The Golden Truth: Shortage Of Gold Bars Develops In London

Thursday, January 16, 2014

Shortage Of Gold Bars Develops In London - Follow The Money

It appears as if that old adage that a rumor can't be confirmed as being true until its been officially denied several times applies to the London gold bar market, as it was reported last night by a London Metals Exchange reporter that premiums on "good delivery" bars are now above the spot price of gold, something which is rarely observed in London: Gold Bar Shortage In London

Asian and Middle Eastern Central Banks and investors are hoarding an enormous amount of the 400 ounce LBMA "good delivery" bars that make London the largest physical gold trading market in the world. As the price of gold was aggressively manipulated lower by the Federal Reserve and its agent bullion banks since mid-2011, eastern hemisphere sovereign, Central Bank and investment buying - especially the Chinese - intensified.

With negative "gold forward" rates having been negative for a predominant part of the last half of 2013, I was wondering when a shortage of London bars would be reported. A negative "gold forward" rate means that the entity (bullion bank) who is borrowing or leasing the bars today in order to deliver them into buyers will pay more today for the ability to take delivery of bars now than it would cost to buy them for delivery in the London "forward" market - i.e. anywhere from a month to a year from now.

A rare premium for deliverable bars means a shortage of bars for immediate delivery - directly to buyers not using an intermediary like a bullion bank - has developed (as opposed to the GOFO rate, which applies to the brokerage firm intermediaries making markets in bars and who lease gold needed for delivery from Central Banks to deliver into the buyers who are buying from them).

We know that gold being drained from Comex warehouses and the GLD Trust ETF is being used to make good on deliveries into Asia's voracious appetite for deliverable gold. Unless the Federal Reserve (Bank of England and ECB) can tap into new sources of above-ground gold stocks, we could well begin to see delivery defaults.

Over and above the reports of gold shortages from traders and market professionals, there have been other signs of a developing gold bar shortage for several months. Recall the stunt Goldman Sachs pulled about two months ago when it reported in the press that it had reached an agreement with Venezuela to lease Venezuela's physical gold - the gold Venezuela had repatriated in order to safekeep it under its own watch just two years ago. That news item dropped by Goldman turned out to false. Same for the report that Cyprus was going to sell its gold reserves to help pay for its bail-in. That report proved to be false as well.

I always believed that these reports reflected nothing more than desperation by the big bullion banks like Goldman and JP Morgan - as agents for Fed - to get their hands on gold that could be delivered to Asian buyers who demand delivery. Same for the fact it the U.S. refused to give Germany back its gold being held by the Fed as requested and instead agreed to a suspicious deal to ship back part of Germany's gold over seven years.

While I'm sure plenty of skeptics from Australia to New York to will issue well-crafted rebuttals to the view that there is now a shortage of physical gold in London and New York, the report last night that big buyers are paying a premium to get their hands on immediately on physical gold confirms the obvious. Money speaks a lot louder than words in the world of finance - follow the money...

6 comments:

AnonymousThursday, 16 January, 2014
Dave, Jesse say's 112 to 1 at the Comex.

http://jessescrossroadscafe.blogspot.com/2014/01/comex-warehouse-potential-claims-per.html
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AnonymousThursday, 16 January, 2014
Dave, Thank you bringing this our attention... it all makes sense to me. BTW, you may be interested to know that little ole' me, who you know as 1Kg Lunar Dragon (aka Jim H), has gotten himself into a bit of a row with a certain Australian blogger. I am referred to near the bottom of this piece ;
http://goldchat.blogspot.com/2014/01/how-to-know-when-there-is-real-physical.html

I would in particular like you to critique my reaction to one of the comments under the blog post referred to above... that being from a certain Kid Dynamite, who says;
"1) PROOF that there is no "shortage" of 400 oz bars: PHYS trading below NAV. Q.E.D."

My take just happens to be different (big surprise, right?) I am not sure why PHYS does trade at a negative NAV, but the degree of negativity is small (- 0.25%) and it is clear to me that once an entity paid all the necessary fees to Sprott for freeing up the bars, and the costs of bonded transport to get the bars out of Canada (remember, they are in Canada, outside the banking system... and in order to maintain LGD status, without being recast and re-assayed, they need to have a clear chain of custody thru bonded, system approved carriers like Brinks).. once you add up these fees you are well into the positive. All things considered.. the fact that many PHYS shares are in strong hands (like mine) and that if a large entity did go in and grab lots of bars, their anonymity would probably not be assured, I am not surprised that bars are not running out the door. It is interesting to note though that some small drawdowns have been made, even with the hurdles I mention. Does this all make sense to you Dave? Thanks, 1Kg

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AnonymousThursday, 16 January, 2014
From Australia? ;-)
PM miners seem to be recovering nicely.
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UnknownSaturday, 18 January, 2014
Dave -

thanks for the article over at Robert's site...
probable the most articulate, precise and easily understood article on how the MoneyChangers scam works i have read to date....much props
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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.