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Sprott's John Embry "Gold Is On The Cusp Of A Parabolic Move Up"
Today, the FT provided some additional information on the BIS' "goldgate" as relates to its 346 tonnes of gold disclosed as swapped recently by the ubercentral bank. As the FT says, "Investors have bought physical gold in record amounts during the past
two years and deposited it in commercial banks. European financial
institutions are awash with bullion and some are trying to pledge gold
as a guarantee." There was nothing necessarily new in the article, and as expected the swap was merely put in place to collateralize a dollar funding crunch ahead of the European insolvency, allegedly resolved by the guaranteeing of $1 trillion in the world biggest bail out fund by the IMF and the ECB. Nonetheless, at least now we can end speculating as to who benefited: it was not entire countries that had pledged their gold reserves to the ECB (contrary to the rumor that Portugal had given Bernanke a lien on its gold), but merely ten banks, of which HSBC, Société Générale and BNP Paribas were the biggest. While HSBC's presence is somewhat surprising, the latter two banks having found themselves in a massive currency crunch makes sense: as Zero Hedge had previously noted, this is confirmation that it was precisely the French banks that had found themselves on the wrong side of some major euro trades (one need only to recall BNP's call for subparity in the EURUSD from a month ago). Yet what is without doubt is that physical gold will play an increasingly prominent role as a hard collateral asset. In light of this, we present to you the thoughts of Sprott's John Embry on the precious metal, titled "Gold's on the cusp of parabolic move up" whose conclusion fits with the implications of the BIS action: "Central banks can no longer supply the amount needed to balance supply and demand while mine production continues to stagnate at best. It is imperative that investors ignore the volatility created by the anti-gold cartel and use every opportunity that is created by them to purchase more physical gold." Yes John is conflicted, and yes, he has said comparable things in the past... maybe, as more and more piece of the puzzle come into place, this time he will finally be right?
Full Embry essay
06_23_2010 Gold's on the cusp of a parabolic move up
h/t Kyle
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There are two components to the FT article that confuse me (not difficult). First, the article states that the gold used by the depository banks as collateral for the BIS deposits came from gold that had been deposited with such banks by their customers. If the banks fail, where does that leave the gold depositors, since the banks have used their gold to collateralize BIS's dollar deposit? I guess the question is whether someone who deposits gold at a bank is simply a general creditor of the bank, like a typical savings account holder. If so, so much for the "safety" of gold not held under my mattress. Second, the article states, BIS had the "option" to sell back the gold. That does not sound like a traditional secured loan, where the collateral holder (BIS) has the obligation to sell back the collateral at a fixed price (a repo). In other words, if the price of gold skyrocketed, could BIS have chosen to just keep the gold? If so, it sounds like the depository banks were, in effect, using the gold on loan from the gold depositors to effect a massive short sale. This would certainly make me nervous if I had gold (or anything else) on deposit with those banks, but I am probably (likely) missing something (and I don't have anyhting to deposit anyway :-(. Maybe someone with a better understanding of these gold swaps can educate me, although I have been very careful in not taking any liberties in interpreting the article. Thanks in advance!
if this blog can figure this out, so can the gold investors out there...
bank customers need to be careful where they stash their gold holdings.
gold run, comex crunch, moon shoot!
One more silly question: When they talk about gold on deposit with the bank, are they taling about physical bullion in people's safe deposit boxes, or are they talking about forward contracts or other obligations with the bank? It sounds like the former, but I was under the impression that banks could not access those assets for collateral or other purposes. Sorry to be so dense about this, but it is very interesting!
They take the low-hanging fruit first: stored physical gold in the vaults
You can deposit physical gold in the bullion bank's huge vaults, not only in a safety deposit box.
HSBC sent all the small bullion holdings back to their depositors, to make room for the big institutional deposits from the big investors.
http://www.businessinsider.com/hsbc-tells-gold-bugs-to-take-their-bullio...
That is what the BIS will take first.
If things get really bad, the USTreasury will cut open the safety deposit boxes to search for drugs/terror/etc, like they do in the UK. Check this out:
http://www.dailymail.co.uk/home/moslive/article-1222777/The-raid-rocked-...
Holy shit! Thank you so much for explaining. What a mess. All these people own gold (held in banks and otherwise) as a hedge against a financial crisis. Not only can they sell your gold on deposit, but all of those distressed sales of gold on deposit will depress the price of gold for the poor guy/girl smart enough to bury it in their backyard. Not having a pot in which to piss, suddenly helping me sleep at night...thanks again!!!
Unfuckingreal.
Just what in exactly the fuck DID the police EXPECT to find in safety deposit boxes, fucking CRACKER JACKS?
I know an indian who got married, wore the gold, and said "it goes straight into the safety deposit box."
Yeah, STRAIGHT INTO the fucking pockets of the GOVERNMENT actors who STOLE IT. This is goddamned organized racketeering. No different from the Mafia. Prove that YOU own something?
Yep. You rent everything - your money, your house, your life - from the government. Terms can be changed at any time, retroactively, without need to notify you.
"Brushing aside concerns about the invasion of privacy, he asserted that 'the majority' of the boxes seized belonged to criminals."
Jawohl, mein Fuhrer. I'm sure at least 51% of the people in the U.S. have smoked MJ at some time or other, so let's just jail them all and let the lawyers sort it out.
"However, Lawyer David Sonn said: 'Would an operation like Rize ever be run again? I doubt it.'"
Yep. This will Never Happen Again. I believe it is peace for our time.
Thanks for the chuckle... ZH is (and has) the best.
Investor's gold holdings in banks are being used by banks for liquidity swaps when these banks were caught on the wrong side of a trade? huh?
Isn't this proof to bring your gold holdings home and stash it safely?
Or a private depository outside the Bankster system.
This FT article has HUGE implications that few have picked up on:
Get your gold out of the banks, you phuctards!
The BIS NEVER deals with commercial banks, only with central banks.
The BIS made an exception to their policy and will take all the gold they can get off the hands of the INSOLVENT commercial banks.
Oh, so you think you can go to the BIS in Basel and get your gold back, right?
Fat chance--go ahead and try. The BIS is a sovereign entity, unaccountable to the demand of any nation. They are the Central Bank of the central banks.
Some people should be super pissed by this...how dare the banks pawn off investors' private gold holdings to stave off the banks' inevitable insolvency!
Fascinating! As I ask below, are they literally talking about the bullion in safe deposit boxes or some other form of gold deposit? Also, wouldn't this actually have a depressive effect on gold prices in a banking crisis. Specifically, not only can I sell the shit that I own to meet margin. Now, I can sell the shit owned by somebody else.
question: are you advising to get gold out of all banks worldwide or just usa banks? i think every country is different with regards to its laws and history on how it views its citizens bank safety deposit boxes rights
Here is a similar raid that happened in the good ol' USSA:
http://abcnews.go.com/GMA/story?id=4832471&page=1
Not-So-Safe-Deposit Boxes: States Seize Citizens' Property to Balance Their BudgetsSo go ahead and save your gold in your safe deposit box. Don't say you were not warned...
the boxes in that article are abandoned boxes. But your point is well taken; there was an article just yesterday about a raid in England on private safe deposit box companies. the police opened and took everything; the box holders had to prove they got the contents legally. in my home country the rich and powerful who run things all keep their wealth in bank boxes; its pretty impossible to imagine that happening here, but you never know. But what's the alternative? Keep everything at home? That's a whole different and maybe worse set of risks.
These are not* vcould not be) your ordinary customers,and no way they have 348 Tons, unless it's larger investors.
If it's a traditional Bank, no way they KNOW what's in your SD Boxes to begin with.And certainly would ot be able to TAKE it, without your knowledge or permission........Something is amiss here...........
This Bank had to have been holding Gv't reserves.( I say Portugals,348 Tons, is a WAD).
Only an ignorant person would store cash,jewelry, or PM's in a Bank S D box.
Just like storing cash in IRA's or 401k's,and CD's..............YOU are going to lose control of it, even if it doesn't MELT down............
I cannpt beleive some people will hold hundreds of thousands in these accounts NOW.....
Much less to be too cheap to snag a $2-5,000 safe for home storage.
...And the Understatement of the Year Award goes to.....DosZap!!
"........Something is amiss here..........."
when i built my house I put a safe into the cement foundation with the door facing up. its under the wood floor. Very secure. But I hope I never have to move it!
derek zoolander school for cnbc commentators who cant explain market ramps good
we're climbing a wall of worry
The BIS gold swap is strange. If European commercial banks needed dollars, why not get them from the ECB? Bernanke would have given the ECB dollar swaps if necessary. Why go to the risk of losing money on a big price move against you with gold?
I think the key to your question is leverage. Gold is a helluva pry bar.
you know i like gold, but i fear the current price has little to do with the metal right now. i think many are 'saying' this but don't know it.
the good news is that when gold resumes that price relationship,it'll probably be a bit higher... 'till then it's gonna be ugly.
Gold Run!
Could ZH be so kind as to post a correction to an earlier article on Google and China? The block turned out to be an internal error on Google's part, or so Google says.
False alarm: What's behind the Google search block report?
http://www.chinadaily.com.cn/world/2010-07/30/content_11075089.htm
Uh, that is some HUGE internal error.
Reminds me of Apple's "software" error on their iPhone4...a little misdirection from megacap companies is not unusual, thesapein.
Yes, which is why it's important we have follow up stories to expose these types of frauds. Otherwise, Google wins. They got exactly the desired public response.
In somewhat unrelated news (and sorry if this has been mentioned) a Greek city (Piraeus) has defaulted on it's debt (210 Million Euros).
http://www.ekathimerini.com/4dcgi/_w_articles_politics_100010_30/07/2010...
Excuse me but I've heard this song before.
I have a bit of a problem with your logic... in that if we could afford to maintain our military strength.. then it would make sense. But we can't, so it's a facade (longer term)
Afghanistan, the graveyard of empires...
Production is collapsing on pretty much any sort of manufactured good worldwide. How does this not lead to hyperinflation eventually?
Everyone is focussed squarely on the demand side, but the supply side is in extreme distress. Stockholders are demanding dividends, not re-investment. Plant is being run into the ground at an unprecedented rate. Engineering capabilities are in a state of complete atropy across most of the industrial spectrum, and the engineering schools are mostly empty.
Folks, industry doesn't get re-built overnight, and as industry continues to shrink faster than the money supply, inflation is an inevitability. All it takes is a little bit of accelerant (ie: China deciding, as a national policy, to reduce exports to the USA), and wham, hyperinflation could be upon us.
Central planners are really delusional as to how much capability really exists out there, and reports of low capacity utilization do not speak to the fact that much of the "capacity" could not be easily restarted, nor do they reflect on the "capacity" being in the wrong sectors of the economy (ie: plenty of CRE "capacity" isn't helpful when there's an oil shortage, for instance!).
Lack of engineers and a bad economy is a terrible situation, Pitz. Good observation.
+ $1180 (or whatever it is now)
i dont think shortages will lead to hyperinflation. there are substitutes for almost everything. Besides, nobody has any money to buy anything. To get factories going you need savings. But people will have to work off their debt first. that's going to take a long time.
I think the price of gold will fluctuate.
abundant profundity
Embry has said in the past that gold will go parabolic when there is a run on the bank of gold... when Comex contracts are settled in physical gold deliveries, until Comex defaults because of failure to deliver physical.
I think that view still holds water (or oil, or whatever)
Keep the Precious secret. Keep it safe.
Banking institutions satisfy neither of those requirements.
If gold goes parabolic, we're toast. It means the total failure of our currency with anarchy and Marshall law to follow. We don't want to see an Argentina repeat when the Police quit and went home to protect their families! Hope he's wrong!
Yup, and gold ownership by any non-elites will be illegal, just like between 1930s-1960s.
Precedent is a b!tch, eh?
We are under marshall law.. try to take your toothpaste through airport security.
Those are real guns the security guards at the federal buildings, banks and borders are toting.
The "equity" in your house has just been confiscated.
Try to vote for "change we can believe in" or try to blow this pop stand with more than ten grand.
The police (and other public servants) have not quit.. they are getting fired and replaced with private
security.
Good point. I don't think BO will go on tv and announce he is imposing "martial law." That's so old fashioned. Instead it's more likely to be a stealth martial law. Slowly but steadily tightening down the screws.
Not sure if Gold will go parabolic right now, but I certainly think it will. Personally, I am watching Silver to break through the previous high around 21 and then getting involved - in Silver that is. IMHO, that's where you will get some real price appreciation, way more than Gold.
We have a privitaized, debt based fractional reseve currency. Once it is debt-saturated, it is broken beyone repair. And it is. People are defaulting on their loans, and there are fewer and fewer borrowers with collateral. The currency in circulation can no longer grow through the fractional reserve system. So people can't get their hands on the money to pay back the principle PLUS interest. So more people default on their loans. A self-reinforcing cycle.
The FRN is toast. Dead man walking.
Exchange some FRN's for gold and silver while you still can.
if the price of gold is going to soar that means the value of fiat money is going to crash. So, wouldnt this be the ideal time to go into debt?
It's not the concept, it's the timing. Again, going back to Weimar, the creditors howled at this turnabout in leverage, and in 1922 - before the chasm really yawned - there was a law passed that tied loans to their initial value in Goldmarks. Beware those who can change the rules retroactively, and if you are currently paying attention, you will know that we are in just such an environment.
Only if you buy PMs with the proceeds and have enough cash to pay the interest charges for the gap period when all asset prices collapse and PMs subsequently rebound (parabolically)
but what if gold does not go parabolic? then you are saddled with the debt. You need to invest in something that can generate income to help pay the interest on the loan as a hedge.
Gold in BIS swaps said to have come from looted bank customers' deposits
If you want to believe the Financial Times, the 346 tonnes of gold swaps recently undertaken surreptitiously by the Bank for International Settlements were a matter of the BIS' requiring three of the world's biggest banks to pledge gold as collateral against U.S. dollar deposits placed with them by the BIS so the BIS could earn a little interest. According to the FT, the banks also needed to raise cash and so were glad to obtain it by collateralizing the BIS' deposits with gold. The FT's latest account of the transaction, published Thursday and appended here, is surely the account the BIS would like the world to settle for as curiosity about the swaps is increasing and raising concerns about the grotesque unaccountability of central banks. And as the mouthpiece of the financial establishment, the FT surely was only too happly to convey this unofficial official story. But it's a doubtful story and raises questions of its own...
http://www.gata.org/node/8875
Not buying the argument that long PMs = short US military.
Long PMs = short all currencies.
Agreed that US military is one of the main drivers for dominance of dollar as World reserve currency. But with respect to gold, the relative strength of the dollar against other currencies is not as relevant as the quantity of all world currency in circulation.
if the price of gold is going to soar that means the value of fiat money is going to crash. So, wouldn't this be the ideal time to go into paper money debt to buy...land? If the currency collapses you pay back worthless money with a fraction of your gold and get to keep the productive land. Are we not saying...this is the time to buy real estate when we say gold is going parabolic?
there have been a couple of good ZH threads on this - generally land that can produce... is considered a rational answer as an investment, and land that insulates you is valuable for that purpose alone. both is best.
be wary the societal encumbrances on that land - taxes, usage regulations, etc. such that the intended production takes into account that overhead before investing.
housing used to have the same appeal... so careful that you buy something that *you* want - not something you think others will want someday.
i'm doing the mini storage facility thing on the main highways outside of fast growing major cities in South America. it generates cash flow now and some day hopefully a capital gain. the thing i learned early on about real estate, though, being from asia, is you have to worry more about what the people do with the land around you than you do the land you are buying. especially if there is no zoning. anyway, I am sure there are many other good plays. If you can get 50% financing at less than 5% interest spread over 15 or 30 years...well, look at the value of the dollar vs. gold over the last 30 years on http://fx.sauder.ubc.ca/data.html and you can see all you need to do is put about 12% of the loan amount aside in gold and in 30 years you can pay off the loan.
you're *way* ahead of my advice. hope i didn't come across as condescending.
while i completely agree with your wisdom in saying "you have to worry more about what the people do with the land around you than you do the land you are buying", i fear in today's climate that the rapidly deteriorating respect for the rule-of-law by our desperate municipalities and all of the government entities above them to the Fed, that i would be more worried about what they will do *to* me and my property than *around* me and mine.
in the new amerika, what was yours may no longer be yours.
witness the binding of property-tax to your property as a subtle transfer of your ownership to your stewardship. ultimately, with property taxes of any kind, you merely rent the land, as they will someday take it with guns should you attempt to disengage.
disengage.
i moved back to my home in asia from the us back in the 90s as I could not see any future in the usa. i agree, in the usa whatever you own they can take from you anytime they want to. at the time i thought, people will lose faith in their country here someday. I am sorry to see that I was right but I dont regret getting out early. Sorry.
good on you. hope your corner the world is safe when the 'earth shakes'. keep us in the loop with things going on there. most of what we get is pretty well sanitized by the time we're allowed to see it.
land - gold and as JW says below, cigs and TP.
how much is viagra an ounce these days :^)
there's a hedge...
I like gold, but heard it all before. I will be pessimistic if gold does not reach $1500 by the end of the year.
you can't eat gold....sorry that one is worn out by now.....gold was 850 in 1980...gold is hard to keep safe...
buy land because if .....well you know...you can't eat gold
Booze, cigarettes, and toilet paper.
you eat cigarettes and toilet paper ?
:^)
(couldn't help it... sometimes i crack myself up...)
Hey NADS,
'Buy Land............
Dirt tastes like shit.
Also,what makes you think you have a medium of exchange acceptable to the Revenoors, that will stop them from taking your PAID for property?.
You actually think that IF things stay this course, individuals are going to be allowed to OWN property?.
No way Jose...............that would make you self sufficient, and you WILL bow at the knees of the TAX GATHERERS.
Whether you can keep your property, depends strictly on DO you have ENOUGH of what they will be taking,to pay the NEW tax rates?.
My BET is NO WAY.
SERF's are not allowed to OWN property............
You forgot to mention your eternally lagging Indian festival and wedding season gold sales, and all those unsightly mountains of scrap gold just littering the landscape and waiting to be sold. Not to mention your predictably outrageous lies about next year's gold production being 5% or 7% or 14% higher than this year's, with continual (if even more absurdly implausible) ramp-ups to follow.
And with nary a hysterical and puerile slam at the "Radical Goldbug Extremists" to be read in any of your comments, what kind of Nadler do you call yourself? Oh the shame!
Remember, akak, that JonNadler and Johnny Bravo are Senior Vice Presidents over there at JPM. They are just doing their jobs
Well, well, well...
i just read Harvey Organs wonderful Blog and did a little research in the good ol' internet...
The IMF is selling every month ~15 metric tonnes of gold to surpress the price of Gold.
Sales since February:
Feb: 5,6t / March: 18,4t / April 14,4t / May 15,25t / June 17,4 t
Thats in total 71,05 t since February. Thats worth more than 2 billion Euros.
So as you can see they are having a real hard time to hold the goldprices at this levels.
They can play this little dirty game for months or one year IMO but EVENTUALLY THEY WILL FAIL BIG TIME. its only a matter of time.
If this whole house of cards breaks down and it comes out that only 1 in 45 ounces really exist you can imagine what will happen to the goldprices.
just my 2 cent, maybe i am wrong but i think the potential in gold is enormous.
http://harveyorgan.blogspot.com/2010/07/commentary-july-302010important_31.html
and it's probably like GLD - tungsten laced paper... :^)
thanks for that tidbit.
my tinfoil hat needs some gold plating. good to know they're keeping it all affordable.
when the US EPA says the processing costs of gold (mercury, etc.) are too high... their merely saying those costs are too high at the current price per ounce... right?
it all points to a long-term price rise. but what does that do to the price until then.
thanks for the link!
.knot,
"it all points to a long-term price rise. but what does that do to the price until then"
ACQUIRE PHYSICAL
Long term, depends on what the definition of long term is...........
With the entire global system on the edge, long term could be tommorrow, or 12 mos............
No way US stays afloat w/out major QE, and that will be the US catalyst.
Only an idiot would leave themselves uncovered in light of the worlds smoldering pots.
tnx DosZap, i enjoy your stuff, btw.
i'm as much into physical as i can be, and not into much else (average prepping in basement, etc.) working on getting outta debt as much as i can too. sometimes at odds. buffers are OK for now. traditional markets are an idiot's game.
my take on the gold thing is pure physical is the only real bet, but i'm very (un)comfortable that the PTB will beat the hell outta the short-termers. they (PTB) have no real choice if they want to protect their fiatscos.
i also believe they are between a rock and a hard-place because whenever they suppress the price, the BRICs/mid-easterners unapologetically sweep in and grab as much as they can...
interesting dynamic.
smart money says, to build a little pile of metals with the sole intent of handing it off tax free to the grandkids.
of course i would never do anything like that given the local laws, etc., but some bloggers might.
Updated DOW charts:
http://stockmarket618.wordpress.com
I know I predicted back in Q1 2009 that gold was going to? $750 and years before that I said it was going to $300, but I am right this time, it is goig to 200 baby! believe me
Shit, I feel like adding more to my goldminers shorts.