Craig Hemke of the TF Metals Report wrote an article which has sniffed out the probable motive behind the shamelessly blatant paper smash of gold on Sunday evening July 19 at one of the quietest trading periods of the week:
As a readily-accessible source of instantly-available gold, The Authorized Participant Bullion Banks are once again redeeming their 100,000 share lots for physical gold from the GLD “inventory”. That this gold is then utilized to settle physical demand from around the globe is hardly arguable, given recent history. – Craig Hemke, TFMetalsReport.com
I believe Craig has hit the nail on head here. Ever since first reading James Turk’s original dissection of the GLD Trust legal structure from the Prospectus, it’s been pretty obvious that GLD was created to act as a “holding reservoir” of physical gold that would be used by the Central Banks/bullion banks as a source of gold to required to settle LBMA forward commitments to buyers (i.e. China, India and Russia) who would refuse to settle in cash. 99% of all Comex trades are settled in cash.
The one unresolved question, for me anyway, is the issue of how much gold really still exists in unencumbered (e.g. leases or hypothecation agreements) physical bar form in HSBC’s vault or the vaults of designated subcustodians. It’s an question that won’t be answered until the system implodes because GLD, by design, has made it impossible for anyone to conduct a bona fide, independent audit.
This is an excerpt from a post I wrote on the The Golden Truth, the predecessor blog to Investment Research Dynamics – it looks like my analysis was correct back then which reaffirms Craig’s analysis of what happened two weeks ago:
We have witnessed a stunning drain of gold from the GLD ETF trust. Through last Friday, an incredible 479 tonnes – more than 35% – of GLD’s gold has been removed and has disappeared, most likely to Asia – in the space of about 10 months. The biggest chunk of that 479 tonnes was removed shortly after Germany’s Bundesbank issued it’s feeble and hopeless request to the U.S. that the Federal Reserve start shipping back some portion of the 1500 tonnes of gold that is supposedly being “safe-kept” on behalf of Germany by the Fed in its vault in New York City. Gold luck, Angela…
I have looked at GLD suspiciously ever since James Turk issued the first analysis of GLD’s prospectus back in 2004. Those of us who are familiar with securities laws and investor “safe guards” supposedly enforced by the SEC were absolutely shocked that the SEC approved the GLD prospectus as it was filed because of the egregious lack of GLD sponsor and custodian legal accountability standards typically required by the SEC for publicly traded securities.
Given this fact, I believed at the time that GLD was a scheme devised to suck in retail and institutional cash that might otherwise flow in massive quantities into actual physical gold that would be safe-kept in private vaults in this country. Although GLD has a mechanism to enable investors with a minimum of 100,000 shares to convert those shares into gold that would be delivered to the investor, the procedure is exceedingly cumbersome and expensive and there’s a mechanism embedded in the language of the prospectus that enables the trustee of GLD to deny such requests.
But I also knew – through GATA’s invaluable research – that there would eventually be a shortage of physical gold that would be available to allow the western Central Banks and bullion banks to maintain their oppressive and incessant manipulation of the paper gold market for the purposes of maintaining a cap on the price of gold, for the purposes of defending the credibility of the U.S. dollar. I figured that at some point the gold in GLD would used for this purpose once the Central Bank stocks of gold were largely if not fully depleted. In this context, please recall that about three years, the ECB system, which had been selling 400 tonnes per year on average, pretty much stopped selling any gold. That’s sign-post #1 that I was right.
Then along comes the Bundesbank in early 2013, with a request that the Fed start shipping Germany’s gold held in in New York back to Germany. That’s when all hell broke loose:
(The graph above is from the TFMetalsReport.com)
There’s something really wrong with that picture because the intuitive response from the market by Germany’s request of the Fed should have been a quickly rising price of gold. But as you we all know, the Fed defaulted on the request – for all intents and purposes – and that’s when the massive drain of gold from GLD commenced.
The truth is that my original hunch was correct. 100% correct. The gold in the GLD trust is being used to satisfy the enormous physical delivery demands from China and the other big gold buying countries because the western Central Banks have run out of gold to deliver. That is an unmistakable fact. Reports and data ad nauseum have been published in the last six months describing and verifying the voluminous, unprecedented amount of gold bars that have been moved – literally physical transferred – from the Comex in NY and the LBMA and Bank of England vaults in London to Switzerland and then on to Hong Kong, where it flows to its ultimate destinations in China. Anyone who would deny that this is the case has a blatant and catastrophic disregard for the truth as supported by provable facts.
So the question is, how much longer can the depletion of gold from GLD continue before this scheme falls apart? Let me first say that it is likely that the U.S Government’s “Waterloo” in this situation will be the gross miscalculation – when GLD was originally devised – of the growth and size of China’s appetite for physical gold for which actual physical delivery is demanded.
Along with all the other manipulated schemes of the western Central Banks/Governments, I believe that the GLD fraud is starting to unravel. I would argue that the ability to execute successfully the intervention in interest rates, currencies and equities requires the unfettered ability to manipulate the price of gold. In my view, the western Central Banks are losing their grips on gold and this will likely bring the entire western financial system down.
While most people and the media associate the “BRICS” most commonly with Russia and China – perhaps because the neo-cons who control the U.S. Government and media have forced this illusion on the unsuspecting American public – let’s not forget that the “S” in “BRICS” stands for “South Africa.”
Huh? South Africa? Isn’t that some British outpost in Africa? Let’s not forget that South Africa is the fifth largest gold producing country in the world. It also is the world’s largest exporter of platinum and chromium and produces and sells a hulluva a lot of iron ore.
My colleague Rory Hall of The Daily Coin happened to find an article in The BRICS Postonline which reported that South Africa was now conducting over 30% of its trade with China directly in yuan. China is by far South Africa’s largest trading partner. The trend in China’s bilateral trade settlement in rand/yuan with S. Africa underscores the movement in world trade away from using the U.S. dollar.
In the Shadow of Truth’s latest Market Update segment, Rory and I discuss this development, as well as what appears to be one massive bottom forming in the ability of the paper gold criminals to push gold much lower. Make no mistake, as this earlier post today illustrates,there is an enormous bid for physical gold in the market. And that bid is coming from both China and India now.
As Jim Willie stated, the dollar will not collapse per se, it will vanish. One of the best ways a smaller investor can take advantage of this insight besides accumulating physical gold and silver is to implement bearish bets on teh stock market. One of the biggest individual stock bubbles of all time has formed in Amazon.com’s stock. I have written a uniquely in-depth research report which I’m in the process of updating and revising. I have new insights which come from a reader who is a tech company accounting specialist. In fact, one of the manipulation tricks being used was alerted to him from an insider.
AMZN implements misleading and arguably fraudulent accounting in order to present the illusion that produces “free cash flow.” In fact, AMZN burns cash like a Weimar-era furnace fueled by printed marks. My existing report is available here: AMAZON dot CON. Anyone who has already purchased it prior to the release of updated report will receive the updated version. Once the updated report is released, I will be raising the price.
This report also includes capital management strategies which are necessary when shorting any stock and options strategies for anyone not comfortable shorting stocks. There has never been a comprehensive analysis of AMZN’s accounting like I present in my work. When this market rolls over, small fortunes will made by anyone with the patience to set up an AMZN short position ahead of the crash.
I was exchanging emails with Eric King of King World News earlier this week and, in the context of the unprecedented degree of paper gold manipulation and anti-gold propaganda regurgitating from the financial media, I asked him if he thought what was happening signaled a bottom:
Yes I do think it’s the bottom, Dave. The anti-gold propaganda is off the charts. I have never seen it this bad. Every bullion bank and mainstream media station is bashing gold. – Eric King, King World News
I thought the “pet rock” article in the wall street journal was the height of the madness. But an article featured by Marketwatch which suggested that gold might hit $350 and that its fair value is $875 is perhaps the culmination of absurdity.
The irony in this is that, while the U.S. propagandists who are pulling the proverbial rug out from under the American public and extracting as much wealth from the public as they can before the country collapses, the Chinese are accumulating physical gold – aka real money – at a record rate.
Meanwhile gold and silver eagle sales from the US Mint have begun to accelerate this summers. My good friend and colleague of several years, “Jesse” of Jesse’s Cafe Americain posted commentary which succinctly encapsulates contrast between fact and fiction:
And as you may have seen in the posting from earlier today showing the sea change in leverage over even the past ten years there, it is seemingly getting a lot less physical all the time, even compared to just five or six years ago.Winning…Even the US Mint seems to be getting in on the act. The mint sold 202,000 ounces of gold in the form of coins for the month of July, one of its largest monthly sales totals in several years.
That’s a lot of pet rocks. Do the math. I wonder where the poor, deluded ignoramuses who obviously do not understand finance are getting all that money to spend on such worthless trifles. Does the US Mint take food stamps?
You can read the rest of his piece here: Jesse’s Cafe Americain
In contrast to Jesse, the Wall Street Journal’s Jason “Gold is a pet rock” Zweig is perhaps the most pathetic journalist of our era…