More Clues About What Happened In The April Gold Swoon

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This month’s Bank Participation Report (BPR) in gold was highly revealing. It gives considerable clues about what happened during the big POG swoon, and what the players did. In a nutshell, the bullion banks squared their positions and left the hedge funds holding the bag.  And the specs cannot supply real gold.

The second event is that actual producers of gold are only hedged 37,463 contracts, or 3,746,300 ounces.  That’s down from over 20 million ounces last October. This means producers are not going to be supplying much real gold to the Comex either.  Delivery even on this small hedge is spread out over time, often years.  Meanwhile, the eligible dealer inventory that remains on the Comex has been disappearing and is at its low of 1.835 million ounces of gold. Total Comex open interest is 442,341 contracts, or 44.234 million ounces of paper gold.


A closer look at the bullion banksters positioning reveals that three U.S. banks are net short 16,781 Comex contracts, a decline of 24,885 contracts from the April BPR, or a 60% drop. There are 23 non-U.S. banks that report holding Comex gold contracts. Their net-short position in the May BPR was 22,474 Comex contracts, a decline of 21,979 Comex contracts from the April BPR, or a 50% drop. The biggest banks involved are JP Morgan (the most notorious), HSBC and Bank of Nova Scotia.

As you can see from the following chart, the banksters’ short position in gold has been steadily reduced since December. As I have suggested, this is largely a function of the need to unwind leasing, engendered by the slow-motion move of physical gold back to Germany (and others). I discussed this change in the leasing regime in a previous blog [“Gold Being Pulled From Depositories To Deal With Repatriations“]. I believe the consequence is that the Fed needs some of its leased-out gold returned. Secondly, the huge physical demand out of Asia after the bear attack is a wake-up call for bullion banksters to get out of the way. The bullion banks are NOT set up to exploit further POG weakness. The hedge fund and speculative community are on their own and exposed. This can only be called a “market clearing event.”

Chart Source: Nick Laird

Japan also witnessed the halting of its absurd JGB bond market on Friday due to the rapid rise in yields. The 10-year bond closed at 0.7 basis points, a rise of 16% from Thursday. Japanese investors are now dumping their Japanese bonds and buying “high quality” European bonds like the Italian and Spanish sovereigns. This is an accident waiting to happen. Elsewhere in you-can’t-make-this-stuff-up la-la land, bank loan delinquencies in Ponzi-unit Italy rose by almost 22% to 8% on bank loans outstanding.

Despite the collapse of its currency, there are no signs (yet) from Japan of a rush to hold gold. You can add the Japanese to the list of foils and bag holders, joining the gold short speculators. It’s quite another story in India, and especially China. I will be posting a blog Monday morning that addresses the potential for a speculative run in precious metals from the latter.

Italy 1o-Year Sovereign

Chart Source: Bloomberg

Google Searches For The Term “Gold” in Japan

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  • Gangster State America — Paul Craig Roberts
    May 13, 2013

    There are many signs of gangster state America. One is the collusion between federal authorities and banksters in a criminal conspiracy to rig the markets for gold and silver.

    My explanation that the sudden appearance of an unprecedented 400 ton short sale of gold on the COMEX in April was a manipulation designed to protect the dollar from the Federal Reserve’s quantitative easing policy has found acceptance among gold investors and hedge fund managers.

    The sale was a naked short. The seller had no gold to sell. COMEX reported having gold only equal to about half of the short sale in its vaults, and not all of that was available for delivery. No one but the Federal Reserve could have placed such an order, and the order came from one of the Fed’s bullion banks, one of the entities “too big to fail.”

    Bill Kaye of the Greater Asian Hedge Fund in Hong Kong and Dave Kranzler of Golden Returns Capital have filled in the details of how the manipulation worked. Being sophisticated investors of many years of experience, both Kaye and Kranzler understand that the financial press runs with the authorized story planted to serve the agenda that has been put into play.

    Institutional investors who have bullion in their portfolio do not want the expense associated with storing it securely. Instead, they buy into Exchange Traded Funds (ETF) and hold their bullion in the form of a paper claim. The largest, the SPDR Gold Trust or GLD, trades on the New York Stock Exchange. The trustee and custodian is a bankster, and only other banksters are able to turn investments into delivery of physical bullion. Only shares in the amount of 100,000 can be redeemed in gold.

    The price of bullion is not set in the physical market where individuals take delivery of bullion purchases. It is set in the paper futures market where short selling can drive down the price even if the demand for physical possession is rising. The paper gold market is also the market in which people speculate and leverage their positions, place stop-loss orders, and are subject to margin calls.

    When the enormous naked shorts hit the COMEX, stop-loss orders were triggered adding to the sales, and margin calls forced more sales. Investors who were not in on the manipulation lost a lot of money.

    The sales of GLD shares are accumulated by the banksters in 100,000 lots and presented to GLD for redemption in gold acquired at the driven down price.

    The short sale is leveraged by the stop-loss triggers and margin calls, and results in a profit for the banksters who placed the short sell order. The banksters then profit again as they sell the released gold into the physical market, especially in Asia, where demand has been stimulated by the sharp drop in bullion price and by the loss of confidence in fiat currency. Asian prices are usually at a higher premium above the spot prices in New York-London.

    Some readers have said “don’t bet against the Federal Reserve; the manipulation can go on forever.” But can it? As the ETFs such as GLD are drained of gold, their ability to cover any of their obligations to investors diminishes. In my opinion, these ETFs are like a fractional reserve banking system. The claims on gold exceed the amount of gold in the trusts. When the ETFs are looted of their gold by the banksters, the gold price will explode, as the claims on gold will greatly exceed the supply.

    Kranzler reports that the current June futures contracts are 12.5 times the amount of deliverable gold. If more than 8 percent of these trades were to demand delivery, COMEX would default. That such a situation is possible indicates the total failure of federal financial regulation.

    What the Federal Reserve has done in order to maintain its short-run policy of protecting the “banks too big too fail” is to make the inevitable reckoning more costly for the US economy.

    Another irony is the benefactors of the banksters sale of the gold leeched from the gold ETFs. Asia is the beneficiary, especially India and China. The “get out of gold line” of the US financial press enables China to unload its excess supply of dollars, accumulated from the offshored US economy, into the gold market at a suppressed price of gold.

    Kranzler points out that not only does the Fed’s manipulation permit Asia to offload US dollars for gold at low prices, but the obvious lack of confidence in the dollar that the manipulation demonstrates has caused wealthy European families to demand delivery of their gold holdings at bullion banks (the bullion banks are essentially the “banks too big to fail”). Kranzler notes that since January 1, more than 400 tons of gold have been drained from COMEX and gold ETF holdings in order to satisfy world demand for physical possession of bullion.

    Again we see that institutions of the US government are acting 100% against the interests of US citizens. Just who does the US government represent?

    • loantech


  • Xstatra reports 34% increase in resource at Hackett River. Recall that Sabina holds a large silver royalty on HR.

  • Columbia Univ Jeffrey Sachs speaking candidly on sistema criminality.

  • More countries looking for their gold, this time Mexico, wow, scandalous:

    Today we have an exclusive note on this blog, but hopefully this can be known through the “mainstream media” too: the Mexican Superior Audit of the Federation (“ASF” in Spanish), in its “Report of Supreme Audit Results of the 2011 Public Account” delivered last week to the Chamber of Deputies, gave a stern “recommendation” to the Bank of Mexico (Banxico).

    As you may recall, last year we informed that after four months of legal wrangling with Banxico, it was forced to give us the information we wanted (that of course they did not want to disclose), about the supposed physical location of Mexico’s sovereign gold holdings.

    Thanks to that, we found out that 95 percent of the Mexican gold reserves (about 125 tonnes) were abroad, and almost all (99%), in London, England.

    Well, the ASF documented the purchase of 100 tonnes of gold that was made in 2011, for a total of 4,543 million dollars.

    In its report, the ASF says that a confirmation of the operation was made with the counterparty, but also “found that Banxico has not conducted physical inspections to gold to verify compliance with the terms of acquisition and the conditions regarding its storage, in order to be certain of the physical custody of this asset.” Our emphasis.

    Moreover, the central bank only has documents which establish the terms and conditions, the dates of the transactions and payment vouchers. That’s all.

    In other words, Banxico invested 4.5 billion dollars and released the money without making any confirmation of the existence of the gold purchased, or of the location of the vaults where the gold bars were supposed to be held. Mere “paper gold”.

    The ASF states that the Central Bank gave them some arguments on why they did not consider any verification as necessary, and assured them that the gold reserves were under the custody of “a prestigious financial institution”. It seems that Banxico has a “blind faith” regarding such an institution.

    According to the report, the Bank of Mexico said that the metal seller “only” offers services to other central banks and monetary authorities, and “places gold in custody in a bank of the United Kingdom” who “sets strict standards for weight and purity which gold bars must meet, in order to be received under custody.” Almost a religious act for Banxico.

    In this blog it’s been documented that this custodian is none other than the famous Bank of England, which is supposed to provide its services on an “allocated basis”. That is, that customers have, or should have, a list of every ingot owned with serial number and stamped certifications of purity.

    Banxico has none of these lists. Last year it could not answer a single question made by this journalist, through a legal “Request for Information”, about the number of bars that make up the Mexican gold reserves. The central bank only said that “due to the variability of the content of gold in the bars, it is not possible to specify with certainty the exact number of bars purchased.” Oops!

  • George Cole

    We hear all kinds of theories on the motivations of central banks in creating new asset bubbles. But one idea we never see dicussed — the desire of central bankers to enrich their friends in the financial community at the expense of prudent savers. All done under the cover of “boosting economic growth.”

  • George Cole

    US 10 year treasury yields surged to 1.9% last week as stocks rallied further. Will 2% be tested again?