How Much More Gold Can They Drain From GLD Before It Loses All Credibility?

                                                    

And thus I clothe my naked villainy
With odd old ends stol'n out of holy writ;
And seem a saint, when most I play the devil

           - Shakespeare, "Richard III"

We have witnessed a stunning drain of gold from the GLD ETF trust.  Through last Friday, an incredible 479 tonnes - more than 35% - of GLD's gold has been removed and has disappeared, most likely to Asia - in the space of about 10 months.  The biggest chunk of that 479 tonnes was removed shortly after Germany's Bundesbank issued it's feeble and hopeless request to the U.S. that the Federal Reserve start shipping back some portion of the 1500 tonnes of gold that is supposedly being "safe-kept" on behalf of Germany by the Fed in its vault in New York City.   Gold luck, Angela...

I have looked at GLD suspiciously ever since James Turk issued the first analysis of GLD's prospectus back in 2004.  Those of us who are familiar with securities laws and investor "safe guards" supposedly enforced by the SEC were absolutely shocked that the SEC approved the GLD prospectus as it was filed because of the egregious lack of GLD sponsor and custodian legal accountability standards typically required by the SEC for publicly traded securities.

Given this fact, I believed at the time that GLD was a scheme devised to suck  in retail and institutional cash that might otherwise flow in massive quantities into actual physical gold that would be safe-kept in private vaults in this country.  Although GLD has a mechanism to enable investors with a minimum of 100,000 shares to convert those shares into gold that would be delivered to the investor, the procedure is exceedingly cumbersome and expensive and there's a mechanism embedded in the language of the prospectus that enables the trustee of GLD to deny such requests.

But I also knew - through GATA's invaluable research - that there would eventually be a shortage of physical gold that would be available to allow the western Central Banks and bullion banks to maintain their oppressive and incessant manipulation of the paper gold market for the purposes of maintaining a cap on the price of gold, for the purposes of defending the credibility of the U.S. dollar.  I figured that at some point the gold in GLD would used for this purpose once the Central Bank stocks of gold were largely if not fully depleted.  In this context, please recall that about three years, the ECB system, which had been selling 400 tonnes per year on average, pretty much stopped selling any gold.  That's sign-post #1 that I was right.

Then along comes the Bundesbank in early 2013, with a request that the Fed start shipping Germany's gold held in in New York back to Germany.  That's when all hell broke loose:

(Please note:  the original graph is from the TF Metals Report. I sourced it from my esteemed colleague, "Jesse," of Jesse's Cafe Americain.  Solid circle edits are mine to enhance visual readability of the chart.  Jesse's original post can be read here: Collapse in GLD gold holdings).

There's something really wrong with that picture because the intuitive response from the market by Germany's request of the Fed should have been a quickly rising price of gold.  But as you we all know, the Fed defaulted on the request - for all intents and purposes - and that's when the massive drain of gold from GLD commenced. 

The truth is that my original hunch was correct.  100% correct.  The gold in the GLD trust is being used to satisfy the enormous physical delivery demands from China and the other big gold buying countries because the western Central Banks have run out of gold to deliver.  That is an unmistakable fact. Reports and data ad nauseum have been published in the last six months describing and verifying the voluminous, unprecedented amount of gold bars that have been moved - literally physical transferred - from the Comex in NY and  the LBMA and Bank of England vaults in London to Switzerland and then on to Hong Kong, where it flows to its ultimate destinations in China.  Anyone who would deny that this is the case has a blatant and catastrophic disregard for the truth as supported by provable facts.

So the question is, how much longer can the depletion of gold from GLD continue before this scheme falls apart?  Let me first say that it is likely that the U.S Government's "Waterloo" in this situation will be the gross miscalculation - when GLD was originally devised - of the growth and size of China's appetite for physical gold for which actual physical delivery is demanded.

With that in mind, my best guess is that if the gold in GLD were to be depleted by another 35% from here, the largest remaining shareholders of GLD would likely start exercising their legally ambiguous "right" to convert their shares into physical gold and have that gold delivered out of JPM's custodial vault and into their possession.

Think about the Hobson's Choice faced by the sponsor, trustee and custodian of GLD:  if they don't honor shareholder conversion requests to convert and deliver gold, it will send the "default" signal to the world that indeed GLD is a fraud, that GATA has been right along.  The price of gold will literally go straight up, "bid without"  - meaning huge bids will appear at much higher levels and there won't be any offers.  The other side of this "choice" is that it is likely that the physical gold - at that point in time - to honor such requests is actually not available in HSBC's vault to be delivered and the trustee will attempt to settle in cash.  Gold goes bid without.

At this point there's really no telling just how much longer GLD can be drained of gold before the western Central Bank/BIS fiat paper gold system inevitably collapses, but with each passing day of increasing awareness and understanding of what is happening with the world's physical gold vs.the derivative paper claims on that gold, and with each additional day the LMBA GOFO rate is negative, the time to collapse is quickly shrinking.  I do believe that, in what ironically was devised as a "fool-proof" tool manufactured to allow the west to "manage" the physical gold vs. paper problem for a long time, will likely be the Icarus wings of the U.S. Government's fiat money scheme.

Note:  I am in the processing of revising and updating my original analysis of the GLD trust and why the shares in ETF are fraudulent - stay tuned...

Senator Diane Feinstein Wants To Make NSA Spying On YOU A Law

As an update to my saga challenging Pulte Home executive, Jim Zeumer, to having himself and his management taking their own after-tax money in the bank and buying shares of PHM, so far there's been no response.  He was quick to jump all over me with his disagreement of my analysis of PHM's use of GAAP accounting to exaggerate the company's earnings.  But when I asked him how come he's happy to use $83 million of shareholder money to buy back stock while insiders dump their shares, I get no response.  Nothing.  Crickets.  Still waiting, Jim...

I think next to Harry Reid, Diane Feinstein has to be one of the most vile, hypocritical and power-mongering politicians not named Barack Obama.  I hate to say it, but for as much as I despised Bush and his gang of Republican criminals, the Democrats in power make the previous regime look like choir boys.

I vividly remember in the early 1990's being forced to contribute to Feinstein's Congressional campaign by the guy who ran leveraged finance at Bankers Trust because Ron Burkle (who made a fortune doing grocery store leveraged buyouts) was one of BT's biggest fee-paying clients and Burkle was in the process of buying out Feinstein.  I'm still bitter about that to this day.

Feinstein is leading an effort in the Senate to make it a law of the land for the NSA to listen in to every single phone call - landline or cell - that is made in this country.  In her words, " People believe it's surveillance, but it's not."   Then what is it, Diane?  George Orwell Was Right

I shudder to think that this might actually pass both houses of congress because Obama will gleefully sign the bill.  Does everyone remember that Obama, as one of the planks in his campaign platform, promised to make an effort to repeal the Executive Orders signed by Bush which enabled comprehensive cell phone surveillance of every American?

I'll bet that nearly everyone who voted for Obama does not remember.  Like blind sheep following the  guileful Shepherd to the slaughterhouse, Obama supporters seem to have selective memory of Obama's promises.  I vividly remember because I was at one of his rallies in Denver in October 2008 and I can recall all the promises he made, none of which he has followed through on.

Although I don't think anyone really believes Obama when he expresses denial of knowing the extent of the NSA's spying on the whole world - it's truly amazing how closely the unfolding events of today reflect the vision of George Orwell's "1984," which was published back in 1949:

Just When You Think It Can't Get Any More Absurd Out There...

       
We have a President who lies through his teeth straight into the camera - with a smile - about his knowledge of NSA spying, Obamacare and, really, just about everything else going on, and yet his approval rating - although it has hit a new record low - is still at 42%.  "Disapproval" is 51%, which means a majority of the country disapproves of the job he's doing.  As for the 42%, the only possible reason I can see his rating still being that high is that he gets unconditional support from his African American support base and from a high percentage of faux-liberals who believe that if they oppose Obama they will be branded a racist.  

And how about the fact that NSA chief Keith Alexander is telling anyone within ear-shot that the NSA is doing what it is doing in order protect our freedom and civil rights.  I'm not quite sure how the NSA accomplishes either by knowing about everytime I log onto to my email account and by tracking my daily trips to the grocery store with the Google and Apple GPS app loaded into my smart-phone.  I'd like to hear him explain that one and answer about 100 questions I have that Congress is getting paid well by SuperPacs to not ask.

I guess all you can do is laugh about what's going on.  I will say that I'm already fatigued from seeing "Duck Dynasty" Halloween costumes and it's not even noon in Denver.  If anything speaks to the inability of most people to think outside-the-box, it is the preponderance of people running around looking like a ZZ-Top band member in camo today.

I know a few other commentators are now remarking how ridiculous it is that Wall Street, the financial media and the entire investment community spend most of their time now analyzing every last sub-atomic particle that is part of every last punctuation mark of the FOMC statement to try and figure if and when the Fed will taper.  Probably the most patently absurd comic book portrayal of this is the bald Steve Liesman pouring over his copy with sweat beading up on his bare forehead as he strains and grunts to figure out exactly what changed from the previous FOMC statement.  It just can't get any more pathetic than that.

The fact of the matter - and I made this same statement shortly after Bernanke first uttered the word "taper" - is that the Fed unequivocally can not taper.  Well, it can start to reduce its Treasury and mortgage bond purchases but the entire financial and political system would collapse in short order.

Not only can the Fed NOT taper but it will actually end up having to INCREASE its money printing and bond buying.  Why?  Because despite the accounting games being used to hide the truth, big banks are choking on massive derivative bets and many other bad investments - like foreclosed home inventory and risky loans that are not paying interest.  This huge pile of assets has rendered the Too Big To Fail So We Must Bail banks increasingly insolvent.  This is a fact that can be seen by anyone who really knows how to sift through financial statements.

Secondarily, the Government will be issuing a lot more debt this year.  If you don't think that's the case then why did Harry Reid and his Republican sidekick Lisa Murkowski slip a provision that removes the debt ceiling limit for now into the agreement that ended the Government shutdown?  The United States in total - both the Government and the private sector - is taking on total systemic debt right now at a rate that is significantly faster than the ability of our economic system to generate the growth and cash flow needed to service that debt.

I don't know how much longer it will take before the Government is soon issuing debt just to make interest payments, but I would bet my life - and I'm serious about that - that it will happen far sooner than anyone - I mean anyone - out there is now forecasting.  If the Fed were to slow down its purchasing and monetization of Treasury debt, interest rates would shoot catastrophically straight up instantaneously.  We saw a preview of that in May.

At any rate, my recent article on Seeking Alpha which was highly critical of Pulte Homes use of accounting management techniques drew a very strong protest from Jim Zeumer, the investor relations nerd there.  So in the spirit of Shakespeare's, "the lady doth protest too much methinks," I asked him:  "We know that your management has been very good at selling a lot of stock lately.  If you are confident in your math and your company's decision-making with regard to its application of accounting standards, then why don't you and all the other upper level executives take money out of your bank account - as in cash already earned and taxed - and buy a real amount of stock?"  I might add that the Company spent $83 million in shareholder cash to buy back shares while the insiders were selling in copious amounts.

So far only crickets in my in-box.

The Wall Street Journal Published Blatant Lies About The Gold Market

If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.  - Joseph Goebbels, Hitler's Minister of Propaganda

Over the past year or so there has been a very aggressive attempt by Wall Street and the financial media to discredit gold as both an investment and a store of value against the intentional devaluation of the U.S. dollar by the Federal Reserve and the Government.

As a perfect example of this, the Wall Street Journal published an article yesterday titled, "Gold Fades From Investment Picture."  You can read the article here, which I've reproduced except for one irrelevant picture of gold bars (you can download this document by clicking on the "Download" button on the top right) :

 
WSJ_Gold -

Notwithstanding the absurdity of the opening sentence, the next sentence makes the statement that Russia's Central Bank has accounted for 30% of all gold reported to the IMF  since the start of 2010 and that Russia sold gold in September.  First, note that the statement is qualified by making sure that they cite all gold purchases reported to the IMF.  The truth is that the IMF is emphatically not the official Central Bank scoreboard for Central Bank gold purchases.  There is no such thing.  Theoretically it would be the the BIS (Bank for International Settlements) but tell that to China, which hasn't issued an "official" Central Bank gold report since April 2009.

But let's put the WSJ's assertion into the context of the Russian Central Bank's gold activities since 1994:

As you can see, since 2007 Russia has nearly tripled its gold reserves and has been steadily accumulating nearly every month since then.  You can also see that there were two other months, both in 2012, when Russia sold a small amount of gold.  To make the assertion that a relatively small gold sale by the Russian in Central Bank indicates that Russia's appetite for gold is waning is outright incompetent reporting.  It's a borderline fraudulent statement.  In fact, one Russian Government official recently had this to say:  "The more gold a country has, the more sovereignty it will have if there's a cataclysm with the dollar, the euro, the pound or any other reserve currency"  LINK.

For the sake of brevity, I'll skip over the ridiculous comments that are in the article that were made by moronic Wall Street analysts and get to the part in which the article asserts that Central Banks are on track to cut their buying by 34% in 2013.  The truth is that we really don't know exactly how much gold any of the Central Banks are buying other than that nearly all of the Central Bank gold buying is coming from eastern hemisphere Central Banks + several South American CBs.

What we do know is that based on the amount of gold flowing into China through official sources in Honk Kong plus physical gold deliveries reported by the Shanghai Gold Exchange, China alone is on track to import close to entire annual amount of gold that will produced in 2013 by all gold mines.  Here's the net import (imports less re-exports back to Hong Kong) for China through August this year:

I don't know about you but this chart doesn't look to me like the world's largest importer of gold is slowing down its purchases.  Please note that this chart does not include gold that has been delivered year-to-date on the Shanghai Gold Exchange.  When you add those numbers in, China has imported well over 1,000 tonnes of gold so far this year.  In fact, let's take a look at that:

Please note that this total 1,750 tonne number would include gold imported through Hong Kong.  Also note that it is anticipated that estimates for the total amount of gold mined in 2013 are between 2200 and 2230 tonnes.  So you can see that China is sucking down nearly all of the world's gold production on its own.

One more very important point to emphasize.  The gold that may or may not be imported into China that is purchased for the Peoples Bank of China (Central Bank) does not get reported officially.  We have no idea how much gold is being accumulated on an annual basis by the PBC.  We do know that China produces about 400 tonnes of gold per year from its mines and the gold it produces internally is not exported.  But if you net out the gold produced by China from the global total produced, you can see that ex-China the world is going to produce about 1800-1900 tonnes of gold.

There are several other problematic aspects to the Wall Street Journal's article, but they all center around the fact that "sources" cited by the authors of the article are, at best questionable.  I will go out on a limb and state for the record that the article is intentionally or unintentionally fraudulent.

One more aspect to all of this to note.  You might be asking yourself, if China is taking down most if not all of the gold that will produced by mines this year, where is India, Turkey, Russia, Viet Nam, the Middle East and the other gold-buying Central Banks getting their gold and how come the price of gold isn't going higher?

First, the GLD gold trust has had over 500 tonnes removed from it since mid-December 2012.  Accounting for the gold that has been removed from all of the physical gold ETFs plus the Comex in New York, roughly 700 tonnes of gold being stored by various institutional custodians has literally disappeared from sight.  We have no idea where this gold has ended up, but it's safe to say that most, if not all, of it has ended up in private vaults of Central Banks and investors in all of the gold major gold importing countries.

One more point about that.  The LBMA (London Bullion Market Association) does not report the amount of gold held by the Association so we have no idea how much gold has been drained from it.  We do know that the Bank of England released 1300 tonnes of gold from its vault sometime this past summer.  We also know that gold swap rates on the LBMA were negative for a significant amount of time this summer and have been over the past several days.  This is indicative of a very tight supply vs. demand for physical market in London.

So there you have the facts about global demand and supply.  The truth is that China, and other countries, are buying gold hand-over-fist and there's not really much that western Governments can do to stop it.  The price of gold has been contained by the U.S. Fed, the Bank of England and ECB through the use of paper derivative gold contracts - futures and forwards.  It is also highly suspected that the Bank of England released 1300 tonnes of physical gold from its vaults as described above to help keep a lid on the price of gold.

I think it's now becoming somewhat generally accepted that western banks and Central Banks are actively manipulating the price of gold and silver via the paper derivatives markets.  At some point, and I have no idea when but I suspect the time is not far off, these entities are going to lose control of their ability to keep the price of down.  Although this will be a huge gain for those of us who are positioned to take advantage of what we see coming, I truly fear the ramifications of this event for the U.S. dollar and U.S. economic/political system.

Be Careful With That Sushi You Are About To Eat...

Which is worse?  A rogue NSA or a President who gives his approval and then lies about it?  - Washington's Blog

The secret of freedom lies in educating people, whereas the secret of tyranny is in keeping them ignorant.   - Robespierre, one of the leaders of the French Revolution

Ever wonder why you are not reading news about the Fukushima nuclear reactor disaster?  Do you even realize what a catastrophe it is - and will be for the west coast of the United States?  How about because of the fact that General Electric built all six reactors for plant and was integral in the construction of it.  It just so happens that GE used to own NBC, CNBC and MSNBC as well.  Rest assured that GE has made sure that Comcast, NBC's new owner, has placed  a media blackout on Fukushima at those news outlets.   But it also happens that GE's CEO, Jeff Immelt, has been tapped to be one of Obama's "special" outside advisers.  You can bet that Immelt made sure a general squelching of any news related to Fukushima was ordered by Obama.  Why?  Let's find out.

I was not paying attention to this issue either until a friend of mine who is an energy trader brought it to my attention.  He has made it an avocation of his to dig up as much news as he can from alternative sources in order to stay informed.  Some of the reports he has mentioned to me would make the hair on the back of your neck stand up.  For instance, did you know that herring fish with blood coming out of their eye sockets are being caught off the coast of British Columbia, Canada?  I bet your local newspaper didn't catch that story...

I also heard a news report about tuna fish being caught off the coast of California that were found to have high levels of radiation.  In addition, apparently there are massive pools of cesium-137 - i.e. radiation-laced sea water - headed for the coastline of California (the Kuroshio Current).  This is another reason why the U.S. has put an informal media blackout on Fukushima-related news.  Imagine the devastation to California real estate bubble values if people were truly informed.

The author of Washington's Blog has posted a very informative, truth-seeking article about just how deadly the Fukushima nuclear disaster is becoming and I highly recommend spending time reading it - it might just add another dimension to your understanding of just how severe the problems are in this country:  Fukushima Is Here

There are technical details about what's happening there that are even worse than that blog report but I'll spare you the details.  But did you notice that there was tsunami warning after an earthquake in the Fukushima area this past weekend that seemed to completely disappear from the news?  I guess we can just call that the case of the disappearing weather disaster.  But even if a big wave of water doesn't crash down on Fukushima, based on what my friend has told me the earthquake alone has likely caused the release of even more deadly radiation into the ocean and into the current that takes seawater from Japan's coast to the north coast of California...

We Better Rename The White House Or This Is A Racist Country

I find it very hard to believe that Obama had no idea that the NSA was tapping Angela Merkel's cell phone.  Either he's lying or he's asleep at the switch and should be evaluated to determine if he's fit to be President.  The denials and lies have to stop.  Time for Obama to stand up and take responsibilty like a man.  In fact, for starters I'd love to see the short list of just exactly on whom the U.S. Government/Obama Regime isn't spying.

I have to say, this idea of "political/social correctness" has become utterly absurd.  It first peaked my interest a few years ago when a friend of mine, who's son goes to Cherry Creek High School - a public bastion of white, upper middle class privilege in Denver - told me that his son, who has liberal views, happened to be in a discussion with some peers in which he disagreed with some of Obama's policies.  From that point on he was told that he was a racist because he disagreed with Obama.  Hmmm....

Ed Asner said it publicly first when he was asked why the ultra-liberal, anti-war Hollywood celebrity crowd was not coming out at all in opposition to the Obama Government's attempt to militarily - unprovoked I might add - flatten Syria and put in a puppet, to which he responded that if you oppose anything that Obama does or stands for in Hollywood you are labelled "anti-black."  His words, not mine and I'll note that he stated that he voted for Obama.

So now, and this is what provoked me to write this rant, I saw over the weekend that some actress, Julianne Hough, was heartily slammed for her Halloween costume which portrayed an African American character in the TV series "Orange Is The New Black."  You can see her costumer here:  Racist costume?  I can't even express how absurd this situation is.  I'll let the readers decide for themselves, but what it tells me is that if I were to dress up as my favorite African American NFL football player for Halloween this year, I would be branded as a racist.

What's even more pathetic is that Obama has been actively campaigning to coerce the the owner of the Washington Redskins to change the nickname of the team.  The Redskins originated in 1932 as the Boston Braves.  They changed it to Redskins in 1933 and moved to DC in 1937.  I have been avidly following football since the late 1960's.   I have never in over 44 years have ever heard any overt criticism of the use of "Redskins" as a nickname.  Yes, I do remember there was a brief period several years ago when Indian-derived team nicknames were attacked and there was a movement to get the Atlanta Braves to change their nickname and stop using the "tomahawk chop" to cheer their team.  And there was a movement to try and force the Florida State Seminoles to change their nickname.  I also recall that the Chief of the Seminole Tribe came out and strongly supported the use of the nickname.

Quite frankly, I have to believe that given all the scandals and poor political decisions - and the fact that Barack is riding the economy into a serious depression -  plaguing Obama and his incompetent administration, that Barack has much better things to take care of than wasting his time lobbying his dwindling support base for a name-change to Washington DC's dynastic NFL football franchise.  Kudos to Reskin's owner Daniel Snyder for, up to this point, ignoring the ridiculous request from Obama.

But this does bring me to my modest little proposal - with apologies to Jonathan Swift.  We have called the building in which the President resides while he is in office "The White House" since 1811, long before Obama's ancestors ever stepped foot in this country.  However, I find myself feeling like a racist every time I reference that building as "The White House."  I therefore am asking everyone to write their Congressman and to send to letters to that place where Obama lives requesting that we rename that building as something that is not racist and might be offending certain demographics.

Kerry Lutz Of The Financial Survival Network Interviews Me About Treasury Debt, Gold And The Housing Market

I did an interview with Kerry Lutz and his Financial Survival Network's radio show last week.  Kerry's mission is to educate his audience on the truth behind the hype and to understand what's really occurring in our system with the end goal of helping people financially survive what's coming.

The show lasts about 20 minutes and I review the circumstances behind that massive spike in Treasury debt outstanding, the latest developments in the physical gold and silver market and the resumption of the bear market in the housing market.

You can hear the interview here:  Is The Housing Boomlet Over?

Just like many articles, including some Wall Street firms, are now publishing hard data which shows that the stock market - by several metrics - is the most overvalued it's ever been in history - the housing market is currently significantly overvalued, with prices bid up by one-time factors that are disappearing.  It's going to get very ugly out there over the next 12 months.