Thursday, January 2, 2014

Gold and Silver articles of note - January 2 , 2014 - highlights from GATA and Jesse's Cafe Americain !

( Paper gold at ETFs rolled over shortly after paper speculation started its  fall off a cliff in 2012 )

Gold "Speculation" Drops To Record Low

Tyler Durden's picture

While the last two days of relative excitement in the precious metals are noteworthy in their bucking-the-trend of recent months, there is perhaps a much more critical 'trend' that may finally allow the demand for physical gold to peer through the veneer of synthetic paper pricing. As JPMorgan notes, speculative positions (defined CFTC net longs minus shorts) have dropped to record lows in the last few weeks. With ETF gold holdings back below 'Lehman' levels and gold coin sales elevated, perhaps the Indian government's (and most of the Western world's Feds) hope for the death of the precious metals market is greatly exaggerated...

Gold Spec positions at record lows...

"Paper" Gold ETF Holdings at pre-Lehman crisis levels...

As "physical" Gold coin sales are on the rise again...

Charts: JPMorgan


Did the Bundesbank get even a little of its original gold back?

3:49p ET Saturday, January 4, 2014
Dear Friend of GATA and Gold:
Correspondence between the German financial journalist Lars Schall and Germany's Bundesbank suggests that the small amount of gold the Bundesbank claims recently to have repatriated from the Federal Reserve Bank of New York was not returned in the form in which it was deposited many years ago -- that, indeed, the original German gold was not and is not available to be returned because something undisclosed was done with it.
Schall's correspondence with the Bundesbank is appended along with a statement by Peter Boehringer of the German Precious Metal Society and a leader of the movement in Germany seeking repatriation of the country's gold supposedly vaulted abroad, who raises questions the Bundesbank has yet to answer.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
December 26, 2013
Dear Ladies and Gentlemen:
I am an independent financial journalist.
In connection with the transfer of 37 tons of Bundesbank gold from New York to Germany, I came across the news that the bars were a melted before the transfer. May I kindly ask you for the following information:
Why were the bars melted at all? And why couldn't that wait until the bars arrived in Frankfurt?
Kind regards,
Lars Schall
* * *
January 3, 2014
Dear Mr Schall:
Thank you for your enquiry.
At a press conference on the topic of Germany's gold reserves on 16 January 2013, Executive Board member Carl-Ludwig Thiele presented the Deutsche Bundesbank's new storage concept. In addition to the relocation of gold bars, this concept includes, amongst other things, measures to ensure that the specifications of the London Good Delivery (LGD) standard are met. You can find these specifications on Page 17 of the following presentation:

Storage plan (new)
..................... 2012 ........... 2020
Frankfurt ....... 31% ............ 50%
New York ....... 45% ............ 37%
London .......... 13% ............ 13%
Paris .............. 11% .............. 0%
Planned relocations:
-- Phased relocation of 300 tonnes of gold from New York to Frankfurt.
-- Phased relocation of 374 tonnes of gold from Paris to Frankfurt.
-- Achieve LGD standard, where this is not already the case.
You can find the specifications for the London Good Delivery (LGD) standard at the following address:
In cases where these specifications were not already met, the Bundesbank had these original gold bars melted down and recast in order to meet this standard. This was achieved without any difficulties.
Please understand that in order to ensure the security of the gold transports and our employees, the Bundesbank is unable to provide you with any further information.
Yours sincerely,
Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Tel.: +49 69 9566x3511 or 3512
* * *
Statement by Peter Boehringer, president of German Precious Metal Society and co-initiator of the Repatriate our Gold campaign --
-- on the Bundesbank's response.
Why does the Bundesbank continue to avoid transparency regarding Germany's gold holdings?
Why not just come up with easy-to-deliver facts instead of repeated rhetoric about an alleged remelting of gold bars in the United States that even people with some knowledge of the gold industry and some common sense fail to understand?
There is no reason why the original gold bars acquired in the 1950s and 1960s (if they ever existed at all, which has never been proven, as by publication of bar lists or photos) had to be melted down and recast into LGD-compliant bars in New York as opposed to Frankfurt. Nor is there reason why all this had to be done in obscurity without any published report of the recasting.

The public is still waiting for answers to crucial questions like these:
-- What kind of gold bars were melted? Original material from the 1950s and '60s?
-- How can the Bundesbank hint in its press release that some of the old bars already met the LGD specifications when those specifications were not defined and made a standard for central bank bars until 1979?
-- Why has the Bundesbank not published a bar number list of the old bars? How can there be security concerns about bars that no longer exist? Why has the Bundesbank not published a bar number list of the newly cast bars?
-- Who exactly melted the bars? Where exactly was this melting performed? Is there a smelter at the Federal Reserve Bank of New York?
-- Who witnessed the melting and recasting of the bars?
-- Are there any reports on this in writing with a valid signature? By whom?
-- And especially: Why was it deemed necessary to perform this action in the United States as opposed to Frankfurt or nearby Hanau, where there are some of the best facilities in the world for metal probing, melting, and recasting? Had these actions been performed in Germany in a fully transparent manner, it would have been so easy for the Bundesbank to dismiss all questions from "paranoid gold conspiracy theorists."
The Bundesbank is just the custodian of Germany's national gold, which is worth more than $125 billion. The Bundesbank owes the public full transparency in all these gold matters. That is, physical audits, independently verified storage reports, and a publication of the full bar lists of all its gold in all national or international vaults.
Despite having now had the excellent opportunity of this partial repatriation, the Bundesbank has again failed to produce any proof or indication that at least 37 tonnes (out of 1,500 tonnes of German gold at the New York Fed) still existed through 2013 in their original 1950s-'60s bar form. Instead, Germany is now owner of almost 3,000 LGD-compliant standard bars, which proves nothing and dismisses no allegations of decade-long manipulation of the gold price.
It is still possible and even probable that the old German bars were lent into the market long ago or that they have multiple owners or are backing multiple gold exchange-traded fund derivatives. Of course the same holds for our remaining 120,000 bars at the New York Fed.
The "repatriation" of a mere 1.5 percent of Germany's foreign gold holdings and the supposed melting and recasting of the original gold bars do not prove the continued existence of Germany's remaining gold holdings supposedly vaulted at the New York Fed.
The Bundesbank has missed a great opportunity to bring transparency to Germany's gold reserves. What a pity. And at its current speed the Bundesbank will require 60 years to accomplish the repatriation mission forced upon it by an impatient public. What a shame.
The initiators of the Repatriate Our Gold campaign --
-- are considering legal action based on freedom-of-information law against the Bundesbank and possibly also against its auditors, who have certified the Bundesbank's balance sheet without having adequately considered the risks associated with a non-transparent gold hoard, which is the only asset of substance on the Bundesbank's books. (Ninety percent of those assets are mere paper claims, many of dubious quality, like "Target 2" claims.)
Our objective remains to achieve the publication of all gold bar lists and full transparency involving Germany's gold. The German people are entitled to have all information about their golden property.
And the American people have a right to know as well. After all, it is the U.S. Federal Reserve System and the U.S. Treasury Department that have been obscuring their gold holdings and foreign gold holdings since the last proper audit in 1953.

Unprecedented Total Chinese Gold Demand 2013

Friday the numbers were released on total Chinese gold demand for 2013. Total demand can be measured by the amount of physical gold that is withdrawn from the vaults of the Shanghai Gold Exchange. In the last full trading week (#52, December 23 – 27) of 2013 there were 53 tons of physical gold withdrawn, which brings the yearly total to 2181 tons. Since November demand for physical gold has surged, weekly withdrawals have been above average, presumably transcending weekly global mine production. Not only did we observe strong demand at the SGE, it was also perceived in an incredible shopping spree at jewelry shops around new year. From Want China Times:
….Many Chinese gold buyers have been happy to see the price drop as this is traditionally peak season for gold purchases before the Lunar New Year holiday and the recent slump will allow them to buy gold at relatively low prices.

“It is a good deal. It can be seen as an investment when gold prices go up in the future,” a customer said. 

The sales had surged by at least 20% in December 2013 from a month earlier and were up by 15%, compared with the same period in 2012.

Of the sold items, products related to the upcoming Year of Horse were the most sought after in stores.

Beijing gold rush, Chinese gold demand 2013
January 1, 2014 Beijing

Beijing gold rush 3, Chinese gold demand 2013
January 1, 2014 Ningbo, Zhejiang

Beijing gold rush january 2014, Chinese gold demand 2013
January 1, 2014 Beijing

The Real Asset Co. Buy Gold Online

Throughout week 52 GOFO has remained negative in London, GLD lost 4.5 tons and on the Shanghai Gold Exchange premiums increased to 2 %.

GOFO july december 2013

Overview Shanghai Gold Exchange data week 52

- 53 metric tonnes withdrawn from the SGE vaults in week 52 (23-12-2013/27-12-2013)
- w/w  - 3.95 %
- 2181 metric tonnes withdrawn in 2013
- weekly average 41.94 tonnes in 2013


For more information on SGE withdrawals read thisthisthis and this.

SGE weekly gold withdrawals week 52 2013, Chinese gold demand 2013

This is a screen dump from Chinese SGE trade report; the second number from the left (本周交割量) is weekly gold withdrawn from the vault, the second number from the right (累计交割量) is the total YTD.

Shanghai Gold Exchange gold withdrawals week 52 2013, Chinese gold demand 2013

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

SGE premiums week 52

Below is a screen dump of the premium section of the SGE weekly report; the first column is the date, the third is the international gold price in yuan, the fourth is the SGE price in yuan, and the last is the difference.

Shanghai Gold Exchange gold premiums week 52 2013

Overview Chinese Gold Demand 2013

2013 has been a spectacular year wherein the pice of gold fell 29 %, but Chinese gold demand has been unprecedented and may have reached, PBOC purchases included, over 2500 tons. Exposing a disparity between the gold price set by derivatives and supply and demand for the underlying good. The divergence strongly hints at price manipulation, of which the Chinese would have been the largest beneficiaries. China has $3.5 trillion in foreign exchange (of which at least 1.7 trillion denominated in USD) and is aware the US is forced to devalue their currency; evaporating China’s reserves. For this reason China has a strong incentive to diversify away from the USD into gold. Hence the enormous physical gold purchases in 2013.

SGE yearly vs COMEX 2006 2013

In January 2013 USGS forecasted global mining production would be 2700 tons for the year, but due to the drop in the gold price this may turn out significantly lower as mines were forced to shut down.

A lot of the gold sold on the SGE was sourced via Hong Kong and Switzerland from the UK. The trade numbers from these countries from the last months haven’t been published yet, though in the first ten months of 2013 the UK has net exported 1199 tons (annualized 1439 tons) to Switzerland, Switzerland has net exported 779 tons (annualized 935 tons) to Hong Kong, and Hong Kong has net exported 957 tons (annualized 1148 tons) to the mainland. Hong Kong itself net imported 510 tons of gold over this period, annualized 612 tons. The UK’s primary seller was the world’s largest ETF holding GLD, whose inventory dropped by 551,7 tons.

GLD 12 2013, Chinese gold demand 2013

UK Gold Trade 2008-2013 10-13

Switzerland Gold Trade 2013-Q3

HK Swiss gold trade 10-2013, Chinese gold demand 2013

Hong Kong - China gold trade 10-2013, Chinese gold demand 2013

HK + China net inflow 10-2013, Chinese gold demand 2013

2014 will be an exciting year; Chinese gold demand is not likely to slow down but supply is running dry. By the way, the rest of the world will also demand gold as all developed economies in recent years have been kept alive by the printing press, whereby the price mechanism is completely destroyed, a path of no return nor good outcome. Stretching the end of the global fiat experiment.

The Real Asset Co. Buy Gold Online

Gold’s direction will turn in 2014 resuming its bull-market (drive a new monetary order). It will be fascinating to see how this will play out as the floating supply is virtually gone.

In Gold We Trust

Von Greyerz: Gold has moved out of central bank vaults to private vaults

1:50p ET Friday, January 3, 2014
Dear Friend of GATA and Gold:
Western central banks don't permit audits of their gold reserves because the gold is no longer around, Swiss gold fund manager Egon von Greyerz tells King World News today. The metal, he says, has left their vaults and moved into private vaults largely in Asia. An excerpt from his interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

IMF paper warns of savings tax and debt repudiation

4:05p ET Thursday, January 2, 2014
Dear Friend of GATA and Gold:
The International Monetary Fund study cited below by The Telegraph's Ambrose Evans-Pritchard, warning of defaults, a tax on savings, and higher inflation to repudiate excessive debt, is posted at the IMF's Internet site here:
Evans-Pritchard's report on the study cites "financial repression." He writes: "Financial repression can take many forms, including capital controls, interest rate caps, or the force-feeding of government debt to captive pension funds and insurance companies. Some of these methods are already in use but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts."
But despite many attempts, your secretary/treasurer has been unable to persuade Evans-Pritchard that a primary mechanism of "financial repression" is suppression of the price of gold and that such "financial repression" long has been Western central bank policy, as amply and perhaps now even tediously documented by GATA here:
We'll just have to keep working on it.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
IMF Paper Warns of 'Savings Tax' and Mass Write-Offs as West's Debt Hits 200-Year High
By Ambrose Evans-Pritchard
The Telegraph, London
Thursday, January 2, 2014
Much of the Western world will require defaults, a savings tax, and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.
The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its "toolkit" for emerging market blow-ups.
"The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point," said the paper, by Harvard professors Carmen Reinhart and Kenneth Rogoff.
The paper said policy elites in the West are still clinging to the illusion that rich countries are different from poorer regions and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering ("forbearance").

The presumption is that advanced economies "do not resort to such gimmicks" as debt restructuring and repression, which would "give up hard-earned credibility" and throw the economy into a "vicious circle."
But the paper says this mantra borders on "collective amnesia" of European and US history, and is built on "overly optimistic" assumptions that risk doing far more damage to credibility in the end. It is causing the crisis to drag on, blocking a lasting solution. "This denial has led to policies that in some cases risk exacerbating the final costs," it said.
While use of debt pooling in the eurozone can reduce the need for restructuring or defaults, it comes at the cost of higher burdens for northern taxpayers. This could drag the EMU core states into a recession and aggravate their own debt and aging crises. The clear implication of the IMF paper is that Germany and the creditor core would do better to bite the bullet on big write-offs immediately rather than buying time with creeping debt mutualisation.
The paper says the Western debt burden is now so big that rich states will need same tonic of debt haircuts, higher inflation, and financial repression -- defined as an "opaque tax on savers" -- as used in countless IMF rescues for emerging markets.
"The magnitude of the overall debt problem facing advanced economies today is difficult to overstate. The current central government debt in advanced economies is approaching a two-century high-water mark," they said.
Most advanced states wrote off debt in the 1930s, though in different ways. First World War loans to the US were forgiven when the Hoover Moratorium expired in 1934, giving debt relief worth 24 percent of GDP to France, 22 percent to Britain, and 19 percent to Italy.
This occurred as part of a bigger shake-up following the collapse of the war reparations regime on Germany under the Versailles Treaty. The US itself imposed haircuts on its own creditors worth 16 percent of GDP in April 1933 when it abandoned the gold standard.
Financial repression can take many forms, including capital controls, interest rate caps, or the force-feeding of government debt to captive pension funds and insurance companies. Some of these methods are already in use but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.
The policy is essentially a confiscation of savings, partly achieved by pushing up inflation while rigging the system to stop markets from taking evasive action. The UK and the US ran negative real interest rates of -2 percent to -4 percent for several years after the Second World War. Real rates in Italy and Australia were -5 percent.
Both authors of the paper have worked for the IMF, Prof Rogoff as chief economist. They became famous for their best-selling work on sovereign debt crises over the ages, "This Time is Different: Eight Centuries of Financial Folly."
They were later embroiled in controversy over a paper suggesting that growth slows sharply once public debt exceeds 90 percent of GDP. Critics say it is unclear whether the higher debt is the problem or whether the causality is the other way around, with slow growth causing the debt ratio to rise to faster.
The issue became highly politicised when German finance minister Wolfgang Schauble and EU economics commissioner Olli Rehn began citing the paper to justify eurozone austerity policies, over-stepping its more careful claims.
Critics says extreme austerity without offsetting monetary stimulus is the chief reason why debts have been spiralling upward even faster in parts of southern Europe.
The weaker eurozone states are particularly vulnerable to default because they no longer have their own sovereign currencies, putting them in the same position as emerging countries that borrowed in dollars in the 1980s and 1990s. Even so, nations have defaulted through history even when they do borrow in their own currency.

* * *

China gold chief confirms gold price suppression by U.S.

10:14a ET Thursday, January 2, 2014
Dear Friend of GATA and Gold:
Gold price suppression is U.S. government policy to maintain the dominance of the U.S. dollar in the ongoing international currency war, the president of China's gold mining association, Sun Zhaoxue, told a financial conference in Shanghai last June.
Sun's remarks were disclosed today by gold researcher and GATA consultant Koos Jansen, who obtained them from a rough transcription provided by the SINA Financial news service.
Jansen prefaces Sun's remarks with some incisive observations of his own about whether there is manipulation of the gold market and, if so, who is responsible for it. Jansen describes himself as a believer in "conspiracy facts," since, he writes, when money and power are at stake, people conspire.
While gold price suppression can hardly be addressed by mainstream financial news organizations in the West, for years it has been a fairly common topic in the government-controlled news media in China, and Chinese news reports about gold price suppression by the United States have even been cabled back to the U.S. State Department in Washington by the U.S. embassy in Beijing:
That would make the West's mainstream financial news media seem even more government-controlled than China's.
Jansen's commentary and account of Sun's speech are posted at Jansen's Internet site, In Gold We Trust, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Lawrence Williams: Banks forcing miners to hedge to help cover banks' gold shorts?

6:25p ET Tuesday, December 31, 2013
Dear Friend of GATA and Gold:
MineWeb's Lawrence Williams writes today that bullion banks may be pressuring gold mining companies to hedge production to help rescue the bullion banks from short positions, but selling gold directly to Chinese companies at a premium may be a better deal. Williams' commentary is headlined "Bullion Banks Forcing Hedging to Replenish Their Gold Stocks?" and it's posted at MineWeb here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Von Greyerz warns of collapse of gold futures market

4:23p ET Tuesday, December 31, 2013
Dear Friend of GATA and Gold:
Interviewed today by the German financial journalist Lars Schall, Egon von Greyerz of Matterhorn Asset Management in Switzerland describes the increasingly precarious nature of the gold futures market, predicts that it will collapse because of the unavailability of metal to cover the claims made against it, implores gold investors to keep their metal outside the banking system, and cites manipulation of the gold market. The interview is 24 minutes long and can be viewed at Matterhorn's Internet site, GoldSwitzerland, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Jesse's Cafe Americain......

02 JANUARY 2014

NAV Premiums of Certain Precious Metal Trusts and Funds - Breaking Bad

There is a blizzard moving into the northeastern US this evening.

It may affect tomorrow's trade in equities.

I had put a decent short position on in the closing minutes of 31 December.  I have taken most of that off the table here and now.

I am long gold and silver bullion.

To my mind, prices were pushed to some short term extremes for the year end tape painting.

I tend to agree with much of Ted Butler's recent analysis titled 2013: The Year of JP Morgan.   If it becomes publicly available I will link to it.  For now it is by subscription only.

Ted thinks that JP Morgan is the major mover in the Comex gold market, executing market corners first to the short and then to the long side over the course of 2013.

They most likely have some privileged knowledge of the market structure and official policy, and perhaps even semi-official support in this, if nothing else than by indirect acquiescence, or turning a blind eye if you will.

Below is a recent video about gold buying in India.  China, southeast Asia, and the Mideast offer similar stories, except that the governments there are not trying to restrict purchasing to please the Western bankers.

Hubris Is the Basis of Tragedy

To the extent that any very serious people take note of this, it is to ignore it, and then deride it. History shows that those who represent fading and unsustainable regimes tend to ignore what is happening, then turn stridently against any opposition to their will by both words and actions. And finally, they lose.

There are some very good reasons why China and India and quite a few of the new emerging economies are seeking safe havens from the dollar. It is not because 'they hate our freedom.' It is not because 'they are ignorant of modern economics.' It is not because 'they are a bunch of gold bugs.'

It is because the Western financial system is a shell game of frauds, and remains largely unreformed, run by and for insiders. Recognition of a fraud first arises at the periphery.

And the dollar has become a major vehicle for exporting these frauds to the rest of the world through the mispricing of risk and the brazen manipulation of price discovery, in many financially related markets. How can anyone continue to ignore and even deny this pervasive and ongoing corruption in the markets?

If you do not understand this, you will probably be able to understand little of what is going on now, and will understand little of what may likely happen over the next few years. I would expect there to be quite a bit of disinformation put forward about it.

To paraphrase Upton Sinclair, sometimes it is difficult to get a man to understand what his career path and his wallet encourages him not to see.

Sometimes, but thank God not always, when flawed characters face a crisis they start breaking bad.  And overcome thereafter by greed, pride, and the will to power, they do not know when  to stop.

And so they hurl themselves over into the abyss, and take a number of good people with them.

"Who are you talking to right now? Who is it you think you see? Do you know how much I make a year? I mean, even if I told you, you wouldn’t believe it.

Do you know what would happen if I suddenly decided to stop going into work? A business big enough that it could be listed on the NASDAQ goes belly up. Disappears! It ceases to exist without me...

You clearly don’t know who you’re talking to, so let me clue you in. I am not in danger. I am the danger. A guy opens his door and gets shot, and you think that of me? No! I am the one who knocks."

Walter White, Breaking Bad

02 JANUARY 2014

Gold Daily and Silver Weekly Commentary - Year End Paint Is Dry, Metals Rebound

"You get tragedy where the tree, instead of bending, breaks."

Ludwig Wittgenstein

There was intraday commentary on the metals here.

I have included the CME metals depository data below. There were no additional deliveries noted on the 31st. There could be a little more action ahead, but January is a 'non-active month.'

The bifurcation of the precious metals market between paper and physical bullion is widening into a yawning gap. I do not know what will end this, but I suspect that it will end unexpectedly and quickly, and is likely to be noticeable.

Happy New Year. Welcome back.