03 April 2018

Backwardation, the Bank of England, and Falling Prices

I have a post up on Monetary Metals commenting on Jeffrey Snider's observation of the anomalous situation in the gold market between 2013 and 2016 where negative gold forward rates (GOFO) indicated backwardation while the gold price was falling. I expand on Jeffery’s chart which shows periods where the LBMA GOFO rate was below zero, along with the Bank of England’s custody holdings (gold held on behalf of central banks and bullion banks) with Monetary Metal's MM GOFO figures. Read more here.

I also addressed comments on the article at Zero Hedge and Silver Stackers.

17 March 2018

Once in Golconda

Once in Golconda: A True Drama of Wall Street 1920-1938
John Brooks
Allworth Press, 1969

p150: "Its [Wall Street] fixed star-money-had left its regular place in the heavens and begun to wander and dance and lurch. For generations the dollar had been held firmly fixed by a force that was accepted in banking circles as being equivalent to a natural law of astronomy, the gold standard-specifically, by the Treasury's pledge to redeem dollars with gold in any quantity for all comers at $20.67 per fine ounce. Now, with that pledge temporarily abrogated in the emergency, the dollar was free to fluctuate in the world markets at the whim of speculators, just like come humbler currency, or indeed, like some untrustworthy common stock. The [first] hundred days [of Roosevelt's presidency] marked the beginning of a unique, and for many people hair-raising, period of almost a year during which the secure wealth for Americans consistend not of gold, which they were now forbidden to possess except for industrial use or in the form of jewelry, and not in money, every possessor of which found himself involved intentionally or not in a game of chance, but in land or goods."

p155: "Next day [April 19, 1933] came the public announcement that the country was off the gold standard, and, from Wall Street, some astonishing reactions. ... What was most astonishing of all, though, was the swift and decisive approval of Roosevelt's move by the greatest banker of them all. From 23 Wall came a public message signed by J.P. Morgan-apparently the only formal statement of his career, apart from one that had followed British devaluation in 1931: 'I welcome the reported action of the President ... It seems to me clear that the way out of the depression is to combat and overcome the deflationary forces.'"

p162: "But no nation had ever mounted a systematic and concerted attack on its currency, in a time when its gold stocks were ample, for the sole purpose of creating domestic inflation and thus helping debtors. They had not done so because the idea was so outlandish it had never occurred to them. If it had, it would have appeared to their economic ministers as about as sensible as repeatedly hitting oneself on the head with a hammer so it would feel good when one stopped."

15 December 2016

Silver Smoking Gun to Stop Dishonest Dealing

I have an article up on Monetary Metals' website with some thoughts on the amended London Silver Fixing Antitrust Litigation which included damaging chat logs provided by Deutsche Bank that revealed collusion between bullion bank traders to “shade”, “blade”, “muscle”, “job”, “spoof” and “snipe” the silver market. Read more here.

29 August 2016

Central Bank Non-Transparency

Just a quick post on Jan Nieuwenhuijs/Koos Jansen's article on the refusal of the Dutch Central Bank to publish a bar list. The reason given was that "the conversion of internal lists to documents for publication would create too many administrative burdens."

I find this excuse weak when gold ETFs can produce bar list in the thousands of pages, and do so without creating any security issue. Even if the custodians where they have the gold have given them a pdf bar list that for some reason contains information that could be a security risk, it should not be a problem to ask that custodian to modify the report/query on their inventory database to exclude such information, or output only the relevant fields of data as a csv file or spreadsheet. If the problem with doing that is that the custodian does not operate an electronic inventory system then we have some serious questions about the control and safety of that custodian's operations.

I think the real reason for not wanting to disclose the bar list is as some have noted in the comments to the article - when a central bank leases gold out, they get different bars back (see here on why this is case) and thus the changing bar numbers on the list would reveal what percentage of the central bank's gold was lent to bullion banks during the year.

For a central bank who follows correct accounting rules and show leases separately to physical gold (see here regarding Reserve Bank of Australia) a bar list should not be an issue (although see here for blogger Bullion Baron's problems getting a bar list out of the RBA, which it seems was more of a case of interference from the BoE and a lack of courage by the RBA to stand up to them) but for a central bank who reports physical gold and leased gold as "gold" the bar list would raise questions like "why didn't you disclose the difference, how can you pretend that leased and physical are the same" or questions about the risk the central bank is taking and whether the return they got was worth the risk. Whilst I haven't met central bankers personally, I'm guessing they don't take too kindly to having their actions or judgements questioned. Hence the stonewalling.

15 July 2016

Monetary Metals Closes First Gold Fixed-Income Deal at 5%

What was that about gold being a sterile asset?

FREEDOMFEST LAS VEGAS, Nev., July 15, 2016—At FreedomFest, Monetary Metals announces that it has closed its first gold fixed-income deal, to finance the gold working inventory of Valaurum. The initial amount of gold meets Valaurum’s current needs, with room for expansion driven by its growth. The interest rate is 5 percent of the gold, paid in gold.

Read more here and check out the revamped Monetary Metals website.

13 July 2016

Yin and Yang

During gold’s bear market from 2011, the flow of gold out of ETFs drove the popularity of the West to East narrative not just among goldbugs but also bullion market professionals. It was a life raft I suppose that many clung to, to find hope as the price relentlessly fell, notwithstanding how much gold was flowing into “the East”. Today, investors have abandoned the raft as they step out on to the terra firma of $1050 and stagger about basking in the lush tropical greenery of a rising gold price. Read more here.

01 April 2016

The Voldemort Effect in the Gold Market

Gold market analysts have for many years puzzled over the unusual behaviour of the gold market during the 1990s, specifically the bizarrely flat gold price from 1993 to 1996 in the face of sustained selling pressure from central banks and gold miners hedging their production. To-date no one has been able to identify the hidden source of demand that was obviously supporting the gold market during that period. Read more here

12 February 2016

On the absurdity of buying gold

Izabella Kaminska Feb 11 11:18am: "all evidence points to a serious network-wide issue that’s spiralling out of control ... the root cause of the insecurity is the increased pressure on banks to make their systems as user friendly as the systems of non-bank challengers ... even if the latter don’t necessarily have the same quality of checks and balances in place ... the real cost for banks might not even be associated with the rise of successful fraud attacks on the network but rather the missed business opportunities associated with contaminated data profiles"

Izabella Kaminska

Monetary Metals Hires Bron Suchecki

Yep, you read right, I have resigned from the Perth Mint, see announcement below. Looking forward to being able to do some innovative stuff in the gold "space". Will be based in Perth but will get to enjoy the TSA experience a few times a year.


Scottsdale, AZ—Monetary Metals is pleased to announce that it has hired Bron Suchecki as Vice President, Operations. Bron will help the company develop new products and processes.

“We are excited to be able to attract someone of Bron’s caliber. We are growing to serve many customer opportunities, and Bron is a key part of our team,” said Keith Weiner, the CEO.

Bron leaves a management position at the Perth Mint, where he has become widely known over 20 years there. His areas of expertise include the physical side of the bullion business, risk management, and market analysis.

Bron will help the company grow its fund and market letter business, and develop additional products as part of the Monetary Metals vision.

About Monetary Metals
Monetary Metals is the leading company in gold investments, offering investors a gold yield on their gold. The company also publishes much of its groundbreaking proprietary research, to help the investment community better understand gold and its emerging role.

Keith Weiner, CEO
keith _at_ monetary _dash_ metals _dot_ com

04 February 2016

Ethics and the inner ring

C. S. Lewis is one of my favourite writers so it was good to be reminded of his work by blogger mickeyman in a post I strongly recommend http://worldcomplex.blogspot.com.au/2016/02/ethics-and-inner-ring.html

Highly relevant to our times and also relevant to the gold blogosphere. "Lewis tells us that there are many inner rings in society--and rather than entering the inner ring of financial chicanery, there is the possibility of entering a ring composed of those of good will--the sound craftsmen."