Eric Sprott on Ukraine Russia War: Capital Controls, Bank Runs, Gold and Silver Forecast TNR.v MUX GLD GDX

  Eric Sprott discusses the Gold market manipulation and the set of evidence presented by a number of new reports on the subject. According to Eric, demand for Gold is exceeding available supply and it will power the Gold price much higher. China is buying record amounts of Gold and situation in Ukraine puts more strain on the global economy and its monetary system. Gold is the place you turn during the financial and political distress.

Koos Jansen: Chinese Physical Gold Demand YTD 369t Up 51 % Y/Y TNR.v MUX GDX GLD RGLD ABX

  "Koos Jansen continues his remarkable work reporting the real demand for Gold in China. According to his information this demand is on track for another record annualised so far and is up 51% on Y/Y basis. Geopolitical shift with the Ukraine situation will only add to this fire and ongoing Financial War will claim its victim US Dollar."

Currency Wars: The Yuan's Silent Scream - Portrait Of A Derivatives Bomb Being Detonated TNR.v MUX GDX GLD

"David Kranzler published a very interesting article confirming our discussion about the ongoing Financial War involving USA, Russia and China now. Bo Polny on the chart above presents his view about the implications of US Dollar crash below 80.00 level for the Gold market and you can find our thoughts on the links  below."

Dollar Crashed Below 80.00 What Is Next For Gold, Copper And Lithium? TNR.v MUX ILC.v GDX

"In a few words: they all are going much higher now. Let's discuss why we think it is going to be the case. What is coming next for stocks and commodities? The concept of Great Inflation in 2014 was first introduced here by Toby Connor article and so far the market was unfolding as he has predicted. The most important observation here is that not only we are seeing the first signs of increased money velocity and unfolding Inflation in the different Commodities Breakouts, but that FED is actively looking forward to create Inflation. Janet Yellen statements about desired level of Inflation were quite a revelation for the Central Banker to say the least. Never fight the FED and with the help of Russia and China US dollar will slide down even more and Inflation will be coming not only onto your grocery bills, where it was never gone, but even into the massaged government statistic reports."

Koos Jansen: Chinese Physical Gold Demand YTD 369t Up 51 % Y/Y TNR.v MUX GDX GLD RGLD ABX

  

  Koos Jansen continues his remarkable work reporting the real demand for Gold in China. According to his information this demand is on track for another record annualised so far and is up 51% on Y/Y basis. Geopolitical shift with the Ukraine situation will only add to this fire and ongoing Financial War will claim its victim US Dollar.

Currency Wars: The Yuan's Silent Scream - Portrait Of A Derivatives Bomb Being Detonated TNR.v MUX GDX GLD

"David Kranzler published a very interesting article confirming our discussion about the ongoing Financial War involving USA, Russia and China now. Bo Polny on the chart above presents his view about the implications of US Dollar crash below 80.00 level for the Gold market and you can find our thoughts on the links  below."

Dollar Crashed Below 80.00 What Is Next For Gold, Copper And Lithium? TNR.v MUX ILC.v GDX

"In a few words: they all are going much higher now. Let's discuss why we think it is going to be the case. What is coming next for stocks and commodities? The concept of Great Inflation in 2014 was first introduced here by Toby Connor article and so far the market was unfolding as he has predicted. The most important observation here is that not only we are seeing the first signs of increased money velocity and unfolding Inflation in the different Commodities Breakouts, but that FED is actively looking forward to create Inflation. Janet Yellen statements about desired level of Inflation were quite a revelation for the Central Banker to say the least. Never fight the FED and with the help of Russia and China US dollar will slide down even more and Inflation will be coming not only onto your grocery bills, where it was never gone, but even into the massaged government statistic reports."

In Gold We Trust:

Chinese Physical Gold Demand YTD 369t Up 51 % Y/Y

The Shanghai Gold Exchange (SGE) is back on schedule publishing their trade reports on friday that cover the previous trading week. Last friday’s report covered the trading week February 17 – 21. For me the most important numbers is always the amount of physical gold withdrawn from the vaults as this equals Chinese wholesale demand. Withdrawals in week 8 (February 17 – 21) accounted for 49 tonnes, year to date there have been 369 tonnes withdrawn from the vaults. If we divide the later by the number of days of the corresponding period (52) we come up with an average demand of 7.09 tonnes per day – this includes weekends and the one week holiday at Lunar year when the SGE was closed.

I got a few request regarding demand compared to last year and daily moving averages. Great ideas which I have carried out (request are always welcome, we’re doing this together). Compared to last year demand is up 51 % over the same period. Of course we had the shocker in April 2013 when withdrawals exploded to 117 tonnes in week 17. I don’t expect any spikes that big this year so probably this year’s growth compared to 2013 in percentages will be decreasing when we’ll pass April. Nevertheless, the daily average of 2013 was (2197/365) 6.02 tonnes, while this year we’re up to 7.09 tonnes. China is on schedule to establish a new record, if the world can supply any more gold.

Although I’m not much of a technical guy, I made the following calculation for the 200 DMA. Because the withdraw numbers are weekly disclosed I divided 200 by 7 (days in a week) which equals 28.57. The 200 DMA in the chart below is the trend line of 28.57 red columns (weeks), which boils down to 200 days. The hight of the trend line still corresponds to the (weekly) withdrawal numbers on both axes. (200 DMA = 28.57 WMA)

We can see the the 200 DMA rising in 2013 to nearly 50 tonnes a week in June, then it fell slightly at the end of the year. Before the new year wholesale demand picked up again prior to an unprecedented buying spree on retail level and moved the trend line up at currently just under 50 tonnes a week.

The longer this insatiable demand continues the more I start to ask myself where this gold is coming from. We know from Swiss refineries they’re having a very hard time to source this much gold for China.

According to the World Gold Council all above ground gold accounts for 170,000 tons, in my opinion it’s impossible to know this amount. It’s a rather Keynesian thought that an institution can know how much grains of gold every single human being across the globe extracted from the earths crust in the history of humanity, and how all these grains were allocated or maybe lost throughout history. I think the total amount of above ground gold is as invisible as the hand that regulates the free market. Every economic agent can only be positive about it’s own gold holdings and decide to exchange these against goods or services, depending on the exchange rates set by the free market. Although all exchange rates are currently set by Keynes’ descendants, that doesn’t mean any institution knows the total amount of above ground gold.

It’s just a matter of strong and weak hands now. Most goldbugs are strong hands – because they not only hold gold for investment purposes, they also hold it because of their view on economic theory – while a random US citizen on food stamps that owns a golden earring is a weaker hand. Anyway, based on certain parameters (import, demand, mining) one would think that in coming months the price of gold and Chinese demand wil getin conflict; the situation simply can’t go on like this forever.

Meanwhile the mainstream media is slowly waking up to the possibility the price of gold has been manipulated for decades through the London fix, which in my opinion is just one aspect of the manipulation process. Although I’m sure this aspect will unravel the rest of the process as well. All in all lots of stress in the gold market, reflected by long periods of negative GOFO. I hope to write an article about the details of GOFO in the near future.

Overview Shanghai Gold Exchange data 2014 week 8

- 49 metric tonnes withdrawn in week 8  (17-02-2014/21-02-2014)

- w/w  - 23.86 %

- 369 metric tonnes withdrawn year to date

My research indicates that SGE withdrawals equal total Chinese gold demand. For more information read this, this, this and this.

This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

Below is a screen shot of the premium section of the SGE weekly report; the first column is the date, the third is the international gold price in yuan, the fourth is the SGE price in yuan, and the last is the difference.

In Gold We Trust

Currency Wars: The Yuan's Silent Scream - Portrait Of A Derivatives Bomb Being Detonated TNR.v MUX GDX GLD

Jim Sinclair.

Update March 4th, 2014 Here we go as per Jim Rickards's Currency Wars template:

ZeroHedge:

Putin Advisor Threatens With Dumping US Treasurys, Abandoning Dollar If US Proceeds With Sanctions

"While the comments by Russian presidential advisor, Sergei Glazyev, came before Putin's detente press conference early this morning, they did flash a red light of warning as to what Russian response may be should the west indeed proceed with "crippling" sanctions as Kerry is demanding.  As RIA reports, his advice is that "authorities should dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine." Glazyev said the United States would be the first to suffer in the event of any sanctions regime. “The Americans are threatening Russia with sanctions and pulling the EU into a trade and economic war with Russia,” Glazyev said. “Most of the sanctions against Russia will bring harm to the United States itself, because as far as trade relations with the United States go, we don’t depend on them in any way.”

  David Kranzler published a very interesting article confirming our discussion about the ongoing Financial War involving USA, Russia and China now. Bo Polny on the chart above presents his view about the implications of US Dollar crash below 80.00 level for the Gold market and you can find our thoughts on the links  below.

Ukraine and Peter Schiff: Recovery Fantasy, Dollar Crash Below 80.00 And Gold "Wall of Worry". TNR.v MUX GDX

"Obama can have his own war finally after the few unsuccessful attempts with YouTube evidence in Syria. We do hope that it will be only Financial War and we can see the first rounds of it this week. Initially US Dollar went up on the escalation of the situation in Ukraine - as any potential military action in the world is supposed to be positive for the U.S. Military Complex, but on Friday with major headlines from Moscow about Ukraine Dollar has dived decisively below 80.00 to the 79.78 close. After these U.S. actions in Ukraine considered as an insult by the Kremlin the least you can expect is selling of the US Treasuries by Russia and, maybe, already accelerating of selling by China as well. They have been already smelling the rat about the USTs Game Of Musical Chairs for a long time. It is just too personal. None of these two countries - or it will be better say leaders - would like to be liberated next in any circumstances. Dr. Paul Craig Roberts - former US Treasury official - has made the best comments on the situation in Ukraine."

Dollar Crashed Below 80.00 What Is Next For Gold, Copper And Lithium? TNR.v MUX ILC.v GDX

"In a few words: they all are going much higher now. Let's discuss why we think it is going to be the case. What is coming next for stocks and commodities? The concept of Great Inflation in 2014 was first introduced here by Toby Connor article and so far the market was unfolding as he has predicted. The most important observation here is that not only we are seeing the first signs of increased money velocity and unfolding Inflation in the different Commodities Breakouts, but that FED is actively looking forward to create Inflation. Janet Yellen statements about desired level of Inflation were quite a revelation for the Central Banker to say the least. Never fight the FED and with the help of Russia and China US dollar will slide down even more and Inflation will be coming not only onto your grocery bills, where it was never gone, but even into the massaged government statistic reports."

Investing.com:

The Yuan's Silent Scream

Anyone who denies that the Fed is engaging in unprecedented intervention in all of the markets -- especially the gold and silver markets -- is guilty of either ignorance or willfully intentional denial.  But the Chinese can play the intervention game as well.  We are seeing that giant footprint of intervention in the dollar/yuan relationship, as the Chinese yuan has just experienced it biggest weekly plunge ever:

 The Dollar vs, The Yuan

Briefly, this graph (edits in white/red are mine) shows the $/yuan relationship.  It plots the amount of Chinese yuan needed to buy one U.S. dollar. When the ratio declines, it means the yuan is increasing in value vs. the dollar.  As you can see, there has been a steady decline in the $/yuan ratio, which means that Chinese Government has been letting the yuan rise in value.  That is, until about a week ago.

What most market observers tend to overlook is that there are likely tens of billions worth of OTC derivatives that have been issued by the too-big-to-fail banks tied to the trading relationship between the $/yuan. In fact, Morgan Stanley estimates the amount to be at least $150 billion.  They also show a table in that link which estimates possible losses to the banks if this is the case to be well in excess of $1 billion.  Morgan Stanley should know, it was one of the biggest beneficiaries of the 2008-2009 Bush/Obama bailout of Wall Street.  MS also has one of the highest net exposures as a percent of bank capital to derivatives accidents.

In my view, that spike up in the $/yuan you see in the chart above has probably triggered a massive derivatives "explosion" because typically, in their keen foresight and wisdom, the bank rocket scientists never account for the risk of a big move like the one above in a such a short period of time.  If they were to price in this possibility, the derivatives contracts upon which they make $10's of millions in selling profits would be too expensive and the banks would miss out on that easy income.   But hey, we haven't seen a move like that in the history of the $/yuan contract so why should the banks ever expect it to happen?  And the Fed and Government has their back if they're wrong.

Of course, this was same Nobel Prize winning wisdom that cause the Long Term Capital collapse and bailout (remember that one?) and that caused - more catastrophically - the 2008 collapse of the U.S. financial system (AIG/Goldman) and the subsequent joint Republican/Democrat 100% approved taxpayer bailout.

Many analysts are wondering why the Chinese Government, which has a tight control over the trading level of the $/yuan, has enabled the above spike up to occur.  If you think about the ramifications of what I just laid out above, it leads to one possibility (hint: think about the big blow that was just delivered to western bank balance sheets if I'm right about a behind the scenes derivatives accident having just occurred).

I see this as another big cruise missile just fired by China in the global currency war.  The first big missile being the massive accumulation of gold by the Chinese (as has been documented ad nauseum).  There's also another benefit to the Chinese.  Think about the massive size of China's dollar reserves.   The dollar has just become significantly more valuable vs. the yuan and so has the value of China's dollar reserves.  This gives China more buying power to buy gold using dollars.

One other point, and this is tied to China's ultimate goal:  to unload its massive hoard of dollar reserves while making as little noise about it as possible.  Last night, a few hours after the yuan dropped precipitously against the dollar, the US dollar index plunged in cliff-dive fashion, losing 36 basis points in about 30 minutes.  While that may not sound significant, in currency trading terms that is considered to be a mini-crash.  Oh, it also dropped below key 80 line of support that has been drawn in the sand by the U.S Government, slicing through that level with ease.

I would suggest, and there's no way of telling without having access to the inside books - the books which contain the numbers for which the banks spend millions to make sure Congress helps the banks keep them hidden - that the Chinese have unloaded another truckload of dollars behind the all the smoke emanating from the holes created by the Chinese Government motivated $/yuan crash and the related derivatives explosions:

 The US Dollar Index

The greatest trick the devil ever pulled was convincing the world he didn't exist."