Comex Registered Gold Falls To 587,235 Ounces - Claims at 63 to 1 - The Karma of Buddha's Palm

There was a rather large adjustment into eligible gold storage at the HSBC warehouse as 51,617 ounces left the deliverable 'registered' category.

This is not such a big short term issue since November is a' non-active delivery month' for the Comex precious metals futures markets.

But in fact there is so little actual physical delivery activity taking place there anymore, even in an 'active month,' that one might argue that the New York metals market is approaching practical insignificance, long before it can reach the storied permanent backwardation.

However, one must keep up appearances, since the Comex still effectively sets the metals price for much of the free world, if only aspirationally these days for Asia.

More charts will be added as they are updated later this evening.

Earlier today in a piece about price premiums in India I included a link to the online section of Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds.

You might want to have a quick glance over the chapter regarding John Law's highly innovative dalliance into the théorie monétaire moderne that was adopted by the nation of France, almost to the point of its demise.  It is a useful reminder that truly, there is nothing new under the sun.

As theoretical as all these pricing antics and market manipulations might seem, exercises in price setting for personal greed or policy considerations have real world consequences, especially when they are applied over long periods of time, and with some resort to coercion.

The longer that valuations are maintained against the market, the stronger the coercion to sutain them must become, to the demise of freedom, and the point of exhaustion and collapse.   The Soviet ruble is a possible case study for what happens when the unsustainable meets the inevitable, even with a hairy knuckled police state backing it up. 

We might start thinking about 2014 as the year of financial consequences.

Weighed, and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - 修羅の花 'The Flower of Carnage'

“I recently made fairly detailed presentations to two Asian central banks... I was struck by the fact that one of the central bankers did volunteer to me that most central bankers are aware of the fractional reserve nature of the Western gold banking system, and its vulnerabilities.

He clearly acknowledged their understanding that gold does not back all of the claims to gold that are floating around the world financial system, particularly when it comes to the West. You would probably never get a central banker to acknowledge that publicly, but that is precisely what he said to me off the record.”

Chris Powell, KWN

There was a fairly substantial adjustment of gold bullion from registered to eligible in the HSBC vaults yesterday. It brings the inventory of deliverable gold down to a new record low. I will post something about that later this evening.

Intraday commentary touched on the 21% premium being paid for physical gold bullion in India now, and equates it to a US dollar price of $1,565 just to give you an idea of the divergence between paper and physical in the world today.

Someone sent me a rather insipid piece on gold demand in the FT. The only excuse for it is that the author unquestioningly accepts the data and quotes from the World Gold Council at face value.

The reason for this disillusionment and investor bearishness for gold is slack demand from India.  This is the same India that is willing to pay a 21% premium for any physical gold they can get through the very obtuse and restrictive government controls.  QED, right? 

Since the WGC is jointly responsible for setting up GLD, I can see where they might wish to go out of their way to put a dreary, downcast outlook on their own members' products. 

The action in the gold market since last October has been nothing short of remarkable.  I suspect it was a trading ploy gone badly for the reasons which I have stated before, with semi-official sanctions. 

But it takes a special sort of insular arrogance to keep doubling down on a bad trade, and hope that it finally turns your way.   If these jokers do not wise up fairly quickly, this one could make the London whale look like the Canary Wharf carp.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - '16 Trillion, Shoot It All'

OMG.

India Paying an Equivalent $1,565 Per Ounce For Physical Gold Bullion

“Let us not, in the pride of our superior knowledge, turn with contempt from the follies of our predecessors. The study of the errors into which great minds have fallen in the pursuit of truth can never be uninstructive...

Hitherto no difficulty had been experienced by any class in procuring specie for their wants. But this system could not long be carried on without causing a scarcity. The voice of complaint was heard on every side, and inquiries being instituted, the cause was soon discovered. The council debated long on the remedies to be taken, and [John] Law, being called on for his advice, was of the opinion, that an edict should be published, depreciating the value of coin five per cent below that of paper.

The edict was published accordingly; but, failing of its intended effect, was followed by another, in which the depreciation was increased to ten per cent. The payments of the bank were at the same time restricted to one hundred livres in gold, and ten in silver. All these measures were nugatory [pointless] to restore confidence in the paper, though the restriction of cash payments within limits so extremely narrow kept up the credit of the Bank.

In February 1720 an edict was published, which, instead of restoring the credit of the paper, as was intended, destroyed it irrecoverably, and drove the country to the very brink of revolution...”

Charles MacKay, Extraordinary Popular Delusions and The Madness of Crowds

When the Reserve Bank of India and the government tried to staunch gold imports by increasing duties and limiting supply in order to help their western central bank counterparts, who were deeply embarrassed by their inability to return Germany's gold, the experiment in currency controls had the effect of making the premiums paid for actual gold jump to 21.6% over western paper 'spot' prices.

What good is a 'spot price' for gold if it is just a construct derived from the paper gold price on the increasingly gold deficient Comex, and not from a physically transacting market?  And what good is a price set on a so-called physically transacting market like the LBMA if it is done in secret, with leverages said to be approaching 100 to 1?

Recent revelations about the manipulation of price benchmarks, from LIBOR to derivatives to basic commodities, seem to have knocked the efficient market hypothesis into a cocked hat, which is where it always belonged, if the dustbin was full.   Markets are naturally efficient to the extent that men act naturally like angels. 

Here is an interview that Tekoa da Silva recently conducted with an Indian gold dealer about the future of demand for physical gold in India, which he believes will be strong, and more importantly, why.

Let's see, if one region of the world is willing to pay, for substantial amounts, a 21% premium for a physical commodity that is easily transportable, what might an astute economist predict would happen?

The 'average person' might expect them to predict a substantial flow of that commodity from west to east.   And that does seem to be the case if one looks at the data which is available.  Gold Seen Flowing East As Refiners Recast Bars For Asia.

These days, however, far too many economists, analysts and pundits see what they have been told to see, by whomever is paying them.  Academia, politics, and the media are not naturally efficient, for the same reasons as markets.

Is it any surprise that in a culture that glorifies personal greed and the arrogance of power, virtue is in scarcity and deceit becomes routine?   Bad behaviour can drive out the good, until a system or culture can become a festival of shamelessness, and a feast for predators.

India is not an isolated example.  The situation is simply worse there for the moment because some Indian officials are historically compliant to Anglo-American interests.  But China, Russia, Latin America, and the Mideast are increasingly less complacent to be so ill-used these days.

Change is happening.  And there may be some significant volatility associated with this historic difference of objectives and opinions about what value is, and how and by whom it is set.