Jim Sinclair’s Blockbuster/Gold and silver raid today

Gold closed down $12.40 to $1408.60 (comex closing time).  Silver fell by 51 cents  to $22.81 (comex closing time).
As I promised you, the chances for a raid were very high due to the falling gold and silver equities and the lower silver price.

In the access market at 5 pm gold and silver reversed course and rose northbound:
gold: $1414.10
silver: $22.98

At the comex, the open interest in silver rose sharply to 157,264 contracts as it is still  holding firm at elevated levels . The open interest on the gold contract fell by 252 contracts to 416,581. Generally, I would say that 390,000 OI would be rock bottom for gold but in this environment anything goes.  The total amount of gold ounces standing for April rose slightly to 34.26 tonnes as silver also  had a slight increase to 3.770 million oz standing.

The big news in the physical markets was reported by Jim Sinclair.  His close friend could not retrieve his allocated gold stored in Switzerland due to “concerns of money laundering and terrorism”. First we had the Amro story where customers were paid cash instead of receiving gold on delivered contracts. Then Andrew Maguire reported yesterday that customers who had leased gold for a “return” on their stored gold could not get their gold back.  And today, the Jim Sinclair story  (see below…Jim Sinclair/Dave from Denver)

The USA mint announced late tonight that the  lowest denominated gold bar the 1/10 oz has been halted due to lack of supplies.

Goldman Sachs closed out their gold short this morning.

In paper news, the Chinese PMI report was terrible causing the Shanghai composite to tumble 2.57%.

European PMI‘s on both manufacturing and service were equally bad but do not worry,  We had the Fed and Japan printing massive QE and they are buying up  everything in sight.

Then the uSA flash PMI was also reported and it was weak as well.

We will go over these and other stories but first…………………….

Let us now head over to the comex and assess trading over there today:

The total gold comex open interest fell by 252 contracts today  from  416,833 down to 416,581,  with gold rising by $25.70 on Monday.  The front April OI fell by 26 contracts from 585  down to 559. We had 42 notices filed on Monday so we gained 16 contracts or 1600  gold oz will not be standing for the April gold contract month. The next non active contract month is May and here the OI fell by 103 contracts to 1402. The next big contract month is June and here the OI rose by  402 contracts from 254,602  up to 255,004.  The estimated volume today was huge at 211,950 or 21.195 million oz.  The world produces around 70 million oz ex China ex Russia.  Thus Tuesday’s volume equates to around 30% of global annual production. The confirmed volume on Monday was also huge at 200,998 contracts (approx 625 tonnes of gold).

The total silver comex OI  rose by 1442  contracts from 155,815 up to 157,264. It still looks like we still have some  stoic longs who seem impervious to pain as the OI in silver continues to remain elevated. The front non active delivery month of April saw its OI fall by 2 contracts from 28 down to 26 . We had 10 delivery notices filed on Monday, so in essence we gained 8 contracts or 40,000 oz of additional silver will stand for delivery in April.  The next big delivery month for silver is May and here the OI fell by 5154 contracts to stand at 38,960. We are less than 2  weeks away from first day notice for the May silver delivery month.   The estimated volume today was huge, coming in at  102,602 contracts which equates close to 513 million oz of silver. The world produces 700 million oz per year ex China ex Russia so in essence today’s volume equates to 73.3% of annual silver production. We had confirmed volume on Monday at 72,072 contracts which is a huge volume day . (.360 billion oz or 51.4% of annual silver production)

Comex gold/April contract month:

April 23.2013      April gold.

Gold
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
 198,536.285 (HSBC,JPM, Scotia)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
 42  (4,200  oz)
No of oz to be served (notices)
517  (51,700)  oz
Total monthly oz gold served (contracts) so far this month
10,499  (1,049,900 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
26,484.136  oz
Total accumulative withdrawal of gold from the Customer inventory this month
605,604.27  oz
We had good activity at the gold vaults.
The dealer had 0 deposits and 0 dealer withdrawal.

So Who Sold All That Gold? – JPM’s Own Version

Since prevailing fringe theory is that JPMorgan and the other bullion banks ‘control’ the price of gold, we thought it would be interesting to hear yet another explanation for last week’s monumental precious metal market events… from the horse’s mouth…

Via JPMorgan,

Who sold the gold?

Gold’s 1 day fall of 9% on Monday was one of the largest 1-day falls in the history of the gold market, but what do we know about who was selling?

We have three high frequency flow indicators for the gold market: CFTC futures positions, Gold ETFs and gold coin sales in the US. Of course, these only make up a portion of gold demand but the remaining physical demand is difficult to capture on a high frequency basis.

The peak in gold ETF holdings of physical gold was actually in December 2012 and there have been reasonably steady outflows since then. In contrast, the peak in the gold price was in October 2012 and it has been falling steadily since then.

Additionally, the outflows from gold ETFs have continued in the latter part of this week, even though the gold price has rebounded some 4%. Looking further back there has not been a strong correlation between ETF flows and gold prices on either a high or low frequency basis. ETFs do not seem likely to have been the culprit here, although Monday’s $1.8bn outflow undoubtedly didn’t help.

Sales of American Eagle gold coins, perhaps an indicator of retail investment demand, have actually risen sharply over the past two weeks. 

Total sales so far in April are 153,000 ounces, already the highest month since mid 2010, and we still have two weeks to go.

That leaves CFTC managed money futures positions. Unfortunately, we only have data up until last Tuesday, the 9th of April, so not including the sell-off period itself. However, there has historically been a strong correlation between changes in these positions and changes in the gold price, so it seems likely that CFTC positions will also have fallen sharply, but we have to wait until next week to know for sure.

In summary, of the three high frequency indicators of gold demand at our disposal, it seems likely that futures investors will turn out to be the biggest sellers over the sell-off period. Of course this doesn’t tell us anything about causality, especially as we are missing a large part of the physical market. Anecdotal reports suggest that physical demand, driven by China was very strong in the days following the sell-off, so this may well be what has allowed prices to stabilize at current levels.

Source: http://www.zerohedge.com/news/2013-04-21/so-who-sold-all-gold-jpms-own-version

How the Gold Market Was Crashed – But Most Importantly, Why? Leveraged Default? And Silver?

Many are still sorting through the data to try and figure out what happened, but it is hard to look at the available data and the market action and conclude that the recent ‘flash crash’ in gold was anything but a calculated takedown.

Some big players had been trying to work the market price of bullion down in stair step fashion for some time.  Their tracks on the tape were big enough to be hard to miss, and any number of people who watch the market structure as it develops were seeing them, and a few were reporting what they saw.

But it just wasn’t enough.  The pressures were building, and something had to be done.

A plan for a market operation to relieve the pressure was made, and then executed ahead of the upcoming option expiration on the Comex on April 25th.  The word was quietly spread so the important monied interests would not make a fuss about losses when the time came, as in the case of MF Global and Cyprus.

And then Goldman gave the signal to the market with their ‘short gold‘ call.

As I said at the time, I was not sure if this was done to try and avert a disaster, or to cover up some longer term corruption. Or perhaps a bit of both.  Motives are never easy to discern where leverage and opaque trading pools are involved.

This could be in advance of a major announcement out of Europe with regard to the Eurozone and also their monetary policy following along the lines of Japan.  Perhaps it is even something regarding US policy.  Obviously one has to have an open mind about that.

But there were persistent rumours of a potential default situation at both the LBMA and the Comex. Well, one has to take those with a skeptical eye.  But there are some data that point to the LBMA in particular, although the drawdown of bullion from the two exchanges could have been more general.

Linked just below is a report that includes more data and it well worth reading. It tends to concentrate on the Comex.

How the Gold Market Was Crashed.

It seems that the word has gone out to the media and the stories are being spun to protect the system.   And the parrots dutifully pick up the chatter, without knowing why.

The story being spun that there was a speculative excess in gold being held by pension funds that panicked.   Foolish people, outsiders really, got over their heads and caused this regrettable incident.

There is probably a grain of truth in that, but I think it is more likely that they were forced out of their positions by a market operation designed to do just that.  And market insider knew exactly what they were holding.

Price declines caused by legitimate selling and panicked longs are not marked by increasing open interest. That is the hallmark of short selling with a purpose.

This is a big deal, and it was writ large across the media.  And that suggests that there is an equally big problem that had to be dealt with quickly and brutally.  Ordinarily market operations are more adept and protracted.

Something was close to breaking, and it most likely still is.

And if it broke, it would prove to be embarrassing to quite a few very important people.  At least, that is what this situation suggests to me.

Even the endlessly levitating stock markets seem a bit ‘edgy’ with a tension on the tape.

I cannot possibly know what is at the root of this.  Can’t find Germany’s gold, and can’t buy enough at the LBMA to deliver it, because the market is leveraged 100 to 1?

Maybe not that but something of that magnitude.  A major TBTF tottering on the brink of a derivatives domino collapse? There are rumours out of Switzerland about Italy and France.

Most eyes are on the States, but how quickly we forget that ABN/Amro declared a force majeure and stopped all physical delivery of bullion, forcing settlement in cash.  The soft default of a major bullion bank is no joke, especially when it appears they could not obtain suitable goods at any price.

This tends to point towards problems in Europe and the LBMA.  And one of the big sources of LBMA 400 oz. qualified gold is the big SPDR Gold ETF, GLD which is stored by HSBC in London.  I have included a chart of who tends to use 400 oz. bars below.  The COMEX does not.

As you may recall, Andrew Maguire reported early on that there were indications of problems on the LBMA with regard to gold inventory.  It is said to be leveraged 100 to 1.

“Entities went to the LBMA and said, ‘We don’t trust anybody anymore. We want our physical metal.’ They were told they would be cash settled instead by a bullion bank. The Western governments have been trying to plug holes, and the reason for it has to do with the default that was taking place at the LBMA.

This is why this smash has been orchestrated because of the run that has been taking place on physical metal. So Western governments had to do this because of an imminent run on the unallocated LBMA system. The LBMA bullion banks had become so mismatched at one point on their trading positions vs real world demand that they had to orchestrate this smash.”

The ‘entities’ in question are again just rumour, but they are most likely to be from the Mideast or Asia.    They could be a central bank, or even an ETF for that matter.  But the size was said to have been substantial, and untenable for withdrawal without a severe market disruption given the leverage on which the LBMA operates.  100 to 1 leverage is no joke when the drawdown is physical and available supplies are tight.

If you have not picked it up, the implication in this theory is that the big price declines allowed some non-allocated repositories, like GLD for example, to disgorge delivery ready bullion to the LBMA for delivery to the entity that had demanded delivery.

And something like this might not be a singular event.  People talk, and if one entity got nervous and took delivery that information cannot be kept from other sizable players in the same circles.  And so others step up and ask, and there is the threat of a run.  And it could be happening in more than one place, ie not just the LBMA.  Hence the decline in inventories at the Comex referenced above.

JP Morgan holds enormous derivatives positions in the precious metals not reported anywhere in detail except occasionally in the OCC report.  If something were to perturb the markets, it would almost certainly affect them.

And recall that the outrageous excesses of the ‘London Whale’ were not uncovered by regulators, but rather by market participants who reported JPM to be distorting the market because of the size of their position.  And the OCC is having a bit of recent notoriety from overlooking irregularities (some say crimes) to protect the banks.  So keep that in mind.

Changing the subject, if you wish to get a bit more baroque, gold may have been a necessary misdirection with the real target being silver, which hardly anyone is talking about, even the house economists and spokesmodels for the status quo.

Keep an eye on stocks and the markets.  The big money always moves first, because they get to know what is happening first.

But I have to remind you, your guess is as good as mine.   It is an opaque market, and it has gotten worse and not better, despite all the show of ‘reform.’

Source: http://jessescrossroadscafe.blogspot.in/2013/04/how-gold-market-was-crashed.html