Saturday, April 5, 2014

Ed Steer's Gold and Silver Report - April 5 , 2014 News , Data for Friday( 4/4/14 ) and the week beginning March 31 , 2014 ..... Items of note ( Bill Gross in trouble at PIMCO ? ) ..... Doug Noland's Friday missive ( HFT, Rigged Markets and The Man ) ..... Economic downturn in global economy to push bond yields lower , US ten year to 1.50 percent by mid 2015 says Saxo Bank ........Timing the Collapse: Ron Paul Says Watch the Petrodollar ...... Secret Service launches probe of O.C. coin dealer Tulving Co........ Alasdair Macleod: Renewed estimates of Chinese gold demand ( if you read nothing else on gold this weekend , read the full missive set forth . Mind blowing as to the implications ) ...... additional items on China gold demand and Russia - A group of lower house members of Parliament are urging Russian oil and gas producers and traders to stop using the US dollar..........


The gold price didn't do a thing in Far East trading on their Friday---and as I stated in The Wrap section of yesterday's column, volume up until the London open was lower than I could ever remember seeing it.
But shortly after trading began in London, some positive price action got underway, with higher ticks at both the 12 noon BST silver fix---and again at the Comex open in New York.  The usual smash down at the release of the jobs numbers failed to materialize.  But the serious price rally that began when London closed at 11 a.m. EDT in New York, ran into the usual not-for-profit sellers within 15 minutes---and that was it for the remainder of the day.
The CME Group reported the low and high price ticks as $1,284.40 and $1,307.50 in the June contract.
Gold finished the trading day in New York at $1,302.30 spot, up $15.50 on the day.  Not surprisingly volume, net of April and May, was pretty decent at 156,000 contracts.
Here's the New York Spot Gold [Bid] chart so you can see the Comex trading session in more detail---particularly the price capping shortly after London closed.
Silver did nothing in Far East trading as well, with the total volume under 2,000 contracts at the London open.  But once silver began to rally, it was obvious that there numerous times where a seller of last resort put in an appearance before prices got too far out of hand to the upside, especially in New York trading.  And, true to form, not only did JPMorgan et al cap the rally, but the also sold silver back down below $20 the ounce while they were at it.
The low and high ticks were reported as $19.785 and $20.23 in the May contract.  Silver finished the Friday session at $19.955 spot, up only 14 cents on the day---and it should have been obvious to all except the willfully blind, that it would have closed materially higher if allowed to do so.  Net volume was only 30,500 contracts, so "da boyz" had a pretty easy time keeping the price under wraps.
Platinum hit its low of the day shortly before London opened---and then rallied quietly until just about lunchtime in New York.  From there it traded sideways into the close.  Palladium didn't do much.  Here are the charts.
The dollar index closed late on Thursday afternoon in New York at 80.46---and then chopped sideways until around 8 a.m. EDT.  The index jumped around either side of unchanged for the next three hours before sliding a hair into the close.  The index finished the day on Friday at 80.43---virtually unchanged on the day.


The CME Daily Delivery Report showed that 84 gold and 11 silver stocks were posted for delivery on Tuesday within the Comex-approved depositories.  JPMorgan and Canada's Scotiabank took delivery of most of the gold contracts.  The link to yesterday's Issuers and Stoppers Report is here.
There was another withdrawal from GLD yesterday.  This time an authorized participant withdrew 57,807 troy ounces.  And as of 8:11 p.m. EDT, there were no reported changes in SLV.
I forgot about Joshua Gibbons' updated SLV bar list in yesterday's column, so here it is now.  "Analysis of the 02 April 2014 bar list, and comparison to the previous week's list: 1,538,108.2 oz. were added (all to Brinks London), no bars were removed or had a serial number change.  As of the time that the bar list was produced, it was overallocated 28.8 oz.  145,922.1 oz. were removed Wednesday, but not yet reflected on the bar list."  The link to Joshua's website is here.
The U.S. Mint had a tiny sales report yesterday.  They sold 4,500 troy ounces of gold eagles---500 one-ounce 24K gold buffaloes---100 platinum eagles---and zero silver eagles.  Week/month-to-date the U.S. Mint has sold 11,000 troy ounces of gold eagles---7,000 one-ounce 24K gold buffaloes---293,000 silver eagles----and 300 platinum eagles.  Based on these numbers, the silver/gold sales ratio is only 16 to 1.  However, I don't expect this low sales ratio to last too long, as the next big silver eagles sales report will change everything.
Over at the Comex-approved depositories on Thursday, there wasn't much in/out activity in gold, as only 16,274 troy ounces were reported received---and 199 troy ounces were shipped out.  Most of what was received went into JPMorgan's vault.  The link to that activity is here.
But it was a horse of an entirely different colour in silver---and by the time they parked the forklifts for the day, they reported receiving 1,243,515 troy ounces---and had shipped out an eye-watering 2,304,448 troy ounces of the stuff.  That action is definitely worth a quick look---and the link is here.
As far as yesterday's Commitment of Traders Report goes---as I was expecting, there was improvement in the Commercial net short positions in both gold and silver yesterday.
In silver, the Commercial net short position [total long positions minus total short positions in that category] declined by 3,313 contracts, or 16.6 million ounces---and the Commercial net short position now stands at 142.2 million troy ounces.
Ted Butler said that the raptors [the Commercial traders other than the Big 8] purchased about 4,100 new long contracts that the technical funds puked up as JPMorgan et al engineered the price lower.  But to add insult to injury, Ted also said that JPMorgan added 1,000 new short contracts to their already grotesque short-side corner---and their short position now sits at an even 20,000 contracts, or 100 million ounces. [Make note of that number, as it resurfaces in my discussion on the Bank Participation Report.]
In gold, the Commercial net short position declined by 13,592 contracts, or 1.36 million troy ounces.  The current net short position is now down to 11.40 million troy ounces.
Ted said that the decline in the Commercial category was virtually all raptor buying of the long contracts [13,400 in total] that the technical funds in the Non-Commercial category were forced to sell.  That number included the 3 or 4,000 contracts that JPMorgan added to their long-side corner in the Comex gold market---and their current long position stands at 43,000 contracts, or 4.3 million troy ounces. Remember that number for later as well.
As wonderful as the COT Report was, I was hoping for more, as the current net short positions in both gold and silver are nowhere near their record lows of late December.  Based on the price action of the last week, I'm not sure if we're going to revisit those lows again in this cycle or not.
As I said in this space yesterday, the numbers in the companion April Bank Participation Report [BPR] are extracted directly from the numbers in the COT Report, so we can compare apples to apples for this one day a month and discover what the world's bullion banks were up to during the last month.  The cut-off for both reports was at the Comex close on Tuesday.
I'll start with silver---and during the reporting month, the price of silver declined by about $1.75---but despite that fact, '3 or less' U.S. banks increased their short position in that metal by 1,852 contracts---and is now up to 20,600 contracts.  But from the COT Report above, Ted said that JPMorgan's net short position was an even 20,000 contracts.  So it appears that virtually the entire net short position in Comex silver held by all U.S. banks [3 or less according to the BPR] is, in fact, only held by one U.S. bank---and that's JPMorgan.  If two other U.S. banks [and they would be Citi and HSBC USA] actually held short positions in Comex silver, they would only be a few hundred contracts at most.  But a safe bet is that JPMorgan Chase is the only U.S. bank with a short position in silver---and the other two U.S. banks are now net long the Comex silver market.
Also in silver, 13 non-U.S. banks---and that's a minimum number--- decreased their net short position in Comex silver by 2,714 contracts.  These non-U.S. banks now hold 14,721 Comex silver contracts net short---and it's always been my opinion [since the October 2012 BPR came out] that Canada's Scotiabank holds well over half of that short position all by itself.  So if you take 8,000 of those 14,721 contracts and assign them to Scotiabank, the remaining 7,000-odd contracts or so divided up between the 12 [minimum] remaining non-U.S. banks become pretty much immaterial in the grand scheme of things.
Here's Nick's most excellent chart showing every Bank Participation Report in silver going back to the turn of the century---and the 'click to enlarge' feature works wonders here.  It's charts 4 and 5 that you should spend the most time on.  And as I say in conjunction with the silver BPR chart every month---note the August 2008 increase in the U.S. banks' short position.  That's when JPMorgan officially took over the silver short position from Bear Stearns.  And also note the blow-out in the Commercial net short position in the non-U.S. banks in October 2012.  That's when Canada's Scotiabank was outed---and had to report their Comex positions as a bank---and could no longer hide behind the skirts of their wholly-owned subsidiary Scotia Mocatta.
In round numbers, gold was down about $70 during the reporting month, however you'd never know that by the way the banks, both U.S. and foreign, reacted during that time.
In gold, '4 or less' U.S. banks that hold Comex contracts actually decreased their net long position by 11,039 contracts---and their net long position now sits at 14,565 contracts---and all of that decrease came from JPMorgan's long position.  Ted mentioned in the COT Report above that JPMorgan has a net long-side corner in Comex gold of 43,000 contracts on its own, so that means that the other 3 U.S. banks must hold a combined net short position of about 28,500 Comex contracts to make the numbers in the BPR balance out.  As to why JPMorgan holds a long-side corner in the Comex gold market---and the other 3 U.S. bullion banks are massively short---is still a mystery to me, but that's the way it's been for about a year now.
Also in gold, 21 non-U.S. banks also went shorter in gold during the reporting month, despite the price decline.  They increased their net short positions by a smallish 2,118 contracts---and their net short position now sits at 38,977 Comex contracts.  It's my opinion that a decent chunk of that is also held by Canada's Scotia Mocatta---at least a third, or around 13,000 contracts.  So the remaining 26,000-odd Comex contracts, once divided up between the other 20 non-U.S. bullion banks are, like in silver, basically immaterial.
In platinum, 4 U.S. bullion banks were short 12,828 Comex contracts, a decline of 2,525 contracts from the March BPR.  These four banks are net short 19.2% of the entire Comex platinum market---and it's a good bet that JPMorgan holds the lion's share of this grotesque short position.
Also in platinum, 13 non-U.S. banks decreased their net short position by 1,336 Comex contracts---and their combined net short positions now sits at 4,928 Comex contracts.  All together, these 13 banks are net short 7.4% of the entire Comex platinum market.  And as you can already tell, divided up between all 13 banks, their positions are immaterial.
In palladium, '3 or less' U.S. bullion banks increased their net short position in this metal to 9,653 contracts in the April BPR.  That's an increase of 1,205 contracts from the March BPR.  These '3 or less' U.S. banks---most likely dominated by JPMorgan as well---are net short 23.5% of the entire Comex palladium market.
Also in palladium, '13 or more' non-U.S. banks decreased their net short position in this metal down to 3,640 contracts, a decline of 773 contracts from the prior reporting month.  These '13 or more' non-U.S. banks are short 8.8% of the entire Comex palladium market---and even without doing the division, their individual positions are immaterial as well.
In a nutshell, JPMorgan went shorter in both silver and gold during the reporting month, even though prices were well down from a month earlier---and even the non-U.S. banks got into the act in gold as well, as they increased their net short position in the face of declining prices.  It's madness.
As I say every month, the precious metals price management scheme is 100% "Made in the U.S.A." with JPMorgan Chase as the capo di tutti capi---with Canada's Scotiabank thrown in for a little international "spice" in silver and gold.

Non redundant news and views....

Top investors press Allianz to step up oversight of Pimco

Several of the biggest investors in Allianz are pressing the German insurer to step up oversight of its California asset management unit Pimco and one is considering the unusual step of going public with its concerns at a shareholder meeting in May.
Reuters contacted the 10 top investors in Allianz as well as smaller shareholders to gauge their views on Pimco, the bond powerhouse whose reputation has been tarnished by a run of poor returns and the departure of CEO Mohamed El-Erian amid a row with co-founder Bill Gross.
Six of the biggest shareholders declined to comment ahead of the Allianz annual general meeting (AGM), scheduled to take place on May 7. One expressed confidence that the German firm was addressing the management and performance issues at Pimco.
This Reuters news item, filed from Frankfurt, was posted on their website very early yesterday morning EDT

Doug Noland: HFT, Rigged Markets and The Man

“The U.S. Commodity Futures Trading Commission is reviewing futures markets to ensure high-speed trading isn’t violating the law, acting CFTC Chairman Mark P. Wetjen told reporters… ‘I don’t have the impression at the moment that futures markets are rigged,’ Wetjen said… He was responding to comments by Michael Lewis, author of the book ‘Flash Boys,’ that investors are being robbed by traders using advanced computers to jump ahead of their trades.”

Charles Schwab stated that “High-frequency trading is a growing cancer that needs to be addressed… High-frequency traders are gaming the system, reaping billions in the process and undermining investor confidence in the fairness of the markets.”

I’m definitely no fan of high-frequency trading (HFT). Still, it’s difficult for me to get all that worked up on this particular issue. I guess I’ve seen too much during my going on 25 years in the financial markets. This week Michael Lewis created a firestorm with his assertion that markets are “rigged.” Are they rigged? There is clearly a prevailing “rigging” element, yet the high-frequency traders are bit players. HFT is symptomatic. They’re not the “cancer.”

Credit is inherently unstable. Always has been. History has also clearly demonstrated that stock markets are prone to destabilizing bouts of exuberance, intense speculation and spectacular boom and bust cycles. Nurture a Credit system dominated by marketable instruments and you’ve created a highly unstable Credit mechanism. Allow marketable securities to inflate to 400% of GDP and you’ve created highly unstable financial and economic systems. Push everyone into a securities market Bubble and then you’re really trapped. Policymaker rationalizations and justifications even foster the delusion that rigging markets is good and reasonable policy.

Doug's weekly Credit Bubble Bulletin, posted on Internet site yesterday evening, falls into the must read category every week---at least for me.

Bond yields to hit fresh lows as world recovery wilts, growls Saxo bear

If you thought I was gloomy about the state of the global economy, try Steen Jakobsen from Saxo Bank. There will be no further recovery. We have already enjoyed the good times for this cycle. It is downhill from now on, or at least very soon.
The rise in average 1-year rates from 1.50pc to 1.95pc in the G10 economies over the last year has already been enough to push the whole fragile edifice over the edge once again – albeit with a lag. “The world is in depression. There is no way it can survive higher rates,” he said.
US 10-year Treasury yields will soon roll over and slowly drop to all-time lows beneath 1.50pc by mid-2015.
The S&P 500 index of stocks on Wall Street will give up all of the QE3 gains, sliding down by almost a quarter to 1,400 in a year-long bear market.
This Ambrose Evans-Pritchard blog showed up on the Internet site yesterday sometime---and it's worth reading.  

Timing the Collapse: Ron Paul Says Watch the Petrodollar

"The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better." ~ Ron Paul
What Ron Paul is referring to here is the petrodollar system. It's one of the main pillars that's been holding up the US dollar's status as the world's premier reserve currency since the breakdown of Bretton Woods.
Paul is essentially saying that, if we want to better understand the answer to the elusive question of "When will the fiat US dollar collapse?", we have to watch the petrodollar system and the factors affecting it.
This timely commentary was posted on the internationalman.comInternet site back in late November of last year---and I thought I'd dust it off in light of the previous story.  

Three King World News Blogs

Secret Service launches probe of O.C. coin dealer Tulving Co.

The Secret Service has opened an investigation into the Tulving Co., an Orange County precious-metals coin dealer under fire for allegedly taking customers’ money but failing to fulfill their orders.
Agency spokesman Max Milien confirmed the probe Tuesday but would not provide specifics, citing an ongoing investigation. In addition to providing security to current and former U.S. leaders and their families, the Secret Service also looks into financial crimes, from major fraud to counterfeit currency.
Meanwhile, the Tulving Co., which many in the industry called a major player, has filed for Chapter 11 bankruptcy protection. The Costa Mesa-based business reportedly owes $1 million to $10 million to as many as 49 creditors, according to a bankruptcy document filed last month.

Alasdair Macleod: Renewed estimates of Chinese gold demand

I have been revisiting estimates of the quantities of gold being absorbed by China, and yet again I have had to revise them upwards. Analysis of the detail discovered in historic information in the context of China's gold strategy has allowed me for the first time to make reasonable estimates of vaulted gold, comprised of gold accounts at commercial banks, mine output and scrap. There is also compelling evidence mine output and scrap are being accumulated by the government in its own vaults, and not being delivered to satisfy public demand.
The impact of these revelations on estimates of total identified demand and the drain on bullion stocks from outside China is likely to be dramatic, but confirms what some of us have suspected but been unable to prove. Western analysts have always lagged in their understanding of Chinese demand and there is now evidence China is deliberately concealing the scale of it from us. Instead, China is happy to let us accept the lower estimates of western analysts, which by identifying gold demand from the retail end of the supply chain give significantly lower figures.
Before 2012 the Shanghai Gold Exchange was keen to advertise its ambitions to become a major gold trading hub. This is no longer the case. The last SGE Annual Report in English was for 2010, and the last Gold Market Report was for 2011. 2013 was a watershed year. Following the Cyprus debacle, western central banks, seemingly unaware of latent Chinese demand embarked on a policy of supplying large quantities of bullion to break the bull market and suppress the price. The resulting expansion in both global and Chinese demand was so rapid that analysts in western capital markets have been caught unawares.

Deposit Insurance System Will Increase Physical Gold Demand in China

Within 2014 the State Council aims to implement a new deposit insurance system for its banks. While one might think this is meant to lower systemic risk, it’s actually meant as a step to shift risk from the government to its citizens. Handing the people the opportunity to be more responsible for their own financial health, introducing more laissez-faire.
The defensive nature of gold in the face of defaults is highlighted. This article concerns depositors, but we should be on the watch for signs that banks themselves are encouraged to hold gold as hedge against financial risks: for this hedge to be effective, the value of gold must rise by a large magnitude to make up for any such systemic losses – if official bailouts are to be avoided. This would mean that a large rise in the price of gold is implied in the policy!


Setting an example is not the main means of influencing others; it is the only means. ~ Albert Einstein 
Today's pop "blast from the past" is from 51 years ago---and don't ask me what happened to all that intervening time.  He was an American singer-songwriter who was a teen idol when I was in my teens in early-to-mid 1960s.  His music was not only popular in North America, he was one of the few American recording artists to enjoy fame on both sides of the Atlantic.  It's been quite a number of years since I've posted it---and it's time for a revisit---and the link is here.
Today's classical blast from the past is an old chestnut by Peter I. Tchaikovsky.  It took him less than a month to compose his classic violin concerto in D major---but what work it was---and it's considered to be among the most technically difficult of all the violin concertos to play, but Dutch violinist Janine Jansen has no problems with it at all, as she and the Frankfurt Radio Symphony Orchestra toss it off in this 19 April 2013 recording posted over at Internet site---and the link is here.  Watch it full screen---and turn the sound way up.
I was happy to see that "da boyz" were a no-show at the release of the jobs number yesterday, but it was equally as obvious that JPMorgan et al weren't going to let things get out of hand, either.
Here are the 6-month charts for both gold and silver.  As you can see, the gold price broke back above the 200-day moving average, but got stopped at the 50-day moving average.
Silver has quite a ways to go before it gets anywhere near its 50 and 200-day moving averages---and it could take awhile if the powers that be continue to hold silver under the $20 spot price mark.
The new situation that has arisen around Russia and the petrodollar could certainly develop into something, as a move away from the dollar in oil payments would certainly not be good news for the U.S. dollar---and we'll have to wait and see how this develops.
It's getting harder to believe that the powers that be can keep the current economic and financial system afloat much longer in the face of what is happening in the world today.  As I said yesterday, if push really becomes shove, then it's my opinion that Russia and China together could end the price management scheme in all four precious metals, but the side effects of that would be pretty enormous---and not all of them positive, at least not in the short term, as the upheaval would be felt world-wide.
But one thing it would end is the fortunes of all the world's rich commodity-producing countries that Chris Powell says "insist on being poor"---and that would change the economic, financial monetary situation in pretty short order.  You have to wonder whether Russia and/or China would chance it, but the fact of that matter is that the current financial order is on its last legs anyway---and it only remains to be seen whether these two countries will be proactive with this---rather than reactive.
Time will tell, I suppose---but how much time is impossible to know.  So we wait.
I'm done for the day---and the week.
Enjoy what's left of your weekend---and I'll see you here on Tuesday.

Additional items......

In Gold We Trust......

Deposit Insurance System Will Increase Physical Gold Demand China

Within 2014 the State Council aims to implement a new deposit insurance system for its banks. While one might think this is meant to lower systemic risk, it’s actually meant as a step to shift risk from the government to its citizens. Handing the people the opportunity to be more responsible for their own financial health, introducing more laissez-faire. I present a translation from a Chinese commentator on this matter, published on March 21, 2014.

Notes from the translator, LK:

The fact the Chinese government is pushing to introduce a nation wide deposit insurance system in 2014 tells a lot; according to the author, we are in an environment of heightened financial uncertainty and default risks. As the West moves for bail-in legislations, the Chinese are heading in the opposite direction.

As Western economies become more and more policy and stimulus driven, socialist China is becoming more market driven, preparing to withdraw official support and let defaults occur to clean up malinvestments and unviable businesses. The first corporate bond default in history happened past February (2014).

Efforts to carefully move towards market driven mechanisms are introduced to the people as government guarantees will slowly be withdrawn, depositors are stimulated to investigate and seek ways to protect themselves.

The defensive nature of gold in the face of defaults is highlighted. This article concerns depositors, but we should be on the watch for signs that banks themselves are encouraged to hold gold as hedge against financial risks: for this hedge to be effective, the value of gold must rise by a large magnitude to make up for any such systemic losses – if official bailouts are to be avoided. This would mean that a large rise in the price of gold is implied in the policy!

Deposit Insurance System Will Increase The Demand For Physical Gold In China

2014 March 21

Author: Liu YuXiang, Research Director, Shandong Zhaojin investment company ltd.

March 5, Premier Li Keqiang in his government work report suggested that one of the main tasks this year is to deepen financial reform, including “the establishment of a deposit insurance system and improve the mechanisms of risk management for financial institutions.” On March 10, central bank governor Zhou Xiaochuan also said the deposit insurance system will be launched within 2014.

“Compulsory insurance”, “bounded compensation” and “different rates for different risks” are important aspects in the design of the deposit insurance system. Bounded compensation meaning that a policy holder will receive compensation in full if the amount is within the stipulated limit. With the introduction of the deposit insurance system, depositors, for the first time, will face the reality that bank deposits may not in fact all be safe and secure.
The limited compensation feature in the deposit insurance system is expected to have bullish effects on the price of gold. In the minds of the Chinese people gold is a hard currency, the asset of minimal risk. For a long time, under the planned economic system, China’s banks were not only riskless but also payed interest, hence the preferred investment channel for many. Under the socialist market economy bankruptcy has become accepted by the public not only in theory but also in practice. Subsequently this particular commodity currency, gold, operating for the potential risks of commercial banks has also been accessible to the public. The deposit insurance system will hike the risk awareness to the general public, with the market speaking out the fact that banks may indeed collapse as the official safety guarantee is withdrawn. People will also start to recognize the message that there are other ways and places, apart from banks, in which they should consider putting their money.

Gold is the most well known strategy against risk and is well recognized by ordinary Chinese people. The insurance safety guarantee may be set at RMB 500,000 which covers more than 99 % of the accounts. The deposits greater than this amount may go seek a type of capital guarantee investment. Although the gold price is now near a two year low, compared to other investment asset classes such as stocks and bonds, gold still has a considerable advantage; in times of heightened financial risk gold should perform better than other asset classes.


Gold is an effective hedge against counter-party risks in deposit losses. After the launch of the deposit insurance policies, those not covered by the insurance guarantee will naturally be more aware of risks and will likely shift some assets into physical gold so as to guard against deposit defaults. Moreover, gold’s high value, stable physical properties and easy storage should make gold a first choice for wealth preservation purposes. Hence, the policy of the new deposit insurance system should raise China’s demand for physical gold, and is bullish for the gold price.

Gold’s safe haven attributes has received fresh attention recently as capital markets have become jittery again: The “11 ChaoRi” default is the first interest bearing corporate bond default in history, and it’s likely to be a first, not a last. More cases of default will definitely have an impact on global capital markets. After “11 ChaoRi”, copper and iron ore prices plunged more than 9 percent, global mining stocks took a dive, followed by market indices. The RMB has also lost value.

Let’s review the history of the United States deposit insurance system. In the 1930s the United States passed the Glass-Steagall Act in order to save the banking system, in 1933 the government established the FDIC bank deposit insurance agency. The deposit insurance system came into operation in 1934 to ensure stability, it was the the world’s first system of this type.

The Chinese economy is facing a lot of problems and we must establish a sound financial and social safety net as soon as possible, preferably before any banking problems surface because prevention is the best crisis management policy. We can see from the tumbling prices of various industrial raw materials and the loss of value of the RMB that China’s economic situation isn’t doing well. In all this, however, gold has stayed firm for the last 3 months. In this environment, the introduction of the deposit insurance system should be expected to push up the safe haven demand for gold.

In Gold We Trust


GOFO Turned Negative AGAIN: The Consequences

Today (April 3, 2014) the one month Gold Forward Offered Rate (GOFO) turned negative again. This is the seventh time since July 8, 2013 this has happened. I would like to share a few thoughts on this.

A few weeks ago when I wanted to see and download GOFO rates these were easily accessible on the LBMA website. This site, however, recently suffered a makeover. A few days ago I couldn’t find the GOFO rates at all, then when I did find them I noted they weren’t allowed to copy! I directly emailed the LBMA about it, this was their response:

The LBMA do not own the gold and silver prices, we publish the prices on our website under an agreement with the London Gold and Silver Fixing companies, who own the data and who are responsible for setting the gold and silver prices on a daily basis. When we launched the new website, this was on condition that we prevented the data from being downloaded or scraped from the site. If you would like to be able to download the data you will require a licence from the Gold and Silver Fixing Companies.

Nice one, no more GOFO data for the average Joe to analyse. I immediately requested a license at the London Gold and Silver Fixing companies to be able to download the GOFO rates. In the meantime I spent a couple of hours manually writing the rates one by one in my excel sheet from the new LBMA website.

Gofo Rates On LBMA site

The LBMA also changed the order of the rates; the last date is now at the top. Just to make things a little easier.

What Is GOFO?

I will just skim the surface here, I will write about GOFO in detail in coming posts. First lets have a look at some equations and what factors determine GOFO to help us understand what GOFO is.

LIBOR (USD loan) – GLR (Gold Lease Rate, XAU loan) = GOFO


LIBOR is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. It’s a benchmark for fiat money interest rates all over the world. Many consumer interest rates like mortgages and credit card loans are derived from LIBOR.

The gold lease rate (GLR) is the interest rate on gold. If a central bank chooses to lend (lease) some of its gold reserves, it agrees on an interest rate with the borrower. For example, the US Treasury, which is the owner of the gold on the Fed’s balance sheet, decides to lend 3 metric tonnes for 1 year to a jeweller against a 2 % interest rate. A year later the jeweller has to repay the US Treasury 3,06 metric tonnes. In this transaction paper gold would be created out of thin air, as at the start of the lease the gold would be physically transported to the jeweller but would remain on the Treasury’s balance sheet as gold receivable (assuming the Treasury would disclose the distinction between gold and gold receivables). Double counting the same gold creates gold. When the gold loan is payed back by the jeweller the created gold vanishes. Just as in fractional reserve banking at commercial banks.

Gold loans exist in various forms, they can also be done through a book entry at a bullion bank without physically moving gold. The GLR is determined by supply (gold lenders) and demand (gold borrowers) in the gold market.

The Consequences Of Negative GOFO

From looking at the equations we can conclude GOFO is the difference in interest rate between US dollars (USD) and gold (XAU). When the three months GOFO is negative, it means the interest rate to borrow XAU for three months is higher than the interest rate to borrow USD for three months; there is more demand for XAU than USD. This suggests the value of gold expressed in dollars will rise.

Bear in mind we live in a ZIRP bubble bath, there is such USD supply (out of thin air) that LIBOR is exorbitant low.

Nevertheless in the following chart we can see that when GOFO is trending down the price of gold (XAUUSD) is pushed up.

 GOFO goldprice

In the above chart I made the negative GOFO periods grey. The gold price (right axis) tends to go up in these periods. If GOFO persists to trend lower it’s very likely the price of gold will rise. When we look back a couple of years, we can see that every time GOFO dipped in negative territory a strong bull market in gold followed. I expect to see the same in coming years.

GOFO history

The Real Asset Co. Buy Gold Online

Deutsche bank that recently announced to stop participating in the London gold fix (and is one of the banks under investigation of manipulating the London gold fix) wrote this on GOFO, from their Quarterly Commodities Report April 2013:

Historically, GOFO rates have only been negative twice since 1999, but have frequently moved into negative territory over the past year. We believe this is a result of on going large shift of gold from the west to the east. More recently, with GOFO turning positive, it suggests that physical tightness has eased at least in the near term.

Well guess what, GOFO is back negative again and the west to east gold exodus is long from over.

In Gold We Trust

PS I wrote this post in HTML code because my server is having some trouble again. I will update this posts with related links and more info if I can get better access to the server.

Russia increasingly understands its international leverage with 

oil, gas, and gold

Lawmakers Call on Oil and Gas Producers to Ditch 'Dirty, Bloody Dollar'
From Russia Today, Moscow
Thursday, April 3, 2014
A group of lower house members of Parliament are urging Russian oil and gas producers and traders to stop using the US dollar. They say this means sharing profits with the United States and making Russia vulnerable to Western sanctions.
"The dollar is evil. It is a dirty green paper stained with blood of hundreds of thousands of civilian citizens of Japan, Serbia, Afghanistan, Iraq, Syria, Libya, Korea, and Vietnam," one of the authors of the motion, Mikhail Degtyaryov of the conservative nationalist party LDPR, said in an interview with Izvestia daily.
Degtyaryov also said that Russia already had a bilateral agreement with China allowing payment in national currencies and this proved that such step was possible.

"Our national industrial giants will not suffer any losses if they choose to make contracts in rubles or other alternative currencies," the MP said. "Russia will benefit from that. We should act paradoxically when we deal with the West. We will sell rubles to consumers of our oil and gas, and later we will exchange rubles for gold. If they don’t like this, let them not do this and freeze to death. Before they adjust, and this will take them three of four years, we will collect tremendous quantities of gold. Russian companies will at last become nationally oriented and stop crediting the economy of the US that is openly hostile to Russia.”
Degtyaryov is known for drafting an official bill banning the US dollar in Russia. He told reporters that this document has been recalled from parliament and amended with a ban on the euro and promised to resubmit the new draft to the lower house in the near future.
On Wednesday the head of leading state-owned bank VTB, Andrey Kostin, also urged Russia to start transitioning to ruble payments with all its trading partners, including China and Western Europe. Kostin also said the switch should begin as soon as possible and that exporting companies should lead the way in adopting the change. According to the banker the plan could help to lower the country's dependency on "the whims of US and EU authorities."
However, industry experts have warned against hasty moves, saying that sometimes the transition to a different currency was simply impossible.
The head of the Trade and Industry Chamber's committee for financial markets, Yakov Mirkin, said that at present the international practice was to calculate oil and gas prices in US dollars as the international reserve currency. "We cannot swim against the current. This is how the whole thing works. Maybe such a thing will be possible in 10 or 15 years, but not today," Mirkin noted.
The head of the public relations department of the Russian state oil corporation Rosneft, Mikhail Leontyev, said that his company was bound by contract obligations and the fast switch to a different currency was simply impossible.

 Full Alasdair Macleod missive on China's gold demand - a must read !  Absolutely stunning and it really places into play the questions of whether China is now in control of the world gold market  and if so , what do they do next ? Just look at the last chart summarizing China demand - will blow your shoes off your feet ! 

Renewed estimates of Chinese gold demand

Geopolitical and market background

I have been revisiting estimates of the quantities of gold being absorbed by China, and yet again I have had to revise them upwards. Analysis of the detail discovered in historic information in the context of China's gold strategy has allowed me for the first time to make reasonable estimates of vaulted gold, comprised of gold accounts at commercial banks, mine output and scrap. There is also compelling evidence mine output and scrap are being accumulated by the government in its own vaults, and not being delivered to satisfy public demand.

The impact of these revelations on estimates of total identified demand and the drain on bullion stocks from outside China is likely to be dramatic, but confirms what some of us have suspected but been unable to prove. Western analysts have always lagged in their understanding of Chinese demand and there is now evidence China is deliberately concealing the scale of it from us. Instead, China is happy to let us accept the lower estimates of western analysts, which by identifying gold demand from the retail end of the supply chain give significantly lower figures.
Before 2012 the Shanghai Gold Exchange was keen to advertise its ambitions to become a major gold trading hub. This is no longer the case. The last SGE Annual Report in English was for 2010, and the last Gold Market Report was for 2011. 2013 was a watershed year. Following the Cyprus debacle, western central banks, seemingly unaware of latent Chinese demand embarked on a policy of supplying large quantities of bullion to break the bull market and suppress the price. The resulting expansion in both global and Chinese demand was so rapid that analysts in western capital markets have been caught unawares.
I started following China's gold strategy over two years ago and was more or less on my own, having been tipped off by a contact that the Chinese government had already accumulated large amounts of gold before actively promoting gold ownership for private individuals. I took the view that the Chinese government acted for good reasons and that it is a mistake to ignore their actions, particularly when gold is involved.
Since then, Koos Jansen of has taken a specialised interest in the SGE and Hong Kong's trade statistics, and his dedication to the issue has helped spread interest and knowledge in the subject. He has been particularly successful in broadcasting market statistics published in Chinese to a western audience, overcoming the lack of information available in English.
I believe that China is well on the way to having gained control of the international gold market, thanks to western central banks suppression of the gold price, which accelerated last year. The basic reasons behind China's policy are entirely logical:
• China knew at the outset that gold is the west's weak spot, with actual monetary reserves massively overstated. For all I know their intelligence services may have had an accurate assessment of how much gold there is left in western vaults, and if they had not, their allies, the Russians, probably did. Representatives of the People's Bank of China will have attended meetings at the Bank for International Settlements where these issues are presumably openly discussed by central bankers.
• China has significant currency surpluses under US control. By controlling the gold market China can flip value from US Treasuries into gold as and when it wishes. This gives China ultimate financial leverage over the west if required.
• By encouraging its population to invest in gold China reduces the need to acquire dollars to control the renminbi/dollar rate. Put another way, gold purchases by the public have helped absorb her trade surplus. Furthermore gold ownership insulates her middle classes from external currency instability which has become an increasing concern since the Lehman crisis.
For its geopolitical strategy to work China must accumulate large quantities of bullion. To this end China has encouraged mine production, making the country the largest producer in the world. It must also have control over the global market for physical gold, and by rapidly developing the SGE and its sister the Shanghai Gold Futures Exchange the groundwork has been completed. If western markets, starved of physical metal, are forced at a future date to declare force majeure when settlements fail, the SGE and SGFE will be in a position to become the world's market for gold. Interestingly, Arab holders have recently been recasting some of their old gold holdings from the LBMA's 400 ounce 995 standard into the Chinese one kilo 9999 standard, which insures them against this potential risk.
China appears in a few years to have achieved dominance of the physical gold market. Since January 2008 turnover on the SGE has increased from a quarterly average of 362 tonnes per month to 1,100 tonnes, and deliveries from 44 tonnes per month to 212 tonnes. It is noticeable how activity increased rapidly from April 2013, in the wake of the dramatic fall in the gold price. From January 2008, the SGE has delivered from its vaults into public hands a total of 6,776 tonnes. This is illustrated in the chart below.
SGE Gold monthly (kg)
This is only part of the story, the part that is in the public domain. In addition there is gold imported through Hong Kong and fabricated for the Chinese retail market bypassing the SGE, changes of stock levels within the SGE's network of vaults, the destination of domestic mine output and scrap, government purchases of gold in London and elsewhere, and purchases stored abroad by the wealthy. Furthermore the Chinese diaspora throughout South East Asia competes with China for global gold stocks, and its demand is in addition to that of China's Mainland and Hong Kong.
The Shanghai Gold Exchange (SGE)The SGE, which is the government-owned and controlled gold exchange monopoly, runs a vaulting system with which westerners will be familiar. Gold in the vaults is fungible, but when it leaves the SGE's vaults it is no longer so, and in order to re-enter them it is treated as scrap and recast. In 2011 there were 49 vaults in the SGE's system, and bars and ingots are supplied to SGE specifications by a number of foreign and Chinese refiners. Besides commercial banks, SGE members include refiners, jewellery manufacturers, mines, and investment companies. The SGE's 2010 Annual Report, the last published in English, states there were 25 commercial banks included in 163 members of the exchange, 6,751 institutional clients accounting for 81% of gold traded, and 1,778,500 clients of the commercial banks with gold accounts. The 2011 Gold Report, the most recent available, stated that the number of commercial bank members had increased to 29 with 2,353,600 clients, and given the rapid expansion of demand since, the number of gold account holders is likely to be considerably greater today.
About 75% of the SGE's gold turnover is for forward settlement and the balance is for spot delivery. Standard bars are Au99.95 3 kilos (roughly 100 ounces), Au99.99 1 kilo, Au100g and Au50g. The institutional standard has become Au99.99 1 kilo bars, most of which are sourced from Swiss refiners, with the old Au99.95 standard less than 15% of turnover today compared with 65% five years ago. The smaller 100g and 50g bars are generally for retail demand and a very small proportion of the total traded. Public demand for smaller bars is satisfied mainly through branded products provided by commercial banks and other retail entities instead of from SGE-authorised refiners.
Overall volumes on the SGE are a tiny fraction of those recorded in London, and the market is relatively illiquid, so much so that opportunities for price arbitrage are often apparent rather than real. The obvious difference between the two markets is the large amounts of gold delivered to China's public. This has fuelled the rapid growth of the Chinese market leading to a parallel increase in vaulted bullion stocks, which for 2013 is likely to have been substantial.
By way of contrast the LBMA is not a regulated market but is overseen by the Bank of England, while the SGE is both controlled and regulated by the People's Bank of China. The PBOC is also a member of both its own exchange and of the LBMA, and deals actively in non-monetary gold. While the LBMA is at arm's length from the BoE, the SGE is effectively a department of the PBOC. This allows the Chinese government to control the gold market for its own strategic objectives.

Quantifying demand

Identifiable demand is the sum of deliveries to the public withdrawn from SGE vaults, plus the residual gold left in Hong Kong, being the net balance between imports and exports. To this total must be added an estimate of changes in vaulted bullion stocks.
SGE gold deliveriesGold deliveries from SGE vaults to the general public are listed both weekly and monthly in Chinese. The following chart shows how they have grown on a monthly basis.
SGE Gold monthly (kg)
Growth in public demand for physical gold is a reflection of the increased wealth and savings of Chinese citizens, and also reflects advertising campaigns that have encouraged ordinary people to invest in gold. Advertising the attractions of gold investment is consistent with a deliberate government policy of absorbing as much gold as possible from western vaults, including those of central banks.
Hong KongHong Kong provides import, export and re-export figures for gold. All gold is imported, exports refer to gold that has been materially altered in form, and re-exports are of gold transited more or less unaltered. Thus, exports refer mainly to jewellery which in China's case is sold directly into the Mainland without going through the SGE, and re-exports refer to gold in bar form which we can assume is delivered to the SGE. Some imported gold remains on the island, and some is re-exported from China back to Hong Kong. This gold is either vaulted in Hong Kong or alternatively turned into jewellery and sold mostly to visitors from the Mainland buying tax-free gold.
The mainstream media has reported on the large quantities of gold flowing from Switzerland to Hong Kong, but this is only part of the story. In 2013, Hong Kong imported 916 tonnes from Switzerland, 190 tonnes from the US, 176 tonnes from Australia and 150 tonnes from South Africa as well as significant tonnages from eight other countries, including the UK. She also imported 337 tonnes from Mainland China and exported 211 tonnes of it back to China as fabricated gold.
Hong Kong is not the sole entry port for gold destined for the Mainland. The table below illustrates how Hong Kong's gold trade with China has grown, and its purpose is to identify gold additional to that supplied via Hong Kong to the SGE. Included in the bottom line, but not separately itemised, is fabricated gold trade with China (both ways), as well as the balance of all imports and exports accruing to Hong Kong.
Hong Kong plus fabricated supplies
The bottom line, "Additional supply from HK" should be added to SGE deliveries and changes in SGE vaulted gold to create known demand for China and Hong Kong.
SGE vaulted goldThe increase in SGE vaulted gold in recent years can only be estimated. However, it was reported in earlier SGE Annual Reports to amount to 519.55 tonnes in 2008, 582.6 tonnes in 2009, and 841.8 tonnes in 2010. There have been no reported vault figures since.
The closest and most logical relationship for vaulted gold is with actual deliveries. After all, public demand is likely to be split between clients maintaining gold accounts at member banks, and clients taking physical possession. The ratios of delivered to vaulted gold were remarkably stable at 1.05, 1.03, and 0.99 for 2008, 2009 and 2010 respectively. On this basis it seems reasonable to assume that vaulted gold has continued to increase at approximately the same amount as delivered gold on a one-to-one basis. The estimated annual increase in vaulted gold is shown in the table below.
Vaulted gold
The benefits of vault storage, ranging from security from theft to the ability to use it as collateral, seem certain to encourage gold account holders to continue to accumulate vaulted metal rather than take personal possession.


Supply consists of scrap, domestically mined and imported gold
ScrapScrap is almost entirely gold bars, originally delivered from the SGE's vaults into public hands, and subsequently sold and resubmitted for refining. Consequently scrap supplies tend to increase when gold can be profitably sold by individuals in a rising market, and they decrease on falling prices. There is very little old jewellery scrap and industrial recycling is not relatively significant. Official scrap figures are only available for 2009-2011: 244.5, 256.3 and 405.8 tonnes respectively. I shall therefore assume scrap supplies for 2012 at 430 tonnes and 2013 at 350 tonnes, reflecting gold price movements during those two years.
Scrap is refined entirely by Chinese refiners, and as stated in the discussion concerning mine supply below, the absence of SGE standard kilo bars in Hong Kong is strong evidence that they are withheld from circulation. It is therefore reasonable to assume that scrap should be regarded as vaulted, probably held separately on behalf of the government or its agencies.
Mine supplyChina mines more gold than any other nation and it is generally assumed mine supply is sold through the SGE. That is what one would expect, and it is worth noting that a number of mines are members of the SGE and do indeed trade on it. They act as both buyers and sellers, which suggests they frequently use the market for hedging purposes, if nothing else.
Typically, a mine will produce doré which has to be assessed and paid for before it is forwarded to a refinery. Only when it is refined and cast into standard bars can gold be delivered to the market. Broadly, one of the following procedures between doré and the sale of gold bars will occur:
• The refiner acts on commission from the mine, and the mine sells the finished product on the market. This is inefficient management of cash-flow, though footnotes in the accounts of some mine companies suggest this happens.
• The refiner buys doré from the mine, refines it and sells it through the SGE. This is inefficient for the refiner, which has to find the capital to buy the doré.
• A commercial bank, being a member of the SGE, finances the mine from doré to the sale of deliverable gold, paying the mine up-front. This is the way the global mining industry often works.
• The government, which ultimately directs the mines, refiners and the SGE, buys the mine output at pre-agreed prices and may or may not put the transaction through the market.
I believe the government acquires all mine output, because it is consistent with the geopolitical strategy outlined at the beginning of this article. Furthermore, two of my contacts, one a Swiss refiner with facilities in Hong Kong and the other a vault operator in Hong Kong, tell me they have never seen a Chinese-refined one kilo bar. Admittedly, most one kilo bars in existence bear the stamp of Swiss and other foreign refiners, but nonetheless there must be over two million Chinese-refined kilo bars in existence. Either Chinese customs are completely successful in stopping all ex-vault Chinese-refined one kilo bars leaving the Mainland, or the government takes all domestically refined production for itself, with the exception perhaps of some 100 and 50 gram bars. Logic suggests the latter is true rather than the former.
Since the SGE is effectively a department of the PBOC, it must be at the government's discretion if domestic mine production is put through the market by the PBOC. Whether or not Chinese mine supply is put through the market is impossible to establish from the available statistics, and is unimportant: no bars end up in circulation because they all remain vaulted. It is material however to the overall supply and demand picture, because global mine supply last year drops to about 2,490 tonnes assuming Chinese production is not available to the market.
Geopolitics suggests that China acquires most, if not all of its own mine and scrap production, which accumulates in the vaulting system. This throws the emphasis back on the figures for vaulted gold, which I have estimated at one-for-one with delivered gold due to gold account holder demand. To this estimate we should now add both Chinese scrap and mine supply. This would explain why vaulted gold is no longer reported, and it would underwrite my estimates of vaulted gold from 2011 onwards.
Further comments on vaulted goldFrom the above it can be seen there are three elements to vaulted gold: gold held on behalf of accountholders with the commercial banks, scrap gold and mine supply. The absence of Chinese one kilo bars in circulation leads us to suppose scrap and mine supply accumulate, inflating SGE vault figures, but a moment's reflection shows this is too simplistic. If it was included in total vaulted gold, then the quantity of gold held by accountholders with the commercial banks, as reported in 2009-11, would have fallen substantially to compensate. This cannot have been the case, as the number of accountholders increased substantially over the period, as did interest in gold investment.
Therefore, scrap and mined gold must be allocated into other vaults not included in the SGE network, and these vaults can only be under the control of the government. It will have been from these vaults that China's sudden increase in monetary gold of 444 tonnes in the first quarter of 2009 was drawn, which explains why the total recorded in SGE vaults was obviously unaffected. So for the purpose of determining the quantity of vaulted gold, scrap and mined gold must be added to the gold recorded in SGE vaults.
Though it is beyond the scope of this analysis, the existence of government vaults not in the SGE network should be noted, and given cumulative mine production over the last thirty years, scrap supply and possibly other purchases of gold from abroad, the bullion stocks in these government vaults are likely to be very substantial.

Western gold flows to China

We are now in a position to estimate Chinese demand and supply factors in a global context. The result is summarised in the table below.
Global demand and supply
Chinese demand before 2013 had arrived at a plateau, admittedly higher than generally realised, before expanding dramatically following last April's price drop. Taking the WGC's figures for the Rest of the World gives us new global demand figures, which throw up a shortfall amounting to 9,461 tonnes since the Lehman crisis, satisfied from existing above-ground stocks.
This figure, though shocking to those unaware of these stock flows, could well be conservative, because we have only been able to address SGE deliveries, vaulted gold and Hong Kong net flows. Missing from our calculations is Chinese government purchases in London, demand from the ultra-rich not routed through the SGE, and gold held by Chinese nationals abroad. It is also likely that demand from the Chinese diaspora in SE Asia and Asian is also underestimated by western analysts.
There are assumptions in this analysis that should be clear to all. But if it only serves to expose the futility of attempts in western capital markets to manage the gold price, the exercise has been worthwhile. For much of 2013 commentators routinely stated that Asian demand was satisfied from ETF redemptions. But as can be seen, ETF sales totalling 881 tonnes covered only one quarter of the west's shortfall against China, the rest coming mostly from central bank vaults. Anecdotal evidence from Switzerland is that the four major refiners have been working round-the-clock turning LBMA 400 ounce bars into one kilo 9999 bars for China. They are even working with gold bars that are battered and dusty, which suggests the west is not only digging into deep storage to satisfy Chinese demand at current prices, but digging a hole for itself as well.

I think Jim Willie is spot on and this ties directly into China's gold move ......

The shocks will be many as the USDollar struggles and falls off the global financial stage in full view. The desperate maneuvers like in Syria and Ukraine should be seen as last ditch efforts to save a dying system. For two decades the USDollar has been defended by military means. Worse, for 50 years the USGovt has been a hidden nazi enclave of wicked fascists who have hidden behind their overt disdain for communism, with Kissinger the flag bearer, with Brzezinski the ideologue, with Papa Bush the executor, with narcotics and genetics and gold thefts their principal agenda. The official US support of fascist regimes includes a list of nations as long as your arm. Since 2008 when the Lehman kill was executed in order to rescue Goldman Sachs, when Fannie Mae was hidden under the USGovt roof to prevent its $trillion fraud from being exposed, and when AIG was tucked in the USFed basement closet for ample monetized rescues to patch the derivative black holes, the Anglo-American banking system has indeed been going through trials and tribulations, leading to its death throes. The climax of the banking system death process is upon us finally, the fibrillations of sudden illiquidity against the backdrop of relentless unforgiving insolvency so evident to those with eyes that function. Never before has the USGovt been so plain in its fascist ways, with abuses on domestic soil and installed nazi regimes on foreign soil. They kill economies systematically. They wage war relentlessly, using it as a business initiative. They control bank movements obsessively. They monitor human movement compulsively. In Kiev were seen the swastikas on armbands. The name Neo-Con is derived as a more palatable version of Neo-Nazi. The game is over for their captured gutted violated USDollar kingdom in a veritable killing field of nations.

The entire world must create a more workable system, an equitable system. The banking structures and trading systems require it. No longer can the Anglo-American free credit card be tolerated. No longer can the exporting nations accept vendor financed trade, the credit extended by the producers. No longer can the world be subjected to USMilitary aggression, financed by the victim nations. No longer can a deeply corrupted and immoral pack of leaders be permitted to roam in privileged channels. No longer can absent criminal prosecution be forced upon the masses. No longer can the battle among vile secular bankers and satanic bankers and bankers from the Sanhedrin tree be permitted in the open. No longer can the battle go on for tight global control with liberties tossed in the dustbin. The path to totalitarianism financed by narcotics in a magnificent undertow must be interrupted, the Orwellian world within view.

The Paradigm Shift is far along, no more an infant project. The Western leading nations have transformed into the Axis of Fascism. The Eastern leading nations have emerged as seeking viable fair solutions, essentially a return to the Gold Standard. The physical gold migration from London and Switzerland proves the shift in power underway. The swing nations of Germany, Saudi Arabia, Turkey, India, and Iran will play pivotal roles in shaping the future. The year 2014 will not end with any remote resemblance to its start.

Ukraine was clearly the Waterloo event for the USDollar, which requires the passage of time for critical changes in psychology and perception. Putin is in no hurry. Besides, when Russia does respond, it will be on the financial and economic front, where the US & British puppeteers are legless and without moral spine. The US-led Western NATO forces, joined by secretive mercenary forces and Blackstone thugs, invaded Ukraine and thereby fell into a significant trap set by Putin. The Germans had been making important moves toward a deeper alliance with Russia. The first interruption was Cyprus, where Russian banks conduct intermediary operations and where GazpromBank has offices, and where the Russians were purchasing gold in large quantities. The second interruption was Syria, where the Russians were working steadfastly to establish the Iran Shiite gas pipelines for Gazprom system integration, which would (will) supply the Western European market. The third interruption is Ukraine, the last ditch attempt to cut Russia off from Eastern Europe, using Western energy firms as the leverage device. Under the cloud of confusion, the Western fascists stole the Ukrainian central bank gold and diverted $70 billion of public funds into Swiss banks. The world is on the path to demanding a solution, as the fascists are being recognized and called out. The world demands a viable solution. It is coming. It will shake the world.

Since the Black Monday 1987 event, the big US money center banks became dependent upon narco money laundering functions. Since the 2003 wars with Iraq and Afghanistan, the big US banks would fail without the steady narco fund injections. Managing reserve efficacy requirements in overnight accounting has become a daily challenge. In the following decade, these big banks, together with the big London banks, joined in service by the big French and German banks, have lashed themselves together with derivative rope, while working in deep collusion to rig the LIBOR, the FOREX, and the GOLD markets. The bold crimes and illicit activity and blatant malfeasance are in the open nowadays, have been in the open for over two years, yet without any semblance of prosecution, remedy, or restitution. The regulators continue in their musical chair exercises, which include sitting on their hands while saluting their bank masters. The big US banks have become control centers for criminal interventions in some bizarre service to preserve a corrupted system, while crafting legislation in the USCongress that serves their purposes. Their big bank structures are as filled with toxic matter as they are crime syndicate vault stores. The world demands a viable solution. It is coming. It will shake the world.

It has become comical that supposed experts actually believe certain markets to be viable, or offer value, or present opportunity. The following financial markets are deeply corrupted and heavily controlled. USTreasury Bonds are maintained by direct unsterilized USFed monetization and bond purchases, reinforced by Interest Rate Swap derivative contracts. The USTBond market controls are furthermore blessed as the new normal, a stabilizing force, in almost full consensus. The US Stock market is maintained by the Working Group for Financial Markets, when the Wall Street banks are subject to fatigue. The USDollar is maintained by the USDept Treasury’s favorite tool, the Exchange Stabilization Fund, which employs FOREX derivatives with its army of Western banker tools. The Crude Oil market is maintained by the Wall Street trading desks, but to a lesser extent of control in recent months, as the Saudi Petro-Dollar is fast fading into the annals of history. The Gold market is maintained by Wall Street naked shorts, in concert with London bank naked shorts, aided by SPDR Gold Trust inventory raids, aided by denied COMEX deliveries, all under the sleepy eyes of the Commodity Futures Trading Commission. The US Big Bank stocks are maintained by phony accounting blessed by the Financial Accounting Standard Board, which overlooks the falsified portfolios for their asset values and hollowed out reserves. One could go on further. The world demands a viable solution. It is coming. It will shake the world.

The global banking system cannot continue to function with USTreasury Bonds as reserve capital. It is not pristine, not of high value, not of any value really. The USTBonds are toxic paper that serves as phantom foundation for the Western banking system. The fiat currencies are backed by debt which is falling apart into crumbs on the floor. The USTBonds cannot be called AAA-rated much longer, since they are from a nearly infinite USGovt debt balance sheet, when considering unfunded liabilities. The global banking system suffers from acute blood contamination. The bank welfare, the social network, the broad-based pensions, the war costs, these have bankrupted the USGovt balance sheet at a time when the USEconomy fails to recover, except when the Weimar rose colored glasses are worn for perception visual aids. The world demands a viable solution. It is coming. It will shake the world.

The backlash to the widely approved USFed hyper monetary inflation policy has finally come. The backlash actually began last September 2013 when the pathetic trial balloon from Taper Talk had its bluff called. The outcome was the stark realization that the QE to Infinity was actual policy, cheered on by the financial markets, begged by the US corporate captains of industry, who both urgently require credit faucets to flow. The global fallout has included higher food prices, higher business cost structure in every nation, shuttered businesses, and profound economic deterioration, which has resulted in widespread capital destruction. Anyone like Michael Pento (see CNBC last days of March) who calls the USFed policy destructive is wiped clean. The entire Eastern world is demanding an end to the debasement of USD-based assets and reserves, along with the harmful influence to lift cost structures everywhere. The world demands a viable solution. It is coming. It will shake the world.

The Eastern nations have had enough of the Anglo-American hegemony (called bullying or criminal force feeding). They dislike the usual weapons used such as Bank SWIFT blocks, bank center obstacles, sanctions against companies doing business with labeled rogue nations, interrupted contract bidding, and more. The Eastern nations began banding together with the G-20 Meetings, then put the G-7 and G-8 into the shadows, then built the BRICS nation consortium. Finally they are constructing the potent BRICS Development Bank and the BRICS Central Bank and the BRICS communications network. Their central bank is the sleeper cell in the mix. It will be revealed soon as the processing center to convert USTBonds to Gold bullion. Later it will convert other major nation sovereign debt to Gold bullion, like UKGilts, EuroBonds, and JapGovtBonds. The Eastern nations have acted in unison, shown solidarity, worked in coordinated channels, and seek common goals. They are a force to be reckoned with, while the G-7 diminishes into a mist of a faded empire. Out of the BRICS will come new organizations and institutions that fortify the East and display in full force the Global Paradigm Shift. The BRICS and G-20 are the agents to the shift, led by Russian & Chinese projects, pacts, accords, and initiatives. It is coming. It will shake the world.

When the USGovt imposed sanctions against Iran in 2012, the chest beating was in full view. The celebrations took place before the battles were waged, and then lost. The British and European Governments followed suit, like the goose stepped phalanx they represent, all done in full view. The primping in the mirror was in full view. The browbeating was in full view. The handshakes were in full view. The banker-led Western governments were very impressed with themselves. The Jackass at the time mocked them at every opportunity and every turn, for their futile efforts and self-aggrandizement. The triangle or Iran, Turkey, and India defeated the USGovt sanctions with clever gold trade settlement schemes, using intermediaries, avoiding legal obstacles, and accomplishing the task to make payments for Iranian oil & gas shipments. The US left a door open for Iranian companies to serve as mules to deliver gold bullion, gold that was provided by Turkish banks acting as intermediaries. The Indian energy customer found a way to make payment to Iran. The sanctions workaround was born. It will serve as a model in defiance to the Western clown show, which erected a veritable Maginot Line that the Persian mules jumped over. How pathetic the arrogance of the Anglo-American banker hacks! The Gold Trade settlement has a prototype, developed but in need of some refinement. The Gold Standard will return, not in bank transfer platforms or currency trading platforms, but in peer-to-peer transactions made in settlement. The world demands a new payment system, an alternative to the deeply flawed USD-centric current system. Even effective viable barter systems are to emerge. It is coming. It will shake the world.

A year ago, the Shanghai crowd began the highly disruptive practice of permitting a higher gold futures contract price, when compared to the corrupted suppressed New York and London price. Perhaps some extra optimism was involved, hoping for wide premiums in Shanghai versus NY/London. However, even 2% to 3% is sufficient to promote arbitrage and a gradual but significant drainage of gold bullion, leaving London and entering Hong Kong and Shanghai. Next comes the Shanghai crude oil futures contract, to be priced in Chinese Yuan terms. The new Shanghai Free Trade Zone is fast forming. It will feature fully convertible Chinese Yuan by June, not in two years. It will happen this summer. The component of Shanghai Yuan price for crude oil and gold together will be highly disruptive to the entire Petro-Dollar system. The endorsement must come from the Saudis, which will happen on cue. It will spawn the Petro-Yuan, to first challenge the Petro-Dollar, then displace it. The foundation for the USDollar is fracturing in full view. It is coming. It will shake the world.

Russia is the true powerhouse in the crude oil sector. The Saudis are yesterday’s news, as their excess capacity is non-existent. Their water cut is over 90% in the giant Ghawar, meaning its fields produce almost ten times as much brine water as crude oil. The Russians have the excess capacity and will begin to flex their energy muscles very soon. Price is determined at the margin, not the myth or false billboard. The focus has been on natural gas, but the oil & gas will be double barreled shot gun applied to alter the European hearts and minds. The Jackass forecasts that the Kremlin will announce that oil & gas payments by European clients must be in Rubles, Yuan, or Gold bullion. The surprise will be inclusion of Yuan for potential payments to Russia, which will demonstrate an alliance with China. Thoughts and threats of isolating Russia are as absurd as notions of gold sitting in FortKnox. A nation with twelve time zones cannot be encircled. The payments for Russian energy sales in Yuan terms will be a significant part of the Petro-Yuan system to emerge. Moreover, the Russians can use the Yuan to purchase finished products from China, and to aid the internationalization of the Yuan itself. Some serious back scratching is about to be exhibited by the Eastern Dynamic Duo. It is coming. It will shake the world.

Naturally, the world’s biggest oil importer will work to set terms for its own purchase of crude oil. They will hasten a change from any present system that requires them to pay for Saudi oil, or Iranian oil, or Indonesian oil, or Nigerian oil, the change to feature payment in USDollar terms. They have sufficient market power to dictate terms, and they will do exactly that. They will insist on purchasing oil imports with transactions completed in Chinese Yuan payments. They will strongarm the Saudis into accepting Yuan payments, and the entire cast of weakling OPEC players will follow the leader. The Petro-Yuan will be born in Saudi Arabia, with a Beijing phone call. It is coming. It will shake the world.

The Saudis are in a huge bind. They lost their USGovt protector for the last 50 years. They need a new protector in order to continue the pilferage and plunder of the desert kingdom’s natural wealth. It is hardly a royal family asset, but the West enables it to be exactly so. The Arab Spring charade and smokescreen effectively ripped the cord between the WashingtonDC and Riyadh. The turning point was Egypt, where the US engineered a Morsi regime installment, which the Saudis quickly eradicated. Now the dirty little secret is that the Saudis are more in control of the Suez Canal than the US and British gangsters, where Persian Gulf oil for the European market must make passage. But the Persian Gulf needs more unity, and needs a cohesive agent, which must be design sail some impressive ships and sport some hefty guns. The Chinese not only fit the bill, but the Saudis have already answered the call. The economic summit in late March in Beijing, led by President Xi Jinping and Prince Salman, provided all the necessary groundwork. The Saudis have a Chinese missile deal in the works, sort of a consummated marriage. The Saudis will soon announce, while standing under the Chinese umbrella, that any oil payments are acceptable in USDollars, Chinese Yuan, Euros, British Pounds, Swiss Francs, and Japanese Yen. The Saudis will transform themselves into an equal opportunity crude oil mart with many working windows. They will kneel before all fiat paper princes, including the King Dollar. It is coming. It will shake the world.

The influence of OPEC will fade with the Saudi desert sun. The OPEC cartel serves as the Petro-Dollar active platform to enforce the payment system in USDollar terms. Deviations invite USMilitary reaction. See Iraq, dateline 2003. See Iran, dateline 2012. Oil policy is dominated by the Saudis in the OPEC meetings, often held in Vienna. The Arab Royals like to get out of the office and mingle, even see the world that is not sun scorched. In order to comply with the Chinese new leadership in the oil and currency nexus, the Saudis will have to swallow hard and permit the Iranians to become a leading player within the NatGasCoop. It will supplant OPEC. It will be led by Russian Gazprom. It will not be dominated by oil transport ships, but rather by natgas pipelines. The key new ports will be in Syria, in Israel, with connector valves to Greece, Ukraine, and soon Pakistan. What OPEC is to the Petro-Dollar, the NatGasCoop will be to the Petro-Yuan. The risk to the Arab kingdoms is a return to desert tents and away from palaces. The coop cartel will include strange bedfellows like Iran, Qatar, Israel, Turkmenistan, Algeria, and Russia. It is coming. It will shake the world.

The grand prize has always been Europe. With NATO, the United States captured it. But with bond fraud, failed banks, monetary inflation, toxic patches, austerity plans, bank bail-in threats, agency eavesdropping, and narcotics trafficking, the Anglo-Americans have wrecked their alliance with Western Europe. The clincher and breaking point will be action in Ukraine. The USGovt has been in violation of NATO Treaties forged with Russia ever since 2004 when the defensive missile shield was put in place in Eastern Europe. At the same time, the US courted certain eastern nations to join NATO in a real big stretch. The stretch to impose a nazi regime in Kiev is the final straw. The European nations are splintering away from the US fold, one by one. The reasons stated appear to be financial in uniform fashion. The London bankers and the German bankers will not forego the lucrative Yuan Bond trade, just for a lousy two bits in Ukraine. Besides, they did not share in the looted Ukraine central bank gold, which went to New York Fed vaults. The United States will find itself horribly isolated again and soon, just like in Syria. The Western energy giants of Chevron, Royal Dutch Shell, and ENI of Italy will not enjoy sufficient spoils to keep the European alliance together. It is a pathetic alliance. It has no strong dogma besides thefts and sacked control. It has no deep commitment. The nazi modus operandi has been laid bare. Europe will move gradually to the future, and depart from the past. Europe will be led by Germany, whose industrialist elite are 90% pro-Russian. Europe will turn its back on the United States initiative in Ukraine, with political lip service offered in support, but with absent military commitment and support, or approval for attack under any pretense. Europe will back the Petro-Yuan that is pushed by Russia and China, thus disproving any hint of Russian isolation. Europe will be the midwife to the Petro-Yuan birth. It is coming. It will shake the world.

The death of the Petro-Dollar was written when the USFed announced Quantitative Easing and the uncontrolled spew of bond purchases. The central bank monetary policy to debase the USDollar forced Eastern nations to begin diversification plans out of the USTreasury Bonds held in banking reserves. They suddenly become toxic, falling in value, or propped in value by the Weimar press managed in New York. The death of the Petro-Dollar was confirmed when the Saudis ousted Mohamed Morsi from the US designed throne in CairoEgypt. One must wonder what early assurance China had given to Riyadh Royals in order for the Saudis to pump $6 billion into the Egyptian coffers, alongside certain other Persian Gulf participation. The death of the Petro-Dollar was given a hidden eulogy in Beijing when Xi and Salman worked out numerous supporting deals to lay the foundation for a decade of union. The death of the Petro-Dollar will cause unprecedented ripple effects across the Western world. It is coming. It will shake the world.

The shock waves will be enormous and far reaching, hitting every sector of the USEconomy. The price system will undergo shock from the unwillingness of foreign suppliers to accept old USDollars. The import prices will rise significantly. The supply network will undergo shock from shortages and pockets of inventory lapse. The USGovt will find tremendous challenges in funding its deficits, while the USFed loses its control of the USTreasury market. Expect even the derivative machinery to suffer deep strain, if not breakdown. Foreign banks will engage a grandiose dumping exercise. The new Scheiss Dollar must be born in order to finance the US debt and to assure imported supply, thus to ensure continuation of the USEconomy itself. The USGovt has no jurisdiction over foreign contracts, period! The shock waves for the Petro-Dollar death will urgently force the launch of the domestic Dollar, the decision hastened by the extreme vacuum to come. The Scheiss Dollar will feature an exchange rate that must undergo a painful sequence of devaluations. The poor currency baby will not find stability easily, since devaluations will not be large enough to bring about equilibrium, and will be too small in the hope to avoid disruptions. It is coming. It will shake the world.

The motive for Cyprus action, Syria action, and Ukraine action is to prevent, obstruct, and forestall the progression in the Eurasian Trade Zone. If truth be known, the conflict between the United States and Russia has additional roots in Georgia, dateline 2008. The skeletal system for the trade zone is to be the Gazprom energy pipelines and the scattered LNG nodes. Its headquarters will be Moscow, Beijing, and Berlin, all shown in time, with strong satellites in Delhi and Tokyo. The role played by Iran, Turkey, and Brazil will also be important. The passage of time will be crucially important in the following weeks and months, since time permits the rapid degradation. All of Eastern Europe is watching the horror show in Ukraine, and especially in Kiev. As the rape and pillage is continued in orchestration by the USGovt security agencies, the European Soros gangsters, and the Blackstone thugs, all Eastern European nations will be watching closely. They will wish to escape the scourge of the Anglo-Americans, their French tyrant poodles, the Big Oil firm plunderers, and the Attila the Hun lookalikes. The contamination of the water tables in Ukraine, Bulgaria, Romania, and Poland might turn the tide. The trap has been set, but it cannot spring shut to trap the Western pirates without the passage of time. Putin will use that passage of time to permit the public sentiment to change, and to permit the Ukraine Economy to collapse in double quick timeframe. Without its central bank gold, and without the $billions in official state funds, and without the Western investors, the nation will collapse in three months. It is coming. It will shake the world.

A tremendous opportunity has arisen. The Chinese are in a position to mediate between the United States and Russia, while in the background working vigorously to put the Petro-Yuan final touches in place, while in the background working to put the Gold-backed Yuan currency in place, while in the background working to build the components to the Eurasian Trade Zone, while in the background working to convert the BRICS Banks into a gold acquisition office. China can look like the champion for peace, while winking at Putin through the Kremlin window. Furthermore, China can take the lead in diplomatic roles in the Persian Gulf, like between the Saudis and Oman. Many are the bilateral conflicts within the Persian Gulf, all the result of the Moslem Brotherhood influx supported by the Al-Qaeda main office in Langley. Never has their Al-Q leadership and coordination been more obvious from US offices. As footnote, let it be known that Germany has an open opportunity to rise as the European diplomatic champion. The Germans can mediate between Russia and the other European nations who wish to break away from the US Nazi camp. The important swing state for the uniting of Europe with Asia is Germany, and has always been Germany. The Schaeuble foibles will be overcome in time, a bump in the road. It is coming. It will shake the world.

Pakistan refuses to sell its gold as per IMF demands

We're here from the IMF and we're here to help you.
We’re here from the IMF and we’re here to help you.
Pakistan has refused to sell gold worth $2.7 billion, citing national security reasons, as the International Monetary Fund (IMF) pushes Islamabad to convert the precious metal into cash to build foreign currency reserves, revealed the global lender’s report on Friday.
According to the report, the State Bank of Pakistan (SBP) holds over 2 million troy ounces of monetary gold, having $2.7 billion value at market rate. It is not counted in gross international reserves as it is not deemed to be liquid by the SBP, says the IMF.
The IMF and Pakistan authorities discussed what steps would be needed to make gold more liquid, the report adds. “However, the (Pakistani) authorities stressed that they have no plans to sell gold and preferred existing arrangements for gold holdings for national security reasons.”