Sunday, April 27, 2014

May we face looming Silver shortages , does a sharp decline in Shanghai silver stocks serve as a canary in the coal mine ?? ( April 27 , 2014 Updates ) .......The Decline In Shanghai Silver Stocks Picks Up Speed ! Any correlation to JP Morgan and Barclays recently exiting commodity trading businesses ( as well as Deutsche Bank ) ?

UPDATE: The Decline In Shanghai Silver 

Stocks Picks Up Speed

Filed in Precious Metals by  on April 25, 2014 • 18 Comments
Someone is taking delivery of silver from the Shanghai Futures Exchange in a big way.  The amount of silver withdrawn from the exchange increased substantially this week.  Matter-a-fact, more silver was removed this week than in the past three weeks combined.
Earlier this week, I posted a chart on the change in silver warehouse stocks at the Shanghai Futures Exchange.  In less than two months, silver inventories at the exchange declined 244 metric tons.
Here is the chart from my prior article:
Shangahai Futures Exchange Silver Inventories April 18 2014
As we can see the silver inventories declined from 575 metric tons (mt) at the end of February, to a low of 331 on April 18th.  This was a 42% decline in seven weeks.
According to the most recent data put out by the Shanghai Futures Exchange, silver withdrawals picked up significantly this week.  There were 15 mt removed on Monday, 9 mt on Tuesday, 22 mt on Wednesday, 18 mt on Thursday and 9 mt on Friday.
Shanghai Future Exchange Silver Stocks April 2014.jpg new
Since my last update, total silver inventories at the Shanghai Futures Exchange fell 73 mt, from 331 mt on April 18th to 258 mt this Friday, April 25th.  In less than two months, 317 mt of silver or 55% of total inventories were removed from the exchange.
Furthermore, the Comex shed another 1 million ounces of silver today:
Comex Silver Inventories 42514
Over the past two months, gold inventories at the Comex have risen slowly, while silver warehouse stocks continue to decline.  A total of 17.2 million ounces of silver were removed from the Shanghai (10.2 million oz) and Comex (7 million oz) exchanges since the end of February.
For some reason, a great deal more silver is being withdrawn from the Shanghai Futures Exchange.  In just one year, inventories at the exchange declined from 1,123 mt to current level of 258 mt.
It will be interesting to see how things unfold in the next several weeks at the Shanghai Exchange.  If the current high rate of silver withdrawals continues.. there won’t be much silver left at the exchange at the end of next month.

Silver Continues To Drain From The 

Shanghai Futures Exchange

Filed in Precious Metals by  on April 21, 2014 • 51 Comments
In the past week, the Shanghai Futures Exchange suffered another large withdrawal of silver from its warehouse stocks.  Actually, this is the lowest level of silver inventories since the exchange started building its silver stocks in August, 2012.
In my article, Large Decline Of Shanghai & Comex Silver Stocks, I reported that inventories at both exchanges fell significantly since the beginning of March.  According to the most recent data, the Shanghai Futures Exchange had another 41 metric tons (1.3 million oz) of silver withdrawn as well as a million oz removed from the Comex since April 10th.
Shanghai Silver Stocks April 10 2014
Shanghai Silver Stocks April 18 2014
(Note: figures are in Kilograms)
Here we can see that the silver stocks at the Shanghai Futures Exchange declined from 372 metric tons on April 10th, to 331 metric tons of Friday, April 18th.  This was an 11% decline in total stocks in just 8 days.
Moreover, the Comex saw its silver inventories fall from 177.7 million oz to 176.7 million oz during the same time period.
Comex Silver Inventories 41814
I took the weekly data from the Shanghai Futures Exchange (SHFE) and made the graph below.  Silver inventories at the SHFE peaked at 575 metric tons at the beginning of March (same time as the Comex), and declined 224 metric tons (42%) to reach an all-time low of 331 metric tons on Friday, April 18th.
Shangahai Futures Exchange Silver Inventories April 18 2014
The total withdrawal of silver from both exchanges since the beginning of March:
Shanghai Futures Exchange = -7.8 million oz (244 metric tons)
Comex Inventories = -6.7 million oz (208 metric tons)
In less than two months, a total of 14.5 million oz (452 metric tons) of silver were removed from both exchanges.  The interesting thing to focus on here, is the difference in percentage of withdrawals at the two warehouses.  While the Comex experienced a 4% decline of its inventories, the SHFE lost 42% of its total warehouse stocks.
Even more interesting… SHFE silver warehouse stocks are down a stunning 70% since their Peak of 1,123 metric tons, one year ago.
shanghai Silver Stocks 41213
You see, after the big take-down in the precious metals last year, the SHFE silver stocks fell to a low of 385 metric tons by mid November.  Over the past 4 months, the SHFE continued to build its silver inventories reaching 575 metric tons on Feb 28th (shown above).
For some reason, silver continues to be drained from both exchanges….coincidentally this is taking place at the same time the top banks are exiting the commodity trading business.  On March 19th, JP Morgan announced:
and just out today:
Of course, these two banks are going to hold onto their precious metals trading activity… because how would the Fed continue to manipulate the paper price of gold and silver without the aid of these fine institutions.
Furthermore, ever since Deutsche Bank announced that it was exiting its participation in price-fixing of gold and silver on Jan 17th, there have been a rash of mysterious banker deaths and suicides.
Something very fishy and foul is taking place at the top banking institutions.  Unfortunately all we can do is speculate, but I would imagine things are about to get a great deal more interesting as time goes by.
Got your gold and silver?


Top Silver Supply Figures & Forecasts Are Incorrect

Filed in MiningPrecious Metals by  on April 13, 2014 • 26 Comments
Top Silver Supply Figures & Forecasts Are Incorrect
I am a bit surprised at the forecasts and data coming out by the leading agencies and institutions on silver mine supply.  According to my research, the USGS understated U.S. silver mine supply while Thomson Reuters GFMS over-estimated global silver production for 2013. Let’s take a look at U.S. silver production first.  If we look […]

Large Decline Of Shanghai & Comex Silver Stocks

Filed in Precious Metals by  on April 10, 2014 • 11 Comments
Large Decline Of Shanghai & Comex Silver Stocks
Something interesting took place at the Comex and Shanghai silver warehouses over the past month.  Silver stocks at both these warehouses peaked at about the same time, March 10th.  However, for the past month, a substantial amount of silver was removed from both warehouses. In the chart below, we can see that total silver inventories […]
Food for thought ........ The real brain tease is regarding large scale counterfeiting ( gold or silver bars ) 

Real Gold? Are You Sure? An Examination Of Modern Gold Counterfeiting

Filed in Precious Metals by  on April 4, 2014
By Ugo Bardi: Since gold costs almost a thousand times more than tungsten (ca. $ 40,000 per kg against about $ 50 per kg) you can understand that there is a lot of incentive for the second law to play a role, here: with a chance to cheat, someone will.
I spent some time looking into this matter and I can tell you that, yes, there may be problems with gold counterfeiting with tungsten nowadays (in minor measure, also with silver). Not so bad as some people say, but not to be underestimated.
Stacks of gold bars stored in the bank of England (from the Daily Mail). An impressive display of wealth, with only one small problem: can we be completely sure that all that glitters is real gold?

Real gold? Are you sure? An examination of modern gold counterfeiting

by Ugo Bardi,
In life, I’ve discovered that there exist laws describing human behavior that seem to be as strong and inflexible as the laws of physics. One, that I call the “second law,” says that if there is a chance to cheat, someone will (the first law is the well known one, “there ain’t no such a thing as a free lunch). The second law of human behavior may hold in particular with the ancient human activity called “counterfeiting”, in particular of money and precious metals.
The advantage of gold as currency has always been that it was very difficult to counterfeit. From the time when Archimedes screamed “Eureka!” in his bathtub because he had found a way to test the gold content of his king’s crown, it was known that gold was much denser than anything else known. So, a good scale was all what was needed to discover if something was real gold, or it just glittered like gold.
But, today, things have changed: we have something that ancient gold counterfeiters couldn’t even dream of: tungsten with a density almost exactly the same as that of gold and that makes density measurements nearly useless. Since gold costs almost a thousand times more than tungsten (ca. $ 40,000 per kg against about $ 50 per kg) you can understand that there is a lot of incentive for the second law to play a role, here: with a chance to cheat, someone will.
I spent some time looking into this matter and I can tell you that, yes, there may be problems with gold counterfeiting with tungsten nowadays (in minor measure, also with silver). Not so bad as some people say, but not to be underestimated.  There follows what I found – it is based on some 30 years of experience in materials science, but it doesn’t claim to be the last word on the subject. If you know more details or you have different data, let me know. One of the things that I have learned in life (in addition to the second law of human behavior) is that you never finish learning.
1. Counterfeiting gold bullion.
The term “bullion” applies to nearly 100% pure (or “100% fineness”) gold. Bullion ingots and bars come in different sizes: the typical kind traded between banks or governments comes in the “400 oz.” size (corresponding to 12.4 kg). One such bar is worth today around half a million dollars. Ordinary people won’t normally ever see one such bar, except in pictures. But gold bullion is commercialized in variable sizes and there exist much smaller ones, for instance ingots as small as just one gram. Dealers and goldsmiths also trade gold in the form of non standard bars or of foil, wire, and grains. In all cases, assaying methods are normally able to determine the fineness of the gold, but tricks with tungsten are possible and sometimes not easily detectable. There are two of these tricks, both are reported to have been actually used.
Gold plated tungsten bars and ingots. The start is with a pure tungsten bar. Such bars need special equipment to be made, but seem to be available on the market, although it seems that counterfeiters also use tungsten carbide (TiC) or “Tungsten Heavy Alloy” (WHA). These materials are almost as dense as pure tungsten, but easier to manufacture by powder sintering in the form of massive bars. Then, counterfeiters wrap the tungsten in gold foil 1-2 mm thick and then weld the two contacting surfaces by high temperature treatment. It is also necessary to treat the object in such a way to remove the “seam” were the edges of the wrapping foil touch each other, but that can be done with good welding skills. The final result is an object that is pure gold in the first few mm, but pure tungsten (perhaps carbide) below. The gold layer is thick enough that it can be stamped and punched as if it were solid gold all the way inside. Apparently, you can also buy these gold plated bars already made! The final result can mislead even experts if they limit themselves to visual examination and weighing. Also, the gold plating is thick enough that it makes the underlying tungsten undetectable to most common assaying methods such as X-ray fluorescence. There are only a few ways to detect the scam. Ultrasonic testing should work, although it may not be enough. Then, if the tungsten is in the form of carbide or WHA, it could be detected by a strong magnet, since both contain small amounts of magnetic metals (typically nickel), but the magnet would detect nothing if the tungsten is in pure metallic form. In practice, the only way to be sure of the scam is by drilling a hole in the object. That will immediately reveal the hard and dark colored tungsten inside. For a report of this counterfeiting method having been actually used, see here
Tungsten bars buried in gold ingots/bars. It is done by inserting one or more tungsten bars/billets in a gold ingot or bar. It can be done while the gold is being melted in a crucible, or it can be done drilling a hole in the gold ingot, hammering in the tungsten bar, then plugging the hole with a pure gold plug and welding everything in order to obtain a smooth surface. In this case, the tungsten may be only a fraction of the gold, nevertheless it provides a nice profit for the scammer who has succeeded, in a way, in the feat of transforming a vile metal into gold. This trick is very difficult to detect because even drilling a hole in the ingot doesn’t guarantee to find the foreign object inside. You need to slice the ingot salami style, or remelt it. However, ultrasonic examination will immediately detect that there is something wrong inside. For a report of this counterfeiting method having been used, see here.
2.  Counterfeited gold coins.
Gold coins are a popular form of gold trading, diffuse among private owners. Their weight may go between 1 oz to 1/10 oz. They are rarely pure gold because they would be too soft, more typically they contain slightly more than 90% gold in weight, that is they rate as “22 carats”.
There are standard and well known ways to counterfeit gold coins: the substrate can be made in brass or silver and then coated with a thin layer of gold – it can be done electrochemically. These fake coins are easily detected simply by weighing them: brass and silver are much less dense than gold. But, as I said before, tungsten has the same weight of pure gold, so if the substrate is in tungsten, weighing is useless to detect the scam. The problem, here, is how to manufacture a believable tungsten coin to be later coated with gold. Metallic tungsten is extremely hard – stamping a tungsten disk with an ordinary press simply wouldn’t work. Perhaps it could be done with special and expensive equipment and maybe by hot-forming tungsten carbide or WHA. Both methods would be very expensive and require remarkable expertise. However, assuming that it could be done, the tungsten coins could be electroplated with gold and would have the right weight for a real gold coin. The trick could be detected only by expensive equipment such as X-ray diffraction. At home, the scam could be detected only by scratching the surface with a file to see the dark color below. But that could also ruin a perfectly good coin.
Do such coins actually exist? I think not. I searched the Web but there is no hard evidence of real tungsten coins anywhere. Sure, there are web sites which purportedly sell you gold plated tungsten coins. But I just don’t believe that: what gives the game away, in my opinion, is that they only sell already plated coins. They don’t even show pictures of the coins before plating. If they had unplated tungsten coins, they should be happy to sell them to people who would then plate them at home – that’s the easy part (and possibly the illegal one) of the counterfeiting job. So, if you shell out the $1000 (the minimum that I found is needed) to buy the advertised coins, then you’ll probably receive just the ordinary kind of gold plated brass coins. Of course, you would complain. Sure, and then?
On the whole, I think that gold plated tungsten coins are just a legend and not something to be worried about; at least for the time being.
3. Fake Jewellery. 
Jewels come in a wide variety of shapes; rarely at grades higher than 18 carats (75% gold in weight). Since there are so many varieties and so few standards, it is with jewels that counterfeiters have traditionally found their favorite playground. There are zillions of ways to make fake gold jewels and counterfeiters are helped by the fact that often we have composite objects for which it is difficult to make precise density measurements. Nevertheless, in some cases, such as for a simple ring, it is possible to tell if a jewel is gold plated brass or silver simply by weighing it and measuring its density. The problem is, again, with a tungsten substrate. Weighing, in this case, is useless.
Here, I think scams could exist. Search in the Web for “tungsten jewelry” and you’ll find many companies selling you tungsten jewels, especially in the form of rings (actually, they are usually made in tungsten carbide). These jewels are real: they are shown in pictures and there are reports of people having bought them. Of course, there is nothing illegal in selling tungsten carbide rings and bracelets; although most of us would find them a little dull. The problem is that someone could plate them with gold and sell them as if they were pure gold. The weight would be the right one for 18 carats gold and even experts could be fooled. I wouldn’t be surprised if it were actually done (remember the second law of human behavior!). However, for the time being, there don’t seem to exist reports of people having been sold gold plated tungsten jewelry as it were real gold. It may be because it is still a new idea. In this case, we’ll see such reports appearing soon.
5. Silver counterfeiting
All what I was saying about gold can be said for silver as well. Traditionally, silver coins and bullion have been counterfeited using brass as substrate. But the scam is easily detected using a scale. So, in modern times, counterfeiters could use molybdenum rather than tungsten, as molybdenum (“moly”, for friends) has about the same density as silver. Also here, it is probably possible to make fake silver ingots, bars, coins and jewels with the same technologies described for gold. The problem for the counterfeiter is that the monetary gain is much smaller: silver is worth much less than gold, while moly still costs about 1/10 of silver by weight. So, it is not obvious that all the work and the effort to replace silver with moly is worthwhile. Since there are no reliable reports of this kind of scam being actually done, I think it must be very rare – if it exists at all. So far, silver seems to be relatively safe.
6 – Defending yourself from gold and silver scams.
The defense against the kind of scams we have been discussing here depends on who you are and on what kind of resources you have. If you are a bank, you probably already have expensive and sophisticated gold assaying equipment and you feel safe (but don’t forget the second law!). If you are a mafia boss, you know what to do with the cheaters who sold you counterfeited gold. If you are an ordinary person, however, you can’t afford sophisticated equipment and you don’t have henchmen who’ll send the cheater to sleep with the fishes. You have to do your best with simple equipment and good common sense. In this case, I think I can suggest the following:
1. Buy thin. Thin objects (such as coins or small ingots) are difficult (and probably impossible) to fake with tungsten and molybdenum. That will defend you from most of the modern scams we have been discussing here.
2. Learn how to measure density. It is easy (see, e.g., here) and all what you need is a good electronic scale that will cost you less than $ 50. You can also use scales specifically designed to test gold coins. These methods can’t detect tungsten, but they will defend you from old style scams (brass in the place of silver and silver in the place of gold). Note, however, that these measurements become difficult for very small objects, let’s say under 5 grams.
3. Get a strong magnet to test your gold – it is a good idea in particular for jewelry. You can buy extra-strong rare earth magnets for a few dollars over the Web. If your gold doesn’t stick to the magnet, that doesn’t necessarily mean it is real gold but if it does surely there is something badly wrong with it. This test should reveal scams done with steel and also with tungsten carbide or WHA, which contain magnetic elements such as nickel. (silver is a somewhat different matter, as it is slightly attracted by strong magnetic fields)
4. Never forget the second law of human behavior: “if there is a chance to cheat, someone will.”
7. Large scale counterfeiting
On the whole, it seems that there is little to be worried about for an ordinary person who buys small amounts of precious metals, especially if one takes some elementary precautions. However, this story leaves us with the impression that, with the advent of tungsten, gold has lost some of its glitter.
The problem is that the temptation of faking a large gold bar is strong: replacing a 300 or 400 oz bar with one in tungsten means making a few hundred thousand dollars with a relatively modest effort. And the scam is difficult to detect: if the bar rests in the vault of a bank or of a government facility, it may well stay there for decades before anyone will test it in ways that could detect the tungsten inside. Not surprisingly, it has been done; even at the level ofNational Banks. I have also reports from sources which I consider reliable in the gold industry telling me that the actual cases of tungsten scams are much more common than it would seem from what the media report. Yes, there are nice rules that should prevent such occurrences, such as the Gold Good Delivery standard. But all certifications are made by people, and people can be corrupted – especially when we are talking of millions of dollars. Remember the second law of human behavior: “if there is a chance to cheat, someone will”
Does that mean that, as some people said, the gold bars stored in Fort Knox are all in tungsten? Well, I think not, but pause just a moment to think: if they were fake, how would we know?