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Old 08-08-2013, 04:03 AM   #1
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Is there a gold backwardation or not?



Sources:
http://goldchat.blogspot.ro/2013/07/...thats-not.html
http://goldchat.blogspot.ro/2013/07/...thats-not.html

I guess not...

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Old 08-08-2013, 08:07 AM   #2
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The Author of the report you linked to works for the Perth Mint and he suggests that this might be more of a leasing market problem than a physical supply and demand problem he says...
Quote :
So I think there is a case to say that negative GOFO as more driven by tightness in the gold leasing market. Note that shortage in the borrowing and lending market does not have to coincide with a shortage in the buying and selling market.
Quote :
A real gold bank run will manifest itself in the wholesale markets for 400oz bars. When I see them attracting a premium and/or being difficult to source, or bullion banks desperately bidding on the Perth Mint's refining output, then we "have the real deal" as Dan says. I will let you know. just watch Bullion Vault and Gold Money - which are backed by 400oz bars and which deal in that market every day - for reports of difficultlies in getting 400oz bars and restrictions on how much gold can be bought, and/or if they start to add on a "special" premium to their spot price.
Hmm.... When he sees 400oz bars attracting a 'special premium' he will let us know?The two biggest gold consumers India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?

Hmm... When he sees bullion banks desperately bidding on Perth Mint's refining output he'll let us know?
Quote :
The Perth mint reported the highest demand levels in five years and that the mint was working through weekends to satisfy demand.
http://www.gold.org/ (Q2 Market update)

Hmm.. When he sees restrictions on how much gold can be bough he will let us know? 'the Reserve Bank of India banned import of gold by domestic consumers through bank credit' ' Gold coin and bar sales stopped in India' 'Pakistan temporarily bans gold imports'

Well I think the author has failed to disclose something... That he is blind!
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Old 08-08-2013, 08:17 AM   #3
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As for the graph you linked to, just read the comments from the people who responded...

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Backwardation of any sort should not normally occur in the gold market because of the available large above-ground supplies. The fact that gold backwardation is in fact occuring is highly significant. The now twelve days of negative GOFO rates suggest extreme tightness in the physical market in London. I find it somewhat strange that you are trying to downplay this..
Quote :
Why do you think that this state has not been in this situation since 2008? And only a few times in the past decade.
Quote :
The gold chart shows a long term uptrend in gold.However, in the short term the prices are lower. This is true backwardation. It defies the trend, and therefore indicates fear of near term gold supply failure.Another backwardation indicator is that the gold lease rate is higher than the Libor rate.

POTEMKIN:

'Potemkin Village':
Quote :
any construction (literal or figurative) built solely to deceive others into thinking that some situation is better than it really is
'battleship Potemkin':
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One of the most influential propaganda films of all time
http://en.wikipedia.org/wiki/Battleship_Potemkin

http://en.wikipedia.org/wiki/Potemkin_village
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Old 08-08-2013, 09:18 AM   #4
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Originally Posted by Unbeatable View Post:
The Author of the report you linked to works for the Perth Mint and he suggests that this might be more of a leasing market problem than a physical supply and demand problem he says...

Hmm.... When he sees 400oz bars attracting a 'special premium' he will let us know?The two biggest gold consumers India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?

Hmm... When he sees bullion banks desperately bidding on Perth Mint's refining output he'll let us know? http://www.gold.org/ (Q2 Market update)

Hmm.. When he sees restrictions on how much gold can be bough he will let us know? 'the Reserve Bank of India banned import of gold by domestic consumers through bank credit' ' Gold coin and bar sales stopped in India' 'Pakistan temporarily bans gold imports'

Well I think the author has failed to disclose something... That he is blind!
I'm glad you read it and you observed he works for Perth Mint. Seems so...
Why is he "blind"?

I think he makes some interesting points there...
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Old 08-08-2013, 09:19 AM   #5
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Originally Posted by Unbeatable View Post:
As for the graph you linked to, just read the comments from the people who responded...

POTEMKIN:

'Potemkin Village':

'battleship Potemkin':

http://en.wikipedia.org/wiki/Battleship_Potemkin

http://en.wikipedia.org/wiki/Potemkin_village
As you can see from my avatar, I took the nickname from "Battleship Potemkin", there was a famous old Russian movie about it...
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Old 08-08-2013, 09:37 AM   #6
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Originally Posted by Potemkin View Post:
I'm glad you read it and you observed he works for Perth Mint. Seems so...
Why is he "blind"?
I think he is blind because he says in his most recent blog, (http://goldchat.blogspot.co.uk/) that when these three factors happen

1. High Premiums
2. Unprecedented demand for mint output
3. Gold buying/ownership restrictions

Then you'll know it is more likely real backwardation and not just a gold leasing problem.

These points -

1. India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?
2. The Perth mint reported the highest demand levels in five years
3. The Reserve Bank of India banned import of gold by domestic consumers through bank credit. Pakistan temporarily bans gold imports'

Are my points, not his, to show that those three things he is waiting for to happen are already happening.

Yes I see your Avatar is Battleship Potemkin,

But because of some dubious posts you've made, like finding the only guy who is blind to the crazy physical demand at the moment and making posts like this in the China thread -

Quote :
China has been "gold crazy" for a very long time...

They are also nuts about US bonds and US dollars overall. How crazy!
It makes me wonder if you chose that name because you are deliberately trying to troll/downplay/'potemkin village' the PM situation at the moment.
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Old 08-08-2013, 12:12 PM   #7
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Originally Posted by Unbeatable View Post:
I think he is blind because he says in his most recent blog, (http://goldchat.blogspot.co.uk/) that when these three factors happen

1. High Premiums
2. Unprecedented demand for mint output
3. Gold buying/ownership restrictions

Then you'll know it is more likely real backwardation and not just a gold leasing problem.

These points -

1. India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?
2. The Perth mint reported the highest demand levels in five years
3. The Reserve Bank of India banned import of gold by domestic consumers through bank credit. Pakistan temporarily bans gold imports'

Are my points, not his, to show that those three things he is waiting for to happen are already happening.

Yes I see your Avatar is Battleship Potemkin,

But because of some dubious posts you've made, like finding the only guy who is blind to the crazy physical demand at the moment and making posts like this in the China thread -



It makes me wonder if you chose that name because you are deliberately trying to troll/downplay/'potemkin village' the PM situation at the moment.
Unbeatable, couldn't you post some graphs or something?
http://www.pmbug.com/forum/f2/china-...22/index2.html

/sarc.
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Old 08-08-2013, 03:38 PM   #8
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Originally Posted by Unbeatable View Post:
I think he is blind because he says in his most recent blog, (http://goldchat.blogspot.co.uk/) that when these three factors happen

1. High Premiums
2. Unprecedented demand for mint output
3. Gold buying/ownership restrictions

Then you'll know it is more likely real backwardation and not just a gold leasing problem.

These points -

1. India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?
2. The Perth mint reported the highest demand levels in five years
3. The Reserve Bank of India banned import of gold by domestic consumers through bank credit. Pakistan temporarily bans gold imports'

Are my points, not his, to show that those three things he is waiting for to happen are already happening.

Yes I see your Avatar is Battleship Potemkin,

But because of some dubious posts you've made, like finding the only guy who is blind to the crazy physical demand at the moment and making posts like this in the China thread -



It makes me wonder if you chose that name because you are deliberately trying to troll/downplay/'potemkin village' the PM situation at the moment.
you are being paranoid!

Look: I don't know much about precious metals, I admit. I'm no expert, but I don't think my posts are "dubious".

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Old 08-08-2013, 03:40 PM   #9
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And yes, China has been buying gold "like crazy" for years... Nothing special about that.

I never thought the word "Potemkin" has a bad significance in your mind. I should have picked some other battleship's name... I just could not find a better name.

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Old 08-08-2013, 08:31 PM   #10
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Originally Posted by Unbeatable View Post:
Hmm.... When he sees 400oz bars attracting a 'special premium' he will let us know?The two biggest gold consumers India & China are paying a $30+ premium an ounce over spot, a 600%+ increase over what they paid in previous years!?
The premium in India and China is not for 400oz bars, but for smaller forms and particularly in India there are import duties and other taxes that go into the premium. The demand in India and China is high, but it is not translating into premiums for the raw wholesale form (400oz bars).

Originally Posted by Unbeatable View Post:
Hmm... When he sees bullion banks desperately bidding on Perth Mint's refining output he'll let us know?
My statement was about bullion banks and 400oz bars. Your quote is referring to demand for coins, two different markets. You are missing the whole point of my comment, which is that retail level demand, premiums do not reflect a shortage of gold at the wholesale level and a run on the fractional reserve bullion banking system.

Originally Posted by Unbeatable View Post:
Hmm.. When he sees restrictions on how much gold can be bough he will let us know? 'the Reserve Bank of India banned import of gold by domestic consumers through bank credit' ' Gold coin and bar sales stopped in India' 'Pakistan temporarily bans gold imports'
You are misquoting again. The restrictions I was talking about was restrictions by GoldMoney and Bullion Vault, not any restriction in any market. I picked GM and BV because they buy 400oz bars for their pooled storage products. If there was a shortage/run on the wholesale gold banking system then GM and BV would have problems sourcing 400oz bars. They are not.
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Old 08-09-2013, 03:44 AM   #11
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You found this thread quite fast. How come?
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Old 08-09-2013, 04:26 AM   #12
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Welcome to the forum Mr. Bronsucheki. I'm familiar with your posts over at Silver Stackers. Cheers.
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Old 08-09-2013, 05:20 AM   #13
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Originally Posted by Potemkin View Post:
You found this thread quite fast. How come?
Google blogger tells you what sites people visiting your come from, I saw it because people clicked on the links to my blog from this topic.
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Old 08-09-2013, 05:26 AM   #14
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Originally Posted by PMBug View Post:
Welcome to the forum Mr. Bronsucheki. I'm familiar with your posts over at Silver Stackers. Cheers.
Thanks. Sstackers is the only forum I have time to check personally, too hard to keep up with all the others I have been on (see here http://www.perthmint.com.au/research_about.aspx). Feel free to leave a comment on my blog letting me know if someone is laying in to me and you want to get a debate going.
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Old 08-09-2013, 07:03 AM   #15
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Quote :
A real gold bank run will manifest itself in the wholesale markets for 400oz bars. When I see them attracting a premium and/or being difficult to source, or bullion banks desperately bidding on the Perth Mint's refining output, then we "have the real deal" as Dan says. I will let you know. just watch Bullion Vault and Gold Money - which are backed by 400oz bars and which deal in that market every day - for reports of difficultlies in getting 400oz bars and restrictions on how much gold can be bought, and/or if they start to add on a "special" premium to their spot price.
My original quote clearly shows that you are talking about the 400oz bar wholesale market, looking for bullion banks bidding on mint output and looking for restrictions placed on the Gold Money and BullionVault purchases etc.

But to be blunt (And as I think you know full well yourself), the idea that you'll see the overt stress indicators that you suggest coming from the bullion banks actions themselves is quite frankly absurd because the day they show provable supply side issues is the day they default. Which is why I showed how each of the indicators are already clearly manifesting themselves in the gold market. (& though you repeatedly try to pretend that there is this massive separation between stresses in demand in the retail and wholesale market, they are in fact completely interlinked.)
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Old 08-09-2013, 07:05 AM   #16
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But if you want me to address your specific quotes...

Quote :
When I see... bullion banks desperately bidding on the Perth Mint's refining output... I will let you know
1. In times of demand stress the bullion banks are the ones supplying many mints with additional refining input never mind bidding on the output?
2. I'd imagine the bullion banks have preferential contracts in place and ones that prohibit you, a Perth Mint employee from disclosing market sensitive information, so I take your 'I will let you know' with a pinch of salt.
3. If the bullion banks were having issues, instead of people like Perth Mint employees letting the public know about it, I'd expect them to go out and try to convince people of the opposite - 'Don't worry there are not wholesale supply issues' & shi*, look, here you are...


So rather if I was looking for supply problems in the 400oz wholesale market, I'd look for signs of additional central bank leasing, particularly the Bank of England who are a key source of supply in times of stress.

& shi* look a story just in the last two weeks that the BOE may have leased up to 1300 tons in the 400oz wholesale market in the first half of the year

http://www.pmbug.com/forum/f2/bank-e...ince-jan-2596/

Or I'd look for signs that Bullion Banks are running short of supply and/or are being forced to help one another out.

& shi* look at how much of JPM's inventory has been removed this year and also this story from just yesterday

Quote :
while yesterday HSBC released eligible inventory, today Scotia was forced to hand over registered gold straight into JPM's eligible pile: this is perhaps the first time we have seen this happen laterally between two vaults, without an intermediate warrant detachment step. Furthermore, with HSBC moving 43.4K oz from Registered to Eligible, we would expect either another major Comex withdrawal in the next few days from HSBC, or this is merely HSBC making room for further gold "requests" by JPM.
http://www.zerohedge.com/news/2013-0...some-your-gold

But as these don't constitute hard evidence, & people like Potemkin would say 'Rumours, words, stories...' I chose to bring up provable supply side shortages &/or unprecedented demand in the gold market which is of course what creates the wholesale market problems you are witnessing above.

As for your other quote

Quote :
Just watch Bullion Vault and Gold Money... for reports of difficultlies in getting 400oz bars and restrictions on how much gold can be bought,
Really!? How many hours do you think it will take from the time they announce purchasing restrictions to Gold Money to the time they default? I think you know that this is the very last thing they will do, if they don't actually just default first.

If there are demand stresses for gold, I think it's (painfully) obvious that they would rather do their best to try cut demand from the biggest gold consumer, India. (EDIT: Which is obviously why I brought up the restrictions in India and outright temporary import ban in Pakistan as being very indicative of shortages in the wholesale market.) As this would ideally (For the bullion banks) have the effect of decreasing demand for their good delivery bars in that market and also freeing up mint output sourced from the mines & scrap, so that it could then be used to refine new 400oz delivery bars for the bullion banks as opposed to coins and smaller bars for retail.

Last edited by Unbeatable; 08-09-2013 at 12:14 PM. Reason: see 'EDIT:'
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Old 08-09-2013, 12:08 PM   #17
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Bronsucheki, are you able to confirm or deny this claim (at least as it pertains to the Perth Mint) from Bill Haynes?

Quote :
...
Most physical gold sold in Asia carries premiums, especially in India, and bullion banks are moving to fill that void in order to capture those lucrative premiums.

They are doing so by procuring physical gold in the U.S., not only from the COMEX warehouses and ETF liquidations, but directly from refiners. The gold is then converted into forms which Asians are comfortable with -- mainly kilo bars, and then the gold is shipped to Asia.

Several weeks ago I exchanged emails with a rep for a major precious metals refiner about the huge ETF liquidations and speculated that the liquidated gold was in fact going to Asia. After all, the gold coming out of the ETFs and the COMEX warehouses has to go somewhere.

The rep said that my speculation fit well with what his refinery was seeing. He said, “I think you are absolutely right given the level of large institutional demand we see for our kilo bars and 400 ounce bars that are going to New York and London.” New York and London are the off-loading sites for gold being shipped to Asia.

In another email, he said, “The bullion banks were buying as much metal from our company as they could get their hands on, just to ship to Hong Kong and Singapore.” So this is just further evidence that ETF and COMEX gold is going to Asia.
...
http://kingworldnews.com/kingworldne..._They_Can.html
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Old 08-09-2013, 12:19 PM   #18
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Interestingly, Tekoa Da Silva published a very similar piece this morning:
Quote :
I had the chance to reconnect with a source in the bullion management business, whose operations deal on a direct basis with the shipping desks at the GLD. While remaining unnamed at this time, it was a powerful conversation, and he was quite liberal in sharing thought.

Speaking to what his group is hearing from the main GLD custodian, he noted that, “GLD is collapsing in [terms of] the number of share issuance, and [is] being redeemed…we are hearing from my end…that the GLD main custodian has been collapsing it and redeeming it, and that gold is just being shipped via their shipping desk directly to Asia.”

He further added that, “It is quite clearly a major establishment using their shipping desk to ship gold bullion, and potentially having it re-smelted down in Singapore, Hong Kong, etc. It (the gold) is moving.”
...
http://bullmarketthinking.com/gld-is...ectly-to-asia/
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Old 08-09-2013, 12:25 PM   #19
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This thread started quite a controversy...
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Old 08-09-2013, 08:32 PM   #20
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Originally Posted by Unbeatable View Post:
But to be blunt (And as I think you know full well yourself), the idea that you'll see the overt stress indicators that you suggest coming from the bullion banks actions themselves is quite frankly absurd because the day they show provable supply side issues is the day they default.
Nope, it is not a sudden event, it will build up over time and signals will be given, see http://www.goldchat.blogspot.com/201...strust.html‎ (that does need some refinement but the basic idea is there). Bullion banks, just like any bank, will do everything they can to drag out and avoid a run, they aren't just going to throw their hands up at the first sign of trouble. Those "do everything" will be gradual at first and will be visible to us in the wholesale market who know what to look for.

Originally Posted by Unbeatable View Post:
Which is why I showed how each of the indicators are already clearly manifesting themselves in the gold market. (& though you repeatedly try to pretend that there is this massive separation between stresses in demand in the retail and wholesale market, they are in fact completely interlinked.)
There is separation between retail and wholesale. Most of the retail problems/premiums are driven by production capacity shortages rather than shortages of raw gold or silver. For example, during the 2008 financial crisis the blogosphere was going crazy about shortages of silvers, particularly, yet the Perth Mint was shipping in 20 tonnes of silver each week from London for about 20 weeks on end. Go and have a look at my blog around that time.

The indicators you mention are just indicators of strong end user demand, not a run on the bullion banks nor any stress at that end. India premiums reflect the restrictions the Govt has put on, something they have been ratching up for a long time well before this talk of a run/stress and driven by a CAD problem. It hasn't affect demand much at all - instead of the shipments of gold we sell going to India they have suddenly started going (demand coming from) dubai and thailand, funny that.
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