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Yet another day with lots to cover, whilst the “New York Gold Pool” defends $1,300 gold as staunchly as “battlefield $20 silver.”  Yesterday, its “Cartel” utilized prototypical DLITG, or “Don’t Let it Turn Green” algorithms to keep both gold and silver negative; and today, following the 206th “2:15 AM” paper raid in the past 232 trading days, “Cartel Heralded” prices when they attempted to break out naturally, at exactly the 8:20 AM open of the COMEX paper market – and again, at exactly the 10:00 AM EST close of the global physical markets.  And as I write, the paper battles rage on.

24hr Gold Silver 4-17-2014

Meanwhile, “Dow Jones Propaganda Average” futures had their usual “pre-market” surge at 7:00 AM EST; as always on equity options expirations days – as the Fed ensures its masters the “TBTF” banks, profit on call option positions.  In this case, the Dow futures ramp occurred despite its largest component, IBM plunging 4% after a miserable earnings report featuring its lowest global revenues since 2009.  To wit, U.S. equity option expiration period performance is typically the polar opposite of what occurs during COMEX option expiration periods; as said “masters” are ensured profits on their gold and silver put option positions – whilst traders are still foolish enough to buy Paper PM calls, time and again lose their shirts.

Of course, the Physical PM market is another story; as U.S. Mint silver Eagle sales again surged this week – putting 2014’s pace 26% above 2013’s record level, despite weekly rationing; whilst gold forward, or GOFO rates, have, for the first time ever, gone into backwardation for the one month, two month, three month, and six month terms.  In fact, this latest month-long paper attack has been so transparent even propagandized Westerners are starting to get it.  By far, this has been Miles Franklin’s strongest week in some time; and trust me, once Americans re-awaken the inevitable, Cartel-destroying product shortages won’t be far behind.

The big question, of course, is how long can Americans, Europeans and other holders of hyperinflating currencies be “pacified” by relentless campaigns of money printing, market manipulation, and propaganda – when cumulatively, their abject failure becomes more obvious each day?  I mean, when Janet Yellen stands before the public – as she did yesterday – espousing expectations of “full employment” and minimal inflation by 2016, does anyone really believe her anymore?  The Fed has not only been dead wrong about every prediction it’s ever made, but proven to lie about what it’s really doing, in its eternal quest to fool the world into believing the twin myths of “deflation and recovery” under a fiat currency regime.

Five Years of Hard Work

Worse yet, it candidly admits its policies have been highly inflationary, making the rich richer and the poor poorer.  Tell me, can anyone look at these two horrifying, damning charts and conclude anything other than that the Fed is utterly clueless?

FRED Charts

Even the highly secular Japanese have lost faith in their despicable, nation-destroying Central bank – which is why finally, they are lining up to buy gold.  So why not Americans and Europeans, whom clearly are experiencing the same hideous economic trends?  In the U.S., for instance, at what point do people stop listening to propaganda that all bad economic data is “weather-related” – after it’s been proven otherwise, time and again?  I mean, the chart below clearly depicts 2014 to be the worst retail sales environment – barring early 2009’s Global Meltdown I – in the last 15 years, by a wide margin.  Throw in the fact that inflation is higher now than at any time in that period, and you can bet “inflation-adjusted” figures would be even uglier!

Alhambra Partners

Don’t believe me about inflation?  I’m not sure anyone disagrees anymore, as prices for items we “need versus want” are rising so rapidly, it’s hard to keep one’s head above water anymore.  And just wait until Obamacare is fully implemented – when the true meaning of “taxation nation” is fully understood, as in ALL socialist societies before it!  Day after day, we discuss the utter explosion of food and energy prices which couldn’t be more ominous given the dire economic environment.  U.S. food prices rose 20%, across the board, in the first quarter alone with – among others – beef, bacon, chicken, shrimp, and milk surging to all-time highs.  Today, it’s orange juice and egg price surges making headlines; the latter, ironically, as we head into the Easter weekend.  As for the other half of “non-core” expenses, crude oil is again pushing $105/bbl., presaging what could be shocking driving season gasoline prices.

As for the rest of today’s headlines – before I get to today’s primary topic – how about this one, of Obama’s latest “non-GAAP” budget proposal?

Congressional Budget Office says Obama’s FY 2015 budget plan would reduce U.S. deficits by $1.05 trillion over ten years versus current CBO current-law estimates.

CRFB.org, April 17, 2014

As always, it anticipates savings “over ten years,” with the large bulk occurring in the final years, long after Obama’s out of office.  Better yet, the absolute amount, $1.05 trillion, represents no more than a 10% decrease in the roughly $10 trillion of deficits likely under the current plan; that is, assuming the economy “recovers” without interest rates simultaneously increasing from nearly all-time low levels when the national debt approaches $30 trillion; not including, of course, “off-balance sheet” debts and “unfunded liabilities.”  But then, again, since when have U.S. “non-GAAP” projections meant anything in the real world?

Total US Fed Govt

Then you have the “deadly dollar demographics” that will dramatically compound the aforementioned taxation issues; as like Japan, America’s aging population cannot support the weight of a rapidly expanding pool of entitlement dependents.  Throw in the fact that in recent years, the only economic “bright spot” has been a housing bubble created by Fed money printing – which per this week’s bank earnings reports, is clearly collapsing – and you can see how the Fed’s “tapering” propaganda campaign is nearing the end of its useful life.  Oh well, I guess “the 1%” that benefitted from the housing bubble will again be bailed out by “the 99%,” whose only “benefit” from said bubble was a higher cost of living; or perhaps, “bailed in.”

And finally, the inexorable movement out of dollars by dozens of nations, led by the emerging BRICS economies – which are in the process of creating their own trading blocs, central banks, and settlement systems; led, of course, by the Russians – who based on Putin’s speech this morning, will stop at nothing to destroy U.S. hegemony and the dollar’s “reserve currency” status and, of course, the world’s wealthiest, most powerful nation – China.

Which brings me to today’s topic, that of the People’s Bank of China’s “official” gold reserves, and whether or not they’ll update the public as to what they really are.  Or better yet, what they want the public to think they are.  The reason I’m writing of this topic are persistent “rumors” that, since April 24th marks the five-year anniversary of the last such update, the PBOC is planning to give an update imminently.  As you can see below, there is no precedent for specific time intervals between announcements and given that the legal structure of the Chinese gold market was radically liberalized in 2002, it makes historical comparisons even less relevant – particularly given that before 2002, not only was China a non-entity in the global economy, but said dollar hegemony wasn’t even questioned.

PBOC Official Gold Reserve Announcements

First off, I once again need to emphasize that the Miles Franklin Blog deals solely in the realm of fact, not “conspiracy theory.”  Secondly, I have not heard – or read of – any such rumors personally other than readers emailing that they “heard” such rumors.  And finally, if such an event were imminent, how would anyone know beforehand; unless, of course, they were a Chinese insider with an agenda to “leak” such news – which in my view, makes no logical sense.

Personally, I don’t believe there’s a chance the Chinese would show their hand at their critical juncture in history – as if they ever did.  To wit, if you actually believe they had exactly 1,054 tonnes in April 2009, I have a bridge to sell you – given that not only does that number sound incredibly low, but the Chinese government notoriously “cooks” official data.  And if ever there was a piece of official data worth misleading the world about, it’s this one.

Again, it doesn’t take a “rocket scientist” to interpret the buying power emanating from China; as simply viewing this astonishing chart of Shanghai Gold Exchange withdrawals, its quite clear demand is skyrocketing – and thus, “official” reserves well above 1,054 tonnes.  In 2013 alone, a whopping 2,100 tonnes were withdrawn from this one exchange; and thus, given the countless pro-gold comments of Chinese government official in the past decade – let alone, the fact that none of China’s 400+ tonnes of mining output is exported – I wouldn’t be surprised if the real reserve number is ten times, or more, the 1,054 tonne official figure.

In Gold We Trust

Equally important, don’t forget that China is a communist country and thus, the government owns essentially everything.  In other words, there’s a blurred line between “official” and “unofficial” holdings – particularly in the corporate world, where most companies are either government-owned or “affiliated.”  That’s why I think the analysis of the great Koos Jansen is so credible; as he incorporates – in this report – a reserve estimate incorporating various elements of supply, including both “official” PBOC holdings and other, “non-official” supplies likely to be held by government-controlled entities.

Per below, he estimates “official” PBOC holdings – if reported today – would be around 3,500 tonnes but the “unofficial” level, closer to 13,000 tonnes.  In my view, the latter amount is likely reasonably close to reality but no matter what it is, there’s no doubt it’s significantly larger than 1,054 tonnes.  And equally importantly, it no doubt exists – unlike the supposed 8,133 tonnes held by the U.S. Treasury; the supposed 3,387 tonnes held by the Bundesbank (much of it, LOL, housed at the New York Fed); and best of all, the 2,814 imaginary, double-counted tonnes “held” by the IMF.

In Gold We Trust

To conclude, I ask the question – will the Chinese give a gold reserve update on this, the fifth anniversary of the last one?  My guess is no, as frankly, I don’t see why they would purposely sabotage their own efforts to acquire as much gold, at Cartel-subsidized prices, as possible.  Remember, the Chinese government has more than $3 trillion of foreign currency reserves – including $1.2 trillion of toxic U.S. Treasuries and thus, have more to lose, other than the U.S. itself, from a dollar collapse than any entity on the planet.

The fact that the PBOC recently stated “it’s no longer in China’s favor to acquire foreign exchange reserves” should tell you all you need to know about their intentions; and thus, it makes absolutely no sense that they would “shake up” markets with the equivalent of a 10.0 Richter scale financial earthquake by volunteering ownership of massive gold holdings.  Of course, the one caveat to such analysis is that, if it turns out China has already reached the point where it no longer believes it can source material amounts of physical metal, the PBOC may determine that now is the time to end the dollar’s hegemony with such an announcement.  It has to happen sometime and per above, with GOFO rates in record backwardation, there’s no doubt physical markets are extremely tight.  Just how tight, we don’t know; but inevitably, we assure you, we most certainly will.

Frankly, we don’t see the purpose of speculating on such an event which as sure as night follows day, will inevitably occur.  If it happens to be this month, you sure as heck better have already protected yourself with your own stash of physical metal; as in the aftermath, it may be impossible to acquire it, certainly at prices anywhere near today’s historically depressed levels.  And if it’s next year, or two or three years from now, the same situation will present itself.  That is, either you are ready for the new monetary order – backed by real money – or you aren’t.