..by Biz Bluetree
When asked that question by a Seeking Alpha reader of a previous article, I decided to make it the focus of a new article. I soon discovered information to not only address the reader’s concerns but, expose the SPDR Gold Trust ETF (GLD), HSBC Bank (HBC) and the New York Federal Reserve of alleged gold pillaging and causing this year’s mid-April price smack down.
For purpose of this article we’ll call our reader Bob.
With no clear answer to that question this article will take a look at what allegedly happened and why, and illustrate that it’s not as rare an occurrence as one may think. But first let’s set a base of four reference points by which to counter opinions and arguments that will undoubtedly be made in the response forum.
We can’t ignore that there is a line clearly drawn in the sand between one group who says, “in gold we trust” and another who dismisses the yellow metal as a barbarous relic, or simply a trade like any other.
Let’s get into it…
First and foremost: the utility of money is based on its soundness. With each passing month of $85B worth of FED QE our money is less sound.
Second, the U.S. government is the largest debtor nation in the world, yet is the only nation that can legally print the world’s reserve currency – the US dollar – the rock upon which the world’s financial system now teeters.
Third, when the money can no longer be trusted people will stop accepting it as legal tender leaving the financial system to failure and collapse. (See all fiat currencies in history)
Fourth, there is right now a mass exodus of gold flowing from west to east. As well a wide disparity in how gold is viewed in the west versus the east.
Bob introduced himself:
“I have one comment here, he wrote. I consider the manipulation of gold and silver a fact and I also think that it is done on a daily basis. Just looking at the way the market behaves, it is clear that there are some people out there whose job is to watch the metals and hit the futures market if prices go up”.
Bob’s suspicion is valid. In a recent article targeting PMs and patience, Emmet Kodesh, a SA colleague whose insight I respect, restated remarks made by Dr. Philippa Malmgren, President & Founder of Principalis Asset Management and former Special Assistant to the President of the United States for Economic Policy, who said; “major investors know that manipulation of the gold market is a fact of life”.
And further, the magnitude of sovereign debt is so great it cannot be paid down and “will have to be defaulted on”, says Dr. Malmgren.
Default? Dollar crash? Economic meltdown? Government shutdown? A vast majority of people will loose everything while others grow rich? Yes.
A wealth transfer.
In my opinion, being on the right side of a wealth transfer may be as simple as holding the best protective positions through an economic crisis. Such a crisis will likely include chaos, necessity shortages, bank holidays, power outages, etc. You must be prepared for it.
My family’s protective positions will be hold-in-your-hand silver and gold, ownership of real-land, and stock in the correct PM and critical-resource mining companies with the greatest upside.
Only invest in miners on whom you’ve done your homework. Those you trust, with good management, good ore-grades, low-price-to-cash-flow ratio, companies with the ability to get the job done and with little to no country risk. Without going deeper, McEwen Mining (MUX) comes first to mind as does First Majestic Silver (AG) and Paramount Gold and Silver (PZG).
I will also say this, stay well informed of current events. Don’t rely only on mainstream media and watch the stock market closely. Because also, in my opinion the time may come when even holding shares of metals and critical resource miners becomes too risky despite their future higher valuations. Is your brokerage a bank?
Bob continues, “It is clear that China and India have bought all gold supplied in the world from both mining and scrap for the last two months. Other people buy too and demand is strong. Is it possible to quantify that with some hard numbers?”
Well, I can’t speak to the “all gold” claim, but mentioning China brings us closer to the crux of this article. The April data on China’s retail buying of gold, silver and jewelry shows record sales. Even though jewelry makes for 40%, it still leaves about $3 billion of silver and gold (coin and bullion) sales for just that month, more than the US Mint’s silver and gold coin sales for the past 12 months combined.
“According to the World Gold Council, Chinese demand of gold bars and coins grew to 109.5 tons in Q1 2013, which is 2.5x the 5-year quarterly average of 43.8 tons”, said Eric Pomboy of Meridian Macro Research in King World News.
In April when the bears and sideliners were exclaiming, “the gold bubble has burst”, “everyone is exiting gold”, “gold has lost its luster”, etc., truth be known, it was the bullion banks taking gold out of the SPDR Gold Trust ETF and selling it to satisfy massive demand in Asia at a time when the premiums on gold in Asia were threw the roof, at an additional $50 an ounce. (The Shanghai Premium)
Keith Barron, a consultant to major companies around the world, prospector at heart and co-responsible for the largest gold discovery in the last 25 years; the Fruta Del Norte gold deposit in Ecuador, explained the GLD fleecing in KWN:
“Bullion banks were raiding the GLD ETF for gold and pocketing up to $50 on the spread, just for shipping it to Asia. …that is why a tremendous amount of tonnage was moving out of GLD. It was because of massive demand for physical gold, not people selling it”.
If you still don’t feel the need to hold physicals but a voice inside your head insists on an easier PM investment the nod here goes to the Sprott Physical Gold Trust (PHYS) or Sprott Physical Silver Trust (PSLV). Not only because of a 15% tax vs. a 28% tax, but also allocated accounts vs. non-allocated accounts eliminating counter party risk.
I just wouldn’t touch GLD with the proverbial ten-foot pole because of who runs it? Trustee: Federal Reserve Bank of New York. Custodian: HSBC Bank.
Do you trust them? I don’t.
HSBC, one of the largest banks in the world, headquartered in Hong Kong and the UK – yes, the same bank with rumored ties to terrorist money and money laundering – enjoys long-standing status in Asia. The FED? Enough said.
How long? We may not know.
KeithBarron sums it up eerily best, “You have bankers and politicians literally destroying the future of the West for generations to come in order to keep a dying financial system alive for a few more years. This really is a tragic and very sad situation.”
See the four reference points above.
Conclusion: The three protective positions mentioned above can be invested-in today at bargain basement prices. Good advice is to take action by taking advantage. Create protective positions and aim for the high side of the wealth transfer.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
#Gold, #silver, #Precious Metals