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Endeavour Silver Corp. Message Board

  • mensch1003 mensch1003 Jun 12, 2013 9:41 PM Flag

    Zero hour

    As long as EXK increases production each year my concern is the price of Ag & when will it move. Sprot has given a facinating speculation and it appears very credible to me that the central banks do not have the gold reserves they claim to have. Sooner or lator the comex will default & when it does the emporer wears no clothes, what a day of reckoning it will be
    “The mere combination of only five separate sources of demand,” Sprott writes in a recent white paper, “results in a 2,268-tonne net change in physical demand for gold over the past 12 years — meaning that there is roughly 2,268 tonnes of new annual demand today that didn’t exist 12 years ago,” when supply and demand were more or less in balance.

    And those are only the official figures. “There are lots of other purchasers of gold that I don’t have records of,” he elaborated in our interview.
    “So, for example, when somebody physically buys a gold bar, whether it’s [hedge fund manager] David Einhorn or the University of Texas endowment or someone like that, there’s no place that I can go and see how many bars were purchased. There’s no public documentation if Russian billionaires are buying gold.” For every story that makes the news, like Einhorn or UT, there might be 10 purchases that occur sub rosa.
    Summing up, nearly 2,300 tonnes (officially) of new demand each year are coming into a market where supply is still stuck at roughly 3,700 tonnes. “So where’s the gold coming from?” Mr. Sprott asks rhetorically. “Who’s supplying this gold?”
    After a research project that’s gone on as long as the bull market in gold, he’s left with only one plausible explanation — the one that makes default on a major commodity exchange inevitable.
    “The Western central banks,” he tells us, “are surreptitiously supplying gold by leasing theirs out.”
    “Wait a minute,” you’re asking. “You just said central banks became net buyers of gold in the last decade.”
    True… but all the buying has come from developing countries like Russia, China, India and Kazakhstan.
    Meanwhile, the numbers from the big developed countries — the U.S. included — have been static.
    Remember the main reason central banks are in business — to benefit their biggest and most powerful member banks.
    And what’s beneficial to U.S. and European banks is gold leasing. Commercial and investment banks lease gold from a central bank at bargain rates — usually less than 1% a year. Then they sell that gold into the private market and plow the proceeds into… well, anything that yields more than 1%. It’s a sweet deal if you’re a banker.
    “But then the gold is gone, right?” Yes. If the central bank wants its gold back from the commercial and investment banks, those banks would have to buy gold on the open market — driving up the price. That’s a bad deal if you’re a banker.
    So usually, there’s a tacit understanding: Central banks don’t ask for their gold back, and the commercial and investment banks roll over their gold leases. As long as they’re earning more than 1%, the debt service is easy peasy.
    But if a central bank asks for its gold back, it’s game over.
    “They can get away with [the leasing],” Sprott explains, “because on their financial statements, the one line they have for gold says ‘gold and gold receivables.’ A receivable is not real gold, physical gold… and we don’t get a breakdown between the receivables and the physical. They’ve not provided that.”
    Look below and you can see the guile central bankers use to concede their gold “holdings” is not limited to bars in a vault.

    “It would not lend much credence to central bank credibility,” Sprott writes, “if they admitted they were leasing their gold reserves to ‘bullion bank’ intermediaries who were then turning around and selling their gold to China, for example.
    “But the numbers strongly suggest that that is exactly what has happened. The central banks’ gold is likely gone, and the bullion banks that sold it have no realistic chance of getting it back.”
    Add it all up and we’re getting much closer to Zero Hour.
    Addison Wiggin for The Daily

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    • It is unlikely that this company and all other miners will continue increasing production. It doesn’t make sense in current market environment and, moreover, global mining industry needs to find ways to decrease production.

      Reduction in mining output is not just a way to re-balance supply-demand; the latter is futile for gold mining and too remote for silver mining. Production decline is needed to force government hands; get them back to reality check situation. There are too many governments, practically all of them, that get used to situation when mining investments flow in unlimited and government can just apply new levies every year; unlimited source of income.

      When production drops and new mining investments discontinue, government income disappears, well-deserved situation, and some of them could be forced gradually to rethink and rescind most obnoxious forms of taxation and extortion, thus making easier for future generation of miners to start new mining boom.

    • there is a clause in the comex that says they can cash settle any claims. abn amro already defaulted earlier this year on gold and they cash settled. hong kong mercantile exchange also defaulted and they cash settled. it didn't cause any major rise in metals. they just halt trading. cash settle all contracts and then reopen. sprott is right the physical isn't there. Harvey organ reports almost everyday that the comex keeps losing it's gold a default will be inevitable at the comex. but whether it actually moves the price of gold who knows.

      • 1 Reply to scoylesays
      • Most likely, it doesn’t move gold price at all; i.e. if all and any publications in kingworldnews, zerohedge etc. could move price of gold then this price would be very different from current levels. Gold price is a financial factor affected by world economic situation. Simplistically speaking, it goes up when situation is so-so and it goes down when situation gets better than average.

        Needless to say that all and any talk about shortage in gold supply is ridiculous and reflects, at best, problems with tunnel vision. In reality, all gold ever mined is still available on market, i.e. gold supply is essentially unlimited. One can try to offer 20-30% premium over spot and see huge proposals for delivery, no shortage. Gold price, as any other parts of market mechanisms, is always in equilibrium: every seller finds a buyer and vice versa and transactions go predominantly at current spot price.

    • Supply is flat. Demand has risen and premiums for physical purchases are at all time highs. Could demand drop if the price were to fall again? Is it plausible that the people and entities who have been buying gold and silver will reduce their purchases with a lower price? What does that say about price in the long run?

      Eventual ramping up of the price of PMs is now a matter of time. It's not if but when.

    • You can go broke being right...

1.90-0.06(-3.06%)Apr 24 4:02 PMEDT