Weekly Gold and Silver Flows In Funds and ETFs

Flowing, from West to East.

We seem to have indications of a durable bottom being formed.

Let's see if that trend continues.

Do Not Look at These Charts Showing Registered 'Deliverable' Gold Bullion In New York

“The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil."

John Kenneth Galbraith, The Great Crash of 1929

Here are a few charts that show the rather striking decline in 'registered' gold, that is gold available for those standing for delivery, in the Comex warehouses.

'Standing' by the way means standing around and waiting for someone to choose to fulfill your request for your contract to be fulfilled with actual bullion before the cut off date.

You can see from the first chart that the likelihood of someone actually standing for delivery and receiving bullion has never been less at The Bucket Shop.  Real metal is unfashionable amongst our financial sophisticates.

As for delivery and withdrawal of bullion, it is getting stronger and stronger in the East.  Second chart.  What can one say at such embarrassing behaviour?  What a bunch of rubes!

The shills and shrills for the bullion banks will tell you, in hair-splitting and often misleading detail that none of this means anything.    And you better listen to them because they are the ascended masters of the universe.

All of these categories and procedures at The Bucket Shop are meaningless.   And the holders of these millions of dollars in bullion often change the designations of their metal in new but meaningless ways in their quest to baffle the world.  And provide makework for their brokers and clerical staff.

The Bucket Shop is not likely to fall into a hard default.  You cannot lose when you own the game and set the rules, and can always force settlement.

Try not to underestimate the skillfulness and determination of market manipulators.  And especially their shamelessness. They hate it when you refer to the obviousness of their schemes. Like rigging almost every global market, and selling tailor made toxic instruments which they later bet against.  And getting caught, paying a wristslap fine to their cronies, and then claiming that they are the real victims of zealous prosecutors and your envy at their well-deserved success.

So nothing to see here.  Better not to look at it or ask any questions. About anything. Just leave your money and move along.

'Claims Per Deliverable Ounce' Likely Soars to over 200:1 as JPM Pulls Another Large Tranche

JP Morgan, who as I shared last month tends to move large amounts of gold into the registered (deliverable) category on the Comex just in the nick of time, took another huge tranche of gold out of that category last Friday.

Registered (deliverable) gold is now down 202,000 troy ounces or a little over 6 tonnes,  a level which we have not seen there since Nick Laird started keeping track of the Comex warehouses in 2003.

A quick calculation that awaits the updated open interest figure shows that the 'claims per deliverable ounce' has now likely soared to over 200:1.  We have never seen a ratio that high.

I will put up the 'official calculation' from Nick when the official number becomes available.  We might not see the ratio climb if there has been a plunge in open interest, however unlikely that might seem.

Not just considering the Comex, which I consider to be a atavistic pricing mechanism, a conjunction of several things trouble me in the light of Ronan Manly's second article in his current series.

He does a meticulous estimate that indicates that the levels of unencumbered gold in the LBMA, which some of us have come to call 'the float' of physical bullion, are now so low that he calls it 'a game of musical chairs' to cover the unallocated gold accounts.

You may read Ronan's entire article here.

Things being what they are, I am now persuaded that 'the float' is tight enough so that the probability of a 'break' or dislocation in the physical bullion market is high enough to warrant some extra caution. Not panic, but caution, at least until the situation clarifies, particular with an eye to the historically significant month of December.

The other item that greatly concerned me is Jim Rickards assertion that in this type of situation the price of gold is not likely to go up gradually, but may suddenly rise step-wise, almost overnight, by more than a hundred dollars or so per step.  You may watch it here.

I do not claim to have the contacts or pull that some may have or claim to have.  But I have now seen enough to think that in terms of insurance and conservative investments that caution is warranted, now, rather than later.

So, IF you are an investor, not a short term trader, and are holding some percentage of gold in your portfolio as insurance, you may wish to reconsider any arrangements that you may have in which you cannot exercise reasonable control over your possession of bullion which you have purchased.

This is what I believe Kyle Bass referred to as fiduciary caution.

Particularly at risk of a forced cash settlement would be any leveraged or unallocated holdings with an indeterminate counterparty risk, or what some people refer to as 'paper gold.'

I am not saying that there will be a hard default, in terms of outright confiscation in a bankruptcy court, not at all.  Although that may happen.

But I would consider carefully any arrangements that offer guarantees or assurances that could be satisfied with a cash settlement at a price to be determined by someone else without your consent.  As we saw in 1933, they settled at one 'official price' and then allowed the price to resume some 40% higher.

If you are a short term trader, do what you will, but be mindful of your leverage, and take uncovered short positions at your own risk.  And if covered, carefully consider your counterparty risks, because the bigger players will be lawyered up and looking for patsies and victims.  Again, a hard lesson from MFGlobal.

This market may likely turn extremely volatile, even to the extent of a big down move followed by a sizable move higher.  This is how these jokers roll.  When the going gets tough, they tend to keep doubling down and running a bravura bluff.   This was the story of 'the London Whale.'

In the meanwhile, we will have to bear up as best we can with this ridiculous lack of transparency and secrecy and sound regulatory oversight in public markets in the age of crony capitalism.

I have included the latest silver Comex chart as well.   I have to admit that I do not feel I have the same grasp of silver that I hope to achieve in gold.   There seems to be a steady bleed in the inventories, and one huge difference is that with silver there is no great central pool of it to cover short term gaps in the physical markets through leasing as there is with gold.

So, I will keep an eye on silver, because the premiums there are acting more oddly on the retail level than gold is, and its market structure is such that a festering problem can become a big and obtrusive problem rather quickly, and the central banks would be in a poor position to do anything about it.

I would tend to exercise the same caution with silver investments as insurance as I would with gold.  And so I am.

Financial Media Wakes Up to 'Physical Tightness' In London Gold Bullion Market

How interesting that the Financial Times has finally noticed 'tentative signs of increased demand for bullion from consumers in emerging markets.'  You know, those obscure places with difficult names such as I-N-D-I-A and C-H-I-N-A.

It's not all that new of a phenomenon, mates.   Our friend Nick has been tracking it, and we have been talking about that here at Le Cafe, for a couple years now.  Well, maybe almost a decade.  See the charts below.

And we have also been hearing about 'physical tightness in the market for gold for immediate delivery.'  While the 'cost of borrowing gold has risen sharply in recent weeks.'

Even while the price of gold was shoved lower on the non-delivery paper markets of The Bucket Shop, helping to crater the deveopment and production of mining companies.

Sounds like borrowing gold for physical delivery is starting to be a dodgy business, a little hard to manage at such high leverage of claims to items.

Wait until people start realizing that there is a diminishing mix of deliverable and of 'borrowed gold' backing up a pyramid of derivatives and paper claims.   Is that the sound of a spoon scraping the bottom of the pot yet?

What happened to the theory of higher prices to relieve demand in excess of supply?

And where is that 'borrowed gold' coming from, by the by?  It must belong to someone, and they may even think it is safely tucked away while it is on its way to Asia via Switzerland.

If the LBMA has been doing what some think they have been doing with demand and available supply, then we haven't seen anything yet.

Never be the last one out of the pool.

But let's see how all this plays out.

Gold Demand from China and India Picks Up

By Henry Sanderson
Financial Times, London
Wednesday, September 2, 2015

London's gold market is showing tentative signs of increased demand for bullion from consumers in emerging markets, after the price of the precious metal fell to its lowest level in five years in July.

The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.

The rise "does indicate there is physical tightness in the market for gold for immediate delivery," said Jon Butler, analyst at Mitsubishi. ...

... For the remainder of the report:

http://www.ft.com/cms/s/0/eae18206-5154-11e5-b029-b9d50a74fd14.html

Gold Daily and Silver Weekly Charts - Option Expiration Tomorrow

There was some cursory movement of bullion out of the Comex warehouses yesterday, but in general they are reasonably well equipped ahead of the April active contract period which begins next Monday with first notice.

As you know there is a precious metals option expiry for the April contract tomorrow.  We may consider the gut check already delivered for it ahead of time perhaps, but there is still the off chance of another hit in the quiet periods tonight and the day after tomorrow.

I have included a chart of the gold price in dollars with a few technical because we finally saw the 50 DMA climb over the 200 DMA.  That is known as the 'golden cross.'   It would be more meaningful if it was occurring on substantial volumes.

I am not such a big believer in technical measures except at their extremes in an inefficient market that is being managed to certain ends.   But it is worth noting at least. 

The delivery calendar is more important, and not so much even that for New York and London.  The real markets for precious metals are now in the Mideast and Asia.

Time settles all accounts.

Have a pleasant evening.

Inside London: 'Demand Delivery For the True Price of Gold'

Buba is the nickname for Deutsche Bundesbank, the central bank of Germany.

I nearly fell out of my chair when I read a description of the divergence between the paper and physical gold markets from the Inside London column of the Financial Times.

"But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."

And this in the prince of mainstream financial publications.   Quick, alert the spinmeisters for Davos man that the natives are growing restless.  

As the fellow says, one day the ties that bind the actual and the traded commodity will snap. So if you fancy gold at today's depressed price,  take delivery.

"In June last year the average volume of gold cleared in London hit 29m ounces per day. The world’s mines are producing 90m ounces per year. The traded volume was many times the cleared volume.

The paper gold in the London Bullion Market takes the familiar forms that bankers have turned into profit machines: futures, options, leveraged trades, collateralised obligations, ETFs . . . a storm of exotic instruments, each of which is carefully logged, cross-checked and audited.

Or perhaps not. High-flying traders find such backroom work tedious, and prefer to let some drone do it, just as they did with those money-market instruments that fuelled the banking crisis. The drones will have full control of the paper trail, won’t they?

There’s surely no chance that the Fed’s little delivery difficulty has anything to do with the cat’s-cradle of pledges based on the gold in its vaults?

 

...But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."

Read the entire article in the Financial Times here.

Caveat Emptor: Another Level of Non-Quantifiable Risk Added to Trading Metals On the Comex

The disclaimer below has recently been added to the Comex warehouse report.  Sharp-eyed Dave from Denver and His Band of Merry Pranksters spotted this little addition at the bottom of the page.

This is from the report that shows the amount of gold and silver said to be available at the Comex.

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

So much for even any pretext of audits and inventory controls.   Just numbers on a piece of paper when push comes to shove.

One can only wonder why the Exchange felt the need to add this statement now, after all these years.  Especially when Comex eligible gold inventory levels are approaching record lows, and there is widespread mistrust of certain parties and their opaque market positions on this list.

And there are rumours of forced cash settlements in lieu of bullion delivery floating around. The Hong Kong Metals Exchange just folded, and forced cash settlements. And banks are cancelling physical delivery arrangements.

How can someone who is trading metals and storing them at the warehouse not be concerned about a declaration of force majeure without liability recourse? What is the purpose of a commodities exchange when there are no representations made that they even possess what one is trading?

Who does the PR for these jokers? Or do they just not care anymore?

We'll have to call the Waffle House and see if Bart Chilton has any comments to make about this.

I wonder if we will see more disclaimers like this. The supermarket can put a disclaimer in the meat department that says that while they buy their product from believable sources, they make no representations or accept no liability with regard to the actual species of the meat which you are buying.

Weighed, and found wanting.

CNBC Europe: Is Gold a Bubble, Or an Outstanding Value, or Both?

My friend Horst from Germany sent this to me.

I think you will find it to be of interest.

The subject discussion revolves around the currencies, paper gold, and bullion.

Ben Davies, CEO of Hinde Capital



I cannot help but note that the level of discussion in CNBC Europe and Bloomberg Asia is much more serious than that of Bloomberg and CNBC USA. I wonder why this is, given the global character of the financial markets.

And then there is Fox Business where T/A does not necessarily have anything to do with technical analysis or charting.