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The GLD Two-Step

90
Thu, Feb 20, 2014 - 11:32am

Much has been made recently about "metal flowing back into the GLD". As if this is a sign that "investors are returning to the sector" and "the ETFs are working just as you'd expect". Uhhhh....not so much. Let's look at the actual numbers.

First of all, you know the story. While price was beaten savagely lower in 2013, allowing JPM and the other banks to either dramatically reduce or eliminate altogether their net short positions, the GLD was raided for metal to cover the ever-increasing demand from China and other dollar creditor nations. From a 1/1/13 "inventory" of 1,349.92 metric tonnes, the GLD was consistently pillaged for supply and it finished the year at 798.22 mts, down over 40%. Even though price initially bottomed on 6/28/13 at $1180, the GLD shed a total of 171.28 metric tonnes between that date and the double bottom date of 12/31/13.

Apologists for the fractional reserve bullion banking system claimed that the "inventory" declines were due to investor liquidations, caused by lower prices for gold. Only a gold bug kook would believe that the GLD raid was being orchestrated in an effort to dislodge physical supply. "Just wait", the Apologists said. "The gold will return as prices rise", they promised. 

Since The Double Bottom was established on New Year's Eve, there have been all sorts of articles and commentaries proclaiming the return of gold to the GLD. A quick Google search yields all sorts of results. Here's just a sampling:

https://www.bloomberg.com/news/2014-02-14/gold-extends-climb-to-three-mo...

https://www.proactiveinvestors.co.uk/columns/ft-money/15417/gold-etf-hol...

https://goldnews.bullionvault.com/buy-gold-0131020143

https://seekingalpha.com/article/2025061-will-the-gold-and-silver-surge-...

After perusing these articles, you would think that gold was rapidly flowing back into the GLD as prices rally. Of course, if you did think that, you'd be wrong. Let's take a look at the actual numbers and see if we can spot a pattern.

Though there were a few, small additions to the GLD back in August, for most of 2013 there were nothing but daily withdrawals. The first, major addition that got everyone's attention was on 12/20/13, when 5.30 metric tonnes suddenly appeared in "inventory". The following market day, 12/23/13, that metal was just as suddenly removed as 8.40 metric tonnes left the building. Hmmmm, said Turd. That's curious. Since then, this happened two more times. There was a deposit on 1/17/14 that was completely removed by 1/23/14 and there were a series of deposits in late January and early February that, as of yesterday, have also been removed. It looks like this:

DATE NET CHANGE TOTAL "INVENTORY" PRICE

12/19/13 -3.90 mts 808.72 mts $1194

12/20/13 +5.40 814.12 $1204

12/23/13 -8.40 805.72 $1198

1/17/14 +7.49 797.05 $1252

1/22/14 -1.20 795.85 $1239

1/23/14 -5.39 790.46 $1262

2/13/14 +7.50 806.35 $1300

2/14/14 -5.10 801.25 $1318

2/19/14 -5.64 795.61 $1320

So what do we see here? Every major addition that has occurred over the past two months has been met with an almost immediate, subsequent withdrawal. It appears that every time an Authorised Participant comes up with some gold to cover and close a short sale, another Authorised Participant quickly grabs the metal in order to settle one of its own physical claims. Recall that we've been writing about this phenomenon for months, as gold rapidly flows from London to Switzerland, where 400 ounce bars are being recast into Asian kilobars with official government insignia. Just today, there's another headline detailing the Swiss export of gold: https://www.bloomberg.com/news/2014-02-20/switzerland-sent-80-of-bullion...

The tight supply of London Good Delivery (LGD) bars is also evidenced by the persistently negative Gold Forward rates. Negative GOFO used to be an anomoly, occurring for just 7 days over the period of 1989-2012. Lately, though, it has become the status quo as one-month GOFO rates have now been negative for 94 of the past 160 market days. That they remain negative currently is obviously one of the factors prohibiting Cartel Bank price raids into this 2014 rally:

DATE 1-mo 2-mo 3-mo 6-mo 12-mo
11-Feb-14 -0.03400 -0.02000 -0.00400 0.05800 0.12600
12-Feb-14 -0.04800 -0.02600 -0.01200 0.04400 0.12200
13-Feb-14 -0.04600 -0.03000 -0.01000 0.04400 0.12200
14-Feb-14 -0.05000 -0.03000 -0.01000 0.03600 0.11800
17-Feb-14 -0.05000 -0.03200 -0.01000 0.03400 0.11600
18-Feb-14 -0.05200 -0.03400 -0.01400 0.03800 0.11400
19-Feb-14 -0.04800 -0.03000 -0.01000 0.03400 0.11000
20-Feb-14 -0.05200 -0.03400 -0.01200 0.03200 0.11200
Getting back the GLD "inventory", one final note. Did you notice the net change YTD?
As you know, price hit a Double Bottom on 12/31/13 at $1180. Since then, it has rallied over $140 or nearly 12%. But the GLD is now down YTD, falling from 798.22 mts to yesterday's 795.61. "Investor liquidations" my arse! And without the 23 metric tonnes "paid back" to the GLD in covered shorts, GLD "inventory" would now be down 26 metric tonnes YTD!
And it's not just the GLD. As Jesse notes here, if you combine all of the popular funds and exchanges, "inventories" declined by over 61 metric tonnes in January...all while price was rallying from $1180 to $1260. https://jessescrossroadscafe.blogspot.com/2014/02/61-tonnes-of-gold-bull...
So, don't buy this nonsense that "gold is returning to the GLD" and that "the ETFs are functioning just as they should". Physical gold is clearly in very short supply worldwide as demand is insatiable. Continue to stack, while there's still time. "Emere stupri intinge!"
TF

About the Author

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

  90 Comments

Gent · Feb 20, 2014 - 8:13pm

In yesterday's thread there was a link to a Rick Rule interview

As to gold moving around Rick said {paraphrased}

"In {time} Germany received {small amount} while {large amount} went to the East. It's really simple to figure out .... the Chinese are just better at loading gold bars onto planes than the Germans"

AlienEyes · Feb 20, 2014 - 8:16pm

May a falling bankster land on your poodle ! devil

HeirHelmut Terp · Feb 20, 2014 - 8:17pm

Although I still own mining stocks myself, IMO buying mines is not investing. It is speculating.

But in case you really want exposure to the mining sector, then there are much better opportunities than buying single mines. I'm myself closing more and more of my positions out and switching to ETFs. They are fantastic and you can be so lazy and have much more spare time!

1.Although I know how to judge drill results, I can tell you, that it is almost impossible to judge what is really going on. Even geologists have problems to interpret the information.

2. Mining is so risky, that anything can happen anytime to a mine. The ground, the weather, politics.

3. In this business the characters are at least equally bad as in the financials sector. Whenever an insider tells you something "between you and me", sell the stock and don't touch it with a ten feet pole!

4. It is incredible how much pushing is going on. Media focused on the resource sector are worse than MSM. Forums are polluted with multiple identities. Companies themselfes create infill drills on old holes to create positive news.

5. These risks are ADDITIONALLY to the already risky and volatile precious metals prices.

Gladly today there is no need to take this risk anymore, thanks to ETFs.

If you really want miner exposure (NOT for investing), buy some good low cost ETFs and forget all the tedious studying of earnings reports and MD&As and all the additional risk of individual stocks.

If you do not study the reports, then you should NEVER buy a single company anyway -> ETF!

NEVER EVER go for a tenbagger!!! Forget all these stories from Casey or Sprott and the pushers! If you go for a tenbagger, you will not realize all many 30% and 50% and 100% gains. That's what they want. They want you to buy and hold and dream. But you have only one chance since you cannot compete with their information advantage: they are slow, because they are big. Therefore your chance is to be fast and quick. They need days to build up positions and to exit. You can do this in a second.

Do not ignore chart technics.

And never become greedy. Most people psychologically are not suited for trading. Once the target is reached and they have the pleasure feeling of +50% they want more. If you do not have this under control, stocks are not suited for you and resource stocks even less. How have you been trading commodities?

Always make a plan first - entry + exit + stop. And stick to your plan! Also something most people are unable to do no matter how often you explain it to them. Always place your stops and NEVER change them to avoid closing out the position. Because all big losses start as small losses.

It is nothing ordinary that after you have been stopped out, that the chart turns. If you cannot live with it and cannot switch off after the position is closed, you will probably be sucked in at the wrong times, or you will change your stops - because then you are weak and not suited for trading and will become SLAUGHTERED.

Learn to be patient. Watching a missed opportunity how it makes 30% or 100% is not easy. Especially if you exited prior. You must develop as much self discipline, that you can watch any missed opportunity without any feelings of sorrow or greed because you KNOW why you did not enter it.

Nobody knows where a stock will go. The only thing you can determine is how much you are willing to lose. Manage risk!

After a successful phase, which can in the resource sector can bring incredible gains, do not begin to believe, you know something or you are good! Always keep in mind, that nobody knows Mr. Market and he will destroy EVERYBODY who believes he is good and knows what he will do.

All this sounds easy, but nevertheless most people are not capable to execute it.

The mining sector is, besides futures trading, the most dangerous in the financial world. Be very careful and trust no one.

Also do not rely on interpreted news (financial media, blogs). Use the raw data and interpret them yourself. Read the statements of the central banks yourself and do not let others interpret it for you. Everyone out there has an agenda.

And this sector definately is nothing where retirement savings should be moved, too.

Terp · Feb 20, 2014 - 8:28pm

Thanks Heir!

All good advice! Great advice.

I don't have so much invested right now that it would hurt me so bad if every single company went bankrupt - since I know my limitations with stocks and am now mostly "gambling" with some of my inherited $$

All true what you said about investing and I made every mistake you could in my first two years trading commodities. Lessons didn't come cheap. Needless to say, emotions did a lot of my trading for me even though I told myself they wouldn't. Yes, Stops were moved, profits were not taken at the price I told myself to take them, hehe.

Still - then and even now - I don't trade with anything I can't afford to lose. I'm a lot more strict now and try to only time "big" moves rather than day-to-day stuff.

And you're right - I don't have time to look at all these companies and figure out what they're up to and how much money they have on hand.

Thanks a ton for taking the time and giving me your advice!!!

I was joking before, but perhaps I will use that IRA $ for a monster box or two =)

Terp

Undecided · Feb 20, 2014 - 9:03pm

O Canada...

Oh! Canada...

Ohhhhhhhh CAN A DUH!!!!!!

Lights out. 

benque · Feb 20, 2014 - 9:04pm

Do not do what I did, after I did what I did first....and you will be fine.

Can't wait to be rid of the damn poodle....oh wait, look! Up in the sky! Its a bird! Its a plane! No! Its Jamie!!

C'mon frenchie, sit right here; don't move. (Love it, 2 birds with one bankstah)

infometron · Feb 20, 2014 - 9:16pm

US, eh? ;^)

Occasnltrvlr · Feb 20, 2014 - 9:20pm

...A bunch of physically-fit young women be aggressive and violent, I'd prefer vegetable oil to ice.

benque · Feb 20, 2014 - 9:27pm

Either way....slip-sliden-away. I approve of both.

edit: Remember roller-derby?

Quisp · Feb 20, 2014 - 10:20pm

Wow...... not that I can afford one. But I sure want one! That's 22 pounds of silver!

4 oz · Feb 20, 2014 - 10:33pm
Video unavailable
gadsden@hushmail.com 4 oz · Feb 20, 2014 - 11:13pm

Interesting points about supply and hoarding 

ivars · Feb 21, 2014 - 2:01am

Silent on DJIA except it is still below highs:)

On PM front: GRS so far this week has not convincingly broken the bottom support of long term channel..but it was very close. Important if the week end this way or not:

Mantis · Feb 21, 2014 - 3:20am

Loved that quote and noted the use of the english version Arse

Never let the truth get in the way of a good lie.

Thanks for the public article.

The Fast Show - ARSE
twippers · Feb 21, 2014 - 6:23am

I'm a huge fan of silver but this is definitely one time I'm much happier holding gold in my hands.

Orange · Feb 21, 2014 - 6:51am

Power is out. Generator works just fine.

Prepare and stack!

infometron twippers · Feb 21, 2014 - 7:04am

Wow! Lucky guy!! Being embraced by and pointing to pure gold (that would be Hayley Wickenheiser, one of the greatest hockey players ever! Canada's female equivalent of Wayne Gretzky, so to speak, for those who may not know :^)

What was the deal with that "cross check" leading to the winning power play goal, twippers? That was about as clear a case of a penalty shot call as I've ever seen. Love to know what Hayley's comments to the referee were on that!! Can you share them?

Also, what was with those two previous penalty calls, the one on Canada and the one on the U.S. in overtime? Man, I've never seen such questionable calls, three in a row! IN OVERTIME, no less!!

EDIT: Lest I forget, kudos to Jenny Jones & crew! Right on the button!!

benque · Feb 21, 2014 - 8:11am

I'm green with envy on three fronts.

As well, can't express how proud we all are back home for Hayley and the whole team.

SilverSurfers · Feb 21, 2014 - 9:25am

are putting up a little spat, eh? 21.83, in range for TGIF!! come on, all together ..

RUN BABY RUN!!! Drazyuvietcha moya drook, loubit photographieyu, twippers ... yes

ROCK ON!!!

https://www.youtube.com/watch?v=VZ5bS3_BCDs

PROFOUND: Bullion Resistance Levels are defensive stops to the destruction of global Totalitarian Socialistic Fascism, ie, gov enslavement of people, for when bullion supplants fiat, by market forces, bullion in pocket is one of the 5 pillars of FREEDOM, to wit, god gold guns land and vote, (currently held high by many brave Ukranians).

Sidebar: Russian wife is furious over the rebellion in keiv. GO POUND SALT!! lol, the fact that Russians would get upset by what is happening in Ukraine, an independent state, SPEAKS VOLUMES, does it not? There is your clue ..... and its not about sustaining democracy. In chechnia, the chess master got a pass, to black flag terrorists and federation rebels, in Ukraine he plays the tyrant, along the Black Sea, in the Bay of Pigs.

twippers · Feb 21, 2014 - 9:43am

Twippers, that's awesome! Congrats!

TreeTop Dweller Orange · Feb 21, 2014 - 9:44am

Orange,

we must live in the same neighborhood...

twippers benque · Feb 21, 2014 - 9:47am

The ref was from England. The hockey capital of the world!

SilverSurfers · Feb 21, 2014 - 10:35am

10year yield, 2.78, rising? Artificial low rates is negative real rates, gold positive, whereas high rates indicate fiat instability, also gold positive, also responding to those low rates. After a decade of negative real rates, and 12 year bull thereon, the expected wave 3/5 up in POG could be telling of the instability to come, baked in the cake, now launching in a new shift for bullion up move to run monstrously to the upside. https://www.marketwatch.com/investing/bond/10_year

yeah, GLD may be doing the two-step, but the POG will do the boogie.

https://www.youtube.com/watch?v=8QHehUAG5Yc

Final - Boogie-Woogie World Championship 2012 - Fauske Norway

next post: dg, you are so ON IT!!! thanks much

Fred Hayek · Feb 21, 2014 - 11:27am

Now, of course it could just be a coincidence. The authorized participant, scumbag bullion banks could have simply decided in each case to redeem shares worth several tons of gold right after a similar sized deposit had been made. Over and over and over.

Or, they just couldn't get a hold of enough shares to do a redemption but, luckily, did get a hold of a huge numbers of shares, just as many as equalled the most recent deposit into GLD. Over and over and over.

Or . . . there really aren't 790 tons of gold held by the GLD and the scumbag bullion banks can't simply withdraw 6 tons of those 790 tons at any time but have to wait for another scumbag bullion bank that was able to somehow get a hold of 6 tons of gold and shovel it into GLD to do so. 

Fred Hayek · Feb 21, 2014 - 11:34am

The tone of complete exasperation on the part of the guy from buba is practically audible between the lines. You can almost hear his internal monologue, "Why are they asking me real questions!?!"

Fred Hayek · Feb 21, 2014 - 12:03pm

"Or . . . there really aren't 790 tons of gold held by the GLD and the scumbag bullion banks can't simply withdraw 6 tons of those 790 tons at any time but have to wait for another scumbag bullion bank that was able to somehow get a hold of 6 tons of gold and shovel it into GLD to do so."

And now you know why there are always quotation marks around "inventory"...

bullion only · Feb 21, 2014 - 12:12pm

If China can import through the open market through Shanghai over a thousand tons of gold in a year and have it all re-smelted in Switzerland then take posession and store it in private vaults, then why can't the US print some money and buy some gold the same way as China buys and return it to Germany. I mean we are not talking about much fiat when the US prints 85 billion a month.

In fact why doesn't the US print as much as they want and buy up all the gold as China does and restock Ft.Knox?

Could it be:

1. Special deal with China that we won't compete for the gold as long as you don't destroy the dollar?

2. Not enough gold to go around? (But only 300 tons for Germany is not much so that dosen't make sense)

Any thoughts?

The Vet TF · Feb 21, 2014 - 6:29pm

The trustees must have some sort of time limit that they enforce on the APs to ensure that GLD stock sold naked short by them is backed by the deposit of actual metal as required by the ETF trust. I am assuming that when pressed to make good on the delivery one of the APs simply deposit the gold one day and another one redeems it again the next day in a round robin manner. 

This is almost the same scam that the naked short brokers did for years. After getting all the extensions available (they could get weeks not days) when they still could not deliver the stock they had sold naked short and to avoid being forced to buy in stock and pressure the price, they arranged for another "mate" to sell them the same number of naked short shares. This effectively transferred the position to the "mate"and started the delivery clock extensions again. A couple of brokerages working together could keep this up forever, just swapping the naked position between each of them every couple of weeks.

Texas Sandman · Feb 23, 2014 - 2:32pm

That's the mid-point of the "W" bottom we've been tracing.

If we breakout there, the measured move goes to $32 (25-(25-18) = 32)!

Just bought another 100 silver phils. Though my usual pattern is to do buys on beat-down days, this is a celebration.

Two consecutive weekly closes above the 200 day MA. The technically oriented hedge funds are likely to be watching that and getting very nervous over their shorts right about now.

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