The Golden Truth: Hugo Chavez Issues A Wake-Up Call To Paper Gold Shorts

Thursday, October 6, 2011

Hugo Chavez Issues A Wake-Up Call To Paper Gold Shorts

Venezuela will begin repatriating its gold reserves from Western nations by mid-November, the central bank head said on Wednesday...first boat laden with reserves would be back by mid-November. "It will be here as soon as possible, no later than in a month-and-a-half," he said...Venezuela's gold abroad is in England, Switzerland, the United States, Canada and France

Here's the reuters LINK

I've been wondering when we would next hear about this ever since Chavez first announced the move during the summer. Interestingly, the nations who hold VZ's gold are the very same nations who participate in active "fractional" bullion safekeeping storage operations. This means that there are many multiples of paper claims - futures, forwards and OTC derivatives - issued against the actual known - i.e. "officially reported" - physical inventories held by the bullion vault banks in these countries.

Anyone worried about counter-party default risk? Ask Madoff investors and AIG counter-party banks (Goldman, JP Morgan, et al) how they feel about counter-party default risk...know where your gold is?

10 comments:

AnonymousThursday, 06 October, 2011
know where your gold is?
Yep.
ReplyDelete
Replies
JDThursday, 06 October, 2011
Finally got my package in the mail today. It was like Christmas at my house today. I took advantage of the correction and ordered 3 1oz gold Canadian maple leafs 99999 edition (boy are they stunning in person) and 1 monster box of 2011 american silver eagles (San Fran Mint). All of it is going straight into my safe after I am done fondling and appreciating the beauty of them. I bought the dip and if Blythe & co. have another smackdown I am prepared to buy more. I know where my gold & silver is.....do you?

JD
ReplyDelete
Replies
SatyaPranavaThursday, 06 October, 2011
i'm worried that chavez might meet a gaddafi type moment sometime after repatriation. let's see what type of justification we can use to invade venezuela.
ReplyDelete
Replies
European AmericanThursday, 06 October, 2011
Dear Doctor Dave,
At this late stage of the game would it be correct to assume anyone who owns physical gold and doesn't have it in their possession, i.e. on their premises, has been infected with the highly contagious dis-ease, running rampant as it spreads across the financial globe, called DENIAL?
ReplyDelete
Replies
AnonymousThursday, 06 October, 2011
(Dave)

LOL DENIAL ain't a river in Egypt, is it?
ReplyDelete
Replies
AnonymousFriday, 07 October, 2011
Michael Lewis: The United States is Now a Third-World Nation

Michael Lewis, author of the new book “Boomerang,” says the United States and many European nations suffered a moral failure which lead to economic collapse. Lewis insists that the U.S. economic situation will get much worse before it gets better.

http://www.ritholtz.com/blog/2011/10/michael-lewis-the-united-states-is-now-a-third-world-nation/?
ReplyDelete
Replies
AnonymousFriday, 07 October, 2011
(Dave)

Funny, I wonder why Ritholz never published my view when I wrote him 5 years ago and told him this country was a Banana Republic.

Thanks for the link. I feel like telling Lewis he's a several years late with that call: "Hey Michael, how about game of liar's poker? By the way, were aware that Larry Bird is retired?"

LOL
ReplyDelete
Replies
AnonymousSaturday, 08 October, 2011
Hopefully start of a trend...

Miner Gets Physical With Payout

SYDNEY—Some banks are accepting gold as collateral for loans, and developer Donald Trump will take it as a security deposit in his new skyscraper in Manhattan. Now, a Colorado gold mining company has another idea: make dividend payments in bullion instead of cash.

Jason Reid, president of Gold Resource Corp., whose Colorado Springs, Colo., company is developing projects in southern Mexico, said Gold Resource plans to make the first dividend payments within months.

To prepare for the novel payout, the company in August began exchanging $1 million of its cash into metal with the idea of minting one troy ounce gold and silver coins to be distributed monthly.

"Many investors would rather hold physical gold or silver rather than fiat currencies that will continue to be debased," said Mr. Reid.

Some think the idea of paying bullion instead of cash just might catch on. Ian Lawrence, managing director of in Cobar Consolidated Resources Ltd. in Melbourne, said he has had discussions with several investors about getting dividends in physical metal and personally thinks it is a "great idea."

"There's been a lot of interest from shareholders," he said.

Dividends in gold are another example of the metal's new allure as an alternative currency. Hedge funds have allowed investors to denominate holdings in gold, and exchange-traded funds backed by physical gold have become some of the most popular investment vehicles.

http://online.wsj.com/article/SB10001424052970204294504576616853174753570.html
ReplyDelete
Replies
BrianSaturday, 08 October, 2011
I really enjoy this site and since my kid brother is the best skier in all of Colorado...soul skier.com...I like it even more.

Right after Chavez's announcement if you'll remember... was when gold went parabolic. I expected short covering then. I fig'd the bullion banks would have to unwind at least 10x the positions as the underlying commodity dried up. That is a huge amount. I believe and still do, that bullion banks simply leased new gold deposits to make up for the shortfall or simply upped the fractional margins. Now if three or four countries did what Chavez did...all at once...well now wouldn't that be fun?
ReplyDelete
Replies
AnonymousSaturday, 08 October, 2011
(Dave)

Thanks for the feedback Brian. Appreciate it. I like to think I'm the best 49 yr. old skier in Colorado but I'm probably not - maybe in the bumps...

I see you live in the heart of silver country. Silver is going to outperform gold over time!
ReplyDelete
Replies

Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.