Gold and Silver news and views January 18 , 2014 - Ed Steer's Saturday missive , Koos Jansen missives - focusing on China , Andy Hoffman declaring COMEX is in technical default on the December Contract for Gold !

http://www.caseyresearch.com/gsd/edition/eric-sprott-one-more-sign-of-manipulation-in-the-gold-market

¤ YESTERDAY IN GOLD & SILVER

The gold price drifted aimlessly in Far East trading on their Friday---and that continued into morning trading in London.  But once the noon silver fix was in, which was also the low of the day, away the price went to the upside.  The rally got capped shortly after 11:30 a.m. EST in New York---and that was it for the day.

The CME Group recorded the low and high ticks at $1,237.30 and $1,254.60 in the February contract.

Gold closed on Friday in New York at $1,254.10 spot---up $11.40 from Thursday.  Net volume was light at only 100,000 contracts or so.

It was more or less the same for silver, with the low and high ticks coming at the same time as gold's. Once the high was in around 11:35 a.m. EST, the price got sold down a bit before trading sideways into the 5:15 p.m. electronic close in New York.

The low and high ticks were reported as $19.96 and $20.425 in the March contract.  Volume, net of January and February, was 31,500 contracts.

The platinum price didn't do much in Far East trading, but began to rally shortly before 9:30 a.m. GMT in London.  That rally got capped at precisely 12 o'clock noon in New York---and it wasn't allowed to move higher from that point onwards.

Palladium chopped sideways as well all through Far East and early London trading.  But, like gold and silver, once the noon silver fix was in in London, palladium began to rally, only to run into a not-for-profit seller around noon in New York.

The dollar index closed in New York late on Thursday evening at 80.92---and then traded sideways until 11 a.m. GMT in London.  The subsequent rally ran out of gas at, or shortly after 1 p.m. in New York.  From there it declined a handful of basis points into the close.  The index finished the Friday session at 81.22---up 30 basis points on the day.

***

The CME's Daily Delivery Report showed that zero gold, but a surprising 242 silver contracts were posted for delivery on Tuesday within the Comex-approved depositories.  Jefferies was the short/issuer on all but 2 of those contracts.  It should come as no surprise that JPMorgan stopped 107 of those contracts in its in-house [proprietary] trading account---and a further 15 in its client account.  Canada's Bank of Nova Scotia was in second place stopping 60 contracts---and ABN Amro and Jefferies were tied for third place.  The link to yesterday's Issuers and Stoppers Report is here---and its worth a quick look. 

There were big deposits in both GLD and SLV yesterday.  GLD took in a chunky 241,059 troy ounces---and SLV had an authorized participant add a whopping 4,330,440 troy ounces.

The U.S. Mint had a small sales report yesterday.  They sold 4,500 troy ounces of gold eagles---1,500 one-ounce 24K gold buffaloes---but only 64,000 silver eagles.  Month-to-date the mint has sold 83,500 troy ounces of gold eagles---39,500 one-ounce 24K gold buffaloes---and 3,464,000 silver eagles.  Based on these figures, the silver/gold sales ratio so far this month works out to 28 to 1.

Over at the Comex-approved depositories there was no in/out activity in gold on Thursday.  But it was different story in silver, of course, as 956,071 troy ounces were received [all into Scotia Mocatta] and 187,381 troy ounces were reported shipped out.  The link to that action is here.

The in/out activity in silver this week, both in SLV and the Comex-approved depositories, is literally off the charts---and I would bet serious money that all this silver has built up a lot of "frequent flier" points.

Well, the numbers in this week's Commitment of Traders Report for positions held at the close of Comex trading on Tuesday, January 14th were certainly not what either Ted Butler or myself were expecting.  We were expecting the worst, but got nothing remotely resembling that.

In silver, the Commercial net short position actually decreased by 720 contracts---and now stands at 124.0 million troy ounces. In gold, the Commercial net short position increased by 3,371 contracts---and is now up to 4.53 million ounces.  I spoke to Ted briefly yesterday, but didn't have time to get into all the details.  He figures that JPMorgan's short-side corner in silver in the Comex futures market didn't change by much---but is down about 1,000 contract from the prior week, to about 16,000 contracts now.  In gold, he figures JPMorgan increased their long-side corner by about 2,500 contracts to the 59-60,000 contract mark.

****

Selected news touching on gold and silver.....

German Gold Manipulation Blowback Escalates: Deutsche Bank Exits Gold Price Fixing

Germany's blowback against gold manipulation is accelerating. Following yesterday's report that Bafin took a hard line against precious metals manipulation, after its president Eike Koenig said possible manipulation of precious metals "is worse than the Libor-rigging scandal", today the response has trickled down to Germany and Europe's largest bank, Deutsche Bank, which announced that it would withdraw from the appropriately named gold and silver price "fixing", as European regulators investigate suspected manipulation of precious metals prices by banks.

As a reminder, Deutsche is one of five banks involved in the twice-daily gold fix for global price setting and said it was quitting the process after withdrawing from the bulk of its commodities business.

Well, that's a good excuse for bowing out, but one has to wonder whether it was a voluntary move, or whether they forced out of it by the German government, as it's my belief that Deutschebank is still trading precious metals.  I found this story on the Sharps Pixley website at 6:30 a.m. EST, an hour after I'd filed yesterday's column.  This Zero Hedge piece is courtesy of reader M.A.

Interview with Eric Sprott

This 6-page interview in a pdf file, was posted on the miningmarketwatch.net Internet site on Friday...and I thank Blaine, Washington reader Marcus Konstantin for sending it my way.  I haven't had the time to read it, so I can't comment on it.

Sprott Money Weekly Wrap-Up: Eric Sprott on Bafin’s Findings on Metals Manipulation

This 9:45 minute audio interview with Eric is definitely worth listening to---and it was posted on thesprottmoney.com Internet site yesterday.

Miners Chopping $10 Billion Search Bodes Next Price Boom

Mining companies are extending massive cuts in exploration budgets for a second year, setting up the next price boom as China continues its relentless pursuit of metals and energy.

Exploration spending plunged by 30 percent or $10 billion last year, squeezing budgets to search for minerals and sustain supplies, according to MinEx Consulting Pty, whose clients include BHP Billiton Ltd. (BHP), the world’s biggest miner. Payments may drop another 10 percent this year for geologists, drilling exploratory holes and analyzing mineral specks to unearth the next copper, iron ore or gold El Dorado, MinEx said.

Investors in mining companies and metals may welcome the cuts because they’ll help propel a rebound in prices. Platinum, aluminum, silver, nickel, zinc, lead and uranium all are forecast to rise by 2017, according to the median of analyst estimates compiled Jan. 16 by Bloomberg.

The losers will be buyers of cans, cars and all the goods made from metals. “Companies are doing the right thing by cutting back on exploration,” said Daniel Sacks, who helps manage $107 billion at Investec Asset Management in Cape Town. “It’s a cyclical industry.”

This Bloomberg news item, co-filed from Perth and Sydney, was posted on their Internet site very early yesterday morning---and my thanks go out to reader Ken Hurt for sending it along.

Citi goes bullish on miners for the first time in three years

“We would rather be too early than too late in making this call.”

And with that, analysts at Citi moved their 12-month view on the mining sector to bullish for the first time in three years. 

Sure, they’re concerned about the potential for long-term structural demand for commodities in China, and yes they’re aware there could be a seasonal slowdown in the first quarter of this year (as they pointed out in December), but analysts are seeing better bottom-up fundamentals, notably from big diversified miners. 

“Investor sentiment has hit rock bottom. The mining sector has moved through five stages of grief, namely Denial, Anger, Bargaining, Depression, and now we think we are in Acceptance that the sector has moved into a new norm,” said lead analyst Heath Jansen, in a note out Thursday.

This marketwatch.com article was posted on their website on Thursday morning EST---and it's the second offering in a row from reader Ken Hurt.

India’s Dec gold jewellery exports fall 30% y/y

Exports of gold jewellery from India in December dropped 30.4 percent from a year ago to $443.19 million, an industry body said on Friday.

Gold jewellery exports from April to December fell 51.5 percent to $4.92 billion, the Gems and Jewellery Export Promotion Council (GJEPC) said in a statement.

India, which is fighting hard to reduce its current account deficit, has brought in measures to restrict imports of gold -- its second-biggest import item after oil -- which has affected the jewellery sector.

The measures included a rule that said 20 percent of all the gold shipped in must be turned around and exported as jewellery.

The above four paragraphs is all there is to this Reuters story [filed from Mumbai] that found a home over at the mineweb.comInternet site yesterday---and my thanks go out to Ulrike Marx for digging it up for us.

¤ THE WRAP

JPMorgan is as slick (and crooked) as they come---and it’s real clever how the bank has decided which physical commodities businesses it will keep, whatever the Fed decides. The problem is that the bank manipulates gold and silver to a much greater extent than even the markets they have been formally accused of manipulating, like electricity. And, certainly, given how long JPMorgan has manipulated the price of silver and gold and how much more serious it is to manipulate the price of a world commodity, instead of merely ripping off thousands of utility customers in California and Michigan, the Fed would, hopefully, see it differently than JPMorgan. - Silver analyst Ted Butler: 15 January 2014 

I was happy to see an 'up' price day yesterday---as I always expect the worst on a Friday.  But I could tell from the price action that none of the four precious metals was allowed to run away to the upside during the New York session, which is a phenomenon I commented on in this space yesterday.

We're firmly back above the 50-day moving averages in both gold and silver once again---and it remains to be seen if JPMorgan et al will show up to cap the ensuing short covering rallies.  They certainly did yesterday---and I'll be interested to see how the precious metals react, or are allowed to react, when trading begins in New York at 6 p.m. on Sunday evening.

I'm also very much interested in how this story about Germany's gold will continue to unfold in the main stream press as time goes along.  As I've said a few times in the past, I'm sure that Germany has figured out by now that their gold is long gone from the New York Fed---and if it isn't, then its been hypothecated out of existence over the years.  I'm also wondering how the Anglo/American spying operations against Germany [and the rest of Europe, for that matter] are playing a role in all of this.  The latest happenings with Deutschebank removing itself from the London gold fix is certainly another brick in the wall---and as I mentioned further up, it's interesting to speculate whether they withdrew on their own, or whether they got shoved by the German government.  Time will tell.

Although I---along with lots of others---can't shake the feeling that behind the scenes at the BIS, there are some really ugly situations developing as the chickens come home to roost on this Western price management scheme.

I think that the Chinese [along with perhaps the Russians] are finally putting the screws to the physical market---and will continue to do so until the central banks in the West finally scream "Uncle".  We'll know that day has finally arrived when the world is looking at new precious metal prices that are significant orders of magnitude higher than they are now.

I also doubt that it will happen slowly.  But as I and others have mentioned many times over the years, we'll see the gold price adjusted upwards on a weekend before Tokyo opens---and from that point onwards there will be a New World Order, but not the kind that the powers-that-be had planned for themselves.

So, we wait.

See you on Tuesday.

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And some additional items of note.... Two recent articles from Koos Jansen

http://www.ingoldwetrust.ch/zhang-bingnan-gold-safeguarding-national-economy

Zhang Bingnan: Gold Safeguarding National Economy

The next translation I present is from a speech by Zhang Bingnan, financial expert for CCTV and vice president of the China Gold Association, an institution that acts as a bridge between the Chinese government and gold producers in protecting business interests and providing information, consultancy, co-ordination and intermediary services for them. Zhang has 20 years of research and management experience in economic sectors in China’s gold industry. One of his studies was “A Study on Optimal Scale of China Gold Reserves“ in which he proposes the Chinese official gold reserves to be 5787 – 6750 tons by 2020.

Because his study was done in 2012 the estimates are too low in my opinion, as Chinese demand for physical gold exploded in 2013 and may continue this strong pace in the future.

The gold withdrawn from the SGE vaults is equal to Chinese gold demand (which I have exposed here), excluding PBOC purchases.

Zhang has done many studies, inter alia a five part analysis on gold’s role in the modern economy, and came to the conclusion that gold is an essential part of the current monetary system. At the same time he states China needs to further study gold’s role in a future monetary system.

Zhang held his speech just before the one held by Tan Ya Ling, that I published last week, hence the reference Tan made to Zhang’s theory on gold for the future economy.

Translated by Peiying Peng:

Zhang Bingnan: Gold Is Safeguarding National Economic And Financial Security

May 7, 2013, Beijing – sponsored by the Capital University of Economics and Business, co-hosted by the Chinese Gold Market Research Center, Jing Yi Gold Co and CPM Group the Chinese gold market trends seminar 2013 was held.

Hexun network’s exclusive Gold Report broadcasts, Secretary-General of the China Gold Association, Zhang Bingnan delivered a speech at the conference. He stated that the scientific development of the gold market needs a supporting theory, the sustainable development of the gold industry needs a supporting theory, and the ordinary Chinese citizens, who are incorporating gold into their portfolio to avoid risks, need a supporting theory.

He also said that recently gold has gained worldwide attention; the media have also reported on the Chinese gold rush by the Chinese aunties. In fact, the rush to grab gold is not just limited to the Chinese aunties, this gold buying binge is spread throughout the whole world, from Shanghai, Beijing to Hong Kong, Mumbai and New York.  It should be said that this craze for gold buying is global. Therefore, it is not just China that is buying gold in bulk, but also the rest of the world.

So why this global rush to buy gold in large quantities during the gold price fall this time? In 2008, after the Gold price pushed through $1,030, it also fell twice for 10%, and then further fell 30% in the following 6 months. Why did we not see any gold buying rush then? In fact, once we see the Chinese aunties rushing to buy gold, we need to really thinking deeply about the underlying reason from this phenomenon. Why the falling price in 2008 did not lead to a global demand for buying gold?  And why is it happening this time around? I think it’s because after this round of global financial crisis, more and more people around the world have a clearer understanding that gold is safeguarding national economic security and financial security. Its importance of protecting ordinary people’s portfolio is increasing. 

In 2008, people might still be in the craze of seeing the stock market rising from 6,000 points to 10,000 points, people might still indulge in buying a house and see its value double in a few years. During that time, Freddie Mac, Fannie Mae stocks were still at more than 160 US dollars per share. Nobody had a clear view as what we have today regarding asset protection and scientific configuration of their portfolio.  It is this round of global financial crisis that has made us increasingly recognizing the irreplaceable importance of gold in safeguarding national economic security, and safeguarding ordinary people’s assets.

Why did the governments around world have changed their policies, after 20 consecutive years of net selling of gold, to net buying since 2010? Last year the governments around the world had net purchases of 534 tons of gold, accounting for 18.8% of total gold production worldwide that year. Why are governments around the world in recent years started to buy gold in different options? Why after this fluctuation of the gold price, people around the world are buying gold in different options? Compare to 2008, I think we have a clearer understanding of the global gold rush. The reason behind all this is that gold has become increasingly important and popular after this round of financial crisis. This reason has little direct correlation with short-term price fluctuations.

He also told Hexun network’s exclusive Gold Report, the future of gold depends on the role of gold in the financial system. The further we understand this, the further gold can go. Therefore we still have not fully understood the nature of the gold, the true pattern of the gold market. This is the case for our own theorists, our gold market, and our financial sector. So symposiums such as this one will further discuss and research on this topic.

Through this round of global financial crisis, we are increasingly aware of the importance of gold. It may be more and more important to include gold into the top-tier design, including top-tier design of the national financial security, and also ordinary citizens’ asset protection.  From this perspective, we still have a long way to go.

In the second weekly report, that covers the five trading days from 6-1-2014 to 10-1-2014, today released by the Shanghai Gold Exchange we can read a spectacular amount of physical gold has been withdrawn from the vaults; 79 tons. Last week I wrote withdrawals were down, but could well pick up this month as China will celebrate Chinese new year on January 31, 2014 according to the Chinese Lunar calendar. And withdrawals did pick up..

This type of demand puts the physical gold market under severe stress, hence the scramble for gold in London a few days ago. “There is a shortage of big bars, especially good-delivery 400-ounce bars”, said Bernard Dahdah from Natixis “One part of the problem is that large quantities of these bars that have come from ETFs, have now been moved to be re-refined into three-nines bars of smaller sizes and are therefore no longer available to the London market.”  The 1 month Gold Forward Offered Rate has been negative throughout the entire week Chinese demand was this strong. Until January 31 demand for physical could remain elevated, after which it will likely return to its average strong levels.

Next to insatiable physical gold demand from China, these are interesting times in the gold market as the German Federal Financial Supervisory Authority, Bafin, made allegations at banks saying ”possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal“, on January 17. The Financial Times reported in December, citing sources, that Bafin demanded documents from Deutsche Bank as part of a probe into suspected manipulation by banks of benchmark gold and silver prices. Maybe it’s not a coincidence that Deutsche Bank, one of five banks involved in setting these benchmark gold and silver prices, stated today that they will stop participating.

Overview Shanghai Gold Exchange data 2014 week 2

- 79 metric tonnes withdrawn in week 2, 6-01-2013/10-01-2013
- w/w  + 120.9 %, y/y + 49 %
- 99 metric tonnes withdrawn year to date

Source: SGE, USGS

My research indicates that SGE withdrawals equal total Chinese gold demand. For more information read this, this, this and this.

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.

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

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.

Andy Hoffman....

Harvey Organ on COMEX December Contract situation....


http://harveyorgan.blogspot.com/2014/01/jan-172014deutsche-bank-exits-london.html

*****

Let us now head over to the comex and assess trading over there today,

Here are today's comex results:

 

The total gold comex open interest fell today by 3175 contracts from  416,265 down to 413,090 as gold was up $1.90 yesterday.  In the non active month of January  the OI rose by 2 contracts up to 223. We had 1 notice served upon yesterday so we thus  gained 4 contracts or an additional 300 oz of gold will stand for the January contract month. The next big active month for gold is February and here the OI fell by 8,643 contracts to 154,804 . We have  2 weeks before first day notice for the big February contract month. Last February we had over 40 tonnes of gold stand for delivery. The estimated volume today was poor at 113,486 contracts.   The confirmed volume yesterday was fair  coming in at 141,716.  

****

Comex gold/ contract month

Jan 17.2014   the January delivery month.   

Gold	Ounces
Withdrawals from Dealers Inventory in oz	nil
Withdrawals from Customer Inventory in oz	nil
Deposits to the Dealer Inventory in oz	nil
Deposits to the Customer Inventory, in oz	nil
No of oz served (contracts) today	1  (100 oz)
No of oz to be served (notices)	222  (22,200  oz)
Total monthly oz gold served (contracts) so far this month	7  (700 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month	156,334.1 oz
Total accumulative withdrawal of gold from the Customer inventory this month	65,266.514 oz

We had no activity in the Comex gold vaults today for the second straight day.

We had 0 dealer deposit  and 0 withdrawals

total dealer deposits and withdrawals;  zilch

 we had 0 Customer deposits

****

The total dealer comex gold falls remains  tonight  at  370,137.237 oz or only 11.512 tonnes of gold . The total of all comex gold (dealer and customer) rests at 7,809,243.617 oz or  242.90 tonnes.

Tonight, we have dealer gold inventory for our  3 major bullion banks(Scotia, HSBC and JPMorgan) with its gold inventory  resting  tonight  at only 8.881 tonnes.


i) Scotia:  88,532.124 oz or 2.753 tonnes
ii) HSBC: 109,981.67 oz or  3.420 tonnes
iii) JPMorgan: 87,071,35 oz or 2.708 tonnes

total: 8.881 tonnes

Brinks dealer account which did have  the lions share of the dealer gold saw its inventory level remains constant tonight  at only 80,138.17 oz or 2.492 tonnes.  A few months ago they had over 13 tonnes of gold at its registered or dealer account.

****

and what is totally remarkable is the fact that little gold entered the dealer comex vaults despite December being the busiest month for the gold calender.

January is generally very quiet but we should see some gold transfer into JPMorgan from HSBC and Scotia for December settlements.

In going back over the data for the month of December and today, we have now had 6 withdrawals from the dealer:

3.7 tonnes

1.92 tonnes

1.669 tonnes (from Brinks on last Thursday in December)

  plus


Friday's 2,700.600 oz ( jan 3/2014 from Manfra) or 0.084 tonnes

last Thursday's  (Jan 9) 1.987 tonnes from Scotia 

2.79 tonnes (from Brinks  Jan 15.2014)

plus 3 adjustment from the dealer to the customer account of 3.806 tonnes + Friday's, .006 tonnes and last Thursday's .3547 tonnes of HSBC adjustments

total:  16.310 tonnes of gold comex settlements.

We had 20.19 tonnes of gold standing for the December contract month and therefore 3.880 tonnes is left to be settled upon  (20.19 tonnes - 16.310 tonnes)

Physical Gold Shortage Goes Mainstream

Submitted by Tyler Durden on 01/18/2014 18:18 -0500

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While the topic of rehypothecation and the shortage of physical gold is well covered here at Zero Hedge (and the ever-changing COMEX gold vaults' inventories), it appears the concept of the exploding "leverage" or default risk of the COMEX has now hit the mainstream media. As BNN reports, veteran trader Tres Knippa, pointing to recent futures data, says "there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion." As he goes on to explain to a disquieted anchor, "the underlying story here is that the people acquiring physical gold continue to do that. And that’s what is important," noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying. Knippa's parting advice,buy physical gold; avoid paper.

One of the problems...

That won't end well...

Knippa warns that if 1 entity asks for delivery of a position-limit-size long in gold, it will absorb 81% of COMEX's inventory... and if 2 entities were to do so... COMEX has a problem...

China is taking control of the gold market away from the LBMA, Maguire says

Submitted by cpowell on Sat, 2014-01-18 22:25. Section: Daily Dispatches

2:23p PT Friday, January 17, 2014

Dear Friend of GATA and Gold:

In an excerpt from his latest interview with King World News, London metals trader Andrew Maguire explains a telling detail of how China is taking control of the gold market away from the London Bullion Market Association:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/1/18_Ma...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Key snippet from Maguire....

Maguire:  “An increasing number of producers are being approached by China to buy their forward production, and at a premium over spot....

http://www.goldmoney.com/research/research-archive/market-report-somethings-afoot-in-gold-and-silver

Market Report: Something’s afoot in gold and silver…

By Alasdair Macleod

Posted 17 January 2014

Almost unnoticed, Open Interest in gold futures has taken off spectacularly, increasing by over 35,000 contracts since the beginning of the month, which is shown in the following chart.

As a general rule of thumb, an increase in Open Interest on a rising gold price is bullish, indicating the bulls are back in charge. The pick-up in silver's open interest is not so marked because it starts from a higher base.

Here the pattern is somewhat different from that of gold, with open interest having already risen sharply on the falling price three months ago and remaining elevated ever since. In this case, the bulls appear to have held their nerve during a very bad time for the silver price, which is a sign that the bears never actually gained control.

Furthermore the bullion banks in silver appear to be getting nervous. On a number of recent occasions in quiet trade silver has been marked down with little or no corresponding move in gold, only to fully recover in the absence of selling. This pattern is consistent with market-makers (a.k.a. the bullion banks) trying to close their shorts, but there is not the liquidity for them to do so. The next chart, of the four largest traders' net position says it all.

Note how in 2013 these bullion banks covered 60,000 net shorts, amounting to 300,000,000 ounces, only to see this hard-won ground begin to slip away from them in recent weeks. The second largest four are suffering the same fate, having got their net shorts down to as little as 475 contracts in early November, only to see the position deteriorate to 13,777 last week, This is a big exposure for these smaller traders.

Money Managers have closed some of their silver shorts but are still exposed at three times their average. The squeeze in the market might also have something to do with commercial businesses locking in low prices for physical silver into the fourth quarter of 2013, with no matching increase in hedging by the mines. So if there is a short-term crisis developing in precious metals, it could well be in silver.

Turning to economic developments over the last week, there has been growing hope expressed that economic recovery is on its way in the UK and to a degree in the US. While the talking heads have been promoting equities and talking glibly about future economic prospects, the statistics suggest a very bumpy road. Most discouraging perhaps is the Baltic Dry Index, which is a pretty good indicator of global commercial activity: this has been in freefall since mid-December, when it dropped from 2,330 to 1,374 earlier this week.

Next week

Next week looks like being very quiet for announcements. Here is the list:

Monday.

Japan: Capacity Utilisation, Industrial Production (Final).

Tuesday.

Eurozone: ZEW Economic Sentiment.
UK: CBI Industrial Trends

Wednesday.

Japan: All Industry Activity Index, Leading Indicator (Final).
UK: Average Earnings, Unemployment Rate, Public Borrowing.

Thursday.

Eurozone: Flash Composite PMI, Current Account.
US: Initial Claims, Flash Manufacturing PMI, FHFA House Price Index, Existing Home Sales, Leading Indicator.

Friday.

UK: BBA Mortgage Approvals.

Is Germany's gold in France as impaired as its gold at the New York Fed?

Submitted by cpowell on Mon, 2014-01-20 00:01. Section: Daily Dispatches

4p PT Sunday, January 19, 2014

Dear Friend of GATA and Gold:

Today's fuss about the German Bundesbank's repatriation over the last year of only 5 of the 300 tonnes of its gold that it planned to repatriate from the Federal Reserve Bank of New York should include a fuss about the Bundesbank's similarly pitiful repatriation of its gold vaulted at the Banque de France in Paris.

A year ago the Bundesbank said it would repatriate 374 tonnes from the Banque de France:

http://www.nytimes.com/2013/01/17/business/global/german-central-bank-to...

But today's report in the German newspaper The World on Sunday --

http://www.welt.de/wirtschaft/article123988843/Die-ganze-Wahrheit-ueber-...

-- quotes the Bundesbank as saying that it has managed to repatriate only 32 tonnes from France so far.

Is the German gold supposedly vaulted in France as impaired as the German gold supposedly vaulted at the New York Fed seems to be?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

http://www.zerohedge.com/news/2014-01-19/germany-has-recovered-paltry-5-tons-gold-ny-fed-after-one-year

Germany Has Recovered A Paltry 5 Tons Of Gold From The NY Fed After One Year

Submitted by Tyler Durden on 01/19/2014 13:35 -0500

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• Federal Reserve Bank
 
• Federal Reserve Bank of New York
 
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On December 24, we posted an update on Germany's gold repatriation process: a yearafter the Bundesbank announced its stunning decision, driven by Zero Hedge revelations, to repatriate 674 tons of gold from the New York Fed and the French Central Bank, it had managed to transfer a paltry 37 tons. This amount represents just 5% of the stated target, and was well below the 84 tons that the Bundesbank would need to transport each year to collect the 674 tons ratably over the 8 year interval between 2013 and 2020. The release of these numbers promptly angered Germans, and led to the rise of numerous allegations that the reason why the transfer is taking so long is that the gold simply is not in the possession of the offshore custodians, having been leased, or worse, sold without any formal or informal announcement. However, what will certainly not help mute "conspiracy theorists" is today's update fromtoday's edition of Die Welt, in which we learn that only a tiny 5 tons of gold were sent from the NY Fed. The rest came from Paris.

As Welt states, "Konnten die Amerikaner nicht mehr liefern, weil sie die bei der Federal Reserve of New York eingelagerten gut 1500 Tonnen längst verscherbelt haben?" Or, in English, did the US sell Germany's gold? Maybe. The official explanation was as follows: "The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly." Additionally, the Bundesbank had the "support" of the BIS "which has organized more gold shifts already for other central banks and has appropriate experience - only after months of preparation and safety could transports start with truck and plane." That would be the same BIS that in 2011 lent out a record 632 tons of gold...

Going back to the main explanation, we wonder: how exactly is a gold transport "simpler" because it originates in Paris and not in New York? Or does the NY Fed gold travel by car along the bottom of the Atlantic, and is French gold transported by a Vespa scooter out of the country?

Supposedly, there was another reason: "The bullion stored in Paris already has the elongated shape with beveled edges of the "London Good Delivery" standard. The bars in the basement of the Fed on the other hand have a previously common form. They will need to be remelted [to LGD standard]. And the capacity of smelters are just limited."

So... New York Fed-held gold is not London Good Delivery, and there is a bottleneck in remelting capacity? You don't say...

Furthermore, Welt goes on to "debunk" various "conspiracy websites" that the reason why the gold is being melted is not to cover up some shortage (and to scrap serial numbers), but that the gold is exactly the same gold as before. Finally, to silences all skeptics, the Bundesbank says that "there is no reason for complaint - the weight and purity of the gold bars were consistent with the books match." In conclusion, Welt reports that in 2014 "larger transport volumes" can be expected from New York: between 30 and 50 tons.

Here we would be remiss to not point out that the reason why the German people and the Bundesbank have every reason to be skeptical is that as Zero Hedge reported exclusively in November 2012, before the Buba's shocking repatriation announcement and was the reason for the escalation in lack of faith between central banks, it was the Fed and the Bank of England who in 1968 knowingly sent Germany "bad delivery" gold.  Which is why we have a feeling that the pace of gold transportation will certainly not accelerate until such time as the German people much more vocally demand an immediate transit of all their gold held at the New York Fed: after all, it's there right - surely the Bundesbank can be trusted to melt the gold (if any exists of course) into London Good Delivery or whatever format it wants.

Unless of course, the gold isn't there...

From November 9, 2012:

Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."

Over the past several years, the German people, for a variety of justified reasons, have expressed a pressing desire to have their central bank perform a test, verification, validation or any other assay, of the officialGerman gold inventory, which at 3,395 tonnes is the second highest in the world, second only to the US. We have italicized the word official because this representation is merely on paper: the problem arises because no member of the general population, or even elected individuals, have been given access to observe this gold. The problem is exacerbated when one considers that a majority of the German gold is held offshore, primarily in the vaults of the New York Fed, and at the Bank of England - the two historic centers of central banking activity in the post World War 2 world.

Recently, the topic of German gold resurfaced following the disclosure that early on in the Eurozone creation process, the Bundesbank secretly withdrew two-thirds of its gold, or 940 tons, from London in 2000, leaving just 500 tons with the Bank of England. As we made it very clear, what was most odd about this event, is that the Bundesbank did something it had every right to do fully in the open: i.e., repatriate what belongs to it for any number of its own reasons - after all the German central bank is only accountable to its people (or so the myth goes), in deep secrecy. The question was why it opted for this stealthy transfer.

This immediately prompted rampant speculation within various media outlets, the most fanciful of which, of course, being that the Bundesbank never had any gold to begin with and has been masking the absence all along. The problem with such speculation is that, while it may be 100% correct and accurate, there has been not a shred of hard evidence to prove it. As a result, it is merely relegated to the echo chamber periphery of "serious media" whose inhabitants are already by and large convinced that all gold in the world is tungsten, lack of actual evidence to validate such a claim be damned (just like a chart of gold spiking or plunging is not evidence that a central bank signed the trade ticket, ordering said move), and in the process delegitimizing any fact-basedinvestigations that attempt to debunk, using hard evidence, the traditional central banker narrative that the gold is there and accounted for.

And hard evidence, or better yet a paper trail of inconsistencies, is absolutely paramountwhen juxtaposing the two most powerful forces of our times: i) the central banking-led status quo (which is de facto the banker-led oligarchy whose primary purpose in the past several centuries has been to accumulate as much as possible of the hard asset-based fruits of people's labor, who toil in exchange for "money" created out of thin air - a process which could be described as not quite voluntary slavery, but the phrase would certainly suffice), and ii) "everyone else", especially when "everyone else" still believes in the supremacy of democratic forces, accountability, and an impartial legal system (three pillars of modern society which over the past 4 years we have experienced time and again have been nothing but mirages). Because without hard evidence, not only is the case of the people against central bankersnon-existent, even if conducted in a kangaroo court co-opted by the banker-controlled status quo, it becomes laughable with every iteration of progressively more unsubstantiated accusations against the central banking cartels.

Finally, when it comes to cold, hard facts, which expose central banks in misdeed, even the great central banks have to be silent silent, as otherwise the overt perversion of justice will blow up the mirage that modern society lives in a democratic, laws-based world will be torn upside down.

And while others engage in click-baiting using grotesque hypotheses of grandure without any actual investigation, reporting or error and proof-checking to build up hype and speculation, which promptly fizzles and in the process desensitizes the general public and those actually undecided and/or on the fences about what truly goes on behind the scenes, Zero Hedge travelled (metaphorically) in space - to London, or specifically the Bankof England Archives - and in time, to May 1968 to be precise.

While there we dug up a certain memo, coded C43/323 in the BOE archives, official title "GOLD AND FOREIGN EXCHANGE OFFICE FILE: FEDERAL RESERVE BANK OF NEW YORK (FRBNY) - MISCELLANEOUS", dated May 31, 1968, written by a certain Mr. Robeson addressed to the BOE's Roy Bridge as well as its Chief Cashier, and whose ultimate recipient is Charles Coombs who at the time was the manager of the open market account at the Fed, responsible for Fed operations in the gold and FX markets.

This memo, more than any of the other spurious and speculative accusation about Buba's golden hoard, should disturb German citizens, and of course the Bundesbank (assuming it was not already aware of its contents), as the memo lays out, without any shadow of doubt, that the BOE and the Fed,effectively conspired to feed the Bundesbank due gold bars that were of substantially subpar quality on at least one occasion in the period during the Bretton-Woods semi-gold standard (which ended with Nixon in August 1971).

The facts:  

At least two central banks have conspired on at least one occasion to provide the Bundesbank with what both banks knew was "bad delivery" gold - the convertible reserve currency under the Bretton Woods system, or in other words, to defraud - amounting to 172 bars. The "bad delivery" occured even as official gold refiners had warned that the quality of gold emanating from the US Assay Office was consistently below standard, and which both the BOE and the Fed were aware of. Instead of addressing the issue of declining gold quality and purity, the banks merely covered up the refiners' complaints 

It is this that the Bundesbank, the German government, and the German people should be focusing on. If in the process this means completely ridiculing the Buba's "she doth protest too much" defense strategy that what is happening in the media is a "phantom debate" as per Andreas Dobret's recent words, so be it. In fact, one may be well advised to ignore anything Buba has said on this matter, because in attempting to hyperbolize the matter out of irrelevancy, the Buba is now cornered and will have no choice now but to explain just what the true gold content of the gold even in its possession is, let alone that which is allocated to the Buba account 50 feet below sea level, underneath the infamous building on Liberty 33.

Full May 1968 memo from the BOE to the NY Fed: highlights ours:

MR. BRIDGE

THE CHIEF CASHIER

U.S. Assay Office Gold Bars

1.  We have from time to time had occasion to draw the Americans’ attention of the poor standards of finish of U.S. Assay Office bars. In addition in 1961 we passed on to them comments from Johnson Matthey to the effect that spectrographic examination did not support the claimed assay on one bar they had so tested (although they would not by normal processes have challenged the assay) and that impurities in the bar included iron which caused some material to be retained on the sides of crucible after pouring.

2. Recently, Johnson Matthey have put 172 “bad delivery” U.S. Assay Office bars into good delivery form for account of the Deutsche Bundesbank. These bars formed part of recent shipments by the Federal Reserve Bank to provide gold in London in repayment of swaps with the Bundesbank. The out-turn of the re-melting showed a loss in fine ounces terms four times greater than the gross weight loss. Asked to comment Johnson Matthey have indicated verbally that:-

(a) the mixing of “melt” bars of differing assays in one “pot” could produce a result which might be a contributing factor to a heavier loss in fine weight but they did not think this would be substantial ;

(b) a variation of .0001 in assay between different assayers is an extremely common phenomenon;

(c) over a long period of years they had had experience of unsatisfactory U.S. assays

3. It is not, however, possible to say that the U.S. assays were at fault because Johnson Matthey did not test any of the individual bars before putting them into the pot.

4. The Federal Reserve Bank have informed the Bundesbank that adjustments for differences in weight and refining charges will be reimbursed by the U.S.Treasury.

5. No indication should, of course, be given to the Bundesbank, or any other central bank holder of U.S. bars, as to the refiner’s views on them. The peculiarity of the out-turn will be known to the Bundesbank: it has so far occasioned no comment.

6. We should draw the attention of the Federal to the discrepancy in this (and any similar subsequent such) result and add simply that the refiners have made no formal comment but have indicate that, although very small differences in assay are not uncommon, their experience with U.S. Assay Office bars has not been satisfactory.

7. We hold 3,909 U.S. Assay Office bars for H.M.T. in London (in addition to the New York holding of 8,630 bars). After the London gold market was reopened in 1954 we test assayed the bars of certain assayers to ensure that pre-war standards were being maintained. It might be premature to set up arrangements now for sample test assays of U.S. Assay Office bars but if it appeared likely that the present discontent of the refiners might crystalise into formal complain we should certainly need to do this.  In the meantime I would recommend no further action.

31st May 1968

P.W.R.R.

To summarize: Bank of England discovers discrepancies with US Assay Office gold bars, notifies the NY Fed that its gold bars have major "bad delivery" issues, but, and this is the punchline, on this occasion, we'll keep it quiet, because the Bundesbank got these bars. This is merely one documented assay occasion: one can imagine that of the hundreds of thousands of gold bars in official circulation, the "good delivery" quality of bars outside of the US, and perhaps BOE, official holdings has progressively declined over the decades of Bretton Woods. One can also only imagine what has happened to all those "good delivery" bars currently held by the Fed as custodian at the NY Fed. Literally: imagine. Because there is no way to check what the real gold consistency of these gold bars is, and whether the refiners found ongoing future inconsistencies with "good delivery" standards of bars handed off to other "non-core" central banks. And, yes, without further evidence the above is merely speculation.

As to the remaining relevant facts: the US ran out of good delivery gold in March 1968 and only had coin bars remaining. Which is why it closed the gold pool and went to a two-tier price system. The Bundesbank went on to cover some of the outstanding gold debts of the Fed to the gold pool. Subsequently, the US then did several deals with the BOC to get a substantial amount of gold to pay back the Bundesbank which was sent over to England from March until June 1968. One can, again, only speculate on the quality of said gold. The Fed then created unsettled accounts to account for these transfers between itself and the Buba.

In light of the above facts and evidence, one can see why the Buba is doing all in its power to avoid the spotlight being shone on the purity of its gold inventory: after all the last thing the German central banks would want is someone to go through the publicly available archived literature, to put two and two together, and figure out that it does not take one massive "rehypothecation" (see "to Corzine") event for German gold credibility to be impaired: all it takes is death from a thousand micro dilutions over the decades to get the same end result. Because chipping away one ounce here, one ounce there for years and years and years, ultimately adds up to a lot.

We eagerly look forward to the Buba's next iteration of self-defense. We can only hope that this one does not include a reference to a "phantom debate", to "East German terrorist Simon Gruber" or to Goldfinger, as it will merely further destroy any remaining credibility the Bundesbank may have left in this, or any other, matter.

http://www.zerohedge.com/news/2014-01-19/shanghai-daily-china-expected-announce-it-has-more-doubled-its-gold-reserves

"China Expected To Announce It Has More Than Doubled Its Gold Reserves", Shanghai Daily

Submitted by Tyler Durden on 01/19/2014 19:00 -0500

• China
 
• HFT
 
• Hong Kong
 
• India
 
• People's Bank Of China
• Precious Metals
 
• Reserve Currency
 
• World Gold Council

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The topic of China's below the radaraccumulation of gold is nothing new: first revealed here in September 2011 as part of a Wikileaks intercept, watchers of Chinese gold imports have been stunned by the ravenous pace with which Chinese customers have been gobbling up both domestic and foreign gold production month after month. One needs merely to glance at the net imports of gold just through Hong Kong to get a sense of just how much gold has flowed into the country which has now surpassed India as the largest buyer of gold.

But the biggest question mark since 2009, when China gave its last official gold holdings update, has been how much gold has the People's Bank of China accumulated. One thing is certain: it is well more than the official number of just ovef 1000 tons.

Recall the confidential memo revealed through Wikileaks:

According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.

In other words, between 2009 and 2011, China's gold reserves had increased according to internal data. One can assume they have increased substantially since then, however the PBOC, judiciously, has refused to provide an updated amount of its gold holdings for five years in a row: after all why buy at higher prices (if the world knows that the PBOC is buying at any price), when it can buy cheaply?

However, the period of stealth - and cheap - accumulation may be ending. At least according to the largest English-language portal in East China: Shanghai Daily.

The website, which cites an analysis by Jeffrey Nichols of American Precious Metals Advisors, reports that the Chinese central bank is about to announce its gold holdings have nearly tripled from 1054 tons to 2710 tons.

From Shanghai Daily:

China may soon announce an increase in its official gold reserve from 1,054 tons to 2,710 tons, Jeffrey Nichols, managing director of American Precious Metals Advisors, said.

The People’s Bank of China has not reported any increase in official gold holdings since 2009, when the central bank said the official reserve was at 1,054 tons, which accounted for only about 1 percent of its multi-trillion foreign exchange reserves.

The PBOC has been “surreptitiously” adding to its official gold reserves. It has bought a total of 654 tons in 2009 through 2011, another 388 tons in 2012, and more than 622 tons last year, mostly from domestic mine production and secondary supplies, Nichols said in a commentary posted on NicholsOnGold.com yesterday.

Central bank purchases comprise the smallest fraction of global gold demand — less than 10 percent.

“If China announces an increase in gold reserves, there would be an immediate drag-up force in the gold market,” Albert Cheng, managing director of the industrial association World Gold Council for the Far East, told Shanghai Daily.

China is the biggest gold consumer and producer in the world.

Combined demand in China in the first three quarters amounted to 821 tons and the demand for the whole last year is expected to exceed 1,000 tons, according to the council’s earlier statements.

Oh well: the period of quiet accumulation was fun while it lasted.

That said, we for one would be happy if Nichols is wrong, and if the PBOC were not to announce any time soon it has become the fourth (or third, or second) largest official holder of gold in the world. Because unlike clueless, momentum-chasing traders everywhere, it is always better to buy lower than higher: a concept which the entire Western "developed" markets and the HFT algos and sophisticated "hedge fund" investors that trade them, have either forgotten or never grasped to begin with.

http://www.ingoldwetrust.ch/china-not-only-imports-gold-through-hong-kong

China Not Only Imports Gold Through Hong Kong

There are some gold analysts that create presumptions about Chinese gold demand by looking at how much gold Hong Kong net exports to the mainland, as if the mainland only imports gold from Hong Kong. I think this a misconception; just because China doesn’t officially disclose their gold trade numbers doesn’t mean they only import gold through Hong Kong.

The mainland has 22,117 kilometers (13,743 miles) of border, and I can’t think of one reason why gold could not enter through ports located anywhere at the border. To give you a small example, this is an article from the China Gold Association which reports on gold ore imports from Kazachstan in 2012.

Translated by Soh Tiong Hum:

Gold Ore Imports Surge Through Port Of Alashankou, Xinjiang

Published: 2012-11-28 

Between January and September 2012, 16,800 tons of gold ore worth USD 6.5 million enteredAlashankou, Xinjiang port of entry, an increase of 1173 % over the same period in 2011.   The sharp increase in volume is mainly due to rise in gold price and an increase in profit margin for imported inferior gold ore. China maintains its strong emphasis on the import of resource commodities and provides enterprises with encouraging policies. In the meanwhile port of entry inspection units and transport departments take convenient and speedy measures to ensure that goods clear customs quickly, in turn lowering cost of logistics. In the same year, the port commission attracted investments in a gold ore processing plant and a gold smelter so as to value-add to imported gold ore thereby increasing demand for the raw material.

 

Alashankou (A on the map) in the Xinjiang province is the main port from Kazachstan to China. 16,800 tons of gold ore is approximately 4000 ounces of fine gold, not much. However, it’s an example of the Chinese buying all the gold they can get their hands on. If you read the website of the port Alashankou it states the import of metal ores is still increasing. Gold is not only coming in through Hong Kong, it can be imported from anywhere. CME started to recognize this in September 2013:

The vast majority of bullion inflows into China emanate from Hong Kong which still serves as the main conduit into the mainland and often serves as a proxy for Chinese demand (although direct imports through Shanghai are increasing).

According to my findings  the best way the calculate China’s total net gold import is by taking SGE withdrawals as a reference, read this for a full analysis.

In 2013 the exact amount of gold withdrawn from the SGE vaults was 2197 tons. This can only have been supplied by domestic mine production (430 tons), scrap (200 tons, my guess) and import. So..

Import = 2197 – 430 – 200 = 1567

China roughly (because I can't be sure on the scrap number) has imported 1567 ton of gold in 2013.

Some news outlets have been reporting on falling net imports by China in November, from 130 tons in October to 61 tons in November, thereby suggesting demand is fading.

This suggestion ignores the fact that the mainland doesn’t exclusively import gold from Hong Kong. It’s true that most of China’s gold imports emanate from Hong Kong, but this is not an accurate reflection of Chinese demand. Let’s have a look at the next chart.

We can see big differences between the red line (SGE withdrawals = Chinese demand) and the height of the blue bars (all known supply). The gaps had to be filled by additional import (illustrated in November on the chart). Note, Hong Kong trade numbers from December haven’t been released yet.

By looking at  SGE withdrawals we can see that demand hasn’t been dropping since October, au contraire,  it has increased! From 139 tons in October, to 168 tons in November, reaching 218 tons in December. Chinese demand for physical gold was clearly visible on retail level around new year when there was a national shopping spree which I reported on here. The upward trend continues in January; 99 tons of gold were withdrawn from the SGE vaults in the first 10 days of 2014. One of my sources in the mainland notified me on scarcity in storage capacity for consumers, January 7:

HSBC, Bank of China, Dah Sing Bank, Bank of East Asia, Shanghai Commercial Bank, ANZ, Citibank and Hang Seng Bank; NONE have available Safe Deposit Boxes – all occupied and there is a waiting list.

Having said that, let's quickly go through to the other numbers from the Hong Kong Census and Statistics Department on gold trade up until November, as this is still valuable information.

For clarity, the following charts are all based on trade numbers from Hong Kong. With these numbers we know how much gold ends up in Hong Kong itself (import minus export) and how much gold Hong Kong trades with other countries (net import or export). The “China net inflow charts” are only about the amount of gold that China mainland net imports through Hong Kong.

Hong Kong net exported 1017 tons of gold to the mainland in 11 months.

Hong Kong itself net imported 573 tons of gold in 11 months. I hope I can write more on this in the future because there is mainland demand hidden in these numbers.

Hong Kong net imported 66 tons from Switzerland in November, down from 85 tons in October, – 22 % m/m. A second monthly decrease, this could signal that the main vein (the gold route from the UK to Shanghai) is drying up. Year to date (nov-2013) Switzerland has net exported 848 tons of gold to Hong Kong.

From January – November Hong Kong and the mainland net imported 1590 tons.

For the Hong Kong gold trade charts I use the following categories from the customs report.

HKHS code (Hong Kong Harmonized System)

98002: GOLD COIN AND CURRENT COIN

97101: GOLD (INCLUDING GOLD PLATED WITH PLATINUM), NON-MONETARY, UNWROUGHT OR IN SEMI-MANUFACTURED FORMS, OR IN POWDER FORM

What I’ve noticed is that in November Hong Kong net imported 15 tons of gold coin from the mainland (HKHS 98002)..

..and it net net exported  10 tons of gold coin to the US.

In 11 months Hong Kong net imported 45 tons of gold coin from the mainland and net exported 33 tons of gold coin to the US. This could be strong demand for Chinese golden coins, Panda’s, in the US.

By The Short Hairs

By Turd Ferguson | Thursday, January 16, 2014 at 11:52 am

Just two weeks from today, The Comex will begin the process of delivering February2014 contracts. More than ever before, JPMorgan has The Comex "by the short hairs". Will they let go?

I've been telling you for some time that the biggest factor for the paper price of gold in 2014 is JPM's NET LONG market corner in Comex gold futures. From a NET SHORT position in the fall of 2012 that grew as high as 75,000 contracts, JPMorgan utilized the price weakness of 2013 to build a NET LONG position of similar size by last summer. This position has since warbled between 55,000 and 80,000 contracts as price has fluctuated and bounced along The Bottom.

Last Friday, we received another Bank Participation Report from the CFTC. On it, there were several changes of note...most notably the non-U.S. bank position that is also now nearly NET LONG. This latest report also gave us an updated peek under the hood at JPM's position. By no means is this an exact science so I've always pegged JPM's NET LONG position to be about 90% or so of the U.S. Bank GROSS LONG position on the report. Using this "formula", we can calculate JPM's NET LONG position to be around 55,000 contracts as of last Tuesday. For what it's worth, this is about the same level at which Uncle Ted has it pegged, too.

Why has it declined? Primarily it was the expiration of the Dec13 futures. Recall that initially, over 10,000 stood on First Notice Day. Since the JPM House Account ultimately stopped over 96% of all Dec13 deliveries (6254 of 6493), I think it's safe to conclude that JPM also held the vast majority of the other 3,664 contracts that were NOT delivered, instead being sold and closed via Comex trading. So, in the end, about 9,500 of the decrease in JPM's NET LONG position came from the exercise and/or closing of December positions.

So now JPM has a NET LONG position of 55,000 contracts, likely spread across the board as such:

• 20,000-25,000 in the front-month of Feb14
• 10,000-15,000 in April14
• 5,000-15,000 in June14
• 0-5,000 in August14
• 0-5,000 in Dec14

And the questions you need be be considering are:

1. HOW many will they use to stand for delivery in February?
2. WHY are they so furiously taking delivery?
3. WHAT are they trying to accomplish?
4. Perhaps, most importantly, do they have any other, more sinister motives?
5. And, finally, how many deliveries can The Comex withstand without "breaking"?

Let's start with #1.

As mentioned above, there were 10,157 Dec13 contracts standing at First Notice Day. As of November 13, 2013 (equal in trading days to this past Tuesday) there was a total Dec13 open interest of 171,848 which, as a percentage of total gold open interest was 42.54%. Last January, on an equivalent date, the Feb13 open interest was at 195,146, the percentage in Feb13 was 44.26% and, ultimately, a whopping 13,070 stood on First Notice Day. As of last Tuesday, there were 165,856 Feb14 contracts still open and this represented 39.93% of the total open interest. So, at this point in January, is it safe to conclude that at least 8,000 will stand for February delivery? Yes.

Moving on to #2.

Why? That's a very good question and it ties in with #4. Perhaps NOW would be an excellent time to go back and read this: http://www.tfmetalsreport.com/blog/5018/evidence-gold-corner. During the price collapse last year, as JPM was rapidly converting their cornering NET SHORT position into a cornering NET LONG position, JPM got hooked for quite a bit of gold. As the non-U.S. banks, primarily HSBC took massive deliveries, JPM was stuck providing the metal. In fact, in just the first six months of 2013, the JPM House and Customer accounts delivered an amazing 31,939 contracts! That's 3,193,900 troy ounces. Not coincidentally, at the same time, registered stocks in the Comex vaults began to decline dramatically, from 3,000,000 ounces in January down to about 700,000 by the end of June.

Could it be stated that JPM delivered and then the other banks took it and left the building? Yes. Could it be concluded that JPM is now stopping 96% of deliveries because they want "their" gold back? Yes. Did they take (stop) just enough in December to avoid breaking The Comex? Yes. (They could have taken A LOT more and even cash-settled 30%+ of what they had on First Notice Day.) Will they likely pull the same move in February? Yes.

Now #3.

And this is where it begins to get real interesting. What do we KNOW about JPMorgan?

1. This NET LONG position is real, not imagined.
2. They "lost" A LOT of gold in the first six months of 2013.
3. They're in deep doo-doo with the U.S. government for all kinds of lawlessness, ranging from mortgage fraud to market manipulation.
4. The Dodd-Frank Law with the coming CFTC position limits, JPM's internal business restructurings and The Fed's latest actions all hint at MAJOR changes coming to a paper metal market near you.

In the end, I think JPMorgan is attempting to "get back" the gold that it "lost" in 2013 before they and the other banks may be forced to curtail their trading activities in the months and years ahead.The question for 2014 is: Will the other bullion banks play ball?

But why would they? If you, as head of HSBC, know that gold is going higher AND you know that supplies are tight AND you know that Chinese demand continues unabated, why on earth would you be short on The Comex and let JPM stand and demand delivery from you? Wouldn't you, instead, be moving to reduce and eliminate your NET SHORT position on The Comex? With no short position, JPM would have to get "their" gold from someone else. And what did I mention earlier about the latest non-U.S. bank position? Oh yah...it's down to just 6,364 contracts NET SHORT. As recently as two months ago, it was 39,480 contracts NET SHORT. Do you think these guys have wised up to JPM's plan?

So that leads us to #4.

IF JPM wants "their" gold back and IF the CFTC and Fed wants them out of paper metal and IF the other banks are unwilling to play along and provide the gold...what is JPMorgan going to do?

Last fall, I speculated that JPM could, ultimately, break The Comex on purpose....just like the did BearStearns. Want to grow your company and increase its TBTFness? Grab a rival by the short hairs and don't let go. Call their note and force them into bankruptcy. Then, ride in as a White Knight and save the day by buying them on the cheap. In a terrific piece of investigative reporting, ZeroHedge uncovered this exact behavior in the demise of Lehman Brothers, too.http://www.zerohedge.com/news/2013-03-03/did-jpms-cio-intentionally-and-maliciously-start-margin-call-avalanche-crushed-lehma

With this as a model, could JPM be scheming to break The Comex if they don't "get their gold back"? I have no idea BUT they certainly could! Again, the CFTC has allowed JPM to build a NET LONG position of over 50,000 contracts, at least 20,000 of which is in the front-month Feb14. JPM already knows that the CFTC is powerless to stop them as, back in December, they stopped 6,254 contractsIN CLEAR VIOLATION of the current front-month position limits. They might stand for 20,000+ in February. They might stand for 30,000 in April. The point is: Since they have a cornering position, they could stand and break The Comex at any time. Just as in the case of Bear Stearns, JPM could then just ride in and buy out a desperate CME Group.

Again, is this likely? No. Is it possible? Absolutely!

Finally, #5.

Much of this depends upon the willingness of banks such as HSBC, Scotia, Barclays, DeutscheBank et al to play along, stay short and provide the gold to satisfy JPM's delivery demands. Take a look at this chart (courtesy of Jesse), does it look to you like they're playing ball?

And notice these Gold Stocks changes. The oldest daily report I can find on my hard drive is the one from 9/30/13. Note the reported positions of each depository, keeping in mind that "this information is taken from sources believed to be reliable..."

Now look at the same report as of yesterday:

Besides the oft-noted continued reduction of total registered, note the rather dramatic change in the size of JPM's eligible account.

Hmmmm.

And now, with just 280,000 ounces of registered gold (if you exclude JPM's), The Comex only has enough registered gold to physically settle 2,800 contracts in February. Of course, eligible gold can always be reclassified into registered in order to meet settlement demand...BUT...will it? Probably...but we'll see.

Again, JPM will likely stand for just enough gold that The Comex will be able to continue on toward April. The purpose of this post is NOT to make you think that The Comex's demise is imminent.What you do need to be aware of though is that, by virtue of their massive and cornering NET LONG position, JPM has The Comex "by the short hairs" and they can break it anytime they want. Just another reason that 2014 is going to be a very interesting year.

TF