What China Is Doing In The Gold Market Will Shock The World

Buy physical bullion, not paper financial assets.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/3/23_What_China_Is_Doing_In_The_Gold_Market_Will_Shock_The_World.html

Keiser Report: No jail for banksters in real world Monopoly

Watch the last 13 minutes of this 26-minute video to get a better feel for gold backwardation, negative GOFO rates, fractional gold reserve banking, a commercial default, and difference between paper gold and physical bullion.


http://www.youtube.com/watch?v=j615aokEA_Y

Going for Gold in a Dangerous World

This guy is brilliant not just for his insight but how he can clearly ascertain and describe in a clear fashion the inherent risks in our interconnected, global financial system.  The risks are currency devaluation, counterparty and custodial risk.  The solution is to get out of paper assets and into physical bullion, spread among multiple jurisdictions.

http://online.barrons.com/article/SB50001424053111903964304577422321621057552.html#

Are JPM's COMEX Silver Positions Only A Hedge Against Physical in the Warehouse?

And now the rebuttal on whether JPMorgan truly has enough physical silver to cover their paper shorts.

http://www.roadtoroota.com/public/1013.cfm

Paper vs. Physical

Commodities prices are getting hammered--including precious metals, because the collapse of the Euro is becoming more apparent, causing the (transient) rise in the USDollar.  Spot prices for gold and silver are plummeting, yet the premiums for physical bullion and coins are widening, suggesting shortages still exist.

One has to ask oneself, why spot prices are dropping, yet supply is still tight, and prices for the physical metals haven't dropped accordingly.  The answer is the paper markets are being manipulated, even in the face of physical shortages.  The margined weak hands are liquidating.  Strong hands are holding and even adding via dollar cost-averaging.

London Trader - China Bought Massive Amount of Gold Today

The bullion banks are manipulating down the price of gold with their paper trading schemes, but this only aids buyers in Asia, as they buy the physical bullion at lower prices.  By scalping short-term profits, the bullion banks are just accelerating the depletion of physical inventory, auguring in an upside explosion in price later on.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/10/21_London_Trader_-_China_Bought_Massive_Amount_of_Gold_Today.html

“The price discount in gold is the most welcome thing to the entire Eastern Hemisphere.  The Chinese are buying very relentlessly because they know what is going to happen.  We had a major, major physical buy order today.  The Chinese bought a massive amount of physical today at the lows.”

“They (the Asians) are aware of how tight physical supply is and they buy in London towards the fix because they know there is an 80% chance the commercials will take it down and they will get a better price.  The Asians sit there and say, ‘Bring it on because we’ve got some orders to fill.’  They just want out of their dollars.

Unbelievably this is part of a continued transfer of wealth from the West to the East.  While our central planners try to figure out how to keep the broken system functioning, the cost to the West is we keep emptying our vaults of gold and shipping it to the vaults in the East.

Andrew Maguire - LBMA Shorts Will be Forced to Take Losses

Read this article on fractional paper gold trading vs. the physical bullion market. 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/6_Andrew_Maguire_-_LBMA_Shorts_Will_be_Forced_to_Take_Losses.html

Western Speculators Sell Gold; Asia and West Buy Bullion - Coin and Bar Supply Increasingly Tight

The title says all you need to know.  The bullion banks are losing control in their price suppression schemes, because the physical buyers are all too happy to buy at lower prices. 

http://news.goldseek.com/GoldSeek/1314363600.php

The Pan Asia Gold Exchange and Hugo Chavez, a curious meeting of minds?

If you can understand this article, you will understand why the prices of physical gold and silver will be much higher going forward.  The author explains the difference between paper claims on unallocated gold and silver, in contrast to physical, deliverable bullion.  When the inevitable shortage on physical inventory materializes, the prices for physical bullion will soar and decouple from the contractual, paper prices.  Many who thought they owned gold and silver will be left holding the proverbial bag.

It's a shell game the bullion banks and central banks are playing--and the suckers are the citizens. 

http://www.cheviot.co.uk/news/2011/08/the-pan-asia-gold-exchange-and-hugo-chavez-a-curious-meeting-of-minds/

Revisiting registered silver in COMEX depositories

There are approximately 32 million ounces of registered silver in COMEX warehouses.  Each futures contract controls 5,000 ounces of silver.  Which means there is enough deliverable silver for 6,400 COMEX contracts.

The open interest was 123,000 contracts as of today.  126,000 contracts traded last Friday.

Normally, most COMEX contracts are settled via cash (rumor is that cash settlement premiums are up to 80% due to the shortage of physical silver).  However, if enough longs stand for physical delivery, the shorts don't have the inventory and the COMEX would have to default.  That can't be good for an exchange.

The supply/demand dynamic is already strained, and the price of physical silver is starting to bifurcate from the manipulated spot price.  A default would send physical prices soaring above the paper prices.

A default on silver or gold has never occurred at a major exchange.  There was a default on nickel at the LME in London in 2006, at which point nickel prices spiked.  The same thing will happen to silver if there is a delivery default at the COMEX.

London Trader - Massive Asian Buying of Physical Gold & Silver

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/16_London_Trader_-_Massive_Asian_Buying_of_Physical_Gold_%26_Silver.html

“What we are seeing this morning is long gold/short silver by hedge funds who are moving on this play once again.  Many of these hedge funds are run by kids who are only out of university for three years now and don’t know what they are doing, they are literally just chasing a dot up and down a screen.  They don’t look at what is happening with inventory levels at the Comex or what’s happening with SLV where real metal is being pulled out of that ETF.

Some are beginning to believe this is a sign of weakness on the part of the bears at this point.  At these prices we are seeing serious buying out of Asia and the buying is consistent.  Whether or not we have seen the bottom as of yet, large physical buyers are now buying the dips aggressively.

The US side on the paper market at the Comex it appears that all of the specs are washed out, and the last time we had open interest at these levels was when silver was $28 or so on its way to $50.  The smart money as I said earlier appears to be dealing with this setback in prices by buying huge amounts of physical metal, continually accumulating it at this point. 

Any time we get into silver into the $33’s we get very, very big, high volume buying.  This buying we are seeing out of Asia is thought to be continued diversification out of dollars, so the physical gold and silver which is being taken out of the market in that case is not expected to return. 

This physical buying is part of an increase in hard asset reserves for China and other Asian countries who are underweight precious metals and it is expected to continue for quite some time, most likely for many years.  Right now, each time we see gold under $1,500 the demand out of Asia is massive, they are huge physical buyers.

Some would say the paper market is diverging from the physical market and that is probably accurate at this time.

China Buying Silver Overnight

I'm glad I bought some silver equities last night and at the open this morning.  The paper futures prices have been plummeting, allowing the Chinese to buy physical bullion at discounted prices.  This will exacerbate the physical shortage, and will backfire on the shorts who are manipulating futures prices down.

http://www.zerohedge.com/article/china-buying-silver-overnight

BlackRock Issues Refutation Of SLV Fraud Allegations; Is It Time To Panic For SLV Holders?

Usually when there is an official denial of something, beware of that something. 

http://www.zerohedge.com/article/blackrock-issues-refutation-slv-fraud-allegations-it-time-panic-slv-holders

In the case of SLV there are multiple safeguards in place.  For one, it’s structured as a grantor trust, which means the trust (on behalf of its shareholders) has the legal right of ownership to the silver it holds.  JPMorgan Chase Bank, N.A., London branch, provides custodial services for storing the silver, but has no legal rights to SLV’s silver holdings.

Umm, Mr. Feldman, we already understand that.  In fact, that is what concerns us "conspiracy theorists" the most.  Has there been an independent audit of JPMorgan's vaults in London?  No?  We didn't think so.

And since when did custodial banks follow the letter of the law?  Ya ever heard of the subprime mortgage crisis?  Or how about Morgan Stanley purchasing (allegedly) physical gold for their clients, charging them a storage fee for years, and when the clients demanded delivery, Morgan Stanley didn't have any gold in their vaults?  <click here>

See disclaimers in the side bar.

Disclosure:  no position in SLV.  In fact, hell no.

A Golden Tipping Point: University of Texas Takes Delivery Of $1 Billion In Physical Gold

In case it didn't dawn upon readers the significance of the University of Texas endowment fund taking delivery of $1 billion of gold bullion, this is the 3rd blog I'm posting on it, since Zero Hedge has a good angle on the tipping point this represents.  Physical gold is now a legitimate asset to hold for institutional investors.  Expect other pension and endowment funds to follow suit, which is of course, bullish for gold.

Again, the Bloomberg article doesn't address the counterparty risk by having the gold stored in HSBC's vault, but the comments from Zero Hedge readers certainly acknowledge the risks.

http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold

Texas University Takes Cue From Kyle Bass to Hold $1 Billion in Gold Bars

http://www.bloomberg.com/news/2011-04-16/texas-university-takes-cue-from-kyle-bass-to-hold-1-billion-in-gold-bars.html

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

I blogged about this last week, but wanted to reiterate that the University of Texas Endowment fund took delivery on $1 billion of physical gold bullion--not an ETF, for reasons I've blogged about many times.  Use the Search function in this blog and enter "GLD" and "SLV" on why it makes sense to avoid those precious metals-based ETF's for gold and silver, respectively.

In a nutshell, those ETF's are good proxies for spot prices of gold and silver UNDER NORMAL MARKET CONDITIONS.  But under distressed conditions, or in the case of a default in the physical markets (i.e. the custodians don't have enough physical inventory to meet their obligations), the physical spot prices will decouple from the ETF prices.  In other words, owning GLD and SLV are merely paper claims to precious metals that may or may not exist in the custodian vaults.  In the case of a shortage, the spot price may soar, while holders of GLD and SLV will be left with owning empty claims.  There's nothing worse than betting in the right direction, and still losing everything.

This is the reason why Kyle Bass advised the University of Texas endowment fund to take physical delivery of their gold bullion, removing counterparty risk.  But there is one detail they did not account for.  Since HSBC is now the custodian for the endowment fund's gold (with serial numbers of gold bars on every certificate), HSBC becomes the counterparty risk, as bullion banks have been rumored and even prosecuted for charging storage fees to clients even though their clients' inventory is no longer in their vaults.  In other words, their clients' gold had been swapped, sold, or leased out--without knowledge and consent from the client!  I'm not suggesting HSBC has been guilty of this in the past, but it has happened.  <click here>

In June of 2007, Morgan Stanley agreed to pay $4.4 million to settle a class-action lawsuit with brokerage clients who bought precious metals and paid storage fees, when in fact it was alleged that Morgan Stanley wasn't physically storing their gold and silver at all. NIA believes we may now have an epidemic of banks selling gold/silver they don't have. If this isn't exposed immediately, it could bring down the world's financial system.

See disclaimers in the side bar.

Disclosure:  long precious metals shares, no position in GLD, no position in SLV.

Spot prices decoupling from mining equities

While physical spot prices for gold and silver continue to surge, some of the mining shares are stagnant, which prompted me to take partial profits in SLW yesterday <click here> .  One possible reason is that the big money hedge funds are long the metals, but short the mining shares as a hedge.  These shorts put a cap on the prices of mining equities.

It may work for a while, but with any arbitrage, if the market wakes up to the reality of higher profits for mining companies going forward, the shorts will be carried out in a body bag.  In other words, this separation between the physical and equities markets is only temporary, and mining equities may not only catch up to the spot markets, but slingshot past the physical markets in the event of a huge short squeeze.

Silver and uranium

See disclaimers in the side bar.

Disclosure:  Sold a little SLW today and bought CCJ to replace it.  Uranium is so beaten up, and unless the world stops using nuclear power, I don't think CCJ is going out of business anytime soon.

Gold and silver spot prices continued to rise today, but the mining equities didn't rise as much proportionately, so perhaps the trade is getting heavy, and the precious metals are due for a breather.  If SLW drops to the 30's, I'm buying the trading shares back, but I did not sell my core position in SLW.

Holders of physical gold and silver made some money today.  I'm still bullish long-term, but looking for a short-term correction, that may or may not occur.  In other words, since I don't have a crystal ball, either way, I'm still in SLW, but I did lighten up today, with an eye toward re-entering at a lower price point.

I tried this tactic when SLW was at $22 last year, looking to get back in if it dipped into the teens (bought original shares in the $2's and $3's), but SLW gapped up and never hit my buy price target.  Do I have regrets, since SLW has soared as high as $47?  Absolutely, but it was still a good trade, from a risk management stand point.  In other words, when you're right, don't get greedy.  I've been burned by greed before.

Having said that, this is now house money (twice), so I can afford to have exert more patience, able to withstand the higher volatility, and wilder price swings.  In other words, I didn't have to sell any SLW today, but I truly believe I can buy back in at a lower price.  We shall see--I've been wrong before, but when I buy right, it masks my selling mistakes.

And if it keeps going up, well, I can't complain, because I am still in.  End of my rambling thoughts.

CME raises precious metals margins requirements--again

http://www.zerohedge.com/article/cme-raises-gold-futures-margins-6-hikes-silver-margins-second-time-under-week

In another desperate attempt to knock down the futures prices of gold and silver, the CME raised the margin requirements on gold and silver futures contracts.

I hope they raise the margin requirements to 100%, so there will be no leverage allowed. Although that would bankrupt the GLD and SLV ETF's, which are not 100% backed by physical inventory.

The more they play the price suppression game, the tighter the noose around their own necks. Buy physical.

Asian buyers have silver shorts checkmated

As described previously, it's a battle between the paper short sellers and the physical buyers. Eventually, physical bullion inventory dissipates, and the shorts will get trampled.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/11/10_KWN_Source_-_Asian_Buyers_Have_Silver_Shorts_Checkmated.html

The Fed is selling paper gold and buying physical gold

And JPMorgan is the Fed's proxy bank.

http://www.financialsense.com/contributors/rob-kirby/the-federal-reserve-is-selling-paper-gold-and-buying-physical-gold

The academic research that outlines the inter-relatedness of gold and interest rates is succinctly laid out in a 2001 treatise, Gibson's Paradox Revisited, by Reg Howe. From this one can deduct that ANY rigging of the gold price must go hand-in-hand with simultaneous rigging of interest rates.

Folks would do well to realize how neatly emerging details of Fed surrogate Morgan’s ‘stealth’ activity in the bullion market dovetails with their obscene, obsequious activity elsewhere in their derivatives book – particularly their JUMBO TRILLIONS sized interest rate swap positions.

Stealth activity on the part of the Fed – utilizing proxy institutions to generate limitless artificial demand for any and all U.S. Government Debt – effectively gives the Fed control of the long end of the interest rate curve [the bond market].

From a timing perspective, it is also noteworthy that gold price rigging – long maintained by GATA – is alleged to have begun in earnest during the Clinton Administration with the appointment of Robert Rubin as U.S. Treasury Secretary [along with understudy Lawrence Summers] in Jan. 1995. Coincidentally [or perhaps not?] we can trace the genesis of the “explosion” in the use of derivatives [mostly interest rate] to that exact same time frame. In fact, if we follow the time line in ‘reverse’ – the growth in the use of derivatives appears like a trail of bread crumbs – right back to the time when Professor Lawrence Summers, under the tutelage of Sir Robert of Rubin, brought his academic alchemy to Washington:

Does anyone with a pulse really believe that ANY Bank Holding Company in the U.S. would be permitted to have a derivatives position in excess of 75 TRILLION [five times the size of U.S. GDP] if they were not ‘in bed’ with the FED????

If you except the premise that, “J.P. Morgan “is” the Fed”, then, “IT’S REALLY THE FED WHO IS BUYING GOLD” and they [unfortunately, this means “America”] likely have NONE LEFT to sell.

NOTHING could be more bullish for the price of gold going forward.

Everyone needs to get it through their heads; these criminals are NOT IN IT for profits. The survival of our “BROKEN FIAT MONEY SYSTEM” “IS” their only goal.
Conclusions:

Officialdom will never admit it and it will NEVER be reported in the mainstream financial news but our financial system has NEVER been in a more precarious state. A banking crisis of unparalleled proportions is coming – probably soon – the exact timing is still sketchy.

Got physical precious metal yet?