The Disconnect Between Supply and Demand in Gold & Silver Markets 130 comments
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There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver. Indian shops are empty of both silver and gold. Even the Indian banks don't have any gold or silver. The big western bullion banks, based in New York and London, control both the gold and silver trade. Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal. Normally, if a banker’s bank knows that its customer-bank has firm orders, it would extend the smaller bank a bigger line of credit. Not now.
By refusing to extend lines of credit, the big bullion banks are essentially rationing a very thin supply. Most physical silver, for example, is being reserved for industrial and fabrication use, and investors are simply not able to get any, without waiting for months. Investor oriented shops are bare, and the U.S. Mint has suspended coin production. All available supply seems to be reserved for industrial users. You cannot substitute paper claims for real silver, in industrial use, because paper doesn’t have the physical properties of silver. So, it seems that all available supply is being diverted to industrial users, and, to a lesser extent, aside from the squeeze on lines of credit, also to jewelry fabricators. But, investors are left out in the cold. They can accept paper claims, or nothing. The most interesting mistake that the manipulators have made is in not supplying the U.S. Mint, which has run out of silver, proving that there is a severe shortage.
Meanwhile, by refusing to extend Indian bank lines of credit, Indian jewelry demand for both gold and silver is being stymied. India is not being allowed to drain away precious metals, in the amounts that are warranted, given the low prices and the numbers of unfilled orders that are sitting on desks in India. World bullion banks, in other words, are managing deliveries of physical gold and silver to artificially reduce the quantities delivered, under the excuse that the “Indians have run down their credit lines.”
The happiest fact of bullion bankers’ lives is that western markets are, with the exception of some fabrication and industrial demand, almost 90% paper based. The huge COMEX futures market almost never sees an ounce of real silver or gold ever change hands. It is all paper, shuffled back and forth. These paper markets are being flooded with paper based "claims" to alleged gold and silver, supposedly being held in big bank vaults in London and New York City. The market is overwhelmed with paper claims, and the big bullion banks (maybe, with the Federal Reserve providing the money?) are paying big bucks to secondary derivatives dealers to get them to lease this artificially created “gold and silver.” In a normal market, one who leases a thing of value must pay for it. But, now, derivatives dealers are being paid to lease both gold and silver. Then again, it may not be a thing of value, if it is fake…
That being said, the paper claims may have a lot of value, whether or not they are fake. Derivatives dealers can write futures contracts, options, etc., according to CFTC rules, because paper "claims" to vault-stored silver and gold can be used as the legally mandated "cover" for futures contracts. To understand the nature of paper claims, we must travel back in time, for a moment, to a class action against Morgan Stanley (MS). According to the complaint, Morgan Stanley claimed that it bought physical silver, on behalf of various clients, and was storing it, in safe-keeping, in its vault in New York. Allegedly, Morgan Stanley defrauded its clients from Feb. 19, 1986, and Jan. 10, 2007. According to the complaint, it never bought any silver, but, all the while, continued to charge clients big fees for storing the imaginary metal. Morgan Stanley is one of the biggest investment banks in the world. It is one of the major players in precious metals. Yet, according to the lawsuit, the paper claims to vaulted silver it issued to clients was nothing more than a lie. One of Morgan Stanley’s defenses, interestingly enough, was that everything it did simply followed “standard industry practices.” For more information, see here.
Apparently, it is standard Wall Street industry practice to send people monthly statements promising that the firm is storing physical precious metals in a vault, charge for the storage, but really never buy or store any real metal. Morgan Stanley eventually settled the case for many millions of dollars in damages, rather than going to trial. That tends to indicate that they were guilty, as charged. I believe, with good reason, as you shall soon see, that most of the paper claims to silver and gold, now floating about, and collapsing prices, are cousins to the Morgan Stanley silver claims.
Logic tells us that the so-called metal must be imaginary, and I will soon tell you why. Yet, for some reason, in spite of class actions like the one described above, no one demands to see it. The majority assumes that banks, like Morgan Stanley, are honest, and would not issue fake paper claims. But, if they did it before, they are probably doing it again. That could be the key to precious metal market manipulation.
If you are a huge bank, with hundreds of billions of dollars worth of short positions, and you know the price is going to explode, you can do one of two things. You can be honest, like most individual and institutional short sellers must be, and cover your short position by buying back at market prices even though you may take losses to do so. Or, you can be dishonest. The majority of banks and hedge funds don’t have the option of being dishonest, even if they want to be.
However, what if you happen to be a primary dealer of the Federal Reserve, or the ECB, or the Bank of England, or all three? If you are, then you happen to have overwhelming knowledge and control of the marketplace, because your divisions are deeply enmeshed in the global financial trading system, and your powerful computers allow you to analyze all markets in a matter of minutes or even seconds. You have an ownership stake in all the big markets like the New York Stock Exchange, Nasdaq, COMEX, NYMEX, and the London Metals Exchange.
Unlike a small or medium sized institutional investor, you are in a position to be dishonest, if you choose to be, and in a position to profit from your dishonesty. Because all orders flow, at one point or another, through your firm or one of a handful of other big wire houses, you will know where the stop-loss triggers of non-affiliated long and short sellers are. With this in hand, you are ready to manipulate any market, especially small commodity markets like gold and silver.
The first thing you need to do is issue large numbers of false paper claims to allegedly stored gold and silver in your vault. This gold and silver really doesn’t exist, but it doesn’t matter because you are a big prestigious bank, and no one questions you when you say it is in your vault. You offer these claims for “lease” to any secondary dealer willing to take you up on it. You don’t want to sell them outright, because then you might eventually be faced with a demand for the real metal, as Morgan Stanley was. You don’t actually have enough real metal to cover these claims, so, you want to make sure that the operation takes place in a limited time frame. That’s why you “lease” the claims for a term of months. If you find that small dealers are afraid to lease such claims, you encourage them by subsidizing the leases with a negative interest rate. In other words, you pay them to accept your alleged gold and silver.
This is exactly what is happening in the precious metals market, right now. Gold and, especially, silver leases are being subsidized. As of a week ago, if you are a dealer, and you lease gold or silver, from the bullion banks, incredibly enough, THEY WILL PAY YOU! At the end of this article, I have attached a chart, showing the current negative lease rates for the various metals. Dealers who lease claims to fake metal, are able to issue futures contracts and other derivatives. The fact that they hold contractual claims to metal means they will have fulfilled the “cover” requirement imposed by their federal regulator, CFTC. The CFTC has never bothered to audit a vault to see if the gold or silver is really there, so you’ve got nothing to worry about. You’re a big bank! You say it is there. Everyone believes you, just like Morgan Stanley’s customers believed them. You might even be Morgan Stanley.
At any rate, you initially issue a lot of claims to fake metal, and so many futures contracts are written, in a very short time period, that they flood the market on exchanges like COMEX and the London Metals Exchange, where almost all the transactions are on paper, and real metal rarely changes hands. Meanwhile, if you are the big bullion bank, you know what you are doing. You issue just enough subsidized precious metal paper to automatically trigger stop-loss orders. The price starts going down as the sell orders are filled. That triggers yet more stop-loss orders, and the process becomes one of dominos, falling one after another, until the price collapses. If the operation is successful, and the collapse is big enough, market confidence is destroyed, on a wide scale.
The destruction of market sentiment won’t last forever. You can’t fool all the people all of the time. But, temporarily, having been burned badly, investors refuse to buy. Buying may still be happening on the real market, as it is, in both America and India, in gold shops. True physical metal will still be in severe shortage, so the metal will disappear quickly, as the price goes down below where true market forces should be bringing it to reach equilibrium between supply and demand. But, real market buyers look to the COMEX and the London Metals Exchange, because they think they are honest exchanges, even though they may not be.
Prices on those exchanges will determine prices charged in shops, and when the price goes down deeply, there isn’t enough product to go around, because everyone buys it. In other words, supply and demand go into disequilibrium, there isn’t enough supply to meet the demand at such low price points, so delays in delivery, as well as outright shortages result. That is what is happening, right now, in the physical gold and silver market. Not only to retail investors, but, also, even to the U.S. Mint, which has suspended production of gold coins, and is rationing silver coins.
At any rate, when market confidence is damaged sufficiently, we can move in. We unwind our new short positions in the futures market, by buying back huge number of long positions at very low prices on the COMEX. We also unwind an exponentially larger number of positions inside the shadow world of "dark pools", which are little known secretive private exchanges, controlled by the big banks. It ended up costing us some money, but not a lot compared to the money we’ve avoided losing. We’ve paid subsidies on the leases, but we’ve never actually had to buy the gold or silver, because there isn’t any available, and none in our vault. This is the way that a group of big bullion banks could induce a price collapse to unwind hundreds of billions of dollars worth of potential losses, or position themselves to go long on hundreds of billions of dollars worth of potential profits.
Contrary to the pundits at CNBC, Bloomberg, etc., the price of gold really has nothing to do with the value of the dollar or the value of oil. It doesn’t matter what the dollar is worth, in relation to euros, pounds sterling or Zimbabwee money. It only matters what supply and demand factors exist for gold. Yes, the demand will fall a bit if the price goes up, for example, in euros, because the euro has depreciated. But, what really counts is not what the euro, yen or dollar price is, but, rather, whether or not there is enough demand to soak up the available supply.
Gold is priced in dollars, but, so long as people holding either dollars, euros, yen, yuan or Zimbabwean money, are willing to pay whatever price gold is selling for, in an honest market, the price should rise. Obviously, enough people are willing to pay for gold and silver, at the previous $978 and $19.50 per troy ounce price, because the U.S. Mint could not source enough metal at those price, and had to suspend coin production.
This proves that people are more than willing to fork over, in whatever currency they are using, the previous prices for gold and silver, in such quantities, that a shortage was already existing, before the price collapse, especially in the silver market. It is true that people in poorer countries like India, might have back on their consumption.
But, while they were cutting back, demand and consumption of gold in North America, including Canada and the USA, was soaring. For example, before it suspended production of bullion coins, due to shortages, the U.S. Mint’s statistics show that it was printing 2.5 times as many gold coins, and almost 4 times as many silver bullion coins, this year, compared to last year. Gold and silver bullion, in bar form, was also flying off North American retail shelves.
Bottom line: Enough people were buying, when the price was high, to exhaust the supply. Basic economics says that, in a free market, this means the price must rise.
But we don’t live in a world of free markets. Instead, we are living in an Orwellian 1984 double-speak world. Welcome to the world of Fed/PPT, where 2+2=5, blue is yellow, and black is white. All things are as they say they are, rather than as they really must be. Welcome to the world of a controlled business media, where the pundits will do anything and say everything to convince you to forget your math, and your eyesight. No, they tell you. It really isn’t so. What you’re seeing isn’t the way it is. Believe, instead, what we tell you. We can do it! We have special skills. There is a new world order. We can make 2+2=5. Just give us your money, and we’ll show you how!
But, let’s return to reality. Right now, virtually no North American precious metals dealer can give you a firm delivery date on large quantities of silver. They have no stock to sell. This means demand is robust. On Friday, as the COMEX gold price was collapsing, the U.S. Mint suspended gold bullion coin production because it cannot source enough gold bullion! That could not happen if bullion banks were selling claims to real physical metal into the marketplace. Indeed, the Mint began rationing silver bullion coins two months ago, when it started having trouble sourcing silver bullion. Word from the Perth Mint in Australia is that it is taking weeks or months to take physical delivery of gold and silver, even though investors are already supposed to own that metal. Supposedly, it is simply being kept in the Mint's vault for safe storage. But, it is getting harder to take it out of “storage”. Meanwhile, as previously stated, Indian gold and silver dealers, wholesalers and banks all have empty vaults. None of this can happen if demand is down, and supply is abundant.
We have a disconnect between reality markets and fantasy markets. The COMEX and London Metals Exchange are fantasy markets controlled by the big bullion banks. They must be engaged in market manipulation, because nothing can explain a big price collapse, in the midst of widespread shortages and robust demand. A group of big financial institutions, deeply enmeshed in the global trading system, and heavily involved in the gold and silver market, must be deliberately inducing temporary panic, for their own purposes. These malevolent characters will eventually be able to buy back their short positions at low prices, and, possibly, also, even collect a significant long position. The process is a continuing one, and hasn’t stopped yet. On Friday, for example, the subsidy for leasing gold and silver was raised to very high levels.
It is obvious what they are doing. More important, however, is why? What does it mean? Well, the PPT bank executives are generally “people in the know” about financial events, before they actually happen, sue to close relations with regulators like the Federal Reserve, and FDIC. They folks are so desperate to cover short positions, that they are willing to spend a billion or so dollars, subsidize precious metal leases, to collapse the market, and destroy investor confidence. But, why? We know that the Federal Reserve, like other central banks, sees gold as a rival to the dollar. But, that’s not enough, because they’ve never attacked precious metals with such ferocity as now, and, if the Fed were directly involved, they could probably supply real metal.
If something terrible is about to happen in the financial world, the losses that big banks would take on their precious metal short positions would put most of them into bankruptcy. Remember the words of Warren Buffett. Derivatives are the financial world’s weapons of mass destruction. Precious metals futures short positions are highly leveraged transactions that could cost hundreds of billions if the price of gold were to suddenly explode.
We can guess that the main players here are big powerful Wall Street and/or High Street investment banks who work closely with the Federal Reserve, the ECB, and the Bank of England. These people are privy to the information needed to carry out a massive manipulation as described above. No one else is. Since most of the collapse happens on the COMEX, we can assume that most of the manipulation is being done by New York based investment banks.
Wall Street’s investment banks control most of the world's gold and silver markets. They are also entrenched in the overall mesh of all financial markets. Making matters worse, because of the 1987 President’s Executive Order on Working Markets, they are authorized to work together, and in conjunction with the U.S. Treasury and the Federal Reserve, to manipulate markets without fear of criminal prosecution. They know exactly where the stop-loss orders are, and how much flooding of paper claims for gold and silver would be needed to trigger them. They are, therefore, perfectly positioned to carry out the nefarious scheme I have outlines. The ultimate aim, of course, would be to destroy investor confidence, by collapsing the price for a few weeks. This would allow them to unload their own exposure at a very low cost, while the majority of market participants are temporarily shell-shocked, and in retreat.
As noted above, they are not using real gold or silver to do this. That implies that this particular attack on gold was not authorized by the Federal Reserve. They’ve never had any real silver and have used paper claims for years to manipulate that market. But, gold has often been supplied out of the U.S. hoards at Fort Knox, West Point, or the NY Fed. I suspect all three have had their gold hoard so heavily loaned and swapped out, that there is little or no physical gold left to play with. That’s why the Federal Reserve has been pushing for the IMF gold sales. The vaults are probably already filled with IOUs from the likes of Goldman Sachs, JP Morgan, etc. Perhaps, that is why the Treasury Department lists total U.S. gold holdings as "gold and gold swaps", and refuses to disclose details how much consists of real gold and how much consists of swap IOUs (loaned out gold). But, anyway, the lack of physical gold probably implies that the Federal Reserve is not involved directly, because they probably still have enough to flood the market for a week or two.
But, it’s not cheap to manipulate markets. It will probably cost over a billion dollars to subsidize the negative lease rates. The only logical reason to spend such a huge amount of money, is if you are going to get an even bigger benefit from doing so. They must be very worried about losing far more. Once again, that implies that some VERY bad economic news is about to be released. Skeptical? How much worse can the economy get? It can get much worse! So, what’s in store? A series of huge bank failures, maybe? IndyMac collapsed two weeks ago. Are we going to see the collapse of Washington Mutual (WM)? National City Bank (NCC)? Someone else?
I don’t know. But, I do know this. The FDIC will not have enough cash to make good on its insurance pledges, if they fail. The FDIC only has $37 billion left in its trust fund, after paying off IndyMac depositors. Between its two major divisions, WaMu has total deposits of about $204 billion. National City has about $101 billion. Could FDIC turn to the Federal Reserve for a quick loan? Not a chance! The Fed has its own problems. It has already polluted its balance sheet with some $450 billion in low value and absolutely worthless mortgage paper that its client banks wanted to get rid of.
Depositors might wait months for their money, while Congress is petitioned to approve the sale of more Treasury bills. This delay would be likely to cause other depositors to make a run on other banks, creating a domino effect. Then, more banks might fail. More bank failures will require yet more dollars, and cause more delays in making depositors whole. At the very least, the sudden issuance of $300 billion new dollars would stimulate massive inflation. Under such circumstances, gold could be expected to explode to the $2 - $3,000 per troy ounce range, within a matter of a few weeks or months.
click to enlarge
Source: Kitco
Update: I just found out that Kitco, one of the biggest precious metals dealers in North America, just posted the following notice:
IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults. (italicized emphasis added)
Sounds like a severe shortage to me, when someone will take your money, and then, even if it takes two years to deliver, and you cancel, they force you to pay a penalty!
Disclosure: Author owns physical gold and holds positions in GLD and SLV.
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This article has 130 comments:
Now, if I can tear myself away from this computer, I have to visit my local Precious Metals shop and relieve them of some of their gold and silver...as I have been doing REGULARLY for some time now!!!!! I invite the posters to do the same!
Thanks, James...you need to continue to put this out in different venues and expose this for the world to see. GATA has done what it can...but it needs others to also get the message out. As for the rest--BUY PHYSICAL...NOW!!!!...a... esp silver... jt
At the risk of suffering the wrath of the conspiracy theorists, a much simpler explanation might be:
The precious metals dealers have so much inventory at costs far above the current prices that their spreads have vanished. So rather than take a loss on their inventory they say there is none in stock. In the meantime, they are still willing to buy at today's prices and will fill new orders with this new inventory as it becomes available.
But what fun is it if there is no conspiracy?
Will anyone who doubts James claims leave a number or website that will allow me to take physical delivery of a futures contract of silver. If need be, I'll go pick it up in the family truckster. I'm still waiting for the silver eagles I paid for.
Maybe someone could explain to me why the US Mint, who manages to get nickels, dimes and quarters to 80,000 bank branches, only supplies silver eagles to 13 dealers. Maybe they don't trust the banks either.
Ya know, if the US had only 13 gas stations, I bet the price of oil would drop a lot. Of course, most of us would then be riding bicycles.
Kudos to you James, for at least trying to explain this bizzaro world. I can only imagine the effort this took.
You say--"The precious metals dealers have so much inventory at costs far above the current prices that their spreads have vanished."
Duh!!!!!...how do YOU know they have "so much inventory" Davyboy??...please give us your sources. And if they actually did, why would it be at such high prices, unless that's where they bought it? And why would they have bought it at those high prices unless someone was buying it from them there??? And if they are actually waiting to sell their present supposedly HUGE inventory, that means they must be waiting for HIGHER PRICES, right Davy?? But why would price go any higher if the present price is a just and reasonable price??
Sheeeesh, Davyboy, didn't your mom or dad or someone ever tell you it's better to keep your mouth shut and let people just assume your ignorant, than open your mouth and prove them right?? jt
Your argument dosn´t convince me.
As far as I know, metal dealers (except small ones, maybe) don´t care about the price. When they buy physical, they lock in the pricen on the futures market. They make money by the spread (when they buy gold or silver from customers or sell it to customers).
Therfore it doesn´t matter for them if the price of gold is 10000 bucks or 1,5.
Now they cannot get metal, either from retail investors or from bullion banks or from other dealers. Around the globe, you can read it. They would love to get it. Their business is buying and selling gold and silver. Now they cannot buy it - and therfefore they can sell any.
A metal dealer that has no metal to sell is no metal dealer like a baker that cannot sell any bread is a ... you get the picture.
You don´t have to believe it, of course. I may be wrong, but I do believe there is a shortage. A severe one. For how long? Good question.
I suppose (and fear) that we hve seen nothing yet. Hopefully I´m wrong.
Greets,
web
1. Those who watch other climbs Mount Everest and have an opinion
2. Those who are actually climbing Mount Everest
If one hasnt tried to buy physical gold at the retail level lately, perhaps more research is in order.
www.rapidtrends.com/bl.../
There are basically 3 levels of bullion dealers: 1) smaller coin shops in little town America/mom & pop op's 2) mid-level dealers with more capital, and better cash flow. Many will be in metropolilitan areas where comptetition is significant 3) National level bullion/coin dealers with substantial capital & a professional staff.
When gold & silver stops were run overnight in the Asian market, many level 1, and a few level 2 bullion dealers holding physical metals, likely are being squeezed by price. Nice time to put up the "go fishing sign" or execute other avoidance strategies in the short term. The strategy most will take is to keep the shop doors open so they can continue to offer a two way market cycle based upon new purchases of bullion from local sources. Meanwhile, their underwater physical positions will be kept in the safe until prices rise back to a profitable level. A final option is to run all deals through a level 3 dealer, assuming there is gold & silver available for physical delivery.
Considering the options at each market level, DavyT is likely to be partially right. Overall, his initial statement is too broad to defend.
Moderate comments from a retired coin/bullion dealer with 30+ years experience. I have no skin to protect in this dialogue. Hoping to lend a more balanced view point.
.
This can explain short term shortages in coin shops, however, it does not explain the disparity between retail demand and COMEX prices...
If you're not publishing somewhere, you should be. Or do you prefer the cloak of anonymity for this discussion?
In short, this whole article is based on a misunderstanding.
I do not doubt for a second that the Big Players will manipulate the markets. I just do not think it's all that easy to figure out when and how they are doing it.
I think, however, that leasing rates do go negative, to stimulate interest and to help greed overcome fear on the part of smaller dealers who need to issue the actual derivatives. The problem is Kitco. I don't trust them. I have read Jon Nadler's commentary for a long time. He might just be a perma-bear. But, on the other hand, he may be working for the big banks that are doing the manipulations. For example, not too long ago, Nadler was saying Kitco had plenty of silver in stock. Now, they've added the "warning" label to their website, indicating that they don't really have any, just like everyone else. I think that their reports on the negative leasing rates are sometimes true, and sometimes not. Also, sometimes they list a positive lease rate one day, and, then, the next day, you find out it was really negative, by looking at the amount it changed.
We need to find a more reliable source of market information of this type, than Kitco.
If you want to see real evidence of manipulation, look at the tick-by-tick numbers in Asia Tuesday morning 8/19/08. There was a 35¢ drop in the ticker for silver on ONE TICK a few minutes before midnight New York time.
FYI, London Metals Exchange doesn't trade precious metals, it is the London Bullion Market Association (www.lbma.org.uk/core_p...) and London Platinum and Palladium Market (www.lppm.org.uk/). Anyone with even basic practical experience in the precious metal markets know this, so leads me to believe you don't.
In respect of your belief in a shortage, in the wholesale market there is no problem getting physical in 400oz gold or 1000oz silver bars. See www.goldmoney.com/en/c... quote:
"GoldMoney has not experienced any shortages of metal because we transact only in large bars, namely, those that meet the standards of the London Bullion Market Association (LBMA)."
The shortage is simply the US Mint stuffing up its forecasting and running out of blanks (which it purchases from outside suppliers). There will naturally be a delay until these suppliers can replenish the US Mint's inventory. Converting a 400oz bars ex-refinery into a 1oz coin is not like turning on a water tap, it takes time to make stuff, in case you didn't realise. If you walk into a car dealer and they don't have your model/colour in stock, do you go around ranting about how it is a conspiricy by Green lobby groups to force everyone to cycle?
A reasonable response would have been to highlight the shortage of fabricated product at a few places, note that it is an interesting development and should be watched to see if it expands but at this time no problem in the wholesale market. But then that wouldn't be enough to scare everyone into buying GLD.
Disclosure: I work at the Perth Mint, but if we make money from selling coins and bars (no shortage here) why wouldn't I be agreeing with you? Because it is all BS and I have some integrity!
If the retail shortage is solely one of fabrication bottlenecks, why has it continued for some 5 months or more? It isn't very hard to melt a 1,000 ounce bar and pour the silver into 100 ounce molds. That has been done for thousands of years. Similarly, it is very easy to pour some into coin round blanks. Even the silversmiths of the King of Lydia did it, and that was 3,000 years ago!
As to the London Metals Exchange, the author appears to be an American, more familiar with U.S. futures markets than London exchanges. It might have been better for him to stick to what he knows. But, the article points out that the manipulation seems to primarily occur on the COMEX. Your objection on semantic grounds doesn't affect the fundamental merits of the article, nor the theory that is proposed. Nor does it take away from the fact that Morgan Stanley was already successfully sued for allegedly lying about vaulted silver.
Seems to me that one article like this could not possibly affect GLD in any significant way. If it has any effect at all, it might be to negatively affect GLD, since they also issue promises to vaulted silver.
To be frank, I suspect that the theory is so strong, and the facts so obvious that this article has shocked the daylights out of the insiders. Are you one of those insiders? Has someone stumbled upon the dark secrets of the precious metals manipulation industry? Have they used simple logic, reason and deductive skills to expose the game?
Clearly User 244350 is the guy who wrote the article (James Conrad, apparently).
Beyond that, it is an interesting theory.
Bron is correct however, in stating that GoldMoney claims they have absolutely no shortage (happened to be at their website earlier today).
While some still discuss about the value of paper created out of nothing, well "imagination", other run out of it into solid, material gold and silver (which have been the most successful strategy for centuries, when a sevire crisis is on the horizon). Of course there will be a decoupling of the values until they will reach a justified ratio - paper:gold. People, get out of the burning paper house NOW, this is YOUR last chance !
P.S.: If you are still tapping around in the omnimedia nebula of bloomberg & co., start researching on yourself. A good starting point may be here: chrismartenson.com/thr...
"bizzare behavior of the markets right before 9-11"?
elaborate please.
What more do you need to know? All that yabbing from another paper junkie!
If people were interested in holding the physical metal, they would and then the price wouldn't be collapsing. A lot of unsubstantiated conjecture here: Manipulation, PPT, Conspiracy, Gold Competing with Dollars, Dealers and U.S. Mint Out of Supply.
Did one person here ever take delivery on a futures contract and not get it?
Where is the proof that the U.S. Mint can't get supply? Maybe they stopped producing because nobody was buying at the high prices...Did you forget disaster of the First Spouse coins when Gainesville bought so many they were practically giving them away?
I might buy at $650 in a couple of weeks. Just in case Mad Max prevails...otherwise there's no point.
Perth Mint clients can turn up any time to check on their Allocated metal, and plenty do. Not really possible to do with Unallocated, because it is backed by working gold inventory and is not segregated. Similar issue with GoldMoney and Bullion Vault, where there is a long list of liabilities to clients backed by 400oz bars. In these cases all that clients can rely on is an auditor adding up all the liabilities and then counting all the gold.
Just like GoldMoney and Bullion Vault, who have regular audits done by outside firms, the Perth Mint is independently audited by a Top 5 accounting firm, on contract to the Auditor General of Western Australia, which you can consider our "regulator". The auditor is right now finalising our June 2008 financial year end accounts. They attend our stocktake, confirm the precious metal assets and liabilities. Do you really think that if there was a shortage that the auditor would issue an unqualified report, expose itself to massive financial claims from our clients, for the lousy $150,000 in audit fees they get?
Anyway, regarding bullion banks, it is important not to confuse conspiricy with manipulation because they can have the same effect on the market/price. Since bullion banks deal with all players, be they central banks, miners, refiners and manufacturers of gold, they know the real underlying physical supply and demand. It doesn't matter what happens with paper, the most powerful force on the price is fundamental physical demand/supply balance and you can be sure that a bullion bank is not going to trade against that trend in the long run.
Alternatively, if you believe that it is a central bank conspiricy with bullion banks so that is why they are trading against the trend, then why did they let it get to $1000 in the first place? In the late 90s when the price was heading to $250, there was similar talk about a conspiricy and how all the "shorts" would be stuffed if the price got above $400 etc etc. If they have all this "paper power" why didn't they use it then to stop the bull run from $250 to $1000 before it got too much steam?
"I suspect that the theory is so strong, and the facts so obvious that this article has shocked the daylights out of the insiders. Are you one of those insiders? Has someone stumbled upon the dark secrets of the precious metals manipulation industry? Have they used simple logic, reason and deductive skills to expose the game?"
I'm not an insider, I just work at the Perth Mint and all we have done for 100 years and continue to do is make coins and bars. All I can do is speak from that experience and excuse me if I take offense at your attacks on my integrity, which is what you do when you attact the Perth Mint. We are a Mint, we need gold and silver work in progress to make stuff, so it makes no sense for us to take someone's money and not buy the gold and silver to back it - we don't need money, we need metal because me make money from fabricating gold coins and bars.
Can I guarantee one way or the other what the bullion banks are really doing, no - their activities are as opaque to me as they are to you. Am I surprised at Morgan Stanley, no, because if your "custodian" has no use for your metal and thus it is just a cost to them to hold it, then there is the risk that they will cut costs by not holding it.
All I can say is that Mr Conrad's interpretation of the facts (mints suspending coin sales, credit tightening on Indian banks etc) are not a "slam dunk" for his case. There are other more boring reasons for those observed facts that people in the industry can see. I do find it somewhat amusing how these facts are contorted into a theory.
When I get some time, I will gather all these facts and provide the alternative explanation for them on my blog. At the moment I am working on gold confiscation, which is sure to raise a whole new batch of rantings, but I will get around to it in due time.
User244350 & James Conrad & others: SLV and GLD both publish bar lists including serial numbers and they are also audited annually by a Big 4 accounting firm. The bars are held in London metal warehouses (subcontractors) that have never had a major loss of silver or gold over the years including 2 world wars. Morgan Stanley did not admit the allegations against it were true. Here is what they said:
Defendants believe that the record demonstrates that they handled their customers’ precious metals accounts properly in all respects and that if the case were not settled, they would be entitled to summary judgment dismissing all claims. Defendants believe that the evidence shows that the documents provided by Defendants to Class members contained no misrepresentations regarding the purchase or storage of precious metals from and through MSDW. At no time did Defendants make any promises to purchase or store metals on an “allocated” basis, unless specifically requested for by the customer, nor to segregate metal on a customer-by-customer basis. Defendants also assert that MSDW purchased actual, physical metals for its retail customers and that no client sustained any economic injury whatsoever. <u>The undisputed evidence shows that all of the precious metals held on behalf of Defendants’ customers are present and accounted for, purchased pursuant to each and every customer order. Defendants also arranged for the storage of metals at secure, credit-worthy depositories. Defendants were also contractually entitled to charge their customers storage fees for the services they facilitated, pursuant to the CDS that customers signed. These fees were not inconsistent with the fees charged by other brokerage firms.</u> Defendants also assert that all members of the Class were beneficial owners of their precious metals and that the metals were not subject to lien by Morgan Stanley or its creditors.
www.gardencitygroup.co...
Obviously not fast enough and at this point it doesn't really matter. Real people have lost faith in fiat currency and the psychological damage done to any $ as a store of wealth hangs in the balance. There is demand for physical silver in 1oz, 10oz and 100oz coins and bars - it can't be delivered with all things being equal. End of story.
Slugbait - so you've called the Mint today and they haven't got any silver? Funny I just checked with them and seems OK.
Bron says that Perth Mint is not having trouble getting adequate supply. But, remember, the U.S. Mint is several orders of magnitude bigger than the Perth Mint. Its coin production many times larger than any other mint in the world. It needs a level of supply that the Perth Mint couldn't even dream of. And, it doesn't have any "unallocated storage" schemes with which it might have metal, it now is using, stored up from long ago, when availability of physical metal was higher.
The U.S. Mint's daily needs, in light of the doubling and quadrupling of its bullion coin production is, apparently, too much silver and gold for the real market to supply. If there is market manipulation going on, I am sure that the manipulators would have wanted to supply the U.S. Mint. Certainly, the public relations fiasco, and the possibility that this type of overt proof of supply/demand manipulation, might cause some state to intensely investigate, and seek jail time for some of them, should have been enough to make sure the Mint was supplied. But, apparently, there isn't enough available gold and silver, in the world, right now, to supply both the U.S. Mint and the Indian weddings demand that is about to happen. This implies a very severe shortage of gold and silver, probably also inside national gold hoards, whose physical supplies of gold, some say, has been largely replaced by IOUs. Could the real level of gold swaps and IOUs been seriously underestimated by guys like James Turk and the boys at GATA?
Anyway, the U.S. Mint wrote back to the Silver Institute, when questioned about their rationing of silver coins, admitting that they cannot source enough silver. They claimed that the reason is that they are forced, by law, to source silver from American mines, only. Numerous commentators have researched the law, and found that the American sourcing rule applies only to gold, not silver. It is an ancient piece of pork for U.S. gold producers, from back when gold prices were in the doghouse. So, the Mint was not telling the complete truth, for its own reasons.
The June letter, from the Mint, stated:
"...By law, the United States Mint's American Eagle silver bullion coins must meet exacting specifications and must be composed of newly mined silver acquired from domestic sources. The United States Mint will continue to make every effort to increase its acquisition of silver bullion blanks that meet these specifications and requirements to address continuing high demand in the silver bullion coin market..."
Let's assume that all the vaults have done their job and nothing shady is going on there. The problem is - Supply is very tight and higher prices don't seem to be shaking out enough physical sales. Much higher precious metals prices might trigger a run on the dollar. What to do?
The sudden drop in gold and silver surely freed up some supply. Why? Because leveraged traders couldn't meet margin calls and got wiped out. I spoked to a silver dealer Monday who was "about to go jump off the roof" because he spent last few days sending margin calls and closing accounts. Tragic indeed, but that bullion was now back on the market (and at a bargain price!). Hopefully, no one here is thinking about leveraging in metals.
American Eagles directly from the US mint are selling for $1119.95 for gold (37% above spot) and $25.95 for silver (95% above spot). C'mon folks, that a huge disconnect, and no, that doesn't include the pretty blue gift box or shipping and handling. I visit the mint site often enough to tell you it's never been anywhere near this big before.
The article ought to prompt some intelligent U.S. attorney's office to start investigating. Certainly, they ought to do audits of vaulted gold/silver that allgedly is backing the paper promises that, in turn, back the derivatives that have been issued. If the metal isn't in the vaults, then a lot of folks need to go to jail.
However, for smart investors, the real bottom line is that now is an excellent time to buy. It is especially excellent if you can achieve a purchase at the so-called "official" prices. But, even if you must pay a small premium, to secure your metals, it is probably worth doing.
"The CHART OF THE DAY shows open interest, or the total number of contracts yet to be closed, liquidated or delivered. This reached 365,611 on Aug. 12, down 26 percent from a four- month high on July 18 and the lowest since Sept. 10. Open interest on the Comex division of the New York Mercantile Exchange reached 593,953 on Jan. 15 -- the highest since at least 1994 -- before gold rallied another 15 percent to a record on March 17."
From: www.bloomberg.com/apps...
The overall number of contracts fell, dramatically. They didn't simply change hands at a lower price. This implies that entities who issued the long positions are actively buying them back. That is interesting, and strongly supports the possibility that the manipulation hypothesis proposed, in this article, is right on the money.
You guys are familiar with fractional reserve banking and history of how banking started with Goldsmith being first banker. Well stored gold at the vault in exchange for paper money, however 99% of people did not withdrew (take delievery of their gold) or even needed to see their gold so he came up with 1-10 leverage and then more and more.
Bet ya that is exacly what is happening with ETF's. If each one of us took delievery of our gold and silver you would found out you hold nothing more the paper that is worthless cause scam bankers stole again form puplic. Watch Corrupt Banking System on youtube or money masters and your jaw will drop.
uk.youtube.com/watch?v...
Sivler in Australia was around $650 a kilo a few weeks ago.
Now it is $515 a kilo......What is going on??? Perth Mint kilo bars are a long time to get. other bullion companies can supply quicker. In Tasmania there is REALLY only one shop in the capital Hobart that deals in kilo bars. They keep a few 5 kilo bars in stock due to the coast of transport.
On Ebay.com.au & other sites kilo bars of silver were going for over $700Aus in the last few weeks. on average there is around 20 1 kilo bars for auction. In the last week or so the price has dropped also.
Just some info for you.....All good reading.
With no real data to back up this claim aside from circumstantial anecdotes, all with alternate explanations, one could rewrite this article to be about copper, nickel, lead, steel, wheat, pork bellies, stocks, bonds, or foreign currencies and it would make exactly the same point.
Critical thinking test #1: If such massive criminal price manipulation was occurring, involving thousands of bank employees "all in cohoots", how long would it take for some of these people to start defecting, buying a bunch of options for personal gain and undercutting the whole enterprise? For example, if I know my bank is going to drive the price of gold down on Sept. 2, I could get very rich quietly buying options on Sept. 1. When I exercised those options on Sept. 2, it would cause the price to drop less than the bank expected, possibly resulting in a loss for the bank. Am I (and ALL my coworkers) supposed to be too loyal to the bank to do that? Not likely. Expanding the scheme beyond a handful of people would be problematic.
Critical thinking text #2: If you honestly believe the whole precious metals market is propped up by fraud, why in the world would you hold or buy precious metals (paper or physical) at these historically high prices? That's like saying in the early 80's: "We know about the Hunt brothers' manipulation scheme, but that's all the more reason to believe silver will go higher!"
Critical thinking test #3: Do you really want to invest in something when your expected rate of return can only be estimated with conspiracy theories about how the local coin shop ran out of inventory and chit chat about the jewelry market in India? A better idea might be to charge these goldbugs for storage, security, transportation, commisions, and insurance for their randomly fluctuating holdings. You'll make money for sure doing that, with none of the risk!
Critical thinking test #4: After half a decade of record high commodities prices and investment in mining that is just now starting to produce, is anyone thinking about how supply will be expanding soon? Is anyone thinking about how demand will be declining due to the economic slowdown? Do unemployed Indians buy jewelry?
Who is bichin? If I want to go out and put cash down on physical silver, not some paper entry, and the closest thing to spot I can get from my local bullion dealer is scrap, I consider this a supply/demand situation.
Mintage of Canadian Silver Maple Leafs has grown from 985k to 3.7 million in 3 years and this does not count '08. The mints can't keep up with demand and considering the majority of physical silver bought in the last 2 years, people are more than willing to buy at higher prices than today's current spot price.
This is not conspiracy theory, this is reality.
Call these guys if you don't believe me
https://jandm.com/defaultsecur...
This article gives a blueprint on how it is done with gold, but the same principles apply to any commodities market. The ideas here are powerful stuff!
I don't see why you would need thousands of bank employees. Probably, 99.99% of all employees, of any banks doing the manipulation, wouldn't have a clue as to what was going on. The vast majority of folks who work in the banks are honest folks. Only the upper level mucky mucks, and less than a handfull of unscrupulous traders need to know.
It would only take only one or two traders, at a financial institution, who have access to a computer terminal. They'd do most of their work every three months or so, to unload losing short positions. If I had a couple million dollars, I could do it myself. It isn't rocket science. Just trading on false pretenses, and having the backdrop of an old venerable bank to cover you.
There are structural defects in the current futures trading system that need to be cured. The matter needs to be investigated. Gold is probably the easiest to investigate. CFTC just needs to start auditing the vaults to make sure that 90% of the derivatives that are issued are actually covered. Then, if they find that they are not, they'll need to prosecute, but, also, immediately look into all the other commodities.
Looks to me like they have empty vaults; I don't see much for sale at any price.
CONSPIRACY!!!!!
#1 I think you are wrong on many levels here. Insider trading is illegal and most people are too afraid/ moral/ underfunded to act. Sensitive market moving info is kept to an absolulte minimum no. of senior people in my experience, with codenames and chinese walls etc. If a big institution were to engage in any market manipulation it could be controlled by a very small group.
#2 Gold and silver prices are not at historically high levels compared to just about any other asset class, especically when adjusted for inflation. Yes, they have gone up 7years in a row, but from a very low base. I don't understand your point here at all, as the current manipulation theory suggests prices are artifically low, not artifically high (propped up) as was the case with the Hunts Bros.
#3 I believe the majority of phyiscal precious metal investors are interested in preserving wealth from currency debasement, reducing counterparty credit risk (banks and brokers) and consider them good value at current levels (based on cost of production, historical ratio's to other assets etc)
#4 Jewellary demand accounts for about 10% of total annual demand. Investment demand is even less (for silver) and it's this growth that is driving the current retail shortages. Mine supply isn't forecast to expand much. Geologists estimate 30-40years below ground reserves for silver, which in any case is a by-product of other metals, and therefore price in-elastic. But the biggest source of demand for silver is industry at approx 70% (this may reduce, but is not showing any signs of abating so far). Any trouble the financial system runs into will lead to surges in investment demand. I believe more and more people will be drawn to gold and silver as they learn about the current monetary / debt system.
d-train - it is only a conspiracy if your Kitco forum posts have also been deleted!
Chris B - Critical thinking test #5 Maybe a large miner has decided to start hedging again? See goldchat.blogspot.com/... for an interesting chart.
However, there may be something that the average security holder, and specifically the holders of the SLV ETF can do to help reduce the amount of short selling. I remember reading (I forget where) that by registering and holding securities in ones own name, they can not be loaned out to the short seller. Brokers do not like to do this, and will charge a fee for doing it, but I think it can be done.
If this is true (and you will have to research and confirm this), then it may be possible to also do this with the SLV ETF. Thus, it may be possible for one to take an amount of silver out of the short seller loan pool so it is not sold again to depress prices. Of course, this would do nothing for the naked short sales, but it at least would be something.
search.ebay.com/search...=
If author were right, it wouldn't be the case. Looks like pump and dump, sorry.
A short position, in the futures market is not the same as "shorting" a stock. Futures "shorts" are the entities who issue "long" contracts. They are "short" because they must pay off on the long if it a delivery demand is made, or when they repurchase the contract when prices fall. If there were no shorts, there would be no longs.
The problem, I think, is that futures contracts are merely on paper. I disagree with the futures dealer, quoted above, who says delivery takes place as much as 1% of the time. Far fewer contracts are ever delivered on. That makes the system ripe for abuse.
This problem is not new. In times of better government, CFTC created a statute that required all contracts to be "covered" by 90% of the object of the contract, whether grain, silver, gold, copper, etc. The statute was designed to solve the problem that this article describes. It still exists. But, it is no longer enforced, if it ever was. There are never any inspections, never any audits...nothing to put teeth into the cover requirement.
There is nothing wrong with being a speculator. Speculators help provide liquidity to markets, and if someone chooses to be one, their participation in the marketplace is supposed to allow miners, etc., to plan production, and so on.
Speculators take the risk that producers, who have bills to pay, can't always afford to take. If we've done our homework, and the supply/demand on the product is honest, we'll make some money. If not, we lose money.
As a speculator, who buys derivatives (but not necessarily long gold/silver futures), I want to see the counter-party required to hold the "cover". Otherwise, the contracts are not honest. Of course, a miner may have its cover in the ground, but that's ok, so long as it is there. A miner shouldn't, for example, be allowed to sell so many contracts that the total exceeds the amount of metal that can reasonably extracted from his mine, within the time period of the contract. A bank should be allowed to write a futures contract unless it has 90% of the object of the contract, in its vault, ready to be shipped, regardless of whether someone actually demands delivery. That's the rule, and it should be enforced.
When someone sells me a contract promising delivery of gold/silver, or any other commodity, I want to be sure they can really deliver, whether I demand delivery or not. Otherwise, it is simply a fraud, and they are going to manipulate as described. The cost will be the huge amount of losses, that they've stuck me with, on a regular basis, if, for some reason, I am not able to anticipate the manipulation, as many people were not able to do, this time.
CFTC is almost encouraging the type of fraudulent activity described here, by failing to inspect vaults.
See what a nice 20% beating will do to a man.
Only currencies created in the last 50 years or so still live to this day, and their time seems to be running out. The US dollar in its unbacked form was created by FDR in 1933 and Richard Nixon then completed what FDR started by making the currency fiat for foreign bankers too. By any historical analysis the dollar is probably on its death bed. Its only a matter of time before the dollar goes the way of doe doe birds and dinosaurs.
Frankly I would be EXTREMELY surprised any of the fiat currencies in use today are still circulating 5-10 years from now. The problem is not the money itself but the transitional form of the human mind. Part primate and part rational being the human mind simply cannot handle having a printing press at its disposal. Silver and gold are simply a crutch that forces governments and bankers to be disciplined in the face of foul temptation. Without the checks and balances precious metals provide to banking... primate urges to steal from others to make your own life easy cannot be denied forever.
This has been a seminal forum on gold and silver-- and serves notice that we, as investors, are not sitting idly by as the market manipulators and the dishonest bankers would have us do. Our financial lives will surely depend on making the best and most informed decisions possible. To that end, there are many of us who are reading, watching, and listening to what all is being said and are preparing for the changes discussed here. Thanks...
Someone asked "If the powers that be wish to manipulate the PMs downward, why didn't they try at $250-300?" I guess the answers can be many. One is that many analysts expected gold to fall as the US neared recession, as demand for commodities/gold would fall. This was obviously not the case and on the contrary they have rallied.
All in all, I sleep at night with the recognition that this may all just be a battle between the long-term investors and short-term traders. Investors often win as their outlook considers the big picture. Of which favors commodities over the coming years - for whatever wild reasons you can come up with.
Till today no one knows EXACTLY what caused the eruption of WW I, or the Great Depression, or the 20 year stock market rally. What many did know however was that it was coming and that it was profitable.
Disclosure: I own Physical Silver, SLV and some Dow Shorts.
www.kitco.com/market/L...
U.S. Suspends Sales of American Eagle Gold Coins, Treasury Says
By Vincent Del Giudice
Aug. 21 (Bloomberg) -- The U.S. Mint suspended sales of its ``American Eagle'' gold coins after soaring commodity prices led collectors and investors to deplete supplies, a Treasury official said.
Treasury spokeswoman Jennifer Zuccarelli confirmed the government notified dealers of the suspension last week.
It is the first time in two decades that the Mint halted sales of the coins, which are made of 22-carat gold from domestic mines. The coins also contain small amounts of alloy for hardening.
Gold prices soared over the past year, with the most active gold futures reaching a record $1,033.90 an ounce on March 17 as the price of crude oil increased and the dollar weakened against the euro and other currencies. Commodity prices have since retreated.
In commodity trading today, gold for immediate delivery advanced $11.72, or 1.4 percent, to $825.40 an ounce as of 12:15 p.m. in London. The metal earlier reached $827.47, the highest since Aug. 14.
American Eagle coins, introduced in 1986, are also available in silver and platinum. The suspension was reported in today's editions of The Wall Street Journal.
To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg....
Last Updated: August 21, 2008 09:14 EDT
"Aug. 21 (Bloomberg) -- The U.S. Mint suspended sales of its ``American Eagle'' gold coins after soaring commodity prices led collectors and investors to deplete supplies, a Treasury official said. "
So when the price goes higher, purchases increase? Seems to defy economic theory doesn't it. If Kroger raised the price of milk to $20/gal, I doubt there would be a run on it. Yet, we saw similar patters with tech stocks, real estate, China stocks, and energy. It's the result of thousands of people "momentum trading" which is alluring because it works for a while, but always ends badly. Throw in the emotional nature of the retail gold investment market and you have a terrifying game of musical chairs, even without market-distorting Russian mobsters or bankers.
This will be "The Day After".
Extrapolated out, that is a total of 37 tons of gold in a 12 month period. Maybe, I am wrong about this, but I remember reading, somewhere, that gold eagle bullion coins represent 8% of total U.S. investment demand for gold. If that's true, and you run the numbers, and assuming that other gold demand has risen along with demand for the eagle, it means that investor demand in the USA, in fiscal year 2008/2009, August to August, is going to be an incredible 462.5 tons!!! Combine it with jewelry demand of about 295 tons, and 50 dental tons, plus another 50 tons of misc., including computers, electronics, etc., it adds up to an incredible U.S. demand of 857.5 tons of physical gold! That's bigger than Indian demand of about 750 tons in 2007!
Let's use some logic here. Assuming recession hits Europe, as they say it will, European demand should grow by several times this U.S. demand, maybe 1,500 tons. The European psyche is imbued with basic fears, arising out of multiple wars, and they are more gold oriented than Americans.
Where will all that gold come from? Even if the U.S. sold its entire gold hoard, a few years worth of this level of gold demand would empty the IMF and the vault at Fort Knox. They only thing that could stem the demand is allowing the price to rise to its natural level, or, at least, a much higher level than it is at now.
If anyone has more accurate numbers on this -- please comment. But, based upon this calculation, gold prices should soar into the stratosphere this fiscal year.
Assuming the theory of manipulation is true, it will be close to impossible for the manipulators to supply this kind of demand. Keep in mind that all this gold eagle demand was happening when the prices were much higher! And, from what I understand, the U.S. Mint never lowered the price! They were selling these coins far above spot!
Since they started rationing silver eagles two months ago, the demand situation with silver must be even tighter.
But, seriously, whether the result of a gold shortage, or some other reason, the numbers speak for themselves. We're talking 63,000 ounces of gold, just for use in ONE TYPE OF GOLD COIN, in the first 2 weeks of August! Because people also buy a lot of bar bullion, gold maple leafs, kruggerands, etc. Gold eagle coin sales running at a rate of 37 tons per year...incredible! If that doesn't tell rational people that demand is very strong, what does? So, why did the price collapse in those same two weeks? That's the question that this article may answer.
Replace "gold & silver" with "shares of pets.com" to see the problem with this argument. Prices drop as soon the supply of buyers' cash dries up or expectations change. This is nothing new. It happens to some degree in every market.
The run on precious metals coins by retail investors overwhelmed the supply quota and they ran out. The run was caused by rapidly rising prices, and the perception that prices would continue to rise because they had done so in the past. Big deal. Next shipment arrives soon.
I'm not calling anybody stupid for buying at the recent peak, and people who bought or held at the peak shouldn't beat themselves up either (or attempt to defend their judgment by claiming they were thwarted by a conspiracy, that's just sad.). There's simply no way to predict when a market with no fundamentals, led by momentum buyers, will turn. If I could have figured that out, I would have made a few million this summer. Yet, I don't consider myself stupid for missing that opportunity. I didn't have enough information to act and I'm not a high-stakes gambler. Oh well. Best wishes, fellow gamblers. Just don't play high stakes and then get mad and point fingers when you lose.
If last month's price was such a bargain that you bought or held, what changed to make that not the case? Why aren't you still happy with that purchase? It was fiat money anyway.
"That tends to indicate that they were guilty, as charged." - no one is charged in a civil lawsuit, and no one is "guilty" or "innocent". You've been watching too much TV. There is a plaintiff, a defendant, and the result is a judgment in favour of one, both, or neither side.
The $1.5M cash settlement Morgan Stanley agreed to was chump change compared to what it would have cost them in legal fees to take the case to court and win. And have no doubt about it, they would have won this case. Every bank and broker charges not just for storing gold and silver, but even for storing cash or bonds. No bond certificate has been printed in decades; they are all in "book entry" form, like the cash in your chequing and savings accounts, for which you also pay monthly fees.
Other than small transitional amounts, banks and brokers don't hold anything in vaults any more. You can still rent a safety deposit box, but that has nothing to do with banking services. Cash, stocks, bonds, and precious metals have all been in book-entry form, or as you might call it, "fake", for many decades, and the system seems to work just fine, thank you.
According to your definitions, any fiat money--currency not backed up by gold--is "fake". The Gold Standard was abolished in 1971. I'm not sure why all the excitement now.
I think your missing the point of the discussion hear. The investing public cannot buy physical silver at spot right now, but people holding silver on margin are surely having it taken away at and being paid spot, if they can't meet the call.
This week, I have contacted four big futures brokers, none will facilitate physical delivery of precious metals. On Tuesday, I emailed the CFTC saying, "How can I buy a silver futures contract and get physical delivery." No reply (not even an auto-responder).
If the "price" of silver goes below $12 per ounce (which it hasn't, yet), I'm willing to cough up $60,000 for 340 lbs. of it (5000 troy). That's how sure I am that it's a bargain. If the Comex can't arrange physical delivery at (or very close to) it's own spot price, than that price is bogus.
Consider this my Jim Sinclair moment:
Any of you naysayers, just tell me how I can get physical delivery of a silver futures contract at spot. If you can't, shut up.
Thanks again for the article, James.
All these regulations were put in place to prevent tampering with gold and silver, a problem that was common before the 20th century and practically eliminated when the certificate system was put in place.
Jimmyboy - COMEX was never a spot price, spot means for immediate delivery. Quotation of the near contract price as "the" gold price is misleading. Also, obession with the behaviour of COMEX trading overstates the impact of that market. The over the counter spot market is much larger volume wise than COMEX but it is not visible. The unfortunate fact is that gold is not a nice transparent market so makes it hard to work out what is going on. See goldchat.blogspot.com/... for the numbers - only 2% of potential investment gold holdings are visible.
It is entirely, but boringly, possible that in the other 98% of the market some big hedge funds or institutions decided they had enough fun with gold and are moving there money into the next "hot" play. When the World Gold Council were first launching their ETFs in UK and then US, a bit marketing point was that it would allow institutional investors & funds to invest in gold because some fund rules don't allow direct investment in physical. There is no doubt that has driven the growth in the ETF holdings, along with retail investors, but those big investors can also pull out, if they haven't do so already. Surely this could be a factor?
We are Australian Bullion Company (NSW) Pty Ltd and not associated in any way with AGR Matthey or Australian Bullion Company In melbourne. AGR Matthey and Australian Bullion Company In Melbourne have closed their offices but the manangement and staff of Australian Bullion Company (NSW) Pty Ltd trading in Sydney would like to assure all our valued customers that we are trading strongly and our doors and phones are open the normal trading hours. We have had the same management and staff for many years – some more than 30 years and we can assure you we will continue to bring you the same level of outstanding service for many years to come.
By law. the U.S. has to produce gold eagle coins from gold sourced in the U.S. only. Likewise by law, the U.S. mint MUST supply all demand in a timely fashion at market price.
Suspending the sale of coins for a protracted period of time is illegal unless the government mint wishes to claim that all U.S. gold resources have been exhausted.
CrossProfit
I think the key point of interest though, is that the US Mint hasn't done anything like this in something like 20 years.
That in itself should tell you something about this market.
www.rapidtrends.com/bl.../
re: www.rapidtrends.com/bl.../
What is your site's name? Is it rapidtrends or Your Financial Future?
Either way, nice site and nice articles...love the Cicero bit.
BTW, YFF sounds better.
CrossProfit
Now some European input, just FYI. All standard 1 oz coins are out of stock except for Krugerrand. Coins with smaller quantity of gold are available but only at relative (relative to before) small numbers. Gold bars are available (Credit Suisse stamped), also in small quantity. I checked yesterday (Friday August 22). Silver I have no idea, I am only interested in gold. Bottomline as far as I see it is that if you are a small investor, 1-10 oz buyer at a time, you can get your phisical delivery, although you have to compromise on the denomination (Kruger instead of Maple for example, or 100 gram bar instead of roughly 3.3 coins), however if you are in the market for a big lump at least through retail channels you are finding it impossible to fill at 1 stop. I am just really curious how some multi-millionaire is going to play this thing, when he wants to diversify out of paper (money, ETF, whatever). Hopefully one day I will be burdened with this problem, hahaha!
Good input here by the way.
THERE ARE A DOZEN OTHER COUNTRIES THAT ARE.
BUY A MAPLE LEAF, KRUGERAND, PANDA, ETC
GOLD IS GOLD, WHO CARES IF IT CAME FROM THE US MINT?
He claims that banks are putting out fake loans of metals yet he provides no evidence at all.
Advice: Don't listen to a word this guy says.
I think what Conrad and others have proven here is that manipulation of the precious metals prices is possible, and really not too difficult. What you are reading here is a playbook for how it might be done. No one has access to the CFTC records to prove ant of it.
Say you had 100 shares of SLV. You could sell them for $1326. 100 oz. sliver bars on ebay are selling for over $1600 (go look). Keep in mind, this is a purchase from a complete stranger, so paying a 20%+ premium to "market" value seems odd, don't you think.
So, if you could buy at spot price, you could flip them immediately on ebay for a 20% profit, which we would all be doing, instead of blogging., if we could buy physical silver close to spot, which we can't.
So here we are.
Nothing about being a precious metals dealer... all he had to do was prove ownership to the vault, instruct them to deliver and drive away.
Bill M
On Aug 21 08:10 PM Owen wrote:
> According to the COEMX rulebook, physical delivery of precious metals
> can only be made to a registered facility. Some of the larger NY
> banks have such a facility. If you have an account with J.P.Morgan
> or Bank of New York Mellon, they'll be happy to arrange for such
> physical delivery. How you would benefit from that I don't know,
> since you wouldn't have access to the metal unless you are a licensed
> jeweler or precious metals dealer.
>
> All these regulations were put in place to prevent tampering with
> gold and silver, a problem that was common before the 20th century
> and practically eliminated when the certificate system was put in
> place.
Nothing about being a precious metals dealer... all he had to do was prove ownership to the vault, instruct them to deliver and drive away.
Bill M
We all also hope we pull through the upcoming depression well, but that aint goin to happen anytime soon. Save your pm coins, use your fiat money wisely, but have a good place to dump it...food, silver and gold is a good starter.
......................... C O M E X .........................
Buy a mini silver contract from COMEX (1000 oz), and TAKE DELIVERY.
Do not wait till December, when most trade is made in silver in COMEX, because there may be none left and COMEX may default.
Buy it now, and take delivery in October and November.
For those of you who wants to make a quick buck, this is the perfect arbitrage play to take advantage of the price differential between the paper and physical silver market.