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Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds
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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I'm hold out for negative premiums on Au and Ag.
I can wish, right?
Physical sellers would disappear. Permanent backwardation then happens. Gold to $55,000 in short-order. My dream as well!
my silver is in the dog house, litteraly i built a dog house of my 1kg bricks
Can I come over and see it?
I am afraid of capitol controls and war, of course the coming war
prices are irrelevant save for short term paper shufflers.
physical possession is still your only insurance. and that cannot be priced until after the next great set of wars that destroy the politcal status quo upon which the unstable financial system of prices, credit insurance contracts, and tax shelters, now rests.
oh this is getting interesting, Bonds also selling off a little as well
It's so easy to forgot that gold has the capacity and ability to rise out of nowhere with ferocity. Certainly can't say that's upon us -- just that the doldrums of the last 2-3 years makes it easy to forget the previous 5.
thank god zh was here to warn us.
Now wait a second, a couple of weeks ago BofAML told me that gold would NEVER again see the $1,300/oz mark. Surely this can't be?
It's going to 900 but it is using a great circle route.
Haha, funny.
900 what exactly? 900 new Dollars after the 100:1 forward split?
900 rolls of TP. It's a fair trade.
I'm buying TP hand over fist.
I'm using TP hand under wrist.
LOL
me too. Target's been giving $5 gift cards when you buy 2.
a bidet & the "Sheryl Crow" method may be most prudent. ;D
Bought phys gold & silver in 2010. Looked like a genius in 2011. Even with todays upswing, it's still not back to where I bought it.
what? you want to make a profit? gold is for fondling dude. fondle away.
If you want to profit, then learn to sell. Buying is the easy part. Don't blame gold when you don't know wtf you are doing.
No I don't want to sell my PM's for fiat. But it's hard to explain to the wife why I want to keep buying more when it's been going down.
Yeah...unfortunately most wives see going down as a bad thing.
Now, that's funny! And unfortunately, true.
The time to do that is when she's taking last years handbags and shoes to Goodwill.
The key to wifey poo is in the plunking of massive bars of silver and gold on the couch cushion one evening. Once theys eyed the precious, yes, they wants it, to keep it close, to caress, yes...
My wife gave me static until a bounced a 100oz RCM bar on the cushion as she was watching Dog Whisperer. Her eyes lit up. Never heard a peep of opposition since then. As long as I don't go trading it for a Harley, and the kids have new shoes, I get nary a whisper.
HAHAHAHAHA you too? It get's her eyes off of E! news really quickly.
The best part is when she grabs 2 of them and starts doing curls.
You can all thank me for this fortuitous turn of events. I was going to go to my local coin shop to buy a monster box of eagles last Friday when the effing refrigerator decides to take a dump on me (2 year old piece of shit compressor blows out). So, since I didn't get a chance to go buy naturally prices go up. You're welcome.
Bro.
What fridge equals a monster box of eagles?
Did you build a fucking walk in?
No, just had to deal with packing food on ice, getting repair guy to give me the good news, etc. Then having to go out and buy a new one, never got around to going to the coin shop. What really pissed me off is having the thing go south on me after only two years. I guess that repair guy in the old commercials isn't as lonely as he used to be.
I bought Gold in 2005 after the previous recession, glad it's making a big move up today. Now if the markets can correct, I'd be happy as a pig in shit.
IF this to do with the China stuff, may well be worth taking a short on the Hang Seng here , all the chinese banks are on that, plus the Hang Seng futures are currently positive
Somebody must have given Gold & Silver a massive dose of Viagra this morning - Russian & Chinese Viagra?.
[Yawn] Wake me when it hits $1000 or $2000.
$1314 now.
Now $1318! JPM is losing control!
H(edge) Co. HQ: "REPORT STATUS!"
Lt. Short: "My whole fucking platoon's wiped out!"
Silver, the longtime little brother to Gold, always rushes out ahead.
I noticed the GSR is now 63 and falling. And I agree a 75 cent increase looks good, but even at $21-22, we are still $27-28 less than 2011.
And which ZHer can ever forget that memorable silver smackdown, when Navy Seals allegedly smacked OBL and allegedly dumped his body in the ocean.
And Silver followed, because like Osama, silver was just as dangerous.
How dare you say we allegedly got OBL!
You probably don't think 2 planes can drop 3 skyscrapers either, or that jet fuel can melt steel, or that thermite in the dust was just paint chips. We got OBL because Obama said so. We just had to throw him in the ocean because of Muslim law. Then most of that Seal Team died in a helo crash a month later. Conspiracies don't exist.
Copper is going to be relevant during WWIII isn't it?
Go long Cu!
Copper is used in the warhead of anti-tank busters and RPG's so local skirmishes like Ukraine and Iraq bullish copper - WWIII not so much except maybe Faraday cages for EMP's.
Silver spiked to 20.80 on huge volume, then pulled back to 20.60. Looks like stops got run and shorts got squeezed.
This is what I love about ZH!
Great job Tyler(s)!
Not only a great call but an excellect explanaition. This is what ZH does best.
What?? Wait!
I thought all the commodities would plunge w massive selling due to paper contract unwind as the bad paper gets flushed out??
Sounds like the weather is being blamed again. what's the real reason for the surge.
With all the shit FED and ECB are pulling, where would you put your billions in these uncertain times?
Gold is holding value during and after the reset. Smart money knows this and is buying into it.
If I'm wrong, may the Gods of the gold and silver bashers strike me down in front of the bullion shop.
Everytime ZH writes about gold it crashes, so I am expecting a massive sell off any minute.
Long-term, those who were not accumulating on dips will get priced out quickly on spikes like this. E.g. If you didn't buy in the 1200s, do you buy now, etc. People saying gold was overpriced at 1250 will probably wind up buying at 1450. Mining stocks are the deal of the century.
&#@$> PAPER
I hope this ZH article doesn't jinx it like it always does.
There goes the 10yr
Fed losing control ahead of OPEX tomorrow???
Keep a close eye on the bond market boys & girls. It looks to be in the midst of a bi-polar fit. Hit a high of 136'09 this morning, now its oscilating in the 135' range. If it keeps breaking down I have a feeling some serious crap is about to meet a very large fan. Stay nimble my friends.
It seems that with the removal of copper, iron ore, alumina, etc as credit creating assets, there is going to be a very large hole left to be filled by China's central bank, unless they permit many companies to grind to a hault due to working capitalshortages, which is doubtful.
So the central bank there must be providing more liquidity, devaluing their currency and providing further incentives for the Chinese population to buy more pm's.
There are billions more of us peons than there are bankers.
If people start waking up in droves (they have been since 2013), they will start buying silver, because no one can afford gold.
This has been going on for many months now, but they are only now losing control. They did all they could to scare the sheeple into selling their PM's.
The jig is up. It's not working anymore.
Fiat = Faith. We are witnessing the loss of faith in fiat. Cryptocurrency and precious metals to the MOON.
F'CK crypto's my shetcoins account got hacked and lost it all.
ZH: 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).
That was a pretty good call ZH. When your piece was first published I wasn't quite making the connection that although the base metals would drop in price (understood), the PMs would rise in price. But I guess it's as simple as some number of [short position] hedges in the PM markets were backed by the collateral of the physical raw materials, which we of course now know don't exist in the expected quantities. And of course liquidating those short positions has placed upward presure on PM pricing.
Pretty good. Pretty, pretty good.
Ben Kenobi is feeling the pain of the gold shorts....
http://vimeo.com/40730747
What IS drivng the PM's today? The China rehypothecation story has been out for weeks, the ISIS move is temporarily stalled, Ukraine must be priced in and had little effect anyway (oddly)....so what's up? Some frenzied large scale buyers who must know something.
The curve reminds me of alternative cryptocurrencies. When they inch up over a long term trend - 48 hours or more, it gives people confidence to buy. Then, as things go vertical, you get panic buyers. The curve goes more and more vertical. If it goes high enough to destroy the short sellers, then it wont be coming down for quite a bit. Otherwise it can fall pretty quick.
Already down 7 bucks in Asian trading....might just get smashed when London and New York open
Did you this earlier ZH post?
Yes I did. I'm wondering why?
Right. I wouldn't be surprised if we see a ZH post shortly that sheds light on who/what is placing such a long bet at this point. If you lean toward the notion that fundamental events follow cycles, there is a cyclical low due that will take us into the final 5th [Elliot] upwave of this PM bull market.
Im short Gold till 800.dont kill me baby.....
Don't forget to buy 10 year notes & bitcoin while you're at it.
Is this it? Now China and UK can exchange currency without US $ intermediate and Oil is losing Petro dollar depenance as well. The only last Item exchanged left that needs $US is gold and if we find out the only gold is rehypothesized toilet paper will this be it?
APMEX!
Provident Metals!
Silver!
Gold!
I second APMEX. Nothing but good experience with them as well as that place in Phoenix.
I left a large order in their cart last week. Never executed. They called me this week to remind me and i finished it.
These folks claim to value the free market. Well, they may very well soon meet one face to face...and they will learn just what those 'market forces' can DO.
They should've kept half an eye on that 'invisible hand', cause it's getting ready for a bitch-slapping.
Hey Hedge Fund Managers, why dont you buy Gold and front run Chinese ? They have to buy Gold due to this ponzi unwind.
I dont think it's a stretch to say that; Things are probably alot worse in Iraq than what the MSM is trying to lead everyone to believe.
Looks like the "sell in May, go away" meme for PMs might be short lived this year.
saved todays kitco chart for masturbation material
Don't waste hard disk space. Hotter charts are about to be released later.
still waaaaaaaaaaaaaaay cheaper than they should be.
3:05PM 06/10/2014
GOLD+$43.60
SILER+1.03
TREND???
Multi-year, yes, but changes of less than $200/oz for gold and less than $5/oz for silver are essentially meaningless, day to day, no matter if up or down.
I've never had a stock go up 125% in days. Thrilling. Doesn't feel real.
$1321/oz, we're going ballistic Mav!
All they know is print. When they slow or stop that all hell breaks loose. It's called a "free market". Can't let that happen.
Major longterm cycle indicators tell me the second week of July is a major bigtime turning point for Gold.UP
Because surprisingly no one's said it yet....GOLD BITCHEZ!!!!
With 51.04 for USLV (2860.490 = silver 3.92 / USLV) it's decaying from 2650 where that trend value was (higher is worse for USLV, better for silver) but did move share price up roughly in tandem..
And 69.49 for AGQ 2x ETF it's decayed from 6.10 to 6.208 (AGQ / silver2)
For gold vs silver itself: silver is dropping performance again vs gold, 285 being the trend curve value & higher numbers being better for gold, worse for silver:
289.2 = Gold / silver1/2 There is no meaningful gold/silver ratio, linearly.
and there is the smackdown....
This should be the start of the significant rally I was hoping for in the metals but couldn't figure out how it could happen. And by significant I mean silver hitting $26 and possibly as high as the mid $30s. There's three things that have changed in the last ten days (in addition to the China commodity unwind). 1. Last Friday silver broke and closed above its 3-year downtrend line from the $49 high. 2. The Iraq fear trade happened, which doesn't seem like it will be easily resolved anytime soon. 3. The Fed reminded everyone that they won't raise rates until the economy improves, which means they won't raise rates ever. I would think any data that is negative for the foreseeable future will cause a bid in the metals due to the possibility of untaper and the raising of rates pushed off further.
Combine all this with the most bullish Commercial positioning since last June's low and you have a massive Spec short squeeze along with renewed buying. To be clear, this doesn't change my long-term outlook of silver trading at $9 sometime in the next couple years, mostly because the Fed will one day reach its limit, possibly because they can't consume anymore of the bond market, and possibly because the dollar is pushing all-time lows making inflation rise due to commodities catching momentum money flows like 2011 thereby checkmating the Fed.
I personally believe real deflation that overwhelms the Fed has to happen first before the dollar is destroyed either thru overnight devaluation or the issuance of a new currency. Which means holding physical metals is obviously a different strategy than the paper game. There will come a time when hedging a stack will be a good idea. I think it's possible the metals get to extreme Spec positioning on the long side first, but the Commercials own this market. And if it gets away from them like in 2011 they know how to crush it. That's why I don't believe the huge upside that should come in the metals, due to the end of the dollar in a new monetary system, will happen via the futures market. If it happens, it will likely occur all at once in a last resort to overcome the deflation of the biggest debt bubble in history, ala FDR in 1933.
The problem is that deflation on a vast scale destroys production. You end up with treasury notes of vast value, but no produce. Too much money chasing too little produce creates hyperinflation. I think we will see a deflationary vacuum bomb, but it go the way of Weimar, which also started with deflation. Precious metals will not seriously devalue in deflation, they never do, but they will scale up and during the inflationary endgame.
Deflation destroying production is a myth created by the Dollar destroying Fed. Quiz: Will more plasma TV's sell at 5K or 1K? How about smart phones?
The parts for these products go down too when more came be manufactured and sold out the door.....so they can now sell for less and more folks are employed and have money to spend.
The Depression happened because the Fed crashed Wall Street and withdrew Dollars from circulation. No one had money to buy anything. (Vote down the League of Nations will ya!)
Deflation as a fall in prices is the myth. Deflation will be a fall in wages and monies owed being repaid. We will see asset / commodity prices increase during the 'deflation.'
Incorrect.
Reduction of the money supply is deflation, not of 'wages', vs that which is meant to be purchased using 'money' / currency.
One can get income for trade of various means, wages being only one path, and wages/other income in 'dollars' or physical goods, bartered services, are all options on the table.
Yeah....besides our friend Janet said inflation is noise anyway....
I doubt the cartel will let GOLD/SILVER close tomorrow at or above $1300.00 and $20.00... what the hell do I know.
Maybe the cartel is buying...
Been wondering about HR 2847 lately....coming up in a few days....
Anyway, if you missed it earlier... https://www.youtube.com/watch?v=wD3KYlpE2lk
Eventually the people shorting the market get nervous cover their positions and then they go long which squeezes more nervous shorters.
unconvinced that this is a rehypo move, the Hang Seng that has ALL the Chinese Banks on it didn't move all day and stayed positive throughout the metals move, now I might be wrong and if I am then HK should crash tonight or be off at least 2%+ later,...so far HK futures are still rock solid...so i am a little unsure whatother reason there could be although the buying was very odd,continous with no pullbacks...like the FED was buying it??? , you never see Gold trade like that, a spike then a fall but never steady buying like that, something is afoot.
I've seen this sort of trading before. Could be some panicing shorts in the mix and a big player who kept buying.
Gold hit 1320?
Excuse me, I must sit down.
******
Since the FED, B for IS, etc have not shut down, I would bet it is back down to 1283 tomorrow.
Gold and Silver rise?
You ain't seen nothing yet.
But expect a roller coaster ride.
How is it that QingDao is pronounced just like TsingTao? Why can't the Chinese just use standard phonetic English spellings?
'phoneticism' is for 'citizenism'
Well Gold smashed down to 1306 from 1322 ALL Chinese banks stocks are UP and HK futures well up, so this rehypo theory looks like bollox to me
I'm as much of a bull as the next Gold nutter, but one swallow never makes a summer.
They've been playing with the price of Gold now for over 20 years so they're not going to give up without a fight. That BLS prick is still around, his short (at 3am) gun is always loaded.
Holders of Gold will win in the end, we all know that, but over the coming years (unless it really breaks free which is unlikely) we're going to have some really good times and some really bad times.
For example, if/when it approaches the old high THEY ARE GOING TO DEFEND THAT LEVEL WITH ALL THE FUTURES AMMO AND PHYSICAL AMMO THEY'VE GOT (which is a lot).
Just keep adding to your Gold stack when you can, let them have their fun and play their games but with the CBs having lost half their Gold over the last 20 years and no doubt multiple claims on every ounce that's been worked through the financial system (unless it's in your hands) the surpression will end, history proves that.
More than 80 years. Fixed it for ya.