Cyprus Gold...and Silver, too

Mon, Mar 18, 2013 - 10:37am

As if this week wasn't going to be crazy enough, the knuckleheads of the EU have really thrown everyone a curveball with their latest.

Here's the latest from ZH and it's a good place to start:

The gist of it is this:

This is a big deal, regardless of how Cramer and CNBS attempt to downplay it. Why? Fractional reserve banking. As depositors across Europe realize that they are potentially next in line for a similar (or worse) "haircut" if their bank fails, the realization will dawn upon them that keeping money in said bank, at 0% interest no less, is not a very good idea. As depositors begin to withdraw their cash, the entire fractional reserve system begins to seize up. So let's start first with this, a reminder as to how the fractional reserve system works:

You should also be reminded here that this is another reason for the current gold price suppression. At this critical time gold, which also doesn't pay any interest to the holder, must not be seen as an alternative. An illusion must be maintained where there is no alternative to keeping money in a bank or national/regional system. (This is why so many foresee capital controls in the near future.)

So, again, this is why this latest EU "bailout" idea is such a huge mistake. And the proverbial genie is now out of the bottle, too. Even if the deal is amended or if the Russians sail in to make the deal less painful, the EU has tipped their hand. No bank depositor in Greece, Spain, Portugal, Italy, France...anywhere...should now feel comfortable and "guaranteed". And this is what the buffoon Cramer misses entirely with this "analysis":

OK, moving on. Prices rallied sharply at the open last evening but were then beaten back lower. Why? If you've been following along here for the past several weeks, you already know why. There were an abundance on buystops above 1600 and an effort was made to protect them and keep price below 1600 at the Comex open. This effort ultimately failed and price surged at the Comex open as these stops were tripped. I currently have gold hanging around $1610 so our mission is accomplished for far. What we need to see is gold hang in there and close near these levels, at a minimum, with a 16 handle. This will set the table for another run back to important resistance at $1626. As you can see below, that level is important as it is the lows of the new year, Jan 3-4 selloff, and getting back above there is critical for shifting sentiment. And sentiment is key. There was a lot of talk this weekend about the extraordinarily large hedge fund short position in both gold and silver. Why is this so overwhelmingly bullish? Because the hedge funds have neither the intent nor the ability to deliver. They will need to cover at some point. That's buying pressure. And if they can be flipped long at the same time...That's buying pressure times two. So, keep a very close eye on 1626 and 29.40. Those are two very important levels as we go through this week.

It's already getting late and I need to get this posted so just one more item for today...the GLD. It continues to be liquidated and now shows an "inventory" of just 1233 metrc tonnes. Again, on 1/2/13, the GLD had an alleged inventory of 1,349.92 metric tonnes so this baby is down 117 metric tonnes year-to-date or roughly 8.7%. Again, mainstream "analysts" would have you believe that this is entirely due to "investor selling and reallocation" and that this metal has simply been returned to Authorized Participant vaults. OK, sure. Maybe it least a little. But I am 100% confident that the majority this drawdown is from large investors converting their paper GLD shares into physical metal.

Why am I so sure? Check these three data points:

  • Every two months or so, the Comex offers delivery of gold. The latest delivery month of February saw 13,910 contracts stand. That's 43 metric tonnes and about 3X the typical amount that stood for delivery each time in 2012.
  • London regularly sees 15-20 metric tonnes allocated and delivered each day. Though these numbers are not publicly reported, they are confirmed by our friend Andrew and his closely-connected contacts within the LBMA system,
  • And Andy also has considerable contacts in China and Asia. From there, his contacts report that the Shanghai Exchange has delivered over 153 metric tonnes of gold in just the 12 trading days this month! That's another 10 mts/day.
  • It is clear to me that there is a global movement afoot to acquire and deliver physical gold (and silver) as quickly as possible. This physical demand WILL, eventually, turn the paper "ship" around and lead to much higher...and even new alltime high...prices. It is not a question of "if", it is a matter of WHEN.

    I'm not going to be as readily available as usual for the next 2-3 days as MrsF and the LTs require some attention over Spring Break. I will be around and updating the site, just not as much. Hang in there and keep the faith. Buy some more physical today, while you still can.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    Mar 18, 2013 - 10:39am

    Read this article, too

    An industrious Turdite found and posted this op-ed into the previous thread. You should read it and fully consider what is being said here:

    Mar 18, 2013 - 10:42am

    link trouble

    Once I switched formats to put in the CNBS video, it looks like I lost the YT video on fractional reserve banking. Here it is below:

    Monetary Policy: Money Creation in a Fractional Reserve Banking System
    Mar 18, 2013 - 10:48am
    Mar 18, 2013 - 10:50am


    yeserbe 2nd

    well certainly looks to be the begining of the end of this joke

    Next week we have the Debt cealing for the US and hopefully their loss of AAA

    Gold has to break through 1611

    Mar 18, 2013 - 10:52am

    ability to deliver

    realistically, how many longs have the ability to stand for delivery?

    I'd assume not that many.

    I know when we are in strong uptrend, I have more long equity calls than I could exercise on, so I have to close them early.

    Mar 18, 2013 - 10:52am

    The Golden Butterfly....Does It Have Wings?

    March 18, 2013, 8:21 a.m. EDT

    If Cyprus is the butterfly, is gold the pesticide?

    By Michael A. Gayed

    Developments over the weekend in Europe have been nothing short of stunning. A bailout deal for Cyprus was announced after the close on Friday to help save the country from crisis, and yet it is the very nature of the deal which appears to be causing one.

    As part of a bailout, a percentage of all bank deposits would be confiscated, causing those who had nothing to do with the crisis to directly foot the bill. ATMs stopped working, banks were closed, and money is being blocked from leaving borders.

    This is how bank runs happen. Cyprus itself isn't the issue. The problem is the precedent this sets. If Cyprus deposits in banks are at risk of being taken (even if it is a small percentage), then what's to say all deposits across Europe aren't at risk of the same thing happening? This is the bigger problem — the potential fear depositors in other European countries might soon express, which in turn would then cause renewed stress in the euro zone.

    "What's a butterfly garden without butterflies?"

    Roy Rogers

    Somehow, price was sensing this on Friday. While up until Thursday intermarket trends were moving further away from risk-off mode, some hard changes occurred Friday during the day.

    Our ATAC models used for managing our mutual fund and separate accounts sensed some kind of a minor deflation pulse once again, causing us to rotate out of stocks and into bonds. I made it a point last week to say that such a move could happen if the trade to stocks was a false positive, as such rotations week to week have happened in the past for our inflation rotation strategies.

    The question now is if Cyprus is the butterfly flapping its wings which can cause a hurricane across the region. In nonlinear dynamic systems, small changes can result in big consequences (aka chaos theory). As of now, intermarket trends worsened by enough for us to rotate into bonds, but it is not yet clear if they will deteriorate aggressively again to warrant fear of a correction as they did when I made the case for one (that didn't come) late January.

    The stock market may ultimately not care if Cyprus is the butterfly that brings back the “Gray-Haired Bears” given the pesticide of QE from the Fed. However, I do think caution in risk assets should be taken here. The bulls have the next fat pitch of emerging markets EEM -0.77% bouncing off oversold levels on their side. The bears have potential contagion of a bank run in other countries on theirs

    So what does one do? It seems more clear to me that bonds and gold GLD +0.88% can do well in the weeks ahead. The $85-billion question is if stocks can hold their own. Take a look below at the price ratio of the SPDR Gold Trust ETF relative to the S&P 500 SPY -0.48% . As a reminder, a rising price ratio means the numerator/GLD is outperforming (up more/down less) the denominator/SPY. For a larger chart,visit here.

    Gold relative to stocks has been a poor trade from an opportunity cost standpoint, but with the ratio nearing three-year lows and a relative support level in place, I wonder if Cyprus is the catalyst for a reversal in trend.

    Historically, gold outperforms stocks during deflationary pulses, and this seems to be precisely what may be about to unfold in Europe should deterioration persist internally in the markets and overseas news worsens.

    Ironic that this happens after a historic streak higher in the Dow, isn't it? Ironic how this could make the correction call of late-January with hindsight not wrong, but early, isn't it? Remember folks — the year is long, and there are plenty of opportunities for “Nouveaux Bulls” and Gray-Haired Bears to make money with the right timing.

    And the Gray-Haired Bears may have a butterfly named Cyprus to thank for their return...

    Joe Dokes
    Mar 18, 2013 - 10:52am
    Roger Godberd
    Mar 18, 2013 - 10:56am

    Faust! - Cyprus Heist...coming to a country near you soon

    We are all doomed!

    Agree completely TF. Rule of law no longer exists. They can and will shaft you with impunity.

    6 Myths about Money & Banking – Josh Ryan-Collins

    Antony von Clearwell
    Mar 18, 2013 - 10:58am

    top 10 :)

    top ten. new to the game and already top rank?....

    Prize Fighter
    Mar 18, 2013 - 10:59am

    "Ooooo, that's a bingo!"  Is

    "Ooooo, that's a bingo!"

    Is that how you say it after $28.835 filled?

    "We just say, 'Bingo.'"


    Roger Godberd
    Mar 18, 2013 - 11:00am

    The FIX

    Come on my beauty fix above $1600...

    Mar 18, 2013 - 11:07am

    No rally commeth yet?

    Forget precious metals to rally on this Cyprus news. A measly $10 gain, that's all folks, while it went down $30-40 a few weeks ago on virtually no news.

    As soon as the Cypriote news subsides 'they' will slam it back down to below $1600 before you can say "WTF just happened."

    Keep on hoping of higher prices, keep on brainwashing yourself that 'this time it will be different,' keep on catching that falling knife, keep on posting music videos and outrageous "$11000 Gold" KWN links, and keep on shooting messengers like myself.

    The stock market is overvalued, the bond market is overvalued and when it all goes BOOM, Gold and Silver will also tumble...just like it did in September-October 2008.

    El Gordo
    Mar 18, 2013 - 11:08am

    It can't happen here...

    Thank goodness this theft of deposits cannot happen here in the good old USA. Or the theft of our IRA' or our 401(k)'s or our country real estate holdings which serve as habitat for endangered plants and animals, or our stock portfolios that our brokers handle or our corporate bonds which take precedence over shareholders in the event of bankruptcy.....What's that you say - It can happen here. Good grief.

    Mar 18, 2013 - 11:08am

    All rigged market porkin pigmen croney capitalism

    banksters not stupid enough to crash the system unless planned. The cyprus bankster puss pocket should have been jambed shut with 10-15 billion in easy hot printed fiat paper euros. That this has happened when it has it for 1. bentrod to get the Ezero to print to infinity as the dead head fed. 2. benron to get more QE on the table 3/20 goonspeak. This is no accident; no surprise to anyone who knows mega bankster shadow banking whale brokers are behind the intended moves. We can only speculate the reason. Out of chaos comes order. Maybe the new world order and one step closer to a world currency.

    Roger Godberd Fulgurite
    Mar 18, 2013 - 11:09am


    Thanks for your views Mr. Right who knoweth the real truth whilst all others sleepwalk to their doom.

    Glad you are here to share your greater insight.

    Mar 18, 2013 - 11:09am


    Great post today TF.

    The day will come soon enough when GLD goes below 1,000 metric tonnes. Slowly and surely we'll see it approach that number and it appears we're trending that way already.

    I'm just wondering at what point investors in it start a paper bullion bank run that GLD essentially represents albeit not in the traditional definition of a bullion bank.

    SLV can't be far behind and it might even lead the way when a 'run' starts.

    Mar 18, 2013 - 11:10am

    Turd, thanks for all you did, do, will do and will have done !

    Takin' the family to Lost Wages, NV again .... you seem to go there a lot .... I'm all for the place .... pawn shops and casinos .... what goes there .... stays there .... there is even a word for it .... it's on the tip of my tongue .... I'm usually not at a loss for words .... it'll come to me .... oh, well .... I'll remember by the time you get back from spring break ? Monedas 1929 Comedy Jihad Compulsive Gaming World Tour

    Mar 18, 2013 - 11:13am

    What a joke

    What a joke............the US market has recovered the losses almost was -160 preopen Futures...look at it now..hmm....

    Mar 18, 2013 - 11:15am

    I went out for lunch today (i

    I went out for lunch today (i live in Sweden) and the girl at the counter told me that she could not accept credit cards today as there seemed to be some problems by the banks of some sort ... had i not read the news about cyprus and their banks i would have thought nothing further about it. Most likely a coincidence but it makes you wonder.

    Mar 18, 2013 - 11:17am

    gold just broke the upward channel

    I think its back down hill unless some buying comes in just above 1600

    and what stinks is that the miners are not holding gains, getting ready to go south too.

    Silver bear of very little brain
    Mar 18, 2013 - 11:18am


    Here in Spain I have started my own Bank run; I ran to the bank yesterday and exercised the ATM to the limit, repeated today and will again tomorrow and beyond. I anticipate being fairly fit by midweek.

    Mar 18, 2013 - 11:23am

    mess with the russian bear

    once a commie always a commie and you may get more than you bargained for

    Prize Fighter
    Mar 18, 2013 - 11:24am

    MrGuboci is right

    And what's with using terms like "overvalued" when currencies move like Jagger? Overvalued stocks relative to what? 1990 dollars? 2000 dollars? What about 2013 dollhairs? Seeking Alpha with yesterdays valuators? Hmmm.

    Frankenstein Government
    Mar 18, 2013 - 11:26am

    Five Billion in Friday POMO Dough- Has to Land Somewhere

    With the Cyprus grand theft- and the bank holiday there now extended to Thurs.- coupled with poor housing data again today- you'd expect markets to be down big time and PM's soaring.

    Gold now at 1602. The DJIA only down 30.

    The world economy is sick. The bankers have control of all governments and the media. And that 5 billion in POMO dough gathered on Friday is getting used in the usual fashion, melt up stocks- push down metals.

    Day after fucking day. Queue up the tune, " I got you babe."

    Mar 18, 2013 - 11:26am

    The physical demand is the

    The physical demand is the reef that the paper ship will sink on. Everyone aboard is going to get wet, if they don't go down with the ship. Time to man the lifeboats and get to shore.

    Mar 18, 2013 - 11:29am

    If you were to define the

    If you were to define the perfect example of a PSP (paid shill post) would that one someway above be it?

    For Jim Sinclair to predict what is looking like ridiculously accurate timing etc must have meant he had knowledge that the Cyprus fiasco was happening when it did - the alternative is that he can look at the same markets, charts etc as the rest of us and see something few/no-one else can! Certainly not saying this correction is over but if it is then the guy deserves every accolade coming his way.

    Swift Boat Vet
    Mar 18, 2013 - 11:30am

    Cyprus is Serious Business ---- Amazing that ....

    gold and silver are so tightly controlled there are only minimal price gains today. The tonnage of gold and silver paper has got to be a record today. That's my guess, along with the fact that the education system has successfully dumbed down the average westerner to having the monetary knowledge of a turnip.

    Top ten-ish?


    P.S. FAR from top ten :( , that's what I get for reading the whole post and all the articles.

    Mar 18, 2013 - 11:31am

    Gazprom Offers Cyprus Restructuring Deal to Avoid EU Bailout

    Now this is interesting. The EU/IMF goons get competition:

    Russian energy giant Gazprom has offered the Republic of Cyprus a plan in which the company will undertake the restructuring of the country’s banks in exchange for exploration rights for natural gas in Cyprus’’ exclusive economic zone, local media reported.

    Representatives of the Russian company submitted the proposal to the office of Cypriot President Nicos Anastasiades on Sunday evening, Sigma TV reported.

    The proposal states that Gazprom will fund the restructuring of the country’s crippled financial institutions in exchange for substantial control over the country’s gas resources while Cyprus won’t need to take the harsh bailout package offered by the EU.

    EU offered a 10 billion euros rescue package to Cyprus with the condition of raising 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. The originally proposed levies on deposits are 9.9 percent for acounts exceeding 100,000 euros and 6.7 percent on anything below that.

    Cypriot President Nicos Anstasiades is not willing to discuss the Russian’s offer according toNewsit who cited an anonymous source close to the President.

    “The president is not going to discuss this plan because he wants a solution that will come from the EU,” said the anonymous source.

    Mar 18, 2013 - 11:33am

    @ Fulgurite

    Fulgurite , when the bubbles burst and the money start flowing away from the stocks and the bonds , where do you think they would go ? If you have something going down as money moving away from one sector , you must have something going up at the other end where the money flows in . Last time currencies and the $ went up as everybody stayed in cash , this time though when the bond bubble bursts the inflation will be huge and people will be forced into the real deal - commodities including gold and silver . The bond bubble burst is the most bullish event that can happen as far as eye can see.

    Mar 18, 2013 - 11:36am

    The Russians Are Cooking With Gas In Cyprus

    Nother source:

    The Russians have made Cyprus an offer it can refuse, but only if the EU throws more money at the problem.

    Gazprom, the world’s largest extractor of natural gas has offered to bail out the Bank of Cyprus in return for effective exclusive control of the gas reserves off the coast of the island.

    This would mean Cyprus does not need to accept the terms of the EU bailout offer.

    The Cypriot government’s motives are obvious - it can leverage the Russian offer into getting a better deal from the EU to try and placate its furious voters.


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