DEMAND FOR GOLD COINS SOARING
Own physical Gold and Coins outside the banking system
“WE DO NOT BELIEVE ANY GROUP OF MEN ADEQUATE ENOUGH OR WISE ENOUGH TO OPERATE WITHOUT SCRUTINY OR WITHOUT CRITICISM. WE KNOW THAT THE ONLY WAY TO AVOID ERROR IS TO DETECT IT, THAT THE ONLY WAY TO DETECT IT IS TO BE FREE TO INQUIRE. WE KNOW THAT THE WAGES OF SECRECY ARE CORRUPTION. WE KNOW THAT IN SECRECY ERROR, UNDETECTED, WILL FLOURISH AND SUBVERT.”
A few weeks ago, William White (former economist at the Bank of England, the Bank of Canada, and Bank of International Settlements) made a frank admission: “The analytical underpinnings of what we [mainstream economists] do are actually pretty shaky…I’m becoming more and more convinced that all of the models we use are basically useless… We’ve got the potential to do so much harm by not getting the creation of fiat credit and money right.” Doctors at least have the Hippocratic Oath: first, do no harm. If only economists and central bankers had a similar ethic. But they don’t. So they continue ‘making it up as they go along’, as Mr. White suggests, applying failed ideas with impunity and continued authority to an unquestioning public.
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Submitted on 03/3/14
The speculative excesses and political power of Wall Street pose a strategic threat to the Deep State, and as a result a showdown between the Deep State and the surface machinery of governance that has been captured by Wall Street is looming. Put another way: we’ve reached Peak Wall Street and it’s all downhill from here. This crisis is simple to summarize: the paper claims on wealth so far exceed actual wealth that something’s gotta give. Simply put, the vast majority of these claims will have to be zeroed out, i.e. these phantom-claim “assets” will be voided and declared worthless. This leads to the key question: who will the Deep State throw under the bus to preserve itself and the nation-state?
Submitted by Tyler Durden on 02/28/2014 -
While the FT promptly retracted an article on precisely the topic of gold manipulation from earlier this week (recorded for posterity here), Bloomberg appears to not have had the same “editorial” concerns and pressures, and today released an article once again slamming the final conspiracy theory that while every other asset class is manipulated, gold is in a pristine class of its own, untouched by close-banging, price fixing traders or central bankers, and reports that “the London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.” And the punchline: “Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found.”
Gold is moving from West to East, of this there is little doubt. Well, some can doubt it, but those who repeatedly deny it, or tend to dismiss it, may be saying more about themselves than they do about the market.
The more interesting question is what the markets are saying to us, and what the price, demand, and supply action are indicating with regard to the future, and the sustainability of certain noticeable trends.
JPM seems to have the whip hand on the Comex and in the precious metals derivatives markets, but not so much in the physical markets which seem to be wiggling through the fingers of the bullion banks, and perhaps much to their dismay.
As Ted Butler noted in his weekly review on Saturday:
“Quite literally, what JPMorgan does or doesn’t do determines the price of gold and silver. It’s easy to lose track of the big picture when one focuses on all the details. But when you step back a bit, JPMorgan is dominant in just about every detail.”
They are talking about a ‘super-currency’ for international trade, and not to replace any currencies for domestic use.
I have been reporting on this for quite a few years. It is a movement whose time has come as the US dollar reserve currency falters, and the Fed expands the monetary base for domestic concerns.
You can click on either of the subject headings at the bottom of this blog entry, and all of the past postings with those subjects will be selected for your reading.
The major countries will no longer tolerate the monetary manipulation with the global currency in the same unilateral manner with which Nixon changed the Bretton Woods agreement back in 1971 by ending dollar convertibility to gold, rather than devaluing against it.
For lack of a better alternative or term, I settled on the SDR, made up of a new basket of currencies and commodities, almost certainly including gold, and quite possible silver, if China, Russia, et al. have their way.
Right now the nations are in the ‘negotiation stage,’ with the Anglo-American banking cartel putting up a strong resistance for any changes to their ‘exorbitant privilege.’ I would not be surprised to see more forex and precious metal games played as the Lords of Finance flex their monetary muscles.
And then there is the question of the tangled web of rehypothecation of bullion without public disclosure. It could prove to be very embarrassing to some.
But change is coming, one way or another.
FRIDAY, JANUARY 24, 2014
Earlier this week 30-day/4-wk T-Bills were auctioned off a 0% rate. Intra-day, after the auction, the rate went negative. Negative short term rates were last observed in 2008, before the Lehman/AIG/Goldman collapse occurred. Of course, Lehman was allowed to implode and Goldman, who’s ex-CEO was the Treasury Secretary, was bailed out. AIG was the beneficiary of that bailout because Goldman had impaled itself on AIG nuclear waste.
The point here is that negative T-bill rates only occur when very big investors are concerned about the return OF their money and not the return on their money. Think about what a negative T-bill rate means. It means that someone is paying more for the T-bill than they get in return when it matures a few weeks later. Why would someone do that? It’s the “safest” place to park large sums of cash.
A big institutional fund or very wealthy investor pays for a T-bill because they they see something which indicates that the risk of the Government defaulting in the next four weeks is less than the risk of parking that money in a bank or a money market fund. We’re talking millions and tens of millions in short term money. Bank deposits are insured only up to a small amount. After 2008, it has been decided that money market funds will no longer be bailed out by the Government/Fed.
In other words, big big investors with cash that needs to be parked are seeing something that gives them concern about the financial system. The negative rates on T-bills means that whatever was spooking big money in 2008 is spooking it again. My best guess right now is that there is massive risk of derivatives default. This would be the derivatives that blew up the system in 2008 but that the Fed/Government quickly monetized. The problem was never fixed, contrary to Obama’s recent end zone dance on the safety of the banking system.
In fact, the Fed swallowed a portion of the bad derivatives and has been using the better part of the $85+ billion per month it’s been printing since early 2009 to monetize the rest. In other words the catastrophic problems were kicked down the road. Worse, the big banks went out and replaced the crap the Fed took off their balance sheets with even more crap. Accounting rules were changed, and ratified by BOTH political parties plus Obama, which enabled the big banks to hide the problem.
But now the financial system is wearing the Scarlet Letter of negative T-bill rates. The source that is lighting the fuse is emerging market problems, reflected in the currency devaluations by Argentina and Venezuela. But the currencies of other important emerging market economies have been plunging against the dollar as well. The cost of derivatives “insurance” on the sovereign debt of these countries has suddenly increased at a rate that would make Obamacare insurance providers blush.
What the currency plunge/derivatives blow-out implies is that sovereign bond defaults are on the horizon. This is not just confined to “emerging” economic countries. Spain, Portugal, Italy and France are on the ropes financially and economically as well, despite the official European story-line that Europe is in “recovery.”
The issue for the U.S. here is that the Too Big To Fail banks are the ones who have underwritten most of the credit insurance derivatives associated with the sovereign debt that may be at risk to default. They also hold a lot of it on their balance sheet. That’s why the Fed’s Excess Reserve accounts of the big banks have ballooned up in correlation with amount of QE that has been printed. The Fed has monetizing the derivatives exposure but that works only up to the point of a default event.
In other words, a big nuclear derivatives may be coming at our system. Another interesting tidbit to think about. While the paper price of gold was being plunged using Comex futures by the Fed-backed big banks, a major portion of the gold held in the GLD Trust was removed. The common narrative scooped up like dog crap and tossed in our face by Wall Street analysts was that the decline of the gold in GLD was indication of a new bear market in gold.
Essentially gold bottomed in price on June 28th, with a retest of that bottom at the end of December. Based on the $1180 bottom, gold has risen $90 since since the end of June. But guess what? Another 179 tonnes of gold – or 19% – of the amount of gold in the GLD trust at the end of June has disappeared. If gold is rising again, shouldn’t gold be flowing back into GLD? The 500+ tonnes of gold that has been removed from GLD in a little over a year has disappeared down the rabbit hole. There’s no way to know for sure but I’m sure a large portion, if not all, has been shipped to China.
But maybe not all of it. In addition to the huge ratio of gold to physical gold visible on the Comex, according to the latest OCC bank derivatives report the top 4 banks – JPM, Citi, Goldman, Bank of America – are long over $81 billion in gold OTC derivatives. That’s the equivalent of about 1800 tonnes of gold at current at the current price. 1800 tonnes is slightly less than than the annual amount produced globally by gold mines. That amount dwarfs by many multiples the ratio of paper/gold on the Comex that has drawn everyone’s attention. Maybe that’s why the Comex publishes as much data as it does about Comex futures positions and inventory. It draws everyone’s attention from the much bigger gold derivatives problem.
Here’s a link to the OCC derivatives report for anyone interested (it’s from Q3, 2013 – there always a big time lag): Latest OCC Bank Derivatives Report
Something really ugly is coming at our system.
Gold and silver popped a little today, added to the after hours increase which they enjoyed on Friday.
Stocks are in an asset bubble uptrend, and gold and silver are in a remarkably persistent price decline.
Meanwhile at the Comex warehouses, HSBC, the custodian for GLD, managed to add some gold back to the registered (deliverable) inventory. More will most likely be needed for February.
As I said for stocks this evening, follow through is everything.
Have a pleasant evening.
December 13, 2013
Mentioned multiple times before that Hong Kong is one of the cheapest places in the world to buy gold. But the bottom line is that it’s getting a bit more difficult to do so.
At [ ] Bank, for example, they will now only sell a maximum of HK$120,000 (about US$15,400) worth of gold coins to non-account holders. This is less than 12 ounces of gold.
Now, if you open an account at [ ] Bank, no limit applies. And, the good news is that anyone can still open a bank account with them. [ ] does not require Hong Kong residency or a Hong Kong Identity card to open a bank account.
But, you will need to show up in person to the bank with the following:
2. Proof of current residential address
I would also bring a driver’s license or other identity document that has your address on it, if possible.
The proof of current residential address can take the form of a utility bill – an electricity, gas, or water bill is best. But, a bank statement may also be accepted.
The utility bill or bank statement cannot be more than 3 months old. And the name on it must exactly match the name in your passport.
In terms of inventory, [ ] only has current-year Australian Kangaroo Nuggets from the Perth Mint. All sizes are available: 1 Oz, ½ Oz, ¼ Oz and 1/10th Oz.
According to the bank, it’s possible for customers to buy up to 100 coins without any problem. But stocks are limited, so several hundred coins at one time would be problematic.
Their prices are still good – about 4% above spot gold.
Truth: a great holiday gift idea
One of the things we talk about routinely in this column is the fraudulent nature of the global monetary system.
When you step back and look at the big picture, it seems ludicrous. We have essentially awarded totalitarian control of our money supply to a tiny banking elite.
And in controlling the money supply, they have the power to set or manipulate the price of just about everything on the planet.
I’m certain that at some point in the future, financial historians will look back with astonishment at how we could allow ourselves to be bamboozled like this. We have literally entrusted the entirety of our wealth, savings, and livelihoods to just a handful of people. It’s insane.
What’s even crazier is how few people really understand how this system works.
If anything, we’re told that there’s a crack squad of brilliant economists making decisions about things that are simply too complicated for us little people to understand. And we just have to trust them to be good guys.
As a regular reader, I’m guessing that you already understand that this monetary system is one of the most blatant, destructive scams in history. But chances are, you have a lot of friends and family who don’t get it.
This is always a tough nut to crack. People can be very intransigent in their ignorance. They’ve grown up for their entire lives hearing about how they live in a free country with the strongest currency and richest government in the world.
They’ve become so brainwashed that suggesting anything to the contrary is tantamount to blasphemy. And it can be very difficult to talk to them about the truth.
Fortunately the holidays are coming up. So if you’re thinking that you might want to educate some of the important people in your life, here are a few inexpensive gift ideas that might just transform someone’s entire worldview:
1) Book: The Creature from Jekyll Island.
G Edward Griffin’s investigation into the creation of the Fed really does read like a detective novel. At 600+ pages, it’s long. But it’s a real page-turner. And after finishing it, your loved ones won’t ever look at money, politics, or banking the same way ever again.
2) Book: End the Fed.
Written by none other than Dr. Ron Paul, End the Fed synthesizes historical analysis, common sense economics, and his own personal experiences from decades in Congress, all to argue one simple point– that the Fed is destructive and has utterly failed in its mission.
3) Movie: Money for Nothing.
This is my personal favorite, one I definitely recommend checking out. Even if you are up to speed on these concepts, I can almost guarantee that you’ll learn something.
Money for Nothing is a 90-minute documentary that was professionally and impeccably assembled by Jim Bruce and his all-star team.
The film is not only incredibly entertaining, their access to top former and current Fed officials was simply incredible– names like Volker, Yellen, Plosser, Fisher, Lacker, Poole, etc.
Money for Nothing is available for purchase (DVD or digital download) at www.MoneyforNothingthemovie.org.
December 6, 2013
COMEX Warehouse Gold Bullion: Price Moves Smell of Desperation As Inventory Remains Thin
‘O sir, to willful men,
The injuries that they themselves procure
Must be their schoolmasters.”
William Shakespeare, King Lear
There were 3,215 ounces of gold bullion taken out of the HSBC warehouse.
The JPM warehouse had 7,143 ounces changed from deliverable to eligible.
Perhaps the price action freed up some bullion from the GLD ETF. They need it badly. The levels of gold bullion backing up the leveraged COMEX paper claims on gold exchange remain remarkably thin and oversubscribed.
The international monetary regime is changing. Nothing could be more clear if one listens to what is being said, and sees what is being done.
The European Central Banks have made their intentions quite clear, and the Asian monetary powers are in full preparation for their plans, whatever they may finally be.
The forces driving this change are powerful and founded in time and nature. We are watching history unfolding.
Today we saw the familiar methods of the past in a blatant pricing exercise that smelled of desperation. They can set the price by force in the markets in the short term, but they cannot produce that which they have taken, or fulfill that which is owed.
Weighed, and found wanting.
It’s uncomfortable to think that the ‘richest’, most powerful nations in the world– the United States, most of Western Europe, Japan, etc. are already insolvent.
History is full of examples of superpowers buckling under the weight of too much debt and unsustainable finances. The Roman Empire. The Soviet Union. The French Bourbon monarchy. The Ottoman Empire.
This is not the first time in history that it’s happened. And it’s foolish to think that ‘this time is different’.
Furthermore, history shows that whenever governments enter this ‘orbit of insolvency’, they almost always rely on the same destructive playbook of tactics. Capital controls. Price controls. Gun controls. And more………
“It’s a big club…. and you ain’t in it.”
– George Carlin
It must be a byproduct of the government-controlled education system; people still think they live in a free country with a representative democracy. It’s anything but.
Voting, elections, etc. are all just illusions to make people think that they have some influence in society.
A tiny elite orchestrates the whole system. And one of the most influential conductors is the Federal Reserve, a body soon to be chaired by Janet Yellen. Her confirmation process begins today.
Since most people have no idea how central banking really works, her confirmation hearing today is just a footnote.
Even people who are otherwise financially sophisticated simply trust that the men behind the curtain know what they’re doing.
This is quite strange when you consider that central bankers have nearly total control over the economy.
In their sole discretion, they are able to set interest rates, conjure money out of thin air, finance trillion-dollar government deficits, bail out commercial banks, etc.
And through these tools, they have the power to manipulate the prices of just about anything, from the Google stock to real estate in Thailand to turnips in Sri Lanka.
For the last several years, the US central bank has set the example for the rest of the world in aggressively using their policy tools.
Most significantly, they have unabashedly printed money in unprecedented quantities. And this has not been without consequence.
For some, the effects have been beneficial.
Rapid expansion of the money supply has pushed asset prices up all over the world. Stocks. Bonds. Many commodities. US Farmland. Artwork. Fine wines. Just about every asset class imaginable is near its all-time high.
People who are already wealthy have the available funds to invest in these markets. So their wealth has grown even more– exponentially.
The middle class, on the other hand, is experiencing an entirely different effect of money printing– retail price inflation.
And anyone who has been to a gas station, airport, university, doctor’s office, grocery store, etc. over the last few years understands this phenomenon very well.
A typical middle class family has little excess cash to invest after paying for rapidly increasing living expenses. Food. Fuel. Mortgage. Insurance. Etc.
And whatever wages or savings they have are being eaten away by inflation. So while the wealthy are getting wealthier exponentially, the middle class is actually getting poorer.
This explains why the wealth gap in the Land of the Free is the largest since 1929 at the start of the Great Depression.
Central bankers are responsible for much of this. In conjuring money out of thin air, they are benefitting one segment of society at the expense of another.
And with Janet Yellen soon chairing the Fed, very little will change.
Yellen has made it clear that she will continue to print unlimited quantities of money despite overwhelming data that such actions are ineffective and destructive for the the majority of the population.
13 November 2013
”A CREDIBILITY TRAP IS A CONDITION WHEREIN THE FINANCIAL, POLITICAL AND INFORMATIONAL FUNCTIONS OF A SOCIETY HAVE BEEN COMPROMISED BY CORRUPTION AND FRAUD, SO THAT THE LEADERSHIP CANNOT EFFECTIVELY REFORM, OR EVEN HONESTLY ADDRESS, THE PROBLEMS OF THAT SYSTEM WITHOUT IMPAIRING AND IMPLICATING, AT LEAST INCIDENTALLY, A BROAD SWATH OF THE POWER STRUCTURE, INCLUDING THEMSELVES.
Courtesy Report for Premium Viewers
THE MATTERHORN INTERVIEW – September/October 2013
“WE ARE SEEING AN ALL-OUT DEFENSE OF THE STATUS QUO”On behalf of Matterhorn Asset Management, financial journalist Lars Schall talked with Jesse, the host of the popular financial web site Jesse’s Café Américain, about, inter alia: his interest in precious metals; why he thinks the U.S. Commodity Futures Trading Commission decided to take no action regarding complaints about manipulation of the silver market; the future of the so called “currency wars;” and last but not least why he believes that the Federal Reserve is laying the groundwork for its own demise.By Lars Schall[big snip]
By the way, the US is suffering a protracted recession now because while monetary policy is active, although misguided, the fiscal policy has stopped functioning well because of political deadlock. The monetary policy that Bernanke has set is a trickle down approach, which is obviously failing because it is operating in a system that was already skewed by corruption and has not been reformed. It is like sending aid to a Third World country. The aid is seized by powerful warlords and used for their own advantage, with little reaching the people.They know this, but they do not care. It is about personal advantage and careers.In the US in addition to political deadlock, caused by a struggle for power, there is ironically a credibility trap as well. Both sides are dipped so deep in the corruption of the system that they cannot bear to unleash any uncontrolled reform movement, but they are also fighting one another for the spoils. I have seen this play out in the failure of major corporations, and I am seeing it now again on a larger scale.L.S.: What would you say is essential to know in order to understand the precious metals?Jesse.: Exposure to other cultures and times is most important. One can become very insular and parochial in their thinking. We can believe that what is now has always been, and will always be so.As the great financier Bernard Baruch once said, gold ‘has worked down from Alexander’s time. When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory.’ So if one wishes to understand what money is, they might start with gold and its inherent characteristics, since the majority of history seems to have voted in its favor. This is not to say that gold is the only money, but rather, if you wish to understand money, you must first understand the essential characteristics of gold.One of its great advantages is that gold and silver have no counterparty risk, and depend on nothing but themselves for their value. Think about a time traveler, who takes a fifty US dollar bill and a fifty dollar gold piece back to ancient Egypt or Rome. What is the probable relative value of each? What has changed? Therein are the difference and the risk.L.S.: Would you support a free competition of money so that people can choose the various forms of money that they want to use without a force behind it that imposes it upon them (a monetary diktat)? I think your critique regarding the Modern Monetary Theory (MMT) goes a bit in this direction.Jesse.: Yes you are right, the difficulty I see with Modern Monetary Theory is that is has not constructed a systemically based governor in its monetary construct.In theory the Federal Reserve and the Treasury are circumscribed by the judgement of the debt markets which are diversely held. With regard to Modern Monetary Theory I have asked what the limiting factor on issuing money might be. The reply to date has been that no limitations are required because a fiat currency cannot default, and the valuation of the currency can be maintained by force (manipulation) of various types.This only works if one has sufficient political force over everyone who uses the currency. That has been tried before, in the Soviet Union for example. The currency deteriorates from the outside in, from the basis of international trade. And it takes increasing force to maintain the currency as confidence fails.I am sympathetic to the idea of displacing debt as the basis of currency because of its many abuses. But that speaks more to the corruption of the system which will find no cure in a purely fiat currency as proposed by MMT which is even more discretionary and powerful unto itself.A successful currency must emulate some of the characteristics of gold to be sustainable. They would do well to study it. Bitcoin has some promising characteristics, but also some fatal flaws. I have discussed that in the past.But I should make it clear that I am not in favor of a gold standard per se. First of all, the system is so corrupt and so fragile at the present time that a gold standard would be too severe a cure.Rather, I would like to see a system where people have a choice to store their wealth in a variety of instruments including gold and silver, and have the ability to settle transactions in things other than an official currency. That becomes a problem given the propensity to tax private transactions, to which I am also adverse. But perhaps that is a discussion for another day.L.S.: Do you think to own gold and silver these days is the right choice, and if so: why?Jesse.: I cannot speak for anyone else since everyone’s circumstances are different. In my own case it seems to be a good idea to have a portion of my portfolio in precious metals as a protection against the debasement of the currencies, and the many unknowns that are brought about in a great change in the monetary system such as we are seeing today.These great events tend to happen over time, and that lulls us into complacency. But they then seem to come all in a rush and intrude on the public consciousness so that people say, ‘how did this happen?’ That is how it was with the last financial crisis.L.S.: Is the rigging of the precious metals markets getting more and more obvious for you as a trader?Jesse.: I do not see how anyone who watches the tape can miss it. The sell-at-market of large numbers of contracts in quiet periods, what has been called the Dr. Evil strategy, is hard to miss. The intent is quite clear, to knock the price down for some period of time. A simple rule would suffice to stop this sort of abuse, but it does not happen.L.S.: What’s your comment on the dismissal by the U.S. Commodity Futures Trading Commission of complaints about manipulation of the silver market?Jesse.: It is the credibility trap in action. The manipulation of the silver market has the de facto sanction of the government and the regulators who have turned a blind eye to it for so many years that to admit it now would be awkward and embarrassing. The TBTF banks hold so much power because they can threaten systemic destruction, and also ‘know where the bodies are buried’ so to speak.It is ironic that the US system has now devolved into a series of threats of destruction and power standoffs, in the both the political and financial systems. That is a symptom of lawlessness.I think that if reform does come it will come slowly, as those in political power try to operate behind the scenes to repair things without risking themselves, and upsetting their personally lucrative arrangements and careers. Transparency is not possible because too many still in power are complicit, and speed is not desirable for them because let’s face it, the system is working for them as it is.The problem is that short term thinking like this can allow a situation to become so bad that it reaches atipping point. That is why there was such a concerted effort to suppress the Occupy Wall Street movement. No deviation or dissent from the status quo can be permitted at this fragile time.And this is why they say that every so often progressives and reformers must save capitalism from the capitalists. Their short term greed takes them to some tipping point, and they become locked down in a credibility trap that must be resolved from the outside. That is a period of great risk, because sometimes cures are as bad or worse than the disease.L.S.: How do you interpret the movement of physical gold from the West to the East?Jesse.: It is just a surmise, but I think we are seeing an all-out defense of the status quo, as represented by the Anglo-American banks whose power is founded on the dollar. This certainly includes the big European banks unfortunately, but I tend to view all but the biggest multinationals as more dupes than insiders. Greed and hypocrisy are the fashion of the day amongst many.The East is taking advantage of the artificial pricing of the metals to ‘stock up’ if you will, and are not only buying for themselves, but urging their people to buy as well, with a few notable exceptions such as India which has accounting imbalances and has lagged behind on official purchases. The East is preparing for what they think will come next. The West is caught in a failing system, and keeps doing the same thing as though it will still work, somewhat neurotically perhaps.L.S.: What does the financial crisis, its causes and how it is managed tell you about the state of the West, for example morally? Or, to ask it differently, do you believe this is just a financial / economic crisis or is this going much deeper?Jesse.: It goes much deeper. Starting in the 1980’s, the culture of greed and self-centeredness has become increasingly ascendant. Yes, there is always a certain amount of cynical corruption amongst a minority of a people, but sometimes that type of behaviour becomes more socially acceptable, almost contagious, and tends to drive out the good behaviour which cannot compete with it in the short term when the rules are overthrown.L.S.: If you were calling the shots, what would you do to solve the crisis?Jesse.: I obviously cannot address that in any reasonable amount of words, except to say that the influence of big money on the political process is the root of much evil. At one time we had a thesis and antithesis in the political debate. But now that the ruling class has found out that they may become quite rich by acquiescing to certain things, and that there are few consequences for what one may do in that pursuit, the outcome is fairly predictable.We have to bring back consequences, transparency, and the rule of law.L.S.: Do you support a free-trade zone between the U.S. and the EU?Jesse.: Normally free trade zones are not necessary amongst mature economies that are operating on a set of common principles and openness. The zones are generally used to encourage growth in a particular geographic area, so it is a form of government subsidy.I also do not favor a regional or world government, because the greater the concentration of power, the higher the probability of groupthink, shared policy errors, crony insider dealings, and corruption. ‘Free trade’ like free markets is a fantasy that seems to be a stalking horse for world government. They are not naturally free.I like differences, and think people should have the ability to determine how their own society should function and what its priorities should be within some reasonable set of decencies. And like a common currency, common governance tends to flatten out differences, and encourage repression. I always enjoyed seeing the cultural differences in my travels and would hate to see that replaced by an artificial blandness and dystopian uniformity.L.S.: This year will see the 100th anniversary of the U.S. Federal Reserve. Your thoughts on this?Jesse.: It really doesn’t matter what I think, but the Fed is laying the groundwork for its own demise.L.S.: Why do you think so?Jesse.: They are discrediting themselves, and have painted themselves into a corner. The notion that an all-wise and selfless group of technocrats can wield such enormous power, while operating in secrecy and by their own judgement, is a romantic myth.Eventually they make mistakes, and seek to cover up those mistakes, and make even more mistakes in the process. Greenspan was like a slow poison for the Fed, but even if he had not been the chairman in service of the political interests for far too long, I am afraid that the Fed would have probably died of ‘old age.’ A system must renew itself every so often, and the leadership of the Fed has not been up to that challenge. That change must come from outside the Fed which is a creature of the Banks.It will be replaced by something else. What that will be I cannot say.L.S.: What are your thoughts on the direction that the U.S. has taken in general?Jesse.: If one looks at the marvelous and broad international support which the US had after the 911 attacks, and compares that to where the US stands now, in the depths of its scandals and corruption, the policy failure is obvious. I have likened the modern presidency to the emperors of Imperial Rome, with Reagan as Julius. And so now we have Obama as Claudius. And will Nero come next again?We speak of the US, but we must distinguish between the government and the people. The government is in the grip of the monied interests, and pays lip service to the wishes of the people. Reform is needed, and a return to the principles that made the US a beacon of freedom, even if it may have faltered in practice.L.S.: Given your background in computer sciences, do the revelations regarding NSA & Co. surprise you? And what are your thoughts about it that privacy seems to be a thing of the past?Jesse.: No it does not surprise me. The Internet has placed a great deal of information on a common network, and this creates enormous risks for security that were lulled to sleep by a faith in encryption and Virtual Private Networks. I had spent a great deal of time helping certain entities construct secure networks in the past, and the permeability of the new networks makes me shudder. The Internet is both a blessing and a curse.Privacy is essential to the individual, but an excess of official secrecy is not compatible with freedom. And the partnering of the corporations and the government in secret arrangements is a deadly threat to personal freedom and privacy. There will be technical solutions. The problem is more in the realm of the political. Again, those who love power rarely wish to relinquish it willingly.The intensity of the reaction against whistleblowers, most lately Mr. Snowden, is a wake-up call to people who cherish their freedom.L.S.: Does it frighten you that computers will be pretty soon more intelligent than humans – the so called ‘singularity’?Jesse.: Not at all because it is not true. A computer is a tool, that does certain things very well. And so is a jackhammer. And a backhoe. And a nail gun.What is intelligence? A computer is very fast and accurate, and can access an enormous amount of data very quickly. But it is only as good as its programming. It is very adept at deterministic processes. It can ‘ape’ human thought if the programming is good enough, the so called Turing machine. But computers are not self-aware and have no imaginations and no souls. They have no sense of justice.They are very powerful tools for processing information. But they are tools that remain in the hands of a human mind, for good or ill. People who do not understand them may fear them, but that is how it has always been with all new technology.
L.S.: Are you optimistic for the future of mankind?
“Through the mills of God grind slowly, yet they grind exceeding small;Though with patience He stands waiting, with exactness grinds He all.”Friedrich von Logau, Sinngedichte
There was no activity in or out of the COMEX warehouses yesterday, with only a small adjustment at Brinks.
Here is an interview I did with Lars Schall yesterday. You may read at it here.
Lars is a very personable and intelligent fellow, and did a good job of drawing out some comments, and coaxing me to put some things forward more so than I am often wont to do. I am always grateful for the good work that he does.
Next week may be more eventful for the markets as they shake off the last of the summer doldrums. A slight chill is in the evening air, and one senses even now that winter is coming.
I was out most of the day, having an early birthday celebration with my wife. The countryside is quite beautiful, and the farmers markets are laden with the bounty of the Summer. I think Autumn is my favorite time of the year, as it winds into the holidays, and friends and family.
As you may recall October, unlike September, is an active delivery month for bullion on the COMEX. And December is often the most active of all. The time is coming when we will reap as we have sown. The reckoning comes as the harvest is brought in.
Stand and deliver.
I had the chance to reconnect with a source in the bullion management business, whose operations deal on a direct basis with the shipping desks at the GLD. While remaining unnamed at this time, it was a powerful conversation, and he was quite liberal in sharing thought.
Speaking to what his group is hearing from the main GLD custodian, he noted that, “GLD is collapsing in [terms of] the number of share issuance, and [is] being redeemed…we are hearing from my end…that the GLD main custodian has been collapsing it and redeeming it, and that gold is just being shipped via their shipping desk directly to Asia.”
He further added that, “It is quite clearly a major establishment using their shipping desk to ship gold bullion, and potentially having it re-smelted down in Singapore, Hong Kong, etc. It (the gold) is moving.”
When asked his thoughts on the potential for a short-squeeze down the road as all this gold moves east, he concluded by saying, “Anything that can go down as hard as [gold] has, can obviously have a dramatic short squeeze at some time…at the end of this market [I expect] you will have a ridiculous squeeze.”
While much is left unanswered in the public domain regarding this year’s mysterious clearing out of physical gold from Comex warehouses, it would make sense for such events to occur right before a massive run-up in price—whether it be through freely traded markets or by governmental decree.
As a fresh data set, Comex Gold Warehouse Stocks have declined by roughly 4.5 million ounces so far this year, or in dollar terms—$5.89 billion in gold has fled Comex depositories, apparently all on its way to China:
Bottom Line: By the time the details of this continually unfolding gold inventory story of 2013 are fully revealed to the public (if at all), the price of gold will be long discounted to the upside. Plan your positions according.
Demand Meets Undeliverable Object – A Run on the Bullion Banks
“People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.”
John Kenneth Galbraith, The Age of Uncertainty
If this is accurate, if this is really happening, I think that the effects of this run on the bullion banks are going to hit quite a few people dead cold, like a smack in the face.
That is because there is so little coverage of what is going on in the media, even the internet media.
The gambit of smacking down price to dampen the desire for gold appears to have backfired in a big way by sparking an insatiable demand for the physical metal and a remarkable decline in available inventories. That certainly wasn’t what had been expected I would imagine when the process of a more energetic price manipulation in response to Germany’s request for the return of its gold began.
That a sovereign nation asked for the return of its own gold being held in custody, and that request was flatly denied, is almost as unbelievable as the fact that so many are willing to take it in stride, like something that would happen every day.
A seemingly unstoppable force, the flow of gold from west to east, is going to meet the undeliverable object, the nominal inventory of unencumbered gold in the bullion banks and exchanges, sometime over the next twelve months.
Of course one cannot predict exactly what will happen and when, given the phony controversies, obfuscations, and stonewalling that seem to settle like a thick fog over the markets at every treacherous turn in this slowly unfolding financial crisis. But the math is intriguing.
This is getting very interesting. Let’s see what happens.
Is this what I wish to happen? No, I would prefer that the markets be transparent, honest, and provide genuine price discovery and allocation of capital with relative rationale decision making open to all market participants. I think for now the game is badly tilted in favor of insiders and their powerful friends.
I do not believe that there can be a sustainable economic recovery without genuine reform. A financial disaster is what the financial predators seemingly wish to happen, assuming they even care about the broader effects of their foolish greed.
At some point one would have to anticipate a declaration of force majeure and/or a change in the rules if the financial interests do not relent on their aversion to a market-clearing price. And when that tide goes out, we will see who is swimming naked.
But there remains plenty of opportunity for more desperate antics, so as always caution is advised , particularly in the use of any leverage and short term time horizons. This is not a healthy trading environment for the non-professional. And many a person has gone bust by underestimating the shameless manipulation of the markets when regulation is lax.
The exchanges and the Banks will not fail, because the financiers and their friends make their own rules as they go along, and do not hesitate to act in their own interests, promises and customers be damned. That seems to be the way of modern finance and monetary theory. Whatever we say it is, is because we say it is.
The time for debate seems to be coming to an end. Weighed and found wanting.
Stand and deliver.
We had the expected post option-expiration gut check in the metals, which rallied back into the close.
These jokers are about as subtle as our little girls when they play Monopoly, and make up their own rules as they go along.
Interestingly enough it appears that JPM is exploring ways to exit the commodities business. This could be fallout from their recent Enron like energy experience.
Maybe this is more insulating themselves from the vagaries of the market sort of thing.
There is intraday commentary about next week’s packed macro-economic calendar here.
The reports include an FOMC decision, advance GDP for the second quarter, and a Non-Farm Payrolls Report.
It is funny that President Obama chose this week to kick off his ‘don’t blame me for the economy’ road trip.
See you Sunday evening.
So when you hear accounts that 100′s of tonnes of “gold” were dumped on the Comex market , please understand and know that this was “gold” as represented by a paper Comex gold futures contract. On the Comex gold grows on trees – everywhere else in the world that wants to own gold, physical gold has to be delivered.
And to help protect this policy they have convinced or pressured the Japanese to inflate their own currency. The Japanese are now going to print money like the Fed. They are lobbying the ECB to print more. So I see this as a dollar protection policy.
…I know where the gold is coming from in the market, it’s just paper. It’s naked shorts, there is no gold there. If somebody wanted to take delivery on those contracts nobody would be able to provide it. I don’t know what the source of the (physical) gold is. Some people are saying that the actual stocks available for possession are rapidly declining…”
Overturning the Last Remnants of the New Deal
Demand for gold coins in the US has soared since the presidential election, as small investors fret about the lack of action to address America’s ballooning debt.
The US Mint’s sales of American Eagles, one of the most popular gold coins, leaped 131 percent in November, hitting their highest level in more than two years. The Royal Canadian Mint also had its strongest month of sales this year.
Terry Hanlon, president of metals at Dillon Gage, one of the largest bullion dealers in the country, said sales had risen sharply “within a day or two” of the election.
“You’ve got a lot of people who are very worried about the economy. With the election they saw that nothing was going to change,” he said.
While coins are a small part of the overall gold market, the jump in sales highlights gold’s role as the favored investment of disenchanted Americans. The political gridlock in Washington and the prospect of further quantitative easing when the Federal Reserve’s “operation twist” expires at the end of this year have fuelled demand for precious metals among small investors.
“They don’t believe in Uncle Sam any more,” said the head of precious metals at a large bank.
Gold to Gain to $2,000 on Money Printing, Deutsche Bank Says….
Jim Rogers warns Americans to prepare for “Financial Armageddon,” saying he fully expects the economy to implode after the U.S. election.
Hands down, the cheapest place in the world to buy gold coin
2013 Feasibility Report…..This is updated material and as relevant now as at anytime in past 5 years
For anyone looking to hold gold as a store of value or even medium of exchange, major gold coin mintage’s like the Eagle, Maple Leaf, and Krugerrand are advantageous because they’re recognizable worldwide.
You can do business in a coin shop anywhere in the world from Vancouver to Vanuatu with one of these coins; bulk bullion, on the other hand, needs to be specially weighed and assayed by experts before being traded.
For this reason, the premiums for which gold coins sell tend to rise substantially in crisis periods when demand for physical metal is high. In the initial days of the 2008 financial crisis, premiums shot up from 4% to well over 10%, even though the price of gold was simultaneously falling sharply.
Today, with gold routinely taking out its all-time highs, gold coin premiums around the world have remained fairly high– this is one of the things that we typically look at here at Sovereign Man as we constantly travel the globe… and why what I’m about to tell you might have you falling out of your chair:
One of our Asia partners, was in Hong Kong last week, and he conducted his normal rounds of the various banks in the Central business district that sell gold bullion coins over the counter to walk-in customers such as Hang Seng Bank, Bank of China, and Wing Lung Bank.
At Hang Seng Bank, Canadian 1 Oz Maple Leaf coins — in pure, 24 karat gold — were available for cash purchase in Hong Kong dollars at just 0.5% above the prevailing spot price of gold.
This is dirt-cheap… or as they say in Chile, ‘precio de huevos’, and it certainly presents an interesting arbitrage opportunity. Depending on your objectives, however, there may be even better gold coin buys in Hong Kong at the moment.
Over at the Bank of China, for example, the Chinese Panda coins were quoted at 4.9% above spot gold.
Personally, I think the Panda is one of the most beautiful gold coins of all, and in North America they typically sell for much greater mark-ups above the spot price of gold than most other coins, often over 20%. In the UK it’s even more.
Many collectors value the Pandas simply for their aesthetic beauty; and it probably doesn’t hurt that the dealers authorized by the People’s Bank of China to sell Pandas in the US have a virtual monopoly on the market.
Still, this situation can be exploited to your advantage– the difference between the buy price in Hong Kong and the sell price in North America is roughly $275 per 1-ounce coin.
If I had nothing to do and were looking for some adventure, I’d raise some grubstake to fly to Hong Kong, buy coins, and sell them back home at a profit to pay for the trip… or better yet, offer a fee-based service to gold coin investors to buy cheap coins in Hong Kong on their behalf.
For other folks who haven’t yet built up a stash of gold bullion, I would urge you to consider taking a trip to Hong Kong to get started; I’m certain that the money you’ll save will more than pay for the flights, and a nice holiday for you and your loved ones as well.
* * * This is information is actionable and opportunistic to our readership pro bono from our knowledge network
This article triggered a host of questions that I’d like to address today:
l. ” I goggled gold prices in Hong Kong and noticed different prices than mentioned in this article. Why the discrepancy ? “
Google is the black hole of accurate information. The intelligence on the ground always trumps the ether of the Internet, and my partner was actually standing at the bank in Hong Kong speaking to the cashiers.
It’s common to see significant inaccuracies online, especially considering the banks don’t sell their gold over the Internet or the phone… only to walk-in customers. So naturally the most accurate pricing will be at the branch.
2. “Once I buy gold coins in Hong Kong, is there any restriction to taking them out of the country?”
No, there are no restrictions for transporting gold out of Hong Kong as precious metals are not a controlled or prohibited item listed by Hong Kong Customs (rough, uncut diamonds are).
We have transported gold out of Hong Kong numerous times in our carry-on luggage without so much as a glance from security.
3. “Are there restrictions on bringing in gold coins when I return home?”
It depends on where you are flying to and what you purchase. If you are flying to North America, neither the Canadian nor US government considers gold to be a monetary instrument.
Maple Leaf and Eagle coins are technically deemed legal tender in each country, so you would have to raise your hand if the aggregate face value of the coins plus whatever other cash you have on hand exceeds $10,000.
Bear in mind, customs officials in North America have unlimited authority to do whatever they want, even if you are well within the law. As such, it may be advisable to have a receipt for the coin purchase in Hong Kong, as well as evidence for your source of funds (bank statement is sufficient).
If you’re ever in doubt about the regulation, ASK.
4. “Are there any countries that I should avoid for transporting bullion?”
Yes, absolutely. To name a few: Mexico. Thailand. Most of Africa. Russia. Uruguay.
I would also generally avoid Panama as well– the country’s customs regulations value gold based on its market value, not face value… and anyone who brings more than a trivial amount of gold into the country could end up paying an unnecessary import duty.
That’s all for now from `boots on the ground` risk assessment
* Sovereign Man
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Notes from the Field
Yesterday was my lucky day.
While hiking in the middle of nowhere around Lake Tahoe, I literally stumbled onto a 1-ounce US silver eagle coin, 1996 issue. It was just lying there on the ground without a soul in sight.
The coin was pretty muddy, but I managed to clean it off later with an old toothbrush and some elbow grease… at which point I decided to take my good fortune on the road for a little unscientific poll.
I’ve traveled to plenty of countries where the local population is very in tune with the prices of gold and silver, particularly in Asia, India, and the Middle East. It’s simply part of the culture.
In the developed world, however, people have much greater confidence in their paper currencies because they’ve been brainwashed since birth to believe their currencies are sound.
As such, I was not surprised by the results of my little informal survey.
Walking around the lakefront resort community where I’m staying, I stopped passers-by and explained to them how I had found this coin. Then I’d ask, “What do you think it’s worth?”
The first person I showed it to held it in his hand and felt the coin’s heavy weight with a slight tick of his eyebrow. Then he flipped it over to the reverse side, saw the “1 OZ. FINE SILVER- ONE DOLLAR” marking at the bottom, and replied, “Uh, a dollar…”
One after another, locals, tourists, and staff alike were completely mystified at the prospect of my weighty silver coin having much ‘value’.
Several people commented on the coins year, claiming, “Well it’s probably not worth much, maybe just a dollar, because it’s only from 1996… I mean, if it were from the 1950s, then you might have something…”
Another common response was “I have no earthly idea.” After half a dozen of those, I changed my approach and walked into one of the local casinos where I saw three bored dealers at an empty blackjack table.
I plunked my coin on the table and asked, “How many chips will you give me for this?”
Each one of them examined the coin and looked at each other in silent conference before one of them said, “$1.”
I asked a few other folks milling around the lobby if they’d give me $5 or $10 for the coin, which seemed to offend people much more than spark their curiosity for the opportunity.
Finally I met a man and his wife who were walking their dog on the beach nearby; I walked up to them and said, “You look like intelligent people, maybe you can help me out… see I found this coin during a hike today and have no idea if it’s worth anything. What do you think?”
The man took the coin and noticed it was silver; he said, “Oh, this is silver… it’s probably worth something. You should SELL IT!”
Great. I finally find someone who actually seemed aware of precious metals’ value, and his initial reaction is to trade it for paper
Like I said, I can’t really say I’m surprised. Even here in this wealthy resort area filled with educated, successful people, nobody really had a clue. Western governments inculcate such mindless devotion to their paper currencies, I suppose it’s a hard mindset to break.
But as unscientific as my informal poll may have been, it does suggest one obvious conclusion: we are nowhere near the mania phase for precious metals… and any talk of a gold ‘bubble’ is complete nonsense.
The current pullback is just that– a pullback. Like we saw in 2008, institutional money managers are locking in their profits as they cash up and prepare to take heavy losses over the euro crisis.
Gold and silver’s real breakout will be when the average, everyday guy has signed up to receive gold price SMS alerts to his smart phone and has the local coin dealer on speed dial.
Just like the real estate bubble in the early 2000s when every Tom, Dick, and Harry was flipping off-plan condos in Miami, precious metals will enter bubble territory when the masses get into the market.
It may be a bumpy ride for precious metals as the euro crisis continues to unfold… but it’s clear that we’re a long way off from the Joe Six-Pack mania phase.