Whether or not the prices of gold and silver have been “suppressed” has been a topic for several years now. The “no manipulation” camp has argued from “governments and central banks don’t care, to the regulators have found nothing, a scheme this far and wide could never be kept secret, to it doesn’t even matter.”
It does matter, it matters a lot! It matters because if even just one market is “rigged” it means there can be other markets rigged. If gold and silver prices are rigged then by definition since they are the direct competitors of government issued currencies, the currencies are also priced incorrectly. It means the currencies are valued “too high”. It means that governments can issue currency which is valued too high which gives the issuing government more power than they should have based on fundamentals.
This past week Koos Jansen put out an article with a transcript of a speech given by Xu Luode, chairman of the Shanghai Metals Exchange. In this speech given in June, Mr. Luode said on three different occasions his exchange supplied 2,000 tons of gold in 2013. He said this gold was “supplied to Chinese consumers.” I have several observations on this, first, kudos to Koos Jansen because this confirms what he has been saying all along by following Chinese imports of gold. Secondly, it appears that I and others who have done this math may have been wrong in thinking it was the Chinese government doing the accumulation. This speech argues the demand has come from the population or “consumers,” regardless, this was confirmation China is chewing up 2,000 tons of gold in a world where only a total 2,700 tons are produced per year (including Chinese production).
Going one step further we can add roughly 1,000 tons of demand which comes from India bringing the total demand to 3,000 tons versus new global production of 2,700 tons. This is only 2 countries! What about demand from North and South America? What about Europe and the rest of Asia? Or even Australia? Do you see where I am going with this? “Where” is the extra gold coming from? Please don’t tell me “scrap” as I am sure you have already seen your local “cash for gold” shop pull up stakes and close …because grandma’s old earrings have already been sold.
The supply can only be coming from where it is (was) held, the central banks themselves. Another “please don’t tell me” would be that central banks would never ever sell gold to suppress the price and create enough supply to portray “plenty.” The central banks have already done this and done it in a public manner. Remember the “London gold pool” back in the late 1960’s? Do you remember August of 1971 when Nixon closed the gold window and we found out that our holdings went from 20,000 tons to just over 8,000 tons? We “lost” 60% of our holdings back then in an effort to keep gold at $35 per ounce, why is it now impossible that central banks have again tried to suppress the price of gold? Do you believe central bankers have matured, grown consciences and learned by their mistakes of the past? All you need to do is look at money supplies and the amounts of debt the central banks have underwritten to see this is not so. Or better yet, what have their responses to the financial crisis been? Exponentially higher doses of the poisons that got into the mess in the first place, that’s what!
Getting back to supply and demand, it is clear demand for gold has been outstripping new supply for many years, Frank Veneroso first wrote about this nearly 15 years ago …yet the price has been dropping for the last 2 years. Let me ask you this, what price would the stock of IBM be trading at if someone was able to print up a few billion extra yet “fake” shares out of thin air and sell them as real? How can 50% of global silver production be sold on one market (COMEX) within 36 hours and then shortages suddenly appear? If silver was truly sold then it should be so plentiful that picking it up off the street would give you a sore back! If silver was sold and was plentiful then why has the U.S. mint suspended sales several times over the last 3 years? The answer of course was they ran out of supply and could not source what was supposedly “so plentiful,” that’s what.
Before finishing on supply and demand I want to pose a trading scenario with you regarding just 2 banks or traders. If the regulators turned a blind eye, what would prevent Bank A from selling 25% of global silver production on a Monday while Bank B “tepidly” bought throughout the day? Then on Tuesday, Bank B sells whatever was bought on Monday plus say another 10%-15% of global production, while bank A “tepidly” buys what is sold and thus “flattens” their position with a huge profit in hand? Of course Bank B is still short but the sentiment has turned bearish, not to mention the margin call liquidations their sales have created. Bank B will worm its way out of being short by “buying to close” their positions from scared …and forced liquidations. So bank A probably made more than Bank B without working as hard. The gentleman’s agreement will be reversed the next time and Bank A has to do the heavy lifting. I wanted to mention this scenario because so many have asked me “how” it could possibly be done, this is how.
Physical supply and demand has been “made” to not matter over the last 2 plus years but it will, eventually. It has mattered over the last 15 years and was evidenced by price. The “operation” we have witnessed to depress gold and silver prices has been masterful with one exception, by definition “the game” has to end when the supply runs out. The speech given by Xi Luode has thrown a bit of a monkey wrench in my thinking as he said “consumers.” Now I have to wonder about their “official” or state purchases. In my mind I can only imagine they are all lumped together and this figure of just over 2,000 tons is the sum total. If this is not correct then it means the total demand is even higher than this confirmation. It would be very difficult to believe central banks could be supplying a more than 2,000-2,500 ton deficit but we have lived through more strange events than this since 2008?
The bottom line is this, total global demand is and has been outstripping supply …and for many years. The available “stock” must be running very low and while temporarily it has been made to look like supply and demand don’t matter … it will! Like the saying goes, “it doesn’t matter until it matters,” but in this case it will matter greatly because once it is “allowed” to matter there will be little to no supply available as the ammunition has already been spent. This is not a head scratcher in any fashion, short term the prices have been depressed by issuing “fake supply.” Price will readjust violently once the true stock and supply is revealed.
Your article is out early so you must get up with the chickens and write your article the night before (or maybe both).
Another brilliant article and us Joe plumbers thank you for it.
As to the regulators they are as worthless as tits on a bore hog and therefore should all resign in shame and close down their agencies. They make a mockery out of their mission statements! Us tax payers don’t need their sorry butts if they won’t do their job (and they have proven they won’t).
It might not be hard to keep coming up with the needed gold by a certain govt (you know who I mean) if they keep invading countries and stealing that country’s gold in the process. Fighting ISIS looks to be very profitable !!!
Looking forward to your next article as I can’t read enough of them.
Keeping up the life insurance premiums for the family if the central bankers get tired of you educating main street. The central bankers want every one dumbed down and watching America Has Talent (but America has no brains)!
was written Sunday and edited today.
Glad to see that you caught the nuances of what was said.
1st – 2,000+ tons was SUPPLIED to Chinese consumers.
2nd – the PBOC gold acquisition is in addition to this.
3rd – no one know how much gold The PBOC acquired.
Also note that – even though 2,000+ was supplied to Chinese consumers, we do not know that is was all bought up by Aunties and Uncles. I am sure that the jewelry stores, and goldsmiths have a lot in their working inventory.
yes but the jewelry stores sell to the “Auties and Uncles”
Bill, I read recently that Chinas middle class is now at 300 million (approx) and growing, that’s approx USA total population. If true, 2000t for consumers doesn’t seem outlandish at all for a country where the people love gold. Another thing I don’t here many saying if they reprice gold and silver higher wouldn’t China and India have the most wealthy residence in the world for for their gold and silver holdings?
yes, their population would gain wealth.
bill, i hope you are correct that supply will matter. however, what if BOC starts massively leasing gold, which is very profitable and discussed in the attached article? can’t the fiat ponzi scheme continue longer than hard money advocates can stay solvent? thanks, dave
I’m not buying this article as leasing is not “highly profitable”. I believe this article is speaking to borrowers using gold as collateral, this is different than a central bank leasing to a bullion bank where the gold is then usually sold.
Dave, I wondered that too but the problem is the ~2000 ton per year physical gold supply deficit which goes primarily to private buyers in China and India. That can’t be turned off without draconian new rules (that didn’t work in India) which wouldn’t make sense given China’s recent move to encourage its people to buy gold. So if they tried to continue the leasing scheme in Shanghai in the future, then the PBOC will have to supply the real gold, and if they have only 4000-5000 tons it won’t last long!
China will never supply the world, they will hold for many generations to come.
Bill, in his latest interview on finance & liberty Jim Willie discusses the two Chinese triggers he sees coming. The 1st is of the COMEX OI position that you’ve spoken of. 2nd ( the trigger he believes will be initiated) An announcement from PBOC that they will announce a new paper price of gold ie..$3000 on their exchanges. Which they know the west won’t be able to arbitrage because they have no metal. He argues that this is a more honorable tactic. As opposed to pulling the COMEX trigger which could used to paint them as bad guys. I don’t know if that even matters. Given the lack of credibility the US even has at this point in the international community. A desperate, ever increasingly isolated nation. The shortages can’t be that much far off.
I agree Gil and have written of #2 on several occasions.
Bill, how do the derivatives tied to the metal contracts react to the new eastern price? Is that what breaks the system?
as said, it would be a “polite way” of busting COMEX.
Of topic, sort of. Have you heard anything about Harvey Organ? His blog has been taken down. One of the truth tellers – I am concerned for him.
Harvey is building a new website, he is fine and will be speaking during our webinar Thursday afternoon.
another great article. The outlined trading pattern scenario is surely a possibility.
I’m wondering what you think about “Greshams Law” applied to Paper Gold (bad Money) and Physical Gold (good Money).
no doubt Gresham’s law will prevail.
Koos seems to agree with Jim Rickards that China isn’t interested in having the new reserve currency, and that it isn’t set up for it anyway. To have a reserve currency you have to be running a trade deficit, or at least have some monetary asset to give away freely. China doesn’t have a Renminbi bond market set up so I don’t see how they could immediately switch from being a net exporter to net importer. I suppose they could revalue their currency higher with a new gold backing and then all the rich Chinese citizens would be able to buy stuff from around the world (I’m not sure what since China manufactures everything) and export their gold back out as payment but I would think they have learned from the Americans what doing this ultimately leads to — it won’t last much longer than a decade or two before China gives all its money away. Rickards believes China wants to be a part of this new SDR system which I guess would use a basket of currencies, most likely backed in some way with gold, for international balance of trade. Hate to say it, but it does seem the most likely way forward. What I don’t understand is why America is giving up its gold like this. Possibly (likely) all the central banks are in on some deal where the gold is simply being reshuffled around and the US will still have some on that fateful day. But if you compare the amount of gold held by all central banks cumulatively it is going down due to all the private demand from India and China, so we’ll find out pretty soon, maybe next year.
yes, we will have most all of the answers very soon.
So if I read well, we’ve all been fooled on a scale unimaginable.. And knowing these clowns made money off it.. That boomerang is coming right back at them. I’m also planning to make money off it. I’m busy compiling a set of “sing-along-children-songs” to calm ’em down during the collapse, for which I will only accept metal. No, seriously, I’m not sure if they’re aware of what they’ve done, because some still appear in MSM. Crazy! I have a feeling this all might change rather soon. I apologize for the lazy comment, but at some point everything has been said. This cat is out of the bag. Shame on those who did IT.
The cat is not totally out yet …
Tremendous article Bill and one that is needed out in the public domain by one such as yourself who has both studied and traded these markets for many years. The manipulation, as you so aptly state which is accomplished by banks “A” & “B” and probably “C”, “D”, & “E” is done while the Regulators look the other way – “I didn’t see nothin”. The banks and the Regulators working together in this Criminal enterprise are by definition termed a “Conspiracy”. So, again great article exposing how the manipulation of the PM is accomplished by means of a banking “Conspiracy” – the term which most blog writers avoid like the plague. But Truth is Truth and will be standing when all the Politically Correct bloggers are long gone from this earth. God bless
thank you Richard.
Bill, Here it is Oct 14th at 8 pm (MDT) and silver and gold are being attacked yet again. Looks rather brutal for silver. I just don’t get this. It makes me think that something big is about to happen. Could this be linked to the collapse in the oil price? WTI is now less than $82. I haven’t seen a good explanation of what is driving oil down so quickly. DO you see a link with the gold/silver manipulation? Thanks.
a quid pro quo with Saudi Arabia to lower oil price and squeeze Russia’s cash flow.
In this interview from Sept 17, 2014 Jim Rickards explains gold manipulation, very illuminating. According to him China is extorting the US Treasury to get gold at low prices.
I mostly agree with this.
All this Machievellian maneuvering with complex strategies, algorithms and all manner
of other bullshit trades means what? You people ought to be talking about ammo,
food, water, fuel, first aid, Fema camps for Obola and Martial law. You are all living in
La La land. I have plenty of precious metal. It will rise in price when I’m dead and Bill
is in a nursing home drooling.
“Do you remember August of 1971 when Nixon closed the gold window and we found out that our holdings went from 20,000 tons to just over 8,000 tons? We “lost” 60% of our holdings back then in an effort to keep gold at $35 per ounce, why is it now impossible that central banks have again tried to suppress the price of gold?”
Is it just me or does it also seem incredibly stupid to others for anyone to maintain a low gold price ($35 an oz.) when one has a LOT of gold (20k tons)? Seems to me that if one has a a lot of something, they would like it to be as valuable as possible. I know that I would and suspect that the Chinese will do exactly this at some point in time.
yes it seems strange but the flip side is the ability to “print”. Must have a lo gold price as gold competes with your currency.
Bill: the silver shortage will become more acute during the ramping up for WWIII. I read that during the Gulf War under Poppy Bush we used more than 200 million ounces for armaments and munitions, missiles and smart bombs. You cannot wage a tech war without silver. It will be interesting.
we live in interesting times.