Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds

Tyler Durden's picture

But, but, but... Janet Yellen didn't say precious metal valuations were within historical norms? Gold and Silver are surging today (and have done since the FOMC press conference all-clear) with the latter having its best day in months and back at 3-month highs... Intriguingly, just as we warned, gold and silver have been on a significant tear since the Qingdao CCFD probe began (as synthetic hedges are unwound - which dominate pricing in PMs) while copper and iron ore and so on have all fallen (as the reality of no real demand leaks into these commodities).



Is the CCFD unwind having its impact?


As we commented previously:

When we previously contemplated what the end of funding deals (which the PBOC and the China Politburo seems rather set on) may mean for the price of other commodities, we agreed with Goldman that it would be certainly negative. And yet in the case of gold, it just may be that even if China were to dump its physical to some willing 3rd party buyer, its inevitable cover of futures "hedges", i.e. buying gold in the paper market, may not only offset the physical selling, but send the price of gold back to levels seen at the end of 2012 when gold CCFDs really took off in earnest.


In other words, from a purely mechanistical standpoint, the unwind of China's shadow banking system, while negative for all non-precious metals-based commodities, may be just the gift that all those patient gold (and silver) investors have been waiting for.  This of course, excludes the impact of what the bursting of the Chinese credit bubble would do to faith in the globalized, debt-driven status quo. Add that into the picture, and into the future demand for gold, and suddenly things get really exciting.

Here's our previous epxlanation of gold's move... if we are right that somehow China managed to push gold lower via gold CFDs, then the unwind pushes gold higher:


Here's how that might work:

In the gold markets, the paper or synthetic 'demand/supply' dominates pricing as opposed to the non-precious metals which have at least a grain of fundamental sense to them still


Throughout 2012/2013 - as the gold CFDs were booming, Chinese demand for physical gold was soaring as the price plunged (due to the forward hedging required in the CFD transactions which pressured gold swaps/futures lower and thus dominated pricing)


As CFD unwinds hit en masse, these flows must unwind (cover hedges and ensure the underlying physical is there... and if not buy it)


This will pressure gold futures prices higher and because unlike in non-precious commodities where spot markets wag the tail of the futures markets - spot gold will likely be dragged higher also (as we know the demand for the physical has been high).

So unlike in the industrial commodities - where the CCFD unwind drives prices down as the image above shows, thanks to synthetic manipulation and domination of the paper gold (and silver) market, the opposite occurs in PMs.

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Awakened Sheeple's picture

You weren't here for the silver bull, were you... They were glorious times, my friend

cro_maat's picture

Let me see silver at $25 and rising and then I will get excited.

These are still manipulated paper markets. When I have to pay a $5 / OZ premium for physical then I will know the game has changed.

lordylord's picture

"When I have to pay a $5 / OZ premium for physical then I will know the game has changed."

When people aren't taking dollars for silver, then the game has changed.

kliguy38's picture

Go ahead and wait for that premium......I want you to wait ....meanwhile I'll take all I can store at these levels.....thanks   BTW THE reason you buy physical metal is not to trade it.....and I predict RIGHT HERE AND NOW that you will NEVER own one ounce of PMs

Pinto Currency's picture


Physical silver sustaining a 5% to 6% premium at the Shanghai Gold Exchange vs paper silver on the LBMA.

It was the daily Silver Fixing in London that was recently axed after 117 years - which appears to tell us that the immediate problem with price containment is in the silver market.

The paper price containment game only works while the market respects the dropping paper price.

(next - watch the problems with platinum and palladium on the LPPM in London.  Building to be a shocker.)


Edit: see also

Banks caught in fix seek new way to price gold

BaBaBouy's picture

Iellen Is Shittin' Herself Right Now ???

BaBaBouy's picture

GOLD !!!!!!!!!!! $4500..... Oooops, I Mean GOLD $45000...!

Joe Tierney's picture

Yep, and navy beans @$750/LB


Can't eat gold and silver. You'll be using it to bribe for your life when the civil collapse comes.

Manthong's picture

In case you do not f’n know, the pirates at JPM are stacking millions of ounces of Ag whilst spewing billions of short Fed paper.

What do they know that you do not?

SWRichmond's picture

with the auditors coming it must be time to actually get some.

Save_America1st's picture

@lordylord  "When people aren't taking dollars for silver, then the game has changed."

Ain't that the truth!!!

My 2 copper cents-worth suspicion though is that this is way to steady and deliberate of a climb from the open today to not be manipulated.  I still think there's another major smack-down (or 2) still in store for us either by the end of this month or sometime in July.  Maybe after that we'll see something really significant happen. 

But can any positive gains that may occur, even if all the way back up to 49+, be considered "real" until and only until the Crimex has defaulted and gone tits up???

We can't ever have a real market even if "prices" are 500 per ounce if the Crimex is still in business and the paper market persists. 

I sure hope that day comes soon.  I'd love to keep on seeing these sub-30 prices for a long time further so that I and others can keep stacking relatively cheaply.  But the day the Crimex goes bust will be when the real celebrating can finally start. 


BaBaBouy's picture

""Bread $500!""

Ya' Thinks So?
Well Buy & Store Bread Then...

thisisjustarandomusernameicreatedforzerohedge's picture

Copper sharply up again


thought the last China copper articles were bearish...

NoDebt's picture

Up $43/oz. TODAY.

Forty Three.  Flirting with $1320.

Holy cow.

strannick's picture



But but, Goldman said that unwinding unbacked paper claims on limited commodity supplies would drive prices LOWER..  What gives??

Manthong's picture

"Up $43/oz. TODAY"

..when you see $100-200 swings daily, you will know that the market is enforcing itself. 

DoChenRollingBearing's picture

It has taken a long time, much longer than I expected, but Freegold will arrive with its shockingly high price ("$55,000").  My guess would be that silver rides along, but I am moar confident that gold will take the prize.

It still could be well off in the future.  Or it could happen tomorrow.

Never One Roach's picture

"If you don't hold it, you don't own it."


Peeples are beginning to understand that. Some learn from history. Many learn the painful way thru loss and tears.

fockewulf190's picture

Been expecting MDB to show up with his usual anti-gold theatrics.  Alas, he is a no show to the party.

Buckaroo Banzai's picture

MDB trolls for fun, not profit. Keeps his own schedule.

Bananamerican's picture

For the 10 billionth time...

Rubbish's picture

Quite a few cash buyers in LA today. Never seen it like that. $$$$ on the counters. People know the dollar is losing it's value rapidly now, this will catch fire soon.

Flakmeister's picture

Or pay the local doc for the emergency appendectomy performed in your living room...

7.62x54r's picture

Beats not having one, or not having anesthetic.

During the soviet era, you had to pay the dentist in dollars for the novocaine.

7.62x54r's picture

Gold to buy your life, silver to buy rice and beans.

Down to Earth Thinking's picture

@ 762X54 and paying for novacaine Same will happen here with Ocare and worse ! and a good reason to have some storage.


We have not seen anything yet ? As it all melts down into ever more chaos it will make the last runup look like a blip on the radar screen and all because of fear, but rational fear !


Ponder this just for shits and grins, is the meltdown of the current regime having any affect on PMs ? I say absolutely but it won't happen all at once just as most events don't. It will be at a direct relationship to the unwinding of the current illusions. Which are imploding as we speak and the rest of the world has zero confidence in USSA .


But for all who think PMs will actually save you , think again. there is much more to the equation. Fat guys hoarding PMs , beans and bullets will still get it all taken way from them and be victims. Just like those with zip.  


There is a much better way and it only involves a bit of knowledge and some effort but not much. The best of all worlds or ideas is always the best solution.

PenguinMan's picture

I remember reading a WWII story about how prisoners, bribed a German guard for 2 ounces of gold to turn the other way when the order was given during the imminent liberation of prison camps on the Polish border, to kill all of the prisoners and retreat leaving nothing standing.

In times like that, Gold price has a completely different value.

rum_runner's picture

Begs the question why the guard didn't just take the gold and shoot the prisoner.  As a non-gun-owner I'm bothered by the reality that after Katrina-like events it's the lead that matters, not the gold/silver.

Flakmeister's picture

Because as a rule ~95% of people have some shred of honor.... 

It is the other 5% that fuck it up for everyone...

TheReplacement's picture

Knowing what you know, why on earth would you not be a gun owner?

OceanX's picture

A gun is a first strike weapon, you can't draw second.  Predators alway have the advantage, they choose the time to strike.  A strong community is your best defense.

Down to Earth Thinking's picture

Oceanx on a gun ? Good luck with that . you will need it. Whats your address ?

Bohm Squad's picture

"In a need to take your time in a hurry." -Wyatt Earp

HyperinflatmyNutts's picture

You can not eat FRN either!!!!  I never understood why the paperbugs say that?

Schaublin's picture

What will YOU use for bribes when the civil collapse comes?

TheReplacement's picture

Why pay bribes?  Stand up and be a man or just go around.  Never pay bribes.

7.62x54r's picture

If you are outnumbered 5 to 1 by by heavily armed assholes, you may want to re-think that.

Slave's picture

I'm pretty sure everybody here is advocating having both. We should throw in guns and ammo too.

The real question is, are navy beans all you have?

Gaius Frakkin' Baltar's picture

Speaking of beans, I paid a $1.29 for a can of Bush's Baked Beans last night. I know that same can sold for a $1.09 within the last two years... 10% YOY inflation on fucking beans!

Miffed Microbiologist's picture

I think you may be shocked to find out that can contains less beans and more unsavory fillers with the increased price. I haven't bought a can of beans in years realizing we were paying a premium in convenience. It really is cheaper and healthier to buy dried and in bulk.


Xibalba's picture

exacly.  And those without any will pay with thiers. 

Calmyourself's picture

So whats your saying Joe, is that it (AU-AG) will save my life when the time comes.  Well thanks thats good enough for me, too bad about you though..

7.62x54r's picture

BaBaBouy: Gold will go to infinity when the dollar collapses. Along with everything else.

cro_maat's picture

kliguy38 - Maybe you didn't get understand my comment. I was stating that I am not that excited by the relative price movement of the rigged paper market that has no relation to the true value of physical. Despite boating accidents there is a good amount at the bottom of my lake and I am not interested in diving for it to trade for worthless fiat from ogre Yellen. As a matter of fact I will be having more boating accidents in the future regardless of what the rigged paper market does.

Syrin's picture

That reminds me, I need to take all my physical along with all my buddies' guns and ammo on my next fishing trip....