The Coming Shortage Of Physical Gold That Will Change Everything

Is the paper gold scam about to be brutally crushed by a crippling shortage of physical gold?  If so, what will that do to global financial markets?  According to the Reserve Bank of India, “the traded amount of ‘paper linked to gold’ exceeds by far the actual supply of physical gold: the volume on the London Bullion Market Association (LBMA) OTC market and the major Futures and Options Exchanges was OVER 92 TIMES that of the underlying Physical Market.”
In other words, there is a massive amount of paper out there, but very little actual physical gold to back it up.  And right now, we are witnessing voracious hoarding of physical gold all over the globe.  This is especially true in Asia.
As the emerging shortage of physical gold becomes increasingly apparent, the massive Ponzi scheme that the bullion banks have been running for decades is going to completely fall apart. 



Silver Buffs Generic Add2

 
From End of the American Dream:

All of this hoarding is putting a tremendous amount of pressure on those that have made all of these “paper promises”, because the truth is that there really isn’t all that much physical gold on the planet.  In fact, Warren Buffett once estimated that if all of the gold in the entire world was brought into one place, it could be formed into a cube that would only be 69 feet long by 69 feet high by 69 feet wide.

The following is what Egon von Greyerz told King World News the other day…

Governments and central banks have, for decades, leased or sold their gold to the bullion banks.  So they are very likely to own very little of the 23,000 tons that Western central banks are said to hold.

But now bullion banks also have a problem:  They tried to replenish their (physical gold) coffers during the massive manipulative selling that we’ve seen over the last few months in the paper market.  Although they took the price down, most of the physical (gold) that was released by selling from ETFs and hedge funds was absorbed by Asia.

So the bullion banks are still massively short of physical gold.

Right now there simply is not enough physical gold out there and the bullion banks and the central planners are starting to panic.  One of the individuals that really has his hand on the pulse of what is going on is billionaire Eric Sprott

We have seen the COMEX inventories decline rapidly. We know that all of the dealer inventory on the COMEX has already been spoken for by delivery notices, so essentially there will be zero (inventory) if they ever make the delivery.

And the central planners (also) went to India and said, ‘Look, you’ve got to do something about all of this gold buying in India.’ So we’ve had ten different steps by the Indian government to try to curb demand — a 2% tax, a 4% tax, a 6% tax, an 8% tax, and a ruling that banks couldn’t lend money for people to buy gold.

They also convinced the Jewelers Association that as of July 1st they couldn’t sell gold bars and coins. Just last week there was a new rule implemented that if you are importing gold you have to prove that a certain amount is being re-exported. We’ve probably had ten or twelve things (restrictions) happen in six months, all of which is a huge attempt to get the second biggest buyer of gold in the world, after China, to decrease consumption because the gold isn’t around.

The central planners have arranged all of these things. I think it’s just been one big scheme to try to get people dissuaded from owning gold and to cause supply to come out. As you mentioned, because of it (central planner actions) we have the gold forward rates (for gold) being negative, backwardation, and inventories plunging, all of which have been manifested because there is a shortage of gold.

Already the emerging shortage of physical gold is starting to cause some very unusual things to happen in the financial markets.  A recent article by Reg Howe did a good job of explaining what we have been witnessing lately…

By undercutting normal gold lease rates, these super low interest rates have forced central banks to reduce their lease rates to nonsensical levels in order to prevent gold futures from going into overt backwardation. Recall that GOFO, the gold forward rate, is the interest rate for a given maturity less the lease rate for that maturity, and that a negative GOFO represents backwardation. See Gold Derivatives: GLD and Ass Backwardation (5/24/2010); Gold Derivatives: The Tide Turns (5/25/2009). Passing the argument that widely reported premiums for spot physical delivery represent a form of backwardation, figures from the LBMA have now shown a negative GOFO at the shorter maturities for almost three weeks (July 8 through July 25) due to a surge in lease rates, which still remain below more normal historical levels.

Indeed, this unusual event has attracted considerable attention even from those outside the narrow world of gold. See, e.g., J. Skoyles, Backwardation, negative GOFO and the gold price, The Real Asset Co. (July 24, 2013); M. Kentz, Gold futures hiccup indicates demand outpacing supply, Reuters (July 19, 2013); G. Williams, What If, Things that Make You Go Hmmm, Mauldin Economics (July 15, 2013).

The bottom line is that there is a very serious shortage of physical gold, and as this becomes increasingly apparent to the rest of the world, this is likely to cause a tremendous amount of instability in the financial markets in the months ahead.

For much more on this, please see the recent interview with Alasdair Macleod of goldmoney.com that is posted below…

Right now we are also witnessing tremendous demand for physical silver as well.

For example, the U.S. Mint is going to break the all-time record for July by a very wide margin, and it is being projected that sales of Silver Eagles will likely be above 45 million for the entire year.

And remember, unlike gold, silver is used in thousands of different consumer products.  So silver is continually being used up and taken out of the overall global supply.

If silver continues to be used at the current rate, eventually the global supply would be whittled down to almost nothing.  And right now, it appears that the industrial demand for silver is rising substantially.  For instance, a recent article by David Franklin and David Baker described the massive amount of silver that is going to be required by Japan and China as they move very heavily into solar power over the next few years…

With 5.3 gigawatts of new capacity in Japan in 2013 and up to 30 gigawatts added in China over the next three years, the solar industry could potentially have a big impact in the silver market. Silver is a key component in solar panels due to its unique electrical conductive properties, with approximately 80kg of silver required to generate 1MW of electricity. According to the Silver Institute, one megawatt of solar power requires as much as 2.8 million ounces of silver. China and Japan’s solar projects combined will add up to 27 gigawatts over the next three years. This capacity will require approximately 91 million ounces of silver, which means that China and Japan’s new demand could consume up to 11% of global mine supply – and that’s if the world produces as much silver as it did in 2012.

Silver used in solar panels cannot be recycled and therefore disappears from the world’s silver stockpile. If China and Japan can follow-through with their respective solar programs, the silver market could benefit significantly.

So what does all of this mean for you?

What it means is that while we may see wild fluctuations in the prices of gold and silver over the short-term, the long-term prognosis for both metals is absolutely fantastic.

Gold Bars

 

2013 Silver Maples As Low As $2.29 Over Spot at SDBullion!

Comments

  1. Ok, I’ll bite. 
    Imagine me as Forrest Gump.  Not to far a stretch IMO.  The gold market is like a box of chocolates.  You never know what you are going to get. 
    Are the fuktards in the COMEX and LBMA going to win?
    Is backwardation going to give us some tells in the gold price, whether paper market or real?
    Will GOFO rates provide solid intel of precipitous changes  coming in the next few weeks or months?
      Are the Indians and Chinese going to win the gold wars in anticipation of some karmic  precious metal event ?
    Will the statisticians and bean counters be seen as nothing more than the numerical Amen Corner, a lot of sound and fury, signifying nothing?
    Maybe it’s just my nature, but watching this unfold is very entertaining and instructive as history is being written hour by hour.

    PS Will Warren Buffett spend a few of his billions to take advantage of some new technology that allows his consciousness to be downloaded into a new cyborg body. Just imagine Buffett in a Terminator body. Or will he hop the twig and be reincarnated as a tape worm. Expiring minds want to know.

    • LMFAO!

    • Yeah it’s extremely entertaining to watch. Plus having skin in the game is certainly very stimulating as well.
      GOFO doesn’t seem to make any difference to anything, although it does give people something to watch and write about.
      Wishing/hoping that I can continue to ad PM’s at 2009 price levels, but completely sure I won’t be able to. Fully expect Gold to be at $1700+ and Silver fluctuating between $40- $44 by Christmas…..

    • Expiring minds … indeed!

    • +1 for TAPEWORM! 

    • UNCLE BEN AND THE FOMC STATEMENT IS ELUSIVE.

    • So if the COMEX has 434,760 Futures contracts at 100 each, that’s 43 million ounces, covered by 947,847 ounces in the vault, that’s 1 ounce of real for every 182 paper. 1:44 determines the spot price of gold.!!! If you add the options market it becomes 1 ounce to ??? PAPER… Nuts….

      Silver futures and options turn out to be 973,350,000 ounces. Don’t know how many ounces are available

    • small clarification, gold is 100 oz per contract.

  2. Looks like the US mint came clean in July after months of shenanigans.
     
    4,406,500 silver eagles sold. Holy shart.

  3. I just buy (Worthless fiat paper money) physical gold & SILVER on the sidelines. We WILL have a GOLD standard within this year. Or the money changers (banksters) will try to resist by throwing distractions. War, viruses, famine, etc. Can’t change the world unless change yourself. Try ending the television.

  4. This is why it is worthwhile to diversify and not be 100% into Silver.
     

  5. 4 OZ
    Skin in the game and stimulation?  Makes me reflect on some of those hotties RGR and others some up with.
    Where’s Chin when you need him? That dude had some charming young ladies.  He was probably moderated. 
    This is not a porn site and after what i experienced the hands of the Russian Mob and their spyware viruses, I most certainly needed a trojan. Be careful what you type into your browser. One fat finger typo and you’ll find out there are some really bad sites out there
     You do not want to get that virus.   I won’t even open a video from  friends any more.  Way too many nasties out there just waiting to destroy your computer.  Be careful
    There is an article on FOX about a chunk of the sun’s surface 80,000 times the size of the earth that just blew off the surface. 3,000,000 degrees and moving outward at 2,000,000 MPH.
     And it’s coming our way.
      Stay frosty and try to ground some of your more delicate electronics.

  6. Well I just broke down and bought a new Metal Detector instead of my usual Silver, $2000 worth. Now I need to go and find my Silver for free if I get the time. Lol
    As for Gold I have a small amount but then again I’m a Silver Stacker. Keep Stacking
     

  7. Gold is mined and stored. Silver is mined, utilized in a myriad of ways, and as a result, consumed.  End of story.  Stack silver.  Silver’s ONLY downside is that it takes up space, and is heavy.  But, so what, so is the fat lady….and she’s just about to sing!

  8. Okay?! Although this is completely off topic and I didn’t read or watch this video. I am currently watching the news. I quote. “The Republicans will not support the Presidents Stimulus & This will not assist the FINANCIAL CRISIS COMING THIS FALL!” Now when have we heard or anyone has heard about a “FINANCIAL CRISIS” coming this fall in the mainstream media? Can anyone recall. So, it has now been stated that a financial crisis is coming this fall.
    We shall see what happens. 

    • Maybe they are hinting around about a crisis due to the debt limit.  For the last two months or so they have shown the national debt to be $25,000,000 below that limit- with no change one way or the other, but we know the spending continues at a break-neck pace.
      So here’s the new plan-  -  -  “what debt limit?”
       

    • Financial crisis is the same as economic meltdown.  The Feral reserve has debt and credit.   What do you have?  BRICS are going to lauch Iraqi Dinar backed by oil and other resources, China willl likely have Gold as a asset backed currency.  197 countries have agreed to have asset backed currency rather than confedience and a promisary note (FIAT).  

    • S*** will happen!

    • We ONLY hear stuff like that from the MSM when it suits their lefto-communist position and they can blame absolutely everything bad that has ever happened on the Repubs, conservatives, and libertarians.  Otherwise, nope, sorry… not gonna even mention it.
       


    • The video cannot be shown at the moment. Please try again later.

      Max Kieser Crash Jp Morgan 2 year anniversary and it is working. Interviews James Turk

  9. Being new to these parts, I was torn ‘tween continuing on with the dialogue which Willie’s latest had sparked, and going on into the more present moment – AGXIIKs’ opening turned the page for me – the present moment gets the nod, cause his precis of past and present was precise enough to cover the gap. I’m starting to like this place. Maybe “expiring minds” are the way to go out… in style!

    Have to bring a comment from yesterday’s thread(but actually made *today*) into the mix right off…”Mr ED B” took a medium fast pitch and turned it into a run around the bases with this:
    “Perhaps not but there WAS a massive monetary need for both gold and silver that does not exist today… followed up with IF we had a “free market”, we could discuss it seriously”… (for the full the quote pls refer to the Willie piece of yesterday.)

    Which said everything which needed to be said and had not been already in order to line up all the pieces potentially still at loose ends from that conversation. (a)gold and silver traded as money in times past. They do not now…[but will - in certain part of the globe- please consider this trap as baited!] (b) the mythical creature which goes by the name of ‘the markets’…Mr Market…the Invisible Hand…etc etc… is not(IMHO)an active element driving the price structure of items such as the precious metals of the current moment…nor should current denizens of the formerly “first world” consider a “free market” in metals to be a likely component of their future. With those two items out of the way, we can move forward with alacrity to much constructive dialogue – about where the metals might be going – what to do about one’s hoard – where to hold it… and so on. Thanks ED!

    Several comments posted about the punters’ perception of Big Jim W yesterday leave me in no doubt about just how outre his conclusions and presentation are viewed by some amongst us… and therefore I can have not the slightest illusion that the opinions dearest to my own heart – being a degree or two even more extreme than the BIG MON’s own – will be viewed as an even  further dimension of lunacy! But by the light of the silvery moon… let a thousand opinions bloom! Though I’ll be offline in a couple of hours for the rest of the ‘western world’ day, I’m ready to “con-tango” with Mr Eric and the rest of the nest here with a perspective that will prove out to be radically different from what the consensus may be, but you can be sure is offered in a spirit of solidarity and mutual respect.

    My motive here is fundamentally similar to that of he who Napoleon would contemptuously refer to as ‘the Sepoy General’ eg: a wish to see as many of you as possible retreat in good order from an enemy who has taken to the field in overwhelming strength…in order to survive and fight back, another day, on grounds of your own choosing. Flying Wombat and I will be marshaling many opposing opinions about that, I can confidently predict! But we will be surely more alike to von Blücher and Nosey than enemies ‘pon the field!

    With that said, I’m going to fall back on my latent recognition of the need to keep posts brief enough to not glaze eyes, and await the next opportunity to engage those who wish to support the claim that their “invisible friend,” Mr Market, is moving mountains amongst us, rather than molehills… a view that I will happily argue is exactly opposite to what Mr Willie presented in his last piece de resistance… A la prochaine!
     

    • Thanks for the kind words, Hedgey.  The fact that so many of us are able to contribute our bits and pieces to the overall conversation here is what makes this such an excellent site for exploration and knowledge.  I appreciate your posts more than you know.  Several others on here do as well.  Please continue to post your thoughts as they are of real value.

  10. @Silver_Dollar said… “Have you checked that coin for the Omega mark?
    -  -  -  -  -
    Not sure what the ‘omega mark’ is, please enlighten me.

    • LMAO “Made In China”

    • Omega is a yet unarrested counterfiter, who made nearly perfect coins. It took NGC several years to discover the mark. It`s in the eagles claw, a VERY small Greek letter Omega. They may be worth more than the ral McCoy

    • @Mammoth    Omega symbol was used by the ‘Omega Man’ Counterfeiter to sign his work.  Seems this guy produced perfect double eagle counterfeits.  Look for it in the claw of the eagle.  It would be small like a mint mark. 

  11. Hedgey  I like the 3 B’s  Bullion, bullets and babes. 
    Brilliant, Brief and Be gone.  You’re taking away my punchbowl
    Brief—not so much
    Brilliant—questionable at best
    Be gone?
      Sorry, you are stuck with me. 
    But I will try to reduce the fatuous gasbaggery here and there 
    I’m taking prose lessons from Mary B. 
     Cheers.

  12. Conax
    My speculation is that Obama wants to get a one time tax extraction from the corporations holding about $2 trillion in offshore profits earned over the last 10years or so.  Some of these corporations paid 0% to 12% in offshore profits that cannot be repatriated without a 40% tax rate.
     Even with a tax ‘amnesty’ of say, 20%, that would be $400 billion. 
    That one time boost to revenues would allow him to claim he has single-handedly balanced the budgets, beat up all those bad old corporations, reditributed wealth to his base in preparation for the 2014 election cycle  and end up  pushing off the grim work of the  debt ceiling debacle that was supposed to be handled in October 2013   Pushed off by maybe another 6 months. 
    6 months is really a nice timing
    He can get a couple more vacations plus his Christmas vacation before the really hard work gets underway.  It will also help to fund the initial costly tranches of Obamacare, allowing him to claim this ONE TIME TAX  theft is really a savings coming from Obamacare.
    Nice lies if you can pull them off.  We will see

    • “We Will SEE how long that lasts… ”
       
      Oops!  We saw alright!  LOL!!
       
      As to the “hard work”, I am sure that Obumbo will be as far from that as he can get… and probably swinging a golf club, posing on TV, or jetting around somewhere insignificant at HUGE tax-payer expense. And NO, I don’t like it when ANY US politician does it.

  13. “We have seen the COMEX inventories decline rapidly. We know that all of the dealer inventory on the COMEX has already been spoken for by delivery notices, so essentially there will be zero (inventory) if they ever make the delivery.”

    The deliveries have been made, and ownership has transferred.  Some pundits will say that May and June obligations still have to be settled which is absolutely false.  A lot of the delivery notices seen are ‘retenders’ meaning people took delivery, then made delivery of the same quantity.  So if Party A delivers 100 bars on day one and party B stops, that is in effect 100 notices.  If on day two Party B delivers and party C stops, that is now effectively 200 notices.  The delivery has taken place 200x, but only on 100x quantity.  Further, if not withdrawn the stocks will still reside in the “REGISTERED” line (there is no such thing as the ‘dealer’ line and for all the good analysis he does, Harvey does us all a dis-service by calling it such).  
     
    No change in stocks, 200 delivery notices all satisfied representing 100 bars of gold.  Repeat the above scenario a few times and it is easy to see why someone might think that all this gold has yet to leave, the rub is that the ownership has “left” to satisfy the obligation, even if the physical may still be present.
     
    Then the common sense approach… If there was really all these deliveries waiting to be settled don’t you think someone might have made some noise?  I’ve not heard a peep. 
     
    Don’t misread the above, it just drives me nuts when a good story gets blurred by bad interpretation.  As a representation, check the following…  I like Ed Steer, pulled this from his site and is a sentiment I can get behind, we’ll know if it is accurate in about 3-5 days (maybe as soon as 2).  In fact I’m convinced enough that while I don’t have the spare cash for physical gold, i think I am going to sell some of my stocks and buy GLD in hopes of a quick jump higher.  Mary, don’t shoot me, if I’m right I can always convert that extra $ to physical later!!!  
     
    That surprise was the large increase in JPMorgan’s massive net long COMEX gold futures position. The data indicate JPMorgan may have increased its net long position in gold by almost 9,600 contracts to bring that position close to 85,000 contracts. What data? There is only one data point, but it’s a very hard number. The percentage of the Big 4 net long position (which JPMorgan must reside in) jumped to the highest ever at 32.4% and when multiplied against total open interest of 434,750 contracts results in a hard net number of 140,859 contracts held by the big 4 longs. This represents an increase in the Big 4’s net long position of 9,655 contracts from the previous week.
    I’m alleging that JPMorgan accounted for the entire one-week increase in the Big 4 category and that the bank now holds 85,000 contracts of the 140,859 contracts held net long by the Big 4. Certainly, if JPMorgan or the CFTC dispute my calculations, then they can set the record straight. I further allege that JPMorgan holds, once all spreads are removed from total open interest, more than 23.6% of the entire net open interest in COMEX gold futures, up from 20.6% in the previous week. Never has any entity held such a large concentration in COMEX gold futures, to my knowledge. Certainly that is something the CFTC should respond to, as the implications for manipulation in gold has never been clearer.

    • “Mary, don’t shoot me, if I’m right I can always convert that extra $ to physical later!!!”
       
      Lol, Mike.  As investors, neither of us is afraid of or prejudiced against making money in any way that is both legal and ethical.  If someone makes a million dollars in the stock market, some would urge them to give it back.  Not mentioning any names here, but there is animus here against investing in mere “paper”.  Forgetting that for the moment, the name of the investing game is to MAKE MONEY.  This is also called increasing one’s wealth.  This is a good thing, for with money comes both freedom and additional living options.  Yes, profits from paper CAN be cashed out and used for any number of purposes, including buying land, gold, silver, and preps of various kinds.  If someone can do this, they would be foolish not to.  Alas, many people cannot do it or choose not to.  The bottom line seems to be, “Do what works best for you”.  If that is burying your money in a coffee can in the back yard, so be it.  If it is doing a bit of successful investing, then so be that too.  Heck, we can even do combos here, where some of both is done.  Above all else, be flexible in thought and deed.

    • Well, first notice day and JPMorgan took delivery of 2/3 of the gold delivered and did so for their house account. The tide is turning?

  14. I’m fascinated by REPUBLIC OF MARS’s confident statements that a gold standard is happening this year and that the PM community has won.
    I’m also fascinated by hedgey’s recent appearance.
    I’ll be watching.

  15. short enuf 4 u RGR?

  16. Hi guys something strange just happen on CME. The aug gold bid was at 1328.9 and ask was 1334.9 this is the biggest spread I have seen for last few years. It stays this way for at least 30min. It has just recover to bid 1331.2 ask 1331.5. I check the market depth and confirms thus spread is true there us nothing place between bid and ask. 

  17. SSGT where are you located & what is your time zone?
     
    I noticed an inexplicable $5 downward spike in gold at 05:15 in Singapore, which I think matches the opening of the Asian markets. Andy Hoffman over at Miles Franklin has discussed this exhaustively in the past, as being a trick played by the market-riggers to set a negative sentiment at the opening of the market. It used to work a treat for them, but I’m happy to say that it doesn’t seem to do the trick any more. From 09:15 to 09:45 (GMT+8) gold put on $10 – exactly double the *fake* $5 drop at opening!

  18. Don’t mess with my head Mr Wizard.  Short ain’t in the vocabulary.

    It’s like taking a leak off a tall bridge into a chilly river.

    “It’s cold”

    “Deep too”

    Richard Pryor.
    mudbone.

Speak Your Mind