Nov 8, 2014
Alan Greenspan:
“Gold is a currency.
It is still, by all evidence, a premier currency.
No fiat currency, including the dollar, can match it
…Gold has a monetary characteristic which is intrinsic.”

Gold price vs US monetary base

Central Banks may *never* repatriate their citizens gold reserves.

What central bankers choose to ignore:

–Germany

” the Bundesbank asked to have some portion of its gold

sitting supposedly – in the NY Fed vault in NYC
sent back Germany.
The TOTAL amount is 1800 tonnes.
After behind the scenes negotiations,
the Fed agreed to ship 300 tonnes back
over seven years.
To this day, the time required for that shipment
has never been explained.”

“…officials at the Bank of England told German officials
that allowing them in to the vault
to perform physical audits of their gold
just isn’t possible
because there isn’t enough room,
or enough “suitable rooms,”
in which to do it.

–Netherlands

“Almost 300 “concerned Netherlands citizens”
have joined the German initiative for insight about the gold reserves.
In a petition the citizens committee demands “full openness on the quantity and storage location of the Netherlands’ physical gold, and on the extent and nature of the gold claims.”

“Klaas Knot, President of the DNB,
said 90 per cent of the Netherlands’ gold reserves
are kept overseas,
claiming further that “the gold is fine where it is.”
Much of that figure is placed in vaults in New York City,
without identifying names of banks or institutions.”

–Azerbaijan

“JP Morgan, one of the bullion banks that acts as a custodian,
will see 15mt of gold leave its London vaults
*over an undisclosed period of time*,
according to the state oil fund of Azerbaijan.”

–Mexico

” the Mexican central bank
has never inspected the gold it bought, has not performed purity

tests on it
and doesn’t even have a list
of all the gold bars stored in London.”

“Banxico was finally forced to reveal its position in gold.
When pressed for specifics about its gold holdings
they answered,
“it is not possible to specify with certainty
the number of bars purchased”

–Poland

“Poland currently owns around 109 tons of gold deposited abroad.

Most of the reserves are stored in the UK”

“a movement to repatriate national gold reserves
from vaulting … at the Bank of England in London
has arisen in Poland.”

“In order to put pressure on the Polish National Bank, advocates

have launched an action entitled. ‘Give Us Our gold’. ”

—Switzerland

“Switzerland is to hold a referendum
that would … repatriate gold reserves held abroad
and keep them at home.”

“Swiss People’s Party’s efforts
to gain enough signatures
to force the Swiss National Bank (SNB), …
reports, they reached the required 100,000 signature mark”
“it is not uncommon
for the period between an initiative being accepted for referendum

and a vote being held
to extend to several years.”

Finland

most of Finland’s 49.1 tons of gold reserves is held outside the country’s borders, the bulk of it in London.
Leaders of a Finnish repatriation movement are calling for a national referendum on the matter no later than May 2014.

“Ecuador,

[is] demanding that one-third of its foreign holdings be returned to in-country custody.

Ecuador’s gold claims amount to only 26.3 tons”

But when the Central Bank
was serious about repatriating their citizen’s gold reserves:

–Venezuela

Venezuela demanded the return of its 200 tonnes
held in London, NYC and Switzerland
and received it all within about four months.

Meanwhile:

Chinese Gold Reserves increase:

Chinese Gold Reserves Increase

Russian Gold Reserves increase:

Russian Gold Reserves increase

“A healthy strengthening bull market
is accompanied by a large number of stocks
making moderate upward advances in price.
A weakening bull market
is characterized by a small number of stocks
making large advances in price,
giving the false appearance that all is well.”

The stock market trend is up.

The Bullish Percentage of SPX is down.

New Highs decreasing vs. New Lows increasing.

Percent of stocks above their 50 Day Moving Average is down.

Another high with another divergence may occur
but

Devalueing the dollar
ie printing to pay the debt
will allow the US
to pay off our debts in cheap dollars,

and also give a competitive advantage
to US global corporations
against countries who dont print as fast as the US

also, reduce relativly,
US workers wages
so we can be more competative in the world market

but

it will also reduce the purchasing power of the dollar
meaning a lower living standard
for you and me
and all the people in the country

Out of control ?

By printing money
it is hoped to:
–Replenish bank reserves
–Hold interest rates low,
to moderate interest payments on treasury loans,
and to encourage home purchases
–Raise the stock market.

By keeping rates low
and paying interest on bank reserves
the banks have been successfully induced
to withold commercial loans
thereby holding the economy in check
and so, in spite of printing,
holding money velocity low
and so, keeping some pressure on inflation.

But,

Jun 27, 2013
“the Treasury sold $35 billion in five-year notes
to the lowest demand since September 2009,
with a bid-to-cover ratio of 2.45 times.”

“The April TIC report showed
a shocking drop in foreign ownership of US government debt.”

“the selloff [in the bond market]
has now reached the status of the worst ever bond market selloff
(of 90 days or less)
in percentage terms.

“Since May 2nd 2013,
10-year yields have risen from 1.626% to 2.609%,
a 98.3bp selloff
which means that yields have risen 60.5%
in less than two months”

Considering:

–“There are more than $12 trillion paper dollar assets
(stocks, bonds and cash)
held by foreigners outside the U.S.”

if this is the start of ‘recognition’
and foreign holdings of US paper is offloaded
rates will substantially rise

also, as

–“the global derivatives
have increased in size from $100 trillion in 1998,
to $1.2 quadrillion today.”
and the majority of those derivatives are interest rate swaps
and that the banks have sold the fixd rate,
and hold the variable rate

the effect of rate rise, on the banks,
on which the world economy relies,
will be catastrophic,

and the expense to the treasury
will be far greater than tax income will cover.

Except for a miracle
this implies immanent western world
deflation on bank collapse
or hyperinflation on attempts to print
to cover bank or treasury payments
or simultaneously, both.

Gold Small Specs – Largest Short Position ever ?

Gold Large specs – Largest Short Position ever.

Gold Commercials – Largest Long Position in last 18 mos.  [Blees 100]

GLD representing gold
is currently:

–Greater than 2 Standard Deviations below it’s 200 EMA
–Greater than 20% below it’s 200 SMA.

These are historical extremes
and similar locations to the 2008 stretched bottoms.

Gold appears due for a
reversion to the mean
[at least to its 200 MA]
price rise.

Tho note,
In 2008, after returning to it’s 200 MA
gold plunged again below its prior low.

As of today, Jan 25th 2013,
the gold price is currently falling.
So, it is good to remember
the long term future price movement of gold
may be forecast.

–The gold price correlates with the US National Debt.

And the Fed plans to continue to print:

Dec 13, 2012
“The Federal Reserve officially announced QE4+2 yesterday….
The FOMC statement said it would consider raising the federal funds rate above 0%-0.25%
if the unemployment rate fell to 6.5% or the inflation rate hit 2.5%.”

and *must* continue to print.

https://britefire.wordpress.com/2012/07/02/313/

Jan 24, 2013
“The Federal Reserve pushed its balance sheet beyond $3 trillion
for the first time this week
while undertaking open-ended purchases
of Treasuries and mortgage-backed securities”

and major international Central Banks
will continue to spend

–The gold price correlates with the Debt Limit.

“The Treasury Department’s own projections
have US debt at $23 trillion by 2015
a 64 percent increase to the current debt limit.
As the Fed continues to print
the Monetary Base increases.”

–The gold price also correlates with the Monetary Base.

And, the Monetary Base is increasing.

Trend Channel

As in Feb 2004
and Mar 2009
now in Dec 2012
after the breakout
above the top of the W pattern
the target on the drive back down
has been the base of the bar
piercing the W top.

After this drive back target has been hit
the move has been
in the opposite direction
and gold has made substantial moves up.

The target has been hit.
The downward move in gold
is now likely complete.

Below article posted Aug 2012

Since its Low on 12/29/11
Gold has been moving up
for longer than any other up move
since it’s Top on 9/6/11.

So, per Gann the trend is up.

$GOLD has now pierced
and GLD has now pierced
it’s W pattern center high
formed on 6/6/12.

When the center high is pierced
Per Gann this is a safe place to enter.

If the market moves
as it has in the past
we can then expect
based on the HUI chart:

1 2000
A launch straight up.

2 2004
A few weeks attempt
to break the bottom of the pierce bar
[close the gap]
then a launch straight up.

3 2009
A couple of weeks attempt
to break the bottom of the pierce bar
[close the gap]
then a launch straight up.

Banks or Funds
can profitably
drive the gold market down
by first buying puts or selling calls
or selling futures
then dumping large quantities of gold or gold stocks
in a short period of time.

Then buying in, or covering
at the new lower price level.

There will come a time
wen they cant driv th mkt dn any further,
cause *sentiment is at an xtrm*
and no one wil buy their protective calls
or sel them protectiv puts
and no one wil buy their future cntrts
so they will not be able t hedge
a large short position
in order t continu th driv dn.
Then th mkt must rise
as they cvr their shts,
in order to reset sentiment.

But there r xceptns eg.
an investment bank/broker
could driv prices dn
without shorting from their own acct
by selling out [redeeming] client shares:

“MORGAN STANLEY‘s Wealth platform unit has finally,
after months and months of considerations,
pulled the plug on the fund [A PAULSON & CO FUND] that for the second year in a row
is one of the three worst performing in the weekly HSBC report
and IS NOW REDEEMING.
What however is notable is that
MS withdrawing HUNDREDS OF MILLIONS in feeder capital
may well explain why gold has seen such a dramatic dislocation [ie BIG DROP]
in the past week.
Recall that at Paulson & Co, gold is not simply an investment –
the bulk of direct gold investments at the once legendary investor
are in the form of (largely underperforming) gold mining stocks –
but an actual investment class.
In other words, instead of being denominated in USD,
investors are actually denominated in (paper) gold,
with a fixed conversion into GLD at inception.
This means that upon liquidation of gold-denominated shares,
any gold-denominated shares,
he has no choice but to sell GLD,
and by virtue of this being the most liquid paper instrument in the PM space, gold.

“Does the massive gold dislocation [ie BIG DROP] in the chart below

now make more sense
especially since Paulson was aware of MS’ intentions days in advance and traded,
or in this case liquidated, appropriately)?”

Gold Lease Rates

“On September 6, 2011, gold reached a high of $1920;
but when bullion banks intervened by pushing gold lease rates
deep into negative territory in early September,
they made sure enough leased gold would reach the markets
to drive the price of gold lower.

“By late September, gold had fallen back to $1600;
and when gold began to again rise,
gold lease rates were pushed even lower
forcing gold this time below $1600.
The bullion banks one-two punch
took the momentum out of gold’s 27 % summer rally
and by year’s end gold would still be at $1600.

“Lease rates are calculated as:
London Interbank Offered Rate – Gold Forward Offered rate.

“LIBOR had been manipulated
lower than the Gold Forward Offered rate.,
resulting in negative gold lease rates.
Reform in LIBOR will make an end to this suppression.”

Gold as Tier 1 Asset

“if gold is officially confirmed as a “riskless” asset by the European Banking Authority,
then an increase in demand for gold may be seen in the EU.”

Printing Yen

“The Bank of Japan became the latest central bank
to announce further quantitative easing measures.

“If interest rates rose by a mere 2% for Japan,
they would be spending more than 70% of their budget
on just interest expense

“When the savings rates goes negative,
and it is a demographic certainty that it will,
JAPAN will either be forced to pay higher interest rates
or print massive amounts of yen
or cut government spending by equally massive amounts.”

An attempt by Western Central Banks
to recall their swapped and/or lent out gold.

“Over the past several years, we’ve collected data on physical demand for gold
Global annual gold mine supply … is actually lower than it was in year 2000,
there hasn’t been any large, publicly-disclosed seller of physical gold in the market
for almost two years.
Given the significant increase in physical demand
that we’ve seen over the past decade,
particularly from buyers in Asia,
it suffices to say that we cannot identify
where all the gold is coming from to supply it.

“Western central banks are probably under the impression
that the gold they’ve swapped and/or lent out is still legally theirs,
which technically it may be.
But if … those reserves are not physically theirs;
not physically in their possession…
then …”

An audit or an attempt by central banks to regain their gold
would support a higher gold market price.

Dollar as Reserve Currency

“As of, Thursday, Sept. 6,
any nation in the world that wishes from this point on,
to buy, sell, or trade crude oil,
can do using the Chinese currency,
not the American dollar.

“the Russian Federation agreed to sell oil to China
in any and all amounts they desired.
there is no limit.
And Russia will NOT sell or trade this crude oil to China
using the American dollar.”
Never, ever has crude oil been sold, bought, traded,
in any country in the world,
without using the American dollar.”

But,

“the $3.2 TRILLION in official DOLLAR RESERVES that China has accumulated
in maintaining the yuan’s semi-fixed peg to the dollar
tie Beijing’s policy hands.
That is because any hostile gesture,
such as a threat to shift out of dollars,
would destroy Chinese wealth.”

EuroDollars

John Williams of Shadowstats.com:
“there is 12 trillion in liquid dollar assets held outside the U.S.
it is only a matter of time before all the Fed money printing will “trigger a sell-off”

Causing the gold price to rise in US dollars.

‘Be right and sit tight’
philosophy of trading.

August 15, 2012

“Soros Fund Management LLC,
more than tripled its investment in the SPDR Gold Trust
in the first quarter

“John Paulson
upped his stake in GLD by 26%
with more than 44 percent of [his] U.S. traded equities tied to bullion.
Holdings in the SPDR Gold Trust are Paulson’s largest position.

“Paulson is seeking to reverse record losses last year
caused by an ill-timed bet on an economic recovery.

“Bill Gross, Pimco’s co-founder
PIMCO‘s Commodity Real Return Strategy Fund,
has raised its gold holdings to 11.5%

Ray Dalio
asked ‘do you own gold?’,
he smiled and said ‘Oh yeah, I do.’
If you’re going to own a currency,
it’s not sensible not to own gold.
there’s no sensible reason
other than you don’t know history and you don’t know the economics of it.
His suggestion is that gold “should be part of everybody’s portfolio”
as he explains the reality of the endgame of fiat monetary systems.

“Billionaire Frank Giustra
Is Making A Massive Bet
Gold … occupies the largest percentage of his investment portfolio

—————————————-

“George Soros
On September 16, 1992,…
Soros’ fund sold short more than $10 billion in pounds…
the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion

“John Paulson
…became a billionaire in 2007
by wagering against the subprime mortgage market”

Ray Dalio
founded the investment management firm,
Bridgewater Associates.
As of January 2012,
the company is the largest hedge fund in the world
with nearly $120 billion under management.

“The U.S. federal government,…has reached a stage
where forty cents of every dollar spent at the federal level is borrowed,
and a lot of that money has been printed.”

“the Fed has become a significant buyer of debt,
purchasing some 75 percent of US Treasuries last year
because there were no other buyers.”

AND

“the notional value of all OTC derivatives
is in excess of ONE QUADRILLION DOLLARS globally.
The vast majority are related to interest rates.”

“According to the Comptroller of the Currency report, as of December 31, 2011,
JPMorgan Chase held $70.2 trillion in derivatives
and only $136 billion in risk-based capital.
…the bank’s derivative bets
are 516 times larger than the capital that covers the bets.
Goldman Sachs has $44 trillion in derivative bets
covered by only $19 billion in risk-based capital,
resulting in bets 2,295 times larger than the capital that covers them.”

If rates rise
JPMs & GSs variabl rate payout on ‘Interest Rate Swaps‘ could rise abov
the fixd rate recd fr their counterparty + fixd rate recd fr their bond hedg
resulting in *major* losses.
Meaning derivitive mkt disaster
affecting the US financial system.
[Even now, considering real rates, they are a wasting asset, incurring loss.]

So printing *must* continue
so the Fed can continue to purchase US Treasury instruments
to maintain low rates.

But

“The Real Numbers,
(as opposed to Bogus Official Statistics)
show inflation in the U.S.,
is already…at 9.3% annualized per shadowstats.com”
“since January 1, 2000, US dollars have lost…26% in purchasing power.”

ie. Printing/liquidity is causing price inflation in food, gas, medicine, education, etc.

BUT despite the price inflation:

“Since 2008 the money (M2) multiplier has dropped from slightly under 9 to 3.7.”
“Velocity has also dropped sharply in the last few years.”

“Household debt has now declined for the last 16 quarters…
It still has a long way to go in order to reach the 66% level of 2000,
let alone the 60-year average of 55%.
Since this reduces the demand for goods and services,
businesses have little reason to hire new workers or increase capital expenditures.
Since household spending accounts for 70% of the GDP,
the negative effects are felt throughout the economy.”

“Recently we have seen lower-than-expected results or actual declines in
GDP, job growth, retail sales, income growth, core capital goods orders,
vehicle sales and initial unemployment claims.”

So, the prognosis appears as
economic recession or depression
with price inflation,
ie. the US dollar still losing value.
InfCession or InfPression,
with the Damocles sword of derivitive implosion,
DeriviPlosion.

Lean toward hard assets ?

Why QEs *must* continue.

If rates rise
changes in outstanding ‘interest rate swaps‘  means derivitive mkt disaster.
ie iaw w the interest rate rise
JPMs & GSs variabl rate payout would rise
abov the rate they are receiving
from the fixd rate instrument they sold
resulting in *major* losses
affecting the US financial system

also, It is a fact that
in the US and Europe tax revenues do not cover
retirement of debt and govt spending;
so, borrowing to cover bond rollover and new expenses,
by issuing bonds, is required.

But if the necessary borrowing,
under present conditions of:
–large scale borrowing,
–poor economy [poor tax revenues], and
–hi debt to GDP ratios,
would cause hier rates:

“Imagine what the US economy would look like
with the base rate set to Italian levels of six per cent.
Asset values from bonds to stocks to real estate would be decimated.
a deflationary
[cause of inability to pay off the debt at such hi rates
and the fall in asset values]
depression would set in.”

Therefore, to avoid such a rate rise
and deflation
printing *must* continue
so so that govt can buy back its own bonds
at higher prices than other bond buyers would bid
ie hi bond prices = lo int rates.
ie the deficits must be monitized

The handwriting on the wall:

1. “The fed has become a significant buyer of debt,
purchasing some 75 percent of US treasuries last year
because there were no other buyers.”

2. LTRO, the ECB‘s  longer-term refinancing operation
[which has now loaned out above a trillion dollars]
lends banks cash  at about 1%
by loaning against sovereign bonds
that those banks currently hold,
so the banks can, in turn, lend to their domestic governments
by buying newly issued bonds.

The question is not wether QEs [printing] will continue,
the question is,
Is there a way to get off the merry-go-round ?

QE3 Impact

Gold
Wednesday, May 16th  Keith  Weiner

On Monday, May 14, something happened
that hasn’t happened since Dec of 2008.
Two successive near-month precious metals futures contracts
were in backwardation at the same time

the May silver contract is giving away a 3% annualized profit
to anyone who would sell physical silver and buy a May future
that delivers in a few weeks (thus recovering the same position).
Even more incredibly,
no one can or will take the profit that is dangling out there!

I think that it is a lack of unencumbered metal.
The markets for precious metals, silver more than gold,
have become quite tight.

Sunday, June 3, 2012  Adam

May was the highest monthly volume in the history of GDX
(with a bullish monthly candle to mark a bottom)
and Friday was the highest daily up volume in the history of the GDX ETF.
clearly, the big boys … have now established their positions.

Commercials are eliminating gold shorts.

Commercials are building a heavy long euro position.

A dollar drop may be in the cards.

Gold 2

1 The Trend
Eastern Central Bank buyers
most having made  purchases
in Q1 2012:

China, India, Russia, Vietnam,
Ukraine, Turkey, Argentina, Mexico,
Philippines, Khazakstan, Thailand,
Malaysia, Indonesia, Gulf States,
and now Iran.

And,

Over the past decade,
the demand mix has changed toward investment,
starting at 4% of demand in 2000 and growing to 38% by 2009.

Gold is in vogue.

2 Real Interest Rates

“The real interest rate
is the 3 Month T-bill Yeild
minus the CPI.”

“The Fed has pledged to keep rates at “exceptionally low levels”
at least through 2014.”

“The real interest rate
is the nominal interest rate
minus the EXPECTED rate of currency depreciation.

I read:
World money supply growth is 7% per year.
Gold supply increase is            1% per year.

3 Liquidity

“the Fed has become a significant buyer of debt,
purchasing some 75 percent of US Treasuries last year
because there were no other buyers.”

Trillions in European bonds to be refinanced.

GOLD 1
The commercials [JPM and possibly HSBC]
who are in the process of covering their shorts

have tried three times in May
to  break the Dec 29, 2011 gold low
and cover their shorts
by buying the sell stops below.

Anyone who wants gold around that low level
probably could not buy the stops below the low
cause JPM probably put their orders in for those stops
when they started to drive the market down.
And, as I understand it
the High Frequency Traders [JPM]
pay off the exchange
for the privlage of front running other orders.
So, other purchasers must place their orders
above the Dec low.

If the Chinese [or any sovereign nation]
wants to buy gold,
as JPM sells to drive the price down
they can grab that gold for sale
at no cost to them,
because they can buy gold
the same way they buy bonds.
When an enterprise does business in dollars
and wants to exchange those dollars for Yuan,
the government takes the dollars
and prints the Yuan for payment.
They then use the dollars received to buy bonds…
or gold.

Since the gold is paid for in printed money
and is free to the government
[tho not to the taxpayers]
their purchasing power is unlimited.
They can hold a basket above the low,
indefinitely.
The huge buying volume
on June 1st
appears to be capitulation by JPM
and loading of longs
for the next move up.

There is reason to believe
the gold price will be at $1950
before it will fall below $1523.