Monday, May 26, 2014

Gold and precious metal news May 26 -27 , 2014 -- Austria plans to send auditors to the Bank of England in order to verify the existence of Austria's gold reserves stored in british vaults...... In week 20 (12-05-2014/16-05-2014) gold withdrawals from the Shanghai Gold Exchange vaults, which equals Chinese gold demand, accounted for 30 metric tonnes. 8 tonnes below the year to date average. Although 30 tonnes of demand in one week is not particular low, it seems the Chinese are taking a break from their exceptional strong buying in 2013 and in the first quarter of 2014. ....... Former Bundesbank Vice President Jurgen Stark recommends gold , pans current Economic / financial Sphere as " Pure Fiction " ........ Several items from Investment Dynamics......

China rising......

Shanghai Gold Exchange International Board Another Blow To US Dollar

As we can see power shifting from West to East on a daily basis at the current time of writing, in the fourth quarter of this year the Shanghai Gold Exchange (SGE) will launch an international board in the Shanghai Free Trade Zone (FTZ) for investors worldwide to trade gold spot contracts denominated in renminbi. The purpose being is becoming not only the world’s primary physical gold market but also increase pricing power and internationalize the renminbi.

Shortlist of recent developments regarding the rising powers in the East:

Russia’s central bank bought 28 metric tonnes of gold in April
Russia dumps record amounts of US treasuries
Russia closes an energy deal with China worth $400 billion (amongst 40 other business contracts)
Putin says Russia and China need to secure their gold and currency reserves
China openly calls for de-Americanization of the world
China, Russia, Iran and 21 other countries bolster cooperation to promote peace, security and stability in Asia
China is buying assets all over the globe and investing in infrastructure in Africa and West Asia
China is importing unprecedented amounts of physical gold

The SGE international board will be another blow to the US dollar hegemony, as more people around the world will hold and use the renminbi for trading gold. Though the international board’s power on the price of gold can only be wholly exploited when the renminbi is fully convertible.

A Provisional Introduction To The Shanghai Gold Exchange International Board

Currently I don’t have any official documentation on the launch of the SGE international board, but by reading media (onetwothreefour) and from a source in the mainland, this is what I understand of it at this point: China’s central bank, the Peoples Bank Of China, has given approval to the SGE to set up a subsidiary company called the Shanghai International Gold Trading Center to operate the international board. The SGE is currently working on member recruiting, including commercial banks, gold producing companies and investment funds. Allegedly HSBC, ANZ, Standard Bank, Standard Chartered and Bank of Nova Scotia are to take part in the global trading platform.

Imported gold into the FTZ can be deposited in a brand new 1000 tonnes vault, after contracts are settled the gold can be delivered in this vault and withdrawn to be re-exported. Shanghai to become an international warehouse center. At first only spot contracts will be traded on the SGE international board, down the line derivatives will be launched. From Chinese state TV network CCTV.

The Shanghai FTZ can be considered as a Customs Specially Supervised Area, which I have written about extensively on these pages. Gold imported into the FTZ is not allowed to enter the Chinese marketplace without a PBOC permit. A Chinese trader in the mainland can not sell its physical gold to an international trader, for which it would be exported out of the mainland. To export gold out of the mainland there is a PBOC permit required. From what I’ve read, The structure of the Chinese domestic physical gold market will remain in tact after the launch of the SGE international board. Source

A free trade zone (FTZ), also called foreign-trade zone, formerly free port is an area within which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties.


SGE Chairman to Lead The Way

The chairman of the SGE is Xu Luode, who is former President of China Unionpay, a bankcard association established under the approval of the State Council and the People’s Bank of China. Xu already gained experience at Unionpay to lead a financial institution overseas. In 2010 Xu delivered a speech on how Chinese financial institutions can go global at the Lujiazui Forum, an important Chinese forum for policy makers on the rapid expansion of China’s financial market and China’s growing influence on the global economy. Now Xu will use his experience to open up the SGE to the world. From China Unionpay in 2010:

On June 26, Xu Luode, President of China Unionpay, was invited to attend the “Lujiazui Forum 2010,” …President Xu Luode delivered a speech on How Chinese Financial Institutions Can Go Global during the Post-crisis Era. New changes in the international economic pattern, especially the financial pattern, provided significant opportunities for Chinese financial institutions to go global, while the challenges were also formidable. Chinese institutions need strategy and holistic knowledge to promote globalization strategy prudently and steadily and successfully grow to be international corporations, expressed President Xu Luode in his speech.

President Xu Luode emphasized in his speech that the internationalization of an enterprise was not only the business behaviour of the enterprise itself, but should be also closely linked with national strategy and strategies of relevant enterprises. Since 2004, CUP’s internationalization has closely coordinated with the “reaching out” strategy of the country, and at the same time cooperates and interacts with the expanding of Chinese financial institutions and the internationalization of the Chinese Renminbi, thus achieving relatively rapid development.

Was Xu appointed as SGE chairman in October 2013 to launch the SGE international board? Who knows

Heraeus Precious Metals Sales Director Kevin Crisp visits SGE Chairman Xu Luode, 2014
One of the largest gold refineries Heraeus Precious Metals’ sales director Kevin Crisp visits SGE Chairman Xu Luode, February 18, 2014

On may 15, 2014, Xu attended the fourth Commercial Bank Gold Investment Forum in Hangzhou. Based on three sources mentioned above (translated by Soh Tiong Hum) he made the following statements:

The Chinese gold market is an important force, a positive energy in the international gold market but its influence does not correspond to its mass and scale. Last year China’s domestic gold mines produced 428 tonnes; at the same time China imported 1540 tonnes of gold, adding up to nearly 2000 tonnes. China’s import volume is significant but China’s influence on the price of gold is very small. Real influence still lies in the West. Data such as Non-farm payroll, or even a speech could impact the gold market in a big way. In this sense, the mass and scale of China’s gold market and its influence in the international gold market does not match. Through the SGE international board Chinese pricing power will increase.

Foreign investors can directly use offshore yuan to trade gold on the SGE international board, which is promoting the internationalization of the renminbi. The international board will form a yuan-denominated gold price index system named “Shanghai Gold”. Shanghai Gold will change the current gold market “consumption in the East priced in the West” situation. When China will have a right to speak in the international gold market, pricing will get revealed. New York prices gold through bidding whereas the gold price is fixed by five banks in London. However the London gold fixing price is now being questioned since these five banks are price-fixers while at the same time they are also the market’s most important participants.

The development of China’s gold market is not limited to an increase in scale but a series of moves including market development, product improvement, system development and risk prevention. Marketing, pricing mechanisms and international standards are all very important building blocks so every aspect of China’s gold market should join forces to speed up development.

The Shanghai Gold Exchange has nearly 8,000 institutional investors and nearly 5 million individual investors.

The International board will be a platform with global investors. This will raise the standard of product assortment, ability to prevent risk, information technology and support, market promotion and regulation. China is fully qualified and may become the world gold market’s very important first class player.

Regional commercial banks should seize the trends and opportunities in the development of China’s gold market, and become actively involved in the market.

As you may remember Malca-Amit opened a 2000 tonnes gold vault, their biggest vault on the planet, in the Shanghai Free Trade Zone in November 2013. Of course they knew Shanghai was to become to center of the global gold market (why else build such a big vault?). I think Malca-Amit has a lot of market intelligence as many bullion banks and other market participants are their clients. If a part of the Malca-Amit vault in Shanghai is designated to the SGE I don’t know at this moment. The following video is from November 2013:

Though we’ll have to wait for the details on how the SGE international board will exactly operate in a few months, it’s influence on the global gold market will be significant and this will further deteriorate the status of the US dollar hegemony.

In Gold we Trust

Manipulations of PMs ? Nah , couldn't be !  Sarc off.......

Jesse Cafe Americain....

27 MAY 2014

Gold Daily and Silver Weekly Charts - Metals Hit For Comex June Options Expiration

As I reminded several times last week, today was an option expiration on the Comex for the precious metals, for the important June contract.

The metals were hit in a 'mini-puke' in the manner of the Barclays digital options boogie woogie two-step.

This too shall pass.  Nothing has changed.

Have a pleasant evening.

WTF Chart Of The Day: Spot Gold Spikes Over $20 As Futures Close

Tyler Durden's picture

 UPDATE: Gold swung from $1,292 at futures close to $1,312 and is now trading at $1,275 - un-rigged!

Gold futures stopped trading at 1300ET for the Memorial Day holiday... seconds after that Spot Gold prices exploded higher from $1291 to $1312... of course liquidity is extremely light but it seems someone was anxious to get their hands on the real thing... Gold has breached its 200DMA, 100DMA, 50DMA, as well as the crucial $1300 (that Morgan Stanley said would never be seen again).

Nothing to see here , move along...
Moments later...

Un-rigged markets?

Charts: Bloomberg

First Germany, Now Austria Demands An Audit Of Its Offshore Held Gold

Tyler Durden's picture

First it was Germany, now another AAA-rated European country is starting to get concerned about its hard assets.
Overnight Bloomberg reported that following in Bundesbank's footsteps, Austria will audit its gold reserves located in the UK, which represent 80% of its total gold holdings. This gold reserve reviews held at Bank of England in London will be first conducted by external auditors, Christian Gutleder, a spokesman for the Austrian central bank, says via telephone.
As a reminder, Austria held 80% of its roughly 280 tons of gold in U.K., according to last annual report.
Gutleder explained that the Central bank has checked its reserves regularly in the past, adding that gold reserves haven’t changed since 2007. Which begs the question: why check them now then? 
According to the official explanation that review comes after euro-skeptic Freedom Party demanded more transparency, repatriation of reserves. Perhaps it is time to rename the Euroskeptic party into the "we doubt our gold is where you say it is" skeptics. A better explanation was provided by the Austrian Trend magazine, which said that "the measure is seen as a consequence of growing public pressure. There is a rising disbelief among Austrians about the existence of the gold."
Joking aside, with Euroskeptics across Europe ascendent, we wonder which central European nation will be the first to uncover that its gold is no longer where it is supposed to be (that most certainly includes the Banque de France).
Some more color from
Austria is planning to send auditors to the Bank of England in order to verify the existence of Austrias gold reserves stored in british vaults.

The Austrian accountability office will sent a delegation to London in order to check on Austrias gold reserves stored in vaults at the Bank of England. This is reported by Austrian magazine Trend. The measure is seen as a consequence of growing public pressure. There is a rising disbelief among Austrians about the existence of the gold.

“I acknowledge the request. Any grocery store is obliged to do inventory once a year. It is the only way of getting rid of these unreasonable allegations”, Ewald Nowotny, Governor of the National Bank of Austria tells Trend.

Austria officially owns 280 tonnes of gold of which 17 percent are kept in vaults inside the country. Around 150 tonnes are estimated to be stored in London.

In recent years doubts about the existence and the quality of Germanys monetary gold stored at the New York Fed and the Bank of England were raised by a rising number of skeptics. In January the Bundesbank eventually announced plans to repatriate most of Gemanys gold reserves until 2020.
So first Germany (which at this rate may repatriate its gold held in New York, London and Paris some time in the year 3000, now Austria... Who's next to confirm that all those doubts about infinite rehypothecation of physical gold with countless beneficiaries of paper receivables will be the next conspiracy theory to become conspiracy fact, after last week's surprising announcement that Barclays (the first of many) had manipulated paper gold prices on at least one occasions in the past decade.

Austria to audit gold reserves at the Bank of England

Goldbarren © markus dehlzeit -
Austrias gold reserves stored in London are estimated at 150 tonnes.
Austria plans to send auditors to the Bank of England in order to verify the existence of Austria's gold reserves stored in british vaults.
The Austrian accountability office will sent a delegation to London in order to check on Austria's gold reserves stored in vaults at the Bank of England. This is reported by Austrian magazine Trend. The measure is seen as a consequence of growing public pressure. There is a rising disbelief among Austrians about the existence of the gold.
“I acknowledge the request. Any grocery store is obliged to do inventory once a year. It is the only way of getting rid of these unreasonable allegations”, Ewald Nowotny, Governor of the National Bank of Austria tells Trend.
Austria officially owns 280 tonnes of gold of which 17 percent are kept in vaults inside the country. Around 150 tonnes are estimated to be stored in London.
Earlier, doubts about the existence and the quality of Germanys monetary gold stored at the New York Fed and the Bank of England were raised by a rising number of skeptics. In January the Bundesbank eventually announced plans to repatriate most of Gemany's gold reserves abroad until 2020.

Chinese Gold Demand Down From Q1, 751 MT YTD

In week 20 (12-05-2014/16-05-2014) gold withdrawals from the Shanghai Gold Exchange vaults, which equals Chinese gold demand, accounted for 30 metric tonnes. 8 tonnes below the year to date average. Although 30 tonnes of demand in one week is not particular low, it seems the Chinese are taking a break from their exceptional strong buying in 2013 and in the first quarter of 2014. 

I hope to have more information on the potential alliance between the Shanghai Gold Exchange and the Chinese Gold and Silver Exchange, which is based in Hong Kong, in the near future.

The SGE silver premium, as measured by the price of SGE’s most liquid contract Ag(T+D) compared to the COMEX price, stood at 5.4 % on May 16. On that day total SGE silver inventory stood at 76 tonnes.

Shanghai Gold Exchange silver premium

Total silver inventory at the Shanghai Futures Exchange (SHFE), that only has vaults in Shanghai, was 228 tonnes on May 23. Down 954 tonnes from 1182 tonnes on February 8, 2013.

Currently a few silver futures contracts on the SHFE  are in backwardation, for example the December 2014 contract.

SHFE silver backwardation may 23, 2014
Note, the open interest on the SHFE is counted bilaterally, different than from COMEX. For the December 2014 contract there are 209125 longs and 209125 shorts.

On the SHFE the closing silver price on May 23 (of the first delivery month) was 4139 yuan per kilogram. On theSouth Rare Precious Metals Exchange (SRPME), that has vaults in Hechi, Chenzou and Yingtan, it was 4074 yuan per kilogram. The SGE’s Ag(T+D) contract closed at 4114 yuan per kilogram. The spread between the SRPME and the SHFE has been significantly reduced in the last 10 days.   

Map Chinese silver vaults 

Overview Shanghai Gold Exchange data 2014 week 20

- 30 metric tonnes withdrawn in week 20 (12-5-2014/16-5-2014)
- w/w + 6.95  %
- 751 metric tonnes withdrawn year to date.

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

Shanghai Gold Exchange withdrawals 2014 week 20

This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

Shanghai Gold Exchange withdrawals week 20 2014

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

Shanghai Gold Exchange gold premiums 2013 2014 week 20

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

Shanghai Gold Exchange gold premiums 2014 week 19 and 20

In Gold We Trust

From Mish.......

Saturday, May 24, 2014 11:43 PM

Former Bundesbank Vice-President Recommends Gold, Says Current Economic System is "Pure Fiction"

Anyone who is thinking clearly knows the economic system fostered by central banks is totally and completely out of control.

Repetitive rounds of QE, competitive currency debasement, interest rates at zero, and sponsorship of the internet bubble followed by the housing bubble, followed by the current stock market bubble is proof enough.

So, what I am about to report is really nothing but common sense, except for the fact that it comes from an unusual place, where one does not normally hear such discussions.

Jürgen Stark, former vice president of the Bundesbank, and also former chief economist of the ECB (unofficial title) says "The System is Out of Control". Via translation from Libre Mercado, here are a few snips.
 Stark, until recently one of the big hawks central bank of Germany for his fierce defense of monetary orthodoxy, resigned in late 2011 for his outright rejection to the purchase of government bonds by the ECB launched the president of the institution Jean Claude Trichet. Since then, Stark has used his rare, but valuable public appearances to warn of the risks associated with the current policy of central banks to the crisis.

In a conference organized by the Ludwig von Mises Institute in Germany, recommended to protect the attendees directly against a probable collapse of the global monetary system. Stark spoke openly.

Stark noted that central banks, including the ECB, "have completely lost all ability to control and perspective on the economic situation."

The monetary system was saved in 2011 through concerted action by major central banks worldwide. But, according to Stark, the whole system is "pure fiction". The monetary authorities have been groping since 2008 to avoid a second Lehman Brothers, but if happen, "the system will not survive," he warned.

The problem is the monetary model itself. That is, the printing of paper currency without real backing and the multiplier by which the commercial banks can expand credit-uncontrolled without prior savings. Stark recommended allocating part of this fictional savings to investment in traditional "safe havens" such as gold or silver.

Also, in another lecture delivered last week in Paris, Stark noted that the fragile recovery in Europe is not due to the absence of monetary and fiscal stimuli (low rates, debt purchase, etc..) and (more government spending) but the slow deleveraging and lack of structural reforms.

Far from helping, the loose monetary policy of the ECB is hampering the recovery, as advanced free market on multiple occasions. The key to growth, create jobs and end the crisis on solid foundations, as Stark, is to increase competitiveness. And to do so, "we must continue gaining flexibility. Progress has been made, but still not enough. The situation has improved, but the crisis is not over."

"the probability of default, as is reflected in the markets are too low," he added. The expert was critical of the downside risks caused by the fall in spreads and insurance against default (CDS), as attributes, especially the artificial ECB action.

"Capital appreciation has grown stronger euro. But the crisis markets are distorted. We should not be too happy with what happened," he mused.
System is Pure Fiction

Stark is preaching to the choir, but it is appreciated. One does not normally hear such statements from central bankers or even ex-central bankers.

That said, his statements would carry more weight if he was still with the Bundesbank. I wish Stark never left.

Supposedly Stark Left for Personal Reasons but it's easy to discern he was fed up with being the only member of the ECB with a clue.

You can only beat your head against the wall so many times before you lose all sense of hope and finally your mind.

Mike "Mish" Shedlock

Investment Research Dynamics.....

Why War Is Inevitable — Paul Craig Roberts

As the US is the Constitution, what was once the United States no longer exists. A different entity has taken its place.
Dr. Roberts has written a must-read article as his gift to the people of the United States on this Memorial Day Weekend. But it’s only a “gift” if people read it and decide to do something about the Government which no longer of by or for the People.
The truth is hard to bear, but the facts are clear. America’s wars have been fought in order to advance Washington’s power, the profits of bankers and armaments industries, and the fortunes of US companies. Marine General Smedley Butler said, “ I served in all commissioned ranks from a second Lieutenant to a Major General. And during that time, I spent most of my time being a high-class muscle man for Big Business, for Wall Street, and for the bankers. In short, I was a racketeer for capitalism.”
Please take time out to read Dr. Roberts’ article and pass it along to others:   Why War Is Inevitable

“If You Want To Stop Gold Manipulation, Shut Down The Comex”

I did a podcast with Rory at The Daily Coin.  Rory is doing a great job writing articles which expose the truth about what is going on in our system and offering steps you can take to prepare for what’s coming.
In this podcast we discuss the corruption at the Justice Department and Eric Holder’s pivotal role in that, mining industry issues and why the large producers such as Barrick and Newmont should be avoided, the housing market and the LBMA gold and silver fix.  I explain why I think closing down the silver fix means they probably won’t close down the gold fix.  
In lieu of throwing investment dollars are the large-cap mining stocks, mining stock investors should looking for junior exploration mining stock ideas. Right now I truly believe that the junior mining shares – the ones with real deposits that are being tested and proved – are the best stock market opportunity in the close to 30 years I’ve been studying, researching, trading and investing in the stock market. Many of these stocks will achieve gains that dwarf the gains made in internet stocks.
I am offering research reports with companies I think offer huge upside potential and companies which are newsletter “darlings” but should be avoided. You can access these reports here: Mining Stock Reports.
Over the next several weeks I will putting up several more research reports plus a comprehensive report on GLD. I will also be offering “special situation” reports, including research on and ideas to make a lot of money shorting the coming collapse of the housing bubble 2.0.

The Gold Rush In India Begins: Expect A Big Move In The Price Of Gold

The proof is always in the results.  Here’s a story from Mumbai that is excerpted from
“The RBI decision is set to increase the supply of gold and bring down prices considerably, say traders. “The move will increase monthly average gold import from 25-30 tonnes to 50-60 tonnes. Most jewellers’ cost of funds could also decline with the resumption of gold loan facilities,” said Manish Kedia, bullion trader.
Mohit Kamboj, president of the Indian Bullion and Jewellers Association said, “Gold will now become available to jewellers with the move. Retailers can also start getting gold on loan at 4% to 5% interest, against the existing condition of making full payments for the gold bought. This will help save huge interest cost for most jewellers.”
Coincidentally, I sent an article on this topic to Seeking Alpha late last night.  I discussed the issue of the observed ex-duty market premiums to world spot gold that get paid in India.  The recent big decline in the ex-duty premium fell again last night from the night before from $90.54 (p.m.) to $51.35 (data from John Brimelow’s subscription report Gold Jottings).  This is a clear signal that the market is expecting much more extensive removal of the gold import controls installed last year.
You can ready Seeking Alpha article here see the detailed explanation:   The Gold Rush In India Begins.