Mint finds people really want gold — but not ETRs

Republish Reprint

Peter Koven | 13/05/29 | Last Updated: 13/05/30 1:11 PM ET
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Yuriko Nakao/BloombergConsumers are snapping up precious metals at a breakneck pace following recent price declines.

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Executives at the Royal Canadian Mint have joined a chorus of precious metal experts confounded by recent activity in the market.
Two of the Mint’s senior managers on Wednesday pointed out that the demand for its gold and silver coins is soaring through the roof. Yet its exchange-traded receipts (ETRs) have traded at a discount to net asset value this year for the first time, even though they are fully convertible into physical gold and silver.
“We’ve seen this massive physical demand,” Steve Higgins, the Mint’s senior manager of ETR compliance, said in an interview. “There’s a disconnect between that and the trading price of the securities.”
“Disconnect” is a commonly used word in the business right now. Reports from around the world suggest consumers are snapping up precious metals at a breakneck pace following recent price declines. But prices continue to languish as investment funds in North America liquidate their positions in exchange-traded funds.

Related

• Asia gold demand to absorb ETF outflow – WGC
• Gold bets cut to five-year low

A recent World Gold Council report stated investment demand for gold plunged 49% in the first quarter of 2013. It was probably even worse in April, when prices dropped 13% in a two-day period.

But the Mint’s raw numbers demonstrate just how strong physical demand has been lately. Chris Carkner, managing director of sales, noted the Mint sold about 440,000 ounces of gold maple leaf products in the first four months of the year, up 123% from the same period a year ago. Silver coin sales totaled nine million ounces, up 88% year over year.
“Since the U.S. election, we’ve seen strong demand for gold and silver product. And that demand went from strong to almost record levels once the price drop hit in April,” he said.
Mr. Higgins suspects the Mint’s ETRs are being caught up in the ETF liquidation wave. The ETRs have unique redemption features and other benefits that cannot be found in ETFs, but he thinks some investors may be valuing them the same way. “We’re out talking to audiences about it. My hope is it’s just a lack of understanding and will correct itself,” he says.
Traditionally, publicly-traded vehicles such as the Mint’s ETRs or Sprott’s precious metal trusts have traded at healthy premiums to net asset value because they offer a handy way for investors to access precious metals. Mr. Higgins noted it is generally impossible to buy physical gold or silver without paying some sort of premium.
The Mint’s gold ETR had a 3.5% premium when it began trading on the Toronto Stock Exchange in 2011, and that rose to about 6% for much of last year. The premium’s disappearance is an indication of how much volatility has affected the gold market. Prices have dropped 17% so far in 2013.
Financial Post
pkoven@nationalpost.com

source: http://business.financialpost.com/2013/05/29/mint-finds-people-really-want-gold-but-physical-gold-only/?__lsa=1f05-3567

Must watch Got golt Report

just WATCH it

They Better Pray There Is No Short Squeeze...

zerohedge again: 

Well, they've finally done it.
As the following chart of the day from Bloomberg shows, as of this week, hedge funds have made "the biggest bet ever" against gold by taking Comex gold shorts to all time highs.
To their reflexive benefit, we will admit, they have managed to push the price of gold lower, not much... but it is lower (whether with the BIS' assistance or not is irrelevant). It is a different question if the price of gold is low enough to reflect such a record bearishness. But the biggest question is what happens if there is a catalyst to launch a covering rally: such as, hypothetically speaking of course, the People's Bank of China were to announce that it has in the past four years in which it provided no updates on its gold holdings (last is as of 2009), accumulated some 2000-4000 tonnes of gold.
Surely, that would be most unpleasant to all those record shorts, and the impact on the price would be most parabolic. Why, all those shorts better indeed pray there is no short squeeze now or any time in the future...

Hong Kong Mercantile Exchange gold default?

Hong Kong, 18 May 2013

The Hong Kong Mercantile Exchange (HKMEx) announces today it has decided to voluntarily surrender the authorisation to provide automated trading services (“ATS”) granted by the Securities and Futures Commission (“the SFC”). With immediate effect, no new orders may be placed and all open positions will be financially settled at the settlement price determined by HKMEx and its designated clearinghouse.
The voluntary surrender decision was made to enable the Exchange to re-align its strategy with the new industry environment since its trading revenues have not been sufficient to support operating expenses and, as a result, its inability to meet the required regulatory financial conditions.
While trading on the Exchange will discontinue, HKMEx as an organisation will continue to operate with its existing staff, and will focus on developing new products including renminbi-denominated precious and base metals contracts that will better meet customer needs. It also intends to re-apply at an appropriate time for an ATS authorization to launch these products with stronger and more effective market maker programs.
“The favourable conditions under which HKMEx was founded have not changed. Global commodity demand continues to shift towards Asia as the region undergoes sustained growth, presenting great opportunities that we will continue to exploit,” said Barry Cheung, Chairman of HKMEx. “Our priorities now are to protect members’ interests by ensuring effective closing of open positions while strengthening our shareholding base and developing new products that play to our distinctive strengths.”
In closing out the open positions, the Exchange has developed a plan in consultation with the SFC to ensure the process is orderly and that investors are well informed of the matter. The Exchange will disseminate settlement prices to its members the morning of next Monday, 20 May 2013.
Ends --

EPIC MUST READ ARTICLE:So Much for Position Limits on COMEX Gold

Wednesday, May 15, 2013

So Much for Position Limits on COMEX Gold

HOUSTON -- We are using this space to put something in the public domain out of convenience more than anything.

Where were the regulators on gold futures position limits April 12 and April 16? 

Flash back to Friday, April 12, when the paper gold futures market was slammed with an enormous sell order in the early going of New York trading, following a “tenderizing” of the market right at the New York open. 

We have read and heard various descriptions of the initial sell order being as little as 124 tonnes and as much as 400 tonnes of gold equivalent – sold by a single source or by a group all at once – with the express intent to break the gold market. 

Friday, April 12 5-minute tick chart courtesy of Ross Norman, Sharps-Pixley, UK. 

We want to voice a concern of ours which we thought of that very day and have thought about off and on since then, but have yet to act on it.  (Other than to share it with several colleagues.)

Our simple question:  Where are the regulators (in this case the CFTC and CME Group) with regard to size and accountability limits?

First, though, a caveat:  We do not have the actual trade data which would include the actual orders and the sellers of those orders.  Without that, this is pure speculation and subject to receiving that actual data. (More...)

That said, what we do know is that the volume spiked to an unprecedented level April 12 and Monday, April 15 and that initial sale triggered an avalanche of trading and trailing stops.  The net effect was that the initial order was indeed large enough and sold into the market fast enough that it literally overwhelmed the gold futures market.  Whoever it was used a bazooka at a knife fight. The selling panic that ensued will be talked about for generations.

Whether the initial sale into the gold market was 124 tonnes or 400 tonnes is not really material to our question.  Either size would be so much higher than any one trader should have been able to sell into the gold market at one time that it begs the question:  How many traders would have had to be involved in order to “legally” sell that many gold futures contracts into the market? 

Let’s assume for this discussion that the initial sale was 124 tonnes. That’s about 4 million ounces or the equivalent of 40,000 COMEX contracts. 

From earlier work we know that the CME Group has position limits for gold futures of 3,000 contracts in the front month and 6,000 contracts in all months.   

We know from the open interest that the initial sale on April 12 was concentrated in the front month, so no one trader should have been able to sell more than 3,000 contracts at one time, and that’s assuming that trader had a zero open position when the sale occurred.  The 3,000 number is supposed to be the limit of all contracts and options, both long and short at any time, even intra-day. 

Assuming all the traders involved had no open contracts before opening four million ounces worth, how many traders would have had to be involved?  Simple math says (40,000 contracts / 3,000 lots limit) = 13.3 traders.  Call it 14 traders. 

So, in order for the initial 124 tonne sale to have occurred “legally” it would have had to have been 14 traders, all with zero orders open, all acting simultaneously, all acting independently, in their own self-interest, without colluding with each other to “sell-for-effect” or conspiring to foment a price smash. 

In actuality, the chances that there were 14 traders who held zero open orders all acting independently, all throwing their full allowable 3,000 contracts into the gold market within a few minutes of each other are infinitesimally small.

Much more likely is that the initial sale which triggered the sell stop putsch in gold was done by a single trader, acting so far outside the position limit regime as to be brazen about it.

How about a few facts:

At the time of the large sale on April 12, the gold price was breaking through $1,520.

4 million ounces at $1,520 is roughly $6 billion in notional value. 

40,000 contracts would have required about (40,000 X $5,940) = $237.6 million in initial performance bond requirements, if the traders were Spec members.  (CME Group subsequently raised Spec initial margin to $7,040 for the close on April 16.)  If the big seller was a commercial hedge member, then it would have required (40,000 X $5,400) = $216 million in initial bond requirement.  (CME Group subsequently raised Hedger initial margin to $6,400 for the close on April 16.)

At the time of the large sale the COMEX open interest was a little over 416,000 contracts.  So the initial sale was about 10% of the entire open interest of the COMEX.  There was little change in the number of contracts open as of Tuesday, April 16, by the way (413,083). 

A few questions:

Who was the large trader who decided to hammer the gold market with 40,000 contracts all at once? 

How did that trader manage to do so without running afoul of the CME Group position limits or the CFTC regulators? 

Was the initial trade by one, two or many traders?   If by one or two, then there is no way in hell the trade was “legal” under the position limits.

If by many traders all acting at once, then how is that possible without their conspiring in advance to do so? (We are talking about the initial smash trade here, not the ensuing stops triggered.)

We invite well-informed commentary on this subject and would be grateful to any N.Y. traders who know the facts to comment either here on the blog or privately. 

We suppose it is possible that the initial sale was actually much smaller than 124 tonnes, but that it triggered a series of sell stops that collectively amounted to that much, but we are doubtful that the sale which triggered this sell down was “legit” when we look at the facts. 

Our sense is that no one would sell that many gold contracts so fast unless it was with the express intent to drive the market lower and by doing so, trigger sell stops of many other traders - which is, of course, trading for effect, which is patently illegal. (And yes, we know it happens all the time, but there you go.)

Our sense is that we won’t be bothered with any commentary or enforcement action by the CME Group or the CFTC on this issue.  The history of the paper gold and silver futures markets suggests that rules and position limits are just so much sausage – to be ground up by a few elite traders from time to time. 

Not that we are complaining, mind you.  We are merely trying to understand if there really are position limits and whether they should have come into play on April 12, 2013. 

Edit to add:  A trader buddy, responding to our inquiry reminds:  “The hedge members can use their bona fide hedger exemptions to sell more than the limit, but not without filing paperwork with the exchange.”    

If true, and we do believe it is true, then whoever blew out the gold market on April 12 is already known to the CFTC (and what documentation they used to back up their trade).   But don't hold your breath waiting to hear about if from the CFTC under Goldman Sachs-ex Gary Gensler.  

Mr. Gensler is a Goldman sausage grinder from way back... 

Gene Arensberg for Got Gold Report 

SOURCE: http://www.gotgoldreport.com/2013/05/so-much-for-position-limits-on-comex-gold.html

Maguire - Perfect Storm In Gold As LBMA & COMEX Collapsing

Today whistleblower Andrew Maguire told King World News the perfect storm is brewing in the gold market as the LBMA and COMEX are collapsing. Maguire, who recently appeared in the extraordinary CBC production titled, “The Secret World of Gold,” also spoke with KWN about the disappearance of gold from both of those exchanges. Below is what Maguire had to say in part II of his remarkable written interview series which will be released today. Maguire: “One thing is certain today, the bullion banks are on the long side of all of this selling. We are seeing cracks appearing in the fractional reserve LBMA and COMEX price setting mechanisms. It’s really thanks to the most recent paper market discount that we are evidencing this accelerated migration of bullion from the West to the East. The more obvious this becomes, the more it exposes these bullion banks as holding real naked shorts that are absolutely undeliverable fractional reserve bullion positions....

“Fractional reserve bullion banking has now become so mismatched to the fundamentals that it’s going to be extinguished as the increased delivery demand forces this unwinding of the leverage. 

This hot money (hedge fund money) is currently so short at unprecedented levels, while the bullion banks are taking the long side of this fresh short supply that’s coming in from weak hands.  This short fuel above the market is actually a tinder box ready to ignite, and it has set up the current driver for the next move.

The COMEX inventories have been steadily drained, but it’s accelerated rapidly over the last three months.  These mismatched leases are forced to be extended now beyond any historical extremes that I can ever recall, and I talk to other people in the wholesale market and we are all seeing this crack in the system.  On April 12th we saw official defense come in (to the gold market) and it was to avert this imminent LBMA bullion bank default.  But it was just the way it was executed.  It was grossly misjudged. 

And even though this activity (intervention) bought a little more time for these guys, the immediate and unanticipated but accelerated bullion demand (all over the world), actually ended up digging an even deeper hole for the Fed, the Bank for International Settlements (BIS), and the agent bullion banks.  They have actually shot themselves in the foot.

By simply tracking the movements in the international wholesale market, it’s clear that a major supply problem is brewing.  Where has this bullion gone?  It is clearly Fed and Bank for International Settlements borrowed bullion.  What they are doing is seeking to avert a fractional reserve delivery default.  These are in the price setting centers of London and the COMEX.  And it is further extenuated by arbitragers who are moving bullion out of the COMEX and reselling it at higher, real global prices. 

So you have a perfect storm here.  This (Western gold) bullion is not coming back.  It’s being re-melted, cast into kilobars, and it’s ending up directly in Eastern hemisphere central bank and sovereign vaults.  And all of this time the bullion banks are calling for lower prices, and the mainstream media is touting a bear market.  The bullion banks are fully aware of this threat, and they are exiting these mismatched short positions.”

IMPORTANT - Andrew Maguire’s trading service has returned a staggering $98,715 for each and every (single) contract traded in the gold market over the past 12 months.  For those who would like to get more information on Maguire’s incredible trading service and to sign up you can do so by CLICKING HERE.

This is part II of a written interview series which will be released today and it is only a small portion of what Maguire had to say in his extraordinary audio interview.  The KWN audio interview with Andrew Maguire is available now and you can listen to it by CLICKING HERE. 

© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged. 


source: 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/10_Maguire_-_Perfect_Storm_In_Gold_As_LBMA_%26_COMEX_Collapsing.html
 

Looking for the best SILVERBUG song!

hey fellow comrades in silver arms, fellow silvertards...

what is the preferred silverbug song ?

comment your silverbug song here below this post.

I am calling silvertards from all over the world.

my favourite silverbug song is :
Shiny Happy People ( REM)

http://www.youtube.com/watch?v=iCQ0vDAbF7s

post yours in the comments section . Thanks!

JPM Eligible Vault Gold Drops To Fresh Record

Submitted by Tyler Durden on 05/08/2013 19:17 -0400

• China

Two weeks ago we reported about one of the biggest daily withdrawals of eligible gold from the JPM gold vault, it not on an absolute basis, then certainly on a relative, when in one day over 260k ounces of gold were withdrawn, leaving a record low 141.6k ounces, or just over 4 tons of gold in the vault. Subsequently, we tracked the daily additions and withdrawals of gold from the vault to see if any other major withdrawal request would come, instead discovering instance after instance of JPM reclassifying Registered gold into Eligible, which is how the vault saw its eligible inventory rish back to 195K ounces as of yesterday, without any actual net additions or more importantly withdrawals. It seems the pause of withdrawals has ended, and as of yesterday, another delivery led to a withdrawal of 53,658 ounces, or 28.5% of the total, leaving a fresh record low inventory of only 137,377 eligible ounces in the vault.

As a result, total Eligible in the Comex system is now at a level of 6.13 million oz, or roughly the lowest since since 2009.

And since much of the Eligible gold "additions" have come as a result of the reclassification of Registered gold into Eligible, the combined total of Eligible and Registered has also declined to levels last seen in 2008, at just under 8 million total ounces.

But here's the real punchline: if JPM had not been allowed to arbitrarily convert registered gold into eligible in the past two weeks, the firm's current inventory of eligible gold would be just 83,718 troy oz, or a little over one and a half metric tons: an amount that is laughable and is about 3% of the maximum eligible gold (2.8 million oz) held at the JPM vault, shortly after its commercial reopening in October 2010.
Earlier today, when reporting about the insatiable demand for physical out of China, following the report that "The jump in Chinese physical demand also prompted some banks to ship in more supplies from London and Swiss vaults, traders said." we asked "What about New York vaults? And specifically the biggest gold vault in the world, located 90 feet below 1 Chase Manhattan Plaza?" It appears the Chinese may have gotten just a little more gold out of New York today after all.
Finally with gold at record low levels, pay attention to how much more registered gold is converted into eligible in the coming days. Because if one day the registered gold holders realize the "run on the vault" that is going on, and they too ask to have their gold moved elsewhere, then things will really get entertaining.
Source: COMEX