All the Gold in Fort What’s-Its-Name
The official gold holdings (rounded numbers) of the US Treasury Department are as follows:
Fort Knox 147,000,000 ounces
West Point 54,000,000 ounces
Denver 44,000,000 ounces
Federal Reserve of NY 13,000,000 ounces
Other 3,000,000 ounces
Total 261,000,000 ounces
Does anyone really think that gold is unencumbered, unleased, and actually physically there? Yes, I know…
•They would not lie to us, right?
•The official numbers must be true, right?
•They seem like trustworthy people, right?
•Why wouldn’t it be there?
Glad you asked that question. Why wouldn’t it be there? Gold is a bit like an “anti-dollar.” The Federal Reserve creates new dollars by the trillions – dollars are their product. Wal-Mart sells snow shovels and a few other things, Wall Street sells stocks and everything paper, Hollywood sells dreams and entertainment, but the Fed sells dollars, and they don’t like competition. Gold has been real money for 5,000 years world-wide. Federal Reserve notes have been passed off as money for a few decades, and in that time they have lost most of their value as measured against commodities such as wheat, gasoline, and cigarettes.
It could have been worse! Western central banks (officially) and governments sold a considerable sum of gold during the 1990s to help repress the price of gold and to slow the apparent decline in the value of paper money. They also “leased” an unknown amount of gold to bullion banks who also sold that gold into the market. The leases are still “on the books,” so the central banks officially still own the gold, even though it is probably long gone – likely to China, Russia, India, and the Middle East.
Yes, central banks and governments have motive, means and opportunity to suppress the price of gold. They want to support their product (dollars, euros, etc.) and to defeat the competition – gold. If you were a central banker or treasury official who was inflating his currency and consequently reducing its purchasing power, wouldn’t you want to suppress the price of gold to delay recognition of your involvement in the devaluation process?
So why not just do an audit? This is a simple question with a complex set of answers. Here are a few.
•The US gold has not been audited in over 50 years. This must seem strange to any thinking person, but it appears unlikely to change.
•If the Treasury agrees to an audit and the gold is not there, the result will be much unpleasantness – possible indictments, damaged reputations, social unrest, chaos, disillusionment, and destroyed trust – and there is plenty of disillusionment and destroyed trust already.
•If the Treasury performs an audit and the audit claims the gold is actually there, will anyone believe the results of the audit? Is it truly unencumbered – not sold, leased, or hypothecated? Would we even believe an audit had been actually performed?
•If the Treasury acknowledges the lack of a credible audit for over 50 years and then says “we don’t think it is necessary,” will anyone take them seriously?
•The Treasury might claim an audit would be too expensive, but the US government probably wastes the cost of an audit every few hours, so that explanation is likely to sound hollow and stupid.
Bottom line: The whole subject of an audit is fraught with potential trouble for both the Treasury and the Fed. The simple solution is to stonewall the audit question and “extend and pretend.”
The problem is that the questions just won’t die. GATA has researched the subject thoroughly and suggests that much of the Treasury gold is probably gone. Eric Sprott has examined the export numbers (official US government export data) and concluded that somehow the US exported about 4,500 tons of gold more than can reasonably be accounted for.
Germany asked for their gold back – a measly 300 tons – and was told it would take seven years to return their gold. It the gold was physically in the vault and unencumbered, it should have taken a few weeks at most. Seven years – really? This must seem strange to any thinking person.
From Bill Holter:
“I would like to address the biggest (in my mind) conspiracy theory (fact) of all. It has been “said” for nearly 60 years that the U.S. has 8,400 tons of gold left. First off, there has been no audit done since 1956, not even Senators or Representatives (except for one time in the ’70?s for glance) have been allowed to actually see the gold. “Trust us” is what the population has heard, “trust us” is what foreigners are told…trust us, trust us, trust us. The problem is that so much anecdotal evidence has been dug up by GATA and others. Eric Sprott just last month looked at the U.S. gold export numbers going back 10 years or more and found that 4,500 tons OVER AND ABOVE what are reported as production has been shipped out. Where did that gold come from? When looked at with your 3rd grade mind in gear, there is no way that the gold is really there.
… Forget about all of the past official memos uncovered. Forget all of the evidence that GATA has uncovered over the last 15 years. Forget that Germany asked for their gold and were told “wait 7 years.” Forget that gold and silver prices have not acted like any other market since the mid 90?s and those prices have now crashed 3 times in the face of massive demand. Forget that 2 of the smash downs occurred WHILE the CFTC was supposedly “investigating” the silver market. Forget that 40% of the world’s total gold production was sold in reckless fashion in less than 12 trading hours (who would, could, do this?) FORGET IT ALL! …trust us. … All of this “conspiracy stuff” when put together rather than separately makes sense.”
I don’t know how much gold is left, but I have two (only slightly serious) suggestions:
?A very large number of readers on the Deviant Investor site have voted over the past several months regarding what % of the gold they think remains in the US Treasury. The choices were all of it, most of it (>75%), about half (40% to 75%), some (20% – 40%) or very little (<20%). Readers clearly do not believe the official story – about 60% believe very little remains and another 21% believe less than 40% remains. Only 3% think it is all there. A weighted average suggests that the voters on this site believe approximately 20% of the gold physically remains and is unencumbered.
?Nixon temporarily closed the “gold window” almost 42 years ago. Since that time, the official CPI shows that the dollar has lost about 83% of its value. For simplicity, let’s assume that 17% of the dollar’s purchasing power remains and assume that 17% of the gold remains.
We don’t know how much of the gold remains. Does it really matter?
Do any of the following matter?
?Central bank promises
?Integrity of politicians
?Integrity of hundreds of present and past Treasury employees
?Backing for $Trillions in debt besides “full faith and credit”
?A possible solution to the massive debt problem of the US government. If the gold is still there, value it at some large number, say $15,000 – $30,000 per ounce, and then back the dollar with gold. This is not my idea – some very intelligent people have advocated it. If the gold is mostly gone, this option is less likely.
?Fort Knox: Per the voting and dollar devaluation “method” – assume about 20% of the official gold remains – physically in the vaults, unencumbered, not hypothecated or leased to bullion banks. Yes, I know, this is not defensible, scientific, statistically significant, or verifiable. But it sounds about right to me.
?Denver: Assume about the same
?West Point: Assume about the same
?Federal Reserve Bank of New York: Ask the Germans! Assume very little remains.
How much physical gold do you have? How much do you want when you contemplate nearly $17,000,000,000,000 in official US government debt, another $100 – $200 Trillion in unfunded liabilities, and nothing backing that unbelievable amount of debt except the “full faith and credit” of what is clearly a government that won’t balance a budget and must resort to printing dollars to pay its bills?
How much gold do you have stored in a secure (off-site) facility?
aka Deviant Investor
If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail.
Promote, Share, or Save This Article
If you like this article, please consider bookmarking or helping us promote it!
The Deviant Investor
Statistics: Posted by yoda — Tue Jun 18, 2013 6:54 pm
View full post on opinions.caduceusx.com
Gold Bull Mkt VS Gold Bull Era
Jun 18, 2013
I’m getting a lot of emails to do more macro analysis of the gold market, and the time is ripe to do so.
“We need to continue to push for long-term capital inflows and therefore the FDI policy has to undergo a revamp…. We need to move in this direction quickly and it needs to be a paradigm shift in how we look at FDI.” – Arvind Mayaram, Economic Affairs Secretary of India, June 17, 2013, Bloomberg News.
FDI refers to “foreign direct investment in India”. The Indian government charges an 8% duty on gold that is imported into the country. There is also a 4% sales tax.
In the short term, the Indian government is applying a lot of pressure to its gold-loving citizens, but they are also working quickly to dramatically increase foreign investment in the country. I’m 99% sure that once FDI increases, exports will boom, the rupee will stabilize, and the government will reduce the import duties on gold.
Also, Indian gold dealers have tremendous experience handling situations like this. They are already working feverishly with partners in Dubai. Indian gold dealers are not shrinking their operations. They are expanding them, both at home, and abroad.
“An 8 per cent duty on gold import plus 4 per cent sales tax on gold purchases has made huge price difference between India and the UAE. There is 12 per cent difference in the cost of buying gold from the UAE and India. Hence more and more Indian jewellers will be setting up shop here. We are already positioned in this market, but others are likely to follow suit,” – Sham Lal, Managing Director, Malabar Gold and Diamond, Emirates 24/7 News, June 18, 2013.
More than 20% of the world’s gold already flows through Dubai. Volume is increasing, and Indian gold dealers are expanding their operations there.
Even Societe General (SOGEN), the most bearish of the Western bullion banks, believes that demand for gold jewellery will increase strongly.
April 12, 2013 was the beginning of a two day “super-crash” in the gold market. In my professional opinion, the gold bull market ended on that day.
The world changed on April 12, 2013, because the Western gold bull market ended, and the Asian gold bull era began. With all due respect to the Western gold community, it’s probably time to face the music. On April 12, 2013, the sun began to set on the relevance of the West to the POYG (price of your gold).
I’m personally planning to boycott the FOMC minutes release on Wednesday. I invite others in the Western gold community to join me. If nobody in Chindia (China & India) cares about Ben Bernanke’s relevance to the POYG, should you care? I don’t think so, and I mean that purely from a wealth-building standpoint.
Fundamental events in the West, like speeches from Ben Bernanke, will continue to move the POYG, to a degree. Traders can attempt to capitalize on those moves, but intermediate and long term investors should focus on the Asian gold bull era. In the gold market, Asian citizens have certainly “got your back”.
Chinese paper gold markets are beginning to take shape nicely, and the fund managers expect capital inflows to increase on price drops. The decline of the Western paper gold markets is probably a good thing, because when gold falls in price, those weak markets see capital outflows.
Asian paper markets will be vastly superior entities, and I expect them to quickly overwhelm Western paper gold markets, in both size and power.
India is likely to soon see a new boom in exports, as the US economy continues to strengthen modestly. Every day, more Indians come off the farms into the cities. Every person in India wants to buy gold regularly. It’s just a question of whether they can afford to buy it. In the big picture, Indian gold demand is driven not by economic booms or busts. It’s driven by the ongoing exodus from the farms to the cities, and that has barely started.
As the standard of living increases in India, gold demand will increase accordingly. A decline in the gold price will trigger more buying, but a rise in price will still see Indians buy huge amounts of gold.
The Indian government doesn’t want to see a dramatically lower gold price, because that would cause a huge surge of buying by Indian citizens, putting greater pressure on the current account deficit. The bullion banks need to be careful in how they handle the current situation. Both the Chinese and Indian central banks could threaten to overwhelm comex selling with their buying, if there are further “attacks” on the gold price there.
If you believe that the world changed, on April 12, 2013, a relatively minor $100 price drop is not something to be afraid of.
The West owns very little gold now, so the ability of Western investors to drive the price a lot lower, is highly questionable. Also, the power of Asian media is something that the gold bears may be underestimating. My main sources of news are mostly Asian, and websites like “China Daily”, are beginning to get a following in the West.
China Daily’s site is growing fast. It reputedly has 500 million users. There’s also a US edition. Asian media is generally pro-gold, while Western media seems to feature a lot of “gold-haters”. People like Nouriel Roubini are arguably making themselves look ridiculous and ant-sized, with their angry gold-bashing.
I hope this update puts a shimmer on your gold, and takes you away from a lot of the unwarranted negativity that surrounds the mightiest metal.
Let’s take a look at the charts now, and see if they support my macro analysis. Please click here now . That’s the daily gold chart, and you can see that my stokeillator is on a light sell signal. Gold has broken down from a tiny triangle, likely because Western traders are betting that the Fed makes a statement that is negative for gold. I don’t see anything on that chart that gold investors need to be overly-concerned about.
Please click here now . Double-click to enlarge. That’s the monthly chart for gold. Note the “buy box” between $1266 – $1155. The two blue arrows highlight the congestion pattern that created this key HSR (horizontal support & resistance) zone. SOGEN’s technical analysts predict that gold will fall to $1200. I predict that I’ll buy it there, and so should the Western gold community, if it happens. I’m not so sure that much lower prices will happen. Note the action of the 4,8,9 series MACD green histograms. They’ve started to turn up, which is bullish.
Please click here now . Double-click to enlarge. That’s the GDX daily chart. A lot of technicians believe there is a head & shoulders bottom in play, but it may be just a shape, rather than an actual chart pattern. Regardless, there is definitely serious resistance where these technicians have drawn the neckline, which is in the $30.50 – $31.27 area. Asia will need your miners to get them more gold than they are currently mining, in the coming years. Technically, GDX could fall to $22 as easily as it could rise to $35. In the longer term, the gold bull era probably began on April 12, 2013. Asians don’t hate mining stocks. Give them time to prove it!
Jun 18, 2013
Statistics: Posted by yoda — Tue Jun 18, 2013 10:13 am
View full post on opinions.caduceusx.com
“PLEASE Get your Assets out of the Banking System.”
by Egon von Greyerz – June 17 2013
I have pleaded with investors for years to get their assets out of the banking system.
One of the very few men who understands what is happening within the financial system has done the same. Time and time again he is both advising and imploring investors to protect themselves by getting out of the financial system and to own physical gold stored in private vaults in safe jurisdictions. Jim has also advised investors in detail how to achieve direct registration of their precious metals stocks.
Please read and re-read the extremely wise words of Jim SInclair how to protect yourself.
Here is a link to his latest GOTS (Get Out of The System) advice:
In this post Jim states that there is
“A BLACK HOLE IN ALL MAJOR AND SOME MINOR BANKS IN NORTH AMERICA AND EUROLAND”.
I fully agree with Jim’s statement. But investors must also remember that the world financial system is totally interconnected and a single problem in one major bank is likely to lead to a worldwide systemic problem.
Therefore due to the risk of contagion, any asset in any bank is at risk. The ultimate investment for preserving wealth is physical gold (and possibly some silver at the present ratio) stored in your name, outside the banking system in a safe jurisdiction and with direct personal access to your metals.
After the collapse of the Cyprus financial system I wrote an article called
“Get your Assets out of the Banks now”.
Please re-read this article which I am republishing below.
Please also remember that
you cannot buy fire insurance after your house has burnt down..
Egon von Greyerz
“Get Your Assets out of the Banks – NOW”
by Egon von Greyerz – March 18 2013
Note: Video Nigel Farage European Parliament on April 17 2013
“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS A RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION, OR LATER AS A FINAL OR TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED” – Ludwig von Mises
The Cyprus event may later, in the history books, be seen as the catalyst of the fall of a century long Ponzi scheme. This could rank in line with the shot in Sarajevo as the start of WW1 or the collapse of Kreditanstalt in 1931 as the start of the Great Depression.
Isn’t it ironic that exactly 100 years after the creation of the Fed (a private bank created for the benefit of bankers) that the fragile and bankrupt financial system is likely to fall due to the insolvency of a couple of Cypriot banks.
But what is happening in Cyprus will not be the reason for a collapse but just the trigger for what has always been inevitable.
There are only two possible outcomes of the crisis we are now in:
- Either there will now be a run on the massively leveraged (25-50 times) banking system which would lead to no debt being repaid and a deflationary collapse.
- Alternatively, we will now see the beginning of the most massive money printing that the world has ever experienced, leading to a hyperinflationary depression.
The second outcome is the most likely although the risk of an systemic implosion is very high if central banks are too slow in flooding the system with money. The deflationary outcome would lead to no banks surviving and no money in the system. And the hyperinflationary outcome would lead to money being totally worthless. In both cases gold will be a major beneficiary.
But printing money will of course not solve anything since worthless pieces of paper with ZERO intrinsic value can never create wealth. At best it will just kick the can down the road for a very short time.
Cyprus is a mini model of the world financial system. The IMF, ECB and the politicians thought they could get away with the depositors taking part of the loss. But they have clearly not considered the consequences. This action (if ratified) will not only lead to a run on the Cypriot banks but also on banks in other weak areas such as Ireland, Spain, Portugal, Italy, Greece etc. Eventually it could spread worldwide.
The IMF, Fed, ECB, BoE, BoJ and other central banks are likely to very soon come out with a concerted action to support the financial system in order to avoid a total collapse.
For well over ten years I have advised investors to get their assets out of the banking system. This doesn’t mean just their money but also all other investments (stocks, bonds, gold etc) which are likely to be lost when banks go bankrupt.
Wealth preservation is now absolutely critical. This involves eliminating counterparty risk whenever possible. EverythIng within the banking system has counterparty risk even if it is segregated or allocated. Lehman, MF Global and Sentinel are all examples of client assets being lost in the financial system.
Gold (and silver) will continue to reflect the total destruction of paper money that the unlimited money printing will lead to. But investors must hold physical precious metals and they must be stored outside the banking system.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management AG / Gold Switzerland
Statistics: Posted by DIGGER DAN — Mon Jun 17, 2013 5:38 pm
View full post on opinions.caduceusx.com
ALERT: JP Morgan Increases SLV Holdings by 500%
Just so you know….
The past few years of silver smashing has been all about letting JP Morgan extract themselves from that Silver short hot potato. That’s why the CFTC has not filed charges against them (yet) for silver manipulation. That’s why the banking cabal has sat on the price of silver this whole time. That’s why Citibank added $7.5B in OTC silver shorts. That’s why sentiment in the silver market has never been worse.
It’s all about extricating JP Morgan from the silver short position they were REQUIRED to take on by the US Treasury after the collapse of Bear Stearns.
So knowing what is happening it might not be surprising to you that during the 1st Quarter of 2013 JP Morgan has INCREASED their physical silver holdings in SLV for their own account by 500%!
Ted Butler pointed out this new JP Morgan position last week. The numbers are clear in the reported data on SLV which must be recorded quarterly by the major institutional holders. Here’s the latest report showing JP Morgan holding 6,042,752 shares (ounces) increasing their holdings in SLV by 4,819,640 shares or 500%.
This report is cut off as of the end of the 1st quarter so when the second quarter is posted you can bet that this number has increased substantially. On a side note I’d like to point out that two other major cabal members shed massive amounts of shares in the same quarter: UBS selling (or transferring to JPM) 7,477,363 and Morgan Stanley shedding 1,186,347. Both are playing the opposite side of the trade to control the price as the cabal trades back and forth to each other.
I’m not saying that JP Morgan is completely out of their silver short but they may now be very, very close when you put all their various silver holdings together and net them out.
So WHERE IS THE SHORT NOW?!
Truthfully, I don’t know but there are suspects that cannot be counted out. The prime one is Citibank as I pointed out a while back.
ALERT: Silver Short Hot Potato Being Passed Again
But I believe that plan was stopped as soon as it was noticed by the Good Guys that the Citibank silver derivative book had ballooned. The reason I think so is that after adding about $5B a quarter of silver derivatives in 2012 it was abruptly frozen and the CEO and CFO fired.
So where to now? The most likely spot would be a HEDGE FUND that is controlled by the banking cabal as their reporting requirements are almost non-existent as opposed to banks and large financial institutions.
Obviously, BlackRock would be the leading candidate as it is the largest and currently has full control of SLV as it’s legal Sponsor. They also have one of the ORIGINAL market riggers, Peter Fisher, as one of their managing directors. Here’s his bio:
Senior Managing Director Senior Director of the BlackRock Investment Institute
Mr. Fisher is a member of BlackRock’s Global Executive Committee and a senior director at the BlackRock Investment Institute which serves to leverage the investment insights of BlackRock’s portfolio managers for the collective benefit of our clients.
From 2007 to 2013, Peter served as co-head and then head of BlackRock’s Fixed Income Portfolio Management Group. From 2005 to 2007 he served as Chairman of BlackRock Asia. Prior to joining BlackRock in 2004, he served as Under Secretary of the U.S. Treasury for Domestic Finance from 2001 to 2003 and worked at the Federal Reserve Bank of New York from 1985 to 2001.
As Under Secretary of the Treasury, he was the senior advisor to the Secretary on all aspects of domestic finance including financial institutions, public debt management, capital markets, government financial management, federal lending, fiscal affairs, government-sponsored enterprises and community development. He served on the board of the Securities Investor Protection Corporation and as a member of the Airline Transportation Stabilization Board and also as the Treasury representative to the Pension Benefit Guaranty Corporation.
At the Federal Reserve Bank of New York, from 1995 to 2001, he served as an Executive Vice President and Manager of the System Open Market Account, responsible for the conduct of domestic monetary and foreign currency operation and for the management of the foreign currency reserves of the Federal Reserve and the Treasury. He also served in the Foreign Exchange Function, 1990-94, and in the Legal Department, 1985-89. From 1989 to 1990 he worked at the Bank for International Settlements, in Basel Switzerland.
Mr. Fisher’s other current responsibilities include serving as a member of the Strategic Advisory Committee at Agence France Trésor, the FDIC’s Advisory Committee on Systemic Resolution, the IMF’s Financial Institutions Consultative Group and the Google Investment Advisory Committee.
Mr. Fisher is a recipient of the Distinguished Service Award from The Bond Market Association (2004), the Alexander Hamilton Medal from the United States Department of the Treasury (2003), and the Postmaster General’s Partnership for Progress Award, United States Postal Service (2002).
Mr. Fisher earned a BA degree in history from Harvard College in 1980 and a JD degree from Harvard Law School in 1985.
The game of rigging the silver market is seemingly endless but that is exactly what we are fighting for…to END the illegal manipulation.
One day we will win and we will take our freedom back but for now the best we can do is KEEP TAKING THE FIGHT TO THEM!
Do yourself a favor…follow JP Morgan’s advice and BUY PHYSICAL SILVER at these low prices.
Tracking down the NEW holder of the Silver Short Hot Potato will be one of my major goals going forward.
May the Road you choose be the Right Road.
Statistics: Posted by DIGGER DAN — Mon Jun 17, 2013 2:50 pm
View full post on opinions.caduceusx.com
Platinum market deficit to hit 844,000oz in 2013 – HSBC
According to the bank, the platinum market is likely to record a significant deficit in 2013 but, this does not necessarily imply higher prices.
Author: Geoff Candy
Posted: Saturday , 15 Jun 2013
GRONINGEN (MINEWEB) –
The platinum market is likely to hit a record deficit of 844,000 ounces in 2013, HSBC says, as supply shrinks and demand, especially from ETFs picks up.
But, despite this favourable fundamental picture, the bank has cut its average price forecasts for this year and next to $1,580/oz and $1,725/oz from $1,710/oz and $1,800/oz respectively.
The reason for this, the bank writes, is that “Platinum has been more influenced than we had anticipated by the sharp swings in the gold price and this will pull average prices lower for this year and next.”
Nonetheless, the fundamental picture for platinum remains engaging.
On the supply side, HSBC is forecasting total global production of c5.646moz for 2013, with South Africa by far the biggest producer.
This, it says, is a decline of 6.3% from its previous forecast, and is nearly flat on 2012 levels. In other words, the group expects virtually no mine output growth for the year.
Citing the bank’s metals and mining analyst, Emma Townshend, HSBC writes that much of the reason for this is that the chances of further strike action in the South African PGM minefields later this year are high.
“Miner’s unions are demanding double-digit pay increases, which are well above producer offers. Low prices mean that producers are not in a financial position to meet union pay demands and some producers such as Amplats have built stocks in anticipation of production interruptions, due to strike action.”
While the HSBC report came out ahead of the release of a draft action plan signed by government, business and labour in South Africa, committing to a number of initiatives to try and improve the performance of the industry the point stands.
See also: Did South African mining just grow up?
The bank is rightfully wary of further industrial unrest in the country as wage negotiations are likely to be exceptionally tough to get right and could well lead to further disruption to the supply side of the market.
But, it is also important to take note of the cost side of the business as this too has long term implications for the supply side.
According to Townshend, the fair PGMs basket price, which includes a weighted basket of platinum palladium, rhodium, gold, ruthenium, and iridium, currently stands at about ZAR461,855/kg, significantly above the current spot price of ZAR380,000/kg.
"The incentive price analysis suggests that current PGM prices are below levels required to provide producers with an incentive to maintain the current broad base of South African PGM production, let alone plan to increase future output," HSBC writes.
"At the very least, in the current price climate no South African producer can afford to expand capacity and some may rationalize production in 2013.
"Should demand increase, producers might not be able to respond to the increased appetite for metals. This would have a commensurate bullish impact on price."
Based on Townshend’s estimates, HSBC says it expects South African platinum production to fall 8% over the course of the year to c4.066moz – which provides its most compelling argument for being bullish on the sector.
Looking to the other producing regions, it expects Russian production, which accounts for roughly 14% of the global total, to rise around 1% over the year to around 765,000oz , while it expects Zimbabwean production to remain flat at about 375,000oz.
While it previously forecast gains from North American producers, these haven’t been forthcoming and, as a result, the bank has cut its North America production forecast by 13%, "although output should be steady from last year’s levels," it says.
Adding, "If non-South African production is more robust than we forecast, or if South African producers are forced to curtail output even further, our forecast of supply/demand deficits for 2012 and 2013 may narrow or widen, with a commensurate impact on price."
On the demand side, HSBC expects that demand for autocatalysts to remain strong in the US and China and says although it expects it to moderate somewhat it should be able to offset the impact of ongoing weak demand in Western Europe.
HSBC also expects to see a recovery in demand from glass manufacturers and oil refiners while on the jewellery front, despite a slowdown in Chinese economic growth, it says, " platinum jewellery’s status as a luxury good and effective marketing is increasing consumption in that country."
It is however, the success of the recently launched South African platinum exchange-traded fund that has caught the eye.
This rise, HSBC says, combined with steady coin, and bar demand is expected to play a key role in keeping the market in deficit in 2013.
"We are raising our forecast for ETF increases in 2013 to 600,000oz, a 140% increase to our December 2012 forecast. If our forecast is correct, demand for platinum from ETFs will have more than doubled in one year," the bank says.
It adds, that because platinum is a relatively small market, even slight shifts in investment sentiment can trigger flows that can have a noticeable impact on prices.
"Sluggish investment demand in the first few months of the year played an important role in platinum’s price decline, in our view. The launch of the South African ETF in mid-May has already attracted a whopping 371,000oz of platinum demand to date. This is more double the growth in the rest of the platinum ETFs combined this year, which grew 144,000oz. While we do not expect this rapid pace of accumulation to continue, we do believe platinum ETF investment continues to benefit from investors who are seeking hard assets, and may also attract some investors from gold."
So where does this leave the platinum price longer term?
HSBC believes that the platinum market will experience two consecutive years of deficits. The world had one in 2012 and will see another one this year but, it says, deficits do not immediately result in price rallies.
As it points out, "Large deficits in 2002 and 2003 elicited higher prices, but the gains were not significant, and platinum prices stayed well below USD1,000/oz."
But, it adds, at current low price levels, a sizable amount of current production uneconomical. Thus, higher prices are needed if production is to be maintained over the longer term.
"Additionally, the newly launched South African platinum ETF is absorbing a significant amount of metal at a time of static mine production growth. Jewellery demand remains strong and may be benefitting from the dip in prices. Should industrial or auto demand push above forecasts, we believe the market response may be soundly positive for prices, especially if investment demand remains firm."
Statistics: Posted by DIGGER DAN — Mon Jun 17, 2013 8:49 am
View full post on opinions.caduceusx.com
Statistics: Posted by yoda — Sun Jun 16, 2013 9:42 am
View full post on opinions.caduceusx.com
Are The Gold Bugs Wrong?
Jeff Clark, Senior Precious Metals Analyst
June 15, 2013
What a ride the precious metals have been on recently. Gold and silver prices have fallen off a cliff, while gold stocks were thrown on the rocks and left for dead. GLD has seen record outflows.
Popular financial news shows featured guest after guest who proclaimed gold is now "officially" in a bear market, emboldened by the fact that in spite of its recent bounce, the price has languished below its September 2011 peak for 20 months. As a group, gold stocks are down an abysmal 54% over that same period. The capitulation process has been brutal.
So, were we wrong? Is it time to admit defeat, sell our positions, slink into a cave, and lick our wounds?
The only thing that changed over the past 60 days was the price of gold, and perhaps the mainstream’s perception of our industry. The realities of the fiscal and monetary state of the world, however, did not.
What has struck our industry was not the consequence of a shift in fundamentals, but rather a number of transient factors, including: (i) growing belief in the general investment community that inflation will not result from global money-printing efforts; (ii) claims the global economy is improving; (iii) Europeans fleeing their economic troubles buying US dollars (which makes the dollar look strong and hence gold less appealing to some); and (iv) a very large gold sale that caused the gold price to breach "technical support levels" and trigger a cascade of further selling. All of this – and a lot of commentary based more on opinion than fact – has led to the misguided conclusion that gold is a has-been asset.
Casey Research readers know we think inflation is inevitable, but even if deflation were more likely, it is the fallout from a world living beyond its means in which most major central banks are massively debasing their currencies in an attempt to prop up ailing economies that worries me.
These stimulus policies are unprecedented in scale, entirely unsustainable, and induce financial-system instability. And somehow, it is widely believed that the same policymakers who concocted this mess can get us out of it. Our views haven’t changed – yet suddenly, we’re contrarians again.
It takes patience and courage to stay the course amid a groundswell of proclamations that the "gold trade is dead," but our positive outlook isn’t based on stubbornness. The evidence from history is very clear: you cannot solve debt problems with more debt, nor strengthen an economy by destroying your currency. Eventually, these sins catch up to you.
Today’s ongoing economic and fiscal crises cannot end smoothly or without unpleasant consequences. Since none of the excesses that precipitated the 2008 financial crisis have been fixed, another round of crisis is baked in the cake and will likely inflict even greater damage. When that happens, gold will again be seen as the refuge it is, regardless of current popular opinion.
We’re not alone in this thinking. As you’ve undoubtedly read, in response to the crash, global demand for physical metal soared at both the retail and wholesale levels. This reaction is extremely important: we can’t identify a single crash, collapse, or crisis that ended with retail investors stampeding to buy the asset that had just been crushed. Not one.
In our view, the gold story is not over. Far from it. The reasons for owning it are just as important now as they’ve ever been since the bull market started in 2001. I can’t be sure the price is done falling – but I’m sure it’s not done climbing.
What is going on with gold? Was it overvalued before the recent drop? Or is the price being manipulated? Is now the time to get in, and if so, how? These are just a few of the questions investors want answered. And while no one has a crystal ball that issues definitive answers, some people have been around long enough to have keen insights on what’s happening and what’s likely to happen from here.
Statistics: Posted by yoda — Sat Jun 15, 2013 3:08 pm
View full post on opinions.caduceusx.com
When Gold Backwardation Becomes Permanent
by Keith Weiner on January 1, 2013 in Gold
The Root of the Problem is Debt
Worldwide, an incredible tower of debt has been under construction since 1971, when President Nixon defaulted on the gold obligations of the US government. His decree severed the redeemability of the dollar for gold and thus eliminated the extinguisher of debt. Debt has been growing exponentially everywhere since then. Debt is backed with debt, based on debt, dependent on debt, and leveraged with yet more debt. For example, today it is possible to buy a bond (i.e. lend money) on margin (i.e. with borrowed money).
The time is now fast approaching when all debt will be defaulted. In our perverse monetary system, one party’s debt is another’s “money”. A debtor’s default will impact the creditor (who is usually also a debtor to yet other creditors), causing him to default, and so on. When this begins in earnest, it will wipe out the banking system and thus everyone’s “money”. The paper currencies will not survive this. We are seeing the early edges of it now in the euro, and it’s anyone’s guess when it will happen in Japan, though it seems long overdue already. Last of all, it will come to the USA.
The purpose of this article is to present the early warning signal and explain the actual mechanism to these events. Contrary to popular belief, it will not be that the central banks increase the quantity of money to infinity. The money supply may even be contracting (which is what I expect).
To understand the terminal stages of the monetary system’s fatal disease, we must understand gold.
First, let me introduce a key concept. Most traders define “backwardation” for a commodity as when the price of a futures contract is lower than the price of the same good in the spot market.
In every market, there are always two prices for a good: the bid and the ask. To sell a good, one must take the bid. And likewise, to buy the good one must pay the ask. In backwardation, one can sell a physical good for cash and simultaneously buy a futures contract, and make a profit on the arbitrage. Note that in doing this trade, one’s position does not change in the end. One begins with a certain amount of the good and ends (upon maturity of the contract) with that same amount of the good.
Backwardation is when the bid in the spot market is greater than the ask in the futures market
Many commodities, like wheat, are produced seasonally. But consumption is much more evenly spread around the year. Immediately prior to the harvest, the spot price of wheat is normally at its highest in relation to wheat futures. This is because wheat inventories in the warehouses are very low. People will have to pay a higher price for immediate delivery. At the same time, everyone in the market knows that the harvest is coming in one month. So the price, if a buyer can wait one month for delivery, is lower. This is a case of backwardation.
Backwardation is typically a signal of a shortage in a commodity. Anyone holding the commodity could make a risk-free profit by delivering it and getting it back later. If others put on this trade, and others, and so on, this would push down the bid in the spot market, and lift up the ask in the futures market until the backwardation disappeared. The process of profiting from arbitrage compresses the spread one is arbitraging.
Actionable backwardations typically do not last long enough for the small trader to even see on the screen, much less trade. This is another way of saying that markets do not normally offer risk-free profits. In the case of wheat backwardation, for example, the backwardation may persist for weeks or longer. But there is no opportunity to profit for anyone, because no one has any wheat to spare. There is a genuine shortage of wheat before the harvest.
Why Gold Backwardation is Important
Could backwardation happen with gold?? Gold is not in shortage.. One just has to measure abundance using the right metric. If you look at the inventories divided by annual mine production, the World Gold Council estimates this number to be around 80 years.
In all other commodities (except silver), inventories represent a few months of production. Other commodities can even have “gluts”, which usually lead to a price collapse. As an aside, this fact makes gold good for money. The price of gold does not decline no matter how much of the stuff is produced. Production will certainly not lead to a “glut” in the gold market pulling prices downward.
So, what would a lower price on gold for future delivery mean compared to a higher price of gold in the spot market? By definition, it means that gold delivered to the market is in short supply.
The meaning of gold backwardation is that trust in future delivery is scarce.
In an ordinary commodity, scarcity of the physical good available for delivery today is resolved by higher prices. At a high enough price, demand for wheat falls until existing stocks are sufficient to meet the reduced demand.
But how is scarcity of trust resolved?
Thus far, the answer has been via higher prices. Higher prices do coax some gold out of various hoards, jewelry, etc. Gold went into backwardation for the first time in Dec 2008. One could have earned a 2.5% (annualized) profit by selling physical gold and simultaneously buying a Feb 2009 future. Gold was $750 on Dec 5 but it rocketed to $920—a gain of 23%–by the end of January.
But when backwardation becomes permanent, then trust in the gold futures market will have collapsed. Unlike with wheat, millions of people and many institutions have plenty of gold they can sell in the physical market and buy back via futures contracts. When they choose not to, that is the beginning of the end of the current financial system.
Think about the similarities between the following three statements:
“My paper gold future contract will be honored by delivery of gold.”
“If I trade my gold for paper now, I will be able to get gold back in the future.”
“I will be able to exchange paper money for gold in the future.”
The reason why there was a significant backwardation (smaller backwardations have occurred intermittently since then) is that people did not believe the first statement. They did not trust that the gold future would be honored in gold.
And if they don’t believe that paper futures will be honored in gold, then they have no reason to believe that they can get gold in the future at all.
If some gold owners still trust the system at that point, then they can sell their gold (at much higher prices, probably). But sooner or later, there will not be any sellers of gold in the physical market.
Higher Prices Can’t Cure Permanent Gold Backwardation
With an ordinary commodity, there is a limit to what buyers are willing to pay based on the need satisfied by that commodity, the availability of substitutes, and the buyers’ other needs that also must be satisfied within the same budget. The higher the price, the more that holders and producers are motivated to sell, and the less consumers are motivated (or able) to buy. The cure for high prices is high prices.
But gold is different. Unlike wheat, gold is not bought for consumption. While some people hold it to speculate on increases in its paper price, these speculators will be replaced by others, who hold it because it is money.
Gold does not have a “high enough” price that will discourage buying or encourage selling. No amount of price change will bring back trust in paper currencies once the gold owners have lost confidence . Thus gold backwardation will not only recur, but at some point, it will not leave its backwardated state.
In looking at the bid and ask, one other observation is germane to this discussion. In times of crisis, it is always the bid that is withdrawn -there is never a lack of asks. Permanent gold backwardation can be seen as the withdrawal of bids denominated in gold for irredeemable government debt paper (e.g. dollar bills).
Backwardation should not be able to happen at all as gold is so abundant. The fact that it has happened and keeps happening means that it is inevitable that, at some point, backwardation will become permanent. The erosion of faith in paper money is a one-way process (with some zigs and zags). But eventually, backwardation will become deeper and deeper (while the dollar price of gold is rising, probably exponentially).
The final step is when gold completely withdraws its bid on paper. Paper’s bid on gold, however, is unlimited, and this is why paper will inevitably collapse without gold.
The Mechanics of the Collapse of Paper
Let’s look at what will happen to non-monetary commodities when gold goes into permanent backwardation.
People who hold paper but who desire to own gold will discover gold-commodity arbitrage. They can buy crude or wheat or copper for paper, and then sell the commodity for gold. This will drive up the price of crude in terms of paper, and drive down the price of crude in terms of gold. The crude price in dollars will rise exponentially and its price in gold will fall exponentially.
For example, today the price of a barrel of crude in terms of paper is around $100 and an ounce of gold priced in crude is 17 barrels. It is possible to trade $1700 for one ounce of gold this way. Right now, there is no gain to this trade. Anyone buy an ounce of gold directly for $1700.
But when gold is no longer offered for dollars, this indirect way will be the only way to buy gold. The more this trade is used, the more that both the dollar and gold prices of a commodity will be moved, up and down respectively. Let’s look at an example. If the price of crude in paper rises to $2000 and the price of gold in crude rises to 150 barrels, then one would need $300,000 to trade for one ounce of gold this way. There will always be a gold bid on crude, but it doesn’t have to be high.
Of course, this window will shut sooner or later. Producers and hoarders of commodities will refuse to sell for dollars when they understand gold-commodity arbitrage, not to mention once they see the dollar losing value so quickly. And while this is happening, everyone is running to the stores to trade paper for whatever goods they can get their hands on. This is the “Crack Up Boom.” The currency will no longer be acceptable in trade.
Permanent gold backwardation leading to the withdrawal of the gold bid on the dollar is the inevitable result of the debt collapse. Governments and other borrowers have long since passed the point where they can amortize their debts. Now they merely “roll” the debt and the interest as they come due. This leaves them vulnerable to the market demand for their bonds. When they have an auction that fails to attract bids, the game will be over. Whether they formally default or whether they just print the currency to pay, it won’t matter.
Gold owners, like everyone else, will watch this happen. If government bonds holders sell their securities in response to this crisis, they will only receive paper backed by that same government and its bonds. But the gold owner has the power to withdraw his bid on paper altogether. When that happens, there will be an irreconcilable schism between gold and paper, with real goods and services taking the side of gold. And in a process that should play out within a few months once it gets started, paper money will no longer have any value.
Gold is not officially recognized as the foundation of the financial system. Yet it is still a necessary component. When it is withdrawn, the worldwide regime of irredeemable paper money will collapse.
Statistics: Posted by yoda — Sat Jun 15, 2013 1:58 pm
View full post on opinions.caduceusx.com
JPM Vault Gold Drops By 28.4% Overnight, Slides To Fresh Record Low As Withdrawals Accelerate
Submitted by Tyler Durden on 06/11/2013 17:43 -0400
With a massive 6,208 (or 80% of the total in the entire Comex system) Customer Delivery issues outstanding against JPM so far in June alone, many have been wondering – how and when will the firm reconcile what is seemingly more demand for JPM vaulted gold than the firm has in its possession?
While we still don’t have the answer, what we do know is that as of an hour ago when the Comex released its daily vault depository statistics, JPM has said goodbye to another 28.4% of all of its vaulted gold – the largest one day withdrawal since April 25, the result of the departure of 61.5% of its Eligible gold, or 218k troy oz, as hundreds of thousands of registered ounces in the bast few weeks have seen warrant detachment.
Which means that as of last night, total gold held by JPM has fallen to a new fresh all time low of just 550k ounces, down from 768K the day before, and total eligible gold of only 136,380 troy oz in inventory (just over 4 metric tonnes) – also a record low.
Whoever is "running the JPM vault" shows no sign of relenting. At this pace, the world’s biggest gold vault located below 1 CMP, and just next to the Fed’s own gold vault, will be empty in about 1.5-2 months.
Statistics: Posted by DIGGER DAN — Wed Jun 12, 2013 12:21 am
View full post on opinions.caduceusx.com
Scare ‘Em Out and Wear ‘Em Out
Alan Micik snippet
Posted Jun 11, 2013
As we all are painfully aware, U.S. stocks have provided stiff competition for gold in 2013. It is important for physical gold buyers, or ETF buyers, to understand the competition (stocks and such), because gold does not trade in a vacuum as we noted in our 5/12/13 Subscriber Update.
“The U.S. & World Stock markets have been providing significant competition to gold for two reasons. First, they have been advancing as gold has declined, and many ETF gold buyers have been liquidating the gold they bought well above $1,540 and moving it into stocks or even fixed income products in a well documented world-wide “frenzy” to obtain yield. Second, many stocks pay a dividend, and gold doesn’t.
The ETF sellers of gold are of a different breed than physical gold buyers because each group has their own unique reasoning as to why they own gold. Nevertheless, until the ETF liquidation phase is complete gold will not likely mount a significant advance. The first warning that this liquidation phase may be complete will be seen by gold’s price challenging the resistance levels above the market (noted for Subscribers). Another likely requirement will be a period of base- building, or one of our lower levels being hit by the gold price as noted in our 4/28/13 Subscriber Update.”
In our 4/28/13 Update MML noted that:
“In the beginning of any bull market, there is almost always no obvious Fundamental reason to be bullish for the majority, but the technical position of such a market becomes bullish. Bull markets keep rising until everyone understands the “why” (the Fundamentals) behind the bull market advance.
The opposite, of course, is true for bear markets. In the beginning of any bear market, there is almost always no obvious Fundamental reason to be bearish for the majority, but the technical position of such a market becomes bearish. Bear markets keep declining until everyone understands the “why” (the Fundamentals) behind the bear market decline.
Some investors bought gold above $1,750 because there was a great “cover story” that provided the “why” (the Fundamentals) behind the bull market advance. Probably the biggest Fundamental “cover story” was that the FED was going to do QE Forever, so gold became over-owned by the majority.
Today, the opposite “cover story” during this bear phase is that the FED is going to “pare back” on QE Forever…maybe eliminate it if employment and such improve. Now, the buyers above $1,750 have become sellers below $1,540 because they understand the “why” (the Fundamentals) behind the bear market decline. Gold is now likely under-owned by the majority once again.
The other “cover story” for this bear phase is that with U.S. Stocks advancing in 2013 why do you need gold?
This is the normal cyclical change between the bull and bear phases as described above. These phases have a rhythm over time, and since we now know the “why’s” behind gold’s bear phase, it tells us that it is likely late, not early in this bear phase.
These bull and bear phases produce emotions in Investors and Traders. We all like to think we are totally unique (and we are), but when it comes to emotions in markets we are all part of the herd. The prudent Trader and Investor understands that their emotions are almost always incorrect when it comes to markets, so they do the opposite of their emotional urges. (In our MML newsletter, we recently provided the normal “sequence” of market emotions for Subscribers).
For gold, the “Panic” phase was the break of $1,540. Now we have been in the “Capitulation” phase since being bombarded with emotional inducements to sell gold ETF’s nearly every day by the U.S. media. Many investors have done exactly that as evidenced by the ongoing decreases in gold ETF holdings (now at 15 straight weeks as we exited May).
There are only two emotional phases left before gold advances, and there are many clues that we are in these final phases.”
Certainly, long-term Sentiment measures are quite contrarily bullish when compared to 2008 levels. The COT’s are also quite contrarily bullish, and additional dissecting of that data makes a very compelling case for the upside which has been extremely well-documented at 321Gold by various gold analysts. Also, the “true all-in cost” of producing an ounce of gold by the top 13 Majors has been conservatively estimated by well-regarded mining experts as something north of $1,400, so this is long-term bullish for gold in due course.
We also observe the U.S. media endlessly highlighting and reporting bearish pronouncements by banks, brokerage firms, magazines, and even a well-known economist this last week (gold at $1,300 by year-end, and $1,000 in two years is his call).
That’s contrarily interesting, because we don’t recall any of them being bearish or “hedging” at $1,800+.
Given this Evidence, there is no compelling reason to “hedge” one’s physical gold at this time for physical long-term holders, but do understand that Mr. Gold Market can still “scare you out” and/or “wear you out” during “plunges” and “base-building periods.” The “base-building period” phase is more likely what we are in now, since the “Capitulation” phase seems “long in the tooth” after 15 weeks of ETF liquidations.
MML has written about gold “hedging” strategies since late 2011 (see 321gold archives here) and 321Gold (Bob Moriarty) posted our unpopular articles for the gold community when gold was $1,800+, while most other gold websites were only posting bullish views, much less a “hedging” strategy (we had a lot of “hate” emails back in 2011-12).
Today, our closed Investor “hedging” profits are $160 per ounce, and our Trader’s profits are now $110 per ounce. Total MML Trading and “hedging” gains are now $270 per ounce, so these results have offset some of the difficult period gold has faced since September, 2011.
MML continues to suggest a cautious and observational approach at this time, and we continue to hold our physical gold without a “hedge.” We have reported areas (above and below the current market) for Subscribers to monitor as we wait for this “base-building” phase to conclude (which it can do at any time given today’s Sentiment). Our MML philosophy is the same today as always…never sell your physical gold. Hold the amount of physical gold you are comfortable with, and periodically “hedge” some of it (or all of it) when it is overvalued. If trading is suitable given your investment objectives, MML does periodically provide guidance which Subscribers can elect.
If you would like to review our current MML forecasts for gold and other markets, consider a subscription (details are listed below). In deference to our Subscribers, we have a 4 day calendar “Quiet Period” from all Subscriber Updates before any Posts.
Jun 6, 2013
Statistics: Posted by yoda — Tue Jun 11, 2013 11:17 am
View full post on opinions.caduceusx.com