Negative lease rate confusion, again

Jeff Nielson again (see here for previously) proves he knows little about the gold market with this post on negative lease rates. See this comment of Jeff's for a seriously confused guy:

Let me explain this one more time.

GOFO is the "nominal" lease rate. As you (and others) have observed, you SUBTRACT LIBOR from that number to get the "real" lease rate.

Understand that LIBOR is a PROXY for inflation here. So this calculation essentially strips out inflation to tell us the REAL rate at which the banksters are leasing their gold...and when that (real) rate is negative it implies a fraud on the market.

LIBOR = inflation, GOFO = nominal lease rate, huh? My response:

Jeff, GOFO is not a nominal lease rate and LIBOR is not a proxy for inflation.

GOFO is a gold foward (ie future) rate. It is not a lease rate, nominal or real. Technically, as per http://www.lbma.org.uk/assets/OTCguide20081117.pdf it is "rates at which the Market Making Members will lend gold on swap against US dollars". What many people do is focus on the "will lend" and miss the "on swap".

I also don't get how you think LIBOR is a proxy for inflation. Are you seriously saying that 1 year inflation rates are 1%? Shadow Stats I think would disagree with you. LIBOR is the "cost of borrowing unsecured funds" as per http://www.bbalibor.com/

Finally, the Perth Mint does actually borrow gold from bullion bankers from time to time and I can confirm that we are not being paid to do so.

As at today, no counter response by Jeff even though the livefyre commenting system is showing him as "listening". Same MO as my Seeking Alpha exchange with him - just ignore the comment when its is clear you've lost the argument.

Can US Govt seize Perth Mint client gold?

You may be interested in my response to this comment left in the Permanent Portfolio Discussion Forum:

"Perth is good, but I trust Australia less than Uncle Sam. ... If I put my assets in Australia, I not only need to worry about Australia's government seizing my assets in times of their need... but I also have to worry about the US State Departments ability to basically extradite the assets back (and me personally) to the United States under the guise of fraudulent transfer or tax evasion when Uncle Sam is in need."

 

It in I discuss the one occurance we have had of a request by US authorities for a client's gold to be handed over to a US court.

 

Unrelated - this is my new favourite blog Paper Money Shield who's mission is "Defending paper money from the rigorous attacks of precious metal advocates."

SLV bars found in Bullionvault and Goldmoney!

I said to Warren he needed to sex up his post titles but he declined - I suppose it detracts from the serious approach he is taking to this ETF bar list analysis project. Doesn't stop me from using a headline grabbing title however. Another interesting post on what goes on inside the secretive LBMA "chain of integrity" vaults: http://screwtapefiles.blogspot.com.au/2012/09/slv-database-4.html

Empty Letter

Received a letter from the US yesterday addressed - GCORP ATT: Bron Sucheki - and sent air mail with four First Class Forever 2009 dated stamps on it.

 

Funny thing is, it was empty. Don't know if this was meant as some symbolic message (I'm an empty person) or USA goons have intercepted it and removed the offending letter.

 

Very weird.

 

While on the topic of unusual letters, in December 2008 we received a series of four letters addressed to "The Director" just signed Michael. Some samples (I kept them, of course) from the letters:

 

"Gold is going into the stratosphere once the Central Bank controlled, fractional reserve, fiat paper, thin-air monetary and banking system collapses very soon."

 

"Are you happy as Director of the Perth Mint to be parting with gold (and silver) at a price that bears no resemblance to the underlying demand? A price that is doctored by the Illuminati banking shysters to prop up their iniquitous fiat paper money extortion racket against the human race?"

China has 6,355 tonnes of gold

Further to my article on Chinese gold imports, I have a follow up analysis of China's gold stock at the corporate blog.

OK, 6355 tonnes is a little too precise given the opaque nature of the gold market, but the point is that a reasoned approach means that China holds circa this number. I also estimate that of that number, official gold reserves are likely to be 1560 tonnes (not 6000 tonnes like this silly Zero Hedge post, which overstated China's gold import figures as well).

Go Slow on Silver

Screwtape Files guys have a good post on silver cautioning that silver may be primed for a correction.

I've been following the story of Israel Switt and the 10 x 1933 Saint-Gaudens double eagle coins he "acquired". ABC is reporting his family lost an appeal in the Eastern District Court of Pennsylvania. They will be appealing to the 3rd Circuit. For $80million I would be too.

Finally, the Reserve Bank of India continues on with their "socio-cultural revolution" against gold: "Because interest rates are very low, people are investing in gold. But the poor should never invest in gold for whenever they have purchased gold, it either lands up in the temple or in the hands of the moneylender or, at the most, it may be given away during a daughter's marriage."

Maybe they should have a chat to their mates in Vietnam, who have given up on verballing and just taken over the gold market, with the State Bank of Vietnam saying "it had taken over gold bar production in late May, making Saigon Jewellery Company (SJC) the national brand. Since then, all production of gold bars in the country has been exclusively handled by the government."

Take Gold With You On Your Journey Into The Unknown

Have a post up on the corporate site about the Deutsche Bank's latest long term asset return study, subtitled A Journey into the Unknown.

Any analysis that looks at asset returns in gold terms is worth a read. It is interesting in that it has an ambivalent view of gold - usually when people write about gold they have a strong pro or con view.

My view is that if we are in uncharted economic territory as the study argues, then that is exactly the time to hold some gold insurance.

Chinese imports not all they seem

Interesting bit of market intelligence from GFMS:

Reviewing the available customs data reveals bullion flows from Hong Kong to mainland China posted a massive increase this year, with total volumes in the first five months rising over 700% year-on-year. On first glance, this may suggest that demand in China has continued to strengthen with these imports destined for fabricators producing jewellery and investment products. However, our information collection from various trade sources indicated that these Hong Kong export numbers have been highly inflated by growing round tripping between mainland China and Hong Kong whereby local companies used gold to engage in currency and interest rate arbitrage transactions.

I can't get any further details on this from our contacts, nobody wants to talk about it, which is a pretty good indication GFMS is on to something here. Will be interesting to watch China-HK volumes in the coming months, these arbitrages usually don't last.