Perception Deception

A couple of remarkable items hit the wires late last week. I thought we should begin this week with a recap.

Late Friday, this story appeared at ZeroHedge: http://www.zerohedge.com/news/2013-11-22/where-did-all-gold-go

The ZH article included this chart by Goldman Sachs, sourced from Bloomberg, who themselves sourced it from the IMF:

On the surface, we have a neat little chart. It purports to show that some countries are selling gold and some countries are acquiring it, all in a zero-sum vacuum. For example, where Turkey has acquired 250 metric tonnes, Austria as sold 250 metric tonnes. OK, fine. You can just stop there if you want...but...does anything else stand out to you? We'll get back to that in a moment but, first, let's look at the other interesting story from last week.

The link to this Reuters story is here: http://in.reuters.com/article/2013/11/20/china-gold-imports-idINL4N0J410Y20131120

With jaw agape, I read this story on Wednesday, literally stunned that it had seen the light of day. A few of the highlights:

  • Gold shipped from Hong Kong to the mainland, used as a proxy for Chinese demand as bullion imports are a state secret, nearly tripled to 855 tonnes in the year to September. But a surge in China's gold purchases as prices slumped by a quarter this year has also seen at least 133 tonnes shipped directly, according to Reuters calculations based on data from Global Trade Information Services (GTIS).
  • The 133 tonnes does not include gold bought by China's central bank. China said in 2009 that its official reserves of gold stood at 1,054 tonnes but it does not publish regular updates. Industry watchers estimate Chinese reserves may range from 4,000 to 5,000 tonnes by next year.
  • Increasing flows through Shanghai - which are legal but only a fraction of the total because gold is mostly shipped from trading hub Hong Kong - underscore a government push to make it easier for its citizens to buy and trade gold.
  • Redemptions from gold-backed exchange-traded funds (ETFs) have jumped as the price of bullion has fallen - 650 tonnes from the top eight funds so far this year - and much of that may have headed to China from Europe. Refiners say they have been converting 400 ounce bars typically bought by ETFs into 1 kg bars (kilobars) to be shipped to China. Kilobars are used for making jewellery and are also popular as an investment product. "We see huge flows of gold in and out of Switzerland, an inflow of large bars, which we convert to smaller bars," Scott Morrison, chairman of gold refiner Metalor, said from Neuchatel. "From April to August, we saw very large volumes from all our refineries headed to Asia," he said, adding that the bulk of the company's production in Hong Kong went to China.

(As an aside, I might remind you that Turdites were the first to learn of this massive Swiss refinery backlog of 1-kg bars heading to China. I wrote about this in June of 2012: https://www.tfmetalsreport.com/blog/3924/gonefor-good)

Anyway, please be sure to read the entire Reuters story as it confirms many of the things that I and other precious metals analysts have been telling you for months.

But here's the thing...and the point of this post. This paragraph of the Reuters story is the one I want to focus on:

"The 133 tonnes does not include gold bought by China's central bank. China said in 2009 that its official reserves of gold stood at 1,054 tonnes but it does not publish regular updates. Industry watchers estimate Chinese reserves may range from 4,000 to 5,000 tonnes by next year."

You, me and everyone else knows that the "official" Chinese reserve numbers are bogus. As noted above by Reuters, China has chosen to not release and officially update their gold reserve totals. The last update was in 2009 when they publicly confirmed that they had a stockpile of 1,054 metric tonnes. They've been quiet on the subject since.

Fortunately, however, the amount of gold flowing from Hong Kong into the mainland is chronicled and logged each month. Once again, Zerohedge provides some excellent material and below are just a few of the charts I've saved recently:

Want even more info? Koos Jansen does a terrific job monitoring the Chinese import numbers. Within this article of his posted two weeks ago (http://koosjansen.blogspot.com/2013/11/greater-china-net-import-1316-tons-ytd.html), I found these two charts:

So...

Rather than source the abundance of information currently available regarding Chinese demand, Goldman chooses instead to use the Bloomberg/IMF data for their chart and research report. This is the same GoldmanSachs, mind you, that tells their clients that gold is heading to $1050 (http://www.cnbc.com/id/101220299), all the while accumulating shares in the GLD at a rate four times faster than anyone else on the planet. (http://www.zerohedge.com/news/2013-08-30/guess-which-bearish-bank-bought-record-amount-gld-q2)

This got me wondering: What if Goldman chose to present the same information....in the same zero-sum, bar graph structure...only instead used the more accurate, unofficial Chinese reserve numbers? How would the chart look if, instead of 700 metric tonnes, the Chinese reserves were listed at 4,000 metric tonnes?

A quick email to our resident Photoshop expert, Pining4TheFjords, and I got my answer:

WHOA!! That changes things a little, doesn't it? I guess now we know why Goldman chose to use the bogus IMF numbers....This chart wouldn't have fit on the page!

And just as significant as the tall, Chinese import bar...Who the heck is the "mystery seller" with the other massive red bar??? Hmmmm???? Any guesses????

So, anyway, just another case of the truth being kept from the light. So Goldman misleads their clients...what else is new? So the IMF and Bloomberg don't bother to do their own homework on Chinese demand....and this surprises anyone? Whatever. Almost everyone stuck in yesterday's paradigm does so willingly anyway. At least YOU know The Truth. YOU know that Chinese and other "BRIC" nation demand is steadily breaking the current, fractional reserve bullion banking system. And YOU know to accumulate physical metal, just like The Chinese and while you still can, in preparation for The End of The Great Keynesian Experiment.

TF
 

57 Comments

Teach's picture

Things that make you go hmmm...

I wonder whether this is the Chinese way of reminding the U.S. to keep the price of gold down so that the Chinese can continue to dump U.S. paper and exchange it for real money?  http://thefreedomreport.us/ministry-defense-report-mysterious-fireball-streaked-across-oregon-sky-chinese-missile/

And then I start thinking about the militarization of the American homeland...

Shortly after that I tell myself I spend too much time on the computer...

Mr. Fix's picture

A different kind of turd?

Beware The 'Head-Fake' Taper As "Markets Have Now Discounted Their Own Dishonesty"

The story making the rounds these days is that the USA’s industrial economy is on the rise again; that the housing market has “recovered;” that (according to Meredith Whitney) the “central corridor” of the nation (Texas to Minnesota) is the second coming of Japan in the 1960s; that we have more oil than we know what to do with; that the nation has bred a super-race of intrepid entrepreneurial risk-takers like unto no other society in history; and finally that whatever else we are or are not, America is the cleanest shirt in the laundry basket of Mother Earth.

This is all horseshit of course, being smoked in the New York Fed’s crack pipe.

 
mysamg's picture

Goldmans S&P predictions for 2014

I am intrigued by your stand as stated in your closing remarks: "You know where I stand, put my trust in God's word, He will step in at the right time to end it, making a point and that His rightful sovereignty will never be questioned forever again."  JW?Me2  Would love to hear directly from you.  charles@mysamg.com

Mr. Fix's picture

All lines are parabolic except one, gold. Hmmmmmm.......

Guest Post: Inflation Is Raging – If You Know Where To Look

Most people – certainly most governments and economists – define inflation as a general rise in prices. But this is wrong. Inflation is an increase in the money supply, of which a rising general price level is just one possible result – and not the most common one. More often, excessive money creation shows up as asset bubbles, where the new money, instead of flowing equally to all the products that are for sale at a given time, flow disproportionately into the ‘hottest’ asset classes. In each case, mainstream economists and government officials pointed to modest consumer price inflation as a sign that things were fine. And in each case they were simply looking in the wrong place and completely missing the destabilizing effects of an inflating money supply. Now we’re at it again, with economists, legislators and central bankers using low consumer price inflation as a rationale for even easier money, while ignoring epic bubbles in sovereign bonds, equities, high-end real estate and collectibles around the world. A chart tracking the tangible asset classes of the super-rich would show all lines going parabolic - except one, gold - for now.

 
SilverRunNW's picture

OMG! FOX BUSINESS NEWS SUCKS

Some joker just pontificated from a trading floor in Chicago (CME/Comex?) why gold is dropping and he said there is a rumor of China reducing their gold reserves.  Are you fracking kidding me!!!

What a load of shit!

@KoosJansen's picture

China

Iceberg Slim's picture

U-S-A! U-S-A! U-S-A!

I'm guessing that's where China's newly found gold is coming from?

Could it be even coming right from Fort Knox/GLD itself?

SRSrocco's picture

CRITICAL FACTOR: REAL REASON TO OWN GOLD

Even though Chinese Gold Mine supply is exploding, they are burning through their resources.  Jim Rickards spoke about this in an interview a while back.  The Chinese are trying to mine as much gold as they can before the great revaluation takes place, but they are going to run very low of resources within the next 4-6 years.

I discuss why its CRITICAL to own gold.  While a great deal of analysis is on the paper game, I believe there is even a more important reason to hold the yellow metal:

CRITICAL FACTOR: The Real Reason To Own Gold

tyberious's picture

Bill kills it agian

http://blog.milesfranklin.com/big-week-ahead-pieces-to-the-puzzle-and-the-art-of-war

" I mentioned above that the “timing” was interesting, it is, VERY!  I say this because late yesterday Jim Sinclair wrote publicly that he has been in meetings regarding the origins of “cash” metals markets.  He had spoken previously of 6 different metals exchanges that would afford no leverage whatsoever and declared yesterday that he has made the decision to back the Singapore Physical Precious Metals Exchange with his knowledge, reputation and financially. Jim’s message to us can be found here.  He has accepted the position of Executive Chairman of the exchange so without a doubt his heart and soul is in this for the end game.

For those of you have studied or wondered about “Free Gold,” this is how it begins.  True “cash and carry” exchanges will destroy the West’s ability to price gold using leverage and unbacked contracts.  Currently there is virtually “no cost” for JP Morgan, Goldman, Barclays, Morgan Stanley or any other investment house to “sell” gold.  All they need to do is “push a button” and literally millions of so called ounces hit the markets and thus push the price down.  “Cash exchanges” will offer the opportunity to arbitrage metal from the paper exchanges.

I have spoken for some 10+ years now that we would arrive at a “two tier” market in gold and silver.  In some respects we have already.  India is currently paying 20% above paper gold market prices to obtain metals.  There are also premiums (though not nearly as high) for the Chinese to buy gold.  Here in the U.S., Silver Eagle and Maple pricing is some 15-20% above COMEX pricing.  (Interesting to note that though prices dropped this week on the COMEX, premiums expanded by the same amount leaving cash prices nearly unchanged).  So yes, we already have a glimpse at a “two tier market” but if I had to guess, these cash exchanges will “arbitrage” the remaining metals held in the West.  They will buy and ask for delivery knowing full well that they can sell to cash buyers in the East at far higher prices…thus making an arbitrage profit AND draining the remaining scraps at the bottom of our barrel.

THIS is truly big news!  It inevitably had to happen sooner or later because Mother Nature has been demanding it for years.  This “cash and carry” concept will ultimately re price gold and silver to much higher levels and probably multiples of their current prices.  The West has been fighting the tide since 1971 and now looks to have lost the war with this current battle arrangement.  The East on the other hand has acted in harmony with nature.  They were patient and methodical for years upon end and now look to end the “financial war” without ever firing a single bullet.  Let me remind you that history has shown that the winners of war end up with the loser’s gold; it has always been this way.  However, this “war” was different.  The East used our own “bullets” (dollars) against us by producing product, selling that product to the West and earning more “bullets”…which have been used to “buy” our gold."

tyberious's picture

@SRSrocco

What is your assessment of thin-film PV, for off the grid and electric cars?

fraxinus's picture

I have my doubts

I'll eat my hat if the mess the bullion banks have created is limited to just 4000 tons of gold. I believe the continental European states will pursue the bullion banks to honour their obligation for every gram of gold, forever. And I believe that bank insiders will find that efforts to limit their personal exposure to their banks' losses will be exposed and denied. Toothless saps the Europeans are not.

SilveryBlue's picture

Swiss Kilo Bars

Chinese obviously working to guarantee the purity of their stockpile and coincidentally rid their gold of any inconvenient numbers that might trace back to a prior claim. I wonder where the Swiss are putting all the tungsten?

dgstage's picture

This Would be Nice

Teach's picture

WTF!

Just went to convert some Canuck bucks for American for holidays...$1091 C for $1000 U.S.   Unbelievable.  Think I'll use plastic instead.  Pricks.

tyberious's picture

Sobering

Bubble Inflating All Around Us-David Stockman

24 November 2013 39 Comments

By Greg Hunter’s USAWatchdog.com   (Early Sunday Release)

Former White House Budget Director David Stockman says, “Much of the mainstream media is caught up inside the bubble . . . They have an extreme case of ‘recency bias.’  They can’t remember the events of a few years ago.”  Stockman, whose latest book is called “The Great Deformation,” goes on to say, “Look at this bubble inflating all around us. . . . The Russell 2000 is trading at 75 time reported earnings.  People seem to forget that’s exactly where we were in 2007 and 2008.”  Stockman has a grim assessment of the current economy.  Stockman contends, “You are in a crony capitalism bankrupting mess.  That is very disconcerting news to people inside the bubble.”  On China, Stockman says, “They are sitting on this massive hoard of paper that they’re never going to be able to do anything with.  They have huge distortions inside of their economy . . . as bad as anything we have.”  Stockman goes on to say, “This is a symptom that this huge central bank game is nearing its end stage.”  Stockman warns, “When the Fed finally stops printing $85 billion a month . . . we’ll have falling bond prices and rising yields, a crisis at the heart of the financial system, the $12 trillion Treasury note and bond market.  That’s when the day of reckoning will finally begin to unfold, and everybody will be caught up in it.”  Stockman warns, “This is not a viable system.  It’s a house of cards . . . I think it will be a deflationary event . . . financial asset prices will collapse. ”   How does gold do in this calamity?  Stockman says, “As they see those assets go up in smoke, I think there will be a flight to a monetary asset that people will have some confidence in, and gold will be that asset.”  Join Greg Hunter as he goes One-on-One with author David Stockman.  

HeirHelmut's picture

And just as significant as

And just as significant as the tall, Chinese import bar...Who the heck is the "mystery seller" with the other massive red bar??? Hmmmm???? Any guesses????

A must watch.

If Jim the magnificent socier is right again, then he named the source of gold to feed the markets and the central banks with their leased gold.

dgstage's picture

SRS

Any thoughts on this?

Platinum Prices Expected To Surge Over The Next Few Years

http://etfdailynews.com/2013/11/25/platinum-prices-expected-to-surge-over-the-next-few-years/

csquared13's picture

Interesting chart

TGM:

Not nearly enough action to validate this fork. You could continue to watch this as a "potential" up-trending fork though. 

SilverSurfers's picture

there's she blows

Going vertical on the blowbet, 19.50 to 20.30, 80ct move up in 16 hours. :o

Nigel Black's picture

I know the Cartel has beaten us up lately

but it is nice to see a little good news for a change:

treefrog's picture

@green manalishi,

interesting charts, yes, pretty forking interesting!

Mantis's picture

Silver fork

Nice charts. Hard to make it look bearish when you zoom out far enough. yes

Galearis's picture

@ aquarius re Scotia Mocatta 100 ozers

Just got an email back from the SM estore folks and it states they sell 100 ozer silver bars. Even as I note that the bar is not on their product list.

I asked, however, who makes their so-called Solar Applied Metal kilo silver bars as Google does not recognize the company and therefore it is not "good delivery bar" quality product. The SM spokesperson never answered my question.

I've dealt with SM for some fifteen years with mixed feelings about them...I especially got a kick out of how the tellers would try to talk you out of buying metal! They wanted to sell certificates, of course, but if they sell the metal, they could not (as) safely sell the over leveraged certificates. Since it is all a fractional reserve relationship, every time one bought a 100 ozer from them, they couldn't sell 50 to 100 times that in paper form.  At least we could note that they were somewhat concerned with the paper to metal ratio in sales...

Don't get me started on SM!

FWIW,

G.

Wizard's picture

Things Are Getting, Uhhh... Interesting

China Announces That It Is Going To Stop Stockpiling U.S. Dollars

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.

http://www.silverdoctors.com/china-announces-that-it-is-going-to-stop-stockpiling-u-s-dollars/

HappyNow's picture

Chinese monetary announcements

Anybody else notice they give mixed messages?   One committee member or another will often give conflicting statements. 

Further, if you track what they hold you will often see them dumping short term yet accumulating long term US debt. Or vice versa.  Which allows them to talk out of both sides of their mouth.

Beyond the steady accumulation of gold I don't put much stock in what they 'announce'.  Oh, wait, they don't really announce the accumulation of gold, do they?

HappyNow's picture

Chinese monetary announcements

Anybody else notice they give mixed messages?   One committee member or another will often give conflicting statements. 

Further, if you track what they hold you will often see them dumping short term yet accumulating long term US debt. Or vice versa.  Which allows them to talk out of both sides of their mouth.

Beyond the steady accumulation of gold I don't put much stock in what they 'announce'.  Oh, wait, they don't really announce the accumulation of gold, do they?

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