Thursday, January 9, 2014

Gold and Silver News and Views - January 9 , 2014 - Jesse notes an " Interesting Development at the Comex " ..... Alasdair Macleod: Index trackers and their effect on gold and silver futures .... Royal Mint Runs Out of Sovereign Gold Coins on “Exceptional” Demand ..... Dave Kranzler asks " Comex Gold Inventory: Do You Really Trust The Banks ? " Bill Holter discusses Gold Manipulation 101

Articles , news and views from Janaury 9 , 2014 - as we wait the now traditional Non Farm Payroll and Employment situation PM manipulations on Friday January 10 , 2014.........

09 JANUARY 2014

Gold Daily and Silver Weekly Charts - Interesting Development at the Comex

I thought it was pretty interesting that 63,877 ounces of gold bullion left the registered inventory from Scotia Mocatta yesterday.  That brings the deliverable category down to a new low of 416,563 ounces for this leg of the bull market. 

In the past these big declines have tended to mark an intermediate price trend change within six months or so.  Let's see if that holds true this time.

As an aside, I wish to remind you again that the registered, or deliverable category, is not the sum total of all bullion at the Comex.  There are 7,711,145 ounces of bullion in storage that can be placed into a deliverable state with a procedural action. 

For my purposes, this is more of a indicator of pricing preferences, or a willingness to sell, rather than some likely default scenario. I know I have said that quite a few times, but I wanted it to sink in, especially for those who choose to misrepresent what this data implies, for whatever reason, bullish or bearish.

And I will probably post the latest chart on this later tonight.  Because one would tend to think that when available supply placed on the market becomes exceptionally low at certain prices, it could likely indicate higher prices will be required to bring additional supply to market. 

Not all supply is equal, in availability and quality, and prices are, after all, set at the margins.  Water water everywhere, but not a drop to drink, and all that. 

When fellows make the case that all the gold in the world is part of the supply in the same way for the purposes of supply and demand calculations I have to chuckle to myself.  Nothing could be further from the truth in almost every commodity I can think of, including gold.  Things are held by different actors for different purposes.

There are also those who will say, 'you cannot trust this data it could be faked or wrong.'  Yes, a lot of things could be this, or could be that.  Life is a school of probabilities.  But I notice these same people do not seem to hesitate to use the data they prefer for their own purposes, which also could be faked or wrong. 

So I think we can stipulate that we have to use any data we have with some reasonable caution and skepticism, especially in markets that are opaque.  There is plenty of gaming and fraud in these markets.

But if someone wishes to start dismissing the meaning of some data because of some degree of doubt, then they may as well apply that same stringent criteria to all the data which they use.  And in many cases if they do this, they would be compelled to shut up, because they will have nothing meaningful to say.  Alas, such integrity is very rare indeed.

So I think I will prefer to look at all the data available and pertinent, and draw reasonable inferences, testing them along the way, always looking at multiple sources and confirmations.  There is nothing wrong with formulating hypotheses.  That is what is known as 'the scientific method.'   It is what you do with them and how you use them that counts. 

And to that end if working with other people to find out what's what proves fruitful, I will do it of course, always and everywhere. That promise is the practical side of working hard on a blog for 'no pay.'  There are some others, but not easily accounted for on worldly ledgers. And it is more useful than watching sports, or reality TV, or whatever people do these days with their leisure hours.

But some sources of information are relatively dry wells, and not worth the time and effort to try and pull out anything, of even marginal value. 

Yes there is the value of educating the stubbornly ignorant, and the hope of mutual benefit, always.  And the mule may need a good washing, but that does not mean that I'm the one who is going to do it.  These days I would rather wait for rain.

Have a pleasant evening.



Alasdair Macleod: Index trackers and their effect on gold and silver futures

8a ET Thursday, January 9, 2014
Dear Friend of GATA and Gold:
GoldMoney research director Alasdair Macleod writes today that increased weightings of gold and silver in two major market indexes are likely to put upward pressure on precious metals prices. Macleod's commentary is headlined "Index Trackers and Their Effect on Gold and Silver Futures" and it's posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Linked items from Harvey Organ.....

Royal Mint Runs Out of Sovereign Gold Coins on “Exceptional” Demand

Published in Market Update  Precious Metals  on 9 January 2014
By Mark O’Byrne


Today’s AM fix was USD 1,226.00, EUR 900.61 and GBP 744.97 per ounce.
Yesterday’s AM fix was USD 1,226.50, EUR 902.50 and GBP 747.37 per ounce.
Gold fell $7.40 or 0.6% yesterday, closing at $1,224.90/oz. Silver slipped $0.31 or 1.56% closing at $19.56/oz. Platinum inched down $0.26, or 0.26%, to $1,410.49/oz and palladium fell $5.03 or 0.7%, to $733.47/oz.

Gold is slightly higher today but lower this week. Investor sentiment remains extremely bearish but physical buyers continue to accumulate at these low prices. The UK Royal Mint has run out of 2014 British gold sovereigns due to unprecedented demand.
Gold in U.S. Dollars, 5 Year - (Bloomberg)
Respected technical research analyst Louise Yamada predicts further falls in gold. She estimates a short term 19% drop to $1,000 in 2014. However she remains very bullish on gold in the long term.
Bloomberg’s analyst survey of 15 polled this week were the most bullish in a year on gold with only 2 bearish and four neutral. UBS sees near term support at $1,207.57/oz.

Gold in Euros, 5 Year - (Bloomberg)
The U.K.’s Royal Mint, which traces its history back more than 1,000 years, ran out of 2014 Sovereign gold coins due to “exceptional demand” reported Bloomberg.

Gold in British Pounds, 5 Year - (Bloomberg)
“Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating,” the U.K. mint commented yesterday. “The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.”
Market demand makes coin stock availability go up and down as in the past wrote the mint in an email. Gold climbed to a three-week high of $1,248.51 on Jan. 6 as physical demand increased, particularly in China.


Dave Kranzler discusses comex gold we really believe them?

(courtesy Dave Kranzler/the GoldenTruth)


Comex Gold Inventory: Do You Really Trust The Banks?

"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only." - The disclaimer now posted on the Comex gold and silver daily warehouse stock report as of Monday, June 3, 2013.

How would you like to get your bank statement in the mail from JP Morgan or Bank of America and see this disclaimer added at the bottom: "The information in this account statement is taken from sourcesbelieved to be reliable; however, JP Morgan Chase & Co. disclaims all liability whatsoever with regard to its accuracy or completeness. This account statement is produced for information purposes only."  What would go through your mind if that was stamped clearly on your next account statement?

The CME "believes" the inventory reports are "reliable" but will not back up the accuracy.  Do you trust those numbers?  Before you answer that question, keep in mind that the big banks have already been accused and successfully prosecuted for reporting and business fraud in several other areas of their operations.  Also keep in mind that the numbers produced by the CME on a daily basis come from reports generated by the banks themselves.  The numbers ARE NOT subjected to the scrutiny of any regular independent physical audit.

With that said, there has been a lot of discussion lately about the amount of gold inventory on the Comex in relation to the amount of futures contracts.  The imbalance in paper vs the total amount physical gold as reported is catastrophic to the Comex should enough accounts who are long gold demand delivery.

The debate and illustration of the situation with the Comex inventory reports lately have ranged from the sublime to the absurd.  Earlier this week a blog post appeared out of Australia that tried to sound knowledgeable and authoritative in justifying and explaining why the distinction between "registered" stock and "eligible" stock is irrelevant. Well, if you know enough about the facts and are not too lazy to look up the actual CME published rules, you know that the CME gives the banks latitude deeper than the Mariana Trench in their accounting and reporting rules.  The distinction between "eligible" and "registered" is indeed irrelevant.  It's the reliability of the reports that are questionable - just ask the CME attorneys.

There's another well-known newsletter proprietor who makes a healthy living selling his analysis of the CME weekly Commitment of Traders gold and silver report.  He's willing to lash out at bank corruption and fraud openly and freely.  And yet, for purposes of his analysis, the numbers generated to produce all Comex, CME and CFTC reports - numbers, mind you, that are generated by the banks themselves - are 100% accurate and bona fide.  And he's adamant about that. Go figure.

The CME completed its acquisition of the Comex in August 2008.  Yet, that legal disclaimer above did not appear on the Comex gold and silver inventory reports until June 2012.  Everything happens for a reason and the lack of disclaimer was not an oversight - as said silver analyst has stated.  Furthermore,  the only role served by the analysis produced by said Australian blogger (who happens to work for the Perth Mint which has been scrutinized in the past for its own inventory issues) is a theoretical discussion of how the banks can play a "shell game" with the inventory that they do report.

The real discussion needs to focus on the legitimacy of the reports themselves.  Banks by design use fractional asset/liability management and there's no reason to believe that they treat their gold holdings, whether custodial or owned, any differently. What needs to happen is we need to have an accountability system in place that is based on frequent independent audits and NOT reliant on bank generated reports.

"Faith" is defined as "belief without evidence."  If you want to believe that the numbers being reported by the banks which are used to produce all public reports generated and published by the Comex, then you are doing nothing more than placing faith in the banks.  The only real evidence we have is that the CME will not legally backstop the numbers that are produced.

How much faith do you have in the banks?

And finally, Bill Holter discusses Gold Manipulation 101:

(courtesy Bill Holter/Miles Franklin)

Gold manipulation 101

  I have written many times regarding the "manipulation" of various markets.  I have explained that money supply, currency crosses and interest rates are all "admittedly" manipulated and done so officially.  When this is done, we usually get some sort of explanation as to "why".  Such as the economy is too weak, too strong (days long gone by), inflation or unemployment are too high or what have you.  These "levers" are pushed and pulled and done so publicly.  Years ago this was never done "publicly" but later in Alan Greenspan's term and more so during Bernanke's reign, in an effort to create "transparency" (sarcasm intended by both myself AND the Fed) the Fed started announcing what they were doing.  I could go on a long tirade on this topic alone but suffice it to say, the Fed started to "announce" policy to get more traction with jawboning.

  I have also explained many times "why" gold would surely be manipulated and that the Fed (and other foreign central banks) would be stupid not to try to suppress the price.  Gold is THE main competitor to fiat currency, an exploding price is like a neon sign advertising policy failure and currency flaws, as Paul Volcker once said "it was a mistake to let gold get away from us". 

  That said, "how" is it actually done?  In the old days back in the 60's and 70's during the London Gold Pool, the manipulation was quite "physically mechanical" meaning actual gold was sold to meet the excess demand.  This worked for a while until it didn't (stockpiles were being depleted) and the result was the 1980 $850 spike.  Then as the 80's progressed and pressure again began to build for higher prices, "hedging" came along.  The big brokerage houses convinced many gold mining companies (Barrick was the largest) to "forward sell" their product.  This was pitched to the miners as a way to lock in their sales price which helped them plan (their demise).  But what did it REALLY do?  It brought 1,000's of tons of gold "forward" for sale and on to the market.  It had not been mined yet but the true intent and result was to place excess supply (which had not even been mined)  onto the market to depress the gold price.  This scheme was reported extensively by Frank Veneroso back in 1998.

  Around that same timeframe, the Bank of England then publicly announced the sale of some 400 tons which again depressed gold's price.  It also guaranteed that the British would get the absolute worst possible price for their sales...which was the intent, DEPRESS the price.  As the century turned, gold slowly started to dig its way out from under the hedging (leasing) and central bank sales.  By 2003 or 04, a "new" way to invest in gold was conjured up.  The ETF "GLD" was announced.  Many gold enthusiasts jumped with joy because this would finally allow the "little guy" a way to purchase gold with simplicity.  I said at the time, "this thing is only a pressure valve and will divert capital AWAY from the real thing".  I still say the same thing.  GLD has bled 500 of its alleged 1,300 tons this past year.  Are the remaining 800 tons real gold?  In my opinion no but we will soon see I suppose. 

  On a daily basis the manipulative "tool" of choice is the COMEX and their futures contracts.  These can and have been sold far in excess of any gold inventory in the world.

  It has been speculated (and confirmed by Jeff Christian regarding the LBMA) that paper contracts represent real gold on a "100 to 1" ratio.  Meaning that 100 "paper ounces" have been sold for every 1 real ounce.  We had 6 or 7 major "flash crashes" in the price of gold last year along with more than 200 smaller ones.  We just had another one on Tuesday and if you care to see "how" it was actually done, Zerohedge did a great piece using NANEX charts and data to prove beyond a shadow of a doubt that a preprogrammed computer algorithm was to blame . 

  The last and longest lasting method to manipulate gold's price has been the "leasing" of central bank metal.  Starting around 1996, Robert Rubin began "the strong dollar policy".  To "prove" this policy it also meant that gold's price MUST be, why not lease out central bank gold?  It went (goes) like this.  The central bank would lease out gold at half a percent to a bullion bank, they would then sell the gold and invest the proceeds into a 6% Treasury bond.  This was a no brainer or "free money" if you will long as gold's price did not rise, which it has.  The problem is that when this gold was sold, 70% of it became jewelry and is no longer available to "re purchase".  Oh, and another little problem as the Germans have now realized...their "safeguarded" gold was also leased.  Some countries like Portugal (and Italy with LTCM) leased out their gold on their own free will and face the same problem, the gold is gone!

  Any and all of this could be proven beyond any doubt and the perpetrators brought to justice and jailed within just a few days.  There is a paper trail for all of this and the Justice department would have slam dunks all over the place...but there is a small problem.  They can't (and won't) prosecute "themselves" because ALL of these schemes had one goal in mind, suppress the price of gold.  Which is exactly the "unofficial"...official policy.  "Whodunnit" in today's high tech world is a piece of cake but don't hold your breath waiting to hear who sold naked contracts, naked shares or whatever... we are still waiting to see who bought all of those airline puts back in 2001 right?

I know that this piece was very very basic and thus the "101" in the title.  Some may not have even read this far because it's only been a recap of how we got here but it may shed some light for those who have only woken up recently or are still rubbing the "sleep" out of their eyes.  It has been so obvious and "in our face" that it's sickening.  But what is "so obvious" to anyone with half a brain that is "open", is conspiracy whacko alien stuff to those who don't want, can't or won't see it.  Take heart though, Mother Nature is still alive and will exact her revenge and then some when all is said and done, she always does.  

Regards,  Bill H.

Items linked from Ed Steer's Gold and Silver Report....

Four King World News Blogs

JPMorgan metal futures unit included in commodities sale: sources

JPMorgan Chase & Co., the world's biggest dealer in over-the-counter metals derivatives, has added its metals futures brokerage to the sale of its physical commodities business, sources familiar with the matter said.
A JPMorgan spokesman initially declined to comment, but later said: "JP Morgan's metals futures brokerage is not up for sale and we continue to be committed to that business."
The sources said the sale would include its London Metal Exchange (LME) open outcry floor trading team, one of the largest on the world's premier metals marketplace. A deal could come later this month.
I asked Ted Butler if this included their precious metal division as well...and his reply was " don't think so, because of previous statements, but don't know for sure."  I'll keep my eye open for any story that clarifies the situation.  This Reuters piece, filed from London yesterday evening GMT, is courtesy of Phil Barlett.  It's worth reading.

Gold’s weakening outlook threatens miners’ credit ratings

Moody’s Investors Service cut its gold price forecast for the year, putting the credit ratings of Canada’s largest precious metal producers at risk of a downgrade as they battle an industry slump.
Reflecting the sharp drop in gold prices, Moody’s on Wednesday said it will use an average bullion price of $1,100 (U.S.) an ounce instead of $1,200 to determine a company’s credit rating.
“The increasing risk of lower prices suggests that key credit metrics of certain producers are stretched for current ratings in the absence of mitigation through cost reductions or other actions,” Moody’s said in a report announcing the lower gold price outlook.
This article showed up on Internet site yesterday afternoon EST...and I thank Ulrike Marx once more for digging it up on our behalf.

2014 Silver Eagle Bullion Coin Sales Begin January 13

The United States Mint will begin accepting orders for the 2014-dated American Silver Eagle bullion coins on January 13, 2014. Coins produced at both the West Point and San Francisco Mints will be available, although sales will be subject to the US Mint's allocation program which rations available supplies amongst authorized purchasers.
The start of sales for the 2014-dated coins follows an extended gap in availability for the popular bullion product. The US Mint made their final weekly allocation of 2013-dated coins on December 9, 2013. For several weeks leading up to this date, available quantities had been lower than typical, presumably since production had partially shifted towards 2014-dated coins. The start of sales for the 2014-dated coins on January 13, 2014 leaves more than a one month gap in availability that will likely add pent up demand to the already seasonally high demand for the coins.
The US Mint anticipates that they will have approximately 3.5 million coins to allocate on January 13, 2014. They have indicated that allocated quantities for the following week will be much lower. The initial amount of coins available will be lower compared to the prior year.
Last year, the US Mint recorded sales of nearly 4 million Silver Eagle bullion coins on the opening day of availability for the 2013-dated coins. The strong opening was followed by a temporary sell out, with sales resumed under the allocation program which remained in effect throughout the year. In January 2013, Silver Eagle sales had totaled 7,498,000 coins. Full year sales would reach 42,675,000 coins, setting a new annual record.
I get the distinct impression from reading this article that the U.S. Mint is not going to be meeting all the demand that there might be for the U.S. silver eagle in 2014.  However, you can make up your own mind about that when you read the article in its entirety...and it's worth your time.  I thank reader "Schnitz Jansel" for sending this.

Gold Pricing...and the Flows of Gold Metal

Just as the ECB and Fed earlier agreed to construct the Washington Gold Agreement (WAG) in 1999 with the birth of the ECB and European Monetary Union (€-EMU). The emphasis of this gold agreement was originally on –Washington-, and later to be renamed as Central Bank Gold Agreement (CBGA) when the UK left WAG. This is another circumstantial indication that the € – $ agreements are being taken at the BIS level. EMU (€) would not have survived if the Fed hadn’t been willing to provide massive $ / € swaps with the ECB, to avoid the 2008/2009 - crisis total collapse in the EU/EMU. The € and $ were saved.
Then we can also imagine that the BIS has no objection to gold flows to China on condition that the Asians do not force the price of gold higher, without the approval of the $ forces in the BIS. We’ve seen the same dynamics in gold flows to the Middle East (Saudi Arabia) in exchange for preserving the petro -$ during the oil crisis of the seventies and beyond. Therefore the recent long staggered repatriation of German gold reserves do not have any effect on the BIS management of pricing gold.
The BIS central banks system decides when, and which, gold price is appropriate, best suitable for the smooth functioning of the international system of floating currencies.
This essay, posted over at the Internet site yesterday was written under a pseudonym...and I normally don't post this sort of thing because I detest those who don't have the moral courage to say what they have to say under their own names...and resort to hiding behind the skirts of a pen name.  The other problem with not knowing who wrote it, is the fact that you don't if the author has any credibility, or if what he is writing about is truthful or not.  So, having said all that, it should be read for entertainment purposes only, but you have to decide for yourself as you're reading, whether he knows what he's talking about.  Some of it sounds credible...and there's some I'm not sure of.  I thank Ulrike Marx for her final offering in today's column.