The Massive Drawdown of Gold From the West Continues - Silver Comparison - the Abyss

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.  

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."

Sir Eddie George, Bank of England, September 1999


“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.”

Eric Hoffer

Here is the change, in tonnes, in the inventory of major exchanges and ETFs for gold and silver since the beginning of the year.  Nick Laird of Sharelynx.com was kind enough to share the data which he has collected with me.  He does a remarkable job in maintaining an enormous amount of data at his site.

As you may recall, both silver and gold have seen price declines since the beginning of the year. As a reminder, silver is down 28.7% and gold is down 21.5%.  I show this in the last chart. So they have both seen comparably stiff price declines this year.

Since the beginning of the year, the major exchanges and ETFs for silver have added about 1,494 tonnes of bullion. 

But what is absolutely remarkable is that since the beginning of the year the Comex and some of the major ETFs have LOST about 856 tonnes of gold bullion.  And I suspect much of that bullion has gone to the non-reporting vaults in Asia and the Mideast. And there is import/export data that corroborates that hypothesis.

Now, some might say that they don't see what this means, that they don't see the significance. Or that the significance is that people like silver but don't like gold, even though both have seen price declines, and even though demand for physical gold in Asia and the Mideast has been explosive this year according to trade records.

I will tell you what the significance is.  The significance is that you are, figuratively speaking, watching water running uphill and out of sight.  And some look at this and say, nothing to see here.

That gold which is disappearing from the reporting grid will not be coming back to these largely western vaults anytime soon.   And it certainly will not be coming back at these prices.  It is going into some fairly strong hands with an eye to the long term.

Silver is still acting like a precious metal, similar to platinum, which added 21 tonnes, and palladium which added about 1.5 tonnes.

Here is what is happening, as shown in the three charts below.  Draw your own conclusions.   But keep in the mind the negative gold forward rates and record leverage in potential paper claims for physical gold that we are seeing and hearing reported.

And this chart does not include the leased gold that is being occasionally disclosed by Western central banks, which seems to be going to satisfy the appetite of Asia.

It seems pretty darn obvious to me that there are some big buyers outside this reporting system that are taking down supply, and at a fairly aggressive rate, especially in the last twelve months. 

You know that I think this exercise was triggered by the revelation that Germany's gold was missing, and a reflexive price manipulation that was intended to dampen demand, but instead set off an avalanche of physical buying.  

Given that genuinely new gold supply is only added slowly from mining, once the West realizes what is happening the turnaround could take on the character of a short squeeze, and perhaps even a panic and market dislocation to the upside.

And if you are one of those who are holding receipts for gold held in this system, you may find that you have been rehypothecated with extreme prejudice, and given a forced cash settlement at another's discretion. When the time comes your assets may be found to have been used as cannon fodder in the currency war.  Thank you for your support.

The German people asked for their national gold back, and were told by the Fed to go sit down in the lobby for seven years and wait for it. Are you kidding me? What is it going to take to wake people up that something has gone seriously wrong in these markets?  

What kind of new fraud or disclosure of fiduciary misbehavior will it take to bring the dawn?  And what will happen when the dawn finally comes?  Do you wish to be standing in a very long line holding a warehouse receipt or brokerage statement?  Good luck with that.

You may be a financier, fearing the abyss and hanging on, obsessively doing what worked in the past.  But here is some news.  You don't have to fall into the abyss,  the abyss is coming for you.   And the longer this nonsense continues, the worse the drawdowns will become, and the more painful the final reckoning will be. 

Weighed, and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - Ship of Fools

"No offense to those mad geniuses of Greece,
But wisdom is never perfect here below;
Folly is found in every age we know,
Even careful fools differ, but only in their ebb and flow."

Nicolas Boileau-Despreaux, Satires
tr. by Jesse

There was very little activity in the Comex warehouses on Friday as about 16 bullion bars left the Scotia Mocatta customer category.

HSBC has been added to the firms that are being investigated for the rigging in the foreign exchange markets.

Isn't it wonderful how just about every market has been found to be subject to clumsy rigging by the banks, EXCEPT the gold and silver markets?

Gold and silver were capped most of the day, for the usual reasons no doubt.

The gold in particular continues to flow from West to East. How long can it last?   One thing is almost certain, that this will not end well.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - A Tipping Canoe and Twitter Too

This is going to be a fairly interesting week for US economic news.

Tomorrow is the ISM Services, but on Wednesday we will see the unemployment claims, Challenger job cuts, and Advance GDP for Q3.

The jobs related data takes on some importance because we will be getting the October Non-Farm Payrolls report on Friday, along with Personal Income and Spending, and the Michigan Sentiment reading for November.

Twitter IPO looms and today we hear that the price of the IPO is getting kicked higher because it is 'sold out.'

There is an interesting dynamic going on here with the Twitter IPO.  There is of course a desire for the principals not to leave too much on the table with a lowball offering price.  But at the same time they do not wish to price too aggressively and end up with an embarrassment like Facebook had been.

The gaming going on for those being granted shares is quite heated I hear, and there is some desire to ramp the price after the offering comes to market, in order for the flippers to cash in over the following two or three weeks with a healthy profit.  The stock market will have its year end wind at their backs.

So you see how that dynamic is setting up.  The company does need the cash, since they have little cash flow of their own, so pricing higher is a definite plus.

And over this web of intrigue and varied interest hovers the mighty vampire quid, Goldman Sachs.

I have a feeling that this one is going to signal a high water mark of some sort, exactly what I am not yet sure.

Have a pleasant evening.

Nanex: One or More News Organizations Leaked Fed Information to Markets

This is from Nanex:

"On October 25, 2013, the Federal Reserve announced it would add an Internet Kill Switch (among other measures) to prevent future leaks of FOMC news announcements.

We proved with market data that the September 18, 2013 Fed (FOMC no-taper) news release must have been secreted out of the Treasury Department and placed on computers in New York and Chicago trading centers sometime before the official 2 PM release from Washington, D.C...

We have since learned, from people familiar with the matter, that one or more news organizations secreted the Fed news out of the Treasury Department before 2 PM and loaded it onto servers in trading centers in New York and Chicago. This has not yet been disclosed publicly..."

Read the entire story including questions to be answered here.

The Age of Narcissism

"Narcissism falls along the axis of what psychologists call personality disorders, one of a group that includes antisocial, dependent, histrionic, avoidant and borderline personalities.

But by most measures, narcissism is one of the worst, if only because the narcissists themselves are so clueless."

Jeffrey Kluger

If you wish to see the narcissist in their natural habitat, the chat boards and comment sections of some blogs are where the marginally successful dwell, often dominating the conversation with their self-obsessed arrogance.  Sometimes in periods of unusual circumstances they can even rise to positions of power.  They are attracted to corporate structures, and financial and political positions.

They have no humility, no doubts, and no empathy. Whatever life or luck or others may have helped them to achieve, they feel that they deserve it all, and more. They have worked for everything they have, whereas others who have suffered setbacks and misfortune simply have made bad choices or been lazy. And if others have been cheated and abused, then they deserve it for being stupid.

They are often judgmental and racist, and brimming over with hateful scorn for others, unless they can be co-opted into their sphere of influence and behave according to the narcissist's world and rules.

As Thomas Aquinas said, 'well-ordered self-love is right and natural.' It is when this natural behaviour becomes excessive and twisted that it becomes a pathology, a disorder of the personality.

Often narcissists have exaggerated ideas about their own talents and worth and work. Sometimes they are compensating for the neglect and disregard, or even abuse, of one or both parents who failed to see and appreciate how special they are. At other times they are the product of an environment in which they have been raised to believe that they are special, and deserve special treatment and consideration.   Since obviously not all children of privilege or abuse become narcissists, it might have its genesis in an untreated form of depression or genetic predisposition.

"The classic narcissist is overly self-confident and sees themselves as superior than other people. Think of a child who has always been told by mom and dad that they would be great, and then that child takes and internally distorts that message into superiority.

The compensatory narcissist covers up with their grandiose behavior, a deep-seated deficit in self-esteem. Think of a child who felt devalued but instead of giving up on life, resorts to fantasies of grandeur and greatness. This person will either live in that fantasy world or decide to create that fantasy world in real life."

If this affliction is accompanied by other problems such as sadism or malignant mania, they may become a destructive element for all who encounter them.  Their illness affects others more than themselves, so they may often not seek treatment, and excuse the damage they inflict with the 'weakness' of others.

They seek to fill the great empty holes of self-loathing with the lives and possessions of others, all the while proudly wreathing their actions with self serving rationalization. 

They are more to be pitied than scorned, as they are living in a small part the hell which they are making for themselves.  But we must guard ourselves against their powerful certainty in an age of uncertainty.  Their certainty is a madness which serves none but itself.

"Narcissism is a psychological condition defined as an obsession with the self. While not all forms of self-love or self-interest are destructive, extreme cases can be very damaging and may be diagnosed as narcissistic personality disorder (NPD).

In these instances, the disorder is characterized by a lack of empathy for others, sadistic or destructive tendencies, and a compulsion to satisfy personal needs above all other goals.

People suffering from NPD tend to have difficulty establishing or maintaining friendships, close family relationships, and even careers. About 1% of people have this condition, and up to 3/4 of those diagnosed with it are men.

The signs of narcissism often revolve around a person's perception of himself in comparison to other people.

Those with severe cases often believe they are naturally superior to others or that they possess extraordinary capabilities. They may have extreme difficulty acknowledging personal weaknesses, yet also have fragile self-esteem.

Narcissistic people also frequently believe that they are not truly appreciated, and can be prone to outbursts of anger, jealousy, and self-loathing when they do not get what they feel they deserve."

Hallmarks of Narcissism

A pervasive pattern of grandiosity (in fantasy or behavior), need for admiration, and lack of empathy, beginning by early adulthood and present in a variety of contexts, as indicated by five (or more) of the following:

•Lacks empathy: is unwilling to recognize or identify with the feelings and needs of others

•Has a grandiose sense of self-importance (e.g., exaggerates achievements and talents, expects to be recognized as superior without commensurate achievements)

•Has a sense of entitlement, i.e., unreasonable expectations of especially favorable treatment or automatic compliance with his or her expectations

•Is interpersonally exploitative, i.e., takes advantage of others to achieve his or her own ends

•Is often envious of others or believes others are envious of him or her

•Requires excessive admiration

•Shows arrogant, haughty behaviors or attitudes

•Believes that he or she is "special" and unique and can only be understood by, or should associate with, other special or high-status people (or institutions)

•Is preoccupied with fantasies of unlimited success, power, brilliance, beauty, or ideal love

Comex Deliverable Gold Falls to 658,443 Ounces, Claims Per Deliverable Ounce at 55

There was a change in status of 48,652 ounces of gold bullion in the JPM warehouse which were withdrawn from the registered to the eligible category.  Apparently someone had a change of heart.

Big change of heart.  About one and half tonnes worth.

The claims per ounce of deliverable gold stand at 55.  As I have explained before, this is a metric, a way of measuring inventory against potential ownership.

Like the velocity of money or a speedometer on a car it does not do anything.  But it does provide information that can be quite useful if you are interested in where you are and where you might be going.

But it is a measure of some related things with meaning. And one that apparently annoys some who would rather not notice it now that it is at an extreme reading.  Extremely low readings of deliverable gold relative to demand generally mark a trend change in price within six months.

And that makes sense.  It will take higher prices to move more of that gold out of the eligible to the deliverable category, the antics of JPM notwithstanding.

But in the meanwhile quite a bit of gold has been draining away from the West to chase the premiums for delivery in the East.  The offtake in the Comex and the GLD ETF have been remarkable, not seen in any of the other precious metals.

This does not strike some people as odd.  And that is understandable.  The really big changes, what are called sea changes, always catch most of the people unawares and tosses them for a loss.  And experts are not exempt, not at all, because they often become lost in the familiar.  I think we have seen that most recently in the financial crisis that so many economists failed to see coming even as it rolled over the economy.

And then there is the 'investment' activity of the western Central Banks with their nation's gold reserves.  The obligations must weigh heavily.

I find it quite interesting that there is a new scandal brewing in the FX markets involving price rigging.   It is odd how the Banks have been caught rigging so many markets, but when it comes to precious metals, the apologists find all sorts of odd behaviour to be quite innocent and above reproach.

We are approaching the time when those who have will throw down, and those who have not, will fade away.  I do not see the future as inevitable.  But I do believe that there will be a reckoning of sorts. There always seems to be.

Weighed, and found wanting.

Stand and deliver.