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Guest Post: Andrew Maguire Discusses GOFO and Gold "Backwardation"

156
Mon, Jul 29, 2013 - 1:30pm

With LBMA Gold Forward rates remaining negative for an unprecedented sixteenth consecutive day, I asked Andrew Maguire for his opinion on what this means and whether or not it indicates "backwardation" in the global gold market.

Please keep in mind that what you read below is just a snippet of the weekly commentary that Andy provides to all subscribers and members of "Turd's Army". This comprehensive, weekly summary is hands-down the most extensive and valuable bit of information I receive all week. If you are not an active trader but nonetheless someone with a keen interest in the global metals markets, I urge you to subscribe. You can do so by clicking here: https://www.coghlancapital.com/andrew-maguire-gold-trading

To further the understanding of this condition, Andy also appeared on Max Keiser's program earlier today. Look for that soon on RT or on YouTube tomorrow.

TF

GOFO & Gold Backwardation, by Andrew Maguire

I (Andy) have been asked by some members to allow a section of Commentary to be made public in order to demystify the backwardation argument. As noted it is not my intention to attack good people, however, it is important that the differences between the global cash market and paper markets are understood. Therefore I have agreed, especially as there are a certain mints and brokerages running pooled accounts that IMO have a vested interest in throwing up a smokescreen on this very important subject.

I received some more good questions this week regarding backwardations that need clarifying especially after a series of recent blogs claiming there are no backwardations in Gold. I would first like to say that one of these assertions came from Trader Dan, a person I do not know personally but respect as a good technician and very likely a good trader, too. This response is not an attack upon him or any others who I know have no vested interest in trying to debunk what is clearly the most important signal of physical shortages historically ever seen. In a nut shell, he is comparing apples to oranges. By isolating the real global cash market for gold and then only comparing Comex futures contracts in series out several years, I agree they are largely in contango. But this is a purely US centric Comex paper market phenomenon and has nothing to do with the divergence between the futures market and REAL CASH PRICE of bullion as determined by London fixes each day.

I am not comparing prices in select regions around the world where premiums are anywhere from $6 to $100, I am benchmarking the cash price of gold as determined twice daily in the largest global marketplace for gold in the world, London. When comparing this delivery market vs. the future-dated, largely non-delivery Comex market, then from a real cash wholesale perspective the London spot or cash market dwarfs physical activity on the Comex. This is where an apple becomes an orange and bears little comparison. The LPMCL clears some 700 tonnes of gold and 5000 tonnes of silver every single day. Understood only a portion of these transactions result in physical allocations but the point here is that this is the actual real cash price I can buy or sell my physical twice a day in any size I wish and at a price that has been averaging far in excess of several sets of future prices. This, in simple terms, is what is referred to as real world backwardation, not an isolated set of future paper settlement prices but how the real cash market for gold relates to these synthetic sets.

Nor can gold be lumped in and compared apples to apples to Oil or other commodities. NONE of these commodities trade as an FX currency cross, in other words gold is distinct in that it trades as a currency cross being sold and bought long and short against all other currencies 24 hours a day. The FX price is the real determinate of how much gold can be swapped for $ or vice-versa. Nor is gold consumed, affected by weather, or has a production season etc. Unlike other commodities there is an assumption of an abundant large supply of above ground bullion to meet whatever demand is required at any time.

Sure we can expect to see backwardation occur in gold and silver when we are very close to a front contract expiry but when it happens so far in advance of this event, as we have been tracking for many months, and then even worse, now extending into the next 3 successive months, (August October and progressively in and out of backwardation with GCZ3 December), then there is no argument that can be presented that can explain this as a normal condition, nor has it ever been seen before. It simply means there is an auditable distrust in exchanging physical gold for paper gold, especially when this condition technically guarantees an arbitrage profit by simply selling physical into the spot market at the fix and contractually having to wait a maximum of 30 days, let alone 180 days to be repaid ones physical. When you consider just how long that the largest most liquid gold market in the world has been backwardated against front month futures, (continuing in July for a protracted period of time at $1.60 and at times up to $2.15 above the August Futures contract set to expire in a matter of days), there is very little interest in arbitraging this ‘risk free’ profit in the millions of ounces... then Houston, we have a problem. There is demonstrably little confidence that by giving up your bullion for even a near date paper promise, you will ever receive it back.

Make no mistake though from a physical market perspective, the extreme condition we are currently witnessing in gold should never happen and forewarns of an extremely serious imminent disconnect illustrating a lack of immediately deliverable supply. The fact this condition has existed for such an unprecedented period of time forewarns the paper link to gold is in its final stage of irrelevance and collapse.

Aside from the likes of respected traders such as Dan, do not be fooled by those trying to construct a negative spin on gold backwardation, claiming this condition is of little concern. If not shills with a vested interest in capping gold, then they are making the classic mistake of comparing this condition like for like to oil or other consumable hard commodities.

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  156 Comments

C Taylor · Jul 30, 2013 - 10:25am

Yes, just noticed it too. I've been watching it every morning since it's been negative and I believe today's the first day it seemed oddly late? Hmmmmmmm...?

C Taylor · Jul 30, 2013 - 10:33am

It would be nice if we actually had a respectable mainstream business news channel a la CNBC or Bloomberg, who would actually report valid news and bring to light the oddity of these negative GOFO Rates. Instead they are just pumping tools or tools to herd the sheep into doing things the big guys can gain on. I guess that's why Zero Hedge recently reported that CNBC's ratings are in the toilet because the investor has now learned after getting fleeced in the dot com bubble and the housing bubble that the MSM has become useless. Even if they had a Schiff on to give a counter argument to there is no housing bubble, he was harassed and scoffed at.

Strongsidejedi Green Lantern · Jul 30, 2013 - 10:34am

The debacle of the economic policies over the past ten years is becoming clearer and clearer.
Despite the attempts by federal economic bureacracy to alter the calculations of the indicators, there remain indicators that reflect the debacle that has occurred in the United States.

https://www.bloomberg.com/news/2013-07-30/american-dream-erased-as-homeo...

This story recites a bunch of analyses in real estate. The analysis suggest that the proportion of Americans who buy a home versus rent a home has returned to the 2004 data point.

It's worth a read partly due to this quote:

Meanwhile, the U.S. Senate and the House of Representatives have both introduced bills that would overhaul the housing finance system by winding down government-owned Fannie Mae and Freddie Mac, which back more than two-thirds of all mortgage originations.

A House bill from Representative Jeb Hensarling, a Republican from Texas, would eliminate Fannie Mae and Freddie Mac and remove the federal backstop from most of the residential mortgage market.

The Senate bill, written by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner, reflects a growing bipartisan consensus that the U.S. should have a role as a catastrophic reinsurer of mortgages, behind significant private capital. The bill was written with input from the Treasury Department.

‘Our Goals’

“They’re looking for a way to accomplish goals that very much reflect our goals,” Treasury Secretary Jacob Lew said in a July 18 interview on Bloomberg Television.

Those goals include limiting taxpayer risk, getting private capital back into the mortgage markets and maintaining access to credit for worthy borrowers, Lew said.

The political interpretation of this story is that the White House wants to build rental assistance programs for the poor (DEM voter base). They would like to rotate those "minority" and "black" families into homes that they can own, but the last ten years of experience shows why those "investments" could be riskier. GOP understands that they have to put private capital at risk ahead of the US Treasury. The DEMs want expansion of rental programs.

The real question here is who is the final bag holder in the real estate game of musical chairs?

Fannie Mae and Freddie Mac got hit with the foreclosures from the Inland Empire. It's those communities in San Bernardino, Riverside, and Orange County that had the worst impact from the real estate credit bubble. The conclusion of Fannie and Freddie will require either the US Treasury or the Federal Reserve Bank to be the final bag holder.

If the final bag holder is the US Treasury, then the US bonds could see increasing yields demanded by the private investor. The yield curve used to be relatively flat over time and around 4% on short-dated to 6% on long-dated notes. Remember those days pre-2007? 

Ask yourself what a rise from 4.5% to 6.5% on 30 year notes would do. Better yet, if you believe rebound correction is needed, ask yourself what a 8.5% or 10.5% 30 year rate would do.

If the final bag holder is the Federal Reserve Bank, FRB has been buying 85 billion in debt every month this year. If the US Congress does not reauthorize FRB, then those debts would remain in FRB and isolated from the US Treasury. FRB would need to resolve 500-600 billion in Mortgage Backed Securities and would have to release those at "fair market value". Good luck selling that paper guys. Those MBS notes appear to be the counterparty to the title being held by all US citizens under a TARP, TALF, or Fannie/Freddie loan. Those MBS notes probably also include the FHA notes.

For those people who have their life savings in their home, reform in the mortgage markets is critical to their long-term financial stability. These games being played in Washington are literally killing people in the countryside.

I am troubled that the US Congress and White House have taken ten years to resolve the mortgage backed security fiasco. The MBS notes were sold to creditors internationally and these specific notes contributed to the fiasco in 2007-2010. Even so, the DC beltway crowd has not resolved the status of Fannie and Freddie because they are finding it too difficult to unwind the derivatives involved. The knot appears to be tied so tightly and the interweaving so profound that almost any regulatory change will cause unwinding and collapse some part of the economic picture.

In the private capital markets, if the risk in the investment rises, then the yield must rise also. With the financial repression that has occurred over the past 7 years, it has been an economic and political genocide on an entire generation of Americans.

Bollocks · Jul 30, 2013 - 10:53am
Barclays stock hit by £5.8bn cash call to plug shortfall

Barclays chief executive Antony Jenkins told Robert Peston the bank had not been run recklessly

Barclays will issue £5.8bn in new shares as part of a move to plug a £12.8bn capital shortfall created by new regulatory demands.

The bank will also issue £2bn of bonds that are turned into shares or wiped out if the bank gets into trouble.

The size of the share sale is much larger than analysts had expected. Barclays' stock fell 7%.

====

"the bank had not been run recklessly"

Which means it has.

· Jul 30, 2013 - 11:02am

The bank will also issue £2bn of bonds that are turned into shares or wiped out if the bank gets into trouble.

Same difference? But what a great sales pitch:

Not just bonds, but potentially shares of a bankrupt bank! Get yours today.

Strongsidejedi · Jul 30, 2013 - 11:02am

https://www.newyorkfed.org/markets/mbs_FAQ.HTML

quoting the New York Fed:

The following frequently asked questions (FAQs) provide further information about the Federal Reserve’s $1.25 trillion program to purchase agency mortgage-backed securities (agency MBS). The MBS program completed its purchases on March 31, 2010, but will continue to settle transactions over the coming months. In connection with this activity, the Federal Reserve continues to use dollar roll and coupon swap transactions to facilitate an orderly settlement of the program’s purchases.

This agency MBS program is managed by the Federal Reserve Bank of New York at the direction of the Federal Open Market Committee (FOMC). The New York Fed will continue to work with two investment managers to support the implementation of the program.

Effective August 20, 2010

What was the policy objective of the Federal Reserve's program to purchase agency mortgage-backed securities?
The goal of the program was to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally.

What was the volume of MBS purchased?
The FOMC directed the Desk to purchase $1.25 trillion of agency MBS. Actual purchases by the program effectively reached this target. The purchase activity began on January 5, 2009 and continued through March 31, 2010.

Why was it necessary for the Federal Reserve to transact in the agency MBS market via external investment managers?
The operational and financial characteristics of MBS purchases are complex and require specialized technology and expertise to transact. The Federal Reserve chose external investment managers as a means of implementing the MBS program quickly and efficiently while at the same time minimizing operational and financial risks. Because of the size and complexity of the agency MBS program, a competitive request for proposal (RFP) process was employed to select four investment managers and a custodian. The selection criteria were based on the institutions' operational capacity, size, overall experience in the MBS market and a competitive fee structure. The program custodian is J.P. Morgan.

As of August 2009, the Federal Reserve streamlined the set of external investment managers, reducing the number of investment managers from four to two. The New York Fed retained Wellington Management Company, LLP for trading, settlement and as a secondary provider of risk and analytics support; and BlackRock Inc. as the primary provider of risk and analytics support.

List of MBS paper bought by Fed Reserve between 2009 and 2010.

https://www.federalreserve.gov/newsevents/reform_mbs.htm

Transactions include purchases and sales at the trade date. Some of the purchases and sales were associated with dollar roll and coupon swap transactions that were conducted to help meet the programs' objectives and to facilitate the settlement of the initial purchases. Because most of the agency MBS trades are conducted based on the general characteristics of the security, the actual securities (CUSIPs) delivered may vary, within the trade-specified delivery standards.

Data

SSJ EDIT:

Those "coupons" are being bought from large financial houses that were buying UST-bonds in the same timeframe. That means the liquidity from the Fed was going to those houses instead going to the banks under FRB. I would suggest that the liquidity was moving into the global derivatives and private securities market instead of capitalizing the banks.

If my suspicion is correct, the size of the derivatives market should have dramatically expanded in 2009-2011.

CDO's and RMBS are discussed in this Philly Fed paper:

https://www.philadelphiafed.org/research-and-data/publications/working-p...

Strongsidejedi · Jul 30, 2013 - 12:16pm
Risk - It's Not Just A Board Game

Grant Williams (interviewed by Mike Maloney in link I posted above) speaks for 25 minutes on fractional gold reserve behavior by central banks.

Williams demolishes the assumption that sovereign governments have the gold reserves they claim.

johnny comelately · Jul 30, 2013 - 12:58pm

re GOFO i too noted it as i usually check in at 11.01 via their website - but my bloomberg feed showed the levels on time as usual - I think the LBMA were just slow uploading, maybe for good reason bien sur!

johnny comelately · Jul 30, 2013 - 12:59pm

soon enough this is what we will be seeing across trading floors globally

Fatboy Slim - Push The Tempo
Strongsidejedi johnny comelately · Jul 30, 2013 - 1:26pm

https://www.lbma.org.uk/pages/?page_id=55&title=gold_forwards&show=2013

DATE 1 Month 2 Months 3 Months 6 Months 12 Months
19-Jul-13 -0.07833 -0.06500 -0.05000 0.03500 0.15333                    
22-Jul-13 -0.07833 -0.06500 -0.05000 0.02500 0.14833                    
23-Jul-13 -0.07167 -0.05833 -0.04333 0.03333 0.15667                    
24-Jul-13 -0.06667 -0.04833 -0.03500 0.04333 0.15500                    
25-Jul-13 -0.06667 -0.04833 -0.03167 0.04333 0.16333                    
26-Jul-13 -0.05333 -0.04167 -0.02333 0.05000 0.16667                    
29-Jul-13 -0.05667 -0.04167 -0.02667 0.05500 0.17333                    
30-Jul-13 -0.05333 -0.04167 -0.02833 0.05500 0.17667
Strongsidejedi · Jul 30, 2013 - 3:24pm

He's funnier than the shine factor on Liesman's head.

https://www.youtube.com/watch?v=r8kWVs5kWcM

Bollocks · Jul 30, 2013 - 4:05pm
JP Morgan pays $410m to settle US energy case JP Morgan chief executive Jamie Dimon has been trying to improve the image of the bank
Smug-Fuck JP Morgan chief executive Jamie Dimon has
been trying to improve the image of the bank

JP Morgan's energy unit has agreed to pay $410m (£268m) to settle charges from the top US energy regulator that it manipulated energy markets.

The Federal Energy Regulatory Commission (FERC) agency alleged JPMorgan's trading practices drove up prices for electricity, mainly in California and the Midwest.

The fine is the second largest penalty in FERC history.

The bank did not admit any wrongdoing as part of the settlement.

JPMorgan said it was "pleased to have reached an agreement with FERC to put this matter behind it.'"

JPMorgan spokesman Brian Marchiony said the settlement would "not have a material impact on our earnings" because the bank had previously set aside reserves for the case.

https://www.bbc.co.uk/news/business-23506803

(note - minor edit by me wink)

----------
would "not have a material impact on our earnings"

Make that "bonuses"

Strongsidejedi · Jul 30, 2013 - 5:00pm

Several URL's on Swiss banking gold

From SNB's 2012 report:

"Gold sales have not taken place since September 2008."

On page 144: 2012 year end gold reserve is 1001 metric tons of gold ingots with 39 metric tons of gold coins. 2011 year end gold reserve was 986 metric tons of gold ingots with 39 metric tons of gold coins. So, SNB acquired 15 metric tons of gold ingots in 2012. (So 1001 + 39 = 1040 metric tons at end of 2012)

From https://www.usagold.com/swissgoldwgc.html (a 1999 report on Swiss gold)

2,590 tonnes of gold in its official reserves (1) Switzerland is the world's fourth biggest individual official holder of bullion, after the Eurosystem (2) , the US and the IMF. As of April 1999, gold forms 38.3 per cent of the reserves of the Swiss National Bank (SNB). For many people, both inside and outside Switzerland, there has long been an assumption that the strength of the country's currency and its economy owes much to its considerable reserves of gold. The link between gold and the Swiss currency has been enshrined in the country's constitution for more than a century.

The media outside Switzerland were therefore taken aback when, on 24 October 1997, a joint group of the Swiss Finance Ministry and the SNB produced a report on reform of the country's currency laws which, among other matters, recommended that some 1,400 tonnes of the gold reserves should be sold.

Let's do some math.

If the 2590 mt number from 1999 is correct, then indeed the SNB sold off 1400+ metric tons.

The 1999 gold reserve appears to be 2590mt.

The 2012 gold reserve appears to be 1040mt.

The balance is 1550 metric tons.

Isn't that an interesting number?

1550 again.

 
Strongsidejedi · Jul 30, 2013 - 5:14pm

SNB report from 2000 shows the gold transactions and leasing numbers.

https://www.snb.ch/en/mmr/reference/annrep_2000_komplett/source

"The agreement on gold sales concluded in September 1999 between 15 European central banks (cf. 92nd Annual Report, page 45), also requires the National Bank to limit its gold lending to the previous level of 328 tonnes. It therefore kept its lending volume constant on that level; at the end of 2000, the amount of gold lent was 323.8 tonnes." - page 50

"The National Bank sells gold no longer required for monetary policy purposes totalling 1,300 tonnes successively over a period of time on the market. The proceeds are invested in various financial assets which are managed separately from the other assets. The investment process is structured similar to the foreign exchange reserves. Within the framework of the investment strategy fixed by the Governing Board, an internal steering committee determines the detailed investment guidelines and management measures. The yardstick for success is the yield achieved on benchmark portfolios.

The sale of the gold no longer needed began at the beginning of May. By the end of December, the National Bank had sold 170.8 tonnes of gold on the market at an average price of US dollars 275.58 per ounce. The proceeds from these sales amounted to Sfr 2.6 billion. The Bank for International Settlements (BIS) was entrusted with the sale. The sales were concluded at regular intervals and in quantities that protected the market as much as possible. They are effected within the framework of the agreement on gold sales concluded between 15 European central banks in September 1999. The agreement fixes annual sales quotas.

The possibilities of hedging additional gold holdings earmarked for sale against an unfavourable development of the gold price in Swiss francs are considerably limited by the agreement on gold sales of September 1999. The National Bank may therefore not hedge against the gold price risk with derivative instruments. It can, however, manage the currency risk of future US dollardenominated proceeds from gold sales. For this reason, the National Bank has concluded dollar forward sales against Swiss francs and euros to the extent of roughly one-third of the future proceeds in dollars. A complete hedge of the currency risk is not necessary because, as a rule, any weakening of the dollar against the Swiss franc regularly coincided with a rise in the dollar price of gold. Moreover, broad-based hedging could lead to disturbances in the Swiss franc forward market. In 2000, hedging transactions resulted in a profit of Sfr 82.8 million."

from page 90:

"Physical gold holdings, which are stored at a variety of locations in Switzerland and abroad, declined by 180.7 tonnes compared with 1999. Of this figure, 170.8 tonnes were sold and 9.9 tonnes are accounted for by lendingtransactions and higher balances on metals accounts.

Claims from gold transactions

This item relates principally to secured and unsecured claims from gold lending transactions. Transactions are effected with first-class Swiss and foreign financial institutions. At the end of 2000, there were outstanding claims of over 323.8 tonnes, corresponding to a market value of Sfr 4,685.4 million (including accrued interest) on gold lending transactions."

1999 holdings are listed as 2099.3 mt gold ingots, 175.2 mt gold coins

2000 holdings are listed as 1918.5 mt gold ingots, 175.2 mt gold coins

 
Strongsidejedi Strongsidejedi · Jul 30, 2013 - 5:23pm

SNB gold reserve is reported to be at 2100 mt in 1999, 1918.5 mt in 2000.

Now, it's reported to be around 1040 mt.

Therefore, about 1050 mt were sold between 1999 and 2008.

In that same time period, Gordon Brown started the famous gold sales in London.

How much gold did England sell?

see the Brit's Treasury Dept. report here:

https://www.docstoc.com/docs/28912647/Review-of-the-sale-of-part-of-the-...

Annex A on page 28 states that 12.7 million ounces were sold.

Convert 12.7 million ounces of gold to metric tons...

It's 360 metric tons.

The sales were over by 2002.

Strongsidejedi · Jul 30, 2013 - 5:41pm

GLD inspectorate certificate as of 2009 list is published by GLD's trust at:

https://www.spdrgoldshares.com/media/GLD/file/Inspectorate_Certificate_O...

The report is interesting because the inspector clearly itemized every bar. He lists a variety of reporting errors when reconciling the inventory lists.

Regardless, he counted 36,015,108.723 fine troy ounces of gold in 89,797 London Good Delivery bars.

These bars were listed as being at "London Vaults of HSBC Bank USA National Association"

I've previously published the quote from GLD that the HSBC custodian vaults are actually the Bank of England and LBMA vaults in London.

So, how many metric tons of gold are 36,015,108.723 fine troy ounces?

It's 1120 metric tons. The numbers are getting interesting, aren't they?

Let's look at April 2011 near the peak.

GLD publishes its inspectorate certificate here:https://www.spdrgoldshares.com/media/GLD/file/Inspectorate_Certificate_A...

They note 39,167,616.813 fine troy ounces of gold held in 97,677 London Good Delivery bars.

How many metric tons of gold in 39,167,616.813 troy ounces?

It's 1218.25 metric tons.

For more: https://www.spdrgoldshares.com/media/GLD/file/

For the Internet literate, crawl it and download while you can.

Strongsidejedi · Jul 30, 2013 - 5:54pm

BoE sales were about 360 metric tons.

SNB sales were about 1050 metric tons.

BoE + SNB = 1410 metric tons.

GLD at peak in April 2011 reportedly had 1218.25 metric tons.

SNB was selling at a rate of about 1800 metric tons per year from 1999 to 2008.

1410 - 1218 = 190 metric tons.

The numbers are pretty obvious here. There is wayyy to close of a match between these numbers and the GLD inventory numbers.

GLD piled together the title rights to the bars in London vaults from other central banks. Those were probably lease rights. The GLD title rights were allowed to run up to the level of nearly the entire gold sales from both Switzerland and England combined.

The SNB report from 2000 itself says it all:

"National Bank has concluded dollar forward sales against Swiss francs and euros to the extent of roughly one-third of the future proceeds in dollars. A complete hedge of the currency risk is not necessary because, as a rule, any weakening of the dollar against the Swiss franc regularly coincided with a rise in the dollar price of gold. "

Sounds like GOFO right?

Why is there really any question about what's going on here?

SNB and England are dealing with the title rights to the same bars of gold in the same HSBC vaults.

GLD was in the mix and screwing things up.

That's why Elizabeth and Phillip show up in those very vaults to see for themselves what is going on in December 2012.

So, they got GLD and the rabble investors out of their vault.

My guess is that Soros got a hefty pay off from London for cooperating.

Had he stayed in the gold market, he would have had the queen's gold.

They were running out obviously. The margin was one year of Swiss gold sales in the calculus.

Therefore, the gold bars left in the vault were the queen's personal reserve, not previously hypothecated or rehypothecated in the fractional reserve gold margin.

· Jul 30, 2013 - 5:56pm

SSJ, great stuff! Excellent forensic analysis!!

Strongsidejedi TF · Jul 30, 2013 - 6:01pm

Thanks.

Beinke a la Montreal Quebec set me off on that track.

Looks like the analysis was really fruitful.

McGuire and McLeod and the rest of the gang have been right.
Plus, you set up that analysis with your pointing me to the GLD decline in inventory.

My guess is that the GLD inventory went back to Switzerland.

You have to wonder if Soros was being shielded by the Swiss.

I'm guessing the phone call is something like... "Bonjour Mr. Soros, I am calling from the SNB. We'd like to discuss your investment accounts here. Can we make an arrangement with you to keep your accounts quiet and your fund solvent? By the way, we want our gold back in London. Can you sell your gold to us at once? After all, if you don't, we'll have to work your accounts with UBS, and we really wouldn't want to do that ... right? n'est pas?"

"oh oui oui msr."

"Danke, Merci, and Thank you Mr. Soros, you are such the team player"

"oh oui oui..."

hangs up and calls London desk

McGuire then sees what he sees....am I right?

Strongsidejedi · Jul 30, 2013 - 6:59pm

https://www.spdrgoldshares.com/media/GLD/file/SPDR_Gold_Trust_10-Q_(quarter-ended_03_31_13).pdf

page 13 of the report:

"As at September 30, 2012, the Custodian held 42,803,608 ounces in its vault 100% of which is allocated gold in the form of London Good Delivery gold bars excluding gold payable, with a market value of $76,019,208,058 (cost — $50,726,261,488). Subcustodians held nil ounces of gold in their vaults on behalf of the Trust and 339,296 ounces of gold were payable by the Trust in connection with the creation and redemption of Baskets."

42,803,608 ounces = 1213 metric tons (in line with the estimate above).

Also they report "In the six months ended March 31, 2013, an additional 31,800,000 Shares (318 Baskets) were created in exchange for3,080,127 ounces of gold, 64,000,000 Shares (640 Baskets) were redeemed in exchange for 6,195,243 ounces of gold, and 84,474 ounces of gold were sold to pay expenses.

As at March 31, 2013, the Custodian held 39,264,721 ounces of gold on behalf of the Trust in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $62,754,840,067 (cost — $47,757,325,849) based on the London PM fix on March 31, 2013. Subcustodians held nil ounces of gold in their vaults on behalf of the Trust."

6,195,243 - 3,080,127 = 3,115,116 ounces net lost

3,115,116 ounces = 88.3 metric tons lost from GLD between 9/12 and 3/13.

tmosley · Jul 30, 2013 - 7:08pm

I hat tipped each of those posts, SSJ, and it still doesn't seem like enough. Thank you for the investigative journalism!

Strongsidejedi tmosley · Jul 30, 2013 - 7:34pm

Thank you Tmosley.

I was starting to feel like the rest of the board wasn't seeing those postings.

It would be really interesting if Andrew McGuire could correlate the BoE data with any reports from LBMA on LBMA gold vault reserve.

I just posted that reference to the spreadsheet I found on BoE's own website.

Strongsidejedi · Jul 30, 2013 - 8:07pm

Any conclusions by anyone else?

Here's a few of mine

1. It looks like the governments in the IMF certainly do align gold with SDR's and with other currencies.

2. Gold can not be a barbaric relic when SNB and BoE ledger gold as part of their reserve.

3. When Gold is included in the SDR "basket" at IMF, is that by "tradition" also?

4. FRB-NY had huge outstanding debts purchased from big players in the 2009-2010 timeframe. Where's the $1.2 trillion in assets to balance that sheet? Or, are we still calling MBStuff "asset" instead of "liability"?

5. When US Fed Reserve injects 85 billion per month on various contracts, is that supposed to provide insulation from moral hazard? Who's hazard are we really talking about here?

6. Which rules supreme? The privacy of the FRB or are we talking about the moral hazard of the currency in the United States of America? Congress anyone?

7. Geez, if I can put this together on TFMR, where the hell has Bart Chilton been? He gets paid by US taxpayers for this crap and he's not done squat!

8. Soros is no idiot. That guy got something in return for relinquishing authority and title over the BoE and SNB ingots in London. Or, is it possible that Soros' analysts in London were out having tea at Piccadilly while TMFR readers were triangulating on the prospective buyers? If Au goes to 3000, then Soros' liquidation of GLD shares is a foolish mistake. On the other hand, if Au goes back to 750, then Soros' liquidation of GLD shares will look incredible. Didn't Soros scope out the numbers before he sold millions of shares?

9. Where the hell is Bill Gross in this mix? Was PIMCO completely asleep during the GLD action? Or, is the Bill and Mo show just getting started? Too much surf and turf at Balboa Island?

10. Where is TimG? He was at FRB-NY and had to have inside info on the Maiden Lane and the TARP/TALF/barf me with a spoon. When our national government was coughing up 400 metric tons of GLD shares, did US Treasury department consider the impact on our national trade balance? Or are the exchange of GLD allocated gold ingots in London "off ledger"?

tmosley · Jul 30, 2013 - 8:18pm

I hat tipped each of those posts, SSJ, and it still doesn't seem like enough.

Me too! Like I said SSJ is on fire. That's alot of analysis going on. Guess I'm gonna have to hold up a sign and tell the audience when to applaud.

Anybody have the thought, even a momentary flicker, that all this GOFO and backwardation stuff is a harbinger to some kind of event? I'm not talking about an upward movement in Gold, but some kind of event where it wouldn't be a good idea to be holding $$$? Don't wanna lead too much. Probably just a temporary moment of insanity.

Strongsidejedi · Jul 30, 2013 - 8:21pm

LBMA gold in vaults...mentioned in this paper.

The Role of the Bank of England in the Gold Market

Michael Cross

Head of Foreign Exchange, Bank of England

The LBMA Annual Conference 2009, Edinburgh

https://www.lbma.org.uk/assets/cross.pdf

Bank of England has one of the largest gold vaults in the world; to give you a broad idea of the magnitudes, there are around 400,000 gold bars in our vaults, with a market value at current prices therefore of around £100 billion. The gold in our vaults is held on behalf of our customers and they include other central banks, international financial institutions, Members of the LBMA as well of course as the UK Treasury. The Bank is not unique in its role as custodian, and other central banks do offer similar facilities, most notably the Federal Reserve, and other commercial firms in London and around the world provide custodial services, although these are most commonly provided on an unallocated basis. As you know, the Bank provides an account management service on an allocated basis. That means that our customers holding gold at the Bank have title to specific bars.

As I’m sure you also know, owners of gold are able to mobilize those holdings conveniently by making or receiving book entry transfers between the accounts of our customers at the Bank. Transfers affected in this way are advantageous because there is [no?] requirement for the gold to be physically removed from the Bank’s vaults. Instead, the title to the bars is transferred in the Bank’s back office system. The Bank is probably unique in providing this kind of account management service on the scale that we do. The service provides an important element of the gold market infrastructure in London, which helps participants to trade in a secure and efficient way.

The system has grown up organically over a long period of time rather than by specific design – and very much in response to representations from participants in the London market. We certainly value the dialogue on this and on every other aspect of the gold market in London. As a parallel with the government’s gold lease facility on the Bank of England’s side, which grew out of our role as custodian, is that we used to accept gold unsecured deposits from other central banks and then on place them in the market in our own name at a price that took into account the operational and credit risk involved. However, like the government’s gold reserve, given historically low lease rates, the Bank is no longer able to on place gold deposits at a margin that justifies the credit or the operational risks involved. As such, we don’t currently accept gold deposits from other central banks for on placement.

Strongsidejedi · Jul 30, 2013 - 8:34pm

We all know who the guys are that show up here and talk their negativity in this forum.

https://www.lbma.org.uk/pages/?page_id=152&title=forecast_2013

Well, maybe the Turd mashers can go read the official forecasts posted at LBMA for 2013?

Somehow, despite this being a PM blog, and despite the blogosphere being so small, NOBODY went to LBMA and posted the actual forecasts from EVERY major player in the LBMA!

NONE of the analysts predicted the correct low. All were off by 20% and NONE forecasted the gold sales from Jan to June 2013.

Want to conjecture why?

Because NONE of those analysts on the LBMA and looking at physical really understood the relationship between GLD and the title to the bars in the LBMA and BoE vaults.

And, NONE of those analysts work for Goldman Sachs or JPMChase (the "cartel" as TF puts it). One analyst works for HSBC, but he was way off in his estimates.

If the world at LBMA is going to sit at St. Andrews enjoying the 3 PM hole 19 tea, maybe they can get into their offices and actually post a LBMA inventory report that is able to match to GLD's postings.

After all, it's the same vaults!

And, if you really have 400,000 GD bars there, GLD already counted some 80,000 of them...right? Right?

Kcap · Jul 30, 2013 - 10:23pm

The force is strong with you today.

Excellent....truly beyond excellent analysis tonight!

Kcap

Ag1969 · Jul 30, 2013 - 11:10pm

Have any of you seen the commercial where the little girl says, "infinity times infinity" and the guy pretends his head exploded? I feel like that today with all of the information I am trying to process from just one day! I have listened to the interview with Kaye, watched a Rothschild conspiracy video, listened to SRSrocco, watched the Keiser Report with AM, I bounce over here, and SSJ has rocked the whole PM world with a series of earth shattering posts, and now I still have to listen to Turd's podcast? Make the bad men stop Mommy, so I don't have to do this anymore. It is like Golf, I ... just ... can't ... put .... it ... down....

I hat tipped every post as well SSJ, you totally rock, bubble guppies style!

Bubble Guppies -We Totally Rock !

Edit: Can anyone tell I have a 5 year old? I hear that shit everyday! .... head explodes again.

tmosley · Jul 30, 2013 - 11:20pm

Turd--I think SSJ needs a guest spot for all this info, to make sure it gets the audience it should.

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