Gone...For Good?

Tuesday, June 19, 2012 at 11:44 am

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.

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Comments

York Rite

Submitted by Tabberto on June 20, 2012 - 8:56am.

So long as you make yourself happy, its ok. Really.

Turd is making a really obvious point, cartel playbook 101. If the rally follows this evening I imagine you will be quick to give credit.....

even more

Submitted by Mickey on June 20, 2012 - 9:02am.

the problem here in US is everything is stretched--the States are in trouble, the local munis in trouble, pensions are in trouble -private and Public-Social Sec and medicare in trouble even before the boomers hit big.

The banks are in trouble because the mark to model does not provide liquidity. Hides the lack thereof. The derivatives are in a world of their own.

There is no quick fix here and may not even be a fix even with austerity.

And the problem is nothing is being done even yet to turn this around and in fact Obama wants to spend more on things that are rather difficult to take away once given. Welfare is not like a roads project with a begining and end. and creates something.

mickey

Submitted by DrkPurpleHaze on June 20, 2012 - 9:08am.

Yep, it's all BS and skewed/stretched data and shaped into whatever sounds good or bad at the moment.

Just depends what they're after at any given time and they'll use the data as evidence to support whatever they're trying to attain. It's warped and distorted self-serving MOPE.

@yabs

Submitted by QE to infinity on June 20, 2012 - 9:09am.

Do you think a safe deposit box at a bank is ok?

I agree with you that diversified approach to stacking is essential, with some PMs stored outside your jurisdiction, but I'd say a safe deposit box at a BANK is NOT ok! If you can't store safely in/near your house, then a safe deposit box OUTSIDE the banking system would have to do for that portion of your stack that you want to keep close at hand for emergencies, but not in a bank. If a bank is closed due to bank holiday or a real emergency, you won't be able to get at your PMs there. Also it's the easiest place for a government to target, just like FDR did.

I don't see any particular point holding PMs at both BV and Goldmoney, as they are really quite similar, so one or the other, but why keep both and pay double storage fees, when you really aren't getting double protection from diversifying into both of them? I'd say BV or Goldmoney is handy for diversification, but not both. Unless maybe store silver in Goldmoney and gold in BV, or something like that, but then you can't swith easily between the metals.

So to me a good diversification plan looks something like: some PMs (preferably in the form of small coins) in your physical possession, well hidden, and not advertised to anyone (except maybe one person you trust, like your spouse), some in Goldmoney or BV, in a vault outside the US and outside your home country, some in a private vault/non-bank safe deposit box outside your country, preferably offshore. Then maybe some Sprott trust shares and miners.

@ Tabberto

Submitted by York Rite on June 20, 2012 - 9:14am.

Should gold be higher at close of play today than it was when that message was submitted yesterday then I will give a thumbs up. If not then I'll make no remarks relating to it because I will conclude that Turd's insights are of no value to me and will remove TF Metals from my bookmarks and consequently won't visit this site again.

Why so butthurt? lol

Submitted by tmosley on June 20, 2012 - 9:19am.

Why so butthurt?

lol

Tactics for the cartel today?

Submitted by Turdle GG on June 20, 2012 - 9:19am.

Keep gold down near 1,600 until Bernank speaks. If any gold-positive news is announced, apply the usual 2% cap rule to keep gold from rising above recent resistance of 1,630.

Then think about knocking it back down tomorrow.

@ York Rite

Submitted by Ned Braden on June 20, 2012 - 9:22am.

BLESS YOU for that !

tactics?

Submitted by Mickey on June 20, 2012 - 9:23am.

who the heck knows? We are living in unusual times and things are changing quickly.

PM were knocked down the last 90 minutes-in the usual manner and now PMs are being bought.

its great to be a trader when you know what is going to happen and when.

the rest of us are outsiders--so just play the long term trend.

just remember the system is corrupt-in many ways.

Turdle, I like your style.

Submitted by Dr G on June 20, 2012 - 9:23am.

Turdle, I like your style. And remember, that all it will take is a mention of future QE or tools to give gold a little push. Typically those moves are extreme over-reactions and gold gives back all of its gains before the session is over.

I've convinced myself that easing won't happen at this meeting, so maybe I'm believing my own lies. Twist ends in 10 days, so maybe this meeting is the perfect time to announce further meddling. Guess we will find out in 3 hours. :)

another take

Submitted by Eman Laer on June 20, 2012 - 9:25am.

Is it possible that they're choosing the smaller kilo size in anticipation of a much higher price? Kind of like the appeal to stackers of smaller (fractional) gold coins/bars. 4000 oz X $10,000 is a big number, even for a CB.

400oz vs Kilo bars

Submitted by bronsuchecki on June 19, 2012 - 9:58pm.

Tip!

The conversion of 400oz bars into Kilo bars is not unusual of itself and occurs if there is a lot of demand from India/Asia as they prefer Kilo bars. However, the reason that market prefers Kilo bars is because that is what is used in the jewellery trade for the following reasons:

1. Kilo bars are usually supplied as 99.99 or 99.50 and consistent, whereas 400oz bars not only have varying weights but also varying purities. It is therefore a lot easier to alloy down Kilo bars into lower carat jewellery than trying to deal with differing purities of 400oz bars.

2. Easier to handle and melt a Kilo (32oz) bar rather than a 400oz brick.

Because of the extra cost of making Kilo bars (and potential for discount if you are trying to sell them back in volume), they would not be the preferred way of acquiring and holding by Central Banks or other large investors. Therefore Kilo bar demand is generally indicative of end jewellery demand (which will not be returning - although high scrap volumes over the past few years says to some extent otherwise) and not so much pure investment.

Therefore the recasting itself is not so much news. The question I have is was it explicitly stated by the source that the kilo bars were NOT being stamped with the mark of the refiner or was that inferred/assumed. Bars without an LBMA accredited mark trade at a discount, so asking a LBMA accredited refiner to stamp with some other brand is unusual.

So now I'm conflicted...

Submitted by Turd Ferguson on June 20, 2012 - 9:26am.

MODERATOR

Yes, I am very pleased to see gold and silver DOWN this morning. This suggests that an UP move is coming after the FOMC.

But, if I can somehow be wrong, the Santa-hating YorkRite will remove me from his favorites list.

What to do, what to do???

Response to: @ Tabberto

Some Comic Relief .. Before the Fed

Submitted by ReachWest on June 20, 2012 - 9:29am.

A wee bit of comic relief courtesy of Bloomberg this morning ..

Americans Say They’re Better Off Since Obama Took Office

By David J. Lynch - Jun 20, 2012 2:00 AM MT

A plurality of Americans now say they are better off than they were when President Barack Obama was inaugurated, providing a surprising lift to Obama’s re- election campaign despite troublesome economic news.

Forty-five percent of those surveyed in a Bloomberg National Poll say they are better off than at the beginning of 2009 compared with 36 percent who say they are worse off. In March, poll respondents split almost evenly on that question after having been decidedly negative since the aftermath of the worst recession in seven decades.

“I’m just tired of the doom and gloom,” says Jim Seeley, 52, a mortgage banker in Traverse City, Michigan, and a poll respondent, in a follow-up interview. “I think it’s looking better. People just need to stay positive.”

Full comedy piece is posted here ..

what to do, what to do

Submitted by DrkPurpleHaze on June 20, 2012 - 9:34am.

Here's my opinion....Zap!

ist2_1829934_finger_and_computer_keyboar

Turd

Submitted by OrangeAlert on June 20, 2012 - 9:34am.

It can be up, just not higher than the when you made the post. Not sure what the price was there, but a pop back up to about $1630 on no news from the FOMC would be a win-win I would think!

@eman laer

Submitted by Turdle GG on June 20, 2012 - 9:37am.

"Bars without an LBMA accredited mark trade at a discount, so asking a LBMA accredited refiner to stamp with some other brand is unusual. "

i think the point is that they are taking the bars out of the old (LBMA) system, in preparation for their new system, in which the LBMA is irrelevant

Some Comic Relief .. Before the Fed

Submitted by ClinkinKY on June 20, 2012 - 9:37am.

Apparently the 45% figure was taken from an exclusive survey of "undocumented" immigrants at approximately 5:00 P.M. on Friday, June 15, 2012.

"Do you think a safe deposit

Submitted by Wizard on June 20, 2012 - 9:38am.

"Do you think a safe deposit box at a bank is ok?"

No No No No No

Nothing in the banking system is yours, Nothing in the Banks possession is yours

When the doors close, Assets Gone!! Period

Way too many past examples to list through out the history of banking and their legalized thefts.

I am sure that most of us agree what is going on in the banking system against the common man is basically, war has been waged on the savers. Yes? War on every level from the street fight to the wars of nations are the same, it is just a matter of scale. War has certain basic doctrines and one of the most basic are.

All warfare is based on deception

Sun Tzu

@ York Rite

Submitted by Nuclear Rocketman on June 20, 2012 - 9:42am.

As the Soup Nazi so famously said...

10 yr UST action

Submitted by DrkPurpleHaze on June 20, 2012 - 9:45am.

Appears to be front running some news?

http://www.marketwatch.com/investing/bond/10_year

Re: York Rite

Submitted by DeltaCharlie on June 20, 2012 - 9:55am.

Bye, bye York Rite.... The headline for this post seems fitting!! lol.

Journalistic Malpractice

Submitted by I Run Bartertown on June 20, 2012 - 9:56am.

http://www.wnd.com/2012/06/chicagos-unreported-race-war/

"Anyone who reads or writes about the epidemic of racial violence in Chicago is an “idiot” who engages in “meaningless … race baiting,” says Ravi Baichwal.... more than 50 episodes of black mobs attacking… the award-winning police blog Second City Cop, there may be 25 more incidents of mob violence and lawlessness in that weekend alone that were never reported……Michelle Jacobsen. “The police and media have three basic purposes; serve, protect, inform. Their purposely miserable failure is putting lives in danger.”

… broken jaw…attacked a man trying to protect his wife from theft and assault. The Chicago Tribune said he suffered a “concussion, a fractured orbital bone under his left eye, two cracked teeth and a cut over his left eye that required six stitches.”…violence in the downtown precincts is massively under-reported… officers were kept busy trying to control huge crowds of unruly, young African Americans in the city’s increasingly violent downtown area. Separate groups, of nearly two hundred people…an epidemic of racial violence and denial – with dozens of attacks against women, “gays,” seniors, Asians and others from black mobs. Few, if any, were reported as racial violence.

“There are good reasons not to identify the attackers by race. It’s the newspaper’s sound general policy not to mention race in a story, whether about crime or anything else, unless it has some clear relevance to the topic. My question to readers accusing us of political correctness is: Why do you care so much about the attackers’ race? If you fear or dislike blacks, I suppose it would confirm your prejudice. But otherwise, it tells you nothing useful.”

… the city closed North Beach for Memorial Day after a crowd of 1,000 black people attacked beachgoers…Mayor Rahm Emanuel said the beach was closed because it was too hot. …Other city beaches remained open. Callers to talk radio and leaks from the police department revealed the true extent of the violence – and who was responsible for it……McCarthy said he knew who was responsible for all the violence: Sarah Palin. Because she supports the right to bear arms."

A story that remains untold is the Memorial Day Uprising in Baltimore...the police ceded downtown to violent mobs..the media said nothing until some of the attackers posted a vid on LiveLeak. Then, some of it trickled out. If you love your children, talk to them. They are fed a steady diet of propaganda that leaves them extremely vulnerable. Be the 'bad guy'. Save a life.

@Turdle GG

Submitted by Eman Laer on June 20, 2012 - 9:58am.

"i think the point is that they are taking the bars out of the old (LBMA) system, in preparation for their new system, in which the LBMA is irrelevant"

Yeah, I got that. I thought bronsuchecki was saying that the kilo size indicated that the metal wasn't slated for CB use and that's what I was questioning.

"Because of the extra cost of making Kilo bars (and potential for discount if you are trying to sell them back in volume), they would not be the preferred way of acquiring and holding by Central Banks or other large investors."

_resident just invoked

Submitted by I Run Bartertown on June 20, 2012 - 10:05am.

Executive Priviledge on Fast and Furious. Gunrunning to support your attack on the 2nd Amendment should be considered treason. Yes, the execution kind of treason.

@IRB - It seems that at every

Submitted by cpnscarlet on June 20, 2012 - 10:08am.

@IRB - It seems that at every level of government, and now the press, the clarion call is the same - "DO YOUR F'ING JOB".

And the response is silence.

Wow

Submitted by Big Buffalo on June 20, 2012 - 10:13am.

This is either a serious head-fake, or all markets are about to get a serious beatdown.

Which America was surveyed?

Submitted by recaptureamerica on June 20, 2012 - 10:18am.

Which America was surveyed?

Thanks to the nay sayers

Submitted by El Gordo on June 20, 2012 - 10:19am.

A couple of days ago I listened to the nay sayers and held on to my fiat a little longer. Now, if it can just go on down a little lower maybe I'll take a little PM off the active market and put it into a safe hole somewhere. If it goes down, buy some more, if it goes up, just buy a little less - but no matter what, buy and hold.