gold: how to manage your investment

8/13/2019 Gold: How to Manage Your Investment

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october 2013

GoldHow to Manage

Your

Investment

F O C U S

Special Report : Gold



S p e c i a l R e p o r t : G

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SUMMARY

Introduction 3

I) Understanding the monetary system – understanding the role of gold 5

A) Understanding gold 5

B) Relative implications 7

II) How gold is manipulated 8

A) How central banks intervene to distort the gold market 8

B) Proofs of manipulation and intervention on the gold market 10

III) Indicators and the end of manipulation 12

IV) Gold confiscation : a real threat? 14

A) Risks of confiscation today? 14

B) The impossibility of imposing worldwide confiscation of gold 14

C) The confiscation of deposit accounts is a much closer reality than gold confiscation 15

V ) A look on the recent gold crash : Was there any manipulation? What lessons should we learnfrom it? 16

A ) A well-thought-of scenario? 16

B ) An incredible reaction from the gold physical market 16

C ) Physical gold shortage? 17

D ) Dichotomy between the paper and physical markets 18

E ) Beware of GLD 19

VI ) How to buy physical gold : practical advice 20

A ) For the active investor wanting to go « in and out » of physical gold 20

B ) For the investor looking for wealth preservation through gold bullion ownership 20

C ) For the all-in-one investor 21




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Gold : The Indispensable Lighthouse for Managing Your Wealth

By Fabrice Drouin Ristori

Introduction

If you own gold or are interested in investing in gold to protect your wealth, its price over thelast two years must surely be leaving you wondering.

This correction is hard to understand for many investors, as the economic, financial andgeopolitical context is degrading.

Has gold stopped playing its wealth preservation status ?

Understanding gold, as an asset, is not so easy. It’s nearly impossible to grasp the true natureof this investment without being aware of the different elements we’re going to address inthis report.

Let’s use a metaphor to better understand

You’re a pilot... and you’re piloting your investments as well as you can in a chaotic and

uncertain environment. You’re doing the best you can using the available information anddata, such as interest rates, inflation, yield, currencies... tr ying to integrate all this informationin order to take the best decisions for your wealth.

The first step will consist of becoming aware that all the decisions you have made were madeby reading false indicators. Thus, I’d bet your decisions haven’t been the best ones.

You have to realise that you’re piloting a plane on which all electronic signals are wrong.And, to make matters worse, you also have to ignore the false information the controltower (mass media) is giving you.

In order to get out alive, you must fly by sight only, your only information coming from whatyou see physically through your windshield, which necessitates a lot of experience and self-assuredness.

Applying this metaphor to gold brings the following questions :

• Why are the indicators being skewed?

• Who benefits from distorting those indicators, when our wealth depends on them?

• How are those indicators skewed, both the ones in your cockpit and the ones from thecontrol tower?

These questions bring about other ones :




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• Are there still any indicators one can rely on to make sound investment decisions? Whatare the real indicators that you can trust to « pilot » your investments for your bestinterests?

• What are the solutions available to guarantee your odds of financially surviving in thisdistorted environment?

The objective of this report is to provide the keys for analysing the price of gold and to helpyou understand why owning physical gold is paramount for the protection of your wealth, in

the actual context.




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I) Understanding the current monetary system andthe role of gold

Note to the pilot : do not trust your instruments, they are giving false readings

A) Understanding gold

1 - Since 1971, when president Nixon decided to close the «gold window», wehave been living in a system of flat currencies that are no longuer convertibleinto tangible assets.

Monetary creation is based on a fractional reserve system that lets the banks createmoney with a weak currency, or even with no currency at all.

Money is being created through the issuing of debt. And, since 1973, money printingis the sole privilege of a private banking system.

With debt comes interest that has to be repaid. In France, until 1973, before thePompidou law, the State could issue its own money without having to pay anyinterest (zero rate). That came to an end. One can judge the pertinence of such a lawby witnessing the explosion of sovereign debt since.

Today, there is absolutely no limit to monetary creation, as we can conclude fromthe billions of dollars, euros, pounds, yuan and yen created in the last two years to «save » the financial system. Thus, no limit to the erosion of your capital; no limit to the

loss of purchasing power of the currencies, in which your savings are denominated.One must absolutely understand that each new euro created mathematically erodesthe value of the ones created before. Proven mathematics, in any era.

Prior to 1971, currencies were convertible into US dollars which were, in turn,convertible into physical gold.

The amount of money in circulation then was directly dependent on theexisting gold stocks, which de facto limited money creation and instilled somediscipline with the central banks. The bank notes were « guaranteed » byphysical gold.

Today, contrary to the pre-1971 period, the value of the currencies is based entirelyon the trust we have in them. The bank notes in your wallet are only guaranteed bythe trust, or faith, that owners of said notes hold toward them. If this trust shouldone day falter, the value of your currency would crumble, and you would have norecourse.

Too few people, today, understand our monetary system; it is of the utmostimportance to understand its bases in order to realise the interest of investingin gold and to understand gold’s historical role as the basis of a sound monetarysystem.

2-Gold is the main gauge of the value of the currencies, thus of the interestrates and, by extension, of the sovereign bonds.

Gold acts like the proverbial canary in the mine. It reflects the destruction of a




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currency’s value when it is over-issued, as it is, by creating debt.

An analysis published in 1988 by Robert Barsky and Lawrence Summers, « TheGibson’s paradox and the gold standard », explains in details the historical relationbetween gold and interest rates. You can read it here .

The first thing to understand is that the nominal interest rate (the one you seeon the market) differs from the real interest rate, which takes into account theanticipated rate of inflation.

Thus, the real interest rate equals the nominal rate minus the anticipated rateof inflation. This notion has to be well understood.

If you invest 100 euros and the nominal rate is 5%, you earn five euros. But if inflationis at 4%, your real yield is 1%. You only earn one euro.

Now, back to Gibson. What can we learn from him?

He shows us that, in a free market (emphasis on ‘free’), the price of gold is inverselyproportional to the real interest rate (long-term), not to the nominal interest rate. Whichis logical, since the former takes into account inflationary anticipations.

• If the real interest rate goes lower, it’s a sign that anticipated inflation is rising faster thanthe nominal rate. Historically, this situation has been favorable to gold, since the metal isthe best weapon one can use to protect one’s capital from eroding due to inflation.

• On the other hand, if the real rate goes up, it means that inflation is loosing steam.Historically, this has always been unfavorable to gold.

In other words :

• When a rise in real interest rate is due to the nominal rate rising more than the rate ofinflation, it threatens the price of gold.

• On the other hand, if the nominal rate rises slower than inflation, the real rate goes down,and this is good for the price of gold.

What is favorable for gold is a situation where economic agents expect inflation and the realrate gets lower. In that case, long-term sovereign bonds see their yield « eaten up » by inflation: real rates are low or even negative.

Gibson demonstrates graphically the inverse correlation between the price of gold and the

real interest rate. But, since 1995, this correlation cannot be verified systematically... the priceof gold is dropping while the real long-term interest rate is dropping as well. Why?

In 1980, when gold was peaking, the real interest rate was negative, at -2%. Gold got into abear market only when the real interest rate got to +8%.

Today, the real interest rate, even though it’s creeping back up a little, is close to zero, andeven negative in certain countries. Why isn’t the price of gold at its highest? Curiously, sincethe last few years, it seems the thermometer is broken, because this correlation is not thereanymore.

In the absence of any interference, e.g. in a free market based on gold supply and demand,Gibson proves that a falling real interest rate brings about a rise in the gold price. Could it be

that the loss of correlation be due to interventions on the gold market?

http://www.gata.org/files/gibson.pdf






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Interestingly, Barsky and Summers conclude that it would be impossible for the monetaryauthorities to control interest rates (laxist low-interest monetary policy) without, at thesame time, controlling the price of gold...

B) Relative implications ?

When the price of gold goes up in a currency, it means that the trust in that currency isdiminishing. If trust in a currency is faltering, States have to pay a higher interest rate to theinvestors to whom they want to sell their bonds to finance themselves.

Gold is thus at the basis of the determination of interest rates and the value of currencies.

Since interest rates determine the value of the Treasury bonds issued by governments (largelyheld by banks and States) and of all derivative financial products, it ’s not hard to understandwhy controlling the price of gold and the interest rates is paramount for the pundits of theactual monetary system. A rise in interest rates would crumble the financial system by aseries of chain reactions.

Manipulating the price of gold is highly strategic in maintaining trust in the actualmonetary system and stability in the banking system.

This manipulation is destroying the working mechanisms of the free market.




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II) How gold is manipulated

Before expanding on the matter, let’s recall that manipulation of interest rates is a provenfact. The LIBOR scandal that came to light a few months ago is proof that the banks havebeen intervening on the interest rate markets.

A) How central banks intervene to skew the gold market

Western central banks wish to sustain the actual monetary system, and especially the USdollar, the world’s reserve currency. It’s in their best interest, since they largely dominate thissystem.

They wish to control interest rates and Treasury bonds, thus they intervene on the gold

market. Because gold mirrors the loss of faith in currencies, it must be controlled so thatit doesn’t show reality as it is.

How do central banks intervene to skew the gold market? They intervene in many ways, andsome of those interventions have evolved over time.

➤ In the 1960’s, they were selling physical gold directly on the London market to push itsprice down. But this « technique » ended up being way too costly and contributed to thedefinitive vanishing of the vast gold reserves the banks had.

➤ Today, price manipulation is done in a much more virtual and sophisticated fashion,through interventions on the COMEX market and the creation of « paper » gold.

Here are the different tools they’ve been using to move the price of gold either way they seefit :

1- Through swap arrangements with bullion banks, selling physical governmentgold on the market.

Up to just a few years back, this mechanism was operating, but it ceased progressivelybecause it was becoming too costly in real physical gold.

Central banks lend or lease the gold they « hold » on behalf of the governmentsto the bullion banks. These same banks then sell the physical gold on the marketand invest the proceeds from the sales in Treasury bonds that guarantee risk-free

income, thanks to the interest paid by the State. This is known as the Gold carrytrade, which lets the banks realise three of their objectives :

• Manipulating the price of gold to the downside (by creating supply to themarkets)

• Guaranteeing revenue for the bullion banks

• Supporting the value of the sovereign bonds

The progressive tapering of this mechanism does not alleviate the fact that thebullion banks will have to reimburse this gold leased by the central banks,one day. They have what’s called an enormous short position on gold. At the end, in

order to reimburse this gold, the bullion banks will have no other choice than buyingphysical gold on the market to give it back to the « lending » banks.

http://www.telegraph.co.uk/finance/libor-scandal/9572029/Libor-the-facts.html

http://www.telegraph.co.uk/finance/libor-scandal/9572029/Libor-the-facts.html




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This manipulation mechanism is to be viewed in the light of the recent goldrepatriation demands from many countries. When a country as important asGermany decides to ask for its physical gold to be repatriated, it shows that theGermans are much worried about the possibility of getting back its physical goldstored in the United States, England and France. Not to mention that it will take seven years fot Germany to gets its gold back. This delay couldn’t be explained

logically if the gold really were in the New York Fed vaults, as well as in England orFrance. The leverage between « paper » gold and physical gold, 100-150 / 1, shouldraise concerns, because when the music stops, there won’t be enough chairs togo around (physical gold). Germany just reserved its chair, Venezuela was thefirst to do it a while back, and this movement will accelerate, as I’ve been explainingfor over a year. Last country to date, Switzerland.

2- Selling futures contracts and options on gold, notably on the COMEX, usingbullion banks as intermediaries.

To recapitulate, enormous quantities of short contracts are sold in a very shortperiod, at times when markets are the least liquid, to make the price plunge. Here’s

an example :

The day before Ben Bernanke’s press conference on the future of the Fed’s monetarypolicy (last December), the gold and silver prices were, once more, victims of «assaults » the very moment COMEX opened at 2 :30 p.m. (Central European Time).

Many analysts were expecting a new important plan of asset buybacks by the Fed,a QE4, to replace « Operation Twist », due to end this year. With this new wave ofdisproportionate « monetisation », the prices of gold and silver should have reactedstrongly to the upside (what they will do progressively, starting December 12). But,especially the days preceding official announcements of quantitative easing, no linkmust be established between gold’s performance and inflationary monetary

policy.

Since gold and silver act like a « canary in the mine » or, in other words, show thedollar’s depreciation, it becomes paramount to manipulate their prices so thatinvestors do not connect the dots between money printing and the currency’spower of purchase destruction. Such a devaluation usually materialises by a risein precious metals’ prices.

3- Swap operations between central banks

Gold held by a central bank is lent to another central bank that sells it on the markets.The central bank that leased the gold (or swapped it) continues to show this gold aspart of its balance sheet just as if it still possessed it, even though this gold doesn’t

exist anymore, having been sold on the markets.

4- Diversion of the massive gold demand toward « paper-gold » type financialproducts

By « paper » gold, we mean certificates, trackers or ETFs. The size of the « paper »gold market is anywhere from 100 to 150 times the size of the physical gold market,gold that really exists.

Many investors are under the impression that they’re holding physical gold, wherasall they’re holding are paper promises. All those financial products, which never letthe buyers verify the existence of the actual gold, are used to divert the massive

physical gold demand from investors toward non-existent virtual gold, thuscreating more supply on the market and depressing the price. Investing in « paper »

https://www.goldbroker.com/news/germany-announces-end-game-musical-chairs-gold-190.html


https://www.goldbroker.com/news/bankrun-physical-gold-switzerland-repatriate-gold-reserves-187.html

https://www.goldbroker.com/news/bankrun-physical-gold-switzerland-repatriate-gold-reserves-187.html






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gold amounts to a direct contribution to the price manipulation.

5- Manipulation by the media

We’ve stopped counting the articles announcing the end of the bull market in gold inthe mainstream media, in total contradiction with a cyclical bull market that’s beenin place for over twelve years. The aim is to divert public opinion from investing ingold, thus diminishing the number of potential buyers.

B) Proofs of manipulation and intervention on the gold market

All official proofs of gold price manipulation are listed on GATA’s site (Gold Anti-Trust ActionCommittee), an organisation that has been fighting for over ten years for the truth to come out in the open.

There is a long list of proofs, but here are just a few :

➤ In 1995, the Fed publicly acknowledges that gold swap operations with other centralbanks have occured. These operations, as explained above, help a central bank in sellingits gold on the market anonymously. This confirmation, published in the Fed’s federalcommittee minutes is still available on their website.

➤ In 1998, Fed’s Chairman, Alan Greenspan, was stating before the United States Congress: « Central banks stand ready to lease gold in large amounts if its price should rise ». Thus,Greenspan was contradicting the official explanation for the leasing of gold, that being thewill to collect some interest on a « sleeping asset ». This official acknowledgement fromGreenspan is still posted on the Fed’s website.

➤ In 1999, the Washington Agreement, signed by the european central banks, confirms

their intervention on the gold market to control its price. You can read this accord on the World Gold Council website.

➤ On February 28, 2003, Barrick Gold, then the most important gold miner, ackowledges before New Orleans U.S. Judicial Court, thus under oath, that a gold manipulationmechanism is in place.

➤ In a 2003 report, Australia’s central bank recognises that « currency and gold reserves areuseful in permitting interventions on the foreign exchange market ». His speach is available here.

➤ But the most official acknowledgement of gold manipulation by central banks certainlycomes from William S. White’s speach in Basel in 2005, before the Bank for InternationalSettlements (BIS), when he stated : « There are five main purposes of central bankcooperation, and one of them is the provision of international credits and joint effortsto influence asset prices (especially gold and foreign exchange) in circumstances wherethis might be thought useful. » His speach is available here.

➤ Declassified State Dept Data Highlights Global High-Level Arrangement To «RemainMasters Of Gold» By «The Reshuffle Club». Read more here.

More proofs have been provided by other experts :

➤ Eric Sprott’s analysis on the fact that the central banks do not have all the gold they saythey own, due to the manipulations they have orchestrated.

➤ An analysis of the gold spot price action at certain precise times shows unexplained drops.

http://www.gata.org/node/8052


http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.pdf

http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm


http://www.gold.org/government_affairs/reserve_asset_management/central_bank_gold_agreements/


http://www.gata.org/files/BarrickConfessionMotionToDismiss.pdf


http://www.rba.gov.au/publications/annual-reports/rba/2003/pdf/2003-report.pdf



http://www.gata.org/files/WhiteSpeech-BIS.png

http://www.zerohedge.com/article/declassified-state-dept-data-highlights-global-high-level-arrangement-remain-masters-gold

http://www.sprott.com/markets-at-a-glance/do-western-central-banks-have-any-gold-left-part-ii/





http://www.zerohedge.com/article/declassified-state-dept-data-highlights-global-high-level-arrangement-remain-masters-gold

http://www.gata.org/files/WhiteSpeech-BIS.png


















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➤ A former assistant to the U.S. Treasury State Secretary, Dr. Paul Craig Roberts, states thatthe Fed manipulates the price of gold and silver so that the markets do not lose faith in theUS dollar, which would lead to a rise in interest rates. The U.S. Treasury State Secretary isresponsible for supervising the Exchange Stabilisation Fund, created in 1934 to « interveneon the gold and currency markets, and on any other credit instrument of financial asset». Paul Craig Roberts was his assistant, so it’s fair to say that he knows what he’s talking

about. You can read his reasoning behind the price manipulations here.

Proofs of manipulation abound... one just has to really look for them.

http://www.paulcraigroberts.org/2013/04/04/the-assault-on-gold-paul-craig-roberts/

http://www.paulcraigroberts.org/2013/04/04/the-assault-on-gold-paul-craig-roberts/




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III) The end of manipulation and the signs of it

➤ Understanding our actual monetary system lets you see the big picture. A little like thelandscape you’re looking at from your cockpit that shows you you’re flying and where youare.

➤ Awareness of price manipulation lets you recognise that your main flight instrument ,the altimeter (or the spot price of gold), from which other instruments (interest rates,Treasury bonds, derivatives...) derive, cannot be relied on. It’s indicating an artificially lowaltitude.

There are other more technical indicators that may help you (ratios, debt levels...) but the goal,here, is to help you understand the global environment in which you have to make investment

decisions, so you make the right ones.

The manipulation of gold prices cannot last forever. It will fail, just like the London Gold Pool(the London physical gold market) failed in 1968 as demand turned toward physical, ratherthan « paper », gold.

This manipulation is actually already failing for several reasons :

➤ Investors are progressively loosing faith in « paper » gold, and manipulation is madepossible only because of « paper » gold. Any increase in demand for physical gold will leadto delivery defaults at bullion banks and other « paper » gold issuers (since there is muchless physical gold than all the « paper » gold sold), and this will accelerate the movementtoward physical gold. There is anywhere from 100 to 150 times more « paper » gold thanthere is physical. Imagine what would happen if only 10% of those paper assets were toask for delivery... the price of gold would take off. Simply because the physical is just NOTAVAILABLE.

For the moment, this phenomenon is visible in what is called « backwardation ». Moreand more often, spot prices are superior to long term prices, while the contrary should behappening. It goes to show that investors prefer to be holding physical, that they’re losingtrust. Futures buyers are thus thinking that there is a risk that the contract may not behonored (e.g. no physical delivery). Even if there is money to be made, they prefer holdingon dearly to their physical gold.

➤ The strength of the dollar , the world’s reserve currency, is being questioned every

day, as can be seen by its progressive abandonment in several international tradesettelements. Since enormous reserves are held in dollars worldwide, the physical goldrush, to protect oneself from the rapid depreciation of the dollar, will accelerate. It willbe a rush toward the only form of money that cannot be printed and that represents theinterests of no particular country in particular.

Take note that central banks haven’t bought so much gold since 1964 : Why are centralbanks buying so much gold? Why are they trying to get out of dollars and into gold fortheir reserves? Are they anticipating some changes to come in our international monetarysystem? Jim Sinclair, the legendary investor, answers these questions by explaining that,for the last twelve years, we’ve been in a global gold re-evaluation, and that gold will bethe basis of the future monetary system, since it’s the only trustworthy asset, or collateral,

recognised all over the world (gold is the only AAA asset). We’re right in the middle of thetransition phase.




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The major problem, today, is the absence of a trustworthy standard, some sound collateral tosettle a debt or « extinguish » it.

When this physical gold rush and the loss of faith in the dollar materialise, your altimeter(the price of gold) will then be working fine and will be showing a much higher altitude thanthe one you thought you were flying at. The loss of altitude you were observing (correction/

consolidation for the last two years) was, in reality, only due to the malfunctioning of youraltimeter.

While we’re waiting for gold to regain its real price, determined by supply and demand ofphysical gold, let’s ponder the fact that, historically, each and every fiat money experimenthas ended in total collapse.

In other words, if you put too much trust in your altimeter, you risk crashing.




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IV) Gold confiscation – A real risk?

The most widely known case of gold confiscation happened on April 5, 1933, in the UnitedStates. Frankin D. Roosevelt’s executive order 6012 made gold owning illegal.

(In France, we have to go back to 1720, under John Law, for gold confiscation)

In 1933, gold was part of the monetary system, since the dollar was convertible into gold for$21 an ounce. Gold was a very important part of the monetary mass, and having a lot of goldheld by the populace could become problematic in a period of crisis.

When Roosevelt decided to devalue the dollar, it meant an automatic raise in the price of gold.He didn’t want private investors to benefit, so he ordered that gold be confiscated.Soon after, he devalued the dollar, which put gold at $35 an ounce.

A) Any risk of confiscation today?

Contrary to the ‘30s, gold is no more part of the monetary system. Gold is no more, like inthe ‘30s, the instrument permitting growth of the monetary mass, the QE of those days. So,chances are slim that it would be confiscated again.

Also, since gold is not recognised as valid payment in the actual monetary system, confiscatingit wouldn’t stop the system from collapsing.

There are more risks of having gold taxed through some value-added tax or by raising the taxon the realised plus-value.

B) Imposing a global gold confiscation is impossible

Not all countries would accept gold confiscation, which makes global gold confiscationimpossible.

Interests diverge within the great world powers as to seeing the actual dollar-based monetarysystem survive more than a few years.

China, Russia or Switzerland would never confiscate their citizens’ gold.

For example, China is coaxing its citizens to invest in gold and silver, and it’s probably preparing

for the Yuan to be convertible into gold.

Countries such as Switzerland and Germany have asked for the repatriation of their gold heldabroad. Even in the United States, eleven states are pressuring for bringing back gold and silver as official payment means (as written in the U.S. constitution).

Confiscating their citizens’ gold makes no sense in this context.

In any case, we should remain cautious, at least in the Eurozone (and the United States),because, as we’ve seen with Cyprus, european leaders will stop short of nothing to keep theactual system afloat and protect the banking sector.

Consequently, for maximum security, gold must be held in its physical form, not in certificates

of financial products issued by banks, and it also must be held outside of the banking systemand of one’s country of residence.

http://www.bloomberg.com/news/2013-04-08/trust-in-gold-not-bernanke-as-u-s-states-promote-bullion.html







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C) The confiscation of bank deposits represents a much more real andimmediate risk than gold confiscation

Today, the most dangerous risk is deposits confiscation. What happened in Cyprus confirmsthat holding funds within the banking system is risky.

Deposit insurance, even under 100,000 euros, is an illusion, as explained by Philippe Herlin

Cyprus could very well be the template for other european countries.

Also the confiscation of pension funds being confirmed notably in Spain.

All funds in the immediate vicinity of governments and the banking sector are at risk in theWestern countries.

https://www.goldbroker.com/news/insured-bank-deposits-under-100000-euros-myth-230.html


http://www.businessweek.com/news/2013-04-04/spanish-pension-fund-profits-from-draghi-after-rajoy-raid

http://www.businessweek.com/news/2013-04-04/spanish-pension-fund-profits-from-draghi-after-rajoy-raid






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V ) Focus on the recent gold crash – Was there anymanipulation?

By Isabelle Mouilleseaux

Between March 27 and April 15, 2013, gold plunged by 25%. It had never happened inthirty years... Let’s go back to the strange shenanigans of that crash.

Here is what happened :

A ) A well planned scenario?

First Act - On Friday April 12, when the crash started, two gigantic trades are thrown at theCOMEX (U.S. gold futures market) within an hour.

I’ve never seen such big positions being thrown at this market. Two short positions :

• The first one sells 100 tons of gold

• The second one sells 300 tons of gold

A total of 400 tons of paper gold sold, or 12.8 million ounces. This is close to 20% of the annualgold production dumped in one hour on the COMEX. At a price of $1,550/oz, it totals $19.8Billion.

No wonder the paper gold market collapsed.

And, to make really sure...

Second act - On Monday April 15, margin calls (mandatory cash deposits) on U.S. futures arehiked from 16% to 19% for gold.

That forced traders to immediately deposit some cash in their account or sell a part of theirpositions to face the sudden margin call, which provided more downside momentum for theprice of gold.

Coming back to the 400-ton short position... I really wonder WHO can place such a...monumental order? WHO has the leisure of taking such an important financial risk? Onereally has to be « darned sure about it » to take such a large position. It can only be taken bya bullion bank, or even by a central bank...

But there is something even more stunning.

B ) Incredible reaction from the gold physical market

Demand took off. A massive rush on the physical occurred along with a tremendous rise inpremiums (the spread between the physical gold being exchanged and the spot price).

Coin dealers, notably in Asia and the U.S., have had their stores ransacked. Many dealers ran




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out of stock with so many individuals rushing to buy coins and lingots.

- In Hong Kong, according to the Financial Times, such a gold rush on the Gold & Silver ExchangeSociety hasn’t been witnessed in the last fifty years.

• In Beijing, people were lining up in front of coin dealers to « buy at a good price ». Accordingto Voice of China, the Chinese bought $16 Billion worth of gold (300 tons) in 15 days.

• In India, buyers rushed to buy jewelry and coins.

• In Dubaï, premiums reached...750%!

• The U.S. Mint sold in one day, April 17, 63,500 ounces in gold coins. April 19, sales wereequal, after only three months and a half, to 62% of 2012 sales. On April 25, it was entirelyout of Gold Eagles (1/10 oz) for sale, it ran out of stock! 209,500 ounces of gold were soldin April while 292,000 were sold in total for the first three months of the year : a record.

• The Bank of Mexico had sold 173,411 ounces in the first quarter. In the first 23 days of April,it had already sold 174,000 ounces.

• In England, precious metal coins sales tripled in April (versus March)

• In Australia, the Mint cannot produce fast enough for demand.

• In Canada, the Royal Mint sold 440,000 1oz gold coins and 9 million ounces of silver (SilverMaple Leaf) in the first four months of the year, a hike of 123% over the same period.

• In Switzerland, delays for physical silver deliveries went from 15 days before the crash to12 weeks after the crash.

Meanwhile...

The gold ETFs are being depleted.

« People do not want gold certificates, they want real physical gold »

This is Terrence Duffy, the CEO of the U.S. futures market (the king of paper markets), sayingit on Bloomberg TV !

C ) Physical gold shortage?

Curiously, more and more « paper » gold investors who, up to now, had never asked for physicaldelivery, are now trying to convert their certificates into physical gold from the COMEX. This

futures market had to deliver over 43 tons of gold in February 2013, which is quite out of theordinary.

When we take into account that over 100 times the amount of available physical gold fordelivery is traded on the paper markets, this can send a shiver through our spine...

While it’s true that most investors « play » on the COMEX without ever asking for delivery,things could change for the worst if only just a few of them decided all of a sudden to ask fordelivery; this could cause a COMEX default.

Certain bullion banks have already taken the lead : ABN Amro just announced to its clientsthat they could continue to invest in « paper » gold, but that they would be settled in cash

rather than in physical gold.

Another indicator : the evolution of the GOFO rate turning negative.

http://www.bloomberg.com/video/cme-s-duffy-says-exchange-competition-helps-market-6rSibzdvRRGnC9Ldgfo~XQ.html

http://www.bloomberg.com/video/cme-s-duffy-says-exchange-competition-helps-market-6rSibzdvRRGnC9Ldgfo~XQ.html




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As you know, central banks lease their gold to other parties in order to turn a profit. The officialmarket rate for borrowing or leasing gold is called the Gold Lease Rate (GLR).

For this rate to be attractive, it must be lower than the LIBOR rate (Londo Inter-Bank OfferingRate).

The spread between the two rates is called the GOFO rate (Gold Going-Forward Rate). Asperfectly explained by Cyril Jubert, « With a constant LIBOR, when gold abounds on themarket, GOFO goes up because no one wants to pay a higher price for something plentiful.When there is less gold on the market, GOFO goes down because it costs more to lease it.

And, very rarely, GOFO can even turn negative. »

Here is GOFO’s evolution after the gold crash :

We can notice a very sharp fall of the GOFO rate. And this fall does not come from a changein LIBOR, which hasn’t moved that much. Thus, my conclusion is that it’s the GLR going up.And, in general, when a rate rises, it signifies that there is more demand than there is supplyavailable.

Is physical gold becoming rarer?

This phenomenon was amplified during the summer, with GOFO staying in negative territoryfor almost two months... this has never happened before!

D ) There is a real dichotomy between the « paper » market and thephysical market.

Let’s recall that physical gold cannot be manipulated. It can’t be multiplied at will, contrary togold futures contracts than can be multiplied infinitely ( just like the dollar).

If you wish to acquire some gold, or if you own any, I highly recommend that you hold thephysical form. Forget « paper » gold.

Forget ETFs, certificates, trackers and so forth if your goal is one ofinsuring your investments.Those paper products are meant for opportunistic investors who look to book some quickprofits by getting in and out of the market.

Let me take this opportunity to talk a little bit about the SPDR Gold Trust tracker, the famousgold-backed ETF, better known as GLD. Cyril Jubert, editor of L’Investisseur Or & Matières,defines it as :

E ) GLD : Beware

« This product is a kind of gold tracker, since the value of a GLD share is based on the gold spotprice. If we have a mind to question the bankers’s good intentions, we’ll notice that no single audit

of the supposed gold stocks by an outside organism is proposed in its statutes. Those gold stockscould be entirely virtual, with no one being the wiser. This is just speculation, of course...




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The fact that GLD doesn’t charge anything for handling, storage or insurance, reinforces theperception of virtuality of this electronic gold. But for the lambda investor, buying some GLDis more comfortable than manipulating some physical, and it does provide a form of insuranceagainst currency devaluations.

But, above all, for the monetary instances (Fed, ECB...) looking to curtail the monetary erosion

caused by all their full-speed money printing, GLD helps in channeling a portion of thephysical gold demand, thus limiting the rise in gold prices. Quite a good deal...

On the other hand, the actual gold held in this GLD is being used to brutally weigh in on themarket. It would seem, also, that the funds invested in GLD may be used to play some options andderivatives to manipulate the prices. So... is there any collusion between the monetary instances,the big bullion banks and GLD? There are no proofs, but a lot of pundits think there are, notablythe folks at GATA (Gold Anti-Trust Action Committee), as you can see in this article for example ».

Cyril Jubert

http://gata.org/node/12593







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VI ) How to buy physical gold – Practical advice

Depending on your investor profile, there are several types of offerings :

A ) Active « in-and-out » investor looking to get in and out of physicalgold on a regular basis

It’s been possible for a long while to buy and sell stock shares on the Internet at any time,using your broker’s trading platform. Today, the same thing can be done with physical gold,thanks to the Bullion Vault trading platform.

Through the Internet, you can buy, sell, even trade physical (starting as low as one gram) goldwhile being personally and legally the owner of the gold you buy. And this is 100% pure gold.

If you fit this profile, we recommend a broker, Bullion Vault, where they will open a « metalaccount » for you. This « physical gold » broker lets you buy, sell and store physical gold at verycompetitive prices, thanks to its trading platform. The gold you buy is held in a « professional» specialised vault (your choice of New York, London or Zurich).

The physical metal you buy is allocated to you in your name. You are the sole, unique, owner. You’re not the creditor of a debt in some « gold account » and there is no intermediary. Shouldyour broker go bankrupt, your gold is protected, since legally separated, and cannot be usedin any case to pay your broker’s creditors. Your gold does not figure in any way in your broker’saccounts.

B ) Investor looking for physical gold and silver as a store of wealth

For investors interested in full ownership of physical gold or silver outside of the bankingsystem and of the European Union (which I highly recommend), we recommend :

➤ For pure gold and silver bars of all sizes : Goldbroker.com (FDR Capital). They are specialistsin bringing a secure storage solution, outside of the banking system. Your gold or silveris stored in Zurich, Switzerland, at a reputed precious metals secure warehouse specialist,Rhenus Logistics. Both delivery and direct access to the warehouse to verify your preciousmetals are guaranteed (for your information, several of our Chronique Agora subscriberswent to verify in person their physical gold holdings in Rhenus’s vaults, and were quitesatisfied with the level of service).

If you choose this solution, you own gold in your name, and you are the sole owner (your goldis 100% legally allocated through the issuance of a storage certificate, edited in your name,and certifying your bar(s)’ serial numbers). There is no intermediary between you and yourgold, so there is no risk of counterparty default in case of a broker’s bankruptcy. Your gold canin no way be used to pay the creditors.

Also worthy of note is the presence of Egon von Greyerz, founder of Matterhorn AssetManagement and Goldswitzerland.com , on the board of directors of FDR Capital (Goldbroker.com), which says a lot about the seriousness of these specialistsTo find out more about this : www.goldbroker.com

➤ For pure silver bars of all sizes, we also recommend the Swiss specialist Europos.

https://www.goldbroker.com/#1233

https://www.goldbroker.com/#1233




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Europos proposes high-security delivery of silver bars, at any time, taking delivery inperson, and/or storage of your ingots (in a swiss bank vault). Again, you are the sole ownerof your stock, which is 100% legally allocated, with serial numbers. Should either thebroker or the bank go bankrupt, your silver is protected, being legally separated.

C ) The all-in-one investor

If you’re looking for a provider able to offer different types of services related to gold (all-in-on concept), we recommend aucoffre.com. They provide :

• Buying/selling gold coins (Full name ownership : members receive an ownershipcertificate).

• A gold savings account : starting as low as 1 gram of gold (Full name ownership ).

• A debit card backed by your gold account.

Your gold can be delivered or stored in secure vaults in France, Belgium or Switzerland

Don’t stay in the dark... keep in touch

Would you like to find out more about gold, its evolution, what makes it interesting, themanipulations, the trends and the outlook?

You can follow us on :

• https ://goldbroker.com/news/ (f or Fabrice Drouin Ristori )

• http://la-chronique-agora.com/ (for Isabelle Mouilleseaux & Yannick Colleu )

>> La-chronique-agora.com in english: http://dailyreckoning.com

https://goldbroker.com/news/

http://la-chronique-agora.com/

http://dailyreckoning.com/

http://dailyreckoning.com/

http://la-chronique-agora.com/

https://goldbroker.com/news/

gold: how to manage your investment

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