Gold & Silver Daily
"The technical funds in the managed money were either going long or selling shorts."

¤ Yesterday In Gold & Silver

NOTE:  There were some serious production issues with my Saturday column---and the last of them weren't dealt with until Monday evening.  Large chunks of Part 1 just weren't there, but the rest of the column was fine.  If you'd like to read that part of my Saturday column, the link to that section is here.

The gold price rallied about five bucks or so in morning trading in the Far East on their Monday, with the Hong Kong high coming shortly before London opened.  The price chopped quietly lower from there, before a buyer showed up shortly before 9 a.m. in New York.  That rally, which was allowed to last about five minutes, got capped, with the high tick coming at 10:30 a.m. EDT---and from that point onward, every rally attempt, no matter how tiny, got sold down.

The low and high ticks were reported by the CME Group as $1,176.60 and $1,192.10 in the June contract.

Gold finished the Monday trading session in New York at $1,187.80 spot, up $9.90 from Friday's close---and right on its 50-day moving average.  Net volume wasn't overly heavy at 102,000 contracts, the same as Friday's volume.

Here's the 5-minute gold chart courtesy of Brad Robertson---and you can see the volume spike on the rally, as JPMorgan et al went short against all comers.  I suppose it could have been a short covering rally, but I don't think so.  Add two hours for EDT---and the 'click to enlarge' feature works wonders.

The rally in silver was far more rambunctious---and it started at 1 p.m. in London, which was 20 minutes before the COMEX open.  But the big move, like in gold, started minutes before 9:30 a.m. EDT---and was capped minutes after 9:30 a.m. EDT.  It was all down hill from there until about ten minutes before the COMEX close---and it traded flat in electronic trading after that.

The low and highs were recorded as $16.125 and $16.765 in the July contract.

Silver closed yesterday at $16.37 spot, up 27.5 cents on the day, but would have obviously closed materially higher if allowed to do so.  The same with gold.  And because silver pierced its 50-day moving average and closed above it, net volume was pretty chunky at 42,000 contracts.

Although much smaller markets, the rallies in those two metals met the same fate---and at the hands of the same short sellers of last resort.  Platinum closed at $1,146 spot, up 17 bucks---and palladium finished the Monday session at $779 spot, up 7 dollars on the day.  Here are the charts.

The dollar index closed late on Friday afternoon in New York at 95.25---and the traded flat in early Far East trading.  Then shortly after 1:30 p.m. Hong Kong time, the index began to head south, but it appeared that "gentle hands" were at the ready about 45 minutes later, as it was about to take out the 95.00 mark to the downside.  As it was, the low was 95.04.  The subsequent rally to its 95.60 high tick lasted until 11:30 a.m. in London---and then at 1 p.m. in London, began to head south once more.  The secondary low at 95.20 ended minutes before 9 a.m. EDT.  It rallied 30 basis points from there, before chopping sideways for the remainder of the Monday session.  The dollar index closed at 95.42---up 17 basis points on the day.

The gold stocks opened on their highs---and were back to the unchanged mark by 11 a.m. EDT---and chopped sideways for the rest of the Tuesday session.  The HUI eked out a small gain of 0.06 percent, which was about the same amount that it lost on Friday.

The silver equities rallied to their highs shortly before 10:30 a.m. EDT---and although they faded from there, Nick Laird's Intraday Silver Sentiment Index closed up 1.75 percent.

By the way, Nick Laird was kind enough to send me the HUI and Silver Sentiment results for the week just past.  The HUI closed up 3.52 percent---and the Silver Sentiment Index by 2.22 percent.

The CME Daily Delivery Report for Day 3 of the May delivery month showed that zero gold and 3 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  Nothing to see here.

The CME Daily Delivery Report for the Monday trading session showed that gold open interest for May fell by 18 contracts, leaving 209 contracts still open.  In silver, o.i. declined by 148 contracts, leaving exactly 1,100 contracts till open in May.

There were no reported changes in GLD yesterday---and as of 6:33 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

There was a decent sales report from the U.S. Mint yesterday.  They sold 2,500 troy ounces of gold eagles---1,000 one-ounce 24K gold buffaloes---and 427,000 silver eagles.

Over at the COMEX-approved depositories on Friday, they didn't report receiving any gold, but shipped out 33,484 troy ounces.  Virtually all of it came out of Scotia Mocatta's depository.  The link to that activity is here.

It was a pretty slow day in silver as well, as 34,821 troy ounces were received---and 60,139 troy ounces were shipped out the door.  The link to that action is here.

At the gold kilobar COMEX-approved depositories in Hong Kong on Friday, the received 3,901 kilobars---and shipped out 1,454 kilobars.  All of the activity was at Brink's, Inc.  The link to that activity in troy ounces is here.

Before getting into the stories for today, I want to take a minute to discuss Ted Butler's "just plain weird" Commitment of Traders Report in silver on Friday.  Ted gave me one explanation shortly after the report came out, but on sober second thought the next morning, he came up with a different and far more plausible explanation.

I will quote a few paragraphs, rather than try explaining it myself.

The big, but very welcomed surprise was that the short position in the managed money category grew by a sharp 5,441 contracts to 37,724 contracts despite the price close above the 50-day moving average into the Tuesday cutoff. The most plausible explanation (assuming no reporting error) was that the short position was much larger before the rally into Tuesday. That the technical funds would hold such a large short position, the largest since last fall, while surprising, is unabashedly bullish because this is the rocket fuel of buying that comes when the moving averages are penetrated to the upside once again. And I can only conclude that more technical fund shorts were added on the late week sell off.

Just to put this into the perspective of equivalent silver ounces, the technical funds sold short an additional 27 million oz in the reporting week, increasing what is a purely speculative short position by definition to over 188 million oz. I’d like to see anyone try to explain how this could not be an artificial price depressant and how the CFTC and CME should not be put out of business for allowing it. That it will ultimately be bullish for price is almost beside the point.

So large was the increase in the short holdings of the technical funds that it initially sent me in an analytical direction that proved false and that I spent hours writing about before realizing I was headed in the wrong direction. In fact, I wrote paragraph after paragraph before recognizing my error. I was all about to tell you how the 8 biggest commercials drastically increased their concentrated short position until I recognized it wasn’t the commercials but the technical funds. I am assuming that the report is correct and I am handling the data accordingly. If there are big revisions, that is beyond my control.

I was all set to tell you how the commercial categories changed this week, but I’m throwing all of that out. Yes, the concentrated short position of the 8 largest shorts grew markedly, to nearly 350 million ounces, the largest level in years. But because the trader count on the short side of managed money dropped so much (from 36 traders in the previous week to 28 traders this week) and the gross short position of these traders increased so much (by 5441 contracts) it now seems clear that a number of managed money shorts have entered into the ranks of the 4 and 8 largest traders, something rarely observed. Usually, this is a commercial only group, but that can’t be the case this week.

Therefore, I won’t venture a guess as to what the commercial categories did this week. I just now uncovered this and in my conversation with Ed Steer yesterday, I hadn’t realized yet any of this and what I told him was markedly different than what I think now. That’s one of the hazards of on the spot analysis since we usually discuss the COT report literally minutes after the report is released. Thus whatever Ed reports in his column today will be much different than what I am reporting now and all the blame for that is on me, not him. I did tell him when we discussed the report that I really had to think about it more because it was so strange. How strange, I only came to comprehend moments ago. - Silver analyst Ted Butler: 02 May 2015

Here's a chart that Nick Laird passed around on Sunday evening.  It shows the foreign "Earmarked"gold holdings of the U.S Federal Reserve Bank---and as you can tell, the amount of gold shipped out has been picking up quite a bit since February of 2014.  I have a Zero Hedge story about "Earmarked Gold" in the Critical Reads section further down, but if you can't wait, the link to that is here.

I have a decent number of stories for you today---and I'll leave the final edit up to you.


¤ Critical Reads

Bill Gross: The Bull Market 'Super-Cycle' Is Nearing Its End

Bill Gross said the bull market “supercycle” for stocks and bonds is approaching its end, as the unconventional monetary policies that have kept it alive since the financial crisis are running out.

The attempt by global central banks to cure a debt crisis with more debt doesn’t have much further to run, which will end a rally that’s lasted three and a half decades, the 71-year-old manager wrote in an investment outlook for Janus Capital Group Inc. Investors should stop focusing on price appreciation and instead look to “mildly levered income,” such as his recommendation to short German government debt, he said.

“Credit-based oxygen is running out,” Gross wrote in the outlook, titled “A Sense of an Ending,” in which he compared the final stages of the market cycle with his own mortality. “I merely have a sense of an ending, a secular bull market ending with a whimper, not a bang.”

This Bloomberg commentary appeared on their Internet site at 5:51 a.m. Denver time yesterday morning---and today's first story is courtesy of Roy Stephens.


Stephen Roach: Fed Is Laboring Under a 'Dangerous Delusion'

The easy money antics of the Federal Reserve and other central banks are delusional and bound to lead to a global crack-up, according to Yale University economist Stephen Roach.

Roach, former chairman of Morgan Stanley Asia, suggested the "big bazooka" of quantitative easing has led to inflation of assets like stocks and encouragement of currency depreciation — ingredients for disaster.

"The world economy is in the grips of a dangerous delusion," he declared in a column for Project Syndicate.

"Not only have wealth and currency effects failed to spur meaningful recovery in post-crisis economies, they have also spawned new destabilizing influences that threaten to keep the global economy trapped in a continuous series of crises."

This article was posted on the Internet site at 7:00 a.m. EDT yesterday morning---and I thank West Virginia reader Elliot Simon for sharing it with us.


Bad sign? Retail investors all in: TD Ameritrade

A broad look at the 6.5 million customer accounts at TD Ameritrade indicates that retail investors are "pretty fully invested" in stocks, the online brokerage's CEO said Thursday.

Fred Tomczyk cited several signs of this: margin loans at high levels, client cash at low levels and account holders at the firm logging in frequently. "It's usually a good indication that people are very engaged in the markets and watching their investments closely," he said on CNBC's "Squawk Box."

But Tomczyk acknowledged the potential pitfalls of these trends and what they may portend for stocks. "I wouldn't be surprised if we have a correction here. We've had six [or] 6½ years of up markets here."

Well, dear reader, as you already know, if there is a correction, it will be interesting to see how low the powers-that-be allow it to fall before they step in with "gentle hands".  This news item appeared on the Internet site last Thursday---and it's the first of two stories that I 'borrowed' from yesterday's edition of the King Report.  It's worth reading.


Auto Sales Drop, Miss For 5th Month in a Row; Worst Year-to-Date Performance Since 2009

This is the biggest miss for domestic auto sales since September (and weakest total print since last April)... This is the longest streak of missed expectations since 2008.

This very brief 2-chart commentary showed up on the Zero Hedge website last Friday---and it's another little something I found in yesterday's edition of the King Report.  It's worth a quick look.


Lake Mead water level falls to a landmark low, and is likely to get worse

For Western states enduring a debilitating drought, the news is bone-dry bad: Anemic Lake Mead has hit a historic low level.

The surface of the sprawling reservoir outside Las Vegas late Tuesday afternoon fell to 1,079.76 feet above sea level — nearly 140 feet below capacity — as the prolonged drought continues to evaporate the beleaguered Colorado River system.

Mead's chalky white shoreline is advancing as the waters quickly recede.

For California, Arizona and Nevada, which draw water from Mead, a grim situation is about to get worse: Officials estimate that Mead will drop to the unprecedented low elevation of 1,073 feet as the hottest summer months bear down, with less snow pack in the Rocky Mountains to recharge the Colorado River.

"We're only at 38% full. Lake Mead hasn't been this low since we were filling it in the 1930s," said Rose Davis, a spokeswoman for the U.S. Bureau of Reclamation in Las Vegas. "All the way around, this is bad news. There's not much good to say about 15 years of drought, no matter how you look at it."

This very interesting article put in an appearance on the Internet site [via the L.A. Times] back on April 29---but it's worth reading.  And if you don't want to read it, you should at least look at the pictures, plus the chart at the end.  I thank Brad Robertson for passing it around yesterday.


Presenting the Most Overvalued Housing Market [Canada] in the World in One Chart

In every inflating bubble, there’s usually two camps. The first group points out various metrics suggesting something is inherently unsustainable, while the second reiterates that this time, it is different.

After all, if everyone always agreed on these things, then no one would do the buying to perpetuate the bubble’s expansion. The Canadian housing bubble has been no exception to this, and the war of words is starting to heat up.

On one side of the ring, we have The Economist, that came out last week saying Canada has the most overvalued housing market in the world. After crunching the data in housing markets in 26 nations, The Economist has determined that Canada’s property market is the most overvalued in terms of rent prices (+89%), and the third most overvalued in terms of incomes (+35%). They have mentioned in the past that the market has looked bubbly for some time, but finally Canada is officially at the top of their list.

Of course, The Economist is not the only fighter on this side of the ring.

This very interesting story, complete with chart, is a must read for all my Canadian subscribers.  It appeared on the Zero Hedge Internet site on Sunday---and it's courtesy of reader M.A.


Internet 'rationing' needed as U.K. cannot keep up with demand

Internet access may soon need to be rationed or restricted because the U.K.’s power supply and communications network cannot cope with consumers’ appetite for online video, the Royal Society will hear this week.

The Internet is already consuming at least 8 per cent of Britain’s power output, with the energy demand from data transmission and storage as well as smartphones, laptops and televisions. Demand doubles every four years, according to one estimate.

At the same time optical cables and switches are set to reach their capacity to carry data by the end of the decade.

The Royal Society will hear this week that the country’s communications networks face a “potentially disastrous capacity crunch”, as academics meet to discuss the problem.

This very interesting story was posted on the Internet site on Sunday afternoon---and it's the first of two stories in a row from reader B.V.


German opposition demands probe into BND/NSA surveillance and industrial espionage

The German opposition is threatening legal action against the government unless it shares detailed information on the extent of ties between the German BND and the NSA. Meanwhile Germany’s top prosecutor has launched an investigation into the latest leaks

“Merkel has to show now whether she wants to explain it or cover it up,” Konstantin von Notz, MP of the Green party told DPA. Meanwhile Green leader Martina Renner warned of a possible lawsuit if the government fails to investigate the issue.

Another member of the opposition Left Party also requested more information from Merkel’s government, in particular Interior Minister Thomas de Maiziere and Foreign Minister Frank-Walter Steinmeier about the BND’s “assistance” to the NSA.

“This appears to be reaching a criminal dimension,” Christian Stroebele, a senior Greens member of parliament, told the Rheinische Post newspaper.

This news item showed up on the Russia Today website late Sunday evening Moscow time---and I thank reader B.V. for finding it for us.


Moscow rattles Germany’s Merkel

The Germans themselves speak in hushed tone with a furtive glance of the eye when the topic of conversation grazes Chancellor Angela Merkel’s adult life in the German Democratic Republic (“East Germany”). The well-informed German would tell you that the files relating to the East German spy agency Stasi have been spirited away to the CIA’s vaults in Virginia no sooner than the Berlin Wall collapsed, and Merkel’s past association with the communist party organs lies buried there.

For argument’s sake, the only “third party” privy to the privileged information would probably be the Russian intelligence, which inherited the Soviet era KGB’s archives. Indeed, President Vladimir Putin had served in Dresden as a young KGB officer.

But, although the Germans have been eager to dig up Putin’s life and times in Dresden, they show little curiosity about Merkel’s. Now that may be about to change. The Russian official media organ Sputnik has just featured a sensational piece titled Is Merkel a CIA Asset?

Given Russia’s media culture, such a frank disclosure on a highly respected world leader by an official media agency in Moscow is unthinkable without state approval. The issue is not the veracity of the contents of the Sputnik’s feature article. Frankly, it may not even be earthshaking content, and the German leadership is neither the first to act as the CIA’s “asset” abroad nor is going to be the last. But what matters is the Kremlin’s imprimatur, despite whatever denials of plausible culpability.

This essay by career Indian diplomat M.K. Bhadrakumar was posted on the Asia Times website on Saturday---and as far I'm concerned, it definitely falls in the must read category.  I thank Roy Stephens for bringing it to our attention.


Russian Foreign Ministry: Austria Interested in an Early Normalization of Relations with Russia

Austria is opposed to the long confrontation with Russia and increasing sanctions pressure.  The statement was made by the Russian Foreign Ministry, in connection with the forthcoming May 4-5 visit to Moscow by the Minister for Foreign Affairs of Austria, Sebastian Kurz.

"In the wake of the overall EU led policy on Ukraine, Austria is nevertheless among the opponents of a long confrontation with Russia and increasing sanctions pressure. This position is shared by many Austrian politicians, public figures, and the vast majority of entrepreneurs. Banking structures, the industrial sector, service industries and tourism are not going to fold their business in Russia and do not hide their interest of an early normalization of relations between Russia and the EU ", - reported at the Foreign Ministry.

The ministry noted that "relations between Russia and Austria are developing in a positive manner, characterized by a high degree of mutual trust, stability and the absence of serious problems."

"Leaders of the two countries focus their interest in the development of political dialogue, the expansion of trade, economic, investment and innovation cooperation, cultural, scientific and technical contacts", - said in a statement.

The above four paragraphs are all this is to this article that showed up on the Internet site on Sunday---and it's another contribution from Roy Stephens.


Czech president says anti-Russian sanctions are counter-productive and whip up tension

The West should abandon its sanctions against Russia as they only whip up tensions and in no way promote de-escalation, Czech President Milos Zeman told TASS on Sunday.

"The sanctions are not merely inefficient, on the contrary, they are counterproductive. They only whip up tensions instead of promoting de-escalation. This opinion is shared by Austrian Chancellor Werner Faymann, who said they were stupid things, This opinion is shared by Slovak Prime Minister Robert Fico and Hungarian Prime Minister Viktor Orban," the Czech president said and called for the soonest abandonment of the anti-Russian sanctions. He said trying to press Russia was an unproductive effort only enhancing strains in the relations between Russia and the West.

Zeman said he was sorry the aggravation of the situation in Ukraine had delayed plans of visa-free travel regime between Russia and the European Union. "During European Union-Russia summits, this issue was already gelled but, regrettably, talks on that matter have been frozen over the Ukrainian crisis," he said. "But I am absolutely confident they will be finally resumed."

This news item, filed from Prague, appeared on the Internet site on Sunday---and once again I thank Roy Stephens for sending it our way.


'Warning lights' flash over Greece and France as manufacturing stumbles

Warning lights are flashing over the Greek and French economies, analysts said on Monday, after a closely-watched manufacturing survey showed both nations remained "mired in contraction" in April.

Turmoil in Greece, and concerns that the country could default on its debt and be forced out of the eurozone pushed Greek activity to a 22-month low, according to Markit's latest manufacturing barometer.

The figures also suggested that the European Central Bank's €1.1 trillion bond-buying programme, which has helped to weaken the euro, has so far failed to lift France out of its chronic malaise.

French manufacturing activity contracted for the 11th consecutive month in April, with the rate of decline the fastest so far this year. Markit also said employment levels fell for a thirteenth successive month in April.

This news was posted on The Telegraph's website at 11:02 a.m. BST yesterday, which was 6:02 a.m. in New York.  It's also courtesy of Roy Stephens.


Ukraine: humanitarian disaster as fighting continues

Thirty-five year old Alexandr Ortinsky moved into a 24 square-metre container on the outskirts of Kharkiv, Ukraine’s second largest city, earlier this year.

“As soon as they started shelling we moved,” he says, after fleeing an area held by separatists in Luhansk last summer.

His wife and six children, including one disabled son, are with him.

Together, they share a space that includes a small kitchen, a bathroom, and toilet. The German built-unit is part of larger modular city for nearly 400 refugees.

This article appeared on the website at 9:25 a.m. Europe time on their Monday morning---and the stories from Roy just keep on coming.


Red Phones: NATO Initiates Hotline to Russia's Defense Ministry

The North Atlantic Treaty Organization (NATO) and Russia's Ministry of Defense have set up a direct military-to-military communication link to deal with any issues they might face amid mounting tensions, according to Frankfurter Allgemeine Zeitung.

"NATO and Russia's military command maintain communications links. NATO's Supreme Allied Commander Europe and the chairman of the NATO Military Committee have received permission to get in contact with their Russian colleagues," Frankfurter Allgemeine Zeitung said, citing sources in the North Atlantic Alliance.

NATO declined to clarify when the telephone line was set up but said that communications channels would always remain open, the media outlet noted. Russia has reportedly already received the telephone numbers.

This story appeared on the Internet site on Sunday afternoon Moscow time---and it's also courtesy of Roy Stephens.


Robert Fisk: Who is bombing whom in the Middle East?

Let me try to get this right. The Saudis are bombing Yemen because they fear the Shia Houthis are working for the Iranians. The Saudis are also bombing Isis in Iraq and the Isis in Syria. So are the United Arab Emirates. The Syrian government is bombing its enemies in Syria and the Iraqi government is also bombing its enemies in Iraq. America, France, Britain, Denmark, Holland, Australia and – believe it or not – Canada are bombing Isis in Syria and Isis in Iraq, partly on behalf of the Iraqi government (for which read Shia militias) but absolutely not on behalf of the Syrian government.

The Jordanians and Saudis and Bahrainis are also bombing Isis in Syria and Iraq because they don’t like them, but the Jordanians are bombing Isis even more than the Saudis after their pilot-prisoner was burned to death in a cage. The Egyptians are bombing parts of Libya because a group of Christian Egyptians had their heads chopped off by what might – notionally – be the same so-called Islamic State, as Isis refers to itself. The Iranians have acknowledged bombing Isis in Iraq – of which the Americans (but not the Iraqi government) take a rather dim view. And of course the Israelis have several times bombed Syrian government forces in Syria but not Isis (an interesting choice, we’d all agree). Chocks away!

It amazes me that all these warriors of the air don’t regularly crash into each other as they go on bombing and bombing. And since Lebanon’s Middle East Airlines is the only international carrier still flying over Syria – but not, thank heavens, over Isis’s Syrian capital of Raqqa – I’m even more amazed that my flights from Beirut to the Gulf have gone untouched by the blitz boys of so many Arab and Western states as they career around the skies of Mesopotamia and the Levant.

This short essay was posted on the Internet site on Monday---and I thank reader U.D for passing it around.


The Maersk Tigris Incident: Are we on the road to war with Iran? -- Justin Raimondo

Ron Paul, as usual, was prescient when he warned – in 2007 – of a Gulf of Tonkin type incident in the Persian Gulf that could bring us to the brink of war with Iran. The seizure by the Iranians of a commercial vessel flying under the Marshall Islands flag in the Gulf in order to collect a debt – the result of a legal judgment in a complaint which had wound its way through courts for 14 years – is being blown up out of all proportion by Washington, which has sent warships to the area in order to “guard” shipping and ensure “freedom of the seas.”

Here‘s a Washington Post piece claiming the Iranians violated international law when they seized the vessel, but apparently the same rules don’t apply to the Americans. No one raised much of a fuss, back in 1991, when the U.S. seized a Panamanian-flagged ship accused of defrauding the U.S. military: there was no court case, and yet the U.S. claimed its civil forfeiture rules gave it the right to “arrest” the ship. And then there’s this 1987 case where the U.S. seized a Liberian-flagged ship because the crew hadn’t been paid. This is the typical pattern where Washington is concerned: the rules, such as they are, can be bent according to the U.S. government’s convenience.

The U.S. State Department is claiming that they have a treaty obligation to defend Marshall Islands shipping “under the terms of an amended compact entered into force in 2004,” i.e., because the islands are, in effect, a U.S. protectorate. However, initially, the Pentagon was singing a far different tune, saying no such obligation existed.

This shortish essay by Justin was posted on the Internet site yesterday---and once again I thank Roy Stephens for sending it along.


In Rush to Help Nepal, India’s Modi Ends Up Annoying Its Leaders

It took just about four hours after an earthquake ripped across Nepal on Saturday for India to get a C-130J Super Hercules cargo airplane and its roaring propellers headed toward the disaster zone, with relief workers aboard.

Almost 100 disaster personnel soon came in a C-17 Globemaster III. An Ilyushin IL-76 went next, with additional people and five sniffer dogs to find survivors.

More followed in what amounted to an airborne armada from Indian Prime Minister Narendra Modi. For the people of Nepal, the second-poorest nation in Asia now living in a landscape pocked with flattened homes and ruptured roads, it was a godsend. Thousands were dead and millions homeless.

But less than a week later, the efficiency of Modi’s response -- part of a wider effort to improve ties with the region since he took office -- is having an unintended consequence: It’s made clear just how underequipped and dysfunctional Nepal’s own government has been in the aftermath of the earthquake.

No good deed goes unpunished, I suppose.  This Bloomberg news item put in an appearance on their website at 3:25 a.m. Denver time yesterday morning---and I thank Nitin Agrawal for sending it our way.


Jim Rickards: Speech to the National Center for Policy Analysis

This speech is in two parts---and in transcript form.  There's no audio or video track.  The link to Part 1 is here---and Part 2 here.  The Q&A answer session is the only part worth reading in my opinion and, for whatever reason, it's stuck on the end of Part 1.  It has to do with China, SDRs, IMF and gold.  I thank Harold Jacobsen for finding both of these for us.


Why Central Banks Hate Physical, Love "Earmarked" Gold, and What is the Difference

Several days ago we showed the dramatic conclusion of what happened to Czechoslovakia's gold which had been placed at the Bank of England for safekeeping days after Germany annexed the central European republic ahead of the start of World War II. We hate to spoil the punchline for those who haven't read the post yet, but the her it is: it was gone; it was all gone.

And all of this happened with the explicit assistance of the Bank of International Settlements which was formed in 1930 to promote the free flow of capital and global economic growth. Instead, time and again, what the BIS has proven its only mission to be, is to facilitate the spread of intangible assets and fiat currencies while it quietly confiscates, sequesters and aggregates (for a select group of individuals) he world's physical assets. Mostly gold.

In fact, until the advent of the BIS, gold held by central banks came in one version. Physical.

It was only after the BIS arrived on the scene did gold's macabre doppelganger, so-called paper, registered or "earmarked", gold emerge for the first time.

Courtesy of Adam LeBor's book exposing the history and inner workings of the BIS, "The Shadowy History of the Secret Bank that Runs the World", below is a brief story of how earmarked gold came into being.

This commentary showed up on the Zero Hedge Internet site on Sunday afternoon EDT---and it's the third and final offering of the day from South African reader B.V.  It's definitely worth reading.


LBMA adviser, former Barclays executive will help central banks rig the gold market

Confidentiality in business is often a given, and in relation to precious metals, if the "additional sensitivity" in precious metals transaction was related to physical security and security of transport and vaulting, this would fall under normal "additional security." But the context of Spall's comment suggests that this "additional sensitivity" means market sensitivity. This is supported by the Spall's next observation, which clarifies that, yes, indeed, there is a need for "additional sensitivity" particularly "when it involves the official sector, such as governments, central banks, and sovereign wealth funds."

Spall therefore concedes that the London gold market and the LBMA will not provide transparency when dealing with the "official sector" because the "official sector" requires this lack of transparency. Spall's statements thus also indicate that the commercial sector will gladly give the official sector this "additional sensitivity" -- that is, this lack of transparency.

So the question becomes: What transactions in gold are being undertaken by the "official sector" that require such secrecy and sensitivity?

Most likely these official transactions involve the surreptitious rigging of the gold and currency markets, transactions that, in 1999, the staff of the International Monetary Fund found member central banks so determined to conceal.

Spall's advertisement for his new company is more evidence supporting the frequent assertion by GATA Secretary/Treasurer Chris Powell that "the location and disposition of national gold reserves are secrets far more sensitive than the location and disposition of nuclear weapons."

This longish commentary by Chris Powell, with several embedded links, showed up on the Internet site on Sunday---and it's worth your while.


Gold paperization in India won't be happening any time soon

Writing today in The Hindu, the second-largest English-language newspaper in India, published in Chennai (formerly Madras), former Indian government official Sutanu Behuria explains why the sort of monetization -- paperization, actually -- recently proposed by the country's government for the vast amount of gold held by the Indian public is not going to happen any time soon.

It's not just because of the centrality of gold in Indian culture and religion, Behuria writes. It's because the country lacks the infrastructure that would be necessary to standardize and evaluate any gold submitted for monetization.

"It is likely that it will take considerable time to put the architecture in place."

Behuria's commentary is rather misleadingly headlined "All That Glitters Is Not Gold" and it's posted at The Hindu's Internet site on Sunday IST---and I found it in a GATA release---and it's certainly worth reading.


Indian gold jewellery industry demand to grow 8-10%: ICRA

The ICRA report notes that India’s gold jewellery industry could record a growth of of about 8-10% in the medium to long-term, driven by growing penetration of the organised sector and improving consumer sentiments, the report stated, reports say.

Also, the long term, gold jewellery demand in India is being driven by the growing lifestyle of disposable income, especially in Tier 2, Tier 3 and rural markets, which would influence the demand in a significant way, reports add.

Import over medium term would reach levels as were prior to the restrictions imposed, largely replacing sourcing of gold through the unofficial channels / recycled gold. The report said large retailers could clock 10%+ growth over the short-to-medium term and retailers overall would record a notable growth.

The above three paragraphs are all there is to this tiny gold-related article that was posted on the Internet site on Saturday---and I found it on the Sharps Pixley website.


China’s SGE gold flows still at high level – 51 tonnes last week

For the second week in a row, gold withdrawals from China’s Shanghai Gold Exchange (SGE) have been at around 50 tonnes – a high level for the post Chinese New Year period. Withdrawals from the exchange for the first 16 weeks of the year have already reached around 780 tonnes suggesting that if flows out of the SGE are maintained we could be in for a new record year with withdrawals well in excess of those of 2013, which totalled almost 2,200 tonnes. As we have said in these pages before, whether one considers SGE withdrawal figures to equate to Chinese gold demand, which the Peoples Bank of China would seem to suggest, or whether the true consumption figure is actually quite a bit lower as the mainstream gold analysts reckon, they still remain an excellent indicator of demand growth or fall in the world’s biggest market for the yellow metal.

Time was when Chinese mainland net imports from Hong Kong were considered the best proxy for Chinese demand and up until just over a year ago this was very much the case with the majority of Chinese gold imports coming in by this route. But since then the Chinese have opened up the routes by which gold can be imported and we suspect that now at least 40% of gold imports, probably even more so far this year, go directly into the Chinese mainland via ports such as Shanghai and Beijing, thus bypassing Hong Kong altogether.

I had the chart for this in my Saturday column, but Lawrie writes it up very well---and it's worth the read.  It was posted on the Internet site yesterday---and it's the final offering of the day from Roy Stephens, for which I thank him.


China's True Gold Holdings to Remain a Secret After All

What caught our attention is what the IMF spokesman said almost at the very end of his press conference. To wit:

QUESTIONER: Just a few questions about other countries. A quick clarification on SDR, in January the managing director mentioned there would be an informal board briefing in May. Is that still happening, or has it been pushed back?

MR. RICE: On the -- sorry, I didn't catch the first part on the --


MR. RICE: Yes.

QUESTIONER: Is May still the -- this month is still the timeline? Or has it been pushed back?

MR. RICE: .... the board meeting has been deferred because the work is underway and we'll let you know as soon as that board meeting is scheduled again....

The headline to this Zero Hedge story from Sunday afternoon EDT would be more accurate if it read "China's True Gold Holdings to Remain a Secret For a While Longer".  It's also worth reading---and I thank 'David in California' for passing it around.



¤ The Funnies

Here's the last photo from my Sunday outing of ten days ago---and I took it in the midst of all those seagull shots that I posted in Saturday's column.   There's a small toboggan hill just to the right of where I was photographing seagulls.  This little little girl ran down the hill and stopped to examine something---and silhouetted against that sky like that, I could I resist!  I cropped out some sky and grass---and here it is.  The is from at least 100 meters away.  The 'click to enlarge' feature really helps here.

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¤ The Wrap

Another rally in four all four precious metals that were stopped in their tracks by JPMorgan et al and their HFT buddies.  When will it end, you ask?  Beats the hell out of me.  Here are the 6-month charts for all four precious metals---and you don't need to be a rocket scientist to figure out what happened today.

There wasn't much deterioration in gold, because for the most part it stayed below its 50-day moving average, but silver was another story.  It broke above and closed above its---and it was obvious that the technical funds in the managed money were either going long or selling shorts---or a combination of both.  On the other side of the trades were "da boyz"---selling longs and buying whatever shorts necessary to kill these rallies stone cold dead.  And, for the most part, it was "Mission Accomplished".

If they hadn't been there, you can let your imagination run wild as to where prices for all four precious metals would be at the moment.  But that's why they're there, dear reader.  The banks say that they're there to add "liquidity" to the markets,  but the fact of the matter is that they're only there for marked rigging purposes.

And as I write this paragraph, the London open is fifteen minutes away and all four precious metals are currently trading around the unchanged mark from Monday's close.  Net gold volume is just under 10,000 contracts, which is pretty light.  Silver's net volume is a hair under 2,900 contracts---and the dollar index, which hadn't been doing a thing up until around 2:15 p.m. Hong Kong time, blasted 25 basis points higher in just a few minutes.

Today at the close of COMEX trading is the cut-off for this Friday's Commitment of Traders Report---and its companion Bank Participation Report---and I'll be more than interested in what precious metal prices do, or are allowed to do, during the New York session today.

I'm heading off to bed early tonight---and as I write this paragraph at 3:45 a.m. EDT, I see that all four precious metals are down a hair from Monday's close.  Gold's net volume is just under 13,000 contracts, which is still pretty light---and silver's net volume is just under 3,900 contracts.  The dollar index is now up 27 basis points---and a bit off it's earlier high.

After yesterday's price action, I have no idea what to expect during the COMEX trading session today, so nothing will surprise me when I check the charts later this morning.

See you tomorrow.

Ed Steer