Raiding the GLD

313
Fri, Feb 22, 2013 - 12:26pm

Time to broach this subject again.

Just yesterday, the GLD saw a withdrawal of 8.88 metric tonnes. This followed a drawdown of nearly 23 tonnes on Wednesday. In fact, since the start of 2013, the GLD is now down 59.61 metric tonnes or 4.42% of "inventory". 

Hmmm. Now where has that gold gone?

  • Has it simply been returned to the Authorized Participants' vaults as investors reduce their exposure to precious metals?
  • Have GLD investors liquidated shares and taken delivery?
  • Or, as argued back in November, are the APs using the GLD as a store of gold that they can easily access anytime they struggle to find legitimate physical metal to deliver to clients demanding immediate allocation and delivery?
  • If the third bullet is true, then GLD drawdowns would be symptom of very strong, global physical demand.

    So, for your consideration, let's revisit this issue. First, here's a reprint of the points that Andrew Maguire made initially. The full link can be found here: https://www.tfmetalsreport.com/blog/4327/guest-post-price-suppression-mecanics-gld-and-slv-andrew-maguire

    THE PRICE SUPPRESSION MECHANICS OF GLD & SLV

    The bullion banks finance their ‘physical inventory’ by leasing it or selling it to GLD and SLV shareholders/investors, then the bullion banks in turn use these ETF’s inventories as a ‘flywheel’ to both manage and leverage their physical reserves. For this walk-through, I will use GLD as an example. (One can substitute SLV for all that is described below relating to GLD except the basket sizes are smaller, constituting 50,000 shares).

    Baskets of GLD shares are bought and sold through a limited number of Authorised Participants. The authorised participants, (AP’s), are JPMorgan, Merrill Lynch, Morgan Stanley, Newedge (a joint venture between Société Générale and Credit Agricole CIB), RBC, Scotia Mocatta, UBS and Virtu Financial. This is how it is supposed to work. The size of each GLD basket comprises of 100,000 shares, each share representing just less than 1 troy oz. The AP’s, transfer ALLOCATED physical gold to the trustee who in turn creates the required number of new baskets of shares and then transfers these newly created shares back to the AP. To redeem the shares for physical gold or silver, the AP’s transfer any number of the baskets of 100,000 shares back to the trustee who then redeems these shares and transfers allocated gold back to the AP.

    This is all well and good on the face of it, but there are a number of ways this ‘allocated’ gold backing the shares in the ETF can be diluted /hypothecated in order for the bullion banks to ‘manage’ their physical reserves.

    If, as is often the case, there is insufficient allocated inventory available to the bullion bank at the current Comex driven & discounted spot fix price to create the necessary new GLD shares backed by allocated gold, then it is possible for a bullion bank to borrow short these GLD shares from the ETF instead of providing the required Allocated physical to the trustee to meet this obligation thereby ‘fly wheeling’ this physical demand in order to meet obligations elsewhere, likely at the day’s gold fix. This obviously has the effect of manipulating price lower vs. the true immediate supply demand fundamentals as no allocated physical metal has to be bought on the open market at that days fix to meet this new share demand as should be the case.

    This is now the point where transparency evaporates. The AP claims to be Short GLD while concurrently claiming to be backing it with an equal size long ‘UNALLOCATED’ spot gold position. However, LBMA unallocated gold accounts are run upon a fractional reserve requirement and leveraged around 100/1 so there is very little need to back this transaction with any real physical at this point; this is left until later as explained below. To unwind this short GLD position, the bullion bank has to ALLOCATE the required amount of unallocated gold and then transfer this gold back to the trustee thereby receiving back the required # of shares in order to repay the original GLD shares sold short.

    However, in conjunction with concurrent concentrated short futures positions, the sole object of this entire charade is to assist in depressing the price of gold at times of strong physical demand so that the futures price can be capped, usually at key inflection points where the price would break out and also swamp the very large concentrated Comex short positions. If this were not the case, the bullion bank would simply bid up that days fix price until it reflected that days true supply demand price levels for that fix and provide allocated gold to meet this real demand at that higher price.

    The resulting distortion now created between the real and paper market price is exacerbated through the use of heavy position concentration and leverage in the futures and derivatives markets, where these very same bullion banks then seek to profitably repay the shorted GLD shares at a lower price at the point at or below where the lines cross profitably. This then puts these bullion banks in a position to finally spot index UNALLOCATED gold against this naked short position only then moving to buy the now discounted unallocated gold into the Comex contrived dips. These discounted unallocated long spot index positions are then ALLOCATED at the upcoming fix, enabling both the repayment of the GLD short position at a profit but most importantly controlling the rise in price against much larger derivative positions elsewhere.

    Conversely, as evidenced by the steady 12-year stair step rise in prices easily observed in the daily and weekly charts, despite this many-year capping, we have also seen an ever larger and untenable LBMA unallocated short positions grow to what I now consider to be extreme danger levels. The reason is as follows: When the Bullion bank needs to make good on the unplanned/unanticipated CB and sovereign physical allocations at the fixes, they have regularly achieved this by going long GLD vs. short/selling UNALLOCATED gold. They then immediately turn around and transfer the required number of baskets of GLD shares to the trustee and receive ALLOCATED gold in return. Instead of settling/covering the short UNALLOCATED leg with this ALLOCATED gold, they are forced to satisfy these CB and Sovereign allocations by providing them this metal instead. The longer term price charts reveal this stair step higher, whereas we see no reduction, in fact from 2008 an increase, in the naked short Comex, (and unallocated OTC), bullion bank positions.

    I hope this has been helpful in providing an insight into the internal dynamics of the ETFs and how the bullion banks continue to operate in the shadows.

    Quite a few folks found this explanation a little too technical and slightly confusing. To help the cause, a few days later I took a stab at deciphering Andy's message:

    _______________________________________________________________________________

    Finally today, please allow me to take a stab at explaining in greater detail the "Guest Post" from Andrew Maguire. I posted it on Wednesday as we were leaving for Thanksgiving and I can see now where it caused some confusion. As you know, one of my favorite techniques for explanations is the chronological layout so let's give that a try. Additionally, I think I'm laying this out accurately. This is how I understand it. I'll check with Andy on Monday to ensure that this is at least close to being accurate. If it's not, I'll post some additional clarification then.

    1. The "Authorized Participants" have a special relationship with the fund whereby they issue metal, 100,000 ounces at a time, to the fund in exchange for 100,000 share blocks.
    2. This should function as a two-way street where the AP can get its metal back by redeeming shares and the AP can also supply additional metal in exchange for additional shares. THIS, HOWEVER, IS WHERE THE TRICKERY AND MANIPULATION BEGINS.
    3. On big UP days in paper price, there is often a big physical demand in London and a big demand for additional shares in GLD.
    4. This is a double whammy of demand. The Bullion Bank (and Authorized Participant) should have to not only supply metal at the London allocation but this same BB/AP might also have to deliver metal to GLD to cover all of the newly-issued shares.
    5. I think you can see where that's a lot of metal and, in an environment of limited inventories, rapid BB/AP supply depletion would lead to shortages and even higher prices.
    6. So, here's the trick they employ to manage the situation, even doing so at a profit: The GLD delivers the gold back to the AP without the AP actually redeeming their shares. The AP is considered to be "short" the shares, instead.
    7. These shorted shares provide the "offer" against the investment world "bid" for GLD shares that day on the NYSE. Since no new shares are needed to be created that day, no new demand for physical deposit is created, either.
    8. On the other side of this trade, GLD delivers metal to the AP as if it had redeemed the shares, though. The AP uses this metal to settle the physical allocations for that day.
    9. So, where there should have been two, separate demands for physical, the demand was met by short-selling GLD and then using this GLD metal to meet allocations in London.
    10. The effect is then chronicled by Harvey and others as "gold went up $20 but, mysteriously, GLD shed 2.72 tonnes".
    11. Here, then, is how they reverse these "trades" and return everything to where they were. The BB/AP that is short the metal to the GLD needs to put it back in at some point. The next time a paper price raid is effected on the Comex, the AP itself takes delivery of some metal in London.
    12. This metal is then returned to the GLD in exchange for a "covering" of it's short position.
    13. This, typically, takes place on a DOWN day where Harvey et al notice that "though gold declined $15, the GLD added 2.72 tonnes of metal today. Go figure."

    Anyway, I hope this helps explain the process. Again, the Bullion Bank that is also an AP of the GLD can "flywheel" metal into and out of the GLD and/or SLV anytime they need to in order to meet physical demand elsewhere. In the process, the BB/AP conveniently provides liquidity for GLD/SLV share demand, which negates additional GLD purchasing which would have otherwise been necessary. It's a true WIN-WIN-WIN for the BB/AP as they are able to cap and control price while appearing to have no problem meeting London demand and then they turn around and cover all the positions at a profit on the next bout of price weakness.

    Again, THIS IS NOT SUPPOSED TO BE HOW IT WORKS. The banks are supposed to supply metal to both the GLD and the London buyers. There is not, however, sufficient supply to make this happen at the current price levels. So, instead of allowing price to rise to the natural equilibrium of buying and selling interest, the BB/AP uses the tricks outlined in Andy's guest post to manage and cap the situation. On the bright side, THIS CANNOT CONTINUE FOREVER and, WHEN it fails, the reset in price will be spectacular to behold.

    _______________________________________________________________________________

    By the time the next week rolled around, there was an active discussion on the internet regarding the accuracy of this analysis. (No doubt this post will reinitiate the "discussion" and bring out many of the same commentators.) Here's a link to the follow-up discussion, posted a few days later. Before you form an opinion on the matter, you'll definitely want to read both sides of the issue: https://www.tfmetalsreport.com/blog/4354/cage-match-bron-vs-denver-dave

    So there you have it. All of this should all make a very interesting reading assignment for you as we wait for today's GLD numbers. Could there be another huge drawdown? If so, what does it mean? Does it even matter? I look forward to reading your comments.

    TF

    p.s. Andy just recorded this morning another interview with KWN. Be sure to check that site later today for the full interview.

    About the Author

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    turd [at] tfmetalsreport [dot] com ()

      313 Comments

    Strawboss
    Feb 22, 2013 - 7:22pm

    Here is Dan Norcini's chart

    Here is Dan Norcini's chart of the large spec positioning. I have added gold's prices at the peaks/troughs so you can see how the specs are always positioned in the worst possible way when the cartel pulls the rug out from under them - over and over and over.

    This is SOOO incredibly bullish I can hardly contain myself.

    And it doesnt even include the "dip" from Wed/Thursday.

    Mr. Fix
    Feb 22, 2013 - 7:34pm

    “What do you want to be when you grow up?”

    Teacher asks the kids in class, “What do you want to be when you grow up?”

    Little Johnny says, “I wanna be a billionaire, going to the most expensive clubs, taking the best bitch with me, giving her a Ferrari worth over a million bucks, an apartment in Copacabana, a mansion in Paris, a jet to travel through Europe, an Infinite Visa Card and to make love to her three times a day.”

    The teacher, shocked, and not knowing what to do with the bad behavior of the child, decides not to give importance to what he said, then continues the lesson.

    And you, Susie?

    “I wanna be Johnny’s bitch!”

    And this:

    ruger

    Bollocks
    Feb 22, 2013 - 7:39pm
    Mr. Fix
    Feb 22, 2013 - 7:48pm

    @ Bollocks

     That should be fair warning for anyone following O'bummer.

    sideshow03 Mr. Fix
    Feb 22, 2013 - 7:51pm

    Re: Mr. Fix

    Exactly my thoughts....why is it such a good thing these shorts were covered with the price going down?? I don't understand either..

    ¤
    Feb 22, 2013 - 7:53pm

    Silver Fire Sale Over?

    Feb. 22, 2013, 6:01 a.m. EST

    For silver, being cheap is a good thing

    By mpicache[at]marketwatch[dot]com (Myra P. Saefong), MarketWatch


    Reuters Silver is down nearly 9% this month.

    SAN FRANCISCO (MarketWatch) — Silver’s free fall may be coming to an end.

    After a nearly 9% dive in silver prices this month, investors should be able to breathe a sigh of relief as growth in industrial and investment demand gains pace, and calls of “oversold” conditions and “bargain” prices for the precious metal intensify.

    “Silver is grossly oversold at current levels, more so than any time in the past five years,” said James Carrillo, senior portfolio adviser for precious-metals investment firm Swiss America Trading Corp.

    Silver futures prices /quotes/zigman/8702780 SIH3 +0.0035% have lost $2.65 an ounce, or 8.5%, this month, after closing at $28.70 Thursday on the Comex division of the New York Mercantile Exchange. Year to date, they’ve lost over 5%. That compares with gold’s /quotes/zigman/8702781 GCJ3 +0.11% month-to-date loss of around 5% and a nearly 6% decline for the year.

    “Fundamentally, silver should be rising,” as physical demand remains strong, said Carrillo. “However, the technical side of the market is dictating direction currently.”

    Before Thursday’s 0.3% gain, silver prices had fallen for five sessions in a row—dropping nearly 8% during that losing streak and breaking a key support level by settling below $30 on Feb. 15. Prices closed Wednesday at their lowest since Aug. 20. The iShares Silver Trust /quotes/zigman/417006/quotes/nls/slv SLV +0.36% , which holds silver bullion, is down nearly 6% this year.

    The absence of China last week due to the Lunar New Year celebrations “set the ball rolling and left the silver price at the mercy of the technical picture,” said Julian Phillips, a South Africa-based contributor to SilverForecaster.com. “I would expect a snapback just as surprising as the fall.”

    Good signs

    Analysts have been pointing out silver’s growing popularity as an investment asset, but many are starting to tout its prospects for use in industrial applications again, as sentiment over global economies improves. Read: Silver gains favor as an investment asset.

    Jeffrey Wright, managing director at Global Hunter Securities (GHS), said he likes silver more than gold this year because of silver’s “industrial utility” and “true expansion” in industrial uses.

    “The slide in silver could be coming to a close relative to gold because demand and usage fundamentals are expanding regardless of investment demand,” he said. “Demand in silver for industrial uses is driven by industrial activity in the U.S. and China.”

    Last week, HSBC said it expects silver prices to rise to an average of $33 an ounce this year. It also predicted a significant recovery in 2013 industrial demand for silver based on forecasts for growing industrial production in some key silver-consuming economies. Read The Tell blog: HSBC polishes silver outlook, sees demand rise in 2013, 2014.

    Of those key consumers, China is a standout when it comes to investment as well as industrial demand.

    In a December 2012 report, the Silver Institute said China’s retail investment demand for silver is forecast to grow “robustly” in the short to medium term as more of the nation’s population gains access to physical silver. Read the Jan. 25 Commodities Corner: If China likes silver, maybe we should too.

    “The Chinese have to hedge themselves against the continuous debasement” of their U.S. dollar reserves and “the opposite of the U.S. dollar is gold and silver,” said Gijsbert Groenewegen, a managing partner at Silver Arrow Capital Management....(cont. pg.2)

    https://www.marketwatch.com/story/for-silver-being-cheap-is-a-good-thing...

    Mr. Fix
    Feb 22, 2013 - 7:56pm

    Reply to sideshow,

     If anything, this just confirms to me how irrelevant the numbers in the COT report actually are.

     Just the fact that they covered that many shorts without driving up the price means that all of this analysis is useless.

    ¤
    Feb 22, 2013 - 8:08pm

    Quasi-Gold Standard Already Underway

    China, Gold, and the "Boom of the Century"

    Written by Ralph J. Benko
    Thursday, February 21, 2013

    "China's foreign exchange reserves have not increased for almost two years...."

    The Califia Beach Pundit provides an extraordinarily canny assessment of Chinese monetary policy, its dollar peg, foreign exchange accumulation, and gold's commodity price:

    China's decision in early 1994 to peg the yuan to the dollar was a key factor driving China's growth, since it brought Chinese inflation rapidly down to the level of the U.S. The prospect of a stable currency not only reduced inflation and its multiple distortions, it also increased the market's confidence in China, and helped boost investment in the country since it all but eliminated foreign exchange risk. Indeed, since the yuan has only appreciated against the dollar since 1994, foreign investors benefited from strong Chinese growth and yuan gains. China was the boom of the century.

    Pandawiki

    Image courtesy of Pandawiki.net

    Massive inflows of foreign capital seeking to benefit from rapid Chinese development essentially forced the BoC to buy over $3 trillion of foreign exchange, with a commensurate increase in the Chinese money supply. Converting capital inflows into yuan is the only way foreign capital could actually enter the economy, because you can't build a factory or hire workers with dollars—the dollars need to be converted to yuan, and it is the proper role of the BoC to buy those dollars and issue new yuan in the process. Yet despite massive forex purchases, which relieved pressure on the yuan to appreciate, the BoC still had to allow the yuan to float irregularly upwards. A stronger yuan helped to keep the inflationary pressures of rapid growth under control.

    As I explained in this post, it now appears that this process of forex purchases and yuan appreciation is at an end. This is a big deal. China's foreign exchange reserves have not increased for almost two years, and the yuan has been stable against the dollar for the past two or three months. Capital flows and trade flows appear to have reached some kind of equilibrium, just as Chinese and U.S. inflation have converged.

    ... China's central bank started buying up capital inflows in earnest in early 2001, right about the time that gold was hitting a multi-year low. This came to an end in early 2011, as net capital inflows approached zero, and shortly thereafter gold peaked. Both forex purchases and the price of gold increased by many orders of magnitude over roughly the same period.

    Is there a plausible explanation for the strong correlation between these disparate variables? I think there is, but I can't say so with authority.

    ...

    Don Luskin ... argues that the outstanding stock of gold is relatively fixed—growing only about 3% per year—but that the demand for gold has jumped by orders of magnitude since China, India, and other emerging markets have enjoyed explosive growth and prosperity gains. In other words, the number of potential buyers of gold has risen much faster than the supply of gold, so naturally gold's price has increased. This is not a story about massive money printing and hyper-inflationary consequences, it is a story about a one-time surge in the demand for the limited supply of gold.

    There has been considerable speculation by savvy observers -- such as financier and author James Rickards -- that "China this year or next will announce a tripling or quadrupling of its gold reserves after acquiring the metal surreptitiously." As Evans-Pritchard observes in the UK Telegraph, "It is no secret that China is buying the dips, seeking to raise the gold share of its reserves well above 2pc. Russia has openly targeted a 10pc share. Variants of this are occurring from the Pacific region to the Gulf and Latin America."

    The FT observed in late 2011, central banks are net buyers of gold for the first time in 20 years.

    Can a classical gold standard be far behind?

    https://www.thegoldstandardnow.org/key-blogs/1893-china-qthe-boom-of-the...

    Mr. Fix
    Feb 22, 2013 - 8:12pm

    Can a classical gold standard be far behind?

    I sure do hope so, seeing as that I've got an awful lot of it lying around here.

     It would be nice if I could spend it someday, maybe while I'm still alive, and young enough to enjoy it.wink

    silverstool
    Feb 22, 2013 - 8:15pm

    Black Monday in the UK?

    https://www.guardian.co.uk/business/2013/feb/23/george-osborne-britain-aaa

    Preservation of UK's AAA status has been the number 1 priority for the incumbent government. This is an embarrassing failure. Sterling doesn't have the advantage of the 'reserve currency' or being tied to the Eurozone. Remember 1992 when Soros 'broke the Bank of England'?

     https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england...

    Sterling is very vulnerable and may be the second major currency to crash (after the Yen). It may also help explain why the metals have been smashed this week, in advance of further fiat meltdown, in order to maintain the illusion of weakness. I think this has massive repercussions in the financial capital of fraud, The City of London.

    Strawboss sideshow03
    Feb 22, 2013 - 8:23pm

    Sideshow03 - the shorts

    Sideshow03 - the shorts havent been "covered" - they are simply being transferred from the cartel onto the hedge fund (large specs). Think of it as a hot potato - or a hand grenade with the pin pulled. You will know when the shorts are being covered when the OI is declining while price is rising.

    What is good about it is that historically - the large specs are heavily short at market bottoms (like they are right now) and the cartels have their lowest level of short positions at market bottoms (like right now).

    For our purposes - that is a good thing because it strongly suggests that prices are at - or near - a bottom and will soon rise. The COT is very predictive in determining market tops and bottoms so it is great for getting the "big picture" right.

    The large specs (hedge funds) holding the hot potato/live grenade are soon going to all be rushing for the exits in a mad dash to cover those shorts into a rapidly rising gold price.

    That doesnt mean it will happen on Monday or anything. It might take a few more weeks to get going - but, rest assured - it will get going. History had proven that time and time again.

    Jasper
    Feb 22, 2013 - 8:30pm

    @ Strawboss

    Very well said! - my July silver 34 calls should work out well as should Turd's July call!

    sideshow03 Strawboss
    Feb 22, 2013 - 8:38pm

    Re: Strawboss

    So are the makings of a "short squeeze"? Would that be a reduction of (total) short positions in a declining IO? I understand the hot potato analysis, and that makes sense, but what stops the music? Why can't this potato just be passed back on forth? I assume as the price rises, the Cartel starts to "take back" these short positions (potato) from the large specs...so when does the music stop?

    I also would like to know what Mr. Fix asks above as well....why are the large specs always on the losing end? How many times do you get slapped in the face before you back the eff up??

    ag1969
    Feb 22, 2013 - 8:39pm

    Dry Powder and ATB's

    So, I have been bumming all week that I had no dry powder to add to my stack. Well, today I stumbled into some dry powder that I was not expecting. I seized the opportunity to patronize our favorite bearing company, and I am proud to say that I now own at least 1 of every 5 oz ATB released to date. As I have said before, I just love those coins. I was missing Chickasaw, Olympic, and Vicksburg. I was able to get all three. I also bought 5 Free Lakota Bank Crazy Horse proofs. For those of you that have not seen those coins in person, they are beautiful coins. Highly recommended.yes After adding those to my cart, I still had some ponzi coupons left, so I threw in a 1/4 oz. AGE for good measure. Now I wait. I am waiting for 10 freedom girls, 10 Canadian Wood Bisons to complete my Canadian wildlife collection, a couple of Maples with the snake privy, and today's order. 

    Side note, I was watching Jimmy Kimmel last night and he had a brilliant idea to save the post office:

    Legalize pot, and put the post office in charge of delivery. I think it would work!wink


    Feb 22, 2013 - 8:45pm

    btw

    FINALLY....very nice FUBMs on the charts today.

    ag1969
    Feb 22, 2013 - 8:46pm

    Regarding GLD

    For those of you that remember my "big Picture and back to the basics" post this morning:

    Basics, GLD is manipulated and abused by the world's biggest criminals and liars. It is nothing more than a criminal scam to use other people's fiat to build a big stack. Reason for big draw down? From my perspective combining the basics with the big picture, it was stolen, by aforementioned criminals and liars. There, I solved it for all of you, so get on with your weekend and make it a safe and happy one!

    Nick Elway ltcolkilgore
    Feb 22, 2013 - 8:49pm

    @ltcolK Even Mercury dimes?

    Mercs not as likely to be counterfeited as silver dollars. I thought they were the safest. Maybe they are.

    I googled "counterfeit mercury dime" and it looks like most of the action is the rare 1916-D and the 1942/1941 overstamp. They'd each be worth hundreds of FRN's if real. 

    What scares me are the replicas :

    https://www.coincommunity.com/forum/topic.asp?ARCHIVE=true&TOPIC_ID=64234

    ¤
    Feb 22, 2013 - 8:51pm

    On corruption and the status quo: Gold manipulation

    Gold manipulation: The logical outcome of mainstream Economics

    Martin Sibileau

     This is the first of three articles I will post on the suppression of gold. What drives me to write about the topic? I am tired of seeing endless proof of suppression (i.e. the typical take downs in the price at either 8:20am

    Please, click here to read this article in pdf format: February 21 2013

    This is the first of three articles I will post on the suppression of gold. What drives me to write about the topic? I am tired of seeing endless proof of suppression (i.e. the typical take downs in the price at either 8:20am ET or at 10am-11am ET, with impressive predictability) and at the same time, it is unfair that anyone who voices this suppression be called a conspiracy theorist. Therefore, these three letters will give a rigorous theoretical support to the claim.

    The first letter will show that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. From the publication of this letter onwards, the onus to prove the contrary will fall upon mainstream economists. The conspiracy theory will actually be the opposite: To claim that suppressing gold is not necessary.

    The second letter will show how that suppression takes place. For those familiar with the gold market, this letter will offer nothing new and perhaps, it will even be incomplete. But at the macro level, I will seek to offer an insight.

    The third letter will examine the consequences of this suppression and rigorously, prove that the claim of the gold bugs, namely that physical gold will trade at a premium over fiat gold or gold paper is also not a conspiracy theory, but the logical outcome of the current paradigm.

    Before I begin, I would like to say that I think proving the logical implication from mainstream economics that gold needs to be suppressed is perhaps comparable to Von Mises demonstration of the impossibility of economic calculation under socialism. Both are very intuitive, of consequence, and a necessary intellectual step. Without further ado, let’s start with the first thesis: The suppression of gold is a logical necessity, under mainstream economics.

    Axioms of mainstream economics

    1.-Policy makers believe that there exists a general level of prices, and it can be measured by a price index (Ludwig Von Mises absolutely demolished this notion, but this is outside the scope of this letter. What is relevant is that price indices are “measured” and published by every nation and the market trades on them).

    2.-Policy makers believe that in the long term, growth in the supply of money is neutral (Even David Hume laughed at this notion back in 1752)

    3.-Policy makers use the general-equilibrium framework introduced by Léon Walras

    4.-There exists a gold market and within this market, there are investors who see gold as money, as gold has been money for thousands of year

    5.-In global trade, there is no relevant single price index, but relative prices, affected by cross exchange rates.

    Thesis

    If axioms 1-5 hold, both a global monetary coordination (as opposed to currency wars) as well as the suppression of the price of gold are required, for the global economic system to remain stable.

    Demonstration

    Between 1874 and 1877, the works of Léon Walras introduced the notion of general equilibrium in Economics. Considered by Schumpeter as “the greatest economist”, in 1874 Walras published “Éléments d’économie politique pure, ou théorie de la richesse sociale”, as he was teaching in Lausanne. His work examined the conditions necessary to reach equilibrium in an economic system, based on a system of simultaneous equations. To this day, mainstream economists, including those at the helm of central banks, rely on the framework of general equilibrium to work out the theses on which their policies are based....(cont.)

    https://sibileau.com/martin/2013/02/21/gold-manipulation-the-logical-out...

    Mr. Fix
    Feb 22, 2013 - 9:00pm

    Good evening Turd,

     Would you being able to answer one of the above questions, pertaining to why a hedge fund would knowingly trade longs for shorts at the bottom?

     Could this just be something like Goldman Sachs betting against their own clients?

    Or MF Global where billions in “client funds” have just been stolen, without their knowledge yet?

     It's as if the big banks are just unloading all of their “hand grenades” to the smalltime investor through the hedge funds,

     so they don't have to pay for the losses,

     once again, the investors get screwed.

     Does this make sense to you?

     Wouldn't this make for some bankrupt hedge funds?

    dgstage
    Feb 22, 2013 - 9:04pm

    Mr. Fix

    I hope your are wrong about a trap. Turd had a great podcast on TTM today. He made some great points about JPM trying to balance there position.

    Mr. Fix
    Feb 22, 2013 - 9:06pm

    @ Strawboss

    Thank you for your explanation, so far, I get it, except for one thing:

     Why would a hedge fund buy (or swap for) such a massive short position at the bottom?

     I want to understand their motivation.

     Your own analysis determines that they are about to get creamed.

     Why wouldn't they know that?

    Mr. Fix
    Feb 22, 2013 - 9:10pm

    @ dgstage

    I am not hoping for a “bull trap”, in fact, quite the opposite.

     Nothing would please me more than to see Blythe Masters get “caught with her pants down”. 

     There's just a couple of items in the COT that don't seem to add up. Somebody is about to get screwed big time!

     Was this addressed in the “Turd Talks Metals" report?

    Dyna mo hum
    Feb 22, 2013 - 9:21pm

    @ Fix

    "Somebody is about to get screwed big time" Not us stackers this time! We carry the big stick!

    Mr. Fix
    Feb 22, 2013 - 9:23pm

    @ dgstage

    Thank you, now we're getting somewhere,

     we can make expect a lot of small and large specs to get slammed.

     Now, why exactly would they "volunteer" for that? 

    dgstage Mr. Fix
    Feb 22, 2013 - 9:23pm

    Mr. Fix

    I thought he made it clear someone was going to get screwed. I felt quite encouraged on his views today, that a lot small, and large specs could get slammed.

    Most likely Blythe will not get caught with her pants down, more of a planned retreat.

    atomic180
    Feb 22, 2013 - 9:24pm

    Mr Fix it does smell FOUL...

    The LS going short and relieving the stress on the BB seems like a sell out and I sence more Au weakness... CME COMEX all BS

    Mr. Fix
    Feb 22, 2013 - 9:27pm

    @ Dyna mo hum

    I agree, this is definitely one of those times when it is good to be a "stacker".

     I'm just curious why hedge funds would volunteer to "get screwed big time".

    ¤
    Feb 22, 2013 - 9:28pm

    24hGold: Ranting Andy

    When to Sell Precious Metals by Ranting Andy - Miles Franklin Published : February 22nd, 2013

    Last week, I was sent an email asking when will be the appropriate time to sell PHYSICAL gold and silver. After all, the goal is ALWAYS to “buy high” and “sell low,” isn’t it? Actually, that’s a trick question, as “buy high/sell low” only pertains to investments – NOT savings. Given that PHYSICAL gold and silver represent REAL MONEY, they should decidedly be classified as the latter.

    Throughout the recent Cartel bombing, calls for the “end” of the PM bull have been shrilly cried by the “evil troika” of Washington, Wall Street, and the MSM. But why wouldn’t they; as gold and silver are the mortal enemy of their fiat-generated power base? For my entire TEN YEARS (soon to be eleven) of HEAVEN AND HELL this process has been ongoing; with each successive episode occurring amidst a still more bullish PM landscape. Thus, clearly “WHEN TO SELL PRECIOUS METALS” is not now.

    In the past, I have given “price targets” for gold and silver. However, unlike stocks, bonds, and other PAPER investments, they are not dependent on future scenarios. Instead, I have simply calculated the amount of published money supply and published gold reserves, and did the division. In other words, they are set in stone; particularly as FAR MORE money has been printed than disseminated…

    Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts

    …and FAR LESS gold is at Fort Knox than purported…

    Ron Paul worries Fort Knox gold is gone

    Thus, my “price target” of $15,000-$20,000/oz for gold – NOW – is likely vastly too low; as well as my silver “target” of $1,000-$4,000/oz…

    THE ULTIMATE QUADRUPLE TOP BREAKOUT

    Irrespective, my goal is not to “sell” my PHYSICAL gold and silver at those prices – or any dollar-based price, for that matter – until the dying GLOBAL FIAT CURRENCY SCHEME implodes; which it surely will, as fiat currency is a proven Ponzi scheme…

    The End of the Fiat Money Era: The Real Ponzi Scheme

    I have no idea when or how the “game” will end; but just as night follows day, Gold Standards ALWAYS follow fiat regimes…

    Research Shows ALL Fiat Paper Money Systems Eventually Fail

    When it does, it’s IMPOSSIBLE to know how the world will transition to REAL MONEY; only that it WILL! Thus, to those owning PHYSICAL gold and silver; relax, as you have already won. And for those that don’t, the recent Cartel attacks provide the perfect opportunity to…

    https://www.24hgold.com/english/news-gold-silver-when-to-sell-precious-m...

    Mr. Fix
    Feb 22, 2013 - 9:37pm

    @ atomic180

    yes Big time!

    ...................................(But, why?).....................................

    Congratulations on making it one year at TF metals report.

     (I checked).wink

    Mr. Fix
    Feb 22, 2013 - 9:39pm

    "Turd can explain it better."

    Well, there's something I'm looking forward to.smiley

    Become a gold member and subscribe to Turd's Vault

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