Thursday, August 29, 2013

Deliverable Gold Falls To a New Low Of 725,000 Ounces

"There was a transfer of 43,575 ounces out of the deliverable (registered) category to eligible storage with the JP Morgan warehouse, bringing the total gold in the registered category to 725,030 ounces.

Friday will be the last day for August delivery. The next delivery month will be October.

Total gold in the COMEX warehouses remained steady at about 7 million ounces.

Without higher prices it does not seem realistic to expect those with their gold stored in the warehouses to move it to registered and to offer it for delivery.

As I have said, I do not expect the problems with gold and silver to reach a climactic resolution at the COMEX in the form of a default.  That is more likely to be a secondary effect of a greater scandal or failure that will begin with the physical market, and probably overseas. 

What will trigger this reckoning?  Perhaps some large owner or even a central bank will not accept that their gold is missing as readily as the Bundesbank has done, with their gold apparently having been rehypothecated away for the profit of the private bullion banks.

Be that as it may, the leverage within the paper market is obviously at elevated levels, providing a risk factor that sets the bar for counterparty risk rather low.  This could facilitate a rather energetic short squeeze at some point.  I hear that at least one very significant market participant is positioned to benefit from such an eventuality.

Weighed, and found wanting.

Stand and deliver..."


Massive Flight Of Physical Gold & Silver Out Of West Continues

"On the heels of continued volatility in global markets, today one of the legends in the business spoke with King World News about the ongoing war in the gold and silver markets, and the fact that Western central planners are becoming increasingly desperate.  Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also spoke about the continued massive flight of gold and silver out of the West. 

Below is what Barron had to say in his powerful interview.
Barron:  “Despite some pullbacks, overall both the gold and silver markets have been moving up quite nicely.  All of your guests on KWN predicted this would happen because we knew the precious metals markets were deeply oversold.  We also knew the cost to buy both gold and silver had declined below the median cost of production. 

You can never have this situation going on for very long (metal below cost of production) because it puts the producers out of business.  But what we have really seen over the last couple of months is a massive amount of physical gold moving out of the COMEX and LBMA systems, out of the ETFs, and this gold has migrated to the strong hands in the East...."

Unprecedented Run On Physical Gold Now Set To Accelerate

"With gold and silver continuing to consolidate recent gains, today John Hathaway warned King World News that the run on physical gold may now be set to accelerate.  Hathaway also spoke about the enormous implications as this massive run on gold unfolds.  Hathaway, of Tocqueville Asset Management L.P., is one of the most respected institutional minds in the world today regarding gold, and his fund was awarded a coveted 5-star rating. 
Hathaway:  “Eric, I still think we are dealing with a shortage of physical gold vs the enormous amount of paper claims.  Of course we are seeing a bit of backing and filling in gold as August comes to an end, but I think this story is going to keep coming back.
Entities who have paper claims, whether it’s futures contracts or derivatives -- where you have banks or the COMEX as the intermediary -- are going to say, ‘Hey, I would like to have my gold in a more secure situation.  This means getting possession of their physical gold in a non-bank vault....

“So there will be an increased demand for storage and vaulting needs outside of the banking system.  This will drive the gold price higher over time because the leverage of paper claims to physical gold is at least 100 to 1..."

Wednesday, August 28, 2013

CITI: GOLD $3,500

"After falling by more than 20% from its recent highs, gold is now nearly 20% off of its lows.

Citi's top technical analyst Tom Fitzpatrick has been a long-time bull on gold.
And in a new interview with King World News' Eric King, Fitzpatrick reiterates his view that the yellow metal could head to $3,500.
“Within the gold dynamic, we believe this recent correction was very similar to what the gold market witnessed from 1974 to 1976 -- as the equity markets recovered from the bear market bottom in 1974.  In this instance, very recently gold went 14% below the 55-month moving average, exactly as it did back in 1976.
After the low in gold in 1976, the equity market peaked 4 weeks later.  So far, following the $1,181 low in gold, the peak in the equity markets has been 5 weeks thereafter.  And as we started that historic upward movement in gold, beginning in 1976, this was also when the equity market peaked and went into a corrective phase, and that is when gold really came into its own.
So we believe we are back into that track where gold is the hard currency of choice, and we expect for this trend to accelerate going forward.  We still believe that in the next couple of years we will be looking at a gold price of around $3,500.  As the gold/silver ratio plummets near 30, this would also suggest a silver price above $100.”


Financial Times: "World Is Doomed To An Endless Cycle Of Bubble, Financial Crisis And Currency Collapse"

"It's funny: nearly five years ago, when we first started, and said that the world is doomed to an endless cycle of bubble, financial crisis and currency collapse as long as the Fed is around, most people laughed: after all they had very serious reputations aligned with a broken and terminally disintegrating economic lie. With time some came to agree with our viewpoint, but most of the very serious people continued to laugh. Fast forward to last night when we read, in that very bastion of very serious opinions, the Financial Times, the following sentence: "The world is doomed to an endless cycle of bubble, financial crisis and currency collapse." By the way, the last phrase can be written in a simpler way: hyperinflation.
So ok then: we are happy to take that as an indirect, partial apology by some very serious people. Partial, because the piece's author, Robin Harding, doesn't explicitly come out and state that this cycle of boom and bust is a direct function of ever encroaching central-planning being handed over to a few economists with zero real world experience, whose actions result in ever more devastating blow ups once the boom cycle shifts to bust. Instead, it is their admission that this is what the world has come to. But, being economists, they naturally fail to see that it is all due to them. Instead, just like pervasive market halt, flash crashes, and everything else that now dominates a broken New Normal, this cycle which eventually culminates with currency collapse, or said otherwise, hyperinflation.
The FT's read on the paradox of modern finance and central banking is surprisingly accurate: in fact, it is almost as if it comes not from the FT but from a textbook on Austrian economics, or a Zero Hedge article:
All [the central bankers'] discussion of the international financial system was marked by a fatalist acceptance of the status quo. Despite the success of unconventional monetary policy and recent big upgrades to financial regulation, we still have no way to tackle imbalances in the global economy, and that means new crises in the future.
Indeed, the problem is becoming worse. Since the collapse in 1971 of the old fixed exchange rate system of Bretton Woods, the world has become used to the “trilemma” of international finance: the impossibility of having free capital flows, fixed exchange rates and an independent monetary policy all at the same time. Most countries have plumped for control over their own monetary policy and a floating exchange rate.
The rest of the article is also like reading early Zero Hedge. Or middle. Or late: in a world of instantaneous fungibility and global capital flows, the Fed is in charge of hot money everywhere, which incidentally is why it is the Emerging Markets that are getting destroyed (first, for now) as the global Fed-funded carry trade slowly but surely unwinds.
Yet all the debate was about how individual countries can damp the impact of capital flowing in and out. Prof Rey’s own conclusion was that it is hopeless to expect the Fed to set policy with other countries in mind (which would be illegal). She recommended targeted capital controls, tough bank regulation, and domestic policy to cool off credit booms.
In practice, this will never work well. It requires every country in the world to react with discipline to constantly changing capital flows. It is like saying we can cure the common cold if only everyone in the world would wash their hands hourly and never leave the house. Even if it did work, the necessary volatility of policy would still impose painful economic costs on the countries acting this way.
The shocking lucidity continues:
The flaws in the international financial system are old and profound, and they defeat any effort to work around them. Chief among them is the lack of a mechanism to force any country with a current account surplus to reduce it. Huge imbalances – such as the Chinese surplus that sent a flood of capital into the US and helped create the financial crisis – can therefore develop and persist.
Even the conclusion is straight out of a Zero Hedge article:
The flaws in the international financial system are old and profound, and they defeat any effort to work around them. Chief among them is the lack of a mechanism to force any country with a current account surplus to reduce it. Huge imbalances – such as the Chinese surplus that sent a flood of capital into the US and helped create the financial crisis – can therefore develop and persist.
Indeed, running a surplus is wise because there is no international central bank to rely on if investors decide they want to pull capital out of your country. There is the International Monetary Fund – but Asian countries tried that in 1997, and the experience was so delightful they have been piling up foreign exchange reserves ever since to avoid a repeat.
A reliable backstop is impossible when the international system relies on a national currency – the US dollar – as its reserve asset. Only the Fed makes dollars. In a crisis, there are never enough of them – a shortage that will only get worse as the world economy grows relative to the US – even if the problem for emerging markets right now is too many of them.
The answer is what John Maynard Keynes proposed in the 1930s: an international reserve asset, rules for pricing national currencies against it, and penalties for countries that run a persistent surplus. After the financial crisis there was a flood of proposals along these lines from the UN, from the economist Joseph Stiglitz, and even from the governor of the People’s Bank of China. None has gone anywhere.
Oh it will go somewhere... as soon as Bernanke leads the US to its own final "currency collapse", resulting in an inevitable shift in the reserve currency status as we have shown many times before, and as has happened in history so many times. Because no reserve currency is forever.
And finally, on that other topic, gold and systemic stability, here is what the FT has to say:
A stable international financial system has eluded the world since the end of the gold standard.
What else is there to say.
No really: when the FT becomes ZH, maybe everything that should be said, has been said?"

Jim Rogers : War on Syria will push Commodities Up and Stocks Down

"Jim Rogers : well Tara I own Gold I own Oil and there is going to be a war and it sounds like America is desperate to have a war they are going to go much much higher , stocks are going to go down , markets I am sure are already going down commodities are going to go up , some of the things I own I am going to make a lot of money , I am not particularly keen on war I assure you but it sounds that they want it ...."


This Triggered The Short Squeeze That Is Crushing Gold Bears

"...Eric King:  “John, many have argued that gold never should have broken down from the $1,500 to $1,600 area.  Their feeling is that the move down in gold was engineered by Western governments because the LBMA was in danger of having its fractional gold reserve system completely collapse.  This manipulation has clearly backfired on Western governments.  Now that gold is recovering, how do you see this market trading in the future?”
Ing:  “Well, one thing about following the gold market for as long as I have (43 years), I remember, as you do, when the price of gold was $35 an ounce.  Then, we were told that $100 was the peak.  Then, when gold broke over $200 an ounce, and Americans were finally allowed to buy gold, that was when the price of gold was supposed to go though the roof.  Of course the next day the gold price began its historic collapse where it lost roughly 50% of its value.  So, then they told us that was supposed to be the peak.
If you remember just a few years ago, we were being told that gold was never supposed to see the 1980 high of $850 ever again, and yet hear we are today trading above $1,400.  Now, we are being told by the mainstream media that $1,920 gold won’t be seen for another generation.  I’m not sure whether $2,000, $2,500, or even $10,000 is going to be the peak for gold at the end of this cycle.
I can recall being in a bear market in gold for 20 years.  We have only been in this bull market in gold for about 12 years.  So we should expect to see a 20 year bull market, which means we are only about half way through this current bull market in gold.  This means we have a lot of room on the upside still to go.”
Eric King:  “John, I just want to circle back to this issue of there being a shortage of available physical gold.  The fact that entities are having difficulty buying physical gold in size right now, is that why you say there is so much room on the upside for gold, because it’s just not available (in size)?”
Ing:  “One of the reasons for the collapse in gold, and this war between the physical gold and paper gold market, is related to the unintended consequences of quantitative easing and the fact that borrowing costs are essentially at zero.  This has meant that a lot of the central banks and bullion banks have introduced trillions of dollars of commodity derivatives, particularly in gold, and they are now essentially ‘floating’ around. 
The problem is that because of all of this tremendous physical demand for gold, and the fact that there is too much paper ‘floating’ around, whether it’s paper barrels, paper copper, or paper gold, one of these days this squeeze is going to bankrupt the counterparties.
This is why you have to look carefully at these big banks, hedge funds, and big trading houses.  To them, they all view these commodities the same way, it’s just a cost to carry.  But what’s happening right now is that in the physical world the demand is so extraordinary that we we have this backwardation in gold as an example.  This means that there is a squeeze going on in the gold market.
There was simply too much ‘paper’ that has been put out there, and now it is quite clear that there is not enough physical gold backing that up that paper.  So my expectation is that over the next few months, every option expiry, as we approach each of them, we will see a short squeeze in the price of gold, and that means significantly higher prices as we move forward and the squeeze in gold accelerates.”

Gold Poised To Super-Surge 150% & Silver A Staggering 300%

"On the heels of continued fierce action in the gold and silver markets, today top Citi analyst Tom Fitzpatrick spoke with King World News about an expected 150% super-surge in the price of gold, and a staggering 300% in silver.  He also included 4 fantastic gold and silver charts which illustrate how this enormous advance will begin.
Below is Fitzpatrick’s tremendous interview along with 4 key charts: 
Eric King:  “Tom, we are continuing to see these advances in gold and silver that you predicted would happen.  Let’s start with gold.”
“Yes.  Overall we are still of the view that what we saw was a very deep correction in secular bear market, but a correction nonetheless.  The platform which has now been established with the recent low, below $1,200, is going to be a platform for a substantial move higher....
“The price of gold is now advancing above the area that really marked the breakdown point in gold.  This area is where gold has the rising trendline and the 55-month moving average.  These zones come in around the $1,390 to $1,405 levels.
So a monthly close back above that zone would suggest that gold is now undoing the longer-term break that was the catalyst for the move down below $1,200.  This will open up the gold price for a test of the really big break point, which was the area around $1,520 to $1,525. 
This $1,520 to $1,525 zone was pierced on the downside as the equity markets were hitting new all-time highs.  Regaining a strong foothold above that area would be the catalyst in terms of price that would signify gold has definitely reentered the bullish phase of its secular bull market (see chart below).
This break back above that key area ($1,525) would also open up the door for a move in gold toward the $1,790 to $1,800 price level (see chart above).  We still remain of the belief that gold will ultimately see new all-time highs during this strong move to the upside..."

Tuesday, August 27, 2013

We May Be In The Early Stages Of The Next Global Economic Crisis

"The global economy could be in the early stages of another crisis. Once again, the US Federal Reserve is in the eye of the storm.

As the Fed attempts to exit from so-called quantitative easing (QE) – its unprecedented policy of massive purchases of long-term assets – many high-flying emerging economies suddenly find themselves in a vise..."


China Warns US About Cutting Tapering Too Soon, Proposes BRIC Foreign Currency Fund

"The focus for the entirely useless upcoming G20 meeting is fear over US tapering, capital flight, and liquidity.

Reuters reports Ahead of G20, China urges caution in Fed policy tapering
The U.S. Federal Reserve must consider when and how fast it unwinds its economic stimulus to avoid harming emerging market economies, senior Chinese officials said on Tuesday.

The warning by China's Vice Finance Minister Zhu Guangyao and central bank Vice Governor Yi Gang came as economies from Brazil to Indonesia struggle to cope with capital flight as U.S. interest rates rise ahead of an expected tapering off in the Federal Reserve's bond buying program that unleashed liquidity across the world.

The United States - the main currency issuing country - must consider the spill-over effect of its monetary policy, especially the opportunity and rhythm of its exit from the ultra-loose monetary policy," Zhu said.

China will refrain from providing stimulus to the world's second-largest economy, which he said was on track to grow around 7.5 percent this year - in line with the government's target.

"On monetary policy, the focal point (of G20) will be on how to minimize the external impact when major developed countries exit or gradually exit quantitative easing, especially causing volatile capital flows in emerging markets and putting pressures on emerging-market currencies," Yi said.

Yi said a $100 billion foreign-currency fund being discussed by countries that make up the BRICS grouping of Brazil, Russia, India, China and South Africa will be set up in the foreseeable future. He said China would provide "a big share" of the funds but he did not give details.

"It will not exceed 50 percent," he said.

The BRICS' leaders have agreed to set up the fund to help ward off currency crises..."

Monday, August 26, 2013

Guest Post: The Recession That Never Ended: 2008 -2013 (And Counting)

"The reality is that the recession never ended for 95% of U.S. households, and by many metrics the recession has deepened.
If you want to claim the 2008 recession ended, you have to find a metric that reflects "growth." For instance, gross domestic product (GDP), which has expanded since 2009.
But as Lance RobertsGordon T. Long and I discuss in Is the US in a Recession? (43 min. video, 52 slides), this metric of "growth" is suspect on a number of counts.For example, does this chart of full-time employees relative to the population look expansionary?
Or how about this chart of median household income, which adjusted for inflation is down 7.2%?
Or how about real personal income less government personal transfers on a 5-year basis (the red line)? Notice that the red line only popped briefly above 0% into "growth" in late 2012 as those who could declared income in 2012 before the 1013 tax increases kicked in.
None of these charts is remotely expansionary. We can further question broad-based measures of expansion such as GDP statistically: in economies with high income/wealth inequality such as the U.S., the top 5%'s expansion of income and wealth creates an illusion that the entire workforce is doing better when the opposite is true.
If you doubt this, please examine this chart of income disparity. Note that the vast majority of income increases have accrued to the top 5%:.."

Sunday, August 25, 2013

France Is Heading For The Biggest Economic Train Wreck In Europe

"...1. Your country is in recession and has been for almost two years. Even the government is beginning to acknowledge that growth is and will be flat. Standard & Poor's thinks your growth rate may be as low as -1.5%. Jean-Michel Six of Standard & Poor's recently noted, "The current account deficit is growing month after month, and this means it is depending more and more on the rest of the world to finance its growth. In my view, France has got just one more year to sort itself out."
One of the ways to deal with a debt crisis is to grow your way out of it. You are not doing that. The number of new industrial plants created by foreigners fell 25% last year, and new job creation fell 53%. Ernst & Young said France's anti-market body language had become almost "repulsive" to outside investors, and a series of bitter labor disputes has not helped (source: The Telegraph). French industrial output is still falling, and both your manufacturing and service PMIs are among the worst in Europe—far worse even than those of Italy and Spain, both of which are clearly in financial disarray. The following PMI chart is from March, but August was still in negative territory (chart courtesy of Josh Ayers of Paradarch Advisors).

130825 02

2. Your debt growth is unsustainable. France is currently enjoying the lowest effective borrowing rates it has had for 30 years, allowing the interest you pay to fall even as the total debt rises. Both interest payments and interest as a percentage of GDP are at all-time lows.
Here is a summary analysis from just about the best research team around, at Bridgewater:
France is approaching the point in its debt expansion phase in which debt service costs will rise faster than incomes causing a squeeze. The below charts convey that in brief. They show France's debts rising relative to incomes while interest rates fell so that debt service expenses fell relatively despite the greater debts. When debt service expenses fall relative to income, that leaves more money for spending which is stimulative for the economy. Both the risk-free rate and credit spreads have fallen just about as far as possible. As a result, the net relief in debt service payments that has come from the interest rate decline will be removed. If interest rates rise, particularly if both the risk-free rate and the credit spreads rise, the debt service bill will have to increase more.
That means that either (a) debt service expenses will increase as a share of income, thus squeezing consumption and lowering economic growth (b) there will be an acceleration of indebtedness in order to pay for both the increased debt service requirements and increased consumption growth (which is a sure sign of an unsustainable bubble) or (c) incomes from some other sources have to rise. Since income growth is a function of productivity growth and competitiveness in global markets, and France is not doing much to improve productivity and competitiveness, we do not expect incomes to benefit from changes in these. That means that debt and debt service growth will either accelerate until the debt bubble pops or debt growth and economic growth will slow which will be painful. Since painful slower growth is not an option, it is more likely that debt and debt service growth will accelerate until the bubble pops. That will have important implications for the whole Eurozone.
France is getting close to the end of its ability to play games with its debt. Though France moved a lot of its debt to off-balance-sheet accounts for its social programs, the total debt is growing so much that the rating agencies will have to start taking notice.
3. The level of French debt is at postwar highs and is beginning to approach that of the peripheral countries. Note in the chart below from Bridgewater that in Germany total nonfinancial debt has been decreasing the past few years, the debt of peripheral Europe in the aggregate has gone roughly flat, but France's debt is increasing dramatically. At the pace France is accumulating new debt, it will not be long before your financial situation looks quite similar to that of your peripheral neighbors..."

COMEX Registered Gold Falls To a New Low As JPM Takes a Large Delivery From Scotia Mocatta

"Registered (deliverable) gold on the COMEX fell to a new low as JPM took delivery of 28,809 ounces from Scotia Mocatta.

There were a few transfers from the Eligible to Registered category with the only one of note being 4,605 ounces at Scotia Mocatta.

This is activity that occurred on Thursday.  We will have the information on Friday next week.  Let's see if the higher prices have shaken any more gold loose from weaker hands.

Next week we will see an option expiry on the COMEX for the precious metals on Tuesday,  and the end of the August delivery period on Friday.

The 'owners per ounce' remains very high at a little over 48 potential claims for every ounce of gold in the registered (deliverable) category.  It will take higher prices to move more of the gold from 'eligible,'  or stored in an approved COMEX warehouse, to 'registered,' or available for delivery.

Although it remains fairly stable at around 7 million ounces, the drop in total gold from all categories in all COMEX warehouses from over 11 million ounces at the beginning of the year is stunning.  It takes a bit of work to get that gold back into the system.  And much of it seems to have headed to other shores, and may not be coming back at any price.

I think that in their arrogance and greed, the gold cartel may have gone a bit too far in their latest pricing gambit, and painted themselves into a corner.  Higher prices may cause more accumulation of physical bullion by the ETFs, and nothing seems to halt the strong demand for physical bullion from Asia.  The writing is on the wall.

Weighed, and found wanting.

Stand and deliver."


Billionaire Sprott Says World To Witness A Frightening Collapse

"Today billionaire Eric Sprott warned King World News that the world is in for a massive and frightening collapse.  He also startled KWN when he revealed what his biggest fear is when the mega-collapse takes place.  This is the second of three interviews with the Canadian billionaire that will be released today.  Below is what Sprott, who is Chairman of Sprott Asset Management, had to say in part II of this remarkably powerful interview series.
Eric King:  “Ron Rosen has been watching these markets for almost 60 years now, but he told KWN in an interview very recently that the stock market was going to have a massive collapse -- he was talking (about a) 66% (decline).  And (he also said) that gold and silver were going to skyrocket.  Since then we’ve seen the Dow plunge 500 points, gold move up about $80, and silver has risen $2.60.  This environment that you see going forward, is that a scenario that could play out as Rosen describes?”  
Sprott:  “Well, Eric, I guess I would start out with my fundamental conclusion about the financial system in the world.  It’s obvious to me that the U.S. government is broke.  That’s the easiest calculation in the world to make....
“You can use the Department of the Treasury’s own numbers, when they report the GAAP deficits for the year.  Last year it was $6.5 trillion, and that takes the increase in present value of known obligations.  So we have a $17 trillion economy, with a $6.5 trillion deficit which will continue to rise.  Unfunded obligations, based on various estimates, are always somewhere between $40 to $80 trillion -- with a $17 trillion economy that already runs a cash deficit of around $1 trillion a year.
I analogize between Detroit and the United States.  We all knew Detroit was broke 10 years ago, but nobody did anything about it.  We all waited the 10 years and then, finally, of course what happens is instead of the pensioners having to take a 10% or 20% cut, they have to take a 75% cut.
That’s what I fear is going to happen in the U.S. -- that we keep delaying, and delaying the obvious, and then someday there is going to be something that happens, and of course the cuts that people with have to exist with in Medicare, social security, government pension checks, will be way bigger than it had to be because nobody did anything about it in the meantime.
Where we are going is so obvious.  So, do I think the market could go down 66%?  Yes.  I’ve always thought the whole (stock) market was a bit of a Ponzi scheme, (the same) as we know that bonds are a Ponzi scheme.  And I think the price of gold being driven down is another Ponzi scheme to make fiat currencies look good.  I don’t have a target like that (66% decline in stocks), but do I see it as a possibility?  Yes I do.”   


Wednesday, August 21, 2013

Secret Central Bank Activity In The Gold Market Exposed

"Today one of the savviest and most well-connected hedge fund managers in the world spoke with King World News about uncovering exactly how the Western central banks conceal their secret activity in the gold market.  Outspoken Hong Kong hedge fund manager William Kaye also warned that Western central banks are now “running out of gold” to supply into the market.  Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, had this to say in his fascinating and powerful interview.

Kaye:  “Investors need to be focused on the numbers that are involved in the gold market.  The available feedstock of gold and other precious metals that is necessary to prevent the paper market from being bifurcated from the physical market is being rapidly depleted.

This gets no attention in any of the mainstream media.  It’s absolutely amazing.  You are not going to read about this in the Financial Times or the Wall Street Journal or any bank sell-side reports for that matter....

But for the people who do serious work, whether it’s Grant Williams or Andrew Maguire, people like us and a handful of others, the numbers speak for themselves.  Mine production is plummeting rapidly.  If metals prices were, for some bizarre reason, to stay where they are today, roughly 25% of mine production would be taken out of the market.  That’s a staggering number.

2,600 tons of gold were produced and sold into the market in 2012.  At current run-rates, we believe that only 2,200 tons of gold will be sold into the market.  The production numbers have gone down rapidly because of depressed prices.  Those numbers will continue to fall if gold prices don’t rise dramatically from where they are today.

At existing prices, as I said, roughly 25% of production or what is equivalent to the entire junior mining industry today would cease to exist by this time next year.  So, to be clear, this would be an additional 25% reduction from the already reduced 2,200 ton number.  This is potentially a very, very serious situation for the Western price manipulators because supply would continue to disappear at a rapid pace.

You also have the World Gold Council weighing in with scrap production falling on their estimates.  Scrap production has declined 25% alone in 2013.  Well, that’s pretty interesting because none of our contacts in the scrap industry report that their numbers are down anywhere close to that.  So the only way you can arrive at that conclusion, Eric, is, as so many insiders have been telling us, the scrap number is just a ‘plug’ for what the central banks do (in terms of supplying physical gold from Western vaults).

You have to remember that if you look at the World Gold Council reports, there is no line item for gold which is sold into the system that was leased from central banks.  Now this is amazing because we know this occurs.  The central banks themselves have admitted it.

The central banks control more gold than any other entity in the world, so how can the World Gold Council ignore such an important factor in the market?  But they do.  So central bank gold supply into the market is concealed through the scrap side of the business.

Interestingly, Thomson Reuters confirms the World Gold Council’s scrap numbers.  But Thomson Reuters will not share, and neither will the World Gold Council, their numbers with us.  They won’t tell us where their sources are.  They won’t document the numbers.  They will just say, ‘take it or leave it.’  Well, I prefer to leave it.  When someone says, ‘take it or leave it,’ and I’m paying for their service, I’ll leave it. 

I just don’t trust people that won’t come clean.  We said, ‘Prove to us that you didn’t just make them up,’ and they refused to do it.  So I am very suspicious of those (scrap) numbers.  And I now side entirely with our sources, and we have more than one, who have said for some time now that ‘They just make this stuff up.’ 

So this is how they attempt to camouflage what the central banks are doing in the physical gold market.  Well, the Western central banks, as you and I have discussed in several interviews, are running out of gold.  So, naturally the (scrap) number is going to drop markedly because the central banks are cutting back on their delivery of gold into the system because they are simply running out of gold.  

The Western central banks are running out of gold to deliver into the system, and the Eastern central banks and the emerging market central banks are net-buyers and they have no interest in selling.  Take a look at India:  India has a crisis going on.  They bitch about having a current account deficit and their currency being attacked, but you don’t see the Indian Reserve Bank selling their gold, do you?  The Reserve Bank of India only buys gold. 

The Indians could mount a very powerful defense of the rupee if they wanted to by simply selling central bank gold.  But they refuse to do that.  India is trying very hard to keep their citizens from buying gold, but all the central bank does is buy.  They never sell.

My advice to the KWN readers around the world is they should take their cue from what powerful entities like the Reserve Bank of India, which is one of the ultimate insiders in this game, are doing.  Don’t pay attention to what they are saying.  They are saying, and in particular to 1.1 billion Indians, to ‘Sell gold.  And whatever you do, don’t buy gold.’  But meanwhile, all they do is buy gold and they don’t sell a single ounce.  They won’t even do it to defend the currency.  To me that’s a very powerful message about where they know the price of gold is headed.” 

A 2008-Type Of Event Will Plunge The World Into A Panic

"...Kaye: “John has a lot of credibility.  I can tell you that the the leverage in derivatives is absolutely enormous.  People just don’t understand how staggering the leverage is inside of the derivatives complex.

So there are entities with bets on higher interest rates in place, and this is against other entities that are betting interest rates will remain low or even head lower from here.  The fixed income markets are massive.  And everybody says, ‘We are delta-hedged’ and all of this other nonsense.  But having run an arbitrage operation and having had to be dealt a hedge, I can tell you that nobody is really hedged, they just say they are.

There is serious concern at the moment over derivatives exposure because of the move higher in interest rates.  So there are probably entities who are screaming right now because of what has taken place in the interest rate markets.  And if they had to actually report, as opposed to just papering over in some fashion, the mark-to-market losses that they are experiencing, this would not only be extremely painful, but possibly it would possibly destabilize to the entire financial system.

In other words, one thing central planners can’t allow is for the ‘too-big-to-fail’ to appear to be failing again because that’s a very slippery slope.  Confidence in banking is everything.  Everyone now knows, particularly after 2008, that the financial system has far too much leverage.  

As soon as the people lose confidence in the system, panic will ensue, and so that just can’t be allowed to happen.  The system would implode again, and this time it would be much more serious than in 2008 because the sovereigns no longer have the firepower to bail everybody out.  That’s what is different now.  I don’t know precisely what is happening behind the scenes right now, but I would imagine it to be quite chaotic.” 

Tuesday, August 20, 2013

Gold Daily and Silver Weekly Charts - Goldman Was Buying Gold While They Were Saying 'Sell?'

"Gold and silver had quiet pullbacks today as the markets digested some of their recent gains.

Overall trading is very quiet as many traders are on their summer vacations.

Registered inventory bounced back up a little bit last week, but remains rather thin and indicative of an intermediate trend change.

A reader informs us that:
"For those with a bloomberg terminal, type up the command: {GLD Equity PHDC1 } ... GS bought $5b USD of GLD last quarter, while they were pitching their "sell gold" call to the world."

California economist says real US debt $70 trillion

"Or so claims a recent headline. But that's not what I actually said, as I try to clarify below.
In a recent paper I examined off-balance-sheet liabilities of the U.S. federal government. I concluded that these came to $70 trillion as of 2012, or 6 times the size of net federal debt held by the public. These off-balance-sheet liabilities take the form of implicit and explicit guarantees and commitments, but should not be construed as comparable to debt obligations of the U.S. Treasury.
The first decision you have to make in deciding how much the government really "owes" is how to treat government trust funds such as Social Security. These represent sums that the U.S. Treasury has promised to pay to the trust funds. They are counted as an asset of the trust funds and a liability of the U.S. Treasury. One perspective is that these represent obligations that one part of the U.S. government-- the Treasury-- has promised to pay to another part-- the Social Security Administration. If you view this as money that the federal government just owes to itself, you might choose to exclude it from your measure of government debt. Leaving out the sums that the Treasury owes to the various government trust funds leads to the measure known as the net federal debt, or debt owed to the public. This came to $11.3 trillion as of the end of fiscal year 2012..."


Gold Is Flooding Out Of London To Switzerland At An Alarming Rate

"Submitted by Mike Krieger via Liberty Blitzkrieg blog,

This is one of those stories about the gold market that almost seems too wild to be true since the numbers are so extraordinary. According to a Reuters article from earlier today, Australian bank Macquarie has reported that gold is flooding out of London and into Switzerland at a mind-boggling rate. Specifically, 240 tons were exported in May alone and 797 tons during the first half of 2013. That means gold is being exported at a annualized run rate of 17x the 92 tons exported for all of 2012. That’s insane.

Moreover, it seems a lot of that gold is being sent to Switzerland so that the 400oz bars can be melted down into different sizes that are more amenable to Asian sensibilities. So, as many of us suspected all along, what has happened is lobotomized Westerners have sent much of their gold to Asia just as the financial system prepares to melt down again. The fact that the market has absorbed all of this and yet we still have a backwardated market is extremely bullish..."


18 Signs That Global Financial Markets Are Entering A Horrifying Death Spiral

"The following are 18 signs that global financial markets are entering a horrifying death spiral...
#1 The yield on 10 year U.S. Treasuries has risen for 5 of the past 6 days, and it briefly touched the 2.90% level on Monday.
#2 Rapidly rising interest rates are spooking investors and causing them to pull money out of bonds at a very rapid pace...
Investors have yanked nearly $20 billion from bond mutual funds and exchange traded funds so far in August. That's the fourth highest pullback ever, according to TrimTabs data. In June, investors took out $69.1 billion -- the highest on record.
#3 The sell-off of U.S. Treasuries is being led by foreigners.  In particular, China and Japan have been particularly aggressive in selling off bonds...
China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries.
The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed on Thursday.
China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.
#4 Thanks to rapidly rising bond yields, some of the largest exchange-traded bond funds are getting absolutely hammered right now...
• The $18 billion iShares iBoxx $ Investment Grade Corporate Bond fund (ticker: LQD) has fallen 7.94% since May 2, according to S&P Capital IQ. That's including reinvested interest from the fund's bond holdings.
• The 3.7 billion iShares Barclays 20+ Year Treasury Bond (TLT) has plunged 15.9% the same period. Longer-term bonds typically get hit harder when rates rise than shorter-term bonds. For example, the iShares Barclays 3-7 Year Treasury Bond fund (IEI) has fallen 3.2% since May 2.
• PowerShares Emerging Markets Sovereign Debt (PCY), which invests in government bonds issued in developing countries, has fallen 12.7%. The fund has $1.8 billion in assets.
#5 In recent weeks we have witnessed the largest cluster of Hindenburg Omens that we have seen since prior to the last financial crisis.
#6 George Soros has bet a tremendous amount of money that the S&P 500 is going to be heading down.
#7 At this point, the S&P 500 has fallen for 9 out of the last 11 trading days.
#8 Margin debt has spiked to extremely dangerous levels.  This is a pattern that we also saw just before the last financial crash and just before the dotcom bubble burst..."