About These Most Recent Price 'Corrections' in the Gold Market

Here is some perspective.

First is a chart below of the three recent major price declines, bear attacks driven by concerted contract dumping by a bullion banks holding heavy short positions.   We know this by the volume of contracts being suddenly put forward on the 'sell side.'

And second is a comparison of the two major gold corrections from this year.

As you may recall the Spring 2019 gold correction resolved into a very brisk rally to the upside, as the shorts were squeezed by determined buying by large speculators.

Let's see how this latest price decline resolves.

And let us remember that eliminating and hobbling regulators does not result in freer markets and fairer price discovery, anymore than eliminating law enforcement would result in a safer and more orderly freeways, human nature being what it is, and what it is not.  Except in the propaganda put forward by the hirelings and mouthpieces of would be market manipuators and bankster serial felons.

How Much of 1,740 Tons of London 'Good Delivery' Gold Monetized and Sent to China Central Bank

Koos Jansen has an interesting piece out this morning, that asks some very insightful questions in the ongoing attempt to connect the dots between the shocking decline in the 'float' of unencumbered gold out of the London Vaults with the tremendous, and not always fully visible, flows of gold into strong hands and Asian Vaults.

As you may recall it was Koos' groundbreaking work in analyzing the Shanghai Gold Exchange that blew the lid off the enormous flows of physical gold into China, despite the stubborn opposition of some well paid establishment analysts.

And all of this is relevant to what some have called 'the currency war,' which is the attempt to forge a new international monetary regime out of the ruins of the Bretton Woods Agreement and the fiat petrodollar.

This analysis ties together with a number of highly significant events, including the backwardation of gold price, the flight of gold from the registered category at Comex, and the tightness of physical supply in London as shown by lease rates and informed observations, despite the usual scoffing from apologists.

I have seen various estimates that the London float is now adequate for about 4 to 12 months at most, given this draining of supply, before the market gets into serious trouble.  That is unless a central bank or gold pool friendly semi-official fund undertakes to divest itself of more their nation's gold, as England apparently did by selling their sovereign gold wealth on the cheap near the turn of the century to bail out their banking chums, in the odd case of Brown's Bottom.

The gold in this current instance seems more likely to have been taken out as leases and sales from custodial gold holdings at the Bank of England, and the stores of gold that is backing ETFs and Funds in private vaults, having been disgorged by the actions of their participants and custodians, often the self-dealing bullion banks.

Perhaps this is mistaken.  Perhaps there is a reasonable explanation for all this oddness in the gold market.  Good then let us hear it, and not these silly scoldings and transparent fabrications of nonsense that seem to be the stock in trade of the bullion bullies and paperati which only serve to fuel more doubt and questions.

And why is it again that the US and UK were unable to return Germany's national gold stores in a reasonable timeframe?  And India desperately looks for ways to limit their peoples' appetite for physical bullion of their own?  So many questions, so much leverage, secrecy, and stonewalling.

As Koos Jansen observes:

Consider the following:

• Good Delivery gold bars can be monetized – in countries like the UK, Hong Kong, Switzerland and Singapore – from where they can be shipped into China while circumventing global trade statistics. This is because monetary Good Delivery gold bars are exempt from global trade statistics (UN, IMTS 2010). Needless to say monetary imports into China are conducted by the PBOC.
• Non-monetary Good Delivery gold bars (declared at international customs departments) imported into the Chinese domestic gold market are required to be sold through the SGE. However, trading volume at the SGE in GD bars has been a mere 3 tonnes in all of history.

We can thus conclude that if any Good Delivery gold bars have entered China these did not go through the SGE system where Chinese citizens, banks and institutions buy gold. Instead, it’s likely that the Good Delivery gold bars that crossed the Chinese border went directly to the PBOC vaults...

Nick Laird and I noticed that although the total amount of physical gold in London fell roughly 2,744 tonnes (9,000 – 6,256) over four years (graph 1), only 997 tonnes were net exported as non-monetary gold (graph 4). This makes me wonder where the residual 1,747 tonnes (2,744 – 997) went. Possibly, this gold has been monetized in the UK and covertly shipped to a central bank in Asia, for example China. I don’t have rock hard evidence, but it fits right into the wider analyses.

You may read the entire piece and its complete evidence and reasoning The London Float And PBOC Gold Purchases.

One thing that is strikingly odd about this is that it is one of the more revelatory accumulations of data on the shadowy corners of the global gold market since Frank Veneroso's seminal study of the flows in the gold market involving central bank gold at the beginning of the great bull market that began at the start of the new century.

And yet so many sites still have not picked up on this sea change and unfolding currency war, despite it tying together so many other observations and data and market tremors.  Perhaps it is insufficiently pedigreed.   The contrarian perspective says that this may be the hallmark of the real thing.

Unstoppable Demand Meets Undeliverable Object - A Run on the Bullion Banks

"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage."

John Kenneth Galbraith, The Age of Uncertainty

If this is accurate, if this is really happening, I think that the effects of this run on the bullion banks are going to hit quite a few people dead cold, like a smack in the face.

That is because there is so little coverage of what is going on in the media, even the internet media.

The gambit of smacking down price to dampen the desire for gold appears to have backfired in a big way by sparking an insatiable demand for the physical metal and a remarkable decline in available inventories. That certainly wasn't what had been expected I would imagine when the process of a more energetic price manipulation in response to Germany's request for the return of its gold began.

That a sovereign nation asked for the return of its own gold being held in custody, and that request was flatly denied, is almost as unbelievable as the fact that so many are willing to take it in stride, like something that would happen every day. 

A seemingly unstoppable force, the flow of gold from west to east, is going to meet the undeliverable object, the nominal inventory of unencumbered gold in the bullion banks and exchanges, sometime over the next twelve months.

Of course one cannot predict exactly what will happen and when, given the phony controversies, obfuscations, and stonewalling that seem to settle like a thick fog over the markets at every treacherous turn in this slowly unfolding financial crisis.  But the math is intriguing.

This is getting very interesting. Let's see what happens. 

Is this what I wish to happen?  No, I would prefer that the markets be transparent, honest, and provide genuine price discovery and allocation of capital with relative rationale decision making open to all market participants.   I think for now the game is badly tilted in favor of insiders and their powerful friends.

I do not believe that there can be a sustainable economic recovery without genuine reform.  A financial disaster is what the financial predators seemingly wish to happen, assuming they even care about the broader effects of their foolish greed.

At some point one would have to anticipate a declaration of force majeure and/or a change in the rules if the financial interests do not relent on their aversion to a market-clearing price.  And when that tide goes out, we will see who is swimming naked.

But there remains plenty of opportunity for more desperate antics, so as always caution is advised , particularly in the use of any leverage and short term time horizons.  This is not a healthy trading environment for the non-professional.  And many a person has gone bust by underestimating the shameless manipulation of the markets when regulation is lax.

The exchanges and the Banks will not fail, because the financiers and their friends make their own rules as they go along, and do not hesitate to act in their own interests, promises and customers be damned.  That seems to be the way of modern finance and monetary theory.  Whatever we say it is, is because we say it is.

The time for debate seems to be coming to an end. Weighed and found wanting.

Stand and deliver.

Tonnes of Gold Removed From the Major ETFs and the COMEX Since January 1

Considering the theory that the purpose of this market operation was designed to take the price of gold lower since the first of the year, and to free up bullion to relieve certain stresses in delivery, I was wondering if we could quantify the results of it in any way.

With the help of Nick at Sharelynx.com, the keeper of records and master of charts,  I was able to calculate the approximate number of tonnes of inventory that were released into the market, or some private storage area perhaps, from the top funds and exchanges in the western world. The time period is from the beginning of this year through 26 June.

If this is correct, and the hypothesis is correct, then it is 'mission accomplished.'

There should be no excuses for not delivering Germany's gold.  And plenty of other bullion has been made available to solve those other pesky failures to deliver that seemed to be cropping up.

So one may presume that the bullion is in the mail to its rightful owners, in care of the Herr Weidmann at the Deutsche Bundesbank. The NY Fed sends its special regards.  Ich liebe dich.

Unless of course it has been rehypothecated to those barbarian buyers in Asia and the Mideast, yet again.

C'est la guerre des monnaies. Quelle dommage!

I have also included Nick's personal wave count for gold and silver, although I am not an adherent to the waves theory per se. And his long term confidence range for the gold bull market.

The stars seem to be aligning, with perhaps a few more antics and end of quarter shenanigans.  But boys will be boys, and they can't keep their hands off their toys.  So who can say what will happen next.  How about another round of bailouts?

How Goldman and J P Morgan May Intend to Rape the Mining Industry (Again) and Take It Over 'On the Cheap' As Bullion Rallies

Those who have followed the mining industry over the years know how painful it was for those who had sold their bullion forward, on the advice of bullion banks like Goldman and J P Morgan, to unwind those hedges. The cost was company insolvency and a sale on the cheap for the smaller players, and billions in writeoffs for the larger, like Barrick Gold.

Perhaps a round of precision naked short selling and bullion price suppression will soften them up the cash strapped miners, and curtail their access to the alternative sources of capital and credit enough to prompt some soft-headed and desperate CEO's make their (sometimes self-serving) deal with the devil again.

You will forgive me if I wonder if Goldman would be taking the other side of this trade with their customers, waiting gleefully for the day when their 'forecast' proved to be wrong, and the miners found themselves unwittingly in their greedy little hands, God's work having been done once again.

And if they are caught, well, the going price of fraud on a massive and obvious scale seems to be about $550 million, so that will have to be factored into the business plan. Short sales on the collateral damage should cover that cost of doing business nicely, and keep the moral hazard and faux regulators happy.

And as for investors, they may wish to consider putting any miner who buys into this scheme on their 'do not buy' list. Although it should be noted that Barrick had a few good years, while its peers suffered, for its betrayal of its industry and ultimately its shareholders, when the devil had his due. In the famous New Orleans lawsuit they claimed that they had been working with JPM at the behest of the Federal Reserve.

Are the BIS, the IMF, the ECB, and the Fed starting to scrape the bottom of their bullion barrel, requiring fresh sources of physical to sell into the market, and feeling the twinges of anxiety that disclosure is near, the jig is up? Hope so. Could not happen to a more deserving group. And I hope to live to see the day.

Mineweb
Goldman predicts falling gold price beyond 2011, recommends gold hedging
Lawrence Williams
Thursday, 15 Jul 2010

Goldman Sachs has raised its medium term gold price forecast to $1,355, but reckons prices will fall from 2011 and recommends producers sell gold forward.

LONDON - Plus ça change. Goldman Sachs is suggesting that mining companies sell gold forward again. The logic behind this is that although the bank reckons the gold price will increase to $1,355 an ounce over the next 12 months - a tiny increase from its earlier prediction of $1,335 - beyond that it is looking for prices to stabilise and fall as the U.S. Fed tightens monetary policy and the recession is seen to be ending.

Of course the big gold banks, of which Goldman is probably the most successful, can do very well out of its clients hedging their gold forward whatever the fortunes of its clients in so doing. It was notably the bank which reputedly advised Ashanti Goldfields to sell its gold forward at gold's low point back at the end of the 1990s - a policy which brought the gold miner to its knees leading to its takeover by AngloGold - another Goldman client. Indeed commentators have suggested that Goldman made profits on every angle of the Ashanti hedging debacle, and on the sale of one of its clients to another.

Goldman would probably counter that its primary responsibility was to its shareholders - perhaps even more so than its clients - and that the sudden turn-around in the gold price which caused Ashanti's effective bankruptcy, was completely unforeseen, but the whole episode left a bitter taste that lingers to this day, particularly in Ghana where Ashanti was seen as the country's major gold player on the world scene.

However, the fact that Goldman is still looking for an increase in the gold price, even if only over the next 12 months, is positive for gold. The bank actually forecast a six-month gold price (effectively a year-end figure) gold price of $1,290 rising to the $1,355 figure over the following six months. With predictions being regularly updated (the latest figure is an update from Goldman's previous one of only three weeks earlier) the position may again change depending on how quickly the global economy is seen as recovering.

Goldman also delivered forecasts for base metals and silver, all of which ranged higher than previous ones apart from zinc where the bank was looking or an 18% fall.