Sorry, No Gold Today

April 25, 2013

  • Former chairman of commodities exchange denied delivery of physical gold? Strange tales as “zero hour” draws nearer
  • Frank Holmes with a gold chart that should settle any jangled nerves
  • One set of laws for the rulers, another set for the ruled: Your Congress in action (again)
  • A treatment for liver disease that could grow a tiny company 28-fold
  • Shrinking food packages for your own good… a reality check from Boston… breaking developments that limit the shelf life of this video… and more!

  “I am amazed Leo did not go ballistic,” read the short message from legendary gold investor and trader Jim Sinclair.

We can’t vouch for the accuracy of the tale we’re about to relate. But we pass it along as one of a growing number of signs that our “zero hour” scenario for gold is approaching sooner than anticipated.

  First things first: The “paper price” of gold has zoomed up this morning to $1,453. Under the zero-hour scenario, the price of real physical metal starts to break away from the paper price — in dramatic fashion. Indeed, physical metal could prove very hard to come by.

The potential trigger event: A commodities exchange “defaults” and settles a futures contract in cash and not metal.

This morning brings us a flurry of anecdotes and hard numbers to indicate that zero hour is creeping ever closer.

100  “Just received a text from my futures broker at Linn Group,” Mr. Sinclair wrote at his blog on Tuesday.

The text read in part: “Leo Mahlamed [sic] former Ch/CEO of CME took delivery of 2 gold contracts. They would only give him a warehouse receipt not the gold. This from the floor.”

Leo Melamed was indeed chairman of the Chicago Mercantile Exchange from 1969-93. He’s still on the board of its parent firm, CME Group.

Two contracts, by the way, is a mere 200 ounces.

  “There are reports,” writes Mark O’Byrne at GoldCore, “that certain Swiss banks are also prohibiting clients taking delivery of their gold bullion and will now only settle in paper currency.”

Near as we can tell, there’s only one report and it too originates with Sinclair, who described the situation to a certain radio interviewer. We’d share a quotation or two, but the interviewer’s representatives get all huffy and threaten to sic lawyers on us when we do that — never mind our policy of crediting all media sources we cite.

Suffice to say Sinclair did not name the bank. And his story is of only one client, a friend of his.

But it’s a believable story in light of the Dutch banking giant ABN AMRO’s decision a month ago to offer cash settlement only for clients who’d stored gold — or thought they’d been storing gold — at the bank.

  “Physical metal is now seemingly becoming key in investors’ minds,” writes Lawrence Williams at Mineweb this morning.

“They are no longer putting any faith in paper gold and this is being seen in all quarters with reports from virtually all continents of demand exceeding supply of physical metal, and some hefty premiums being applied on sales of gold bullion.

“Those who precipitated the recent fall in the gold price,” he adds, “may have unleashed a beast that will put future efforts at market manipulation way out of their control.”

  “What the interveners have accomplished,” concurs Vancouver veteran James Howard Kunstler, “is only to prove that the gold and silver derivatives markets are unreliable.

“They may have smashed the trade in that kind of paper, but only achieved a firmer divergence between the derivatives markets and the bullion markets where, for example, the premiums on delivery of silver ounces makes the price exactly equal to the pre-smackdown price.”

  Speaking of which — the paper price of silver this morning is up more than 3%, to $23.94.

But if it’s Silver Eagles you want, one of the major online dealers is asking $29.54 — a 23% premium! If you buy more than 100, you get a slight break of 25 cents per coin.

  Gold Eagle sales this month are now within reach of the all-time record.

No sooner did we write yesterday that “April will almost surely end with the second-highest sales on record” than the Mint updated its website. Book it: April sales now total 196,500 ounces.

The only month with a higher total is 231,500 in December 2009. And that lofty number was achieved only because of pent-up demand for half-, quarter-, and tenth-ounce coins. The Mint suspended production of all fractional Gold Eagles a year earlier because of a supply crunch a lot like the current one.

  Nor can the British Royal Mint keep a lid on demand. April sales are up 150% compared with last month.

“Since the dip in the price of gold, we have seen increased demand for our gold bullion coins from the major coin markets,” the Royal Mint’s Shane Bissett tells Bloomberg, “and this presently shows no sign of abating.”

  “We believe the yellow metal is experiencing a short-term correction during its long-term secular bull market,” says Vancouver stalwart Frank Holmes.

He’s pointing to something we’ve pointed to ourselves of late: the big drop gold experienced in the mid-’70s.

“From February 1975-August 1976, gold fell 44%,” Frank reminds us. “However, those investors who held tight to their gold were rewarded: From August 1976-January 1980, gold rose an astounding 700%.

“This time around, gold fell 28% over nearly the same period.

“This chart holds a mixed message for investors,” Frank concludes. “On the one hand, if history repeats itself, gold could fall as far as $1,050.”

Heh… that’s our technician Greg Guenthner’s downside target.

“The positive message, though,” Frank interjects, “is that history teaches us that gold can withstand a 44% decline and rebound substantially.”

[Ed. Note: Our friends at EverBank have developed the simplest way ever to dollar-cost average your purchase of precious metals — for as little as $100 a month. This is the only pooled-metals plan we’d even think of endorsing. You can learn how to get started right here.

Full disclosure: We have a business relationship with EverBank and we may be compensated if you choose to act. But we wouldn’t bring it to your attention if we didn’t believe it was a good deal.]

  The major U.S. stock indexes are on the rise this morning. At 1,589, the S&P is a mere 4 points away from the all-time record set two weeks ago today.

  Oil has rebounded sharply in the last week — from below $88 to above $92 at last check.

Brent crude — a better indicator of what most of the world pays — is back above $100, at $102.51. The biggest move came yesterday in the face of dollar weakness. This morning, the dollar index is at 82.8.

  So Congress is looking to exempt itself from Obamacare.

“Congressional leaders in both parties,” Politico reports, “are engaged in high-level, confidential talks about exempting lawmakers and Capitol Hill aides from the insurance exchanges they are mandated to join as part of President Barack Obama’s health care overhaul, sources in both parties said.”

Pretty brazen, coming only a few days after Congress repealed a key provision of the law passed last year to limit their insider trades…

  “NASH is a silent epidemic breaking like a tsunami on our shores,” writes Patrick Cox on the science-and-wealth beat.

NASH is short for nonalcoholic steatohepatitis — a liver disease that can lead to cirrhosis and organ failure. As the name implies, you don’t have to drink to excess — or at all — to get it. It afflicts roughly 12 million Americans. “There is currently no effective therapy,” says Patrick.

But he’s excited by the potential of one treatment in development: “We believe, based on animal and human cell tests, that NASH can be reversed.”

Doing the math, we see 21% of NASH patients are in stage 3 or 4 of the disease; stage 4 is full-blown cirrhosis. If only 7.5% of those hardest cases got this therapy, the company would end up being worth $1.9 billion. Current market cap: $67 million. “This company,” Patrick concludes, “will not only make investors fortunes, but will prevent incalculable human suffering.”

[Ed. Note: Among the other companies on Patrick’s radar is one the Pentagon has granted a virtual monopoly. And as we noted yesterday, that firm has secured a new deal with another government agency — the one that oversees the Pentagon’s missile defenses.

Word is spreading quickly. We have no idea how soon the immediate profit potential will disappear. Which is why we’re closing off access to the video laying out the company’s exclusive technology tonight at midnight. Here’s where to check it out before we’re forced to pull it.]

  First came rising food prices. Then came the shrinking packages with an identical price… to hide rising food prices. Now comes a shrinking package with the shocking message that it’s for your own good.

Or at least that’s our takeaway from the news that Snickers bars will shrink by year’s end so they’ll have no more than 250 calories. Ditto for any other Mars product currently over that limit.

“The company,” NPR reports, “says it wants to be an industry leader, helping its customers enjoy ‘responsible snacking.'”

Result: The 2-ounce Snickers with a calorie count of 280 will have to shrink by 11%.

Will Snickers still “satisfy” with 30 fewer calories?

And the king-size bar? That will be replaced by a package of two-four smaller bars that a Mars flack promises will “enable sharing or saving a portion for later.” Right…

Still to be decided is whether the smaller bars will be shorter or slimmer. But “we will always preserve the great taste that consumers love,” the company mouthpiece assures us.

Less candy, more sanctimony. Way to go, Mars…

  “This is in reply,” a reader writes, “to the guy who was OK with the number of police, etc., involved in the Boston manhunt.

“Did he read or hear how they actually found the guy? They called off their search and were leaving the area, figuring he had escaped their massive dragnet. Civilians were finally ‘allowed’ back out of their homes and one of them went into his backyard, saw the cover of his boat open and blood all over the side, looked inside, saw the suspect and called the police. They rushed back in and took credit after they destroyed the guy’s boat with bullets.

“If they had let everyone go about their day from the beginning, the guy may have been caught many hours earlier. Instead, they put on a display of military might and pushed the Constitution aside. Every news shot I saw was with hundreds of guys armed to the teeth standing around collecting a paycheck — probably with double time and hazard pay.

“When will people wake up to the fact that the government cannot protect you or your loved ones, that you need to protect yourself. They will be there to file the paperwork for you with the coroner when they arrive after your 911 call.”

  “If you look closely at your word cloud,” a reader writes…

[Hmmm, he’s talking about the reader survey and the words that came up most frequently in the responses. Let’s pull it up right here for reference…]

“‘government'” the reader goes on, “actually appears three times (lowercase, uppercase and plural).

“Add in ‘federal’ (in uppercase, lowercase and abbreviated ‘Fed’) and it jumps to six. You could even throw in Congress, politicians and policies to make nine. For that matter, add administration, regulations and Obama to make it an even (dirtier) dozen.”

The 5: Well, yes, there’s a common thread for sure when we ask what people see as the biggest threat to their wealth.

More interesting is the portion of the survey — it has only two questions and there’s still time to respond — in which we ask for the kinds of solutions you’re seeking. We’re still crunching those numbers and figuring out what they mean.

Whatever the result, Addison says they’ll figure into the major announcement coming tomorrow about the future of The Daily Reckoning.

Yes, he finally clued me in, but he swore me to secrecy. I forget exactly what he said the consequences would be if I spilled the beans early — but it was definitely something about my livelihood.

With that, I can only urge you to keep an eye on your inbox tomorrow… and respond to the survey if you haven’t already.


Dave Gonigam

The 5 Min. Forecast

P.S. Final reminder: Due to breaking company news, we’re only hours away from removing Patrick Cox’s “crime of the century” video from our servers. Take a final look before midnight tonight.


Recent Alerts

Here Comes the AI Cartel

Maybe you saw the news earlier this week: An outfit called the Center for AI Safety issued a 22-word statement — as dire as it is terse. Read More

A Deal in D.C., a Wipeout on Wall Street

Debt ceiling deal, U.S. Treasury auctions, Wall Street liquidity, Fed policy reversal, BlackRock recession call, gross domestic income, GDI, Maryland license plate snafu Read More

Climate, Carbon… and Control

“The climate change agenda is not about climate change,” says Jim Rickards. “It’s about total political and economic control of the population.” Read More

White House’s New Witch Hunt

Go figure: The stock market is at nine-month highs, but the Biden administration is amping up its jihad against short sellers Read More

The Biden Bleed

Presidents have meddled with the SPR for political purposes. But Biden is really leveling up. Read More

Natural Gas Gets Blacklisted

The EPA — with Team Biden’s blessing — proposes an overhaul of U.S. power plants by 2042. Read More

Green Smokescreen

Ray Blanco is on the lookout for presumed do-gooders… blowing “Green Smoke” up our collective rear ends. Read More

“No Blood for Chips!”

Fair warning: This edition of The 5 might be the most controversial issue we’ve ever published. Read More

The Dollar’s Death March

Nine years after The 5 started writing about “de-dollarization,” you can’t get away from headlines about it now. Read More

The “F” Word

No sooner did G7 leaders sit down yesterday than they declared they’re doubling down on sanctions targeting Russia. Read More