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.

Nova Scotia Apparently Backing the Meager Action in Comex Gold - Gresham's Law

Gresham's law is an economic principle that states that when an official market or cartel overvalues one type of money or asset and undervalues another with respect to its fair market value and risks, the undervalued money or asset will leave the country as best it can, or will disappear from circulation into hoards, while the overvalued money or assets will flood into circulation.

Let me stipulate up front that when it comes to the global gold market, the Comex has actual gold flows that are so meager compared to the amount of trading which occurs on paper that I have said it is starting to look like The Bucket Shop.

And in recognition to the disclaimer statement that appears on all of their documents, the exchange makes no claims and accept no liability that any of these numbers are accurate. They are taking the originators of these numbers at their word, some of which are Banks which have recently been shown to be serial offenders when it comes to their financial dealings, pricing, and representations.

As of Wednesday, only 171,613 ounces (5.13 tonnes) were 'up for delivery.'   In a global market where the daily deliveries are measured in metric tonnes, that is a very small amount.

In terms of overall active Comex contracts, that represents a paper to physical leverage of roughly 263 to 1, compared to a historic trend of about 24:1.

And as I looked things over, I was struck by the fact that of those meager ounces available, 101,312 (3.2 tonnes) were from the vaults of Nova Scotia, or roughly 60% of the total.

That struck a chord in my memory, so I looked over the list of deliveries for the month of October.

Of the pathetically small amount of 240 contracts, or 24,000 ounces (.75 tonnes) delivered in the entire month, 17,600 have come from the 'house account' at Nova Scotia.

And the 'takers' of those few ounces have been the 'house accounts' at JP Morgan and HSBC.

So what I am trying to prove with all this?  Nothing.   I am merely showing an interesting trend change that has gone largely overlooked, except in some notable exceptions of the 'smart money.'

And I am documenting some facts for those who have a mind to see them, and to establish a record that people can refer to when these jokers blow up yet another market through their reckless obsession with gambling large.

It shows that in a world of global gold flows, very little is moving in the Comex warehouses, and the little that is changing hands seems to be moving between the houses of three of the big bullion banks.

And it tend to support a hypothesis that the gold trading in London and New York has taken on the character of currency crosses, and lost their ties to the physical commodity nature of the product.  This divergence may be convenient for the management of the price, and for easy profits for those managing the game.

But it has longer term consequences which will eventually come back to shock the markets.  Where have we seen these types of divergences among risk, valuation, and the underlying realities before?  In just about every financial fraud and following crisis in the modern era at least.

So remember this when the next crisis comes, and the distraction, dissimulation, and duplicities are put forward, and the search for non-consequential scapegoats is underway. And you are expected to bail out these jokers once again 'to save the system.'

I am fairly confident that all of this will come to pass if things do not change, and serious reform and enforcement of the rules of the markets are not undertaken.  So far the changes we have are largely cosmetic.  In a plutocracy big money manages the government and the media;  they have bought and paid for it.  And eliminating government only serves to eliminate the middleman.  Transparency and reform are the only sustainable answer.

The big action in the precious metal bullion markets is in Asia.

And gold and silver bullion are steadily flowing from West to East because of a mispricing of valuation and risks.   And the reason for the stunning drop in physical trading activity in the West is because in a manifestation of Gresham's Law,  the hypothecated paper metals are driving out the bullion out of the market.

This is a trend, and it has significance to those who are willing to see it.

Nine Out of Ten Non-Regulators MIght See a Trend In Intraday Precious Metal Trading

'What is truth?' said jesting Pilate, and would not stay for the answer.

Francis Bacon

Here are the intra-day averages for the price of gold and silver for February.

 

Can you detect any pattern intraday? 

 

There does seem to be a pronounced pattern associated with the geographic location of the primary trading market's time zone.

 

As the dissembling Winnie the Pooh said to the angry nest of bees, 'I'm only a little black rain cloud,  pay no attention to me.'

 

Tut tut, looks like rain.

 

Storms gathering on the horizon.  Better get more buckets for the bucket shop.

 

 

Charts courtesy of Nick Laird at Sharelynx.com.