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This Is The Way I See It - Gold & Silver
By: Bill Murphy, Le Metropole Cafe, Inc., LemetropoleCafe.com
April 18 - Gold $400.20 - Silver $7.12
This Is The Way I See It
It is becoming clearer by the day that the gold rigging game is on its last legs. It is only a matter of time (say a few weeks or months) before the price of silver explodes first with gold following close behind.
What are the signs this is so? I offer the following:
*Silver's price action. After having been stuffed for years, silver soared from sub $5 prices to $8.46 before a “last gasp” cartel attack buried it last week. The result: a very normal correction. One needs only to review silver’s weekly chart to see how normal it has been thus far:
http://futures.tradingcharts.com/chart/SV/W
After a similar run, we have seen the same sort of technical correction in soybeans:
Soybean weekly
http://futures.tradingcharts.com/chart/SB/W
*The gold price action tells us much is changing fast – part of the "structural market change" notion MIDAS has brought to your attention the past couple of months. Since the beginning of this year, gold has briefly taken out $430 twice only to be thrust back by a desperate Gold Cartel. At the same time, it has successfully rebounded off of the $395 area three times to-date.
Gold weekly
http://futures.tradingcharts.com/chart/GD/W
*On this last dip, the Indian ex-duty premiums exploded above $10 on Thursday and Friday. This is WAY above average and extraordinarily bullish as it tells us demand for bullion in gold-devouring India has SOARED on the price dip below $400. Simply put, the greater the premiums the less local bullion dealers are able to satisfy local demand without going into a buying spree on the international market.
Meanwhile, we know the Saudis are also substantial buyers. Since the beginning of this year, demand in China has been picking up on a monthly basis since their gold market was opened up to their citizens for the first time in 40 years.
*The most vocal central banking advocate of selling central bank gold over the past couple of years has been Ernst Welteke. Supposedly, he has resigned over a flap about some hotel bill. I don’t buy it. In the articles covering this German scandal, there has been talk about gold sales being an issue between the bank and various political factions. However, is the real issue about selling gold, or how to declare to the German public their gold was leased out, and since they cannot get it back (without driving the gold price hundreds of dollars per ounce higher), they must find a graceful way of downsizing their official reserves? Something stinks here.
Why has no one referred to this blurb which surfaced only 3 months ago?
Jan. 17 (Bloomberg) -- The board of Germany's Bundesbank opposes a plan by its President Ernst Welteke to sell some of the central bank's gold reserves to fund research in Europe's largest economy, Der Spiegel said.
``Welteke won't get a majority for his proposal,'' the magazine cited an unidentified board member as saying. Only three of the board's eight members are in favor of the proposal, Spiegel said, citing the board member. –END-
This story bluntly reveals Welteke was in conflict with his board about what to do with Germany’s gold, or how to explain to other Germans what has happened.
This fits right into what GATA has been saying for years. Namely, the gold loans are FAR higher than acknowledged by the establishment and that Germany may have lent out half, or even all of its gold. For new Café members, or to refresh memories, please review this "Oldie-But-Goodie" excerpt from a brilliant James Turk piece written way back on April 23, 2001:
Behind Closed Doors
by James Turk
© by The Freemarket Gold & Money Report.
……..It’s an interesting proposition, and one that fits well with another newly discovered fact. Some very interesting sleuthing by Mike Bolser, who has been assisting Reg Howe in his lawsuit against the BIS, has revealed that the Treasury has made a small but very significant accounting change. Mike noticed that the Treasury Department has changed the designation of nearly 1700 tonnes of inventoried gold at the US Mint’s facility in West Point, New York (approximately 21% of the total US Gold Reserve) from "Gold Bullion Reserve" to "Custodial Gold".
The August 2000 Status Report on US Treasury Owned Gold stored at West Point has a designation of "Gold Bullion Reserve". See: http://207.87.26.43/gold/00-08.html. But the September 2000 and subsequent status reports inexplicably designate this same gold that is stored at the US Mint in West Point as "Custodial Gold". See: http://207.87.26.43/gold/00-09.html
This change was made without explanation, so rather than let the matter remain unexplained, Mike diligently contacted the Treasury asking what seemingly are two uncomplicated questions. Would the Treasury please explain why they made this change, and what does this change in designation mean with respect to the ownership status of the gold at West Point?
They are simple questions, but perhaps they touch too close to a nerve. Not surprisingly, the Treasury so far has not responded to Mike. I have some views on what Mike discovered, and why the Treasury is so quiet about it. I think this change in asset classification is related to the ESF gold swaps. Here’s my thinking.
The change Mike spotted possibly occurred as a result of accountants looking at the financial statements of the US Mint being prepared for its annual report ending fiscal year 2000. Note that the previous director of the Mint (Phillip Diehl) resigned in early 2000, so this was the first annual report signed by the new director (Jay Johnson). If there is one thing that government bureaucrats do well, they take great pains to call things by their right name. To do otherwise would put their job in jeopardy if something under their responsibility came under Congressional scrutiny, and it was subsequently determined that the name assigned to something was incorrect or misleading.
Therefore, this change in the descriptive label for nearly 1,700 tonnes of gold at West Point from "Gold Bullion Reserve" to "Custodial Gold" was purposeful. It happened for a reason. This conclusion is all the more plausible because the Treasury did not change the classification from "Gold Bullion Reserve" to "Custodial Gold" to describe the gold stored in Fort Knox or at the US Mint in Denver. Maybe new US Mint director Johnson saw something he didn't like. What could that have been?
I’ve already put one-and-one together to establish that the ESF has "gold swaps" with the Bundesbank. It therefore does not require much conjecture to add one supposition to the equation by concluding that the gold in West Point has been swapped with gold owned by the Bundesbank, thereby necessitating its reclassification from "Gold Bullion Reserve" to "Custodial Gold". Here’s what I think has happened.
The Treasury Department wanted to make gold available to some bullion banks. This statement is based on my basic premise that several of the big banks have gold books that are hopelessly imbalanced. By having borrowed short and loaned long, these banks have in their quest for profits imprudently fallen into the alluring but usually fatal banker’s deathtrap – a mismatched loan book. But what’s worse for these banks, it is even more difficult and treacherous to try extricating themselves from this particular deathtrap because they haven’t mismatched their loan book of dollars, which we all know can be created by the Federal Reserve ‘out of thin air’ if dollars are needed to bailout banks from a deathtrap predicament. Instead, these banks have mismatched their gold book. And no one – not even the Federal Reserve – can create gold out of thin air.
So given this reality about the nature of gold, the Treasury had to turn elsewhere to find the gold necessary (1) to keep these banks from defaulting on their bullion obligations arising from their mismatched gold books in an environment where metal had become increasingly difficult to come by and/or (2) to keep the gold price low so that the likelihood of default by the banks would be lessened, even though metal would remain tight because fabrication year after year was exceeding newly mined supply. Rather than accept the bitter pill that certain banks were about to default on their bullion obligations, the Treasury looked for alternatives and found one – they put their hand into the till, until recently known as the Gold Bullion Reserve at West Point. They swapped this gold with the Bundesbank. I’ll explain how they did it, but let’s first consider the practical aspects of this transaction.
In all likelihood, these particular bullion banks needed gold in Europe where their obligations were originally established. There is very little gold lending in New York. It is a practical problem to ship the gold out of West Point without raising the alarm of government auditors. It is costly too. Also, it is likely that some of the gold in West Point is coin-melt from the 1933 gold confiscation. Even if it could be smuggled out of the West Point vault into the market without raising suspicions, the alarm bells would go off at the refiner and soon thereafter in the market because everyone knows that only the US government has coin-melt bars. The appearance of coin-melt bars in the market would immediately raise suspicions that the US Gold Reserve was being dishoarded, an outcome that the Treasury would obviously take steps to avoid in concocting its scheme because the US Gold Reserve cannot be depleted without Congressional approval. Therefore, one is faced with the practical considerations of overcoming these hurdles, but the answer is relatively simple.
The Treasury has gold in West Point. The Bundesbank has gold in Europe. The Treasury cannot directly do a deal with the Bundesbank because unlike the ESF, the Treasury is subject to Congressional oversight. So instead the Secretary of the Treasury and the President decide to use the ESF to set up a swap line for gold with the Bundesbank.
-END-
The entire article may be found at:
http://www.lemetropolecafe.com…vID=1470&SearchParam=West Point
GATA’s James Turk wrote this three years ago and it fits in perfectly with the gold price action and all the commotion going on in Europe recently.
One of GATA’s main themes is half the central bank gold is gone, done away with in a surreptitious manner. Using three different methodologies, Frank Veneroso, James Turk and Reg Howe all came up with similar numbers. Last year, they felt the total of lent/swapped central bank gold was somewhere between 14,000 to 16,000 tonnes We are another year down the road. Since gold demand exceeds mine and scrap supply by 1500+ tonnes per year, and that supply/demand deficit is growing each month due to an ever-increasing investment demand around the world, 16,000 tonnes now becomes my more conservative number.
What this means is The Gold Cartel is hitting the wall. Certainly nowhere close to the remaining 15,000/16,000 tonnes of central bank gold, out of a supposed 32,000 tonnes, is going to leave their vaults. The bottom line is The Gold Cartel is running out of physical gold to continue their scam, which is why the gold price is starting to go into convulsions and preparing to follow the recent silver price spike.
It all fits. What comes next is Rothschild’s stunning decision to exit the gold business. The following was sent me today by Nick Nickolaas, whom I have high regard for. Note what Warren Pollack says about the Rothschild decision. It is well done. Of course, he doesn’t quite get there in that he leaves out the real reason Rothschild is most likely leaving the gold business:
Because the gold price-rigging scam is ending.
The lies the central bankers/bullion bankers have told the public about gold, much less the geopolitical ramifications in sub-Saharan Africa, are profound. Their ramifications will be staggering. Rothschild wants out before the proverbial "S" hits the fan.
From the Desk of Nick Nicolaas #25
April 18, 2004
Re: European Trip and Rothschild withdrawing from commodities trading including gold
Dear Friends:
I will be leaving in the next hour for Europe where I will be for the next month, however if you would like to reach me the easiest is via e-mail to nicolaas@attglobal.net
I will be following up with those individuals, banking and fund managers, who David Henstridge (President of Tumi Resources and Director of Tinka Resources) and I met during our February European Tour encompassing six cities.
However before I leave I decided to send you the Warren Pollock Newsletter below which I think is important for you to be aware of.
Regards,
Nick Nicolaas
nicolaas@attglobal.net
The Macroeconomic Newsletter
Warren Pollock
pollock.warren@verizon.net
Something Significant at Rothschild
In a surprise move today Rothschild announced that it is withdrawing from commodities trading including gold. The ramifications of this are totally unpredictable as we cannot look into Rothschild's objectives. However ,we should consider that the cover story Rothschild provided
Regarding profitability concerns are absurd. This move could mean the following; The political confidence of large wealth holders in the US fiduciary responsibility to global banking and governance through mutual interest may have been exhausted. Large money may be insisting that political change occur in the US. The gold leasing game for arbitrage profits has just ended. The leasing game can only safely occur when prices of gold remain predictable. Central banks would loan gold through Rothschild to bankers and brokers. Bankers and brokers would sell the gold and use the proceeds to gain easy profits between the current interest rates and the cost of the gold lease. Significant derivative problems could exist causing Rothschild to have exposures on lent gold that cannot be returned to central banks. Rothschild may be unwilling to lend gold. In banking terms this would reduce golds liquidity between banks and central banks. For individuals this would make gold more scarce. They may be unwilling to lend gold for a variety of reasons. Rothschild may be acting upon intelligence it has via its political contacts regarding pending geopolitical threats which could include a wider war in the Middle East or the further isolation of the US.
1. Rothschild may be consolidating and accumulating positions in gold in advance of a global financial collapse, or a US financial collapse.
2. A financial collapse could be induced or timed to meet political objectives. This would be the equivalent of financial terror attack.
N M Rothschild
N M Rothschild & Sons Limited, London announces that it is withdrawing from commodities trading, including gold.
This decision has been taken following a strategic review of the services offered by Rothschild and will result in the withdrawal from commodities sales and trading activities in London. As part of this decision, Rothschild will be withdrawing from the twice daily London Gold Fixing which it currently Chairs. Discussions are being held with other members of the Fixing to ensure an orderly handover of the Chairmanship. Rothschild will continue to provide advice, project finance, corporate banking and other services to its Natural Resources and Mining clients around the world. The London announcement has minimal impact on metals sales and trading services from Rothschild’s businesses in Australia and Singapore. Announcing the decision, David de Rothschild, Chairman of N M Rothschild & Sons Limited, said: "Our income from commodities trading in London, including gold, has fallen as a percentage of our total income in each of the past five years. Following a strategic review of our activities we have concluded that this is no longer a core area of activity and have, therefore, decided to withdraw from the market."
"The sustained growth of the Rothschild Group over the past decade has been a remarkable success story. We remain committed to growing further our activities in specialist commercial banking, private banking & trust services and objective relationship-based investment banking advice."
For further information: John Antcliffe Smithfield 020 7360 4900
-END-
Let us not forget that Rothschild’s abrupt decision follows another stunning/flip-flop decision by Barrick Gold late last fall to renounce hedging, and only one day after praising its virtues. It has been well documented how Barrick CEO Greg Wilkins "abruptly" exited a gold conference in London, at which he was scheduled to speak, to head off to New Orleans where Barrick is co-defending a gold price manipulation suit along with Gold Cartel honcho, JP Morgan Chase.
Taking it a step further, it wouldn’t surprise me the French are being leaned on by ECU colleagues regarding the looming gold problem to help out in some way. It also wouldn’t surprise me that bullion dealer apologists GFMS have been clued in as to what is coming and, therefore, actually put out a modestly bullish gold forecast of $450. They have been neutral to bearish the past three years.
There is no need to review all of what GATA has warned of over the years about what is to come as a result of the nauseating Gold Cartel price-rigging scheme. Most of you know what that is and many more will find out when the eventual gold scandal breaks.
The point of delving into all of this now is it is clear to me the arrogant Gold Cartel is on its last legs. As GATA’s Mike Bolser constantly reminds us, they are engineering a retreat. However, I believe their retreat is going to be stepped up in the weeks and months to come because they are HITTING THE WALL! They are running out of enough physical gold to do their dirty!
As I constantly remind those in the audience when I given presentations at various investment conferences, to know what GATA knows is the key to understanding the gold market – the KEY to knowing what is coming gold price-wise and why. The evidence is there, plain as day, for all to see.
The Gold Cartel is going to be blown out of the water in the near future. Once again the call to GATA’s stretcher-bearers to please stand by goes out, for when the price fixers are forced to run for the hills, the price of gold is going to go bonkers. Fortunes will be made by our camp!
Investing in gold, silver and the shares is truly THE historic investment opportunity of a lifetime, which is why it is so important to keep in mind:
GATA BE IN IT TO WIN IT!
MIDAS
BILL MURPHY
CHAIRMAN
GOLD ANTI-TRUST ACTION COMMITTEE
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-- Posted Monday, April 19 2004
