Tag Archives: gold shortage

The Shortage Of LBMA Bars Persisted Before Coronavirus

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , , ,

I found it amusing that Zerohedge tried to take credit for reporting the problem of a physical gold shortage on the LBMA and Comex earlier last week. Several of we “gold bugs” have been discussing and reporting on this issue since before the virus crisis exploded. The Comex has been settling contracts that stand for deliver through EFT and PNT transactions by which the counterparty accepts cash payment or the transfer of the Comex obligation to London for several months.

GATA’s Chris Powell expounded on this in a must-read essay on Friday: “What the heck are those mysterious ‘exchange for physicals,’ the mechanisms by which contracts to buy gold on the New York Commodities Exchange are neither fulfilled by delivery on the Comex nor settled for cash there but transported for supposed delivery elsewhere?

The mechanism long has been incorporated by the Comex trading system but was described as an “emergency” procedure undertaken upon agreement by buyer and seller — except that the use of this “emergency” procedure has exploded in the last year, involving tens of thousands of contracts and, nominally, hundreds of tonnes of gold.” Gold Traders Paid Not To Redeem Comex EFPs

Chris Marcus of Arcadia Economics and hash out this issue in our latest podcast:

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Russia To Supply China With Up To 100 tonnes Of Gold Annually

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , , ,

Russia’s second largest bank, VTB Bank, announced a deal to supply Russia with 12-15 tonnes of gold in the next 12 months.  The amount supplied will increase over time and eventually reach 80-100 tonnes annually:  Reuters Link.

Perhaps the most interesting aspect of this will be to see if the World Gold Council acknowledges this gold as “Chinese imports.”   The WGC and other entities which purport to track global gold “consumption” have been reporting declining demand for gold in China, based on declining imports from Hong Kong.   Of course, these “official” sources completely ignore the fact that China imports an unknown amount of gold through the ports of Beijing and Shanghai…move along, nothing to see there…

The unarguable scheme by western Central Banks to suppress the price of gold with paper gold is contingent on the ability to deliver actual physical gold into China and India.   In this blog’s educated opinion, the supply of gold available to make this happen is running low:  Central Bank gold stock plus investor custodial gold that has been hypothecated.

This report out of Russia supports the thesis that China’s Central Bank is accumulating, and has accumulated, significantly more gold than it is willing to disclose.  As reported in the South China Morning Post when China announced opening Beijing, after also opening Shanghai,  for gold imports:

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…The mainland has begun allowing gold imports through the capital, sources familiar with the matter said, in a move that would help keep purchases by the world’s top bullion buyer discreet at a time when it might be boosting official reserves.  South China Morning News

This is likely why the Fed/ECB/BOE are collectively having a difficult time pushing the price of gold lower after its big move starting in mid-December.   At some point, gold is going launch out its current lateral consolidation and move much higher by the end of the year. Especially once the market fully understands that the ONLY policy choice left for the Fed is to keep printing money at an accelerating rate or risk complete financial collapse.

Indian Government Gold Schemes Destined To Fail

Financial Markets, Gold, Market Manipulation, Precious Metals, , , ,

The new schemes are aimed at monetizing some of the huge amounts of gold believed to be in private hands in India – in particular some of the religious temples have huge hoards of gold which have been built up over the years. The idea is to give gold holders a way of generating income from their bullion holdings, although the general distrust of the economic system which prompts Indians to hold gold in the first place will indeed likely have a limiting impact on the take-up.   Lawrie Williams, LINK

The India Government is rolling out a plan designed to coerce Indians into putting their gold into banks in exchange for receiving interest on the gold deposits.  The “Gold Monetization Scheme” and “Gold Sovereign Bond Scheme” are both aimed at “monetizing” the gold held by private citizens.  But why are the banks in India interested in getting ahold of the massive amount of privately held gold in India?  In reality, these “schemes” are nothing more than a thinly disguised “scheme” to implement a fractional gold system.

I highly suspect that the Fed/U.S. Government was instrumental in pushing this plan through the Indian Central Bank and Finance Ministry.  India will import at least 1,000 tonnes of gold this year (easily over 1,000 tonnes when smuggling is considered).  This is putting extreme stress on the ability of the western Central Banks/bullion banks to source gold that can be delivered into the big eastern hemisphere buyers, who require and demand physical delivery.

It’s in the Indian DNA to buy and hold possession of gold in all forms.  They have inherent distrust of the economic system, which is why they buy and hold physical gold in the first place.  In fact, as the article linked above references, there’s been a gold deposit program in place since 1999 but has attracted only 15 tonnes since its inception.

Exchanging gold in hand for a piece of paper that promises the payment of interest plus the return of that gold at a specified date in the future leaves the investor exposed to a high degree of counterparty.  Unquestionably the Indian Government wants to this gold so that it can turnaround and lease it to the western Central Banks, who are in desperate need of a steady supply of gold to deliver to China.  As for the extreme degree of the counterparty risk involved, just as the German Government…