Gone...For Good?

346
Tue, Jun 19, 2012 - 11:44am

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 ( https://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. (https://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

About the Author

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turd [at] tfmetalsreport [dot] com ()

  346 Comments

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¤
Jun 20, 2012 - 9:45am
Nuclear RocketmanTabberto
Jun 20, 2012 - 9:42am

@ York Rite

As the Soup Nazi so famously said...

The Soup Nazi - "Por Favor?"
Wizard
Jun 20, 2012 - 9:38am

"Do you think a safe deposit

"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

ClinkinKYReachWest
Jun 20, 2012 - 9:37am

Some Comic Relief .. Before the Fed

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

Turdle GG
Jun 20, 2012 - 9:37am

@eman laer

"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

OrangeAlert
Jun 20, 2012 - 9:34am

Turd

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!

¤
Jun 20, 2012 - 9:34am

what to do, what to do

Here's my opinion....Zap!

Eman LaerBron Suchecki
Jun 20, 2012 - 9:32am

another take

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.

ReachWest
Jun 20, 2012 - 9:32am

Some Comic Relief .. Before the Fed

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 ..

York Rite
Jun 20, 2012 - 9:26am

So now I'm conflicted...

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???

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