http://www.cnbc.com/id/100900759
A must read as Andrew Maguire states from his people on the inside that the LBMA is running on vapor as all of their physical gold has moved offshore. The LBMA has no gold and thus the reason for the negative GOFO rates:
(courtesy Andrew Maguire/Kingworldnews)
A must read as Andrew Maguire states from his people on the inside that the LBMA is running on vapor as all of their physical gold has moved offshore. The LBMA has no gold and thus the reason for the negative GOFO rates:
(courtesy Andrew Maguire/Kingworldnews)
(courtesy Andrew Maguire/Kingworldnews)
Price smash just made things worse for gold banking system, Maguire says
Submitted by cpowell on Fri, 2013-07-19 18:16. Section: Daily Dispatches
2:14p ET Friday, July 19, 2013
Dear Friend of GATA and Gold:
London gold and silver trader and silver market rigging whistleblower Andrew Maguire tells King World News today that the recent gold price smash has increased demand so much as to endanger the whole fractional-reserve gold banking system. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Reuters notices gold backwardation and even quotes Naylor-Leyland
Submitted by cpowell on Fri, 2013-07-19 20:14. Section: Daily Dispatches
Gold Futures Hiccup Indicates Demand Outpacing Supply
By Mike Kentz
Reuters
Friday, July 19, 2013
A dislocation in the gold futures market indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged.
For the full story:
the full Reuters story!!!
Gold futures hiccup indicates demand outpacing supply
July 19 (IFR) - A dislocation in the gold futuresmarket indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged.
Gold went into backwardation in comparison to the three-month futurescontract in early January, meaning the spot price rose above the short-dated future contact. Now that process looks set to creep out the futures curve to longer-dated maturities, signalling some cause for alarm.
"The fact that has remained and widened ... indicates that the physical market has tightened up substantially, a postulation that is corroborated by the growing premiums being paid ... and the ongoing wholesale delays in the delivery of substantial bullion tonnage," wrote Ned Naylor-Leyland of Cheviot Asset Management in a report this month.
"What is happening now is that the absolutely inevitable 'run' on the 100:1 leveraged bullion banking system is truly underway."
Backwardation is a concern in gold markets because in theory demand for physical delivery should never outweigh supply, since the amount of available gold is a known, fixed quantity. The event is not unprecedented, as it also happened during the financial crisis of 2008 - and corrected itself the following year.
The current dislocation indicates that holders of gold futures have begun demanding delivery. But because of the large amount of leverage in the market, participants are not able to deliver on their obligations.
"More and more people want their gold today, at a higher price, no matter that they can buy a future much cheaper," said Guillermo Barba, economist at the New Austrian School of Economics in Mexico.
The high demand lately for spot physical delivery has played a part in the yellow metal's recent rebound from its low of US$1200 per troy ounce at the end of June to US$1283 on July 18. But analysts say it is difficult to determine both the cause of the backwardation and whether it will persist.
"It could be a whole range of factors; a bullion bank may have overcommitted in the physical market, miners have reinitiated hedging programs since the April price dive and have to borrow gold to hedge, and that may have cascaded up the chain of physical demand," said Robin Bhar, commodities strategist at Societe Generale.
"With the gold market you don't find out the reasoning or explanation for an event until days, weeks, or even months after the event. What's strange here is that a time of seasonal demand weakness we have strong physical demand and backwardation."
PRICE CONFUSION
The lack of data and understanding highlights the market's tenuous grasp on gold prices, a fact that was reinforced by Federal Reserve Chairman Ben Bernanke's response to a question regarding the metal's confusing price fluctuations on Wednesday.
"Nobody understands gold prices, and I don't really pretend to understand them either," he said.
Usually the price of gold is seen as a measure of confidence in central banks' ability to keep inflation under control, but some believe the shape of the futures curve has now become a more important barometer of market sentiment.
"The actual message of the backwardation is that there is behind the curtains a lack of confidence in the fiat monetary system, a de facto rejection of paper money by some people who prefer the real money (gold and silver)," said Barba.
"That's why a fall or rise in gold prices is not so relevant anymore. The monetary 'fire alarm' message, courtesy of the relationship between spot and futures prices, is: run for your gold, there is not enough for all."
CREEPING OUT THE CURVE
Some believe the current dislocation is only a blip, as in 2009. After all, only the spot versus three-month futures relationship is currently in backwardation, as opposed to spot compared to longer-dated futures contracts.
But since January, the short end of the curve has gone into backwardation increasingly earlier and earlier, indicating the trend may soon start to move further out the curve.
The April 2013 futures contract went into backwardation 30 trading days before April 1, while the June contract went into backwardation 42 trading days before June 1. The August contract turned over 55 days before August 1, and the October contract flipped on July 8, 61 trading days before October 1.
Over the short term, some expect backwardation will spark a squeeze on paper investors in the gold market as the physical demand will force traders looking to cover short positions to bid up the spot price in an effort to shore up inventories.
"The bullion banks want to get gold back into contango and stop the movement of the remaining inventories by shaking the market lower, using paper leverage to do so," wrote Naylor-Leyland.
"It hasn't worked, indeed more and more investors are now seeking allocation, delivery and physical metal at the expense of synthetic products offered by the banks. The squeeze we have been waiting for is closing in, it is always darkest just before dawn."
A version of this story will appear in the July 20 issue of IFR Magazine
This is interesting: China is now planning to back the yuan with gold.
(courtesy Ed Steer commentary)
China reportedly planning to back the yuan with gold
The reports have not been confirmed officially, but analysts are warning that the step, if taken, will weaken the yuan and destabilise China's already troubled economy, ultimately provoking a new bout of the economic crisis worldwide.
Beijing's possible move to back the yuan with gold would not be meant as a strategic measure to strengthen the national currency and increase its attractiveness as an investment medium. Rather, it would be a flaunt aimed at demonstrating to the world (and to the USA in particular) that China is capable of taking the risks associated with a departure from the dollar standard. Experts warn however that, apart from benefiting no-one, such a decision may actually have catastrophic consequences.
Separating the yuan exchange rate from the US dollar may further weaken the American currency in the long run; in addition, China's monetary policy would become very much restricted, believes Evgeny Nadorshin, chief economist at AFK Sistema.
This rather strange news item showed up on the Russia: Beyond the Headlines website on Thursday...and I'm not sure what to make of it. It may be true, but I can't imagine China broadcasting it in advance. I thank reader 'David in California' for bringing it to our attention.
Read more...
http://www.tfmetalsreport.com/blog/4848/guest-post-how-could-we-be-so-wrong-icarus
Guest Post: How Could We Be So Wrong?, by "Icarus"
By popular demand, I decided to turn this very well-written comment by "Icarus" into it's own, stand-alone guest post.
In the first half of his essay, Icarus lists off eleven, separate items that should have been precious metal positive over the past two years. (I'd encourage all readers to add into the comments any events that he might have missed.) In the second half, Icarus makes some reasonable conclusions and connects the current price decline to the ongoing shenanigans with the GLD, the Comex, GOFO and other ongoing events that TPTB are attempting to portray as one-offs.
I'm confident you'll enjoy reading and discussing this excellent commentary.
TF
How Could We Be So Wrong
by, "Icarus"
Let's take a trip down memory lane. Assume it's August of 2011. Gold has hit $1900 an ounce. Now assume we had a time capsule that could catapult us two years into the future. Let's jump in our time machine and jump from the present (August 2011) to July 2013 shall we? Once we get there we will learn a few things:
- The bank depositors of Cyprus have been 'bailed in'. This means that their depositors have had their deposits stolen taken, to pay off other banks in the banking system. This template is then benchmarked by all the other major Reserve banks in the world. Message? Your money is no longer safe in the banking system.
- The United States, owner of the world's reserve currency, has been downgraded by Standard and Poors to AA+ from AAA. For the first time in history the world's reserve currency is not one of the safest places to put your money. It's debt to GDP ratio is soaring and in spite of a total flooding of 17 trillion dollars into the economy there is no substantial recovery. No data point in existence shows a recovery yet. They all just show us bumping along the bottom with economic stagnation.
- QE 2 is announced. Followed by QE to infinity. These two programs are euphemisms for outright money printing to pay our bills. The amount of money 'printed' by the Federal Reserve increases the money supply by a factor of 4 over a few short years. This is outright money debasement and will eventually result in massive amounts of inflation. We are just throwing trillions of trees with ink on them at the economy. This has stemmed the decline for a short time, but it has not turned the longest recovery in history around. We should be booming with this flood of money, in reality we are just treading water at the bottom of the toilet bowl.
- The Swiss announce that they will print to oblivion to keep the Swiss Franc from rising too high against the Euro. The world's safe haven in the 20th century (the place where the world went to protect the value of their savings thru a great depression and two world wars), the bastion of stability, has now become for the first time in centuries, just another currency in the worldwide currency war.
- The Federal Reserve puts the United States on a zero interest rate policy (ZIRP). In essence this steals 8 Trillion dollars of potential interest payments (assuming a normalized rate of 5.8%) from savers and gives it to the banks who save interest that they should have paid to savers. Savers, and retirees, and the economy in general, lose 8 trillion dollars, over 2.5 trillion a year. Things have value today because they can generate income in the future. What the FED is saying with ZIRP, is that dollars have little value in the future.
- Venezuela becomes the first country to repatriate its gold from the vaults under the Federal Reserve Bank in New York (most countries store part of their gold hoard in NY). The Germans become the second country to ask for their gold back. They are told that you can only have one third of their gold, and they must wait 7 years to get it. Why? Could the German gold not be there? Could the Federal Reserve have absconded with this sovereign gold and they need 7 years to replace it? Is there now a gold shortage?
- The Euro is crumbling. Portugal, Spain, Greece, Cyprus and now Italy, are in full blown DEPRESSION. They are experiencing total economic collapse.
- China has increased its purchases of gold on the open market by 10X. In May and June they purchased 100% of global mine supply. They will be the largest purchaser of gold in the world in 2013, surpassing India.
- Politically, the Middle East is as unstable as it's ever been. Iran continues to develop nuclear weaponry. We had the Arab Spring which deposed dictators throughout the region. The United States has been involved in conflicts in Libya, Yemen, Pakistan, and Afghanistan, and we are now selling arms to terrorists in Syria, where there is a full scale civil war that pits the Russians on one side and the U.S. on the other. And we now have boots on the ground in Jordan.
- The Congress has done nothing to fix the problems that caused the meltdown of 2009. They passed Dodd-Frank which has more holes than Swiss cheese (of course, it was written by the banks, for the banks). They continue to run up 1 trillion dollar deficits, and the sequester (which was very painful to both sides of the aisle) cuts less than 3% of the budget. And this "savings" is now totally wiped out by the interest rate increases of just the last 4 weeks. The Volcker Rule, keeping the banks from trading in their proprietary accounts against clients has been eviscerated. So in effect we have had no movement on increased fiscal responsibility. We still have done nothing to solve the problems of the 2009 meltdown.
- Fraud in the financial system goes into overdrive. Sentinel brokerage steals customer accounts, no one goes to jail. Politically connected John Corzine steals 1.4 Billion from his clients at MF Global, and no one goes to jail. HSBC bank, money lauders trillions of dollars from Mexican drug cartels, pays a fine worth three days profit, and no one goes to jail. Barclays and now JP Morgan is fined over a billion dollars for manipulating energy markets, and no one goes to jail. Every bank in the country committed hundreds of thousands of felony offenses by lying in court to judges and forging signatures on foreclosures, and no one goes to jail. And the biggest of all; the major banks are caught with their hands in the cookie jar manipulating LIBOR (London Interbank Overnight loan rates) which sets the cost of money EVERYWHERE (in essence they stole money from everyone in the world), and no one goes to jail.
Now let's get back into our time capsule, and return to 2011. We have a decision to make. Knowing the future events of the next two years, how do we position our portfolios in 2011 after learning about these eleven facts to come?
I submit that a prudent man would stay far, far away from the stock and bond markets. The bubbles here are getting worse, and the fraud (which increases when no one is punished) is terribly destabilizing. The degradation of the world economic output is staggering. The money printing is irresponsible. In this environment the only acceptable place to be is in something safe. The strategy should be to get a return OF your assets, not a return ON you assets. We must find a safe haven to protect us until this storm clears up. Until now, in the history of the last 120 years, that would indicate that we invest in the US dollar, the Swiss Franc, and gold. Well as mentioned, with massive money printing by both the Swiss National bank and the U.S. Federal Reserve, we are both debasing our currencies unmercifully, that leaves those two safe havens out. The only historic safe haven left for protection in 2011 is gold and other hard assets. As a matter of fact in some circles we could have been considered totally irresponsible for not putting 50 to 80% of our assets in this metal of kings.
That's what we did in 2011, without knowing these 11 items. Well, so far, we blew it. Gold, even after these 11 absolutely tremendous gold positive developments, has cratered from $1900 to $1200. The markets on the other hand proceeded to march on to all-time highs. What happened?
I think what happened can be summed up in a statement by Paul Volcker, Chairman of the Federal Reserve, back during the last crisis in 1980. When asked if he would have done anything different when he raised interest rates to 18% and destroyed the inflation of the day, he stated, referring to that time:
"Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."
Bernanke has not made the same mistake. He has obviously intervened in the gold market to keep the price down (learning from Volcker), and thus keep the dollar as an attractive alternative to gold (generating demand for dollars, that keeps our interest rates low). The FED, by law, cannot sell our countries gold to flood the world with supply and keep the price from reaching its normal market clearing value. But they can surreptitiously loan our gold out, and have the bullion banks (like JP Morgan) sell the gold into the market to hammer the price. They can also do this with German gold they hold. No one is the wiser until someone asks for their gold back. This leasing shenanigans game is why Ron Paul wanted to audit the FED and got over 250 Congressmen and Senators to cosponsor his Audit the FED bill. You think the gold not being there anymore might be the reason why the Germans have to wait 7 years to get their gold back???
As for the stock markets, Bernanke is ON THE RECORD with his famous 'wealth effect' policy. If we can get the stock and housing markets up, people will spend more money and we will jump start a recovery. Sounds like some kind of trickle down economics offshoot to me, and we know how that turned out...........Obviously they are depressing gold and pumping up the markets at the same time to further their current policy agenda. THERE IS NO MARKET PRICE DISCOVERY LEFT when interventions like this occur. The prices of both, like their balance sheets, are simply made up.
Well I think the game is afoot and is now about to collapse. The gold used to manipulate is now all gone. Sold. There is no more gold to flood the market with. The boyz are now stealing gold from every nook and cranny they can find, to keep this ponzi scheme going. Just look at the following graph from July 2013:
The yellow is the amount of physical gold available on the Commodity Exchange (COMEX). Note that these are two graphs, the data points are not cumulative, the yellow graph and the green graph stand on their own.) Notice the severe drawdown of available metal since January of this year from 11 million ounces to seven million ounces on the COMEX. The green is the drawdown of gold from Gold Exchange Traded Funds (ETF's). Notice the drawdown of gold from 9 million ounces to less than 6 million ounces since January 2013. This depletion of gold is UNPRECEDENTED! Looks like a panic to me.
Note that the main stream media reports that the drawdowns are simply investors selling their ETF gold shares because they don't want to hold gold. Well think about this. Gold and Silver are kissing cousins. They are both considered monetary metals and they both have a very high correlation to each other. What gold ALWAYS does, silver does, albeit more violently, because it is a smaller market. They are opposite sides of the same coin.
Now explain to me, main stream media, why the silver ETF's have had substantial net gains in inventory since January. Silver is not being drained, only gold. If this were Joe average investor selling, he'd sell both at the same time!!! That's not happening! Someone is pulling gold out of these vehicles while silver is going in. And by the way, where is all this physical going? That would be China, to satisfy their insatiable increased demand for the hard stuff.
Ladies and Gentleman we have a run on the bank going on. Physical gold is going from West to East. The Bullion Banks are out of physical gold available to sell into the market to suppress the price, and now they are raiding the ETF's and the COMEX to get physical gold to suppress the price of gold. It's only a matter of time before our strategy of using gold as our insurance against collapse (a la Greece) will be vindicated. They can play these games for a while, but they cannot fool Mother Nature forever. The market and its price discovery mechanism will eventually win. You cannot manipulate markets and ignore the law of supply and demand forever.
Regards,
Icarus
Thanks to Eric Sprott, Turd Ferguson and Grant Williams for the basic ideas presented.
economic and geopolitical news and views - global
Is this the final straw?
(is that a Golden anvil around President Obama's neck?)
We have seen much news recently and many stories when knitted together point to a picture where the Dollar will be supplanted as the world's reserve currency and where Gold will play some sort of role. Even looking at the Gold market from different angles gives you signs that something is definitely in the works.
I came across this article yesterday written by William F. Engdahl which has strangely gotten very little press considering the ramifications which are huge. Behind the scenes it appears that Saudi Arabia is backing away from the U.S.. Our "partnership" goes all the way back to 1945 and was certainly reinforced in 1973 when they agreed to trade oil ONLY for Dollars. Just after going off of the Gold standard Henry Kissinger cut a deal which created instant and massive demand for Dollars which allowed us the rope we have used to financially hang ourselves.
This "demand" for Dollars to settle for Arab oil may now be ending because of foreign policy. You see, we have made a mess out of communicating to the world where it is that we exactly stand. Al Qaeda is our enemy? They are our ally? We fight against them? We support them with subsidies and arms? Which is it? Well, it depends. It depends on which country you are talking about and what particular political subject. In the current case, Saudi Arabia is supporting the military that has taken rule in Egypt. They are doing this financially at a time that it is unclear what our policy is and they don't want what has happened in Egypt to happen to them. They have watched as leaders have been toppled like bowling pins and they are just plain scared and acting in what they perceive is their best interests.
The article ends with "to be continued". I would like to ask a few questions as to what exactly "to be continued" might look like. If a BRICS currency is formed (which I fully believe is already close to being introduced), will Saudi Arabia (followed by other Middle East countries) accept the new currency in lieu of Dollars? What if the BRICS demanded settlement in their new currency, would the Saudis refuse?
But wait, how about this one, what if the Saudis decided to accept another currency and our fearless leader got pissed at them? What if he started using language that could be considered "fightin" words"? What if the Saudis started to sell Dollar assets? Like Treasury bonds? I wrote a piece yesterday entitled "How much is too much", maybe I should have asked the question of "how much is too much" on the Fed's BALANCE SHEET
because they would be the ONLY ones buying Dollar assets if the Saudis were selling...along with the Chinese, Japanese, South Koreans...heck, maybe even the Brits would be selling to meet margin calls.
I would like to remind you of a movie that came out back in 1980 called "Rollover". This short trailer pretty much says it all http://www.youtube.com/
We brought you the story this week that the ECB lessened conditions on the collateral sent to them on the LTRO swaps consisting of sovereign bonds, asset backed real estate and just about any kind of garbage. Because of the lack of good collateral, the ECB now longer require AAA stuff, but will settle for A which in reality is D-.
Expect this charade to continue until Sept 22 and then when our PIIGS nations line up at the trough for money, Germany will say enough is enough
(courtesy Mark Grant/Out of the Box and Onto Wall Street)
Two Months Until The German Elections And The Return Of Reality
Submitted by Tyler Durden on 07/19/2013 08:46 -0400
Submitted by Mark J. Grant, author of Out of the Box,
“For what we regard as reality is conditioned by the theory to which we subscribe.”
-Stephen Hawking
Europe has denigrated into a strange place where fantasy replaces reality as necessitated by their governments and the Union that governs them. It is a world where anything but direct liabilities are not counted, where securitizations worth 50 cents on the Dollar are held at par and where both data and numbers are manipulated for the preservation of the State.
Dreams are born of imagination, fed upon illusions, and put to death by reality. The guillotine returns after September 22, 2013.
You cannot believe anything that you are told by the Europeans. You cannot accept any of their financials, both sovereigns and banks, at face value. The actuality of the financial condition of the European Central Bank is not only shrouded in secrecy but it is shrouded in make believe. It is a Grimm fairytale.
Familiarity, the first myth of reality: What you know the best, you observe the least.
Devotion, the second myth of reality: The faithful are most hurt by the objects of their faith.
Conviction, the third myth of reality: Only those who seek the truth can be deceived.
Fellowship, the fourth myth of reality: As the tides of war shift, so do loyalties.
Trust, the fifth myth of reality: Every truth holds the seed of betrayal.
-Magic, The Gathering
You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire.
The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent.
Conspiracy of dogmatic, deliberate, and willful ignorance does not either form the “raison d'être” or constitute an excuse for inaction. It is the tolerance of sheer lies, self-deception and malfeasance. It merely locks all your flaws in floors and stored behind concrete doors; a thick veil that obscures clear seeing of reality and it may cause you to stumble, fall and drift into transgression to reach the end point of decadence.
After almost forty years on Wall Street let me assure you that reality always returns. Always and because it must. What is uncounted does not disappear. Losses eventually have to be paid. Deception by governments has a long time frame but it is not eternal. Lies are eventually confronted by truth.
There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so.
Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us.
First the bough will be exposed. Next it will crack. Let’s all hope that it does not break and toss the baby into the thorns.
“Reason is a choice. Wishes and whims are not facts, nor are they a means to discovering them. Reason is our only way of grasping reality; it is our basic tool of survival. We are free to evade the effort of thinking, to reject reason, but we are not free to avoid the penalty of the abyss we refuse to see.”
-Terry Goodkind, Faith of the Fallen
Submitted by cpowell on Fri, 2013-07-19 18:16. Section: Daily Dispatches
2:14p ET Friday, July 19, 2013
Dear Friend of GATA and Gold:
London gold and silver trader and silver market rigging whistleblower Andrew Maguire tells King World News today that the recent gold price smash has increased demand so much as to endanger the whole fractional-reserve gold banking system. 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.
Reuters notices gold backwardation and even quotes Naylor-Leyland
Submitted by cpowell on Fri, 2013-07-19 20:14. Section: Daily Dispatches
Gold Futures Hiccup Indicates Demand Outpacing Supply
By Mike Kentz
Reuters
Friday, July 19, 2013
A dislocation in the gold futures market indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged.
For the full story:
the full Reuters story!!!
Submitted by cpowell on Fri, 2013-07-19 20:14. Section: Daily Dispatches
the full Reuters story!!!
Gold Futures Hiccup Indicates Demand Outpacing Supply
By Mike Kentz
Reuters
Friday, July 19, 2013
Reuters
Friday, July 19, 2013
A dislocation in the gold futures market indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged.
For the full story:
Gold futures hiccup indicates demand outpacing supply
July 19 (IFR) - A dislocation in the gold futuresmarket indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged.
Gold went into backwardation in comparison to the three-month futurescontract in early January, meaning the spot price rose above the short-dated future contact. Now that process looks set to creep out the futures curve to longer-dated maturities, signalling some cause for alarm.
"The fact that has remained and widened ... indicates that the physical market has tightened up substantially, a postulation that is corroborated by the growing premiums being paid ... and the ongoing wholesale delays in the delivery of substantial bullion tonnage," wrote Ned Naylor-Leyland of Cheviot Asset Management in a report this month.
"What is happening now is that the absolutely inevitable 'run' on the 100:1 leveraged bullion banking system is truly underway."
Backwardation is a concern in gold markets because in theory demand for physical delivery should never outweigh supply, since the amount of available gold is a known, fixed quantity. The event is not unprecedented, as it also happened during the financial crisis of 2008 - and corrected itself the following year.
The current dislocation indicates that holders of gold futures have begun demanding delivery. But because of the large amount of leverage in the market, participants are not able to deliver on their obligations.
"More and more people want their gold today, at a higher price, no matter that they can buy a future much cheaper," said Guillermo Barba, economist at the New Austrian School of Economics in Mexico.
The high demand lately for spot physical delivery has played a part in the yellow metal's recent rebound from its low of US$1200 per troy ounce at the end of June to US$1283 on July 18. But analysts say it is difficult to determine both the cause of the backwardation and whether it will persist.
"It could be a whole range of factors; a bullion bank may have overcommitted in the physical market, miners have reinitiated hedging programs since the April price dive and have to borrow gold to hedge, and that may have cascaded up the chain of physical demand," said Robin Bhar, commodities strategist at Societe Generale.
"With the gold market you don't find out the reasoning or explanation for an event until days, weeks, or even months after the event. What's strange here is that a time of seasonal demand weakness we have strong physical demand and backwardation."
PRICE CONFUSION
The lack of data and understanding highlights the market's tenuous grasp on gold prices, a fact that was reinforced by Federal Reserve Chairman Ben Bernanke's response to a question regarding the metal's confusing price fluctuations on Wednesday.
"Nobody understands gold prices, and I don't really pretend to understand them either," he said.
Usually the price of gold is seen as a measure of confidence in central banks' ability to keep inflation under control, but some believe the shape of the futures curve has now become a more important barometer of market sentiment.
"The actual message of the backwardation is that there is behind the curtains a lack of confidence in the fiat monetary system, a de facto rejection of paper money by some people who prefer the real money (gold and silver)," said Barba.
"That's why a fall or rise in gold prices is not so relevant anymore. The monetary 'fire alarm' message, courtesy of the relationship between spot and futures prices, is: run for your gold, there is not enough for all."
CREEPING OUT THE CURVE
Some believe the current dislocation is only a blip, as in 2009. After all, only the spot versus three-month futures relationship is currently in backwardation, as opposed to spot compared to longer-dated futures contracts.
But since January, the short end of the curve has gone into backwardation increasingly earlier and earlier, indicating the trend may soon start to move further out the curve.
The April 2013 futures contract went into backwardation 30 trading days before April 1, while the June contract went into backwardation 42 trading days before June 1. The August contract turned over 55 days before August 1, and the October contract flipped on July 8, 61 trading days before October 1.
Over the short term, some expect backwardation will spark a squeeze on paper investors in the gold market as the physical demand will force traders looking to cover short positions to bid up the spot price in an effort to shore up inventories.
"The bullion banks want to get gold back into contango and stop the movement of the remaining inventories by shaking the market lower, using paper leverage to do so," wrote Naylor-Leyland.
"It hasn't worked, indeed more and more investors are now seeking allocation, delivery and physical metal at the expense of synthetic products offered by the banks. The squeeze we have been waiting for is closing in, it is always darkest just before dawn."
A version of this story will appear in the July 20 issue of IFR Magazine
This is interesting: China is now planning to back the yuan with gold.
(courtesy Ed Steer commentary)
China reportedly planning to back the yuan with gold
The reports have not been confirmed officially, but analysts are warning that the step, if taken, will weaken the yuan and destabilise China's already troubled economy, ultimately provoking a new bout of the economic crisis worldwide.
Beijing's possible move to back the yuan with gold would not be meant as a strategic measure to strengthen the national currency and increase its attractiveness as an investment medium. Rather, it would be a flaunt aimed at demonstrating to the world (and to the USA in particular) that China is capable of taking the risks associated with a departure from the dollar standard. Experts warn however that, apart from benefiting no-one, such a decision may actually have catastrophic consequences.
Separating the yuan exchange rate from the US dollar may further weaken the American currency in the long run; in addition, China's monetary policy would become very much restricted, believes Evgeny Nadorshin, chief economist at AFK Sistema.
This rather strange news item showed up on the Russia: Beyond the Headlines website on Thursday...and I'm not sure what to make of it. It may be true, but I can't imagine China broadcasting it in advance. I thank reader 'David in California' for bringing it to our attention.
Read more...
http://www.tfmetalsreport.com/blog/4848/guest-post-how-could-we-be-so-wrong-icarus
Guest Post: How Could We Be So Wrong?, by "Icarus"
By popular demand, I decided to turn this very well-written comment by "Icarus" into it's own, stand-alone guest post.
In the first half of his essay, Icarus lists off eleven, separate items that should have been precious metal positive over the past two years. (I'd encourage all readers to add into the comments any events that he might have missed.) In the second half, Icarus makes some reasonable conclusions and connects the current price decline to the ongoing shenanigans with the GLD, the Comex, GOFO and other ongoing events that TPTB are attempting to portray as one-offs.
I'm confident you'll enjoy reading and discussing this excellent commentary.
TF
How Could We Be So Wrong
by, "Icarus"
Let's take a trip down memory lane. Assume it's August of 2011. Gold has hit $1900 an ounce. Now assume we had a time capsule that could catapult us two years into the future. Let's jump in our time machine and jump from the present (August 2011) to July 2013 shall we? Once we get there we will learn a few things:
- The bank depositors of Cyprus have been 'bailed in'. This means that their depositors have had their deposits stolen taken, to pay off other banks in the banking system. This template is then benchmarked by all the other major Reserve banks in the world. Message? Your money is no longer safe in the banking system.
- The United States, owner of the world's reserve currency, has been downgraded by Standard and Poors to AA+ from AAA. For the first time in history the world's reserve currency is not one of the safest places to put your money. It's debt to GDP ratio is soaring and in spite of a total flooding of 17 trillion dollars into the economy there is no substantial recovery. No data point in existence shows a recovery yet. They all just show us bumping along the bottom with economic stagnation.
- QE 2 is announced. Followed by QE to infinity. These two programs are euphemisms for outright money printing to pay our bills. The amount of money 'printed' by the Federal Reserve increases the money supply by a factor of 4 over a few short years. This is outright money debasement and will eventually result in massive amounts of inflation. We are just throwing trillions of trees with ink on them at the economy. This has stemmed the decline for a short time, but it has not turned the longest recovery in history around. We should be booming with this flood of money, in reality we are just treading water at the bottom of the toilet bowl.
- The Swiss announce that they will print to oblivion to keep the Swiss Franc from rising too high against the Euro. The world's safe haven in the 20th century (the place where the world went to protect the value of their savings thru a great depression and two world wars), the bastion of stability, has now become for the first time in centuries, just another currency in the worldwide currency war.
- The Federal Reserve puts the United States on a zero interest rate policy (ZIRP). In essence this steals 8 Trillion dollars of potential interest payments (assuming a normalized rate of 5.8%) from savers and gives it to the banks who save interest that they should have paid to savers. Savers, and retirees, and the economy in general, lose 8 trillion dollars, over 2.5 trillion a year. Things have value today because they can generate income in the future. What the FED is saying with ZIRP, is that dollars have little value in the future.
- Venezuela becomes the first country to repatriate its gold from the vaults under the Federal Reserve Bank in New York (most countries store part of their gold hoard in NY). The Germans become the second country to ask for their gold back. They are told that you can only have one third of their gold, and they must wait 7 years to get it. Why? Could the German gold not be there? Could the Federal Reserve have absconded with this sovereign gold and they need 7 years to replace it? Is there now a gold shortage?
- The Euro is crumbling. Portugal, Spain, Greece, Cyprus and now Italy, are in full blown DEPRESSION. They are experiencing total economic collapse.
- China has increased its purchases of gold on the open market by 10X. In May and June they purchased 100% of global mine supply. They will be the largest purchaser of gold in the world in 2013, surpassing India.
- Politically, the Middle East is as unstable as it's ever been. Iran continues to develop nuclear weaponry. We had the Arab Spring which deposed dictators throughout the region. The United States has been involved in conflicts in Libya, Yemen, Pakistan, and Afghanistan, and we are now selling arms to terrorists in Syria, where there is a full scale civil war that pits the Russians on one side and the U.S. on the other. And we now have boots on the ground in Jordan.
- The Congress has done nothing to fix the problems that caused the meltdown of 2009. They passed Dodd-Frank which has more holes than Swiss cheese (of course, it was written by the banks, for the banks). They continue to run up 1 trillion dollar deficits, and the sequester (which was very painful to both sides of the aisle) cuts less than 3% of the budget. And this "savings" is now totally wiped out by the interest rate increases of just the last 4 weeks. The Volcker Rule, keeping the banks from trading in their proprietary accounts against clients has been eviscerated. So in effect we have had no movement on increased fiscal responsibility. We still have done nothing to solve the problems of the 2009 meltdown.
- Fraud in the financial system goes into overdrive. Sentinel brokerage steals customer accounts, no one goes to jail. Politically connected John Corzine steals 1.4 Billion from his clients at MF Global, and no one goes to jail. HSBC bank, money lauders trillions of dollars from Mexican drug cartels, pays a fine worth three days profit, and no one goes to jail. Barclays and now JP Morgan is fined over a billion dollars for manipulating energy markets, and no one goes to jail. Every bank in the country committed hundreds of thousands of felony offenses by lying in court to judges and forging signatures on foreclosures, and no one goes to jail. And the biggest of all; the major banks are caught with their hands in the cookie jar manipulating LIBOR (London Interbank Overnight loan rates) which sets the cost of money EVERYWHERE (in essence they stole money from everyone in the world), and no one goes to jail.
Now let's get back into our time capsule, and return to 2011. We have a decision to make. Knowing the future events of the next two years, how do we position our portfolios in 2011 after learning about these eleven facts to come?
I submit that a prudent man would stay far, far away from the stock and bond markets. The bubbles here are getting worse, and the fraud (which increases when no one is punished) is terribly destabilizing. The degradation of the world economic output is staggering. The money printing is irresponsible. In this environment the only acceptable place to be is in something safe. The strategy should be to get a return OF your assets, not a return ON you assets. We must find a safe haven to protect us until this storm clears up. Until now, in the history of the last 120 years, that would indicate that we invest in the US dollar, the Swiss Franc, and gold. Well as mentioned, with massive money printing by both the Swiss National bank and the U.S. Federal Reserve, we are both debasing our currencies unmercifully, that leaves those two safe havens out. The only historic safe haven left for protection in 2011 is gold and other hard assets. As a matter of fact in some circles we could have been considered totally irresponsible for not putting 50 to 80% of our assets in this metal of kings.
That's what we did in 2011, without knowing these 11 items. Well, so far, we blew it. Gold, even after these 11 absolutely tremendous gold positive developments, has cratered from $1900 to $1200. The markets on the other hand proceeded to march on to all-time highs. What happened?
I think what happened can be summed up in a statement by Paul Volcker, Chairman of the Federal Reserve, back during the last crisis in 1980. When asked if he would have done anything different when he raised interest rates to 18% and destroyed the inflation of the day, he stated, referring to that time:
"Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."
Bernanke has not made the same mistake. He has obviously intervened in the gold market to keep the price down (learning from Volcker), and thus keep the dollar as an attractive alternative to gold (generating demand for dollars, that keeps our interest rates low). The FED, by law, cannot sell our countries gold to flood the world with supply and keep the price from reaching its normal market clearing value. But they can surreptitiously loan our gold out, and have the bullion banks (like JP Morgan) sell the gold into the market to hammer the price. They can also do this with German gold they hold. No one is the wiser until someone asks for their gold back. This leasing shenanigans game is why Ron Paul wanted to audit the FED and got over 250 Congressmen and Senators to cosponsor his Audit the FED bill. You think the gold not being there anymore might be the reason why the Germans have to wait 7 years to get their gold back???
As for the stock markets, Bernanke is ON THE RECORD with his famous 'wealth effect' policy. If we can get the stock and housing markets up, people will spend more money and we will jump start a recovery. Sounds like some kind of trickle down economics offshoot to me, and we know how that turned out...........Obviously they are depressing gold and pumping up the markets at the same time to further their current policy agenda. THERE IS NO MARKET PRICE DISCOVERY LEFT when interventions like this occur. The prices of both, like their balance sheets, are simply made up.
Well I think the game is afoot and is now about to collapse. The gold used to manipulate is now all gone. Sold. There is no more gold to flood the market with. The boyz are now stealing gold from every nook and cranny they can find, to keep this ponzi scheme going. Just look at the following graph from July 2013:
The yellow is the amount of physical gold available on the Commodity Exchange (COMEX). Note that these are two graphs, the data points are not cumulative, the yellow graph and the green graph stand on their own.) Notice the severe drawdown of available metal since January of this year from 11 million ounces to seven million ounces on the COMEX. The green is the drawdown of gold from Gold Exchange Traded Funds (ETF's). Notice the drawdown of gold from 9 million ounces to less than 6 million ounces since January 2013. This depletion of gold is UNPRECEDENTED! Looks like a panic to me.
Note that the main stream media reports that the drawdowns are simply investors selling their ETF gold shares because they don't want to hold gold. Well think about this. Gold and Silver are kissing cousins. They are both considered monetary metals and they both have a very high correlation to each other. What gold ALWAYS does, silver does, albeit more violently, because it is a smaller market. They are opposite sides of the same coin.
Now explain to me, main stream media, why the silver ETF's have had substantial net gains in inventory since January. Silver is not being drained, only gold. If this were Joe average investor selling, he'd sell both at the same time!!! That's not happening! Someone is pulling gold out of these vehicles while silver is going in. And by the way, where is all this physical going? That would be China, to satisfy their insatiable increased demand for the hard stuff.
Ladies and Gentleman we have a run on the bank going on. Physical gold is going from West to East. The Bullion Banks are out of physical gold available to sell into the market to suppress the price, and now they are raiding the ETF's and the COMEX to get physical gold to suppress the price of gold. It's only a matter of time before our strategy of using gold as our insurance against collapse (a la Greece) will be vindicated. They can play these games for a while, but they cannot fool Mother Nature forever. The market and its price discovery mechanism will eventually win. You cannot manipulate markets and ignore the law of supply and demand forever.
Regards,
Icarus
Thanks to Eric Sprott, Turd Ferguson and Grant Williams for the basic ideas presented.
economic and geopolitical news and views - global
Is this the final straw?
(is that a Golden anvil around President Obama's neck?)
We have seen much news recently and many stories when knitted together point to a picture where the Dollar will be supplanted as the world's reserve currency and where Gold will play some sort of role. Even looking at the Gold market from different angles gives you signs that something is definitely in the works.
I came across this article yesterday written by William F. Engdahl which has strangely gotten very little press considering the ramifications which are huge. Behind the scenes it appears that Saudi Arabia is backing away from the U.S.. Our "partnership" goes all the way back to 1945 and was certainly reinforced in 1973 when they agreed to trade oil ONLY for Dollars. Just after going off of the Gold standard Henry Kissinger cut a deal which created instant and massive demand for Dollars which allowed us the rope we have used to financially hang ourselves.
This "demand" for Dollars to settle for Arab oil may now be ending because of foreign policy. You see, we have made a mess out of communicating to the world where it is that we exactly stand. Al Qaeda is our enemy? They are our ally? We fight against them? We support them with subsidies and arms? Which is it? Well, it depends. It depends on which country you are talking about and what particular political subject. In the current case, Saudi Arabia is supporting the military that has taken rule in Egypt. They are doing this financially at a time that it is unclear what our policy is and they don't want what has happened in Egypt to happen to them. They have watched as leaders have been toppled like bowling pins and they are just plain scared and acting in what they perceive is their best interests.
The article ends with "to be continued". I would like to ask a few questions as to what exactly "to be continued" might look like. If a BRICS currency is formed (which I fully believe is already close to being introduced), will Saudi Arabia (followed by other Middle East countries) accept the new currency in lieu of Dollars? What if the BRICS demanded settlement in their new currency, would the Saudis refuse?
But wait, how about this one, what if the Saudis decided to accept another currency and our fearless leader got pissed at them? What if he started using language that could be considered "fightin" words"? What if the Saudis started to sell Dollar assets? Like Treasury bonds? I wrote a piece yesterday entitled "How much is too much", maybe I should have asked the question of "how much is too much" on the Fed's BALANCE SHEET
because they would be the ONLY ones buying Dollar assets if the Saudis were selling...along with the Chinese, Japanese, South Koreans...heck, maybe even the Brits would be selling to meet margin calls.
I would like to remind you of a movie that came out back in 1980 called "Rollover". This short trailer pretty much says it all http://www.youtube.com/
We brought you the story this week that the ECB lessened conditions on the collateral sent to them on the LTRO swaps consisting of sovereign bonds, asset backed real estate and just about any kind of garbage. Because of the lack of good collateral, the ECB now longer require AAA stuff, but will settle for A which in reality is D-.
Expect this charade to continue until Sept 22 and then when our PIIGS nations line up at the trough for money, Germany will say enough is enough
(courtesy Mark Grant/Out of the Box and Onto Wall Street)
Two Months Until The German Elections And The Return Of Reality
Submitted by Tyler Durden on 07/19/2013 08:46 -0400
Submitted by Mark J. Grant, author of Out of the Box,
“For what we regard as reality is conditioned by the theory to which we subscribe.”
-Stephen Hawking
Europe has denigrated into a strange place where fantasy replaces reality as necessitated by their governments and the Union that governs them. It is a world where anything but direct liabilities are not counted, where securitizations worth 50 cents on the Dollar are held at par and where both data and numbers are manipulated for the preservation of the State.
Dreams are born of imagination, fed upon illusions, and put to death by reality. The guillotine returns after September 22, 2013.
You cannot believe anything that you are told by the Europeans. You cannot accept any of their financials, both sovereigns and banks, at face value. The actuality of the financial condition of the European Central Bank is not only shrouded in secrecy but it is shrouded in make believe. It is a Grimm fairytale.
Familiarity, the first myth of reality: What you know the best, you observe the least.
Devotion, the second myth of reality: The faithful are most hurt by the objects of their faith.
Conviction, the third myth of reality: Only those who seek the truth can be deceived.
Fellowship, the fourth myth of reality: As the tides of war shift, so do loyalties.
Trust, the fifth myth of reality: Every truth holds the seed of betrayal.
-Magic, The Gathering
You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire.
The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent.
Conspiracy of dogmatic, deliberate, and willful ignorance does not either form the “raison d'être” or constitute an excuse for inaction. It is the tolerance of sheer lies, self-deception and malfeasance. It merely locks all your flaws in floors and stored behind concrete doors; a thick veil that obscures clear seeing of reality and it may cause you to stumble, fall and drift into transgression to reach the end point of decadence.
After almost forty years on Wall Street let me assure you that reality always returns. Always and because it must. What is uncounted does not disappear. Losses eventually have to be paid. Deception by governments has a long time frame but it is not eternal. Lies are eventually confronted by truth.
There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so.
Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us.
First the bough will be exposed. Next it will crack. Let’s all hope that it does not break and toss the baby into the thorns.
“Reason is a choice. Wishes and whims are not facts, nor are they a means to discovering them. Reason is our only way of grasping reality; it is our basic tool of survival. We are free to evade the effort of thinking, to reject reason, but we are not free to avoid the penalty of the abyss we refuse to see.”
-Terry Goodkind, Faith of the Fallen
July 19 (IFR) - A dislocation in the gold futuresmarket indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged.
Gold went into backwardation in comparison to the three-month futurescontract in early January, meaning the spot price rose above the short-dated future contact. Now that process looks set to creep out the futures curve to longer-dated maturities, signalling some cause for alarm.
"The fact that has remained and widened ... indicates that the physical market has tightened up substantially, a postulation that is corroborated by the growing premiums being paid ... and the ongoing wholesale delays in the delivery of substantial bullion tonnage," wrote Ned Naylor-Leyland of Cheviot Asset Management in a report this month.
"What is happening now is that the absolutely inevitable 'run' on the 100:1 leveraged bullion banking system is truly underway."
Backwardation is a concern in gold markets because in theory demand for physical delivery should never outweigh supply, since the amount of available gold is a known, fixed quantity. The event is not unprecedented, as it also happened during the financial crisis of 2008 - and corrected itself the following year.
The current dislocation indicates that holders of gold futures have begun demanding delivery. But because of the large amount of leverage in the market, participants are not able to deliver on their obligations.
"More and more people want their gold today, at a higher price, no matter that they can buy a future much cheaper," said Guillermo Barba, economist at the New Austrian School of Economics in Mexico.
The high demand lately for spot physical delivery has played a part in the yellow metal's recent rebound from its low of US$1200 per troy ounce at the end of June to US$1283 on July 18. But analysts say it is difficult to determine both the cause of the backwardation and whether it will persist.
"It could be a whole range of factors; a bullion bank may have overcommitted in the physical market, miners have reinitiated hedging programs since the April price dive and have to borrow gold to hedge, and that may have cascaded up the chain of physical demand," said Robin Bhar, commodities strategist at Societe Generale.
"With the gold market you don't find out the reasoning or explanation for an event until days, weeks, or even months after the event. What's strange here is that a time of seasonal demand weakness we have strong physical demand and backwardation."
PRICE CONFUSION
The lack of data and understanding highlights the market's tenuous grasp on gold prices, a fact that was reinforced by Federal Reserve Chairman Ben Bernanke's response to a question regarding the metal's confusing price fluctuations on Wednesday.
"Nobody understands gold prices, and I don't really pretend to understand them either," he said.
Usually the price of gold is seen as a measure of confidence in central banks' ability to keep inflation under control, but some believe the shape of the futures curve has now become a more important barometer of market sentiment.
"The actual message of the backwardation is that there is behind the curtains a lack of confidence in the fiat monetary system, a de facto rejection of paper money by some people who prefer the real money (gold and silver)," said Barba.
"That's why a fall or rise in gold prices is not so relevant anymore. The monetary 'fire alarm' message, courtesy of the relationship between spot and futures prices, is: run for your gold, there is not enough for all."
CREEPING OUT THE CURVE
Some believe the current dislocation is only a blip, as in 2009. After all, only the spot versus three-month futures relationship is currently in backwardation, as opposed to spot compared to longer-dated futures contracts.
But since January, the short end of the curve has gone into backwardation increasingly earlier and earlier, indicating the trend may soon start to move further out the curve.
The April 2013 futures contract went into backwardation 30 trading days before April 1, while the June contract went into backwardation 42 trading days before June 1. The August contract turned over 55 days before August 1, and the October contract flipped on July 8, 61 trading days before October 1.
Over the short term, some expect backwardation will spark a squeeze on paper investors in the gold market as the physical demand will force traders looking to cover short positions to bid up the spot price in an effort to shore up inventories.
"The bullion banks want to get gold back into contango and stop the movement of the remaining inventories by shaking the market lower, using paper leverage to do so," wrote Naylor-Leyland.
"It hasn't worked, indeed more and more investors are now seeking allocation, delivery and physical metal at the expense of synthetic products offered by the banks. The squeeze we have been waiting for is closing in, it is always darkest just before dawn."
A version of this story will appear in the July 20 issue of IFR Magazine
This is interesting: China is now planning to back the yuan with gold.
(courtesy Ed Steer commentary)
This is interesting: China is now planning to back the yuan with gold.
(courtesy Ed Steer commentary)
(courtesy Ed Steer commentary)
China reportedly planning to back the yuan with gold
The reports have not been confirmed officially, but analysts are warning that the step, if taken, will weaken the yuan and destabilise China's already troubled economy, ultimately provoking a new bout of the economic crisis worldwide.
Beijing's possible move to back the yuan with gold would not be meant as a strategic measure to strengthen the national currency and increase its attractiveness as an investment medium. Rather, it would be a flaunt aimed at demonstrating to the world (and to the USA in particular) that China is capable of taking the risks associated with a departure from the dollar standard. Experts warn however that, apart from benefiting no-one, such a decision may actually have catastrophic consequences.
Separating the yuan exchange rate from the US dollar may further weaken the American currency in the long run; in addition, China's monetary policy would become very much restricted, believes Evgeny Nadorshin, chief economist at AFK Sistema.
This rather strange news item showed up on the Russia: Beyond the Headlines website on Thursday...and I'm not sure what to make of it. It may be true, but I can't imagine China broadcasting it in advance. I thank reader 'David in California' for bringing it to our attention.
Read more...
http://www.tfmetalsreport.com/blog/4848/guest-post-how-could-we-be-so-wrong-icarus
Guest Post: How Could We Be So Wrong?, by "Icarus"
By popular demand, I decided to turn this very well-written comment by "Icarus" into it's own, stand-alone guest post.
In the first half of his essay, Icarus lists off eleven, separate items that should have been precious metal positive over the past two years. (I'd encourage all readers to add into the comments any events that he might have missed.) In the second half, Icarus makes some reasonable conclusions and connects the current price decline to the ongoing shenanigans with the GLD, the Comex, GOFO and other ongoing events that TPTB are attempting to portray as one-offs.
I'm confident you'll enjoy reading and discussing this excellent commentary.
TF
How Could We Be So Wrong
by, "Icarus"
Let's take a trip down memory lane. Assume it's August of 2011. Gold has hit $1900 an ounce. Now assume we had a time capsule that could catapult us two years into the future. Let's jump in our time machine and jump from the present (August 2011) to July 2013 shall we? Once we get there we will learn a few things:
- The bank depositors of Cyprus have been 'bailed in'. This means that their depositors have had their deposits stolen taken, to pay off other banks in the banking system. This template is then benchmarked by all the other major Reserve banks in the world. Message? Your money is no longer safe in the banking system.
- The United States, owner of the world's reserve currency, has been downgraded by Standard and Poors to AA+ from AAA. For the first time in history the world's reserve currency is not one of the safest places to put your money. It's debt to GDP ratio is soaring and in spite of a total flooding of 17 trillion dollars into the economy there is no substantial recovery. No data point in existence shows a recovery yet. They all just show us bumping along the bottom with economic stagnation.
- QE 2 is announced. Followed by QE to infinity. These two programs are euphemisms for outright money printing to pay our bills. The amount of money 'printed' by the Federal Reserve increases the money supply by a factor of 4 over a few short years. This is outright money debasement and will eventually result in massive amounts of inflation. We are just throwing trillions of trees with ink on them at the economy. This has stemmed the decline for a short time, but it has not turned the longest recovery in history around. We should be booming with this flood of money, in reality we are just treading water at the bottom of the toilet bowl.
- The Swiss announce that they will print to oblivion to keep the Swiss Franc from rising too high against the Euro. The world's safe haven in the 20th century (the place where the world went to protect the value of their savings thru a great depression and two world wars), the bastion of stability, has now become for the first time in centuries, just another currency in the worldwide currency war.
- The Federal Reserve puts the United States on a zero interest rate policy (ZIRP). In essence this steals 8 Trillion dollars of potential interest payments (assuming a normalized rate of 5.8%) from savers and gives it to the banks who save interest that they should have paid to savers. Savers, and retirees, and the economy in general, lose 8 trillion dollars, over 2.5 trillion a year. Things have value today because they can generate income in the future. What the FED is saying with ZIRP, is that dollars have little value in the future.
- Venezuela becomes the first country to repatriate its gold from the vaults under the Federal Reserve Bank in New York (most countries store part of their gold hoard in NY). The Germans become the second country to ask for their gold back. They are told that you can only have one third of their gold, and they must wait 7 years to get it. Why? Could the German gold not be there? Could the Federal Reserve have absconded with this sovereign gold and they need 7 years to replace it? Is there now a gold shortage?
- The Euro is crumbling. Portugal, Spain, Greece, Cyprus and now Italy, are in full blown DEPRESSION. They are experiencing total economic collapse.
- China has increased its purchases of gold on the open market by 10X. In May and June they purchased 100% of global mine supply. They will be the largest purchaser of gold in the world in 2013, surpassing India.
- Politically, the Middle East is as unstable as it's ever been. Iran continues to develop nuclear weaponry. We had the Arab Spring which deposed dictators throughout the region. The United States has been involved in conflicts in Libya, Yemen, Pakistan, and Afghanistan, and we are now selling arms to terrorists in Syria, where there is a full scale civil war that pits the Russians on one side and the U.S. on the other. And we now have boots on the ground in Jordan.
- The Congress has done nothing to fix the problems that caused the meltdown of 2009. They passed Dodd-Frank which has more holes than Swiss cheese (of course, it was written by the banks, for the banks). They continue to run up 1 trillion dollar deficits, and the sequester (which was very painful to both sides of the aisle) cuts less than 3% of the budget. And this "savings" is now totally wiped out by the interest rate increases of just the last 4 weeks. The Volcker Rule, keeping the banks from trading in their proprietary accounts against clients has been eviscerated. So in effect we have had no movement on increased fiscal responsibility. We still have done nothing to solve the problems of the 2009 meltdown.
- Fraud in the financial system goes into overdrive. Sentinel brokerage steals customer accounts, no one goes to jail. Politically connected John Corzine steals 1.4 Billion from his clients at MF Global, and no one goes to jail. HSBC bank, money lauders trillions of dollars from Mexican drug cartels, pays a fine worth three days profit, and no one goes to jail. Barclays and now JP Morgan is fined over a billion dollars for manipulating energy markets, and no one goes to jail. Every bank in the country committed hundreds of thousands of felony offenses by lying in court to judges and forging signatures on foreclosures, and no one goes to jail. And the biggest of all; the major banks are caught with their hands in the cookie jar manipulating LIBOR (London Interbank Overnight loan rates) which sets the cost of money EVERYWHERE (in essence they stole money from everyone in the world), and no one goes to jail.
Now let's get back into our time capsule, and return to 2011. We have a decision to make. Knowing the future events of the next two years, how do we position our portfolios in 2011 after learning about these eleven facts to come?
I submit that a prudent man would stay far, far away from the stock and bond markets. The bubbles here are getting worse, and the fraud (which increases when no one is punished) is terribly destabilizing. The degradation of the world economic output is staggering. The money printing is irresponsible. In this environment the only acceptable place to be is in something safe. The strategy should be to get a return OF your assets, not a return ON you assets. We must find a safe haven to protect us until this storm clears up. Until now, in the history of the last 120 years, that would indicate that we invest in the US dollar, the Swiss Franc, and gold. Well as mentioned, with massive money printing by both the Swiss National bank and the U.S. Federal Reserve, we are both debasing our currencies unmercifully, that leaves those two safe havens out. The only historic safe haven left for protection in 2011 is gold and other hard assets. As a matter of fact in some circles we could have been considered totally irresponsible for not putting 50 to 80% of our assets in this metal of kings.
That's what we did in 2011, without knowing these 11 items. Well, so far, we blew it. Gold, even after these 11 absolutely tremendous gold positive developments, has cratered from $1900 to $1200. The markets on the other hand proceeded to march on to all-time highs. What happened?
I think what happened can be summed up in a statement by Paul Volcker, Chairman of the Federal Reserve, back during the last crisis in 1980. When asked if he would have done anything different when he raised interest rates to 18% and destroyed the inflation of the day, he stated, referring to that time:
"Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."
Bernanke has not made the same mistake. He has obviously intervened in the gold market to keep the price down (learning from Volcker), and thus keep the dollar as an attractive alternative to gold (generating demand for dollars, that keeps our interest rates low). The FED, by law, cannot sell our countries gold to flood the world with supply and keep the price from reaching its normal market clearing value. But they can surreptitiously loan our gold out, and have the bullion banks (like JP Morgan) sell the gold into the market to hammer the price. They can also do this with German gold they hold. No one is the wiser until someone asks for their gold back. This leasing shenanigans game is why Ron Paul wanted to audit the FED and got over 250 Congressmen and Senators to cosponsor his Audit the FED bill. You think the gold not being there anymore might be the reason why the Germans have to wait 7 years to get their gold back???
As for the stock markets, Bernanke is ON THE RECORD with his famous 'wealth effect' policy. If we can get the stock and housing markets up, people will spend more money and we will jump start a recovery. Sounds like some kind of trickle down economics offshoot to me, and we know how that turned out...........Obviously they are depressing gold and pumping up the markets at the same time to further their current policy agenda. THERE IS NO MARKET PRICE DISCOVERY LEFT when interventions like this occur. The prices of both, like their balance sheets, are simply made up.
Well I think the game is afoot and is now about to collapse. The gold used to manipulate is now all gone. Sold. There is no more gold to flood the market with. The boyz are now stealing gold from every nook and cranny they can find, to keep this ponzi scheme going. Just look at the following graph from July 2013:
The yellow is the amount of physical gold available on the Commodity Exchange (COMEX). Note that these are two graphs, the data points are not cumulative, the yellow graph and the green graph stand on their own.) Notice the severe drawdown of available metal since January of this year from 11 million ounces to seven million ounces on the COMEX. The green is the drawdown of gold from Gold Exchange Traded Funds (ETF's). Notice the drawdown of gold from 9 million ounces to less than 6 million ounces since January 2013. This depletion of gold is UNPRECEDENTED! Looks like a panic to me.
Note that the main stream media reports that the drawdowns are simply investors selling their ETF gold shares because they don't want to hold gold. Well think about this. Gold and Silver are kissing cousins. They are both considered monetary metals and they both have a very high correlation to each other. What gold ALWAYS does, silver does, albeit more violently, because it is a smaller market. They are opposite sides of the same coin.
Now explain to me, main stream media, why the silver ETF's have had substantial net gains in inventory since January. Silver is not being drained, only gold. If this were Joe average investor selling, he'd sell both at the same time!!! That's not happening! Someone is pulling gold out of these vehicles while silver is going in. And by the way, where is all this physical going? That would be China, to satisfy their insatiable increased demand for the hard stuff.
Ladies and Gentleman we have a run on the bank going on. Physical gold is going from West to East. The Bullion Banks are out of physical gold available to sell into the market to suppress the price, and now they are raiding the ETF's and the COMEX to get physical gold to suppress the price of gold. It's only a matter of time before our strategy of using gold as our insurance against collapse (a la Greece) will be vindicated. They can play these games for a while, but they cannot fool Mother Nature forever. The market and its price discovery mechanism will eventually win. You cannot manipulate markets and ignore the law of supply and demand forever.
Regards,
Icarus
Thanks to Eric Sprott, Turd Ferguson and Grant Williams for the basic ideas presented.
economic and geopolitical news and views - global
Is this the final straw?
(is that a Golden anvil around President Obama's neck?)
We have seen much news recently and many stories when knitted together point to a picture where the Dollar will be supplanted as the world's reserve currency and where Gold will play some sort of role. Even looking at the Gold market from different angles gives you signs that something is definitely in the works.
I came across this article yesterday written by William F. Engdahl which has strangely gotten very little press considering the ramifications which are huge. Behind the scenes it appears that Saudi Arabia is backing away from the U.S.. Our "partnership" goes all the way back to 1945 and was certainly reinforced in 1973 when they agreed to trade oil ONLY for Dollars. Just after going off of the Gold standard Henry Kissinger cut a deal which created instant and massive demand for Dollars which allowed us the rope we have used to financially hang ourselves.
This "demand" for Dollars to settle for Arab oil may now be ending because of foreign policy. You see, we have made a mess out of communicating to the world where it is that we exactly stand. Al Qaeda is our enemy? They are our ally? We fight against them? We support them with subsidies and arms? Which is it? Well, it depends. It depends on which country you are talking about and what particular political subject. In the current case, Saudi Arabia is supporting the military that has taken rule in Egypt. They are doing this financially at a time that it is unclear what our policy is and they don't want what has happened in Egypt to happen to them. They have watched as leaders have been toppled like bowling pins and they are just plain scared and acting in what they perceive is their best interests.
The article ends with "to be continued". I would like to ask a few questions as to what exactly "to be continued" might look like. If a BRICS currency is formed (which I fully believe is already close to being introduced), will Saudi Arabia (followed by other Middle East countries) accept the new currency in lieu of Dollars? What if the BRICS demanded settlement in their new currency, would the Saudis refuse?
But wait, how about this one, what if the Saudis decided to accept another currency and our fearless leader got pissed at them? What if he started using language that could be considered "fightin" words"? What if the Saudis started to sell Dollar assets? Like Treasury bonds? I wrote a piece yesterday entitled "How much is too much", maybe I should have asked the question of "how much is too much" on the Fed's BALANCE SHEET
because they would be the ONLY ones buying Dollar assets if the Saudis were selling...along with the Chinese, Japanese, South Koreans...heck, maybe even the Brits would be selling to meet margin calls.
I would like to remind you of a movie that came out back in 1980 called "Rollover". This short trailer pretty much says it all http://www.youtube.com/
We brought you the story this week that the ECB lessened conditions on the collateral sent to them on the LTRO swaps consisting of sovereign bonds, asset backed real estate and just about any kind of garbage. Because of the lack of good collateral, the ECB now longer require AAA stuff, but will settle for A which in reality is D-.
Expect this charade to continue until Sept 22 and then when our PIIGS nations line up at the trough for money, Germany will say enough is enough
(courtesy Mark Grant/Out of the Box and Onto Wall Street)
Two Months Until The German Elections And The Return Of Reality
Submitted by Tyler Durden on 07/19/2013 08:46 -0400
Submitted by Mark J. Grant, author of Out of the Box,
“For what we regard as reality is conditioned by the theory to which we subscribe.”
-Stephen Hawking
Europe has denigrated into a strange place where fantasy replaces reality as necessitated by their governments and the Union that governs them. It is a world where anything but direct liabilities are not counted, where securitizations worth 50 cents on the Dollar are held at par and where both data and numbers are manipulated for the preservation of the State.
Dreams are born of imagination, fed upon illusions, and put to death by reality. The guillotine returns after September 22, 2013.
You cannot believe anything that you are told by the Europeans. You cannot accept any of their financials, both sovereigns and banks, at face value. The actuality of the financial condition of the European Central Bank is not only shrouded in secrecy but it is shrouded in make believe. It is a Grimm fairytale.
Familiarity, the first myth of reality: What you know the best, you observe the least.
Devotion, the second myth of reality: The faithful are most hurt by the objects of their faith.
Conviction, the third myth of reality: Only those who seek the truth can be deceived.
Fellowship, the fourth myth of reality: As the tides of war shift, so do loyalties.
Trust, the fifth myth of reality: Every truth holds the seed of betrayal.
-Magic, The Gathering
You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire.
The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent.
Conspiracy of dogmatic, deliberate, and willful ignorance does not either form the “raison d'être” or constitute an excuse for inaction. It is the tolerance of sheer lies, self-deception and malfeasance. It merely locks all your flaws in floors and stored behind concrete doors; a thick veil that obscures clear seeing of reality and it may cause you to stumble, fall and drift into transgression to reach the end point of decadence.
After almost forty years on Wall Street let me assure you that reality always returns. Always and because it must. What is uncounted does not disappear. Losses eventually have to be paid. Deception by governments has a long time frame but it is not eternal. Lies are eventually confronted by truth.
There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so.
Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us.
First the bough will be exposed. Next it will crack. Let’s all hope that it does not break and toss the baby into the thorns.
“Reason is a choice. Wishes and whims are not facts, nor are they a means to discovering them. Reason is our only way of grasping reality; it is our basic tool of survival. We are free to evade the effort of thinking, to reject reason, but we are not free to avoid the penalty of the abyss we refuse to see.”
-Terry Goodkind, Faith of the Fallen
| The reports have not been confirmed officially, but analysts are warning that the step, if taken, will weaken the yuan and destabilise China's already troubled economy, ultimately provoking a new bout of the economic crisis worldwide. Beijing's possible move to back the yuan with gold would not be meant as a strategic measure to strengthen the national currency and increase its attractiveness as an investment medium. Rather, it would be a flaunt aimed at demonstrating to the world (and to the USA in particular) that China is capable of taking the risks associated with a departure from the dollar standard. Experts warn however that, apart from benefiting no-one, such a decision may actually have catastrophic consequences. Separating the yuan exchange rate from the US dollar may further weaken the American currency in the long run; in addition, China's monetary policy would become very much restricted, believes Evgeny Nadorshin, chief economist at AFK Sistema. This rather strange news item showed up on the Russia: Beyond the Headlines website on Thursday...and I'm not sure what to make of it. It may be true, but I can't imagine China broadcasting it in advance. I thank reader 'David in California' for bringing it to our attention. Read more... http://www.tfmetalsreport.com/blog/4848/guest-post-how-could-we-be-so-wrong-icarus Guest Post: How Could We Be So Wrong?, by "Icarus"
By popular demand, I decided to turn this very well-written comment by "Icarus" into it's own, stand-alone guest post.
In the first half of his essay, Icarus lists off eleven, separate items that should have been precious metal positive over the past two years. (I'd encourage all readers to add into the comments any events that he might have missed.) In the second half, Icarus makes some reasonable conclusions and connects the current price decline to the ongoing shenanigans with the GLD, the Comex, GOFO and other ongoing events that TPTB are attempting to portray as one-offs.
I'm confident you'll enjoy reading and discussing this excellent commentary.
TF
How Could We Be So Wrong
by, "Icarus"
Let's take a trip down memory lane. Assume it's August of 2011. Gold has hit $1900 an ounce. Now assume we had a time capsule that could catapult us two years into the future. Let's jump in our time machine and jump from the present (August 2011) to July 2013 shall we? Once we get there we will learn a few things:
Now let's get back into our time capsule, and return to 2011. We have a decision to make. Knowing the future events of the next two years, how do we position our portfolios in 2011 after learning about these eleven facts to come?
I submit that a prudent man would stay far, far away from the stock and bond markets. The bubbles here are getting worse, and the fraud (which increases when no one is punished) is terribly destabilizing. The degradation of the world economic output is staggering. The money printing is irresponsible. In this environment the only acceptable place to be is in something safe. The strategy should be to get a return OF your assets, not a return ON you assets. We must find a safe haven to protect us until this storm clears up. Until now, in the history of the last 120 years, that would indicate that we invest in the US dollar, the Swiss Franc, and gold. Well as mentioned, with massive money printing by both the Swiss National bank and the U.S. Federal Reserve, we are both debasing our currencies unmercifully, that leaves those two safe havens out. The only historic safe haven left for protection in 2011 is gold and other hard assets. As a matter of fact in some circles we could have been considered totally irresponsible for not putting 50 to 80% of our assets in this metal of kings.
That's what we did in 2011, without knowing these 11 items. Well, so far, we blew it. Gold, even after these 11 absolutely tremendous gold positive developments, has cratered from $1900 to $1200. The markets on the other hand proceeded to march on to all-time highs. What happened?
I think what happened can be summed up in a statement by Paul Volcker, Chairman of the Federal Reserve, back during the last crisis in 1980. When asked if he would have done anything different when he raised interest rates to 18% and destroyed the inflation of the day, he stated, referring to that time:
"Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."
Bernanke has not made the same mistake. He has obviously intervened in the gold market to keep the price down (learning from Volcker), and thus keep the dollar as an attractive alternative to gold (generating demand for dollars, that keeps our interest rates low). The FED, by law, cannot sell our countries gold to flood the world with supply and keep the price from reaching its normal market clearing value. But they can surreptitiously loan our gold out, and have the bullion banks (like JP Morgan) sell the gold into the market to hammer the price. They can also do this with German gold they hold. No one is the wiser until someone asks for their gold back. This leasing shenanigans game is why Ron Paul wanted to audit the FED and got over 250 Congressmen and Senators to cosponsor his Audit the FED bill. You think the gold not being there anymore might be the reason why the Germans have to wait 7 years to get their gold back???
As for the stock markets, Bernanke is ON THE RECORD with his famous 'wealth effect' policy. If we can get the stock and housing markets up, people will spend more money and we will jump start a recovery. Sounds like some kind of trickle down economics offshoot to me, and we know how that turned out...........Obviously they are depressing gold and pumping up the markets at the same time to further their current policy agenda. THERE IS NO MARKET PRICE DISCOVERY LEFT when interventions like this occur. The prices of both, like their balance sheets, are simply made up.
Well I think the game is afoot and is now about to collapse. The gold used to manipulate is now all gone. Sold. There is no more gold to flood the market with. The boyz are now stealing gold from every nook and cranny they can find, to keep this ponzi scheme going. Just look at the following graph from July 2013:
 The yellow is the amount of physical gold available on the Commodity Exchange (COMEX). Note that these are two graphs, the data points are not cumulative, the yellow graph and the green graph stand on their own.) Notice the severe drawdown of available metal since January of this year from 11 million ounces to seven million ounces on the COMEX. The green is the drawdown of gold from Gold Exchange Traded Funds (ETF's). Notice the drawdown of gold from 9 million ounces to less than 6 million ounces since January 2013. This depletion of gold is UNPRECEDENTED! Looks like a panic to me.
Note that the main stream media reports that the drawdowns are simply investors selling their ETF gold shares because they don't want to hold gold. Well think about this. Gold and Silver are kissing cousins. They are both considered monetary metals and they both have a very high correlation to each other. What gold ALWAYS does, silver does, albeit more violently, because it is a smaller market. They are opposite sides of the same coin.
Now explain to me, main stream media, why the silver ETF's have had substantial net gains in inventory since January. Silver is not being drained, only gold. If this were Joe average investor selling, he'd sell both at the same time!!! That's not happening! Someone is pulling gold out of these vehicles while silver is going in. And by the way, where is all this physical going? That would be China, to satisfy their insatiable increased demand for the hard stuff.
Ladies and Gentleman we have a run on the bank going on. Physical gold is going from West to East. The Bullion Banks are out of physical gold available to sell into the market to suppress the price, and now they are raiding the ETF's and the COMEX to get physical gold to suppress the price of gold. It's only a matter of time before our strategy of using gold as our insurance against collapse (a la Greece) will be vindicated. They can play these games for a while, but they cannot fool Mother Nature forever. The market and its price discovery mechanism will eventually win. You cannot manipulate markets and ignore the law of supply and demand forever.
Regards,
Icarus
Thanks to Eric Sprott, Turd Ferguson and Grant Williams for the basic ideas presented.
economic and geopolitical news and views - global Is this the final straw?
(is that a Golden anvil around President Obama's neck?)
We have seen much news recently and many stories when knitted together point to a picture where the Dollar will be supplanted as the world's reserve currency and where Gold will play some sort of role. Even looking at the Gold market from different angles gives you signs that something is definitely in the works.
I came across this article yesterday written by William F. Engdahl which has strangely gotten very little press considering the ramifications which are huge. Behind the scenes it appears that Saudi Arabia is backing away from the U.S.. Our "partnership" goes all the way back to 1945 and was certainly reinforced in 1973 when they agreed to trade oil ONLY for Dollars. Just after going off of the Gold standard Henry Kissinger cut a deal which created instant and massive demand for Dollars which allowed us the rope we have used to financially hang ourselves.
This "demand" for Dollars to settle for Arab oil may now be ending because of foreign policy. You see, we have made a mess out of communicating to the world where it is that we exactly stand. Al Qaeda is our enemy? They are our ally? We fight against them? We support them with subsidies and arms? Which is it? Well, it depends. It depends on which country you are talking about and what particular political subject. In the current case, Saudi Arabia is supporting the military that has taken rule in Egypt. They are doing this financially at a time that it is unclear what our policy is and they don't want what has happened in Egypt to happen to them. They have watched as leaders have been toppled like bowling pins and they are just plain scared and acting in what they perceive is their best interests.
The article ends with "to be continued". I would like to ask a few questions as to what exactly "to be continued" might look like. If a BRICS currency is formed (which I fully believe is already close to being introduced), will Saudi Arabia (followed by other Middle East countries) accept the new currency in lieu of Dollars? What if the BRICS demanded settlement in their new currency, would the Saudis refuse?
But wait, how about this one, what if the Saudis decided to accept another currency and our fearless leader got pissed at them? What if he started using language that could be considered "fightin" words"? What if the Saudis started to sell Dollar assets? Like Treasury bonds? I wrote a piece yesterday entitled "How much is too much", maybe I should have asked the question of "how much is too much" on the Fed's BALANCE SHEET
because they would be the ONLY ones buying Dollar assets if the Saudis were selling...along with the Chinese, Japanese, South Koreans...heck, maybe even the Brits would be selling to meet margin calls.
I would like to remind you of a movie that came out back in 1980 called "Rollover". This short trailer pretty much says it all http://www.youtube.com/
I will say this, when the BRICS introduce a new currency the demand for Dollars will instantly implode. Were Saudi Arabia accept this new currency to pay for oil, all hell will break lose and Dollars from all over the world will come back home to roost. The inflation that we have exported for all these years will all of a sudden come back home and hit all at once. You could very well see a doubling or more the prices of many products as the Dollar supply chases the products. Add to this economic scenario one where we are at war over oil in the Mideast and prices could simply explode to unaffordable levels that only the 1%ers could afford.
Like I said earlier, this has gotten VERY little press yet has the potential to be bigger than anything...going all the way back to 1973! A break with Saudi Arabia will be the last financial straw. Regards, Bill H.
We brought you the story this week that the ECB lessened conditions on the collateral sent to them on the LTRO swaps consisting of sovereign bonds, asset backed real estate and just about any kind of garbage. Because of the lack of good collateral, the ECB now longer require AAA stuff, but will settle for A which in reality is D-.
Expect this charade to continue until Sept 22 and then when our PIIGS nations line up at the trough for money, Germany will say enough is enough (courtesy Mark Grant/Out of the Box and Onto Wall Street) Two Months Until The German Elections And The Return Of Reality
Submitted by Mark J. Grant, author of Out of the Box,
“For what we regard as reality is conditioned by the theory to which we subscribe.”
-Stephen Hawking Europe has denigrated into a strange place where fantasy replaces reality as necessitated by their governments and the Union that governs them. It is a world where anything but direct liabilities are not counted, where securitizations worth 50 cents on the Dollar are held at par and where both data and numbers are manipulated for the preservation of the State. Dreams are born of imagination, fed upon illusions, and put to death by reality. The guillotine returns after September 22, 2013. You cannot believe anything that you are told by the Europeans. You cannot accept any of their financials, both sovereigns and banks, at face value. The actuality of the financial condition of the European Central Bank is not only shrouded in secrecy but it is shrouded in make believe. It is a Grimm fairytale. Familiarity, the first myth of reality: What you know the best, you observe the least. Devotion, the second myth of reality: The faithful are most hurt by the objects of their faith. Conviction, the third myth of reality: Only those who seek the truth can be deceived. Fellowship, the fourth myth of reality: As the tides of war shift, so do loyalties. Trust, the fifth myth of reality: Every truth holds the seed of betrayal. -Magic, The Gathering You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire. The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent. Conspiracy of dogmatic, deliberate, and willful ignorance does not either form the “raison d'être” or constitute an excuse for inaction. It is the tolerance of sheer lies, self-deception and malfeasance. It merely locks all your flaws in floors and stored behind concrete doors; a thick veil that obscures clear seeing of reality and it may cause you to stumble, fall and drift into transgression to reach the end point of decadence. After almost forty years on Wall Street let me assure you that reality always returns. Always and because it must. What is uncounted does not disappear. Losses eventually have to be paid. Deception by governments has a long time frame but it is not eternal. Lies are eventually confronted by truth. There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so. Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us. First the bough will be exposed. Next it will crack. Let’s all hope that it does not break and toss the baby into the thorns. “Reason is a choice. Wishes and whims are not facts, nor are they a means to discovering them. Reason is our only way of grasping reality; it is our basic tool of survival. We are free to evade the effort of thinking, to reject reason, but we are not free to avoid the penalty of the abyss we refuse to see.” -Terry Goodkind, Faith of the Fallen |
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