-commercials are sometimes called "large speculators." The rest are the small traders, called "non-reporting" since they are not required to identify themselves. The ones to watch are the large speculators (non-commercials), as they tend to move with the direction of the market. Individual entities could be long or short, but in combination the net position of the group is a key indicator.
The following chart shows the price of gold as a blue line at the top, and the next panel down shows the net position of these large speculators as a black line. You can see that over the long term, they move together. When the net speculative position is above zero, this group is betting on rising gold prices. Of course, the reverse is true when it's below zero. In this 20-year view, the large speculators were holding net negative positions during the lowest point of the gold price, around the year 2000. As the price of gold rose, their positions went net long, and they profited.
An interesting thing about the chart above is that the increasing amount of net longs reversed itself before gold peaked in 2011, suggesting that these large speculators became slightly less bullish all the way back in 2010. The balance remains net long, but it remains to be seen how long that lasts.
What is not so obvious is that these large speculators are so big that they can affect the market as well as profit from it; when they initiate massive positions in a bull market, they drive the price of the futures contracts even higher. Similarly, when they remove their positions or actually go short, they can push the market lower.
So what happened a week ago was that a massive order to sell 400 tons of gold all at once hit the market. Within minutes the price plummeted, and over a two-day period resulted in the largest drop of the price for futures delivery of gold in 33 years: down $200 per ounce.
We don't have the name of the entity that did this. However, the way the gold was sold all at once suggests that the goal was not to get the best price. An investor with a position of this size should have been smart enough to use sensible trading tactics, issuing much smaller sell orders over a period of time. This would avoid swamping the market; and some of the orders would be filled at higher prices and thus generate more profit. Placing a sell order big enough to affect the overall market price suggests that someone with powerful backing wanted to drive the price of gold down.
Such an entity could have been a large speculator who already had a sizable short position and could gain by unloading some of its short position once the market momentum had driven the price even yet lower. Or it could be a central bank – one that might be happy to have the gold price move lower, as it would provide cover for its printing of more new money. Of course, it could be some entity that owned long contracts and wanted to get out of the position all at once. We don't know, but this kind of activity, resulting in the biggest drop in 30 years, raises more than just suspicion when we consider how important the price of gold is to many markets around the globe.
Can markets really be influenced by big players? Well, was the LIBOR rate accurately reported by huge banks? Have players ever tried to corner markets? The answer to all the above, unfortunately, is yes.
There's an even bigger problem with the legal structure of the futures market: even the segregated funds on deposit can be pilfered by the broker for the brokerage's other obligations. That is what happened to MF Global customers under Mr. Corzine. (I had an account with a predecessor company called Man Financial – the "MF" in the name. I also had an account with Refco, which is now defunct. Fortunately, the daggers did not hit my account, since I was not a holder when the catastrophes occurred.) My take: the futures market is dangerous, and not a place for beginners.
One last note: after the Bankruptcy Act of 2005, the regulations support the brokers, not the investors, when there are questions of legality about losses in individual investment accounts. Casey Research will be producing a report with much more detail on this subject in the near future.
So, what now? We aren't going to see a secret memo – no smoking gun to confirm that what happened on April 13 was an attempt to affect the market. Still, the evidence is suspicious. When big entities can gain from putting on big positions, the incentives are big enough for them to try – LIBOR, Plunge Protection Team, Whale Trade, etc., all support this view.
The Physical Gold Market
Previously, there was little difference between the physical and paper markets for gold. Yes, there were premiums and delivery charges, but everybody regarded the futures market as the base quote. I believe this is changing; people don't trust the paper market as they used to.
Instead of capitulating to fear of greater losses, the demand for physical gold has hit new records. The US Mint sold a record 63,500 ounces – a whopping 2 tonnes – of gold on April 17 alone, bringing the total sales for the month to 147,000 ounces; that's more than the previous two months combined. Indian markets, which are more oriented to physical metal, now have a premium of US$150 over the futures price in Chicago. Demand at coin dealers has increased as the price has dropped. And premiums are much bigger than they were as recently as a week ago.
Here is a vendor page that quotes purchase prices and calculates the premiums on an ongoing basis. It shows premiums of 50% and more in many cases. On eBay, prices for one-ounce silver coins are $33 to $35, where the futures price is quoted as $23. A look on Friday April 19 shows one vendor out of stock on most items:
#F17C14; font-family: Arial; font-size: 13px; line-height: 15px;" border="0" cellspacing="1" cellpadding="1" width="490"> #666;">
| #fff; font-size: 16px; line-height: 17px;" colspan="4" align="center" valign="bottom" bgcolor="#F17C14">Buy - Sell On Silver Bullion | |||
| 2013 Sealed Mint Boxes Of 1 Oz. Silver American Eagles - #800517;">Brand New Coins |
500 Coin Min.
(1 Sealed Box) |
Buy @
Spot + $1.80 |
Sold Out
|
| 2013 Sealed Mint Boxes Of 1 Oz. Silver American Eagles "San Francisco Mint"#800517;">Brand New Coins |
500 Coin Min.
(1 Sealed Box) |
Buy @
Spot + $2.00 |
Sold Out
|
| 90% Silver Coin Bags (Our Choice Dimes Or Quarters) $1,000 Face Value Figured at 715 Ozs Per $1,000 Face |
$1,000 Face
Value Min. |
We Buy @
Spot + $1.70 Per Oz (Spot + $1.70 X 715) |
Spot + $4.99 Per Oz
(Spot + $4.99 X 715) |
| 90% Silver Coin Bags 50¢ Half Dollars $1,000 Face Value We Ship in 2 $500 Face Bags |
$1,000 Face
Value Min. |
We Buy @
Spot + $1.90 Per Oz (Spot + $1.90 X 715) |
Sold Out
|
| 90% Silver Coin Bags Walking Liberty Half Dollars $1,000 Face Value We Ship in 2 $500 Face Bags |
$1,000 Face
Value Min. |
We Buy @
Spot + $2.10 Per Oz (Spot + $2.10 X 715) |
Sold Out
|
| Amark 1 Oz. Silver Rounds ( Made By Sunshine ) Pure .999 BU |
500 Coin Min.
|
Buy @
Spot -15c |
Sold Out
|
Clearly, the physical gold market today is sending different signals than the paper market.
The long-term fundamental reasons to hold gold are undeniably still with us. The central banks of the world are acting in concert in "currency wars" or "the race to debase." As they print more money, the purchasing power of each unit declines. They are caught between the rock of having to keep interest rates low to support their governments' huge deficits and the hard place of the long-term effect of diluting their currency. If rates rise, even First World governments will be forced to pay higher interest fees, leading to loss of confidence in their ability to pay back their debt, which will bring on a sovereign debt crisis like what we have seen in the PIIGS or Argentina recently.
The following chart shows the rapid growth in the balance sheets as a ratio to GDP for the three largest central banks. I've extrapolated the expected growth into the future based on the rate at which they propose to buy up assets. One could argue about how long these growth rates will continue, but the incentives are all there for all central banks to bail out their governments and their commercial banks. I fully expect the printing game to continue to provide the fuel for hard-asset investments like gold and silver to increase in price in the years to come.
So what does it all mean? The paper price of gold crashed to $1,325 in the wake of this huge trade. It is now hovering around $1,400. My first reaction is to suggest that this is only an aberration, and that the fundamentals of the depreciating value of paper currencies will eventually take the price of gold much higher, making it a buying opportunity. But what I can't predict is whether big players might again deliver short-term downturns to the market. The momentum in the futures market can make swings surprisingly larger than the fundamentals of currency valuation would suggest.
Traders will be looking for a significant turnaround to the upside in price before entering long positions. However, a long-term, fundamentals-based trader has to look at the low price as a buying opportunity. I can't prove it, but I think the fundamentals will drive the long-term market more than these short-term events. The fight between pricing from the physical market for bullion and that from the "paper market" of futures is showing signs of discrimination and disagreement, as the physical market is booming, while prices set by futures are seemingly pressured to go nowhere.
In short, I think this is a strong buying opportunity.
Haven't heard this theory - might be something to this if we don't see another massive raid by JP Morgan led shorts ?
http://silverdoctors.com/are-jpms-alleged-silver-shorts-already-in-the-money/#more-25546
ARE JPM’S ALLEGED SILVER SHORTS ALREADY IN THE MONEY?
*Breaking
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