14 November 2013

Gold Daily and Silver Weekly Charts - 修羅の花 'The Flower of Carnage'

“I recently made fairly detailed presentations to two Asian central banks... I was struck by the fact that one of the central bankers did volunteer to me that most central bankers are aware of the fractional reserve nature of the Western gold banking system, and its vulnerabilities.

He clearly acknowledged their understanding that gold does not back all of the claims to gold that are floating around the world financial system, particularly when it comes to the West. You would probably never get a central banker to acknowledge that publicly, but that is precisely what he said to me off the record.”

Chris Powell, KWN

There was a fairly substantial adjustment of gold bullion from registered to eligible in the HSBC vaults yesterday. It brings the inventory of deliverable gold down to a new record low. I will post something about that later this evening.

Intraday commentary touched on the 21% premium being paid for physical gold bullion in India now, and equates it to a US dollar price of $1,565 just to give you an idea of the divergence between paper and physical in the world today.

Someone sent me a rather insipid piece on gold demand in the FT. The only excuse for it is that the author unquestioningly accepts the data and quotes from the World Gold Council at face value.

The reason for this disillusionment and investor bearishness for gold is slack demand from India.  This is the same India that is willing to pay a 21% premium for any physical gold they can get through the very obtuse and restrictive government controls.  QED, right? 

Since the WGC is jointly responsible for setting up GLD, I can see where they might wish to go out of their way to put a dreary, downcast outlook on their own members' products. 

The action in the gold market since last October has been nothing short of remarkable.  I suspect it was a trading ploy gone badly for the reasons which I have stated before, with semi-official sanctions. 

But it takes a special sort of insular arrogance to keep doubling down on a bad trade, and hope that it finally turns your way.   If these jokers do not wise up fairly quickly, this one could make the London whale look like the Canary Wharf carp.

Have a pleasant evening.