Central banks buying gold

http://www.blacklistednews.com/8_tr._in_Gold_vs._750_tr._in_derivatives/17349/0/0/0/Y/M.html paper and electrons can be expanded to gigantic proportions. Gold however cannot be printed or multiplied with electronic computer entries. The ratio of paper assets, currrently being inflated and defaulted to gold is ridiculously high. almost 100:1

Guess what, the paper will not maintain value. duh! it never does over the long term.
the only reason i accumulate silver and gold is for retirement, planned about 30 years from now. i dont believe any other asset will maintain value as well as silver and gold over the next 30 years. and definitely none of the paper assets.

DoChenRollingBearing said:

Well here is my take on FOFOA, gold standard, etc.

His prediction (and he says it is almost inevitable) is that the 100x paper gold claims on each physical ounce (and maybe other things could happen too) will at some point "break" paper gold, which means that "paper gold" may very well go WAY down (as paper gold becomes worth less or even "worthless"), while physical gold goes into hiding... Until the markets settle down, and we will find that physical gold will only be available at a price of $55,000 (FOFOA even gives a 2 standard deviation range: $25,000 - $85,000).

At $25,000, that would make the FED's gold (currently valued at $11 bn @ $42.22 / oz) worth a cool $595 bn. Also, if Ft. Knox (etc. storage of US gold) has the 8000 tons, that number works out to a similar $440 bn.

Double those numbers if we go to 55k.

FOFOA believes that hyperinflation is ALMOST inevitable as well.

He DOES NOT back a gold standard! Too inflexible, and it would likely get abused anyway (fractional bullion banking).

It is impossible for me to summarize his logic, it is too big a topic, his Freegold idea. You will have to tackle the subject on its own at his blog:

fofoa.blogspot.com

---

Also, note how Greece (and Italy, or even the USA) have very mum about using their gold to pay down their debts. Why? Because they do not feel that current price is actually the true value of their gold!

In fact, I have not seen EVEN ONE .gov entity anywhere offer to settle their debts in gold! That means something... I think that means that gold will go WAY UP!

Click to expand...

i find this analysis bovine. lets see, at 42.22 bucks the 261 mio ozs are worth indeed 11.01942 billion. at 25,000 bucks they are worth 6.525 trillion. ok, ok, anyone can get the math wrong by an order of magnitude.
but wait, 100x more paper gold than physical? pifles. this is bovine excrement. perhaps smoking some nasty stuff. certainly not on this planet.

then he takes complete leave of any semblance of reality. "gold only available at 55,000" hehehehe. this guy is delusional. come on. get real.
at that price jewellery is turned to bullion faster than the speed of light and the miners are more than happy to sell at a fraction of that price.
on his ideas of free gold i wouldnt speculate, because if they are as stupid as his analyses of gold prices and availability, then its not worth the time.
at any rate, a gold standard, pure and hybrid is stupid the the nth degree, a barbarous relic unworthy of human beings in the 21th century AD. gold is a great investment though, but would be very detrimental if used as standard of value.

anyone who tells you nonsense that there are 100x or 1000x or even 10x more paper gold or silve ounces than physical is an idiot, a fool or a liar.
such is just precious metal porn, not a solid analysis based on facts. :flail:

there are about 5.46 billion ounces of gold above ground. 100:1 paper to physical would imply there are 546 billion paper gold ounces floating around. there are also over 17 billion silver ounces above ground a 100:1 ratio would imply 1.7 trillion paper silver ounces. this is ridiculous. a claim of fools and morons. there isnt that much money in the world.

as a silver and gold bug i am all for the physical stacking and i welcome a great price rise for both metals. but staying the reality is also important. peddling precious metal porn and disinformation is disgusting and should revolt anyone with a love for truth.

So taking from what you've said, Silver_Bug, you don't believe the folks at GATA either? They've been saying what FOFOA is pretty much echoing, for over 8 years or so, I think. Just curious about how much credibility you give any of the Rehypothecation claims by trading insiders in the gold market.

Silver_Bug said:

there are about 5.46 billion ounces of gold above ground. 100:1 paper to physical would imply there are 546 billion paper gold ounces floating around. there are also over 17 billion silver ounces above ground ...

Click to expand...

Where do you get your figures from?

One thing some of these guys never focus on is the supply/demand equation. i think its helpful to look at money supply, national debts, credit mkt debt to get an idea of where gold can go but you also can't forget the supply picture. at the end of the day these are traded commodities. if prices go up dramatically that could hurt industrial demand, jewelry, and people will come up with more scrap metal, mine more etc. just a thought.

does this FOFOA ever address the supply picture? seems to me you can't look at things in a vacuum.

Dow Jones news is carrying a report this morning from GFMS (formerly Gold Fields Mineral Services) detailing the amount of gold purchased last year by the world's Central Banks. It was indeed a formidable number.

The net purchases of the yellow metal came in near 430 tons, a more than 5-fold increase on the previous year. It was also the highest level recorded since 1964.
...

Click to expand...

http://traderdannorcini.blogspot.com/2012/01/gfms-reports-substantial-offtake-of.html

Russia cuts it's treasury holdings in half during the last year.
Anyone wonder what they did with all these dollars?

Vodka. Lots and lots of vodka.

We know they added to their gold reserves.

escobar said:

One thing some of these guys never focus on is the supply/demand equation (...) if prices go up dramatically that could hurt industrial demand, jewelry, and people will come up with more scrap metal, mine more etc. just a thought.

Click to expand...

I doubt it will happened. If prices start to rise dramatically, in an increasingly volatile and unstable environment, small time investors, regular Joe's with jewelry, etc. (=potential scrap metal suppliers) will hold dearly onto their only tangible & sound stores of wealth (=silver cutlery, some gold jewelry etc.). They will only trade as much as they need/have to, and hoard as much as they can.

Industrial demand is a non-issue for the price RISE part of things - it will be simply pass onto consumers, the amounts used in a single product are tiny (that is why it is not economical to recycle most of them, and they end up on the landfills). Although if the economy collapses (so people stop buying smartphones, iPads, solar panels et all), that might impact the prices on the FALL side (significantly less demand for Ag from industry = significantly more supply for investment purposes). But in this case I think we will be looking at a serious case of SHTF, with markets collapsing around us and sending us back a couple of centuries, and in this case, "thou holding the gold"... you know. You'll be OK if you are prepared to protect it.

As for the "mining more" argument. I just don't think you can balance huge swings in investment demand (all that "monopoly money", trashing frantically all over the place, from port to starboard side, trying to find some "safe" place to be, along with the want to jump onto "the next big thing") by ANY physically manufactured commodity. Monopoly money is not constrained by the mundane realities, that all other branches of real, tangible, productive economy are - investment lenghts/timelines, physical-world time and effort constraints that has to be overcomed, before new mines are put online, etc... [EDIT: added]Therefore, there is about an order of magnitude more Monopoly Money in this world, than the global tangible, physical economy's GDP. Can you imagine even a fraction of that money, being pumped into gold/silver - and even assuming doing it orderly, and not in panic? No amount of new mines will suffice, to supply that amount and keep prices from going ballistic, simply no way. Not to mention, Monopoly Money wants everything NOW, and mines take time to start supplying stuff. Like, years

And the funniest thing is, it is clear as day to me (as green as I am in financials, which is RGB value of (0,255,0) ) that today's market is nothing but a headlines-driven. Just a sheeprats race, with a complete and utter disregard to any fundamentals. [EDIT: added] So all it takes, is few more inevitable doom & gloom headlines, instead of today's "everythings fine, we are finally off the rocks, there are off shots of recovery visible, tada!" - and we're back to square one. Only, with few more trillions of debt to pay off eventually, and to service it NOW, with some more trillions multiplied by ten by fractional reserves banking to spend on things/or to "invest" into..., emm..., whatever it is, that everyone else is investing in today... - I know! Twitters/Facebooks/Zyngas (high inflation, anyone? volatile, unproductive markets, anyone?), and without the slimmest chance to prevent the inflation, by rising the interest rates - because of that thing, whatsitsname, ah yes - totally out of touch with reality amounts of DEBT, that couldn't be serviced, if interest rates are to rise AT ALL.

Also, I firmly suspect short term Gold might and will be outperformed by stocks, and possibly, as a resut, even by fiat currencies (="falling gold prices") and if I could only predict, when the stocks will eventually collapse again (under another controlled set of doom & gloom headlines, I suppose - because NOTHING has fundamentally changed since 2007/8 crash, apart from taking on new mountains of debt, but we have already enjoyed few roller-caster ups in the stock markets...), I would probably invest in stocks ATM, and convert them back into phys' few months from now in the future. Too much risk for me, though, I could very well miss the moment, I am not a trader - so I will keep to something that is long-term safe and sure as hell to rise - phys PMs. How much they will eventually rise, and when, precisely - anyone's guess, but I do not have a second life to keep watching the headlines and :flail: invest like 99% of "pros" :flail: are doing, I have a job & life & SHTF preparations plan to execute...

regards,

mmmm sheep rats .......

s'pose we could eat em ........ and save the sheep (-:

Philippines is where Ben Fulford says theres lots of 'unrecorded ' gold held.

Is this why they can be the largest seller ?

Any records for previous years ?

The Phillipines is the largest recorded seller.

Iran is practically begging to be "Libya'd":

TEHRAN (Commodity Online): Iran has more than 900 tonnes of gold, as per a national newspaper report, more than India and Japan!

As per the World Gold Council data of Aug 2011, this makes Iran the 10th largest holder of gold reserves in the world, beating Japan and India who both have 843.3 tonnes and 614.6 tonnes of the metal respectively.

Fars News Agency quoted Yahya Ale-Eshagh, Chairman of the Tehran Chamber of Commerce as saying that his country has 907 tonnes of Gold and $120 billion in foreign currency reserves. As such, Iran has no shortage of foreign funds to meet any obligations that may arise, he added.
...

Click to expand...

http://www.commodityonline.com/news...more-gold-than-india-and-japan-45761-3-1.html

PMBug said:

Iran is practically begging to be "Libya'd":

Click to expand...

even more so if Chindia actually pays for crude with gold .....

A sharp fall in gold prices has triggered large purchases of bullion by central banks in recent weeks, according to several traders with knowledge of the transactions...“Central banks have definitely been looking at gold as an asset class much more closely ever since European central banks stopped selling,” a senior gold banker said. “There has been a huge interest.”

Click to expand...

The quote is from the Financial Times: ...

Click to expand...

http://truthingold.blogspot.com/2012/03/sharp-fall-in-gold-prices-has-triggered.html

I'm not real sure I'd put much weight on Iranian reports...it's just the kind of things governments say when their economies are in the crapper - which theirs is.

"there are about 5.46 billion ounces of gold above ground. 100:1 paper to physical would imply there are 546 billion paper gold ounces floating around. there are also over 17 billion silver ounces above ground a 100:1 ratio would imply 1.7 trillion paper silver ounces. this is ridiculous. a claim of fools and morons. there isnt that much money in the world"

@silverbug

even if 5.46 billion is our number, and that's fine if it is, that doesn't mean that that is the amount traded on the market. i would argue that the overwhelming majority of above ground gold and silver isn't available ( i'm certainly keeping mine) and therefore is most likely not considered in the market supply. central banks around the world are buying tons, literally. i feel pretty confident in saying they aren't letting theirs go for a while either. at least this is only my assumption. when people refer to the paper to phyzz ratio at 100:1 or 10:1 or whatever, i would guess that is either a reference to what is actually traded regularly including naked short selling or is a statement designed to reflect the disproportionate magnitude of paper to physical trading as opposed to a hard number.

going further, i read in many places where the world derivitives market is worth around 700 Trillion. i wouldnt' guess there was THAT much money in the world either, but i would at least open my mind to the possibilities before i called people fools and morons.

KWN's "London trader" had some intriguiging innuendo:

...
The 50 tons of physical gold taken on the 29th of last month was just the start of some very large drawdowns of physical metal. The bullion banks also know there are stacks of orders from sovereigns at lower levels, so they have to be careful how they handle the tape here.

For what it’s worth, those sovereign orders are looking to move to higher levels. At the same time the bullion banks are harvesting the weak-handed COMEX players. So if they have 10,000 contracts to cover into, they could care less if that costs them 5 tons of physical gold when they drop the price a bit.

This is why the bullion banks will probably counter sovereigns raising their bids by moving gold back above the 200 day moving average. This would be done by the bullion banks to prevent those sovereign orders from being filled, even when they are raised.

On a separate note, those that have been calling for gold to collapse to $1,200 are completely unaware of what is taking place in the physical market. Who is going to sell it down to those levels? Hypothetically, if it were to drop below $1,600, China would literally be buying hundreds of tons of gold.

Why would the West give China that gold at discounted prices? Yes, the bullion banks act on behalf of the central banks to manipulate the price, they act as agents, but the central banks and their agents are also aware that the Chinese are building up their gold reserves. This is the bigger picture which the gold bears do not understand.

Click to expand...

http://kingworldnews.com/kingworldn...overeign_Gold_Buyers_to_Raise_Their_Bids.html

Thank god the UK isn't considering to buy gold, because this would mean the bull market is over.

UK Treasury says no plans to add to gold holdings
The UK Treasury said on Wednesday there were no plans to add to Britain's gold reserves, after finance minister George Osborne said in a presentation of the budget that he would take the opportunity to rebuild the country's reserves.
"What the Chancellor (finance minister) is talking about here is rebuilding the official reserves, so it's not gold-specific. It's just over financing the deficit this year by 6 billion pounds ($9.51 billion) in 2012-13 to build up the official reserves," a Treasury spokesman said.
Osborne said in presenting the country's budget for fiscal 2012-2013: "We are also taking the opportunity to rebuild Britain's reserves, which had fallen to historically low levels. I can confirm our gold holdings have risen in value to 11 billion pounds."
When asked if the Treasury had plans to increase the amount of gold Britain holds, currently 9.975 million ounces, valued at 11 billion pounds ($17.44 billion), the spokesman said: "There aren't."
Britain famously sold more than half of its gold reserves in 1999, shortly before bullion started a blistering rally that took prices to a record high of $1,920.30 an ounce in September 2011 from below $300 an ounce at that time.

Click to expand...

http://uk.reuters.com/article/2012/03/21/gold-britain-idUSL6E8EL9AS20120321

What money would they be using to buy gold were they so inclined? :rotflmbo:

NICE, swissaustrian! LOL!

The stinging whip touching the Bank of England. Maybe when Gordon Brown is back they will buy some gold at $55,000...

Russia And Mexico Both Buy Nearly $1 Billion Worth of Gold in March
...
IMF data released overnight shows that Mexico added 16.8 metric tons of gold valued at about $906.4 million to its reserves in March.

Russia continued to diversify its foreign exchange reserves and increased its gold reserves by about 16.5 tons according to a statement by its central bank on April 20.


...

Click to expand...

More: http://www.zerohedge.com/news/russia-and-mexico-both-buy-nearly-1-billion-worth-gold-march

Beat me to it...

This helps explain why there is a bid under gold.

Also.. I guess Gartman was wrong about Russia no longer being a buyer. What a buffoon.

PMBug said:

What money would they be using to buy gold were they so inclined? :rotflmbo:

Click to expand...

we also have a tool called the printing press .........

but it seems we would rather print and give it to IMF / EBC, cos their needs are greater

...all these recently announced Central Banks purchases of gold, and the gold itself is going nowhere, or slightly down. This begs two questions: are these CB operations conducted behind closed doors (ie between the CBs themselves-but who's the net seller in that case?), and not on the open market? Or, are those purchases made on the open market, but how possibly gold price is not going up?

Either way, the so called open market in gold, seems to be non functioning in it's current form

Regards

bushi..

Central bank purchases are done both in public and through private parties. Central banks also go through intermediaries to acquire stakes in mining operations then make direct purchases of the bullion through these companies. China has been very active in this. I'll be able to speak more about this in a few weeks.

bushi said:

... This begs two questions: are these CB operations conducted behind closed doors (ie between the CBs themselves-but who's the net seller in that case?), ...

Click to expand...

I'm guessing they are buying directly from the miners / mints, not on the open market.

http://www.pmbug.com/forum/f2/mark-cutifani-major-buyers-finding-’s-hard-get-physical-gold-281/

the jackass reckons 80% is off market -

http://www.marketoracle.co.uk/Article34101.html

Ive been told by someone supposedly 'in the know' that its even more than that.

..OK, that's most probably true - but let's follow through; so they are buying directly from producers - in so doing, they shall reduce the supply of physical metal in the open market - if we assume (and I think it is a safe assumption), that miners were not in a position to increase their output on a whim, to match these CB orders. If they ever were, gold would not be in the role of gold - you know what I mean, it differs from paper in that "supply" part of the equation .

So, we have tighter supply, but price does not move upwards, in fact, is going slightly down all the time when CBs are stuffing their vaults as fast as they can? That would have to imply, that the DEMAND on the open market has decreased exactly as much (actually, slightly more), than the supply has been reduced, by CBs buying out the miners' production, before it hit's the markets? Doesn't seem very probable, that one.

Which part of the supply/demand relationship I am missing here (the one with manipulated market prices, I suppose )? Secondly, can they really engineer the price of metal to such a degree, with such a precision, and if so, for how long? I mean, it (normally*) SHOULD be read that way - IF CBs were currently NOT buying the yellow stuff in truckloads, tightening the open market supply, price would go down through the floor - no? Obviously there is very little reason for that kind of action in gold price, but that's what it seems to me*

*if the market is still ANYTHING about real price discovery, and not price manipulation ONLY.

All in all, I think it is given at that stage, that we are heading (and fast) to some sort of a global/local currencies backed by a Gold Standard of some sort, question remains, would Joe Shmocks like ourselves be able to participate in the upcoming gold's success, or are we to be shot down by big boys & gubbermints one way or another (to prevent small time investors/gold bugs from getting their piece of the action)?

Funny thing, how we have to discuss policies and try to anticipate govt's actions, rather than investors', to make sense of today's markets... What a bunch of nonsense it is....


EDIT: slightly off topic, but it just hit me: in Yurp, Gold is exempt from VAT (VAT is in effect a sales tax, technically it is not, but the cumulative effect is being pushed on the final consumer, so in reality, is as good as), silver is not VAT -exempt. I wonder why it is so???? Yet another "Tradition", I suppose?

Supply/demand/price is set by the paper markets. They don't necessarily correlate to the physical market. I don't know how much physical stuff the LBMA/COMEX really have in their vaults or how much they are re-hypothecating the stuff. It's still not clear to me if they are even delivering physical metal for contract redemptions.

So, I'm thinking about what happens when the rest of the world dumps the dollar. Let's pretend the Fed isn't as stupid as we all make them out to be for one minute. Let's further presume that they have been surreptitiously printing fiat dollars and buying gold and silver from producers through intermediaries. It is entirely possible that the end game comes when the US announces they are devaluing the dollar by 50% or something, prompting a tidal wave out of everything US. This in turn further devalues the dollar as all those dollars hit at once and no one wants them. Let's further presume that by this time we are in a global depression and the EU has broken up, banks have imploded, etc. Now, with all the paper gone, and the world desperate to have a solid basis for money, the Fed announces the creation of gold backed currency, fully convertible. Then, a little while later, they disclose that the Treasury is in possession of 40 or 50 thousand tons of gold, the largest stockpile in the world by many multiples.

Possible? Yes. Probable? No. However, if I were the Fed and colluding with the treasury during what is arguably the most dangerous time in our fiscal history, that is precisely what I would do.

ancona, first I do not know if the Fed is even allowed to own its own gold, but that's a minor point. You raise two great points I would like to expand a bit.

I think you are correct that the Fed and Treasury, and well almost all high-level decision makers there in DC are NOT stupid. Senator Tom Coburn, in his brand new book (The Debt Bomb) says just that: that they all KNOW we are going off the cliff (sooner or later) but few have the cojones or the political will to do anything (as they would likely lose in their re-election bids). And/or their other privileges...

Second, FOFOA raises a possible stunt the Treasury and Fed (my how difficult it is to see where one's role starts vs. the other's...) could one day just offer to buy "any and all gold" for an arbitrary high price (say, $5000 or $10,000 / oz). Clearly a lot would come in... But, how much once the price floor is set? Doing that would indeed signal to the world that our Keynesian policies have failed, big time. FOFOA then goes on to write that Freegold would soon then be upon us (his latest approx. price target: $100,000 / oz).

Exactly DoChen.

If the treasury were quietly and patiently stacking gold, and if they hav3e been doing it for ten or twelve years, they could easily have picked up a shit mountain of it. As you say, they could offer some arbitrarily high price, get thousands of tons, then drop the debt bomb, immediately devaluing all that fiat they just paid for the gold, then build up from the bottom as the largest holder of gold on the planet. The rest of the world then follows suit.

Unfortunately, I think China is the one following this stealth strategy of buying gold by the ton in anticipation of remonetization. Not the USA.

I agree that China is stockpiling huge quantities of metals, and not just silver and gold, they are stockpiling copper and brass as well. I understand that China does not export silver or gold at all, and that all domestically mined precious metal stays in the country.

Turkey's central bank raised its gold reserves by almost a fifth in July taking its total holdings to 9.3 million troy ounces, data from the International Monetary Fund showed on Friday.

The IMF's monthly statistics report showed that Turkey's gold holdings rose by 18 percent or 1.4 million troy ounces.
...
Russia's central bank increased its gold reserves by around 0.6 million troy ounces last month, taking its total holdings to 30.1 million ounces, the bank said earlier this week.

Other central banks with significantly smaller reserves - Belarus, Sri Lanka, Moldova, Ukraine, Kyrgyz Republic and Kazakhstan - added to their reserves in July, but the increases were incremental. Kazakhstan, which purchased 45,000 troy ounces, was the largest.

Guatemala and Mexico sold a small portion of their stockpiles.

Click to expand...

http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=157661&sn=Detail

...
The IMF reported that various countries continued diversifying into gold in July, some significantly.

South Korean gold reserves rose a sharp 16 tonnes for a 30% increase in total gold reserves.

Paraguay became the latest central bank to begin diversifying into gold. Their gold reserves rose sharply - from a few thousand ounces to over 8 tonnes.

Desperate North Korea has exported more than 2 tons to gold hungry China over the past year to earn US $100 million. Even in tough times during the Kim Il-sung and Kim Jong-il regimes, North Korea refused to let go of its precious gold reserves.

Chosun media reports that “a mysterious agency known as Room 39, which manages Kim Jong-un's money, and the People's Armed Forces are spearheading exports of gold, said an informed source in China. "They are selling not only gold that was produced since December last year, when Kim Jong-un came to power, but also gold from the country's reserves and bought from its people."

This is a sign of the desperation of the North Korean regime and also signals China’s intent to vastly increase the People’s Bank of China’s gold reserves.

Data on the International Monetary Fund’s website shows Kazakhstan’s assets rose 1.4 tons to 104.4 tons last month, Turkey’s gold reserves gained 6.6 tons to 295.5 tons, Ukraine’s rose 1.9 tons to 34.8 tons.

While the Czech Republic’s bullion assets fell 0.4 ton to 11.8 tons, data shows.

Nations bought 254.2 tons in the first half of 2012 and may add close to 500 tons for the year as a whole, the London-based World Gold Council said earlier this month.

The trend among central banks to diversify their foreign exchange reserve holdings with gold continues.
...

Click to expand...

http://www.zerohedge.com/news/2012-...serves-south-korea-increased-gold-reserves-30