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

Punk-Assets
Jun 19, 2012 - 1:58pm

@ Dr G Sinclair significance of June 21st

June 21st marks the the 1st 3 weeks of june, his "3 weeks" that he has consistently talked about recently. Thats all that he is implying IMO. I dont believe for 2nd he pulls things out of his ass. Do you believe he pulled $1650 out of his ass or $900 out of his ass? How about his 2006 formula? Was it pulled from his ass too? lol

S Roche
Jun 19, 2012 - 2:00pm

@Outlooking in

The LME is being sold (base metals) not the LBMA (bullion).

tyberious
Jun 19, 2012 - 2:02pm

Sorry in advanced, Long post

Greetings!

Martin Armstrong: Wrong on Gold

(Is he a Charlatan or an Ignoramus? That's not the point.)

Silver Stock Report

by Jason Hommel, June 19th, 2012


On June 14th, Martin Armstrong bashed the idea that gold would be worth about $55,000 if there were no paper gold. He used only ridicule, not rational arguments, and he is wrong, as I will show.

First, I will present two facts.

The first fact is that all dollars are a form of paper gold, since they used to be a promise to deliver silver or gold on demand. Today, dollars are a form of defaulted gold bearer bonds that paid zero interest. They are literally a substitute for gold, and can be redeemed for gold at any gold dealer. If all the US debt were to be backed by the US gold hoard, we can see what the value would be. $16 trillion divided by 261 million OZ. = $61,000/OZ. which is not far off the number that Armstrong ridicules.

Second. An ounce of gold was not worth "a man's suit" in most of human history, unless you counted it as the most expensive suit possible, such as a suit of armor. The most expensive suits today range from $40,000 to $100,000 to even $1 million. Link: https://most-expensive.net/mens-suits

In 1441, a suit of squire's armor cost 5-6 pounds sterling in the 1500's.
https://www.lonniecolson.com/medieval/armourcost.html
By 1817, the pound became the British Sovereign, a gold coin worth about 1/4 of an ounce of gold. So, a suit of armor was worth about an ounce of gold, or about a year's salary.

In responding to Martin's comments, I will reply in ALL CAPS. I'M NOT SHOUTING, IT'S JUST EASIER TO READ WHO IS SAYING WHAT, IN THE EVENT THAT YOU READ THIS IN A TEXT ONLY FORMAT WITH COLORED TEXT REMOVED. JASON: REPLIES IN ALL CAPS.

Here is Martin's report:

https://www.inflateordie.com/files/Why%20You%20Should%20Buy%20Gold%2006-14-2012.pdf

I'M REFUTING A PART OF THE REPORT, STARTING ON ABOUT P. 20. YOU MIGHT WISH TO READ ARMSTRONG'S PIECE IN FULL, FIRST, BEFORE MY REBUTTAL, WHICH INTERRUPTS HIS FLOW.

[SNIP]

NOW, TO MY READERS. I HONESTLY DO NOW KNOW WHETHER ARMSTRONG IS A CHARLATAN OR IGNORAMUS. I DO NOT USE THOSE WORDS TO CALL HIM NAMES OR BE RUDE, BUT TO SHOWCASE MY OWN IGNORANCE. I DON'T KNOW WHETHER ARMSTRONG IS BEING DUMB ABOUT GOLD ON PURPOSE WITH A SECRET INTENT TO PURPOSEFULLY DECEIVE (A CHARLATAN), OR WHETHER HE IS BEING DUMB ABOUT GOLD BECAUSE HE IS GENUINELY DUMB (AN IGNORAMUS). I TEND TO BELIEVE THAT HE IS SIMPLY GENUINTELY DUMB, AND NOT TRYING TO DECEIVE ON PURPOSE, BECAUSE THAT'S WHAT I BELIEVE ABOUT PEOPLE IN GENERAL. ALSO, ARMSTRONG REPEATS A FEW ANTI GOLD ARGUMENTS THAT HAVE BEEN AROUND FOR YEARS THAT HE LIKELY DOES BELIEVE, LIKELY BECAUSE HE HAS NEVER FULLY THOUGHT THEM THROUGH, AND LIKE MOST PEOPLE, HE SIMPLY REPEATS WHAT HE HAS BEEN TAUGHT AT HIS WASTEFULLY EXPENSIVE UNIVERSITY. I BELIEVE ARMSTRONG IS SIMPLY A PRODUCT OF THE AGE OF PAPER IN WHICH WE ALL LIVE.

I WAS TAUGHT BY A DIFFERENT SOURCE, THE BIBLE AND BY REASON. THIS IS PERHAPS PARTLY WHY HE MOCKS THE VIEW I ADVOCATE AS BEING "RELIGIOUS" IN NATURE. BUT NOT EVERYONE WHO THINKS THAT PAPER CAN GO TO ZERO VALUE ARE RELIGIOUS EXTREMISTS LIKE ME, EITHER. IN FACT, THE FEDERAL RESERVE HAS OPENLY ADMITTED THAT THE VALUE OF THE DOLLAR IS BASED ENTIRELY UPON BELIEF, MAKING THEIR SIDE OF THE ARGUMENT THE RELIGIOUSLY BASED ONE, NOT MINE.

I BELIEVE THAT EVEN WHEN PEOPLE ARE DOING EVIL THINGS, LIKE REPEATING EVIL PROPAGANDA ABOUT FUTURES MARKETS, THAT PEOPLE DON'T GENERALLY PERCEIVE THEMSELVES TO BE EVIL. JUST AS GOVERNMENT'S MISTAKES ARE MOSTLY IN IGNORANCE, LIKEWISE, ARMSTRONG IS PROBABLY JUST IGNORANT. I ALSO DON'T BELIEVE THE MAJORITY OF PEOPLE WHO HOLD PAPER ARE DOING THAT FOR NEFARIOUS PURPOSES WITH EVIL INTENT EITHER, BUT RATHER, BECAUSE THEY JUST DON'T KNOW ENOUGH ABOUT GOLD.


=====


I strongly advise you to take possession of real gold and silver, at anywhere near today's prices, while you still can. The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.

[Sorry about the edit folks, but full-text article copies are NOT cool, please take the time to read the full article HERE. Moderator Jefferson]

Bugzy exiledbear
Jun 19, 2012 - 2:06pm

@exiledbear

I think you may have pushed the lever too far forward on your time machine.

"My thoughts are": Banks will be given enough money. Paper will lose value, people will lose faith, people will offer you a lot of paper for your store of wealth.

You instead take your store of wealth and buy property in your area or in South America. Open up a Corona and chill.

B

Edit, yes it would make sense to smelt to 1 kilo. For all those reasons given above. There would be no if ands or buts about quality or ownership. A new standard.

$50,000 ounce would make a 400 oz bar a bit clumsy. Divide that by 13 - interesting.

waxybilldupp
Jun 19, 2012 - 2:08pm

"Fed Will Ease ..."

Speculation is rampant regarding what the FED will do when. Not unusual, perhaps, but certainly seems more confused. I submit that the strident forecasts for one path or another signal rapidly escalating desperation. There is nothing left that will work. The Bernank has been pulling bunnies out of his ass for years now. What has improved? NOTHING! That said, Ben will for sure, not do nothing, but I think he will wait until he can (try) and impact the election.

Does the race to buy Euros today signify an improved EU situation, or a recognition that the dollar is crapier than it was yesterday? It makes my head spin just watching it all. It's tough to be patient. As an engineer, I was never very tolerant when dealing with others who could not see the logic of a clearly data driven decision. Europe is screwed; Japan is screwed; the USofA is screwed. Their continued ability to seemingly avoid any significant consequences for their social, economic and political behavior makes me crazy, but I just have to keep reminding myself ... Be Patient! Be Patient! Hope for the best; prepare for the worst. Every day the can is kicked is one more day to prepare. This is going to end so very badly.

wax off

bullwhip29
Jun 19, 2012 - 2:09pm

@ tpbeta

Re: My bet for tomorrrow...

The DOW is up over 850 pts since the low from earlier this month. Expectations are exceedingly high that Benny delivers more than an extension to Operation Twist , that Greece forms a coalition govt and rams the bailout plan through one way or another and that the Spanish banks get access to another TARP-like bailout fund. We'll find out real soon if Goldman is bs'ing everyone again...or not. It is safe to say that no change in policy/language would result in this thinly traded market going bidless in seconds. While stocks and all other commodities are going parabolic, gold is quietly being "contained" today and not beaten down too hard. Interesting. Maybe the EE plans on turning Seabiscuit loose tomorrow instead of whipping his a$$ for the umpteenth time (which is what everyone and his dog is assuming will happen)?

El Gordo
Jun 19, 2012 - 2:09pm

LME and LBMA not the same

There is a difference between the London Metal Exchange (LME) where industrial metals are traded and the LBMA which trades PM's. It could easily be misunderstood.

dropout
Jun 19, 2012 - 2:14pm

Yes ~ The LME not the LBMA!

Thank you. My bad!

ancientmoney
Jun 19, 2012 - 2:22pm

silver v. gold

Turd, the big question has to be, why are the western bankers/elites allowing the transfer of physical gold to the orient? You'd think they could find a way to suppress price without letting go of physical, through some sort of new rules, etc., if they so chose.

I have been thinking about precious metals and investing in them for over a dozen years. I have some thoughts:

Some time ago, Ted Butler and or Antal Fekete postulated that JPM was short as a hedge for the Chinese government, who was long silver. China used silver as money for a much longer time than did the west, and much of that silver likely ended up in their govt. coffers when they went to fiat.

Could it be that there is a governmental quid pro quo going on? Is the east allowed to siphon out western gold in exchange for a Chinese silver flow to keep silver prices under control?

China needs gold to prepare for the new financial world, which seems quite likely to have a gold component. All countries need silver, and China may be the big kahuna supplier, if the suppostions line up as above. All governments want to keep control of money and the financial world, from where they gain and maintain their power. China is no different.

Nobody knows how much silver sits in Chinese ports or warehouses. It may be dwindling, or maybe they have enough to quell prices awhile yet.

Back in 2002 David Morgan wrote an article on silver fundamentals. In it, he said that if the U.S. government had to wage a serious (non-nuclear) war, it could run out of needed silver within two years, based on known silver supplies back then. I would think that the timeframe now must be shorter than that. He said one naval torpedo uses over 4,100 ounces of silver in its circuitry. Smart bombs use many pounds of silver in each one as well.

I think it boils down to this: the financial world is stressed to the max. Paper PM manipulations will continue unabated by the regulators, as there is no other choice. Gold and silver will be controlled until it no longer can be controlled. Then, some sort of ban will likely be installed, as silver will suddenly become a "strategic material." Maybe governments will commandeer silver directly from the miners/smelters--they won't nationalize the mines, but will require all stocks to be sold to the government or its contractors. The price might be $1,000 per ounce, but we'll never know. Silver will no longer trade in the open as any other commodity, but in secret by elite powers of the political/military/industrial complex. They may allow some allotments to go to general industry for solar, medical, other uses, but it will be controlled.

There is a lot of silverr laying around in people's homes, attics, etc. in the form of old silverware, teapots, coinage, etc. For these and other reasons, it would not be possible or practical for the government to declare silver ownership illegal, but they could make it difficult to get anymore in any size.

Given the strategic importance of silver, the dwindling supply, and the outrageous price controls now in place on silver, it seems something like this train of thoughts has been playing out. I'd be interested to hear from others their thoughts on the silver question.

Tyler
Jun 19, 2012 - 2:29pm

Please help me out here! opinions

I think many of us would agree that TPTB are immoral, but are intelligent. After all, they have successfully consolidated their power and duped the masses. That doesn't happen without some thoughtful planning. I realize there may be some opposing viewpoints on this opinion, but for the sake of argument, let's accept that is the case.

Let's be clear on another point as well - it's not necessarily the metal itself they value, but the POWER it allows them to wield. It's really all about the power.

Now, I would imagine they have seen this endgame coming for a while now - where artificially low paper prices allows buyers such as China to cheaply purchase large quantities.

If PM=POWER, this transfer means they are actively allowing their power to be transferred to a new entity.

Looking at history, it is laughable to think TPTB would do this willingly. We have two options.

1. They plan on using a new entity (let's just use China as the example), as their new vehicle for control. Let's say this is similar to what TBTB did with the USA when they continually attempted to install Central Banking. They had been using European countries to exert dominance, but then they saw the USA as the best vehicle to achieve their goals.

You must admit, the decline of the USA in the past few decades is rather startling. However, TPTB still do use American resources and power to install their agenda (how many wars?).

Are the TPTB switching from an American car to a Chinese car? If so, we would have to make an argument that is an intelligent move (remember, they are intelligent!). Let's assume TPTB could hijack control of China (seems it would be easier to do than with the USA, and they have already done that.) TPTB now have a country of 1 billion people, all the gold they just bought (from their former system) as well as much undeveloped land and many natural resources. Don't forget all those huge ghost cities that were built - I'm sure they will find use for them.

On a 200 year horizon, that does sound more appealing than using a developed country with an overweight, undereducated, population.

Think for yourself - if I were executing the plan above, what are some of the steps I would take?

- Indebt my old vehicle to the new one - this helps justify in people's minds that the new is better than the old

- Dismantle the old vehicle such that it cannot argue/fight against the new one

- Make old vehicle dependent on imports from new vehicle

- Make old vehicle dependent on new vehicle for military equipment

- Deplete the army of the old vehicle by spreading it too thin

- Set up measures in old vehicle to control an angered/disillusioned populace

Sound like anything we know about?

Now here is where it gets messed up. As much as we bitch and complain about TPTB, how many of yourselves read this and found yourself thinking, "Hey, the USA is better than China! They can't do that!". I believe there is a part of each of us that wants to be in TPTB's good graces. Maybe that is part of the reason we accumulate PMs. Are we that different? Shit...

2. Back to point 2 of PM=POWER. The other option we have is that TPTB want to change the equation such that PM does not equal power. In this scenario, they are letting PMs go because they think they can do without them. They think that they can let the Chinese take it all and will still be okay. This goes against thousands of years of history, but is it possible?

Does a digital currency make gold obsolete? A digital currency backed by "gold" they don't have and that no one cares they don't have?" A digital currency backed by something else? Or by nothing - but the global situation is so intense that no one cares? A place where there is so much struggle just for food that the population will use whatever medium allows them to eat?

If you were implementing this plan, how would you pull it off?

- transfer more and more of life to a digital medium

- create a catastrophe surrounding all fiat currencies

- create sample digital currencies, credit cards, online exchanges

- as additional justification for all things digital, create "climate change" and carbon taxes

- create a way to control those who opt out of the system (drones, camps)

Hmmm.

In this case, the inevitable result would be a separation of the East and West. If the East implemented a commodity backed currency as is clear they want, trade would largely shut down between the two hemispheres. TPTB have the advantage of having created a natural enemy for their never-ending war/terror fear mentality. We know when people are afraid they will give up freedom and more easily jump to the safe, new system.

What do you think? If I'm not mistaken, TPTB in the West already has many ties with those in the East. Option 1?

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