Draining Physical Gold From Funds and Trusts To Supply the Markets of Asia - An Extreme In Speculation

Numbered — God has numbered your reign, and will end it.
Weighed — you are weighed on the scales, and found wanting.
Divided — your power will be divided up and given to others.

Daniel 5:25-28


“QE [quantitative easing] puts beer goggles on investors by creating a line of sight where everything looks good."

Peter Boockvar

It is interesting, but little noted, that during similar price declines, physical gold is removed from the funds and trusts, while silver remains almost untouched.

That is because the 'gold float' of physical gold available to supply the steadily aggressive demand is critically low, whereas silver, while also beaten down by speculators, sees no decline, because there is an adequate supply of physical silver, for now.

Compared to the physical delivery market of Shanghai, the NY Comex looks like a game of Liar's Poker, an exercise in pure speculation, almost like a bucket shop.

The number of 'claims per ounce' in gold has risen once again to 315 claims per ounce offered at these prices.

In the way that the Fed implements it, Quantitative Easing is like beer goggles for financial paper.

A purposely misaligned, an arbitrary valuation and mispricing of risk in any asset class, commodity or currency, can be sustained only by force and fraud. As the fraud becomes weaker and less effective, the force must increase.  Eventually the scheme breaks down, and a more market-based equilibrium will reassert its presence. That is monetary or value theory based on history. 

Gold is moving from West to East, and is unlikely to return anytime soon, and at anything near to these prices.

Our markets will have been weighed, and found wanting.

Strong Growth Recently In Gold and Silver 'Published' Holdings

As you know Nick Laird of goldchartsrus.com tracks and charts quite a few of the more interesting aspects of the precious metals markets.

One thing he does track is the amount of gold and silver held in funds and trusts that publicly disclose the amount of bullion that they are holding.

Nick calls this 'transparent' holdings, which some have rightly contended that they are not all that transparent, because you are taking them at their unaudited word.    Comex, for example, releases its bullion numbers with a strong disclosure as to their accuracy.

And as we have seen in some unfortunate circumstances, even allocated bullion can be subject to multiple, competing claims.

So I am calling this the 'published' holdings.  For that is what they are.

And they have been rising sharply, led initially by gold but with some recent activity by silver.

NAV Premiums of Certain Precious Metal Trusts and Funds

I found it interesting that in yesterday's Comex delivery report, Nova Scotia took delivery of 43 x 5000 ounces contracts, about 215,000 ounces of silver bullion, for their 'house account,' at the price of 14.08.  I include that particular CME report below.

Apparently the Central Gold Trust has proposed a conversion of the Trust into an ETF, rather than accept the acquisition offer from Sprott. You may read that proposal as a PDF document. 

The Sprott Funds are mildly negative in price to their NAV, which is the 'new normal' in this bear market leg in precious metals.

What is not so normal, at least in my recollection, is the deepening negative cash balance which I have estimated for Sprott Silver at a little over $430,000.   And from the low level of cash in its account it looks like Sprott Gold is going to be following them soon, unless provisions are made to raise cash.

As you may recall, the Sprott underwriter Morgan Stanley gets a 4% cut on new offers of units, which has been the usual way in which Sprott has raised funds.  With the premiums close to negative, they cannot execute such an offering without 'diluting' the value of the fund in that offering, which they have pledged in their prospectus that they will not do.

So it appears that selling bullion is the only way to raise the required funds.  I have this from third parties, but Sprott has never said anything otherwise or objected to this interpretation.

Another interesting factor in the Sprott funds is the redeemability feature.  Although it has not happened with silver, there have been a number of redemptions of gold bullion out of the Sprott gold Trust over the past couple of years.  That is a good thing, that the process works, and that one might obtain their physical gold for private safekeeping.

But one might wonder what would happen if there was a 'run on physical gold' as some conjecture might occur, given the divergence in pricing between paper and physical.    According to an informal source, there is no provision in the funds to block, slow down, or attempt to prevent any redemption of the gold or declare force majeure.

The counterbalance for this is, of course, the market.  In order to redeem bullion, one must buy the units in the market at a certain price.  And if someone started buying up the Trust units in size, the price of those units would probably adjust to an increasing positive premium which would mitigate the attractiveness of a mass redemption.  And in the case of a 'run on bullion' I would imagine that holders of units would refuse to sell.  But nibbling at the bullion, as it is on almost all Western gold funds, has occurred.

I include the 'Total Holdings' of the Funds and ETFs for gold below to show the decline in bullion inventory.   And to pre-emptively respond to the misinformation of the bullion banks' gold trolls, who like to claim that this rise and fall in gold inventory is merely a matter of price, I include the same time periods for silver bullion as well.  Nine out of ten investors might notice that silver has had a steep decline in price from its all time highs as well.

One cannot take a single data point alone, and even a cursory examination of the bullion flows globally shows a massive movement of gold bullion from West to East, with some significant declines in the 'free float' of gold in some traditionally strong Western markets, such as London for example.

And the outflows from the Asian markets into strong hands on the mainland and the Western exports to them have been absolutely astonishing.  That the financial media and analysts ignore this, with some even denying it overtly, is shocking I suppose, unless you have been paying close attention to some of their more egregious service to the speculative financial interests for the last fifteen years.

By way of disclosure I own no shares in any of these Funds and ETFs at this time, and receive no money or gratuities from any of the funds which I discuss.  I have owned all of them from time to time. I have owned most of the mining stocks from time to time, except for the more obscure 'juniors.'  I do not prefer one over the other so much as each has its place and use in a portfolio.

As I have indicated recently I am cash heavy for the moment in my short term trading, waiting for the market to provide some additional information to prompt some action.  This is normal now because I am no longer a very active trader.  That is a younger man's game. I prefer to take more intermediate term positions and in size.

My long term holdings remain as they have been.

China Acquired 2000 Tonnes of Gold In 2013, Almost Double World Gold Council Estimates

Dornbusch's Law:   The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.

Dr. Rudi Dornbusch

The lack of intelligent coverage by the media for this sea change in global asset allocations is remarkable.

Koos Jansen has been doing some terrific work in this area.

I have some suspicions about where the gold bullion that is leaving the Western funds and ETFs is going.

Gold is moving steadily from West to East. When the reckoning comes, it may be terrific.

SGE Chairman: 2013 Chinese Gold Demand Was 2000 tonnes

By Koos Jansen

Published: 10-10-2014 18:23

This is the final blow for the ones who still couldn’t comprehend, after all evidence presented, the amount of Chinese non-government gold demand in 2013.   At the LBMA forum in Singapore June 25, 2014, one of the keynote speakers was chairman of the Shanghai Gold Exchange (SGE) Xu Luode. In his speech he made a few very candid statements about Chinese consumer gold demand, that according to Xu reached 2,000 tonnes in 2013. In contrast to the Word Gold Council (WGC) that states Chinese gold demand was 1,066 tonnes in 2013. Xu's speech has now finally been translated and published in the LBMA magazine The Alchemist #75.

Xu's statements once again confirm what I have been writing for months. SGE withdrawals equal Chinese wholesale demand:

import + mine + scrap = total supply = SGE withdrawals = wholesale demand

Let's go through a couple of quotes from Xu:

Data on China’s gold imports has not previously been made available to the public. However, gold has historically been imported through Hong Kong, and Hong Kong is highly transparent, disclosing details such as the number of tonnes of gold imported on a monthly basis. Last year, China imported 1,540 tonnes of gold. Such imports, together with the 430 tonnes of gold we produced ourselves, means that we have, in effect, supplied approximately 2,000 tonnes of gold last year. 

The 2,000 tonnes of gold were consumed by consumers in China. Of course, we all know that the Chinese ‘dama’ [middle-aged women] accounts for a significant proportion in purchasing gold. So last year, our gold exchange’s inventory reduced by nearly 2,200 tonnes, of which 200 tonnes was recycled gold. 

Again, we can read the simplified equation (for 2013):

import (1540t) + mine (428t) + scrap (229t) = SGE withdrawals (2197t)

I recommend that you read the entire article here.

61 Tonnes of Gold Bullion Flow Out of Western ETFs and Exchanges In January 2014

“Gold is a possession and not a promise.”

William Rees-Mogg, The Times 12 Dec 1979

Here is the data for gold bullion outflows from ETFs and Exchanges in January of this year.

As you can see, it is a more general phenomenon than some have implied in their remarks about the Sprott redemptions and its discount to NAV the other day.

And this was in a month of generally rising prices for gold. 

So the trend continues.  There were 942 Tonnes that left the Western repositories in 2013. 

Gold is moving from West to East.  What does it mean?

And what is left is all that prowling paper, empty of value, looking for more wealth to devour.

The bankers' boys say not to worry.  But do not ask to see what remains behind the central banks doors.

Trust, and believe, for the good of the system. Our system, the one that keeps us rich.

If you open your eyes, you'll spoil everything.

Dead bankers and hollowed vaults.

Such goings on.  My, my, my.

NAV Premium of Certain Precious Metal Trust and Funds - 91,680 Ounces of Gold Out of Sprott

The premiums on PHYS and PSLV are back more to 'normal' levels now, although still hardly exuberant.  PSLV is at a slight premium, and PHYS is almost flat.

The deeper discounts on CEF and GTU are still there, but a bit thinner that they have been.

Since the last time I put out this chart, another 91,680 ounces of gold bullion have been redeemed from the Sprott Physical Gold Trust.

I can imagine someone rationalizing this redemption as an arbitrage deal because PHYS is selling at a slight discount to its NAV. However, given the 'friction' of the transaction, and the necessity of storing this amount of gold, it seems like a fairly small amount to be tempting for a mere arbitrage against the NAV discount, given the volumes of gold that are being taken out.

Although it is possible that PHYS has priced its redemption process too cheaply.  And there is no allowing for the desperation of a hedge fund that is willing to scrape for thin returns. This assumes they are not taking delivery to ship the gold to Asia for the premiums for physical paid there. If so, then it is not really arbitrage as I am using the term with regard to the discount to NAV, but the discount of paper to bullion.  And that is a general trend that is hard to miss.  But some do.

But one would think that playing the spread with paper and leverage, and betting that there would be a reversion to norms if the premiums fall to historically low discounts, would be a smoother and more scalable wager for any fund truly interested in paper profits. Here is a link to the distribution of PHYS premiums historically.

But this seems to be viewing a phenomenon in isolation that I think it is more correctly seen as part of a general trend, that one is foolish to ignore.

As I have shown here repeatedly, there is a general scouring of enormous proportions of the physical gold bullion from most if not all of the Western trusts and funds at these prices as set by the Comex, which unfortunately is still a price maker for the physical trade despite its own shrinking physical basis.  That is the inconvenient reality that gold imposes on the financiers:  they cannot print it into existence, except as an apparition of paper, without genuine substance.

And there are none so blind as those whose paychecks depend on their willing ignorance.  It is unfortunate, but a fact of life.

So, let's see where this grand experiment goes. I have not been keeping an eye on the short interest in the PHYS, but I think the greater problem is the price of gold overall, which does not seem to be a market clearing price in terms of the actual commodity.   And as a result, the physical bullion is flowing towards markets paying fairer prices, and finding ownership in stronger hands.

But why argue about it, especially with those whose mindset is clearly fixed in one direction? Let the tide go out, and we will see what allocated and unallocated funds are naked.   And who, at the end of the day, is actually holding what gold, and with what encumbrances, cross claims, and counterparty risks.  

So in summary, some might say that gold is flowing out of Sprott because of its discount to NAV, which I point out is miniscule, and much more adeptly gamed through the usual paper games.

Rather, gold is flowing from financialised markets to cash basis markets, from highly leveraged schemes to the vaults of stronger hands flush with paper of less confident value, and put even more simply, from West to East.

This is what happens when once again we begin to see 'peak paper.'  Yes it certainly has not failed yet, and yes, the official measures may show little devaluation from inflation and mask the enormous leverage and undisclosed counterparty risk that is still in the system, après Crash.

 And to this I say, 'in time.' 

Not everyone is investing with a two month time horizon, as is de rigueur in the City and on the Wall Street these days, and passing around their hot potatoes of dodgy paper from hand to hand as quickly as possible, before the next bell rings.

Gold and Silver ETF Inventory Changes For 2013 - 942 Tonnes of Western Gold Gone

The drain of gold from the Western ETFs and Funds is apparent.  About 942 net tonnes have been removed.  This compares to the 856 tonnes that had been removed as of mid-December.   That is quite a bit of bullion moving out in just a few weeks.

But even more notably, this is in sharp contrast to silver, which has had about 992 net tonnes added.   On a percentage basis silver has had a worse price performance this year compared to gold, so ascribing this to investor preference seems a bit thin. 

This is certainly an interesting phenomenon.  It will be worth remembering I suspect.

There seems to be little question that the gold market is being manipulated by some big players.   And there is certainly quite a bit of precedent for this manipulation.  The bigger questions are the motives, and the course of the endgame, this time.   All manipulations end, eventually. 

As an aside, I would like to address a recurring pet peeve of mine.  The financial spokesmodels will often look at the drawdowns in the GLD inventory and say, 'investors were dumping gold today.'  

Where were they dumping it, into the ocean? 

All this gold, that no one seemingly wants, and yet the New York Fed cannot find enough bullion to return Germany's gold, and for seven years.  What about the gold they hold that no one has yet asked about?

No, the gold has been moving from the custody of GLD as Authorized Participants, aka the usual suspects, redeem bullion from the ETF, and send it elsewhere. 

Where does this all lead?  Follow the yellow brick road, or more appropriately, the river of gold.  Judging from the overall import and export numbers, it is quite the golden river, flowing from west to east. 

It is caught in the tide of history, as are we all. 

These figures are from 12/31/2012 through 12/30/2013 and are courtesy of Nick Laird at Sharelynx.com.

YTD 856 Tonnes of Gold Bullion Leave the Comex and 10 Major Western ETFs and Funds

About 856 tonnes of gold bullion have left the Comex and the ten major western ETFs and funds that I have been tracking in calendar year 2013.

For comparison I include the same chart with the levels shown on 1 Novemember 2013.

I wonder where all this gold bullion is going?   We can see that twelve tonnes were transferred to the Comex, most likely to meet December delivery requirements. 

As for the rest, who can say where it has gone, and when and under conditions it might be coming back.

I wonder how much of that gold was leased out from Western central banks?

Data is from Nick Laird at Sharelynx.com

Gold Bullion ETF and Fund Drains From the Beginning of 2013 - Comex Registered at 69 to 1

"We must always tell what we see.  Above all, and this is more difficult, we must always see what we see."

Charles Péguy

The first chart below shows the amount of gold that has been taken out of the vaults of various funds and ETFs since the beginning of this year.

The number in black is the total number of tonnes that have been removed from their vaults, presumably to be sold off into the market, most likely heading for points East based on the import export data which we have seen.

The number in red is the percent decline in the fund or ETF total inventory this year.

The more I look into this, the more I see the fingerprints of a few Western bullion banks, with their activities centered in New York and London, with some minor involvement from the Swiss.

Physical supplies are a bit thin. That seems to be clear from various analyses of flows of gold from West to East.   Even with the steep price declines in silver, there is absolutely nothing comparable to this happening with the silver ETFs and Funds.

I read a bank analyst opinion today that the declines in gold bullion inventory show 'investor disenchantment' with gold bullion.   That might be more credible if the supplies of bullion held in these funds were not primarily determined by bullion banks, who are also playing the markets for their own books.

I am fascinated at the apparent repeal of the law of supply and demand.

The lack of reform in the financial system is strangling the real economy, and perverting the minds and hearts of weaker willed men and women who destroy their own selves in the service of 'easy money.'

One wonders where the gold will be obtained when this trend reverses. Venezuela seems to be willing to swap its sovereign wealth into the market. Germany and a few other countries are already there.

Weighed and found wanting.

Stand and deliver.

As always, this data is supplied by master data wrangler Nick Laird at Sharelynx.com.

 This comes from a much larger chart of almost every major gold bullion publicly disclosed vault. I carve out those with major holdings and present them individually on the chart above. The master chart provides the 'big picture' and includes vaults with little activity, such as the Central Fund and the Sprott Fund.

Here is the chart in which Nick shows all 'transparently held' gold and silver in these public funds and ETFs as a single total. Compare gold to silver which is shown just below it.

For those who have expressed an interest here is the latest potential 'Owners Per Ounce' for gold bullion that is deliverable at these prices at the Comex. The figure in the first chart above is for total gold in all Comex warehouses, both deliverable and that which is in customer storage at one of their accredited vaults, but is not for sale.

There has been a sizable drain out of the Comex warehouses in general. I wonder why?

I think the reasons that these things are happening are not all that mysterious, but rather are easily understandable once you can see them for yourselves. The problem is getting some people to see what they in fact are seeing.

The Massive Drawdown of Gold From the West Continues - Silver Comparison - the Abyss

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.  

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."

Sir Eddie George, Bank of England, September 1999


“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.”

Eric Hoffer

Here is the change, in tonnes, in the inventory of major exchanges and ETFs for gold and silver since the beginning of the year.  Nick Laird of Sharelynx.com was kind enough to share the data which he has collected with me.  He does a remarkable job in maintaining an enormous amount of data at his site.

As you may recall, both silver and gold have seen price declines since the beginning of the year. As a reminder, silver is down 28.7% and gold is down 21.5%.  I show this in the last chart. So they have both seen comparably stiff price declines this year.

Since the beginning of the year, the major exchanges and ETFs for silver have added about 1,494 tonnes of bullion. 

But what is absolutely remarkable is that since the beginning of the year the Comex and some of the major ETFs have LOST about 856 tonnes of gold bullion.  And I suspect much of that bullion has gone to the non-reporting vaults in Asia and the Mideast. And there is import/export data that corroborates that hypothesis.

Now, some might say that they don't see what this means, that they don't see the significance. Or that the significance is that people like silver but don't like gold, even though both have seen price declines, and even though demand for physical gold in Asia and the Mideast has been explosive this year according to trade records.

I will tell you what the significance is.  The significance is that you are, figuratively speaking, watching water running uphill and out of sight.  And some look at this and say, nothing to see here.

That gold which is disappearing from the reporting grid will not be coming back to these largely western vaults anytime soon.   And it certainly will not be coming back at these prices.  It is going into some fairly strong hands with an eye to the long term.

Silver is still acting like a precious metal, similar to platinum, which added 21 tonnes, and palladium which added about 1.5 tonnes.

Here is what is happening, as shown in the three charts below.  Draw your own conclusions.   But keep in the mind the negative gold forward rates and record leverage in potential paper claims for physical gold that we are seeing and hearing reported.

And this chart does not include the leased gold that is being occasionally disclosed by Western central banks, which seems to be going to satisfy the appetite of Asia.

It seems pretty darn obvious to me that there are some big buyers outside this reporting system that are taking down supply, and at a fairly aggressive rate, especially in the last twelve months. 

You know that I think this exercise was triggered by the revelation that Germany's gold was missing, and a reflexive price manipulation that was intended to dampen demand, but instead set off an avalanche of physical buying.  

Given that genuinely new gold supply is only added slowly from mining, once the West realizes what is happening the turnaround could take on the character of a short squeeze, and perhaps even a panic and market dislocation to the upside.

And if you are one of those who are holding receipts for gold held in this system, you may find that you have been rehypothecated with extreme prejudice, and given a forced cash settlement at another's discretion. When the time comes your assets may be found to have been used as cannon fodder in the currency war.  Thank you for your support.

The German people asked for their national gold back, and were told by the Fed to go sit down in the lobby for seven years and wait for it. Are you kidding me? What is it going to take to wake people up that something has gone seriously wrong in these markets?  

What kind of new fraud or disclosure of fiduciary misbehavior will it take to bring the dawn?  And what will happen when the dawn finally comes?  Do you wish to be standing in a very long line holding a warehouse receipt or brokerage statement?  Good luck with that.

You may be a financier, fearing the abyss and hanging on, obsessively doing what worked in the past.  But here is some news.  You don't have to fall into the abyss,  the abyss is coming for you.   And the longer this nonsense continues, the worse the drawdowns will become, and the more painful the final reckoning will be. 

Weighed, and found wanting.

Stand and deliver.

Tremors and Warnings in the Gold Market

"Here and there an individual or group dares to love, and rises to the majestic heights of moral maturity. So in a real sense this is a great time to be alive. Therefore, I am not yet discouraged about the future.

Granted that the easygoing optimism of yesterday is impossible.

Granted that those who pioneer in the struggle for peace and freedom will still face uncomfortable jail terms, painful threats of death; they will still be battered by the storms of persecution, leading them to the nagging feeling that they can no longer bear such a heavy burden, and the temptation of wanting to retreat to a more quiet and serene life.

Granted that we face a world crisis which leaves us standing so often amid the surging murmur of life's restless sea. But every crisis has both its dangers and its opportunities. It can spell either salvation or doom. In a dark confused world the kingdom of God may yet reign in the hearts of men."

Martin Luther King


"However, I have learned that in times of crisis, the dodos always charge in to make matters worse."

Andrew Greeley

Here are three charts that capture the somewhat uniquely dangerous situation in the gold futures market on the Comex.  It reminds me of watching a child playing with a chemistry set, or a drunk getting behind the wheel of a car.  Disaster is not assured, but the situation cries out for adult supervision and intervention.

The first chart shows all gold in storage at Comex certified private warehouses. The major bullion banks control the vast majority of this storage. Among these are JPM, HSBC, Scotia Mocatta. Storage and delivery services are also provided by Brinks and Manfra, Tordella, and Brookes, a large NYC coin and bar dealer.

The year long decline in open interest on the Comex is a phenomenon worth noting. It is marked on the third chart.   Even as gold bullion purchasing is soaring, gold futures interest in the US is in a secular decline.   But even with this decline, the 'claims' of ownership as represented by futures contracts over ALL gold in the warehouses is a bit high.

Not to say that futures contract owners can have any claim on gold merely held in storage.  But they can try.   I include this because some people consider it to be important.  If the price is allowed to rise high enough, that customer gold might be tempted into the deliverable category and offered for sale.  The key question is 'how high.'

The better metric to watch is the number of claims per registered, or deliverable ounces of bullion on the Comex.  This gives us a current 'temperature reading.'   And that measure remains near all time highs at 52.62 claims per ounce at these prices.   My friend Nick Laird at Sharelynx, who does a wonderful job of charting and data gathering, prefers to call it 'owners per ounce.'   But since a single ounce of gold cannot have 53 owners if the music stops, I prefer to call them 'claims' or virtual ownership.

Every prior deep decline in registered gold bullion during this bull market has marked an intermediate price trend change.   I do not think this time will be different, all other things being equal.

What exacerbates this situation is the absolutely remarkable drawdown in gold bullion from the ETFs around the world, but most heavily in GLD and on the Comex.   We have not seen anything like this in silver, platinum, or palladium.  It is significant.  See The Amazing Disappearing Gold Bullion

As you know, I am persuaded that the request from the Bundesbank for the return of Germany's gold, and the deferral of this by the Fed for seven years, set off a chain of overreactions and market maneuvers that in retrospect will be viewed as foolhardy.

If the price of gold is allowed to rise closer to the $1650 to $1750 trading range by the end of January, preferably the end of December,  I think the Comex might avert what for them could become a potentially disastrous situation.   And they need to get started on this fairly quickly so that the rise is gradual and controllable. The higher it riser this year, the less pressure there will be on physical gold early next year.

If the bullion banks continue to game the system, and scalp profits with other peoples' money,  my forecast is for a market break and dislocation in the gold market that will imperil quite a few smaller trading houses, and greatly impact confidence and global trade.  I would not be surprised to see a halt called to the paper and physical gold trade, a forced cash settlement on futures and derivatives, and a price adjustment higher, perhaps in multiples of triple digits.   Such price jumps can be unsettling well beyond their immediate circles of interest.

And we could see a TBTF bullion bank or two shaken to their foundations.  If the governments overreact in trying to get them out of their own mess again without loss or reform, then I think it is time to keep your heads down and watch for big changes.  I doubt they could be that clumsy, but most politicians know less about money than most economists, and that is pretty bad.  And they are certainly as craven and pliable, so it is possible.

I have a couple of other forecasts about changing politics in the US, which involves major changes in the current two parties.  People forget that the lifeline of the Republicans and the Democrats as they are now is more current than old in terms of human history.  And a major party change with some splintering and interesting alliances is becoming more probable.

Although it is just a forecast, it looks like the die will be cast in December.  If they try the annual price hit in early December, they might set off a series of unfortunate events as the new year unfolds.

So you might consider this a sort of warning to be watchful, just based on the market mechanics.  It does not have to happen.  But it has been hard to overestimate the reckless stupidity of unbridled greed.

Again, the most likely outcome is the infamous muddle through and the kick of the can down the road, with a rising price in gold as part of an intermediate trend change.  But we are now in a period of high risk, and I don't yet see the right steps being taken to avert it.   Some of that rests on the shoulders of the CFTC, and quite a bit on the exchange, the politicians, and the regulators of the banks.  They need to take the keys away from the drunks and reckless children in their own organizations and in the ones that they oversee.

I do not want to join the doomsayers, those who troll for clicks with ever more dire headlines of impending doom.  It almost gets to be like watching the supermarket tabloids.

All of our problems are soluble, and things are no worse now than they have been many times in the past.  Our parents and grandparents faced much worse, and I personally have seen harder times by far.  But it is getting pretty bad on a secular level, mostly from self-inflicted wounds and corruption.

I wanted to state this unequivocally now because I can see another financial crisis brewing, and if it does come it undoubtedly will be followed by a bunch of hand-wavers running around saying that 'no one could have seen it coming.'  Just like the last two or three financial crises.  Maybe this time the powerful will act with caution and good sense.  I have the impulse to hedge that though, and certainly not to count on it. In their self-centered blindness they are becoming mere players and pawns in the great tide of history.

"The long memory is the most radical idea in America. That long memory has been taken away from us. You haven't gotten it in your schools. You're not getting it on your television. You're being leapfrogged from one crisis to the next. Mass media contributed to that by taking the great movements that we've been through and trivializing important events.

No, our people's history is like one long river. It flows down from way over there. And everything that those people did and everything they lived flows down to me, and I can reach down and take out what I need, if I have the courage to go out and ask questions."

Utah Phillips


"You will study the wisdom of the past, for in a wilderness of conflicting counsels, a trail has there been blazed. You will study the life of mankind, for this is the life you must order, and, to order with wisdom, must know. You will study the precepts of justice, for these are the truths that through you shall come to their hour of triumph. Here is the high emprise, the fine endeavor, the splendid possibility of achievement, to which I summon you and bid you welcome."

Benjamin N. Cardozo

The Amazing Disappearing Gold Bullion: Major Precious Metal Inventory Changes in 2013

The difference in the changes between gold and silver inventories is interesting.

I suspect that a great deal of the gold that has been lost this year has been repurposed to private ownership in China, the Mideast, and India among other places.

Although I do not show them here, Palladium and Platinum look much more like silver than gold.

Most of the conventional, off the cuff explanations do not seem to hold together under serious scrutiny.  Yes, silver is 'poor man's gold,' but Platinum certainly isn't.  And an aversion to paper gold, but not to paper silver? 

Gold seems to be somewhat different, even unique, with a large amount of physical inventory leaving the West.

Overall about 811 tonnes of gold have been withdrawn from inventory, while 1,434 tonnes of silver, 21 tonnes of platinum and 1.5 tonnes of palladium were added to these same types of ETFs and funds during 2013.

A remarkable short squeeze on gold bullion supply might occur if the price of gold breaks out, stimulating more investment in these 'paper gold' instruments.

The data for these charts came from Nick Laird at ShareLynx.com.