Saturday, June 21, 2014

Gold and Silver Report June 21 , 2014 --- Ed Steer's always excellent Saturday roundup of news / data and views on / or touching on gold , silver , platinum and palladium ........ Koos Jansen missive ( Hong Kong Is The Key In Global Gold Trade, For Now ) ..... Items of note from GATA !


From a price perspective it was a pretty quiet trading day on Friday.  Gold got sold down to its low, such as it was, at 9:30 a.m. BST in London.  The rally from that point didn't do much---and the New York high tick came at 10:30 a.m. EDT.  From there it got sold down five bucks and traded flat into the 5:15 p.m. EDT electronic close.
The CME Group recorded the low and high ticks as $1,307.10 and $1,321.80 in the August contract.
The gold price closed yesterday afternoon in New York at $1,314.70 spot, down $5.60 from Thursday's close.  Volume, net of June and July, was a very hefty 167,000 contracts, as the technical funds continued to bail out of their short positions---and the raptors [the Commercial traders other than the 'Big 8'] sold them their long positions.
The price pattern in silver was similar to gold's.  But you will carefully note that the rally that began after the noon London gold fix wasn't allowed to cross the $21 spot price threshold, but silver did close up a bit from Thursday.
The low and high were recorded as $20.58 and $20.99 in the July contract.
Silver closed in New York on Friday at $20.875 spot, up 12 cents from Thursday.  Net volume was very heavy once again at 53,500 contracts.
Platinum was under selling pressure for most of the Friday session---and the tiny rally that began in New York, got sold off.  The metal finished down $16 on the day.  Palladium got hit hard, as it closed down $17 on the day, giving back everything that it gained on Thursday, plus more.  Here are the charts.
The dollar index closed late on Thursday afternoon at 80.32---and didn't do much on Friday.  The 80.21 low tick came about 1:10 p.m. Hong Kong time, the 80.48 high was painted at precisely 9 a.m. in New York---and it closed at 80.35, up a whole 3 basis points on the day.


The CME Daily Delivery Report showed that 4 gold and 3 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  Nothing to see here, please move along.
There were no reported changes in GLD---and as of 9:34 p.m. Friday evening, there were no reported changes in SLV, either.
When I was talking to Ted yesterday, he confirmed my guess [and that's what it was] that SLV is probably owed about seven million ounces.  And as I said in this space on Thursday, now it become a question of whether or not the metal is deposited, or whether the authorized participants [read JPMorgan] short the shares in lieu of.  My money is on the latter scenario, especially considering the fact that 4.3 million ounces of physical silver have been withdrawn from SLV so far in June---with 3.1 million troy ounces of that amount leaving for parts unknown since Monday.
There was no sales report from the U.S. Mint yesterday.
But, for the month so far, the mint has sold 31,500 troy ounces of gold eagles---12,000 one-ounce 24K gold buffaloes---1,925,000 silver eagles---and 700 platinum eagles.  These sales convert to a silver/gold sales ratio of 44 to 1.
There was little activity in gold over at the Comex-approved depositorieson Thursday, as only 934 troy ounces were reported received---and nothing was shipped out.  This activity isn't worth linking.
However, as is almost always the case, it was another world in silver---and Thursday's action was no exception as 599,965 troy ounces were reported received---and a very chunky 1,451,892 troy ounces were shipped out the door.  CNT received the entire 600,000 ounces---and virtually every ounce shipped out came from Canada's Scotiabank.  The link to that action is here.
When Ted and I were talking yesterday, he made mention of the fact that during the last five business days, there was about six million ounces of in/out  silver activity in the Comex approved depositories.  That's about three days of worldsilver production---and since virtually every ounce of silver mined in the U.S. ends up at the U.S. Mint, almost all the silver moving in and out of the Comex must, by the process of elimination, be of non-U.S. origin.
Based on the frantic in/out movements on a daily basis, it's an excellent bet that most of these silver good delivery bars have frequent flyer points coming out the wazoo---and are probably still warm when they're unloaded off the trucks at the Comex-approved depositories.
Well, the much-anticipated Commitment of Traders Report [for positions held at the close of Comex trading on Tuesday, June 17] was not what I was expecting at all.  It was far worse than I was expecting---and neither Ted nor I were happy campers.  Here are all the low points.
Silver only rose about 60 cents during the reporting week, with virtually all of the increase occurring in the rally on Thursday, June 12.  But the Commercial net short position blew out by an astounding 8,516 contracts, or 42.6 million troy ounces.  The new Commercial net short position now stands at 114.2 million ounces.  Ted Butler said that it was the classic case of the technical funds covering short positions as the price rose---and the raptors [the Commercial traders other than the Big 8] selling them all the long positions they wanted.
According to Ted, the 'Big 8' shorts were minor players during the reporting week---and JPMorgan covered about 1,000 contracts of their short position---and their short-side corner in the Comex futures market is now down to 13,000 contracts.
In gold, the price was only up a bit over ten bucks for the reporting week, but the Commercial net short position in gold blew out by an incredible 15,175 contracts, or 1.52 million ounces of the stuff.  The new Commercial net short position is now up to 7.83 million troy ounces.
Once again it was the technical funds rushing to cover short positions---and the raptors selling them all the longs they wanted.  Ted said that JPMorgan sold 3,000 contracts of their long position during the reporting week as well---and their long-side corner in the Comex gold market is now down to 34,000 contracts, or 3.4 million ounces.
When I first saw the COT numbers it dawned on me immediately that the raptors had sold their long positions in both metals for very little gain, if any---and in such quantities that they effectively capped the price of both during the reporting week.  I'm sure that was the intent.
And if that's what happened during the last reporting week, one shudders to think what happened 'under the hood' on both Thursday and Friday, as volumes in both metals were over the moon.  Ted's guess is that the massive short positions held by the technical funds in both gold and silver just two weeks ago, no longer exist in any meaningful amounts---and unless the technical funds are prepared to go long at this point, these rallies are basically done like dinner.   We'll have to wait and see what happens next week.
I'm not looking forward to next Friday's Commitment of Traders Report one bit.
Here's Nick's famous "Days of World Production to Cover Short Positions" chart updated with the latest COT data.
Since Friday was also the 20th of the month, the good folks over at The Central Bank of the Russian Federation updated their website with the May data.  It showed that they had purchased another 300,000 troy ounces of gold for their reserves during the month.  Here's Nick Laird's most excellent chart updated with that information.


Non redundant news and views , focus on items touching on the precious metals....

Martin Hutchinson: Systemic risk is worse now than in 2008

Since the crash of 2008, huge attention has been paid by regulators to systemic risk, the risk that some event will cause the crash of the entire banking system, not just of an individual bank. Tens of thousands of pages of financial regulations have been written, and almost as many thousands of speeches have been bloviated, about how we now understand the dangers of “too big to fail” and therefore a crash such as occurred in 2008 can never happen again.
Needless to say this is nonsense; systemic risk is worse now than it was in 2008. What's more, the next crash will almost certainly be considerably nastier than the last one.
The main issue addressed by legislation has been “too big to fail,” the idea that some banks are so large that their failure would cause a catastrophic economic collapse and hence they must be propped up by taxpayers. It will not surprise you to learn that I don't regard this as the central problem.
Most of the risks in the banking system today are present in a wide range of institutions, all of which are highly interconnected and getting more so. Hence a failure in a medium-sized institution, if sufficiently connected to the system as a whole, could well have systemic implications. At the same time, pretty well all banks use similar (and spurious) risk-management systems, while leverage—both open and more dangerously hidden—is high throughout the system. Foolish monetary policy is foolish for all, and if a technological disaster occurs, it is likely to affect software used by a substantial faction of the banking system as a whole. There are a number of good reasons to break up the banking behemoths, but breaking them up on its own would not solve the systemic risk problem.

Bulgaria Stocks Drop Most in 16 Months as Bank Runs Out of Funds

Bulgaria’s stock index slumped the most in 16 months as the central bank appointed administrators to manage the nation’s fourth-biggest lender after it ran out of funds and stopped all operations.
Shares of Corporate Commercial Bank were suspended today after slumping 9.8 percent yesterday. The Sofix Index retreated 3.7 percent to 538.90 at the close in Sofia. The government’s July 2017 euro-denominated bonds fell, sending the yield up four basis points to 1.49 percent.
Bulgaria’s central bank appointed two administrators for three months to manage Corporate Commercial and suspended the bank’s management, central bank Governor Ivan Iskrov said at a news conference in Sofia today. The lender faced an “enormous run on funds” in the past week, Iskrov said. The development comes before Bulgaria starts investor meetings in Europe on June 23 for a possible euro bond sale.

China sends four oil rigs to South China Sea amid regional tensions

China has sent four oil rigs into the South China Sea in a sign that Beijing is stepping up its exploration for oil and gas in the tense region, less than two months after it positioned a giant drilling platform in waters claimed by Vietnam.
Coordinates posted on the website of China's Maritime Safety Administration showed the Nanhai number 2 and 5 rigs had been deployed roughly between southern China and the Pratas islands, which are occupied by Taiwan. The Nanhai 4 rig was towed close to the Chinese coast.
The agency did not say who owns the rigs.
Earlier this week, it gave coordinates for a fourth rig, the Nanhai 9, which it said would be positioned just outside Vietnam's exclusive economic zone by Friday.

Jim Rickards: Connecting dots in the global mosaic

The relationship between geopolitics and global finance has rarely been more densely connected and complex as it is today. Knowing how to invest and allocate assets among various classes requires understanding the strategic drivers of valuation and volatility. Here is an around-the-world tour of flashpoints and their implications for investors.
The disintegration of Iraq is far from over. The situation will deteriorate further putting upward pressure on oil prices. The ISIS-Sunni drive to Baghdad has been temporarily slowed due to the Shiite call to arms, and Iranian intervention on the side of Shiites and the al-Maliki government. ISIS sensibly is regrouping and consolidating gains while awaiting further aid from its Saudi sponsors. All of this is a prelude to much larger battles to come.
The war in Iraq has the potential to become a regional war. Turkey may be drawn in by the emergence of a Kurdish state in northern Iraq. Iran has already been drawn in to support al-Maliki. Syria and Iraq have effectively been partly merged because the border has been erased. Jordan is relatively weak and will be hurt by refugees and spillovers. Jordanian territory is used by both ISIS and the United States for base operations. None of these developments will be resolved soon, so the regionalization of the conflict will proceed with negative implications for regional energy supplies.

Deutsche Bank conducts internal probe into trading on gold fix

Deutsche Bank is conducting its own investigation into trading around the setting of London's daily gold price benchmark, in addition to one being carried out by Germany's financial watchdog, sources close to the matter said.
The German bank had been a member of the century-old gold "fix" - a widely used price set twice a day by five banks in a conference call - for two decades until May, when it resigned from the processes for gold and silver.
An internal investigation can be triggered by scrutiny from external regulators as a bank would need to examine its own processes to answer questions raised.
Taking early action as a result of an internal probe may also mitigate the impact of any sanction the regulator imposes.

Shanghai to Start International Gold Trading in Q4

China, the world’s biggest gold user, will start international gold trading in Shanghai’s free-trade zone in the final quarter of this year, according to a city government official.
“We will aim to commence trading in the fourth quarter,” Zheng Yang, head of Shanghai’s financial services office, said today in a conference in the city. The nation’s central bank earlier this week approved the trading platform to be included in the zone’s banking system.
China, also the world’s largest bullion producer, is seeking to step up its presence in the global gold market at a time when the industry is discussing changes to the century-old fixing benchmark in London used to trade and value the metal. The country overtook India as the largest user last year as the biggest price drop in more than three decades spurred purchases, the World Gold Council said in February.


There is only $20 to $25 billion worth of silver bullion in the world or one one-hundredth of one percent (0.01%) of the $200 trillion of total personal financial wealth. By comparison, total world gold holdings of 5.5 billion oz are worth more than $7 trillion or 300 times the value of total silver bullion. Of course, all the world’s silver bullion is owned by a wide variety of investors, so it is somewhat presumptuous to call it available. Only the actual owners will determine at what price the silver is truly available. All the silver bullion in the world is very much different than all the available silver bullion in the world. One thing much more certain is that $200 trillion worth of world personal wealth exists and if the smallest fraction of one percent of that wealth tries to buy the metal, the price lid will be blown off. - Silver analyst Ted Butler: 18 June 2014
Today's pop 'blast from the past' certainly doesn't need any introduction, even though it dates from 1976---and neither does the American rock group that performs it.  They---and their music---are legendary.  The link to their biggest hit is here.   I have the Collectors Edition of this CD in the rack upstairs.
Today's classical 'blast from the past'---which I also posted late last year----was composed about 400 years ago---and is one of the most often-recorded examples of late Renaissance music.
Miserere was composed by Gregorio Allegri back in the 1630s.  The work acquired a considerable reputation for mystery and inaccessibility between the time of its composition and the era of modern recording; the Vatican, wanting to preserve its aura of mystery, forbade copies, threatening any publication or attempted copy with excommunication. They were not prepared, however, for a special visit in 1770 from a 14-year-old named Wolfgang Amadeus Mozart, who, on a trip to Rome with his father, heard it but twice---and transcribed it faithfully from memory, thus creating the first known unauthorised copy.
This recording by the world renowned Tallis Scholars, is the finest known to me---and the link is here.
It was certainly a nothing sort of day from a price perspective on Friday, but under the hood the volume numbers indicated that the technical funds were covering large portions of their remaining short positions---and the raptors [the Commercial traders other than the 'Big 8'] were letting them off the hook by selling their long positions to anyone looking to cover.
Here are the 6-month charts for both gold and silver---complete with their respective 50 and 200-day moving averages.
The raptors never even tried to make a decent profit by skinning the tech funds after they'd spent months setting up a potential short squeeze of biblical proportions, especially in silver.  You have to ask yourself why that would be the case---and as I've said before, the Comex is such a crooked game, that the only answer is pure collusion.
Shortly after I wrote the above paragraph, it suddenly crossed my mind, as I was rereading what I had already written, that the possibility exists that JPMorgan may have been one of the entities covering their silver short positions during the Thursday and Friday trading sessions---and the raptors were selling long positions directly to them, along with the longs they were selling to the technical funds at the same time---as the raptors certainly had the long positions to do both.  This scenario is one that Ted Butler and I have spoken of for more years than I care to remember---and if there was a ever a time to pull it off, it would be under a price/volume scenario such as this one.  As a matter of fact, he mentioned something about it in passing on the phone when we were talking about twelve hours ago---and it wasn't until I was actually writing this stuff down that it all came flooding back.
So, if it was the same old, same old, you have to wonder what will drive prices higher from here.  Will the technical funds now increase their long positions?  If they do, gold and silver prices will rise, but the raptors [and probably the Big 8 short holders] will be taking the short side of those trades all the way up---and that just sets the stage for another engineered price decline at some point further down the road.
However, if the unthinkable happened---and JPMorgan did cover its short position in silver on the sly, then it's a whole new ball game.  If that scenario did play out, then the possibility exists that the technical funds may still have a bunch of short positions that they haven't covered---and the raptors may still be holding a significant long position.  And not to be forgotten in all of this are the positions of the remaining short holders in the 'Big 8' category.
So, what did happen on Thursday and Friday?  The same old, same old---or did JPMorgan and maybe Canada's Scotiabank---sneak out the silver back door and leave the remaining shorts holding the bag?
That data won't be known until next Friday's Commitment of Traders Report---and there are still two more trading days to go until the 1:30 p.m. EDT cut-off for that report on Tuesday.  There's lots that can go bump in the night between now and then.
So, we wait.
Here's Nick's "Total PMs Pool" updated as of the close of trading on Friday.  As you can tell, the amount of precious metals in the depositories around world is pretty static---and has been for quite some time.
I don't have much else to add to today's column.  I'm still mentally trying to come to grips with the possibility that JPMorgan---and maybe Canada's Scotiabank as well---got out of Dodge while nobody was looking.  If that turns out to be the case, the exit strategy will have proved to have been most timely---and likely premeditated---as the world's economic, financial and monetary system are long overdue for a major reset---and somewhere in that scenario are gold and silver prices that are orders of magnitude higher than they are now.
Enjoy what's left of your weekend---and I'll see you here on Tuesday.


Koos Jansen...

Hong Kong Is The Key In Global Gold Trade, For Now

It began to dawn on me  when I was writing a post on May 27th about the Shanghai Gold Exchange international board. For the post I added a video from CNBC with Joshua Rotbart, general manager of  Malca-Amit precious metals, a vaulting company that recently openend a 2000 tonnes vault in the Shanghai Free Trade Zone (FTZ). In the video Joshua explains about his business in the FTZ. His position – bullion banks being his clients – gives him a lot of expertise with regard to global gold trade. 

So currently gold being transported to China, had to be imported only by local banks. So a lot of the time the gold is being parked out of China and only transferred and shipped into China when needed. What happens now, is that you can park the gold in the Free Trade Zone and it’s not considered final importation into China. Financial institutions can trade within the facility and then only upon request ship it to China.

Hong Kong Gold Trade With China Mainland

At this moment there are 12 banks (listed at the bottom of this article) that can import gold into China. These banks have a PBOC license to import gold, though for every shipment they need anew approval. Before approval the gold is “parked out of China”, like Joshua says. “…and only transferred and shipped into China when needed”, should be interpreted as only shipped into China when PBOC approval is granted. In the past years most gold that entered China mainland came in through Hong Kong. Why? Because Hong Kong was the parking spot for gold outside of China before it was allowed to be imported. This will soon change as the Shanghai FTZ will take over this role.

In 2013, the year Chinese demand for physical gold exploded, Hong Kong gross gold import was 2239 metric tonnes. The bulk of this was exported to China mainland (net 1158 tonnes), but a staggering 597 tonnes was left behind. Hong Kong is inhabited by 7 million people who couldn’t have bought 597 tonnes of gold in one year. According to my analysis most of Hong Kong’s net import is floating supply that was shipped to the East by the bullion banks, pending for a bid in Asia, likely from China.

Hong Kong gold trade January 2009 - April 2014
From January 2010 to April 2014 Hong Kong net imported 938 tonnes of gold.

Before we jump conclusions over the amount of gold in Hong Kong, I would like to expand on a few reasons that can put this amount in perspective. As some of …

  1. the gold is smuggled to the mainland. Illegally or tolerated by Chinese customs. In China mainland there is a 22 % tax on jewelry, in Hong Kong it’s zero %. Mainland tourist often go to Hong Kong specifically to buy jewelry. Chinese travel agencies even offer jewelry shopping trips to Hong kong. Whatever they buy is tolerated to be brought into the mainland by Chinese customs without restrictions (note, they’re are very stringent when it comes to gold export, only 50 grams per person). About half the jewelry sold in Hong Kong is bought by mainland tourists.
  2. the mainland tourist buy gold in Hong Kong and store it locally.
  3. the gold is smuggled to India or other countries in Asia. Click here for a newspaper article from 1969 about gold smuggling via Hong Kong. This practice has been going on for many decades.
  4. the gold is vaulted in Hong Kong by custodial companies from around the world, like GoldMoney (though GoldMoney only has 2 tonnes stored in Hong Kong).
  5. the gold is possibly purchased by the PBOC or its subsidiary SAFE, but I think this is unlikely. PBOC wouldn’t show up in any customs report.

These arguments are worth mentioning, but I think there still is a few hundred tonnes floating supply allocated in Hong Kong. We’ve heard stories from refineries in the West (Switzerland) that supply is running dry. Perhaps this is not the case in in the East (Hong Kong) – explaining the occasional discount at the Shanghai Gold Exchange.

Shanghai Gold Exchange gold premiums

In April 2014 Hong Kong net imported 13 tonnes, the lowest figure since February 2013. It will be interesting when Hong Kong becomes a net exporter. Have a look at their monthly gold trade since January 2013:

Hong Kong monthly gold trade January 2013 - April 2014

If we look at net import we can see gold piling up in Hong Kong after April 2013, when the price crashed and Chinese demand exploded. Not only the mainland net imported unprecedented amounts of gold throughout 2013, in anticipation there was also a lot parked outside, pending to be imported.


Because China is the largest buyer on earth and there is still a pile of gold waiting next door, the moment Hong Kong will be net exporting could be the tipping point in the physical gold market.

Hong Kong net exported 67 tonnes to the mainland in April, also the lowest figure since February 2013. This is in line with dropping Chinese gold demand in April, measured at the SGE. The link between Hong Kong net export to China en Chinese demand will soon be gone as banks are already moving gold into The Shanghai FTZ.

Hong Kong - China gold trade monthly January 2009 - April 2014

Year to date China net imported 354 tonnes from Hong Kong.

Hong Kong - China gold trade 4-2014

Gold Trade In The Rest Of The World

China was mainly supplied by the UK in 2013, that net exported 1425 tonnes over this period. Chinese demand has been “flat” since March, which caused the UK to become a net importer in April – for the first time since December 2012.

UK Gold Trade 2009 - April 2014

Based on historic trade data there is still bullion in London, that’s for sure, the question is how much of that can be sold when demand from the East will rebound. Though the UK was a net importer in April, they net exported 22 tonnes to Switzerland.


When we look at Swiss gold trade year to date, it’s clear that their booming refining business is fading; total import and total export is dropping – UK net import is down and also net export to Hong Kong is down. Switzerland did have a gold trade surplus every month in 2014, year to date they have net imported 131 tonnes, this is likely to be Western investment demand.

Switzerland gold trade April 2014


I’m very curious what’s gonna happen if physical demand for gold (mainly from China) will rebound in the coming months. Will the UK, US or Switzerland (net) export any gold? My eyes are on SGE withdrawals (Chinese demand) and Hong Kong net gold trade.

In Gold We Trust


New silver benchmark seen heralding gold fix revamp

By Nicholas Larkin
Bloomberg News
Thursday, June 19, 2014
LONDON -- Proposals to replace the 117-year-old system of fixing prices for the $5 trillion silver market are poised to add more transparency for the London benchmark used in the $18 trillion gold industry as well.
London Bullion Market Association members will hear firms' proposals tomorrow for alternatives, including electronic trading, to replace the silver fixing by banks that began in 1897. The daily procedure will end Aug. 14, when Deutsche Bank AG quits the meetings as part of the German company's exit from commodities, leaving just two banks to set prices. The World Gold Council yesterday called for a meeting next month for the industry to discuss changes to its own valuation process.
Precious metals are getting more attention from regulators after price rigging in everything from interbank lending rates to currencies led to fines and overhauled financial benchmarks. The U.K.'s Financial Conduct Authority in May fined Barclays Plc after a trader sought to influence the gold fix in 2012. An LBMA survey last month showed the market wants a new silver system to be an electronic, auction-based process with more direct participants and prices that can be used in trades.
"The process is somewhat antiquated," Courtney Lynn, the treasurer for Chicago-based Coeur Mining Inc., the biggest U.S.-based primary silver producer, said June 12. "In that sense, it could use some updating. If the silver process ends up working well and the market feels that they can remove a certain level of regulatory risk, I think they'll opt to move to the silver pricing mechanism" for gold, she said.
About $5 trillion of silver and $18 trillion of gold circulated globally last year, according to CPM Group, a New York-based research company. Silver was fixed at $19.94 an ounce in London today, for a 2.3 percent gain this year. Gold climbed 7.3 percent this year to $1,293 an ounce by its afternoon fixing today. Gold for immediate delivery reached a record $1,921.17 in 2011, the year silver touched $49.8044, according to Bloomberg generic pricing.
London Silver Market Fixing Ltd. said in May it would stop administering the benchmark, used by everyone from mining companies to central banks to trade or value metal, once Deutsche Bank ends its participation on Aug. 14. The German lender, HSBC Holdings Plc and Bank of Nova Scotia conduct the silver fixing, which first took place more than a century ago at the office of Sharps & Wilkins with former dealers including Mocatta & Goldsmid, Pixley & Abell, and Samuel Montagu & Co.
Deutsche Bank, Germany's biggest lender, said in January that it would withdraw from participating in setting gold and silver benchmarks in London, a month after announcing that it would cut about 200 jobs in commodities and exit dedicated energy, agriculture, dry-bulk, and base-metals trading. JPMorgan Chase & Co., Morgan Stanley, and Bank of America Corp. also are retreating from raw materials.
Politicians and regulators have pressed banks to cut back their commodities activities to reduce balance-sheet risk, while earnings were eroded by lower volatility in raw materials and reduced client interest. Market-making and liquidity in the European and U.S. power, industrial metals, and bulk commodities areas suffered the most as banks retreated, Paul Hawkins, global head of commodities at Credit Suisse Group AG, said at a briefing in London on May 22.
During fixings, member banks declare how much metal they want to buy or sell for clients as well as their own accounts. Traders relay shifts in supply and demand to clients and take fresh orders as the spot price changes, before the fix is made. Participants can trade the metal and its derivatives on the over-the-counter market and exchanges during the calls.
Autilla Ltd., Bloomberg LP, CME Group Inc./Thomson Reuters, ETF Securities Ltd., Intercontinental Exchange Inc., the London Metal Exchange, and Platts will present proposals for a new silver mechanism at a seminar in London tomorrow, the LBMA said in a statement today. The solution should be agreed by the market and announced in early July after consultation with regulators, it said. Testing is planned for early August.
A new gold mechanism or changes to the current procedure should be based on executed trades rather than submitted quotes, be tradeable and not just a reference price, while data should be transparent, published, and subject to audit, the World Gold Council said in a statement yesterday. It will hold a meeting July 7 in London for the industry to discuss changes.
"The fixing process needs to be reformed," Natalie Dempster, managing director for central banks and public policy at the council, said yesterday in a phone interview. Still, whatever method is developed for silver won't necessarily be appropriate for gold, partly because of differing user bases and supply chains for each metal, she said.
While there's been no notice from fixing banks or regulators that the gold rate should be replaced, the processes for setting gold, silver, platinum, and palladium are much the same. Fixing companies, the LBMA and the London Platinum and Palladium Market publish the rates on their websites. Trade and volume data aren't disclosed.
Societe Generale SA, Bank of Nova Scotia, HSBC, and Barclays are the four remaining members of the London gold fix, which takes place twice daily and dates back to 1919. Spokesmen for Societe Generale, Barclays, and HSBC declined to comment. Joe Konecny, a spokesman for Bank of Nova Scotia, didn't reply to voice messages or e-mails sent by Bloomberg.
Nobody was available to comment when calls were made by Bloomberg to a phone number listed on the London Gold Market Fixing Ltd.'s website. Douglas Beadle, who has been a consultant to the fixing company, didn't reply to a message left by phone.
The LBMA is "happy to participate in discussions on issues designed to ensure the continued efficiency" of the gold and silver markets, Ruth Crowell, chief executive of the organization, said in an e-mailed statement yesterday.
The fixing still works well, even as scrutiny on the way prices are set has increased, according to David Govett, the head of precious metals at Marex Spectron Group in London and a trader for 30 years. With four members still setting the gold rate, the benchmark could continue, he said.
When asked to rate the usefulness of the current silver mechanism on a scale up to 10, an LBMA survey in May of more than 440 participants returned an average of 7.5. Sixty-four percent said they use the fixing daily and 72 percent said the price discovery method is sufficient.
While traders say fixings are efficient and a crucial reference point, economists and academics say the process is susceptible to manipulation and lacks sufficient regulation. Germany's Bafin is looking at benchmarking processes such as gold and silver price fixing at individual banks, a spokesman for the Bonn-based regulator said in April.
At least nine financial firms, including Deutsche Bank and Barclays, have been fined more than $6 billion for manipulating the London interbank offered rate, or Libor, and related benchmarks. Twelve people are facing prosecution in U.K. investigations. Regulators and prosecutors across three continents are also looking into possible manipulation of the foreign-exchange market in a probe that has seen more than 30 traders fired, suspended or put on leave.
Britain's FCA has been visiting member banks involved in the gold fixing this year as part of its review of gold benchmarks, a person with knowledge of the matter said in April. The regulator said May 23 it fined Barclays 26 million pounds ($44 million) because one of its traders sought to influence the price-setting process in 2012.
A new benchmark won't be developed in the style of the present fix, Brian Lucey, a finance professor at Trinity College Dublin who has been an economist for the Central Bank of Ireland, said by phone June 17.
"When the gold and silver fixes were first set, they were pretty much the only game in town," Lucey said. "Now we have the data which allows us to get a really good handle on the market. A mechanism that gives more information about more of the market is better for all."

China gold association chief talks gold down on its biggest day of the year

They haven't gotten all they want yet.
* * *
Chinese Gold Demand Seen Flat to Lower This Year
By Nicole Mordant
Thursday, June 19, 2014
VANCOUVER, British Columbia, Canada -- Private sector gold demand in China, which last year surpassed India to become the world's biggest consumer of the yellow metal, will be flat to slightly lower this year, a China Gold Association official said Thursday.
Demand for gold jewelry in China remains strong but interest in gold bar investments is soft compared with last year because of concerns about further weakness in the gold price, said Xin Song, president of the China Gold Association.
Although gold gained nearly 3 percent on Thursday to rise above $1,310 an ounce on the back of a drop in the dollar, bullion prices are still down 22 percent since the start of last year and a third below their all-time peak in September 2011.
"Demand will be almost the same as last year, or a little bit less. ... But for sure it will be over 1,000 tonnes," said Song, who was in Vancouver for an industry conference. ...
... For the rest of the story:

Silver shorts vulnerable for option expiry next week, Turk tells KWN

5:25p ET Thursday, June 19, 2014
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk tells King World News today that he continues to see great potential for a short squeeze in silver, and if silver continues to rise tomorrow, the shorts may be destroyed during futures option expiration next week:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

What would stop central banks from buying the other half of the market?

1:42p ET Thursday, June 19, 2014
Dear Friend of GATA and Gold:
Fund manager and market analyst Victor Sperandeo tells King World News today that oil production in the Middle East easily can be disrupted by terrorists, causing a catastrophic oil price spike and a crash of equity prices. Sperandeo argues that market interventions and manipulations by central banks and their having purchased nearly half the equity markets make those markets especially vulnerable to a crash.
Maybe, but if central banks have bought nearly half the equity markets, why couldn't they buy the other half? Who or what would stop them? Mainstream financial news organizations and disinformation specialists like CPM Group's Jeff Christian and the World Gold Council's Pierre Lassonde will be denying it even as it's happening, maybe even as central banks issue press releases about their interventions in pursuit of "stability" and "limiting volatility."
Sperandeo's interview is excerpted at the KWN Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Koos Jansen: Investment gold demand higher in Switzerland than in China?

10:05a ET Thursday, June 19, 2014
Dear Friend of GATA and Gold:
Gold researcher and GATA consultant Koos Jansen today disputes the assertion by CPM Group's Jeff Christian that Switzerland is importing more gold for investment than China is. Jansen's commentary is headlined "Investment Gold Demand Higher in Switzerland Than China?" and it's posted at his Internet site, In Gold We Trust, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Does gold outflow from Bank of England signify distrust among central banks?

10a ET Thursday, June 19, 2014
Dear Friend of GATA and Gold:
Does the outflow of gold from the vault of the Bank of England, confirmed by a bank report this week --
-- signify repatriation of gold by central banks and a loss of trust among them as the fractional-reserve gold banking system comes under strain, the very thing that collapsed their gold price management system in the late 1960s and early 1970s?
That's the suspicion of a market letter issued by Hebba Alternative Investments in Baltimore and posted today at Seeking Alpha:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

TF Metals Report: Morgan bought gold to sell it for price control

11a ET Wednesday, June 18, 2014
Dear Friend of GATA and Gold:
Analyzing gold futures market position data, the TF Metals Report's Turd Ferguson writes that JPMorganChase & Co. seems to have acquired its big long position in gold last year and early this year only as ammunition for selling to control the monetary metal's price. Ferguson's analysis is headlined "Considering the Latest Bank Participation Report" and it's posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Even more gold came out of Bank of England's vault in 2013

9:51a ET Wednesday, June 18, 2014
Dear Friend of GATA and Gold:
Thanks to exchange rate calculations provided by market analyst Bron Suchecki of the Perth Mint --
-- gold researcher and GATA consultant Koos Jansen has revised substantially upward his estimate, published yesterday, of the net amount of gold that came out of the Bank of England's gold vault for the year ending in February. They agree that the Bank of England's custodial gold total fell by 755 tonnes. Jansen's updated analysis is posted at his Internet site, In Gold We Trust, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.