Gold & Precious Metals

9 Key Points for the Gold & Silver Markets

With continued volatility in the gold and silver markets, today King World News reached out to 40 year veteran John Hathaway.  Hathaway is the prolific manager of the Tocqueville Gold Fund and he has achieved a 5-star rating from Morningstar.  Hathaway sent KWN, exclusively, an outline of 9 key points in the gold and silver markets.  Here is a portion of one of the 9 key points (all 9 points below):  “The fact that gold has survived the negative news flow from the monetary and economic front is encouraging.  If gold can withstand the apparently changing narrative that had underpinned a bullish stance on gold, it will be a sign of enormous strength.”

shapeimage 24

Most people have no idea what is taking place behind the scenes of the precious metals market – in particular, the silver market.

For many of you, much of what I am about to say may seem like Déjà vu. But because of the timing and the way I see the charts moving, I find it to be my duty to go over this once again.

Most of what is determining gold’s price is paper trading – which is fundamentally flawed. The amount of paper gold and silver contracts that trade on the futures and equities exchanges easily outweigh the amount of actual physical trading that takes place.

That means it’s the paper markets setting the price discovery for gold. It means that short term sentiment – and manipulation – are the causes of both gold and silver’s volatility and not the actual fundamentals of gold and silver themselves.  

For example, in a report published last year (see Before it’s Too Late), Eric Sprott and Andrew Morris pointed out the significant discord between paper and physical supply on the Comex relating to silver:

“…Over 800 million ounces traded each day in April on (the Comex). Further, consider that as at the end of April there were only 33 million ounces of registered inventories to back up all of that paper trading. Just imagine if a mere 5% of all of that buying actually stood for delivery; the entire inventories would be more than wiped out.”

Over a year ago, I published a letter that revealed how most of the gold that is traded in the markets are not actually fully backed by the actual metal itself, as many believe (see The Silver Conspiracy):

For years, most people have assumed that the London Bullion Market Association (LBMA), the world’s largest gold market, had actual gold to back up the massive “gold deposits” at the major LBMA banks. But it doesn’t.

This was confirmed during the CFTC hearings when Jeffrey Christian of the CPM Group said that the LBMA banks have approximately 100 times more gold deposits than actual gold bullion. This means that for every ounce of gold traded in these markets, 99 of them appear from thin air. Has gold and silver been converted into a fiat currency in these markets?

In the LBMA market, for example, an average of 19.6 million ounces of gold was traded per day in July. The world has produced on average approximately 2,497 tonnes per year over the last several years – which is just over 80 million troy ounces.

That means the LMBA, trades nearly a year’s worth of worldwide gold production in less than a week.

In October 2010, we published another letter proving our theory and why silver will climb to new highs (see Enron Lives On?). Silver more than doubled in value since that time, as it nearly reached an all-time high of $50.

In both letters, I mentioned how the trading of both silver and gold is not only highly leveraged, but easily manipulated – especially on the silver side. Many of the shorts used to manipulate the price are both naked and heavily leveraged.

But what happens when these shorts need to cover? What happens when the actual fundamentals of driving gold and silver up reveals its true colours?

Back on July 2011, I wrote a piece on the South Rare Precious Metals Spot Exchange in China, as well as The Gold Exchange.

Here is the excerpt:

In brief, the Pan Asia Gold Exchange features a market-driven mechanism and provides two basic services: a physical gold purchase and distribution network and innovative products based upon physical gold – for anyone. 

In short, that means simpler, quicker, and more cost-effective transactions between all parties for gold-related transactions. But more importantly, it means a new wave of capital injection for the gold market. 

Here’s a video about the Pan Asian Gold Exchange (Make sure you watch it): 

Even whistleblower Andrew Maquire (see The Silver Conspiracy), who is no stranger to shorts and leverage employed by the banks against precious metals, was seen featured in the video. He says the exchange promises better price discovery, less leverage, and should in-time dilute the effects of short-side concentration in both gold and silver.  

We all know what happens when shorts have to cover…

The Pan Asian Gold Exchange could very well help send the price of gold into new territories.  

A New Wave of Capital

The Pan Asian Exchange has signed an agreement with The Agricultural Bank of China (ABC), integrating its customer account information system with their platform.  

That means the exchange will have direct access to the accounts of 320 million retail customers, 2.7 million corporate clients, and nearly 24,000 branches. ABC is China’s third largest lender by assets. When it went public last year, it became the world’s biggest ever initial public offering. It currently ranks No.8th among the Top 1000 World Banks and Forbes Global 2000 named it the 25th-largest public company in the world.

This is where it gets big. Real Big.

Imagine buying gold through your bank with the click of a mouse. The Pan Asia Exchange has now created the first ever rolling spot contract that will allow Chinese banking clients to buy 10 ounces (the minimum transaction) of gold contracts in RMB, through their account, and directly linked to the exchange. If you have an account with ABC, you can instantly buy gold, or gold contracts.  

Think about it: 320 million retail customers and 2.7 million corporate clients, all with the same Chinese appetite for precious metals (see Age of America Over?); all now able to buy gold in 10 ounce increments with the click of a button.   

Once more of these international contracts go live, we’re going to see a strong demand for physical gold as the drawdown of physical gold begins to meet the obligations of the contracts. Buying gold directly from your bank account – that’s real demand. It’s essentially like the SPDR Gold Trust, or GLD, with much stricter leverage guidelines and 100% backed by gold.  

Because of the massive short positions against silver, and gold, every physical ounce of the precious metals taken out of the physical market and into the new Chinese exchange will force a massive short squeeze as leveraged short sellers have to cover their positions in the paper market.

There’s no doubt these highly leveraged shorts are extremely vulnerable and can easily be taken out by physical demand. When you go from trading paper to actual physical metals, that’s when the prices of these metals will skyrocket as the supply can’t keep up with demand.

This new exchange has just slowly begun to trade in local Chinese communities. But they’re going to be fully operational within 6 months. That means in less than 6 months, more than 320 million retail Chinese customers and 2.7 million corporate clients can buy gold online that is 100% backed by bullion – not leveraged pieces of paper.  

Eventually, the exchange will be opening its doors to foreigners.   

The US did it…why not Europe?  

The world’s central banks have been printing a tidal wave of newly created paper money right under our noses over the past few years. And as I have stressed over the past couple of months, they won’t stop.

Since December, the ECB has provided more than €1 trillion of new loans in two separate tranches. In the latest tranche, 800 banks grabbed €529.5 billion of new loans at 1% for three years using almost any form of collateral.   

While it may not directly be Quantitative Easing, the outcome is the same. Just like the US, this type of negative real interest rate loan is just another form of QE. It’s another way of injecting money without spooking the world, and without violating any charters.   

This, in effect, means the banks effectively decide how much money is created. Because the ECB
does not directly monetize the debt of the weak sovereigns, which it is prohibited from doing by charter, it instead gives the commercial banks the ability to take their newly borrowed money and use it to buy sovereign debt.  

In other words, it’s as if the ECB purchased sovereign debt through the commercial banks and is effectively “printing” new money without “technically” violating its charter.

We know currency is being devalued as a result. The amount of money being created is more than we’ve ever experienced – and the record breaking amounts won’t stop.   

Gold WILL be above $2000 before the year is over and silver easily topping $50.  

The opportunities to participate are mounting.

Until next week,

 

Ivan Lo

Equedia Weekly  

Time To Sell Gold?

Not if you’ve Mark Leibovit who argues that “Gold retraced into the mid 1600s as hoped, silver did not quite reach the desired 30-31 level. Meanwhile, should spot gold clear 1792 and spot silver clear 37.60, fasten your seat belts – a moon shot will then likely unfold before our eyes.

Screen shot 2012-03-09 at 1.43.03 PM

Screen shot 2012-03-09 at 1.43.30 PM

The Financial Times – Bernanke’s QE silence a blow to gold price

The 5 per cent fall, gold’s largest daily drop in more than three years, has triggered a nervous reappraisal of the precious metal among some investors: how strong can the fundamentals of the market be, they ask, if a non-denial from the Federal Reserve chief can have such a marked impact? The nervous shake-out has continued this week with gold on Tuesday dipping below its 200-day moving average, a technical indicator closely watched by traders, for the first time since mid-January to touch a low of $1,664 a troy ounce. Many analysts and investors believe the eventual shift to monetary policy tightening by the Federal Reserve will mark the end of gold’s decade-long rally, which has lifted prices from less than $300 an ounce in 2001 to almost $2,000 last year. By promising to keep rates at zero until 2014, therefore, the Fed has pushed back the gold price peak, which many analysts had expected to come in late 2012 or early 2013. “The consensus within the Fed to extend the zero interest rate policy to beyond 2013 does, all other things being equal, imply an extension of the gold bull market,” says Philip Klapwijk, head of metals analytics at Thomson Reuters GFMS, a leading precious metals consultancy. “Maybe in the short term QE3 matters,” agrees a gold specialist at a large hedge fund. “The more important thing is that rates are on hold and I don’t think that is going to change.”

Marc Faber – Gold Far From Bubble Phase: Marc Faber

With more than 40 years as an economist to his credit and claiming gold as the “biggest position in my life,” Gloom Boom & Doom Report Publisher Marc Faber assures us that gold is nowhere near a bubble phase, but cautions that corrections of 40% are not unusual in a bull market. At the end of March, Faber will share his secrets for surviving corrections at the World MoneyShow in Vancouver. In advance of that appearance, he sat down with The Gold Report  for this exclusive interview where he discusses his bias for portfolio diversification in terms of geographies as well as asset classes.

Also from Marc Faber March 9th/2012 –Marc Faber : Gold Price may not exceed the $1,922/oz in 2012

This year the Gold Price may not exceed the $1,922/oz high that we reached on Sept. 6. Maybe it will. I’m not a prophet. I’m just telling people that I’m Buying Gold and holding it. I don’t speculate in gold. If you Buy Gold, you better understand that the price could always move to the downside. If you don’t understand that, don’t invest in gold—or in anything.”

 

Mark Leibovit’s Daily Gold Comment (More on Mark’s services is available at http://www.vrtrader.com/login/index.asp including a Trial Offer. Mark was  #2 Gold Timer for 2011 and the #1 Gold Market timer for the 5 year period ending in 2010)

Mark Leibovit’s Daily Gold Comment via Don Vialoux’s Timing the Market:

GOLD – ACTION ALERT – BUY (Continue to look to take delivery of the physical metals)

Short-term, gold and silver are continuing to bounce off oversold positions. While gold retraced into the mid 1600s as hoped, silver did not quite reach the desired 30-31 level. Meanwhile, should spot gold clear 1792 and spot silver clear 37.60, fasten your seat belts – a moon shot will then likely unfold before our eyes. The sell-off was clearly ‘engineered’ and the scoundrels could easily engineer another one at a moment’s notice. This is why I encourage ‘stacking’ silver and gold. In other words, using weakness to accumulate the physical metal and put it in a place where government can’t get it or find it. I’ve been asked when will be the time to sell silver or gold. Will it be when it hits a particularly high price such as $11,000 in gold or $500 in silver? I cannot answer that question with any great certainty this morning, but my gut feeling is the time to sell will likely be when THE ENTIRE STRUCTURE OF THE WESTERN FIAT BANKING SYSTEM COLLAPSES AND SOMETHING ELSE IS ABOUT TO REPLACE IT!

Recent recommendations by Mark include purchases of Taseko (TGB), Smith & Wesson(SWHC), Market Vectors Gold Index(GDX), North American Palladium(PALL) and the High Yield Bond ETF(JNK)

 
 


Precious Metals Monitor: Major Reversals In Gold & Silver Reset Technical Expectations

It’s been a dismal week for precious metals, as gold, silver, platinum and palladium all dropped precipitously. The correction began on Wednesday of last week after Ben Bernanke’s testimony to Congress. But it wasn’t what the Fed Chairman said that spooked precious metals traders, but rather, what he didn’t say.

“When Bernanke didn’t mention the possibility of another round of [quantitative easing], that was enough to take the fizz out of everything,” said Dennis Gartman. “Before [the testimony], gold was looking quite strong, but [afterward] it just gave up the ghost.”

The implication is of course, that gold had been pricing in more stimulus — such as a third round of quantitative easing (QE3) from the U.S. central bank. Yet that may not have been the case.

“Negative real interest rates and accommodative monetary policy were and remain the key drivers of investment demand,” said Morgan Stanley. “Bernanke’s testimony [last week] did nothing to remove this benefit.”

“Under these circumstances, QE3 would have been icing on the cake for the monetary easing trade, but not the fundamental driver of bullish investor positioning,” the bank concluded.

Indeed, as of the close of Monday, exchange-traded fund holdings of gold totaled a record 77.4 million troy ounces, indicating that at least one segment of investor demand for the yellow metal remains strong.

goldetfholdings20120306

…..read more and view 24 charts HERE

Political risk in the Middle East has increased significantly with war between Iran and Israel almost inevitable, and precious metals and equities investments offer some safety, Swiss money manager and long-term bear Marc Faber said on Tuesday.

“Political risk was high six months ago and is higher now. I think sooner or later, the U.S. or Israel will strike Iran—it’s almost inevitable,” Faber, who publishes the widely read Gloom Boom and Doom Report, told Reuters on the sidelines of an investment conference.

Brent crude [LCOCV1  122.49    0.51  (+0.42%)   ]traded near $123 per barrel in volatile trade on Tuesday on fears of a disruption in Iranian supplies. Israeli Prime Minister Benjamin Netanyahu showed no signs of backing away from possible military action against Iran following a Monday meeting with U.S. President Barack Obama.

“Say war breaks out in the Middle East or anywhere else, (U.S. Federal Reserve chairman[cnbc explains] ) Mr. Bernanke will just print even more money—they have no option… they haven’t got the money to finance a war,” said Faber.

“You have to be in precious metals and equities… most wars and most social unrest haven’t destroyed corporations—they usually survive,” he said.

He said that Middle East markets had largely bottomed out, though regime changes from the Arab Spring revolutions were unlikely to be investor-friendly.

Faber said that in uncertain times, investors had to reconcile themselves to volatility.

“If you can’t live with volatility, stay in bed,” he said, pointing out that even cash.

The 66 year-old, who has earned the moniker “Dr Doom”, earlier told the conference that the likelihood of war in the Middle East was boosted by Western powers’ imperatives of keeping China in check, given its dependence on Middle Eastern oil.

“The Americans and the western powers know very well they cannot contain China economically… but one way to contain China is to switch on and switch off the oil tap from the Middle East,” he said.

“I happen to think the Middle East will go up in flames,” he said.

(POWERFUL Speech!) PM NETANYAHU’S SPEECH AT THE AIPAC 2012 – WASHINGTON DC Making the Case for Preventing Iran from acquiring Nuclear Weapons.

{youtube}4ufkFEU2kjw{/youtube}