GLD Drain Accelerates Again

19
Tue, May 19, 2015 - 12:19pm

The GLD is once again being drained of "inventory" during a period of rising prices. Is this a sign of tight, global supply? Unfortunately, we can only speculate.

As we've diligently established over the past eight months, the paper price of gold is now largely controlled by daily changes to the dollar-yen. HFT trading algorithms now control nearly every "market" and, within paper gold, it appears that most HFTs are set to sell gold as the yen declines versus the dollar and buy gold as the yen appreciates.

Here's the past three years of correlation, with the yen in candles and gold in bars:

And here's just the past 12 months:

However, there's a period within that 12-month chart where the correlation clearly broke, roughly between 11/5/14 and 12/1/14. After that, the correlation resumed. I've added arrows to the chart so that you can see what I mean (click to enlarge):

And what was occurring then to break the correlation? Recall that over the exact same time period, the now-discontinued London GOFO rates moved into extreme and historic negativity. The snapshot below shows 1-month, 2-month, 3-month and 6-month GOFO rates between 11/4/14 and 12/5/15. Note several things:

  • The sharp acceleration of negative rates began on November 5
  • Negativity peaked on December 1 as even the 6-month rate was at an all-time, historic low of -0.12333%
  • All negativity then evaporated by December 5

Combining this chart analysis with the GOFO rates led me to the following conclusion:

The paper--physical connection nearly "broke" last November. The HFT trading programs that linked the gold price to the value of the falling yen had driven price uneconomically low and the result was a dramatic shortage of readily-deliverable gold in London. This yielded a price "floor" near 50 that still holds as support to this day, despite several attempts to crack price below there in the time since.

However, in January the LBMA conveniently (for them) decided to discontinue the publication of daily GOFO rates. Clearly this tool had become too useful for all of us who seek to peer into the deliberately-opaque London process. So, after years of daily updates, the LBMA decided to simply quit publishing the rates. So, how can we decipher whether or not tightness exists in the wholesale gold market without the GOFO rates? That's the puzzle...and maybe we have a partial answer.

The raiding and pillaging of the sham GLD for physical metal has been documented many times on this site. Here are just a few examples:

However, this pillaging doesn't just occur during periods of falling price, it occurs during periods of rising price, too. One such period was the algo-disconnect discussed above, between 11/5/14 and 12/1/14, when GOFO rates went historically negative.

Over that same time period, and while price was rising from a close of just $1147 on 11/5/14 to a close of $1219 on 12/1/14, the total stated "inventory" of the GLD fell by 21.19 metric tonnes from 738.82 mts to 717.63 mts. "Inventory" began to rebound in early December before falling once again and finishing 2014 at just 710.81 mts.

So, to summarize the GLD changes, as price rose $72 or 6.3% during that 4-week period in November of last year, the GLD shed 21.19 mts or roughly 2.9% of "inventory". Were the Authorized Participant (Bullion) Banks raiding the GLD in a desperate attempt to confiscate any available metal in order to meet global demand in a time of extreme physical tightness? Well, you could very easily come to that conclusion, couldn't you?

Again, though, how do we assess physical tightness going forward since the LBMA decided to stop letting us see the the GOFO rates? Can the GLD alone provide the answer? No, it can't. However, it may still be able to provide some clues. Let's take the current GLD "inventory" activity into consideration.

As the month of May began, the paper price of gold stood at $1174. Once again, this was very close to the "physical floor" we identified back in early November. Over the next two weeks, gold rose by 4.6%, closing at $1228 yesterday. Over this same time period, the GLD "inventory" has once again fallen sharply, from 741.75 mts on 5/1 to just 718.24 mts last evening....including a 5.67 metric ton puke-job just yesterday.

So, again and just like last November, price rose dramatically while the GLD "inventory" fell by 23.51 mts or 3.2%.

Hmmmmm. Did we just witness another physical demand-induced price squeeze? Again, it's impossible to confirm given that the LBMA no longer publishes GOFO. However, we'll continue to monitor the daily changes to the GLD "inventory", particularly if price begins to decline again toward that $1150-$1180 range. In the absence of free information from the LBMA, monitoring the GLD may be one of only public indicators left in measuring global gold supply stress.

TF

www.tfmetalsreport.com/freetrial

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  19 Comments

vonburpenstein
May 19, 2015 - 12:22pm

looks like a....

Post-a-looza today and I'm #1 Oh well, 2...yaeeee beer!

vonburpenstein
May 19, 2015 - 12:24pm

yo Marchas....

....I've got 23 pendings down here in Georgia, not seeing you here yet must mean you're a selling too...eh?

CPE
May 19, 2015 - 12:37pm

Kill

the

Beast!

CPE
May 19, 2015 - 2:16pm

@ArtL

All the action is in the competing thread, inside the vault.

ArtL
May 19, 2015 - 2:17pm

not much activity for a #4

Gold ans silver are still under the control of the HFT algos.

infometron
May 19, 2015 - 2:31pm

@ Craig

Very helpful indeed! I've been watching GLD in relation to HUI to get a sense of investor sentiment during today's smack downs. Even though HUI is down 3.6% (possibly because of short selling miners that comprise the index), GLD, down 1.4%, has weathered the tempest quite a bit better. That tells me investors are not too concerned about the smack downs right now... so how long before the cartel starts short selling GLD as well?

Marchas45
May 19, 2015 - 3:57pm

@ vonburpenstein

Bloody hell 23 Pendings. I thought 8 was good. Lol Is everybody moving from town at once or are those Pendings in the suburbs? Lol Keep Stacking

vonburpenstein
May 19, 2015 - 6:33pm

Marchas...

...hit a hot streak all of a sudden...some cheapeez in the group but a few Gooduns too. Take all I can at this point...with ag rising, better hurry on a mb or who knows whatll happen...8 is awesome also...probably all high$ from watching you...

SS121
May 19, 2015 - 7:39pm

let's think about this

this is kind of long, and not well written or proofed, but all please read. Even You Marchas, please! (i know you prefer shorter posts, but this is as good as it gets)

GOLD CHART

we do not know exactly how the chart price is determined do we? Maybe it's a fake as i have presented, maybe it's HFT Algo's as the media teaches us, maybe it's good old honest trading as some say. WE DO NOT KNOW.

But what we do know is that there are NOT thousands of physical Gold bars being bought and sold in some market somewhere that is behind the price. Whatever the source of the chart date, none of the options have anything to do with physical Gold. The "Gold Chart" shows the price of Fiat Gold.

COT Report

We do not know exactly who is reporting the transactions on the CoT report. We do not know if the data is accurate, legitimate, or a complete manufactured hoax.

But what we do know is that the transactions on the CoT report do not refer to the transfer of physical Gold bars. They are Gold contracts. Paper (or digital) with the word "Gold" written on them. They are Fiat Gold transactions, regardless of the accuracy of the data.

Gold "Delivery"

The Bullion Banks that own and operate the Fiat Gold market take delivery of these Fiat Gold Contracts that they pass back and forth to one another. Taking delivery of a Fiat Gold Contract means adding numbers in the paper ledger with Gold Warehouse written at the top. Warehouse accounts. If the GLD buys fiat Gold contracts for the fiat Gold chart price, and then takes delivery (by decree)... then the GLD adds fiat Gold to their warehouse account.

Chart: Who is manipulating the gold chart?? is the gold chart manipulated?? ...is it capped?? JPM?? China?? The Fed?? CoT: Who is the big short?? is the data correct? what does the data mean?? GLD/Bullion Banks/Delivery/Warehouse: Who is drawing down the GLD? Who is taking delivery? IT DOES NOT MATTER. THESE ARE ALL DISTRACTIONS. This is the system's Alchemy process for creating Gold.

The Bullion banks take "delivery" from each other and put the Fiat Gold into their Fiat Gold warehouse accounts. Turd has detailed the Fiat Gold nature of these recordings on many occasions. There is no actual gold involved in this fiat chart -to- fiat transaction -to- fiat delivery -of- fiat gold -to- fiat warehouse account process.

Now keeping the Fiat Gold bullion bank process in mind, and please re-listen listen from 11:33 to 14:48 of the recent Turd and Andy interview.

Don't get lost in the weeds of the process being described, as we are prone to do regarding charts, CoT reports etc... Instead just listen to hear whether the "gold" being described is Fiat Gold, or real Gold.

11:33 to 14:48 https://www.tfmetalsreport.com/podcast/6848/talking-gold-andrew-maguire

​The same people own the Central Banks AND the Bullion Banks. What's going on here should be pretty clear at this point.

The 1st sentence in Turd's post: The GLD is once again being drained of "inventory" during a period of rising prices.

Turd's "inventory" in quotes implying that it's merely fiat Gold warehouse account entries. (Turd, if i'm mistaken please let me know)

Yes, the same Bullion Bank warehouse process included in Andy's answer to Turd's question at 11:33 which was basically 'where are the CBs getting the gold?'

---

It's not how the chart price is derived, the important thing is that it's a Fiat Gold price

It's not "who is making?", "why are they making?" or even if they are making transactions, the important thing to understand is that any transactions are Fiat Transactions. (No real Gold involved)

Bullion Bank to Bullion Bank deliveries on those fiat contracts.... same thing. Fiat Gold. Added or removed back and forth in the warehouse accounts. (No real Gold involved)

And according to Andy, this Fiat Gold apparatus is where those Central Banks are getting the necessary **** Gold deliveries that allow them to keep up appearances.

The PBOC is the Central Bank of China

For 2 years we have had endless discussions regarding **** Gold going to "China". It's usually just referred to as "China", but the "China" that issues the RMB (Yuan) is the PBOC, the Chinese Central Bank.

And just like chart discussions, market discussions, delivery, warehouse, GLD and other discussions, ...what is the most important thing to understand regarding the gold that is going to the PBOC (Central Bank) from the Bullion Bank market supply process??

What will be the most important thing to understand about any future Official Chinese (PBOC) Gold Holding announcements?? Or IMF Gold Holding Announcements?

Answer: It's all ____ ____ !

Marchas45
May 19, 2015 - 8:20pm

@SS121

All read and listened to.

Answer: It's all _Fucken___ Manipulated____ ! and all rehypothecated Bullion. Keep Stacking

Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

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Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

Key Economic Events Week of 11/4

11/4 10:00 ET Factory Orders
11/5 9:45 ET Markit Services PMI
11/5 10:00 ET ISM Services PMI
11/6 8:30 ET Productivity & Labor Costs
11/6 Speeches by Goons Williams, Harker and Evans
11/8 10:00 ET Consumer Sentiment
11/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 10/28

10/30 8:30 ET Q3 GDP first guess
10/30 2:00 ET FOMC fedlines
10/30 2:30 ET CGP presser
10/31 8:30 ET Personal Income & Spending
10/31 8:30 ET Core Inflation
10/31 9:45 ET Chicago PMI
11/1 8:30 ET BLSBS
11/1 9:45 ET Markit Manu PMI
1/1 10:00 ET ISM Manu PMI

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

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