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Thunder Road Reports On Irregularities In The Gold Market
Paul Mylchreest submits the following exhaustive Thunder Road report (from October 15, 2009), which is a follow-up to the previously posted Redburn Partners report. A detailed analysis on some of the less discussed aspects of the gold market, this is another must read for all who have even an incipient interest in the gold market.
Paul's proposed investigative alternatives are as follows:
Alternative 1:
On average there is more than one ownership claim on each gold bar conforming to London Good Delivery (LGD) standard on the “pool” of gold which acts as liquidity for the massive OTC gold trade based in London. Essentially, the market operates on a fractional reserve basis, but if a sufficient number of market participants become concerned about this and there is a stampede to take delivery of physical bullion, there is a risk of market failure. Such a process could be delayed by central banks lending gold to the market, although this would likely be obvious by a spike in gold lease rates, or by a much higher gold price in order to encourage holders to sell bullion. In this scenario, the gold price could SOAR at any time and the gold market, which is subject to little regulation, is basically an accident waiting to happen;
Or:
Alternative 2:
There is FAR more gold bullion held in private hands than is acknowledged by current industry estimates. It is the large amount of additional gold on top of known gold stocks which provides sufficient liquidity to support the high volumes traded through London. The most likely source for this gold dates back to the Japanese conquest of Asia from 1894-1945 when Japan is alleged to have looted the gold and valuables of 12 nations – it is best known as the story of Yamashita’s Gold. If true, my analysis shows that particularly heavy volumes of this gold may have been laundered into the London market during 1986-90 and the mid/late 1990s. In this scenario, the continued evolution of the gold bull market could be more protracted, if supplies of this gold continue to enter the market periodically.
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So what we've got is more proof that fractional reserve gold banking is alive and well? Makes sense to own physical.
Most unallocated gold receipts are sold on fractional reserve principles
Even the Perth mint that Schiff is always talking up.
When SHTF, If you dont hold it, you dont own it.
these Toyota executives remind me of the 3 Japanese guys Cramer had sleep in the Carl Farbman furniture on Seinfeld. Mr. Tanaka, Mr. Oh, and Mr. Yamaguchi.
If I understand this correctly, even gold is not on a gold standard? At least as it is "owned" by the majority of investors.
You understand this correctly.
yes this is an important point....when
the usa was on the gold standard it did
not back up all of its paper with specie...
spprox 25% of currency was backed...antal fekete calls this the fiduciary component of gold and is why such economists
as murray rothbard advocate a pure 100%
gold standard....
the reason is that it puts the money on a
firm foundation by removing the sticks
holding up the massive house...
when a panic strikes, the wobbly superstrucure
collapses like a telescope and creates
untold havoc....
Gold manipulation reminds me sub-prime mortgages. Early or later the entire bogus structure comes down.
TD! You are such an alarmist! Since when have banks EVER used fractional reserve banking! Oh, wait....
A lot of work, thanks.
Didn't Madonna warn us long ago? "Let's get physical."
Olivia Newton John, actually.
thank goodness for australians.
Gold's been manipulated since 1988 after the birth of PPT. Crimex and lbma WILL go broke in the coimng months, as they're offering rediculus amount of money instead of delivery. THEY DON'T HAVE ANY PHYSICAL
It comes as no surprise to most
there are different prices for different gold markets,
with Stocks, ETFs, Futures and Physicals demanding
increasing premiums in that order on the way up.
This works in reverse order on the way down.
Since gold prices are driven by credit and derivatives,
then the collapse of these and other markets creating
margin calls pulls down all markets, including gold.
Just look at the correlation between gold and other
markets in collapses since 1980...
http://www.jubileeprosperity.com/
Oh god, not you again. Peddling the same preposterous nonsense, I see.
You have no idea what you're talking about.
I am Chumbawamba.
"irregularities in the gold market"
Yeah, like how it ever got over 1000 in the first place.
Don't worry, those irregularities are in the process of being fixed today.
Send in the clowns.
You can't wipe snotty noses with gold.
GOLD BITCHES!!!
I am Chumbawamba.
+100^100^100
I was wondering when you would get back to your old self.
You.Cannot.Go.Wrong.Having 5%-10%.Of.Your.Net Assets.In.Gold.
5%-10% was for the "good ol days", and that was still a low ball number. Nowadays that lowball figure should be 15%-25%. I have PMs as 1/4-1/2 of a balanced....yes, balanced, portfolio. That does not include mining stocks.
Myself I am at 60/40, pm/$. And that will be reduced when I finish a lump sum payout of a loan next month.
Don't have much but I do not feel worried at all.
Just waiting for all the lies to end, really.
Gah another BS article on gold which is based on nothing more than psuedo-science, leaping to conclusions, and "it could be possible"s. ZH has posted way better gold articles, this one is just going to work readers into a tizzy over nothing.
"never let a tizzy go to waste" (some famous person)
Is it possible that Yamashita's Gold survived the previous crisis in the seventies? Are those in power so far looking that they kept a stash for the next crisis?
Didn't we (U.S.) confiscate Yamashita's gold in 1945-'46??
John Rubino and James Turk figure about a 80:1 ratio for the amount of gold promised in paperform for delivery vs what's available. Fractional Reserve big time rumoured to threaten to take down large shops and cause cascade failure, particularly in London, hence some of the inexplicable raids by the hands of officialdom. Gotta protect their own.
"The motivation for writing this report is the fact that the gold market doesn't make sense. Basically, the numbers don't add up."
Amen brother. Time to shoot the messenger, which the author recognizes is a possibility when he pleads on the cover "Gold market - accident waiting to happen or crime scene? Don't shoot the messenger."
We must all remember that the most important tool of any Ponzi or con game or scam is plausibility or plausible deniability. As long as a "reasonable" counter argument can be mounted against the truth, those who wish to maintain the Ponzi or their belief in the Ponzi will strike at the whistle blower. Since some of the complexity of many financial systems is intentionally built in to afford plausible deniability (just like complex laws [like the tax law] allow lawmakers wiggle room and thus influence) this will always be the case.
One must simply stop arguing the rigged game and just demand accountability, backed up by the pitchfork and torch. If you resort to arguing, you have already lost. It's a rigged game. Don't even consider they you can win because you can't.
Aside from RoboTrader's bodacious posts, what DOES make any sense, any more, at any time?
It is obvious from reading this that, while gold is much maligned as a barbarous relic by the banksters, THEY value it highly and trade it vigorously. They want the price kept low so there's more for them.
“There is much more fund participation in the market – but their spot transactions are generally netted against EFPs – exchange for physicals, which swap the original exposure to the spot London market with a futures contract. So the initial loco London transaction is offset and essentially nullified by the EFP, which moves the position to the exchange. Therefore, no loco London clearing takes place.”
The above is very interesting, as I recall recently that the exchanges issued a ruling that allowed EFPs to be settled in...you guessed it, shares of GLD.
and wouldn't it be best long term for the value of gold to increase, if the banksters were to continue to use it as a loan of recourse?
+ on this......"The above is very interesting, as I recall recently that the exchanges issued a ruling that allowed EFPs to be settled in...you guessed it, shares of GLD." Soros I presume.
This is the one thing that all these fiat monkeys who trade paper fail to acknowledge:
If gold was going to tank at some point, why are central banks all over the world falling over themselves trying to get big hoards of gold to add to their holdings?
Anyone care to take a stab at that one?
I am Chumbawamba.
There is as much truth to that assertion as there is to Geithner's PPIP plan being "good for all Americans".
Gold is manipulated. Why do you guys all believe in one tiny commodity, yet acknowledge fiat manipulation, oil futures manipulation, rice / corn / sugar manipulation.....
Totally bizarre behavior. The whole game is rigged. Accept it, then you'll realize your gold is just another tool the gov't uses to control you bitches.
Sorry, wrong. Gold and silver, precious metals, held as a physical asset, are very difficult if not impossible for the government to control.
First, they can never set the price of gold: the market does that, and no matter how much manipulation they engage in, the price will always ultimately rise or fall to where the market says it should be.
Second, precious metals, in physical form, in your possession, have no counter party. It is pure wealth.
Gold is not a "tiny" commidity. It is THE monetary commodity and has been so for thousands of years.
The trend is your friend.
I am Chumbawamba.
"Gold" should be taught as a history class in H.S. and Universities. While we talk Yamashita's gold, how about Prescott's? This is the story of how he rode into asia with Averil Harriman and single handedly took the Japanese government's gold for Scull and Bones exclusively.
"Gold" should be taught as a history class in H.S. and Universities."
I understand you're point so this is simply a general comment and not directed towards you, just simply under your point. I agree with your supposition.
Unfortunately, the purpose of schools is not to inform, educate or even inspire (if they happen to do so, a terrible mistake was made) but to indoctrinate and propagandize the general population in the ways of the world as it has been created for us to slave in. What we in America so eloquently parrot as "freedom" is actually "liberty" as in "you are at liberty to select from thousands of professions as long as you accept that the current economic and social system is the only method afforded to you."
Now time to join the "real" world. We have a brand new hamster wheel ready and waiting for you, personalized with all the latest bells and whistles. Ready, set, GO!
I totally agree with you CD.
And I agree with your views. I am an idealist concerning the education system. Hence my notion that a class titled, "Gold; what you never knew, so were never afraid to ask" would gain any respect from the bureaucratic institutions. I do believe if all the info was made public, the theories of sound money (ie gold/silver/commodities standard) would gain traction. Our Universities and public school systems were created to instill facsism into our collective consciousness, but learning by nature instills truth and freedom. The truth will be the dagger in the NWO's back.
I would settle for a book on GOLD similar to Reinhart and Rogoff's book "This Time is Different", a masterpiece of a book looking at hundreds of financial crises through the centuries.
Gold is an extremely interesting topic, one can never learn enough. So much is secret.
Most of us still believe we are nothing but a body with a mind.
A class in what is is to be in the human form and how to best manage it.
Class on paying attention, how to focus.
How to remain aware and not get caught up in the mind or emotions
How to leave your body at will.
On sensitivity and flow,learning to balance the dual nature of material reality
duplicate.
absolutely CD, school is not to infom or educate...
Which is going to make it easy for us to take over this mess
and rule proper, after the collapse.
Rule 1: Robo is in charge of all murals....
The price of poker just went up.
I apologize for this somewhat OT post. I am not financially oriented, but because of my fear about the economy's future I was motivated to learn more, and found this site (as well as Karl Denninger’s). This site is obviously not for beginners such as myself, and so I will hardly ever post because I won't bring much to the conversation. With that said . . .
Do you recommend any books I should read to clue myself in about the macro situation? Based on what I’ve read here, I just ordered “Confessions of an Economic Hit Man,” End the Fed,” and “This Time is Different.” Do you recommend any others? TIA.
Finally, thank you to many of the posters here, from whom I am learning lots. Hat tips especially to McCreant, Cognitive Dissonance, GordonGekko, SWRichmond, Mr Lennon Hendrix. Because of you & others, I am 100% out of the market, & have converted many of my FRN’s into physical PM’s, which I hope to keep forever. (After this post, I intend to thank Tyler and Marla in a more pecuniary manner.)
go to mises.org and check out their library. bastiat, hayek, rothbard etc
The Black Swan, Nassim Taleb. (others also recommend Fooled by Randomness which I haven't read yet.)
Also, buy a macro text book, read the lies, then burn it, but remember the lies to use against the perps.
in finance one never segues with: " with that said...." please use the financially correct "having said that..."
watch the last episode of curb your enthusiasm: seinfeld
I second "The Black Swan". You will probably like "This Time is Different" even though it is not an "easy read".
I think you will happy with your physical PMs (as long as it is not more than, say, 20% of your net worth), despite what MB might say.
Still, friends of ours like MB, Leo K, etc. who hold different views than many of us do make this a better site, force us to keep thinking.
I'm in 100% percent baby, not counting the day to day spending cash that is always screaming out from my pocket, "USE US TO BUY MORE GOLD AND SILVER!!!"
I am Chumbawamba.
Chumba! You are starting to sound like the recently resurrected Mogambo Guru!
Now, damn it, every time I open my wallet, MY cash is going to start screaming the same damn thing.
Of course you have to be very brave and very mature to be 100% in gold. Friend of mine in Texas is something like 50% in gold.
If we reach even a decent fraction of FOFOA's prices, then that 5% - 10% will get much bigger.
And Chumba would have the bragging rights all the way to, well you know. While he is serviced by young hotties who also re-fill his drinks.
Freedom is freedom to act unimpeded. Since most of our interactions with most of the other humans on this planet are economic in nature, freedom means, in large part, economic freedom. It's impossible to separate economics from politics; much of the reading I'd recommend is Revolutionary-era thought, and Austrian Economics. The first reveals, in plain language that anyone (even a Congressman) can understand, the system of government that we're supposed to have and of which we've allowed ourselves to be robbed. I especially recommend Patrick Henry's substantial and correct arguments against Virginia's ratification of the Constitution; his warnings are prophetic: http://www.constitution.org/afp/phenry00.htm
The second develops an economic system that is based entirely on voluntary action and free exchange, one which is well suited to a free people. Mises, Hayek, Rothbard, Lew Rockwell, Ron Paul...from there it is easy to understand the need for sound money and competing currencies. Controlling the value of a currency means controlling the economy means controlling freedom and life itself.
Ralph T. Foster's book "Fiat Paper Money, the history and evolution of our currency" is an excellent history book
on the creation and destruction of Fiat currencies.
Excellent book, but I warn you, the book is a spoiler on how
our present crisis ends.....
Dummer than most, most likely but i feel free to post because I AM .
We are all in this mess together, rich and poor, educated or not .
Its the NOT SPEAKING UP thats gonna hurt us more.
economics in 1 lesson, by henry hazlitt.
Free download for both patriots and sycophants.
http://fee.org/library/books/economics-in-one-lesson/
I recommend you read the posts at www.fofoa.com
+23
FOFOA da man. Need to read kind of a lot of him to get his point.
Also read Antal Fekete, who has really interesting takes on gold and ever lower interest rates destroying capital.
OK Real Estate Geek, try this one on.
Completely copied and pasted from FOFOA (hope he doesn't mind).
It is a synopsis, in the form of a story, of the Thoughts of "Another" and "Friend Of Another", which were posted on Kitcos', and later USAGolds' discussion boards between 1997 and 2001.
The King and His Gold
In his very first post on the Kitco forum, October 5, 1997, Another wrote "gold and oil can never flow in the same direction". This was a major theme in his writings. To understand Another is to understand what is going on with the gold market now. And in that spirit I have written a short story that will hopefully help you understand this first important message from Another:Many decades ago the Saudi King realized his barren kingdom was sitting on a gold mine. Only it wasn't gold, it was oil. From his high perch as king, he was able to see the wide and very long view of the world, way off into the future. He saw a future filled with many riches, but he also knew that those oil reserves under foot were only finite cavities of value. As a king, he knew the workings of money and fiat currencies. He knew that the Western World needed his oil treasure, but he didn't want to exchange it for only paper. He wanted to turn his virtual "gold mine" into an actual pile of gold.
Back then, the paper which paid for the oil was redeemable for gold directly from the US Treasury. So there was no problem. He would take the paper and then turn it in for gold. Later, after much inflation, the US Treasury defaulted on the promise of gold. Chaos ensued for almost 10 years. The price of both oil and gold skyrocketed and there were long lines at the gas pumps. For this kingdom was only willing to trade it's finite supply of oil for an equally finite store of value, gold. And without a secured source of gold at a stable price, the oil wells just didn't have the incentive to run at peak production.
Then in the early 1980's, the markets were brought back under control. A secret deal was cut between the King and a few very high, and very powerful leaders in the West. These leaders probably included central bank chairmen and top level leaders in the US and the UK. The Western World was on it's way to world domination, both financially and militarily, but to maintain this power it needed cheap oil. The Kingdom was a good way through it's reserves of oil, and to part with this valuable commodity, the King needed the promise of an equally scarce store of value, gold. So the deal was that oil would be shipped to the West in exchange for dollars AND gold. The dollar price of oil would be kept low as long as the much more valuable gold could be had for those same low costs. The CB's involved in the deal guaranteed this to the King by backing up the deal with their own vast stores of golden bars.
But these top bankers, like the King himself, were not as dumb as they may seem. In fact, they were the best and the brightest, for they knew that the true value of gold was probably somewhere around $50,000 per ounce in today's dollars. And that was the value of oil to the King as well. His oil reserves might only last his kingdom a mere century, but if he traded it for gold, not dollars, he would enjoy the wealth of his treasure for 1,000 years or more.
The central banks that backed this deal with their own gold NEVER intended to give the King any of their precious treasure. They knew they had a way around that. By using the open markets which traded paper contracts for gold, they could keep the price of gold down to $300 per ounce and the public would be none the wiser. Then, the King with his $30 per barrel of oil could buy future gold delivery straight out of the mines in backroom deals for a premium of perhaps 100% (which is a guess). So for 20 years, vast amounts of gold flowed from the West to the Middle East for maybe $600 per ounce (twice the spot price on COMEX at the time), and those sales were hidden from the price discovery exchanges so as not to affect the price, and the oil flowed to the west freely, at the seemingly cheap price of $30 per barrel. But in reality, the King was getting one ounce of gold for 20 barrels of oil, and if gold is really worth $50,000 an ounce, that's a price of $2,500 a barrel.
So who is paying that price? In a way, all of us are. The mines are making a profit for what they pull out of the ground. They are getting twice the cost of mining. That's a good profit. But the gold in the ground under us is flowing east, while the oil in the ground in the kingdom is flowing west. So who is getting the better part of this deal? I say the King is.
Sure, we have seen unprecedented prosperity for 30 years now. But that is about to end. On the other hand, the King has seen 50 years of amazing prosperity and is looking forward to another 950 years of extreme prosperity. You see, once the oil runs out, the kingdom does not become poor. In fact, that is when the party really begins! They have sold to the West 30 or 40 years of prosperity in exchange for a thousand years of unimaginable wealth.
Then, around 1997, some big money in the Far East became aware of this bargain on gold. But they couldn't get in on the back room deals that traded large amounts of physical without affecting the price. So they had to accumulate physical on the open market which started to drive the price up. This started the 10 year rise in the price of gold..... and oil! For now that the King has to pay more for his gold, we have to pay more for his oil.
And somewhere along the way, too much physical gold was heading east, both to the desert and to the great wall, and the mines could not cover it. This threatened a default in the paper gold price discovery markets used by the Central Banks to protect their own gold reserves. So they were faced with the option of either watching the whole monetary system crash, or parting with some of their own gold. They finally had to ship some of their precious treasure to the King. After that near disaster, they fought the markets even harder, with larger and larger short positions. But now, at this very time, they (the CB's) have maybe half the gold they once had, and they have probably the largest short positions ever too. So they are standing right on the edge of a cliff, holding the end of a rope that's trying to pull them over.
It won't take much for this deal to fall apart. And when it does, we'll see the price of gold go up to probably $5,000 an ounce and then all trading will stop. No market will exist for gold at it's true value. For those that have all the gold in their possession are only buying, not selling. Oil will skyrocket too... if it flows west at all. This is coming, and soon. Buy gold. Hold gold. It only has to meet it's true price once in a lifetime and that will be more than worth the wait. I believe this is not a once in a lifetime opportunity right now, but possibly a once in the history of the world opportunity. Silver, platinum, commodities... they may all do well. But nothing will come close to the true value of gold. $50,000 an ounce may even be low.
FOFOA.blogspot.com is a veritable goldmine of information on gold, and thoughts on its' role in the largest possible context.
Anyone with an interest in gold, or indeed with contempt for it, should at least expose themselves to these ideas. I see a number of ZH regulars already have.
The exchange between FOFOA and Ender in this particular post :
http://fofoa.blogspot.com/2008/09/freegold.html
has much food for thought too, but so do many/most other posts too..... you did ask for recommended reading right?
Seems to me the Tylers are considered the sharpest knife in this drawer -
ever wondered 'Why so many ZH posts on GOLD?'
Are they trying to tell us something? Hmmmmmm......
I know there are some pretty smart folks frequenting this joint, but sometimes answers are obvious, and simple, and historically proven.
And sometimes people can be a little too clever for their own good.
try Jim Sinclair at www.jsmineset.com. If you read Mises then also read www.antalfekete.com
I thank you all. Having said that (LOL, #243876), I am almost overwhelmed by the amount of reading ahead of me, but I recognize it's essential to protect my finances against what seems to be coming. (Fortunately, I'm extremely well-prepared in the lead and provisions department.) Thanks again!
G. Edward Griffin's: The Creature From Jekyll Island
Very eye opening indeed.
answers could be found in a big-assed audit of the fed (other cen banks too)
Some transmutation may be required to meet claims...
Gold has been manipulated just as much as any fiat has in history. In fact, the basis of fiat fractional banking came from the goldsmiths who held physical and lent 10x what they held.
Gold Bugs - gold aint the solution. All money, physical and fiat - is ALL perception.
Unfortunately for you, 99% of the world loves the dollar, and 99% of the world falls asleep when you start talking about gold. So, manipulated or not, its no better than fiat - as perception is what rules the markets not your so called logic
Perceptions change.
I am Chumbawamba.
Which is why fractional reserve banking (deceit and making money from wealth that does not belong to you) is the problem, not precious metals.
Which is why you never try to sell your Au or Ag to someone that does not appreciate the timeless nature of that which cannot be falsified.
Either you are visiting from HuffPo or the gov't is hiring anyone they can get to troll comment sections these days.
Just in case you are sincere and misguided I have this for you:
http://dailyreckoning.com/fiat-currency/
Meanwhile, precious metals will maintain weight and purity until someone decides to tamper with that balance.
"Some say that pain isnt real But when I sit on a pin And it punctures my skin I dislike what I fancy I feel."
While perceptions play a big role in all markets, fundamental will eventually dominate, and a study of history shows that fiat currencies always fail. And, unfortunately for you, when the current fiats collapse, you will be uncomfortably impaled on the gold pin if you aint got any because gold is real despite your simple relativism. /p>
99% of the world loves the dollar, huh?
Pretty crowded trade looks like to me.
Alternative #2. Someone else gets it!
Just think of all those slave goldminers from thousands of years ago......sneak a nugget home every night. Sooner or later, those nuggets end up in the castles of the poobahs.
Official tonnes mined=actual gold above ground?
If a poobah, it would be fun (and profitable) to set up a system whereby gold prices could be goosed and then sell some of my hoard into the high price.....capiche?
Everything is a tool to "jerk" the fool.
40muleteam borax
What we are basically saying here is that everything is nothing. Every kind of "investment" is a fig newton of someone's imagination. Your bank deposits aren't really there. Your gold is just a paper transaction. Your pension is only a worthless promise. Companies are so poorly run that they can blow up in a second so ownership is empty too. Notice I said "fig newton". This means that what we think we own is not even substantial enough to be called a figment.
So, if the thing we pay money for is not in our hand, it probably doesn't exist. Now, even if I own my home, the property taxes can go so high that I can't pay them and the house is lost.
So, what to do? I don't know. I'm sure the house of cards is coming down quite soon, probably this summer. We are still going to have to deal with paper money no matter what. There are not enough gold coins in the world to cover the amount of trading even for just food that needs to be done. Trading gold bars at the supermarket probably won't work.
So maybe all we will be left with is the actual cash we have on hand. It will remain a physical thing that can be traded while anything held in a computer somewhere will disappear like the ghost it really is. Even gold in storage won't matter because who can physically move it around? Maybe jewelry will still work because it is small enough to be carried around and traded easily. This suggests that Asia will survive and we in the west won't. But then, even with gold you would have to have a way to determine its purity which few places have.
I'm going to put in a larger garden this year. At least I will be sure to eat for a while. A tomato in the hand may be worth far more than we think.
Japan is up....so are most commodities, hahaha! Got gold?
Thank you to BS, and his magic printing press! (JK, JK....I do not condone, I merely point out the facts)
Looks like India might've caught the fever... http://in.reuters.com/article/domesticNews/idINSGE61N01O20100224
Computers and databases are good only to speculate about what the actual statistics may be.
"A Short History of Financial Euphoria" by John Kenneth Galbraith is a good one evening read...
In a recent interview, Rothschild stated he saw concerns in the global economy and was investing in gold bars (sounded like physical) and strong country debt (probably Treasuries).
But I am sure someone with the avatar of "Master Bates" knows much more than Rothschild (not). Although, perhaps he is an agent of the .gov or another accumulator like George Soros who stated gold was the ultimate bubble and then doubled his position.
Paul Mylchreest concludes is that there is
"an aggregate pool of gold of just over 16,866 tonnes of gold to support an average of 2,134 tonnes of daily spot gold trade. On this basis, 12.7% of the pool of available gold is being turned over every day on average. … And the entire pool is turned over every 7.9 working days. In my opinion, this level of trade relative to the estimated pool of gold liquidity is excessive and doesn’t pass the smell test."
Firstly, he makes a series of assumptions to get to his figures. For example, his 16,866t figure relies on World Gold Council/industry estimates of above ground gold and the percentage that is investment. Being a trade organisation representing miners who want a high gold price one should expect that “stock” numbers will be estimated on the downside. When estimating what the real trading volume of gold is, then he steps into a more rubbery area because he is relying on only two guesses from some industry people - we need more than that.
As a result, one must consider his 12.7% turnover figure to have a fair margin of error considering all the assumptions and estimations used to derive it. This is not to say that it should be 1%, just that it is not a “hard” number.
Secondly, even if 12.7% is correct, I don’t think it logically follows that this “doesn’t pass the smell test", a conclusion he comes to by comparing gold to equity, other commodities and fiat currencies. The last one is probably the most relevant. In this he has to again make some assumptions about currency trading turnover to come to a figure of 2.6% for Sterling, conceding that when including forwards and swaps “daily Sterling turnover is only equivalent to 8.4% of UK broad money”.
Why stop at Sterling? If one does the same calculations for the Australian dollar, you get 4.1% for spot and 13.3% including forwards and swaps. Does gold’s 12.7% (which could be lower if some of Mylchreest’s assumptions are changed) now appear as an “excessive amount of gold trading relative to the likely pool of available gold”?
Mylchreest’s final conclusion is that either 1. there is “more than one ownership claim on each gold bar” or 2. “there is far more gold bullion held in private hands than is acknowledged by current industry estimates”.
I would suggest that there is another OR that Mylchreest has not considered: the very fact that gold is no one’s liability and cannot be printed means it attracts a disproportionate amount of trading and speculation. Why is it assumed that 12.7% is excessive and unreasonable? Could not the 12.7% figure be proof of the special monetary nature of gold, proof that it is the King of Currencies?
Good one Bron. Glad to see you commenting. keep it up.
The gold comments are getting to be surreal.
Why can't it be that the funds have jacked up USD price of gold (POG) way past what it should be in real purchasing power? Think of what an ounce of gold buys now, even at 130 lower than the December high when the momo geeks lost control.
With an eye to value, one could have gotten a round trip airline ticket from Chicago to a desirable place in Central America for a week of rather decent accommodations, and had plenty of change for the restaurants. That is stupid cheap for all time for an ounce of gold.
That is not to say that gold might be the only way for the little folks to keep some of what they have saved once the next realization of the insolvency hits. FWIW, the Union movement in the late 1920's was adamant on retaining gold currency as the only check on the FED/banksters in devaluing the savings of the least powerful. How did that work out once the sheep lost the ability to get specie for their accounts?
There are times when one sees the profligacy of the banksters moving into high gear. Then is the time to convert to hard currency. When the momo funds pile on and ramp it way out of line to near-future purchasing power, that is the time to sell. It should be an unemotional currency trade. (although the vast goomint taxes on it make it hard to sell)
The present situation is hard to read. If it was easy we would all be rich from currency crosses. Au is a currency.
If you really think the relative value for gold is so high why dont you go gold panning and find out how long it takes you to actually aquire 1 oz of gold. I bet you would be lucky to get that in a month.
If there were any irregular sales. GE would know about it.
http://www.wipo.int/pctdb/en/wo.jsp?wo=2003025708
Currently, major indices tanking, and gold stocks coming off lows.........disconnect, just what I've been waiting for and want to see more of !!
What if the gold sold in the late 90's was not Japan's but gold from Ft. Knox? I think it's more likely that Greenspan/Rubin were illegally liquidating US reserves to suppress the gold price and fuel their bubble.
Ft. Knox presumably holds what are known as coin-melt bars, that are not deliverable in futures contracts cleared through the LBMA. When the US went off the gold-coin standard in 1933 the Treasury hoovered up all the coins in the banks, probably the largest stock of coinage that ever circulated, and melted them into featureless bars. Ft. Knox was finished in the late 30s, and apparently tours are not allowed, not even the president.
One "rumor", (there are a few on the 'net with respect to this) was that the bulk of Ft. Knox gold was lost in the 1960s in an ill-advised attempt at maintaining the Bretton Woods agreements, during the Johnson administration.
The rationale was to dump gold and defend the price, but it didn't work, etc. What then followed was a two-tiered system, briefly, and the a closing of the "gold window" by 1971. It was true that in 1968 the gold market was in a frenzy, and I read somewhere else that so much traded that the floor at the london exchange collapsed.
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