Eagles and Vultures

Wed, Mar 13, 2013 - 2:14pm

Just a brief post today concerning a couple of anecdotal demand indicators.

Let's start with Gold and Silver Eagle sales from the U.S. Mint. First, chew on these little factoids that Uncle Ted shared a couple of weeks ago: (https://www.butleresearch.com)

  • In 1986, the U.S. Mint was directed by law to begin minting gold and silver coins. Over those 27 years, The Mint has sold approximately 325,000,000 Silver Eagles.
  • Almost exactly half of those sales have occurred in the past five years alone (2008-2012 = 157,000,000).
  • Annual sales above 35,000,000 exceed the entire annual U.S. production for 2012. (Courtesy of our friend SRSrocco: https://www.financialsense.com/contributors/steve-angelo/2012/01/04/silver-sales-surpass-domestic-production)
  • Annual sales at 35,000,000 represent about 5% of total global mine production for any single year.
  • So, anyway, Silver Eagle sales, though not the be-all-end-all, are clearly a significant force in global silver demand. And where are we with this demand? Let's take a look.

    Year Jan sales Feb sales March sales Total year end YoY %chg

    2008 2,170,000 200,000 1,855,000 19,583,500 +98%

    2009 1,900,000 2,125,000 3,132,000 28,766,500 +47%

    2010 3,592,500 2,050,000 3,381,000 34,662,500 +20%

    2011 6,422,000 3,240,000 2,767,000 39,868,500 +15%

    2012 6,107,000 1,490,000 2,542,000 33,742,000 -15%

    2013 7,498,000 3,368,500 1,601,500 (1-12) proj: 60,000,000 +78%

    For 2008, Q1 sales were 21.3% of total. Q1 2009 was 24.9% and Q1 2010 was 26.0%. Q1 2011 was 23.6% of all 2011 sales and Q1 2012 was 30.0%. So, on average, Q1 accounts for about 1/4 of all annual sales. Also, for the first 12 days of March, total sales are 1,601,500. This projects March 2013 total sales of 4,137,500. Projecting Q1 2013 sales forward gives us a total 2013 sales figure of just above 60,000,000.

    As Ruprecht would say: "That's a lot." That's a 50% increase over the record from 2011 and an 80% increase over 2012.

    Now let's turn our attention to gold.

    Year Jan sales Feb sales March sales Total year end YoY %chg

    2008 26,000 27,500 50,000 860,500 +334%

    2009 92,000 113,500 136,500 1,435,000 +67%

    2010 85,000 84,000 102,000 1,220,500 -15%

    2011 133,500 92,500 73,500 1,000,000 -18%

    2012 127,000 21,000 62,500 753,000 -25%

    2013 150,000 80,500 26,000 (1-12) proj: 1,190,000 +58%

    Using the same math as we did with silver, the projected March sales for this year are 67,000 and this provides a Q1 total of 297,500. Gold Eagles, like silver, average about 25% of their annual sales in the first quarter each year. This projects total 2013 sales of 1,190,000 and a nearly 60% increase over 2012.

    And what do you make of the continued drawdown in the GLD? As of last evening, the total amount of gold allegedly held by the fund is 1,236.31 metric tonnes or about 39,748,500 troy ounces. Now, going back to the beginning of 2013...On 1/2/13, the fund held 1,349.92 metric tonnes or 43,401,000 ounces. That is a truly staggering drop of 8.42% or 113.61 metric tonnes. This could also be stated as 3,652,646 troy ounces or 9,131 London Good Deliver bars or, at $1600/ounce...about $5.8B in gold.

    So, Gold Eagle sales are soaring, projected to rise by nearly 60% in 2013 vs 2012. At the same time, gold is being drained from the largest, easily-available stock on the planet, the GLD. Of course, metal leaving the GLD is due to liquidations but how much of that liquidated gold is being returned to AP vaults and how much is being delivered out? I wish I knew. And then consider this:

    There were 13,910 contracts that stood for delivery of Feb13 gold. That's 1,391,000 ounces. Looking back, there were only 4,623 that stood for delivery in Dec12, 5,178 in Oct12 and 5,807 in Aug12. Adding together those three, previous delivery months you get 15,608. Again, last month alone in February, 13,910 stood for delivery. Hmmmm. I wonder how many will stand in April?? The good news is: We won't have to wait long to find out. First Notice Day is March 28.

    So, anyway, I'm not sure what this proves, if anything. However, as you can plainly see, a trend is afoot for physical delivery of metal, both gold and silver. Will this trend continue? Probably. Does that imply higher prices in the future? Probably.

    Econ 101 teaches us that higher demand with stable supply leads to higher price. Consider, too, that in the metals, lower price makes mining less profitable, especially in the face of high energy prices. Less profitable mining leads to less production. Again, what does Econ 101 teach us? Higher demand with less supply equals even higher prices.

    Therefore, please hang in there. It may not look like it but we are winning. Keep the faith and keep stacking.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    Mar 13, 2013 - 2:27pm

    This is the most important article in the last few years

    On the heels of gold and silver surging, today King World News wanted to check in with the firm that is calling for $10,000 gold. Paul Brodsky, who co-founded QB Asset Management Company, had this piece regarding the Fed’s so-called exit, destructive hyperinflation and the gold market: “The markets have begun to wonder whether the Fed (and other central banks) will ever be able to exit from its Quantitative Easing policy. We believe there is only one reasonable exit the Fed can take. Rather than sell its portfolio of bonds or allow them to mature naturally, we believe the Fed’s only practical exit will be to increase the size of all other balance sheets in relation to its own.”

    “This ‘exit’ will be part of a larger three-part strategy for resetting the over-leveraged global economy, already underway. The first stage is policy-administered monetary inflation – QE in which the Fed is de- leveraging bank balance sheets by adding bank reserves. The second phase will be policy-induced price inflation – hyper-inflating the general price level enough to diminish the burden of debt repayment and gain public support for monetary system change. (Imagine today the Fed proclaims all one dollar bills are ten dollar bills. Goods and service prices would increase 10x, more or less, as would wages, asset prices, revenues, costs, etc. The only item on the balance sheet that would not increase 10x would be the notional amount of systemic debt owed.) We believe the third phase of the strategy will be a monetary reset that recaptures popular confidence following the hyper-inflation.

    Below, we list a progression of facts and reason supporting these conclusions:

    1. •As the Fed monetizes Treasury debt (or, as it claims, temporarily adds Treasuries and MBS to its balance sheet prior to selling them or letting them mature sometime in the future, thereby draining reserves), the obligations of the US Treasury (i.e., obligations of US taxpayers) to the US banking system are increasing dollar for dollar.

    1. •The US banking system is: 1) the largest American creditor to the Treasury; 2) the largest warehouse of US taxpayer wealth (via deposits); 3) the largest (infinitely capitalized) intermediary for public US capital markets, and; 4) the monopoly issuer of US dollars and USD- denominated credit. In short, the US banking system is the issuer of the world’s reserve currency and supports conditions to maintain USD hegemony.

    2. •Thus, it seems reasonable to assume that the interests of maintaining a healthy US banking system rise above or are at least equal to the economic interests of Americans, and to a large extent their government.

    1. •Significantly higher US interest rates would implicitly harm the Fed’s balance sheet (which is not marked to market) and explicitly harm the loan books (assets) of private bank balance sheets (marked to market), potentially placing bank capital ratios in jeopardy and undermining confidence. (While significantly higher interest rates would ostensibly increase the value of adjustable rate bank loans not near their cap levels, they would also decrease the creditworthiness of borrowers’ loan collateral values, lowering lending activity.)

    1. •The Fed’s balance sheet is infinite and the Fed creates the currency with which its balance sheet may grow. The Fed will always have more money at its disposal with which to buy bonds and set benchmark interest rates than the quantity of bonds for sale, sine qua non.

    1. •Thus, it seems reasonable to assume that there will not be a sudden rise in US market interest rates unless the Fed wants such a rise. Nominal economic growth or even price inflation will not necessarily act as a trigger for higher Treasury yields (but it may be reasonable to fear higher yields within tertiary bond markets in which the Fed/banks do not have significant exposure).

    1. •The relevant issue for Treasury investors is not the risk of capital loss from bond price depreciation, but rather the risk of capital loss in real terms – negative real returns as coupon interest and principal repayment do not keep pace with price inflation (i.e., the loss of future purchasing power of Treasury P&I vis-à-vis consumer goods, services and equity assets).

    1. •The mix of economic growth (leading to higher tax receipts) and/or government austerity needed to reverse ongoing debt growth over time is mathematically impossible to achieve within the context of a stable social environment. The US public sector and US households are in a compounding debt trap in which there is no exit. Thus, debt is growing and being shifted presently, not being extinguished, and this portends the likeliest future path.

    1. •Real output growth from current debt/leverage levels cannot be generated from a coincident increase in more systemic credit/debt. So, the policy solution cannot be issuing new credit and transferring debt with the goal of generating increasing demand and nominal output growth. (And we further argue that wealth concentration that results directly from asset price inflation is a very relevant and direct constraint on real economic growth.)

    1. •The US economy (and all indebted advanced economies) is shrinking in real terms presently and fiscal measures are incapable of providing a sustainable remedy. This is precisely the catalyst forcing today’s aggressive monetary policy action.

    1. •The only solution is true systemic de-leveraging (banks, households and governments). Banks are already in the process of being de-levered through QE in the form of bank reserve creation.

    1. •There are only two ways to de-lever balance sheets: 1) letting debt deteriorate naturally, which would cause a 1930s style deflationary depression, and/or; 2) creating new base money in the form of bank reserves (first) and circulated currency (second). Both reduce leverage ratios (unreserved credit-to-money available with which to repay systemic debts).

    1. •The only two ways for the US government to de-lever without creating a deflationary depression would be: 1) Treasury sells assets (e.g. land, resources, shipping lanes etc.) and uses the proceeds for debt repayment, and/or 2) Treasury has the Fed devalue (inflate) the US dollar against a monetary asset on its balance sheet. The former would threaten US sovereignty and the latter would threaten the purchasing power of US dollars (i.e., the perceived current savings of US dollar holders).

    1. •To gain US public and geopolitical support for policy-administered deleveraging through devaluation and a fundamental shift in the world’s monetary system, confidence in the current regime would have to be lost. The most effective tool for achieving this broadly would be price inflation.

    1. •Over the last forty years, the rate of price inflation has been about 2% per year (about a 125% compounded growth rate), which has diminished the purchasing power of the USD by about 55%. In other words, one dollar in 1972 is worth about forty-six cents today. Policy-administered US dollar devaluation would apply the same principle, but the inflation would occur suddenly and, discretely. Following a hyper-inflationary episode, the public would be conditioned for another resetting of the global monetary system (its fifth in one hundred years).

    1. •Central banks, led by the Fed, would have to re-price and monetize an equity asset rather than debt assets. The only monetize-able equity asset on official balance sheets is gold (which may explain why central banks of emerging economies are voracious buyers presently).

    1. •Re-monetizing gold would be popular within indebted advanced economies and therefore politically expedient. While net savers of US dollars would be harmed from the devaluation, net debtors would be helped. (The burden of repaying existing debts would be greatly diminished vis-à-vis inflated wages and asset prices.) Thus, those holding cash and bonds would suffer and those with mortgage, school, auto, and consumer debt would benefit. On balance, a policy- administered USD devaluation would be greatly welcomed within advanced economies. It would position politicians and central banks as economic saviors.

    1. •For the first time in memory all global currencies are baseless, including the lone reserve currency, and there is no other scarce currency that provides an alternative for global savers seeking a better store of future purchasing power. This implies that the Fed, with or without the encouragement of the BIS Global Economic Committee of thirty global central bankers, may unilaterally and effectively expedite a global currency devaluation. A policy-administered USD devaluation would force all other fiat currencies to respond in kind or to adopt the US dollar as its currency (maintaining USD hegemony).

    1. •The global system would revert to the gold/dollar exchange standard used between 1945 and 1971 (i.e., Bretton Woods). Currency devaluation against precious metals has long precedent (including the USD in 1933).

    1. •As we have discussed in the past, the mechanics for currency devaluation are straightforward and would be simple to exercise.1

    1. •Global banks, having already been de-levered and finding the quality of their loan books to be pristine following the devaluation, would be eager to lend again. (The fractional reserve banking system would not be altered.) The devaluation would be economically stimulative.

    In our view, public arguments by Fed members and observers of future balance sheet reduction using normal asset sales or amortization seem specious. The most visible, politically expedient and most likely path seems to be the path usually taken: inflation. In the case of the Fed and other central banks, we assert the magnitude of the systemic leverage problem will be met with equal inflationary force.


    Mar 13, 2013 - 2:28pm

    How to know when the new bull begins...

    For the last 3-4 months when the price goes up it is usually a spike that is quickly capped as soon as the momentum slows a bit. Then over the next 24 hours it is slowly bled down until an opportunity arises for the cartel to manufacture a waterfall to bring the price back to where it was before the initial spike. This is exactly what happened yesterday and today.

    You will know something has changed and that the bull might be starting up again if after a spike up, the price continues to move up at a slow but steady rate for the rest of the day. I have not seen a spike, followed by this kind of slow climb since September.

    Mar 13, 2013 - 2:31pm


    Or ateth... sumpin like that..

    Just sayin…

    Edit: Or maybe neinth or tinth...

    Edit again:

    From dictionary.com

    -oid a suffix meaning “resembling,” “like,” used in the formation of adjectives and nouns (and often implying an incomplete or imperfect resemblance to what is indicated by the preceding element): alkaloid; anthropoid; cardioid; cuboid; lithoid; ovoid; planetoid. https://dictionary.reference.com/browse/-oid

    I might add hemorrhoid literally means 'resembling a hemorrhage'.

    Therefore 'factoid' really means 'resembling a fact', not necessarily a real fact.

    just sayin again…

    Mar 13, 2013 - 2:36pm

    Turdistan Counter-Attack

    This seems like an appropriate response...


    Mar 13, 2013 - 2:38pm

    Sino-Turd Relations

    Looks like the Chinese have you under attack maybe ;-)


    Will the Dept. of Turdland Security take retaliatory action? Let's see if we get any hints what counter-attack measures TF might respond with.


    Mar 13, 2013 - 2:38pm

    The bull began

    2/20 .... ;)

    ok, this aint rocket science, but we have 29+top and 1580+top available for china, london and NY, to play with. looking good for a huge tomorrow, without them pesky gaps. power pops, closing gaps, retesting support, which seems to be slowly inching upward now 28.85Ag and 1585Au, pattern change from usual smack down, dollar on a terror. 1600/30 still the call for friday close. but wat doz i noz

    Mar 13, 2013 - 2:39pm

    All well and good, but a 1972 dollar would be worth about $9

    today. The real economy is no bigger now that it was in the early '90s, and is about 30% smaller than it was in 2007 (if you consider building McMansions part of the "real economy")

    Mar 13, 2013 - 2:42pm

    Jesse Livermore

    Free copy of Jesse Livermore 'Reminiscences of a Stock Operator' in pdf . Can't get enough it :)



    Moderator Jane
    Mar 13, 2013 - 2:47pm

    Server crashes - here comes my tin foil hat!

    I'm probably a bit more paranoid on this subject than admin is, and most likely, any excess strain on the server is coming from mindless spambots that don't really care who they are targeting. But I am reminded of the guy last year...and I frankly don't remember his username off the top of my head...I think he was a very overzealous 911 truther if I'm not mistaken. And when we tried to moderate him, he threatened us and claimed he would break into the site and post his screeds no matter what, and we could not stop him!

    There are a couple of loonies like that out there. On the very small chance one or more of them is screwing with Turd, if you happen to be out there on the great Interwebz and see someone crowing about the site crashing, or even more obviously bragging about it, do let us know.

    On a related note, it's fascinating to me how many famous politicians are now being targeted by Anonymous and having their personal data leaked. Lately it has been Michelle Obama and Colin Powell, if I'm not mistaken.

    PS I am not on moderator duty at this time so please don't ask me to wade through the posts and help out...if anything I need to be helping with the server. Thank you!

    Mar 13, 2013 - 2:48pm


    Awesome! Thanks!

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