Gold and What Moves it.

I had the great opportunity last week to connect with legendary 'mine-finder', Bob Quartermain, President and CEO of Pretium Resources...

 

In moving on to the subject of physical gold; Bob is known for traveling around the world regularly, updating shareholders of Pretium on operational progress of the company. During his free time on those trips—he visits gold shops.

“I recently came back from a trip to the Middle East,” Bob explained,“When the gold price (on paper), was falling to recent lows of $1350. And when I [went] to the gold souks in the evening either in Doha or in Dubai, it was just full of people in there, trying to buy gold jewelry and bars. So there was this real disconnect, between the physical attraction for gold, and what was going on in the paper markets.”

Further reflecting on the fundamentals of gold, Bob added that, “I’ve been a precious metals bull all my life…[and a] component of my portfolio is in physical gold…it always has a bid, it’s transportable, you can carry it, and you can turn it into cash fairly quickly. You can sell a gold equity and you may need a few days of settlement on that, [but] if you take a gold bar into a bank, you get immediate cash for it.”

The purveyors of this piece of media re-direct/distraction forgot to tell us that QE isn't intended to help the economy.  It's intended to keep the too big to fail banks - both domestic and foreign - solvent and to keep the Government outfitted with low-cost Treasury bond financing.

Skeptical?  Then spend some time reading this ...

Gold, which attracted white settlers from the west and paved the way for modern Australia remained a key income generator for the country even today.

 

CANBERRA(BullionStreet): Gold production in Australia, one of the world's largest gold produces, would continued to maintain current levels despite a 5 percent drop in first quarter this year, according to Surbiton and Associates.

 

Inclement weather disrupted productions in Western Australia, where roughly 80 percent of Australia's gold is mined, it added.

 

In it's latest Gold Quarterly Review, Surbiton said just 63.5 tonnes of the shiny metal were pulled from the ground in the three months to March this year, but that amount is set to rise.

 

It said the recent decrease in gold price will see miners target higher grade ore in the coming months. ...

After sharp increase in gold import in April-May gold imports are likely to come down significantly in June. RBI blocked consignment import route for domestic market and the central government imposing 2% additional import duty is expected to result in fall in gold import in June.

I am very confused by the constant bombardment of the news headlines that tend to contradict each other. One begins to wonder if the “ARMS” race media outlets are running is to craft headlines that have the greatest market impact. In a world of keyword algo readers, the market impact can be immense in a mereTWO SECONDS.

Last week it was the economic lightweight Jon Hilsenrath writing that traders and investors were misinterpreting the Bernanke hints at tapering and the FED’s QE program would remain in place longer than the markets were anticipating. It was thought, as usual, that the Hilsenrath piece was a planted piece by the Bernanke-led communications team. ...

I am privileged to present a comprehensive yet succinct two-part account of the banking/debt crisis in Cyprus, prepared by a knowledgeable resident of that nation.Why do the debt crisis in Cyprus and the subsequent "bail-in" confiscation of bank depositors' money matter? They matter for two reasons:

 

1. The banking/debt crisis in Cyprus shares many characteristics with other banking/debt crises.

 

2. The official Eurozone resolution of the crisis--the "bail-in" confiscation of 60% of bank depositors' cash in an involuntary exchange for shares in the bank (which are unlikely to have any future value)--may provide a template for future official resolutions of other banking/debt crises.

 

In other words, since the banking/debt crisis in Cyprus is hardly unique, we can anticipate the resolution (confiscation of deposits) may be applied elsewhere.

 

Readers may recall that the initial resolution in Cyprus called for all depositors to accept a "haircut" (the harmless-sounding vernacular for confiscation). This triggered widespread outrage, and was soon amended to exempt the first 100,000 euros on deposit. 60% of the remaining "uninsured" deposits would be confiscated and involuntarily exchanged for bank shares, in two tranches of 37.5% and 22.5%: Bank of Cyprus starts process of turning uninsured deposits into stocks (April 29, 2013)

 

In sum, it's extremely important to understand the real story of the Cyprus Debt Crisis to be able to sort out which features of the situation may be considered unique and which ones are shared by other banking/debt crises. ...

Jim Rogers criticised the stance taken by Fed chairman Ben S Bernanke, saying the action has artificially supported the economy and the culmination of the quantitative easing would result in the global economy to face headwinds as the money was not used to spur the economy productively.

He strongly hopes that Bernanke will leave office by January 2014 when his term expires, as his policies damage the global economy in the long run.

Rogers believes the economies of the US and Japan will be hurt very badly when interest rates start to move up again.

Rogers, who currently resides in Singapore, said the domestic saving pattern of Asians would shield them somewhat from a sharp turn in the global economy but it would not leave them completely unscathed.

Rogers also stressed the currencies market will be in turmoil once the quantitative mea sure s put in plac e currently are withdrawn. ...

PARIS(BullionStreet): France has taken capital controls to a new level, banning the shipment of physical gold, silver, and cash through the mail, effectively shutting down the precious metals trade in France!

France has prohibited the sending of currency, “coins and precious metals” by mail.

In new legislation which was enacted May 23rd, the French government decreed that it is forbidden to send all forms of currency - coins and cash and all forms of precious metals - coins, bars and jewellery by mail.

The official gold holdings (rounded numbers) of the US Treasury Department are as follows:

 

Fort Knox147,000,000 ouncesWest Point54,000,000 ouncesDenver44,000,000 ouncesFederal Reserve of NY13,000,000 ouncesOther3,000,000 ouncesTotal261,000,000 ounces

 

Does anyone really think that gold is unencumbered, unleased, and actually physically there? Yes, I know...

They would not lie to us, right?The official numbers must be true, right?They seem like trustworthy people, right?Why wouldn't it be there?

Glad you asked that question. Why wouldn't it be there? Gold is a bit like an "anti-dollar." The Federal Reserve creates new dollars by the trillions - dollars are their product. Wal-Mart sells snow shovels and a few other things, Wall Street sells stocks and everything paper, Hollywood sells dreams and entertainment, but the Fed sells dollars, and they don't like competition. Gold has been real money for 5,000 years world-wide. Federal Reserve notes have been passed off as money for a few decades, and in that time they have lost most of their value as measured against commodities such as wheat, gasoline, and cigarettes.

 

It could have been worse! Western central banks (officially) and governments sold a considerable sum of gold during the 1990s to help repress the price of gold and to slow the apparent decline in the value of paper money. They also "leased" an unknown amount of gold to bullion banks who also sold that gold into the market. The leases are still "on the books," so the central banks officially still own the gold, even though it is probably long gone - likely to China, Russia, India, and the Middle East.

Yes, central banks and governments have motive, means and\ opportunity to suppress the price of gold. They want to support their product (dollars, euros, etc.) and to defeat the competition - gold. If you were a central banker or treasury official who was inflating his currency and consequently reducing its purchasing power, wouldn't you want to suppress the price of gold to delay recognition of your involvement in the devaluation process?

The last weekly COT report to show money managers betting on aggregate against the silver price were published in April -– prior to that no managed money net short silver position had been published since September 2007.

 

Despite this, the GLD's biggest holder, hedge fund Paulson & Co., says it has no intention of closing its Gold Fund, news agency Bloomberg reports, citing a letter to investors it has obtained.

 

"While gold continues to pivot between negative investment appetite, which has slowed, and softer physical demand, this week the market focus will shift to the FOMC meeting and press conference," a note from Barclays says.

 

"The markets are a little bit fatigued at the moment," agrees Victor Thianpiriya, commodities analyst at ANZ. 

 

"They are still looking for direction from the Fed meeting. That's clearly the big driver this week."

 

Over in China meantime, Huaan Asset management, one of two physically-backed gold ETF providers to be approved by the China Securities Regulatory Commission, has said it aims to attract $400 million of initial funding – equivalent to around 9 tonnes at current prices – though no launch date has yet been announced.

 

"Gold hasn't lost its appeal as a store of value in China," says fund manager Xu Yiyi, who will run the Huaan ETF.

 

"Investors here usually like to buy on dips, so a decline in the bullion prices this year should work in our favor." ...

Banks in California’s Central Valley are on high alert, and they should be. There is a young man, around 20-years old I’m guessing from his picture, who has robbed at least six banks over the last few months. He doesn’t use a gun, doesn’t wear a mask, or does he make threats to the bank tellers. Most customers or bank employees never know the bank was robbed even though the man committing these crimes flaunts his face in front of high-tech surveillance cameras time and time again. The young robber simply walks into a bank, hands over a note, and then walks out with stacks of other people’s cash. Local banks are warning employees and urging people to be aware.

My motive for sharing this story of brazenness is less about warning than observation.  Today’s banking industry shows concern over such theft but the truth is they’re more concerned with endangering employees than losing dollars. The mother-ship bank, better known as the Federal Reserve Bank, can….. and will, replace stolen fiat with a keyboard stroke, no worries.

After all, 99.4% of the perceived money safely stored in your local bank doesn’t exist. It’s nothing more than a digit assigned to an account number.

 

Oddly enough, the same 99% percent of folks staggering your neighborhood streets, and still believing their dollars are stored in a bank somewhere, fail to understand the difference between money and fiat currency. This monetary ignorance separates these folks from sound money like physical silver or gold, respectively.

 

The Wells Fargo bank building in my local community is hands down the nicest and most expensive building on Main Street. I’m not a commercial appraiser but guessing this building has a value worth several million dollars, I’m willing to bet your community is no different. Just down the street, but on the same side, sits my humble-looking local coin shop (I would estimate this building’s value around $250k, but no more).

 

One building, the Wells Fargo one, reflects a perception of wealth and security even though it houses no intrinsic source of sound money. The other building, our local coin shop, needs some updating but houses many times the building’s worth in physical silver and gold, or, real money. Unfortunately, less than 1% of the folks passing by recognize the difference.

Folks living in the US are at a real crossroads. Monetary confusion influences them to ...

For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realise that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.  -  George Orwell, "1984"

The ability to perceive and understand the truth about Government/Federal Reserve/Industry economic reports is getting more difficult for those who only look at the headlines or take a cursory glance at the story, without delving into the details.  I'm sure eventually, if Orwell's vision plays out accurately even further than it has already, the details behind the headlines will be conveniently obfuscated -  “Yes, sometimes two plus two is four. But sometimes it’s five or even three. Sometimes it’s all of those at the same time.”  (from "1984").  

So today the NY Fed released its monthly Empire State Manufacturing report, which showed that the general index increased from April's decline.  But the new orders index was -6.7, shipments index was -11.8%, unfilled orders -14.5%, labor index -10. I believe the source of the increase was derived from prices paid, +21, and prices received, +11.3.   There was an increase in the "outlook," a touch-feely sentiment poll, but the 6-month future outlook was negative.

In fact, beneath the headline number the report was down-right ugly.  You can check my ability to read and copy numbers here:  Empire State Manufacturing Survey. ...

With continued volatility in key global markets, today 40-year veteran, Robert Fitzwilson, wrote another absolutely extraordinary piece.  Fitzwilson, who is founder of The Portola Group, put together the following masterpiece exclusively for King World News

Fitzwilson:  “Alexander the Great is the source of a phrase used in modern times to describe resolving an apparently unsolvable problem by ‘thinking out of the box’.  While traveling in modern day Turkey near a region called Phrygia, Alexander deviated from his march to visit a city called Gordium.  

 

He was keenly aware of a prophecy that surrounded a cart and a yoke held together by a knot of cornel bark.  The prophecy foretold that the person who could untie the knot would rule all of Asia.  Many had tried, but none had succeeded.  It was apparently so for the impetuous Alexander....

Stephen Leeb tells King World News:

 

“At some point, and there may make hints of that, they may cut back a little bit, but the reality is the Fed has to continue to pour money into this economy.  If you look at median incomes, they have plunged for the average family since the beginning of the century.

When you look at oil prices bordering on $100 a barrel, that $100 level is a much, much harder hit than it was 5 or 6 years ago because median incomes are so much lower.  The only strong point we have in this economy is housing.  Is the Fed going to pull the rug out and watch everything collapse again?  No.  So I think the Fed eliminating QE is a false worry.  ...

 

With the two day Fed meeting beginning, the Godfather of newsletter writers, Richard Russell, writes about what he calls, “The Great Gold Rip-off.”  This is a fantastic piece where Russell also discussed the impact on the silver market, whether or not the US has all of the gold it claims, and what Russia and China are up to at this time.

Richard Russell:  “It looks like the great gold rip-off is completed and over.  A few of the banks (JPM) spread the rumor that gold was heading for $1,000 and that the bull market in gold was toast.  This set off a panic in gold and silver, which served the perpetrators well.  

As the metals swooned, the crooks, who had sold the metals short, made a tidy fortune as the metals collapsed.  At the same time, they loaded up on cheap gold and silver.  In all, quite a play, during which a good many duped investors dumped their silver and gold.

I understand that there is now a huge speculative short position in gold on the Comex.  This position will have to be covered.  This means driving the shorts out of the market.  Thus, the manipulators will have cleaned up -- first by selling the metals short, and then by loading up on the metals at the bottom of the panic in preparation for (hopefully) the ride up.

My guess is that China and Russia soaked up a good deal of the bargain-priced gold near the bottom of the panic. China waits patiently while the US spends its way into bankruptcy. ...

John Hathaway tells King World News: 

Hathaway:  “Right now I am focused on some very key markets.  Japan obviously is making the headlines, but the U.S. stock market is also giving all of the appearances of being at the beginning stages of a substantial correction.

When you think about what’s been a headwind for gold, it’s been the attitude of, ‘Who needs it?  We’re making money hand-over-fist in stocks.’  But I believe we are at the end of that phase now.  So right now I’m watching with the expectation that we are in the midst of substantial and adverse corrections in what have been competing assets for gold....

 

Today a legend in the business told King World News that another “black swan” is going to create tremendous financial chaos and devastation for investors around the world.  Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also spoke about what is really taking place behind the scenes in the gold war. 

 

 

Barron:  “The usual suspects are up to the same shenanigans in the gold and silver markets, but the reality is that physical demand still very, very strong.  Premiums are still high in places like Vietnam, Thailand, China, etc.

It’s interesting that new taxes on gold were introduced in India as the government attempts to clamp down on Indian tremendous demand for physical gold.  The Indian government is desperately trying to get people to invest their money in anything else but gold, but it’s not working...