In my previous missive, I tried to illustrate the supply side of gold and how the movements of inventory have recently changed. In this part, we will look more to the demand side with a wrap up of why it truly matters “whether the gold is there” or not.
From a demand perspective, we already know China is buying the entire global mine supply of gold on their own. We also know India is very big buyer purchasing almost 40% of global supply. Adding just these two together we come up with 140% of new gold being spoken for. I believe there is now a new “bidder” coming to the table, Europe! The euro is crashing versus most all foreign currencies. Whether it be because of the fear of their breaking up (Greece exit etc.) or whether it be their poor financial condition or the new announcement of huge QE debasement, it does not matter. What does matter is the action of the euro.
As you can see, gold has exploded in terms of euros. In fact, in just the last two months gold has risen more than 25%. As I understand it, Europeans look at gold differently than we Americans do. They understand it better but look at its price less often. The typical charting in Europe looks mainly at month end closes, if there are huge swings during the month yet the price did not move up or down a lot when the month was finished then “nothing much happened” in their view. Gold has now broken out wildly to the upside and will have two back to back “big” monthly price gains. This will alarm many Europeans who will now become buyers. This is perfectly natural behavior, when your currency is being debased, finding a safe have to protect your purchasing power is what it all boils down to. (This same thing can be said regarding many other currencies, the Canadian dollar, the pound, the yen and so on). I believe the demand for gold (and silver) coming from Europe is about to explode! This demand will not be spurred by “greed”, it will be spurred by the emotions of self preservation.
From a global standpoint I also see the very real potential for an explosion in demand for these very same emotions of self preservation. We could get into the hypothetical of what will happen when the dollar does again weaken, this is not the direction of my thoughts currently but an interesting topic because the day will come. If you look at just the last six months volatility in so many derivatives markets and what has already happened, there are dead bodies out there similar to “A weekend at Bernie’s” if you will. There are really five major “fashionable” carry trades out there which hedge funds have piled into…all of which are blowing up at the same time. First we have the short dollar/long oil and commodities trade, there are two more trades “long” commodities trades where the short (funding side) is Swiss francs and another which uses Japanese yen. Another carry trade is long the dollar and short the 10 year Treasury which is a bet on higher rates. The last one I’d like to mention is one which began sometime in 2012, long the Nikkei index and short gold. ALL of these trades are blowing up to one extent or another and the losses are now in the $ trillions!
We are told “not to worry” because everyone is hedged and “CDS” (credit default swaps) insure everything … so no one can get hurt. I am here to tell you there are two sides to every trade and two side to every CDS. As I have said all along, “volatility is a killer” because if someone loses SO BIG they become insolvent, the winner becomes a loser when he cannot be paid. This is exactly where we are now. Liquidity is drying up at the same time volatility is increasing, a deadly combination. As for the farcical CDS market, what will happen if Greece just decides to default? What if they decide to exit the Eurozone? What happens to these CDS which will need to be paid out with actual cash rather than carried on the books at some fictitious level? Will we continue to see default not ever “declared” a default? In the case of Greece, they no longer even have the ability to pay, how can this not be declared a default?
All of the previous leads us to THE biggest demand factor for physical gold purchases of all, FEAR! In a situation where defaults are cascading, gold will be sought after because it is THE only money on the planet which cannot default. The demand will be staggering and record setting …THEN our question of “is the gold really there” becomes of utmost importance. The very real distinction between paper gold and real gold will be wider than the Grand Canyon! We will see further physical demand come from those who are currently “comfortable” because they believe they have gold as a “hedge” or safe haven. You see, it will be at this point in time where the floodgates of demand open. Not only will demand be coming from every possible angle in a flight to quality, the 99 out of 100 who “believe” they own gold will also be scrambling for the real deal!
To wrap this up, “is the gold really there?” has not to this point mattered. It has been always “assumed” to be there and it is “believed” to be there …otherwise we live in a society with no law, right? No one in their right mind would represent they have physical gold if they do not because they could go to jail …right? In my mind there is no “fact” more important than “the gold being where it is supposed to be”. Even though (and because) the world for the first time is no longer on the gold standard, “having it” still matters. It matters for several reasons. First, not having gold while proclaiming you do has worked for many years because no one questions it. No one has truly questioned gold ownership because gold does not “flow” as it once did to settle trade. Now however, questions are being asked and even nations (think Germany and Netherlands) are making calls on their vaulted gold.
More importantly, China has been accumulating gold and financial/economic power. There can be no mistaking what their ultimate intentions are, China will “remonetize” gold in an effort to bring truth back to finance. When gold becomes “important” again, really and truly having it WILL matter. “Trust us” will no longer be good enough, proof will be required. A “chicken or the egg” moment will arise. Gold demand will explode either out of financial fear of the actions in paper markets or …it will explode because the revelation is uncovered the “gold really isn’t there”.
You see, the very small (in relation to paper) gold market is where “we came from” in the first place. The entire paper edifice was originally built off of a foundation of gold. All debt, all currency, all derivatives and all wealth has been leveraged off of the 1971 “foundation”al assumption that the gold is in fact “there”. When it is discovered that in fact, the gold is long gone and at least 100 ounces of paper gold has been sold for each single real ounce in existence, confidence in everything built from this foundation will crumble. Think about this, even the average guy in the street will be panic stricken. The average guy in the street will think “what do mean my bank doesn’t have any gold”? Even the lowest of IQ’s will understand what is meant by “the gold isn’t there”. How does trust survive even overnight when it turns out the gold is gone?
Please understand how important this question “is the gold really there?” is. It matters not, what the answer to this question is …until it is asked. If no one asks the question, the ugly answer can remain in the dark as it has (publicly) so far. I however contend the world has been quietly asking this question for at least 6 years. This is why demand has increased so dramatically. The decision was made by the Chinese et al that in fact the gold really isn’t there and have been acting upon this assumption. They did not “pull the plug” and call BS on the U.S., they kept smiling and quietly accumulating gold, real gold. What has happened is the equivalent of counterfeiters printing up and selling 100 billion shares of IBM. It won’t put IBM out of business but it does mean many investors own “something worth nothing”. The astute investors who see value in IBM’s depressed stock price and have “real” shares delivered in hand to them will benefit, those holding the fake shares will pay the penalty.
Simply put, the world runs 100++% on confidence, what will happen to this confidence when it is discovered the gold is gone? This is why I and many others harp so often on supply and demand. The “supply” cannot be there if the demand is truly as high as reported. One or the other must be wrong. In my mind, supply is finite while demand is potentially infinite because central banks can and have printed $ trillions. These $ trillions are all potential demand on supply and making a “call” every single day. May God help us all when this fraud is discovered and confirmed, our lives will be changed forever! This is not about a “bull market” or $1,000 dollar move in gold or a $30 move in silver, this is about the biggest transfer of wealth in all of history and control of “all the marbles”. You must understand this most basic of concepts to understand why you must own as much gold and silver before it is discovered “the gold is long gone”. The truth is really going to hurt!
Bill, I believe that the Chinese either know, or assume that the gold in Ft Knox has been leased out. I also believe that all the gold accumulating nations feel the same way. My question is this. Can the Fed legally claim they are the owners of gold that has been leased out? If this is the case, it would be very insightful for the Chinese to assume that all or most of the gold has been leased out, never to be returned. That the gold was used to depress or supress the price of gold all these years. The Fed can just say they are still the owners of 8000 tons of gold because maybe legally they still are. No one cares about this except stackers, and these gold accumulating nations since they are enjoying the privelege of buying gold cheaply. They would never ask the question publicly. And why would they say anything unless they were denied the ability to source gold when they wish to buy. Once the time comes that they cannot source gold, then they might decide to publicly ask questions and force the issue out in the open for all to see. Since we do not know how much actual phyzz gold is still available for purchase we cannot know how much longer this ponzi scheme can continue. Its just an interesting discussion for the time being.
of course they know.
The East will play along until there is no further benefit for them to do so.ie..non delivery event….
What is not in the Western closet is likely what will hurt them the most.GOLD
Only thing we know for sure is NOBODY at government levels or MSM are giving us straight answers.
I look forward to exciting 100% from mining equities soon..
The markets will destroy themselves soon enough and then we will all be wards of the state.lol
Big Government usually ends up with BIG problems.
all correct until the last line. You omitted the word ALWAYS and replaced it with usually.
No worries Bill. I just am so accustomed now to people lying to me that I have regressed and try lying to myself just to keep it interesting.lol
All joking aside..we are headed for disaster and the more we talk about this publicly the more we put ourselves at risk.
If you want the truth today you must look at things from the position that (nothing is as they tell us) and always look at things from THE BIG PICTURE perspective.
Thanks for keeping us tuned into the evolving story.
This thing does appear to be coming apart from the seams.
yes Mike, almost no matter what it is, you have to question the logic behind it because 2=2 never equals 4 anymore.
To Mike. ‘no worries Bill. I just am so accustomed now to people lying to me that I have regressed and try lying to myself just to keep it interesting.’
That sentence is a laugh riot. The funniest!
yes Ron, it was a good’ern!
Bill, I believe this is part of the reason why the Swiss un-pegged their Franc and exited the Euro.
The Swiss are the globes largest by volume refiners of gold bullion. They have seen on a daily bases the volume of gold bullion being received for processing, from where, in what form, in which form it leaves and to where it goes.
The Swiss KNOW who has the gold and roughly how much. This is why their recent currency moves, unpegging the Frank and signing an agreement with China as a Yuan trading hub has come to pass.
They are pre-postioning themselves to an advantageous position before the big reset occurs. Yes, I know, reading between the lines and taking notice of the signs along the way, all show whats about to come down the pike! Your article is right on the mark.
yes, exactly OLI!
History tells volumes…
The Swiss have a history of positioning themselves to benefit from world events.
The Swiss know as you said volumes about the flow of physical.
Yes, their recent move said volumes to those paying attention.
The flow of physical the last 3 years also tells volumes.
The PM SUPER SALE is nearly over.
You are either about the Shanghai Express or you are missing the train.
What is in your suitcase..Folding currency or money…
the Swiss see the flow first hand.
Bill,
As to your comment that no one would claim they have gold if they really do not; it seems to me that 4 or 5 years ago a bank got busted for charging their customers storage fees for gold/silver when they DID NOT actually have the gold/silver.
I bet that is still going on. If it’s not in your OWN hands you simply do not own it; you just own a piece of paper that says you own it. JOKES ON YOU !!!
I won’t take the bet, I believe it was Morgan Stanley with silver.
Gold stocks destroyed after FOMC : gold will be slaughtered tomorrow.
is that what your crystal ball tells you? Stocks in general were down 300 points from top to bottom.
Bill, I don’t understand how this non-delivery event hasn’t already happened? It’s been rumored for quite some time that the London vaults are empty. We all know the shenanigans surrounding the German gold repatriation, Ukrainian gold being stolen, Libya gold stolen, we’re running out of countries to invade. Nordic European nations repatriating gold. 100-1 leveraged gold, the list goes on and on. You don’t even need dots anymore this thing is a full blown Picasso in your face! The Chinese & Swiss certainly know the math. Yet, somehow record tonnage still moving eastbound? The speed at which things are unfolding is going exponential. I just hope Eastern powers pull the financial rug before the western psychos take the world to war. Cheers great work.
thanks Gil, tough to know how much is left, we do know massive tonnage has already been moved.
Bill, great job!
I understand your hesitation to mention Mr. Rickards in your last 2 missives and his view that the US’s 8000 tons plus of physical gold is still in the possession of the US. I thought I would express my opinion.
As pointed out by Glen way above , legally “IMF” speaking, Mr. Rickards is technically correct. As most here know, the IMF allows central banks to classify gold receivables as Gold in Bank. I am sure Mr. Rickards relies on this definition even if he is fully knowledgeable that this is a fraudulent principle.
Mr. Richards is with the US intelligent agencies and many in the Gold community can see where his loyalty lies along with his motives for saying what he says. Mr. Rickards is truly brilliant and represents the CIA as well as anyone can. He has written his best selling book on currency wars and this has earned him an incredible amount of credibility. He recommends some physical gold should be in everyone’s portfolio and that he agrees with GATA that gold is a manipulated market. It has allowed him to plant the IMF’s SDR concept (I am sure a gold receivable is still gold in the bank with an SDR) with new gold community members and potential gold community members and has even earned him a GATA approved speaker position. ………………………Has he been doing his job well?
Mr. Rickards recently has suggested that gold price manipulation is now a global effort to appease China. http://dailyreckoning.com/fix-gold-price-manipulation-now-global-effort/
For discussion purposes only, what would it suggest if gold price manipulation is now a global effort to appease China. It would suggest,
1 The US has all the physical gold it says it does, this is something that Mr. Rickards wants everyone to believe,
2 All countries are in on this including all the Brics, this implies that all these countries are aware of a reset and that the role that the SDR will play in this reset, again something that Mr. Rickards wants everyone to believe,
3 China is content with the accumulation program, little surprised Mr. Rickards did not let us in on exactly the amount of Gold China wishes to accumulate,
4 “is the gold really there?” is. It matters not now and Mr. Rickards contends it will not matter in the future. At one point, Mr. Gold actually agreed with this view. Idk, Mr. Gold’s view on this may have since changed,
5 Everything is under control, derivatives?, what’s that????
6 Mr. Rickards is devine?
7 Dr. Willie isn’t devine : )
8 Thru 10, I’ll let the Miles Franklin Professionals take it from here, if they wish!!!!
Have a great day Bill!
I know for a first hand fact, Jim Rickards did know as of Aug. 1 2011, there had been no audit since 1955. He was shocked, I saw the look on his face.
Everything moves forward by design until the design flaws cause a major failure.
BIG PICTURE…
What should happen eventually does happen.
All Aboard The Shanghai Express…
BTW this train will not stop at the SDR station.
Enjoy the ride…
When it is revealed that the gold is not there. AND everyone rushes to gold – the question to be asked is not only WHAT IS THE PRICE OF GOLD, but WHAT MULTIPLES OF ITS CURRENT PRICE IT WILL BE?
It is known that there is AT LEAST 100x (or more) paper gold against the physical. It has also been posted that the TRADED amount of gold is $370 Billion against DELIVERED physical gold at $250 Million. This is about 1400x.
So, the only question that remains – What will gold’s TRUE VALUE be, when it is freed from its shackles? Regardless of its nominal devalued dollar price at that time, what would its value (or buying power) be, when calculated at today’s buying power?
Wealth transfer INDEED.
thanks G8, the other question you might ask is “can I buy any …ANY at all?”.
I wonder too how high gold price could go. I have a feeling TPTB may be concocting something to prevent all financial wealth from funnelling through gold. They could bring out a commodity based currency backed by oil or something, thereby reducing the demand for gold from ridiculous extremes. I wonder though if they’d be smart and savvy enough to pull that off since I don’t think it’s been done before. But when you just think of the ramifications of a total fiat currency collapse; sometimes it boggles the mind what will happen to gold. Will one ounce buy you a new car? When you think about it you understand one of the reasons why they have been fighting it for so long and violently.
any new currency introduced must have the confidence of the people that it has value.
One time I had two neighbors who were selling a nice horse back and forth to each other.
Each month or so one neighbor would buy the horse from the other at a slightly higher price.
And so it went until one neighbor sold the horse to a third party for even a higher price!
The first neighbor showed up mad as “hell” at the other neighbor.
The second neighbor said he would gladly split the profit with him, but no way….
The first neighbor said: “That’s not the point! We were making a good living from trading the horse, and now you have messed it all up!”
Another good’ern! I read this to my wife and she told me my readers are deranged. Me? I’m proud to know you!
Tks Bill and I’m glad I found your words for you have a way of reducing gross economics down to its least common denominator.
Oh, your wife maybe right; but just on Wednesdays and never in front of the grandkids.
The only problem with this story is how he sold tickets for a dead horse but we’ll let that slide.
Young Chuck moved to Montana and bought a horse from a farmer for $100.00. The farmer agreed to deliver the horse the next day. The next Day he drove up and said, “Sorry, Son, but I have some bad news, The horse died.”
Chuck replied, “Well, then just give me my money back.”
The farmer said, “Can’t do that. I went and spent it already.”
Chuck said, “Ok, then, just bring me the dead horse.”
The farmer asked, “What ya gonna do with him?”
Chuck said, “I’m going to raffle him off.”
The farmer said, “You can’t raffle off a dead horse!”
Chuck said, “Sure I can. Watch me. I just won’t tell anybody he’s dead.”
A month later, the farmer met up with Chuck and asked, “What happened With that dead horse?”
Chuck said, “I raffled him off. I sold 500 tickets at two dollars a Piece and made a net profit of $898.00.”
The farmer said, “Didn’t anyone complain?”
Chuck said, “Just the guy who won. So I gave him his two dollars back.”
Chuck grew up and now works for the government.
A Federal Reserve member.
Great read Bill.
Sure looks like gold and silver will come to the forefront of the financial system again. If the Swiss folk are smart they’d be swapping francs for bullion right about now.
yes.
Very good article Bill.
Your writing is very easy to read and concise in its delivery.
If I might interject a thought I had.
At some point the Dow will crash and go into freefall, I think we can all agree on that its not if but when.
This will mean all the stock holders who have been pumping up the markets will start pulling their funds out simultaneously. Now forgive me if I’m wrong on this, but won’t that mean that all the money the FED has printed and pumped into the DOW will end up pouring like water from a broken damn into the M1 M2 money supply as it desperately searches for a new home?
How many commodities are there out there that could soak up this kind of money tsunami?
Land and real estate could take some of it as a safe haven, forestry and high demand commodities could soak up a bit more, but bar holding it in cash which will be rapidly hyperinflating as more of it floods into the market, there seems to my mind only one place for it to go…. PM’s right? If this is the case and the money currently stuck in the stock market suddenly starts looking for a home in PM’s the price increase would be stratapheric.
yes, certainly some of panicked money will seek safe haven gold and silver.
The pressure on the physical gold delivery mechanism is growing daily. I suspect that very soon we may see the price suppression system fail. and the manipulators will have no choice but to call it quits.
I think that we will soon see further evidence of Central Banks like the SNB adding to their physical gold holdings.
Recently we saw one bullion dealer close up shop and reason given was the inability to secure sufficient verifiable supply.
That in my view is the canary in the mine warning signal of problems.
Currency problems all over the world is another.
Nobody knows when this will fail but fail it will.
Eric Sprott has a new piece out on KWN this morning.
I predict that many books will be written on the end of the paper gold game in the coming years.
All aboard the Shanghai Express…seat sale now on…space limited…Sale will end without further warning.
Special Pricing is only valid while Quantities Last.
do you have a link to the Sprott interview?
They don’t want an audit…….hummmm
Why,,,I see 3 possible reasons:
– the gold is gone….
– the gold is not transferable,,,maybe radioactive for reasons that have been discussed
These 2 reasons would have the same effect….
But what if:
– there is far more gold held by US than anyone knows (I know it’s a long-shot) but what if???
really? What if my horse could crap out Gold Eagles while doing cartwheels? Actually, this is a great question and gives me an idea for an article. Look for it early next week.
Currency Wars..
Trade Wars…
Geopolitical Wars…
Our Governments and Central Bankers have done such a great job.
There is only way this will continue.
The elites will get richer and the middle class will be destroyed.
The poor will likely revolt.
Today gold and silver will get taken down before contracts expire. After all if holders demand delivery this is over this week.imho
this will more than likely be another expiration where the longs walk away. That said, there are only 83,000 contracts left with two days. 8 million ounces versus 770,000 available …a dangerous game the shorts are playing.
i think your wife would think more of your horse than she does of some of your readers.
speaking of my horse, Kathy will begin a portrait soon of him raring up. She just finished a truly kick ass portrait of her son and has entered in one national and two international competitions. I will post the portrait next week, truly incredible!
Wow, can’t wait to see them.
Many artist do see the world as de-arranged. One of my goals is be able to look past our present reality and see the world through the eyes of an artist.
gig, this portrait is a virtual photograph. She works with pastel which is a very hard medium to do realism. I will post either tomorrow or Monday, Kathy is now a MASTER portraitist. I would never say this if it were not true even if she is my wife. Enough said, you be the judge.
Come on Bill, can’t wait, I’m gettin’ Holter with-drawl symtoms…..
But I guess I can give u a Super Bowl wkend pass.
Until you give us our next “attitude supporting fix” let me leave you with this:
Once I had another neighbor who got a horse for his wife,,,,,,
He said it wasn’t all that bad of a trade.
I could make a joke but don’t want to insult my wife or my horse. We had technical difficulties Friday, my piece is written but could not be posted. It’s a “fun” piece and Kathy’s latest portrait displayed. She has gone from zero to international quality in 2 years, you’ll see Monday.
Morning Bill,
Just a thought this morning for a possible article, the gold vs silver ratio…..
It’s easy to see what it is and what it once was; but what do these reflect?
– was it correct then, is it correct now?
– what underlying forces influence it, and how will they influence the ratio in the future?
It seems at present gold is the main focus internationally, no doubt partially because of value/volume; however if the ratio in question shifted to reflect current supplies of g&s, how might that affect international attitudes?
Have a Good’n
gig
silver comes out of the ground at a 12-1 ratio, the historical price ratio was 15-1 when there were no such things as derivatives.
As a shrimp I’m very happy at current prices. The lower the better, actually! The giants can’t buy phyzz in size without breaking the CONeX/LBMA paper PM ponzi. So they play the CONeX paper shuffle and accumulate larger crumbs (like 2k tons for China). The eastern powers could end it any time they like, but why don’t the? Why do they continue to pick up as many crumbs as not to break the system? Because they know that’s best for them, that’s how they get the most metal. The West plays along with its extend and pretend strategy, but they’re bleeding out a lot of bullion. When will they run on empty and put an end to the charade? I also believe sooner than later, but for most this will come as a complete surprise. I said several times, I do not believe that the metals will be able and trade higher in orderly style now, so it will be some sort of coordinated reset higher, and all paper promises will be settled in cash at the pre-set market price. At that point ounces in your hand would be the only thing that counts… So I embrace every pull-back… I hope they smash the metals one more time. 800 gold, 12 silver, bring it on.
good luck with those prices…keep on stacking!