Eastern Hemisphere Physical Gold Buying is Going to be the Federal Reserve’s Waterloo!

Source: Merk Investments

Connecting all the dots, there is no question in my mind that the big price smashing of gold in mid-April was an operation designed to shake loose enough 400 oz. gold bars out of GLD in order to satisfy the enormous delivery demands coming from Asia, India and even within Europe GLD is the only possible source of above-ground 400 oz. gold bars that could be used to satisfy this enormous demand for physically deliverable bars.
At some point, and probably sooner than most people are willing to believe, this physical demand is going to force an upward “explosion” of the paper derivatives being used to hold down the spot price right now

In 30 years of studying and trading the financial markets, I have never seen contrarian indicators for any market sector flashing as bullishly as they are for gold and silver, which further confirms my view that the metals have bottomed and are getting ready to give those of us who held on the ride of a lifetime.

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Submitted by Dave in Denver:

In over 30 years of studying, researching, trading and investing in the financial markets, I have never seen the contrarian signals flashing as bullishly as they are for gold right now.

It’s really quite astonishing.  Especially the degree to which the negative media reports – especially from Bloomberg News and CNBC – are piling up like dead bodies in the aftermath of the Mt. Vesuvius eruption.

I want to “connect some dots” for everyone who has been worried about the rather large liquidation of gold from GLD.  In fact, media citations of this gold drain have proliferated like the odor of burning marijuana in the streets of Denver now that pot has been legalized (trust me, it’s everywhere).

But what is really going on?  Let’s look “under the hood” at some relevant information that is being left out of a lot of the financial reporting in the U.S.  To begin with, the way gold is put into or taken out of GLD is via the Authorized Participants.  These are the primary market makers in GLD shares.  When they collect a basket of 100,000 shares from buyers or sellers, they take the cash proceeds and either buy gold to move into GLD or buy gold from GLD to remove the gold from the trust.  The current list of AP’s, at least according to GLD’s latest 10-K filing are:  Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sach, HSBC, JP Morgan, Merrill Lynch, Morgan Stanley, Newedge (a online hedge fund oriented futures bookie), RBC, UBS, and Virtu Financial (another online hedge fund bookmaker).

If the price of gold – for whatever reason, legitimate or not – gets crushed, it will tend to generate a lot of selling in the shares of GLD.  In turn, that will generate the ability of the AP’s to collect 100,000 share baskets and convert those baskets into gold that is removed from the GLD vault and into the “custody” of the specific AP who is turning in the shares.  At today’s price of gold, 100,000 shares represents about $14.2 million – 9,627 ozs of gold, or roughly .29 tonnes.  Since the beginning of the year, roughly 293 tonnes of gold has been drained from GLD, which had 1350 tonnes in it – allegedly – on 12/31/12.  Nearly 30% of the total amount of gold that has been drained from GLD occurred in the 3 weeks since the April 16-17 price massacre.

So where, you might ask, is all this gold going?  It’s not just vaporizing into thin air.  Using today’s price of gold, 293 tonnes is worth about $14.5 billion.  If you look at that AP list above, all of them except the two hedge fund bookies are LBMA “bullion bank” market makers.  Unless these bullion banks are keeping the gold for themselves – and if any of them were, it would have to show up in the footnotes of their next 10-Q – that gold is being delivered to buyers of it on the other side.

So, who would be buying this gold?  Based on numerous news service reports, which often seem to never make their way into the U.S. financial media reporting, India and China combined through the end of April have imported somewhere around 700 tonnes of gold, plus or minus 100 tonnes.  What’s 100 tonnes among bullion bank friends when GLD still has 1,057 tonnes left?  Here’s one news report – actually from Bloomberg – which is calculating that China purchased around 223 tonnes of gold in March alone:  LINK  That is a staggering amount of gold (mostly 400 oz bars – the type of bar in GLD’s vaults) when you consider that the global annual mined production of gold is around 2500 tonnes, and declining.

And here’s an account out of India about the massive gold demand there in April and May:

 “The biggest slump in gold prices in more than three decades on April 15 spurred banks, traders and jewelers to import more than 100 tons last month, said Rajesh Khosla, managing director of MMTC-PAMP India Pvt. Purchases this month will match April’s imports, he said”

And here’s a refreshingly honest assessment of the situation from an Indian newspaper:

The jump in Chinese physical demand also prompted some banks to ship in more supplies from London and Swiss vaults, traders said  LINK

If you read that entire article, you’ll see that in 2012, India/China imported more than 1/3 of the global  gold production and will likely account for close to 50% this year.  This is the unintended consequences for the Central Banks who are spear-heading the manipulation of the price of gold for the purposes of defending the dollar and fiat currencies.

This rabid demand for 400 oz. gold bars from China/India (not to mention Russia, Turkey, Viet Nam, pretty much all of southeast Asia) goes a long way toward explaining the rumors that were circulating during February and intensified in March that the LBMA was in danger of facing a big delivery default.

Layer on top of this the fact that many wealthy families in Europe are now demanding delivery of the gold bars that JPM and other bullion banks are holding custody of.  The report on this from my friend was confirmed independently by a source of Bill Murphy’s over in Europe.  This is exactly why ABN/Amro announced a week before the $200 hit on gold that they would no longer deliver physical gold from their gold investment account product and would instead only settle redemptions in cash.  That product catered to high net worth investors over there.  ABN didn’t have the gold that would be required to satisfy delivery claims.  It was a fractional bullion investment account, just like all the other big bank “bullion” investment products.  Morgan Stanley settled a lawsuit several years ago for this type of scheme using silver.  But they never admitted guilt.

So in connecting all the dots, there is no question in my mind that the big price smashing of gold in mid-April was an operation designed to shake loose enough 400 oz. gold bars out of GLD in order to satisfy the enormous delivery demands coming from Asia, India and even within Europe.  GLD is the only possible source of above-ground 400 oz. gold bars that could be used to satisfy this enormous demand for physically deliverable bars.

At some point, and probably sooner than most people are willing to believe, this physical demand is going to force an upward “explosion” of the paper derivatives being used to hold down the spot price right now.  In 30 years of studying and trading the financial markets, I have never seen contrarian indicators for any market sector flashing as bullishly as they are for gold and silver, which further confirms my view that the metals have bottomed and are getting ready to give those of us who held on the ride of a lifetime.

Phil banner

 

Comments

  1. I agree with the title of the article. The only question I have is when should I pencil it in on my New Kid’s on the Block Calendar? Or has that calendar even been made yet ( i.e. the year 2023).

  2. GOLD AND SILVER HAVE NOT BOTTOMED YET. GOLD BELOW 1100 AND SILVER BELOW 20 BEFORE THIS IS ALL DONE.

    • Then you are shorting gold until it hits $1100 and silver $20 at which point you will prepare to go long?
       
       

    • So what?  You still ain’t gonna find a ASE for less than $30 on eBay or your local coin shop.  The COMEX is for suckers.

  3. Seat-belt buckled and shoulder strap cinched nice and snug … I’m ready.

  4. One of the biggest reasons the West should be upset about sending its gold to China isn’t that the West will be poorer, but that these maniacs will be richer:
    http://www.laogai.org/
     
    And… if ever you’re on a vacation in Singapore, and you suddenly need an organ transplant, guess where that organ will come from?
    A freshly executed Chinese political inmate whose organs are sold cheap outside China.
    (And the Muslims accuse Israel of “atrocities”… ha!)
    This is sad… This disgusting regime becoming the World leader.

  5. Midnight gardening anyone?
    A tiny acorn one day will be a strong oak.
    This rabbit hole has a ways to go :)  

  6. I can imagine in my mind the next trick the tptb might have up their sleeve.  Everybody right now is scream “the bottom is in, look at my chart and all my trend lines” but that dont mean s***.  We all get that now, but now that the price has basicly stepped down again and normalized, what would the newbie stackers and old time stackers who need to liquidate some to live do if it just by chance stepped down again by $4-5 ?  Their trying to destroy a movement, not just a few stackers who hate the corrupt system.  

    • You make a very valid point. With the economy getting worse all the time and no end to that in sight, a lot of people who have accumulated – even if they began, say, a decade or more ago – are going to need to liquidate at least to some extent, eventually, to cover expected or unexpected living expenses. I guess, as has been stated numerous times before, it will continue to go on until it can’t.

    • The Doc sure likes his charts.  Most of us know JPM controls where the price goes next, and no chart will tell you that.  But I’ll tell you what I did when it dipped under $30.  I went back to work, and now I’m back to being a buyer.  It was nice having a year of retirement.  I’m still in my mid fifties, perfect health, so work or play, either way…  I’ll retire again in September :)

    • Good for you, SilverHawk… way to go.  Working the system for our benefit is about the best we can manage in this corrupt world.  As long as your job is not too onerous, this should work well.  :-)   

  7. it really should be treason the way they are shipping our childrens future into the control of the east.

    • It IS treason. Mary… and of the lowest and most vile kind.  It is being brought to us by the future inhabitants of the 9th level of Hell, the betrayers of trust.
       

    • I’ve got a lot of things on my mind right now, none of which revolve around gold. However, I need to say something here.

      What if the whole point of this is to level the playing field? Without substantial gold reserves, the East can’t play ball. The west is saying, “Here, we’ll make it easy for you to accumulate a reserve.” It doesn’t matter whose currency gets commodity backed first. All currencies will have to follow suit. Bretton Woods could only work as long as there weren’t gold vacuums distorting the dollar-gold continuum.

    • Oh, wow.  I love it when I’m smarter than a smart thing on a smart day.

      Thanks, Jim Rickards, old chap.  ;)

      http://www.youtube.com/watch?feature=player_detailpage&v=WZjE5fJgrV0#t=465s
       

  8. I think this whole “the east is coming” business is a little overplayed. The gold going to “the east” is still a pittance when compared to what the moneychangers have socked away over the centuries. TPTB still control the most powerful military in the world, the citizens of “the east” are largely unarmed. The real goal of this is the degradation and pauperization of the U.S., moreso than China or any other nation state being enriched.

    • @Kenneth
      If “the most powerful military in the world” where to attack China, it (China) would only have to dump all their US treasuries and the war would be over in their favor. Without the rest of the world paying for the US military the dollar would turn into confetti and the people would revolt. I don’t think the american people will buy another false flag making them fund another insane senseless war. My two cents.

    • @widget – Fair enough, and you make very valid points. My belief is that China knew exactly what they were getting into when they were granted Most Favored Nation trading status, a window of time to do their part to gut American industry and further cripple this nation. They – as did the entities which granted them that privilege – had to know that their “investment” in U.S. currency and treasuries would yield continually diminishing returns, but, again, offered them a window of time to use some of those funds to stockpile what resources they could without upsetting the apple cart – both internationally and domestically - so to speak.

  9. When People buy on the COMEX they are buying Paper.  What is the Bottom of Paper do you Suppose?

    • “What is the Bottom of Paper do you Suppose?”
       
      That which lines the bottom of the bird cage?
       

  10. “Morgan Stanley settled a lawsuit several years ago for this type of scheme using silver.  But they never admitted guilt.”
     
    No, they never do and for a good reason.  The US legal system allows civil suits to be mounted against wrong-doers.  Winning a conviction in a civil suit trial is easier than in a criminal court trial since the burden of proof required is lower.  OJ skated in criminal court but lost in civil court for this very reason.
     
    “So in connecting all the dots, there is no question in my mind that the big price smashing of gold in mid-April was an operation designed to shake loose enough 400 oz. gold bars out of GLD in order to satisfy the enormous delivery demands coming from Asia, India and even within Europe.  GLD is the only possible source of above-ground 400 oz. gold bars that could be used to satisfy this enormous demand for physically deliverable bars.”
     
    I don’t think that any of us really knows whether or not the GLD is the ONLY POSSIBLE SOURCE of 400-oz. bars.  It surely is A source but it very well might not be THE source.

  11. I dont think there is any conspiracy beyond the moneychangers who require special diet needs trying to keep gheir existing ponzi scheme alive..

  12. Whats happening is’ Greed on Steriods’ the luciferians edomites are drunk with their power & fiat money ,read Obadiah and learn of their Prophesy ,a must read!

  13. I am surprised the US billionaires are not putting pressure on the crooked polictical and justic systems?

    • Because not doing that is how many of them became billionaires? :) A clever billionaire would take delivery of their physs and quietly exit through the back door I think.

    • “A clever billionaire would take delivery of their physs and quietly exit through the back door I think.”
       
      Sprott addressed this by saying that he would not do it because he did not relish the idea of having to look under his car every time he got into it.  Of course, with his money, he could hire a couple of former commandos with Uzis under their coats watch over his car, home, and self.  That’s probably not a bad idea, anyway.
       
      Also, if all this NWO crap really is a worldwide conspiracy, WHERE is the back door?  The moon?  lol
       

    • @Ed_B … “Also, if all this NWO crap really is a worldwide conspiracy, WHERE is the back door? The moon? lol”
       
      I’m laughing right along with you, Brother. These ‘bug-out-prepers’ deceive themselves into thinking there’s anywhere to go for escape from subjugation, when there really isn’t any better place than one’s own locale in the final analysis. In the throes of idealized  ’independence’ and ‘self-reliance’, they’re failing to go the next step toward organization of FAR more secure consolidated independence and self-reliance in community with their neighbors.
       
      We now have Governors of 14 States who’ve re-activated their Constitutional State Militias (no, National Guard units are federalized), to stand against grossly un-authorized federal impositions, obviously contemplated by Congress in its increasingly foreboding ‘statutes’. THESE GOVERNORS GET IT. Defense of independence and self-determination is a community matter, every bit as much as of individual preparedness.
       
      So, all you Don’s and Dorothy’s out there … get the heels a-clicking and repeat in unison … There’s No Place Like Home, There’s No Place Like Home …

    • Exactly so, Pat.  There really IS no place like home.  If we ever do have a real SHTF scenario wherein the fabric of civilization comes unraveled, there will be places where it devolves very quickly into an “us vs. them” situation and if we don’t look, talk, or think like the locals, we will definitely be placed in the “them” category.
       
      I applaud all who prep because they “get it” insofar as bad things happening and them being ready to preserve their family and friends from it to the extent that they can.   But I take exception to the idea that “bugging out” is wise.  In many cases, they are ready to bug out and leave very large amounts of survival supplies that they have carefully built up and may desperately need.  Far better would be to remain in place, gather our friends and family around us, and be ready to fight like hell, if necessary, for what we have and need to get through the worst of the SHTF time!  I can see bugging out as a viable strategy only in case of a natural disaster that is unstoppable or when one has an alternate, more secluded, and well-stocked place as a fall-back position.
       
      As to the national guards… they are not now nor have they ever been the guardians of liberty.  They can and will be federalized at the stroke of the president’s pen, so no help there IF the Fed Gov is collapsing into tyranny.  State militias are good and every state should have one.  There are plenty of patriots who are ready, willing, and able to volunteer their time and expertise in various areas of vital importance to the local states, counties, and towns at need.
       
       

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