Gone...For Good?

For weeks, I and others have been telling you about massive sovereign and central bank demand for physical metal at the current paper price. From this demand alone, we can infer quite a few things. Today, I can take it one step further.

First, some background. Members of "Turd's Army" become subscribers to Andrew Maguire's "DayTrades" and "MetalsTrades" service. This service allows traders to follow Andy's actions, thereby learning how and when Andy affects trades in the gold and silver markets. In it's own right, the service is very effective at producing consistent, monthly returns for his clients and the "Army". However, subscribers also have access to Andy's weekly "Market Commentary", which he posts every weekend. This commentary is always informative and provides subscribers with a sort "insider's perspective" which simply cannot be found anywhere else on the internet. No one has more experience, more wisdom and more contacts than Andy and, without question, subscribers benefit from the access he provides.

Similarly, I like to think that everyone here in Turdville benefits from the access that I am able to provide. I receive a lot of on-the-record and off-the-record information and I try to pass along as much of it as I can. Some of it is just speculation and some of it is the sort of "inside baseball" stuff that I attempt to further refine into nuggets that can help you plan for the future.

All of that said, what we now know is this. Beginning some time ago, but continuing today at an accelerating pace, physical metal is being purchased in London and then delivered out of the system. Under "normal" circumstances, this is not necessarily unusual. The bullion banks simply expect this metal to return to them at some point, where it can be re-leased, re-hypothecated and re-delivered in the future. This is how it has worked for decades. However, this time it's different.

What I have learned and have since been able to confirm via a second source is this: London Good Delivery bars are being delivered to Eastern buyers. Instead of being vaulted inside the LBMA system, these bars are being sent directly to refiners. The bars are then being melted and recast in 1 kilogram sizes. The new bars are then being stamped with official, government insignia and sent on to vaults outside of the LBMA system and points east, never to return again. 

​What does this mean and why is this important? Quite clearly this information, if accurate, has several significant ramifications:

  • The Chinese and others are preparing for a new system. Whether it's simply a new gold pricing and delivery system to replace the LBMA/Comex or whether it's a new global trade settlement system that is guaranteed with gold is impossible to say, at this point. 
  • The physical gold supply of the LBMA and secondarily the Comex, much of which has been acquired/supplied through leasing, is being rapidly depleted and will not be coming back. 
  • The bullion banks, which have profited for years from leasing, trading, vaulting and the like, are about to feel the rather dramatic effects of this supply depletion.

As this pertains to the banks, last week I wrote this ( http://www.tfmetalsreport.com/blog/3893/still-pounding-away) and I think the auto dealer analogy is still a good one here. IF China and others are buying gold in London and IF the bullion banks are delivering to them leased and rehypothecated gold and IF the Chinese are taking this gold and melting it and IF they are then recasting it into non-LBMA, 1-kg bars, then the bullion banks have a serious problem on their hands. The delivered gold isn't coming back into "the system". It is no longer in "London Good Delivery" form. It's gone. For good. 

My advice to you today is to ponder this information and its implications. Ask yourself these questions:

  • If you vault gold within the current system, do you really own it?
  • If the banks begin to scramble for physical metal, will paper price trade higher or lower?
  • If the Chinese and others are planning for a new, international trade settlement system to supplant the U.S. dollar as reserve currency, what does that mean for the future value of the dollar? What would that mean for the future value of all fiat currency? What would that mean for the future value of gold and silver?

Perhaps now would be a good time to go back and review this post, too. (http://www.tfmetalsreport.com/blog/3885/last-desperate-acts) At 34,000+ views, most of you have already read it. Maybe it's time to read it again.

Think. Look around. Trust your instincts. Prepare accordingly.

TF

347 Comments

babaganoush2307's picture

1st

First?

luv2stak's picture

second?

t'would be a FIRST for me!

because I fed the Turd recently?

Turd Ferguson's picture

Double meaning of title

MODERATOR

"Gone...For Good?" begs two, separate questions:

  1. Is it gone for good? Meaning, is it really true that the metal is never coming back?
  2. Is this "good"? If the global financial power truly shifts East, away from London and New York, is this good? Do we really want this to happen? Regardless, could anyone stop this from happening anyway?
AlienEyes's picture

TURD?

TURD?

Be Prepared's picture

I am Number Four...

I think that was a movie title... yeah... it was.... oh well....

achmachat's picture

thanks for the update!

This is one of those posts that you have to read more than once...

SV's picture

Disappearing Phyzzical

For a very long time the powers that be have been worried about hoarding of the precious metals by the buying public, but if governments and transnationals are doing it, then it is precisely the powers that be who are hoarding, and thus therewith comes not a problem. 

There is plenty of gold out there, and the ruling class own plenty of it! Silver demand though has been a worry of groups like the Silver Users Association for more than a century - at least...

http://silvervigilante.com

thisismynewname's picture

Panic sets in...

I think I need to aquire some au.

dmunjal's picture

Agreed, but how long?

Yes, this sounds like their plan.  But how long will it take to accumulate enough gold?  I could see it taking years, maybe even a decade.

Roger Godberd's picture

Martin Armstrong - The Truth About Gold -

MUST READ...

The one piece of propaganda about gold that has gained a lot of traction is that it would be worth more than $50,000 an ounce if the “Paper Gold” was eliminated for that is the conspiracy that keeps gold down. A typical comment I receive:
“I agree gold will be the hedge, but remember, with gold valued at physical only, it’ll be worth at least $55,000 in today’s dollars. That will get every government out of a hole. Some lucky individuals that have seen the way the tide is turning will benefit too, but mostly it’ll be governments around the globe. There is no way they can tax their way out of this mess.”

This argument is just nuts and so insane it is hard to grasp who even makes up this shit. ALL commodities trade in futures and physical. This has been going on since Babylon who invented futures markets. Farmers borrow today to plant their crop. To guarantee a profit, they sell it forward. So yes, there is now paper wheat rather than physical. So what? This is not a conspiracy that just hatched. This is how markets have been trading for at least 5,000 years. The statement presumes there is a conspiracy that all of these people have sold “paper gold” they do not have and that suppresses the price.

The first statement I was hit with was how the investigation would uncover that mythical person who sold in effect PAPER STOCKS they did not own to force the market down. I asked how is it possible for any short to ever outnumber the longs? If at the time he borrows shares from a long and sells then to another person creating a second long, how does he outnumber the longs? He is at best outnumbered two-to-one. Now let’s take futures or naked shorts in stock. In order for some player to sell, there has to be a buyer. Everything is always evenly matched. So again, neither side can out-number the other.

So why has this argument gotten any traction? The PRESUMPTION is that those buying PAPER GOLD are “real” and the shorts are all just a conspiracy and if they were not there, then the longs would drive the price up dramatically to $50,000+. You could say that about every future contract from oil to wheat. Hell, life insurance is a futures contract. A number of people can take a life insurance policy on you from yourself, family, or your employer. There is only one life, but there can be numerous policies. So?

The FREE GOLD arguments today are similar to the FREE SILVER arguments of the 1890s that virtually bankrupted the USA in 1896 claiming silver should be raised in value and FREE SILVER will save the day. PAPER GOLD by no means is suppressing the price. The longs do not have to roll their futures. You can let your contract do to the end and take delivery! The longs are no more “real” than the shorts. This is a trading market. Sorry – that’s it. The so-called shorts are by NO MEANS suppressing the price of gold. If all the longs went to delivery, which they have the power to do not a short, then the “conspiracy” would be broken. Gold is just not ready for price time – IT WILL BE! JUST NOT YET! If all this nonsense would stop, a lot more people would buy gold. Right now, far too many assume to buy gold is a religion that makes no sense. I also get emails asking am I really serious and think gold would rise absent all the nutty scenarios?

The latest craze was all about PAGE (Pan Asia Gold Exchange). Somehow the new Chinese gold market will be an “honest” market compared to US and Europe was the new mantra that was supposed to reverse gold and sent it to moon within days. People have distorted this issue of spot v. futures claiming the futures market is dictating the spot market and somehow PAGE, located in Kunming, the capital city of Yunnan Province in South Western China, will reverse London and New York trends. This evil conspiracy where people prefer to LEVERAGE their bets rather than just buy gold for cash UNLEVERAGED is absurd and could apply to every market and of course stocks where margin trading exists. It did not stop the Dow rising from 41 in 1932 to the highs in 2007. It has also been argued that the US/European spot market is not “real” for you own no real title to a specific bar of gold. You can say the same thing about a $20 bill you deposit in a bank. When you go back and withdraw the $20, it will not be the same identical bill/note that you deposited. If you buy a stock it too is in “street name” unless you take delivery for only then will it be actually issued in your personal name. This is the way EVERYTHING functions. It is NOT abnormal. Title does NOT exist in anything unless you take delivery. If you invest in a mutual fund, you no longer have title to that specific money either. So these sorts of arguments are exploiting the nature of the entire financial marketplace that is by no means unique to just gold. So those making such arguments are either charlatans or ignorant of the real global structure. Of course, me just explaining this truth will only foster more hatred from those who are trying to preach a religion rather than forecast markets.

The PAGE market is a 10 ounce 90 day contract and it will be in China’s currency – the renminbi. This story is being spun to make people think that magically positions will now gravitate to China from COMEX and London because of the lack of title. This is just more nonsense. This would then create a contango because PAGE will be traded in renminbi. You will then have currency risk. China knows what it is doing. Again these stories are coming from people who have no real trading experience – just theory they seem to conjure up while reading the newspaper on the throne.

Much of these scenarios are simply repeats. For decades, Chinese citizens were barred from owning physical gold under penalty of imprisonment as was the case in any Communist country since gold was an underground form of money (which we could end go back to in an electronic money world). Those restrictions came off in 2002 and then, in September 2009, China began to actively promote gold ownership to its citizens. This was to help the trade imbalance. How? I did the same thing for Japan. As long as the gold would be purchased from America, the trade statistics only track money flow – not goods. Once you understand the accounting system, it becomes easy to tailor you actions to help political circumstances. Since the Japanese had the same problem, all they had to do was buy gold in the USA and it would impact the Current Account as if they bought Chevys. China is doing the same thing. Buy American gold, not manufacture. You get the same economic bang for your remminbi.

People making up these stories to justify buying gold are confusing a lot of people with bullshit that is turning potential buyers off because when they investigate closely, the stories appear to be akin to a used car salesman claiming a little old lady drove every car on the lot. The real point of this new contract in renminbi is currency! The theory is that when PAGE would open, gold will soar overnight for it will be the only REAL market and the Chinese have been waiting so long to buy, gold will take flight. Well, the PAGE market was scheduled to open in the last quarter of 2011 and here with 50% of 2012 gone, those lines have not appeared. China did not change the world with PAGE. In fact, again it is the same nonsense that dominated the rally from $35 to $200 in anticipation Americans would then line up to buy gold. That did not happened when America legalized gold.

Nevertheless, in other words, what China is doing is flying an indirect way to trade its currency. You will be able to arbitrage the gold stripping out the renminbi. China and its central bank are NOT stupid. The people I met with in the central bank in Beijing were traders, not academics. They know PRECISELY what they are doing. This is opening the door to indirect currency trading. From their perspective, this will allow them to experiment with a free floating currency without it directly affecting the exchange rate. It is a clever black market derivative. Just as we warned that allowing each member state in Europe to retain separate bond issuing authority was merely creating a derivative way of still trading a implicit currency per nation. Trading gold in renminbi is no different than Greece still issuing its own Euro bonds allowing capital to target just Greece. You can buy Page and sell New York on a per ounce basis and the net result will be a currency spread with nothing to do with gold that is neutralized.

The ratio of trading futures to actual spot gold is about 10:1 on a bad day. This is another pet argument that somehow is twisted into some evil plot where the future market is setting the tone for the price in the spot market. This simply means people prefer futures than spot because they can LEVERAGE their money. This is no different than buying stocks on margin. All commodity markets trade the same way. This is not evil because someone trades gold back and forth to make money instead of buying and holding as the stock brokers advised during the Great Depression. If you trade spot, you pay cash in full. People trade the futures to LEVERAGE their money the same as buying stocks on margin with a little more kick. This does not make them a traitor to some cause.

There have been schemes to manipulate markets. This was common in ALL commodities especially the agricultural markets during the 1970s. As long as you are at one of the bank NY banks, you can do no wrong. That is corruption – it is not a plot to control the price of gold permanently. To what purpose? Just because gold is not at $10,000, does not invoke a conspiracy. Commodities always bust upward into a Phase Transition phase. Gold has not rallied just yet beyond the $2,000 level because the CONFIDENCE in the system has not yet collapsed. The say Spain will be bailed-out. But there is no actual entity with cash to help it. This is like a guy willing to say whatever it takes to get his date in bed then and there. Tomorrow I another day to explain why she thinks he lied, bit it is her problem because she misunderstood. It is just a matter of time when gold with explode and the real catalyst will be the Sovereign Debt Crisis. They manipulate silver more so than gold because it is easy. We really do not need all these scenarios to justify buying gold. It is the natural hedge against geopolitical and economic instability. In that regard, gold is coming of age.

Then there is the: “How do you explain the Chinese encouraging their citizens to save in gold, and the same in Europe (VAT removed, frequent issues from the mint), and actually even the Americans are minting Eagles as fast as they can. If it was all a conspiracy for government to tax everything electronically why would they still be dishing it out, especially the US?” The presumption here is that government gives two-shits about the people! The US and Europe are selling gold to the public BECAUSE they know there is NO POSSIBLE way they will return to gold. They removed VAT in Europe to sell more. HELLO? China has not really encouraged people to buy gold because gold is a great investment. This is a trick I showed the Japanese. Buy gold in New York to reduce the appearance of a TRADE DEFICIT because the Current Account does not care WHAT it is that has been purchased, only the currency being paid. So sorry! This is a trick I have taught countries for decades how to massage the political problems that stupid bureaucrats have no clue what they are arguing about – i.e. Plaza Accord. Buy gold in NY resell it in London, and reduce the trade deficit – voilà!

http://www.martinarmstrong.org/

Obviously MA is not up to speed on the PAGE story as we all realise this is history. Very interesting aspect though about Balance of Payments... There is plenty more in the article & reckon it is worth reading in it's entirety.

Short Stack's picture

What am I missing here ?

If the gold is "gone for good" ie., taken out of circulation and off the market, shouldn't that result in an upward move in the spot price ?

Isn't that exactly what we stackers are doing ?   Removing phyzz from the market system so that TPTB have no control over what we hold ?

JimmyTheHand's picture

Wow

That's some pretty powerful stuff to think about.  I heard last week that China (Hong Kong) is going to buy the LME...

Interesting things happening.  Will the gold come back to the system?  Yep, but the system under THEIR control, not Londons. 

I don't know if it is good or not...  Going to have to ponder that.

Thanks for doing such awesome work Turd!

achmachat's picture

@porky

...somebody better tell Mr. Armstrong that PAGE has been canceled for quite some time now...

:-)

I Run Bartertown's picture

TF

"Similarly, I like to think that everyone here in Turdville benefits from the access that I am able to provide. I receive a lot of on-the-record and off-the-record information and I try to pass along as much of it as I can. Some of it is just speculation and some of it is the sort of "inside baseball" stuff that I attempt to further refine into nuggets that can help you plan for the future."

And a fine job you do.  Thanks. yesyes

AlienEyes's picture

Mental notes.....

Buy gold.

Buy lead.

Buy food.

Dollar bye-bye.

achmachat's picture

what's going on in FX?!

silver is free-falling in euros!

50 euro-cents already since this morning in a steady line.

Dr G's picture

@short stack, yes, you would

@short stack, yes, you would think it would increase the spot price, however the Comex and NY are largely in control of the spot price (including the Globex electronic trading, which is active nearly 24 hours a day). Comex trades futures contracts, so in a direct manner the amount of physical doesn't affect the price of those contracts. That's how far the futures contracts have gotten away from the physical spot price.

So to answer your question, as long as Crimex is in control, the spot price will have no direct relation to the available amount of physical metal. But when the Crimex fails, the spot price will act as a rubber band and shoot to where it should be based on fundamentals (one of which is most definitely supply of metal).

Dr G's picture

Buy gold. Buy lead. Buy food.

Buy gold.

Buy lead.

Buy food.

Dollar bye-bye.

Dollar bye-bye but not short-term. Short-term stack some cash. Take it out of the banking system so that you can access it. Cash still is the medium of exchange for buying gold, lead, and food. I use it on a daily basis. We all do. I also stack it physically. Others would be smart to do the same.

OhOh's picture

Todays Numbers

Todays numbers and timings are reinforcing your view.

Be Prepared's picture

Turd Questions...

This Question seems to hold the most punch for me..

If the Chinese and others are planning for a new, international trade settlement system to supplant the U.S. dollar as reserve currency, what does that mean for the future value of the dollar? What would that mean for the future value of all fiat currency? What would that mean for the future value of gold and silver?

(1)  It is clear to China, India, Russia and the others that the days of U.S. hegemony are heading into their twilight years.  They aren't dumb and are smart enough to know that they need to bleed the old system in a way to sustain it long enough for them to get most of their value transferred into another system.  These governments do not have any real ties to the western system and, therefore, are not really obliged to follow the old ways of banking.

(2)  Any actions the emerging creditor nations are taking will most certainly be towards building a new robust system that favors their part of the world and their own economies.  They are in the driver's seat and they know it.  Pulling gold out of London and changing into a new tradable format seems like a perfect step in preparing for it to be used, in some way, to establish trade currency.

(3)  The future value of the dollar is on a spiral of our own making.  As long as we maintain a course of expanding our debt even further beyond the 100% debt-to-GDP ratio, we are driving, at an ever increasing pace, towards our demise economically.  All fiat currency is not going away and the rise of a permanent digital system will gain increasing acceptance amongst the sheep because they don't understand how freedom is intricately interwoven into holding sound money that is not based upon debt.

(4)  Where silver and gold go....  I struggle with how it will finally play out.  I realize that I may be awake, but I am still forced to live in the matrix where all the doors and keys are not within my grasp.  Capital controls, taxing gold and silver, making it illegal to own again.... may make our thoughts to use these tools to bridge us to the other side... a ride into the unknown.  I hope that it will keep me solvent and, more importantly, free.  The value I place in holding these metals is not so much in their wealth and store of value, but in my ability to determine my life as I see fit, unhindered by the binds of government, to the best of my abilities.  Time will tell.

Big Buffalo's picture

Informative

It's posts like this that makes reading this site 67 times per day worth it! Thanks Turd.

It may take a few years but the dollar WILL go down. I'm very happy to have started stacking just over a year ago. My only regret is becoming aware now rather than 10 years ago.

Maybe we should be buying more China Panda, rather than American Gold Eagles. (loaded statement)

Lastly - Looks like the House certainly has more balls than Congress.

Katie Rose's picture

What does this mean for silver?

OK, I am one who stacks silver.

I've always thought that silver would be the choice of the masses, and the things I need (alfalfa, grains, sugar for canning, etc.) are supplied by regular folks.

Our little farm is owned f/c, and we are not greedy people at all.

So if the new currency is gold backed, have I shot myself in the foot big time?

I just can't believe that silver will have no place in the new financial scheme of things.

Am I suffering from Normalcy Bias when it comes to silver?

**********

I have got to go milk my goats, so I can not respond to any answers for awhile. smiley

Excalibur's picture

LME

The LME is the exchange for base metals, not to be confused with the LBMA. 

proton777's picture

Just Another Tuesday

Remember, we're playing their game, on their field, with their rules and their referees.

Dr G's picture

Katie, just a fantastic

Katie, just a fantastic question you've posed. I always enjoy discussions about silver. I'm not smart enough from a historical perspective to contribute to them much. The extent of my analysis is that gold and silver have always been money. They brought the Christ child gold and He was betrayed for silver. So there must be some value there.

We stackers have always been taught that gold will create wealth and silver will preserve it. I think Turd himself mentioned that a couple of weeks ago. I guess that's what I've always agreed with, but I cannot say why I agree with it or even that it is correct.

achmachat's picture

@ Katie Rose

There is a reason why every sovereign bullion series you can get comes in gold and silver.

(Perth Mint, Canadian Maples, Austrian Philharmonics, US Eagles etc. etc.)

It is implied that silver is part of a monetary union if and when gold backs a currency.

But one thing is certain: When the time comes, the gold to silver ratio will most certainly NOT be fixed at today's 55, but south of 20.

York Rite's picture

Day 98 - more champagne, please

Today's another stellar one for the paper pushers as gold and silver fall versus every major currency worldwide in spite of a falling USDX. 
 
It's been one long party for Jimmy Seligman (aka Sinclair) and his Our Crowd gang since the middle of March when gold was pummelled down to below $1,700 and has remained there ever since.
 
How they must chortle and guffaw between clinking glasses when recalling his often stated belief that gold's trading range in 2012 would be $1,700 to $2,111. 
 
Meanwhile, we are nearing the four-month anniversary of the longest imminent in history for it was on February 28 that the same disinformation king issued his barely concealed call urging CIGAs to buy silver and mining shares - hours before the all-out attack on all things precious metals began. 
 
 
PS I don't care about comments from his misguided apologists who cling to the belief that him being wrong about everything thus far in 2012 is merely a coincidence or the shills who can't refute the obvious so choose to post Freemasonry symbols in response. But if anyone cares to dispute my contention that Sinclair has communicated nothing but total rubbish throughout this year then tell me something - anything! - that he's been proven correct about.
Dr G's picture

@achmachat, but what about no

@achmachat, but what about no silver Krugerrands? And what about platinum coins? Are those not issued simply because they are precious metals? Does that imply that precious metals will all be part of a monetary union?

Just thirsty for some answers and opinions and knowledge.

Turd Ferguson's picture

Btw

MODERATOR

Gold and silver going DOWN today is a VERY GOOD SIGN for tomorrow!!!

achmachat's picture

@ Dr G

the Krugerrands are gold for historic reasons. South Africa's precious metals mining has always been concentrated on gold, rather than silver.

The other case also exists: The Armenian Noah's Arcs do not come in gold.

I have it from an extremely reliable source that in the top echelons of society, gold and silver have always been and are still considered as money.   

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