http://harveyorgan.blogspot.com/2013/06/massive-raid-on-goldsilver-todayamount.html
Wednesday, June 26, 2013
Massive raid on gold/silver today/Amount standing for gold at comex rises to 30.46 tonnes/GLD and SLV inventories remain constant/Italy reveals massive fraud on the public with hidden derivatives/Gold coming close to marginal cost/Mining sector in South Africa in disarray/
Good evening Ladies and Gentlemen:
Gold closed down by $45.20 to $1229.60 (comex closing time ). Silver fell by 94 cents to $18.59 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1226.50
silver: $18.56
Last night, just after posting my commentary, I noticed that gold immediately fell by 15.00 dollars on no news. I skyped both Bill Holter and Bill Murphy and told them that we were in for a monstrous raid and the crooks did not disappoint us. Dave Kranzler of the GoldenTruth is of the opinion that the constant raids on gold now is orchestrated by the Fed because of problems in China. Their banking sector is in disarray and they may want to cash their USA treasuries. Also the problems in Italy this morning with new derivative problems could possibly bring down the entire global financial scene and both of these facts are bringing grief to the Obama as the big USA banking sector have huge amounts of credit default swaps underwritten on both of these nations
At the Comex, the open interest in silver fell by 7891 contracts to 140,639. It seems that we lost a few paper players today. The silver OI is still holding firm.
First day notice is on Friday and we will then get a good glimpse as to how many silver contracts will stand for delivery.
The open interest on the entire gold comex contracts fell by 3606 contracts to 390,647 reacting to gold's fall in price yesterday. The number of gold ounces standing for this June delivery month rose to 979,500 or 30.466 tonnes. If gold is such a barbaric relic of the past, how come we are witnessing a huge amount of gold standing? The number of silver ounces standing in this non active month of June remained constant at 725,000 oz.
Tonight, the Comex registered or dealer inventory of gold remains at its nadir in inventory at 1.359 million oz or 42.27 tonnes. This is still dangerously low. The total of all gold at the comex (dealer and customer) rose a bit to 7.590 million oz or 236.08 tonnes of gold.
JPMorgan's customer inventory remains constant tonight at 141,197.86 oz or 4.39 tonnes. Its dealer inventory also remains constant at 408,709.033 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The total of the 3 major gold bullion dealers( Scotia , HSBC and JPMorgan) in its gold Comex dealer account registers only 27.76 tonnes of gold
The GLD reported another massive loss in inventory of 16.23 tonnes of gold inventory. The SLV inventory of silver showed a minor loss in inventory of 483,000 oz.
Kingworldnews and Eric King provide one great interview with John Hathaway you will not want to miss.
We also have a commentary from Bill Holter (Miles Franklin) who discusses the correct terminology of "deflation" and how it fits in with today's scenario on gold. It is an extremely important read.
In other physical stories we have a good commentary from Patrick Heller on the manipulation/rigging of gold. Also Martin Creamer gives a great account of how the mining industry in South Africa is literally destroyed.
Mark Grant gives this thoughts today on the Italian derivative disclosure.
And finally, we have that important paper from Dave Kranzler (the GoldenTruth ) as to his thoughts that China may wish to cash in on its huge hoard of USA treasuries. Graham Summers reports on the huge miss in USA GDP.
We will go over these and many other stories but first.....................
Let us now head over to the comex and assess trading over there today.
Here are the details:
The total gold comex open interest fell by 3606 contracts from 394,253 down to 390,647 with gold falling by $2.00 yesterday. The front active month of June surprisingly saw it's OI rise by 71 contracts from 993 up to 1064. We had 151 delivery notices served upon our longs yesterday , thus we gained a massive 222 gold contracts or 22,200 additional ounces will be standing in this June delivery contract month . Somebody was in terrible need of physical again today. The next delivery month is the non active July contract and here the OI fell by 160 contracts down to 387. The next active delivery month for gold is August and here the OI fell by 7359 contracts from 223,080 down to 215,721. The estimated volume today was astronomical at 316,206 contracts.(remember no rollovers) The confirmed volume yesterday was in the good at 178,315.
The total silver Comex OI fell by 7891 contracts with silver rising slightly in price yesterday by 4 cents yesterday. No doubt we have lost some of the players who have not learned that they cannot win in a crooked casino. The front non active June silver contract month shows a loss of 8 contracts down to 12. We had 8 notices filed yesterday so in essence we neither gained nor lost any silver contracts for the June delivery month. The next big delivery month is July and here the OI fell by only 17,359 contracts down to 18,657. We have 2 days left before first day notice (June 28.2013) and we will probably have a normal delivery of about 20 million oz. The estimated volume today was gigantic coming in at 138,377 contracts, however we had considerable rollovers to the next active delivery month of September. The confirmed volume yesterday was excellent at 111,728. The volume today in oz is over 690 million oz or almost equivalent to one years annual production of silver.
We had one major customer deposit today :
Into Scotia customer account: 64,177.218 oz
total customer deposits: 64,177.218 oz
Yesterday you will recall that we had a big withdrawal of exactly 64,177.218 oz from HSBC. So this customer wanted to park his gold at Scotia and not at HSBC.
It is very strange that in a big delivery month, we are witnessing hardly any gold enter the dealer
we had 0 customer withdrawals:
total customer withdrawals: nil
Today we had no adjustments.
Thus tonight we have the following JPMorgan gold inventory:
JPM dealer inventory: 408,709.033 oz 12.17 tonnes
JPM customer inventory: 141,197.86 oz or 4.39 tonnes
As we reported to you two weeks ago, that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
The last Tuesday in May (May 28), we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of tonight 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
Tuesday, June 11, we had 217,844.96 actual ounces leave JPMorgan
Today, the CME reported that 119 notices were issued of which 29 came from JPMorgan's customer . However 32 notices were stopped (received) by the J.P.Morgan's house or dealer account and we should see 3200 oz of gold arrive at its dealer account
In summary on the customer side of things for JPMorgan:
Today 29 notices were served upon our longs from the JPMorgan's customer side
(and zero from its dealer side).
Thus on JPMorgan customer side:
From the beginning of June we have had 1620 notices served from the customer side of JPMorgan for 162,000 oz. If we add the 71,611.00 oz owing from May issuance, we get 233,611 oz. If we subtract the actual withdrawal of gold from JPMorgan of 217,844.96, this still leaves 15,767.04 oz that needs to be settled upon from the vaults of JPMorgan customer side.
The total dealer comex gold remains tonight at its nadir of 1.359 million oz or 42.27 tonnes of gold.
The total of all comex gold, dealer and customer rises slightly tonight to 7.590 million oz or 236.08 tonnes..
Now for JPMorgan's dealer side and what the inventory should be:
On June 11.2013 we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall two weeks ago on Saturday (and again on that following Monday night,) I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 61,613.07 oz was either withdrawn or adjusted out, leaving the dealer side at 408,709.033 oz where it sits tonight.
On the dealer side here are the last 13 trading sessions as to notices issued from JPMorgan's dealer side:
Friday: zero
Monday: 1
Another disturbing piece of news is the low dealer gold inventory for our 3 major bullion banks: Scotia, HSBC and JPMorgan equal to 27.76 tonnes
i) Scotia: 231,619.164 oz or 7.204 tonnes (Monday... 285,596.23 oz or 8.88 tonnes)
ii) HSBC: 252,683.176 oz or 7.85 tonnes (Monday 270,197.277 oz or 8.4 tonnes)
iii) JPMorgan: 408,709.033 oz or 12.71 tonnes
Brinks dealer account has the lions share of the dealer gold at 447,198.56 oz 13.909 tonnes
Today we had 119 notices served upon our longs for 11,900 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (1064) and subtract out today's notices (119) which leaves us with 945 contracts or 94,500 oz left to be served upon our longs.
The bankers have until late tonight to file notices for those 945 contracts to be delivered by Friday night.
8850 contracts x 100 oz per contract or 885,000 oz served upon + 945 contracts or 94,500 oz (left to be served upon) = 979,500 oz or 30.466 tonnes of gold.
We gained a massive 22,200 of additional gold ounces standing in this June delivery month. And this occurred with a huge drubbing of gold as if nobody wanted the yellow stuff.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 159.00% of that total production.
Ladies and Gentlemen: we have a three-fold problem:
i) the total dealer inventory of gold is at a very dangerously low level of only 42.27 tonnes and none of the 9.5 tonnes delivery notices from May and the major part of the 30.466 tonnes from June issued by JPM on its dealer side has yet to leave.
ii) a) JPMorgan's customer inventory remains at an extremely low 141,197.86 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 408,709.03 oz. However all of this gold has been spoken for plus an additional 85,890. oz of deficient gold.
iii) the 3 major bullion banks have collectively only 27.76 tonnes of gold left in their dealer account.
i) Out of Delaware; 1986.70 oz
total customer withdrawal : 1986.70 oz
Gold closed down by $45.20 to $1229.60 (comex closing time ). Silver fell by 94 cents to $18.59 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1226.50
silver: $18.56
Last night, just after posting my commentary, I noticed that gold immediately fell by 15.00 dollars on no news. I skyped both Bill Holter and Bill Murphy and told them that we were in for a monstrous raid and the crooks did not disappoint us. Dave Kranzler of the GoldenTruth is of the opinion that the constant raids on gold now is orchestrated by the Fed because of problems in China. Their banking sector is in disarray and they may want to cash their USA treasuries. Also the problems in Italy this morning with new derivative problems could possibly bring down the entire global financial scene and both of these facts are bringing grief to the Obama as the big USA banking sector have huge amounts of credit default swaps underwritten on both of these nations
At the Comex, the open interest in silver fell by 7891 contracts to 140,639. It seems that we lost a few paper players today. The silver OI is still holding firm.
First day notice is on Friday and we will then get a good glimpse as to how many silver contracts will stand for delivery.
The open interest on the entire gold comex contracts fell by 3606 contracts to 390,647 reacting to gold's fall in price yesterday. The number of gold ounces standing for this June delivery month rose to 979,500 or 30.466 tonnes. If gold is such a barbaric relic of the past, how come we are witnessing a huge amount of gold standing? The number of silver ounces standing in this non active month of June remained constant at 725,000 oz.
Tonight, the Comex registered or dealer inventory of gold remains at its nadir in inventory at 1.359 million oz or 42.27 tonnes. This is still dangerously low. The total of all gold at the comex (dealer and customer) rose a bit to 7.590 million oz or 236.08 tonnes of gold.
JPMorgan's customer inventory remains constant tonight at 141,197.86 oz or 4.39 tonnes. Its dealer inventory also remains constant at 408,709.033 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The total of the 3 major gold bullion dealers( Scotia , HSBC and JPMorgan) in its gold Comex dealer account registers only 27.76 tonnes of gold
The GLD reported another massive loss in inventory of 16.23 tonnes of gold inventory. The SLV inventory of silver showed a minor loss in inventory of 483,000 oz.
Kingworldnews and Eric King provide one great interview with John Hathaway you will not want to miss.
We also have a commentary from Bill Holter (Miles Franklin) who discusses the correct terminology of "deflation" and how it fits in with today's scenario on gold. It is an extremely important read.
In other physical stories we have a good commentary from Patrick Heller on the manipulation/rigging of gold. Also Martin Creamer gives a great account of how the mining industry in South Africa is literally destroyed.
Mark Grant gives this thoughts today on the Italian derivative disclosure.
And finally, we have that important paper from Dave Kranzler (the GoldenTruth ) as to his thoughts that China may wish to cash in on its huge hoard of USA treasuries. Graham Summers reports on the huge miss in USA GDP.
We will go over these and many other stories but first.....................
Here are the details:
The total gold comex open interest fell by 3606 contracts from 394,253 down to 390,647 with gold falling by $2.00 yesterday. The front active month of June surprisingly saw it's OI rise by 71 contracts from 993 up to 1064. We had 151 delivery notices served upon our longs yesterday , thus we gained a massive 222 gold contracts or 22,200 additional ounces will be standing in this June delivery contract month . Somebody was in terrible need of physical again today. The next delivery month is the non active July contract and here the OI fell by 160 contracts down to 387. The next active delivery month for gold is August and here the OI fell by 7359 contracts from 223,080 down to 215,721. The estimated volume today was astronomical at 316,206 contracts.(remember no rollovers) The confirmed volume yesterday was in the good at 178,315.
The total silver Comex OI fell by 7891 contracts with silver rising slightly in price yesterday by 4 cents yesterday. No doubt we have lost some of the players who have not learned that they cannot win in a crooked casino. The front non active June silver contract month shows a loss of 8 contracts down to 12. We had 8 notices filed yesterday so in essence we neither gained nor lost any silver contracts for the June delivery month. The next big delivery month is July and here the OI fell by only 17,359 contracts down to 18,657. We have 2 days left before first day notice (June 28.2013) and we will probably have a normal delivery of about 20 million oz. The estimated volume today was gigantic coming in at 138,377 contracts, however we had considerable rollovers to the next active delivery month of September. The confirmed volume yesterday was excellent at 111,728. The volume today in oz is over 690 million oz or almost equivalent to one years annual production of silver.
Comex gold/May contract month:
June 26/2013
the June contract month:
the June contract month:
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
nil
|
Withdrawals from Customer Inventory in oz
|
nil
|
Deposits to the Dealer Inventory in oz
|
499.57 (Brinks)
|
Deposits to the Customer Inventory, in oz
| 64,177. 218 (Scotia) |
No of oz served (contracts) today
|
119 (11,900 oz)
|
No of oz to be served (notices)
|
945 (94,500 oz
|
Total monthly oz gold served (contracts) so far this month
|
885,000 (885,000 oz)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
78,856.579 oz
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 448,124.42 oz |
We again had little activity at the gold vaults
The dealer again had 1 small deposit and no withdrawals.
i) Into Brinks dealer: 499.57 oz
i) Into Brinks dealer: 499.57 oz
We had one major customer deposit today :
Into Scotia customer account: 64,177.218 oz
total customer deposits: 64,177.218 oz
Yesterday you will recall that we had a big withdrawal of exactly 64,177.218 oz from HSBC. So this customer wanted to park his gold at Scotia and not at HSBC.
It is very strange that in a big delivery month, we are witnessing hardly any gold enter the dealer
we had 0 customer withdrawals:
total customer withdrawals: nil
Today we had no adjustments.
Thus tonight we have the following JPMorgan gold inventory:
JPM dealer inventory: 408,709.033 oz 12.17 tonnes
JPM customer inventory: 141,197.86 oz or 4.39 tonnes
As we reported to you two weeks ago, that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
The last Tuesday in May (May 28), we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of tonight 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
Tuesday, June 11, we had 217,844.96 actual ounces leave JPMorgan
Today, the CME reported that 119 notices were issued of which 29 came from JPMorgan's customer . However 32 notices were stopped (received) by the J.P.Morgan's house or dealer account and we should see 3200 oz of gold arrive at its dealer account
In summary on the customer side of things for JPMorgan:
Today 29 notices were served upon our longs from the JPMorgan's customer side
(and zero from its dealer side).
Thus on JPMorgan customer side:
From the beginning of June we have had 1620 notices served from the customer side of JPMorgan for 162,000 oz. If we add the 71,611.00 oz owing from May issuance, we get 233,611 oz. If we subtract the actual withdrawal of gold from JPMorgan of 217,844.96, this still leaves 15,767.04 oz that needs to be settled upon from the vaults of JPMorgan customer side.
The total dealer comex gold remains tonight at its nadir of 1.359 million oz or 42.27 tonnes of gold.
The total of all comex gold, dealer and customer rises slightly tonight to 7.590 million oz or 236.08 tonnes..
Now for JPMorgan's dealer side and what the inventory should be:
On June 11.2013 we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall two weeks ago on Saturday (and again on that following Monday night,) I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 61,613.07 oz was either withdrawn or adjusted out, leaving the dealer side at 408,709.033 oz where it sits tonight.
On the dealer side here are the last 13 trading sessions as to notices issued from JPMorgan's dealer side:
Friday: zero
Monday: 1
Tuesday: 0
Wednesday : 0
Wednesday : 0
Thursday: 0
Friday: 0
Monday: 0 .
Tuesday: 0
Wednesday: 0
Thursday: 0
Friday: 0
Monday:0
Tuesday: 0
Wednesday: 0
Thus, 4946 notices have been issued by JPMorgan (dealer side) so far in June for 494,600 oz and these ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 408,709.033 oz.
Somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 85,890.97 oz (408,709.03 inventory - 494,600 oz issued = 85,890.97 oz)
In other words, the entire 408,709.03 oz must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 85,890.97 of additional deficient gold
JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.
How will JPMorgan satisfy this shortfall??
Friday: 0
Monday: 0 .
Tuesday: 0
Wednesday: 0
Thursday: 0
Friday: 0
Monday:0
Tuesday: 0
Wednesday: 0
Thus, 4946 notices have been issued by JPMorgan (dealer side) so far in June for 494,600 oz and these ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 408,709.033 oz.
Somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 85,890.97 oz (408,709.03 inventory - 494,600 oz issued = 85,890.97 oz)
In other words, the entire 408,709.03 oz must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 85,890.97 of additional deficient gold
JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.
How will JPMorgan satisfy this shortfall??
Another disturbing piece of news is the low dealer gold inventory for our 3 major bullion banks: Scotia, HSBC and JPMorgan equal to 27.76 tonnes
i) Scotia: 231,619.164 oz or 7.204 tonnes (Monday... 285,596.23 oz or 8.88 tonnes)
ii) HSBC: 252,683.176 oz or 7.85 tonnes (Monday 270,197.277 oz or 8.4 tonnes)
iii) JPMorgan: 408,709.033 oz or 12.71 tonnes
Brinks dealer account has the lions share of the dealer gold at 447,198.56 oz 13.909 tonnes
Today we had 119 notices served upon our longs for 11,900 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (1064) and subtract out today's notices (119) which leaves us with 945 contracts or 94,500 oz left to be served upon our longs.
The bankers have until late tonight to file notices for those 945 contracts to be delivered by Friday night.
Thus we have the following gold ounces standing for metal in June:
8850 contracts x 100 oz per contract or 885,000 oz served upon + 945 contracts or 94,500 oz (left to be served upon) = 979,500 oz or 30.466 tonnes of gold.
We gained a massive 22,200 of additional gold ounces standing in this June delivery month. And this occurred with a huge drubbing of gold as if nobody wanted the yellow stuff.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 159.00% of that total production.
Ladies and Gentlemen: we have a three-fold problem:
i) the total dealer inventory of gold is at a very dangerously low level of only 42.27 tonnes and none of the 9.5 tonnes delivery notices from May and the major part of the 30.466 tonnes from June issued by JPM on its dealer side has yet to leave.
ii) a) JPMorgan's customer inventory remains at an extremely low 141,197.86 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 408,709.03 oz. However all of this gold has been spoken for plus an additional 85,890. oz of deficient gold.
iii) the 3 major bullion banks have collectively only 27.76 tonnes of gold left in their dealer account.
end
now let us head over and see what is new with silver:
now let us head over and see what is new with silver:
Silver:
June 26/2013: June silver contract month:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | 1,986.7 oz ( Delaware,) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | nil |
| No of oz served (contracts) | 9 (45,000 oz) |
| No of oz to be served (notices) | 3 (15,000 oz) |
| Total monthly oz silver served (contracts) | 142 (710,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 988,092.07 oz |
| Total accumulative withdrawal of silver from the Customer inventory this month | 5,240,720.9 oz |
Today, we had little activity inside the silver vaults.
we had 0 dealer deposits and 0 dealer withdrawals.
We had 0 customer deposit:
i) total customer deposit: nil
We had 1 customer withdrawal:
We had 0 customer deposit:
i) total customer deposit: nil
We had 1 customer withdrawal:
i) Out of Delaware; 1986.70 oz
total customer withdrawal : 1986.70 oz
we had 0 adjustments today
Registered silver at : 41.397 million oz
total of all silver: 164.847 million oz.
The CME reported that we had 9 notices filed for 45,000 oz today. In order to calculate what we believe will stand in the month of June, I take the Oi standing for June (12) and subtract out today's notices (9) which leaves us with 3 notices or 15,000 oz.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
142 contracts x 5000 oz per contract (served) = 710,000 oz + 3 contracts x 5000 oz or 15,000 oz left to be served upon = 725,000 oz
we neither gained nor lost any silver oz standing today.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
142 contracts x 5000 oz per contract (served) = 710,000 oz + 3 contracts x 5000 oz or 15,000 oz left to be served upon = 725,000 oz
we neither gained nor lost any silver oz standing today.
Now let us check on gold inventories at the GLD first:
June 26.2013: (at 6 pm est)
June 25.2013:
June 26.2013: (at 6 pm est)
Tonnes969.50
Ounces31,170,424.23
Value US$38.517 billion
June 25.2013:
Tonnes969.50
Ounces31,170,424.23
Value US$39.850 billion
* * *
Selected news and views.....
Premiums in India double as the rupee crashes, demand for gold surges:
(courtesy Reuters/GATA)
Premiums in India double as the rupee crashes, demand for gold surges:
(courtesy Reuters/GATA)
(courtesy Reuters/GATA)
Gold premiums double in India amid surging demand
Submitted by cpowell on Wed, 2013-06-26 19:34. Section: Daily Dispatches
Gold Premiums Jump as Physical Demand Outstrips Supply
By Siddesh Mayenkar
Reuters
Wednesday, June 26, 2013
MUMBAI -- Gold premiums doubled in India on Wednesday as suppliers struggled to meet surging demand after a ban on consignment imports, but futures prices fell to their lowest in more than a month as international gold prices fell due to a strong dollar.
India, the world's biggest buyer of gold, now requires importers to pay upfront for inventory, making it difficult for smaller jewellers with lower working capital to source supplies. The government also raised the import duty to 8 percent in May to keep a lid on the surging current account deficit.
... For the full story:
Patrick Heller: Gold rig reaches the desperation stage
Submitted by cpowell on Wed, 2013-06-26 05:19. Section: Daily Dispatches
1:15a ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Writing for Numismaster, Michigan coin and bullion dealer Patrick A. Heller contends that central bank intervention in the gold market is so overwhelming and obvious lately that the intervenors must not care about getting caught. He'd like to think that this suggests that the intervention has become desperate and is even drawing close to the end. Heller's commentary is headlined "Gold Drop: An Opportunity?" and it's posted at Numismaster here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
\
end
(courtesy Kingworldnews/John Hathaway)
Physical gold's disconnect from paper at new extreme, Hathaway tells King World News
Submitted by cpowell on Wed, 2013-06-26 19:19. Section: Daily Dispatches
3:16p ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Tocqueville Gold Fund manager John Hathaway today tells King World News that the disconnect between the physical and paper gold markets is bigger than ever with premiums for delivery of real metal at record levels. The short position in gold, Hathaway adds, is bigger than it was at the market's bottom in 2008. He can't wait to see the reversal. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
This is a huge development. Gold is approaching its marginal cost and once reached, almost all mining
companies will stop production and keep their mines on maintenance. Then we will have zero ounces
of gold produced around the world.
(courtesy zero hedge)
Gold Drops Below Its Average Cash Cost
Submitted by Tyler Durden on 06/26/2013 13:05 -0400
As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...
Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.
It is at that point where one must apply the New Normal supply and demand curve, when one can predict a $0 per ounce price for gold, as physical demand continues unabated, while actual physical, not paper, production has now started going offline.
Joking aside, not even Bernanke and all the paper Gold ETFs in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demands, especially by China, is still in the hundreds of tons each year.
The following commentary is a superb commentary with the topic of deflation.
Bill describes deflation correctly and how this mess will end will be a massive hyperinflation.
study every word..
(courtesy Bill Holter/Miles Franklin)
Deflation?
Inbox
x
I have been told that I just don't get it. We are moving toward a deflation and this is why Gold is "going down". I wrote the first paragraph at the end but would like you to read it twice so I started with it and will finish with it. The "deflationists" have come out of the woodwork, further below is just one e-mail that I received yesterday. What is coming will be a monetary panic which hyperinflates the currency away. When paper markets sell 50% of the world's global Gold production in less than 24 hours, yes the price will drop. Whether the Gold "will" get delivered or NOT does not matter today, it will only matter "later". If you cannot see that paper trading many times one year's global Gold production in one month can not only influence but in the short term "make" price...then no need to read the following.
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
I received this e-mail yesterday telling me that I don't understand deflation...
Bill,
I’m afraid what most people who believe metals are the place to be for the fallout are forgetting that a weak economy combined with collapsing credit and rising yields is a very deflationary environment. As you yourself said, there is no method left with which to reflate.
In a deflationary environment all commodities are going down.
Just like in 2008 when a collapse of the financial system threatened a deflationary depression, commodities got hammered. Oil went to 24$ a barrel. Gold was at 300$ an ounce.
Unless you actually think Bernanke wins or tries to pull a Japan and ups purchases to 200 billion a month. This is a deflationary environment going forward and commodity prices will reflect that.
My reply was this: Ah yes, another deflationist! So Dollars will be worth more? Dollars which are issued by a bankrupt entity? That are backed by the “full faith and credit” of that bankrupt entity? First off, Gold only traded down to $696, not $300 in 2008. It did not fall as much as any other “commodity” because Gold is not a commodity…it IS money. JP Morgan himself said “Gold is money, nothing else is”. In a true deflation, Gold does better than anything else and deflation is THE best environment to own Gold…even better than hyperinflation which is where the current fiasco will ultimately end up. “Dollars” only did well in the Depression because they were still backed by Gold, a “surrogate” for Gold so to speak. Were they not backed by Gold they would have crashed and burned. We now live in VERY different times than the Great Depression.
I received another couple of e-mails from this gentleman where he says that Dollars will get stronger and Gold will go back to sub $200 (where it was in the year 2000 he said) and possibly even to $100 per ounce. The current thrashing of the metals have brought them out of the woodwork, I have been called a "permabull" and even compared to (and doing the same disservice as) the likes of Jim Sinclair, James Turk and Eric Sprott. First off, I am flattered to be considered or even my name mentioned in the same sentence as these 3 individuals. As for being a "permabull? Well yes, I have been bullish Gold and Silver every single day since mid 1997 when Gold broke below what I believed to be the cost of production. I try to call bottoms, not tops because the ultimate top is many multiples of current prices. Each year, month and every day since then (1997), "policy", both fiscal and monetary have made the true values of Gold and Silver worth more in Dollar terms. The reasons to own the metals now are far more prevalent and far stronger now than they were since the bull market began in 1999. I might add that the reasons are far more obvious.
As for the "deflation" argument, for the umpteenth time I will shoot it down. In a fiat system where the central bank can create as many Dollars as possible, "true" deflation cannot happen. Can asset prices drop? Of course they can, real estate can drop, stocks can drop, bonds can drop and so can Gold/Silver...for a spell. Can the amount of Dollars actually drop (the definition of deflation)? Well yes, it is possible. Will the Fed ever let this happen? They cannot. They cannot ever let this happen because it would be the end of the system and also the end of the Dollar itself. A system as indebted as the current one will immediately implode if credit (money creation) were to even stagnate much less shrink. The problem is that Dollars themselves would completely lose value were this to happen because they are based on "credit", more credit and EXPANDING credit to retain any value.
The world we live in today is not anything like the 1930's. Back then Gold and Dollars were interchangeable. Dollars "represented" Gold holdings and were exchangeable for actual Gold until 1932. Once the "link" between the two was severed, Dollars were devalued by 75% vs. Gold. So if you say that Dollars did well during the deflation...you are correct but Gold did far better. Gold did far better because it "IS" money and Dollars were only a "proxy" for money when in reality it was just a currency. Today? Are Dollars money? Just look up the definition of money in the dictionary or wash a couple hundred bucks 3 or 4 times in your jeans pocket and you'll know the answer. Dollars are a currency...and currency is to trade with, NOT save with.
What we face today is a deflation "in terms of Gold" because it is being hoarded and taken off the market. In fact, the more that COMEX sells paper Gold to depress the price...the faster physical Gold is being taken off market and delivered into dark vaults worldwide. Those who claim "Dollar deflation" are missing the point that Dollars themselves are the "bedrock" or the foundation for ...yes...Dollars themselves much like 2 drunks trying to hold each other up. Can they "go up" in value for a while? Yes of course. Can the Fed ever pull Dollars out of the system? Not a chance, even the mention of "tapering" has caused a financial market hissy fit.
==============================
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $ trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
Regards, Bill H.
Submitted by cpowell on Wed, 2013-06-26 19:34. Section: Daily Dispatches
Gold Premiums Jump as Physical Demand Outstrips Supply
By Siddesh Mayenkar
Reuters
Wednesday, June 26, 2013
Reuters
Wednesday, June 26, 2013
MUMBAI -- Gold premiums doubled in India on Wednesday as suppliers struggled to meet surging demand after a ban on consignment imports, but futures prices fell to their lowest in more than a month as international gold prices fell due to a strong dollar.
India, the world's biggest buyer of gold, now requires importers to pay upfront for inventory, making it difficult for smaller jewellers with lower working capital to source supplies. The government also raised the import duty to 8 percent in May to keep a lid on the surging current account deficit.
... For the full story:
Patrick Heller: Gold rig reaches the desperation stage
Submitted by cpowell on Wed, 2013-06-26 05:19. Section: Daily Dispatches
1:15a ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Writing for Numismaster, Michigan coin and bullion dealer Patrick A. Heller contends that central bank intervention in the gold market is so overwhelming and obvious lately that the intervenors must not care about getting caught. He'd like to think that this suggests that the intervention has become desperate and is even drawing close to the end. Heller's commentary is headlined "Gold Drop: An Opportunity?" and it's posted at Numismaster here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
\
end
(courtesy Kingworldnews/John Hathaway)
Physical gold's disconnect from paper at new extreme, Hathaway tells King World News
Submitted by cpowell on Wed, 2013-06-26 19:19. Section: Daily Dispatches
3:16p ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Tocqueville Gold Fund manager John Hathaway today tells King World News that the disconnect between the physical and paper gold markets is bigger than ever with premiums for delivery of real metal at record levels. The short position in gold, Hathaway adds, is bigger than it was at the market's bottom in 2008. He can't wait to see the reversal. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
This is a huge development. Gold is approaching its marginal cost and once reached, almost all mining
companies will stop production and keep their mines on maintenance. Then we will have zero ounces
of gold produced around the world.
(courtesy zero hedge)
Gold Drops Below Its Average Cash Cost
Submitted by Tyler Durden on 06/26/2013 13:05 -0400
As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...
Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.
It is at that point where one must apply the New Normal supply and demand curve, when one can predict a $0 per ounce price for gold, as physical demand continues unabated, while actual physical, not paper, production has now started going offline.
Joking aside, not even Bernanke and all the paper Gold ETFs in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demands, especially by China, is still in the hundreds of tons each year.
The following commentary is a superb commentary with the topic of deflation.
Bill describes deflation correctly and how this mess will end will be a massive hyperinflation.
study every word..
(courtesy Bill Holter/Miles Franklin)
Deflation?
Inbox
x
I have been told that I just don't get it. We are moving toward a deflation and this is why Gold is "going down". I wrote the first paragraph at the end but would like you to read it twice so I started with it and will finish with it. The "deflationists" have come out of the woodwork, further below is just one e-mail that I received yesterday. What is coming will be a monetary panic which hyperinflates the currency away. When paper markets sell 50% of the world's global Gold production in less than 24 hours, yes the price will drop. Whether the Gold "will" get delivered or NOT does not matter today, it will only matter "later". If you cannot see that paper trading many times one year's global Gold production in one month can not only influence but in the short term "make" price...then no need to read the following.
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
I received this e-mail yesterday telling me that I don't understand deflation...
Bill,
I’m afraid what most people who believe metals are the place to be for the fallout are forgetting that a weak economy combined with collapsing credit and rising yields is a very deflationary environment. As you yourself said, there is no method left with which to reflate.
In a deflationary environment all commodities are going down.
Just like in 2008 when a collapse of the financial system threatened a deflationary depression, commodities got hammered. Oil went to 24$ a barrel. Gold was at 300$ an ounce.
Unless you actually think Bernanke wins or tries to pull a Japan and ups purchases to 200 billion a month. This is a deflationary environment going forward and commodity prices will reflect that.
My reply was this: Ah yes, another deflationist! So Dollars will be worth more? Dollars which are issued by a bankrupt entity? That are backed by the “full faith and credit” of that bankrupt entity? First off, Gold only traded down to $696, not $300 in 2008. It did not fall as much as any other “commodity” because Gold is not a commodity…it IS money. JP Morgan himself said “Gold is money, nothing else is”. In a true deflation, Gold does better than anything else and deflation is THE best environment to own Gold…even better than hyperinflation which is where the current fiasco will ultimately end up. “Dollars” only did well in the Depression because they were still backed by Gold, a “surrogate” for Gold so to speak. Were they not backed by Gold they would have crashed and burned. We now live in VERY different times than the Great Depression.
I received another couple of e-mails from this gentleman where he says that Dollars will get stronger and Gold will go back to sub $200 (where it was in the year 2000 he said) and possibly even to $100 per ounce. The current thrashing of the metals have brought them out of the woodwork, I have been called a "permabull" and even compared to (and doing the same disservice as) the likes of Jim Sinclair, James Turk and Eric Sprott. First off, I am flattered to be considered or even my name mentioned in the same sentence as these 3 individuals. As for being a "permabull? Well yes, I have been bullish Gold and Silver every single day since mid 1997 when Gold broke below what I believed to be the cost of production. I try to call bottoms, not tops because the ultimate top is many multiples of current prices. Each year, month and every day since then (1997), "policy", both fiscal and monetary have made the true values of Gold and Silver worth more in Dollar terms. The reasons to own the metals now are far more prevalent and far stronger now than they were since the bull market began in 1999. I might add that the reasons are far more obvious.
As for the "deflation" argument, for the umpteenth time I will shoot it down. In a fiat system where the central bank can create as many Dollars as possible, "true" deflation cannot happen. Can asset prices drop? Of course they can, real estate can drop, stocks can drop, bonds can drop and so can Gold/Silver...for a spell. Can the amount of Dollars actually drop (the definition of deflation)? Well yes, it is possible. Will the Fed ever let this happen? They cannot. They cannot ever let this happen because it would be the end of the system and also the end of the Dollar itself. A system as indebted as the current one will immediately implode if credit (money creation) were to even stagnate much less shrink. The problem is that Dollars themselves would completely lose value were this to happen because they are based on "credit", more credit and EXPANDING credit to retain any value.
The world we live in today is not anything like the 1930's. Back then Gold and Dollars were interchangeable. Dollars "represented" Gold holdings and were exchangeable for actual Gold until 1932. Once the "link" between the two was severed, Dollars were devalued by 75% vs. Gold. So if you say that Dollars did well during the deflation...you are correct but Gold did far better. Gold did far better because it "IS" money and Dollars were only a "proxy" for money when in reality it was just a currency. Today? Are Dollars money? Just look up the definition of money in the dictionary or wash a couple hundred bucks 3 or 4 times in your jeans pocket and you'll know the answer. Dollars are a currency...and currency is to trade with, NOT save with.
What we face today is a deflation "in terms of Gold" because it is being hoarded and taken off the market. In fact, the more that COMEX sells paper Gold to depress the price...the faster physical Gold is being taken off market and delivered into dark vaults worldwide. Those who claim "Dollar deflation" are missing the point that Dollars themselves are the "bedrock" or the foundation for ...yes...Dollars themselves much like 2 drunks trying to hold each other up. Can they "go up" in value for a while? Yes of course. Can the Fed ever pull Dollars out of the system? Not a chance, even the mention of "tapering" has caused a financial market hissy fit.
==============================
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $ trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
Regards, Bill H.
Submitted by cpowell on Wed, 2013-06-26 05:19. Section: Daily Dispatches
1:15a ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Writing for Numismaster, Michigan coin and bullion dealer Patrick A. Heller contends that central bank intervention in the gold market is so overwhelming and obvious lately that the intervenors must not care about getting caught. He'd like to think that this suggests that the intervention has become desperate and is even drawing close to the end. Heller's commentary is headlined "Gold Drop: An Opportunity?" and it's posted at Numismaster here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
\
end
(courtesy Kingworldnews/John Hathaway)
Gold Anti-Trust Action Committee Inc.
\
end
(courtesy Kingworldnews/John Hathaway)
Physical gold's disconnect from paper at new extreme, Hathaway tells King World News
Submitted by cpowell on Wed, 2013-06-26 19:19. Section: Daily Dispatches
3:16p ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Tocqueville Gold Fund manager John Hathaway today tells King World News that the disconnect between the physical and paper gold markets is bigger than ever with premiums for delivery of real metal at record levels. The short position in gold, Hathaway adds, is bigger than it was at the market's bottom in 2008. He can't wait to see the reversal. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
This is a huge development. Gold is approaching its marginal cost and once reached, almost all mining
companies will stop production and keep their mines on maintenance. Then we will have zero ounces
of gold produced around the world.
(courtesy zero hedge)
Gold Drops Below Its Average Cash Cost
Submitted by Tyler Durden on 06/26/2013 13:05 -0400
As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...
Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.
It is at that point where one must apply the New Normal supply and demand curve, when one can predict a $0 per ounce price for gold, as physical demand continues unabated, while actual physical, not paper, production has now started going offline.
Joking aside, not even Bernanke and all the paper Gold ETFs in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demands, especially by China, is still in the hundreds of tons each year.
The following commentary is a superb commentary with the topic of deflation.
Bill describes deflation correctly and how this mess will end will be a massive hyperinflation.
study every word..
(courtesy Bill Holter/Miles Franklin)
Deflation?
Inbox
x
I have been told that I just don't get it. We are moving toward a deflation and this is why Gold is "going down". I wrote the first paragraph at the end but would like you to read it twice so I started with it and will finish with it. The "deflationists" have come out of the woodwork, further below is just one e-mail that I received yesterday. What is coming will be a monetary panic which hyperinflates the currency away. When paper markets sell 50% of the world's global Gold production in less than 24 hours, yes the price will drop. Whether the Gold "will" get delivered or NOT does not matter today, it will only matter "later". If you cannot see that paper trading many times one year's global Gold production in one month can not only influence but in the short term "make" price...then no need to read the following.
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
I received this e-mail yesterday telling me that I don't understand deflation...
Bill,
I’m afraid what most people who believe metals are the place to be for the fallout are forgetting that a weak economy combined with collapsing credit and rising yields is a very deflationary environment. As you yourself said, there is no method left with which to reflate.
In a deflationary environment all commodities are going down.
Just like in 2008 when a collapse of the financial system threatened a deflationary depression, commodities got hammered. Oil went to 24$ a barrel. Gold was at 300$ an ounce.
Unless you actually think Bernanke wins or tries to pull a Japan and ups purchases to 200 billion a month. This is a deflationary environment going forward and commodity prices will reflect that.
My reply was this: Ah yes, another deflationist! So Dollars will be worth more? Dollars which are issued by a bankrupt entity? That are backed by the “full faith and credit” of that bankrupt entity? First off, Gold only traded down to $696, not $300 in 2008. It did not fall as much as any other “commodity” because Gold is not a commodity…it IS money. JP Morgan himself said “Gold is money, nothing else is”. In a true deflation, Gold does better than anything else and deflation is THE best environment to own Gold…even better than hyperinflation which is where the current fiasco will ultimately end up. “Dollars” only did well in the Depression because they were still backed by Gold, a “surrogate” for Gold so to speak. Were they not backed by Gold they would have crashed and burned. We now live in VERY different times than the Great Depression.
I received another couple of e-mails from this gentleman where he says that Dollars will get stronger and Gold will go back to sub $200 (where it was in the year 2000 he said) and possibly even to $100 per ounce. The current thrashing of the metals have brought them out of the woodwork, I have been called a "permabull" and even compared to (and doing the same disservice as) the likes of Jim Sinclair, James Turk and Eric Sprott. First off, I am flattered to be considered or even my name mentioned in the same sentence as these 3 individuals. As for being a "permabull? Well yes, I have been bullish Gold and Silver every single day since mid 1997 when Gold broke below what I believed to be the cost of production. I try to call bottoms, not tops because the ultimate top is many multiples of current prices. Each year, month and every day since then (1997), "policy", both fiscal and monetary have made the true values of Gold and Silver worth more in Dollar terms. The reasons to own the metals now are far more prevalent and far stronger now than they were since the bull market began in 1999. I might add that the reasons are far more obvious.
As for the "deflation" argument, for the umpteenth time I will shoot it down. In a fiat system where the central bank can create as many Dollars as possible, "true" deflation cannot happen. Can asset prices drop? Of course they can, real estate can drop, stocks can drop, bonds can drop and so can Gold/Silver...for a spell. Can the amount of Dollars actually drop (the definition of deflation)? Well yes, it is possible. Will the Fed ever let this happen? They cannot. They cannot ever let this happen because it would be the end of the system and also the end of the Dollar itself. A system as indebted as the current one will immediately implode if credit (money creation) were to even stagnate much less shrink. The problem is that Dollars themselves would completely lose value were this to happen because they are based on "credit", more credit and EXPANDING credit to retain any value.
The world we live in today is not anything like the 1930's. Back then Gold and Dollars were interchangeable. Dollars "represented" Gold holdings and were exchangeable for actual Gold until 1932. Once the "link" between the two was severed, Dollars were devalued by 75% vs. Gold. So if you say that Dollars did well during the deflation...you are correct but Gold did far better. Gold did far better because it "IS" money and Dollars were only a "proxy" for money when in reality it was just a currency. Today? Are Dollars money? Just look up the definition of money in the dictionary or wash a couple hundred bucks 3 or 4 times in your jeans pocket and you'll know the answer. Dollars are a currency...and currency is to trade with, NOT save with.
What we face today is a deflation "in terms of Gold" because it is being hoarded and taken off the market. In fact, the more that COMEX sells paper Gold to depress the price...the faster physical Gold is being taken off market and delivered into dark vaults worldwide. Those who claim "Dollar deflation" are missing the point that Dollars themselves are the "bedrock" or the foundation for ...yes...Dollars themselves much like 2 drunks trying to hold each other up. Can they "go up" in value for a while? Yes of course. Can the Fed ever pull Dollars out of the system? Not a chance, even the mention of "tapering" has caused a financial market hissy fit.
==============================
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $ trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
Regards, Bill H.
Submitted by cpowell on Wed, 2013-06-26 19:19. Section: Daily Dispatches
3:16p ET Wednesday, June 26, 2013
Dear Friend of GATA and Gold:
Tocqueville Gold Fund manager John Hathaway today tells King World News that the disconnect between the physical and paper gold markets is bigger than ever with premiums for delivery of real metal at record levels. The short position in gold, Hathaway adds, is bigger than it was at the market's bottom in 2008. He can't wait to see the reversal. 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.
This is a huge development. Gold is approaching its marginal cost and once reached, almost all mining
companies will stop production and keep their mines on maintenance. Then we will have zero ounces
of gold produced around the world.
(courtesy zero hedge)
This is a huge development. Gold is approaching its marginal cost and once reached, almost all mining
companies will stop production and keep their mines on maintenance. Then we will have zero ounces
of gold produced around the world.
(courtesy zero hedge)
Gold Drops Below Its Average Cash Cost
Submitted by Tyler Durden on 06/26/2013 13:05 -0400
As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...
Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.
It is at that point where one must apply the New Normal supply and demand curve, when one can predict a $0 per ounce price for gold, as physical demand continues unabated, while actual physical, not paper, production has now started going offline.
Joking aside, not even Bernanke and all the paper Gold ETFs in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demands, especially by China, is still in the hundreds of tons each year.
The following commentary is a superb commentary with the topic of deflation.
Bill describes deflation correctly and how this mess will end will be a massive hyperinflation.
study every word..
(courtesy Bill Holter/Miles Franklin)
Deflation?
Inbox
x
I have been told that I just don't get it. We are moving toward a deflation and this is why Gold is "going down". I wrote the first paragraph at the end but would like you to read it twice so I started with it and will finish with it. The "deflationists" have come out of the woodwork, further below is just one e-mail that I received yesterday. What is coming will be a monetary panic which hyperinflates the currency away. When paper markets sell 50% of the world's global Gold production in less than 24 hours, yes the price will drop. Whether the Gold "will" get delivered or NOT does not matter today, it will only matter "later". If you cannot see that paper trading many times one year's global Gold production in one month can not only influence but in the short term "make" price...then no need to read the following.
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
I received this e-mail yesterday telling me that I don't understand deflation...
Bill,
I’m afraid what most people who believe metals are the place to be for the fallout are forgetting that a weak economy combined with collapsing credit and rising yields is a very deflationary environment. As you yourself said, there is no method left with which to reflate.
In a deflationary environment all commodities are going down.
Just like in 2008 when a collapse of the financial system threatened a deflationary depression, commodities got hammered. Oil went to 24$ a barrel. Gold was at 300$ an ounce.
Unless you actually think Bernanke wins or tries to pull a Japan and ups purchases to 200 billion a month. This is a deflationary environment going forward and commodity prices will reflect that.
My reply was this: Ah yes, another deflationist! So Dollars will be worth more? Dollars which are issued by a bankrupt entity? That are backed by the “full faith and credit” of that bankrupt entity? First off, Gold only traded down to $696, not $300 in 2008. It did not fall as much as any other “commodity” because Gold is not a commodity…it IS money. JP Morgan himself said “Gold is money, nothing else is”. In a true deflation, Gold does better than anything else and deflation is THE best environment to own Gold…even better than hyperinflation which is where the current fiasco will ultimately end up. “Dollars” only did well in the Depression because they were still backed by Gold, a “surrogate” for Gold so to speak. Were they not backed by Gold they would have crashed and burned. We now live in VERY different times than the Great Depression.
I received another couple of e-mails from this gentleman where he says that Dollars will get stronger and Gold will go back to sub $200 (where it was in the year 2000 he said) and possibly even to $100 per ounce. The current thrashing of the metals have brought them out of the woodwork, I have been called a "permabull" and even compared to (and doing the same disservice as) the likes of Jim Sinclair, James Turk and Eric Sprott. First off, I am flattered to be considered or even my name mentioned in the same sentence as these 3 individuals. As for being a "permabull? Well yes, I have been bullish Gold and Silver every single day since mid 1997 when Gold broke below what I believed to be the cost of production. I try to call bottoms, not tops because the ultimate top is many multiples of current prices. Each year, month and every day since then (1997), "policy", both fiscal and monetary have made the true values of Gold and Silver worth more in Dollar terms. The reasons to own the metals now are far more prevalent and far stronger now than they were since the bull market began in 1999. I might add that the reasons are far more obvious.
As for the "deflation" argument, for the umpteenth time I will shoot it down. In a fiat system where the central bank can create as many Dollars as possible, "true" deflation cannot happen. Can asset prices drop? Of course they can, real estate can drop, stocks can drop, bonds can drop and so can Gold/Silver...for a spell. Can the amount of Dollars actually drop (the definition of deflation)? Well yes, it is possible. Will the Fed ever let this happen? They cannot. They cannot ever let this happen because it would be the end of the system and also the end of the Dollar itself. A system as indebted as the current one will immediately implode if credit (money creation) were to even stagnate much less shrink. The problem is that Dollars themselves would completely lose value were this to happen because they are based on "credit", more credit and EXPANDING credit to retain any value.
The world we live in today is not anything like the 1930's. Back then Gold and Dollars were interchangeable. Dollars "represented" Gold holdings and were exchangeable for actual Gold until 1932. Once the "link" between the two was severed, Dollars were devalued by 75% vs. Gold. So if you say that Dollars did well during the deflation...you are correct but Gold did far better. Gold did far better because it "IS" money and Dollars were only a "proxy" for money when in reality it was just a currency. Today? Are Dollars money? Just look up the definition of money in the dictionary or wash a couple hundred bucks 3 or 4 times in your jeans pocket and you'll know the answer. Dollars are a currency...and currency is to trade with, NOT save with.
What we face today is a deflation "in terms of Gold" because it is being hoarded and taken off the market. In fact, the more that COMEX sells paper Gold to depress the price...the faster physical Gold is being taken off market and delivered into dark vaults worldwide. Those who claim "Dollar deflation" are missing the point that Dollars themselves are the "bedrock" or the foundation for ...yes...Dollars themselves much like 2 drunks trying to hold each other up. Can they "go up" in value for a while? Yes of course. Can the Fed ever pull Dollars out of the system? Not a chance, even the mention of "tapering" has caused a financial market hissy fit.
==============================
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $ trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
Regards, Bill H.
As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...
Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.
It is at that point where one must apply the New Normal supply and demand curve, when one can predict a $0 per ounce price for gold, as physical demand continues unabated, while actual physical, not paper, production has now started going offline.
Joking aside, not even Bernanke and all the paper Gold ETFs in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demands, especially by China, is still in the hundreds of tons each year.
The following commentary is a superb commentary with the topic of deflation.
Bill describes deflation correctly and how this mess will end will be a massive hyperinflation.
study every word..
(courtesy Bill Holter/Miles Franklin)
The following commentary is a superb commentary with the topic of deflation.
Bill describes deflation correctly and how this mess will end will be a massive hyperinflation.study every word..
(courtesy Bill Holter/Miles Franklin)
Deflation?
Inbox
x
Inbox
I have been told that I just don't get it. We are moving toward a deflation and this is why Gold is "going down". I wrote the first paragraph at the end but would like you to read it twice so I started with it and will finish with it. The "deflationists" have come out of the woodwork, further below is just one e-mail that I received yesterday. What is coming will be a monetary panic which hyperinflates the currency away. When paper markets sell 50% of the world's global Gold production in less than 24 hours, yes the price will drop. Whether the Gold "will" get delivered or NOT does not matter today, it will only matter "later". If you cannot see that paper trading many times one year's global Gold production in one month can not only influence but in the short term "make" price...then no need to read the following.
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
I received this e-mail yesterday telling me that I don't understand deflation...
Bill,
I’m afraid what most people who believe metals are the place to be for the fallout are forgetting that a weak economy combined with collapsing credit and rising yields is a very deflationary environment. As you yourself said, there is no method left with which to reflate.
In a deflationary environment all commodities are going down.
Just like in 2008 when a collapse of the financial system threatened a deflationary depression, commodities got hammered. Oil went to 24$ a barrel. Gold was at 300$ an ounce.
Unless you actually think Bernanke wins or tries to pull a Japan and ups purchases to 200 billion a month. This is a deflationary environment going forward and commodity prices will reflect that.
My reply was this: Ah yes, another deflationist! So Dollars will be worth more? Dollars which are issued by a bankrupt entity? That are backed by the “full faith and credit” of that bankrupt entity? First off, Gold only traded down to $696, not $300 in 2008. It did not fall as much as any other “commodity” because Gold is not a commodity…it IS money. JP Morgan himself said “Gold is money, nothing else is”. In a true deflation, Gold does better than anything else and deflation is THE best environment to own Gold…even better than hyperinflation which is where the current fiasco will ultimately end up. “Dollars” only did well in the Depression because they were still backed by Gold, a “surrogate” for Gold so to speak. Were they not backed by Gold they would have crashed and burned. We now live in VERY different times than the Great Depression.
I received another couple of e-mails from this gentleman where he says that Dollars will get stronger and Gold will go back to sub $200 (where it was in the year 2000 he said) and possibly even to $100 per ounce. The current thrashing of the metals have brought them out of the woodwork, I have been called a "permabull" and even compared to (and doing the same disservice as) the likes of Jim Sinclair, James Turk and Eric Sprott. First off, I am flattered to be considered or even my name mentioned in the same sentence as these 3 individuals. As for being a "permabull? Well yes, I have been bullish Gold and Silver every single day since mid 1997 when Gold broke below what I believed to be the cost of production. I try to call bottoms, not tops because the ultimate top is many multiples of current prices. Each year, month and every day since then (1997), "policy", both fiscal and monetary have made the true values of Gold and Silver worth more in Dollar terms. The reasons to own the metals now are far more prevalent and far stronger now than they were since the bull market began in 1999. I might add that the reasons are far more obvious.
As for the "deflation" argument, for the umpteenth time I will shoot it down. In a fiat system where the central bank can create as many Dollars as possible, "true" deflation cannot happen. Can asset prices drop? Of course they can, real estate can drop, stocks can drop, bonds can drop and so can Gold/Silver...for a spell. Can the amount of Dollars actually drop (the definition of deflation)? Well yes, it is possible. Will the Fed ever let this happen? They cannot. They cannot ever let this happen because it would be the end of the system and also the end of the Dollar itself. A system as indebted as the current one will immediately implode if credit (money creation) were to even stagnate much less shrink. The problem is that Dollars themselves would completely lose value were this to happen because they are based on "credit", more credit and EXPANDING credit to retain any value.
The world we live in today is not anything like the 1930's. Back then Gold and Dollars were interchangeable. Dollars "represented" Gold holdings and were exchangeable for actual Gold until 1932. Once the "link" between the two was severed, Dollars were devalued by 75% vs. Gold. So if you say that Dollars did well during the deflation...you are correct but Gold did far better. Gold did far better because it "IS" money and Dollars were only a "proxy" for money when in reality it was just a currency. Today? Are Dollars money? Just look up the definition of money in the dictionary or wash a couple hundred bucks 3 or 4 times in your jeans pocket and you'll know the answer. Dollars are a currency...and currency is to trade with, NOT save with.
What we face today is a deflation "in terms of Gold" because it is being hoarded and taken off the market. In fact, the more that COMEX sells paper Gold to depress the price...the faster physical Gold is being taken off market and delivered into dark vaults worldwide. Those who claim "Dollar deflation" are missing the point that Dollars themselves are the "bedrock" or the foundation for ...yes...Dollars themselves much like 2 drunks trying to hold each other up. Can they "go up" in value for a while? Yes of course. Can the Fed ever pull Dollars out of the system? Not a chance, even the mention of "tapering" has caused a financial market hissy fit.
==============================
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $ trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
Regards, Bill H.
I have been told that I just don't get it. We are moving toward a deflation and this is why Gold is "going down". I wrote the first paragraph at the end but would like you to read it twice so I started with it and will finish with it. The "deflationists" have come out of the woodwork, further below is just one e-mail that I received yesterday. What is coming will be a monetary panic which hyperinflates the currency away. When paper markets sell 50% of the world's global Gold production in less than 24 hours, yes the price will drop. Whether the Gold "will" get delivered or NOT does not matter today, it will only matter "later". If you cannot see that paper trading many times one year's global Gold production in one month can not only influence but in the short term "make" price...then no need to read the following.
Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
I received this e-mail yesterday telling me that I don't understand deflation...
Bill,
I’m afraid what most people who believe metals are the place to be for the fallout are forgetting that a weak economy combined with collapsing credit and rising yields is a very deflationary environment. As you yourself said, there is no method left with which to reflate.
In a deflationary environment all commodities are going down.
Just like in 2008 when a collapse of the financial system threatened a deflationary depression, commodities got hammered. Oil went to 24$ a barrel. Gold was at 300$ an ounce.
Unless you actually think Bernanke wins or tries to pull a Japan and ups purchases to 200 billion a month. This is a deflationary environment going forward and commodity prices will reflect that.
My reply was this: Ah yes, another deflationist! So Dollars will be worth more? Dollars which are issued by a bankrupt entity? That are backed by the “full faith and credit” of that bankrupt entity? First off, Gold only traded down to $696, not $300 in 2008. It did not fall as much as any other “commodity” because Gold is not a commodity…it IS money. JP Morgan himself said “Gold is money, nothing else is”. In a true deflation, Gold does better than anything else and deflation is THE best environment to own Gold…even better than hyperinflation which is where the current fiasco will ultimately end up. “Dollars” only did well in the Depression because they were still backed by Gold, a “surrogate” for Gold so to speak. Were they not backed by Gold they would have crashed and burned. We now live in VERY different times than the Great Depression.
I received another couple of e-mails from this gentleman where he says that Dollars will get stronger and Gold will go back to sub $200 (where it was in the year 2000 he said) and possibly even to $100 per ounce. The current thrashing of the metals have brought them out of the woodwork, I have been called a "permabull" and even compared to (and doing the same disservice as) the likes of Jim Sinclair, James Turk and Eric Sprott. First off, I am flattered to be considered or even my name mentioned in the same sentence as these 3 individuals. As for being a "permabull? Well yes, I have been bullish Gold and Silver every single day since mid 1997 when Gold broke below what I believed to be the cost of production. I try to call bottoms, not tops because the ultimate top is many multiples of current prices. Each year, month and every day since then (1997), "policy", both fiscal and monetary have made the true values of Gold and Silver worth more in Dollar terms. The reasons to own the metals now are far more prevalent and far stronger now than they were since the bull market began in 1999. I might add that the reasons are far more obvious.
As for the "deflation" argument, for the umpteenth time I will shoot it down. In a fiat system where the central bank can create as many Dollars as possible, "true" deflation cannot happen. Can asset prices drop? Of course they can, real estate can drop, stocks can drop, bonds can drop and so can Gold/Silver...for a spell. Can the amount of Dollars actually drop (the definition of deflation)? Well yes, it is possible. Will the Fed ever let this happen? They cannot. They cannot ever let this happen because it would be the end of the system and also the end of the Dollar itself. A system as indebted as the current one will immediately implode if credit (money creation) were to even stagnate much less shrink. The problem is that Dollars themselves would completely lose value were this to happen because they are based on "credit", more credit and EXPANDING credit to retain any value.
The world we live in today is not anything like the 1930's. Back then Gold and Dollars were interchangeable. Dollars "represented" Gold holdings and were exchangeable for actual Gold until 1932. Once the "link" between the two was severed, Dollars were devalued by 75% vs. Gold. So if you say that Dollars did well during the deflation...you are correct but Gold did far better. Gold did far better because it "IS" money and Dollars were only a "proxy" for money when in reality it was just a currency. Today? Are Dollars money? Just look up the definition of money in the dictionary or wash a couple hundred bucks 3 or 4 times in your jeans pocket and you'll know the answer. Dollars are a currency...and currency is to trade with, NOT save with.
What we face today is a deflation "in terms of Gold" because it is being hoarded and taken off the market. In fact, the more that COMEX sells paper Gold to depress the price...the faster physical Gold is being taken off market and delivered into dark vaults worldwide. Those who claim "Dollar deflation" are missing the point that Dollars themselves are the "bedrock" or the foundation for ...yes...Dollars themselves much like 2 drunks trying to hold each other up. Can they "go up" in value for a while? Yes of course. Can the Fed ever pull Dollars out of the system? Not a chance, even the mention of "tapering" has caused a financial market hissy fit.
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Let me put this in layman's terms. Let's assume that we do have a deflation. This means that there are less Dollars outstanding. Less Dollars outstanding means that the interest that needs to be paid on all bonds, all life insurance products and all bank accounts does not exist. Not only does not exist but won't exist when the payments are due. All banks, all brokers and all insurance companies then become instantly insolvent because they cannot pay their obligations and a selling frenzy begins to raise cash. Then of course you have a federal government that must pay over $1 trillion per year in interest payments (not to mention $ trillions more in benefits), since we are in deflation the Fed is no longer rolling Treasury debt over so the Treasury doesn't have the funds to pay interest (let alone retire principal as comes due). So...now you also have a Treasury that is insolvent. ...and what is that little term written that's on all your Dollars? The "full faith and credit of the United States"? So Dollars, which are issued by a government that is insolvent, bankrupt, whatever you'd like to call it are supposed to become more valuable. Oh yes, they will pay with tax revenues! How much tax revenue will be coming in with a financial sector that has closed their doors because of too much debt and not enough Dollars to perform interest payments...one that will crash in a nanosecond with the help of computerized trading? ..........And the last man standing? Gold! Why? because it "is". It "is" money that cannot and did not default while all of this so called deflation occurred. Remember, deflation means less Dollars outstanding so interest owed did not get paid out which collapses the tent. In today's world with the amounts of debt outstanding and with computers that can trade $1 trillion (in a "quadrillion world") faster than you can blink your eye, how fast do you think it will take for whole system to close down?
Do you really believe that true deflation can last longer than even 1 week? Do you really believe that Dollars will gain in value versus Gold? The only possible way that this could occur is if technology discovered a way to create Gold (supply) faster than Dollars (demand) are created. With Gold now below the cost of production I am pretty sure that this is not going to happen anytime soon!
Regards, Bill H.
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