The Gold Illusion

The Gold Illusion

The gold illusion is that paper gold actually represents solid gold whereas in fact the two are as far apart as Melbourne, Australia is to London, UK.

This has never been more obvious as now where it can be seen that Goldman Sachs & Co have accounted for over 93 percent of all ‘gold sales’ over the past three months.*

In the report ‘I’ stands for issues, where the company parted with solid gold. ‘S’ means Stops and indicates where the company takes delivery of the gold.  ‘C’ means customer’s accounts and ‘H’ signifies house accounts. You will see that most transactions end up at zero, meaning that there has been n-0 movement of actual gold.  If any was delivered on a day it was gotten back that same day.   Some of the companies, it can be seen receive more gold than they deliver, others less.  Goldman Sachs, however, does not change one iota.  Despite crying about, how gold the devils brew, it has not relinquished one golden ounce of the stuff this year to date.

J. P Morgan, on the other hand, has relinquished 1,966,00 troy ounces of gold over the past 3 months. 74 percent more than all the gold the US mint delivered in 2012 in its American Gold Eagle program.  (Note Feb, March and April).

Yet, a report by Tekoa Da Silva indicates that the Comex Depository Warehouse Gold Stocks have been depleting over the past three months. This does not gel with the Comex report and it makes one wonder if there is any gold in the Comex at all and I cannot get rid of the notion that this is a way of destroying the gold illusion and preventing customers from demanding their gold be redeemed as the comex never actually had any physical gold in the first place and now it can be said to be almost true.

According to chart sage Nick Laird, this data indicates that:

“Eligible stocks which are owned in LBMA/Comex good delivery form are being drawn down—which means they are being removed from the warehouses. As to how and why they are [being] removed, that is a mystery. [Up until now], eligible stocks were on the continual increase throughout the bull market. Now that trend has changed.”

Meanwhile, while the US government is working furiously to bolster confidence in the US Dollar, across the waters Europe and Asia are taking full advantage of the contrived foot on the price of gold and buying it up.

In New Delhi the gold retailers are paying over the top in order to mean increasing demand.  as customers grab every ounce of gold they can lay their hands on. Retailers are paying 8 to 10 dollar premiums an ounce over and above the international gold price, 4 to 5 times the average in normal peak times.

"We have not seen this kind of premium on gold imports in years," said Suresh Hundia, president emeritus of the Bombay Bullion Association. 

In Dubai it is a similar story.  Frantic gold buying since April the 12 has pushed up the premium retailers have to pay to ensure they retain sufficient stock in this real gold rush with premiums touching 5 dollars an ounce.

The manic buying of gold jewellery at local shops since April 12 is now pushing up the premium retailers need to pay to ensure they have enough stock coming in on a daily basis.

Cyriac Varghese, general manager at Sky Jewellery said, “Since the afternoon of April 12 gold retail sales shot up by nearly three times over the next seven days and this represents the best phase for Dubai’s gold trade in the last 12 years,” said. “But it has also led to pressure for retailers on the inventory side and there is a bullion shortage – our instructions are to snap up any supply so that stocks are constantly replenished. The last thing any retailer wants to see is getting caught with insufficient stock at his shops – if it means paying a steep premium then it will be paid.”

In New York the US Mint has suspended further sales of its one tenth ounce American Eagle gold bullion coins due a ‘depleted’ inventory giving rise to the notion that there is not as much gold in the US as first thought.  

Michael Kramer, president of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York, says they have been inundated with orders from existing and new wholesale and retail customers.

"It's panic. This is one of the busiest times in quite a while. People think gold's at the lows and they want to take advantage," he said in an interview."

The gold illusion is breaking down. 

(In the chart, the February 1 to April 25 delivered gold contracts includes only transactions between Companies.   For that reason MorganStanley’s 307 contracts transferred from  house account to customer account was excluded from the calculations.

Total Net gold deliveries Feb 1 to April 25:

Vision Financial – 1 contract
R J O’Brien – 2
ADM Investor Services INC – 2
Marex – 5
Citigroup Global Markets – 10
ABN AMRO – 110
JP Morgan – 19,660)

*http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf

http://gulfnews.com/business/retail/dubai-gold-buying-spree-leads-to-bullion-shortage-1.1173632

http://www.gata.org/node/12495

http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=187188&sn=Detail

http://online.wsj.com/article/SB10001424127887324874204578440242906344734.html

http://www.reuters.com/article/2013/04/23/usmint-gold-suspension-idUSL2N0DA22N20130423

http://bullmarketthinking.com/comex-physical-drain-accelerates-with-over-7-8b-disappearing-from-all-depositories/

A Run on Gold

Comex Depository Wharehouse Gold Stocks

The world is experiencing an unprecedented run on gold. While paper gold plummets, people are buying up gold like there is no tomorrow and while the media is saying all is lost and gold has done its dash, banks, countries and institutions, as well as individuals, are buying up as much gold as they can get their hands on. 

According to Mehul Choksi, chief executive officer of Gitanjali, India’s biggest retailer of jewelry and diamonds by sales. “The season is very hot for buying with weddings and other auspicious dates coming up," he continued, “The decline will be positive for jewelry as there will be a pick-up in demand because affordability will increase. Volumes will increase.”

“We rushed to buy as soon as we saw prices fall so much and decided to buy jewelry early for our daughter’s wedding in January,” said Blossom D’souza, while browsing through a selection of bangles in a jewelry store in Mumbai’s Chira Bazaar area. “Now we can buy more gold within our budget.”

The Perth Mint reports a record highest activity of the year and, recently, one of the best days out of the past year. The demand for gold coins has skyrocketed with sales of Australian gold bullion coins increasing by almost fifty percent in the first quarter of this year compared to the previous year.

And over in Japan, gold merchants who normally see long lines of middle income and older Japanese cashing in on long held unwanted jewelery are now experiencing the reverse. Buyers of gold now outnumbering sellers, with buyers waiting up to three hours at Ginza Tanaka, the main shop of Tanaka Holdings, to make a transaction.   It was recently reported by a Ginza gold merchant that buyers had taken about 6 kg of gold home by early afternoon on Tuesday last. One 60-year-old man walked out of the store with 500 grams of gold for about 2.2 million yen ($22,500).

Meanwhile, In China and Thailand the rush is on to buy gold as a result of the new forced low gold price.

According to the Financial Times, "The feverish buying has left many of Hong Kong's banks, jewellers, and even its gold exchange without enough yellow metal to meet demand. In Shanghai the gold exchange saw volumes -- often seen as a proxy for demand -- rising to a record on Monday, while queues formed outside some jewellery shops in Beijing"  And Haywood Cheung, president of the Hong Kong Gold & Silver Exchange Society, said the exchange has basically run out of gold."In terms of volume, I haven't seen this gold rush for over 20 years," he said. "Older members who have been in the business for 50 years haven't seen such a thing."

Joni Teves, precious metals analyst at UBS, scommented to clients recently, ."Physical markets have responded to the much cheaper gold price levels, "Our physical flows to Asia have been particularly elevated this week.'

Back in the good old US of A, gold dealers are reporting a brisk demand for gold and silver. Silver is commanding a 20 percent premium and considered cheap at the cost due to the difficulty in getting any.  Delivery times are reported as being around 5 to 6 weeks.

Paul Tustain, Director of BullionVault is reporting volume sales. “Monday and Tuesday were our strongest 48 hour period for new customers this year.”  He said recently. “We normally have about 230 deposits a day (300 on a Monday) and about 100 withdrawals a day (120 on a Monday). Mondays are usually higher because they include weekend activity. On Monday we had 723 deposits versus 284 withdrawals. On Tuesday we had 732 deposits versus 150 withdrawals. Monday was a record day for business transacted, beating the previous peak of September 2011.”

Sources in Hong Kong report volume buying of gold also. “I've been taking this opportunity to stock up on some yellow metal.  “I went to Hang Seng bullion counter yesterday.’ Said one buyer. “The line was out the door.  It took an hour wait to see a teller.  When I asked if people were buying in the dip or selling in panic, she told me that they haven't had once ounce of gold sold back to them all day.  She told me they have sold more gold in 24 hrs than they normally do in 3 months.  Yes, there was a lot of extra security.  The guy in front of me bought over $1 million in gold.  He paid in cash and walked out of the door with the (gold) bullion in a Nike bag….”

A number of analysts have questioned the paper gold plunge and questions are now being asked if JPMorgan, and to some extent the HSBC really have the gold to substantiate the massive sell off recently. As the Comex gold inventories, in fact, have plunged by the largest amounts on record contrary to media ‘reports’ that inventories have increased (see chart) and,instead of inventories increasing by the largest amounts on record, which is what the mainstream media would have you believe, the opposite is true.

Gold is gold and paper is paper.  A paper manipulation does not blind people to the true value of gold. Gold buying is still highly popular as it has been for centuries.  The recent artificial dipping of the futures gold price has only served to give more people a better advantage to buy gold.  There is indeed a gold run.

References:

goldandsilverblog.com/physical-demand-for-gold-and-silver-skyrockets-gold-bullion-coin-sales-highest-since-december-0481/

uk.reuters.com/article/2013/04/16/us-japan-gold-idUSBRE93F18I20130416

www.BullionVault.com

www.hardassetsinvestor.com/features/4699-gold-nose-dives-below-1500-as-etf-holdings-free-fall-fueling-panic-selling.html

www.bullionbullscanada.com/gold-commentary/26069-paper-gold-isnt-real-gold

The Daily Grind.

Buying gold vs selling gold

Buying gold vs selling gold

Buying gold vs selling gold.  Which to do? It is well understood that when something is in short supply, the price goes up. As rarity of a product or service increases, so does the price.  The art world understands this completely. Yet in the gold and precious metals arena we have a completely different story.

On the one hand we have shortages of gold available to buy with major shortages in the availability of gold for sale according to veteran Bill Haynes. Buyers are currently already outpacing sellers by a 50 to 1 ratio.  He recently reported on King World News, “last week we sold more gold and silver than we normally sell in a whole month.  On Friday alone it was astounding because we sold as much physical bullion as we would normally sell in an entire week.  There is a great deal of big money coming into the market on this decline.”

One ounce gold bars are the biggest seller.  And don’t forget the silver market.  The US mint is having a hard time keeping up with the demand for silver eagles and silver maple leafs which are already seeing delayed delivery.   The premium on gold and silver products is at a premium.  

Yet on the other hand we see the ‘price of gold’ going down contrary to the value of gold.  In point of fact it is being driven down with a vengeance by JPMorgan et al.  GATA's Chris Powell stated many years ago."There are no markets anymore, only interventions." And we can see this now quite blatantly in today’s market.  Only recently high frequency traders got stuck in to the gold.  This gold cartel raid of shorting precious metals hit an all time high (or should it be low) recently with massive selling. Over five hundred tones of paper gold were recently sold by the gold cartel in one hit to drive the price down.

Faith in the US dollar as the world’s reserve currency is dropping as countries divest themselves of the currency.  Some countries are now trading directly (Australia and China for example) and the BRIC group of countries, Brazil India, Russia and china are heading towards a reserve currency of their own.   As the world’s gold is slowly but inexonerably moving from west to east the US banks are becoming more and more desperate in their frantic efforts to bolster confidence in the dollar.  Screwing confidence in gold is one way of doing it. Even if it costs more money, but hey who cares, they can always print some more.

But through all this quagmire of who is selling what to whom and for how much, the value of gold and the real gold price remains the same. Buy gold vs sell gold does not change. Gold is a solid precious metal and an ounce of gold will still buy you a jolly good suit.

Gold Price Today

Gold Price Today

The gold price today that you find issued in the media is not the actual goldprice.  It is the paper gold price and subject to manipulation in order to create the apparency of gold being of less value than currency. A fallacy as in actual fact the value of gold never changes.  Gold continues to retain its value in terms of exchange and what one can purchase with it.

During the past few months there has been a heavy trading of paper gold at the end of each daily session in an effort to keep the gold price below 1600USD.  Despite this the central banks are buying up gold to bolster their failing economies.   The Russian Central Bank, the world’s biggest gold buyer now added 570 tonnes over the past decade.  That is over 30 Billion dollars worth of gold. They are not alone. Over the past couple of years, the bank for international Settlements has increased its gold holdings by almost 8 percent. Turkey has increased its gold holdings by over 85 percent and Brazil has doubled its gold holdings.  Many other central banks are energetically buying gold like it is going out of fashion.  Iraq has increased its gold reserves by over 400 percent and Paraguay by a whopping 1152 percent!

In fact, most of the smaller nations have high percentages of gold acquisition over the past 2 to 3 years and are working hard to catch up to the larger nations.

Of course India and China continue to work furiously buying up as much gold as possible with China even buying into gold mines to supplant their holdings at a cheaper price.  And it is all about price isn’t it?  By firmly keeping the gold price down the Central Banks can buy at a lower price.  Makes sense does it not?

The BRIC Nations (Brazil, Russia, India, and China) are notably not sitting on their laurels.  They are working on setting up a new development bank to pool foreign reserves in order to prevent any off balance of payments or future currency crisis.  According to Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, "The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world. There's a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the Western world."

And gold will play a significant part in this. Notice how these are all countries with a very heavy focus on buying gold to supplant their reserves. This is not done out of whimsy. When the crunch comes, and it will, these countries want to ensure they still have some value in their currency.   The future aligning of currencies to gold reserves is getting closer and closer.

A currency will only have value when there is gold to back it.  Remember it was not long ago that the central banks elevated gold to be a 1^st tier in the CAR*

So the gold price today, as expressed as a gold price futures (Notice also the word ‘futures’ is often omitted from the gold price in the media) is not the real price of gold. Only the paper price of gold used to dissuade people from buying the real gold while it is still cheap.

*CAR:  Capital adequacy ratio is the ratio which determines the banks ability to meet its liabilities in an agreed upon time frame and is the capital the bank uses as a cushion against any potential losses it might incur. It is designed to protect the bank's depositors and other lenders. Most nations define what the CAR is going to be and maintain the banks CAR in order to maintain confidence in the countries banking system.