08 January 2014

In the land of the goldbugs who choose to be blind, the one-eyed blogger is king

I have a post up on the corporate blog about Comex stocks coverage (owners per ounce) talking about yet another example of the one-eyedness (a mind not open to all the data and varying interpretations) I discussed in yesterday's post. The post is a rework/expansion on this personal blog post on Comex stocks.

The interesting thing to me about those bloggers who have been using Nick Laird's owners per ounce charts for registered gold and its current 80:1 ratio is that to get to that chart you have to scroll past the chart for total gold stock and its 5:1 ratio. In other words you have to wilfully ignore the 5:1 ratio and the big difference between this and the 80:1 ratio.

Now I can admit that maybe such bloggers disagree with my views that you have to look at both eligible and registered stocks (although I fail to see how when there is over 5 million ounces of conversion volume between the two categories during 2013) in assessing the likelihood of a Comex default or shortage of gold, but surely anyone who isn't one-eyed would want to at least discuss/explain the 80:1 and 5:1 discrepancy to their readers?

For those who like to use both of their eyes, consider these points from the corporate post:

1. people only keep metal in a Comex deliverable form and in Comex warehouses because they are expecting to sell it back in the futures (if they took it off eligible there would be costs to get it accepted back as eligible) and they will sell it if the price is right

2. sellers may try and "hide" their intention to sell by holding eligible (making it look like gold is not available for delivery and thus get the price bid up) then at the last minute instantly change their gold to registered status

3. Silver Doctor's theory that “the owners [or eligible] would likely be strong-armed or forced into converting their eligible supplies into registered should things become desperate for the cartel

4. 2.6 million ounces (80 tonnes) was converted from eligible to registered, indicative of point 2

5. 3.2 million ounces (100 tonnes) was converted from registered to eligible, indicative of strong hand longs standing for delivery?

With some points from this post:

5. you can deliver 3 kilo bars against a Comex futures contract (note there is a cash adjustment for any over/under ounces as the result of delivery of odd weight 100oz bars or kilo bars against a futures contract)

6. BBs have been proven to deliver tonnes of kilo bars into Comex warehouses, this could indicate weak markets where they park metal until demand returns (see here: " the owner may simply want to vault their metal securely, before using it to meet demand elsewhere – for manufacturing, or from investors in another marketplace, such as Asia")

7. consequently, movements of round ounce tonne lots, indicative of kilo bars, out of the warehouses may be an advance bullish signal of Asian demand returning

And this interesting story from Martin Armstrong:

8. "To create the fundamental, they moved inventory from New York to London. They were manipulating silver as always. Playing games with the inventories. They were moving silver from New York to London where the Buffett orders were being executed. This made the US warehouse inventories drop sharply." to give the impression of a shortage of silver

And finish with this interesting point made to me in an email by a Mr D:

9. A BB is only legally obliged to deliver from registered stock. Failure to deliver eligible gold wouldn’t be a default. So this eligible gold could be safely used as the basis for a lot of transactions outside Comex that are completely opaque while it the gold remains on show to the Comex punters

I think all the above makes a strong case for looking at the total Comex stocks (both eligible and registered). I personally think the Martin Armstrong story is the most telling. By focusing on the 80:1 ratio bloggers may well be (hopefully innocently) helping those playing games with reported warehouse stocks.
I'd like to think that after this gold bear market the eligible stocks are now mostly held by strong hands rather than just being BB inventories, and thus a squeeze is in play, but I'm keeping my mind (and both eyes) open to the fact that the figures may be gamed. I hope you also choose to not be blind.


  1. Thanks for the blog post once again. I have one further observation for you to consider.

    In the beginning of December, Comex Gold Stock report showed availability of 700k ounces of registered gold. During the month, very little/practically no new gold was registered. Of December deliveries, 625400 ounces (96%) went to JP Morgan house account. The remaining 4% was shared by the rest of the bullion banks.

    Here's what I'm wondering:

    1) JPMs ability to get all of the available physical (and nobody else "wanted" to have any) should raise some eyebrows. How did they do it?
    2) To me, it looks that practically all registered gold is now in the hands of JPM. Did they just corner Comex? Will the same phenomenon of "nobody else but JPM wants physical gold" have a replay during the next delivery month? If it does, then it definitely looks like something fishy is going on.

  2. @OneEyedBug:

    we have no idea what % of the COMEX registered gold JPM owns right now.

    this is because of EFP/EFRP transactions, which go up everyday to the tune of hundreds of thousands/millions of ounces. (Look at the PNT volume column on the COMEX daily report for gold... ie: more than 9000 contracts yesterday...)

    of course, the charlatan goldbug bloggers will, come the end of January, tell you that there MUST be an imminent problem with February deliveries BECAUSE THERE IS NO REGISTERED GOLD TO BE HAD - JPM OWNS IT ALL. which is blatantly false, based on their lack of understanding of how it works.

  3. @KidDynamite

    I fully understand that eligible gold may be registered for delivery any time. Whether it happens, remains to be seen. I think there will be more registered gold.

    However I have some difficulties understanding, how is it possible that one party in the Comex marketplace stopped 96% of all delivery notices.


    That does tell that 6254 contracts worth of physical gold were delivered to JPM on December. Doesn't it? Is there some other report (pls. provide a pointer) that I should look at to understand the movement of physical gold in Comex?

    If similar phenomenon occurs again in February (or alternatively, nobody, not even JPM, gets any gold because no new registered gold appears) I'm very tempted to make some preliminary conclusions about availability of physical gold in Comex. One possibility then is, that the metal is indeed in some strong hands, of which one belongs to JPM.

  4. Bron

    Your pts on comex inventory, I believe, are valid. As long as registered owners are willing to lend gold to bullion bankers, why carry a significant amount of eligible gold? If that spigot gets turned off, the ball game changes quickly.

    Miner production ex china/russia is around 2000 tons per year. The change in global ownership (demand) imo is around 5000 to 6000 tons per year. In 2013, massive liquidations of gold etfs and the lbma were required to fulfill demand. In 2014, the liquidations are largely over. Koos Jansen graph of UK imports in 2013 showed that they were around 200 to 300 tons, a small fraction of their exports. Virtaully, all gold net gold surpluses accumulated by the UK since 2009 were liquidated in 2013. Nothing left.

    At $1200 gold the change in global ownership imo will continue at the 2013 pace until pog ramps up. It may even accelerate. Where are the bullion banks going to get say 3000 tons of gold to meet demand?

    It's not going to come from the existing gold supply. Only about .5% of the 170,000 tons of worldwide gold is recycled as "old gold". It's been in decline now for several years. Note that when gold hit $1900 an oz it was already in decline. A huge chunk fo the wgc old gold tonnage is excess scrap from fabricated products and leased gold. Their direct response to me through Randall Oliphant's company (New Gold) on this subject was that it is too opaque to consider breaking out. Baloney!!

    Big imbalance therefore between supply and demand. Price will bring supply and demand into balance.

  5. I really dont care for that COMEX jive talk at all.

    I try to look at it like that: Let's assume for a second that the "evil paper price of gold" is really a 100% scam, just like all those nutjobs and self-proclaimed experts and ex-car-salemen tell you. That just some evil JPM bankster sits there and types in the price at free will.

    Now ask yourself in this scenario: When is this fake made up price too low or too high? How could we tell?

    IMHO: When there is less and less physical gold on the physical sale shelves in your coin shop or mint, than we know the price is too low, simple as that. When it is constant the price looks okay and when it is growing it looks overpriced.

    Okay, you might say, nobody has a total overview of all those shelves worldwide. True, but I have not noticed in any country any kind of shortage on any kind of product (also older coins). THAT is the simple truth.
    And all that "chinese buy hand over fist" just like Bron also mentioned points to the opposite: All those people are getting there stuff for which they wait in line for hours.

    And just like Bron wrote "Time to man up". It is what it is, no reason to blaim somebody or to come up with some bogus storries.
    I am indeed personally a little bit disappointed, I think mainly because I dont really understand the price action. On the other hand I am happy about having my stash over the last five years, helped me to sleep much better, dont know how else I would have managed it and will help me in the future.

    Greets, AD

  6. All valid points. And dependent on the vault numbers being valid too.

    I have bought over the counter at Scotia Mocatta in Toronto and can still remember the time the teller tried to talk me out of taking the purchase in bullion form. I can also remember them running out of metal.

  7. @oneyedbug -

    i seem to have confused you. let me try again:

    1) i didn't mention registering eligible gold, but yes, I agree that will happen, just like it did in December if you watched the vault movements.

    2)JPM stopped 96% of Dec deliveries because they were long 96% of DEC gold futures. Is that unusual? yes. i think it is. it's odd. strange things can happen at year end with funding and balance sheet issues, and JPM probably has a bigger balance sheet and thus better capability to trade the gold curve than most banks, but 96% is still bizarre.

    3)my point was that another 6000 contracts might be settled in Feb because that "Registered gold that JPM took delivery of" may not be JPM's anymore. They can trade out of it via EFP transactions, which happen daily in plentiful size. you can see them in the COMEX daily volume report in the PNT Volume column.

    in other words, JPM may have already "exchanged" those 6254 deliveries (swapped for Feb or other futures, etc)... someone else may own them now. we have no idea.

    4) I would suspect that JPM's goal is not to be a "strong hand" in gold (ie: they don't care where the price goes), but to make an extra buck on calendar spreads or EFP transactions because they have the most flexibility to do so.

  8. Honestly I do not understand the hype about physical delivery at Comex. Comex is a future trading platform for Gold, the physical delivery volume is too small compared to the OTC market in order to play any role. The DAILY delivery volume at LBMA is someting from 10-30t, whereas the MONTHLY delivery volume at Comex is probably about 5t-10t It is simply not worthwile to discuss physical delivery at Comex, waste of time. The goldbugs are right, it is just paper trading, nothing else, but this paper trading sets the price at the moment.

    The OI has fallen from over 600k to 380k, that means that the COMEX is less significant for the paper traders.

  9. Bron, you're an idiot

  10. Yo Bron: pull out my one-eyed trouser snake and insert it into your mouth

  11. One things for sure 2014-2015 will tell us what's up with Bullion. I say get the gold while you still can. It may go lower but so what! Its going 5-15 times higher very soon.

  12. First. let me say that I have a `reinforced` tinfoil hat next to my computer just for these occasions.

    I believe that there is some gold that is just for show. This `Show Gold` never comes out (unless someone screws up) of the eligible category and would only come out in the most extreme circumstances. The risk for the `Show Gold` is that it is assayed or even worse shipped to Switzerland for recasting into 9999 kilo bar form. My tinfoil hat persona believes we have the `tungsten gold plated bars` in the system. This is why I watch the registered category more closely.

    The theory of `Show Gold` fits in with my thoughts that:
    1)China is recasting the gold it receives to 9999 to insure it has the real gold.
    2)The reason of no audits of the gold points to the point that `Show Gold` will not stand up to scrutiny.
    3)The reason German officials were not allowed to even see their gold was that with the new portable scanning techniques to verify gold purity, they don`t want ANYONE (not under their control) close to the bars.
    4)The very long term attempt to decouple gold from the monetary system required extremely large amounts of gold which wasn`t available, so some genius came up with the idea of `Show Gold`as a temporary measure. This has morphed into an existential threat to the underpinnings of the trust in the financial system.
    5) China (and others) are in the process ensuring that when (or if) this genius`s plan blows up, they have as much of the real gold as possible (private or government doesn`t matter). China has more experience historically with the inevitable endgames of paper currency.
    6)Germany receiving very little of their requested gold (and that in recast form) points to a brutal shortage of non `Show Gold`. If China can import over fifty tonnes in one week, why has Germany received less than that in a whole year?

  13. @JohnM tinfoil hats are so last year lol
    get a hat lined with magnets! That will stop T H E M

  14. @Anonymous..... That's a great idea. I'll start looking for a supplier right away. LOL

    Any ideas on a reputable supplier? :)

  15. @JohnM
    Bron would argue that Germany not getting even remotely close to a 7yr pro-rated amount of gold yet just means that Germany is no hurry to get their gold.

    He would also argue that the Germans only made the request for show because radical one-eyed bugs were raising a political stink

    LOL - that's the kind of nonsensical argument Bron likes to promote.

  16. @Dave in Denver

    I think Germany would dearly like to get their Gold back. BUT, they think that they're in a situation of "we all hang together or we all hang separately".

    Nearly all the Central Banks understand this to varying degrees. They are willing or unwilling participants, depending on how charitable you are. Perhaps some are useful idiots but I doubt it.

    There is an element of playing the game here. There have been a number of CBs announcing Gold purchases but the question is: Has it been delivered? Mexico, India etc. These purchasers (from all the reports I've seen) dodge requests for bar numbers, delivery specs, audits, etc. One of my tinfoil hat thoughts is that this is why India got the go ahead for the IMF sale over China. China (and nearly everyone else) would have requested delivery and recasting.

    For Germany, the stink may have been a factor but the longer term means they will have to be dealing with Russia (gas, etc.), the Middle East and Asia. And these are the ones taking physical. If trust continues to unravel, the amount of physical in your possession will reflect directly on bargaining and economic strengths. It will also help if you do not look like a complete idiot for being fleeced of country's patrimony.

  17. As it relates to technical analysis, I am effectively a no-eyed bug, as it were. However my vision fails in that realm though, my sense of history is more acute. It tells me that there have always been institutional forces manipulating reality towards their own ends--which is not to say that it's right or that we are to stand down at those subversions. But in the end, my otherwise sleepless nights are quelled with the thought that whereas coercion is firmly rooted in the domain of the weak, true power is irreconcilably at variance to it. The peasant who abides by this understanding is counted greater than the king that undermines it.

  18. Thanks for the generally constructive comments.

    I’m glad to see that my blog has a diverse readership and a tolerant environment that homosexuals feel free to express themselves, but FYI I don’t swing that way.

    However with only 1 x "you're and idiot" and 1 x "suck my cock" obviously my post was too balanced, I will try harder next time.

  19. OneEyedBug

    Like KD, I agree the complete domination of JPM is very unusual. While JPM and HSBC are the dominant bullion banks in terms of market share (of clients), so we should not be surprised to see them with most of the volume, but 96% is well beyond JPM's share of the business.

  20. PreciousMetalsFollower09 January, 2014 10:09

    Annonymous you and Bron have given me the best laugh for ages, love the humour amongst this very interesting topic

  21. Norm,

    Your points about gold moving from weak to stronger (Asian) hands are valid, but what we don't know is how much of the part of the 170,000t that sits in London is being sold by weak investors.

    I would think that this opaque flow would mirror that which we see in the ETFs, so am hopefull that we have increasing numbers of stronger holders.

    The BBs don't have to find the 3000t, price will solve that problem. The only flow they care about is unallocated redemptions, and that we don't have any info on.

  22. JohnM,

    The Germany gold repatriation deserves its own post. While Dave is dismissive of my view, a reading of the news articles on it generally supports my view,

    However, I don't think the story is totally innocent and it raises questions for me and I will do a more nuanced analysis of it when I get time.

  23. Rumor is that you ARE are ankle-grabber and that you give the best head south of Christopher St. in Greenwich Village, NYC - Jon Nadler says you're the best

  24. @JohnM replying to @Dave in Denver.

    Good post.

    Hi Bron, this is the first time I have seen some idiot posting here. Interestingly, you did not delete his vulgarity. But I do suspect he is probably a blogger on precious metals, simply because some of them really don't like you. Their knowledge is superficial and just a repetition of what some other fool blogger has posted.

    Keep up the great work. Thank you.

  25. Yes you are right this is the first time I've gotten such vulgarity. That tells me I must be getting more influence and/or read, so I'm taking it as a badge of honour and will leave it up to commemorate that.

    In the future I will delete such comments, which don't have anything useful to say or any point to make so as to keep the signal to noise ratio as high as possible here.

    As always, I will keep all comments, whether they be pro or con, that are actually trying to make a point/contribution.

  26. Of all the blogs in the gold community, your blog is one of the best, although I must admit, it hurts sometimes to hear the real facts from you.

  27. Hi Bron,

    I'm wondering how margin factors into these calculations as well. Does the margin put up by clients factor into the coverage ratio as well? Perhaps Kid Dynamite might also pick up on this question. If I'm "in the tall grass with this question" I would welcome correction.


  28. Client margin wouldn't affect the coverage ratio, as the cash required to be put up against a futures contract (and any changes in that cash margin balance) does not change the number of futures contracts (which is what open interest measures), that is client cash balances aren't in the coverage ratio.

    Changes in margin requirements may result in people subsequently wanting to hold more or less contracts, causing OI to change. Coverage will change if stocks are stable.

  29. Bron,

    Who holds the cash that the traders post as margin?

  30. The brokers I guess, whether the clearinghouse/exchange requires the brokers to stump up the margin I'm not sure, maybe not if they have good credit.

    These detailed mechanics are out of my area of expertise.

  31. @Bron, @KD,

    Thanks for your replies. I truly appreciate your informed and balanced views. Even if all the "charlatan stuff" is cleared away from the gold market, there's still a strong case left.

    The JPM share of 96% of the delivered metal is even more curious, when you consider that it went to their House account. Could it be that JPM wants to quickly grow a "dark pool" of physical metal for its clients. That might be handy for trading metal at non-public prices that are not exactly following the Comex spot price? That's what the PNT is about?

    I'm eagerly waiting for February. Maybe the JPM dominance continues. Maybe new registered gold appears in the vaults. Or maybe not. This topic is very exciting to be followed, preferably with some physical in your own possession.

    Finally, it's good to remember that in terms of volume, we're talking about chump change compared to LBMA, the mother of all dark pools.

  32. @Bron/Costata:

    Bron wrote: "Changes in margin requirements may result in people subsequently wanting to hold more or less contracts, causing OI to change. "

    but that, of course, may change the coverage ratio! ie: if margin requirements are relatively low, and more speculation is encouraged, resulting in more OI, coverage ratio might decrease... and vice versa if margin requirements are unusually high.

  33. @OneEyedBug:

    "That might be handy for trading metal at non-public prices that are not exactly following the Comex spot price? That's what the PNT is about? "

    well the non-public prices are related to the public prices, of course. ie: the trading levels of the EFP are tied to the price of the futures roll (difference between Dec/Feb) and to the arb with the LBMA system and other instruments like GLD.

    in other words, you're not just going to pay JPM a premium for gold via EFP or EFRP privately negotiated transactions if you can trade the listed instruments for cheaper.

  34. So let me ask you Bron--with your wealth of expertise, do you think that there is gold market manipulation?

  35. As answered here http://goldchat.blogspot.com.au/2013/05/questions-from-tf-metals-report-readers.html

    I believe in manipulation but not suppression. One is short term, the other long term. Many of the manipulation and suppression theories are simplistic comic book stuff. Often why people consider me anti-manipulation is because I critique these theories. Doesn’t mean I don’t believe others, like this http://goldchat.blogspot.com.au/2009/06/death-of-gold.html : “To kill gold you don't manipulate its price, you manipulate its volatility.”

  36. Bron, whatever word we apply to the unnatural distortion of markets for the benefit of the few at the expense of the many--should the manipulation that you regard be prosecuted for the public good? How do you, Bron, prove manipulation, and once proven, how do you stop it so we can allow markets to discover their own prices?

  37. Tommy,
    maybe you better make a clear definition on what you consider "manipulation" and what in particular do you complain about the market situation/prices right now.

    If I read the german definition of "market manipulation" http://de.wikipedia.org/wiki/Marktmanipulation (it is much shorter than the english version, but also gives reference to the german law), I come up to the conclusion that the gold-&silver buggery are the real scam artists and wannabe manipulators (e.g. NIA, GATA, "Silver Liberation Army" ROTFLMAO!!!).

    I have the strong feeling that anybody that takes the word manipulation into their mouth is just trying to make some dumb excuse for not having the greedy profit he was hoping to have and blaming somebody else. IMHO disgusting and misleading.

    Greets, AD

  38. Devil's Advocate--I'm looking for Bron's association of the manipulation he regards as valid. It is not for me, a commoner, to provide analysis that Bron, an expert in his field, may have at his ready disposal. Rather, I can use any meaningful insight gained to better align myself with the realities of this world. In all things, we are to allow the evidence to adduce the theory.

  39. Thanks for the responses. If no-one minds I'll return to this topic in later threads. I would like to understand the relationship (if any) between margin requirements, the coverage ratio and the capital ratios of the bullion banks.

  40. tommyboy,

    See http://goldchat.blogspot.com.au/2013/11/so-who-are-the-liars-and-cartel.html "Perth Mint’s government ownership means we are public servants and thus cannot comment on policy matters or be critical of our own or other governments policies or actions"

    Note also that the Perth Mint does not trade on public exchanges, we simply have no standing in other countries jurisdiction nor any direct evidence ourselves of these manipulations.

    I am not sure what you expect us to do, if the CFTC itself http://goldchat.blogspot.com.au/2013/12/the-difficulty-of-proving-manipulation.html with its rights to access the books of traders could not make a case.

  41. People will believe what they need to believe in order to feel good about their wisdom or expertise they're hoping to project onto their followers.

    Then there's the subscription/merchandise angle some blooger folks are soley interested in...truth or alternative explanations be damned. Lets call them goldbug cheerleaders who use verbal pom-poms to rally their flock against some evil enemy that primarily exists in their mind.

    Fear sells...that's their hoped for bottomline.