Wave of Selling Activity at the London PM Gold Fix Still Occurring

Nice to see that 'the London fix' has been 'fixed.'

Not!

The problem was never just in London, and not just with their 'fix.'

The major source of the problem is much greater, and a the dark heart of it in the bucket shop markets about 3,460 miles to London's west.

This chart is from Nick Laird and his chart and data repository at sharelynx.com.

 

NAV of Certain Precious Metal Trusts and Funds - Sprott Bid For Canadian Metals Trusts

Bloomberg reports that Sprott may be planning an 'unsolicited bid' for the acquisition of the Central Gold Trust and the Silver Bullion Trust.  The planned acquisition would cut the 'trading gap' or NAV discount of the Gold Trust.

 

The market has already cut the recent discount to NAV roughly in half this morning with a rally in the price of GTU.  Markets tend towards the arc of price discovery, if sometimes more slowly, even in a climate of persistent manipulation.   And once begun, those adjustments have sometimes then come suddenly, which 'no one could have foreseen,' as we saw in the most recent financial crisis of 2007.

"Sprott Asset Management LP is planning to make an unsolicited offer to acquire Central GoldTrust and Silver Bullion Trust valued at $800 million, a person with knowledge of the matter said.

An offer at that level would reflect a 3.5 percent discount to the combined market value of the trusts at the close Wednesday of about $829 million. The proposal could come as early as Thursday, said the person, who asked not to be identified because the information is private.

The trusts, which buy and hold substantially all of their assets in respective metals in bullion and certificates, have been under pressure from investor Polar Securities Inc., the Toronto-based hedge fund. Polar has been urging the trusts to change how unitholders can redeem their investment as a means of closing their trading gaps.

Sprott aims to use its broader marketing platform and investor relations expertise to close the historic trading gap on both targets between their unit price and their net asset value, said the person familiar with the situation. Sprott projects it will add about $3.14 per unit in value to Central GoldTrust and 95 cents a unit to Silver Bullion by closing that gap, the person said.

J.C. Stefan Spicer, president and chief executive of both Central GoldTrust and Silver Bullion, declined to comment. Glen Williams, a spokesman for Sprott, declined to comment."

 

In other industry news, Bloomberg also reported that growing Swiss exports indicate that 'gold bars are leaving U.K. vaults for Switzerland, where they’re refined and sent to Asia. India and China.' Or in other words, gold is flowing from west to east.

 

Sometime recently challenged that notion of gold flowing East, as just a slogan.  Look, he said, at the mighty gold inventories on the Comex.  Yes, I have looked, and what is truly available at these prices is a rounding error on the physical markets in Asia and the Mideast. 

 

Right now, at these prices, there are a total of 567,928 ounces of registered gold available for delivery in all of the Comex warehouses.   That is a little under 18 tonnes.  The Central Gold Trust alone, a fairly modest player in the bigger scheme of things, holds 698,496 ounces of gold bullion.  It appears that Sprott is bidding to pick up all of it, and at a discount to spot.  How is that for mispricing of value?

 

And yet all of this, all of the Comex and these trusts,  this is just about what is being taken out of the Shanghai gold exchange alone each week.  And then there is India, Russia, and the Mideast.

 

The crux of this, of course, is the implied threat of the West, led by the US, to throw their own gold reserves on the table to keep the prices of bullion artificially low and 'under control.'   Really?  Throw down then, and see what happens next.  Because once that is done, there is no going back.  And the dislocation that follows may bring down more than a few bullion banks with it.

 

Someone needs to sit down with these central banking lads and give them a more realistic assessment of what price levels they can ever hope to sustain given the highly distorted dynamics of the markets which they themselves are perpetuating.   I am sure their bullion banker buddies will tell them whatever they wish to hear while the fees are flowing.

 

I suspect that the real gap here is the divergence between the physical markets and the paper markets.  And after several long years of persistent market rigging it is yawning.   You might do well to mind that gap, because it may close at some point, and that move could be sudden, and noticeable.

 

 

China Withdraws 70 Tonnes Gold From Shanghai Week Ending 16th January - Third Highest Ever

"It is the Soviet Union that runs against the tide of history by denying human freedom and human dignity to its citizens."

Ronald Reagan, Speech to the British House of Commons,  8 June 1982

"The center of world power is the unchallenged superpower, the United States, attended by its Western allies...For a small but growing chorus of Americans this vision of a unipolar world led by a dynamic America is a nightmare...Our best hope...is in American strength and will-- the strength and will to lead a unipolar world, unashamedly laying down the rules of world order and being prepared to enforce them."

Charles Krauthammer, The Unipolar Moment, 1990

"The enormous gap between what US leaders do in the world and what Americans think their leaders are doing is one of the great propaganda accomplishments of the dominant political mythology."

Michael Parenti

"The genius of American power is expressed in the movie The Godfather II, where, like Hyman Roth [Meyer Lansky!], the United States has always made money for its partners.   America has not turned countries in which it intervened into deserts; it enriched them.  Even the Russians knew they could surrender after the Cold War without being subjected to occupation."

Robert Kagan, July 17, 2003

Robert Kagan is a famous neo-con figure in US government circles.  He is the husband of Victoria Nuland.  Nuland, as Assistant Secretary of State for Europe, is famed for her partnering skills and diplomatic insights, summing up concerns for collateral damage from the crisis in the Ukraine with 'f*uck the EU.'

 

China withdraw around 70 tonnes of gold bullion from the Shanghai Gold Exchange for the week ending 16th January.

This is the third highest amount of gold offtake from Shanghai ever.

As a result of price rigging, gold is flowing steadily from West to East.  Because, whether the public realizes it or not, the world is very actively engaged in the evolution of the monetary basis of world trade, which has been referred to here and other places as the currency wars.

 

I have little doubt that the Western central banks think that their triumph is unstoppable, an inevitability.   And so they firmly stand against all evolution and change, preferring to fight tooth and nail to maintain the US dollar supremacy.

 

I believe that this currency war has its genesis in the grandiose schemes of the highly influential neo-cons and financiers in the Clinton, Bush, and Obama administrations, together with their attendant counterparts overseas.

 

I suspect that they may be in for a surprise.  Events have a way of rising to an occasion of hubris.

 

Now, putting aside any moral or practical political discussions about this, let us just consider one thing.  Let us assume for a moment that all this circumstantial and direct evidence is correct, and there is a currency war underway.  And that the Banks have been engaged, for many years, in the systematic rigging of the price of gold. 

 

This is not impossible, a conspiracy fantasy, or even all that improbable for that matter, since we know that many of these same actors did a similar thing for much the same motives in the famous London Gold Pool.

 

Assuming that this is true:  what is likely to happen if this gold currency rig fails again?

 

Chart courtesy of data wranger Nick Laird at goldchartsrus.com.

 

History shows again and again, how nature points out the folly of men.

Have a pleasant weekend.

 

 

Related:   Will Gold Be Part of a New International Monetary System, Koos Jansen

 

 

The Creature from Jekyll Island - lolz

Gold Daily and Silver Weekly Charts - All Manipulations Fail, and Sometimes With a Bang

"The basic tool for the manipulation of reality is the manipulation of words. If you can control the meaning of words, you can control the people who must use the words."

Philip K. Dick

"All through history the ways of truth and love have always won. There have been tyrants, and murderers, and for a time they can seem invincible, but in the end they always fall. Think of it--always."

Mohandas K. Gandhi

 

I am not so optimistic about the short term winning odds for truth and love, things being what they are these days.  If goodness paid off like a cash machine, everyone would be virtuous, as some theories like to assume. 

 

But in thinking about the more mundane, day to day world, common economic reality has a way of asserting itself against abusive and foolish human power, and sometimes with a vengeance.

 

Gold broke out of its downtrend today with a higher high.  There was intraday commentary, with a strong cautionary note on this, here.

 

There were more explanations for what happened this week with regard to the foreign exchange markets.   Zerohedge featured a menu of reasons for this.

 

I sorted them out to the 'what' and the 'when.'  And most of them were about 'when.'  What caused the Swiss franc to Euro peg to fail at this particular time.  And most of them were good guesses.

 

But that is not what is really the most important thing, the real reason.

 

The Swiss National Bank had to stop their protracted rigging of the currency markets because it was no longer practically sustainable.   That is what happened.

 

Well, it *could* have gone on longer if the ECB were cooperating more aggressively, and willing to sacrifice its own people to the needs of the Swiss.  After all, this is what the US has been doing cooperatively with its client states like Japan for quite some time.

 

But with its own QE looming, and a desire to create monetary inflation by buying bad debts at non-market prices, the ECB seems bent on sustaining the unsustainable, the existing European Union as it is currently constituted, by printing money.  In this sense they are following the US, which is pursuing a similar strategy with regards to the preeminence of the US dollar as a global reserve currency par excellence.

 

I forget now who said it, but all that is unsustainable will not be sustained.   (note: several readers have informed me that this is a paraphrase of Herb Stein's dictum, 'if something cannot go on forever it will stop.')

 

Yes it is a tautology, but a good reminder nonetheless that the overestimation of the power of central banks is yet another illusion of the modern era. 

 

A central bank that is willing to expand its Balance Sheet and buy sovereign debt at non-market prices, even if it passes through an illusion of  marketplace discipline with the cooperation of crony banks, is operating a money machine.  And history informs us that this is unsustainable. 

 

This is not stimulus.  QE is not good for the overall real economy.  It is a subsidy for the financial sector.  It is, at best, a very inefficient form of 'trickle down' stimulus.  For the most part it fosters corruption, malinvestments, and inequality.

 

This is wealth transferal through the use of money and the financial system.  It is a policy error of the first order, the self-serving abuse of power by the well positioned and the well to do.  Yes, well-meaning people may go along with this sort of folly, in the vain hope that the people who create the money will distribute the majority of it to the poor and the unfortunate.  But it rarely works out that way. 

 

The Swiss franc was under pressure because economic reality was inducing the currency to become stronger relative to the euro.  And the Swiss National Bank resolved in September 2011 to fight this with a currency peg, for the benefit of their export industry.

 

As late as the time of the gold referendum last year, the Swiss National Bank pledged to print practically unlimited amount of currency to fight the appreciation of the franc.  No one with any knowledge of history believes that a central bank can do this.  And so it was just a dodge, to get past a threat to their personal power, even if it was somewhat awkwardly and over broadly conceived.

 

The US has been leading a cartel of banks, not unlike the old London Gold Pool, to manipulate gold as a currency, seeking to artificially peg it lower to the Dollar.  That is what has been happening for some time now.

 

China and a few other countries are taking up that wager, and draining the global inventory of gold at artificially low prices.  This is not all that unlike the play that Soros and the Swiss Bankers made against the Bank of England when it sought to hold the British Pound at an artificial valuation.  And so they sold the quid, over and over, until the artificial peg was no longer sustainable and the Bank of England folded.

 

We see the collateral damage that the failure of the Swiss peg has caused to some traders and their firms, and I suspect that it is a bit more widespread than has been disclosed.

 

When the gold to the dollar rig fails, and it will, the resulting dislocation in the financial markets could be even more disruptive to some institutions and trading firms.  One can easily imagine the government becoming involved to shelter them from their folly.

 

But it will fail.  That is beyond doubt, as long as anything like a market economy and individual freedom remains.

 

Have a pleasant three day weekend.

 

 

 

 

 

 

Shanghai Posts 51.5 Tonnes of Gold For the Week: How Long Can the Gold Pool Be Sustained

"For 'tis the sport to have the engineer

Hoist with his own petard: and it shall go hard

But I will delve one yard below their mines,

And blow them at the moon."

William Shakespeare, Hamlet

The Shanghai Gold Exchange, where investors actually take their bullion rather than just play liar's poker with multiple paper claims for the same ounces, saw 51.5 tonnes of gold bullion taken in the latest week.

The trend of physical deliveries has been rising the last 12 weeks.

 

To put this in perspective, if there are 32,150.75 troy ounces of gold in a metric tonne, then the Comex has a total of just under 28 tonnes of registered (deliverable) gold in all of its warehouses.  

What is that, about three days supply in Shanghai?  Not to mention the other gold bullion markets around the world.

 

Sounds more symbolic, than practical.  Well, there can be great power in symbols— until long abused belief begins to falter, and confidence frays.  And then one risks the danger of using too much force one too many times, and losing the faithful obedience of the public.  And with it everything that allows a minority to govern.

 

There are another 239 tonnes in storage in all the Comex vaults, in the proper bullion eligible format, but not listed as deliverable at these prices.  Sometimes owners feel comfortable keeping the bullion there for storage, eliminating the need to have the bullion assayed if they ever wish to sell it.

So what does this all mean?    It means that the unsustainable will not be sustained. 

 

Some day the price of gold will likely be whatever China, Russia and like minded bullion markets say it is, the paper pushers in New York and London notwithstanding.   The tangled web of free trade and globalization, ain't it a bitch? 

  

It would already be so, except for the tired efforts of Wall Street's central banking friends and their access to leasing other people's bullion in a misguided effort to influence markets and rig their prices.

 

China and the rest of the world are apparently not yet tired of buying gold on the cheap. 

 

But make no mistake: Shanghai talks, and Wall Street walks.

 

This chart from the data wrangler Nick Laird at Sharelynx.com.

 

 

Related:  How Long Can Phase II of the Gold Pool Be Sustained