I’d like to write about something that is so basic that you may scratch your head and wonder why I would even bother. I have written many times about this and others have shown that the “price” of gold is manipulated. This is no longer a “conspiracy theory,” it is a fact. I titled this piece “The Reason” and will discuss it from 2 standpoints, from the manipulators and from yours.
First, “why” is there any reason to rig the price of gold? This is easy. Governments have every reason TO rig the price and in a fiat world where the money that they create competes directly with gold. They would be crazy not to suppress the price of their competitor. Gold is the canary in the goldmine. If the canary dies then you will soon be dead also just as it follows that if the price of gold is “rising” in dollars or euros or yen, “something” must be wrong with them. The thought process of central banks is that if you can disconnect the alarm then there will be no fire…or at least no one will know that there’s a fire. It is truly this simple, the central banks believed (for too long) that if they could keep the lid on the price of gold then they could do whatever they pleased and no one would know. This was true 10 or 20 years ago, they had the supply that they could feed into the market…this excess supply is very close to being used up. We know this because demand has exceeded known supply by at least 1,500 tons per year for going on close to 20 years, so far more than half of what centrals banks had…is already gone.
Then from YOUR standpoint, if you know that the price of gold is “rigged”…you can go one of 2 ways in your train of thought. Some people think, “Oh I wouldn’t touch it BECAUSE the price is rigged.” Or, as I believe, this IS the very reason to own gold, because you are able to purchase it cheaper than if it were in a freely traded market. If central banks want to “subsidize” gold buyers then so be it; don’t look a gift horse in the mouth. Just buy it and put it away because you know that it is cheaper than a freely traded true market price.
Until last Wednesday or maybe Thursday there was a litany of “bashers” jumping up and down and screaming that the “permabulls” are wrong and that the likes of Martin Armstrong are correct. If you agree that the evidence clearly points to the prices of gold and silver being manipulated then it follows that you should look for “bottoms.” If you cannot see that gold is clearly manipulated (there is clear motive, clear ability in the paper markets and clear evidence of action), then I cannot help you (Armstrong).
If you understand that the price is manipulated and has been for years now then how can you “risk” trying to call a top? How can you trade and “hope” that you guess correctly? What if you guess wrong and the rigging either stops or fails? How do you get back in? Gold has corrected and silver has crashed by more than 50% on the paper markets but the upside is many times the current prices. Do you risk getting in maybe 10% or even 20% lower than current prices while sitting on the sidelines? The “sidelines” being “cash dollars,” euros or yen etc.) and out of something that when all is said and done will trade at multiples of current prices in fiat?
Trying to call “top” in a long term bull market is a mugs game as you can only truly be correct 1 time. This “1 time” is when the bull market is over for good or at least for many years. For example, would you have done the right thing in 1976 by selling your gold at close to $200 if you were not back in as it traded down close to $100? As Richard Russell is fond of saying, “Very very few people ever ride a bull market from start to finish.” I am going to say that there is FAR more risk in NOT owning gold than owning it. I am not even talking about the possibility of a finite percentage loss versus the possibility infinite gains; I am talking about the potential (probability in my view) of the entire financial system coming down. It was only last Monday that we heard of Chinese banks going offline and their whole system having liquidity problems…was this to spread and go global? Would you rather have dollars in a bank or gold out of the system? Do you believe this scenario to be possible (I hope you do)? If so do you have any idea when? Where? Are you willing to bet that you or someone else that you listen to is smart enough to know “when?”
Here is the point, if you bought gold at $1,900 nearly 2 years ago you still bought it at a “subsidized” price. When push comes to shove shortly will you lament about “what a bad buy” it was to have paid $1,900? Or will you just be happy that this capital was not part of the “bail in” where depositors lose money to save their bank? Will you think “Gee, if I only listened to the top callers I would have more ounces?”
Those who know me personally know that I became bullish on gold some 15 years ago. My thought process has evolved over time but my basic premises have never changed. If you bought at $1,900 or $1,600 I will tell you that you got your purchase “cheap,” if you bought last Friday at $1,200 then you got it cheaper but at least you own it. I would not have any interest at all in gold if I thought it was going to $2,500 per ounce and then fall off. I have an interest in owning gold because it is wealth. “Wealth” that will carry you to the next system whatever it may be. Maybe the mainstream pricing will be in SDR’s, in Yuan or some new currency called “wombats” or something like that. The point is this, you will be afforded a place at the table, a ticket to entry, gold will allow you in. Dollars on the other hand will not be accepted and when the new “rules” are made, those with dollars will have no say. Choosing to “trade” gold for dollars means that you stand a chance to be holding those dollars when the inevitable “shunning” of the dollar takes place. “Trading” is a risk not worth taking in my opinion even if you are trying to trade for more ounces rather than dollars.
P.S. I will give it one more day to see if JP Morgan delivers from both their dealer inventory and from the customer side. They are contracted to deliver roughly 100,000 ounces more gold IN JUNE than they had in their inventories as of Friday afternoon. As I see it, they need to completely empty their inventory AND deliver another 100,000 ounces to honor contracts. It is still not even clear that delivery was made on the 1,000 call options from May. This is a very big deal if you believe in contract law, if not…oh well, there’s always Dancing with the Stars or the America’s Got Talent to watch.
Mr. Holter –
the postscript of this post makes it quite clear that you have absolutely no understanding of how the COMEX delivery process works. I would suggest that you seek out sources other than Harvey Organ to explain it to you.
If you don’t wish to seek out the facts/reality, I beg you to stop misinforming your readers with charlatan nonsense.
warmest regards,
KD
vault inventory has moved very little in the last month, nothing has entered the dealer side and 217,000 ounces exited the customer side. They have issued almost 6,000 contracts or about 600,000 ounces of Gold for June delivery…where is it? Did it move? Was it delivered? How was it accounted for? Did “settle” in cash…that would be illegal. Or did it settle in GLD shares?
Bill –
there is no “Dealer” side or “customer” side. Again – if you “learn” about the COMEX from Harvey Organ, everything you know will be inaccurate.
there is “registered” metal and “eligible” metal.
and there is no reason why the numbers in the COMEX warehouse inventory spreadsheet need to change when deliveries are made – that is NOT what COMEX deliveries mean. Several people have tried to explain this to Harvey Organ in the past. This is my first and last effort to try to explain it to you. You can re-quote nonsense from Harvey all you want – it will not get any less false.
so to answer your questions:
the 6000 delivery notices issued from June: yes, they were settled. what happens is that the warehouse receipt is given (From the short, the “issuer”) to the new owner (the long – the “stopper”). No metal moves in this transaction. It’s like a coat check – the claim tag has been given from one party to another. IF and only if the new owner decides to move or reclassify the metal, you will see the warehouse inventories change.
No, it did not “Settle in cash” or “in GLD shares”.
I suggest you familiarize yourself with what an EFP (Exchange for Physical) is, and with the concept that JP Morgan and their customers can hold metal at other COMEX vaults (don’t forget: JPM’s vault didn’t even exist until a few years ago, yet they still traded on the COMEX before then, right?). Then you’ll understand how these delivery notices are issued month after month.
of course it is registered and eligible but easier for people to understand “dealer and customer”. Yes I understand that receipts are issued, however those receipts are presented and metal either has to move between custodians, be adjusted between the eligible and registered sides or withdrawn. We have not seen anywhere near this for June. GLD and SLV shares have in the past been used in “settlement” and are now “allowed”. I did see your response to Dave Kranzler regarding the audit process of GLD…you forgot to mention the sub custodians …sub sub sub custodians and how JP Morgan cannot be held responsible. Also the CME now has a disclaimer on their website regarding inventory numbers and how they cannot be held responsible, gives you a warm and kinda fuzzy feeling
Bill –
when you start with a false thesis, you arrive at false conclusions. In this case, your false thesis is:
“however those receipts are presented and metal either has to move between custodians, be adjusted between the eligible and registered sides or withdrawn. ”
no. false. that’s factually incorrect. that is simply not how it works. it’s not something we can debate – your understanding of the COMEX process is flawed, which is understandable, because you learned it from Harvey Organ. You ignored the coat check analogy, which should help you understand. If I deliver COMEX warehouse receipts to you, there is no change in registered metal, eligible metal, or total metal. The warehouse receipts are just in different hands now (yours, instead of mine).
and yes, it’s “easier” for people to say “dealer and customer” but it’s wrong, and it leads to people who don’t understand the process, like Harvey, and then you, and then all of your readers.
and no, GLD shares cannot be used to settle COMEX contracts. that’s false. I’ve already debunked that nonsense:
http://kiddynamitesworld.com/no-gld-shares-may-not-be-used-to-settle-comex-contracts/
so COMEX is unlike any other place in the world where investors are laying claim to their Gold? COMEX is merely a place to hang your coat? Maybe this is why 1,000 tons can be sold in 2 days, it is not real Gold nor will it ever move or be delivered? I guess I get it now.
Bill,
I wouldn’t worry about folks like “Kid Dyaminite” because he is probably part of the establishment trying to make you look bad.
I would just write him off as a “pimple on the ass of society” !!!
This is in response to your PS. As of Monday’s close, it seems that nothing has occurred in the JP Morgan vault accounts since June 11, according to Harvey Organ, whose accounting seems to be meticulous and accurate, regardless of what KD thinks about it.
I do not participate in the Comex, so I do not know what its contract says, but I DO know “contract law” from my days as a real estate and securities broker. In reading elsewhere, there appears to be a force majeure clause in the contract that WOULD allow them to pay in cash (like ABN AMRO) or offer GLD shares (which would be worth even less than our fiat money if a true default occurs) as payment, but I would assume the force majeure would have to be identified as part of claiming that one had taken place.
I don’t know how soon a contract for delivery is usually settled as I don’t possess any of those, but my intuitive sense is that JP Morgan is playing a game of “chicken” — refusing to budge until and unless their hand is forced, and that suggests to me that they are expecting some kind of approaching “black swan” event that is not really a black swan, but something they have insider knowledge about. IN other words, they have something “up their sleeve” and are waiting until the right moment to play it.
So, given your experience and expertise in the PM markets, what do you think is going on and when do they HAVE to make a move or admit default?