An interview of David Jensen by Jay Taylor on December 17, 2014
Physical Market Stress: Major Gold Market Players Departing
1) Reuters and CME providing silver fix each day.
Reuters has a history of acting as a propaganda arm of the UK Government during WWI and WWII, took secret subsidies from the UK Government in the 1980s and 1990s, and has recently been accused of fraudulently reporting stories from Iraq, Syria, Lebanon etc.
Samples of Reuters' allegedly fraudulent reporting:
Historically, silver has been the day-to-day monetary medium of exchange while gold was reserved for higher-value transactions.
LBMA has had a problem with apparently collusive and fraudulent setting of gold and silver prices and the LBMA's response to the alleged fraud and collusion is to set a new daily silver price with including a party that has been repeatedly acted as a UK Gov propaganda agent and that has also repeatedly been alleged to engage in fraudulent reporting.
2) Further evidence of gold market problems - major metals market participants are leaving in rapid succession:
- Commodity trading giant Gunvor leaves physical gold trade as unable to source gold with origin that is "well documented" http://www.zerohedge.com/news/2014-12-16/commodity-trading-giant-exits-physical-gold-due-lack-physical-documented-origin
- Johnson and Matthey exits precious metals refining business after 160 years http://www.kitco.com/news/2014-12-15/Johnson-Matthey-Sells-Gold-Silver-Refining-Business-For-GBP118-Million.html
- Deutsche Bank exits physical metal trading http://www.fxstreet.com/news/forex-news/article.aspx?storyid=fd5f8ea2-8018-48f6-b4c8-aba13c35d137
Allegations of crimes committed at the LBMA (85% of daily global gold trading volume).
Central issue appears to be multiple claims to bars through rehypothecation / repeated lending of the same assets, unallocated metal instruments creating multiple claims per bar, etc.
Engaging in fraudulent trade or in assets with multiple claims or fraudulent title potentially implicates parties involved in the transactions.
Class action suits of defrauded gold and silver LBMA investors is possible and these companies may be exiting the physical space as a defensive move.
One piece of a mosaic and worthy of tracking for other precious metals players departing this space as the metals markets are scrutinized.
3) James Turk - central banks almost exclusively occupy the gold lease market at the LBMA
With 5 billion oz. of gold globally above ground, if leasing of gold only provided by central banks then that is further evidence of market failure (private gold not available for lease for paper profit).
Artificiality of the physical gold market would be indicated by central banks as sole presence in market sectors where substantial paper profit could be generated.
Overall, serious problems appear to exist and questions are being raised re. the LBMA gold and silver markets.
Gordon Brown showed in 1999 by selling 400 tonnes of the British People's gold at $250/oz. to solve a gold 'crisis' for London traders that the UK gov was acting in the interests of the City of London traders and not UK citizens.
There are 170,000 tonnes of gold available above ground. Why sell 400 tonnes of the UK citizens' gold at market bottom?
Holding gold positions at the LBMA appears to expose investors to risk of numerous claims per ounce of gold putatively available.
Russia and China have announced they are no longer accumulating USD denominated assets. They are actively buying gold and other real assets with their trade generated USD currency and moving to a new, stable currency system as the USD/Euro western paper money system collapses on itself.
LBMA hides statistics from public scrutiny regarding open interest, leverage, etc.
A new open trading platform for gold, silver, and PGM's is needed.
4) Scale: Oil trade dollar volume vs gold trade dollar volume
On daily production basis, 15x more dollar volume of oil is produced each day vs dollar volume of gold produced each day
Daily oil futures trading volume on NYMEX: http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_volume_voi.html
1.2 M futures contracts per day or 1.2 Billion bbls per day
At $60 bbl oil, $72 billion per day of oil futures traded on the NYMEX
Compare London LBMA gold trade: http://www.lbma.org.uk/Clearing-Statistics
October 2014 saw 17.4 million oz. gold per day (net settled) or 174 million oz. of gold per day gross daily trading volume using the LMBA's 10x gross volume vs net settled trading volume.
At $1,200 per oz., that is $209 billion of gold traded each day in London (85% of global daily gold trading volume).
Daily gold trading dollar volume in London is 3x daily oil trading in NY on the NYMEX exchange.
5) Saville article - a typical view of the gold market ignoring the distortion of gold and silver leverage in the physical market
- Look at 2,900 tonne annual mine supply of gold because it is a liquid supply of gold. Gold is tightly held and fluctuations as to how much available to the market
- Saville confuses supply and demand of real metal vs LBMA supply of 'physical' metal
- By leveraging forwards, multiple times and selling 'unallocated' virtual gold, artificial physical supply is artificially created allowing the steering of the gold price while market participants sit in virtual 'physical' gold positions on the LBMA.
- Key is that, as with all Ponzi schemes, investors must be kept sanguine - gold withdrawn from the exchange will quickly collapse the leveraged physical metal system and the market itself.
In summary, it is important to keep open minds about the nature of these metal trading systems, pulling together disparately sourced information to form a mosaic to see with time the big picture. Not all information is material. However, with time, we will be able to see the greater market picture and be able understand and to act to stabilize our markets and monetary system.