Two pieces of news broke last week, if the first turns out to be true, there will certainly be far ranging consequences. The second revelation was that of the truth being told, now we will await the far ranging consequences.
News last Wednesday regarding Apple’s new proposed smart watch is a head scratcher. The headline was astonishing, “Apple to buy 30% of global gold production”. We should look at this from several different angles because several things do not add up. If this article is true and Apple does plan to purchase 30% of global gold production, this is THE biggest game changer in the gold market since 1849!
One million watches per month using two gold ounces for each watch? It sounds like an aggressive goal but Apple does have an impressive track record with new products. The other side of the equation is the use of two ounces of gold for each watch, if true then the math becomes mind boggling and Apple will require 24 million ounces. This represents 30% of the 80 million ounces the world produces. My guess is you’d probably be looking at a price of close to $4,000 per watch, $2,500 for the gold content alone.
Can Apple really do this? Is it even true? The “math” may add up but something else really does not. First, there was absolutely zero reaction in the gold market. Can you imagine if some builder announced they were going to build 300,000 houses per year on top of what is already being built? What would the price of lumber, gypsum and other building products do? They would explode and there would be front running actions of hoarding product. Did we see anything at all like this on Thursday and Friday with gold? Not even a whiff!
Next, how exactly would Apple be able to procure this amount of gold? We are talking about 746 tons of it. Let’s compare this to what the Germans told us one year ago. They were saying they couldn’t get anymore than five tons from the Federal Reserve because of the “logistics” problems …just too much weight I guess? We of course now know this was false because Germany has received more than 10 times this amount and the Belgians 122 tons (which fits nicely into a Boeing 747 cargo plane).
The real question to the procurement question is this, in a market that only produces 80 million ounces per year while demand has been far in excess of 150 million ounces, where would another 24 million ounces fit in? If this Apple story is true and they really do want to market luxury I watches, they will have a serious production problem! Namely, I think they will have a very hard time putting a “shine” on shares of GLD or COMEX contracts. Steel cannot be delivered, construction cannot be completed nor can a vehicle run on derivatives contracts. Though these contracts are wonderful in “pricing” product (for a while), they cannot and will not create real supply. In fact, when they are used to suppress price, they inevitably will create excess demand and reduce available supply. The only thing I can say about this Apple news is if true, it will blow the physical gold market wide open and expose the reality of just how rare gold truly is.
The next bombshell came out on Friday. The Chinese ambassador to Belgium threw a card or two down on the table . Qu Xing apparently made clear what we were all thinking in the first place. He chided the U.S. for their actions within Ukraine. What he said was not really Earth shattering stuff, but, what he said was blunt and to the point which is highly unusual for diplomats who usually try to say very little while doing it “nicely”. Mr. Xing stated the obvious when he brought up the fact that Ukraine borders Russia and of course Russia would have concerns both geographically and ethnically. This alone was a big step because China in fact has now publicly chosen a side albeit the obvious one.
The truly giant step and one I have waited for, for quite some time, was his warning if you will of U.S. external intervention. Even stronger and more shocking was his quote “The U.S. is unwilling to see its presence in any part of the world being weakened, but the fact its resources are limited, and it will be to some extent hard work to sustain its influence in external affairs”. In case you need this broken down, China just said the U.S. is losing power and control all over the world. A starkly blunt statement from the very polite Chinese, a long time in coming but brutally true. Now, what if any response will come from the U.S.? Sad to say I have seen bar fights start over more gentle words than these.
Before finishing I want to add one other piece of news from Friday afternoon. Russian opposition leader Boris Nemtsov was murdered in Moscow. Zerohedge reports and asks “who” did it? and speculates the Western press will again come down on Mr. Putin “like a ton of bricks”. They also speculate there will surely be another round of sanctions against Russia. Several points here, if this was “official action” and sanctioned by Mr. Putin to silence Nemtsov, wouldn’t it have been done in a manner other than a sloppy drive by shooting? If done by the KGB would there even been a body to be found? Also, with the previous news the Chinese have publicly declared sides, what good will sanctions be? Can’t Russia in essence funnel finance via and be helped by China? Have they both signed long term trade, financial and energy deals only to see Russia hung out to dry by what obviously looks fishy (or false flaggy)?
The above was written Saturday, then HUGE news broke on Sunday.
Hypo Alpe-Adria bank the 6th largest bank in Austria looks to have a 9 billion euro smoking hole in its balance sheet. Austrian officials as recently as last week claimed there was no problem …they were either wrong or lied. The first thing you need to understand is Hypo was originally packaged with assets from “bad banks”. The funding came from the wealthy province of Carenthina (10.7 billion euros) and Austria herself (1 billion euros). Until now, this bank was rated “AAA” because of the provincial and national backing. …So much for feeling safe in a AAA rated bank eh? Bail ins are now expected to follow. Notice I did not say “bailout”? Depositors accounts will now be targeted to re “fund” the bank.
What does this mean exactly? My take is there will now be depositors in other banks doing some “math” and making some withdrawals. Remember, interest rates are non existent and may very well be negative for depositors, why would anyone want any risk whatsoever if they are getting no return? The question will arise “what bank” is really safe if Hypo was rated AAA and supposedly backed provincially and federally? In my opinion, this could very well be a “rhyme” with CreditAnstalt which failed in 1931 and ushered in bank runs all over the world.
Is “this it”? Is this the trigger or the “big one”? We cannot know for sure yet but it would be foolish and very dangerous to bet it is not. This situation arose as a result of the Swiss actions, the bank had lent in terms of Swiss francs which became harder to pay off as the franc rose in value. People borrowed in francs because of the low yield and are now burned …as is this bank …and it was not the only one lending heavily in francs, others will surely surface shortly. As I have been pounding the table over the last few weeks, I believe we will see “gaps”, market closures and re set action. Hypo could very well kick it all off as investors come to understand there are no more government or central bank “white horses” to ride in and save them. We live in a computerized world, what used to take days or even weeks …now only takes seconds.
One last tidbit, Singapore and China are racing against each other to create a cash gold market and to have their very own “fix” price. A new Asian fix will begin March 12, this will obviously strike at the hearts of both COMEX and LBMA, not to mention London itself which is where the “fix” price has been quoted from for over 100 years. Ask yourself “why” does China want a cash market and to set the fix each day? This is simple, China is THE largest producer of gold and they are also THE biggest consumer, if you own the car, why wouldn’t you want to drive it? “Times they are a changing”!
We live in a world where truth is a scarce commodity, consequences are a different duck. Consequences are many and becoming more plentiful with each passing day. God forbid the potential consequences of this banking situation. The old saying goes “sometimes the truth hurts”, I tend to disagree. It is not the truth that hurts …it is the consequences!
I posted this earlier on Andy blog.
I repeat it here.
THEY SAID THE TITANIC COULD NEVER SINK….
How can some abandon ship when the Captain is saying EVERYTHING IS FINE.
Nothing short of criminal behaviour in my opinion.
What a freekin mess.
the key is understanding we already hit the iceberg.
Titanic could not be rescued by money printing, markets can and that it is why paper assets (bonds and stocks) have provided so much safety and capital gains.
Still no end in sight.
off your meds again huh? Great logic!
Yes, I think it is harder to save the titanic and its passengers in 1912 that rescuing a bank which has paper assets in its assets and liabilities by providing 0% fiat money loans created out of thin air by a central bank which as vested interests (except for lehman bros killing job !) to do so.
However it does not mean that saving a sinking boat is impossible while saving a failing bank is always successful of course !
Besides, I agree that making some comparisons between such two different things is little meaningless but it still appears to me that odds to rescue the austrian bank are much better especially if taxpayers are making some generous multi billions gift to this bank.
What is so illogic here ?
did not the “generous taxpayers” fund this bank in the first place?
You are right, they were too stingy and did not provide enough fiat for their nice bankers !
It is truly frightening how things are accelerating now.
The Apple thing is really odd. Who in their right mind would want to wear a wrist watch that weighs in excess of 2 ounces? And why would anyone spend that kind of money on a watch that will likely be obsolete in a couple of years despite the Gold content?
As far as the assassination of Nemtsov, what possible motive could Putin have had to eliminate a nobody who posed no political threat since he had virtually no support? The guy was a CIA funded operative who apparently was so useless that he is worth more dead than alive. The US media will milk this for all its worth to further demonize Putin. Truly pathetic!
Thanks for another great article.
thanks Al, haven’t heard from you recently, all OK?
There are two years waiting list in order to buy an hermès Kelly bag at 8000/10000 USD for the basic version.
It takes between 10 and 20 hours to manufacture them with employees paid 30 USD an hour all costs included.
If you had leather and 20% VAT you are about 1000 USD cash costs.
In France you can buy some knives (pre WWII) with ivory handles for less than 5 USD…
Why looking some justification in buying habits of the “modern” man/woman ?
Things are going great considering the accelerating madness around the world. I never miss your daily missive nor Andy’s compilation of terrifying events.
Keep up the great work. You are keeping a great many us inspired and informed.
Thanks
10-4, thanks.
About the drive by Nemtsov killing, one must ask ‘if Putin was responsible’… Why? He was no threat to Putin. At one time maybe, however more and more he was a voice of dissent in the political wilderness. Putin had nothing of real political value to gain by his publicly violent death and everything to lose. Especially considering Putin’s 80% support among the population.
No, this looks more than likely a western “setup” to “stir the pot” of anti-Putin Russian sentiment on his own turf. The MSM has already gotten out their ‘paint that evil Putin brush’ and are using it quite liberally. Unfortunately, most sheeple will believe it hook, line and sinker, without another thought!
it’s not their method.
If Putin would want to dismiss this oponent, there is indeed more quiet way to do it.
Remember the board game truth or consequences…
I am in the mist of creating a new board game.
I am planning to call it Lies and Deception.
Price point.. 1 silver round.
Please mail me your pre-orders.
I promise I will deliver.lol
Excellent post bill. Apple for now is a “what if”. China/Singapore seem a done deal. Critic shooting in Moscow may have been purposefully done in public, to send a signal to Kiev nationalists to leave pro-russian politicians alone. Acting Ukrainian President Olexander Turchynov had ordered security operation to resume. It appears that political assassinations are back in vogue. 1930s may repeat in more ways that one, political assassinations, economic depression, currency wars, war drums, annexation, and military alignments. scary stuff
or a maybe not.
Global Economic Depression; Baltic Dry Ice at low.
Beggar thy neighbor; Currency Wars
Studdenland annexation; Crimea Annexation
Slovokia Occupied; East Ukraine in Rebellion
National Alignments Prussia, Austria, Germany, Hungary, Romania, Bulgaria; Russia, China, Iran, Syria,
Political Opponent Assassinated; Uke and Moscow critics murdered
anymore?
yes Derrick, lots mo!
Bill,
Another great article. Thank you.
I wouldn’t buy the watch from Apple if they make it. In Oklahoma you would have a gun pulled on you and give the watch to the guy with the gun in your face. Yes, we carry guns in Oklahoma, but when a gun is already in you face, you are screwed.
I don’t believe that Putin had any thing to do with his death. Smells like a Langly operation to me. Of course the MSM ( the 6 corporations that own them all) are part of the “bad guy system” and probably had their plans to blame Putin. I DON”T BUY THEIR BULL SHIT!
kids get killed for the latest sneaker on the market, can you imagine gold watches?
How Greece was backed into the corner of compromise.
http://www.theguardian.com/commentisfree/2015/mar/02/austerity-greece-euro-currency-syriza
but they enjoyed it while it lasted.
Putin did it. He send a message. No, not to ciа. Nemzov was not a lengly asset. He was low rank member of Boris Yeltzin group. He used to be a powerful, but lost and got ousted by other oligarchs.
Putin needs capital, but it runs from the country. For instance Abromovich started investing in us shale gas.
So, Vlad told oligarchs (Abromovich, Chubays, Derepaska – they are all tribe ppl) that stolen in 90 capital must stay in country and be reinvested there.
And how to make it clear to criminals that he is no kidding? So, he send a message. He picked weakest link among them.
I’m not so sure.
“We hold these truths to be self evident”
That we will be propagandized, we will be financially enslaved, that the Constitution is no longer valid along with the Bill of Rights.
And for going along with this, you will be rewarded with all the sports you want and the Sports Illustrated bathing suit contest or lack thereof.
YUK!
circuses, bread and wine for all!
If I was a betting man I would bet Greece leaves Euro before the end of July.
However, I anticipate further anti Euro developments to occur even before that time.
The increasing momentum undermining the ability to keep everything afloat will soon reach the point of critical momentum.imho
many fires to put out with new ones starting every day.
if you can get your hands on one of those early release apple gold watched, grab it, it will be a collectors item, as – the experts in everything at apple – will soon realise a bit of truth about the gold market. what a joke
or they plan to ride the wave?
I suppose Apple will have the watches made in China where all the gold is stored. Isn’t that where the IPhones are made?
But don’t count on me wearing 2 ounces on my wrist. Folks are being hit over the head for certain brands of tennis shoes, wow now it will be watches. At least gold will get back to the hood.
yes, good one Gig!
No, good one Bill,,,,,,I clicked the imbedded link.
Maybe this “I watch” is a front for Apple to diversify into Gold? I find it hard to believe that the higher ups at Apple aren’t fully aware of financial calamity that is around the corner. Who knows just my 2 cents worth.
this was my “ride the wave” comment.
Thanks Bill.
…..Re the Apple story regarding their requirement for gold, 2 oz per watch! Its beyond ludicrous. I’m from the computer industry (40 years) and there is no way on Gods little green earth that 2 oz are required per computer/watch…. perhaps 1/1000 of a gram if even that. As for the watch case being gold…. that’s even more stupid. Pretty sure way to get ones’ head blown off for hanging an asset of that class around ones’ wrist!
However.. perhaps they have made a decision that this is the place to park their reserves … and as a cover to taking that step, were coerced into this headline story. I’d love it if they buy that much gold… even if they did justify it under this stupid headline.
And as for gold not reacting to the story… just shows how ‘managed’ the gold market is.
correct Jack.
Jack,
You are refering on gold plated watched. Gold watches have existed for centuries and have average contend of about 1 gold ounce(for women slighly less) in order to make the housing and the bracelet (impossible to make the mechanism even with low grade gold as not enough rigidity).
The market did not react to this news as if apple would release such products, I believe it will be as some customized gold iPhone or ipad : there will be sold at very low volumes such a few thousands which of course will not put pressure on western short speculators (HF, central banks, bullion banks,…) who still dominate the gold pricing to this day…
For those that shudder at the thought of wearing an expensive watch – must live in a bad neighborhood. Try something subtle – like a long sleeved shirt – or not so subtle – like a 45 cal. KH
or don’t wear one, I have worn a watch for about two weeks during my entire life.
I listened to an interview over the weekend by this army intelligence guy who stated that the silver price when the RV happens will be well over $1800.00 because it is so rare and used up. I personally believe it will be infinity because paper cannot truly price real money!!!
Bill I believe since Basel III went in effect today, Apple will be buying gold to back up some of that cash the have sitting on the side. The 2ounce of gold in the watch seems like a large amount especially for your wrist. Maybe Apple is hinting, they will pay twice the amount per ounce to get enough gold for their watches. I believe this is a front to buy the gold up. A few years ago, apple had $600 Billion cash just sitting and dthe numbers have grown since. Also, I believe the gold is now being hoarded because so much news came out about gold, with China, Russia, India and now Apple and the price has only moved lower.
I am now seeing that gold may not go up gradually but spike up ridiculously. Either that or they will have to reset it higher because the machinations to keep it down have all expired! Even in a reset, because the majority of it is now almost all hoarded, the price will still spike higher from there!
whatever they call it, it will be fast when it comes.
Hi Bill,
In my view this can be only one of two scenarios.
1. Apple sees the big picture and will use this to convert cash which they have nowhere to invest. As you suggest.
2. It is an attempt by ??? to diminish the thought of gold as money and move to industrialize it. Apple will never build the product, but it diverts attention.
If the story is true and was Apple originated, clearly Apple knows how to manage the market. Maybe there is a third scenario I just thought of.
3. Perhaps the story was leaked by the market pricers to test how well they could control it during breaking news.
Thanks
gold has lost dollar value since the announcement, the market does not believe the story …and paper is still in control for now.
Bill,
Maybe this would explain some of the huge increase in gold imports already brought into China last year and currently. I would think Apple would want have to have materials on hand to support manufacturing in order to have finished product in the distribution pipeline to meet demand for the planned April release.
maybe some of it.
Maybe they will make an announcement of having discovered a new reincarnated Hunt brother at Apple, and that will be the end of this story?!?
… for silver watches.
The Apple gold Watch Edition is very real. The product specs are released March 9. I believe each watch will contain about one troy ounce of gold, and be priced at $3,000. The first run is for a million watches. If this is a successful luxury watch, which it may be because it is designed to reinvent the watch with various apps, then a case could be made that it will be a 5 to 10 million watch market annually. I don’t think 5 to 10 million ounces (say 10% of annual gold production) used for this product is something to simply ignore.
http://winteractionables.com/?p=18829