A Wafer-Thin Mint

Wow, there's a lot going on today. As expected, gold's getting whacked ahead of option expiry and FND. Silver is getting shoved back, too, but all must be well...the stock market is up again!

However, none of this concerns me nor should it concern you. As discussed yesterday, the metals have had a nice, little 3-week rally and were due for a pause. I speculated last evening on TTM that gold would likely fall toward its 200-day moving average near $1668. It has and I would expect price action to center around this level for the next few days, at least through the Monday Feb13 option expiration. 

Also, never forget that when we head toward option expiration on the heels of a rally, there's always Cartel money to be made by putting the fear of God into those who foolishly sold puts into the expiration. Recall that it works something like this:

  • Sheep hedge fund/money manager sees the rally and thinks, "Hey, I can sell the 1675 puts for $X and, as long as gold is above 1675 on Monday, I'll never have to cover them. This looks like free money".
  • Uh-oh. Price starts to fall away from 1690 and said Sheep begins to get nervous.
  • At 1680, Sheep begins to consider covering at a loss but is unwilling because price may still rally back and, sheesh, expiration is only two trading days away.
  • At 1675, the Sheep panic. Now at a steep loss, the only sensible move is to sell some futures contracts to hedge.
  • This additional spec selling drives price even lower.
  • At this point, The Cartel fleeces the sheep by buying all that The Sheep are selling and price reverses.
  • Ultimately, by option expiration, price is back above 1675 and the "sold" puts, so vigorously defended by the Sheep, actually do expire worthless.
  • The Sheep have been fleeced and The Cartel rings the register on another easy trade.

Anyway, the moral of the story is that its all nonsense. Contrived manipulation to game the fools who continue to allow themselves to be gamed in the first place. By next week, the fundamentals will re-assert themselves and both metals will be set to resume their 2013 rallies.

One of those fundamentals is the current, overwhelming demand for silver. Though there is plenty of reasonable debate regarding a silver "shortage", in this case, as in most everything metal-related, perception is reality. Take the situation at the U.S. Mint, for example.

Having The Mint run out of current supply and suspend sales is nothing new. This has been happening occasionally since 2008. It IS due to investor/collector demand, that much is undeniable. The question I want you to ponder today is: Is there going to be sufficient supply of ASEs going forward to meet demand and defuse this perception of shortage?

Please play along with this thought experiment. Let's say, for a moment, that you are the Chief Procurement Officer for Silver at the U.S. Mint. Your job is to predict ASE demand and order, well ahead of time, enough silver and coin blanks to meet this public demand at some point in the future. How would you go about doing this? Keeping in mind, of course, that you are a government bureaucrat who is not paid to be proactive or think "outside the box". I would imagine that you would guage future sales by reviewing past sales. That sounds reasonable, doesn't it? OK, let's start there then.

In December of 2010, The Mint sold 1,772,000 ASEs and in December of 2011, they sold 2,009,000. Knowing this and knowing that total ASE demand for 2012 was showing a run rate at about 25% below 2011, how much silver do you think you'd order and have on hand for December 2012? 2MM ounces? 1.5MM ounces maybe? Well, I don't know but what I do know is this: The Mint suspended sales on 12/17/12 after December sales had reached 1,635,000 ounces. Why did they suspend sales? They were out of silver, of course.

Now this creates a problem. Suspending sales doesn't make demand simply go away. In fact, it makes it worse as the public reads the headlines about the suspension of sales and senses a shortage. Demand for the remaining two weeks of 2012 simply builds up and rolls over into January, when The Mint finally resumes sales.

Uh-oh. You, as the CPOS (I'm just making that up), only ordered about 6MM ounces for January. Why? Because in January of 2011, the biggest selling month of ASEs ever, The Mint sold 6,422,000 and last year, The Mint sold 6,107,000. And since 2012 demand was down 25% from 2011, you decided that it was unlikely that you'd need more than 6MM ounces this January but you went ahead and ordered 6MM ounces anyway. We all know what happened next...The pent-up demand from 2012 combined with fresh, new 2013 demand wiped out all of your 6MM ounces in the first two weeks and The Mint was forced to suspend sales again on 1/13/13 after sales reached 6,007,000.

Now you're really in a bind. There's got to be anywhere from 3MM to 5MM in pent-up demand in your system, waiting to get filled as soon as you resume sales next Monday. The problem is, you still don't have enough metal on hand. In February of 2011, The Mint sold 3,240,000 ounces and last year sales fell off to just 1,490,000 ounces. Knowing this, you ordered just 2MM ounces for February. Chances are high that The Mint will open for sales on Monday and then have to turn around and close again on Tuesday. Or maybe Wednesday. But you get the picture.

It would appear that The Mint has put themselves into a perpetual state of sales/production backwardation (to bastardize the futures market term) and they are left with only a couple of options, both of them bad for The Bad Guys but good for us.

  1. They could simply go out and secure a whole bunch of silver in order to meet demand, something like 10MM ounces or so. This is unlikely though because 1) Finding 10MM ounces isn't easy, unless you're the custodian of SLV and 2) It would cost a lot of money that currently isn't in The Mint's 2013 budget and what bureaucrat is going to be sticking his/her neck out on that one?
  2. They could simply leave the market for ASEs in this current state of disarray, only opening for sales for days or hours at a time.

I've got to believe that #2 is the option they'll choose and where does that leave us? An ever-increasing perception of extreme physical tightness. Again, it matters little whether or not The Mint could go out and procure the 10MM ounces they need to get "caught up". What matters is the perception that physical silver is in very short supply, otherwise "why would The Mint always be shut down to new orders?". Premiums will continue to rise for all other new and existing forms of silver bullion and this excitement will, eventually, bleed over to the paper market as other bullion producers seek or feel forced to lock in forward contracts and speculators try to cash in on all the excitement.

And this is what I mean by (perception = reality). Something like this Mint situation could easily generate its own momentum in the headlines, the public and the market. Shorts could begin to get squeezed and we might even see a repeat of Feb-April 2011 paper price performance. Throw in any other "news" events like QE∞ and U.S ratings downgrades and the potential becomes decidedly real.

Here's one other thing for you to consider: Has the Treasury Department been planning for this eventuality all along? The law used to read that The Mint had to supply enough silver coins to meet the public's demand. See here: http://codes.lp.findlaw.com/uscode/31/IV/51/II/5112. The actual point was marked with a number (2), section (e):

(e) Notwithstanding any other provision of law, the Secretary
shall mint and issue, in quantities sufficient to meet public
demand
, coins which -
(1) are 40.6 millimeters in diameter and weigh 31.103 grams;
(2) contain .999 fine silver;
(3) have a design -
(A) symbolic of Liberty on the obverse side; and
(B) of an eagle on the reverse side;

Interestingly and sneakily, the law was changed in 2010. See here: http://www.law.cornell.edu/uscode/text/31/5112. It now reads:

(e) Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand, coins which—
(1) are 40.6 millimeters in diameter and weigh 31.103 grams;
(2) contain .999 fine silver;
(3) have a design—
(A) symbolic of Liberty on the obverse side; and
(B) of an eagle on the reverse side;

Note the subtle difference. No longer must The Mint "meet public demand". Now, The Mint must simply make as many ASEs as the SecTreas requests. Hmmmm, now why would they do that? What's the big deal? If silver is just laying around all over the place, collecting dust, why can't The Mint simply produce a seemingly endless supply for an insatiable public? Chew on that one for a while.

So, anyway, what's the point? I firmly believe that we are on the cusp of another, major rally in silver and these actions/inactions by The Mint only help the cause. The state of perpetual ASE shortage created by The Mint will serve to exacerbate demand for both physical and paper metal. This demand will drive prices higher in an increasingly strong feedback loop as we head through the next few months.

Therefore, buy the dip and take delivery...if you can. wink

TF

335 Comments

FleetFeet's picture

I think you can trust the Mint's coins

I can't reassure you 100% about ASE content, but I can give you an alternate explanation for why the TreasSec now has control over both Quality and Quantity. 

from MintNewsBlog.com:  "Almost immediately after the initial suspensions of 2008 and the adoption of the allocation program, many bullion investors called attention to the fact that the US Mint was legally required to mint and issue American Gold and Silver Eagle bullion coins in “quantities sufficient to meet public demand.”  This legal requirement added some pressure and probably unwanted attention to the situation. Eventually, the Mint would have the operations of its bullion program scrutinized at a Congressional hearing."   

Now, the production requirements for bullion coins have been quietly changed with the passage of the Coin Modernization, Oversight, and Continuity Act of 2010.  The requirement was modified to the more ambiguous “quantities and qualities that the Secretary determines are sufficient to meet public demand.”  This leaves the door open to the Treasury Secretary to make an independent determination of the quantity of bullion coins sufficient to meet public demand, regardless of the actual quantity necessary to meet demand. 

I can't remember which year, 2008 or 2009, when Mint supply of silver blanks ran so low the Mint suspended bullion coin operations while continuing to strike all the special coins -- the silver uncirculateds, the silver proofs, the silver commemoratives, etc.  There was considerable criticism of the Mint Director who made the call.  Bullion dealers said bullion coins should always have priority because their minting is mandated by law.  The Mint Director thought the small supply of ready blanks should be used for the high-quality special coins because the Mint made a good profit on them, whereas the profit on bullion coins is very small. 

So now the decision as to which line of Mint product gets priority has been taken away from the Director of the Mint, and given to the Treasury Secretary -- that's the "Quality" decision.  And the Dealers can no longer insist that the laws demand full production of bullion products. 

I think that's all there is to the changes -- to the shifts in wording.  I wish the power had been left with the Director of the Mint -- he's the one who know most about Minting, coinage, and sales.  The TreasSec is just another political pawn.  

Bugzy's picture

Noticed

Scotia Mocatta: They have been running with two sold out items for a few weeks. One of which was the 100oz Valcambi - There was only one sold out sign today. However, it is not that they have restocked the 100 Valcambi - They no longer show it as a product. Are they unable to re supply? Could be nothing - I think it is something.

See link: https://www.scotiamocatta-estore.scotiabank.com/stores/scotiamocatta/catalog/catalog.aspx?nst=pprbihlm92sPEsG3SAczPxXStbR43vSOzQZJCMimV30%3d

Good post at the top Turd.

Bugzy

csquared13's picture

Regarding Kcap's point,...

any chemists/able-bodied here in Turdville that feel like taking on the task???

that would make for a hell of a guest post, Turd!!

Libertybella's picture

@ Kcap- Silver Quality and Quantity

Kcap

I am with you on this. Why change the verbiage in such a specific way if there is no need to do so?

On a related topic I recall seeing a post on this forum ( or the old Watchtower forum) a couple of years ago about a request for public comment that was being circulated by either the Mint or the Treasury.

The request had something to do with seeking public comment on the mix of metals, or alternative metals, to be used in coinage. Maybe it was to replace nickel? I don't remember exactly.

Does anyone recall that? Whatever happened with that?

~Libertybella

Bill of Rights's picture

(No subject)

Feinstein's banned gun list is out

beach_bum's picture

Thought I found some good news to share...

 

Naked-Image Scanners to Be Removed From U.S. Airports

http://www.bloomberg.com/news/2013-01-18/naked-image-scanners-to-be-removed-from-u-s-airports.html

Then I read the fine print way down in the article:

TSA has contracted with L-3, Smiths Group Plc (SMIN) and American Science & Engineering Inc. (ASEI) for new body-image scanners, all of which must have privacy software. L-3 and Smiths used millimeter-wave technology. American Science uses backscatter.

oh well, back to opting out

Urban Roman's picture

On the quality of Mint coins

Presumably, and it is truly a guess, but I tend think that if they decided to reduce the quality, that they would no longer stamp ".999" on the coins. This would "legally" allow them to use lower purity and still be in compliance with those old hallmarking laws that have been in place for centuries. 

The could  say ".9125" or "Sterling" or some such. ... Or "pewter" maybe? 

[edit]
Or nothing at all where the .999 used to be. They could be making "genu-wine silvery medallions",,,,,

Libertybella's picture

@Fleetfeet - Quality vs Type

Fleetfeet

Thx for that explanation. I am still bothered though. If the word "quality" is meant to really refer to the "type" of coin or product, why not just use the more appropriate word "type" instead?

~Libertybella

Nana's picture

"Code of Ethics"

The PTB actually have a "code of ethics", they have to tell you what they are going to do before they do it, they believe it absolves them of any wrongdoing and if you don't object they think you agree.......

Grublux's picture

Opting out

Have done it a few times.  The patdowns vary from place to place some less thorough then other.  Anyone else gone thru it?

Turd Ferguson's picture

Sylvia refuses to buckle

MODERATOR

Coiling for attempt #7??

Clearly 1660 is rather critical support.

Xeno's picture

Qualities

Heard from the mint...

ASE's are always .999 silver

Proof sets are .90 silver also called coin silver

So it seems that Kennedy half and dime proof set in my drawer is only .90frown But my ASE's are .999smiley

Oh well, we can always make up in quantity what we don't have in quality. Junk bags anyone?

Bugzy's picture

A comment on previous thread about interest

A world without interest? Usary.

Well.... my thoughts are: That you would need a no inflationary environment. You would not put money in the bank if you got nothing for it and there was inflation. You might as well spend it.

So if there are no savings there is no capital and thus no capitalism (growth allegedly comes from savings). There again one might be encouraged more to put money to work in profitable endeavors. Share/divi etc.

Then there is risk: Interest on money is usually a function of risk. Without interest how does one price in risk? Does the guy with the shopping trolley pay the same to borrow money as the guy with a good job? Who would you rather lend your hard earned mular to?

I would be tempted to source good quality food locally and pay in cash. After all, every time you use a credit card you create money and hence more debt to the system. Frightening.

Wonder how the Arabs deal with this no interest thang? Thoughts?

Edit US airports: Pat down every time. Just because it inconveniences the man. I do not consent to Xray.

Edit 2 Exactly nana: they REQUIRE your consent.

Bugzy

Grublux's picture

The beatdown in the miners

Is amazing!

Kcap's picture

Did anyone just notice the Kitco chart just changed?

An hour ago the low of this morning at 31.62 was shown on the chart...its not gone.

Its been redrawn and the new low of the day was just made.

This happens ALL THE TIME.  Not one thing we follow is legit.  Not one.  Not the COMEX numbers.  Not the charts.  And I suppose, not even the bullion "quality"....if not now, then tomorrow.

Kcap

achmachat's picture

the results are in!

first things first:

the 2012 ASE are still of the same composition as the ones from the late 1980s.

I let a bunch of 1 troy ounce silver coins undergo a spectrographic analysis to see at which audible frequencies they resonate. For a metal object this small, the smallest differences of weight, pressure points during striking and crystalline structure during production will shift the main resonance peaks around 1% (40 Hz differences are quite normal)

All the tested coins had a single clean peak, whereas .925 or 90% or 50% silver coins have multiple resonance peaks, due to the presence of other metals, the second main peak being in the 9,000 Hz - 10,000 Hz range.

here are the results:

The 5 tested 2012 ASE all had a single clean resonance peak of 3732,5 Hz - 3743,2 Hz

The 5 1989 ASE all had a single clean resonance peak of 3721,4 Hz - 3733,0 Hz

Just so that you can assess what a slightly different shape can mean, the "large modern" Mexican 1 troy ounce Libertads (from 2006, 2010 and 2012) all had a single clean resonance peak of 3957,9 Hz - 3961,0 Hz (This is a much shorter range, which means that the Mexicans actually are way more consistent in their production of bullion, regarding weight and striking pressure) 

The older 1 troy ounce Libertads from the 1980s are much heftier with a smaller diameter.

Those tested had a single clean resonance peak of 5768,3 Hz - 5770,7 Hz.

TJeffson's picture

re testing quality of ASEs

I would think a specific gravity test would confirm the silver content.   

Igiveup2's picture

The upcoming battle

Started to write this Tuesday to post on that thread.  Just finished it.  Wrote it probably as much for me as you.  Here it is....

I grew up in the 60’s.  I was on campus in Madison, Wisconsin in 1968 at the height of the Viet Nam war protests.  In 1969, I won a lottery.  The problem was, I was the prize.   In a little over a year I went from protesting the war to being part of it.  I returned from Viet Nam at the end of 1970.  A year later I got out of the army and got back to living my life.

I’ve always credited the army for being responsible for both the best and worst day of my life.  One was the day I went in, the other when I got out.  That doesn’t mean that those three years were a waste.  I learned much about life while in the military, very much.  One very important thing I learned was that being in charge doesn’t necessarily make you smarter than your subordinates, only more powerful.   

About three years ago a friend of mine turned me onto PM’ s and Zerohedge (which ultimately led me here).  I began to invest in both.   I found the articles on Zerohedge very fascinating but the general content seemed to me to be a bit “out there”.  These conspiracy theories about the government, Rothschilds, central banks and the like just seemed too far-fetched, particularly so based on my experience in the military.  It seemed absolutely insane to believe that the same people who controlled and ran the military had the intellectual capacity to pull something off as elaborate or complex as was being incessantly discussed.

As Turd often states, it’s just too hard to believe in coincidences.  I vacillated between believing the whole world was acting in concert against us and believing they were all just acting at the same time and it seemed like they are acting in concert.  As someone mentioned yesterday, he believed the PTB were all acting based on self interests and although their interests were inter-related, they weren’t colluding.  I believe that too.  Based on my personal experiences in the army and the 30 plus years I have been in business, I believe those who wield the power simply are not that smart.

Their actions however are causing battle lines to be drawn.  Sides are being chosen.  As I stated in a post yesterday, the boat in which we are collectively traveling is headed for a falls.  At one time, we had a chance to navigate around them.  Unfortunately, that time has passed.  The river currents have taken control and will surely push us over the falls.  It is no longer about what happens on this side of the falls.  What matters to us, our kids and our grandkids is what happens on the other side.

On the other side we will leave the river and immediately get back on the road.  The real battle will take place as we leave the river.  This country will be forced to make a choice between continuing the great American experiment, with a renewed commitment to the founding principles of this country, or tyranny.  The war will be fought over that choice.

In 1969 I did not have the courage to walk away from a war I did not believe in.   Now that I believe, I hope I have the courage to do what is necessary.  I hope we all do.

If we do not get it right this time, our kids and grandkids will never forgive us.

Bill of Rights's picture

Maybe ask her if she is or

Maybe ask her if she is or ever was a member of the Nazi party.

Nazi Gun Control

Nazi Weapons Act of 1938 (Translated to English)

Classified guns for "sporting purposes".
All citizens who wished to purchase firearms had to register with the Nazi officials and have a background check.Presumed German citizens were hostile and thereby exempted Nazis from the gun control law.Gave Nazis unrestricted power to decide what kinds of firearms could, or could not be owned by private persons. The types of ammunition that were legal were subject to control by bureaucrats. Juveniles under 18 years could not buy firearms and ammunition.

With that good day Turd...

meegoreng1's picture

@hsofiak

Thanks for your response. It seems you are the only one that responded on the board on this important matter.

It seems silver producers/companies are collaborating with the EE to suppress the price. After all, the majority of the shares for these companies are owned by TPTB anyway.

Keg's picture

I am disappointed

Just looked at the Feinstein gun ban list and I am disappointed to learn that I only have 9 rifles they are trying to ban.  I told my wife I needed more but she just would not listen. 

Kcap's picture

@fleetfleet

But that's just it.

Of course there are multiple ways to take what "quality" means...

However, it gives them the wiggle room for either now or later to do what I wrote....which is to take 2 white metals close to silver, that are cheaper than silver, combine them to the perfect ratio in order to obtain the exact weight of silver...and then blend....blend, blend, blend....

If not now....then definitely tomorrow.  That word is essential for them.  Why would you not put it past them?

I for one would be testing all of my ASE's to make sure that from 2010 forward, they are .999 throughout....and no blending.  Remember, they did this with Gold (tungsten) and with silver in eras of yesteryear, why not again?  We are there now....its desperation time.

Stay focused and aware, to all!

Kcap

57Goldtop's picture

Grublux

I opt for the grope every time.

Some of the most offensive have been in Toronto. When flying to the US, one has to clear US customs in Canada. The worst behavior I've seen has been there, including treating the elderly like they are evil.

I had a very old guy (90 perhaps) in a wheelchair in front of me recently, presumably traveling alone and being pushed by an airline employee. The blue gloves made him get out of the wheelchair and walk through the metal detector. They then checked every single seam on every single article of clothing both on his person and in his carry on. They made him lean face first against a wall and lift one foot at a time so they could check the bottom of his feet. He could hardly hear and seemed unable to talk, so this entire episode involved blue gloves yelling at him.

Next up was me. Took perhaps 5 seconds as they waived me through and despite the fact that I opted out of the scanners they didn't give me the free blue glove massage. Perhaps pushing the old fella around gave these assholes their power rush for a few moments so they left me alone. 

Yes, I'm disgusted. Had some invasive pat downs in many US cities, several of which involved touching my junk. But I haven't seen the weak exploited anywhere as badly as Toronto.

----

My mother in law is great with it. On her last trip she thanked them and asked if they wouldn't mind doing it again.cheeky

Kcap's picture

Thanks Achmachat...

Well, perhaps not yet then....or in limited supply....

But I know that word change will come back to haunt us....there was "intent" with that change....you can bet the farm on that!

Kcap

SteveW's picture

@ag1969 Canadian Mint rationing

Can you please cite your source for the Canadian Mint rationing?

EDIT: OK, I saw the citation a few posts further down, but please, in future, if you break news cite your source. It saves all this typing.

Groaner's picture

Jill is out?

Let me know when everyone in government is out.. removed, gone, adios!

The Green Manalishi's picture

Had Ferd got this one covered?

Search is on for Russia's £50billion of 'missing' gold but it might be at the bottom of world's deepest lake...

·        Six sites identified as places where the royal treasure may be located

·        British spy and a British diplomat said to be involved in its disappearance

·        'Missing' gold of the last Tsar worth 'up to £50 billion' at today's prices

By WILL STEWART

Fresh attempts are to be made to find the 'missing' gold of the last Tsar of Russia - worth 'up to £50 billion' at today's prices - which is believed to be stashed or lost in Siberia.

Some 95 years after Nicholas the Second and his family were shot by a firing squad loyal to Bolshevik leader Vladimir Lenin, six sites have been identified where the royal treasure may be located.

Two of them are in the world's deepest lake and another is in a region notorious for its gulag prison camps during the Stalin era.

Gold from the Russian Imperial state was moved eastward during the First World War and initially held in Kazan on the Volga River.

More: http://www.dailymail.co.uk/news/article-2267748/Search-Russias-50billion-missing-gold-worlds-deepest-lake.html

4406PACK's picture

(No subject)

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