Political Metals

Bill Murphy | LeMetropoleCafe

“The way I see it, if you want the rainbow, you gotta put up with the rain.” … Dolly Parton

GO GATA!!!

The reason for this rare, extra commentary over a weekend is to focus on a couple of points which really stand out in their particular significance and are worth pondering in terms of what is coming down the road for financial markets.

The first is what we jumped all over on PLANET GATA from the get-go about the JP Morgan hedge trade flap gone wrong. It made NO sense from the very beginning to any of us that such a commotion was made over a $2 billion loss on a trade, for whatever reason, when they had just reported yearly gains of $18 billion. Clearly, Mr. Dimon’s public pronouncement, that caught the attention of the entire investment world, was only paving the way for future announcements that will be much more dramatic. All he was doing when he inferred the losses MIGHT get worse was protecting himself, as best he could, by going on the record.

The latest news on JPM…

14:31 JPM JP Morgan Chase struggling to unwind ill-placed bets – WSJ

While breaking no real news, this story notes that the bank’s losses could eventually prove to be even bigger than the $5B some people familiar with the matter have been predicting (see linked comment). The losses could potentially deepen if the company sells its positions into a market that has turned against said positions.
The article notes that while the bank has said that it will take its time unwinding the positions, this does not necessarily guarantee smaller final losses than trying to close out the trades sooner, as the market could turn sharply against the bank in the near term. 
Reference Link: Wall Street Journal 

14:50 JPM CFTC latest federal agency to begin investigating JPMorgan Chase – NYT DealBook

NYT Dealbook reports, citing people briefed on the matter, that the Commodity Futures Trading Commission opened an enforcement case on Friday examining the bank’s trading loss. The CFTC joins the SEC and FBI in investigating possible wrongdoing at the bank. Gary Gensler, the agency’s chairman, is expected to disclose the investigation when he testifies on Tuesday before the Senate Banking Committee.
Dealbook says that the CFTC will potentially examine whether the bank’s trading affected the market for credit derivatives, for which it has jurisdiction.
Reference Link: NY Times

This latest investigation into JP Morgan might be a big deal for the GATA camp. This is actually quite complicated, but very intriguing. The CFTC has been investigating JPM’s role in the silver market manipulation scheme for what will be four years soon. FOUR YEARS! Good friends, like Dave from Denver, have nothing but loathsome talk about the CFTC, for good reason. GATA’s rationale (speaking for myself) about this ridiculous investigation is that the CFTC really has uncovered the scam, but because it is backed by the US Government, they are flabbergasted about what to do, so they do nothing.

The reason they have not closed the case is because they are petrified the silver market might blow up down the road. Think about if you were them. They want this to go away, but if the silver market does blow up, and there is some kind of “Force Majeure” declared in silver by JPM, the CFTC would not only look like fools, but, perhaps it might be said they were more than negligent. Thus, they have done nothing.

Well, all of a sudden, Lo and Behold a new factor enters the silver scam investigation, which directly affects Morgan’s constant claims to the CFTC that their huge silver short position is hedged. Ya mean like hedged in an economic sense as per their claims re the latest credit derivatives market trade was a hedge? This just might force the CFTC to demand JP Morgan prove their claims their silver short position is really a hedged one. This is what I suspect might occur due to the growing scrutiny over Morgan’s trading activities. The CFTC people, except for Bart “Elliot Ness” Chilton, are sycophants and have toed the company line … but there is a point when FEAR makes that no longer viable. They are not going to go to jail for taking one for the team. My guess is we are getting close to that Tipping Point.

As the JP Morgan hedged losses mount and become “official,” the heat on them is going to mount. They will be scrutinized every way imaginable. How can all the class action lawsuits against them, and blatant evidence against them via just what Andrew Maquire has sent to the CFTC via their role in the silver scam, be ignored?

We have already been informed, as of a week ago, that the Morgan losses on their “hedge trade” fiasco could be as high as $15 billion, or more. Already, even the WSJ is alluding that their losses are higher than $5 billion. This is MEGA! As we have discussed on PLANET GATA, this is not just about Morgan, but confidence in the entire financial system. If the $70 trillion derivatives book at Morgan goes NUCLEAR, we could have a financial market TITANIC event which might be right around the corner.

GOOD GRIEF!

Now, for the weekend edition, number two re the understandable, but nauseating, commotion over the Facebook IPO on Friday, which was heralded by CNBC all week.

First, the background…

*The Dow is going down day after day, not with any fanfare, but all rallies are sold. In very quiet and subdued selling, general investors inherently know something is wrong and are acting upon that instinct.

*Europe is falling apart we know, but little is being said about how the US financial system is in parallel with Europe. How bad is this? Just the state of California budget deficit goes from something like $8 billion to a staggering $16 billion and it creates almost no commotion. Huh?

Getting back into the GATA aspect of this is that the US financial markets are all about market manipulation. You need to go nowhere further on what the real deal about US financial markets than this headline…

Banks spend big to prop up Facebook shares on first day of trading
By GARETT SLOANE and MARK DECAMBRE
Last Updated: 8:15 AM, May 19, 2012
Posted: 11:34 PM, May 18, 2012

It was another Wall Street bailout — but this time the banks had to cough up the cash. Facebook’s underwriters propped up the social-network’s trading debut yesterday, as the shares threatened to crash through the initial public offering price of $38. The banks working on the massive $16 billion IPO, including Morgan Stanley, JPMorgan Chase and Goldman Sachs, did their duty by buying up large blocks of Facebook stock toward the end of the day to support the price.

Facebook shares opened up 11 percent at $42.05, and traded as high as $45, before running out of steam, disappointing investors hoping for a big first-day pop. The shares closed up just 0.6 percent at $38.23.

Without the bank bailout, Facebook’s IPO would have been a loser on the day, Wall Street insiders said.

The heavy buying, however, cut into the banks’ already meager fees on the deal. The underwriters agreed to accept a smaller cut — just 1.1 percent of the $16 billion Facebook raised in the IPO — in order to land the high-profile assignment.

After splitting $176 million in fees, the firms likely spent more than they made in fees by buying the swooning stock. Sam Hamadeh, CEO of research firm Privco, believes the banks spent around $380 million on Facebook stock.

“On the heels of JPMorgan’s $2 billion ‘hedging’ trading loss, tThe underwriters have used up all the fees they made on the Facebook deal just to buy and prop up the stock to prevent a busted IPO,” said Hamadeh.

Another source said that the banks took a substantial hit yesterday, which started strong despite glitches that delayed Nasdaq trading in Facebook shares by 30 minutes past their 11 a.m. scheduled debut.

While there was plenty of finger-pointing yesterday, many blamed the bankers for setting the price too high to allow for upside. The IPO share priced at the high end of the $34 to $38 range, which had been raised from an initial range of $28 to $35.

The bankers were wary of pricing the shares too low, leaving money on the table and leading to an outrageous first-day pop. They were shooting for a modest first-day gain in the range of 5 percent to 10 percent.

Still, some observers heaped scorn on Facebook insiders who dumped their shares, saying it was a red flag that weighed on the stock.

Facebook had increased the number of shares being sold in the IPO by 25 percent, to 425 million, with most of the additional float coming from early investors looking to cash out.

The company’s sky-high valuation also made some investors queasy. At $38 a share, Facebook is valued at $104 billion — even though it only made $3.7 billion last year.

Facebook’s big day was a drag on other tech stocks. Trading in shares of Zynga was halted yesterday after a sharp drop, and the stock closed down 13.4 percent at $7.16. China’s social network RenRen was also down more than 20 percent, to $4.93.
gsloane@nypost.com

My take on this, from my Behavioral Finance background on how our financial system really operates, is the effort to hold up the Facebook IPO was an effort to hold up the stock market as a whole. For the BF folks, perception is everything. That is why they do what they do. The Counterparty Risk Management Policy Group (do a Google if new to you), led by the same firms that held up the Facebook share price, does not exist for no reason. One of their mandates is to promote market stability and that is what they just did. That Group works closed with the Plunge Protection Team (Working Group on Capital Markets) to support the US stock market at various times.

What we saw in the price rises of gold and silver at the end of the week was stunning and totally out of the natural order of the gold/silver price manipulation scheme. It was a wowser! My smeller tells me, because the dramatic rally was so pronounced, that we are headed for some serious fireworks in the financial arena.

The Gold Cartel could be in deep trouble now because their honcho, JP Morgan, is in deepening trouble. This is no minor event in terms of the gold/silver market manipulation scandal.

All hands on deck to prepare for the financial market commotion that seems to be right around the corner!

-

Related Articles:

• JP Morgan Chase for Dummies
• Can you spot the Bubble(s)?

Hugo Salinas Price | Mexican Association for Silver

-

The gold price: the reds against the blues

I do not have a crystal ball to tell me the future, nor do I have any special input from insider sources to inform me of what is going on; as a gold-bug I read what all the other gold-bugs are reading.

-

-
If you’ve checked out the Compare AFE, BullionVault & GoldMoney page, you’d have noticed that BullionVault & GoldMoney packaged their bullion dealership and custodian services very differently. It’s interesting to note how the same service can be approached in such a contrasting manner.

There is however, one other significant difference not highlighted in the comparison. It’s not so much about differences in the companies’ services. Rather, it’s over differing opinions of the founders in the much debated the matter of Gold Cartel and Gold Price Manipulation.

In a recent interview by Chris Martenson, Paul Tustain of BullionVault said:

I am not really strongly in the manipulation camp but I do agree that market manipulation tends to happen in futures contracts. This is not anything to do with gold or silver specifically, it is to do with the way futures contracts work.

-
London AM & PM Fix

There are many gold and silver market abnormalities that have been cited as supporting evidence of gold price suppression by the “manipulation camp”. One of the more interesting ones is the phenomenon where the London AM fix has almost always been higher than the PM fix for over a decade. When asked concerning the above, Paul responded:

But I think there is a rational market explanation and I do not think that market manipulation by governments is in fact it. I think it is much simpler than that.

-
It appears that he is using the Occam’s Razor, which is a principle urging one to select among competing hypotheses that which makes the fewest assumptions and thereby offers the simplest explanation of the effect. Put another way, it admonishes us to choose from a set of otherwise equivalent models of a given phenomenon the simplest one. It should be noted however, that simplest available theory need not be most accurate. Listen to Paul’s take on this issue and make your own conclusion after reading a detailed analysis of this phenomenon by Adrian Douglas. Paul also goes into great detail showing how other perceived market abnormalities or statistical aberrations can be explained away without invoking the manipulation theory, including the much discussed bullion banks’ short position in the futures market. A transcript of the interview can be found here.
- 

Gold trading is influenced by government intervention

On the other corner of the gold price manipulation ring, we have James Turk, founder of GoldMoney, director of GoldMoney Foundation and consultant at Gold Anti-Trust Action Committee (GATA). James’ work exposing the gold price suppression scheme is all over the web.

In his April 13 article Some Answers to Doug Casey’s Questions James wrote:

The investigation into the inner workings of the gold market that are out of public view and decided behind closed doors in central banks is an ongoing effort. It has been that way for years, and fortunately, the Gold Anti-Trust Action Committee has been there relentlessly compiling the mounting evidence that something is amiss, that gold trading is influenced by government intervention aimed at keeping the price from rising to its fair value. Or to put it another way, by allowing the gold price to climb higher year after year in what I have dubbed a “managed retreat”, governments hope that people will not notice what is happening to the ongoing debasement of the US dollar…

That was his conclusion at the end of his argument for the case that gold (& silver) price manipulation by central planners  has been and still remains a strategic policy to keep the dollar and the banks that support it alive. Read the full article here.

In his presentation at the GATA 2008 conference, James explained why central banks interfere in the gold market. Interesting to note how he foresaw the Lehman Brothers bankruptcy by predicting another Bear Stearns collapse was only several months away.

So there you have it – two innovative entrepreneurs, two great companies, very contrasting views on PMs market manipulation but they share one very important thing in common – Their relationships with their clients are on a Bailee/Bailor basis and not on a Debtor/Creditor basis. Both companies vouch in no uncertain terms that their clients have complete ownership of physical bullion in their custody. Their At the end of the day, I think that’s what matters most.

-

Further Reading:

• Learn more about BullionVault & GoldMoney
• Gold Manipulation
• Silver Manipulation 

-
[Active updates: Developing stories] The South Carolina Treasurer’s Office, acting upon a directive from the state legislature, has recently published a report on the advisability of investing in gold and silver. Basically, the state legislature wanted to know if it’s wise to invest public funds under it’s custody in gold & silver.

 Here’s what the Treasurer’s Office has to say about itself:

Our mission is to serve the citizens of South Carolina by providing the most efficient banking, investment and financial management service for South Carolina State Government. Our commitment is to safeguard our State’s financial resources and to maximize return on our State’s investments.

This is a tall order, hence we can assume that the report must be well researched and credible.  It concluded that it is not advisable to invest public funds in gold & silver because:-

1. There’s escalating market speculation
2. Current value (I think they mean price) is too high
3. Market possibly in a bubble
4. South Carolina Code of Laws states that the Treasurer has “ full power to invest” in  debt instruments of the US government and corporations, but makes no mention of investments in derivatives of gold & silver. Hence investing in gold & silver derivatives may “create a legal conflict”

While the timestamp of the document was 27 Feb 2012, it can be assumed that the report was prepared soon after the end of September 23, 2011 due to this inclusion. From the perspective of a short term investment, that was a pretty good call, considering the fact that gold and silver have been taken down to $1624 and $31.40 respectively as I write.

However, this piece is not about how good the Treasurer’s Office was at making an investment call based on price. Neither is it about whether gold & silver is in a bubble. These conclusions (2) & (3) are opinions of the Treasurer’s Office, which are subjective. Of greater interest are the facts revealed in the body of the report.

Regular readers of this blog would have noticed that there are several key issues that are repeatedly discussed or highlighted here (through news feeds or third party contributions). They include:-

1. Gold & silver prices are being suppressed
2. Central Banks & major bullion banks are suppressing their prices
3. Naked short selling is one of the price suppression mechanism
4. Bullion Banks and exchanges practice fractional reserve bullion banking
5. Stay out of gold or silver bank accounts, ETFs, Certificates, and all forms of derivatives
6. The safest way to own gold & silver is to hold physical gold & silver

Items (1) to (4) are often disputed by the mainstream media and investors, sometimes referring to them as conspiracy theories. Hence, it is most interesting to see what this government published report has to say about these 6 issues.

Price Suppression is Real

In one short paragraph, this report confirms in no uncertain terms the truth behind the so called “conspiracy theories”. Not only does it confirm the existence of price suppression, it discloses the WHOs and the HOWs!

Risks of holding gold through ETFs, Certificates, Bank Accounts & other Derivatives

It has been repeatedly emphasized here that the only secure means of owning gold & silver is by holding physical coins and bars in your own possession or stored in a private vault outside the banking system. Anything else is a derivative – a paper or electronic representation of the real thing.

This report explains the nature of these derivatives and lists the risks associated with each, together with reasons why the Treasury’s Office advised against investing in them.

The full report in pdf is available for download at the South Carolina Treasurer’s website. Text from relevant sections is reproduced below with comments related to the 6 items above highlighted. Most of the remarks are self explanatory. There are, however, two groups of comments that warrant some discussion.

1. Allocated & Unallocated Accounts

Ways to Invest: Certificates
Unallocated gold certiñcates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the bank’s gold on deposit. Allocated gold certificates should be correlated with speciñc numbered bars, however it is difficult to prove whether a bank is improperly allocating a single bar to more than one investor.

Ways to Invest: Accounts
One of the most important differences between accounts is whether the gold is held on an allocated or unallocated basis. Another major difference is the strength of the account holder’s claim on the gold, in the event that the account administrator faces gold-denominated liabilities, asset forfeiture, or bankruptcy.

The above describes two products offered by banks to clients who want to invest in gold (or silver) without having to deal with the physical metals. For example, when a bank accepts $2,000 from a customer and issues a gold certificate or credits the customer’s gold account under the unallocated system, the bank is not obliged to buy and store 1.2 oz (at current price) of gold on behalf of the customer. It holds only a tiny portion of that amount in gold. Hence when many of its the customers decide to redeem their certificates at the same time, the bank will not have sufficient gold to deliver. This is what’s referred to as a “run on the bank’s gold on deposit”. The same applies when depositing cash in your bank. The practice of keeping only a tiny fraction of what’s rightfully belonging to the customers (gold or cash) is referred to as fractional reserve banking.

When selling allocated gold products, the bank is legally required to hold 100% of the customers deposit in physical metal. For example, if a customer deposits sufficient cash to own a 400 oz gold bar and is assigned a bar bearing serial No: AGR Matthey 156571, how can one be sure that the same bar or a portion thereof is not assigned to another customer at the same time? That’s the issue raised by the report – and the risk is real.

This brings us back to “the only secure means of owning gold & silver is by holding physical coins and bars in your own possession or stored in a private vault outside the banking system”. If you have to use a third party to store your metals, use specialized private vaults instead, because banks operate on a fractional reserve banking system.

There are many companies outside the banking system that offer secure vaulting services. Generally, they have very high transparency, including publishing audited client holdings on the web for public scrutiny (without any login required). Of course clients’ ID are anonymous, and known only to the operator and the client.

Try these links:
GoldMoney bar list and BullionVault client holdings. Their reviews can be found here.

Learn more about private vaulting services, including issues like ownership, custody, bailment, counter-party risks, and performance risks. 

2. Reason for not investing in physical gold & silver

The report listed 5 ways to invest in gold & silver – ETPs, Certificates, Accounts, Derivatives and physical coins & bars. Notice how it highlights & explains all the risks associated with ETPs, Certificates, Accounts and Derivatives and the reasons why it is not advisable for the Treasury to invest in these.

Notice also that there are NO risk associated with physical metals. The only reason given for not investing in coins and bars is “South Carolina does not have the capacity to store or funding to secure gold and silver bullion”.

What a lame excuse! Do they not know that in April last year, “The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion“?

-

Proviso 89.145 GP:
Gold & Silver Investments
Office of State Treasurer

-
GOLD AND SILVER AS AN INVESTMENT:
Historically, investors have purchased gold as a hedge against an economic, a political, or a currency crisis. A decline in investment markets, a growing national debt, a weak currency, increasing inflation, military conflicts and social unrest are the most common reasons for investment in gold. Currently, gold and silver are at historic highs leading many expert investors to conclude that a bubble has been created in the precious metals market. Since the US recession began, the value of gold and silver has increased as investment markets perform poorly, troublesome economic news is announced, and when uncertainty in international markets intensifies.

Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, The London Bullion Market Association, JP Morgan Chase, and HSBC Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artiñcial price suppression.

There are several ways to invest in gold and silver: bars, coins, ETP’s, certificates, accounts, and derivatives. If a state were to choose to invest in gold (and silver), it would likely choose to invest by:

1. ETP’s-Exchange Traded Products. This allows the stakeholder to invest in bullion without having to store bars and coins. The ñrst gold ETF (Exchange Traded Fund) was created in 2003 and has been viewed largely as a success, but has also been compared to investing in mortgagebacked securities. The annual expenses of the fund (storage, insurance, and management fees) are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time. ETF’s are investment companies that are legally classified as open-end companies or Unit Investment Trusts (UIT), but differ from traditional open-end companies and U]T’s. The main differences are that ETF’s do not sell directly to investors and they issue their shares in what are called Creation Units. Also, the Creation Units may not be purchased with cash but a basket of securities that mirrors the ETF‘s portfolio. The Usually, the Creation Units are split up and re-sold on a secondary market.

2. Certificates- allow investors to avoid the risks and costs associated with the transfer and storage of bullion by taking on a set of risks and costs associated with the certificate itself. Banks may issue gold certificates for gold which is allocated (non-fungible) or unallocated (fungible). Unallocated gold certiñcates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the bank’s gold on deposit. Allocated gold certificates should be correlated with speciñc numbered bars, however it is difficult to prove whether a bank is improperly allocating a single bar to more than one investor. The US ñrst authorized the use of gold certificates in 1863. By the early l930’s the US placed restrictions on private gold ownership and therefore, the gold certificates stopped circulating as money, but certificates are still issued by gold pool programs for investment purposes.

3. Accounts- Many banks offer gold accounts where gold can be instantly bought or sold just like any foreign currency on a fractional reserve (non-allocated, fungible) basis. Pool accounts, facilitate highly liquid, but unallocated claims on gold owned by the company. Digital gold currency systems operate like pool accounts and additionally allow the direct transfer of fungible gold between members of the service. Different accounts impose varying types of intermediation between the client and their gold. One of the most important differences between accounts is whether the gold is held on an allocated or unallocated basis. Another major difference is the strength of the account holder’s claim on the gold, in the event that the account administrator faces gold-denominated liabilities, asset forfeiture, or bankruptcy.

4. Derivatives- The product symbol for gold futures is GC, and it is traded in a standard contract
size of 100 troy ounces. In the US, gold futures are primarily traded on the New York Commodities Exchange (COMEX). As of 2009 holders of COMEX gold futures have experienced problems taking delivery of their metal. Along with chronic delivery delays, some investors have received delivery of bars not matching their contract in serial number and weight. Because of these problems, there are concerns that COMEX may not have the gold inventory to back its existing warehouse receipts.

ADVISABILITY:
There is no statute preventing the State from investing in gold and silver. The various methods of investment in gold and silver each carry different and often significant risks, the foremost being speculation. As the US has experienced the recent bursts in the housing and tech bubbles, it is important to take caution when contemplating an unconventional investment. Taxpayer money (state funds and state pension) across the US has not typically been used to invest in gold or silver bullion.

Recently, with the uncertainty in global markets, the devaluation of the dollar, rising inflation, and a flat US economy, there has been a renewed interest in either moving back to a gold standard, investing in gold or both. The value of gold and silver has significantly increased in the last decade, meaning it would cost a great deal to invest at this time.

Risks:
1. Bars and coins- South Carolina does not have the capacity to store or funding to secure gold and silver bullion. For these reasons the State Treasurer’s Office does not advise investing in gold and silver bars and coins.

2. ETP’s- The armual expenses and costs associated with this type of investment are high. In recent years there have been issues surrounding gold ETP’s. The purchase price provides the investor with a fluctuating amount (in weight) of the metal. Over time, as value increases and more investors participate in the fund, the amount of metal owner by the investor decreases. ETP’s can also be split and sold on the secondary market. For these reasons the State Treasurer’s Ofñce does not advise investing in ETP’s for gold and silver.

3. Certificates- Certificates for allocated gold present an accountability problem. Allocated gold certificates are supposed to be correlated with speciñc numbered bars; however, it is difficult to verify whether a bank is improperly allocating a single bar to more than one investor. Also, unallocated gold certificates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the bank’s gold on deposit. This is in conflict with S.C. Code of Laws 1976 SECTION 11-9-660. For these reasons, the State Treasurer’s Office cannot advise investing in gold and silver certificates.

4. Accounts- Similar to the risks associated with gold and silver certificates, allocated and unallocated metals held in accounts produce similar accountability problems. The strength of the account holder’s claim on metals is subject to the account administrators liabilities, assets, and/or solvency. Per S.C. Code of Laws 1976 SECTION 11-9-660, the State Treasurer’s Office cannot advise investing in gold and silver accounts.

5. Derivatives- Over the last three years, gold futures traded on the New York Commodities Exchange (COMEX) have encountered significant accountability problems. Holders of COMEX gold ñltures have frequently experienced delivery delays of their metals. Once delivered, there have been many reports of inaccurate weights and serial numbers on bars that do not match the holder’s contract. For these reasons the State Treasurer’s Office does not advise investing in gold and silver derivatives.

-

Gold: April 2012

-

Having read the above, it may now be easier to make sense of the sharp price decline for both gold & silver over the past 2 days. Lets now ask some questions. Was the price action due to:

• Market forces or Price Suppression in action?
• Falling Demand or Naked Short Selling?
• Human Traders or High Frequency Traders (HFTs)?

Historically, investors have purchased gold as a hedge against an economic, a political, or a currency crisis. A decline in investment markets, a growing national debt, a weak currency, increasing inflation, military conflicts and social unrest are the most common reasons for investment in gold

Recently, with the uncertainty in global markets, the devaluation of the dollar, rising inflation, and a flat US economy, there has been a renewed interest in either moving back to a gold standard, investing in gold or both.

The mainstream media attributed this week’s sharp price decline to  improving economy, low inflation and no imminent QE announcements following the release of the latest FOMC meeting minutes. Given that the above statement was published just 5 weeks before the FOMC minutes, who is lying?

-

Developing Stories

12 Apr:
Jason Hommel explains what Blythe Masters actually meant by “the underlying client position that we’re hedging”.

11 Apr:
Ted Butler, the pioneer of silver manipulation investigation finally broke his silence over the Blythe Masters denial video clip. By far, this is THE best, most level-headed, objective rebuttal to Masters’ famous words that they are “not running a large directional position”. Read “JPM’s TV appearance” posted at Silverseek.com.

10 Apr: 

• ZeroHedge’s take on Blythe Masters denial of JPM’s role in price manipulation
• Keiser Report on the same subject. His solution is the Silver Liberation Army (SLA)

-

7 Apr:
Mike Maloney on RT discussing gold & silver manipulation, Blythe Masters denial of JPM’s role in price manipulation, “First government admission of price suppression” & High Frequency Sheering. Must Watch!

-

6 Apr: 

• JP Morgan and HSBC control over 97% of all of the gold derivatives, according to KWN’s “London Trader – Fed’s Global War Against Gold Escalating”
• GATA: “One of the Masters’ of the universe gets a market manipulation question on CNBC“

Further Reading:

• Storage Options, Bailment, Allocated & Unallocated Accounts Explained
• Gold Manipulation
• Silver Manipulation

-

-

Shortly after BuySilverMalaysia.com launched its webstore on Feb 2, I learnt from its proprietor that he has received numerous emails asking if he would offer buyback as part of the service. “It seems like Malaysians’ concern is about selling back their silver”, he lamented. You’ll notice that it is one of only two dealers amongst those reviewed here without a buyback service.

This is one of the tell-tale signs that many Malaysians who have recently caught wind of the gold & silver story are erroneously looking at gold & silver as speculative investments. They are interested in making a quick buck by buying these metals with the hope of selling them back to their dealers when prices move up in short order. Some are even excited about gold or silver savings accounts offered by various banks and are happy to invest in paper gold or silver. To get an idea of the general sentiment, check out some lively threads at the Lowyat forum (start here, here or here).

Meanwhile, over in the US, it has been reported that bullion dealers who’ve been serving their customers for decades see very little buybacks. Their long term customers have been accumulating these metals, buying when prices are rising and buying even more when there’s a price dip. How is that so?

In a recent interview by SGTreport, Andy Hoffman of Miles Franklin said:

There are no buy-backs. Customers are not selling anything. They haven’t been selling any gold & silver back to Miles Franklin or any of our competitors for years, and they’re never going to. So don’t ever ever think that when you see a big smash in gold or silver that it’s people selling. It has nothing to do with it. It is the gold cartel naked shorting paper, and it’s only a matter of time before they completely and uterly are destroyed as they were in 1968 with the London Gold Pool, and as they have been every single time in history when they attempt to subvert the forces of real money with paper.

You’re not even investing, you’re just owning real money… and you’re doing it for defense. We’re here to protect ourselves.

People should not think of silver & gold as investments. They are savings.

There you have it. They buy gold & silver for different reasons. Not for speculation. Not even as an investment. They buy whenever they wanted to convert their savings from one form of money into another. It is like someone having more confidence in the SGD than RM looking for opportunities to buy more SGD whenever exchange rates are favorable. They buy and hold gold and silver as savings because they know that these monetary metals store value (retain purchasing power) much better than paper currencies. Most importantly, they own gold & silver fully aware that these are political metals, whose prices are actively managed or manipulated by central banks.

[Note: It may appear from the paragraph above that Americans are astute investors or savers. Far from it. Retail ownership of gold & silver on a per capita basis is much higher in India and many Asian countries than in the US. The "they" refers to a very tiny group of well informed Americans who understand gold & silver for what they are.]

For a better understanding of the issues discussed above, listen to SGTreport’s interview with Andy Hoffman discussing a range of topics including Price Manipulation using High Frequency Trading (HFT), Quantifiable Criminality, Exponentially off-the-chart Methods of Attacking, Silver Subsidies, Gold Silver Ratio (GSR), and more.
- 

Part 1

Part 2

-

Further Reading:

• Difference between Investing and Holding gold & silver
• Introduction to gold price manipulation
• Introduction to silver price manipulation

Pan Asia Gold Exchange (PAGE) building in Kunming City, Yunnan, China

-
The much awaited China-based Pan Asia Gold Exchange (PAGE) was scheduled to start trading this June after a ‘soft’ launch at the end of 2011. This exchange that could potentially bring down the Ponzi bullion banking system has been killed before it could see the light of day, according to recent disclosures by Ned Naylor-Leyland and London whistleblower Andrew Maguire.

So “dangerous” was this exchange to the status quo that it faced interference from “a New York based entity with very strong Chinese relationships” soon after the much publicized soft launch. Another factor that helped derail PAGE was the People’s Bank of China’s (PBoC) announcement about control over domestic Gold trading outside of Shanghai.

Before we go into the details of this news, let’s revisit why PAGE managed to send chills down the spine of the powers that be. Consider the following:-

• Currently the prices of gold & silver bullion you pay at your favorite bullion dealers are pegged to or based on the prices of gold & silver contracts transacted at the COMEX in NY and the LBMA in London.

• These contracts are merely paper or electronic representations of gold & silver with little or no physical metals actually changing hands. They are highly leveraged, with approximately 100 oz of paper gold contracts backed by 1 oz of physical gold. For silver, the ratio is about 350:1

• A very very small number of bullion banks (2 to 4) control up to 95% of these paper contracts, and hence are able to influence the price of physical bullion. As ridiculous as it sounds, this is the current price discovery mechanism – virtual paper metals setting the price for physical metals or the classic “tail wagging the dog” mechanism.

• These contracts are denominated in USD.

When such a potential game changer was being conceived, something had to be done, and sure they did. In his recently published research notes “P.A.G.E. Squashed: And now for something completely different…“, Ned Naylor-Leyland of Cheviot Asset Management explains how PAGE was killed.

Just after the publicized ‘soft launch’ (with Central government mandarins in attendance) and the noise made on the internet about its implications, the one shareholder in PAGE that had a foreign listing (in the US) suddenly and stealthily increased its share-holding from 10% to 25%, acquiring additional board directors along the way. The rationale for this sudden change in the weighting of shareholders is shrouded in mystery, however what we do know is that this entity then insisted that they be allowed to build the trading platforms for PAGE from the ground up, rather than buying a working platform off the shelf to get PAGE operational in a timely manner.

This blocking tactic at board level effectively stopped the progress of the fully-allocated spot contract in its tracks, and it was immediately clear to the international-facing people that something fundamental had changed internally. Interestingly, the key Independent Director of this small listed entity that blocked the timely roll-out of PAGE is a well-known Western banker within China, whose CV includes work for the Federal Trade Commission, the Sloan Foundation (related to MIT) and his wife is a member of the Council on Foreign Relations.

-
London whistleblower Andrew Maguire told King World News:

I’d like to briefly remind King World News listeners just what PAGE (the Pan Asian Gold Exchange) was going to be.  This was going to be a Chinese Exchange that was to completely change the way gold and silver trade globally.

If you recall from our previous interview, it posed an immediate threat to the current fractional reserve bullion banking system.  It was the competition of a brand new fully allocated gold and silver contract being pitched up against unbacked paper contracts.  It’s not a stretch to imagine what a threat these contracts posed to the bullion banks.

The whole thing was killed and we recently found out how PAGE was interfered with.  Within hours of our King World News interview last July, I mean you sure get some hits on your show, Eric, the interference stemmed out of a New York based entity with very strong Chinese relationships.  It delayed it enough to kill it and it was killed.

All is not lost. The people originally behind PAGE have begun work on developing another independent exchange which is more streamlined and better funded, focusing on 1:1 silver contracts to bypass the new PBoC ruling on gold. According to Ned, it is expected to go ‘live’ this summer (northern). Let’s give the bullion banks a few more months!

The aforementioned change in domestic Chinese rules mean that along with every other regional Precious Metals exchange, the new unnamed 1:1 allocated exchange is launching with Silver initially, which of course is the Achilles Heel of the Bullion banking system. This in my opinion is far more bullish and exciting short and medium-term than the Gold contract would have been, as the physical Silver market is so tight.

Furthermore, all the regional exchanges mothballed by the PBoC rule change can switch, and are switching to Silver trading which is not covered by the change in rules. The contract itself will be, as before, an international rolling 90 day spot one, denominated in RMB, and the new entity is supported by the same serious players within the Chinese political and military establishment as before. The physical will be acquired ahead of closing each monthly tranche and will be vaulted entirely outside of the Bullion Banks (i.e. private vaulting facilities). From there the allocated receipts will be recorded on an electronic register and the issue will be tradeable in the secondary market with the register adjusted real-time.

This is extremely good news for holders of real Silver and extremely bad news for holders of fake paper Silver who rely on the 350:1 leverage being maintained as the world’s sole price discovery mechanism for large purchases of the white metal. This effectively will be like dealing in an RMB-denominated and fully allocated version of some of the popular Silver Bullion Trusts, but rather than trading at a premium, the premium will price the issue ahead of purchase, affecting global price discovery, as previously mooted.

-
Read the rest of Ned’s report at TFMetalsReport.com. There also an podcast of Ned’s interview with Turd Ferguson on the same page. Listen to Andrew Maguire’s interview with Eric of KingWorldNews here.

-

Related Articles:

• Precious Metals Price Discovery about to Change

-