I finally found some time to look at GLD and SLV exchange traded plans (ETP) inventory and price history. Gold inventory at GLD fell to just below 800 tonnes in the last days of December 2013. The last time GLD has 800 or fewer tonnes of gold was in December 2008 when the price of gold was $780 per ounce. In 2008, the gold bull market was strengthening which eventually pushed prices over $1,800. 2013 is the reverse. Gold buyers are so bearish that they wish to own only 800 tonnes even with the price at $1,200. Remember only Authorized Participants (AP) in GLD, such as HSBC, Goldman, JP Morgan, Scotia, Deutsche, Citi, and UBS are allowed to create or redeem baskets of 100,000 GLD shares in exchange for bullion. The Trust is responsible to manage inventory so that the price of GLD shares tracks that of gold.
Interestingly, silver inventory at the SLV Trust has remained flat while price dropped during the last year. It seems that silver bears are not as pessimistics as gold bears. There are many other possible causes of the disparate behavior of GLD and SLV inventory. What's your theory?
Mine workers in South Africa are striking which will reduce supply and increase cost of gold. http://beforeitsnews.com/financial-markets/2013/08/all-eyes-on-south-africa-2595944.html Gold jewelry demand in Indonesia is set to hit 40 metric tons this year a 30% increase from 2012. http://www.bloomberg.com/news/2013-08-22/gold-s-rout-spurs-surge-in-indonesian-demand-southeast-asia.html The Shanghai Gold exchange continues to trade a tremendous amount of gold bullion. Lately, weekly trading volumes have been almost as much as annual global gold production. Also note that price premiums, the difference between prices paid on the Shanghai exchange and international gold prices are about 1.5%. http://koosjansen.blogspot.nl/2013/08/week-32-sge-chart.html A good review of recent restrictions on gold imports to India, as well as some history and speculation on what is to come. http://www.kitco.com/ind/AuthenticMoney/2013-08-21-Is-India-Preparing-To-Confiscate-Its-Citizens-Gold.html US Mint sales of gold and silver eagles has fallen dramatically in August after a torid pace through July http://www.maxkeiser.com/2013/08/u-s-mint-american-eagles-sales-fall-in-august-but-robust-for-2013/ My attention has been increasing focused on news about physical gold and silver because manipulation of the precious metals markets will be short term as long as demand for physical is strong. Understanding the bullion funds GLD and SLV is central to understanding the market. Many pundits proclaimed that when prices were falling in April and May the funds were forced to sell bullion which perpetuated the price decline. In reality, the GLD and SLV funds do not work that way. Bullion may only be sold through Authorized Participants (AP) in the fund in baskets of 100,000 shares. The APs are the bullion banks, including Goldman Sachs, HSBC, and JP Morgan. These are two excellent articles about the GLD and SLV funds. I wish I had discovered them sooner. http://victorthecleaner.wordpress.com/2012/06/01/gld-the-central-bank-of-the-bullion-banks/ http://fofoa.blogspot.com/2011/01/who-is-draining-gld.html The authors show graphs of inventory levels and share prices at GLD. Inventory and price are correlated, but not perfectly which proves to me that share demand does not directly translate to sales or purchases of physical. The authors conclude that the bullion banks move gold in and out of GLD with share redemptions as they need the physical. Thus declining inventory at GLD implies that the bullion banks need physical and is bullish for gold.
Senator Warren summarizes HSBC's money laundering and 'to big to jail'. At the end of 2012, HSBC was fined over $1.9B for laundering money for drug cartels and other criminals. http://online.wsj.com/article/SB10001424127887324478304578171650887467568.html HSBC is the world's third largest bank. HSBC's profit before tax in 2012 was $20.7B. The fine for funding murders was equal to about one month of profits. And no employees were prosecuted.
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The blog-o-sphere is full of comments about how Senator Warren is grandstanding. Grandstanding or not at least she is shining some sun light on our corrupt financial system. As they say sun light is the best disinfectant. Let us hope that more of our representatives perceive that reforming the financial system is the best way to serve and get re-elected.
This was a new low when I read about the US Dept. of Justice settlement with HSBC at the end of last year. HSBC blatantly ignored international banking laws and laundered money used to finance drug lords and terrorists. And, no one is held responsible for fear of disrupting the banking system. Taibbi does a good, entertaining job of telling the story. HSBC the Gangster Bankers - Matt Taibbi There must have been many, many people at the bank complicit in the money laundering. How can they live with themselves knowing that they aided such violent criminals. Maybe the bonus money bought them enough liquor, luxury cars, and vacations to suppress their memories. And to the US DoJ, its about time that you consider the disruption to the banking system if you do not prosecute and punish these types of actions. For how many people was this the last straw of evidence of a corrupt financial system. The last straw that shattered their confidence and inspired them to act, if only to remove their precious savings from the financial-political pyramid scheme.
