Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1199.80 down $5.30 (comex closing time)
Silver: $17.05 down 7 cents (comex closing time)
In the access market 5:15 pm
Gold $1198.60
Silver: $16.96
Gold/silver trading: see kitco charts on the right side of the commentary.
Following is a brief outline on gold and silver comex figures for today:
The gold comex today had a poor delivery day, registering 43 notices served for 4300 oz. Silver comex registered 68 notices for 340,000 oz .
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 248.27 tonnes for a loss of 55 tonnes over that period. Lately the removals have been rising!
In silver, the open interest fell by 629 contracts, due to short covering, as Thursday’s silver price was up by 14 cents. The total silver OI continues to remain extremely high with today’s reading at 171,441 contracts. The front month of March fell by 66 contracts to 146 contracts. We are still close to multi year high in the total OI complex despite a record low price. This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end.
We had 129 notices served upon for 645,000 oz.
In gold we again have a total collapse of OI as we enter the next active delivery month of April . The total comex gold OI rests tonight at 398,579 for a whopping loss 17,813 contracts. With June gold almost equal to April gold in price, it just does not make sense why so many would liquidate their positions.Today is options expiry for London’s LMBA gold and silver. On Tuesday we have the final options expiry and that is the OTC market. We had 43 notice served upon for 4300 oz.
Today, we had no changes in gold inventory at the GLD/ Gold Inventory rests at 737.24 tonnes
In silver, /SLV we had a huge withdrawal of 1.439 million oz of silver inventory leave the SLV/Inventory, at 323.888 million oz
We have a few important stories to bring to your attention today…
1, Today we again had some short covering in the silver comex with the silver OI falling by 629 contracts. Gold OI fell by a whopping 17,813 contracts.
(report Harvey)
2. Koos Jansen reports that Chinese demand for the week ending March 20 totaled 53 tonnes. This excludes Chinese sovereign purchases. Koos also comments that he believes that gold inventory of sovereign China will finally be revealed once they are included in the new SDR calculations.
3. Pater Tenenbrarum notes in his latest commentary that Euro basis swaps in the future (against dollars) is negative suggesting problems that will be forthcoming in the markets. He suggests two major problems:
i. The Greek debt problems with its associated credit default swaps and interest rates swaps
ii. The oversized short USA dollar short position held by the emerging nations and others.
He is extremely worried about a total collapse on both of these.
(Peter Tenenbraum)
4. Yesterday I reported to you the following: “Russia refuses to take a haircut on the 3 billion usa dollar loan given to the Ukraine. The IMF is requesting everybody take a haircut on its debt for the new loan from the iMF to commence. Russia can call this note early setting off a disorderly default. ” Today Raul Meijer gives a great presentation on this and concludes that Ukraine will default and Russia will not mind if it is messy. However they do want their money back.
(Raul Meijer)
5. It looks like Austria has another potential bank problem with respect to the failure of Hypo bank. It is Pfandbriefbank and this is another black swan that can cause dominoes to fall.
we have these and other stories for you tonight
Let us now head over to the comex and assess trading over there today.
Here are today’s comex results:
The total gold comex open interest fell by a whopping 17,813 contracts from 416,312 down to 398,579 despite the fact that gold was up by $7.80 yesterday (at the comex close). As I mentioned above, the complete collapse of OI as we enter an active delivery month makes no sense.The fact that we have a middle eastern war, troubles in Ukraine and in Greece and then to have a complete collapse in OI is beyond comprehension. We are now in the contract month of March which saw it’s OI fall to 43 for a loss of 49 contracts. We had 1 notice filed upon on yesterday so we lost 48 gold contracts or an additional 4,800 ounces will not stand for delivery in this delivery month of March. The next big active delivery month is April and here the OI fell by 44,303 contracts down to 67,395. We have 2 days before first day notice for the April gold contract month, on Tuesday, March 31.2015. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was fair at 165,235. (Where on earth are the high frequency boys?). The confirmed volume on yesterday ( which includes the volume during regular business hours + access market sales the previous day) was good at 372,636 contracts. Today we had 43 notice filed for 4300 oz.
And now for the wild silver comex results. Silver OI fell by 629 contracts from 172,070 down to 171,441 despite the fact that silver was up 14 cents, with respect to yesterday’s trading . We therefore again had some more short covering by our bankers. We are now in the active contract month of March and here the OI fell by 66 contracts falling to 146. We had 129 contracts served upon yesterday. Thus we gained 63 contracts or an additional 315,000 oz will stand in this March delivery month. The estimated volume today was poor at 21,180 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 52,580 contracts which is excellent in volume. We had 68 notices filed for 340,000 oz today.
March initial standings
March 27.2015
Gold
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
64.30 oz (2 kilobars)(MANFRA)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
43 contracts (4300 oz)
No of oz to be served (notices)
0 contracts (nil oz)
Total monthly oz gold served (contracts) so far this month
52 contracts(5200 oz)
Total accumulative withdrawals of gold from the Dealers inventory this month
114,790.651 oz
Total accumulative withdrawal of gold from the Customer inventory this month
656,754.2 oz
Today, we had 0 dealer transaction
total Dealer withdrawals: nil oz
we had 0 dealer deposit
total dealer deposit: nil
we had 1 customer withdrawals
i) Out of Manfra: 64.3 oz (2 kilobars)
total customer withdrawal: 64.30 oz
we had 0 customer deposits:
total customer deposit: nilo oz
We had 0 adjustments
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 43 contract of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account
To calculate the total number of gold ounces standing for the March contract month, we take the total number of notices filed so far for the month (52) x 100 oz or 5200 oz , to which we add the difference between the open interest for the front month of March (43) and the number of notices served upon today (43) x 100 oz equals the number of ounces standing.
Thus the initial standings for gold for the March contract month:
No of notices served so far (52) x 100 oz or ounces + {OI for the front month (43) – the number of notices served upon today (43) x 100 oz} = 5,200 oz or .1617 tonnes
we lost a huge 48 contracts or 4800 oz will not stand for delivery.
Total dealer inventory: 658,833.604 oz or 20.49 tonnes
Total gold inventory (dealer and customer) = 7,981,901.474 oz. (248.27) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 55.0 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real. I cannot see continual additions of strictly kilobars.
end
And now for silver
March silver initial standings
March 27 2015:
Silver
Ounces
Withdrawals from Dealers Inventory
nil oz
Withdrawals from Customer Inventory
60,775.500 oz (Scotia)
Deposits to the Dealer Inventory
nil
Deposits to the Customer Inventory
1,358,254.11 oz (Scotia, Brinks)
No of oz served (contracts)
68 contracts (340,000 oz)
No of oz to be served (notices)
78 contracts (390,000)
Total monthly oz silver served (contracts)
2500 contracts (12,500,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this month
7,477.613.1 oz
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 2 customer deposits:
i) Into Scotia: 1,158,021.41 oz
ii) Into Brinks: 200,232.700 oz
total customer deposit: 1,358,254.110 oz
We had 1 customer withdrawals:
i) Out of Scotia: 60,775.500 oz
total withdrawals; 60,775.500 oz
we had 0 adjustments:
Total dealer inventory: 70.574 million oz
Total of all silver inventory (dealer and customer) 176.477 million oz
.
The total number of notices filed today is represented by 68 contracts for 340,000 oz. To calculate the number of silver ounces that will stand for delivery in March, we take the total number of notices filed for the month so far at (2500) x 5,000 oz = 12,500,000 oz to which we add the difference between the open interest for the front month of March (146) and the number of notices served upon today (68) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the March contract month:
2500 (notices served so far) + { OI for front month of March(146) -number of notices served upon today (68} x 5000 oz = 12,890,000 oz standing for the March contract month.
we gained 315,000 oz of additional silver standing in this March delivery month.
for those wishing to see the rest of data today see:
http://www.harveyorgan.wordpress.com orhttp://www.harveyorganblog.com
end
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
March 27/no changes in gold inventory at the GLD/Inventory at 737.24 tonnes
March 26 we had another huge withdrawal of 5.97 tonnes of gold. This gold is heading straight to the vaults of Shanghai, China/GLD inventory 737.24 tonnes
March 25.2015 we had a withdrawal of 1.19 tonnes of gold from the GLD/Inventory at 743.21 tonnes
March 24/ no changes in gold inventory at the GLD/Inventory 744.40 tonnes
March 23/we had a huge withdrawal of 5.37 tonnes of gold from the GLD vaults/Inventory 744.40 tonnes
march 20/we had no changes in inventory at the GLD/Inventory at 749.77 tonnes
March 19/we had no changes in inventory at the GLD/Inventory 749.77 tonnes
March 18/ we had a withdrawal of .9 tonnes of gold from the GLD/Inventory at 749.77 tonnes
March 17.2015: no change in gold inventory at the GLD/Inventory 750.67 tonnes
March 16/no change in gold inventory at the GLD/Inventory 750.67 tonnes
March 27/2015 / we had no changes in gold/Inventory at 737.24 tonnes
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).
GLD : 737.24 tonnes.
end
And now for silver (SLV):
March 27. we had a huge withdrawal of 1.439 million oz leave the SLV/Inventory rests this weekend at 323.888 million oz
March 26.2015; no change in silver inventory/SLV inventory 325.323 million oz
March 25.2015:no change in silver inventory/SLV inventory 325.323 million oz
March 24.2015/ we had another withdrawal of 835,000 oz of silver from the SLV/Inventory rests tonight at 325.323 million oz
March 23./we had a huge withdrawal of 1.174 million oz of silver from the SLV vaults/Inventory 326.158 million oz
March 20/ no changes in silver inventory/327.332 million oz
March 19/ no change in silver inventory/327.332 million oz
March 18/ no change in silver inventory/327.332 million oz
March 17/ no change in silver inventory/327.332 million oz
March 16/no change in silver inventory/327.332 million oz
March 27/2015 we had a huge withdrawal of 1.439 million oz of silver leave the SLV/inventory rests at 323.888 million oz
end
will update later tonight/not out at presstime:
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now for the first time into the negative to NAV
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 8.8% percent to NAV in usa funds and Negative 8.8% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 60.3%
Percentage of fund in silver:39.3%
cash .4%
( March 27/2015)
Sprott gold fund finally rising in NAV
2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.22%!!!!! NAV (March 26/2015)
3. Sprott gold fund (PHYS): premium to NAV falls -.45% to NAV(March 26 /2015)
Note: Sprott silver trust back into positive territory at +1.22%.
Sprott physical gold trust is back into negative territory at -.45%
Central fund of Canada’s is still in jail.
end
At 3:30 pm est we receive the COT report which purportedly gives position levels on our major players.
Let us head over to the gold COT;:
Gold COT Report – Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
168,234
113,953
52,190
178,058
230,983
398,482
397,126
Change from Prior Reporting Period
5,966
4,778
5,630
-2,406
-5,971
9,190
4,437
Traders
138
103
84
54
54
231
208
Small Speculators
Long
Short
Open Interest
35,285
36,641
433,767
-5,161
-408
4,029
non reportable positions
Change from the previous reporting period
COT Gold Report – Positions as of
Tuesday, March 24, 2015
(remember this report ends on Tues March 24.2015 and before the liquidation of comex contracts)
Our large specs:
Those large specs that have been long in gold added 6090 contracts to their long side.
Those large specs that have been short in gold surprisingly still thought it necessary to add to their short side to the tune of 1,633 contracts.
Commercials:
Those commercials that have been long in gold pitched 5856 contracts from their long side.
Those commercials that have been short in gold continue to cover to the tune of 6,304 contracts and thus the commercials went again net long for the week.
Our small specs;
WHAT!!!
Those small specs that have been long in gold pitched a gigantic 6040 contracts from their long side ??? makes no sense
Those small specs that have been short in gold covered 1135 contracts from their short side.
And now for silver:
Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
62,332
30,209
22,797
67,276
106,518
683
-7,029
-834
-4,926
4,106
Traders
91
48
45
42
49
Small Speculators
Open Interest
Total
Long
Short
172,659
Long
Short
20,254
13,135
152,405
159,524
-788
-2,108
-5,865
-5,077
-3,757
non reportable positions
Positions as of:
152
128
Tuesday, March 24, 2015
Our large specs;
Those large specs that have been long in silver added 700 contracts to their long side and that was to be expected.
Those large specs that have been short in silver covered a monstrous 7109 contracts from their short side as they saw the light.
Our commercials
Those commercials that have been long in silver pitched a rather large 6974 contracts from their long side as silver was rising.
Those commercials that have been short in silver added another 1940 contracts to their short side as silver was rising. Commercials go net short by 8914 contracts with silver rising.
Our small specs:
Those small specs that have been long in silver pitched a tiny 810 contracts from their long side
Those small specs that have been short in silver covered 1915 contracts from their short position.
end
And now for your more important physical gold/silver stories:
Gold and silver trading early this morning
(courtesy Goldcore/Mark O’Byrne)
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed
By Mark O’Byrne March 27, 2015 0 Comments
Share on facebook Share on twitter Share on linkedin More Sharing Services
- World sleep walking from ‘Cold War’ to ‘Hot War’ and new World War
- U.S. resolution to supply Ukraine with lethal weaponry passed
- Russia warns such moves would “explode the whole situation”
- Minsk agreement remains intact – little justification for escalation and ignoring EU allies
- US continues to act as only global superpower despite powerful Russia and China and new multi-polar world
- Hubris could lead to a new World War
Geopolitical risk has escalated sharply this week after the Saudi bombing of Yemen and the U.S. House of Representatives voting overwhelmingly for the President to provide offensive weaponry to the Ukrainian army.
Both are likely to result in sharp escalation in tensions between NATO and Russia and see an intensification of war in Eastern Europe and the possibility of a regional war in the Middle East.
The move is concerning as European countries who have a real interest in maintaining stability in Ukraine – Germany and France, who are Europe’s de facto leadership, and Russia – have already restored a degree of stability through the Minsk agreement. Germany and France pointedly excluded the U.S. from the process.
The resolution comes despite Russia’s Deputy Foreign Minister Sergey Ryabkov having previously warned in February that such a move would be a “major blow” to the Minsk agreements and would “explode the whole situation.”
The second Minsk Agreement – brokered between Germany, France, Russia and Ukraine last month – has remained largely intact. The head of the reasonably independent Organisation for Security and Co-operation in Europe said earlier this month the the ceasefire in Ukraine was holding. The OSCE confirmed, yesterday, that the withdrawal of heavy arms by both sides of the conflict was “ongoing” according to the Kyiv Post.
Therefore, there would appear to be little justification for the U.S. to send high tech arms to Ukraine at this time especially on the pretext of restoring stability.
The passing of such a resolution highlights the insulated nature of U.S. politics. U.S. policy makers continue to labour under the delusion that the U.S. is still the only global superpower.
The reality is that the U.S. grows more isolated by the day. While the rising superpowers of the East work tirelessly to forge international ties through trade and development agreements, the U.S. continues to act unilaterally and forcefully – as it has since the collapse of the Soviet Union.
The Eastern block does not need war. Its economic influence grows daily – as demonstrated most recently by a whole swathe of European allies joining the new Chinese-led Asian Infrastructure Investment Bank despite pressure from the U.S. not to do so.
On the other hand, it would seem that many U.S. policy makers regard war as an opportunity to re-exert their declining influence.
The U.S. may or not remain a superpower. It has the population, landmass and resources. It has friendly neighbours and is practically impenetrable to attack. However imperial overstretch has bankrupted many an Empire.
It needs to come to terms with the fact that there is a new world order emerging – and not necessarily the one that was envisioned following the collapse of the Soviet Union.
Until its politicians overcome their hubris the world will continue to grow more and more unstable as it lurches closer to another World War. What the catalyst will be which triggers another World War is difficult to tell. There are many options to choose from.
Gold is a safe haven asset and an essential store of value that has protected people from war and economic uncertainty throughout history. It remains prudent for investors and savers to have an allocation to physical, allocated gold.
HOW TO STORE GOLD BULLION – 7 KEY MUST HAVES
MARKET UPDATE
- Gold looks set for second consecutive week of gains
- Japan’s QE fails – Returns to zero inflation
- ‘Master of the universe’ central bank speeches today
- ETF and COMEX holdings fall as gold flows East
- JP Morgan to be part of new gold ‘fix’
- Greeks pull €8 billion from banks
- “No one knows how to solve the situation in Greece”
- Bundesbank warns debt in euro zone has entered “danger zone”
- UK and Irish house prices are falling … again
Today’s AM fix was USD 1,198.00, EUR 1,106.70 and GBP 805.32 per ounce.
Yesterday’s AM fix was USD 1,209.40, EUR 1,097.26 and GBP 809.23per ounce.
Gold climbed 0.65 percent or $7.80 and closed at $1,203.40 an ounce yesterday, while silver rose 0.47 percent or $0.08 at $17.05 an ounce.
In the end of day trading in Singapore, gold prices climbed 0.3 percent to $1,199.95 an ounce after reaching a high on Thursday of $1,219.40. Gold surged after news of the bombing in Yemen but prices were capped at the $1,220 level prior to a retracement of much of the initial gains.
Oil prices jumped over 6 percent at one stage and stock markets worldwide slumped yesterday after Saudi Arabia and allies carried out air strikes, which fueled worries internationally that global energy shipments may be put at risk.
The U.S. claims that Saudi Arabia kept some key details of its military action in Yemen from Washington until the last moment. Saudi Arabia’s more aggressive role is said to be in order to compensate for perceived U.S. disengagement. U.S. President Obama’s Middle East policy increasingly relies on proxies rather than direct U.S. military involvement. He is training Syrian rebels to take on the government of President Bashar Assad and this week launched air strikes to back up Iraqi forces trying to retain the city of Tikrit.
All of this has the real potential for ‘blowback’ in the classic sense and risks leading to a hot war involving Russia.
Gold pulled back today as traders took profits after a seven-day rally in the yellow metal. In spite of the price dip gold is expected to rack up a weekly gain of around 1.5 percent. Gold looked overvalued after the 7 days of price gains and the final rally to over $1,219/oz. The last winning streak of 7 consecutive days in a row was in August 2012. Gold appeared overbought and was due a correction.
As tends to happen, gold is now testing previous resistance at $1,200/oz which may become support.
Gold may have a second week of gains today and if this happens we would be constructive on further price gains next week. Momentum is a powerful force in markets and the recent gains could see technical traders pile in the long side pushing prices higher next week.
However, a lower weekly cose today could lead to sharp selling on futures markets near the close today and at the open in Asia which could push prices lower.
The question is whether the recent rally is another flash in the pan for gold or the start of a more meaningful rally in prices. We believe it is too soon to tell. However, we are confident that gold is in the process of bottoming prior to further gains in the coming months.
Japan has returned to zero inflation after recently emerging from recession, once again highlighting how ineffective QE has been at creating a real, sustainable economic recovery.
It’s a day of ‘master of the universe,’ central bank speeches as both Bank of England governor Mark Carney and Fed chief Janet Yellen preach their ultra loose policies and certain market participants lap up the ‘Gospel according to Mark’ … and Janet. Central bank believers will be watching for indications of their position on rate rise timings and their crystal ball view on the economies of the UK and US respectively.
U.S. GDP estimates for the fourth quarter are forecast for an upward revision from 2.2 per cent to 2.4 per cent on the back of an increase in consumer spending.
Yesterday saw a huge withdrawal of 5.97 tonnes from the world’s largest gold ETF, New York-listed SPDR Gold Shares. The nearly 6 tonne fall to 737.24 tonnes on Thursday, its lowest level since January.This month’s outflow from the SPDR has totalled just over 34 tonnes so far, the largest of any month since December 2013.
Over on the COMEX withdrawals continue. Earlier this year, the COMEX had 303 tonnes of total gold inventories. Yesterday the total inventory fell to 248.27 tonnes. This is a loss of 55 tonnes over that period and lately the withdrawals have been intensifying. Gold continues to flow from the West to East.
JPMorgan will be one of seven participants in the LBMA gold price according to ICE as reported by Eddie van der Walt in Bloomberg.
JPMorgan is to be among seven companies able to participate in LBMA Gold Price benchmark, ICE said today in statement published online. Other participating banks are Barclays, Goldman Sachs, HSBC, Bank of Nova Scotia, SocGen and UBS.
The new LBMA gold price has all the hallmarks of the old fix with just a few banks taking part in it and little participation from large players in the industry – miners, mints and refiners. Also it is noteworthy that there is no non Western banks taking part in the new gold fix. None from Africa, South America or Asia and none from China where there has been speculation of involvement in the new fix.
The crisis in Greece looks set to escalate in the coming days. Greek bank deposits plunged to an almost 10 year low in February as some €8 billion ($8.7 billion) were withdrawn from lenders, amid rising political uncertainty and worries over the country’s possible exit from the eurozone.
Total deposits fell to €152.4 billion euros in February, down from €160.3 billion in January, data from Greek central bank showed yesterday. This is the lowest level since June 2005.
Greece is hurrying to compile a list of economic overhauls that satisfies its creditors and secures desperately needed euros, as it runs increasingly low on cash and debt payments loom.
Officials in Greece’s new government, led by the leftist Syriza party, aim to submit a list of overhauls by Monday at the latest, officials have said. Greece hopes that eurozone finance ministers can meet and approve the country’s overhaul programme by next Wednesday.
Austria’s Finance Minister Hans-Joerg Schelling admitted today that “no one knows how to solve the situation in Greece”.
“We have a crisis of trust with Greece. Every day something is agreed upon and the next day it’s invalid,” Mr Schelling said speaking to the Klub der Wirtschaftspublizisten, a group of financial journalists in Vienna.
The head of Germany’s Bundesbank has warned debt in the euro zone had entered the “danger zone” and called for banks’ exposure to the debt of individual countries to be capped.
He is opposed to more emergency funding for Greece, accusing Athens of gambling away “a lot of trust”.
Speaking to the weekly Focus magazine Jens Weidmann said: “Until the autumn, an improvement in the economy had been discernible. But the new government has gambled away a lot of trust.”
“I am opposed to an increase in the emergency loans,” Mr Weidmann, who also sits on the European Central Bank’s decision-making governing council, said.
UK and Irish house prices are falling. The UK’s Nationwide house price index has revealed a seventh consecutive month of a slowdown in the UK property market. House price falls in central London have start to spread out across the capital to South West London.
In Ireland, property prices fell again in February. Residential property prices fell by 0.4 per cent nationally last month, with the decline in Dublin rising to 0.7 per cent, according to latest official figures. Results show more than 2 per cent has been wiped off the value of homes in the capital since the beginning of the year.
In London in late morning trading gold is at $1,201.73 or down 0.30 percent. Silver is at $17.24, up 0.23 percent and platinum is $1,142.70 down 0.72 percent.
end
Another monstrous gold demand coming from China: 53 tonnes.
Normally they slow down after their new year. I guess they threw that out the window. Please remember that this demand is Chinese citizen demand (equals Shanghai GE outflows) and does not include any sovereign purchases. So far this year without sovereign China, gold imports between China and India amount of 640 tonnes for a little less than 3 months.
Finally, Koos believes that gold inventories will be finally updated by China once they are included in the SDR calculations. The SDR calculation may also include gold as one of the currencies…
(courtesy Koos Jansen)
Posted on 27 Mar 2015 by Koos Jansen
When Will China Disclose Its True Official Gold Reserves And How Much Is It?
Things are heating up in the Chinese gold market
First let’s go through the latest Shanghai Gold Exchange data and then we’ll continue to discuss the most recent developments regarding Chinese official gold reserves.
Friday the Shanghai Gold Exchange (SGE) released its trade report of week 11, 2015 (March 16 – 20). Withdrawals from the vaults, which equal Chinese wholesale demand, accounted for 53 tonnes, up 3.91 % from the prior week.
Year to date total withdrawals have reached a staggering 561 tonnes, up 7.3 % from 2014, up 33 % from 2013.When using the basic equation for the Chinese gold market to estimate import, we learn that up until March 20 China has net imported 412 tonnes. Add to this India has net imported about 230 tonnes over the same period, that’s 642 tonnes combined. I wonder how long the Chinese can keep up this pace of importing before physical supply from Western vaults runs dry.
Trading volume on the Shanghai International Gold Exchange (SGEI) has been 32 tonnes in week 11, which could have distort SGE withdrawals by 0.8 tonnes. (Read SGE Withdrawals In Perspective for more information on the relation between SGEI trading volume and SGE withdrawals)
When Will China Disclose Its True Official Gold Reserves And How Much Is It?
As most readers who are interested in gold will know, China’s official gold reserves are small in proportion to the size of their economy and their foreign exchange reserves. This disproportionate position has been difficult for China to escape from. Any slight move from their immense stock of US dollars into gold could disrupt the gold market, and thus the US dollar, spoiling the party for everybody.
China is forced to buy in secret. The latest update on the size of their official gold pile was in April 2009, when they disclosed to have 1,054 tonnes, up 454 tonnes from 600 tonnes, which they claimed to have since 2003. Common sense indicates the PBOC did not buy 454 tonnes in a few months; most likely they bought this amount in secret spread over six years (2003 – 2009). More common sense suggests they continued to buy in secret since 2009 and they hold at least twice the weight they currently claim.
Last week I reported it’s very likely the renminbi will be adopted into the SDR basket this year and before inclusion China will announce their true gold reserves. All arrows point in the same direction, IMF chief Lagarde stated:
China’s yuan [renminbi] at some point would be incorporated in the International Monetary Fund’s Special Drawing Right (SDR) currency basket, IMF Managing Director Christine Lagarde said, …”It’s not a question of if, it’s a question of when,”
The SDR basket is reconsidered every five years, in 2010 there was no adjustment made, as the renminbi was not considered eligible at the time. But the renminbi has made significant developments since then; this year will be appropriate for adoption.
Next to what Lagarde and the IMF have stated, more “official” channels are hinting at changes to come regarding China in the international monetary system. Roland Wang, China managing director at World Gold Council, told Reuters on March 26:
China currently holds about 1.6 percent of its foreign exchange reserves in gold, which is relatively low compared with developed countries and some developing countries, WGC China managing director Roland Wang said.
“The ideal amount should be at least 5 percent of its total forex reserves,” Wang told Reuters in an interview in Hong Kong.
The latest IMF data points out China’s total foreign exchange reserves, excluding gold, on December 1, 2014, were valued at 3.859 trillion US dollars. 1,054 tonnes at the price of gold on December 1, 2014 (37,600 US dollar for 1 Kg), was a little over 1 % of total reserves.
If China would announce on Monday they hold 5 % of total reserves in gold, this would translate into roughly 5,000 tonnes.
Remarkably, the exact same day Reuters published Wang’s statement, Chinese newswire Caixin published a detailed story on gold in China’s monetary history and its potential function in the present and future economy, written by Hedge Fund manager Li Sheng:
Gold accounts for only 1.6 percent of China’s forex reserves. This is only a fraction of the figure in the United States and many other developed countries. If China ever increased the level to 5 percent, it would have an enormous impact on global demand for gold.
Li mentions the exact same numbers as Wang from the World Gold Council: 1.6 % and 5 % of total reserves. Coincidence?
I think that if China will update us on their gold reserves, the total will be less than 5,000 tonnes. For clarity, I have little hard evidence on the amount of gold the PBOC or its proxies hold in reserve. However, the reason I think it will be less is because of what Song Xin, Party Secretary and President of the China Gold Association, wrote at Sina Financeon July 30, 2014:
Gold Will Support Renminbi As It Moves To Join World
…For China, the strategic mission of gold lies in the support of RMB internationalization, and so let China become a world economic power and make sure that the “China Dream” is realized.
…Though China is already the world’s second largest economy, there is still a long way to go to become an economic powerhouse. The most critical part to this is that we don’t have enough say in matters such as international finance and matters regarding the monetary system, the most obvious of which is the fact that the RMB hasn’t fully internationalized.
Gold is a monetary asset that transcends national sovereignty, is very powerful to settle obligations when everything else fails, hence it’s exactly the basis of a currency moving up in the international arena. When the British Pound and the USD became international currencies, their gold reserve as a share of total world gold reserves was 50% and 60% respectively; when the Euro was introduced, the combined gold reserves of the member countries was more than 10,000 tonnes, more than the US had. If the RMB wants to achieve international status, it must have popular acceptance and a stable value. To this end, other than having assurance from the issuing nation, it is very important to have enough gold as the foundation, raising the ‘gold content’ of the RMB. Therefore, to China, the meaning and mission of gold is to support the RMB to become an internationally accepted currency and make China an economic powerhouse.
That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US.
According to Song step one is to reach the 4,000 tonnes mark to surpass Germany and become the second largest holder in the world, which would be in line with being the second largest economy (in terms of GDP). We can also read China’s aspirations in international finance that is currently, among other deveopments, to be established through the inclusion in the SDR basket. Bear in mind, Song is a Party Secretary, he wrote this with permission, or on behalf of the Communist Party of China (CPC).
Song’s statements makes me think if China will increase its official gold reserves it will be more than Germany’s reserves; something north of 3,384 tonnes. Of course I could be wrong and it will be less – perhaps because they have less, perhaps because the international monetary system “can’t handle” and increase of more than 100%, perhaps because China has more than they see fit to disclose on the grand chessboard.
To finish please read the last bit of the article from Caixin, a must read and it has similarities with Song’s article:
Yuan and Gold: Old Enemies Should Finally Become Friends
…Since the global financial crisis that started in 2008, there has been consensus that an excessive issuance of U.S. dollars, driven by the U.S. Federal Reserve’s need to protect the U.S. economy, was partially to blame for causing havoc. Since the Bretton Woods system collapsed in 1971, the United States has been freed from having to restrict its money supply to the size of the gold reserve its central bank holds.
What does that say about the attitude China should take toward gold?
The boom years for gold between 2008 and 2012 were, of course, driven to a large extent by the United States’ easy monetary policy and an economic recovery in many countries. Yet, China played a part in it as well.
Its push since 2010 to promote the use of the yuan globally and diversify its foreign exchange investment away from U.S. Treasury bonds and U.S. dollar-denominated assets has made investors expect the demand for gold to rise because the Chinese central bank will need a greater reserve to support its currency.
Gold accounts for only 1.6 percent of China’s forex reserves. This is only a fraction of the figure in the United States and many other developed countries. If China ever increased the level to 5 percent, it would have an enormous impact on global demand for gold.
The price of gold started plummeting in early 2013 as the U.S. economy became stronger and the market expected the Federal Reserve to stop its policy of so-called quantitative easing. Meanwhile, China’s demand for gold soared. In the first half of 2014, imports skyrocketed, prompting speculation that the central bank was secretly beefing up its gold reserve.
Buying more gold seems to be a good choice for both the government and individual investors, given the new domestic and international circumstances. The yuan has been relatively stable throughout the most troubled times of the financial crisis, but its peg to the U.S. dollar means it will always fluctuate in sync with the latter, depending on the Fed’s moves.
That is why it is extremely important that we have an “anchor” ourselves.
Gold is a currency that supersedes sovereignty issues, is politically neutral, and is not easily manipulated by monetary policy. Gold may not be able to compete with the currencies of the world’s major powers, but it can certainly be used as an anchor.
In the past year or two, enormous changes have occurred to the structure of China’s economic growth, to the degree of social wealth accumulation, and to the investment and wealth management habits of ordinary people. It is important and urgent that we revisit certain issues, including the relationship between the yuan and gold, under these new circumstances.
The party came to power not only because it won the war but also, and more importantly, because it represented the right thing to do economically and financially. The relative advantages of its monetary system back then have been fully demonstrated, but it will not be long before they turn into obstacles to progress if the authorities reject reform and refuse to evolve along changing times.
The emphasis on material goods over gold and silver in the yuan system may have been superior in wartime and when supplies were insufficient, but it has increasingly become incompatible with today’s needs.
If it was necessary to use all means necessary to secure enough supplies of goods in the old days, today’s priority should be how to fairly distribute them. The emphasis should be on developing a fair market and protecting the ownership of private assets.
In a 1966 essay, former Fed chairman Alan Greenspan wrote that gold is “a protector of property rights.” This is true, but only in times of peace and in an open environment. The old wisdom of hoarding gold in troubled times is applicable only to eras of strife and war. In China in the 1960s, in Nazi-controlled Europe and in the Soviet Union under Stalin, gold could not buy one food, let alone protect property.
So instead of trying to peg the yuan somehow to gold to increase its credibility internationally, the government might as well work to establish rule of law and create a system where private property ownership is respected and the public believes in the strength of the monetary system. Confidence is more important than gold.
But that does not mean the yuan system does not need gold. It can be an anchor that stabilizes the yuan and increases people’s confidence in it. It can also serve as a check to the power of any one major currency.
Increasing private savings and investments of gold, or – as the Chinese government likes to call it – “storing gold with the people,” is not only about the diversification of investment channels. It is also an inevitable path that the yuan must take from being a currency supported by reserves of material goods to one based more on credit.
The government should be pleased to see this trend gaining momentum. Increasing its gold reserves at the same time can also strengthen the public’s confidence in the yuan and promote its use globally.
Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com
end
We are tickled pink with this story: