Hmmm. A couple of things... as it seems important to put the numbers in some sort of context.
Official "buying" of 400 tones... Compared to what in the value in $ allocated, versus other things ? And, compared to what in the relative change that represents, and its market impacts ?
First, 400 tons is 800,000 lbs, or 12,800,000 ounces worth $10.24 billion at $1800 gold.
Compare that to... the recent IMF issuance of $650 billion in SDRs on a pro-rata basis to IMF members...a proportional increase in everyone's foreign exchange reserves... which alone seems it is responsible for interest rates falling recently as foreigners, flush with free hyper-fiat money, used it to bid in Treasury auctions in record numbers, while the usual supporters helping roll over the debt, the primary dealers, all just backed away from the table ? So, that buying of gold equates to roughly 1.57% of the value of the SDRs recently issued... while the percentage of the $ value in SDRs applied in Treasury auctions, thus far... driving the "best 10 year, and best 3 year note auctions ever"... ? The August ten year auction was $41 billion... the three year just completed was $58 billion, with three month and six month auctions of $56 and $53 billion... with another $62 billion in ten year and 30 year notes today and tomorrow... Thats... $270 billion... with the SDRs still only a small percentage, likely not more than 5% to 10% of the total... call it $27 billion... or 4.1% of the total in SDR issuance ? But that was still enough "new demand" (from free money printed and given away for that purpose) to keep the debt rolling over, and to tip the balances in lowering yields... if not quite so much today as U.S. government bond yields rose for a second straight day in spite of buyers using a little bit more of that free money. And that event occurring... even while also including the "good news": Data out Friday showed the fewest U.S. jobs created in seven months in August, although underlying measures were fairly strong, including a 0.6% wage increase that was double expectations. Transitory only, of course... just to make sure you have the context correctly understood... given Powell's recent redefinition of the factors underpinning "transitory" to make it mean... "sustained" and "permanent" ?
So, we're not going anywhere... but, getting there is going to be costing us twice as much as we expected ? The policy drivers are ones INTENDED to force wages higher... without the Democrats actually having to pass any legislation on minimum wages... that they KNOW they couldn't pass ? So, they're using other approaches using "the emergency" to drive wages higher.... all without it causing any inflation, of course ? Except... Federal benefits and rent moratoriums all just expired, so there should be "some" labor market movement from here... unless... it turns out that everyone is just too tired of the charade ?
But, as for gold... ? We should note the statistics are LAGGING... and we just don't really have any idea, yet, what portion of the SDRs are likely to be used in buying GOLD... instead of T-bills ? And, assuming the prior buying being reported now was "out of the blue" and not driven by any prior Basel III driven IMF provided assurances that the bills due for the gold already bought would be covered by those free issuances of hyper-fiat ? What you don't know is probably what matters the most ?
So, its all that "gold buying"... that sent gold prices plummeting 17% off the August 2020 highs ? Still more context required....
That 400 tons of "official" buying... if anyone really believes that number... raises more questions. First, where does one go to buy 400 tons of gold ? I checked E-bay... and while I can buy a good delivery bar of 5 kilos of silver on Ebay... the biggest gold bar I see for sale there is 10 ounces. So, not Ebay ? Of course, odds are pretty good that none of that gold is moving around much... rather than sitting in a vault in London?
But, how much gold is 400 tons compared to "the rest of the market" anyway ? Annual global production is a number that's hard to find... "suppressed" might be a useful word... The World Gold Council website does everything possible... bends over backwards... to avoid addressing the subject with anything approaching clarity... so, won't even use numbers. But, they do a nice update to keep you abreast of what they want you to think about what they have to say, as they always have: Monthly Central Bank Statistics. The only kinda "possibly" correct guesstimates are those from the USGS, to wit: an obviously erroneous guesstimate that 2020 global production was 3.200 tons... but, beyond that, a couple of conundrums...
First, they report Covid was a non-factor as U.S. production was down only 5%... and the rest of the world did even better, down only 3%...
Then, "In the first 9 months of 2020, global consumption in physical bars decreased by about 16%, in jewelry by 41%, and in industrial applications by 10%; however, gold consumption in official coins and medals and imitation coins increased by 33% compared with that of the first 9 months of 2019." Bars "consumption" (not demand) decreased 16%... only because that's the number of bars fewer that were being made ? How that works... so that you make 1/3 more coins from 1/6 less gold in bars being consumed is a bit of a puzzle... so enough gold must have been diverted from jewelry to fulfill the demand for coins ? Except... I was alive then... and, basically, you couldn't get bars... or coins ? There was no gold in the market to get ? COMEX sleights of hand diverted delivery into "cash settlements"... more than usual... then shifted to "London good delivery" ? Hmmm. The United States was not a net exporter of gold in 2020 for the first time since 2010 owing to a significant increase in imports of high-purity gold bullion. At the time.. they met the demand by shipping gold from London to the U.S. on airplanes... while telling us the issue with the inability to meet demand was "only" a "transitory" logistical snafu tied to the Covid... ? Except... that wasn't true... as the "logistical issue" wasn't only about transport... but about production being halted... or slowed ?
More telling perhaps... "Global investments in gold-based exchange-traded funds increased by almost 168%, while gold holdings in central banks decreased by about 58% during the same period." So, the fictional ETF gold met the demand from those who were happy enough to own fake receipts for gold that didn't exist... while the central banks emptied out their vaults of over HALF of the gold in them ? The ratio there... means that every Central Bank ounce that was allocated to a "lease"... and thus removed from "holdings"... was backing THREE ounces of "ETF gold" ? And a clearer picture in a proof of Central Bank directed gold price suppression efforts you could not ask for... except... that 3:1 ratio ?
Also a known, now, that it is a fiction that production was down only 5% ? As miners began reporting quarterly and then annual results... I have not seen any one of them yet reporting less than a 10 - 15% decrease in production during that period... and the period MATTERS, far more than averaged out annual numbers... with the reports of global results in the period being impacted FAR MORE than the U.S. domestic numbers were ? it appears... there was not only a lot of "fake gold" being sold as "ETF gold"... but a lot of "check kiting" going on in the rest of the market... as seen not only in the COMEX / LBMA arrangements to "move good delivery" to London, where the delivery was not really so good... and as seen in the Perth Mint... where the "gold in the vault" turned out to not be there... pretty much the same way as the banks vaults proved to be empty back in 2011 when gold prices spiked ? But, was the ETF gold fraud trade conducted in 2020... done at a 3:1 ratio ?
First, note, so much for Basel III "fixing" the problem with banks gold holdings being fictional... ? How much of that Central Bank gold... given an (involuntary ?) 58% decline in Central Bank holdings... actually made it to the market, not as "paper leased gold"... but as physical ? When the prior "shortages" from the onset of Covid suddenly abated... it was NOT the case that miners were back to full up and shipping new mine production... as a rate greater than needed to meet LARGER demand ? A sudden flood of physical finally made it to the market and relieved the market supply stresses... and that flood of gold had to come from somewhere ? Where did it come from ? Meanwhile... the miners are STILL not back to matching prior years production... as Covid continues to impose restrictions that ARE limiting output... So, it was NOT a restoration of mine supply that met the elevated demand ? What did ?
The sudden surge in supply of physical gold... by proving sufficient to meet the elevated physical demand and over-top that demand to push prices lower again... beginning in August - September ? That gold HAD TO come from somewhere... and mine output DID NOT increase to meet that higher demand ? Central Bank "leased" gold being used to "suppress the price" in the paper trade ? Or, was the ratio in paper trade NOT 3:1 but some much larger number, consistent with prior history, as large as 100:1 or more... with the gold vaults in London being emptied out... to meet the PHYSICAL demand ?
I don't think there's any other way to explain what DID happen... in a way that connects the dots rationally.
So, that would explain why there is added urgency... even desperation... apparent in the ongoing efforts seen now to push the gold price back down... so that the "holdings" in the vaults can be replenished "on the cheap" before the market figures out what just happened... not only in the gold market... but in the SDR issuance being used in monetizing the debt... U.S. tax payers being put on the hook to repay money being given away to... everyone else ?
Nothing to see here ? Move along...
Remember... countries trying to repatriate gold and being told... no ? What else explains that ? |
