Gold

Available Gold Supply Disappearing As Gold Price Plunges

King World News,

27 June, 2013

With gold breaking the $1,200 level, today a legend in the business warned King World News that continued manipulation by Western governments in the gold market is now destroying future gold supply. Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also warned KWN that available physical supplies of gold are disappearing as the plunge in the gold price intensifies to the downside.

Barron: “ETFs continue to be stripped of gold and the bullion banks continue selling the gold overseas when they can arbitrage the price. So investors just need to sit tight and ride this out because available physical supplies of gold are dwindling rapidly.

We are at or very near the bottom because gold has now tumbled below the cash cost of production for the mining industry. So almost nobody is making money mining gold at these prices. As gold falls below the average “cash cost” it begins to get very dire and we start to see mines close.

I have just seen two operations close without any notice in the last couple of days. Certainly the world is not out of the woods yet, and another crisis is just around the corner. A major crisis will emerge in Europe or the United States that will move the price of gold significantly to the upside.

In the meantime, if the bullion banks do not turn the price of gold higher we are going to see gold production plummet. I’m not sure that’s what Western governments want to see at this point. They (Western central banks) are already supplying gold, along with the ETFs being drained, in order to meet the massive global demand for gold. The last thing they need is to see a supply crunch.

If that’s the case, the gold simply won’t be there anymore and Western vaults will be drained at an ever greater pace. There have already been a lot of projects which have been canceled or deferred and this will definitely impact supply already in years to come.

It takes a long time to commission a mining project, and when they cancel it or defer it they stop work and it takes a long time to get going again on these projects. So supply will already be constrained in the marketplace going forward, now it’s just a question of what degree supply will be constrained.”

Eric King: “That collapse in production you are talking about, Keith, will it be fairly dramatic?”

Barron: “It’s already happening, but it’s only to get more and more severe if the gold price continues to weaken or does not rally significantly from current levels. We have already seen major shakeups inside the mining industry and many CEOs have been fired and replaced. So everyone is aware of costs.

The reality is that all of that fat is being trimmed away. A classic example of this was the Barrick announcement to let go of a large number of key personnel. We can expect to see more of this as additional projects get mothballed going forward. A lot of major companies have also halted exploration or cut their budgets for exploration way back. So they will not be finding new deposits in the short-term. The last thing that actually goes is production and that is what we are seeing right now.

This is what Western central planners and governments don’t consider when they are manipulating the price of gold. Right now they are destroying their source of supply to keep the manipulation going. The bottom line is Western governments simply will simply not be able to continue the manipulation of gold as the supply of gold collapses.”

Barron also added: “The world is in an extremely precarious position and I am shocked by the amount of complacency out there. This is what is really frightening. We are seeing a bond bubble which has just now begun to burst, and even though global stock markets have been strong for many years, it has not filtered down to their economies.

In the United States for example, there are still large numbers of people unemployed and totally dependent on the government for their survival. This is the sort of thing which is very, very troubling. None of the problems in Europe have been fixed, they have simply been papered over.

So the financial world is headed for disaster and yet complacency reigns. The reality is that those who move to protect themselves while prices for gold are cheap will be greatly rewarded as the financial world lurches into the next crisis.”

Gold Premiums Double in India as Demand Outstrips Supply

Liberty Blitzkrieg,

26 June, 2013

WAR IS PEACE.

FREEDOM IS SLAVERY.

IGNORANCE IS STRENGTH.

From Reuters:

MUMBAI (Reuters) – Gold premiums doubled in India on Wednesday as suppliers struggled to meet surging demand after a ban on consignment imports, but futures prices fell to their lowest in more than a month as international gold prices fell due to a strong dollar.

India, the world’s biggest buyer of gold, now requires importers to pay upfront for inventory, making it difficult for smaller jewelers with lower working capital to source supplies. The government also raised the import duty to 8 percent in May to keep a lid on the surging current account deficit.

“There may be some demand from jewelers for raw material,” said Bachhraj Bamalwa, former chairman of All India Gems and Jewellery Trade Federation, adding that premiums charged on London prices shot to $20 an ounce on Wednesday from $8-$10 on Tuesday.

“We are unable to supply, though there is demand … we give deliveries after 2-3 days,” said Harshad Ajmera, proprietor of wholesaler JJ Gold House in Kolkata.

Enjoy the gold crash comrades.

Full article here.

In Liberty,

Mike

Luster Gone: Gold Posts Worst Quarter on Record

CNBC,

28 June, 2013

Gold surged more than 2 percent on Friday on end-of-quarter short-covering, but bullion still posted its largest quarterly loss in at least 45 years due to selling amid fears the U.S. Federal Reserve may wind down its stimulus program.

Bullion's 2.3 percent rally was particularly impressive on a day that had little macroeconomic news and no dramatic movements in other commodities and financial markets. Silver jumped 6 percent for its biggest one-day jump since January 2012.

After Friday's rally, gold is still 23 percent lower for the second quarter, its biggest decline since at least 1968, Reuters data shows.

Some investors aggressively bought back their bearish bets on fears gold could rebound, while others squared their books on the last trading day of a dismal second quarter after Thursday's 2 percent drop as funds polished portfolios through the practice of window-dressing.

"You've seen an over-run on the downside here. I am not positive that this is the low but we are very close to it," said John Hummel, AIS Group's chief investment officer, who manages $400 million in assets including a managed futures fund.

Spot gold recently was up 2.2 percent at $1,226.46 an ounce, rebounding sharply from a low of 1,180.71 an ounce, which marked the cheapest price since August 2010.

Friday's rise was the metal's biggest one-day gain since May 20.

Gold's relative strength index climbed to 28 on Friday but still below 30 in an area technical analysts regarded as oversold.

Mark Arbeter, chief technical strategist at S&P Capital IQ, said: "It will take months for gold to trace out a potential bullish reversal formation because of the severe technical damage."

Thursday's slide to below $1,200 an ounce for the first time in three years has prompted nervous investors to buy put options to hedge against further losses.

U.S. gold futures for August settled up $12.10 at $1,223.70 an ounce, with trading volume at around 310,000 lots, nearly 50 percent its 30-day average, preliminary Reuters data showed.

Open interest of Comex gold rose 1 percent to around 400,000 lots, suggesting more participants added bearish positions, traders said.

Physical Demand Lags

Bullion has taken a beating — losing as much as 15 percent or about $200 an ounce — since the beginning of last week when Federal Reserve Chairman Ben Bernanke laid out a strategy to roll back the bank's $85 billion monthly bond purchases in a recovering economy.

After a spectacular surge in physical demand after a $200 two-day dive in April, dealers and jewelers said consumers across the world are reluctant to buy even after the latest price decline.

With one day left in the month, sales of the U.S. Mint's American Eagle gold coins in June stand at only 47,000 ounces, a fifth of what was sold in all April, when sales hit a 3-1/2 year high. Silver Eagles sales are down 20 percent.

Investors, not individuals, are likely to hold the key for prices in the second half. The world's eight largest gold ETFs lost 530 tonnes of gold in the first half of 2013, equivalent to about 10 percent of annual gold production.

Among other precious metals, silver rose 5.9 percent to $19.53, rebounding sharply from a near three-year low at $18.19 an ounce. Platinum rose 1.7 percent to $1,335.49, while palladium also gained 1.7 percent to $655.85

Market manipulation

Given the source this seems like confirmation of what has been said for some time now

The price of gold has been manipulated. This is more scandalous than Libor

the Telegraph,

11 July, 2012

The new media and the 24-hour news cycle have a great deal to answer for, not least encouraging a political class which would otherwise be happily engaged expensing duck houses into the belief that it should demonstrate perpetual action on our behalf – hence the endless stream of badly drafted legislation from the corridors of Whitehall.

It does, however, reveal things that would otherwise be ignored. The issue of manipulation in the gold market which I wrote about last week is a case in point. The ball of half-truths and downright lies which have surrounded the issue for a long time is beginning to unspool in an issue internet activists kept alive long before it was acknowledged by the mainstream media.

People ask why the issue is important at a time of naked market manipulation of the Libor rate. The answer is simple: the Libor manipulation scandal can be seen as the thin end of the wedge in terms of government market manipulation.

Although Libor manipulation affects the interest rates we pay on all number of credit products, gold market manipulation is more serious still.

The price of gold is traditionally a proxy for the value of money. A soaring bullion price is indicative of a lack of faith in fiat currency.

Our financial system is predicated on the notion that money stands as a proxy for the factors of production – capital, labour, land and enterprise.

In short, the abundance of money in the economy should be related to the abundance of those factors. The harder we work, for instance, the more we create. There is more labour in the economy, therefore a rise in the money supply is legitimate in order to mirror this. There is nothing wrong with printing money per se so long as the printing reflects an expansion in the real economy.

Twentieth and Twenty-First century economics appears to have done away with this. Money is now created ex nihilo to feed both the top and bottom ends of society.

Money printing or Quantitative Easing is mainly of benefit to two parties. Firstly, the Government, which is able to borrow more and borrow cheaper than it otherwise would have done. This is because QE money is used to buy bonds, forcing down yields.

The Government uses this money to finance both existing debt and an expansive welfare state which bribes large portions of the population to accept a life of hellish boredom and dribbling docility in exchange for £70 a week in dole money. Such payments are not a genuine transfer of the fruits of existing production within an economy; they are borrowed. They help governments electorally at the cost of the vigour of society.

At the top end, Quantitative Easing money goes directly to banks, who are able to sell their government bonds at a profit. In theory they may use this to even up their balance sheet. In reality they frequently use it as stake money at riskier tables.

In both cases, paper money has been stripped of meaning. It is no longer a reflection of production nor any of its components. It now simply exists of its own right – but it can survive as a measure only for so long as the government keeps such printing in small enough doses that the de-leveraging does not become apparent to workers.

As with everything in economics, there is a correctional market mechanism for this scenario – the flight to commodities, particularly precious metals like gold. Gold holds its value when paper money loses value, because it is beyond the gift of the government to simply will gold into being and give it to friends in high places or voters in low ones.

If gold has been manipulated downwards and if that process continues, then all recourse to a store of value (other than land and property) has been taken from the individual.

The value of our money is falling thanks to Quantitative Easing. Fixing in the gold market takes away one of the key hedges for those with cash assets but no property.

The true fall in the value of money is probably better seen through the rise in house prices since the 1980s – a much better reflection of the market mechanism thanks to the suppliers being so large and because of the lack of a two-way interplay between house prices on the street and derivative products for traders.

In any case, it would appear that the Libor scandal at Barclays has acted to draw out more market figures willing to claim openly that organised price fixing has occurred in gold.

Ned Naylor-Leyland, investment director at Cheviot, a British investment firm, had the following to say on CNBC the other day (H/Tt Chris Powell):

In the aftermath of the Libor scandal, the Bank of England complained that it had received no forewarning from the marketplace.

Gold price manipulation may well be the next big scandal to break – if it does, this time nobody can say that they were not warned.

Finally, a mea culpa – the tonnage figure quoted in the original article certainly undershot the true extent of the short position held by the US bank in question. It was very difficult to get accurate tonnage figures from anyone I spoke to for the article, and I took a pithy aside relating to a “couple of tonnes” rather too literally in a desire to include some. The true extent would have been far greater as many of you pointed out in the discussion board below the article.

Thomas Pascoe worked in both the Lloyd's of London insurance market and in corporate finance before joining the Telegraph. He writes about the financial markets. His email is thomas.pascoe@telegraph.co.uk