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.

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.

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.

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.

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

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 Feb 11 1:33pm: "the absurdity of allocating capital to gold markets in a par value crisis, all that really does is encourage more resources to be spent on gold production, which only adds more unproductive claims over the underlying productive economy. This only encourages further predation, all the while drawing resources away from more useful investments elsewhere"


I'd say the first article has something to do with the second. The assumption is that there are "more useful" "truly productive investments based on improving the base standard of living in an inequality busting manner" elsewhere. If there aren't, and people are worried about the "assets" the banks hold, then is buying gold really absurd?

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.


https://monetary-metals.com/monetary-metals-hires-bron-suchecki/


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.


Contact:
Keith Weiner, CEO
keith _at_ monetary _dash_ metals _dot_ com

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."

LBMA 2016 Precious Metal Forecast

At the beginning of each year the London Bullion Market Association (LBMA) polls a range of respected precious metals analysts in the large banks and independent consultancies for their forecasts for metal prices for the coming year. This year contributors are “predicting price increases across the board for all four metals”. Their forecasts for the average price during 2016 are:

Gold – $1,103, ranging from $978 to $1,231
Silver – $14.74, ranging from $12.63 to $16.78
Platinum – $911, ranging from $748 to $1,076
Palladium – $568, ranging from $413 to $674


Read more here

Would You Risk Going to Jail to Fix the Fix?

To fix the Fix, bullion bank traders (whether they are direct participants or not of the fix process) have to be able to “buy the fix and sell the futures” when the fix gets swamped by sell orders (or vice versa). The problem is that banks have a wide range of clients who hold positions with them across spot, forwards, futures, options, ETFs and so on. It is therefore highly like that one of those clients would be the loser of any such activity (and others winners) and complain (as did the client Barclays’ trader Daniel Plunkett traded against) about it. Alternatively, the regulator may decide to investigate markets from time to time.

The problem is that when a regulator comes looking at trades after the fact they could construe manipulative intent when no such thought was going through the trader’s mind – who was just arbitraging a market imbalance – and the trader finds themselves fined £95,600 and banned from trading, as Plunkett was.

If you think that traders would not be worried about such an unfair claim against them happening, or that client complaints or random regulatory investigations it would be unlikely, you haven’t been reading enough Matt Levine

Read more here

Mystery Federal Reserve Bank NY Gold Depositor

The release of Federal Reserve Bank of New York’s December gold stocks report provides and opportunity to analyse the progress of this current phase of withdrawals from its custodial stocks. I say “phase” because in recent times there have been periods of concentrated withdrawal activity in between periods of little or no activity, as the chart below from Nick Laird at Sharelynx shows.


Read more here

LBMA Silver “Price”: A Perfect Storm of Stupidity

Since I’m partial to a bit of alliteration in my post titles, it is just as well that the Fix had a name change because there is a word beginning with F that describes what happened midday London yesterday (and that word is Farce – go wash your mind out with soap). Anyway, “storm of stupidity” is probably a better fit because it looks like a combination of price insensitive sellers using what now appears to be a closed-end fund.

Read more here

German gold repatriation update

Three years ago tomorrow (16 January 2013), Deutsche Bundesbank announced that they would be repatriating 300 tonnes of gold from New York and 374 tonnes from Paris by 2020, which was a revision of their October 2012 promise they would transfer 150 tonnes from New York by 2015. So how have they progressed and are they meeting their schedule?


Read more here.

The two ways gold could repeat the 1970s

Even though investors are constantly told in disclaimer boilerplate that “past performance is no guarantee of future performance” the siren call of historical price charts is hard to resist. In the case of gold and silver, it is impossible to avoid projecting the 1970s bull market on today’s price action due to its epic nature and perfect representation of Dr. Jean-Paul Rodrigue’s bubble behaviour.

Gold bulls would argue that economies and financial systems have not been healed and accordingly the gold price top in 2011 was only a mid-cycle peak similar to the peak of $197.50 in December 1974. In chart form this claim manifests as per below.


Read more here.

Is gold stretched?

 

Last week I wrote about the gold silver ratio as a way of determining which represents better value. Since then the ratio has moved higher, with gold outperforming silver on its move above $1,100. This has brought with it a number of bullish articles and while the move is encouraging and supports the idea that gold may have bottomed, in relative terms gold looks stretched to me at this time if we take a step back and look at the bigger picture.

Read more here.

Issuers can make deliveries using eligible

Focusing on registered stocks versus open interest is a favourite of many bloggers because it produces dramatic “Comex is about to fail” figures. I have written many times that one also needs to consider eligible stocks as eligible inventory can be converted to registered relatively quickly. Blogger Kid Dynamite noted in passing in an email that December was a textbook example of eligible being used by issuers to make deliveries to stoppers. Not one to take the words of a cartel apologist at face value, I contacted data wrangler Nick Laird for detailed Comex warehouse movements and issuer/stopper figures, to check the facts for myself (and you).

Read more here.

In August I did an analysis of the ideal percentage allocation between gold & silver. This assumed one picks a percentage allocation and sticks with it. Another investing approach is to switch between gold and silver based on one's view of which metal will outperform the other in the future. One way to determine the point at which to switch is to use the gold/silver ratio.

Read more here.