Fabrice Drouin Ristori: How long can the manipulation of the precious metal markets last ?
Jim Willie: Rather than focusing on the time spectrum, think instead on the event spectrum. Focus not on a sequence of time, but instead on an event schedule in a chain. Systems are sustained by the corrupt players, institutions, and policies. The Gold manipulation will continue until the Gold market is totally broken, until the big banks that control it are totally broken, or until the USDollar & USTBond structures are totally broken.
Personally, I am encouraged by the mid-April events to crash the Gold price. It has resulted in exposure of the criminal element, in exposure of the COMEX & LBMA as being desperately low in Gold inventory, in exposure of the great difference between paper Gold price (futures contracts) and physical Gold price (actual high volume sales), and in tremendous motivation by the very wealthy to reclaim their Gold in Allocated Gold Accounts. The bankers have brought to the table a Prima Facie case that their corrupt Gold market attack was motivated by having no Gold for contract delivery. The Jackass forecast is for the next great scandal to be centered upon the Allocated Gold Account thefts, which my excellent source informs me involves the improper usage, leasing, and theft of over 20,000 metric tons of Gold bullion. The German Government formal request for repatriation is the tip of the iceberg. The banks will not break first since far too protected. It is a contest, a race, between the breakdown of the USD/USTBond structure and the COMEX & LMBA Gold market structure. The former is in the process of being rejected by the Eastern nations, now organized. The latter is in the process of being recognized as an empty arena with no Gold in inventory.
FDR: What will put an end to it ? Physical demand ? Geopolitical event (BRICS) ?
JW: My strong suspicion is that the COMEX & LMBA corrupt schemes will continue ad nauseum, despite the growing recognition of their corruption and empty inventory. Those in control of the Gold market are not subject to regulatory rules or legal prosecution, operating as essential parts of the sprawling fascist system. So they will continue. However, the end will come with the global isolation and then rejection of the USDollar in trade settlement. The recent G20 Meeting in Turkey brought attention to the bypass of the USD/USTBond system. The Eastern nations are working fast to create an alternative system, frustrated and angry at the abuses and corruption in the open. The Jackass forecast is for the new Gold Trade Standard to come, which will arrive within several months. It will not create a standard for banking and currency, as in SWIFT rules and FOREX rules. It will involve a new BRICS Development Fund, which will transform into a USTBond processing plant, converting the toxic USGovt debt into Gold bars. The trade settlement will work toward Gold payments, with an important intermediary function provided by Turkey. When crude oil abolishes the USDollar as the standard payment vehicle, the game is over. The G7 Meeting hastily called in emergency session in the first week of May demonstrated that the Western nations have noticed that time is almost up completely. The death of the Petro-Dollar defacto standard will coincide with the death of the USDollar global reserve currency. The end is being driven by China & Russia working within the BRICS, the G20, and the Shanghai Coop Organization.
FDR: What will be the signs proving that the manipulation is ending ?
JW: When the COMEX & LBMA are turned into an empty arena, with very few players and very little activity and a storm of controversy about contract fraud with growing lists of lawsuit cases. When the COMEX shows no posted Gold price at all, amidst broad controversy as to why, an implicit invitation for lawsuits over contract fraud and cases to recover past losses by investors. When the COMEX official Gold price shows not a small discrepancy with the actual physical Gold price from known publicized transactions at the major trading centers, but rather a gigantic and embarrassing discrepancy. My term is the great price spread between the paper Gold price and the physical Gold price. It is growing, since very tiny supply is available at the paper price, and high premiums are required at the physical price. Shortages will become a major problem, a desired problem for the gold community. When the spread widens further, the Jackass forecast is for the debate to enter the room on whether the COMEX price is an anachronism, an artifact from a corrupt era, a recognized den of thieves under financial press scrutiny, a point in fact as evidence for legal court cases (lawsuit damage or criminal prosecution). Expect court cases long before regulatory action.
FDR: Do you anticipate an overnight ending of the manipulation or a progressive process ?
JW: A progressive degeneration is far more the case, the pathogenesis of a cancerous organism. The Jackass expects the manipulation to continue far beyond what most people anticipate. The manipulation will soon become absurd. Another Gold market ambush attack is likely soon. When the paper Gold price is $600 to $800 per ounce lower in the paper COMEX price, the banking authorities will continue their charade, but have a difficult time maintaining credibility or a straight face before public questioning of Congressional grilling. Remember their motive, which in the Jackass opinion is to escape the clutches of their mountain of short Gold futures contracts by means of a declared Force Majeure. The true Gold price might be several $100s higher than the COMEX price, but the banking cartel does not care. They wish to escape the consequences of the short Gold futures contracts with a legally recognized COMEX Gold price, even though corrupt. If the courts recognize and endorse the corrupt lower paper Gold price presented by the COMEX, then the big bankers can legally escape from catastrophic losses and slither like snakes into the forests of Paraguay. That is their goal, and they do not care if the public laughs at the process, or if the financial analysts harshly criticize them. They care about the legal escape route offered by Force Majeure, then establishment of a fascist police state.
FDR: Is the gold/silver paper spot price still relevant to value physical gold and silver ?
JW: Not at all. It is a guideline which is becoming more and more ignored. Rather the spot price is becoming more understood as the starting point, the reference point, in a negotiated price. That price will vary in different parts of the world, already the case. The remarkable fact to the Jackass is that premiums on physical Gold purchases (whether bars, coins, talens) is coming down from the rising levels seen in mid-April right after the Gold market smash assault attack with a flood of paper rubbish slamming the market. The big challenge to the banker cartel will be to bring Gold to market in order to meet the growing demand. They must avoid grand and even grotesque shortages. The bankers will be drained. Recall back in March through July, the London banks were drained of 5000 metric tons by angry motivated Asian entities. The event was kept out of the news, but not out of the Hat Trick Letter. If price is to be kept stable, then supply must meet the heightened demand. The banker cartel has two choices: to continue to bring supply to market and be drained dry, or to refuse to bring supply to market and watch the physical price premium grow toward $1000 per ounce amidst well advertised shortages and an empty COMEX.
FDR: What direct consequences would a free gold/silver market have on people worldwide — not investors, people in general ?
JW: The consequences could fill an entire book. But the Jackass would write the chapter headings as follows. People could save in a true sense with a proper legitimate store of value, in instruments which do not represent a counter-party risk like in debt securities or gold certificate holders. People could be protected from central bank actions that exhibit extremely destructive policies toward the debasement of money itself. People could be assured that their life savings could not be leased, assigned, subjugated, hypothecated, or otherwise stolen by banking and government officials. People could build more effective barriers from the ravages of price inflation. People would not have to constantly search for investment vehicles that act as inflation hedges from the endorsed ruin of money. People could be protected from banker thefts, hidden and overt.
]]>Via TheRealAsset.co.uk
On April 12th 3.4 million ounces (100 tonnes) of gold was sold in the US futures markets. This was just for starters, the main, side and dessert appeared over the following hours and the next session on the Chicago Mercantile Exchange (COMEX).
As those in the West holding paper gold stood frozen watching the price tick further downwards, those in the East and others looking to buy physical gold, went on a shopping spree. Premiums on physical gold in China, India, Vietnam and across Asia hit highs associated with economic and geopolitical crises. Dealers struggled to keep up with demand.
In the four weeks to April 24th reported inventories of ETFs, funds, and futures market depositories collapsed by over 5.5 million ounces ($7 billion).
The largest physical removals were reported by the COMEX of 1.4 million ounces and the SPDR Gold Trust (GLD), which reported total inventory removal of nearly 4 million ounces.
In their Q1 report, the World Gold Council referred to the ‘dichotomous nature’ of the gold market – this is clear as the paper gold market continues to tell a different story to the physical market.
Today we continue to see ETF outflows and COMEX gold futures have fallen once again this week. Meanwhile, premiums on physical gold in Hong Kong have climbed to $5 per ounce, having been $3 last week, whilst traders in Japan are pushing premiums up in response to Chinese gold demand.
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But, what do people really mean when they talk about the ‘paper gold’ and ‘physical’ gold markets?
Gold futures, gold exchange traded products (ETPs) and physical gold are each different ways of gaining exposure to gold. Each form of gold exposure has its relevant gold market segment catering for investors, yet all are priced according to an international gold price.
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The Futures Market
Futures contracts allow investors to efficiently trade gold, for delivery at a future date – they are one of the most efficient ways to buy gold.
The global gold futures market is worth around $75 billion, with liquidity, in the form of open interest spread, around the world’s major financial exchanges.
The 100 ounce gold futures contract on the COMEX dominates this activity and accounts for 85% of gold futures trading. COMEX has mild competition from 1kg gold futures contracts traded on the SHFE (Shanghai) and TOCOM (Tokyo) which account for 7% each of the futures market.
There is little doubt over which gold futures market enjoys the liquidity monopoly of these exchanges and thus has the biggest impact on setting the gold price.
This was no better seen than back in April when several large sell orders of the June futures COMEX futures contract appeared on the market, over 120% of annual gold production was traded in one day and the gold price plummeted to levels 30% below the all-time high of $1,920.
Exchange Traded Products
Exchange traded products, or exchange traded funds, allow investors to easily invest in a given asset class by buying shares in a security that tracks the price of the underlying asset. The gold ETP market has grown over the last 12 years to rival other gold market sectors.
Made up predominantly of gold-backed exchange traded funds, the gold ETP market is worth $81.2 billion. State Street’s SPDR Gold Trust, known by the ticker GLD, accounts for nearly 60% of this market, representing the main liquidity hub within the gold ETP space.
Together, the top physically gold-backed ETF products are worth over $59 billion, of which $48 billion is held by GLD.
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Refineries and Supply to Physical Gold Market
After the two gold market parts above, we arrive at the physical gold market which is supplied by a range of refineries around the world.
The top refineries in the world have a collective refining capacity of 8000 tonnes, the equivalent to $354 billion. This is assuming that they are able to operate at full capacity and are constantly processing given mine and scrap gold supply.
However, supply of gold bullion to the market is on average 4,400 tonnes per year. This physical gold supply is made up of approximately one third recycled gold, with the rest coming from active gold mines. Supply of gold has remained relatively flat since the start of the gold bull market, twelve years ago, meaning that the world’s growing gold demand has to be serviced by this steady supply.
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It is important to note the lack of mining and refining information in areas such as South America and China – hence why we don’t mention refineries from these areas.
At first glance the gold production capacity from refineries appears to more than match the value of assets traded in the futures and ETPs markets. The nature of trading in these markets is more difficult to compare though, and the paper markets are where the greatest daily volumes occur.
After looking at the size of the relative gold market constituent parts, we need to look deeper to establish where the gold price really gets set and how this happens.
The physical market, although larger, with its lower turnover and churn is less relevant at this time, with gold prices being set in the paper markets of COMEX, GLD et al.
We are thus focused upon COMEX and GLD, the largest liquidity hubs in their respective markets. How do their trading volumes compare?
In the last week, the value of the ‘gold’ traded on the COMEX, far exceeded that on the GLD – by over 20 times in fact.
To put this paper trading into perspective, the annual capacity of refineries is $374 billion. Therefore the last week’s gold trading volumes on COMEX were equivalent to 50% of total annual refinery capacity. Half the physical gold that could possibly be refined in a year was traded in paper form this week.
So, whilst the notional value of open interest on the world’s major futures markets is comparable to the market cap of the gold ETP industry, the volumes traded at the major two liquidity hubs within these different market segments is noticeably different.
The dollar value of trading volume at COMEX is far greater than its largest ETF competitor, GLD, meaning that COMEX continues to hold its place as the largest and most sophisticated meeting place for buyers and sellers to express their gold price opinions, in the form of bids and offers, on what the price should be.
COMEX remains the beating heart of gold price discovery.
Questions Being Raised About COMEX
Gold futures contracts are referred to as ‘paper-gold’ because the size of this market is said to be over 100 times larger than physical gold available. As we said previously, open interest on the COMEX, at the time of writing, accounted for over 85% of demand on the gold futures market, so COMEX receives the most examination here.
In theory investors are able to take delivery of the futures contract on expiry, although few do, instead choosing to roll the contract.
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There has been some attention paid to the scale and pace of draw-downs of COMEX inventories. JP Morgan and Scotia Mocatta have seen the largest outflows of bullion in their repositories. Compared to withdrawals at JP Morgan’s storage facilities of 1.2 million in the first 3 months of 2013, Scotia Mocatta’s drainage of 650,000 ounces seems less remarkable in comparison. Until these recent drawdowns eligible gold stocks at COMEX had been increasing.
The speed and acuteness of recent drawdowns in COMEX inventories – over 2 million ounces since the beginning of the year – suggests that traders are increasingly standing for delivery of their futures position. It is argued that these investors are not exiting the gold market, but simply converting their efficiently entered paper position into physical form.
Read the report in its entirety here.
]]>Fabrice Drouin Ristori:How long can the manipulation of the precious metal markets last ?
Chris Powell: It can last as long as gold investors buy “paper” gold rather than real metal. The primary article of faith about gold is that it can’t be printed, but it CAN, insofar as “paper” gold can be printed to infinity. Gold investors who buy “paper” gold with the hope of price appreciation would do better to flush their money down the toilet. At least that way they’ll avoid commissions.
FDR: What will put an end to it –
CP: Probably only the discrediting of “paper” gold, or a futures market default.
FDR: What will be the signs proving that the manipulation is ending ?
CP: I doubt that we’ll get any signs, though maybe the decline in price of “paper” gold relative to the price of real metal is a sign of trouble for the manipulation. More likely the gold price suddenly will be reset to a much higher level that is more sustainable for manipulation by central banks with less drain on their gold reserves, at which point manipulation will resume at the higher level. I doubt that the manipulation will ever end, since, to preserve their power, governments probably always will try to rig the currency markets, and they’ll probably get away with it until investors around the world are far more informed than they are now.
FDR: Do you anticipate an overnight ending of the manipulation or a progressive process ?
CP: I think an overnight revaluation is more likely now. Of course currency revaluations are always done suddenly, aiming for surprise. No central banks are going to call us a few days in advance so we can arrange our portfolios for the greatest benefit. Only the investment banks that function as agents for central banks will get such calls.
FDR: Is the gold/silver paper spot price still relevant to value physical gold and silver ?
CP: It is if people really can find metal for purchase at the paper spot price. But the paper spot price may be losing some relevance as more shortages have been reported and there is rationing of gold and silver coins from government mints. Shortages and rationing are forms of higher pricing that don’t get included in nominal prices. Nominal prices are little use if the product isn’t available. But indeed, most gold-related assets are still taking their cues from the paper spot price and futures prices.
FDR: What direct consequences would a free gold/silver market have on people worldwide — not investors, people in general ?
CP: Free markets in the monetary metals would liberate markets and peoples generally, and reduce the power of governments and central banks, especially their power to control in secret the prices of all capital, labor, goods, and services in the world. Such liberation is really the objective of those who would expose the Western central bank gold price suppression scheme. We don’t really care what people use as money. We just want them to have options of valuation that are beyond the control of government. Here’s how von Mises put it: “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”
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Anyone following Bitcoin will be well aware of the constant DDoS attacks that the exchange has been subject to, but ComputerWorld is reporting that Bitcoin’s Mt.Gox price is also being influenced traders who use the sites trading software to submit large quantities of trades for very small fractions of bitcoins.
Via CompuerWorld
“Miscreants are also trying to manipulate the virtual currency’s price by using Mt. Gox’s API (application programming interface) to submit trades for very small fractions of bitcoins. It is possible to watch real-time trades on Mt. Gox through services such as Clark Moody’s website, which shows Mt. Gox’s order book, or the prices at which people want to either sell or buy bitcoins.”
“During heated trading, it is possible to see a rapid influx of very small quantities of bitcoin on both the buy and the sell side. A sell order for .0111 of a bitcoin, for example, would represent US$1.33 if one bitcoin is trading for $120.”
“It doesn’t appear that buying or selling a $1.33 slice of a bitcoin would be very practical given the small economy so far for bitcoin services, although the market is growing. But entering lots of small sell orders, for example, can give the impression that bitcoin’s price is falling even if it doesn’t represent the broader market sentiment. Traders can submit more than one transaction using Mt. Gox’s API.”
To counter this apparent misuse of its trading system Mt.Gox is limiting the number of small transaction that a trader can submit and capping small transaction during high volume trading. The limits will allow “some small trades but automatically limit the trades depending on the needs of its trading engine.”
The exchange is also working on a new trading engine that will be run separately from its customer website which will make trading less susceptible to slow downs during DDoS attacks.
A statement on the exchange’s Facebook page during a Monday DDoS attack said “We’re very much looking forward to implementing a much stronger solution very soon and will make an announcement to that effect once it’s in place.”
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The program explored the “the power and politics of gold” and covered a wide variety of gold’s shady history from Nazi gold to The Odyssey Marine, the paper gold market, gold leasing, Fort Knox and gold manipulation. In a surprising move for main stream media, the documentary includes interviews with Andrew Maguire, Erik Sprott and John Embry that discuss the amount of gold held by western central banks and gold market manipulation.
While some don’t believe that the documentary went far enough, it ends with this very relevant question, “in the 21st Century gold still manages to keep its secrets. Perhaps the biggest one of all, where is the gold and who owns it?”
]]>The price of gold has taken a hit in the last few weeks dipping down to the $1,500’s. If you own gold and silver as ‘a put option on the financial system’ this temporary dip is of little concern, what you own is real money. And this week Patrick Barron explained why it is the dollar and not gold that is overvalued.
“The problem with comparing the price of gold in dollar terms today and its price in the past is that it ignores dollar inflation. The price of gold today is around $1,600 per ounce.”
“In December 1980 the CPI stood at 86.3. In January 2013 it was 230.3. (This is hardly believable; i.e., that prices have gone up only 2.7 times since 1980.) Nevertheless, adjusting for the CPI increase since 1980, the price of gold today should be $1,633…about where it is right now.”
“But now let’s look at inflation of the money supply. In 1980 M1 was $.420 trillion and M2 was $1.605 trillion. As of January 2013, M1 is $2.470 trillion and M2 is $10.445 trillion. So, taking into account the great inflation in M1 and M2, the price of gold should be either $3,600 per ounce (M1 equivalence) or $3,983 per ounce (M2 equivalence) for the price of gold, IN DOLLAR TERMS, to match its price at year end 1980.”
“Another way to look at the relationship between the dollar price of gold and dollar inflation is to calculate gold’s dollar coverage price; i.e., for the Fed, which owns 262 million ounces of gold, to back the dollar in gold and make it truly redeemable, it would be forced to set the price at either $9,427 per ounce (M1) or $39,866 per ounce (M2). In other words, at any lower price the Fed would not be able to redeem all of its dollars.”
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“History will look back on this salvo fired across US war financing as being the beginning of the end of the US dollar as the reserve currency of choice.”
“Today’s report, if true, is a salvo fired at the concept that the USA has all the gold it claims and all the gold it stores for others. If true, this event is the most important gold development since Charles De Gaulle called the US hand that it would stand by convertibility which many then assumed it could not because even then the amount of gold held was publicly questioned.”
Read the email here.
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Also on the speaker line-up is Keith Neumeyer, President of First Majestic Silver and Jeff Berwick of The Dollar Vigilante.
The Sovereign Exchange is asking for a donation to GATA of two ounces of silver or $100 fiat dollars. Hor d’euvres will be served along with a refreshment. The event will be limited to 75 people, giving everyone a chance to meet and mingle with Bill, Chris, Keith and Jeff. Jay Taylor, Al Korlein and Peter Spina are also scheduled to attend.
If you will be in Vancouver and wish to join in, please email [email protected]
]]>In a recent appearance on RT’s Capital Account GATA’s Chris Powell gave an excellent explanation of why market manipulation is an important issue.
“What they are doing is really [trying] to seize control of everything economic in the world. And really surreptitiously behind peoples backs. It’s an essentially tyrannical system, that is what we are trying to expose. “
Mr Powell believes the precious metals market to be key to this economic control “Because the central banks themselves say so.” He sites paper by Harvard economists “explaining the traditional historic relationship between the gold price and interest rates.”
“Basically they found that gold is a determinant of interest rates. It’s a determinant of the price of government bonds and that is what the gold price repression scheme is really about. It’s a mechanism of supporting government currencies, of suppressing interest rates and supporting government bond prices. “
“As Allen Greenspan testified to congress in 1998, ‘central banks stand ready to lease gold in increasing quantities should the price rise.’”
“gold leasing is not what central banks sometimes pretend it is, a way for them to make a little money on what they call a dead asset, it is a mechanism of market control. It is a mechanism of defeating a potentially competitive currency, it’s a mechanism of suppressing interest rates, and it’s a mechanism of supporting government bond prices. “
Mr Powell and Mr Murphy go on to discuss silver market manipulation saying “it’s a government operation.”
“you can look it up it’s on the Treasury Departments internet site, the law authorizes the Exchange Stabilization Fund to trade secretly in the gold market and any other market that the Treasury Secretary wants to get into.”
They review their resent discovery of IMF reports on gold leasing, comment on the recent tours of the Bank of England’s gold vault and examine the nature of conspiracies.
It’s an excellent interview and well worth watching.
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