Thursday, October 24, 2013

For The 1st Time in History : Every Major Central Bank Is Debasing Currency

"Jim Rogers : This is the first time that I know of, in recorded history, when every major central bank is printing money at the same time and trying to debase their currency. In the thirties, we had beggar-thy-neighbor policies but those were mainly tariffs and controls.

This time everybody is printing money, I don`t think this has ever happened in recorded history."

World Just Witnessed A Stunning Watershed Moment In History

"Today one of the top economists in the world told King World News the world has just witnessed, “a watershed moment in history.”  This is without a doubt one of the most important interviews KWN has ever done with Michael Pento.  Below is what Pento, who heads Pento Portfolio Strategies, had to say in this remarkable and timely interview.

Eric King:  “Earlier today we had Keith Barron discussing the ‘Great Inflation’ -- a technical hyperinflation in the fine art market (which is taking place).  Some of the (fine art) pieces have gained an astonishing 100% in just 6-to-8-months.  It’s stratospheric the prices those (fine art pieces) are going out the door (of auction houses) for.  But he said you see these things in anticipation of a coming ‘Great Inflation.’”

Pento:  “He’s exactly correct, Eric.  Inflation, as it is created through a central bank, always goes to the top 1% of individuals.  First, it goes to the major banks, and then it goes to the very, very rich.  However, what he is saying is a precursor to what’s going to occur for the overall inflation level of the economy....

“First it goes into assets like stocks, bonds, real estate and art.  Then, it will go down to food and energy prices, which we already see creeping up, and then it goes into intractable inflation.  So we are headed there.  And let me interject this one comment:  I have written to media outlets to ask Federal Reserve Chairman Ben Bernanke and other Fed presidents a question -- and we finally got an answer.  And your listeners (and readers) have to understand this..."


The Frightening Truth About China’s Control Of The US

"Leeb:  “The euro is on a tear and it has risen quite dramatically, but one currency has done considerably better than any other during the past month and that is the Chinese yuan.  The yuan is just soaring.  Right now there is a massive of flow of gold from West to East, and I think the West is desperate, and want to emphasize the word ‘desperate,’ to hold down the price of gold because gold represents a massive threat to the US dollar....

Leeb:  “The euro is on a tear and it has risen quite dramatically, but one currency has done considerably better than any other during the past month and that is the Chinese yuan.  The yuan is just soaring.  Right now there is a massive of flow of gold from West to East, and I think the West is desperate, and want to emphasize the word ‘desperate,’ to hold down the price of gold because gold represents a massive threat to the US dollar....

“From a foreign perspective, they are holding what could become worthless pieces of paper because the dollar  may collapse.  So there is tremendous pressure to keep any alternative currencies out of the spotlight.  This means pressure from the West to keep gold down.  

Although China does not want the price of gold to take off from current levels, the timetable for their plans has in fact been accelerated because of the recent chaos in the US.  As I previously mentioned to you, the Chinese have another 5,000 tons of gold they want to accumulate.  If they had been planning to do that accumulation over 2 or 3 years, that timetable has been cut in half because of what has recently transpired.

But we are now approaching the point where there will just be one-to-three currencies that are important in this world, and the dollar will probably not be one of them.  This world is in the throes of a massive change, and, despite the continued propaganda, what we are seeing right now is not business as usual.

My advice for investors is to load up on physical gold and silver.  I strongly believe it is vital for the future of people reading KWN to own precious metals in order to survive financially as the chaos accelerates.  Gold is on its way to regaining prominence in terms of becoming the powerhouse of global currencies.  Silver will also benefit from all of this money printing.

But right now the United States is turning over the keys to the Chinese.  We are literally ceding power, giving the Chinese power.  We are enabling them to become the number one superpower and economy in the world, and I hate it.  I am just mad as hell when I see what’s going on here.  There is a tremendous amount of fear in the United States about the increasing power the Chinese are exerting in this country and the fears are well-founded as far as I’m concerned. 

I am trying to tell everyone what is happening for their sake and for the sake of their families.  You will have to own an alternative currency in order to survive what is coming, and the only one that really makes sense is gold.  But the bottom line is the US is going to lose its reserve currency status to a new bloc of currencies that will include gold as a component.  Once that happens, Eric, we won’t be able to print dollars.  That’s a major worry.

The Chinese are leading the world in terms of gold accumulation.  When the second Bretton Woods Meeting takes place, the Chinese will largely be dictating the terms.  This will force the US to surrender its global leadership to the Chinese.  The thought of this should just chill people to the bones, and no one is even talking about it.”

Here Is The Surprising Reason Gold Is Soaring Again Today

"Tom Fitzpatrick recently quoted an article which stated the following: 

“Two years ago gold bugs ran wild as the price of gold rose nearly six times.  But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight.  The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.  The rout says a lot about consumer confidence in the worldwide recovery.  The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.  Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course.  The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.”

We would assume that this view was released only recently.  However, it was written in the New York Times on 29 August 1976 (!!), only 2 days after gold hit it’s corrective low. 


The fact that the current correction is rather insignificant in a long-term context becomes clear when contemplating the following chart of annual average prices..."

US Dollar Valued In Gold Since 1718

"How many ounces of gold can $1000 buy?

The answer over time is instructive. Here is some knowledge about money.

It is remarkable how few economists really understand this, and what it means, what it implies. 

Here is Paul Krugman's opinion on the currency war and the US dollar in a recent piece called Godwin and the Greenback.    I think it speaks for itself, approaching the language of economic jingoism.

And he is certainly not the worst economic voice out there, which is what makes this so disconcerting.   At least he is not an austerian, those who would crucify the public for the sins of the one percent.

Thanks to my friend Nick at for this.

Nick impishly added in a note that the US defaulted on its gold obligation in 1933 and 1971, a 38 year gap.  And it has been 42 years, so we might be due again.  

I am not a great believer in cycles.  But I am a confirmed believer in what Thomas Mann called the stupidity of cleverness as being among the worst forms of foolishness. It is the capability of knowledge, but without wisdom and sound judgement.

We seem to have a surfeit of clever ones eager to play fast and loose with the nation's currency these days as a means of pushing off genuine reform, and delaying the reckoning between the people and the banks, and the powerful few that control them.


American Debt, Chinese Anxiety, Elaborated

"Or, how the Tea Party is working hard to sabotage the dollar's role in global finance.

Figure 1: Share of publicly held Treasury debt held by foreign residents (blue squares), and held by China (red triangles). Solid squares/triangles denote data from annual benchmark surveys; open squares/triangles from monthly series. Source: TIC, and St. Louis Fed FRED.
From my op-ed "American Debt, Chinese Anxiety" in the International New York Times on Sunday:
Madison, Wisconsin — Last week, the United States once again walked up to the precipice of a debt default, and once again the world wonders why any country, much less the world’s largest economy, would endanger its financial reputation and thus its ability to borrow.
Though a potential global financial crisis was averted at the last minute, one notable development has been a string of warnings by Chinese officials. Prime Minister Li Keqiang told Secretary of State John Kerry that he was “highly concerned” about a possible default. Yi Gang, deputy governor of China’s central bank, warned that America “should have the wisdom to solve this problem as soon as possible.” An opinion essay in Xinhua, the state-run media agency, called “ for the befuddled world to start considering building a de-Americanized world.”
These statements, unusually blunt coming from the Chinese, show that repeated, avoidable crises threaten the privileged position of the U.S. as issuer of the world’s main reserve currency and (until now) risk-free debt.
It is unlikely that China would provoke a sudden, international financial calamity — for instance, by unloading U.S. Treasury securities and other government debt. Nonetheless, the process of repeated crises and temporary reprieves will only solidify the Chinese government’s determination to diversify its holdings away from dollar-denominated assets. ...
Foreign entities — governments, companies and individuals — hold nearly half of the publicly held debt owed by the United States. Of China’s $3.6 trillion in foreign exchange reserves, about 60 percent is estimated to be held in U.S. government securities..."


The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar

"The number one American export is U.S. dollars.  It is paper currency that is backed up by absolutely nothing, but the rest of the world has been using it to trade with one another and so there is tremendous global demand for our dollars.  The linchpin of this system is the petrodollar.  For decades, if you have wanted to buy oil virtually anywhere in the world you have had to do so with U.S. dollars.  But if one of the biggest oil exporters on the planet, such as Saudi Arabia, decided to start accepting other currencies as payment for oil, the petrodollar monopoly would disintegrate very rapidly.  For years, everyone assumed that nothing like that would happen any time soon, but now Saudi officials are warning of a "major shift" in relations with the United States.  In fact, the Saudis are so upset at the Obama administration that "all options" are reportedly "on the table".  If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.
The biggest reason why having good relations with Saudi Arabia is so important to the United States is because the petrodollar monopoly will not work without them.  For decades, Washington D.C. has gone to extraordinary lengths to keep the Saudis happy.  But now the Saudis are becoming increasingly frustrated that the U.S. military is not being usedto fight their wars for them.  The following is from a recent Daily Mail report...
Upset at President Barack Obama's policies on Iran and Syria, members of Saudi Arabia's ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.
Saudi Arabia's intelligence chief is vowing that the kingdom will make a 'major shift' in relations with the United States to protest perceived American inaction over Syria's civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.
Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.
Saudi Arabia desperately wants the U.S. military to intervene in the Syrian civil war on the side of the "rebels".  This has not happened yet, and the Saudis are very upset about that.
Of course the Saudis could always go and fight their own war, but that is not the way that the Saudis do things.
So since the Saudis are not getting their way, they are threatening to punish the U.S. for their inaction.  According to Reuters, the Saudis are saying that "all options are on the table now"...
Saudi Arabia, the world's biggest oil exporter, ploughs much of its earnings back into U.S. assets. Most of the Saudi central bank's net foreign assets of $690 billion are thought to be denominated in dollars, much of them in U.S. Treasury bonds.
"All options are on the table now, and for sure there will be some impact," the Saudi source said.
Sadly, most Americans have absolutely no idea how important all of this is.  If the Saudis break the petrodollar monopoly, it would severely damage the U.S. economy.  For those that do not fully understand the importance of the petrodollar, the following is a good summary of how the petrodollar works from an article by Christopher Doran...
In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.
This means that every country in the world that imports oil—which is the vast majority of the world's nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.
This arrangement works out very well for the United States because we can wildly print money and run up gigantic amounts of debt and the rest of the world gobbles it all up.
In 2012, the United States ran a trade deficit of about $540,000,000,000 with the rest of the planet.  In other words, about half a trillion more dollars left the country than came into the country.  These dollars represent the number one "product" that the U.S. exports.  We make dollars and exchange them for the things that we need.  Major exporting countries (such as Saudi Arabia) take many of those dollars and "invest" them in our debt at ultra-low interest rates.  It is this system that makes our massively inflated standard of living possible.
When this system ends, the era of cheap imports and super low interest rates will be over and the "adjustment" to our standard of living will be excruciatingly painful.
And without a doubt, the day is rapidly approaching when the petrodollar monopoly will end.
Today, Russia is the number one exporter of oil in the world.
China is now the number one importer of oil in the world, and at this point they are actually importing more oil from Saudi Arabia than the United States is.
So why should Russia, China and virtually everyone else continue to be forced to use U.S. dollars to trade oil?
That is a very good question.
In fact, China has been making a whole lot of noise recently about the fact that it is time to start becoming less dependent on the U.S. dollar.  The following comes from a recent CNBC article authored by Michael Pento...
Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a "de-Americanized" world.
China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary through the state-run Xinhua news agency stating that, "Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated."


Tuesday, October 22, 2013

Tremors and Warnings in the Gold Market

"Here are three charts that capture the somewhat uniquely dangerous situation in the gold futures market on the Comex.  It reminds me of watching a child playing with a chemistry set, or a drunk getting behind the wheel of a car.  Disaster is not assured, but the situation cries out for adult supervision and intervention.

The first chart shows all gold in storage at Comex certified private warehouses. The major bullion banks control the vast majority of this storage. Among these are JPM, HSBC, Scotia Mocatta. Storage and delivery services are also provided by Brinks and Manfra, Tordella, and Brookes, a large NYC coin and bar dealer. 

The year long decline in open interest on the Comex is a phenomenon worth noting. It is marked on the third chart.   Even as gold bullion purchasing is soaring, gold futures interest in the US is in a secular decline.   But even with this decline, the 'claims' of ownership as represented by futures contracts over ALL gold in the warehouses is a bit high.

Not to say that futures contract owners can have any claim on gold merely held in storage.  But they can try.   I include this because some people consider it to be important.  If the price is allowed to rise high enough, that customer gold might be tempted into the deliverable category and offered for sale.  The key question is 'how high.'

The better metric to watch is the number of claims per registered, or deliverable ounces of bullion on the Comex.  This gives us a current 'temperature reading.'   And that measure remains near all time highs on my data sources at 52.62 claims per ounce at these prices.   My friend Nick Laird at Sharelynx, who does a wonderful job of charting and data gathering, prefers to call it 'owners per ounce.'   But since a single ounce of gold cannot have 53 owners if the music stops, I prefer to call them 'claims' or virtual ownership.

Every prior deep decline in registered gold bullion during this bull market has marked an intermediate price trend change.   I do not think this time will be different, all other things being equal.

What exacerbates this situation is the absolutely remarkable drawdown in gold bullion from the ETFs around the world, but most markedly in GLD.   We have not seen anything like this in silver, platinum, or palladium.

As you know, I am persuaded that the request from the Bundesbank for the return of Germany's gold, and the deferral of this by the Fed for seven years, set off a chain of overreactions and market maneuvers that in retrospect will be viewed as foolhardy.

If the price of gold is allowed to rise to $1650 to $1750 by the end of January, preferably the end of December,  I think the Comex might avert what for them could become a potentially disastrous situation.   And they need to get started on this fairly quickly so that the rise is gradual and controllable.  

If the bullion banks continue to game the system, and scalp profits with other peoples' money,  my forecast is for a market break and dislocation in the gold market that will imperil quite a few smaller trading houses, and shake the global trade to its foundations.  I would not be surprised to see a halt called to the paper and physical gold trade, a forced cash settlement on futures and derivatives, and a price adjustment higher, perhaps in multiples of triple digits.   Such price jumps can be unsettling.

And we could see a TBTF bullion bank or two shaken to their foundations.  If the governments overreact in trying to get them out of their own mess again without loss or reform, then I think it is time to keep your heads down and watch for big changes.  I doubt they could be that clumsy, but most politicians know less about money than most economists, and that is pretty bad.  And they are certainly as craven and pliable, so it is possible.

I have a couple of other forecasts about changing politics in the US, which involves major changes in the current two parties.  People forget that the lifeline of the Republicans and the Democrats as they are now is more current than old in terms of human history.  And a major party change with some splintering and interesting alliances is becoming more probable.

Although it is just a forecast, it looks like the die will be cast in December.  If they try the annual price hit in early December, they might set off a series of unfortunate events as the new year unfolds.

So you might consider this a sort of warning to be watchful, just based on the market mechanics.  It does not have to happen.  But it has been hard to overestimate the reckless stupidity of unbridled greed. 

Again, the most likely outcome is the infamous muddle through and the kick of the can down the road, with a rising price in gold as part of an intermediate trend change.  But we are now in a period of high risk, and I don't yet see the right steps being taken to avert it.   Some of that rests on the shoulders of the CFTC, and quite a bit on the exchange, the politicians, and the regulators of the banks.  They need to take the keys away from the drunks and reckless children in their own organizations and in the ones that they oversee.

I do not want to join the doomsayers, those who troll for clicks with ever more dire headlines of impending doom.  It almost gets to be like watching the supermarket tabloids. 

All of our problems are soluble, and things are no worse now than they have been many times in the past.  Our parents and grandparents faced much worse, and I personally have seen harder times by far.  But it is getting pretty bad on a secular level, mostly from self-inflicted wounds and corruption in my own opinion.

I wanted to state this unequivocally now because I can see another financial crisis brewing, and a bunch of hand-wavers running around afterwards saying that no one saw it coming.  Just like the last two or three financial crises.  Maybe this time they will act with caution and good sense.  I have the impulse to hedge that though, and certainly not to count on it..."

Dysfunctional Global Economy; Can Things Get Worse? Rediscovering the Price of Money

"Steen Jakobsen, chief economist of Saxo Bank in Denmark, says things are so bad they cannot get worse. Please consider Rediscovering the Price of Money. 
 I’ve been starting my speeches for some time now by saying: “I am the most optimistic I have been in almost thirty years in the market—if only because things can’t get any worse.”

Is that true, and more importantly, how do we get a fundamental change away from this extend-and-pretend which prevails not only in Europe but also the world?

History tells us that we only get real changes as a result of war, famine, social riots or collapsing stock markets. None of these is an issue for most of the world—at least not yet—but on the other hand we have never had less growth, worse demographics, or higher unemployment since WWII. This is a true paradox that somehow needs to be resolved, and quickly if we are to avoid wasting an entire generation of European youth.


Another One Trillion Dollars (1,000,000,000,000) In Debt

"Did you know that the U.S. national debt has increased by more than a trillion dollars in just over 12 months?  On September 30th, 2012 the U.S. national debt was sitting at$16,066,241,407,385.89.  Today, it is up to $17,075,590,107,963.57.  These numbers come directly from official U.S. government websites and can easily be verified.  For a long time the national debt was stuck at just less than 16.7 trillion dollars because of the debt ceiling fight, but now that the debt ceiling crisis has been delayed for a few months the national debt is soaring once again.  In fact, just one day after the deal in Congress was reached, the U.S. national debt rose by an astounding 328 billion dollars.  In the blink of an eye we shattered the 17 trillion dollar mark with no end in sight.  We are stealing about $100,000,000 from our children and our grandchildren every single hour of every single day.  This goes on 24 hours a day, month after month, year after year without any interruption..."


Marc Faber : The World is in Gigantic Asset Bubble

"Marc Faber, The Gloom, Boom & Doom Report, shares his views on how inflation has impacted global wealth.
"We are in a gigantic asset bubble around the world with prices of real estate having risen a lot," he said. "The high end is at record highs. In the Hamptons, in Mayfair, London, Hong Kong, Singapore, and we have a high inflation overseas, so I think that one day this asset inflation will lead to deflationary collapse one way or the other."

Collapsing Global Financial System Now In A Terminal State

"All of the new financial innovations, the high frequency trading, the algorithm programs, none of this existed when I was much younger.  And yet it has had an astounding short-term impact on markets.  Almost without fail, at 3 AM in the morning (east coast), when the London traders report to work, gold gets hammered.

They do this almost every single day now.  These kind of things didn’t happen years ago.  Markets were largely legitimate, but today they no longer represent reality..."

Here Is The Shocking Reason Why Gold Is Soaring Today

"With the price of gold and silver surging, today one of the savviest and most well-connected hedge fund managers in the world spoke with King World News about the shocking reason why gold is now soaring.  He also predicted “there is going to be a mad scramble for physical gold around the globe -- the likes of which the world has never seen in all of human history.”  William Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, had this to say in his timely and powerful interview.

Kaye:  “The Spyder Gold Trust, GLD, continues to get looted.  Yesterday GLD lost more gold on one day since the smash in April -- about 11 tons.  That’s a lot of gold for one day, and now GLD has lost over 35% of the gold they started with at the beginning of the year....

“Critical to the prosecution of what, up to now, has been a very significant raid, has been the ability to get physical gold out of the GLD vault in London.  So on the recent dip we have seen that pattern continue. 

Eric, as I told you last week, we are in the last three innings of this end game and I don’t think this will go into extra innings.  Central planners are now ramping up most of the tactics they know how to use.  It would appear they have already used a fair amount of the 1,300 tons of gold that mysteriously left the Bank of England.

So, it doesn’t appear that they have a lot of other places they can go to loot physical gold, other than GLD.  I need for KWN readers to understand the scale of what’s really happening here:  GLD lost 1.2% of its entire inventory overnight, just in the last 24 hours.  That is absolutely staggering.

As I said earlier, that’s the biggest decline in inventory since the April smash.  This was the same tactic they used in April, and they have been getting equally aggressive again, even though we haven’t seen the same effect in terms of a decline in the price of gold.  I attribute this to the fact that outside of GLD they don’t have many sources where they can turn for physical supply.  Meaning, the West is literally running out of physical gold. 

But I also attribute the limited decline in price to the insatiable demand for physical gold in this area of the world (Asia).  Demand in China has been very, very strong, as has demand from the Reserve Bank of India, Russia, and so forth.  So it’s getting more difficult for these guys to press the price lower and keep it there below $1,300.  Andrew Maguire had predicted this, and certainly the price action has confirmed his view.

So I think the real risk from the standpoint of investors who want to stay on the sidelines until the technical action in gold looks better, is the fact that we are now in a situation where one day in the not-too-distant future, people could wake up and gold is trading several hundred dollars higher.

There is no rule that says when a price suppression scheme can’t be orchestrated any longer, and we are now getting to that point, that a major slingshot in the price of gold cannot come into play.  People could wake up to force majeure getting declared by the Comex, and essentially JP Morgan and the other bullion banks settling all of their contractual obligations outstanding for gold delivery in cash.

These bullion banks are allowed to do that, and this is certainly what’s going to happen, but then there is going to be a total panic.  There are roughly 90 - 1 claims for every ounce of physical gold in existence, and most of those claims are paper.  That cannot be reconciled.  It’s not possible.

So, when various entities wake up one day and realize they have been forced out of what they thought was exposure to gold by the Comex and the bullion banks, and they are settled in cash, there is going to be a mad scramble for physical gold around the globe -- the likes of which the world has never seen in all of human history.  But this scramble for gold won’t be happening at anything close to existing prices.  This is where we will see gold soar to $2,000, $3,000, $5,000 an ounce and more.”

Central Banks Hold On to their Gold despite Weak Gold Sentiments

"Although the gold prices are holding above $1,300 in light of the uncertainty surrounding the U.S. budget and debt limit, the gold-backed ETP holdings have dropped another five metric tones in October after falling 25 metric tonnes in September and 708 metric tones year-to-date. The continuous decline in holdings reflects a further weakening in gold sentiment despite the uncertainty in the U.S. When gold prices dropped almost five percent in September, the gold premium in China also did not rise as high as expected. The ones who beg to differ are the central bankers who have either held on or added to their gold reserves this year, viewing gold as an important diversifier..."


Monday, October 21, 2013

China Enjoying Gold Clearance Sale

"Analyses of China’s massive appetite for gold are everywhere lately. But the following chart, which appeared today in a GoldCore market update was especially striking because it compares 2013 demand with that of 2012 – which was a big year in its own right. Through August, China has imported 994 tons of gold through Hong Kong, versus 511 tons in the year-ago period. And that doesn’t include the production of China’s domestic gold mines (300 or so tons, all of which stays within the country) and whatever else finds its way in through other ports. Assume monthly imports for the rest of the year average 100 tons, add in domestic gold production, and China will have accumulated at least 1,700 tons of gold in one year.
China gold imports
To put this in perspective, Germany claims gold reserves of a bit more than 3,000 tons (though much of this is stored in the US and has probably been loaned out and replaced with a financial asset called a “gold lease” which is only as valuable as the big US money center banks are solvent). So in one year China will have accumulated gold equal to more than half the reserves of one of the West’s financial and industrial powers.
Why? Well, they could simply be investing in something they expect to go up, much like the typical American gold/silver coin buyer of the past few years. Or – way more interesting and probably more likely – they could be planning to back their currency with gold and push the dollar to the sidelines. One hint that a gold-backed yuan is being contemplated came in early 2013 when Yao Yudong of the Chinese central bank’s monetary policy committee called for a new Bretton Woods system. Bretton Woods was the post-World War II fixed-exchange-rate system in which one currency – the dollar – was convertible to gold, while other currencies were pegged to the dollar. A new Bretton Woods-style monetary system, designed when China has the world’s only gold-backed currency, would presumably have the yuan at its center and the dollar, euro and yen as mere satellite currencies.
More recently, China’s official press agency, Xinhua, published an article that calls for a “de-Americanized world” that includes a new reserve currency.
With the rest of the world annoyed by America’s abuse of the limitless credit card that is an un-backed global reserve currency – especially the global surveillance state we’ve created with all that free money – it’s not a surprise that lots of people would prefer a different system. And at the rate gold is flowing from West to East, it might not be long before the latter has the leverage to make it happen.
At which point we in the US would have to start living within our means. Since the difference between Washington’s tax revenue and its present spending and future commitments, when calculated honestly, is about $6 trillion a year, or roughly one-third of U.S. GDP, the cutbacks required to bring its finances into balance would be a lot like what Greece is going through. Except that we’ll still have a printing press. Get ready to make history…"

Billionaire Sprott - Stunning Surprise In The Silver Market

"In the aftermath of significant volatility in both the gold and silver markets, billionaire Eric Sprott told King World News there is a stunning surprise in central planners’ war against silver.  The Canadian billionaire also spoke about the enormous implications of this surprise for silver investors around the world.  Below is what Sprott, who is Chairman of Sprott Asset Management, had to say in part III of this remarkably powerful interview series.

Eric King:  “Eric, for the silver bulls that are out there, what about the silver market?”

Sprott:  “There is an interesting thing going on there, Eric.  We get data out of India.  They consumed slightly less than 2,000 tons of silver late year.  It would appear they are going to consume 6,000 tons this year.

“It might be a little early for me to say that because as gold has been restricted, that number might even be well above that (total of 6,000 tons of silver).  In the first 8 months there were something like 4,000 tons (already consumed), so we are just extrapolating that trend, but the trend was gaining strength as the year went on.

But when you (as India) buy an extra 4,000 tons of silver in a year, you are buying an extra 17% of the (entire global) market.  So we have a new entrant into the (silver) market who takes down 17% of the supply, and the price goes down.  It’s the same analogy as China buying gold.  They (China) buy 25% more of the (entire global) market and the price (of gold) goes down.

Those things don’t hold together.  Logically this should not happen (the price of silver going down).  So, I’m very optimistic on silver.  The US Mint silver sales have just been booming here.  They are still 50/1 in terms of the physical relationship to gold at the US Mint.  We (only) produce 11-times more silver (than gold).  We (only) have about 3-times more silver (available) for investment, and yet investors, via the (US) Mint, are buying it at a 50/1 ratio to gold.  That cannot persist too long without the price of silver going up (substantially)."


Friday, October 18, 2013

Maguire Predicted Gold Surge - Now Says West Is Collapsing

"On the heels of an explosive mid-week surge in the price of gold and continued weakness in the US dollar, today the man who predicted the massive spike mid-week spike in gold ahead of time warned King World News that the West is now collapsing.  London metals trader Andrew Maguire also spoke with KWN about what people should expect to see next in gold.  Below is what Maguire had to say in this tremendous and timely interview.

Eric King:  “Andrew, you made a fantastic call at the end of last week.  You said that gold absolutely could not stay below $1,300 for more than a few days.  We saw the bears holding the price below that key level Monday through Wednesday, but they capitulated on Thursday as gold soared solidly back above the $1,300 price level.”

Maguire:  “Eric, last week we talked about the Fed being cornered.  The reason we saw the price of gold being held below $1,300 is because the Fed was literally being forced to react to the price rise of gold against the US dollar.  This had to do with the government shutdown, and it was forcing their hand -- to give the appearance of stability as the dollar was declining and under tremendous pressure.

So, the Fed moved in to short gold and buy the dollar in the FX markets.  Now, the reason I told you gold wouldn’t be able to hold below sub-$1,300 for more than 3 days is because of ‘spot market indexing.’  While these synthetic paper markets for gold are putting pressure on the price of gold, the underlying physical market is on fire....

“Last Friday, as gold was headed into the lows, I reported a major sovereign ‘spot purchase’ to KWN.  Remember, we said it was about 90 tons (of gold) being accumulated, some of it at $1,270.  You and I were literally speaking on the phone as gold was making the lows.  But that sovereign order had been patiently waiting for weeks and it finally filled.

These trades fly under the radar sometimes because they are initially just a foreign exchange trade, and it’s just part of a major paper gold shuffle in London every day.  But it’s only when these paper gold buyers have the audacity to turn up at a PM fix in London and demand the physical gold that alarm bells are triggered.  

The bullion banks are then forced to buy at market to fill these orders, and there is no bullion bank I know that can turn up that kind of supply overnight.  That’s why we saw 1 - 3 month GOFO rates spike negative once again mid-week.  As these orders stood for delivery, it actually forced gold into backwardation again.  And it’s going to happen each and every time the gold price is now pushed lower.  

So, this is an underpinning that paper traders simply don’t understand.  We are actually talking about the cash value of gold vs futures being at a premium.  China is going to continue to milk this discount window.  They are continuing to exchange dollar reserves for gold, without directly disrupting Treasury and gold prices.  But we are now very, very close to the point where China is the gold market.  

The Chinese, through Shanghai, have already absorbed the bulk of all global mine production, if not all of it in its entirety.  In July alone, Shanghai gold imports exceeded all of the imports for 2012.  We also know that official Shanghai gold deliveries have accelerated since that time.

Last week I reported the September numbers to you and it was over 225 tons of gold being delivered.  But as of today, for the 9 delivery days of October, we already have over 101 tons of gold delivered.  This is an incredibly powerful and diverse underpinning for the price of gold.

Al of this is being reflected by the premiums, recorded deliveries, and what is paid daily above synthetically diluted gold prices.  The Chinese don’t care what Goldman Sachs or any other brokerage shills say about gold.  Instead, they are focusing on building their savings, real wealth, according to age-old ideas, and with a state-sanctioned 20% savings rate invested in gold.”

Maguire added:  “All of this paper manipulation has just been a short-term desperation move on the part of the West.  Obviously we’ve seen interventions in the foreign exchange gold market, which is complimented by activity on the Comex.  And basically what is being done by the Fed is a defense of the US dollar.

It simply results in physical gold flowing out from West to East at an enormous rate.  Unfortunately, that is the self-destructive move that continues to take place as the West destroys itself.  And when you look at China, who thinks in 500-year or 1,000-year time frames vs the West which thinks in one-week and one-day time frames, crisis-to-crisis terms, no wonder the West is collapsing.”