Cyprus Gold...and Silver, too
As if this week wasn't going to be crazy enough, the knuckleheads of the EU have really thrown everyone a curveball with their latest.
Here's the latest from ZH and it's a good place to start: http://www.zerohedge.com/news/2013-03-18/all-conditions-total-disaster-are-place
The gist of it is this:
This is a big deal, regardless of how Cramer and CNBS attempt to downplay it. Why? Fractional reserve banking. As depositors across Europe realize that they are potentially next in line for a similar (or worse) "haircut" if their bank fails, the realization will dawn upon them that keeping money in said bank, at 0% interest no less, is not a very good idea. As depositors begin to withdraw their cash, the entire fractional reserve system begins to seize up. So let's start first with this, a reminder as to how the fractional reserve system works:
You should also be reminded here that this is another reason for the current gold price suppression. At this critical time gold, which also doesn't pay any interest to the holder, must not be seen as an alternative. An illusion must be maintained where there is no alternative to keeping money in a bank or national/regional system. (This is why so many foresee capital controls in the near future.)
So, again, this is why this latest EU "bailout" idea is such a huge mistake. And the proverbial genie is now out of the bottle, too. Even if the deal is amended or if the Russians sail in to make the deal less painful, the EU has tipped their hand. No bank depositor in Greece, Spain, Portugal, Italy, France...anywhere...should now feel comfortable and "guaranteed". And this is what the buffoon Cramer misses entirely with this "analysis":
OK, moving on. Prices rallied sharply at the open last evening but were then beaten back lower. Why? If you've been following along here for the past several weeks, you already know why. There were an abundance on buystops above 1600 and an effort was made to protect them and keep price below 1600 at the Comex open. This effort ultimately failed and price surged at the Comex open as these stops were tripped. I currently have gold hanging around $1610 so our mission is accomplished for today...so far. What we need to see is gold hang in there and close near these levels, at a minimum, with a 16 handle. This will set the table for another run back to important resistance at $1626. As you can see below, that level is important as it is the lows of the new year, Jan 3-4 selloff, and getting back above there is critical for shifting sentiment. And sentiment is key. There was a lot of talk this weekend about the extraordinarily large hedge fund short position in both gold and silver. Why is this so overwhelmingly bullish? Because the hedge funds have neither the intent nor the ability to deliver. They will need to cover at some point. That's buying pressure. And if they can be flipped long at the same time...That's buying pressure times two. So, keep a very close eye on 1626 and 29.40. Those are two very important levels as we go through this week.
It's already getting late and I need to get this posted so just one more item for today...the GLD. It continues to be liquidated and now shows an "inventory" of just 1233 metrc tonnes. Again, on 1/2/13, the GLD had an alleged inventory of 1,349.92 metric tonnes so this baby is down 117 metric tonnes year-to-date or roughly 8.7%. Again, mainstream "analysts" would have you believe that this is entirely due to "investor selling and reallocation" and that this metal has simply been returned to Authorized Participant vaults. OK, sure. Maybe it is...at least a little. But I am 100% confident that the majority this drawdown is from large investors converting their paper GLD shares into physical metal.
Why am I so sure? Check these three data points:
- Every two months or so, the Comex offers delivery of gold. The latest delivery month of February saw 13,910 contracts stand. That's 43 metric tonnes and about 3X the typical amount that stood for delivery each time in 2012.
- London regularly sees 15-20 metric tonnes allocated and delivered each day. Though these numbers are not publicly reported, they are confirmed by our friend Andrew and his closely-connected contacts within the LBMA system,
- And Andy also has considerable contacts in China and Asia. From there, his contacts report that the Shanghai Exchange has delivered over 153 metric tonnes of gold in just the 12 trading days this month! That's another 10 mts/day.
It is clear to me that there is a global movement afoot to acquire and deliver physical gold (and silver) as quickly as possible. This physical demand WILL, eventually, turn the paper "ship" around and lead to much higher...and even new alltime high...prices. It is not a question of "if", it is a matter of WHEN.
I'm not going to be as readily available as usual for the next 2-3 days as MrsF and the LTs require some attention over Spring Break. I will be around and updating the site, just not as much. Hang in there and keep the faith. Buy some more physical today, while you still can.