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.

Gold Daily and Silver Weekly Charts - Quite the Options Expiration - Will To Power

"The world is ours, we are its lords, and ours it shall remain. As for the host of labor, it has been in the dirt since history began, and I read history aright.  And in the dirt it shall remain so long as I and mine and those that come after us have the power.

There is the word. It is the king of words—  Power. Not God, not Mammon, but Power. Pour it over your tongue till it tingles with it. Power.”

Jack London, The Iron Heel

The Comex had an options expiration today for the precious metals, and they certainly rose to the occasion.

If you wondered why such an unusual thing happened, it is because the October contract is not all that important in and of itself, but it has some technical attractions given the option 'hook' which is offered.  A fine opportunity to skin the common trader if you will, who probably have no business swimming with those sharks.

There was some intraday commentary about why it happened as it did here.  

I admit that it went much higher than I thought it would, but it was well worth a bet on the side. Sorry, but even in my old age I cannot resist the occasional wager, the call of the wild.   lol.

Much more importantly, the physical bullion supply situation, or what some have been calling 'the float,' seems to be approaching some sort of crossroads, or even the elusive denouement of the gold pool that many of us have been long awaiting.

Gold is a bit easier to understand for me.  The underpricing of gold and the stubbornly high demand from Asia is sucking the paper markets dry of their underlying bullion.  

Stated a bit flippantly but generally correctly, if you underprice something that people want, and they ignore your clumsy PR campaigns and assorted devices to convince them that they do not want it, they may empty your shelves of it.

I keep wondering why so many people are missing this, even among the 'pros.'   Many listen to 'experts' who are parroting whatever they are instructed.  That is how it too often is.

But I do think that that quite a few are being misguided by what they think that they know well.  These are the ones who were deeply into the paper trade, and proudly knowing all its jargon, its nooks and crannies.    They see the same old rubbish system they know so well still spinning along, but cannot begin to imagine that incredible changes are taking place in other parts of the world of which they know relatively little, and care very little as well.

So ignoring or deriding the great sea change in global monetary exchange that some call the currency war, they are fooled by the familiar.

"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

Silver has a tightness of its own, but it is manifesting differently.  The Bucket Shop is well supplied of silver, but that refuge for the bullion bullies, the central banks, are out of silver inventory altogether.  Judging from the Comex they do have JPM as their proxy, sitting on a silver hoard. But after that bulwark, there is little more behind it.  And the consumption is strong for silver in Asia.

The first chart below is one of the most important I can imagine for you to understand.   What it is basically telling us is that the demand for physical bullion from Asia has been overrunning the highly leveraged paper markets of NY and London, having taken all that the scrap and new mining outputs can produce.  And importantly the central banks themselves have turned to net buyers, and are attempting to secure their own sovereign supplies from the whirlpool of hypothecation.

This is resulting in abnormally high leverage in paper claims and a relative scarcity of gold for immediate delivery, as common sense would seem to suggest if we understand what is happening.  And it is.

Speaking of The Bucket Shop, there were very few deliveries tallied yesterday, and a slow bleed of bullion from the warehouses continues.   It looks like JPM is the dominant bullion player in physical silver.  Gold is piling up a bit in Comex Hong Kong.  Marshaling their forces for a big withdrawal most likely.

I am sometimes stunned by how many other sites refuse to even link to this sort of thing, even consider it, even mention it, and by how many are made so insecure at the thought of something different.   This information has been shut out of some of the finest venues, although they usually make up some lame excuse for it.  Or just ridicule it.

Most people do not want to leave their comfortable harbors of the familiar, and put out upon the troubled seas of thought.   That is what these kinds of generational change, the big turnings if you will, are all about.

So the option expiration is over.   Let's see what the follow through, if any, looks like into the weekend and next week.  I am not confident that the field is won, so let's play it a bit tightly for now.

Slowly, but surely, the times, they are a-changin'.

Have a pleasant evening.


Related:  Shrinking Supply of Physical Gold In London For World Demand
               Swiss Refiner: Physical Tightness Reflected in the Price of Gold 'Not At All'

SP 500 and NDX Futures Daily Charts - Ave! Morituri te salutant

"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage. Intellectual myopia, often called stupidity, is no doubt a reason.

But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right. The sensitivity of the poor to injustice is a trivial thing compared with that of the rich."

John Kenneth Galbraith

Stocks came in much lower this morning, roiled by the markets in Asia and Europe overnight.

And Wall Street is still throwing a hissy fit because Janet did not raise interest rates, and I think more importantly because so many other central banks are now cutting rates.

Contrary to popular beliefs promoted by your favorite mainstream media outlet, there is no sustainable economic recovery.

The oligarchs are taking the greatest share of income growth and Fed monetary stimulus for themselves, and their spending patterns tend to be focused in certain high end areas of consumption, and their investment patterns are often predominantly monopolistic and predatory.

And so we have broad wages stagnant, aggregate demand sluggish, but rents outpacing wages, and housing bubbles in the haunts of the moneyed.

This is not a sustainable situation, but I do not yet see what will change our path from it to something more beneficial and just and advantageous for the nation and the people as a whole.

The very rich and the privileged think that they are winning the race with their cleverness and hearts hardened by custom, but in reality they are running away from the fullness of life.  They are empty souls who seek to plug their emptiness with warehouses of material things,  acolytes of the abyss,  the walking dead.

And what is worse, the only real sadness, it that they are willfully blind, blinded to that love which is moving, even now, among us. And that is their best and perhaps only hope.

Winning...

Have a pleasant evening.