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 - 12:28pm

    Jim Cramer: People still think banks are inter-related

    I cannot believe I just heard him say that. There's an estimated one Quadrillion of bank derivatives.

    Mar 18, 2013 - 12:29pm

    @achmachat re paid shills -

    @achmachat re paid shills - yeah, I hear you but have a theory there are paid shill levels/types e.g. blatant 'troll' like ones going all the way up to very subtle '"one of us" but souring the milk a bit' types.

    I've little doubt there are some around you wouldn't expect. Fascinating aspect of disinfo etc - intrigues the tin foil hat side of me.

    Mar 18, 2013 - 12:30pm

    The German gold thing is smarter than you think

    I read somewhere that the gold stored in the US was never physical but certificates etc to balance a positive trade balance after the 2nd WW.

    So demanding the gold back now in PHYSICAL is a doubly smart move.

    buzlightening Katie Rose
    Mar 18, 2013 - 12:32pm

    I plan on low profile lurking for as long as possible.

    Next 60 daze may have us all out of the loop with internet plug pulled for whatever reason. You name it the list is long from cyber attack, emp, to little tommy terrorist pulling the plug on the US energy grid. Any way chaos and then order. World ORDER!

    Mar 18, 2013 - 12:33pm

    The cramer vid

    Just don't run good

    Mar 18, 2013 - 12:34pm


    Fits well. I would assist that thought with "coordinated" between E-Zone and FED. China is feeling the inflation from existing devaluations, in particular ¥ devaluation. Continuation of pressure on the Chinese that are threatening the "System" would make sense. An inflating Yuan is building social unrest pressures. Further steps will now be necessary by China. This meeting of FED may not see further QE, but this event would make it a more likely outcome, even though the bond has seen some reversal due to the "event" of Cyprus. Rates must absolutely remain low.

    Mar 18, 2013 - 1:02pm

    Cyprus theft

    If the ECB had proposed just print enough money to inflate wages and prices by 10% rescue Cyprus instead of stealing 10% from bank deposits, nobody would have complained, but it would still be theft.

    Mar 18, 2013 - 1:08pm

    @buzlightening . . . systems takedown . . .

    Makes sense. A good old-fashioned crisis is brewing, and we know what the pols say to that . . . "never let a good crisis go to waste."

    Since they control everything, they can take down whatever suits their fancy, and cover it up as easily.

    Now, does everyone realize why 6 months of food, water, shelter and something to protect it all is a major part of stacking? If this doesn't trigger buying of Costco's stackable freeze-dried foods (thanks Katie Rose--on your rec a week or so ago, I bought in one last order, to arrive tomorrow).

    Mar 18, 2013 - 1:16pm

    M1 has gone from $1.89T to $2.47T in the last 24 mo.

    and M2 from $8.9T to $10.4T in the same period. M1 is up 30% (as are the prices of just about everything we use). Essentially, the Fed has STOLEN 14% of your accounts value every year!

    Mar 18, 2013 - 1:17pm

    Last week I posted the silver manipulation debate

    between Bill Murphy and Don Harold.


    I found the debate interesting, cordial, and informative.

    Apparently, they both thought it was productive as well, and got together to continue the discussion over the weekend.

    Bill Murphy of GATA with Don Harrold - $3500 Gold?


    Edit: I still had 3 or so minutes to go on the second discussion when I posted. The last is the best because Don sums things up and restates some of Murphy's earlier points about WHY PM's must be manipulated. It's fun to watch the come on!

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