The Gold Raid of July 19

Sat, Aug 1, 2015 - 2:33pm

At this point, there's really no reason to discuss the "how" and the mechanics of the deliberate, manipulative Globex smash of Sunday, July 19. However, it might be worth considering the aftermath as we look for reasons "why".

As we consider "why", the first and foremost reason was price and chart manipulation. Gold had bottomed at $1130 on November 7, 2014 and had, over the next eight months, found stout support near that level. However, on Friday, July 17, gold closed just above that important level at $1132. See below:

The smash that occurred on Sunday evening, July 19, was designed to take out this important support level and trigger all of the sell-stops that were placed below there. This was accomplished through a massive contract dump of $2.7B in paper gold that not only wiped out the entire global bid stack, it actually cause the entire Globex gold market to seize up and halt for 20 seconds..twice.

Though further selling akin to the event of April 12-15, 2013 failed to materialize, the damage was done and price has yet to recover.

Now to the question of "why".

Since the CoT reports tell us that The Large Spec short position in gold was already near record levels before the raid, why was the raid allowed to happen? Keep in mind that on the other side of those short trades would be "commercial" or Cartel Bank longs. These entities rarely lose as it is nearly always that The Specs are the ones taken to the fleecing shed. In this case, though, The Specs won. Again, why was this allowed? Could the answer be found in the GLD "inventory" numbers?

On April 11, 2013...the day before the massive two-day and $200 price raid that was effectively designed to take out 19 months of price support at $1525...the total GLD "inventory" stood at 1,181.42 metric tonnes. Immediately after the raid began, GLD "inventory" began to fall and by the end of April it was already down over 100 mts at 1078.54. By the June 28 price lows of $1180, "inventory" was down to just 969.50 mts and though price then rallied over $200 through August, GLD was still drained and stood at 921.30 mts on 8/30/13. By the end of 2013, with price back down to near $1200, the total GLD "inventory" had sunk to just 798.22 mts, a drop of a massive 383 metric tonnes from the pre-raid levels. 383 metric tonnes!!

How much gold is 383 metric tonnes? That's about 12.3MM troy ounces or about 31,000 of these:

Or, stacked 192 to a pallet, about 162 of these:

While price stabilized in 2014 and finished nearly unchanged on the year, global physical demand remained high. The clear effective result: More gold needed to come out of the GLD "inventory" and over the course of 2014, the GLD "inventory" fell from 798.22 metric tonnes to 710.81. This was another drop of over 10% and, expressed as London Good Delivery Bars, amounts to another 7,000 of these:

OK, we're almost there. Again, WHY was the Sunday evening July 19 raid allowed to occur? Could the answer be found on the chart below?

Again, as of Friday July 17, price was still above support at $1130 and only down about 5% year-to-date. However, "inventory" had been stubborn to leave the GLD. As noted above, the "fund" began the year at 710.81 mts yet, on July 16, it still showed and "inventory" of 707.88 mts...down not even 3 mts year-to-date...while even the World Gold Council had to admit that global demand remains high:

And, in the time since the raid, it appears that The Bullion Banks have once again miscalculated the effects of the raid on physical demand:

So, I believe we have found the answer as to "why". Why was the raid allowed even though The Banks and other "Commercials" were forced to book some paper losses as a result? Because the GLD tree needed to be shaken yet again. As a readily-accessible source of instantly-available gold, The Authorized Participant Bullion Banks are once again redeeming their 100,000 share lots for physical gold from the GLD "inventory". That this gold is then utilized to settle physical demand from around the globe is hardly arguable, given recent history.

To sum up, since the massive, illegal amd manipulative raid of Sunday evening July 19, the GLD has shed 32.18 metric tonnes of gold from its "inventory". This is about 1,131,000 troy ounces or 2,800 London Good Delivery Bars. To be more accurate, though, perhaps we should express the plundering in different terms. Since this gold is now gone for good and not returning (, a better way to describe the size and scope of the withdrawals would be this...about 35,200 kilograms.


About the Author

turd [at] tfmetalsreport [dot] com ()


Aug 1, 2015 - 2:37pm
Aug 1, 2015 - 2:40pm
Aug 1, 2015 - 2:40pm

Saturday 2nd!

Thought I'd celebrate my 2nd place finish by staring at my stack and wondering if it will ever save my life...while it just sits there seemingly unaware of the world around it!

Aug 1, 2015 - 2:42pm

1,131,000 oz from the GLD... just 10 days is also more than 3X the entire Comex registered gold vault:

ned braden TF
Aug 1, 2015 - 2:54pm

Marchaaasss !

Where are you ?

Aug 1, 2015 - 3:05pm

Well worth your time to read this at least once, by J Hussman

Expert That Correctly Called The Last Two Stock Market Crashes Is Now Predicting Another One . . .just in case you missed this on silverdoctors, July 17th week of market top.

What I am about to share with you is quite stunning. A well-respected financial expert that correctly predicted the last two stock market crashes is now warning that we are right on the verge of the next one. 

From The Economic Collapse Blog:

John Hussman is a former professor of economics and international finance at the University of Michigan, and the information in his latest weekly market comment is staggering. Since 1970, there have only been a handful of times when a combination of market signals that Hussman uses have indicated that a major market peak has been reached. In 1972, 2000 and 2007 each of those peaks was followed by a dramatic stock market crash. Now, for the first time since the last financial crisis, all four of those signals appeared once again during the week of July 17th. If Hussman’s analysis is correct, this could very well mean that the next great stock market crash in the United States is imminent.

It was an excellent article by Jim Quinn of the Burning Platform that first alerted me to Hussman’s latest warning. If you don’t follow Quinn’s work already, you should, because it is excellent.

When someone is repeatedly correct about the financial markets, we should all start paying attention. Back in late 2007, Hussman warned us about what was coming in 2008, but most people did not listen.

Now he is sounding the alarm again. According to Hussman, when there is a confluence of four key market indicators, that tells us that the market has peaked and is in danger of crashing. The following comes from Newsmax

He cited the metric among the indicators that foreshadowed declines after peaks in 1972, 2000 and 2007:

*Less than 27 percent of investment advisers polled by Investors Intelligence who say they are bearish.

*Valuations measured by the Shiller price-to-earnings ratio are greater than 18 times.

*Less than 60 percent of S&P 500 stocks above their 200-day moving averages.

*Record high on a weekly closing basis.

The most recent warning was the week ended July 17, 2015,” Hussman said. “It’s often said that they don’t ring a bell at the top, and that’s true in many cycles. But it’s interesting that the same ‘ding’ has been heard at the most extreme peaks among them.”

It is quite rare for the market to set a new record high on a weekly closing basis and have more than 40 percent of stocks below their 200-day moving averages at the same time. That is why a confluence of all these factors is fairly uncommon. Hussman elaborated on this in his recent report

The remaining signals (record high on a weekly closing basis, fewer than 27% bears, Shiller P/E greater than 18, fewer than 60% of S&P 500 stocks above their 200-day average), are shown below. What’s interesting about these warnings is how closely they identified the precise market peak of each cycle. Internal divergences have to be fairly extensive for the S&P 500 to register a fresh overvalued, overbullish new high with more than 40% of its component stocks already falling – it’s evidently a rare indication of a last hurrah. The 1972 warning occurred on November 17, 1972, only 7 weeks and less than 4% from the final high before the market lost half its value. The 2000 warning occurred the week of March 24, 2000, marking the exact weekly high of that bull run. The 2007 instance spanned two consecutive weekly closing highs: October 5 and October 12. The final dailyhigh of the S&P 500 was October 9 – right in between. The most recent warning was the week ended July 17, 2015.

The following is the chart that immediately followed the paragraph in his report that you just read…

Hussman Chart

When I first took a look at that chart I could hardly believe it.

It appears that Hussman’s signals are able to indicate major stock market crashes with stunning precision.

And considering the fact that we just hit a new “ding” for the first time since the last financial crisis, what Hussman is saying is more than just a little bit ominous.

According to Hussman this is not just a recent phenomenon either. Even though advisory sentiment figures were not available back in 1929, he believes that his indicators would have given a signal that a market crash was imminent in August of that year as well

Though advisory sentiment figures aren’t available prior to the mid-1960’s, imputed data suggest that additional instances likely include the two consecutive weeks of August 19, 1929 and August 26, 1929. We can infer unfavorable market internals in that instance because we know that cumulative NYSE breadth was declining for months before the 1929 high. The week of the exact market peak would also be included except that stocks closed down that week after registering a final high on September 3, 1929. Another likely instance, based on imputed sentiment data, is the week of November 10, 1961, which was immediately followed by a market swoon into June 1962.

Of course the past is the past, and what has happened in the past will not necessarily happen in the future.

So is Hussman wrong this time? With all of the other things that are happening in the financial world right now, I certainly would not bet against him.

Other financial professionals are concerned that a market crash could be imminent as well. The following comes from a piece authored by Andrew Adams

More than 13% of stocks on the New York Stock Exchange are at 52-week lows, which is about 6 standard deviations above the average over the last three years (1.62%) and an extreme only seen one other time during said period (last October when the S&P 500 was percentage points away from a 10% correction).

This dichotomy has created what I believe to be the biggest question about the stock market right now – have we already experienced a stealth correction in the majority of stocks that will soon come to an end or will the market leaders finally succumb to the weight of the laggards and join in on the sell-off? The answer to this could end up being worth at least $2.2 trillion, which is how much money would essentially be wiped out of the stock market if we finally get the much-discussed 10% correction in the overall market (the total U.S. stock market capitalization was $22.5 trillion as of June 30, according to the Center for Research in Security Prices).

Sometimes, a picture is worth more than a thousand words. I could share many more quotes from the “experts” about why they are concerned about a potential stock market collapse, but instead I want to share with you a “bonus chart” that Zero Hedge posted on Tuesday

Bonus Chart - Zero Hedge

Do you understand what that is saying?

In 2007 and 2008, junk bonds started crashing well before stocks did.

Now, we are witnessing a similar divergence. If a similar pattern holds up this time, stocks have a long, long way to fall.

Like Hussman and so many others, I believe that a stock market crash and a new financial crisis are imminent.

The month of August is usually a slow month in the financial world, so hopefully we can get through it without too much chaos. But once we roll into the months of September and October we will officially be in “the danger zone”.

Keep an eye on China, keep an eye on Europe, and keep listening for serious trouble at “too big to fail” banks all over the planet.

The next several months are going to be extremely significant, and we all need to be getting ready while we still can.

Aug 1, 2015 - 3:30pm


The bullion banks let/ made price drop below support at 1130$ so they could redeem shares of GLD in order to fill orders for physical gold? I'm confused? I fail to see how they could profit by doing so, as all said physical gold was bought at a higher price.

Aug 1, 2015 - 3:57pm

@Barfly Re: So....

Out of desperation? To prevent a physical default? The attack was so blatant, no other way of explaining it I can think of. Fiat profits be damned if the whole fiat ponzi scheme is at risk...

How to keep the flight to safety away from precious metals? Must do so at all costs!

Edit: As pointed out many times by many turdites, the on-going price suppression in precious metals will make the rebound all the more spectacular if there is a failure to deliver. The average official propaganda narrative kool-aid sipping financial so & so with an IQ above 100 would have to ask, why has price been going down all these years if supply has been drying up?! Oops!! That's one massive wake-up call!

Goes without sayin' but I'll say it: Craig, I think you've nailed it!

Grey Mare
Aug 1, 2015 - 4:08pm


I'm with Barfly on this...trying to figure it out. I thought the bullion banks were the 'authorized participants' in GLD, allowed to redeem shares for physical And it was already their job to make sure there was enough gold to keep up with delivery requirements on the LBMA and elsewhere. If so, why did they have to smash price to 'free up' gold from the GLD - surely they knew this would just increase eastern demand for physical after their previous experiences? Did they need investors to sell some shares so they could plunder the physical inventory? They didn't seem to need to add physical back in (except for brief spells) when the price of GLD was going up earlier this year. 


Aug 1, 2015 - 4:11pm

Infometron has it

Please read the article closely. The raid was not done by Bullion Banks for paper profit. Instead, The Banks allowed a Bank, a single Spec or collection of Specs to do it with the plan that breaking $1130 would engender enough GLD liquidation (recall all of the MSM gold hit pieces that followed) that The Banks would therefore find the physical metal needed to settle a very tight London delivery. Extremely critical to keep in mind that the custodian of the GLD is the proven-criminal HSBC and most/all of the gold is vaulted in London.

bp9291 Grey Mare
Aug 1, 2015 - 4:16pm

don't know crap

which is what I do or don't know, but this is unprecedented territory for one thing and everything is speculation. So, all this can be true but I also think that buying cheap is a real factor. The closer this thing gets to the end the weirder it gets and accumulation by those in the know is sure to speed up. Why pay a price when you can get it for lower?

Aug 1, 2015 - 4:17pm

@Grey Mare Re: Turd???

I think the Bullion Banks would require some pretext to justify the draw down. Most causal observers just accept that the price of gold is coming down without question. Investors in GLD are another matter! They need those dupes to keep investing...

But those are good questions that you and Barfly have raised, I'm looking forward to the turdmeister's response

Aug 1, 2015 - 4:22pm

In order to "collect" the

In order to "collect" the shares needed to redeem metal, The APs buy shares from the willing dupe sheep that are prompted to sell by the breaking of the $1130 support.

After bundling all of the shares, the APs can redeem them in 100,000 share lots at the fund. They then use this physical metal to settle the physical trades for which they are on the hook.

Again, don't think of this as some kind of traditional or fair market. It's nothing of the sort! As an example, maybe HSBC is on the hook for 30 mts of physical delivery and the buyer is demanding it pronto. Well, maybe HSBC doesn't have 30 mts just laying around that they can ship off to the guy. What do they do? Allow the raid and utilize the 30 mts they plunder from the GLD to settle the outstanding physical trade.

NOT SAYING THAT THIS IS WHAT HAPPENED! However, you need to think about it in these terms.

Grey Mare
Aug 1, 2015 - 4:31pm


Turd and Infometron. On one hand it makes sense, on the other I am not completely convinced. They are criminals, after all. Why not just take the physcial out of GLD and screw (or lie about) the share count? Last thing you want to do at this point is let some western investors make money in the gold market, albeit by shorting. Increase their interest in the paper gold market and increase eastern physical demand at the same time. Do you think the 'Da ma' (shrewd gold-buying Chinese housewives) are investing in the stock market now? I don't....


edit: our posts crossed paths, thanks again Turd. I like the theory, just am wary, that damn physcial shortage has been so long in showing up...

Aug 1, 2015 - 4:52pm

Marty & Avi

After pressing some non-precious metals against the forces of gravity at the gym this morning, but before stepping out to watch the MMA fight tonight whilst intaking fermented grains, there is another "manipulation denier" (kind of like holocaust denier) in the gold community that we can discuss for our own entertainment. Avi Gilburt, like MA, may or may not be a know-it-all pompous ass, but I read him to see what I can learn from him.

I first became aware of Avi Gilburt a few years ago on Seeking Alpha, where he would post an article every Sunday morning written in his own inimitable confrontational style talking out of both sides of his mouth, while claiming "major" credibility for calling the 1900 gold top. I recall in the comment string below one of his articles in February 2013, with silver hovering around $30, stating (in the comment string) that he had repurchased all of the physical gold in the $1550 range that he had sold near the 1900 top, and that he was simply waiting for the next rally in silver to materialize that would take us to at least $60, but possibly as high as $80. 

We all know what happened in April 2013 the day after Obama met with the gangster bankers, but Avi won't talk about that (doesn't want to hurt any potential subscription sales), or anything else to do with the banker punishment unnaturally long cyclical bear that we have endured, because Avi flipped bearish after the big take down, and the almost daily HFT machine jobs have served to make Avi look like a genius since that time. So Avi has played this market largely from the short side for over two years now, but roughly a month ago, he submitted an article to Marketwatch essentially stating that once the gold market turns, he expects it to go up for years to come and that we may achieve prices as high as $25,000 gold and up to 15,000 on the HUI. I understand the argument for $25k gold but the only way the HUI could go that high is if the mines do not get "de jure" nationalized, or "de facto" nationalized through confiscatory taxation, and I wouldn't be willing to take my chances by holding shares beyond the $5,000 gold price range.

Avi sees that the end of the gold bear is drawing relatively near:

Mr. Gilburt is basically looking for one more false rally and then a new low down to 98 range on the unallocated GLD, which I believe equates to around $1,030 in gold, and this may or may not happen despite Avi's high opinion of himself and his selective amnesia regarding his forgotten bullishness in early 2013 with gold holding 1525 and silver holding 26. The next rally may be real, or it may be capped with overwhelming supplies of "mouse click" bullion raining down on our heads (like frogs at the end of the movie "Magnolia"), and if that is the case, more human beings might fold, buckle, and puke their positions which will take us to a new low, which should completely reset sentiment and wipe away every last remianing layer of bullish residue from the uninterrupted decade long run in gold, but at some point (somewhat soon we hope) the tide will turn. Until then, the beatings will continue till morale improves...

Aug 1, 2015 - 4:58pm

Reading this right?

So, with full cartel support (maybe, like here's the gameplan - go for it), specs get to move gold down to the 'next' level - an easier sell as it protects their position. Mission accomplished - blame for manipulation transferred to greedy specs, managed money, and hedge funds.

Cartel bonus - we're at lower level with really tempting and known stops above and desperation on part of specs not to go there. Ongoing efforts at manipulation by the specs

Cartel bonus - GLD inventory freed up to satisfy prior and potential demand to AP - we would be testing the JW supply chain level though. Only AP can redeem so we'll never know in event of some default. Maybe a way of further "owning" miners or production for all we know?

Aug 1, 2015 - 5:09pm

@davejessop Re: Marty & Avi

I always enjoy your posts and look forward to reading them. I wasn't aware of that background on Avi. Thanks Dave. Cheers, Info

Dr. P. Metals
Aug 1, 2015 - 5:12pm

overthinking things

it's simple: print fiat (don't care about losses) to shove it back under trendline. Period. It will be that way, with infinite losses (paper) if required to continue until they choose not to.

Aug 1, 2015 - 5:12pm

I Was Efen

WORKKKKKKING laugh Keep Stacking

By the way I'm still trying to sell (2) Silver Stacker Kilo bars, see previous thread  It's the cheapest around anywhere. Only .76 Cents Over Spot.

Aug 1, 2015 - 5:21pm

oversimplifying things

dr. p.

there is still this little problem of physical supply and demand...

not to mention the fragility and complexities of the global financial fiat system.

if only everyone would love one another, eh? the entire world would be saved!

Aug 1, 2015 - 5:33pm

Two questions.......(unable to figure them out myself)

1. If the phys demand for gold goes up, why demand for the GLD paper goes te opposite way? I would expect both work in correlation.

2. 32.18 tonnes of gold doesn't seem like a lot. Shanghai imported (from different sources) 73.3 tonnes last week. Why HSBC doesn't buy them from GG, AEM, ABX, AUY...instead of going through all that hassle? Parhaps 32 tonnes is a lot after all.

Aug 1, 2015 - 5:45pm

So let me see...

1. Bullion bank sells physical gold to a client, collects cash. Must deliver said physical within a contractual time frame. 2. Bullion bank uses customers cash to sell short on the Comex. 3. Price goes down. 4. Holders of GLD sell shares to same bullion bank. 5. Bullion bank delivers physical gold to client, having obtained it for cheaper than the client paid through redemption in GLD. 5. Profit. 6. GLD inventory goes down when physical demand goes up. Thus is an inverse indicator of physical demand. Opposite happens when paper GLD shares are bought by retail public.

Aug 1, 2015 - 5:47pm

Canary First Question

The bulk of physical demand originates from the East, while Western GLD vomiting investors slavishly obey their emotions causing them to "sell low" on a price decline, thereby freeing up claims on unallocated bullion in London that is immediately shipped to Asia to maintain status quo for one more day...

Aug 1, 2015 - 5:58pm


Asians and western stackers buy low, and they buy even more on price declines. Western stock market speculators buy high and sell low. Someone here posted an article about the historical data on the old "odd lot" stock trades that pretty much indicated that the retail public flips bullish only after a good upward trend, and they flip bearish after most of the damage is already done in a downtrend.

Aug 1, 2015 - 6:07pm

Barfly and davejessop....thanks a lot.

I'm taking my doggies for a walk think about that.

Aug 1, 2015 - 7:13pm


Precisely...when GLD drains, or reduces in price, physical demand is strongest. Amazing irony. It's clear in the relationship between inventories and price. BTW, thanks for the miner analysis a few threads back... This is all to fill US Federal Reserve orders for bullion. Damned be the hedge funds and damned be western citizenry. Alan Greenspan...Alan Greenspan!...said to buy gold. Do we really need anything else? What we're witnessing is the ultimate asset grab at the last minute. Are your hands free??

Grey Mare
Aug 1, 2015 - 7:23pm

Saturday musings - it's too hot to work in the garden right now


Out of interest, I was working out your ‘reverse’ process, which would start with BBs buying physical gold. The exercise brought to mind Fraser Murrell’s (Australian economist) discussion of how the BBs made money with price going both ways in the gold market. His point was that if the BBs actually had to buy all the physical gold to go through the reverse process, they could not create arbitrage for themselves both way (it’s a very technical, but fascinating, argument involving the relationships between the gold lease rate (GLR), the gold forward rate (GOFO) and the LIBOR rates). Basically, he suggests that the BB bi-directional profit depends on the BB ability to buy a small amount of physical but sell much more in the form of gold certificates (i.e. fractional gold purchasing). This allows them profit in both directions as long as they can keep the GOFO rates moving in both directions without going into permanent backwardation. It’s a fascinating but long thesis, but I had forgotten the rest of the argument about how the ‘frationalalizing’ of the physical gold market had transformed the gold market into a dominant economic force. This part is (also) fascinating and I have never seen laid out in the fashion anywhere else so I will quote it here for the interested (given that it is a lazy slow Saturday on the site):

Fraser Murrell: "Secondly, it appears that movements in GOFO and the actions of the bullion banks have a significant effect on the global economy. To understand this consider the size of the gold market. Each day (on Comex alone) around 500,000 contracts are traded, there being 100 oz per contract, with each ounce valued around $1,200. So there is around $60 billion of gold traded per day or around $15 trillion per year. I do not have the figures for all the other markets (London, Shanghai, Hong Kong, Singapore, etc), but when you add it all up, it should be obvious that the global gold market is big enough to influence (and perhaps dominate) any other market on planet earth.

Now look again at the GOFO and LIBOR charts and notice that GOFO leads LIBOR (by around three months) and not the other way around !!! Furthermore the sudden withdrawal of gold from the markets in Sep 2007, resulting in a plunge in the GOFO rates from over 5% down to zero (being caused by the unwinding of a massive gold arbitrage and the establishment of another arbitrage in the opposite direction) was probably responsible for the plunge in LIBOR rates from over 5% down to zero three months later, resulting in the current ZIRP (zero interest rate policy) worldwide. One can argue “chicken and egg” and more research is always needed, but it certainly appears that gold and its GOFO rate (backwardation or contango) lead global interest rate markets and thereby directly influence (or dominate) the global economy.

Thirdly, while geo-politics are beyond the scope of this note, there are reports of large and ongoing buying (by China and others) of physical gold and there are suspicions that this demand has been offset by both a reduction in the physical gold holdings of the bullion banks and by the selling of additional “paper gold” into the market. Although such market conditions (backwardation) encourage the selling gold certificates, there is always the danger of over-extension. Indeed, some reports suggest that there are now over 100 paper claims for every physical ounce of gold held. Furthermore, because a large proportion of the physical gold that backs the markets has been moved offshore (with cash used as collateral instead), the market has become ever more unstable and vulnerable to sudden collapse. Chaos theory tells us that “you never know which snowflake will cause the avalanche, the important thing is the degree of instability of the underlying state” and I would argue that the gold market is in fact unstable and moving ever closer to its “snowflake moment”.

In a “short term backwardation”, the mathematics clearly dictates that the bullion banks should arbitrage by selling certificates. But as the backwardation becomes “semi-permanent” - as it has been since 2011 - the market risks entering a negative feedback loop, causing the backwardation to become ever deeper. This is caused by investors stubbornly buying physical gold thereby removing the backing for the market itself. Announcements by the US Mint of “record sales” and “shortages” do not help.

One solution to breaking such a backwardation is to take LIBOR negative, which seems impossible, but this is strangely happening in Europe where banks are now charging customers interest to safely store their money. Other solutions are (1) to drive the spot gold price ever lower, in the HOPE of getting the spot price to stay below the futures price and thereby create a positive GOFO, and (2) to drive the gold price so high that investors stop buying and the gold hoarders start selling (or leasing), all with sufficient quantity so as to create a lasting contango.

This problem should be well understood by both the bullion banks and the Governments because they have already seen it once before in the 1970s. When Nixon ended the “gold standard” in 1971, there was a massive flight to gold and a “semi permanent” backwardation resulted. The gold price rose from $35 to $200 in 1974 and then the price was taken back down to $100 in 1976 (presumably in the hope of ending the backwardation). But this only caused a surge in demand which eventually took the gold price back over $800 in 1980. Inflation skyrocketed, requiring interest rates to be raised to around 20%. Finally, some sellers and leasers of gold appeared and the backwardation was broken, allowing for the normalization of interest rates and the economy.

But the same problem is repeating today and so far the response has been the same. From 2008 to 2011 the gold price tripled from $650 to $1,900. Over the last three years the bullion banks and Governments have tried to break the backwardation and normalize the economy by dumping huge amounts of physical gold and “paper gold” at the gold spot price. But they have failed, because although they have reduced the gold price from $1,900 back down to $1,200, they have not been able to create a lasting contango. Instead, the gold buyers and hoarders have dug in, bought everything and demanded more – which has only strengthened the backwardation.

Sooner or later, the bullion banks and Governments will run out of ammunition and they will be forced to step back and allow the market to do its thing. Which is to repeat of the 1970s – the worst of all economic outcomes – stagflation. Unfortunately, this is the consequence of all the money printing and while it can be delayed – it cannot be stopped. The gold price will eventually peak in the tens of thousands of dollars and unless the bullion banks unwind their short positions, they will either default or go bankrupt.

But the most serious outcome is Fekete’s vision of a “permanent backwardation” whence, unlike the 1970’s, the gold backwardation can NEVER be broken. In this case, the gold price tends towards the infinite, taking inflation with it. The gold lease rate GLR is also driven to infinity (by the market seeking gold) and LIBOR is dragged up with it under the relationship LIBOR = GLR – GOFO. But in this case there is no end - confidence in dollars is completely lost and gold goes into deep hiding (bid no offer). Under these circumstances we get a hyper-inflation and a total collapse of the fiat money system. Just like the Weimar Republic and Zimbabwe. Gold will then have (once again) reasserted its supremacy."

Aug 1, 2015 - 7:33pm

At the very end of the London Gold Pool

In the late 1960s, the US Feds where flying gold bullion by the tonne to the UK.

Then they gave up, and gold went up 70% almost immediately and by 4x over the next 3 to 4 years.

It seems to me that we are at a similar time now.

However - this time the gold price spring has been wound 10x tighter...

Aug 1, 2015 - 8:13pm

greymare - impressive

When I am a zombie, I'm coming to your house because you've got brains! Nadge - thanks. It seems to me the more I learn about the GLD, the more I think it was designed as a vehicle to get John Q. Sheeple to absorb the risk (read losses) for the bullion banks. This takes advantage of the set of false paradigms the sheeple have been infused with from birth. The chief among them is that one must only keep score in dollars and something is only valuable when it is rising as measured in dollars. Never mind that dollars are imaginary and created from nothing by the men behind the curtain.

Aug 1, 2015 - 8:14pm

CC companies are forcing everyone to use "smart" credit Cards

Credit card companies are forcing everyone to use "smart" credit cards in their war against cash

Cash less society in progress. Have banks figured out a way to get their grubs on every financial transaction?

Smart chip cards can still be hacked.

Convicted felon Citibank's chief economist claims, criminals heavily use currency...GPS tracking anyone?


image credit: trusted traveler

Payment-processing giants like MasterCard and Visa insist that you and your financial data will be safer once you move to "smart" credit cards that contain a computer chip. And like it or not, credit card companies are forcing merchants to make the change.

After an Oct. 1, 2015, deadline created by major U.S. credit card issuers MasterCard, Visa, Discover and American Express, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction. 

In other words credit card companies are FORCING merchants to make the change or they'll have to pay for every fraudulent purchase!

The new "smart" credit card rules are forcing banks to also hold you accountable for any fraudulent purchases! You read that right, banks can blame the customer if they feel you might have been negligent.

EMV stands for Europay, MasterCard, and Visa, which is shorthand for bank owned digital currency.

"Approximately 120 million Americans have already received an EMV chip card and that number is projected to reach nearly 600 million by the end of 2015, according to Smart Card Alliance estimates." 

A Fortune magazine interview with Carolyn Balfany MasterCard's SVP of U.S. product delivery for EMV's revealed this bombshell:

The ultimate would be no card at all, right? Where I just use my phone for everything.

"But is every demographic, is every person, ready for that? When we think about acceptance, we wouldn’t ever want to take a step back on acceptance. We want to make sure we are adding acceptance constantly to further our war on cash Carolyn Balfany said."

Not to be outdone, Citigroup claims only criminals use cash:

Citigroup’s Chief Economist Willem Buiter claims ..."even though hard evidence is hard to come by, it is very likely that the underground economy and the criminal community are among the heaviest users of currency."

Evidence is hard to come by? In other words there is none and he's full of s***!

Chris Skinner, author of The Future of Banking and Digital Bank wants to do away with currency:

"Imagine that your payment mechanism is built into a watch that your bank gave you. The watch includes an RFID or NFC capability, biometric recognition and is supported by existing infrastructures at the merchant front-end and money transmissions process back-end. The retail consumer can therefore go into any store, wave their watch at the contactless terminal, press their finger to the pay point and they have purchased the goods. No card or cash involved."

"That is the vision of the future of retail payments and we are almost there today. We already have contactless payment terminals, fingerprint recognition payments, micro and mobile payments. The only logical step is to introduce non-card based (i.e. biometric-based) payment systems."

There it is in black and white, THE WAR ON CASH IS REAL and credit card companies are hard at work trying to destroy currency!

Back to EMV's; just how secure are "smart" credit cards? According to recent studies EVM "smart" cards are vulnerable to hacking.

Norton Security says that this year 70% of credit cards will be vulnerable to digital pick pocketing.

Researchers have proven "smart" cards are more vulnerable to hacking than banks want you to know:

"I would walk up to you and I might stand like this on the train, Ok and boom, I have your credit card," said David Bryan. 

Bryan, a security specialist at Chicago's Trustwave, used a device in his backpack to read account numbers and expiration dates - all from cards which I think are safely tucked away in my wallet.

"They have everything in just a few seconds," Bryan said. "The card sends data back to the device, right. So that means it's wireless, so if it's wireless, it can be read through clothing."

"The equipment is easily found online but only works on cards with this wireless symbol or cards enabled with "Radio Frequency ID" , "Near Field Communications", "Blink" or "Paypass" technology. As you can see, the device only has to get within 6 inches of the card.

‘The technology is high-frequency RFID,’ Mr Bryan said.

‘It uses 13.56 Mhz to communicate with the card and the reader.

‘In this instance, I used low power Embedded Linux Computer, and an easily purchasable RFID reader.

Researchers at a recent "blackhat conference" revealed more vulnerabilities:

“With just a mobile phone we created a POS terminal that could read a card through a wallet,”Martin Emms, lead researcher of the project said.

“All the checks are carried out on the card rather than the terminal so at the point of transaction, there is nothing to raise suspicions. By pre-setting the amount you want to transfer, you can bump your mobile against someone’s pocket or swipe your phone over a wallet left on a table and approve a transaction."

Transactions took less than a second to be approved.

“This lends itself to multiple attackers across the world collecting small transactions of perhaps €200 at a time for a central rogue merchant who could be located anywhere in the world,” Emms notes. “This previously undocumented flaw around foreign currency, combined with the lack of POS terminal authentication and the ease of skimming contactless credit cards, makes the system more vulnerable to high-value attacks.”

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