A Bear Market in GoLD

326
Tue, Apr 30, 2013 - 10:47pm

Everyone's favorite faux depository reaches a dubious milestone.

As you know, we've been keeping track of the depletion of the GLD. Today, let's use CNBS' favorite metric, the 20% decline, to characterize the "inventory".

On 1/2/13, the GLD showed an alleged "inventory" of 1,349.92 metric tonnes of gold. As of this evening, the GLD "inventory" is listed as 1,078.54 metric tonnes following another drawdown today, this time for 2.10 tonnes.

So, year-to-date, the GLD "inventory" is now down 20.1%...thus the title of this post. What does this mean? How much gold is this? At what rate is gold exiting the GLD? Here are some random bullet points:

  • Down over 20% means that for every 5 bars that the GLD allegedly held 4 months ago, it now holds only four.
  • GLD has shed 271.38 metric tonnes YTD, that's about as much as the entire holdings of Austria and more than the combined holdings of Brazil, Denmark, Australia and Indonesia. https://en.wikipedia.org/wiki/Gold_reserve
  • Using the same source as above, even after this 20% decline YTD, the GLD still holds as much gold as the country of Switzerland. Rrrrright....uh-huh....
  • It took over two months for the GLD lose it's first 100 tonnes for 2013. The "inventory" fell to 1,243.05 on March 7.
  • It then took just six weeks to lose the next 100 tonnes, reaching 1,145.92 on April 16.
  • Three weeks ago tonight, just days before the massive, two-day beatdown of paper price, the "inventory" stood at 1,200.37. Again, this evening, it stands at 1,078.54. That's nearly 122 metric tonnes (over 10% or roughly the size of the total holdings of Mexico) in just the past three weeks alone.
  • In contrast, the SLV has seen its "inventory" rise YTD. It began 2013 at 10,084.96 metric tonnes. As of this evening, it allegedly holds 10,407.44. Up 3% since the first of the year. Now Bob Pissonme would have you believe that the drop in GLD "inventory" is related to simple investor liquidation and re-allocation. If that's the case, how do explain this change in the SLV? <crickets>

So, let's have some fun and attempt to put all of this into context. Again, the GLD has now shed 271.38 metric tonnes in just the first four months of 2013. This is:

  • 8,725,069 troy ounces OR
  • 21,813 London "good delivery" bars OR
  • If you stack those bars onto pallets holding 192 bars a piece, it looks like this:

Yes, that's 114 pallets of gold, each holding 192 bars, each bar weighing 400 troy ounces. Gone. But, to where? Back to Authorized Participant vaults for safekeeping until "investors" begin to accumulate shares of GLD again? That's what Bob Pissonme would have you believe but is that really the case? Perhaps something else is going on, instead? We shall see, now won't we...

It certainly is an interesting time to be alive.

TF

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  326 Comments

Grublux
May 1, 2013 - 1:06pm

Or smart enough

To cause it to happen and benefit from the collapse


May 1, 2013 - 1:07pm

May 1, 2013 - 1:07pm

I discussed this last evening

I discussed this last evening at TTM. What I have always done is not your regular TA...with RSIs and MACDs and stochastics and MAs and all the rest. It's always been about simple pattern recognition, given that the metals are so consistently and brutally manipulated.

Here's a patter we've seen over and over and over again. A rally is halted at some pre-determined point. In this case, it was the 20-day moving average. Then, price recovers and seems ready to move higher but is suddenly and sharply rebuked, creating the impression of a double-top. Then price meanders along in a rounded top form, showing a dissipation of momentum. Finally, The Forces of Darkness pounce and drive price sharply lower.

At this point, buying will look to re-emerge near $1440 and then $1400.

Gold Dog
May 1, 2013 - 1:07pm
Juggernaut Nihilism
May 1, 2013 - 1:12pm

For all the paper haters...

You realize that a major reason the metals ran to their highs in the first place is because the introduction of the ETFs made them more easily available to investors? Look at the metals charts since the introduction on the ETFs. It could be that the so-called paper price has been artificially high as the ETFs have attracted demand that otherwise wouldn't have been there. I don't really care about the price except for my trading account... gold is money and I hold physical as insurance against currency failure.

Louie
May 1, 2013 - 1:13pm

Only reason I can think of for paper price weakness

Is that the COMEX does not have gold/silver to deliver if even a small portion of traders stand for deliver. Who in their right mind would pay for and stand for delivery for gold at $1,650 if they could buy a new contract for delivery next month at $1,450? You could not expect to turn a $200/oz profit on the physical gold. Smash down the paper price and everyone rolls to new contracts.

Problem is, what do they do next month?

tyberious
May 1, 2013 - 1:14pm

Gold in Hand Author : Bill

Gold in Hand

Author : Bill Holter
Published: April 30th, 2013

Though you haven’t heard a peep out of the media, the Cyprus parliament will vote today on their own financial execution. They have basically 2 choices, they can vote themselves out of the EU and everyone loses their bank balances… or they can remain in the EU and lose 90%+- of their bank balances. Option A would mean going the route of Iceland which 5+ years after their collapse is one of the few economies in the world that is actually growing again, option B would mean sticking with the “known” evil which includes the iron anvil of the Euro attached to their feet for the future. Option A is obviously in their best interest, option B is what they will choose.

A media blackout on this event is in effect so that the populace doesn’t panic. How smart would it be to play movie trailers in advance letting people know that “coming to a theater near you” is the theft of your bank balances? Think about it, if you have plans to steal “money in the bank,” you want as much “in the bank” as possible right? Why would you promote a bank run where all the cockroaches (that is what the savers are considered) scatter with their funds before you could rob them? Plans have been quietly put into place to take the “Cyprus template” and use it far and wide. Once begun, you will only hear “we have no other options” topped off by “who coulda’ seen it coming?” The coming “global bail ins” are more than obvious to see, all you need to do is use a little common sense and connect a few dots.

I wrote the other day that “the smack down in gold and silver was probably the result of the bottom of the barrel becoming visible.” This chart courtesy of Zero Hedge pretty much says it all:

Source: Zero Hedge

JP Morgan is down to their last 165,000 ounces of gold eligible for delivery at the COMEX. It is quite interesting that this hoard has dropped by over 90% and that the draw down began last September (1 month before the obvious capping action in gold began in October). It is also interesting that the bloodletting of gold would occur as the central banks of both the U.S. and Japan would announce over $2 trillion of further money supply debasement.

In my mind, it is now only a question of “when” do the lights get turned off and deliveries of metals cease. ABN Amro notified customers 2-3 weeks ago that their supposedly ALLOCATED metal would not be delivered. How can this be IF it was truly “allocated?” The only plausible reason that customer “allocated” metal would not be delivered is because it was previously re-allocated to someone else and is no longer in the vault. There can be NO other explanation. I guess we should wait for the lawsuits to commence by customers who paid storage fees (similar to Morgan Stanley’s fraudulent silver storage back in 2009) for nonexistent metal. As has been said many times before and from several viewpoints, you either have the metal or you do not. When all is said and done, there will be at least 99 people out of 100 who believe that they own metal who will find out that they do not. The time to act and not be a part of these 99 is now. Right now. Deliveries will fail and supply for new purchases will dry up overnight, there will be no “options” once the default is triggered. Believe me or don’t, this is pure common sense and the most basic of math.

Southern Cross
May 1, 2013 - 1:14pm

Watch What Success Looks Like

Taking back Mexico from the thugs and gov. criminals.

"since we began there has not been a single kidnapping, murder, or robbery. There are no extortions....These are the results we are getting. No no has to pay for protection."

Mexican Vigilantes Stand Up Against Crime

This is the blueprint for taking back America.

Nick Elway
May 1, 2013 - 1:15pm

Bron answered my question

https://www.tfmetalsreport.com/comment/193704#comment-193704

As I understand it, Bron's at the Perth mint and has first-hand knowledge of what they are paying to get the raw gold and silver for their operation. If I was in that position I would come across like I was pretty certain too!

Bron says:

Quote:
We are currently not paying any premium for raw gold or silver. I don't think there is a specific level which constitutes a physical-paper disconnect. A few dollars wouldn't but $10 over spot would. What I am looking for is desperation by bullion banks when they are bidding for our excess (above coining and small bar needs) refining output, which could be indicated not just by what premium they are willing to pay, but say us being contacted by counterparties we don't normally deal with, wanting 400oz bars for shipment into London rather than kilo bars to Asia etc.
(I'm assuming $10 is over spot gold)

I know a bit of Bron's frustration, I get called an idiot by global warmists when I point out that Greenland was named Greenland when it was green so their "earth warmest it has been in history" is bunk no matter how many PhDs say it .

Jim Willie and his "$2000 an ounce" number might take a little debunking from one that regularly buys bulk gold and can truthfully say "it ain't so". I don't think Bron is the bad guy here, I believe he is just sharing the truth he experiences.

I could be wrong, disinformation abounds. I'm just a guy searching for truth and I don't even have a MacBook.

AgAuthaChristie
May 1, 2013 - 1:18pm

This needs to be repeated again

Thanks victori.

"The "real" price of gold isn't what you pay for a 1oz coin on eBay. As Mish says "Premiums on small denomination coins is not the same a general premium on physical gold itself." But don't take his or my word for it, here's what Jim Sinclair says:

"For many retail investors around the world they are dialed into the paper market in various exchanges. The second market is a small one, but popular among retail investors, and that’s your corner or even major coin dealers. But neither of those are in fact the real gold market, which is the cash market for gold. This is the cash market for 400 ounce deliverable fine gold bars. That represents the true price of the market on any given day. ... for the physical market, not the coin dealers, but the real market, the 400 ounce deliverable market and Asian type settlement ..."

So what is going on in this real market? Well, don't look to Jim Willie who thinks that "those who purchase metals in bulk are having to pay $2000 or more an ounce for gold in the Asian markets". I work for the Perth Mint and we sell tonnes and tonnes of gold kilo bars into Asia every week and we'd be lucky to get a few dollars of premium above the so-called fake paper spot price. That tells me there isn't any stress in the wholesale markets. So COMEX and LBMA aren't going to be failing any time soon."

unthought known Texas Sandman
May 1, 2013 - 1:23pm

Sandman

Why would I pay higher premium for 2013 when I can get random years for less than 30.. Also, where do you see 4-6 week delay? I dont see that at all. Last week there were NO eagles to be had..this week there are well over 100k and that is JUSt with Apmex. add in all the other dealers and there is no real shortage.. Besides, coins are only a small part of the silver market.. Silver, like copper is getting hit because of the economy

Louie Doctor J
May 1, 2013 - 1:27pm

Dr. J- Hmmmmmmmm

Even better if you take the tires and wheels off of the junker, and let the frame rest on the ground. If you did not have time to put the wheels back on to move the car, you could hook up to it with a chain and drag it.

NonoverlappingMagicCereal TF
May 1, 2013 - 1:29pm

@TF re: I discussed this last evening

It's always been about simple pattern recognition, given that the metals are so consistently and brutally manipulated...A rally is halted at some pre-determined point. In this case, it was the 20-day moving average.

What I don't get is this: if it really is all about 'simple pattern recognition' to identify likely points for manipulation, why are those patterns not being exploited? Why do we not see trading algorithms recognizing the patterns (it would be trivially easy to do), jumping in with short positions in anticipation, and blowing the patterns away? A simple artificial neural network can process video data well enough to drive a car across the united states with complete autonomy, surely it could recognize 'simple patterns' like these.

Is it possible these aren't patterns at all, but simply the human tendency to see 'obvious' patterns in noisy, highly random data?

ReachWest
May 1, 2013 - 1:30pm

@The Green Manalishi  I can

@The Green Manalishi

I can certainly relate to what you're feeling - I think a number of us can.

One thing I can say for sure - If I were to give up - it would be the day prior to everything changing direction. It would be the definitive bottom event.

Anyway - it's all noise IMHO - I have to periodically go back to the 50,000 foot view to understand all the machinations and the primary reasons that I have metals.

In the meantime - I will continue to stack onward.

SIlverbee
May 1, 2013 - 1:33pm

It's all well saying MOPE is irrelevant the data is false etc

But at the end of the day the chart says $1447. At this stage and for the foreseeable future unless you know different Turd that IS the price. I, like the G.M. have a time limit as I have expressed before. I am patient but some indication of the benefits of waiting is really needed right now. Not in some generalised statement or rumor but in a fundamental change which results in a positive price movement.

BB
May 1, 2013 - 1:37pm

@Animal Sacrifice re NAVs of CEFs

Harvey Organ's column gives those NAVs every day, and "back issues" of his column are available for way back.

Indenture
May 1, 2013 - 1:39pm

TF: Why would someone allow

TF: Why would someone allow GLD to show a drain of inventory and at the same time keep SLV the same? What is the purpose of this deception? Is this to trick people into thinking there is plenty of sliver?

Sheetrocker
May 1, 2013 - 1:40pm

May 1, 2013 - 1:40pm

Back at the GLD vault

Did everyone catch the return visit to the London GLD vault on CNBC this morning?

See--they still have lots of gold! The rehypothecated gold can be seen in the background.

Ned Braden Indenture
May 1, 2013 - 1:40pm

@ Reach West

MY SENTIMENTS EXACTLY.......

victori victori
May 1, 2013 - 1:48pm

Bron Suchecki

You wrote: "I work for the Perth Mint and we sell tonnes and tonnes of gold kilo bars into Asia every week and we'd be lucky to get a few dollars of premium above the so-called fake paper spot price. That tells me there isn't any stress in the wholesale markets. So COMEX and LBMA aren't going to be failing any time soon." Versus Jeff Clark who wrote: "The disconnect between the paper price of gold and the demand for physical metal is so great that we want to bring this to your attention so that you can make an informed decision about whether or not to buy gold now. You should know that supply among wholesalers is as every bit as tight as the retail side, that dealers will probably continue having difficulty meeting demand, that premiums will likely continue to rise, and that delivery times aren't going to shorten right away. If you're a bullion buyer, purchasing now could save you some money and hassle over waiting." Your Conclusion: "That tells me there isn't any stress in the wholesale markets." Versus Jeff Clark's conclusion: "...You should know that supply among wholesalers is as every bit as tight as the retail side..." How do you explain this differing conclusion between you and Jeff Clark?

Mamboni
May 1, 2013 - 1:50pm

Solidarity with May 1 Buy Silver Day

I just ordered 100 SAEs out of solidarity with the MAY 1 BUY SILVER AND BREAK THE BERNANK'S BALLS movement. I am already stuffed full with silver bullion already but I'll find some place to put them. Paid 28.70 per coin. My dealer tried to discourage me, saying the premium is rather high. "That's not why I'm buying these" I retorted.

Viva Argentum!

BB
May 1, 2013 - 1:50pm

@Noverlapping

I do pattern recognition (not just in finance) for a living. It’s not easy. It’s one thing to see/detect patterns after the fact. The problem in trading financial markets is that, to take advantage of a developing pattern, you have to commit real money when the pattern is what — maybe 50% complete? Takes deep pockets, and stones. Doesn't mean they aren't there; just means you may not be able to trade them.

zman
May 1, 2013 - 1:57pm

Dollar down -.20% Stocks

Dollar down -.20%

Stocks down, metals down, oil down.

boatman
May 1, 2013 - 2:00pm

Grublux

bingo.

and because no one benefits from a collapse least of all those in power.

they want u working and debting and paying taxes.

Grublux
May 1, 2013 - 2:04pm

Although

During a collapse there is an opportunity for further consolidation of power.

Prize Fighter
May 1, 2013 - 2:05pm

I wish I would have started a

I wish I would have started a thread to track every gap and close. That would be an eye opening visit down memory lane. With all the competing methodology I see out there, it's pretty amazing to me this one doesn't get much traction anywhere and this one has a perfect record. LOL

We all know the potential reward of sound money so I would think a method which only highlights risks would be worthy. I wish it came with upside warnings as well, but it just doesn't work that way.

boatman
May 1, 2013 - 2:10pm

gold is not weak considering

crude's down $2.79.

i am actually encouraged.

NonoverlappingMagicCereal BB
May 1, 2013 - 2:10pm

@BB

I do pattern recognition (not just in finance) for a living. It’s not easy. It’s one thing to see/detect patterns after the fact. The problem in trading financial markets is that, to take advantage of a developing pattern, you have to commit real money when the pattern is what — maybe 50% complete? Takes deep pockets, and stones. Doesn't mean they aren't there; just means you may not be able to trade them.

That's my bag as well, although not in finance, and you are of course correct in general. However, if a pattern is real and as obvious and simplistic as is being claimed here, you absolutely can trade it. But, you might say, you can never see such obvious, predictable, simplistic patterns in real price data, right? Exactly my point.

As you say, it's not easy, because any pattern that was that conspicuous would evaporate immediately. It may take deep pockets, but there are lots of deep pockets out there, and you only need to be right more than you are wrong just enough to cover your transaction costs.

ReachWest
May 1, 2013 - 2:10pm

FED

"Fed says it's prepared to INCREASE or DECREASE purchases" ... well no kidding. "We will do something or we won't." Bizzaro land.

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