NYSE Runs Out of Gold Bars: What Happens Next?

[Peter Presland]

Interesting information and commentary from 'Seeking Alpha' under the above title.

It seems that the new NYSE operation that takes over administration of the ECBOT Gold and Silver emini futures contracts tomorrow has a problem getting hold of 1 Kg Gold Bars. They have used the Changeover from ECBOT to introduce changes to the contract wording that give considerable wriggle room in terms of Short position bullion cover requirements and what Longs are required to accept in lieu of physical delivery. Prima Facie it is more evidence of increasing supply tightness in bona-fide ('official', 'Kosher') supplies of gold and there are many industry pundits calling for $1,500 - $2,000 / oz by the end of the year. Adrian Ash of Bullion Vault is the first article commentator to that effect too.

I remain cautious. The 'Deep-Market' operators don't appear desperate to me and I expect them to remain in control. I do expect $1,000 to be easily breached on that timeframe - but I also expect more 'out of the blue' price smack-downs and even greater volatility than in the past couple of years. Speculative longs trading on margin who get caught up in the hype will - as always - be crucified.

[Peter Lemkin]

Thanks. When they run out of 1Kg bars, they can try Hershey Bars, but I think by then the lower part of Manhattan would be in riot and abandoning ship. Know anything or heard any rumours of the gold under the WTCs? Where did it go? Only part was recovered to known entities.

[Peter Presland]

Peter

No idea about the WTC bullion.

Further to the above. The official position on the current Gold market is of course 'business as usual' - soothing, calming noises about markets working fine etc etc.

The 'Gold-Bug' contrarian narrative is one of covert manipulation to suppress price and various plausible mechanisms have been cited to that end. They are so plausible in fact, that they have long been the basis of profitable trading for many. However, underlying all this is an assumption is that the manipulating shorts will eventually become trapped and either default on delivery or be forced to buy their positions back, either or both resulting in a parabolic upward price movement. I am less sanguine about that little scenario.

I sense we are moving onto new ground. Pace David Guyatt's revelations about the vast quantities of 'Black Gold' in existence, the present unprecedented private demand is probably viewed as a golden (ha ha) opportunity for Black gold to be systematically laundered to meet that demand whilst maintaining both control of the official price and building official records of exactly who is stashing away the kosher stuff. So long as a default on the Comex can be avoided, it will probably continue to be a major price fixing mechanism; which in practice means that, so long as sufficient kosher bullion to cover relentlessly increasing short open interest can be deposited in Comex warehouses, we will continue to see periodic price smack-downs.

[David Guyatt]

Peter, it seems to me that there have been imminent expectations that the "shorts" will be caught duly short and will have to deliver or buy back their positions for the last decade. This has been the "daily vespers" of GATA since its formation in 1999 (I remember it being founded).

[Peter Lemkin]

Peter, it seems to me that there have been imminent expectations that the "shorts" will be caught duly short and will have to deliver or buy back their positions for the last decade. This has been the "daily vespers" of GATA since its formation in 1999 (I remember it being founded).

David, I know there is no real way to know, but if anyone has an educated hunch, it might be you. Can you or will you speculate (sic) on what % of world gold is 'black' v. % 'kosher'?

[David Guyatt]

Peter, it seems to me that there have been imminent expectations that the "shorts" will be caught duly short and will have to deliver or buy back their positions for the last decade. This has been the "daily vespers" of GATA since its formation in 1999 (I remember it being founded).

David, I know there is no real way to know, but if anyone has an educated hunch, it might be you. Can you or will you speculate (sic) on what % of world gold is 'black' v. % 'kosher'?

Far greater quantities than in the white Pete.

The historical records have no real foundation to them. They are just artificial guesses that proved useful to Her Majesty's Empire and those wealthy and powerful elite who sailed in her. For example, the figures do not include Russian nor Chinese/Southeast Asia production. And Russia is the second largest producer after South Africa. China and the far east have lusted after gold for thousands of years. The historical figures are also useless when it comes to, say, ancient Egyptian production. Gold was more available in ancient Egypt than silver and silver production is vast compared to official AU production. Producers also place a percentage of their annual "crop" directly into the black and always have done it seems.

It's the same for diamonds - little sparkly stones that aren't all that rare and the market is, more or less, controlled by the same people who control the precious metals market.

The best book on the subject of diamonds is Jani Robert "Glitter & Greed". There is a lot in that book worth reading, including the way the British government during WWII declined to stop De Beers providing industrial diamonds to Nazi Germany without which their war effort would've ground to a halt. But also for a peek at the sheer volume of stones available for harvest.

However, whereas I used to think it likely that black gold would eventually be magically transformed into official metal I am no sure that this is the case. The argument is that if the CIA have grabbed a large quantity of AU, and the US Army another quantity (via, for arguments sake, their Engineering Corp that was active in the Philippines) and the Air Force some more, the Navy too --- etc etc etc., would these amounts be handed over to the entity we know as the United States government? Imo, the answer is almost certainly no. I don't see a General or a DCI turning over vast sums of money that could be used in deep black budgets, just so the prevailing politician in charge of the nation could squander them on helping out his oil buddies or for his reelection war chest etc.

I suspect (but don't know) that this is the same underlying motivation that the late General Erle Cocke had in mind when he stated in his "Project Hammer" affidavit that:

Cocke was then asked who would have been behind the Hammer project. Would it, the questioner asked, have involved "various agencies of the US Government"?

"Yes. Obviously the CIA, the FBI, the national security agencies of all types, Pentagon in the broadest sense of it and as such, and the Treasury, Federal Reserve. Nobody got out of the act, everybody wanted to get in the act." But there were numerous other entities involved in Project Hammer.

The "repatriation" of the dollars referenced in Project Hammer was probably narcotics revenue. Warehouses full of various used banknotes from around the world waiting to be repatriated, I was told. How true this is I don't know, but there was a sense that it felt correct. I was also told that this related to those pesky Showa 57 series certificates of the M-fund (see: http://www.jpri.org/publications/critiqu...ecial.html. I also have no way of knowing how true this statement was either, but again it resonated as being quite reasonable. This is, of course, the problem with the deep black world. Penetrating it and coming away again with actual evidence is mighty difficult.

But there is an interesting side fact to Project Hammer. Citibank, HSBC etc were completely broke at the end of the 1980's. Bankrupt as a result of the western banks disastrous lending exposure to Brazil, Poland, Russia, Egypt and numerous other Lesser Developed nations. But within approx. 3 years their balance sheets were bountiful in the land of milk and honey. Just how do you turn around multi-billion dollar liabilities to multi-billion dollar assets in just a few short years? Beats me.

[Peter Lemkin]

Peter, it seems to me that there have been imminent expectations that the "shorts" will be caught duly short and will have to deliver or buy back their positions for the last decade. This has been the "daily vespers" of GATA since its formation in 1999 (I remember it being founded).

David, I know there is no real way to know, but if anyone has an educated hunch, it might be you. Can you or will you speculate (sic) on what % of world gold is 'black' v. % 'kosher'?

Far greater quantities than in the white Pete.

The historical records have no real foundation to them. They are just artificial guesses that proved useful to Her Majesty's Empire and those wealthy and powerful elite who sailed in her. For example, the figures do not include Russian nor Chinese/Southeast Asia production. And Russia is the second largest producer after South Africa. China and the far east have lusted after gold for thousands of years. The historical figures are also useless when it comes to, say, ancient Egyptian production. Gold was more available in ancient Egypt than silver and silver production is vast compared to official AU production. Producers also place a percentage of their annual "crop" directly into the black and always have done it seems.

It's the same for diamonds - little sparkly stones that aren't all that rare and the market is, more or less, controlled by the same people who control the precious metals market.

The best book on the subject of diamonds is Jani Robert "Glitter & Greed". There is a lot in that book worth reading, including the way the British government during WWII declined to stop De Beers providing industrial diamonds to Nazi Germany without which their war effort would've ground to a halt. But also for a peek at the sheer volume of stones available for harvest.

However, whereas I used to think it likely that black gold would eventually be magically transformed into official metal I am no sure that this is the case. The argument is that if the CIA have grabbed a large quantity of AU, and the US Army another quantity (via, for arguments sake, their Engineering Corp that was active in the Philippines) and the Air Force some more, the Navy too --- etc etc etc., would these amounts be handed over to the entity we know as the United States government? Imo, the answer is almost certainly no. I don't see a General or a DCI turning over vast sums of money that could be used in deep black budgets, just so the prevailing politician in charge of the nation could squander them on helping out his oil buddies or for his reelection war chest etc.

I suspect (but don't know) that this is the same underlying motivation that the late General Erle Cocke had in mind when he stated in his "Project Hammer" affidavit that:

Cocke was then asked who would have been behind the Hammer project. Would it, the questioner asked, have involved "various agencies of the US Government"?

"Yes. Obviously the CIA, the FBI, the national security agencies of all types, Pentagon in the broadest sense of it and as such, and the Treasury, Federal Reserve. Nobody got out of the act, everybody wanted to get in the act." But there were numerous other entities involved in Project Hammer.

The "repatriation" of the dollars referenced in Project Hammer was probably narcotics revenue. Warehouses full of various used banknotes from around the world waiting to be repatriated, I was told. How true this is I don't know, but there was a sense that it felt correct. I was also told that this related to those pesky Showa 57 series certificates of the M-fund (see: http://www.jpri.org/publications/critiqu...ecial.html. I also have no way of knowing how true this statement was either, but again it resonated as being quite reasonable. This is, of course, the problem with the deep black world. Penetrating it and coming away again with actual evidence is mighty difficult.

But there is an interesting side fact to Project Hammer. Citibank, HSBC etc were completely broke at the end of the 1980's. Bankrupt as a result of the western banks disastrous lending exposure to Brazil, Poland, Russia, Egypt and numerous other Lesser Developed nations. But within approx. 3 years their balance sheets were bountiful in the land of milk and honey. Just how do you turn around multi-billion dollar liabilities to multi-billion dollar assets in just a few short years? Beats me.

Only Alice In Wonderland comes to mind after reading your statement above. I am, by hobby, an advanced mineral collector; and by training a scientist. Though I know how rare Au is in surface minerals and have hunted it some myself; and while I'm familiar with the geology of the larger commercial deposits a(though I haven't done ballpark figures of how much might potentially be there to be had, thus far) - I was always very, VERY suspicious of the statement one can find in encyclopedias et al. that all the Au in the world would only make a cube of 20m per side [Wiki]. It should be a few times that just jewelry. Given glimses of Nazi and Japanese Gold, Add what ONCE was in Ft. Knox and at least similar amounts in Russia. Add Swiss gold and other bank and country gold. Add intelligence/black op gold; etc. I'd say that 'official' guessimation above [20m3] is off by at least an order of magnitude, and more. I wonder who is behind this 'official cube' rube?

Another golden thought. The DPW is not a monolith and certainly no one entity nor group would know how much gold there is total and who had what completely [though, granted, they'd have much better info than us!], so anyone trying to 'control' the market or price could themselves find others working against them. I wonder how many deaths are realted to that yellow metal - and I don't mean miners.

[Jan Klimkowski]

A little tangentially, spooky Ambrose Evans-Pritchard published the following piece on the Torygraph earlier today.

It's now disappeared. :vroam:

Russia backs return to Gold Standard to solve financial crisis

Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system.

By Ambrose Evans-Pritchard
Last Updated: 10:05PM BST 29 Mar 2009

Arkady Dvorkevich, the Kremlin's chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.

Mr Dvorkevich said it was "logical" that the new currency should include the rouble and the yuan, adding that "we could also think about more effective use of gold in this system".

The Gold Standard was the anchor of world finance in the 19th Century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the US, and France all abandoned their parities.

It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and "Great Society" social spending forced President Richard Nixon to close the gold window in 1971.

The world's fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible - or less likely - under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank of gradually raise the gold share of foreign reserves to 10pc.

China's government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the "Bancor" proposed by John Maynard Keynes in 1944.

http://www.telegraph.co.uk/finance/f...al-crisis.html

[Peter Presland]

Jan, Peter, David.

Frankly I was pretty firmly in the GATA 'The shorts will eventually be trapped' camp until reading David's 'The Secret Gold Treaty' - and that from a deep deep sceptic on all things 'official'. (Who was it said 'never believe anything until it has been officially denied? - well that's me in spades). Add to that my background in trading paper gold using well-known measures that were (and to some extent remain) solid evidence of manipulation by people with VERY deep pockets, and it's a pretty fair bet that most traders and the vast bulk of the general population with any interest in gold as an investment regard the official 147,000 MT's above ground gold as being in the ball-park so-to-speak.

The alleged vast quantities of Black Gold explain so much. It does not have to be under the control of the Banksters yet - necessarily. Just the fact of its existence and Bankster knowledge of it is quite sufficient to explain their cockyness. I now expect gold to remain a reasonable investment on any ong-term view - in the sense that its value measured against a basket of necessities will probably always hold; but waiting for a price explosion whilst accumulating offical gold looks more and more like what the Banksters both want and expect people to do - and their plans are laid accordingly.

You can see why the interest I expressed to David in my original Lounge postings was about the stratagems employed to launder large and ongoing quantities of the Black stuff - because that is the key to them maintaining rigid control over its price. Analogous to drugs and diamonds, the crooks are pretty much an indispensable tool of official policy.

[David Guyatt]

A little tangentially, spooky Ambrose Evans-Pritchard published the following piece on the Torygraph earlier today.

It's now disappeared. :vroam:

Russia backs return to Gold Standard to solve financial crisis

Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system.

By Ambrose Evans-Pritchard
Last Updated: 10:05PM BST 29 Mar 2009

Arkady Dvorkevich, the Kremlin's chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.

Mr Dvorkevich said it was "logical" that the new currency should include the rouble and the yuan, adding that "we could also think about more effective use of gold in this system".

The Gold Standard was the anchor of world finance in the 19th Century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the US, and France all abandoned their parities.

It was revived as part of fixed dollar system until US inflation caused by the Vietnam War and "Great Society" social spending forced President Richard Nixon to close the gold window in 1971.

The world's fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible - or less likely - under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank of gradually raise the gold share of foreign reserves to 10pc.

China's government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the "Bancor" proposed by John Maynard Keynes in 1944.

http://www.telegraph.co.uk/finance/f...al-crisis.html

I can see why that little gem of an article suddenly upped and did a George Orwell. Imagine, a new gold-backed joint Sino-Soviet currency in competition to the Mafia dollar. It sounds an incredibly sensible alternative to me except the Mafia dollar will never voluntarily give up its hegemony come hell or high water -- or complete global destruction I suspect.

Hence the story disappeared.