The Phaserl


GLD to Gold – We have a Problem!

from Dan Norcini:

Once again we have another one of those proverbial flies in the ointment when it comes to one of these frequent rallies we have seen in gold during the ongoing bear market of the last two+ years. We get a great rally and a lot of powerful chart action over at the Comex only to wait upon the reported holdings update from GLD and then find disappointment.

Instead of a nice climb in the holdings, what did we get instead? _ a fall of some 5.7 tons! Quite honestly, that came as a very big surprise to me. Given the action in the mining shares, I had expected to see some increase in the holdings. ‘Twas not to be apparently.

This confirms my concerns about the rally – namely that while it was indeed powerful, it was due primarily to short covering and not so much due to an abundance of new buying. It is obvious that some used the rally in gold to close out some longs in the GLD.

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5 comments to GLD to Gold – We have a Problem!

  • clambake

    Of course it seems like a fly in the ointment if you don’t understand what’s going on.
    Go to this guys blog and have a read of some of the comments. 90% of it is sitcom/soap opera, it’s hilarious.
    It’s about some guy who runs this blog for wanna-be traders and the antics they get up to trying to justify their existence and at the same time defend their sand patch.
    There’s this one blogger Ifeelya Balls who is a self confesed gold bug – at this point in time – lol, who is telling off a metals invester for having, wait for it, a different “point of you” lmao.
    It’s a good light hearted read for anyone needing a bit of a poke in the ribs.
    Thanks Dan

  • George

    Jim Sinclair’s stated friend Dan. Remember that. Jim Sinclair quotes Dan Norcini on all his emails. Why you must ask?
    Stop respecting an egomaniac. He has been wrong about so much for so long now, like 3 years. Sinclair and Turk, wow, they have caused massive financial losses for their followers.
    Remember them as losers and move on.

    Buy Gold? Yes!

  • michael

    Ya hilarity ensues in the comments for sure! How dare anyone suggest price rigging, as if metals are the one and only pure markets. Had wondered why Norcicni was no longer on KWN. I guess the spread between reality and fiction got a little too wide. He clearly is trying to justify his job….he is corrupt or everyone else insane…now sadness ensues.

  • rich

    Permanent gold backwardation = global meltdown ahead An analysis of the potential for permanent gold backwardation to lead to global financial crisis and an enormous increase in the gold price.

    In a “short term backwardation”, the mathematics clearly dictates that the bullion banks should arbitrage by selling certificates. But as the backwardation becomes “semi-permanent” – as it has been since 2011 – the market risks entering a negative feedback loop, causing the backwardation to become ever deeper. This is caused by investors stubbornly buying physical gold thereby removing the backing for the market itself. Announcements by the US Mint of “record sales” and “shortages” do not help.

    One solution to breaking such a backwardation is to take LIBOR negative, which seems impossible, but this is strangely happening in Europe where banks are now charging customers interest to safely store their money. Other solutions are (1) to drive the spot gold price ever lower, in the HOPE of getting the spot price to stay below the futures price and thereby create a positive GOFO, and (2) to drive the gold price so high that investors stop buying and the gold hoarders start selling (or leasing), all with sufficient quantity so as to create a lasting contango.

    This problem should be well understood by both the bullion banks and the Governments because they have already seen it once before in the 1970s. When Nixon ended the “gold standard” in 1971, there was a massive flight to gold and a “semi permanent” backwardation resulted. The gold price rose from $35 to $200 in 1974 and then the price was taken back down to $100 in 1976 (presumably in the hope of ending the backwardation). But this only caused a surge in demand which eventually took the gold price back over $800 in 1980. Inflation skyrocketed, requiring interest rates to be raised to around 20%. Finally, some sellers and leasers of gold appeared and the backwardation was broken, allowing for the normalization of interest rates and the economy.

    But the same problem is repeating today and so far the response has been the same. From 2008 to 2011 the gold price tripled from $650 to $1,900. Over the last three years the bullion banks and Governments have tried to break the backwardation and normalize the economy by dumping huge amounts of physical gold and “paper gold” at the gold spot price. But they have failed, because although they have reduced the gold price from $1,900 back down to $1,200, they have not been able to create a lasting contango. Instead, the gold buyers and hoarders have dug in, bought everything and demanded more – which has only strengthened the backwardation.

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