Before I get to today’s topic, let’s revisit what we published in last week’s “Most lopsided trade in financial history.” That is, how every fundamental, technical and sentiment factor imaginable is screaming BUY gold and silver. I won’t even go into what I am declaring a “technical default” at the COMEX; as here on January 14th, it’s pretty clear 200,000 ounces that “stood for delivery” of the December gold contract are not being accommodated. “Us goldbugs” may be frustrated by the obvious criminality, but the fact remains that the entire world sees COMEX registered gold inventories have fallen 85% since last April; the entire world sees these deliveries being defaulted on; and the entire world is witnessing Germany’s gold not being repatriated as requested.
Anyhow, to highlight the theme of how “oversold” PMs have become, here are two extremely telling charts from Casey Research; the first, of a more technical nature…
…and the second, pertaining to gold’s value relative to the PAPER assets pumped up by five years of unprecedented government “QE” and market intervention…
To wit, “Dow Jones Propaganda Index” futures have been higher on eight of the nine trading days thus far in 2014, despite the fact the Dow is actually down 2% to date. Conversely, gold is up 2% thus far, but has been attacked at the 2:15 AM key attack time eight of nine times – and 152 of the past 169 trading days. We could not be more vehement about the Cartel’s usage of technical “lines in the sand” to cap PMs for extended periods; and thus, with gold finally on the verge of winning its two month battle at $1,250/oz. – and silver, it’s seven month battle at $20/oz. – we are quite intrigued as to what might happen next. Not to mention, in just the first two weeks of the year, we have already seen two violations of “Cartel Rule #1” – i.e., “thou shalt not allow PMs to surge when the Dow plunges” – and would have seen three if not for last Monday’s PM “flash crash.”
By the way, if anyone still doesn’t believe gold prices are “managed” (read, suppressed), here are charts of the last two days’ trading. “They” couldn’t be more transparent if they tried; and again, the entire world is watching – as they are the U.S. Mint’s website, which hasn’t updated its bullion sales in the past month.
And now for the “main event”; i.e., the dragon taking the mantle of principal economic superpower. In other words…China. Clearly, there’s a reason we spend so much time focusing on China’s financial condition and policies; as holding the largest share of currency reserves, manufacturing capacity, population and likely – gold, ignoring them could mean the difference between wealth and financial serfdom. And no chart tells the story of China’s plans better than that of gold imports into Hong Kong; which not only excludes imports into other major hubs – like Shanghai and Beijing – but the sovereign wealth fund purchases that have not been reported since this 2009 press release.
No matter where one looks, signs that China is hoarding every available ounce on the planet are evident; from the rapid drain of COMEX, LBMA and GLD inventories; to unprecedented, 24/7 activity of Swiss refiners converting “London good delivery bars” into Asia-friendly kilo bars; to the Shanghai gold exchange, in recent months, executing more PHYSICAL deliveries than global gold production.
Not to mention, the words emanating from China’s government – such as its September 2013 statement that it’s easing gold import restrictions, enabling hundreds, if not thousands of entities to participate in the gold market; and its November 2013 proclamation:
The diversity of participants in the gold market will be promoted and product innovation will be encouraged while risk monitoring, early warnings and risk prevention will be strengthened to promote stable development of the market.
–People Bank of China, January 3, 2014
Throw in the fact that in October, the Yuan surpassed the Euro as the second most utilized currency for global trade settlement; and in December, China became the world’s largest trading partner – and it becomes crystal clear that if you do not heed the path of the dragon, you will likely be financially run over.
Heck, even the MSM is starting to get it – or at the least, report it – per this article by Bloomberg, speculating China’s 1,054 tonnes of official gold reserves is probably closer to 2,710 tonnes. How Bloomberg came up with such a specific number, we have no idea (explanation below). However, to unbiased market observers, it’s quite clear China has been accumulating at a breakneck pace for the past five years
China may have vaulted ahead of Italy and France last year to become the third-largest holder of gold, according to a Bloomberg report.
Assets were probably about 2,710 metric tons, compared with the last reported holdings of 1,054 tons in April 2009, according to the report. Italy’s holdings are 2,451.8 tons, and France owns 2,435.4 tons, according to World Gold Council data. The U.S. is the biggest holder with 8,133.5 tons.
–Bloomberg, January 10, 2014
In our view, the sum total of the aforementioned evidence suggests China has accumulated far more than 2,710 tonnes; as frankly, it appears naive to purport China only had 1,054 tonnes in 2009 – and comical to assume it’s only acquired 1,656 tonnes since. Either way, the chart below depicts global gold reserves as a percent of total currency reserves, as of June 2013; although as you can see by the blue footnote, we have a healthy amount of skepticism regarding such figures. Irrespective, if the “average” currency reserve percentage is 36% – and the PBOC now believes “it is no longer in China’s favor to accumulate foreign currency reserves,” the dragon has a long way to go to build its ultimate gold position, whether it holds 1,054, 2,710, or 10,000 tonnes.
And finally – for filing under the aforementioned category of blatant manipulation the entire world can see; as I was editing, Precious Metals were just treated to their second “flash crash” in the past week – care of yet another Cartel operative aimed at pushing gold below its maniacal “line in the sand” at the key round number of $1,250/oz.
Below is last Monday’s “stop logic” gold collapse at 10:14 AM EST, just as it was about to breach $1,250/oz.; as well as today’s at 11:19 AM EST – in both cases, with absolutely ZERO news or material outside market movements. And just like last Monday, prices plunged so fast, they didn’t appear to actually “fall” at all; but instead, to be “re-priced” roughly $10/oz. lower, safely below $1,250/oz. I have seen literally hundreds of PM attacks in my 12 years in the sector; but NEVER ones as sharp, and blatant, as these two.
As you can see, today’s Cartel operative was so rapid, paper gold actually plummeted below Kitco’s chart before it had a chance to adjust; while silver, yet again, is being forced to test its own “line in the sand” at the very key round number of $20/oz. Heck, at 11:11 AM EST, Zero Hedge posted an article citing how silver was “spiking”; which obviously, TPTB – desperate to prevent the inevitable silver short squeeze – took exception to.
Gee, I wonder how the Chinese dragon will respond to the physical gift it has been given; and if you will be smart enough to stand in front of it, or oppose its will.