"Physical gold is in a serious present shortage with price implications soon to be seen."
--Jim Sinclair
"We are currently seeing all time lows in registered gold and all time highs in claims against that gold. What is wrong with this picture?"
--Art Cashin
One of the big disconnects over the past year has been the divergence between the price of paper gold and the seemingly inexhaustible demand for physical gold, from China all the way to the US mint. Today we get a hint on how this divergence has been maintained: it now appears the main culprit is the massive boost in supply by gold mints around the world working literally 24/7, desperate to provide enough supply to meet demand at depressed prices in order to avoid a surge in price as bottlenecked supply finally catches up with unprecedented physical demand.
Bloomberg reports that "global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will "grind lower" over 2014." Odd - one could make the precisely opposite conclusion - once mints run out of raw product, the supply will slow dramatically forcing prices much higher and finally letting true demand manifest itself in the clearing price.
Austria’s mint is running 24 hours a day as global mints from the U.S. toAustralia report climbing demand for gold coins even while Goldman Sachs Group Inc. says this year’s price rebound will end.
Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.
Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will “grind lower” over 2014.
“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. “We have witnessed some top selling days in the past few weeks.”
What have we done: after a series of reports in late 2012 in which we showed, with no ambiguity, that not only might the Bundesbank's offshore held gold be severely "diluted" (follow our 2012 exposes on German gold here,here, here, and here), but that on at least one occassion, the Fed and the Bank of England conspired against the Buba in returning subpar quality gold, the Bundesbank shocked everyone in early January 2013 when it announced it would repatriate 300 tons of gold helt in New York and all of its 374 tons of gold held in Paris. But convincing the Bundebsbank to demand delivery was peanuts compared to changing the tune of the Financial Times - that bastion of fiat "money", and where the word gold is mocked and ridiculed, and those who see the daily improprieties in the gold market as nothing but "conspiracy theorists" - to say the magic words: "Learn from Buba and demand delivery for true price of gold", adding that "one day the ties that bind this pixelated gold may break, with potentially catastrophic results."
In other words, precisely what we have been saying since the beginning.
Welcome to the 'conspiracy theorist' club, boys.
From the FT's Neil Collins: "Learn from Buba and demand delivery for true price of gold: One day the ties that bind the actual and the traded commodity will snap:
1:18 PM, E.T. | January 17, 2014
With spot gold trading near $1,260 US, veteran trader Tres Knippa says investors should consider accumulating physical gold to take advantage of a delivery squeeze.
Pointing to recent Comex futures data, Knippa says there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion. He believes gold shot through $1,900 in 2011 before plunging last year because of an explosion in the amount of gold futures contracts – setting up separate markets for “real” and “paper” gold.
“Maybe the reason gold prices went up is an expansion of that multiple of the amount of paper gold versus real gold,” Knippa tells BNN. “So maybe the market has come back down as the people who are holding the paper gold start to liquidate it.”
“But the underlying story here is that the people acquiring physical gold appear to be continuing to do that. And that’s what I think is important,” Knippa adds, noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying.
2013 was an absolutely seismic year for gold, but the way in which the tectonic plates shifted has yet to be fully understood.
I firmly believe that in the years to come, when we look back at the great game being played in gold, we will pinpoint January 16, 2013, as the day when it all began to unravel.
That day, the day the Bundesbank blinked and demanded its bullion, will be shown to be the beginning of the end of the gold price suppression scheme by the world's central banks; and then gold will go on to trade much, much higher.
The evidence of suppression is everywhere, though most refuse to believe their elected officials are capable of such subterfuge. However, the recent numerous scandals in the financial world are slowly forcing people to realize that anything and everything can be manipulated.
Libor, mortgage rates, FX — all were shown to be rigged markets, but NONE of them have the importance that gold has at the centre of the financial universe, yet all of them are far bigger markets than gold and therefore much harder to rig.
Gold is a manipulated market. Period.
2013 was the year that manipulation finally began to unravel.
2014? Well now, THIS could be the year that true price discovery begins in the gold market. If that turns out to be the case, it will be driven by a scramble to perfect ownership of physical gold; and to do that you will be forced to pay a lot more than $1247/oz.
Count on it...
Gold has become undervalued relative to fiat currencies such as the US dollar, as shown in the chart below, which rebases gold at 100 adjusted for both the increase in above-ground gold stocks and US dollar FMQ since the month before the Lehman Crisis.
Given the continuation of the statistically-concealed economic slump, plus the increased quantity of dollar-denominated debt, and therefore since the Lehman Crisis a growing probability of a currency collapse, there is a growing case to suggest that gold should be significantly higher in corrected terms today. Instead it stands at a discount of 36%.
This undervaluation is likely to lead to two important consequences. Firstly, when the tide for gold turns it should do so very strongly, with potentially catastrophic results for uncovered paper markets. The last time this happened to my knowledge was in September 1999, when central banks led by the Bank of England and the Fed rescued the London gold market, presumably by making bullion available to distressed banks. The scale of gold's current undervaluation and the degree to which available monetary gold has been depleted suggests that a similar rescue of the gold market cannot be mounted today.
The second consequence is to my knowledge not yet being considered at all. The speed with which fiat currencies could lose their purchasing power might be considerably more rapid than, say, the collapse of the German mark in 1920-23. The reason this may be so is that once the slide in confidence commences, there is little to slow its pace.
Scrambling Gold Mints Around The World Plead: "We Can’t Meet The Demand, Even If We Work Overtime"
Submitted by Tyler Durden on 01/27/2014Bloomberg reports that "global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will "grind lower" over 2014." Odd - one could make the precisely opposite conclusion - once mints run out of raw product, the supply will slow dramatically forcing prices much higher and finally letting true demand manifest itself in the clearing price.
____________________________
Gold Mint Runs Overtime in Race to Meet World Coin Demand
By Debarati Roy Jan 27, 2014Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.
Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will “grind lower” over 2014.
“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. “We have witnessed some top selling days in the past few weeks.”
____________________________
The FT Goes There: "Demand Physical Gold" As One Day Paper Price Manipulation Will End "Catastrophically"
Submitted by Tyler Durden on 01/25/2014In other words, precisely what we have been saying since the beginning.
Welcome to the 'conspiracy theorist' club, boys.
From the FT's Neil Collins: "Learn from Buba and demand delivery for true price of gold: One day the ties that bind the actual and the traded commodity will snap:
____________________________
Is there a shortage of physical gold?
Sultan Ameerali, BNN.ca staff1:18 PM, E.T. | January 17, 2014
Pointing to recent Comex futures data, Knippa says there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion. He believes gold shot through $1,900 in 2011 before plunging last year because of an explosion in the amount of gold futures contracts – setting up separate markets for “real” and “paper” gold.
“Maybe the reason gold prices went up is an expansion of that multiple of the amount of paper gold versus real gold,” Knippa tells BNN. “So maybe the market has come back down as the people who are holding the paper gold start to liquidate it.”
“But the underlying story here is that the people acquiring physical gold appear to be continuing to do that. And that’s what I think is important,” Knippa adds, noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying.
____________________________
Things That Make You Go Hmmm...Manipulation of Gold by Central Banks Cannot Continue in 2014
By Grant Williams, 1/20/2014
I firmly believe that in the years to come, when we look back at the great game being played in gold, we will pinpoint January 16, 2013, as the day when it all began to unravel.
That day, the day the Bundesbank blinked and demanded its bullion, will be shown to be the beginning of the end of the gold price suppression scheme by the world's central banks; and then gold will go on to trade much, much higher.
The evidence of suppression is everywhere, though most refuse to believe their elected officials are capable of such subterfuge. However, the recent numerous scandals in the financial world are slowly forcing people to realize that anything and everything can be manipulated.
Libor, mortgage rates, FX — all were shown to be rigged markets, but NONE of them have the importance that gold has at the centre of the financial universe, yet all of them are far bigger markets than gold and therefore much harder to rig.
Gold is a manipulated market. Period.
2013 was the year that manipulation finally began to unravel.
2014? Well now, THIS could be the year that true price discovery begins in the gold market. If that turns out to be the case, it will be driven by a scramble to perfect ownership of physical gold; and to do that you will be forced to pay a lot more than $1247/oz.
Count on it...
____________________________
Precious Metals in 2014
Alasdair Macleod, Posted 31 December 2013
Given the continuation of the statistically-concealed economic slump, plus the increased quantity of dollar-denominated debt, and therefore since the Lehman Crisis a growing probability of a currency collapse, there is a growing case to suggest that gold should be significantly higher in corrected terms today. Instead it stands at a discount of 36%.
This undervaluation is likely to lead to two important consequences. Firstly, when the tide for gold turns it should do so very strongly, with potentially catastrophic results for uncovered paper markets. The last time this happened to my knowledge was in September 1999, when central banks led by the Bank of England and the Fed rescued the London gold market, presumably by making bullion available to distressed banks. The scale of gold's current undervaluation and the degree to which available monetary gold has been depleted suggests that a similar rescue of the gold market cannot be mounted today.
The second consequence is to my knowledge not yet being considered at all. The speed with which fiat currencies could lose their purchasing power might be considerably more rapid than, say, the collapse of the German mark in 1920-23. The reason this may be so is that once the slide in confidence commences, there is little to slow its pace.
____________________________
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