Tag Archives: SGE

Negative Rates, Money Printing and Gold

“As well as being modified by its specific supply and demand conditions, Gold’s time preference is essentially for its moneyness, represented by its use as a medium of exchange and store of value. The moneyness aspect links it to its exchange value for all commodities, and it is this aspect of gold’s qualities that should warn us that a backwardation in gold, emanating from negative dollar interest rates, will herald a general backwardation in commodities as well.” – Alasdair Macleod, Negative Rates and Gold

The “perfect storm” is forming that will push gold to record highs in U.S. dollars. In 2008 a near-perfect storm hit the global financial system that drove the price of gold to record level in just about every currency including dollars. The only missing ingredient back then was negative interest rates. The same financial excesses that caused the previous financial crisis have reformed only now they are much larger in scale. Most of the western hemisphere has already implemented negative interest rates. Now Trump has opened that Pandora’s Box in the U.S.

Chris Marcus of Arcadia Economics invited me onto this podcast to discuss the implications of Trump’s proposal and how it will affect the precious metals sector:

What’s Driving The Price Of Gold and Silver?

Fear, Greed and Reality. Also Bill Murphy’s “Commercial Signal Failure,” which occurs when physical demand for deliverable gold and silver overwhelms the paper derivative short positions used by the western Central Banks to manage the price of gold and silver.

The naked short position in paper gold and silver is so big that any government or central bank with a substantial FX surplus could pull the plug on it by trading enough Treasuries, or even euros or yen, for real metal. Russia and China, among several other eastern hemisphere Central Banks are doing just that.

Silver Doctor’s James Anderson invited me to discuss the factors behind what appears to be a major move higher in the precious metals, possibly leading to the eventual geopolitical and financial systemic reset (Silver Doctors/SD Bullion):

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Gold Withdrawals On The Shanghai Gold Exchange At A New Record High

For the week ending November 6, gold withdrawals from the SGE were 44.97 tonnes.  This put the YTD total withdrawals at 2,210 tonnes.  Gold withdrawals YTD from the SGE are running 29% higher than last year and 20% higher than 2013, which was a record year for withdrawals:

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Smaugld.com has compiled an excellent summary of the gold withdrawal statistics on the SGE plus some data on Central Bank holdings globally. You can read his post here: China and Gold.

China’s “consumption” of gold this year is on track to exceed the total amount of gold produced this year by mines globally.  India is on track to import close to 50% of world gold production this year.  Russia adds to its Central Bank gold holdings every month.  In June alone it added 800,000 ozs, over 23 tonnes.

On the other hand, paper manipulation of all of the markets by western Central Banks – specifically the S&P 500 and gold by the Federal Reserve – is starting to reach an insane extreme.  Today was a prime example as the S&P 500 futures spent most of the overnight session starting Sunday evening down 8-12 points.  Gold was up $12 most of the night.

As the U.S. stock market opened, gold began to get hit and the S&P 500 popped from down 8 into positive territory.  This was after extremely negative economic and earnings reports were released.  Then, as gold faded back to Friday’s closing levels, around 1:30 p.m. EST the S&P went parabolic, rising 30 points on absolutely no news or reported events that would have possibly triggered a sudden surge like this.

As it so happens, on a preliminary basis, it looks like 11,215 gold contracts were added to the Comex futures open interest tally.  This is 1.12 million paper ounces, or 74x more paper gold than the amount of gold reported to be available for delivery on the Comex.  The total paper gold to deliverable gold (as reported) is 290:1.

Given that the appetite for gold from the east exceeds the amount of gold produced to feed that appetite on a “hand-to-mouth” basis, we can only speculate as to the sources being tapped by the BIS/Fed/Bank of England/ECB to feed the gold consuming beast.

What I will say with 100% certainty is that if you want to own gold but do not have possession of it – or at least have it safekept with an extremely trustworthy custodian – you will probably never have a chance to hold that gold in your hand.  It  is gone and it if it’s not gone by now, it will be gone by the time you understand the reasons why it is gone.

The only question now in my mind is how far will the bullion banks have to stretch the paper game in order to keep the price contained and the interest from the hoi polloi in gold subdued.   If the entities holding the long positions in Comex paper do not hold the paper short-sellers accountable, what’s to stop them from taking that 290:1 up to 500:1 if they have to?

The insane degree of intervention in the markets reflects sheer desperation by the manipulators to keep the wheels on the system.  When the intervention fails, the reaction by the markets will be spectacular to watch.

Shanghai Gold Exchange Has Third Largest Withdrawal Week In Its History

I was exchanging emails with Eric King of King World News earlier this week and, in the context of the unprecedented degree of paper gold manipulation and anti-gold propaganda regurgitating from the financial media, I asked him if he thought what was happening signaled a bottom:

Yes I do think it’s the bottom, Dave.  The anti-gold propaganda is off the charts.  I have never seen it this bad.  Every bullion bank and mainstream media station is bashing gold.  – Eric King, King World News

I thought the “pet rock” article in the wall street journal was the height of the madness.  But an article featured by Marketwatch which suggested that gold might hit $350 and that its fair value is $875 is perhaps the culmination of absurdity.

The irony in this is that, while the U.S. propagandists who are pulling the proverbial rug out from under the American public and extracting as much wealth from the public as they can before the country collapses, the Chinese are accumulating physical gold – aka real money – at a record rate.

Meanwhile gold and silver eagle sales from the US Mint have begun to accelerate this summers.  My good friend and colleague of several years, “Jesse” of Jesse’s Cafe Americain posted commentary which succinctly encapsulates contrast between fact and fiction:

And as you may have seen in the posting from earlier today showing the sea change in leverage over even the past ten years there, it is seemingly getting a lot less physical all the time, even compared to just five or six years ago. Winning…Even the US Mint seems to be getting in on the act.  The mint sold 202,000 ounces of gold in the form of coins for the month of July, one of its largest monthly sales totals in several years.  

That’s a lot of pet rocks.  Do the math. I wonder where the poor, deluded ignoramuses who obviously do not understand finance are getting all that money to spend on such worthless trifles.  Does the US Mint take food stamps?

You can read the rest of his piece here:  Jesse’s Cafe Americain

In contrast to Jesse, the Wall Street Journal’s Jason “Gold is a pet rock” Zweig is perhaps the most pathetic journalist of our era…

 

Two Week Shanghai Gold Exchange Withdrawals Exceed All 2014 Comex Deliveries

The Shanghai Gold Exchange is the only major official physical gold trading market in the world.  All trades on the exchange are settled with the exchange of ownership on physical gold bullion.   Paper future contracts do not trade on the SGE.   In contrast, trading occurs on the LBMA and Comex in paper gold.  The Comex is de facto a 99.999% paper gold exchange for which the percentage metal backing the paper traded is minuscule.  The LBMA has been rapidly “catching up” to the Comex in this regard, although on a percentage basis the LBMA experiences a higher amount physical gold exchanged than the Comex.

Because of the way in which the SGE functions, gold withdrawn from the SGE measures the true demand for gold in China in a given time period.  All gold – except for the gold purchased by the Peoples Bank of China – purchased by any form of end user must pass through the SGE by law.  It is for this reason that “withdrawals” represent the most accurate measurement of demand for gold in China – except the Central Bank’s demand.

In the past two weeks, 106.1 tonnes of gold were withdrawn from the SGE.  As Smaulgld.com has observed:

Gold withdrawals on the Shanghai Gold Exchange the past two weeks were larger than the amount of gold delivered on COMEX during 2014 and greater than the amount of gold Germany has repatriated from the New York Fed since 2013.  LINK

I’ll point out one minor correction to the fact above:  it’s more gold than the U.S. Government has been able to repatriate back to Germany.

Year to date SGE withdrawals are 1,260 tonnes.  This translates into an approximate annualized run-rate of 2400 tonnes – with one of heaviest seasonal periods of Chinese gold demand still to come.

I find it fascinating how the entire world, including and especially the U.S. media, has summarily dismissed the unwillingness of the U.S. Government to return Germany’s gold. Recall, Germany originally asked for over 600 tonnes of gold to be returned.  This was after the Fed refused a request by a German delegation to inspect its gold (the Fed allowed the delegation into one of the nine vaults where the gold is supposedly being “safekept”).

If the gold is there and it belongs to Germany, why is the U.S. Government dragging it’s feet on this matter?   The question, of course, is highly rhetorical.  With China moving  more gold into the country and delivering to the entities who pay for this gold, transportation and delivery is not the issue.

At some point in the future, I have no idea when and neither does anyone else, there will be a massive upward explosion in the price of gold which is ignited by investors and Governments holding paper gold and who make move to take delivery of physical gold that no longer exists in the custodial vaults listed on their paper claims.

“China Gold Demand Picking Up Strongly This Month”

While the London and New York fraudulent paper gold market continues to function as the price-setting markets for the global price of gold, China continues hoovering physical gold. In the latest week reported (June 8-12), 46 tonnes of gold were removed from the Shanghai Gold Exchange.  This puts the year-to-date total at 1,061 tonnes, which is up 20% for the same period over 2014 and 7% over 2013.   Koos Jansen refers to the YTD total as “staggering”  LINK.

The actual amount of gold being “consumed” by China is quite contrary to the flood of bearish media reports on gold this year, including several which characterize China’s demand a weak.  The reports, of course, are entirely misleading as they rely on data from the World Gold Council.  The WGC only tracks and publicizes gold which enters China through Hong Kong.  This is despite the fact that China opened up Beijing and Shanghai for gold imports specifically to mask the amount of gold that it is bringing into the country:

Opening the capital as the third shipment point will help the PBOC keep purchases discreet as it is believed to be adding to its bullion reserves.  – South China Morning Post, April 21, 2014 – LINK

Of course, the western media only uses factual reporting when it fits the propaganda it promotes.

Lawrence Williams has written a short piece describing the facts about the amount of gold flowing into China vs. the media disinformation:

Contrary to a number of media reports telling us China demand for gold has collapsed, and also that premia on the Chinese gold markets have turned to discounts, the latest figures out of Shanghai belie these statements…We have been calculating that perhaps around 40% of Chinese gold imports are now coming in directly rather than via Hong Kong which makes the Hong Kong figures, as reported by the mainstream media, no longer indicative of total Chinese demand.

Here’s the link:  China’s Gold Demand Is Strong

We can pnly wonder how much longer London and NYC can rig the price of gold, as occurred in overnight trading into Monday morning:

GoldJun21Once again gold was somewhat steady during Indian/Asian market hours. Rumors about a deal with Greece started to appear shortly before Asia closed and London opened. Of course the market manipulators used this as an opportunity to put downward pressure on gold.  Then the Comex opened.  Selling hit the Comex floor right at the floor trading opened at 8:20 a.m. EST.  There was no news or events that would have triggered selling by an investment account that was long gold futures.  This was yet another blatant paper attack on the price of gold by the banks, acting on behalf of the policy-makers at the Fed and the U.S. Treasury – collectively the “Plunge Protection Team.”

Of course, it’s easy to put the blame on an HFT hedge fund.  But this is nothing more than a shameless manner in which the truth gets repackaged by the elitists and served up the masses wallowing  in a cesspool of denial and hungry for a fairytale.

But here’s the truth:

COMPLACENY

 

Will the REAL Chinese Gold Demand Numbers Please Stand Up

There are assumptions in this analysis that should be clear to all. But if it only serves to expose the futility of attempts in western capital markets to manage the gold price, the exercise has been worthwhile. For much of 2013 commentators routinely stated that Asian demand was satisfied from ETF redemptions. But as can be seen, ETF sales totalling 881 tonnes covered only one-quarter of the west’s shortfall against China, the rest coming mostly from central bank vaults.  – Alisdair Macleod, Renewed Estimates of Chinese Gold Demand (link)

While there has been much debate over the amount of gold that is actually, realistically being transferred from the western bank and Central Bank vaults, all of us who study this issue can say with 100% confidence that any estimates from the World Gold Council, or from WGC-derived analyses, are incorrect by a significant amount.   This much we know.

Alisdair Macleod, who is one of the few gold market analysts out there with analysis and commentary about the gold market that I believe offers accurate insight and is worth reading,  published a detail report which outlines what appears to be the most bona fide estimate of the amount of gold that is being “absorbed” by China annually.  While most of us have speculated on the size of the true amount of gold held by the PBOC, Mr. Macleod’s analysis puts together the numbers which show why the PBOC disclosure is misleadingly low.

The questions remain why, if gold is a mere ornamental asset being held out of “tradition” (per Bernanke’s testimony to Congress), are Central Banks so secretive about their gold market transactional activities?   This of course is a purely rhetorical question…

I would urge everyone who is interested in seeking truth to spend time and carefully read Mr. Macleod’s analysis linked at the top.  In that I’ve been researching and studying the gold market for nearly 14 years now, I can say with complete conviction that if Alisdair’s numbers are not 100% accurate, they’re pretty damn close to the truth.