Currency markets have been favoring the dollar as there has been an exodus from the Euro lately. The most liquid place for money to go fleeing the euro is the US dollar of course.
What is not being discussed much is that the dollar has perhaps more counter party entropy than even Europe if we use technical insolvency and aggregate debt obligations among current Federal Debt, projected Federal Deficits and State, County and Municipal and other Debt such as hospital bonds and the like and the long term unfunded mandates.
Looking at the intermediate and long view I am seeing the following:
1. Current US total debt is not repayable at current purchasing power levels of the US $
2. Gold and Silver remain the only real hard cash, unencumbered by insolvent counter party debtors.
3. Gold and Silver remain heavily suppressed by US and UK central bank and treasury shadow policy operations.
4. This makes this form of hard cash, and true long term safe store of wealth a particularly good deal at these prices if you can take possession of the physical metal and store it in your sovereign vaults, where it isn't merely a questionable ledger entry but a physically verifiable asset.
5. All debt based, un-backed, fiat currencies will be systematically devalued to "pay" the debt down and the time in which they can continue to jaw bone the "strong dollar" policy will come to an end.
6. There is no practical way the Fed can exit its Quantitative Easing program without causing another major drop off in real estate prices and sending the economy and the financial system into a crisis far deeper than the one from which we may possibly be just now slowly and tentatively exiting. At a most delicate time like this, even talk of ending QE could push the system towards a tipping point.
7. Greater public awareness of the manipulative operations by self serving quasi-governmental interests in the precious metals markets will bring increasing awareness of how to use the manipulators own strategy to obtain more physical metal at lower prices among the larger hedges, sovereign interests and even among the smaller savvy long term investors.
Bottom line: The short term blip up in the dollar relative the a basket of other highly leveraged and indebted currencies is not actually very relevant to the fact that gold and silver remain very far below their inflation adjusted highs (gold at 1/2), (silver at less than 1/6th), and that it seems very likely that as this paradigm becomes more broadly understood, that gold and silver should easily travel well beyond on their inflation adjusted highs. It would not take too much change in perception to see this happen very quickly in the silver market and just somewhat less quickly in gold in my opinion.
Just a few weeks ago we read what Jamie Dimon of JP Morgan said comparing Greece and California in an article from Barron's:
JP Morgan's CEO, Dimon's statement that California is more of a risk than Greece
"…JP Morgan Chase (JPM) CEO Jamie Dimon this afternoon told investors at the company’s annual meeting that he’s more worried about California fiscal solvency than about Greece.
“Greece itself would not be an issue for this company, nor would any other country,” Dimon said, according to Dow Jones’s Matthias Rieker. “We don’t really foresee the European Union coming apart.”
However, given California’s size, “there could be contagion” if the state were to have problems servicing its debts, Dimon warned. …"
U.S. Is Riskier Than Euro Zone; So Says CDS Market
"…
As U.S. CDS spreads expanded to their widest levels in two years, that cross-region gap blew out to 5.7 basis points last Friday before narrowing to 4.7 Tuesday.
Wider CDS spreads indicate that sellers of insurance against a particular issuer's default are charging more for it. In effect, the positive U.S.-versus-euro zone spread means investors think the risk of a U.S. default–however remote–is greater than that on euro-denominated sovereign debt…."
And finally we have this supporting article from cnbc.com:
State Debt Woes Grow Too Big to Camouflage
"…California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay…."
"…“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” said Kenneth S. Rogoff, an economics professor at Harvard and a former research director of the International Monetary Fund. “But if we have a situation where there’s slow growth, and a bunch of cities and states are on the edge, like in Europe, we will have trouble.”
California’s stated debt — the value of all its bonds outstanding — looks manageable, at just 8 percent of its total economy. But California has big unstated debts, too. If the fair value of the shortfall in California’s big pension fund is counted, for instance, the state’s debt burden more than quadruples, to 37 percent of its economic output, according to one calculation…."
Filed under Uncategorized by on Mar 30th, 2010. Comment. 
I am happy to report that after the overwhelming support of the MSN community and what must have been substantial effort on behalf of MSN staff that the Permanent Ban on Duffminster has been lifted and that despite earlier claims by MSN moderators that there was no way to restore the nearly 7000 posts that were deleted from the MSN boards that I had posted, all of my posts appear to have been restored.
I count this as a victory for Freedom of Speech and a testament to the power of protest and persistence as well as the power of knowledge of how things work in the real world. It is also clear that MSN is one of the few forums in which Freedom of Speech is taken seriously and where alternative views on finance, economy, politics and markets is not only well tolerated but in a reasonably fair way, encouraged. It is why I have most often come here to read, post and participate. This restoration of the deleted content has restored my faith in MSN and that human beings still have relevancy in the very rapidly growing web-sphere I have referred to as "the machine".
Again, thanks to each and everyone of you who persistently pursued justice and the "right thing" in this matter and "never gave up" and for your understanding that Freedom is always worth defending, even if the freedom or speech you are defending doesn't necessarily always represent what you believe. It is the freedom we all believe in. Standing together we can accomplish great things and defend great ideas. Freedom of speech and justice are two of the greatest things we have.
God Bless
Very Truly,
Duffminster
Filed under Uncategorized by on Mar 23rd, 2010. 4 Comments.
The Exit Strategy for the Federal Reserve as outlined in a recent Fed publication just goes to show how far away from the roots of responsible banking these people have gone. I guess they don't work for the United States but instead for the handful of too big to fail (Financial Amalgamations, only temporarily called banks so they could receive massive bail out funds and tons of special liquidity program lending and other currency programs to prop up stock markets). Again, the Fed has been piloted recently by Greenspan of the "free markets"/"manipulate the markets" Orwellian school of no regulation on OTC derivatives and now you've got a a Federal Reserve acting as a buyer of last resort and not just of treasuries but real estate and other securitized paper. This is way out of bounds for the Fed's charter. So now you've got Fed Chairman Bernanke saying "The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.".
If the Federal Reserve is ever going to regulate Entities which by their very design are capable of destroying the global financial system (the Too Big To Fail Wall Street Gambling Companies, sometimes called Banks), then the Federal Reserve needs to be under the Authority of the citizens of the United States and by extension the US Congress. Otherwise, it is the classic case once again of the Fox Guarding the Hen House. Discussion of an "operating framework" in which "minimum reserve requirements" are eliminated is clear indication as to the insanity that has been reached at the Fed and also that that insanity comes from serving not responsible banking oversight and policy but the short term interests of the massive financial entities which nearly brought down the entire global financial and economic systems in my opinion.
Testimony to the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
"…
9. The authority to pay interest on reserves is likely to be an important component of the future operating framework for monetary policy. For example, one approach is for the Federal Reserve to bracket its target for the federal funds rate with the discount rate above and the interest rate on excess reserves below. Under this so-called corridor system, the ability of banks to borrow at the discount rate would tend to limit upward spikes in the federal funds rate, and the ability of banks to earn interest at the excess reserves rate would tend to contain downward movements. Other approaches are also possible. Given the very high level of reserve balances currently in the banking system, the Federal Reserve has ample time to consider the best long-run framework for policy implementation. The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
http://www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm#fn9
Filed under Uncategorized by on Mar 23rd, 2010. Comment.
I have been posting on the MSN Market Talk with Jim Jubak Message Board for years and never changed my mode of operation. There was a thread on that Board that outlined the thinking of a very wise, pragmatic, honest and insightful economist who went by the Handle Old and Gray, or as we affectionately refer to him O & G. Yesterday I decided to to add one link to the first message of that Post, which was a link to the PBS Front Line Documentary that detailed how the only Women Head of the Commodities Futures Trading Commission, the US Government Regulatory Agency which was designated as the Sole Regulator for Derivatives in the United States, Brooksley Born, was systematically shutdown and pushed out when she tried to bring regulation to OTC Derivatives and all her efforts to allow the CTFC to do its job to regulate the OTC derivatives like the ones that took LTCM and almost the entire financial system down, was Crushed by the team of Greenspan, Summers, Rubin and the rest of the Zero Regulation "Free Market" hypocrites who daily manipulate the market through their Orwellian Intervention in markets.
I guess, since the Old and Gray Thread was among the most popular, lucid and detailed discussions of the causes of the current financial crisis and related solutions, including review of the current "financial reform legislation" going through Congress, that the addition of the Brooksley Born PBS Frontline Video, which Dams Summers, Greenspan and others was just too much and the Powers that Be were able to twist arms over at MSN (one of the few progressive media outlets in my opinion) and have one of the most prolific and well spoken contributors to that community.
If in fact MSN turned to this level of censorship by way of political strong arming then you can be sure that the so called "Democrats" and their "New Orwellian" TASS implementation of "free speach" are trying to keep the truth away from as many people as possible in my opinion. Its time for each of us to start blogging and getting the unreported and mis-reported realities of how the Fed and its largest member banks have control over our political system and they want to shutdown in Free Speech which challenges there belief in their entitlement to lie, cheat and steal from the rest of the human beings who not as greedy, tricky, cold or inhumane as they in their infinite Darwinian and Orwellian Wisdom are.
Please watch the Brookley Born CTC OTC Takedown Video from Front Line and then go to the MSN Money Talk Message board and other MSN Money Message Boards and post your protest over the Banning of Duffminster and the Deleting of all of his informative posts!
I was given no warning, explanation or other information. After years of contributing content and being well received by most if not all the MSN Money moderators, and until otherwise informed, find this action a clarion call to prepare to begin to implement the tactics of Martin Luther King and Mahatma Gandhi. I'll be ramping up a new broad based economic multi-blog system in the new few weeks at http://www.Duffminster.com. Nothing there yet but please check back every couple of weeks and I urge you to subscribe. The new board will not have a bias torwards metals, and I will be seeking many contributing author/editors.
For those of you who have followed me on MSN over the years, thanks for your support in trying to get me re-instated and the ongoing struggle to defend Freedom of Speech and Diversity of Information for the citizens of of this great nation. We'll have to work to keep it free.
Filed under Uncategorized by on Mar 19th, 2010. 31 Comments.
And given the massive increase in debt we've seen over the last 10 years you expect to be an even better investment over the next ten years. As the debt end game of the classic deterioration in pure fiat currencies plays out, as usual, hard cash, gold and silver, will emerge as the defacto reserve money/currencies and will rise from their artificially suppressed levels to their actual values many multiples above today's prices in my opinion.
"Gold has proved to be the best value investment over the last 10 years, new research has disclosed."
"…The price of the precious metal rose 277 per cent during the past decade, with investors particularly attracted to gold during the recession as they sought a safe haven for their money.
Overall, gold, silver and platinum increased in value by 242 per cent between December 1999 and December 2009, the equivalent of an average annual return of 13.1 per cent.
It means precious metals outpaced inflation which has increased by 30 per cent during the decade or by an average 2.7 per cent a year.
Gold saw the biggest rise over the decade at 277 per cent, followed by platinum at 230 per cent and silver at 227 per cent.
Despite the slump in the housing market in the past two years, property has produced the second highest return after previous metals during the past decade of 187 per cent or 11.1 per cent a year, according to the findings by Halifax.
Shares saw an average return of just 18 per cent over the decade, while cash returned 57 per cent. It comes despite savers seeing their rates of return plummet to record lows after the Bank of England cut interest rates to just 0.5 per cent a year ago.
Suren Thiru, an economist at Halifax, said: "Precious metals were the top performing asset during the noughties, largely reflecting increased demand from China and India for industrial uses and jewellery."
He said that the prospects for prices of investments such as gold and property will be driven in the year to come by the extent and pace with which UK and global economic conditions improve.
"Monetary and fiscal policy decisions, the outcome of the General Election and the strength of demand from China and India are all likely to be important determinants in 2010," he said. …"
Filed under Uncategorized by on Mar 6th, 2010. Comment.
German ProSieben TV Channel Finds 500 Gram Tungsten Bar At W.C.Heraeus Gold Foundry With Bank Origin
"…What appears to be the first documentation of counterfeit gold bars made of plated tungsten was noted today by Zero Hedge as having been reported by a German television station. The counterfeit bar reportedly is in the possession of the W.C. Heraeus gold foundry in Hanau, Germany, said to be the world's largest.
This sort of thing might shake the gold market even more than, say, the International Monetary Fund's confession that it really doesn't have any gold and that it has been selling only bookkeeping entries all this time…."
From: First documentation of counterfeit gold bars, plated tungsten
Filed under Gold Price Supression, Uncategorized by on Mar 1st, 2010. 1 Comment.
This confirms prior and less comprehensive analysis from Adrian and some others questioning the ratios on the Comex gold and silver inventories. I'd like to see the same analysis done for the London Gold and Silve exchanges where the massive OTC derivatives markets dwarfs COMEX.
Adrian Douglas: Alarming trend in Comex gold and silver inventory data
"…Submitted by cpowell on Fri, 2010-02-26 04:54. Section: Daily Dispatches
11:50p ET Thursday, February 25, 2010
Dear Friend of GATA and Gold (and Silver):
Having examined six months of delivery and inventory data from the gold and silver divisions of the New York Commodity Exchange, GATA board member Adrian Douglas has discovered that bullion dealer inventory appears to be reducing dramatically and is not being replaced. Douglas, publisher of the Market Force Analysis letter, concludes that this likely indicates a worsening shortage of gold and silver bullion. Douglas has published a report on his findings at the Market Force Analysis Internet site under the headline "Comex Inventory Data Reveal an Alarming Trend" and you can find it here:
https://marketforceanalysis.com/index_assets/COMEX%20Inventory%20Shows%2…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc. …."
Here is a brief excerpt from Adrian's analysis. I highly recommend going to the Link below and reading the entire analysis and seeing the charts:
https://marketforceanalysis.com/index_assets/COMEX%20Inventory%20Shows%2…
"…The inventory held in the COMEX warehouses is split into two categories which are “registered” and “eligible”. The registered category is metal that is available to be delivered against warehouse receipts. This is essentially inventory belonging to the commercial dealers. There are many traders on the COMEX who sell gold or silver short but much of this is for speculative or hedging purposes; they are not doing it because they have gold or silver to sell. However, there are investors who buy long contracts and want to take delivery. It is, therefore, the commercial dealers, the bullion banks, who provide delivery against such long contracts.
The “eligible” category is inventory that is not available for delivery against futures contracts. It is being stored in the COMEX warehouses by its owners. Although some of this inventory may belong to the dealers for simplicity I refer to it as “customer inventory”. …"
"… But what is more important is that the data reveals a very shocking trend. That is that the registered (dealer) inventory is being drawn down at a phenomenal rate. In silver the inventory has dropped by 24% in 6 months while in gold it has dropped an eye-popping 41% in 6 months! The withdrawal to deposit ratio for registered silver is 14:1 and in gold it is 5:1. If this rate of drawdown continues the registered inventory of silver will be exhausted in 18.8 months and in just 8.5 months for gold!
This inventory drawdown is very revealing. Over the same period the open interest in gold increased 15% while in silver it increased 19%. By way of an analogy one would not expect a company with increasing orders to decrease its stock levels!Why would the inventory not be replenished when Open Interest is increasing? The most likely reason is a growing shortage of bullion. …."
Filed under Uncategorized by on Feb 26th, 2010. Comment.
I believe that this information was intentionally released and that a price must have already been secured. This is pure gut level speculation but to me it makes sense as part of deal to both insure China gets a good price from the IMF and that the market value remains significantly above the negotiated price as an incentive from the IMF to buy the gold in one lump transfer. I am curious as to where IMF will actually obtain the physical gold. In other words, which vaults or respositories will be used. I'm sure the Chinese will insist on physical deliver vs. some kind of paper certificate. If I were the Chinese, I would want the gold in country and not sitting (alledgely) at some large bullion bank repository, where more than one owner might be laying claim to the gold as has been specultaed by some who follow the GATA camp.
China To Purchase Half of IMF's Gold
"…China has confirmed the intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.
World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.
The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most – 200 tons.
China’s interest in international trade is connected with the development of the nation’s economy, as well as with the growing consumer demand in the country.
“Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market,” the agency reports.
Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.
The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries…."
Filed under Uncategorized by on Feb 26th, 2010. Comment.
Despite all the efforts of the Propoganda Machine to keep Gold Prices down and that includes today's propogana on the IMF gold sale and the correlated bullion bank triggering of the auto-pilot black box fund selling, the fundementals of the physical gold and silver markets remain undeniable.
What is so evident is how the Management of Perceptual Economics (MOPE) propoganda is so well honed in that in almost every release, article and PR piece on the anouncement is that the announced IMF gold sales the phrase "to avoid disruptions in the market," is used and of course such a phrase is designed to do just that. These are desperate efforts. See how much of that Gold is available for physical delivery at today's prices. I would wager "none."
First some commentary from Dan Norcini, who I consider one of the most savy gold traders in the world and certainly as knowledgable on the subject as anyone could be.
Trader Dan Comments On The IMF’s Supposed Gold Sales
"…
My Dear Extended Family,
I agree fully with Trader Dan’s assessment of the IMF statement. This is a duplicate of the IMF action in the 1970s. It turned out to be the most positive event as each time the IMF held an auction of their gold they facilitated entry for large investors at singular prices.
It will be no different this time around. Gold will rise because of IMF selling as it did in the 1970s.
I assure you that history will repeat itself on the same circumstances.
Respectfully,
Jim
Dear Friends,
After the pit session trade had already closed for the day in New York, news came out that the IMF was planning on selling the remainder of 403.3 tons of gold, 191.3 to be exact, on the open market. Gold was immediately taken down hard in the thin trading conditions, dropping more than $14 on the day.
There are several things about this that should be noted. First is the timing – it comes on the heels of a resumption of the uptrend in gold with many technical indicators having moved into the buy mode. It also coincides with another brand new all time high in the price of Gold priced in Euro terms at the London PM Fix.
Those of us who have been around the gold market long enough know full well that the timing of this announcement is therefore no coincidence but was timed to attempt to derail the returning bullish sentiment in the yellow metal. Why announce the sale publicly which is guaranteed to receive a lower price for the metal than if the IMF had just quietly sold the metal into the market. This is reminiscent of then Prime Minister Gordon Brown’s announcement that England intended to sell its hoard of gold. That guaranteed that Britain would receive the lowest price possible.
Secondly, China was one-upped by India’s purchase of some 200 tons of gold late last year and got caught flat footed. The spin on this gold sale is that the IMF announcing that they would sell the gold into the open market means that Central Bank demand for gold is not as vibrant as the market was led to believe. That is an interesting tall tale. The simple truth is that Central Banks do not generally buy gold and announce their intentions to do so beforehand. Neither do they tend to buy when prices are moving higher as the momentum based hedge funds do. Time and time again we have seen that the CBs buy gold during episodes of price weakness. Once news hit the wire last year that India had bought 200 tons of gold, the price never looked back and shot straight to $1220+. Any Asian Central Bank that missed buying the gold as a result is certainly not going to panic and rush into the market to obtain it. They are waiting for lower prices where they will acquire the metal. To state therefore that Central Bank demand for gold must not be as robust as originally thought is quite shallow analysis.
My view is that this announcement means nothing in the longer term scheme but was rather a cheap trick to take the market lower. We have already seen this week how some noted elites were pooh-poohing gold and trash talking the metal all the while they were acquiring a position in it. Nothing ever changes in this gold market. It is still one of the least transparent markets on the planet and perhaps the most prone to official sector interference.
Do not be disturbed by the news. It is probably going to be a one or two day wonder and then that will be it. Gold will then go back to trading the currencies taking its cues from the action in the Dollar.
Incidentally, this sale is supposedly going to be phased in over an extended period of time. Rest assured, the IMF would love nothing better than to sell the whole 191 tons in one lump sum to another Asian Central Bank.
Respectfully,
Trader Dan…"
Next, its on to the article after which this post is named:
IMF Gold Sales v. the Alchemy of Gold Futures – What’s the Impact on Gold Prices?
"…The recently announced IMF sale of 191.3 tonnes of their gold reserves, though it caused an immediate sharp knee-jerk reaction in gold futures markets, will have a negligible effect on the long-term price of gold. Here’s why.
In December, 2009 the commercial bullion banks that serve as agents for the leading Western Central Banks were net short 303,791 contracts of gold. Each COMEX gold futures contract represents 100 troy ounces, so the Commercials were net short 30,379,100 troy ounces of gold. With the average price of gold $1,134.72 per troy ounce in December 2009, this net short commercial position represented $34.47 billion worth of gold. There are 32,150.74533 troy ounces in one metric tonne. So 30,379,100 troy ounces/ 32,150.74533 troy ounces = 944.90 metric tonnes of gold. Since gold contracts are supposed to be good for physical delivery, the commercial bullion banks that were short nearly 38% of annual world production of gold this past December should have had 944.90 physical metric tonnes of gold in their vaults to back up their short position at that time. In reality, this situation never exists.
The amount of physical gold that bullion banks deliver through COMEX on a daily basis is negligible compared to the often massive historical short positions that they have maintained for decades. For example, during a two-week span across January and February, COMEX arranged for the physical delivery of 543,500 troy ounces of gold with their contracted warehouse depositories, a figure that represents an average of just 38,786 troy ounces of gold per day or 0.18% of the current net short position. At this rate of delivery, it would take the COMEX more than two years to deliver all the gold represented by the current net commercial short position should the holders of long contracts ask for settlement in physical delivery.
Through the use of futures markets, the Commodities Futures Trading Commission (CFTC) has granted bankers a mechanism to perform alchemy and turn paper into gold on the COMEX by allowing them to establish obscene short positions that represent 25% to nearly 40% of annual gold production at times while simultaneously allowing them to renege on their fiduciary responsibility to actually physically possess the gold represented by their short positions. In other words, the CFTC has allowed gold to operate under the principles of the fractional reserve banking system on the COMEX futures markets. As I stated above, the net short position of the commercials in gold represented more than 30 million troy ounces yet for the past few months they almost never exceeded delivery of 0.2% of their short position on a daily basis. Many people would refute this argument by stating that COMEX only delivered a minute fraction of physical gold represented by this obscene short position because no institution asked for substantial physical delivery of their long contracts. While it is true that less than 1% of most commodity futures contracts are ever settled by physical delivery, futures markets should not exist to serve the purpose of distorting the underlying reality of supply-demand fundamentals of the actual physical commodity. With gold and silver, this has been the case for decades.
However, the real question should be, “If I asked for physical delivery of an amount of gold that I should be able to receive on the COMEX, would I receive it?” Why? If you were India, China or the United Arab Emirates and you wanted to buy 200 tonnes of gold at the price established in futures markets, but you knew that there was no possible situation whereby 200 tonnes of gold would ever be delivered to you via the futures markets, what would you do? Would you buy 200 tonnes of gold in the futures markets only to know that you would suffer a default of this delivery and likely be forced to pay a much higher price in the future or would you try to arrange to buy 200 tonnes of gold NOW from the IMF or another Central Bank? Of course, you would choose the latter tactic. The fact that gold cannot be printed out of thin air is the essential quality that makes gold as a form of money much more sound than the Euro, the dollar, the Yen or any other form of fiat currency.
However, tens of billions of dollars of gold exist only in digital form on the COMEX and the CFTC has allowed bullion banks to indeed achieve alchemy with gold (and silver) in the futures markets. By allowing these mechanisms to persist that have absolutely zero to do with physical supply and demand of gold and silver, bullion banks can suppress the price of paper gold and paper silver in the futures markets. But in the end, they will never be able to perpetually suppress the price of real physical gold and real physical silver. There will come a time when the prices for real physical gold and real physical silver completely sever the already tenuous umbilical cord they maintain to the suppressed prices of gold and silver established by the agent bullion banks of the US Federal Reserve and the Bank of England in futures markets.
As of February 17, the CME warehouse report stated that their depository warehouses contained 1,645,000 troy ounces of registered gold and 8,292,887 troy ounces of eligible gold. Only two of their depository warehouse have significant amounts of physical gold worth mentioning, HSBC, with 4,311,493 ounces of eligible gold and 266,677 troy ounces of registered gold; and Scotia Mocatta with 3,826,013 ounces of eligible gold and 936,855 troy ounces of registered gold. What does “registered” and “eligible” gold mean? As in everything bankers do, these terms are meant to confuse the average person. Central Bankers have used the same tactics to obscure their true holdings of gold reserves by alternately labeling their gold reserves as Bullion Reserve, Custodial Gold Bullion Reserve, and Deep Storage Gold, without granting any transparency to the definitions of their gold stores whenever they arbitrarily reclassify them with different names.
“Registered” gold is gold that has been assigned ownership and cannot be sold to another party while “eligible” gold is gold awaiting registration or delivery. In other words, a large portion of “eligible” gold may not be eligible at all. Furthermore, there are many questions regarding the “registered” gold that these depository warehouses hold as to whether multiple claims exist upon this “registered” gold. Many may say that questioning the validity of “registered” gold is non-justified paranoia, but the historical deceit of bankers justifies our skepticism, not our trust, in them. Just as multiple claims exist upon every single dollar, Euro, pound and yen that shows up in your savings or checking deposit bank passbook, I still believe that the gold listed as “registered” gold may have multiple owners as well (When it comes to the money in your bank savings and checking accounts, you may have the only claim on the digital representation of the cash money that exists in your bank savings and checking accounts, but that digital representation, since it has not yet been printed in cash, is an abstract concept that exists only in your mind and not in real life).
Though “registered” gold represents gold that has already been assigned to someone, unless that physical gold is in your hands, this does not preclude the fact that bankers may have assigned this “registered” gold to “multiple” owners no matter what they claim. Remember if one reads the fine print of the prospectuses of the GLD and SLV paper ETFs, it seems very likely that multiple claims exist on the physical gold and silver that back both the GLD and SLV even though the vast majority of buyers of these ETFs believe otherwise.
Last week’s Commitment of Traders report indicated that commercial bullion banks were still net short 21,342,700 troy ounces of gold. Given the definitions of “registered” and “eligible” gold, and the amounts of registered and eligible gold that exist in COMEX depository warehouses, it is obvious that bullion banks short gold with zero intention of ever physically delivering well over 90% of the gold ounces they short, even though market mechanisms require them to have the physical capacity and means to do so. Thus, if China, India or any number of Sovereign Wealth Funds wanted to buy another 1000 tonnes of gold, it would be physically impossible for them to even partially fulfill this desire. The 663.83 metric tonnes of gold that are currently represented by the physical offset of the current net short positions of the commercials that is supposed to be physically sitting in the vaults of depository warehouses contracted out by COMEX simply is not there. Furthermore, what is “eligible” for delivery may not even be eligible, and multiple claims may exist on both “eligible” and “registered” gold that exists in the contracted depository warehouses.
In the end, the announced IMF sale of 191.3 tonnes of their gold reserves, though it caused an immediate sharp knee-jerk reaction in gold futures markets, will have a negligible effect on the long-term price of gold. The IMF stated that “it would stagger the sales in order not to affect the markets too much”. However, since sovereign state buyers of gold can not get anywhere near the tonnage of gold they desire from the futures markets, the reality is that the IMF could probably dump all 191.3 tonnes on the market in one month and it would be instantly absorbed by China, India and Middle Eastern sovereign funds before any other Central Banks that also wants in on the sale could get their hands on any of it.
More than a year ago, I wrote an article describing the beginning of a disconnect between gold futures markets in Asia with those in London and New York, as well as the disconnect between physical gold and silver prices with the spot prices established in the futures markets in London. Eventually, due to the fraudulent nature of the gold and silver futures markets that have nothing to do with the physical supply and demand of the underlying commodities and everything to do with the desire of the US Federal Reserve and the Bank of England to suppress gold and silver prices, I believe that this disconnect will widen until there is an eventual total disconnect between the AM and PM London Price Fixes for gold and silver and the actual prices demanded by bullion dealers for real physical gold and real physical silver. …"
When the funds and hedgies finally wake up and realize that if they just start taking delivery of the physical metal instead of playing in the manipulated paper markets, the price of Gold will at a minimum double and I personally believe it will climb well above $5,000 and silver will at a minimum tripple and I personally believe it should be trading at closer to $300 per ounce based on its very limited supply.
Filed under Uncategorized by on Feb 18th, 2010. Comment.
If you read the previous post and then read this post, it seems clear that global Quantitative Easing is just getting started or perhaps a unified devaluation of the major paper currencies. Eric Degroot writes another concise post:
Long Term U.S. Government Bonds
"Long-term U.S. Government Bonds: "It is our dollar but your problem." But for how much longer? It will become our problem when LTGBTRI breaks the 1981 up trend line. The trend in the bond market has become the canary in the coal mine.
Update
The 1981 LTGBTRI and LTGBCAI long-term trend lines have been broken. The intense secrecy within G-7 as credit markets waffle is no coincidence. Traders will start pushing this one, like shooting fish in a barrel, as recognition increases.
Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):
Long-Term U.S. Government Bonds Capital Appreciation Index (LTGBCAI):
…"
Filed under Uncategorized by on Feb 9th, 2010. Comment.
