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Susan and I are on the way back to Minnesota today.  I will not be publishing the newsletter on Thursday or Friday, but will be back in your mailbox on Monday.  Here is what my friend Trader David R has to say about the gold market yesterday:

It was a major unexpected ‘Black Swan like’ move in Gold the past two weeks. Descriptions range from its largest two day dollar decline ever, to a +30% drop from its 2011 peak, to a 7.2 Standard deviation event (which would happen every 2.7Million years*), leaving market participants largely puzzled as they searched for enough reasons to substantiate such a fall. Those looking to pinpoint one factor (one Lehman-like trigger) will be left frustrated (unless you fall in the conspiracy-camp in which possible triggers are endless…). Its safe to say the range of factors include:

– Fed Minutes confirming QE to end sooner rather than later

– continuation of heavy ETF liquidations further dampening sentiment

– fears of Cyprus selling their Gold to finance a bailout (which could become a template for other Gold-rich Euro nations)

– Disappointing Chinese econ data pointing to lowered demand

– Massive BOJ easing policy, which has prompted investors run to equities & bonds over commodities (in the short-term)

– A VERY key technical break at $1525, AND the combo of SPX still near record highs & a strong USD, confirming Bernanke wins (and Gold loses) – this forced out key strategic OTC and physical players

– Frustration by longer-term accounts on Gold’s lower ceilings as it becomes desensitized to ANY potential BULLISH catalysts (from Cyprus seizing deposits to horrible NFP to BOJ now actively devaluing fiat money)

As with any ridiculously oversold market, one cannot rule out a (dead cat?) bounce which Gold’s already witnessed through $1400. Physical demand (from Indian demand, retail minted products, volumes on Shanghai to flows and premiums seen through OTC hubs like Dubai and London) has responded splendidly to the flush. [see note to right giving color on current retail demand] Presumably OTC sellers are largely exhausted, so the next leg depends on the struggle between potential ETF sellers (>8Mill oz. of holders are still technically underwater & printing M2M losses) and the combo of physical and CB demand. i.e.: The West (sellers) vs. the rest. With the US employment still unsatisfactory, the US Econ surprise index losing momentum as the (usual) summer slump approaches, there’s little-to-no impetus for another big stab (lower) at Gold. However, many investors are still licking their wounds, and specs are wary, implying it’ll be a hard grind toward $1450 and those looking for a stellar V-Shaped recovery (ie: back at $1550 very soon) will be disappointed. For now consolidation around 1300-1450 seems safe as new catalysts are assessed.

Take a minute to carefully read Jim Sinclair’s comments on King World News last night.  Think about what he is saying….

“This is the frightening reality of the kind of fires that were raging behind the scenes in the financial world at that time.  The uniting factor between the events that took place then (1980) versus today is SUPPLY.  In both situations there was an increased in demand or an expected increase in demand for physical metal.

***

But rather than the recent takedown doing what they expected, which was to significantly reduce the demand for physical gold, especially among the developing nations and among the BRIC’s, the demand for physical gold at a lower price has in fact multiplied.

People need to be reminded that when the market broke in 1980, from $887 down to $449, it then recovered in a straight line to $750.  It was If it wasn’t for the fact that Volcker had taken the cost of overnight money into the 20s (percent), and that 10-Year money was at almost 15%, gold would have gone and made a new high based on the tremendous amount of fear that was present at the time.

I think we are in for a repeat of that type of massive rebound in gold, based on the fact that it’s become obvious to anybody who understands the gold market that the paper market is a total fraud.  Key market participants also understand that the Western central bank gold has been leased out and it is gone.  It’s not in the vaults where the West pretends it is.

This has created an atmosphere where individuals are now panicking in an attempt to get possession of their physical gold, but they are being met with strong resistance, or the contracts are simply being changed unilaterally just like we saw back in 1980 on the COMEX. 

***

So in the fullness of time the history books will show that once again the gold market went through a crisis brought on by the dwindling supply of available physical gold.  The striking difference between 1980 and today is that this time the physical really is gone.  This is the frightening reality of what the financial world is facing today, and I can assure you there will be hell to pay before this is over.”

Continue reading on King World News

It is obvious to me that there is something very different now taking place in the gold and silver market.  In the past, when gold and silver took a big hit, our business didn’t collapse  as some new “value” buying jumped into the market.

Then came the buying panic in 2008, after Lehman fell, but everyone was worried that this could be the end of the financial system as we knew it.  Every asset was plunging, not just gold and silver.  The buying in 2008 lifted gold and silver quickly back to new highs.

This time, there was no “Lehman event,” but throughout our industry buying has poured in with vigor unlike any I have ever seen, stronger than what we saw in 2008 and stronger than at any time in the last 30-years that I have been in this industry.  There doesn’t seem to be any let-up.

In the scope of things, the current drop of 31% is not out of line.  It has happened, percentage wise, four times in the last 11 years.  But the reaction to the drop is very different this time.

jul-2002-jul-2012-gold

Jim Willie’s comments offer an explanation of what is transpiring.  Also, be sure and read the rest of his views below.

Jim Willie wrote:

Do not expect a confiscation of gold house to house in American cities. Instead, while the USGovt security agencies are busy removing (stealing) gold coins and jewelry from bank safety boxes, the USMilitary interests will probably conduct large-scale acquisitions of the major mining firms for national security reasons. The hedge fund suppression with Wall Street cooperation has enabled the juniors to be vulnerable to acquisition for pennies per actual dollar value in true assets. The narco money conversion into venture cap slush funds will be easy, as heroin profits could quickly be converted to deep storage gold. Five years down the road, when the mines have beens depleted, they might be subjected to IPO offerings to the hapless public, who would eagerly buy yesterday’s story from the same crooks who ushered in the housing and mortgage finance congames, again. The cycle never ends.

The breakdown of the precious metals market. History is being made with an ambush of the gold market worthy of historical annals, which should feature corruption as a key element. The COMEX and LBMA are deeply fraud-ridden in management, regulated by the equally corrupt and complicit Commodities Futures Trading Commission (CFTC). Their objectives are to preserve banker power over government and the public, not to ensure a fair equitable market. Therefore, the suppressed price for precious metals will result in global shortages and eventually the total shutdown of the COMEX, possibly with legal prosecution and lawsuits seeking damages. Supplies are fast disappearing, especially for Silver, if not from lack of supply then from withdrawn supply to seek a more fair price at a later date.

Take a survey of the global situation on precious metal shortages. Nearly all major wholesalers in the United States and the rest of the world, Asia included, are completely out of stock for smaller denominated silver rounds and bars, with no projected delivery dates in sight, or else long indefinite waiting periods. At least 12 to 15 clients checked their local favorite coin shops or bullion coin stores, all in the United States and Canada, only to be told that nothing was in stock for purchase. Too numerous and identical in recounted stories to offer quotes. This is a worldwide phenomenon. The other side of the table indicates the tremendous surge in precious metals demand on a consistent global basis. The Liberty Staff concluded, “Ladies and gentlemen, it is becoming patently obvious that world citizens are waking up fast to the inherent risks of fractional reserve private central banking, and the extreme threat that burgeoning government debt means for them. Wise people everywhere are no longer looking for yield but are seeking safety in ever increasing numbers. And, they are looking for it hard and fast. What they are finding is the ultimate safety for wealth protection, namely, Gold & Silver.” The trust in banks will become much worse.

The USMint reports massive silver sales, bringing its 2013 total to an extraordinary 15.868 million ounces this year, as of mid-April. The pace will surely surpass the current annual record. Almost all retailers and major wholesalers are completely out of stock. The earliest expected shipments are at least four to six weeks away. Extremely tight physical supplies have resulted in premiums on Silver Eagles to skyrocket. The wholesalers are on 4-6 week delays for shipments of Silver Eagles.

[Major dealers are] still showing Sold Out signs. Based on a conversation with Dave in Denver last week, Tulving has not received their next allocation of silver eagles. They are not even taking orders from customers. Apmex had an inventory of 38,000 ounces on Wednesday, but by Friday they were sold out.

A personal friend in Vancouver British Columbia reported on a phone call to Johnson Matthey. They told him they had a 100-oz silver bar available for C$2450 but with two weeks for delivery. They also told him he could buy lots of 2013 Canadian Maple Leafs for C$1492, which was only about $100 over spot, with built-in 4-5% vig for exchange rate differential.

The USMint report gold sales are setting monthly records. Last year in April, a total of 20,000 ounces of gold bullion coins were sold. As of April 16th this year, the USMint has sold over 50,000 ounces of gold. Expect a five-fold increase year over year for the month of April. The USMint has reported no 2013 Gold Buffalos available until May 23rd.

A trusted survey of US bullion wholesalers reports a sellers/buyers are occurring in over a 50 to 1 ratio. It has gone hyperbolic. Expect the ratio to rise further until a fair price is posted.

Huge wholesale silver premium increases have been reported. The unprecedented shortages in silver have resulted in huge premium increases for silver dealers at all levels. Premiums for US Eagles and Canadian Maple Leafs are increasing on a daily basis.

Premiums for Junk Silver are completely off the charts. The reported premium of $9 per ounce over spot for pre-1965 US silver coins is the highest in history. Wholesale premiums for Junk Silver have risen 20-fold in the last six months. More importantly, almost none can be found anywhere. Some dealers are taking orders with three months in waiting time.

Zero inventories are reported at major private USMints, known as bullion fabricators. Two of the largest in North America, A-Mark Precious Metals of Santa Monica California, and the NTR Bullion Group of Dallas Texas, have notified their retail dealers that sales of most silver products have been suspended. A-Mark has stopped taking orders for all its 1-oz, 10-oz, and 100-oz rounds and bars. No date has been cited for the resumption of sales.

Retail coin stores are completely out of new stock. The majority of local retail coin dealers are entirely out of stock of any silver products. Surveys reveal almost no customers selling, but where the requests for purchase are at a frenzied level. The silver shortage situation is fast approaching an extreme level.

Subscribe to the Hat Trick Letter for the full article.

Jim Sinclair has published reports he has received of shortages of physical gold and silver (see below).  This is real, folks.  The delays, shortages and rising wholesale premiums are here with us NOW.

This is THE time when we see if the customary “Technical Analysis” used to bully around the prices of paper gold, or the record-setting off take of physical gold and silver powers the price from here forward.  Sinclair and Willie say YES!  The physicals win this time.  The TA boys, like Edelson and even Richard Russell say nothing has changed and the moving averages will rule.  I say it feels different this time and would be very disappointed if the current physical demand fails to influence the price UP to a much higher level.