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Eric Sprott On The Implications Of The "Chinese Gold Vortex"

Tyler Durden's picture




 

Submitted by Eric Sprott via Sprott Global Resource Investments,

After a long and agonizing winter which was attributed to the so-called “Polar Vortex”, we thought it would be appropriate to highlight for precious metal investors the implications of what we call the “Chinese Gold Vortex”. Over the past year, we have been very vocal about what we consider an aberration: the complete disconnect between gold supply and demand fundamentals and the actual price of the metal.

We have shown in February Markets at a Glance (MAAG) that, for all of 2013, demand from emerging markets, particularly China, was extremely strong, outstripping world mine supply by a fair amount. But this extreme tightness in the physical market was not reflected in gold prices. We have since then discussed many signs of manipulation in both the paper and physical gold markets (ETF flows, Indian intervention, LBMA fixings, to name a few).

This month’s Markets at a Glance presents an update on the demand dynamics in China, discussion around new evidence of manipulation and concludes with an illustrative example of the opportunity in gold equities.

Supply and Demand

While the year is still young, we have been able to gather a few data points from China and they are truly impressive. The table below shows Chinese net imports of gold for the first two months of 2014.1 So on average, each month this year, China has imported about 204 tonnes of gold, up from about 143 tonnes last year.2

maag-4-2014-table1.gif
Chinese data is taken from the Hong Kong Census and Statistics Department. Swiss data is taken from the Swiss Customs Administration, which started reporting gold exports to specific countries in 2014.

To put these numbers in perspective, for the full year 2013, total mine supply excluding China and Russia averaged 192 tonnes per month (see the February 2014 MAAG for details on the methodology).3 Basically, China is currently vacuuming, on a monthly basis, all of the world’s mine production plus an additional 10 tonnes. But that is only China; anecdotal evidence from other countries suggests that demand remains strong in other Emerging Markets, where Central Banks keep adding to their gold reserves. Moreover, whereas last year’s ETFs contributed (unsustainably) to supply, this year has so far seen net inflows into gold bullion ETFs.

What immediately comes to mind is: where does all this gold come from? As we have long argued, gold to Emerging Markets has been supplied by Western Central Banks for many years.4 Recent data substantiates this claim. A closer look at Swiss import and export data shows that it imports most of its gold from the US and the UK and exports most of it to China and Hong Kong. For example, in the first two months of 2014, the UK has exported over 233 tonnes of gold to Switzerland; this is more than half of the Chinese net imports over the same period (remember the UK doesn’t produce any gold). Similarly, the US, which has a monthly gold production of about 19 tonnes, has exported, in the month of January alone 56 tonnes, most of which went either to Switzerland or to Hong Kong directly.5 So where does all this gold come from? It is supplied by Western Central Banks, which according to our analysis have very little gold left.

While it is still early, the Chinese Gold Vortex is firing on all cylinders and data so far this year suggests that demand will far outstrip supply.

Manipulation

The topic of gold price manipulation seems to be making its way into the mainstream. Regulators in Germany made the first foray into gold manipulation with their investigations of the London Bullion Market Association (LBMA) now infamous Gold Fixing.6 Now, we hear that the CME Group (which owns the COMEX, where paper gold trades) has been sued by three traders for allegedly selling order information to HFTs ahead of the broader market.7

Simultaneously, academic studies have found evidence of manipulation in the gold market and a consultancy (Fideres) even claims that “global gold prices may have been manipulated 50% of the time between January 2010 and December 2013”.8

We have long suspected manipulation, but it is now clear to us that both the physical and paper bullion markets have been tampered with for quite some time, to the advantage of those that are naturally short gold (i.e. the bullion banks and other gold dealers). With the increasing amount of scrutiny from the public, academia, regulators and now lawyers, manipulators should have a progressively more difficult time preventing gold from reaching fair value.

The Opportunity

The stars are aligned in 2014 for a significant re-rating of the gold price. In our opinion, the best way to participate in a return of the gold price to fundamentals is to invest in junior gold miners. The tables below show EPS estimates under various gold price scenarios and the associated stock price targets, assuming a price-to-earnings ratio of 10x, for both a major (Barrick) and a junior (Crocodile) miner. From the table, it is obvious that junior gold miners have much more leverage to the price of gold.

maag-4-2014-table2.gif
Estimates are for FY2014. Price returns assume a P/E ratio of 10x. All figures in USD.
Source: Sprott Estimates and RBC Capital Markets
For illustrative purposes only, Eric Sprott and Sprott Asset Management Funds beneficially (directly or indirectly) may own in excess of 1% of one or more classes of the issued and outstanding securities of the above securities.

In summary, the tailwinds are twofold for gold: the Chinese Gold Vortex is putting an undeniable pressure on the physical market, while focus on price manipulation makes it progressively harder for price manipulators to operate. The reversal of this anomalous, yet explicable market dysfunction could provide astute investors with multi-hundred per cent returns.

Do not miss this Golden Opportunity!

 

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Wed, 04/30/2014 - 18:44 | 4714073 Cattender
Cattender's picture

Paper (the u.s. Dollar is KING!) LOL!!!!

Wed, 04/30/2014 - 19:05 | 4714128 Xibalba
Xibalba's picture

How many days did it take to get Ukraine's gold into US vaults?  Er...or should I say hours?  Apparently it has no problem arriving to the FRBNY.  It's just the leaving part that takes 20years

 

http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&i...

Wed, 04/30/2014 - 19:55 | 4714253 Peter Pan
Peter Pan's picture

Can someone tell me where Gadaffi's gold is?

Wed, 04/30/2014 - 20:10 | 4714288 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Anyone who reads Zero Hedge should be able to work his/her way up to 5% in gold and/or silver (mostly gold IMO). And at 5% in (physical) gold, you are ahead of 99% of all Americans!  Yay!

"Easy-peasy", just takes time and discipline.

Wed, 04/30/2014 - 20:16 | 4714308 seek
seek's picture

Germany.

Wed, 04/30/2014 - 20:28 | 4714339 ltsgt1
ltsgt1's picture

Wrong country. Germany has gotten only 5 tons of their gold so far. Gadaffi had around 160 tons of gold. Venezuela repatriated all of their 180 tons a few months after we occupied Tripoli.

Wed, 04/30/2014 - 22:15 | 4714393 DoChenRollingBearing
DoChenRollingBearing's picture

I have read a couple of reports -- reports that I cannot verify -- that Germany does NOT want its gold from the FRBNY very quickly.  The reports both had items like "ease of trading" and "ability to manipulate".

Insurance companies do not like to insure more than 2 - 3 tonnes at a time on airplane flights (one tonne is worth over $40,000,000).

German and Swiss refiners do not have all that much spare capacith to refine huge new amounts of gold either.

Like I said, there may be other reasons we do not know why Germany is NOT getting it gold.  I don't know, and I doubt that many do.  It was political pressure by a small-ish German group that pushed the Bundesbank to ask for their gold.

***

Yes, Venezuela sent a warship to London to fetch (some of) their gold, as did France (to the USA0 in 1970 (? date).

Thu, 05/01/2014 - 01:14 | 4715016 hobopants
hobopants's picture

I guess those could all be good explanations, but the discrepancy between the amount on the delivery schedule and what they are actually receiving is suspicious (but that could be partly explained by the transport cost you mention).

I think the biggest tell that the FED simply doesn't have it is the fact that the bars Germany is receiving are newly minted and of inconsistent quality, not the stuff Germany originally gave to the FED to store.

Wed, 04/30/2014 - 20:46 | 4714400 SuperRay
SuperRay's picture

I think that Venezulan gold was carcinogenic....

Wed, 04/30/2014 - 21:43 | 4714573 Poor Grogman
Poor Grogman's picture

Venezuela is in dire need of some humanitarian, freedom loving, anti terriss, gun totin, non lethal, intervention.

It sure is nice of them to hang onto Uncle SAMs gold in the meantime...

Wed, 04/30/2014 - 20:31 | 4714352 Xibalba
Xibalba's picture

I'll take China for 1000

Wed, 04/30/2014 - 20:34 | 4714362 Poundsand
Poundsand's picture

The US broadcast they were coming.  Do you think that was gold that they carried away, or something that passed as gold on quick inspection?

Wed, 04/30/2014 - 18:45 | 4714077 Spitzer
Spitzer's picture

Where is this gold coming from ?

Wed, 04/30/2014 - 18:50 | 4714096 onewayticket2
onewayticket2's picture

Tungsten R Us

Wed, 04/30/2014 - 19:05 | 4714135 Pickleton
Pickleton's picture

Good Lord that pissed me off.  Disarm the military and arm the beurocracy.  

Wed, 04/30/2014 - 19:54 | 4714249 sunnydays
sunnydays's picture

Well China and Russia are about to take control of the London fixing prices of metals.  Will they let them shine ?  :)

http://sherriequestioningall.blogspot.com/2014/04/chinas-view-of-obamas-...

Thu, 05/01/2014 - 08:39 | 4715435 zerocash
zerocash's picture

They will destroy the ammunition in the Ukraine.

Wed, 04/30/2014 - 19:20 | 4714156 hobopants
hobopants's picture

They can drop all the 5.56 and 7.62x51 off at my house, I'll make sure it's properly "destroyed"

Wed, 04/30/2014 - 20:12 | 4714296 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

http://gunbot.net/ as all the ammo you need from many retailers.

Wed, 04/30/2014 - 21:01 | 4714449 hobopants
hobopants's picture

Wow I'm in your debt, fantastic find.

Wed, 04/30/2014 - 19:45 | 4714218 Four chan
Four chan's picture

they are just throwing us off the track those bullets are for killing us citizens.

Wed, 04/30/2014 - 21:07 | 4714482 Papasmurf
Papasmurf's picture

First point, it was intentional to purchase $1B of ammo slated for destruction after delivery. The purpose was to crowd out private availability. Secondly, the article says information can't be shared effectively to move ammo where it's needed. It is not in the interest of the MIC to share this information as that would reduce profits on both ends of the transaction.

Thu, 05/01/2014 - 02:42 | 4715087 Scarlett
Scarlett's picture

if the purpose was to crowd out the people, these imbeciles just gave a reason for manufacturers to improve capacity

Wed, 04/30/2014 - 18:49 | 4714091 maskone909
maskone909's picture

I got some jr's... AUMN seems like a good one if gold pick up momo. If u have money to burn check it out. Other than that i think nothing fundementaly has changed. Still records amount of debt anywhere u look. I would rather have gold coins than giving my money to a bank. Good luck my friends!

Wed, 04/30/2014 - 19:06 | 4714098 Dorelei
Dorelei's picture

I send you a picture of what I do with my gold  !


http://uppix.net/nWyTzzl.jpg

 

Yeah thats right, I eat it ! Its fucking goldlicious !!!

You can use it as a dressing for every meal !

That's the best way of using this store of true greed value used since googols ages !

And what a better way to keep your hard assets close to you ?


When I need to pay my groceries I just spit in the face of the face of the clerk !

When I go the bank I just let my vampiresquid banker suck my dick to get my golden semen !

Men it feels good to go to the bank !!!


As a bonus, I feel like an alchemist every time I go to take a dump!

For the sake of politeness I won't send you a pictures of my shiny shit !

But to get an idea of what it looks like just watch yourself in the mirror, all of you greedy Goldlums shitfaces !!

Wed, 04/30/2014 - 19:26 | 4714177 Ralph Spoilsport
Ralph Spoilsport's picture

Stay classy dorelei.

 

Wed, 04/30/2014 - 20:34 | 4714359 gmrpeabody
gmrpeabody's picture

Punk..., comes to mind with that guy.

Yes..., I'd say dorelei is a punk.

Wed, 04/30/2014 - 20:47 | 4714413 Dorelei
Dorelei's picture

The fight club movie being  based on the story  of a  rebellious counterculture group I take it as a compliment  !

Wed, 04/30/2014 - 19:39 | 4714211 bardot63
bardot63's picture

Hey, Dora-whatever, you can get up off your knees now.  We know when we're licked.

Wed, 04/30/2014 - 20:07 | 4714279 Dorelei
Dorelei's picture

I know you’r really angry because every time you go to the bank you get pounded without lub .

 

The banker hasn’t even finished banging you that every time he says “aaand it’s gone “ …

“Pooop” !!!

Wed, 04/30/2014 - 18:54 | 4714112 Latitude25
Latitude25's picture

Where is the gold?  The average 1%er owns 53 oz.

https://www.youtube.com/watch?v=GAoSj3pyEOw

Wed, 04/30/2014 - 19:41 | 4714212 cifo
cifo's picture

WTF is an "average 1%er"?

Wed, 04/30/2014 - 19:47 | 4714226 Latitude25
Latitude25's picture

Watch the video instead of asking stupid questions.

Thu, 05/01/2014 - 08:39 | 4715431 Salamanda
Salamanda's picture

Ha... great question.

 

a 0.5%er??

 

Thu, 05/01/2014 - 08:39 | 4715432 Salamanda
Salamanda's picture

Ha... great question.

 

a 0.5%er??

 

Wed, 04/30/2014 - 20:50 | 4714426 DoChenRollingBearing
DoChenRollingBearing's picture

The median 1%-er might be a more accurate number to gauge what the wealthy are doing with gold.  One billionaire would skew the average a lot.  I would doubt that the median 1%-er would own 53 oz...  

If I had to guess (my favorite word?), I would say that the median 1%-er might own only 5 - 20 oz.  Not over 50.

Wed, 04/30/2014 - 21:05 | 4714479 Latitude25
Latitude25's picture

Good clarification.  Sounds about right.  Most of those 1%-ers must be Asian though.

Thu, 05/01/2014 - 10:21 | 4715841 CHX
CHX's picture

Anyone holding more than 10 oz will be part of the future 1%ers, so at the top, there will be some newbies, but  the overall change will be negligble (in relative terms) no matter what'll happen, with the exception of current 99%ers that are 10+oz-owners.

Wed, 04/30/2014 - 18:56 | 4714115 I am a Man I am...
I am a Man I am Forty's picture

So how much are these gold miners hedging on the gold price?  I remember way back when when gold skyrocketed Barrick had prices locked in way lower.  I hate when they discuss gold miners without showing the data on this.  Look at a 5 year chart for the price of gold vs. the GDX and tell me what you would rather own.

Wed, 04/30/2014 - 19:01 | 4714127 fonzannoon
fonzannoon's picture

I am investing in the junior miners through the TBTF banks that will end up throwing them a lifeline in bankruptcy to keep them operational after the equity holder have been wiped out.

Wed, 04/30/2014 - 19:54 | 4714246 withglee
withglee's picture

On March 10th, 2014, someone else suggested we should do that. So on paper I bought 13 junior golds. As a group, they are down 17.91% in a month and a half. Only one, OGC is up and it by 4.51%. The worst down is JUNG at -43.66%. They may not have gotten the memo.

On that 3/10 hot tip, the juniors went up for 3 days in a row. Then dove for the next two weeks and have been pretty flat since 3/28. Guess its time to spin the plates again.

Wed, 04/30/2014 - 19:04 | 4714133 quasimodo
quasimodo's picture

"The stars are aligned in 2014 for a significant re-rating of the gold price"

Not sure what he considers properly aligned but this statement just sounds like more ballyhoo and poppycock to me.

Wed, 04/30/2014 - 19:36 | 4714195 BigJim
BigJim's picture

No, no, he really means it this time.

Wed, 04/30/2014 - 21:25 | 4714527 Al Huxley
Al Huxley's picture

If you're convinced that the end-game is the end of the USD as reserve currency, but NOT the end of the world as we know it, then having more time to accumulate gold while its still available at a non-reset price is not a bad deal.

Wed, 04/30/2014 - 19:20 | 4714163 Let them eat iPads
Let them eat iPads's picture

Hey look! A goldbug says gold is going higher.

Thanks for the insightful article, ZH.

Wed, 04/30/2014 - 19:20 | 4714164 TheMonetaryRed
TheMonetaryRed's picture

Why do people assume that HFT traders are pushing the price of gold DOWN when they are pushing the price of everything else UP?????

Wed, 04/30/2014 - 19:21 | 4714165 cpnscarlet
cpnscarlet's picture

Turk is interviewed by Greg Hunter and silver tanks...after three years he still won't take my advice to just STFU.

TURK = moron; SINCLAIR = senile; Maloney = dreamer; Turd = turd; Willie = Jackass; Von Greyez = harlequin; Sprott = buffoon....

The day it all breaks, they will all be screaming about how they were so smart. Well, you know what they say about a broken clock.

Wed, 04/30/2014 - 19:38 | 4714207 hack3434
hack3434's picture

Spot on...Sprott got kicked out his fund after underperforming the market for years plus redemptions. The fund went from +$3 Billion in 2008 down to $350 Million as of last year. He should just STFU and let things play out instead of nitpicking information to make his point. 

Wed, 04/30/2014 - 19:56 | 4714248 devo
devo's picture

Exactly. These guys are wrong 99% of the time.

Maloney is the funniest of the bunch...trading ounces for homes. Good one.

Wed, 04/30/2014 - 23:23 | 4714848 TrustbutVerify
TrustbutVerify's picture

Wrong 99% of the time makes one a 1 percenter - as in right only 1% of the time.  But sometimes that's all it takes. 

Wed, 04/30/2014 - 19:57 | 4714254 Bay of Pigs
Bay of Pigs's picture

And where were you from 2001 to 2008 cpn? Thats right, you didnt know shit about PM's then, and you don't know shit now. Fuck you lumping a bunch of people together just so you can stand on your soapbox pretending that you know more than anyone else in the sector.

Wed, 04/30/2014 - 20:02 | 4714270 devo
devo's picture

Based on Sprout's performance, one could argue he doesn't know shit about the sector, either.

Wed, 04/30/2014 - 20:10 | 4714286 Bay of Pigs
Bay of Pigs's picture

Yeah, and apparently you can't see why people continue to accumulate, and buy and hold physical gold and silver.

Don't like Sprotts funds? Don't buy them then.

Wed, 04/30/2014 - 20:13 | 4714297 fonzannoon
fonzannoon's picture

BOP I truly admire you, no bullshit. You have your own view on this and will be the last man standing if that's what it comes to. I sure as shit hope, if for no one else, it pays off for you in the end.

Wed, 04/30/2014 - 23:12 | 4714816 Bay of Pigs
Bay of Pigs's picture

fonz, I have know this cpn guy for a long time (over at turds before they banned me). All he has ever done is blast anyone suggusting gold and silver are good stores of value and insurance if the TSHF. His mantra has never changed since Ive seen him posting. Mr Negative all the time. He loves throwing stones at all the well known PM guys.

Sure notice lots of PM bears here at ZH now. Doubt they are trolls or bots, just disgruntled investors who should really be piling into stocks and bonds and not listening to Sprott or anyone else in the bullish PM camp. They should just sell all of their physical holdings and get out and quit wasting time on this issue.

Wed, 04/30/2014 - 20:26 | 4714332 devo
devo's picture

Yeah, I won't invest with him obviousy.

I like gold and silver, but I don't worship them. For the past 3 years nobody wants PMs, so the price has gone down. That is reality. Sprout fails to accept reality so he loses. It's a huge speculation and gamble that the masses will ever want PMs. The idea of PMs absorbing all the dollars makes sense but that thesis requires citizens knowing how finance works and/or having enough savings to care about protecting it, among many other factors. That's before PM investors even start to fight the anti-gold media. So it's an uphill battle investing in PMs. Sprout won't admit any of it. He simplifies the thesis to "they print money so gold must go up!", gets his face ripped off, and instead of re-writing the book just keeps preaching it. I agree with the guy above that if he is ever right it will be because he's a broken clock not a Nostradamus. He might as well just shut up and let it play out.

Wed, 04/30/2014 - 20:44 | 4714397 ltsgt1
ltsgt1's picture

"For the past 3 years nobody wants PMs, so the price has gone down."

 

For the past 3 years, nobody in the west wants paper PMs. The Chinese have been buying physical PMs for the past 3 years. All the markets, stock, housing, bonds and PMs are rigged in the west. DOWs went up 50 plus points on the day Yellen annouced another $10 billion tapering, almost zero GDP growth and lousy new and existing home sale is just ridiculous. All prices are where the puppet masters want them to be.

Wed, 04/30/2014 - 21:05 | 4714477 Bay of Pigs
Bay of Pigs's picture

Yes, and therein lies the rub.

Blasting pro gold guys in the west is easy, but not very accurate when looking at real worldwide physical demand. Who are we supposed to be following in the east as they buy hand over fist? I doubt any of these guys posting above have answers to that relevant question. In fact, I know they don't.

Thu, 05/01/2014 - 10:13 | 4715808 matrix2012
matrix2012's picture

dudes, folks in the east simply buy the physical things; mostly don't deal with the paper pms or the mining stawks or other paper stuffs (various gold funds etc)...gold means physical; any other forms do not constitute gold but paper assets! and they buy with their excess/idle money (savings) and holding them securely. it's a way to secure or protect one's wealth, not for seeking short-term gain! it's a very conventional concept that may be hard to grasp for some advanced thinkers... :-)

Wed, 04/30/2014 - 22:04 | 4714637 devo
devo's picture

All the markets, stock, housing, bonds and PMs are rigged in the west.

Right, that is the paradigm. So why invest for one where gold is currency and unicorns roam free?

Wed, 04/30/2014 - 23:04 | 4714795 ltsgt1
ltsgt1's picture

In a world where unicorns roam free, ones must follow the yellow brick road or risk getting drown in the sea of debt when the smoke is cleared. I'm keeping the silver shoes to walk the yellow brick road. Apparently, you enjoy surfing the debt waves on the ruby board, I wish you luck timing the big one when it hits.

Wed, 04/30/2014 - 23:25 | 4714853 devo
devo's picture

I own some already so all good. I just don't understand why anyone would listen to Sprott, Maloney, etc. If you own pms and still have to listen to those guys it's simply for verification and reinforcement that your investment was a good one. And they are always willing to tell you that. It's weird. Just buy it and forget about it; do something fun instead while we can instead of listening to those blowhards act like they know anything.

Thu, 05/01/2014 - 00:18 | 4714944 Bay of Pigs
Bay of Pigs's picture

Blowhards...WTF. Maloneys series on the FED was top notch.

Wed, 04/30/2014 - 20:50 | 4714427 oddjob
oddjob's picture

I've been buying a heap leach junior miner that Sprott reco'd that does roughy 70,000+ oz/yr at costs of $920/oz, the market cap.of the company expressed in oz'a of Au is 19,200 ozs.

Wed, 04/30/2014 - 21:28 | 4714531 Al Huxley
Al Huxley's picture

I agree with the sentiment, these guys have been calling the great reset for a long time now and are looking more and more foolish with the passing years.  That said, first, what's the way out for the USD to remain reserve currency, and 2nd, if and when the dollar rolls over (and I assume it will be a weekend, Cyprus style event) and suddenly gold is rediscovered as a store of wealth, is THAT the time you want to be trying to buy?

Wed, 04/30/2014 - 22:12 | 4714673 Treason Season
Treason Season's picture

Turd = Zio Shithead

Wed, 04/30/2014 - 19:53 | 4714245 DirkDiggler11
DirkDiggler11's picture

I looked into several funds at Sprott Asset Mgt. Performance of his funds are horrible. I can trade the juniors on my own when I'm feeling kind of suicidal and come our the same of better without paying the fees.

Overall Sprott is a smart guy and will be proven correct over the very long term, but he would bankrupt you in the short term if you invest with him.

I find it lower risk and far simpler to just stack on my own accord. After all, If you ain't got phyz, you ain't got shit.

Wed, 04/30/2014 - 22:22 | 4714692 DoChenRollingBearing
DoChenRollingBearing's picture

Agree 100%, especially with gold being better than gold miners.

Gold miners?  No thanks!

"Gold Mining Companies"  (the article I put up three days ago)

http://goo.gl/acna89

Wed, 04/30/2014 - 20:00 | 4714263 ms8172
ms8172's picture

Why is GOld going down again?

Wed, 04/30/2014 - 20:06 | 4714283 logicalman
logicalman's picture

Because TPTB need it to.

You should know that by now.

But remember that's just 'paper gold'

Wed, 04/30/2014 - 21:29 | 4714535 Al Huxley
Al Huxley's picture

But you can buy REAL gold for the paper price, so that's a good thing (unless you think that the USD can persist as reserve currency FOREVER, irrespective of debt levels - which would be a FIRST in human history, but hey, first time for everything...)

Wed, 04/30/2014 - 22:28 | 4714708 DoChenRollingBearing
DoChenRollingBearing's picture

I bought some yesterday.  So, of course it's down today!  (paper price)

Thu, 05/01/2014 - 04:32 | 4715144 CHX
CHX's picture

Yes, real gold but not in large quantities (100s of tonnes). If anyone stepped up to the plate asking for 200 tonnes of physical gold here and now, it will NOT be available at current prices.

Wed, 04/30/2014 - 20:03 | 4714274 Poor Grogman
Poor Grogman's picture

What this means.

1. Banksters are going to have to pull the plug on China, to put a stop to this "nonsense".

Credit contraction is already underway, just can't be too obvious about it or they might scare people into buying gold rather than selling it.

A slow grind causing forced liquidation over time is better for the cartel than a panic like in 08.

This will also help keep the lid on inflation in the US as money is "vaporised" in China.

If you are a sheeple, just stay calm and carry on...

Wed, 04/30/2014 - 20:13 | 4714299 Spungo
Spungo's picture

I hate gold bugs because all they do is cause confusion. Gold is not magic. It's like any other commodity. Sometimes you should buy, sometimes you sell. Gold bugs are no better than CNBC because they never say its a good time to sell.

Wed, 04/30/2014 - 20:23 | 4714326 SilverIsMoney
SilverIsMoney's picture

Go read some Rothbard and get back to us on that... gold has been money for thousands of years for a reason, silver as well...

Wed, 04/30/2014 - 20:36 | 4714367 devo
devo's picture

I own pms and want them to increase in value/start absorbing some of these trillions of dollars, yet I still hate gold bugs for their poor logic.

Wed, 04/30/2014 - 21:00 | 4714459 Latitude25
Latitude25's picture

You find poor logic when you look for poor logic.

Wed, 04/30/2014 - 20:28 | 4714343 SilverIsMoney
SilverIsMoney's picture

The gold and silver markets will finally break when more Americans wake up to the fact the entire system could be crumbled by the weight of rising PM prices.

 

Higher gold price = weaker dollars = hyperinflation or FORCED rate hike to save the dollar = collapse in currency or a collapse in the economy.

 

Gold and silver can literally implode the derivatives bomb by themselves. If Americans would just come to realize allocating even 5% of their wealth into physical PMs could make a tremendous difference in their long term futures and stability of the corrupt markets then the manipulation would cease and the price would break.

 

But until then we get this... logical people looking stupid because they can't predict a manipulated market... go figure.

Wed, 04/30/2014 - 20:44 | 4714398 Papasmurf
Papasmurf's picture

Sprott was distributing his silver shares the same time he was pumping silver. Fuck you Sprott.

Wed, 04/30/2014 - 20:54 | 4714438 kchrisc
kchrisc's picture

Those that own the gold, make the rules.

Corny I know, but tragically true.

Now I am off to find a good Chinese language school. I’d bet Reid knows of one.

 

"Dear Reid, Better bone up on Article 3, Section 3."

Thu, 05/01/2014 - 09:31 | 4714574 Tegrat
Tegrat's picture

-- Some comments and opinions counter to many posts here.

Sprott said silver would be the trade of the decade. So far, worst prediction ever, but ONLY if you thought he meant to go LONG.

Spot is eventually going to default to 0. No one knows when.  Guessing when is a fools game, however preparing for it is not.

Spot may surge to unimaginable high levels before it crashes to 0 - when the market realizes spot is NOT gold.

During this time of the surge and just before it drops to 0 you will not be able to purchase/obtain phyz at any price.

During any surge in price of Juniors, GDX, NUGT you are risking a no-bid holding within days, possible hours even minutes.

There's an outside chance there will be no pre default surge. The bid will be removed without notice.

The S&P cannot crash for any length of time without

   - a large increase in value of the USD/FRN against most commodities

   - a large increase in value of USD/FRN against spot gold/paper aka the commodity

   - a large increase in the value of the USD/FRN against most other currencies.

Given this, what are the chances of the S&P crashing for any length of time?

In other words, the S&P cannot crash for any length of time without taking spot (paper gold) and all other commodities with it.

To wish for spot, GDX and/or Spot Gold to go up and the S&P to go DOWN is a contradiction in wishes.

After the realization that gold is many multiples of pre-reset value,  your government will take control of the mines and those securities will be un-bid.

If the US goes down, so will most other countries in the world including China - we are its largest consumer due to the FR printing press.

China bought trillions of FRN bonds at high yields and now they are dumping them at low yield. China is a terrible trader - now they are buying gold like they were buying UST's! This is the only reason that i'm not bawls to the wall on phys procurement.

For the average worker, the US will always be the best place in the world to live, regardless of a worldwide depression and/or hyperinflation.

Capitalism allows anyone to be a 1%er.  All other forms force the average person most to be miserable and no way out.  Unless you are connected to bureaucrats by chance.

The US is no longer a capitalist country and hasn't been for decades.

Most of people who voted for Obama and the 2006 Democratic sweep, directly or indirectly (ie, voting libertarian) are going to suffer the most with "free" healthcare and many other aspects. It takes an idiot to vote for Obama the first time. A complete moron the 2nd time. Most morons would do it again.

It's been well known Obama has been dismantling our military (ability to defend our borders) and buying billions of bullets for the people who go after law abiding US citizens. In fact every decision he makes will be against the interest of the USA and for the benefit of everyone outside. Hot Mike says he's more flexible now that he's been voted back in by 50+ million morons.

We could solve all of our financial woes by firing 1/2 of the government work force and puting the remaining on realistic valuations ($10.10/hr). And by cutting short term entitlements by 1/2.

I personally have lost more than 30oz of gold in boating accidents, but i always scrape funds to buy more.

Thu, 05/01/2014 - 10:06 | 4715776 CHX
CHX's picture

There are still 5 and a half years to go before you can judge his call. IMO this is a nasty correction in a longterm bull market, and NOT a pricked bubble. Patience with silver, patience with judgment, time will tell.

Thu, 05/01/2014 - 01:01 | 4714997 fasTTcar
fasTTcar's picture

Gold is not worth anything, it is a rock.

What you are buying is the other side of the bet which is how many Euro's, USD, RMB etc to buy that rock.

Day to day, who knows what the price will do?  The same can be said of the S&P. 

How do you derive its value? 

It is accepted worldwide as a standard unit of wealth that can not be printed or inflated away.

Thu, 05/01/2014 - 10:03 | 4715762 CHX
CHX's picture

And how do you "derive value" from fiat currencies that get created by the gazillions every day by the strike of a pen with no sweat? Read up on monetary history, and wake up from your fantasy-land slumber while there is time. Best regards to you and all 

x

Thu, 05/01/2014 - 01:26 | 4715024 zebrasquid
zebrasquid's picture

Keep trashing gold and goldbugs...perfect contrary setup. As a long term gold holder, I hated it when some of the same of you were cheerleading it and the gurus AFTER the 11 year up move a couple of years back...(how'd that work out for ya?). So trash away!

Turk, by the way, wrote a book 10 years ago that predicted just about everything that came to pass a couple of years later. No one's timing is ever always perfect (how's yours?), but Turk's general wisdom and acumen is hardly worthy of the disrespect some of you spew here.

Thu, 05/01/2014 - 04:39 | 4715145 CHX
CHX's picture

Me thinks - as much as I respect and like Commander Sprott - there is some double counting going on in the first table. If the flow of physical gold is net into HK (counted as part of China) and net from HK into China, then you cannot add those 2 up. I may be wrong though, thoughts anyone? either way, even with "just" a monthly flow of ~90 tonnes thru HK, this is very impressive and not sustainable. Prices will eventually go up A LOT, but until the tide turns for good, paper gold smack downs will continue until something breaks. The lower gold goes, the closer wa  are to free gold. good luck to all. 

Thu, 05/01/2014 - 10:38 | 4715896 CHX
CHX's picture

According to this piece

http://marketupdate.nl/en/gold-heading-asia-switzerland/

~300 tonnes were imported to China, HK, and Singapore from Switzerland alone in Q1 of 2014.

 

Thu, 05/01/2014 - 11:49 | 4716230 matrix2012
matrix2012's picture

@ CHX, just check In Gold We Trust, the guy there focuses on CHN's gold.

Thu, 05/01/2014 - 08:15 | 4715365 Latitude25
Latitude25's picture

Looks like Germany is getting their gold back from the UK and US via the Swiss,

http://www.silverdoctors.com/numbers-dont-lie-us-uk-supplying-nearly-all...

Over 10 tons in the first quarter of thia year.

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