It looks as if another COMEX expiration has come and gone without any “fireworks.” I must say, I in no way expected what has occurred, the longs evaporated unlike any time past AND with the knowledge that physical supplies are very tight. Were this any other market, a short squeeze for the ages would have been forced. With less than one week to go, silver had almost 300 million ounces contracted for and gold 16 million. These bled down to almost 20 million silver ounces and just over 1.1 million gold ounces as of Friday. Silver is in the clear so to speak because COMEX claims 65 million ounces in available inventory. Friday’s action saw another bleed as gold also looks to be coming in under the existing inventory with only 500,000+ ounces standing versus 870,000 inventory ounces held.
We have seen this happen many times before where the open interest bled down heavily going into first notice day, but never anything like this. The open interest for both December contracts was staggering with just one week to go… but then just evaporated. What happened was VERY odd because in past expirations, though total open would shrink slightly, much of it would be rolled into the next active contract. This has not happened and makes very little sense because there is almost zero cost (premium) to move out to the next contract? This expiration saw THE biggest build in open interest, followed by THE biggest evaporation ever. With virtually no contango cost whatsoever, the lack of “roll” is astonishing. Were these longs bullish going into the last week of trading… and collectively changed their minds? While I thought I was “on to something” with the outsized OI, apparently I was on “to nothing?” Some will say I cried wolf, something VERY different has happened even though we ended with the same result. Arriving at this “same result” was unlike any expiration week I know of.
I think the best question is “what” exactly were they trading? Were they really trading gold and silver? I think it is quite clear with gold for example, no, these trades were and are nothing but trading pieces of paper back and forth. COMEX claimed to have 870,000 ounces of deliverable gold yet contracts outstanding for over 15 million ounces with only 5 days left. Who in their right mind would buy a contract which promises delivery of an asset where even the exchange itself admits to not have enough of what is contracted for to go around? By the way, Friday saw another 40 ton sale which broke the “price” by $20. Over the last month, we have seen three separate 40, 80 and another 40 ton operation performed all within 15 minute windows. Who would ever sell in this fashion if they wanted to sell at the best price possible? Why not sell all of this “gold” spread out through the day and not damage the price (and psychology)? The answer of course is obvious for anyone willing to see, the sales had a purpose of “setting” a price, a LOWER price.
Switching gears to the real world, gold and silver are both in very tight supply. Gold forward rates in London went more negative on Friday (and again even further today) than ever before with the exception of 1999 when the Washington agreement was announced. For GOFO to go this far negative suggests a very severe shortage on the institutional and central bank level. It is very important to understand what this will most likely morph into… a short squeeze or some sort of buying panic for real and tangible metal. Unlike the COMEX which can “instantly create supply,” this cannot be done in the real world. For example, the 40 tons which was sold on a shortened and sparsely traded Friday will take one full week for the entire world to produce! I view this disconnect of “price versus supply” as one that will, must be rectified. I will speak to this “rectification” shortly. First, let’s look further into the “real” world supply situation.
As of this past week, Silver Eagle and Maple sales are on track to at least meet last year’s record sales and are now running FIVE times higher than in 2007 (before the financial crisis began)! We also know GOFO rates are the most negative with the exception of one time in history. The silver inventory in Shanghai plunged again this past week and is now again under 100 tons. For perspective, this inventory was over 1,100 tons just over a year ago and has been bled by over 90%. In just 2 days last week, 21% of the inventory was withdrawn …and what’s left is now “worth” under $50 million (with a lower case “m”). Silver contracts in Shanghai are also in backwardation, another perfect example of short supply. Refiners in Switzerland are running flat out 24/7 due to Asian and Middle Eastern demand and to top things off, India just eased restrictions on gold imports. When added together, China, Russia and India are taking nearly 150% of global gold production via physical purchases. To put it in further perspective, China has the financial ability to purchase ALL central bank gold reserves at current “prices” THREE TIMES OVER!
So, what is my point? Something very drastic has to and will happen. One market or the other is very wrong. Either the paper price is wrong …or, the physical market is wrongly displaying all the signs of a supply shortage. Can you figure out which one is wrong? Is it the market where “gold” can be created at will or the one where it is actually dug up out the ground? I will say this in my opinion, I cannot understand who in their right mind would trade a COMEX gold or silver contract? Would you gamble in a casino where you knew the games were rigged …and not in your favor? What is the purpose of trading pieces of paper that the exchange itself admits they don’t have enough metal for everyone? Will these contracts save your bacon through a financial implosion? During a dollar or currency crisis (which is exactly why gold is purchased to begin with) will capital fiercely try to enter COMEX contracts or the real metal?
Further, assuming you do “win” on your gold contracts (a poor assumption) and the inventory is overwhelmed (a good assumption), COMEX has already told you they will “cash settle.” So you “make” $1 billion dollars, you get the check, it clears, your bank stays open (lucky for you) and does not bail in your “winnings.” If physical gold has become hoarded and gone into hiding because of a currency crisis, you will be “given …more” of what the problem was in the first place. What exactly did you win? More currency of a bankrupt issuer? In the extreme, ask any Zimbabwean if they would have given up even 1/2 roll of toilet paper for $1 billion Zimdollars? The answer of course is “no,” being a “Zimbabwe billionaire” may not even entitle one to a dinner of beanie weenies!
The disconnect between “price and supply” is exactly what an Austrian economist would predict. If you price filet mignon below that of chicken, the supply of filet mignon will eventually disappear. This is what we are seeing with gold and silver. “Price” does not matter if you cannot get any product just as supply does not matter if the price is too high. Too high of prices will eventually bring out more supply just as low prices will cure low prices. Low price has already, and will create excess demand and also will cause a shrinking supply since mines cannot make money producing at these levels. While COMEX can and has created the price, they cannot create the supply necessary to satisfy the greater demand. COMEX, by forcing the price too low have set in place the fundamentals for a “re pricing” in explosive fashion.
When it comes to gold, we are at the point now where even central banks are displaying a lack of trust in each other. I plan to discuss this along with “deflation” and what the collapsed price of oil might mean. The Saudis are creating a low price of oil by producing more supply than a weak global economy currently needs. This current low price will cure itself by blowing up the U.S. shale industry…and thus lowering supply coming to market.
To finish, the Swiss had their chance to leave the rigged casino. They voted “no” and will instead stay to play the tables until the whole casino burns down. Shame on them! Friday’s action saw a $25 drop in gold and was followed by another $15 Sunday night/Monday morning. Gold has recovered ALL but $5 of both day’s carnage by early this morning. If gold were to close above $1,190 (+$5 from here) it will be a sign of strength. Were gold to close today over $1,200, it would negate ALL of the Friday/Sunday trading and create a very odd looking outside day (remember, the two previous Fridays were outside days also). Were gold to close over $1,200 today, it would then have absorbed the outlandish (fraudulent) 40 tons sold on Friday to crush the price. Action like this would be a sign physical supply and demand are finally overwhelming the price “fixing” mechanism! Please remember this, “price” ALWAYS affects both supply AND demand, you are seeing this in real time!
Looks like gold already breached $1200 lol
yes Mark, I may write an addendum for this afternoon to Harvey and Murphy’s bog.
Upon overhearing discussion during the Holiday festivities, 7 year old grandson asked, “Isn’t there somewhere we can go until this stuff(economic distortions) is over?” We replied, “The whole world has been moving here-legally and illegally- because America is( to paraphrase a wise sage about our Democratic Republic governmental system) ‘the worst place to live- except for all the others’.”
We are indeed the “cleanest hog at the feeding trough”, but will still likely wind up as bacon on some “biggy big’s” plate, unless we prepare and protect ourselves and others.
a very wise 7 year old indeed! Unfortunately, unless you can afford your own island, there is no place to hide.
When our countries get officially renamed with “The People’s Democratic Republic of…” in front, you know it’s over.
you can’t be talking to me Mark? …I already know it’s over.
Bill, I don’t understand why this is so difficult to piece together. All it takes is 2 bullion banks (there are 5) with the FED backing of unlimited amounts of FRN’s and they can paint the tape anyway they please. For example, If party A holds 100,000 shares of IBM at $100 and wants the price to drop they can collude with party B to buy those shares at $98. Then Party B can sell those shares back to Party A at $96. Pretty soon other holders begin to dump as the price falls and both Party A and B can continue to sell to each other and buy more shares from others. With the COMEX this is even easier since they can create contracts themselves and buy and sell them amongst themselves without worry of other parties mucking up their plan. That is why the OI fell apart, all the contracts were owned and written by the bullion banks themselves. The COMEX numbers are all fraudulent so the Commitment of Traders reports are also fraudulent. It really is that simple, the hedge funds are not needed but they do add a bonus…at least that is the way I see it.
“free and fair markets” …and the regulators?
Thanks again Bill for an excellent summary of whats happening.
TPTB have the US populace … and, unfortunately thru proxy meaning the other central banks, the whole western world in the warming pot, like a frog in that pot on the increasingly heated stove, oblivious to the changing and ever more threatening environment. At the governing level, they know they are cooked, and extend this charade so that it does not boil over on their watch. Meanwhile their agents, the trading banks, rip the system off day by day.. in 40 tonnes, out 40 tonnes, and laugh all the way while collecting their bonus payoffs.
The strategy as outlined by Dmitry Kalinichenko is in play, and time is now the enemy that TPTB fear the most and are trying to forestall.
but the 40 tons never exist…
Hi Bill – Thanks for another great article!
Looking at your previous thought that the COMEX was ‘cornerable’, I would say you weren’t wrong about the ‘cornering’, but instead about ‘who was possibly cornering’. It would not surprise me in a rigged market if the FED / COMEX colluded to prevent anyone from cornering the market by buying large enough stakes to keep others at bay. This would explain why the OI evaporated with less than 5 days WITH NO DISCERNIBLE ISSUES. Is that a possibility?
On who would play the game in rigged casino and why – I am guessing those who don’t think we have a problem. Those still willing to risk much for daily peanuts. I don’t have the stones to play that game, but then again, I don’t like betting with my hard earned cash :).
you can rest assured TPTB have and will do everything in their power to keep the game going.
I do hope it hasn’t taken all these years for people to realize that they ARE actually “trading pieces of paper back and forth.”
“Gold” is just as much a casino counters as are porkbellies, forex or iron ore futures.
The travesty is WHY these paper-pushers are permitted to contribute to the price-setting mechanism in the real, physical commodity.
The regulators are not “sleeping”. They are not “asleep at the switch”. They, as an arm of government, are COMPLICIT.
Until either government ends its backing and support for this scheme OR all physical gold has move into strong hands elsewhere in the world, these bettors will continue to fleece the few remaining twits dealing with Comex and, moreover, will continue to swap “losses” and “profits” with one another on the way UP and DOWN.
you cannot eat pork belly futures but bellies are not a threat to the U.S. dollar either.
Bill, this is why folks follow your writing, because you are honest about a missed call, in this case that the COMEX could break over this weekend.
Oh well, no big deal. We all know what is going to happen: catastrophic, cascading defaults on paper and of banks and resurrection of gold and silver. But, once again, we are reminded that we plebes have no ability to know the time of such event.
Keep up the great analysis and commentary, Bill. Thank you for providing a clear prediction and revisiting it immediately after the fact. Most other commentators just gloss over those calls, which is why they lose credibility.
will do, thanks John. …maybe something did in fact break over the weekend? We will see.
It is over…..
The fiat system based on promises will never ever again take hold.
Fool me once.. shame on you… Fool me twice…shame on me…
Would you ever play poker with someone that was known to use a marked deck….
Yes.. it will take time for the players to all leave the table but the chairs have begun moving away…
Ducth player gone. German player standing at the table ready to walk. French player pulling his chair away from the table.
Need I say more..
Once all the players have left the game is over.
Stack…stack and stack some more if you can.
good analogy Mike.
So I take it that when the “price” of gold rises enough…the backwardation will cease.
That is gold will come to the market. Higher prices cure higher prices!
Here is the rider.
Until such time that collective humanity realises that it is no point selling gold to buy increasingly worthless dollars.
yes, high prices cure high prices but gold and silver production are very inelastic to high prices as it takes 3-5 years to bring new production online.
Takes a big man to step up to the plate. You continue to gain my respect. Also, IMO, it is very difficult if not entirely impossible to read the “tea leaves” in today’s markets – primarily because we just cannot believe any (zero) data that we are given to work with. Your analysis is spot on, again IMO, however the data that you have to work with is highly questionable. I was always taught – garbage in garbage out. This may apply today and explain alot. I have two degrees in Financial Analysis – I use to make a living analyzing data – I was very good at it. However, in the world today of managed markets I think I / we are living dinosaurs. I don’t have any answers for how we should determine the correct value of anything in dollars. But, I think this is the current environment we live in. Blessings and thanks for continuing to educate us.
we will not “count” in dollars one day.
Shame on the swiss, shame on them indeed, the only westerners who could say no directly and openly.
This nation is the bankers’ minion : let it be destroyed…
they blew it!
1212.70/1213.70 Wuu Hu.
Rob Kirby is saying gold is selling in Asia at a 50% premium now. Only here in the empire are the sheep still obliviously frolicking on the cliffs edge.
Good article Bill, Thanks
I would like to hear from someone in Asia regarding large tonnage price of gold?
50% does seem a bit hard to believe I must admit. I certainly had to read it more than once to make sure I was seeing it correctly. I really dont know if he is right or not but thought it was interesting.
I have contacted Rob, let’s see what he comes back with?
T, great interview. Rob Kirby sure believes what he is saying. And maybe it is. I sure DK. It would be nice to hear or see just a little bit of evidence from someone in the Gold Industry regarding this 50 per cent asian premium! You would think that some mining companies would want to learn what Rob knows!
Kirby is exaggerating IMO … if there was a 50% premium in Chnia for tonnage, the Chinese would be in North America buying every single ounce of Gold lock, stock, and barrel for a quick massive arb. profit.
yes I agree about the arbitrage, I am trying to get better info but our mining lawyer from Australia has confirmed that gold in big tonnage is trading at a big premium in Asia. I will try to find out how much and get more information.
I’m sure the premiums are big, but obviously at a 50% premium every Gold dealer in North America would already be pooling their inventory & shipping their bars on the next boat to China.
Rob is talking about institutional size transactions, not “coin dealer size”.
I’m talking about the largest Bullion dealers in North America pooling their inventory for a quick arbitrage to China …. why would they sell for a 4% mark-up to North Americans when they can pool their inventory and unload to the Chinese for a 50% mark-up in Asia…. there’s an old saying; “Big Money Doesn’t Lie”.
I highly doubt North American dealers could cobble together 50-100 tons of gold, plus, this size does not exist to deliver. Another aspect is Asians buy in kilo bars while North America has coin, 100 and 400 ounce bars. Let’s sit back and see where this goes, Rob has to have some sort of supporting evidence.
Bill, Does Rob re-confirm with you that the premiums are as high as 50% over spot? And when you communicate with him again, could you please ask who is the (seller) to these institutional buyers?
A light humor, if I may? Do these institutional investors get some additional services with their Gold purchases?
I have not heard back from him, I will personally assume this number of 50% is false until I have some sort of evidence.
I think he was talking more around 5 tons, not 50 to 100.
I don’t think so, this would be only $200 million, a ham sandwich in today’s dollars.
Please listen to the interview Bill. “Odd Job” is correct.
Rob Kirby stated in the interview that sourcing physical gold of the order of 5 tons is impossible anywhere near spot price, and markups are of the order of 50% or possibly even more.
I saw the interview, missed the 5 ton part. If this is true, incredible! Am still waiting to hear from Rob.
I have often wondered if the bankers (fed) purposely take on both sides of a trade, just to give the appearance of open interest falling on the front month. With their high frequency trading platforms (a better word is “front running platforms”), they could control one account which “buys” and have another account which “sells”. Have 5K-10K contracts in a neutral position. Liquidate these positions which give the appearance of traders exiting their long positions.
What are your thoughts?
this is possible.
I too am trying to get confirmation.
I have a contact in Asia that would know the facts.
With backwardation growing and obvious progress in the truth of fiat currencies coming out this is only going to start moving faster and faster.
As it has often been said here, We will wake up one morning and it will be a new ball game.
thank you Mike.
If Rob Kirby’s information here is accurate, this would truly be amazing and every precious metals dealer in the World would be discussing this topic.
I definitely think your on to something Rodger.
a person with a psychopathic personality, which manifests as amoral and antisocial behavior, lack of ability to love or establish meaningful personal relationships, extreme egocentricity, failure to learn from experience, etc.
This guy is full of it, Tanaka Kinzoku, Japan’s biggest gold dealer, premiums haven’t changed hardly at all. Just more historical BS that we’re running out of gold and silver….but we never do. How many times and for how long have we been hearing this? Massive capital flowing INTO the $US ,particularly the last few months, the $US is going higher against ALL other currencies as well as gold and silver. How many times does it have to be said, the $US is still the reserve currency, it’s where most of the big money goes for safety and it’s only just begun. You’ll see the $US gaining strength well into next year against everything else including G & S. and it will have little to do with manipulation and all to do with fundamental capital flows. When you only listen to KWN, Sinclair, Kirby and this site etc. you only hear what’s positive for gold and silver and you are worse off for it.
so negative GOFO rates and backwardation in China are normal? Keep telling yourself “the dollar will stay the reserve currency” and YOU’LL be worse off.
No one can ignore the fact (including the empire) that global use of the USD for trade has dropped from 90% a couple years ago to 60% now.
Whitney had an excellent article yesterday that summed it up perfectly (IMHO)
down, and going lower.
We seem to lose another petrol dollar slave every day or two. Lost S. Korea yesterday.
they were already lost.
So lets ignore the trillions upon trillions of US debt.
Lets also ignore that if as individuals we printed fiat currencies like some countries are printing fiat currencies we would all be criminals.
After all currency is only real if it is printed with the approval of that very elite group of families.
Lets also assume that there is no penalty if we were to go to the bank and borrow money with no intention to pay it back.
Lets assume that when countries did back their currencies with gold that they only did this to cause us to believe that that paper had real value behind it.
What a barbaric thing to do. Fool us to believe that gold had value.
Lets do a survey.. Lets go out and visit the politicians that run lets say Canada and the USA. Lets poll them and see how many of them have a precious metal hoard…just in case.
I bet you that the numbers that do would astound us all.
Yes, the US dollar is still the reserve currency, But for how much longer…..
People have died for gold for thousands of years.. Millions more will die for the same reason if we keep going in the same direction as we are headed now.
The crazy thing is it doesn’t even take that great a percentage of the masses to move the metals the way they did today. Its freaky how very few of the worlds population can leave the masses wondering what the hell just happened. Along with other preparations, I fell safer being one of the odd ducks positioning my family on this side of the “metal” fence. Thanks again Bill for always adding to my awareness and not replaceable education.
being on the wrong side at the wrong time will be a lifetime disaster.
Bill you got your wish. That was the biggest outside reverse candle I ever saw. Gold actually was $80.00 from bottom to top. That is a huge jump. I am sure I will be saying the word huge from now on when it comes to the price spikes..LOL!
As for the Swiss, I read and article on CNBS called gold the 6000yr bubble. In the article is stated that the people of Switzerland continue to buy physical metal and the demand for that is not abating. The people know they will not change the corrupted CB’s so they voted and are voting with their money. Delears said that people buying from them have increased their purchases up to 60%. Now tell me, does this sound like the Swiss people voted against gold?
Another article stated that the immigration law in Switzerland failed and the majority who voted against gold were immigrants. Does this not sound like what Obama is doing here in the U.S? We cannot change a broken system, so therefore we have to vote the only way we can and that is by buying real assets, which will be needed to start the new one if possible.
silver was 17% bottom to top!
I remember following Harvey Organ late last year on a similar line of thinking to yours. The exact numbers escape me, but I remember huge numbers of contracts vs a tiny sliver of Registered gold.
To an outside observer it’s not an exaggeration to say that right at the moment when it was clear only a few participants could get their gold, they all suddenly lost interest and either rolled or settled in cash.
It was as if the depositors were lined up outside a closed bank bashing on the doors and suddenly they all said, “You know what? Lets just not do this…”.
I remember when Air Canada was going bankrupt, the stock see-sawed rapidly between about 10 cents and 25 cents during a time when it was already a legal certainty that it was worth $0. The regulators said they didn’t see any reason to investigate or stop the stock trading even as they acknowledged that many times the number of shares in existence were being naked shorted on days when it went down.
Maybe the Comex is already defunct? What if all the “honest” longs of size left the building long ago leaving a few computers to duke it out and no one in authority can name a good reason to bring down the curtain as long as the traders keep paying them a commission?
In the old days it seemed like you could see a market operating outside its normal range and make a good trade based on a return to normal. Now things going crazy seems to only be a prelude to them going crazier down the line.
I very much look forward to reading someone’s “Last days of the Comex insider tales” on this one in about 10 years.
P.S. please keep on the “50% premium” story. I’m not calling Kirby a liar since I don’t know anything about him, but in the Greg Hunter interview he makes some pretty specific claims. I
if COMEX goes …everything else will go with it because of the confidence factor.
Well, I am certainly in no position to say “You are wrong”, but between flash crashes, MF Globals, and Cyprus confiscations, Ive seen many an event over the last 5 years that make me wonder what it will take to make anyone lose confidence.
I’ve also followed your idea about foreigners cornering the Comex and it made me think:
Imagine 100 Russian nuclear bombers show up on radar heading straight for the US coast. They charge straight at us and just as they are reaching the coast and we are kissing our asses goodbye, they suddenly turn and fly back home.
Doesn’t the sudden long liquidation you describe sound like the financial version of that scenario? I’ve heard of large market participants using the market itself as a signalling mechanism. Maybe the action you describe is a little too coordinated and that in itself is intended as a message.
I always enjoy a good bit of lateral thinking 🙂 Have a good one.
this is possible but the paper losses were big, I think only China could have stomached them.
When I was a baby you could jingle shiny objects in my face and I’d giggle sweetly. Oh Lord, I guess in some ways I’ve never grown up. ; )
the jingle “sounds different” now.
Former Assistant Secretary of the Treasury Paul Craig Roberts speaks out of gold manipulation.
it’s obvious to anyone willing to open their eyes.
Read Trader Dan on PCR and manipulation.
Alternative rebuttal well worth a read
Remember the good ol’days when we were only 17 trillion in debt?
We hit 18 trillion Friday.
…and now a better world.
If only a better world.
Will USA default on their debts? maybe.
Hey …the backwardation in gold is basically over already !!!
Could it be that higher prices cured higher prices as I ( hinted at) .
Whilst I am long in the paper area on gold I might just get some profit and watch the price for physical fall even further.
WHO KNOWS? I don’t, I simply go with flow.
Do not swim upstream it is much too costly !