CME Group – Precious Metals Physical Delivery Process

https://www.cmegroup.com/trading/metals/files/precious-metals-delivery-process.pdf

Why the World’s Billionaire Investors Buy Precious Metals

http://www.visualcapitalist.com/billionaire-investors-precious-metals/

Citigroup Just Cornered The "Precious Metals" Derivatives Market

To provide some contextual color, the Hunt brothers were prosecuted for trying to corner the silver market in 1980.  They achieved approximately a 10% long position in silver, trying to profit on rising silver prices.  A closer inspection reveals the government regulators changed the goal posts on the Hunt brothers, turning them from mere speculators to criminals.

Fast forward to today, and JPMorgan has carved out a 90% position in the COMEX gold exchange, while Citigroup has a 70% position in COMEX silver.  It is egregious that the Hunt's were busted for taking a 10% position, while JPMorgan and Citigroup are left unchecked, free to take massive, concentrated (short) positions.

Yes, the bullion banks will claim they are market makers providing liquidity by taking both sides of a trade, but they have been incessantly investigated for manipulating markets by taking outsized, concentrated positions in LIBOR, fixed-income, and commodities markets.  They used this exact same argument prior to the cratering of subprime mortage-backed securities.

In other words, they are not only Wall Street casinos, they are also placing their own huge one-way bets--and getting in trouble when those bets go sour.  These bets aren't hedges--they are wagers placed from their proprietary trading desks.  It is not a stretch to deduce they are up to the same shenanigans in the much smaller precious metals complex.

http://www.zerohedge.com/news/2015-07-04/why-did-citigroups-precious-metals-derivative-exposure-just-soar-1260?page=1

What Do They Know? CME Implements Gold, Precious Metals Circuit Breakers Up To $400 Wide

The CME knows something you don't.  They are expanding the price range for circuit breakers to be triggered, in the event of "illiquidity" and trading halts.  Basically, it means when there is panic selling or panic buying, and trading is so furious that markets are broken, that the exchange systems break down, and trading is halted.

Expect huge price swings for gold and silver going forward.  We don't know when, but we do know the authorities know it WILL happen.

You've been forewarned.

http://www.zerohedge.com/news/2014-12-11/what-do-they-know-cme-implements-gold-precious-metals-circuit-breakers-400-wide

Precious Metals Manipulation Worse Than Libor Scandal, German Regulator Says

http://www.zerohedge.com/news/2014-01-16/precious-metals-manipulation-worse-libor-german-regulator-says

People Are In Danger Of Suffering Catastrophic Losses

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/5/18_People_Are_In_Danger_Of_Suffering_Catastrophic_Losses.html

Precious Metals in 2014

http://www.goldmoney.com/research/research-archive/precious-metals-in-2014

60-Year Market Veteran Says US Is Bankrupt & Will Collapse

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/8_60-Year_Market_Veteran_Says_US_Is_Bankrupt_%26_Will_Collapse.html

Why Deflation Is Good for Precious Metals

http://seekingalpha.com/article/183323-why-deflation-is-good-for-precious-metals

JPMorgan Closes Precious Metals Sell Recommendation, Goes "Tactically Overweight" Commodities

LOL--nah, no one saw this coming, right?

http://www.zerohedge.com/news/2013-09-08/jpmorgan-closes-precious-metals-sell-recommendation-goes-tactically-overweight-commo

Have precious metals bottomed?

This article is compelling in declaring the bottom in precious metals is in, but he doesn't really understand how the GLD ETF works.

Shareholders of GLD can redeem their shares for physical delivery of gold if they hold more than 100,000 shares.  So when big hedge managers like John Paulson, George Soros, and Daniel Loeb are selling GLD, they are most likely receiving physical gold in exchange--and not necessarily cash.  This would only exacerbate the current shortage of physical bullion.

The analysts and medias misconstrue this as hedge funds "selling" gold.  Yes, they are indeed selling gold, but it is paper gold.  Meanwhile, they are hoarding physical gold, intensifying the shortages globally.

http://sprottgroup.com/thoughts/articles/have-precious-metals-bottomed/

Why Blythe Masters is Telling the Truth About Precious Metals Manipulation

JPMorgan was again recently busted for price manipulation, this time in the energy markets, which means commodities head Blythe Masters lied under oath again.  The pay off to make this latest transgression go away was $500 million.

This is a re-post of Ms. Masters declaring JPMorgan doesn't make directional bets, and that they merely "make markets" for clients and provide "liquidity."  A few weeks later, JPMorgan fessed up to the London Whale trader booking $6 billion in losses before they were able to unwind the trade.

Masters and her boss Jamie continue to lie through their teeth, all the while enjoying their reputation as the biggest and most stable of banks.   Of course, no one mentions their $76 trillion in notional value derivatives exposure.


http://www.silverdoctors.com/why-blythe-masters-is-telling-the-truth-about-precious-metals-manipulation/

Moscow exchange launches first precious metals trading

http://rt.com/business/moscow-exchange-trading-metals-326/

Bitcoin: Is it a Legitimate Currency?

I've known about Bitcoin for a couple years, and in hindsight, I should have acted on it and bought a few.  The recent price surge early in 2013 from a few dollars to its peak to $260, and subsequent crash to its current level of $100 is prima facie evidence that Bitcoin is a legitimate currency, traded in a market exchange.

In previous eras, items as diverse as seashells and tally sticks (animal bones and wood) have been used as currencies, as well as gold and silver for the past 6000 years.  It is well established that during World War II, cigarettes and whiskey bottles were used as currencies.  Enterprising soldiers in Iraq and Afghanistan knew the value of cigarettes amongst the troops.  Cigarettes have been currencies in prison systems for decades.  Where cigarettes are banned in prisons, postage stamps have been the currency of choice.  Certificates and paper currencies have enjoyed monopolies by government decree, but they've certainly had competitors along the way, including black market exchanges.

One Bitcoin aficionado reminded me that toilet paper was a valuable asset during the Serbian-Croatian war.  So to suggest that Bitcoin is not a legitimate currency is naive and wrong-headed, mainly because it has already been in use for three years running, but also because many other seemingly odd items have been used throughout monetary history.

Hard assets bugs may cringe at the thought of Bitcoin as a currency competitor to global paper currencies, but they also miss the point that Bitcoin is supplementary to precious metals, even if it is not a direct competitor to gold and silver as currencies.  Whether it has also contributed to the recent plunge in gold and silver prices is debatable, but its standing as a legitimate alternative currency isn't.

From that perspective, Bitcoin is a DIRECT competitor to gold and silver--at least in this nascent stage of its existence.  Before gold bugs throw tomatoes, I emphasize this observation realizing that gold and silver have NO competition as sustainable and durable MONEY in the long run.  The existential debate of money vs. fiat currency is of wider scope, and can be searched throughout other blog entries.

When currencies collapse, the issuing empire collapses.  That is not debatable, as history shows a 100% correlation for those inevitable outcomes.

My Bitcoin enthusiasm was fueled by my attendance at informal Bitcoin meetups in San Francisco and Sunnyvale since 2012.  What raised my antenna was the presence of representatives from Paypal and VISA at one of the meetups last spring.  That's when I knew these multi-billion dollar financial behemoths had an eye to the future, a world of minuscule transaction costs competing against the industry-standard 3% spread.

In the mean time, gold and silver prices remain undervalued, because there are competing, fiat currencies which the masses still have confidence in, despite their pervasive and persistent devaluations.  Holders of said currencies will eventually discover the ravages of a currency collapse in a "When Money Dies" scenario <click here>.

Trust is being slowly eroded in those fiat currencies, and while some currency dissidents will naturally migrate to gold and silver, a growing minority are choosing Bitcoin and other virtual currencies out of necessity (they have low savings) or by choice (they typically are also anarcho capitalists).  Anarcho capitalists are technologically savvy, libertarians, and prefer the pseudo-anonymity of virtual currencies.  They respect the sovereignty of the individual in a non-aggressive fashion.

The outcome of Bitcoin appears binary:  Bitcoin and other virtual currencies will become wildly successful, as they gain traction and become more mainstream.  Or they will collapse, due to a variety of variables, including security breaches and predatory cannibalism.  I'm betting on the former, as virtual currencies are competitive and cooperative simultaneously.  For instance, Ripple may be a competing currency, but it also legitimizes the virtual currency infrastructure--a validation of Bitcoin.  Dilution and unfettered proliferation are the major concerns there, but the growth of participants will outstrip the growth of currency units.

One pro-Bitcoin talking point superimposes its current adoption trajectory to the early stages of the internet, when a dial-up connection was the only choice.  Another anecdotal observation is Bitcoin infrastructure courses are now offered at Stanford University, the world's preeminent educational institution for technology entrepreneurship.  Google Ventures and Andreesen Horowitz invested in the aforementioned OpenCoin's Ripple.  Peter Thiel led a round of financing for TransferWise.  The list of venture capitalists funding virtual currency ventures is a Who's Who of silicon valley tech titans.

Bitcoin's decentralized infrastructure doesn't immunize it from government shutdown, but it at least provides some protection.  Similarly, the demise of Napster did not precede the end of file-sharing.  To the contrary, it ushered in the subsequent proliferation of BitTorrent, due to its decentralization.  Both have peer-to-peer protocols which provide collateral "forking" should some branches get shut down or become polluted.

With Prism NSA surveillance exposed, there is no doubt that Bitcoin's pseudo-anonymity is being monitored by the government.  The Department of Homeland Security seized Mt. Gox’s Dwolla account.  Mt. Gox users can no longer use the popular Dwolla as a funding option.  A drug dealer was recently raided by law enforcement via the Silk Road marketplace.  The benevolence of the Bitcoin community assisted in bringing justice to dirty money, instead of sheltering the perps.  Integrity and peer pressure enhance the Bitcoin marketplace.

The biggest concern for the viability of Bitcoin is the preservation of Bitcoin's cryptography, the protection of a Bitcoin user's wallet.  A black hat intruding the security of cryptographic constructions would crash Bitcoin with lethal force, inflicting more damage than any government agency could.  Having said that, its 256-bit encryption is virtually impossible to crack.  Again, the operative word is "virtually".  The one constant is the security arms race will continue to escalate exponentially.  Having said that, the computing power needed to hack Bitcoin's encryption is mind-boggling in today's world.

But then again, this tech icon made this prediction:

"No one will need more than 637 kb of memory for a personal computer—640K ought to be enough for anybody," Bill Gates, Microsoft, 1981.

Bitcoin coders are some of the sharpest in the world, and will do everything in their power to protect the sanctity of its encryption.  The element of trust needs to be in place, much like trust is inherent in fiat currencies.  Hopefully, that trust isn't violated with Bitcoin, as it has with our financial overlords via currency debasement and re-hypothecated theft.  And that Bitcoin advocates aren't re-introduced to the phrase "counterparty risk."

To this gold bug, I do not dismiss Bitcoin's role in competitive currencies.  But long-term, Exter's pyramid <click here> still rings true on gold's store-of-value function.  Precious metals will remain the fundamental foundation of sound money.

Will that prevent Bitcoin--or other virtual currencies, from gaining acceptance?  Absolutely not.  It's legitimate.  It's growing in stature and influence.  It's backed by some of the brightest coders and forward-thinking corporations.  It's decentralized.  It's global--beyond national borders.  It usurps government oppression.  It's fungible.  It's adaptable. It's community-based.  It carries low transaction fees.  And the 21 million unit cap preserves scarcity.  That's enough incentive to buy a few--just in case.

Perhaps libertarian gold bug Ron Paul summed it up best in this interview:

http://www.zerohedge.com/news/2013-04-23/ron-paul-bitcoin-if-i-cant-put-it-my-pocket-i-have-reservations

"To tell you the truth, it's little bit too complicated. If I can't put it in my pocket, I have some reservations about that. But it has been designed in the free market. If it is a means of exchange, it would not ever be illegal. You shouldn't regulate it in the free market, but I do not think it fits the definition of money, which has been around for 6000 years.

People want to see something they can know what it is, they can define it, touch it and put in their pocket. If you do not have a computer and someone running the computer and calculations, you don't have it. I am not a big supporter of that, but I am not opposed to it. I admit, I do not fully understand what is going on with it."

Jay Taylor: In Precious Metals, Cash Flow Is King

I've seen Jay Taylor give presentations at conferences.  He is data-driven, and knows what he speaks of.

http://www.theaureport.com/pub/na/15376

France Bans Mailing of Precious Metals

It looks like France just passed a law banning shipment of precious metals through the mail.  It's unconfirmed, but I read they had previously banned purchasing of precious metals via cash payment.  This is essentially the banning of an asset and capital control.  Expect this to spread across Europe--and God forbid, into the United States.

http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000027436428&dateTexte=&oldAction=rechJO&categorieLien=id

Excerpt from Google translation:

"Art. D. 1.-The insertion of banknotes, coins and precious metals is prohibited in mailings, including the insured items, registered items and items subject to formalities certifying deposition and distribution. "

Article D. 2 is replaced by the following:"Art. D. 2.-Jewelry III defined in Article 1 of Decree No. 2000-376 of 28 April 2000 as amended relating to the protection of transport funds can only be carried by insured item by registered mail or by sending subject to formalities certifying deposition and distribution.
Under the provision of the universal postal service as defined in Article R. 1 jewelry can only be transported by sending by registered or insured parcel.

The amount of insured items within the range of universal postal service must meet the threshold set by the order referred to in Article R. 1.The value of the objects inserted in a registered letter or a consignment covered formalities certifying deposition and distribution must not exceed the level of security chosen by the sender when posting the item."

Despite soaring demand for physical precious metals, supply is constrained

The world will run out of physical gold and silver.  Here's some evidence, some coming from obscure news sources, as the mainstream media is not covering these events.

Barrick, the world's biggest gold miner, has their biggest mine being shut down in Chile.
http://www.trefis.com/stock/abx/articles/189839/barrick-golds-crucial-mega-mine-may-be-delayed-at-least-by-one-year/2013-06-04

Freeport McMoran operates the Grasberg mine in Indonesia, which has the world's largest gold reserves.  It is also shut down for up to a year.  Notice how the article focuses on copper--and not gold.
http://www.bloomberg.com/news/2013-06-04/copper-rises-on-supply-concern-as-second-biggest-mine-stays-shut.html

And finally Rio Tinto's Bingham Canyon mine is America's largest silver supplier, as well as a significant miner of gold, is also shut down.  Again, they mention copper, but not a peep about silver.
http://www.reuters.com/article/2013/04/12/rio-utah-slide-idUSL2N0CZ1EO20130412

I've blogged about soaring demand for physical gold and silver.  It's being reported in the major financial media outlets now.  Now I'm blogging about dwindling supply.  Usually, when a price of a commodity rises, like gold has risen from $250 to $1400 in the last decade, more supply is brought into the marketplace, as producers with a profit motive capitalize on higher prices.  Then, as supply increases, prices taper off.  It's one of the universal laws of supply and demand balancing themselves out.

THAT HAS NOT HAPPENED with gold!  Production has flat-lined, on averaging rising 1% a year, despite soaring demand from central banks, sovereign wealth funds, jewelry, investors, and in the case of silver, industrial demand also.  Instead of prices rising in the last two years, prices have declined.  This price manipulation/suppression will not last, because economic laws will eventually win out, much like gravity dictates how fast a Newtonian apple falls to earth.  It can be temporarily propped up, but remove the props and the apple resumes its acceleration.

The stresses in the physical market are showing up in the vaults of JPMorgan, the COMEX, and the US Treasury.  Readers need to educate themselves on the difference between COMEX "registered" and "eligible" inventory.

Quickly, registered is inventory set aside for physical delivery of COMEX bars to longs (owners of futures contracts).  Eligible is client inventory kept inside the vaults--they are essentially "untouchable".  However, if you look at the chart in the article below, JPMorgan was shuffling eligible inventory toward the registered category just to meet delivery demands (typically, only 1% of longs demand delivery--the other 99% are dumb and happy to receive cash settlement--or roll over their contracts to future months).  This is a form of re-hypothecation--or multiple pledging of the same inventory.  It's theft (Google Jon Corzine and how he robbed clients before MF Global collapsed).

JPMorgan, a custodian bullion bank, is running low on physical inventory.  By extension, the COMEX is also running low on inventory of physical precious metals, and could potentially default when longs demand delivery in the future.  This could happen soon at current depletion rates. But given these bullion banks are clever and will find ways to shake the trees to scare more longs out of their positions (using the GLD and SLV ETF's as another set of naked shorting tools), I believe the end of year rush to buy metals will cause the default--the so-called "force majeure" declaration.  They'll simply run out, throw up their hands, and say we couldn't help it--it was an act of God, much like a weather disaster.

And when that happens, if you're a long looking to take physical delivery, good luck on suing them with your legal claims.  This chilling disclaimer was inserted yesterday in the COMEX daily report:

“The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness.  This report is produced for information purposes only.”

That looks rather benign, but could you imagine if your bank inserted a similar footnote in your monthly statements, and declared:

"The information in your account statement is taken from sources believed to be reliable; however, Bank of (fill in the blank) disclaims all liability whatsoever with regard to its accuracy or completeness.  This statement is produced for information purposes only."

If you received that statement, you would run to the bank and withdraw all your funds yesterday.

This is the smoking gun.  It is an open declaration that their inventory reports are suspect, and the assets clients think they legally own will be settled in whatever means the COMEX wishes to settle it.  In lieu of physical delivery of bars, longs will receive cash instead.  The COMEX is preparing for the run on physical gold and silver from which they won't be able to deliver, and this disclaimer preempts any lawsuits due to non-delivery.

http://www.zerohedge.com/news/2013-06-04/jpm-comex-gold-slides-new-all-time-low

 

My conclusion:  GET PHYSICAL GOLD AND SILVER.  Do not mess with ETF's, futures contracts, certificates, etc.  More importantly, the existing and intensifying shortage is strongly bullish for gold and silver's fundamentals.  Ignore the daily gyrations and fluctuations--it's all noise.  Just accumulate, and BTFD when the opportunities arise.

This is not an investment.  Physical gold and silver do not pay dividends--there is no return on investment.  In fact, it costs money to store and secure them.  But treat precious metals as part of your savings--outside the increasingly corrupt and fragile banking system.  The window is closing.

Interview of Chris Powell (GATA) About Precious Metals Market Manipulation

https://www.goldbroker.com/news/interview-chris-powell-gata-about-precious-metals-market-manipulation-257.html

AN ACT CONCERNING PRECIOUS METALS OR STONES DEALERS

The window of opportunity to exit the financial system is closing.  This should raise a red flag for those fearing capital controls.  Cuba here we come.

http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=928&which_year=2013&SUBMIT1.x=-643&SUBMIT1.y=0&SUBMIT1=Normal

AN ACT CONCERNING PRECIOUS METALS OR STONES DEALERS.

To require precious metals or stones dealers to provide a periodic statement of transactions in an electronic format to the local licensing authority and retain any goods purchased for at least ten days, and to make the requirements applicable to precious metals or stones dealers similar to those applicable to secondhand dealers.

Introduced by: Public Safety and Security Committee

I guess lawmakers infer ownership of precious metals is a threat to public safety and security.

You have been warned by me many times.

QBAMCO On Precious Metals And The Coming 'Great Reset'

http://www.zerohedge.com/news/2013-04-29/qbamco-precious-metals-and-coming-great-reset