Sunday, March 18, 2012

Listen To What Central Banks Do, Not What They Say

A sharp fall in gold prices has triggered large purchases of bullion by central banks in recent weeks, according to several traders with knowledge of the transactions...“Central banks have definitely been looking at gold as an asset class much more closely ever since European central banks stopped selling,” a senior gold banker said. “There has been a huge interest.”

The quote is from the Financial Times: LINK

Hmmmm.  Recall, recently that Congressman Ron Paul asked Ben Bernanke - who was under oath and on camera - why Central Banks still hold any gold if it was irrelevant as a currency.  Bernanke's response was that he didn't know but maybe out of "tradition."  That answer shocked me because it was so absurdly mindless - I was wondering if Bernanke had a full frontal lobotomy.  Paul also asked Bernanke if he thought gold was "money" and Bernanke said "no."  Here's the clip and it's worth watching, as it's the first time I've seen Ron Paul really hold Bernanke's feet in the fire on any issue:  LINK

The scramble behind the scenes for taking delivery is going on and it's a real threat to the banking and political elitists.  It was easy for Hugo Chavez to repatriate Venezuela's 200 tonnes from NYC and London.  And don't lose sight of the fact that China takes delivery of all of the gold it buys into a shiny new warehouse depository in Hong Kong.  But it will be interesting to see what happens if Switzerland and/or Germany make a serious move to repatriate because then you're talking about thousands of tonnes that may have already been leased out and sitting in vaults in Hong Kong, India and other depositories not controlled by the Fed, Bank of England or the big bullion banks (JPM, HSBC, Scotia, Barclays, Deutsche Bank, UBS).  I wouldn't be surprised if there's a lot of lobbying going on behind the scenes to try and quash the incipient movements for this going on the German and Swiss legislatures because if either Germany or Switzerland wants its gold and can't get it, things could get really ugly.


  1. Well - how much metal are they talking about 4, 5 , 6 tons? What about Kingworldnews contrarian indicator - the London Trader - who said 40tons were taken when gold was first at 1680 recently. Firstly the last few times the london trader came out the metals promptly sold off after that. Secondly it seems the 40tons are immaterial.

    The coins shops are chock full of metal. this correction or down trend isn't like in 2008 which was fast and furious - like a v bottom - so metal could go into hiding a little. But this relentless down trend???

    It may be the retailers but also the big ones who would go into the miners perhaps and there is no one to fill the void.

    At these levels these metals are just too risky. With all this stuff going on and gold miners still can't get a move. According to Loiuse Yamada the XAU/gold ratio has been on a down trend since 1996.

    Now gold trades from headline to headline, from meeting to meeting, from Greek crisis to European crisis, from US Muni to Muni difficulties.

    Ontop this has solely been a precious metal slide. What happens when the main market takes a dip? Or there is a real crisis??

    1. You clearly haven't been doing this sector very long. The debasement of fiat paper currency continues unabated. As long as that is going on, and if it doesn't the global financial system collapses, gold and silver will continue to go up in value vs. all papers currencies.

      Second, this correction started from new highs for this bull market (2001) in April 2011. On average and in general, big corrections take 12-18 months to run their course and gold corrects anywhere from 20-30%. The end of March will be 12 months so we're well within the parameters of a run of the mill correction.

      Third, how often do you buy gold and silver in quantities from coin dealers? I agree seemingly the coin dealers have a lot of inventory. BUT, we put in a large order for silver eagles with Tulving in mid-January and it took over 3 weeks for them to ship it. That's never happened before. Usually they ship within 2-3 days. Locally the big coin shops are not busy but they're not as stocked as they have been over the past few years.

      The XAU is mostly hedged mining companies and poorly run companies. Anyone who invests seriously in this sector does not use the XAU as their valuation netric. In fact, it's not even worth using the HUI. The HUI is overweighted with poorly run companies like NEM and ABX and AU.

      Like any investment, and gold/silver are currencies not investments, you have to evaluate individual companies, not indices. GG, SLW, RGLD, among many many others, have had spectacular investment gains vs. ANY comparison benchmark.

      Finally, please try not to make your writing sound intellectual by using "firstly" and "secondly." It's poor writing style and it drives me nuts when guys like Ed Steer use it to try and make their writing have a more authoritatively intellectual "voice." It's as bad as using "irregardless" rather than properly using "regardless."

    2. lovely charts. absolutely no strength. it now has turned into selling the rallies. and no one wants to admit that these space isn't undervalued at all. and always towards the end of the day can you see the true colors.

      so now indexing is terrible and you got to pick the ones, like lottery numbers.

      this is a true breakdown in the face of "no" crisis. this is solely a 2008 all over again only in precious metal miners. It doesn't make sense to actually waste your effort with them. at such supposed valuations non are taking part in the big M&A everyone was pumping and never any buy backs, no big insider buys.

      if only 5% of the 5000 miners actually go anywhere then statistically it isn't worth the risk. the reward so far hasn't been there.

      it is one way and can you see how easy it is. even within the gold bug community they put the fear into owning the miners to heard everyone into physical. ie silverdoc report on miners in the US.

      lovely religiuos experience and all the analysts weren't out to lunch. when they downgraded they were just right. more correct than any of you others.

    3. I am a big follower of this blog but my motives and understandings are slightly different than many because of the work I do. I'm a geologist and I know how hard it is to find gold and silver let alone develop a deposit today. Gold and Silver are real money and, unlike fiat, Ben and his central bank cronies can't make more magically appear.
      Eventually this modern fiat experiment will fall flat on its face and those with physical will be a LOT more comfortable than those without.
      Justin from Canada

  2. The issue I really struggle with is the complete lack of strategic foresight by the Western PTB. What the hell are they doing? Selling off phyzz at huge discounts to the East...all in the name of a quick buck and a few more years in power, when in the end they will all be "up against the wall", as an old UK sitcom revolutionary used to say (Wolfie Smith ) We have, and continue to be, sold down the river, it is not the BOE that is buying after all. As you know London is verily the whore of Babylon.

    This is not just about destruction of fiat, but destruction of our whole way of life. Mind you after watching SGT & his "Madness of a Lost Society" mini-doc, one has to wonder if there is much left worth saving! We too have those kind of sheeple sales. I pay heed to the fact that quite a number of the pgms gurus live in the East. As a Brit I find that a move to Argentina with the Celente clan could be fraught with political difficulties, (Falklands) whereas Singapore seems to have much more friendly natives, even if we did abandon them to the Japanese in WW2..ahem.

    I do worry for the US:
    Trespass Bill
    Executive Order -- National Defense Resources Preparedness

    Not to mention the media blackout of Ron Paul and the blatant vote rigging that has been going on.

    So goes the land of the used to be free I guess.

    Mind you, not that we can rest on our laurels over here...after all we have the hated 2003 Extradition Treaty which means US authorities can extradite UK citizens without prima facie evidence. If my home is a castle, seems like I need a moat, and a Faraday cage at the very least. Our leaders kow-tow to the bankster elite and EUSSR, whilst yapping like a soppy little poople to our military masters in the Pentagon.

    Sorry Dave, rambling. Keep up the good work. It is appreciated by a wider audience than perhaps you know...but there's definitely an ill wind blowing...or is that a Stellar Wind?

    1. When they get to the wall, they will have the military destroy it.

  3. good cop/bad cop routine...

    Dallas Fed's Fisher Exhibits Peak Cognitive Dissonance And Self-Delusion

    For today's definitive example of peak cognitive dissonance and self-delusion among those who determine the monetary fate of the world no less, look no further than the Dallas Fed's Dick Fisher, who just said the following according to Reuters:

    No one presently believes that the Fed is going to proceed with QE3 - is that because it will be called THE NEW QE?

    Funny considering earlier, we got this from Goldman's Bill Dudley:

    No decision yet on QE3, New York Fed's Dudley says

    Finally, there is this pearl from Goldman's Jan Hatzius as reported here last week:

    Not easing might be equivalent to tightening

    And that is why central planning always fails. Because a room of these terminally confused people sits down and determines the fate of the world based on their naive academic interpretation of what they perceive is reality.

  4. I wouldn't be surprised if there's a lot of lobbying going on behind the scenes to try and quash the incipient movements for this going on the German and Swiss legislatures because if either Germany or Switzerland wants its gold and can't get it, things could get really ugly.


    I love it when you Talk Dirty Dave hehe

  5. Another Hidden Bailout: Helping Wall Street Collect Your Rent
    Here's yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue.

    This is from the WSJ this morning:

    Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae...

    While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs.

    In con artistry parlance, they call this the "reload." That's when you hit the same mark twice – typically with a second scam designed to "fix" the damage caused by the first scam. Someone robs your house, then comes by the next day and sells you a fancy alarm system, that's the reload.

    Read more:

    Bales Faced Losing Houses as He Fought 6,700 Miles Away

  6. I wonder if these guys are related to the goldman-jpmorgan clan?

    Italian police have arrested 16 judges in what they say is a big anti-mafia operation centred on Naples.
    Altogether about 60 people are being held on suspicion of money laundering and corruption.

    Buildings, cars and property worth 1bn euros (£829m; $1.3bn) were seized around Naples and in northern Italy.

    The names of the detained 16 judges have not been revealed.

  7. I'm in agreement with Dave on this and think anonymous doesn't understand gold and why it's rising against all fiat currencies. Also, I don't like mining stocks because these are paper investments, not real bullion.

    To all the folks out there who are bearish on gold, I mean real, physical gold bullion, I say "fine" and "you probably don't understand it".

    To understand gold and silver, one needs a solid knowledge of the history of money, merchant, commercial and finally central banking. A good primer is John Kenneth Galbraith's Money: Whence It Came, Where It Went.

    But few have undertaken this study, and therefore, few understand how gold and silver compare to all other investments and why it is superior to all other investments.

    But I like the fact that most are ignorant of gold and silver. Everyone gets that which their intelligence and foresight entitles them. If they don't understand it enough to invest their money in it, then they don't deserve to own it. To those folks I say enjoy your investments in paper money, in banks, stocks, bonds, futures and real estate.

    Thanks to Denver Dave for a great and informative site.

  8. well its fine you guys understand gold better and the rest are sheeple.

    guess what - the london trader was on kingworldnews again yesterday and he has become a contrarian indicator, and that was correct - metals going down.

    this correction feels very different and more like a popping of a bubble. major miners have definitely broken down and no word of m&a etc.

    and haven't you noticed how easy it is to get the gold majors to slide - no real fight at any level

  9. and you are noticing that precious metals are uncoupling....

    even from a weakening dollar index - how about that.

    so you understand gold so well...

    well after 1 trillion euros, boe at 325 billion and boj QE and greek cds triggers etc and many other things and they can't catch a bid.

    and James Turk and his comments were to soon once again. physical has stopped the shorts - blah

    1. Peanuts, popcorn...the show must go on...

      The US Government Is Where Everybody, Every Policy, Everything Is Now For Sale At the Right Price

      Working hard and being smart does not bother anyone. It is the lying, cheating, and stealing, that is most disturbing, especially when it involves corrupting the fundamental processes of the nation like the banking system and the money supply.

      And that, ladies and gentlemen, is what is commonly known as corporatism, à la mode Américaine.

      From what I can tell money corruption was taken from a long standing but largely personal, almost petty, retail political sideline into a well-organized, wholesale, industrial scale art form by the Clintons and, given the current climate of campaign funding wherein it has proved so successful at raising enormous funds, that it has become increasingly en vogue, if not de rigueur.

      In times of general corruption, when one is dancing they all must keep dancing, whether bankers or pols, until the music stops.

      so corrupted that they'll do distort markets???

  10. Me personally, I don't care about market manipulations, I don't care about US dollars, euros or the entire FX market. All of it is a sham. I don't care about the London Trader or if he was a fade is a fade or will be a fade - at some point in our lives, in all of our calls - all of us - we're going to be or have been or are today - all of those things.

    Again, I don't pay attention to the so-called gold majors since these are stocks, paper investments and even more easily manipulated than the actual gold and silver bullion in London, New York, Chicago and now Hong Kong.

    Smart investors will hold the bullion, keep as little cash in The System as possible and as Jesse Livermore used to say "sit tight and be right" and "the money is in the waiting" [not the trading].

  11. Threats? not so swift...

    Ellis Martin Report With Jim Sinclair and the Nuclear Economic Trigger

  12. interesting sentiment charts near bottom...

    Gold & Gold Stocks – An Update

  13. Bernanke says gold standard wouldn't solve problems

    Bernanke defended the need for a central bank.

    "The one thing people don't appreciate, I think, is that central banking is not a new development. It's been around for a very long time," he said, citing the creation of the Swedish central bank in the 17th century.

    Since entering office in 2006, Bernanke has taken several steps to make the central bank more transparent, including holding quarterly news conferences and publishing policymakers' own projections for the path of interest rates.

    Bernanke did not touch directly on the outlook for the economy or monetary policy in his remarks, but he struck a cautious note about a rush to unwind the Fed's aggressive easing.

    "You need to be attentive to where the economy is and not move too quickly to reverse the policies that are helping the recovery," he said.

  14. I super love the title. That makes real sense. It's how real business works.

    sell gold