A National Holiday

Two score and seven years ago this day, during the tumultuous Keynesian Epoch and the disastrous reign of King LBJ, Mama Ferg brought forth a Turd...

...It's just too bad that today isn't a bank holiday (yet).

Anyway, there is just so much stuff going on, behind the scenes and right in front of us, that it is really easy to miss/overlook a few things. Additionally, it makes it very challenging to know where to start.

For example, years ago a story like this one would have been BIG news and it would have elicited all sorts of hand-wringing, discussion and speculation. http://www.zerohedge.com/news/2013-01-28/currency-wars-heating-taiwan-korea-and-china-fire-warning-shots Now it's just another headline in a virtually endless string of fiat currency devaluations.

And then there's this. Glossed over last week and completely ignored by the MSM, this story speaks volumes about the current state of affairs. http://www.sovereignman.com/expat/scam-complete-the-us-government-takes-a-page-from-diocletians-book-10559/

But again today, I want to focus upon that which I know is happening. Of course, I can't prove it and certainly others will suggest that they know the exact opposite. One day, in the (not too) distant future, the Chinese will introduce a gold-backed renminbi for international trade settlement and an alternative to the U.S. dollar as a reserve currency. (By the way, perhaps you'll know this day is drawing near when your spellcheck does not think "renminbi" is a misspelled word.)

Anyway, we know that China officially imported about 800mts in 2012, on top of 400 or so in 2011. Their last public pronouncements on their reserves came in 2009, so, given all of official imports since then, the unofficial and off-the books imports AND the amount they've mined and not exported, it's really anyone's guess as to how much gold they are actually sitting upon. 3000 mts? 4000?? 6000??? And the total continues to grow, as do the imports of so many other nations. Take this headline as just another example. http://www.bloomberg.com/news/2013-01-28/russia-kazakhstan-expand-gold-reserves-as-central-banks-buy.html And, of course, the German Gold Hijinx is just the start of a global move to repatriate reserves. Is Switzerland next? http://goldnews.bullionvault.com/swiss-gold-bullion-repatriation-012420136

And how does this story fit into the picture? http://in.news.yahoo.com/china-introduce-gold-exchange-traded-funds-052201538.html

So, finally, for today let's simply focus upon the strange occurrences within SLV and GLD since the first of the year. Two weeks ago, the SLV added about 18.4MM ounces in one day, more than it had added in all of 2012. http://www.zerohedge.com/news/2013-01-17/slv-etf-adds-record-572-tons-silver-one-day-more-all-2012. Then, back on Friday alone, over 7 million ounces were withdrawn. What in the heck is going on? There are many theories but by far the best I've seen comes from Uncle Ted. Since 18MM ounces would be a holding of just under 5% of the fund...and 5% is the level at which a concentrated position must be reported...Ted thinks that a large investor (a Buyer of Size) has taken this position for the expressed purpose of taking delivery. Fast. Again, this makes the most sense considering all of the anecdotal evidence we've accumulated of delivery delays in similar-sized orders through the LBMA. And just who would be wanting 20MM ounces of silver in a hurry? Go back up a paragraph and read the "china etf" story again.

Even if official Chinese sources are not the buyers of this silver, someone is...and that someone seems intent upon building up a sizeable inventory. Is this the "final straw"? Will we look back with hindsight later this year and conclude that this was the sign that the silver market was finally breaking, after years of price suppression finally led to shortages and defaults? Maybe. Regardless, I like Ted's idea a lot and it certainly seems a plausible explanation for the strange goings-on. (You can read Ted's entire analysis by becoming a subscriber: http://www.butlerresearch.com)

Contrast this action within the SLV with the GLD. While SLV has added (and withdrawn) all of this silver this year, the total inventory at the GLD has been declining. By over 20 metric tonnes! On 1/2/13, the total GLD inventory stood at 1349.92 mts. As of Friday, it had fallen to 1329.90. Hmmmm. So while prices have been rising, falling and rangebound for the first four weeks of the year, both ETFs have seen massive withdrawals of metal by someone looking for immediate access and delivery. What does this tell you?

And here you are, spending your weekend obsessing about the writings of some guy who, fresh off his release from the pokey, seems determined to remake himself into some sort of contrarian. Whatever. He can draw all sorts of lines on his silly charts but none of them will change the insatiable demand of the Chinese for physical precious metal as they prepare the next global financial paradigm.

Instead, let's focus on these lines and these silly charts.

Finally, don't forget that today is the day that the U.S. Mint had promised to resume sales of ASEs. Hmmm, I wonder how long it will take until they are forced to suspend sales again? Later today? Tomorrow? Friday? We'll see. Come to think of it, since ASE demand only seems to increase as price rises, perhaps now we know why silver has been beaten back over $1.50 since Wednesday. Did Little Timmy send out orders to Jamie, instructing him to have The Monkeys bash price in order to curtail ASE demand this week? Makes about as much sense as anything else emanating from the silver pit lately.

With that, have a great day and try to keep your wits about you. The Feb13 gold options finally expire today. (And with it my $1800 call that I bought back in November. Ouch.) And though price will likely remain pressured through FND on Wednesday, things should rebound in short order later this week. Maybe the BLSBS will be a catalyst for buying...for once!

TF