During this banker raid on paper gold and paper silver, while banking shill Nouriel Roubini was spouting more propaganda in the distribution channels of the mass media of a gold collapse to sub-par $1000 an ounce prices, we were busy informing our readers about the “Lies of Nouriel Roubini” (whose sole purpose in life, by the way, seems to be to scare uneducated people into selling off their physical gold and silver into the hands of waiting bankers). At the very start of this price slam this past April, we coined an in-depth piece about “Why the Western Banking Cartel’s Gold and Silver Price Slam Will Backfire.” Now, all the reasons we provided in that April piece are coming home to roost among the Western banking cartel today.
Just 3-1/2 years ago in early 2011, COMEX warehouses held more than 11 million ounces of eligible gold, with JPM holding more than 3 million of these 11 million ounces. As of August 9, 2013, JPM’s eligible gold has fallen from 3+ million ounces to 361,606 ounces. Thus, it is safe to conclude that physical gold is being withdrawn from COMEX warehouse due to a lack of trust in the global banking sector’s honesty and credibility. Though most statistics today discuss the collapse in eligible gold, I actually believe that the collapse in registered gold is more compelling. Recall that registered gold is the gold held at the COMEX that is available for delivery while eligible gold is not “eligible” for delivery.
It is interesting to note that just since last April, registered gold held at the COMEX depositories has collapsed from a total of 2,147,398 ounces to just 852,930 ounces. That is a collapse of 60% of the registered gold inventory in less than 4 months! To put this number in perspective, data from Hong Kong gold exports reveal that China has imported an average of 200 metric tonnes of gold every month this past April, May, and June. 200 metric tonnes is equivalent to more than 6.4 million ounces of gold. COMEX holds a total of just 852,930 ounces of registered gold at the current time.
In regard to silver, COMEX warehouses held a total of 45,945,448 ounces of registered silver in late April and now hold 40,504,656 ounces of registered silver as of August 9, 2013, a much less astounding but still significant 12% loss in inventory. However, if we break down silver manipulator JP Morgan’s COMEX holdings, the recent numbers become much more revealing. JP Morgan’s registered silver holdings, just since late April, have been drained from 17,848,170 ounces to 9,940,577 ounces, a massive 44% loss, while their eligible silver has increased a massive 61% from 18,094,433 ounces to 29,065, 774 ounces. JP Morgan, during this raid, has conscientiously converted millions of “registered” silver ounces into “eligible” silver ounces. Why would they do this? While there may certainly be more complex answers to this question that what meets the eye, a simple answer would be that JP Morgan wishes to cut their inventory of silver available for delivery and is limiting their exposure to losses of silver inventory after losing so much of their gold inventory. When we look at changes in the COMEX total eligible silver inventories from late April to the present time, we discover that the eligible inventories have increased slightly from 120,104,569 ounces to 123,988, 236 ounces. From merely poring over COMEX data, it appears that there is no physical silver shortage as the banker engineered silver takedown hardly seemed to affect COMEX eligible and registered silver inventories. However, this would be a misinterpretation of the physical silver market and here is why.
When we look at the annual turnover of gold futures contracts on the COMEX alone, we know that the gold futures markets trade a minimum of 100 ozs of paper gold for every real physical gold of ounce that exists every year. With silver, the fraud is even greater, with upward of a couple hundred of ozs of paper silver traded for every real physical ounce of silver that exists. In 2011, there were roughly only 320 million ounces of real, physical silver available for investment purposes, yet tens of billions of paper ounces of silver trade on the COMEX every year. In fact, during one of the banker raids in February of earlier this year, bullion banks traded 200 million ozs of paper silver on the COMEX in one minute in order to knock the price of silver down significantly!
Thus, given the record breaking sales of silver coins and bullion bars from the US mint, the Perth mint, and record sales reported by silver dealers worldwide, one should understand that there has been a run on physical silver and not just physical gold that has significantly depleted the reserves of physical silver available to investors. Furthermore, though the current 40.5MM ozs of silver held in the registered inventory in the COMEX has remained relatively unchanged (relative to gold that is) during the banker takedown in silver prices over the past few months, this figure is still miniscule considering that the COMEX trades tens of billions of ounces of paper silver ounces that could stand for delivery.
Though negative GOFO rates are making big news among the gold investment community at this time, and for good reason, as the 6-month GOFO just turned negative along with the 1-mo, 2-mo and 3-mo GOFO rates, we don’t have reported negative Silver Forward Offering (SIFO) rates yet. However the operative words here are “reported” and “yet” as I don’t trust the SIFO rates being reported by notoriously dishonest banks such as Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Merrill Lynch, Mitsui & Co, ScotiaMocatta, UBS, and Société Générale. This not exactly a list that inspires confidence that SIFO rates are being reported honestly.
On November 2, 2012, when the LBMA stopped reporting SIFO rates because the SIFO rates “were indicative rates only and therefore not dealable rates unlike GOFO rates”, the 1, 2, 3, and 6-mo SIFOs were respectively listed as 0.62%, 0.616%, 0.618% and 0.612%. First of all, it was nice for the LBMA to finally reveal that the SIFO rates were not dealable rates, and in essence, meant nothing, when many people for years, had assumed that these reported rates were dealable rates. Secondly, On August 12, 2013, according to data I pulled today from Thomson Reuters, the 1, 2, 3, and 6-mo SIFOs were respectively nearly unchanged from the November 2, 2012 rates nearly 2 years ago at 0.600%, 0.585%, 0.584%, and 0.595%. The rates that used to be quoted were median rates among a very wide range of rates and thus not dealable rates. Because these silver forward rates available from Thomson Reuters are nearly identical to the last reported rates by the LBMA, I tend to deposit them in the “rubbish” category of unusable inaccurate data. Thus, despite the continuing smoke and mirrors of “official” data being generated by bankers that wish to produce a picture of no tightness in physical silver supplies, there will come a time in the not-so-distant future when one will notice that COMEX registered and eligible silver inventories are being drained in the same manner that COMEX registered and eligible gold inventories were just drained in the past several months.
About the author: JS Kim is the founder and Managing Director of maalamalama, a fiercely independent research & consulting firm with a focus on Precious Metal strategies to combat the wealth destruction of quantitative easing and Central Banks’ currency wars. Currently SmartKnowledge Pte Ltd. is making an unprecedented offer of a 30% refund of annual subscription fees to its flagship investment letter should the newsletter not turn a profit in the next 12 months. To read about this offer, click the link in this sentence and learn about the best ways to buy gold and silver as insurance protection against irrational Central Banking monetary policies. Alternatively, you may sign up for our mailing list at our website at www.maalamalama.com to receive this offer as well via email.