As Negative Gold Lease Rates Collapse, The Gold Sell Off Is Likely Coming To An End

Tyler Durden's picture

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achmachat's picture

pssshhhhht! don't tell Roubini!

Doomsday Profit's picture

Nouriel (and Naill) have obviously been "talked to" about the folly of their previous positions. Two particularly disturbing sell-outs.... 

Hugh_Jorgan's picture

The fundamental factors for a skyrocketing gold price are unchanged, worse in fact. The truly stratospheric rise will happen at some point, but not until physical is priced by it's own market, free from the ETF puppet show. The problem is that none of the current power brokers in the PM markets want to let physical run wild. It will be interesting to see how this all transpires...

Harlequin001's picture

I suspect they just want to beat the price down at year end.

Can't have too many positive years when stock markets are going nowhere, but side ways and down...

scatterbrains's picture

Gold is bearing down on the long term rising lower channel at 1160ish which well probably occur at the same time SPY slices down into the 900ish area. I don't expect gold to stay cheap for more then a few minutes at that lower channel line so a fast trigger finger will be key.

Nothing To See Here's picture

The central banksters cannot QE if they don't get the price of gold under control. They very well understand that if gold goes on another rocket ride like 2008-2009, their monopoly over money is game over. So right now, what we're seeing is those central banksters trying to set the ground for another round of QE, and they need gold to be unpopular to do that.

Oh regional Indian's picture

They are already QEing. Twist is QE Hidden

Gold is merely doing it's master's bidding in the GOD complex (Gold/Oil/Dollar).

The three HAVE to be seen together, their current individual standing as to price is meaningless.

ORI

/the-plan/

Jay Gould Esq.'s picture

A question for the board:

Do any here have any experience with Provident Metals ? If so, how does this outfit compare with Apmex ?

X Yooper's picture

I have bought silver from Provident but not Apmex so I can’t make a fair comparison. I like Provident, in fact, I just recommended them to someone this morning. I haven’t bought from them recently because I discovered a local coin shop and have become a regular there.

tooktheredpill's picture

do we really want to be long PM's when the debt and equity markets are probably going to go into carnage mode?

goldfreak's picture

i bought a small amount of silver from Provident, no problems

Jonas Parker's picture

I've bought quite a bit from APMEX - smooth transactions with quick and discrete delivery. I probably could have saved a dollar or two by shopping around, but now that APMEX has a track record with me, I prefer to stick with them.

EINSILVERGUY's picture

My dealer of choice has been gainsville. bought about 10 seperate times and no issues. I have purchased from quality silver bullion and Provident. No issues with any of them.  Never used APMEX as their premiums are too high. I also didn't like the add on charges during checkout.  Gainsville has good bar prices. Provident had the lowest 90% junk silver.

Best deal in town though is either a coin show or local dealer. I usually save over $100 in price differential by buying at the coin show instead of online

Goldshark.com will provide comparision shopping for about 10 different dealers

 

 

Manthong's picture
CNBC: “Gold Sheds 'Can't Lose' Status: Now, No One Wants It”     http://www.cnbc.com/id/45684174    
SilverIsKing's picture

I was going to post this link until I saw that you had already done so.  Very funny stuff.

The time is coming when gold will be much cheaper than it is even today, paper gold that is.  At the same time, you will not able to find any physical gold available at any price.

CNBS will still be writing about how gold has been such a bad investment.

Buckaroo Banzai's picture

Always nice to see contrary indicators like this. Was wondering when to start scaling into this recent POG downturn. This gives me the confidence to start pulling the trigger.

exartizo's picture

I had a very nasty problem with Gainesville and decided to never buy from them again. They "lost" my silver shipment and said that I had "signed" for it. It took them about a day to figure out the problem, when I told them I hadn't received the silver. 

Apparently, someone at USPS had the nerve to sign for MY silver. Go figure. 

But I was on pins and needles (as you can imagine) when they told me that I had signed for a silver shipment I never received.

The owner of the company was rude, and that was the clincher. 

Now I do business elsewhere and am much happier. 

exartizo's picture

I had a very nasty problem with Gainesville and decided to never buy from them again. They "lost" my silver shipment and said that I had "signed" for it. It took them about a day to figure out the problem, when I told them I hadn't received the silver. 

Apparently, someone at USPS had the nerve to sign for MY silver. Go figure. 

But I was on pins and needles (as you can imagine) when they told me that I had signed for a silver shipment I never received.

The owner of the company was rude, and that was the clincher. 

Now I do business elsewhere and am much happier. 

ShoeShineBoy's picture

 ECB has already started its QE, but thing is people do not want to acknowledge it as QE. That 3 yr unlimited credit easeing is a one giantic quantitative easeing. I guess people got stuck with unlimited funding, secondary market activity for sovereigns that they do not see how ECB is directing the local banks to fund their own sovereigns through this 3 yr unlmited funding. To make it easier, they even announced that they will accept a wide range of credits at NCBs (i.e. corporate loans, retail loans, etc.)

 

 Further,

 

 for thos technical chart experts,

 

 just reverse the gold chart and tell me if it is not a perfect head & shoulder?

 

xela2200's picture

"The central banksters cannot QE if they don't get the price of gold under control. They very well understand that if gold goes on another rocket ride like 2008-2009, their monopoly over money is game over. So right now, what we're seeing is those central banksters trying to set the ground for another round of QE, and they need gold to be unpopular to do that."

I was thinking the same thing. Could be some printing coming soon.

The CNBC rumor mill is full blast now. Thrashing gold. That means the sell off is bottoming. We will see.

 

trav7777's picture

look...what has occurred should be mostly obvious.

European banks are in immense dollar liquidity stress.  Look at the EUR or DXY.  They have leased to sellers or sold outright against the dollar POG in order to raise dollars.  The collapse of lease rate is indicative of high interest by lessors, aka holders.

BB is holding the ECB hostage here.  Either they print or the fact that most of their debt is in USD destroys them.  Period.  Win/win.

Bear in mind that BANKS and hedge funds, even those physically holding client assets which may be physical gold bars, WILL sell anything they can for paper liquidity to stay alive.  To THEM, "cash is king" because those accounting figures are the difference between being employed and operating and not.

MFG's experience with rehypothecation and comingling are proof positive...you think MFG is the ONLY entity that did this?  LOL.  They are in the paper/eDollar world.  THAT is their god.  If you have an account with them and you want to hold physical gold, THEY do not care.  They will lease, rehypothecate, sell, what you own, even ILLEGALLY, to keep themselves alive.  This has happened again and again and again and we remain just SHOCKED that there is gambling going on in this establishment!

Harlequin001's picture

That is a very short term view, and whilst I agree with it it is nothing more than what happened in the run up to Weimar.

The problem is that as more of this debt is liquidated there is less and less need for USD, and when the world realises this and begins to offload it, look out below.

That's where it all goes wrong.

Buy gold. It's the only way to be sure...

WonderDawg's picture

The problem is that as more of this debt is liquidated there is less and less need for USD, and when the world realises this and begins to offload it, look out below.

It'll be a while.

Harlequin001's picture

maybe, but it will still happen nonetheless...

steve from virginia's picture

'Liquidating' or repaying dollar-debt extinguishes dollars. The result is a dollar shortage. This is what is taking place right now, leaves out the desire of those who hold non-currency assets to convert at whatever rate into currency.

With non-currency assets 100x the level of currency, the question is whether the monetary authorities are able -- or willing -- to keep up with the rate of deleveraging. Since 2007 until earlier this year, the answer has been yes, but with the fiscal 'authorities' meddling in monetary policy, the ability of central banks to meet the rate of redemption is now questionable.

The consequence is negative lease rates for a lot of things besides gold: real estate, wages, derivatives ... anything that isn't currency.

I personally believe monetary meddling is bad policy because there is no gain to it. Deleveraging is necessary but the same fiscal authorities who refuse to widen money access also refuse to engage in creditor restructuring. Chaotic deleveraging means all assets are wiped out in excess of base money, excess indebtedness is charged against output (GDP) and the result is a throwing out of the economic good ... with the bad.

 

WonderDawg's picture

Well said. Perspicuous. Maybe even clear enough that the hyper-inflationists can understand. The magnitude of the deleveraging will overwhelm the attempts of the CBs to print their way out. Once we've extinguished enough of the debt, then the danger of hyperinflation will be real.

dark pools of soros's picture

right but with ZIRPfinity,  getting dollars ain't all that hard for the blessed - this is more than manipulated,  it has been designed and modeled in all those megapetaflop supercomputers.

 

The huge amounts circling above can't be affected by the serfs resources.  The puppet show is in full effect

delacroix's picture

the negative lease rate is a tell.  why buy, when you get paid to lease.  it's a paper lease. I believe the physical gold stays where it is, and the only thing changing hands, is a paper contract. just another layer of leveraged shorting.

GeneMarchbanks's picture

Aside from this paragraph:

'BB is holding the ECB hostage here.  Either they print or the fact that most of their debt is in USD destroys them.  Period.  Win/win.'

Your post makes sense. ECB answers firstly to the Bundesbank secondly to the CB cabal. 'BB' is powerless when it comes to understanding European dynamics because he , like you, sees everything through the lens of market fundamentalism which is pure dogma.

You should probably wait for facts to slowly emerge before tying the known to the unknown.

Nothing To See Here's picture

Define "market fundamentalism" in your sentence?!? I hope you don't mean "keynesian economectrics and mathematical abstract models"?

GeneMarchbanks's picture

In this context it means interpreting European socio-econo-political affairs by way of using US neo-liberal metrics. The EU = US formula doesn't work.

For the most part US media (MSM and otherwise) covers Europe only in the superficial context of 'what this means for us here'. They provide no historical context or broader view.

Ghordius's picture

eh! +1000

I would put it in other terms: the ECB is following a different consensus while the FED still has more room for maneuver - or even simpler, the ECB can only print a fraction of what BB can, period. For the usual reasons of not being a reserve currency, etc. BB leads.

OT: thanks for the endorsement of the Kyle Bass letters, just got though the last two and I agree with you, it's worthwhile to read them, even if I don't agree on all his points (perhaps "yet")

chubbar's picture

The problem as I see it is that CB's or some official entity is leasing gold to be sold into the market place for liquidity reasons. Some might argue this is for price suppression purposes while others would argue it is to generate liquidity from an asset during a liquidity crunch. Obviously whomever is doing the leasing and selling this gold into the market has to be buying futures as an offsetting hedge, at least that is what I would think they'd do.

This doesn't resolve the problem of actually paying back the gold however. The gold that is sold into the market is not going to be recovered at anywhere near these prices plus this gold now has thousands of individual owners, so how are the gold leasors going to get gold, stand for delivery? At the comex? See the problem here? They are going to have to get REAL gold in bulk to payback the CB's or whomever. How much gold has been sold into the market from leased gold over the years? How much will it cost to get this gold back, assuming it is available, and how does this assist the leasor in anyway if they lose their ass in this transaction because the paper market has separated from the physical one? Do these folks really believe that just because they bought a future that it will always convert to physical? Don't they realize there is a finite amount of physical ANYTHING in this world and an infinite amount of claims that can be generated against that physical? I can't wait to hear the excuses when this ponzi blows up. Smartest guys in the room, my ass.

ViewfromUndertheBridge's picture

Paging Robert Rubin and Larry Summers...all your chickens are coming home to roost

Max Fischer's picture

 

 

If anyone is interested in reading ACCURATE commentary on why gold lease rates went negative, I suggest you take a look at the following link:

http://www.metalaugmentor.com/analysis/charlatan-exposed-negative-gold-l...

Max Fischer, Civis Mundi

AUD's picture

Tom is a smart guy but the article is still speculative. Taking it at face value the unallocated LBMA system would seem to be highly leveraged, central bank leasing utilising LBMA unallocated is leveraging it further, indeed leasing gold against assets too illiquid to even borrow dollars is destroying the balance sheet of the central bank, a la Asian Financial Crisis.

The central bank can lease unallocated gold 'off balance sheet' in limitless quantity but limitless quantity is no quality at all. Something will give one day, the balance sheet of central banks has been ruined even without the gold leasing.

RockyRacoon's picture

From Ed Steer today:

Silver analyst Ted Butler had a longish mid-week commentary for his clients yesterday....

"What I didn’t explain in my weekend commentary on Saturday was that the next logical downside trigger point in gold for selling by the technical funds and traders was the 200 day moving average ($1610). This particular moving average had not been broken in gold for almost three years, back to when gold was under $900. The longer a moving average remains unbroken, the more significance it holds to technical traders. This level has now been broken as well, encouraging those holding gold on technical or price movement grounds to sell. This selling begets other selling as fear of further losses resonates through the market as prices plunge. The price declines step up demands for more margin, prompting further long liquidation.

"Given human nature and our collective demand for easy to understand explanations for why prices are falling there will be, for sure, all manner of supply/demand explanations given to justify the price rout. But there have been scant signals from the real world of supply and demand to account for the decline in gold and silver prices. At the core, this is strictly another COMEX-commercial rig job. That it has been highly successful for the commercial crooks is unfortunate in many ways, but encouraging in other ways. The proof that it is another COMEX rig job is fairly easy to demonstrate in past and future Commitment of Traders Reports (COT), as the commercials are always big buyers on these price smashes. We have only gone down in price so that the commercial could buy. It’s not possible that the commercials can always be big buyers on such declines for any other plausible explanation. That the CFTC sits by, even though it has been armed with ne w anti-manipulative regulations is as shameful as it gets."

RockyRacoon's picture
So, Was MF Global Re-hypothecating Gold Bullion?

This accusation has gone viral within the gold community. It is based on a court filing by HSBC and surrounds the ownership of gold bullion held by a trustee for a client of MF Global. The speculation is that the gold had been re-hypothecated, resulting in a question of who is entitled to ownership.

But after digging into this story, reality is not quite as provocative as many have claimed. Here is a link to the actual Interpleader Complaint filed with the New York court.

Scroll down to section four where the sequence of events is spelled out. It is really straightforward stuff.
Bottom line: No gold has been hypothecated, re-hypothecated, or hyper-hypothecated. The dispute is between the trustee of the gold and the claimed owner of the gold. As is not uncommon in this sort of situation, as custodian of the bullion HSBC is stuck in the middle and is asking the court to decide to whom to release the gold so that it – HSBC – is not held liable by either party.
That MF Global is in bankruptcy and the case is filed with the bankruptcy court seems to be the bigger issue here. When a company enters bankruptcy protection, all decisions concerning how money or assets will be released or disposed of are made by the court, and it can be a lengthy procedure. That seems to be the case here, and in time the gold will make its way into the legally sanctioned hands.

Thisson's picture

RR: That was my take on the matter too.  ~Thisson

disabledvet's picture

I stopped reading at the "gold is a source of liquidity" line. Hold it if you are unnaturally attached to it I guess.

trav7777's picture

why is it when gold went up it wasn't manipulation?

tmosley's picture

For his next dumb question, Trav will ask "Why doesn't gravity work on airplanes?"

Harlequin001's picture

Question is 'who is there to manipulate it up, and what is the benefit?'

Gold just needs to find its fair price. That's all people are asking for I believe...

longonSpam's picture

You're kidding right? Trying to squeeze intelligence from a Grand Wizard.. this is obviously the Negroes fault like everything else to trav

DaveyJones's picture

everything does have a black market

longonSpam's picture

His house is always the easiest tofind especially at night with all the burning crosses & empty plastic 1.75l generic Bourbon bottles on the lawn.

trav7777's picture

you idiots amaze me

you think the MSM is telling you the truth?  I state a FACT and you accuse me of hate.  That is why we call these "hate facts."

You people are delusional and dangerous. 

You have no idea how amusing I find all of you, in that you think you're outside the matrix because you can see the financial con and the larger society cannot, but there are levels of truth you are simply UNWILLING to even approach.  And you fight to stay IN the Matrix.

Doesn't it occur to you that almost all of the orthodoxy you encounter every single fucking day is propaganda?

tmosley's picture

The media also says the sky is blue.  Must be a lie!

lol, Trav thinks he's Neo.  Or maybe he's MORPHEUS!  LOL.