Guest Post: "Buy Gold While You Still Can", by Chris Martenson

71
Sun, Sep 27, 2015 - 12:36pm

Chris Martenson and his team at Peak Prosperity do great work and they've been longtime friends of Turdville. This latest research piece is a must read for every current and future holder of physical metal.

Buy Gold While You Still Can!

An important update on the supply of physical gold
by Chris Martenson of https://www.peakproperity.com

One of our long-running themes here is that the truly historic and massive flows of gold from West to East is (someday) going to stop, for the simple reason that there will be no more physical bullion left to move.

It’s just a basic supply vs. demand issue. At current rates of flow, sooner or later the West will entirely run out of physical gold to sell to China and India. Although long before that hard limit, we suspect that the remaining holders of gold in the West will cease their willingness to part with their gold.

So the date at which “the West runs out of gold to sell” is somewhere between now and whenever the last willing Western seller parts with their last ounce. As each day passes, we get closer and closer to that fateful moment.

This report centers on preponderance of fascinating data revealing the extent of the West's massive dis-hoarding of physical gold, for the first time, begins to allow us to start estimating the range of end-dates for the flow to the East.

Here’s the punchline: there’s an enormous and growing disconnect between the cash and physical markets for gold. This is exactly what we would expect to precede a major market-shaking event based on a physical gold shortage.

Stopping the Flows

There are only two outcomes that will stop the process of Western gold flowing East, one illegitimate and the other legitimate.

  1. It becomes illegal to sell gold. This is the favored approach of central planners who prefer to force change by dictate rather than via free markets and free will. Unfortunately, this strain of political intervention is dominant in the West, particularly in the US and EU.
  2. The price of gold dramatically rises. A large increase in the price of gold will (paradoxically) cause greater demand for gold in the West and (sensibly) less demand in the East. This is what should legitimately happen given current supply and demand dynamics. But it may not.

There’s always a 3rd option, we suppose: economically carpet-bombing China and India's financial systems to scare/force some gold back out. Consider such an approach along the ‘economic hitman’ lines of thinking.

This would be done, for example, by having outside interests sell the Rupee furiously, driving down its value and forcing the Indian monetary authorities to defend it by using up foreign reserves to buy the Rupee. Then wait for India to run out of foreign reserves and then casually ‘suggest’ that its government use gold sales to continue defending its currency. India's leaders would have to find ways to somehow ‘coax’ gold from its citizens. I think we can all imagine the sorts of draconian rules and penalties that desperate governments would deploy in such a situation.

As a side note, I believe this is the same process that was used to ‘coax’ a lot of gold out of the GLD trust since 2012. After enough bear raids on the price of gold, which began somewhat suspiciously almost exactly on the date that QE3 was announced, Western gold ‘investors’ lost interest in the yellow metal, sold their GLD shares in droves, and hundreds of tons of gold were liberated from that stockpile.

What is truly odd from a chart perspective: this hammering down of gold started just after it had broken to the upside out of a textbook perfect triangle, when it looked seemingly ready to head off to higher values:

But in the days immediately following the QE3 announcement, gold shed $100, then barely recovered, and just wandered lower until it was violently slammed from $1550 to $1350 over one night (of course) in April 2013.

Now this was highly fortuitous for the ever-lucky Federal Reseve. After launching the largest money printing campaign in US history, the Fed did not need gold heading any higher, possibly providing a signal that would cast doubt on the wisdom or possible effectiveness of its easy-money policies. Policies, mind you, that the years since have proven to do little more than enrich the banker class and the 0.1%, as well as lard the system with extraordinary levels of new indebtedness and liquidity.

The Fed Indeed Cares About Gold

Gold, when unfettered, has a habit of sending signals that the Fed really doesn’t like. Therefore the Fed is at the top of everyone’s suspect list when it comes to wondering who might be behind the suspicious gold slams. Whether the Fed does it directly is rather doubtful; but they have a lot of useful proxies out there in their cartel network.

To reveal the extent to which gold sits front and center in the Fed’s mind, and how they think of it, here’s an excerpt from a 1993 FOMC meeting’s full transcript. Note that the full meeting notes from Fed meetings are only released years after the fact. The most recent ones available are only from 2009. Listen to what this FOMC voting member had to say about gold:

At the last meeting I was very concerned about what commodity prices were doing. And as you know, they got lucky again and told us that the rate of inflation was higher than we thought it was.

Now, I know there's nothing to it but they did get lucky. I've had plenty of econometric studies tell me how lucky commodity prices can get. I told you at the time that the reason I had not been upset before the March FOMC meeting was that the price of gold was well behaved.

But I said that the price of gold was moving. The price of gold at that time had moved up from 328 to 344, and I don't know what I was so excited about! I guess it was that I thought the price of gold was going on up. Now, if the price of gold goes up, long bond rates will not be involved.

People can talk about gold's price being due to what the Chinese are buying; that's the silliest nonsense that ever was. The price of gold is largely determined by what people who do not have trust in fiat money system want to use for an escape out of any currency, and they want to gain security through owning gold.

A monetary policy step at this time is a win/win. I don't know what is going to happen for sure. I hope Mike is correct that the rate of inflation will move back down to 2.6 percent for the remaining 8 months of this calendar year. If we make a move and Mike is correct, we could take credit for having accomplished this and the price of gold will soon be down to the 328 level and we can lower the fed funds rate at that point in time and declare victory.

(Source – Fed)

There it is, in black and white from an FOMC member’s own mouth spelling out the primary reason why I hold gold: I lack faith in our fiat money system. He nailed it. Or rather, I have very great faith that the people managing the money system will print too much and ultimately destroy it. Same thing, said differently.

And of course the people at the Fed are acutely aware of gold's role as a barometer of people’s faith in ‘fiat money.’ Of course they track it very carefully, discuss it, and worry about it when it is sending ‘the wrong signals.’ I would, too, if in their shoes.

The Federal Reserve Note (a.k.a. the US dollar) is literally nothing more than an idea. It has no intrinsic value. America's money supply is just digital ones and zeros careening about the planet, accompanied by a much smaller amount of actual paper currency. The last thing an idea needs is to be exposed as fraudulent. Trust is everything for a currency -- when that dies, the currency dies.

The other thing you can note from these FOMC minutes is that gold pops up 19 times in the conversation. The Fed members are are actively and deliberately discussing its price, role in setting interest rates, and the psychological impact of a rising or falling gold price.

Later in that same meeting Mr. Greenspan says:

My inclination for today--and I'm frankly most curious to get other people's views--would be to go to a tilt toward tightness and to watch the psychology as best we can. By the latter I mean to watch what is happening to the bond market, the exchange markets, and the price of gold…

I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market.

There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology. Now, we don't have the legal right to sell gold but I'm just frankly curious about what people's views are on situations of this nature because something unusual is involved in policy here. We're not just going through the standard policy where the money supply is expanding, the economy is expanding, and the Fed tightens. This is a wholly different thing.

The recap of all this is that the Fed watches the price of gold carefully, frets over whether the price of gold is ‘sending the right signals’ to market participants, and pays attention to gold's impact on market psychology (with an eye to controlling it).

In short, the Fed keeps a close eye on the "golden thermometer".

Back to the supply story for gold. Not long after gold began its downward price movement in 2012, the GLD trust began coughing up a lot of gold, eventually shedding more than 500 tonnes; a truly massive amount.

(Source)

In my mind, the absolute slamming of gold in 2013 was done by a few select entities and represents one of the clearest cases of price manipulation on the recent record. While we can debate the reasons ‘why’ gold was manipulated lower or ‘who’ did it, to me, there’s no question about how it was done. Or that it was done.

Massive amounts of paper gold were dumped into a thin overnight market with the specific intent of driving down the price of gold.

It’s an open and shut case of price manipulation. Textbook perfect.

Even if these bear raids were performed by self-interested parties that made money while doing it, you can be sure the Fed was smiling thankfully in the background and that the SEC wasn’t going to spend one minute looking into whether any securities laws were broken (especially those related to price manipulation). Gold's falling "thermometer" was exactly what the central planners wanted the world to see.

Down and Out

The paper markets for gold are centered in the US, while the physical market for gold is centered in London (but increasingly Shanghai). It’s safe to say that the paper markets set the spot price, while the physical movement of gold originates in London.

What’s increasingly obvious is the growing disconnect between the paper and physical markets. This is exactly what we’d expect to see if the paper markets were pushing in one direction (down) while physical gold was heading in a different direction (out).

The tension between these ‘down and out’ movements is building and, according to a senior manager of one of the largest gold refineries in the world located in Switzerland, the current price of gold “has no correlation to the physical market.”

He notes a lot of on-going tightness in the physical market. Unsurprisingly, gold is moving from West to East with vaults in London supplying much of the physical metal that's being refined into fresh kilo bars and sent off to China and India.

But given the astonishing amount of physical demand, why has the price of gold been heading steadily lower over the past several years?

The aforementioned Swiss refiner is equally perplexed:

If I am honest, the only thing I could share now with you would be that I’m perplexed about the discrepancy between the prices and the situation of the physical market. This is something I still do not understand and is a riddle for me every day. For all people who are interested in precious metals, the physical side of this business should be given more emphasis.

(Source – Transcript)

There’s no mystery as to demand going up in China and India as the price went down. Interested buyers will buy more at a lower price.

But its a big mystery as to why Western “investors” seem more interested in selling gold than buying it right now.

Evidence of Physical Tightness

Besides the first-hand experience of the Swiss refiner, there have been numerous stories in the main stream press also pointing to tightness in the London physical gold market as well as relentless demand from China and India being the driver of that condition:

Gold demand from China and India picks up

Sep 2, 2015

London’s gold market is showing tentative signs of increased demand for bullion from consumers in emerging markets, after the price of the precious metal fell to its lowest level in five years in July.

The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants

“[The rise] does indicate there is physical tightness in the market for gold for immediate delivery,” said Jon Butler, analyst at Mitsubishi.

The move comes as Indian gold demand picked up in July, with shipments of gold from Switzerland to India more than trebling. Most of that gold is likely to originally come from London before it is melted down into kilobars by Swiss refineries, according to analysts.

In the first half of this year, total recorded exports of gold from the UK were 50 per cent higher than the first half of 2014, on a monthly average basis, according to Rhona O’Connell, head of metals for GFMS at Thomson Reuters. More than 90 per cent was headed for a combination of China, Hong Kong and Switzerland.

London remains the world’s biggest centre for trading and storing gold.

(Source)

Shipments and exports are up very strongly and nearly all of that gold is headed to just two countries; China and India.

India Precious Metals Import Explosive – August Gold 126t, Silver 1,400t

Sept 10, 2015

In the month of August 2015, India imported 126 tonnes of gold and 1,400 tonnes of silver, according to data from Infodrive India. Gold import into India is rising after a steep fall due to government import restrictions implemented in 2013.

Year-to-date India has imported 654 tonnes of gold, which is 66 % up year on year. 6,782 tonnes in silver bars have crossed the Indian border so far this year, up 96 % y/y.

Gold import is set to reach an annualized 980 tonnes, which would be up 26 % relative to 2014 and would be the second highest figure on (my) record – my record goes back to 2008.

Silver import is on track to reach an annualized 10,172 tonnes, up 44 % y/y! This would be a staggering 37 % of world mining.

(Source)

With China and India’s combined appetite for gold being higher than total world mining output, it only stands to reason that somebody has to be parting with their physical gold and those entities appear to be substantially located in the US and UK.

When There's No More To Sell, There's No More To Buy

All the above evidence of a tightening physical market for gold is just the tip of the iceberg.

In Part 2: Why Gold Is Headed Higher & May Be Unavailable At Any Price we look at the frightening inventory declines in bullion storage that the LBMA and the COMEX have experienced over the past year.

We then lay out how this deliberate suppression of gold prices by the central planners is destined to end: with MUCH higher prices for gold, and much less availability. In fact, there is high likelihood we will experience a point at which it may be nearly impossible for the average investor to acquire physical gold, as there will be no sellers willing to part with it.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  71 Comments

  Refresh
CC Horses
Sep 28, 2015 - 12:56pm

Scarce Silver to Get Even Tougher to Find in 4th Quarter

Money Metals News Alert

September 28, 2015 – Investors will be watching events in Washington, DC this week as the House of Representatives works on replacing Speaker John Boehner. And both the House and Senate are wrangling over an Obama spending bill needed to avoid a shutdown of certain extraneous government functions.

Precious metals may see some safe haven buying if a deal cannot be reached, though there have been 18 such stalemates since 1976, and few expect a dramatic impact this time around.

The bigger catalyst in the metals markets may be continued weakness in stocks. The S&P 500 lost another 2% last week and 3rd quarter earnings will soon be released. Many expect results to be “grim.” If nervous investors begin dumping equities in earnest, expect some of that capital to flow into the precious metals markets.

Demand for physical coins, rounds, and bars slackened a bit in the past 2 weeks. The markets may be catching a breather following a summer of frenetic physical gold and silver buying.

The respite is much needed by mints and refiners trying to catch up. However, suppliers are so far behind that it will take at least a few months of slower sales for them to get ahead of the game.

Significant turmoil in global financial markets likely won’t help their cause. It won’t take much additional silver demand to force premiums and delivery times even higher – with some products sold out and completely unavailable in dealer inventories.

Scarce Silver to Get Even Tougher
to Find in 4th Quarter

The void left by government mints in North America is shaking up the silver market, creating a major opening for competitors to supply the growing ranks of “silver stackers” and capture market share.

Shortages of fabricated silver bullion products continue across the board. Mints and refiners have fallen progressively further behind in recent weeks – caught flat-footed by a spike in demand starting at the end of June.

Many of the private firms producing rounds and bars are investing in equipment to ramp up production, but the specialized machinery takes time to deliver. And owners know demand is volatile – just a few months ago they had excess capacity. So they are cautious when it comes to expansion.

It will be a few months, at least, before supply catches up with demand for privately minted rounds and bars. This assumes demand does not spike once again. And it may be wishful thinking.

The sovereign mints – particularly in the U.S. and Canada – aren’t likely to pull their weight in the 4th quarter. Almost all of the remaining production of 2015 dated silver American Eagles and Maple Leafs has now been sold. That means many buyers may soon find themselves in a queue for delivery of 2016 dated coins sometime after the new year, or paying even bigger premiums for coins from stock.

The problem is the pipeline of new coins, which is already insufficient. It will completely shut off towards year end. The U.S. Mint, whose bureaucratic incompetence historically makes it the most incapable of keeping up during demand spikes, will stop all production sometime in early to December to change over to the 2016 dies. The production halt generally lasts a month, and deliveries of new coins resume in early to mid January. (Switching out coin dies at private mints only takes a few minutes, but for some reason the process takes several weeks at the U.S. Mint.)

As silver American Eagles all but disappear from the market later this year, expect demand for bars and rounds to rise even more.

There is some good news in the form of new suppliers to the market. The Royal Mint in England and Australia’s Perth Mint both recently launched one-ounce pure silver coins in the U.S. The timing could not have been better, though it remains to be seen how much of the gap they can fill.

So far, inventories for gold products remain in much better shape. There are plenty of options where investors can get prompt shipment. But gold demand is running at very high levels, and there may not be much slack remaining.

These markets would need a period of reduced buying from investors in order for inventories to recover. Whether or not we get that in the coming months remains to be seen. Wall Street and global financial markets are entering dangerous territory just as the bullion market wrestles with shortages that figure to worsen in the near term. Get ready for an interesting Fall.

CC Horses
Sep 28, 2015 - 12:07pm

A grand Illusion - From Belangp

12 minutes long - It gets real interesting at the 8 minute mark showing what 4% inflation does to your money over time.

A Grand Illusion
realitybiter
Sep 28, 2015 - 11:50am

DB flirting w 4 year lows

btw........this seasons Lehman?

realitybiter
Sep 28, 2015 - 11:40am

seems to me like the BS is getting some light

shone on it. In the last two weeks, MSM has published stories on the problems associated with the HPPV vaccine, Paxil and other SSRI, and Statins - all are suggesting documented reports showing the known, but undisclosed damaging side effects. I think if you short the market of stocks, biotech's may be the gift that keeps on giving. They have had the biggest run up and now, not only are they going to give a lot up just because it is time, but also because they are going to see sales careen as millions quit taking their statins, vaccines, and SSRI's - and for good reason - they work very marginally, and they do real damage......and who knows? As O-care gets revealed as a farce, the fraudulent money train stops, too. Couldn't happen to a more despicable industry. I hate the banks, but at least, the loans they make to you don't make you sick!

Sep 28, 2015 - 11:38am

This week's JMB special

2016 SOMALIAN SILVER ELEPHANT COIN JUST $2.89 OVER SPOT ANY QUANTITY!

This week we are featuring the exclusive and brand new 2016 1 oz Somalian Silver Elephant Coin which is available only at JM Bullion for just $2.89 over spot for any quantity!

Buy Online Now!

The Somalian Silver Elephant coin is one of the fastest growing coin series in the world in terms of popularity. Struck by the Bavarian State Mint with a unique design feature on the obverse each year, these coins are coveted both for their silver content and their new designs.

This coin ships in individual plastic sleeves, mint tubes of 20, or mint Monster Boxes of 500. It has a face value of 100 Somalian Schillings, and features the all-new 2016 Elephant design.

2016 SOMALIAN GOLD ELEPHANT COIN JUST $59.99 OVER SPOT ANY QUANTITY!

Also on sale is the 2016 1 oz Somalian Gold Elephant Coin which is available at JM Bullion for just $59.99 over spot for any quantity!

Chiron
Sep 28, 2015 - 11:32am

S&P below 1900

Round number falls! PPT is on a smoking break.

Chiron
Sep 28, 2015 - 11:29am

Trump and unemployment number

Called it a joke! Nice for this to be said on the big stage.

canary
Sep 28, 2015 - 11:29am

@boomstick.....(silver)

Interesting....but there is one name missing in this Swiss silver investigation report....UBS, DB, HSBC, Barcley, Mrgan Stanley, Julius Bear, Mitsu......It tells me how serious about it the Swiss are.

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Coffee Black
Sep 28, 2015 - 11:03am

Edelman's coin shop Jenkintown PA

Has anyone ever bought anything from this coin shop ?

Orange
Sep 28, 2015 - 10:49am

Scottrade

Branch and corporate being very helpful. They told me what I expected, that I didn't get the trades, per their records. They are however going to look at sales during 3:54 last Thursday of uslv at $13.73 to see if they can find anything relating to what I saw, that I had sold 3137 shares.

Either I am seeing things or we are after the crooks, I mean hft banksters stealing from the little guy.

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 5/25

5/26 8:30 ET Chicago Fed
5/26 10:00 ET Consumer Confidence
5/27 2:00 ET Fed Beige Book
5/28 8:30 ET Q2 GDP 2nd guess
5/28 8:30 ET Durable Goods
5/29 8:30 ET Pers Inc and Cons Spend
5/29 8:30 ET Core Inflation
5/29 9:45 ET Chicago PMI

Key Economic Events Week of 5/18

5/18 2:00 ET Goon Bostic speech
5/19 8:30 ET Housing starts
5/19 10:00 ET CGP and Mnuchin US Senate
5/20 10:00 ET Goon Bullard speech
5/20 2:00 ET April FOMC minutes
5/21 8:30 ET Philly Fed
5/21 9:45 ET Markit flash PMIs for May
5/21 10:00 ET Goon Williams speech
5/21 1:00 ET Goon Chlamydia speech
5/21 2:30 ET Chief Goon Powell speech

Key Economic Events Week of 5/11

5/11 12:00 ET Goon Bostic speech
5/11 12:30 ET Goon Evans speech
5/12 8:30 ET CPI
5/12 9:00 ET Goon Kashnkari speech
5/12 10:00 ET Goon Quarles speech
5/12 10:00 ET Goon Harker speech
5/12 5:00 ET Goon Mester speech
5/13 8:30 ET PPI
5/13 9:00 ET Chief Goon Powell speech
5/14 8:30 ET Initial jobless claims and import prices
5/14 1:00 ET Another Goon Kashnkari speech
5/14 6:00 ET Goon Kaplan speech
5/15 8:30 ET Retail Sales and Empire State index
5/15 9:15 ET Cap Ute and Ind Prod
5/15 10:00 ET Business Inventories

Key Economic Events Week of 5/4

5/4 10:00 ET Factory Orders
5/5 8:30 ET US Trade Deficit
5/5 9:45 ET Markit Service PMI
5/5 10:00 ET ISM Sevrice PMI
5/6 8:15 ET ADP jobs report
5/7 8:30 ET Productivity
5/8 8:30 ET BLSBS
5/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 4/27

4/28 8:30 ET Advance trade in goods
4/28 9:00 ET Case-Shiller home prices
4/29 8:30 ET Q1 GDP first guess
4/29 2:00 ET FOMC Fedlines
4/29 2:30 ET CGP presser
4/30 8:30 ET Pers Inc and Cons Spend
4/30 9:45 ET Chicago PMI
5/1 9:45 ET Markit Manu PMI
5/1 10:00 ET ISM Manu PMI

Key Economic Events Week of 4/20

4/20 8:30 ET Chicago Fed
4/21 10:00 ET Existing home sales
4/23 8:30 ET Weekly jobless claims
4/23 9:45 ET Markit flash PMIs
4/24 8:30 ET Durable Goods

Key Economic Events Week of 4/6

4/8 2:00 ET March FOMC minutes
4/9 8:30 ET Producer Price Index
4/10 8:30 ET Consumer Price Index

Key Economic Events Week of 3/30

3/31 9:45 ET Chicago PMI
4/1 8:15 ET ADP Employment
4/1 9:45 ET Markit manu PMI
4/1 10:00 ET ISM manu PMI
4/2 10:00 ET Factory Orders
4/3 8:30 ET BLSBS
4/3 9:45 ET Market service PMI
4/3 10:00 ET ISM service PMI

Key Economic Events Week of 3/23

3/24 9:45 ET Markit flash PMIs
3/25 8:30 ET Durable Goods
3/26 8:30 ET Weekly jobless claims
3/27 8:30 ET Personal Inc and Spending

Key Economic Events Week of 3/9

(as if these actually matter)
3/11 8:30 ET CPI
3/12 8:30 ET weekly jobless claims
3/12 8:30 ET PPI
3/13 8:30 ET Import Price Index

Recent Comments

by Turd Ferguson, 2 min 28 sec ago
by Blackwatersailor, 4 min 12 sec ago
by 4 oz, 6 min 4 sec ago
by RickshawETF, 12 min 23 sec ago
by Ben Stackin, 18 min 10 sec ago

Forum Discussion