30 September 2014

Why China Is the Golden Dragon In the Room That So Few Will Even Discuss

This analysis originally appeared at the USAGold website.

Why China thinks gold is the buy of the century
  by Michael J. Kosares
   Let's start with some big, but digestible numbers:
$3,950,000,000,000 = China’s total foreign exchange reserves

$1,250,000,000,000 = Value of the world’s 31,866 metric tonnes gold reserve at $1220/troy ounce

 $1,280,000,000,000.  = China’s holdings of U.S. Treasuries in its foreign exchange reserves

 $   319,000,000,000. = Value of U.S. 8133 metric tonnes gold reserve at $1220/troy ounce

Now let's delve into what those numbers might mean to the average gold owner...

When it comes to the gold market, China is the dragon in the room. With its nearly $4 trillion in foreign exchange reserves and potential purchasing power, that presence is formidable. 

How formidable?  Consider this:

- China could purchase the total United States gold reserve (8133 metric tonnes) with 8% of its foreign exchange reserves.
- It could purchase the total global gold reserve (31,866 metric tonnes) with 32% of its foreign exchange reserves.

- It could purchase all the gold stored by Exchange Traded Funds (+/- 1750 metric tonnes) with less than 2% of its foreign exchange reserves.

- At $4900 per troy ounce, the value of U.S. gold reserves would match China’s U.S. Treasury holdings of roughly $1.28 trillion. 

- At $4700 per troy ounce, the value of the world’s gold reserves would match China’s total foreign exchange reserves of roughly $4 trillion.

- To put it another way, China could pay double the current price for the world’s total gold reserve and still have nearly $1.5 trillion in foreign exchange reserves.

- China sits atop the list of the world’s foreign exchange holdings.

The United States ranks thirteenth at $133 billion.  For the United States to ascend to the top of the rankings, it would need to revalue its $319 billion gold reserve to almost $4 trillion – or raise the value to just under $15,300 per troy ounce...

There is quite a bit more.  You may read the entirety of Michael's very interesting analysis here.

I think someone could make a valid point that this analysis presumes that China is all that interested in buying gold.

And guess what? They are   They are buying the hell out of it.  And they are encouraging their people to do so as well.

We just don't know yet how much they are buying, and why.  But I am sure we will find out, eventually.    In the meanwhile, no one outside the blogosphere seems to be interested in talking about it, or even admits to knowing it.

Central Banks turned net buyers of gold around 2006 after a long period as leasers and net sellers.  
The only countries that have not visibly gotten with the program are the core members of the Anglo-American banking cartel.  They have been conducting a fairly obvious, and often clumsy, campaign to discourage public interest in gold and silver ownership amongst their own people with varying degrees of success.  
There is much talk of precious metal market manipulation in New York and London.  The leverage in their opaque markets is substantial.  The Fed has stated that it could not return Germany's relatively modest amount of gold being held in custody as requested for seven years.  Apparently it has prior commitments.
There is some seriously weird shit going on in the silver market.   People keep connecting the dots, but no one really has the true picture.  And that is a big strike against the US markets.   You would have to be almost a fool to have any confidence in them and their 'price discovery.' 

The gold and silver story is one of the biggest developments in international monetary relationships in almost forty years, and the whole thing is going on virtually unremarked, unaudited, and unexplained.   It seems like an absolutely lame-brained, misbegotten, monumental government policy error, to try and rig the gold price against a mountain of paper.  And the wiseguys and Wall Street took the baton and ran with it, stuffing their own pockets, and getting themselves and their cohorts stuck in it rather deeply.

Sometimes one might wonder if this hasn't become one of the biggest, Goldfinger-sized, insider trades in history.  You don't need to contaminate the Western gold reserves.  All you need to do is to stealthily hypothecate them to take them out of play.  Poof.  
How would you like to be on the really right side of that trade, supply wise?   And how would you like to be holding the bag, on the wrong side?  
Never waste a crisis. Especially when you are looting a country.
It is hard to fully know anything about the markets in the US because they are so often given to hidden trades and misdirecting statistics.  And this is just the way the powers that be like it.

What could possibly go wrong?

Gold Daily and Silver Weekly Charts - End of September, Hello Non-Farm Payrolls

I have included the warehouse action from yesterday in both gold and silver so we can see how things stand at the end of the month, heading into October.

Gold is flowing from West to East.  The trading action in bullion is already there.

The Comex is a quaint artifact of the era of market manipulation.  It is little more than a shell game.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Skittish

There is no recovery.

The policy errors that are driving these markets are going to take a toll.

Have a pleasant evening.


29 September 2014

Gold Daily and Silver Weekly Charts - Non Farm Payrolls On Friday, End of Month Tomorrow

"Heroes. Victims. Gods and human beings.
All throwing shapes, every one of them
Convinced he's in the right, all of them glad
To repeat themselves and their every last mistake,
No matter what."

Seamus Heaney, The Cure At Troy

Today was the first position day for the October metals contracts.  First delivery will begin on Wednesday, 1 October.

China will go on a one week national holiday for 'Golden Week' on 1 October as well.

There was nothing of particular interest in the delivery reports on the Comex for Friday, and some minor movements of bullion out of their warehouses and registered categories.

We are in an endgame.  We do not know how long it will last.  But the East is buying bullion with paper money at a fairly stiff pace.   And since the financiers have not yet figured out how to create real precious metals, just fakes and frauds of them, there will be an end to it.

The malefactors may not go quietly.  They have blood on their hands, and they will carry this mark with them, forever.  They may never be discovered or held to account in this world, if that is what God wills.  They may even continue to strut about and offer their opinions and prescriptions to their victims unashamedly.  But there will be an end to it, and a final reckoning.  To think otherwise is the opium of the powerful.  They never see it coming.

The Recovery is a charade.   The reason for this is quite simple, and it can be seen in one chart here. 

It should be no surprise that the pig men are getting carried away There does not appear to be anyone to save them from themselves this time, to raise a flag and turn them at the edge of the abyss.  Who could stop, when it feels so good to be winning.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Late Day Buying in Weak Markets

"Suddenly, abused and battered wives or children, the unemployed, the depressed and mentally ill, the illiterate, the lonely, those grieving for lost loved ones, those crushed by poverty, the terminally ill, those fighting with addictions, those suffering from trauma, those trapped in menial and poorly paid jobs, those whose homes are in foreclosure or who are filing for bankruptcy because they cannot pay their medical bills, are to blame for their negativity.

The ideology justifies the cruelty of unfettered capitalism, shifting the blame from the power elite to those whom they oppress."

Chris Hedges

"Narcissism falls along the axis of what psychologists call personality disorders, one of a group that includes antisocial, dependent, histrionic, avoidant and borderline personalities.

But by most measures, narcissism is one of the worst, if only because the narcissists themselves are so clueless."

Jeffrey Kluger

Stocks continued to move weakly most of the day, with the usual late day dip buying ahead of the end of the month which is tomorrow.

Nonfarm Payrolls for September are due out on Friday.

Have a pleasant evening.

What Frightens You?

Do you think that you are the only one who is ever frightened?  Are you frightened of those who are powerful, of the things that can hurt you?   Do you fear loneliness, incapacity, pain?

What frightens you frightens them, frightens us all.   But with a difference.

The difference is that they who serve the world have a harsh and uncaring master, who will never comfort them, now or in the future.  They trust in power, but they have only their only refuge in temporary diversions, oblivion, and death.  

We trust in our weakness, and God's love.  We will never be truly alone, if keep our eyes on His light, and our footsteps in His ways.   We are in His hands, always, even when we do not know it.   Sometimes we are called to be His hands, His voice, and His touch.  But most can be glad that they are not called to great acts, but merely small daily things, such as self denial, and patience, and faithfulness.

This is the nature of our warfare: we rise by falling.  This is the law of God's economy.

The Problem In One Picture: Monetary Stimulus In an Unreformed Economic System

"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy."

Dean Baker

"Most of them became wealthy by being well connected and crooked.  And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."

Charles Ferguson, Predator Nation

Trickle down stimulus doesn't work to activate aggregate demand and encourage real economic growth because the largely unreformed economic system continues to divert the bulk of the stimulus and growth to the top.  

Whatever is put in to this great economic machine, whether it be labor, materials, or monetary stimulus, the best and the most of what comes out is skimmed to the top.  This is not a bug or fault, it is a 'feature.'

This is like sending aid to a Third World nation, where the warlords take the aid for themselves, and allow only a very small portion of it to reach the people.   They take the stimulus and leave the debts.

And then there are the enablers, the professional class.   They must support any regime for it to last.  The Fed knows.  Most academics know.  Big media knows.  Politicians know.  It takes a pliant mind to ignore it, and a devious mind to rationalize it away.  On one hand their brilliance justifies their rewards and positions.  

But on the other hand, when something goes wrong, they don't know nothin' 'bout nothin', and had nothing to do with any of it.  There are lots of fabulously paid CEO's of the public trust, who in reality do nothing and know nothing, except on paydays when they know they are worth a lot.

These latest ubermench are members of the 'winning class.'   And those others, those losers, are obviously lazy, and stupid, and not favoured by the god of fortune.  

Why should they do anything about it, even for the sake of their own conscience?  Am I my brother's keeper?  And the bribes are very good, very Darwinian.  And the positions very piously taken, with pride. 

Why consider the parable of the talents, when we would be as gods?  We will write our own bible, our own parables.  And we will believe them.

So they are sitting back and waiting for the little people to do something about it first, to take all the risks, again.  Whether in war or peace, their cleverness and birthright prevails.  Only the little people suffer and bleed.  We are as wolves, and they are as sheep.  And justice is ours, to do with as we will.


The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

History Lesson

Tsar Nicholas II:   I know what will make them happy. They're children, and they need a Tsar! They need tradition. Not this! They're the victims of agitators. A Duma would make them bewildered and discontented. And don't tell me about London and Berlin. God save us from the mess they're in!

Count Witte:   I see. So they talk, pray, march, plead, petition and what do they get? Cossacks, prison, flogging, police, spies, and now, after today, they will be shot. Is this God's will? Are these His methods? Make war on your own people? How long do you think they're going to stand there and let you shoot them? YOU ask ME who's responsible? YOU ask?

Tsar Nicholas II:   The English have a parliament. Our British cousins gave their rights away. The Hapsburgs, and the Hoehenzollerns too. The Romanovs will not. What I was given, I will give my son.