Friday Road Trip 9/29/2012
 |
 |
Confused...Lot's of Real Gold or Lot's of Fake Gold?
BOTH!
The latest scandal involving 10oz gold bars has opened Pandora's Box in the bullion world and once it is open it can only stay open. I'm not for a second saying that the dealers can't remedy this problem quickly...they can with current and future technologies. Surface testing or weight testing obviously is not helpful but x-ray and ultrasonic analysis can be. There are solutions to this problem if dealers can come together quickly and fix it...but most are NOT!
Why? First, because nobody thinks it's widespread and the best testing machines are expensive. $25k to $50k for something you can rely on to detect filled bars. And second, because they are scared of what they might find. They are afraid of just how many fakes are in circulation, how many are in their inventory and what they will do if they sold some to their customers.
Those who claim it's not a big deal are TOTALLY in denial.
Jason Hommel, who I respect, put out a piece claiming that the problem is being way overblown and it is not a big issue. You can read it here:
http://silverstockreport.com/2012/fake-10-oz-gold-bars.html
This is one time I couldn't disagree more on his analysis. Why not try to fix the problem by buying ultrasound machines to test all his sales and purchases? What will he do if customers come back to him claiming they bought gold bars and coins from him that are fake? Is he going to refund them and take the hit. What if they are lying? What if? What if? What if?...you get the point.
My good friend Andy Hoffman takes it a little more seriously than Jason Hommel but still, in my opinion, underestimates what will happen in the future when TRUST is brought into question as it surely will be in the coming chaos. Here's his take:
http://blog.milesfranklin.com/counterfeit-gold
At some time in the future gold and silver will regain their monetary roles and we will see a sea change in how metal is tested and verified as well as hugely punitive laws to prevent fraud in the precious metal sector.
As for how to protect yourself now...stick with 1oz coins and lower. Stick with silver for a zillion reasons but as far as fraud goes it makes little sense to fake 1oz and below silver because of the cheap cost (for now!). I recommend sticking with American Eagles and pre-1965 US coins.
Until then make sure you ask your dealer how they test their metal and perform as many tests as you can when you receive it.
You can look up various tests by googling "precious metal testing" or something like that. I don't think ANY of the technologies today are 100% accurate so I stick to the small denominations of sliver. I also think that they will be the LAST forms of PM's to be called into question so a significant premium may also be involved.
The funny thing is, just as the world has forgotten that gold and silver are the BEST forms of money and have been used for thousands of years, we have also forgotten to TEST the metals we purchase. Metal testing goes back to 3,500BC to ancient Greece when they used a "Touchstone" to determine gold's purity. Through the millennia humans have ALWAYS tested gold and silver. All the way up until it was "demonitized" in the last 50 years.
 |
|
Anyway you slice it...be careful. In the future this issue will become more and more important.
But having said all this about the potential for fake gold I'd be remiss to point out that all this faking of gold is NOT because there is so little gold in the world. The reason is that gold is so IMPORTANT to the unbacked fiat monetary system. Yes, gold is scarce to the banksters but it's only because MILLIONS OF TONS are held by STRONG HANDS who want to see the Bad Guys destroyed. Here's where I get most of my understand of just how much gold is on this planet...
Golden Secrets
http://www.roadtoroota.com/public/181.cfm
What should be taken away from all this is that we are NOT hearing the full story when it comes to gold. Not on the supply side, not on the demand side and not on the CONSPIRACY SIDE.
One day we will get the full story and it will shock those who are asleep.
 |
|
On October 12th the first part of the CFTC's Position Limits Rule will be implemented which covers the spot month (current month before delivery) of trading. This is the day that a LIMIT is put on JP Morgan's ability to rig the markets in the short term. This is the day that the Bad Guys have been fighting to stop. This is the day that their jugular is EXPOSED.
Yes, the silver hot potato may be passed to the next poor sucker to "handle" silver but history has shown that EVERY SINGLE silver market rigger that took hold of that silver short position has gone belly up. From Drexel Burnham to AIG to Bear Stearns to the next victim JP Morgan the silver short has been a COMPANY KILLER!
Here's what Commissioner Bart Chilton had to say about limits...
Calling for limits, position limits, to ensure that no single trader controlled such a large percent of any given market was something that did gain support. In fact, some key members of the U.S. House like Congressman Joe Courtney who represents this Congressional District, numerous Senators, and none other than President Obama called for limits on speculation.
Finally, a provision was included as part of Dodd-Frank. I should also stop for a moment here to thank Sean for his work in this regard. He was a vocal and firm advocate for limits and I thank him.
So, limits were included in Dodd-Frank. In fact, we were supposed to implement position limits on energy commodities in January of 2011. We missed that deadline. The good news (and my enthusiasm is tempered here, but I'll explain later) is that on October 12 the first set of CFTC speculative position limits becomes effective. These limits on speculation apply to the spot month, which is generally the period right before trading in a contract expires and the obligation to make or take delivery on a physical delivery futures contract applies. Spot month limits are not new. There has been some form of these limits administered by the exchanges (and also by the Commission in the case of the enumerated agricultural commodities). What is new is that these limits will now apply to swaps, whether they're exchange-traded or over-the-counter.
There are three reasons why I temper my enthusiasm on position limits:
1. Limits on speculative positions outside of the spot month won't become effective until sometime later, probably sometime early next year--once we get enough data on swap positions. These hard limits on speculation outside of the spot month will be something new for the energy, metals, and non-enumerated agricultural derivatives markets. They are important, but again, won't be in place in October.
2. I'm also not sure that we have reached the correct limit levels. What I have always said is that we should err on the high side to ensure we aren't doing damage to the markets by syphoning away liquidity. We need to get the levels correct. So, I'm not suggesting that these limits levels are all right on the mark. They may have to be adjusted as we go forward, and our rule allows for that. Under the rule, the position limits change as the size of the derivatives markets and the size of the underlying physical market change.
3. Finally, while position limits should ensure that no one trader holds a concentration so large that it could manipulate prices, that doesn't mean that a group of traders acting in concert couldn't impact prices--as Larry Summers and his colleagues suggested. I'm not even talking about something that would obviously be a violation of law if they did something in collusion. I'm saying, what if a bunch of the Massive Passives simply decided to invest in a market, say heating oil, and all go long? What if there was a herding mentality and once a few did it, a bunch of others followed--regardless of supply and demand?
http://www.cftc.gov/PressRoom/SpeechesTestimony/opachilton-68
I'm not saying that on the 12th of October the silver price will go skyward because of this rule. What I am saying is that there is a REASON why it's been delayed and fought for so long. That reason is the manipulation will be much, much harder and the Good Guys will have the upper hand when it comes to destroying the Bad Guys with rising silver prices and taking delivery. No longer can the Bad Guys short silver with reckless abandon right before delivery but rather the BUYERS of physical can easily hit a point where there are no more seller in a given delivery month.
And let's not forget that the "London Whale" are far from over. Here's an excellent article breaking down what might be happening...
JPMorgan Loss Could Be Next 'Shock' Event
http://seekingalpha.com/article/893711-jpmorgan-loss-could-be-next-shock-event
Whatever is going to happen it should happen soon.
Watch for mid October!
Get Your Fake Tungsten-Filled Gold Coins Here
Yes, the fraud in gold and silver fakes is NOT confined to just large bars! China has long been experts at plating anything with gold and silver...and they don't even hide it! In 2010 I wrote about and listed the companies that advertised molybdenum coating and plating. Here's the article again:
Fake Silver Moly-Bars?
http://www.roadtoroota.com/public/212.cfm
So it should not be a surprise that this article was posted on the Zerohedge.com website:
Get Your Fake Tungsten-Filled Gold Coins Here http://www.zerohedge.com/news/2012-09-24/get-your-fake-tungsten-filled-gold-coins-here
"In the aftermath of the recent stories about Tungsten-filled 10 ounce gold bars discovered in midtown Manhattan, there have been two broad sentiments expressed by the precious metals community: i) that this is as many have expected, and that of the physical inventory in circulation, much is fake (particularly that held in official hands, either via ETFs or in sovereign repositories which for various reasons still can not be publicly assayed) and ii) is the comfort that while it is relatively easy and cost-effective to use tungsten to falsify larger gold bars and bricks, those who own primarily gold coins are safe as for some reason, it is less economic, feasible or widespread to counterfeit smaller precious metal denominations. Sadly, while i) may be true, ii) is patently false. The proof comes courtesy of a firm called ChinaTungsten Online which proudly markets its broad "tungsten-alloy services" including, you guessed it, the gold plating of various tungsten formulations among them "gold" bricks, bars and, yes, coins. Oh did we mention a Chinese company openly advertizes its tungsten gold-plating and precious metals replication services, something which the tabloid media's CTRL-C/V majors openly mock as improbable conspiracy theory. Well, as they say, it is only conspiracy theory until it becomes conspiracy fact."
Again, in the future we will ALL thoroughly test all forms of gold and silver.
Reagan said - "Trust but Verify" - but these days I'd reverse it...
VERIFY THEN TRUST!
Good Guys Go After the Rothschild's Empire
The once untouchable family seems to be a lot more under scrutiny these days. Case in point this article in the UK Guardian...
Rothschild-linked firm Bumi faces investigation for alleged irregularities
http://www.guardian.co.uk/business/2012/sep/24/rothschild-mining-bumi-investigation-indonesia
"Andrew Hickman, from the London Mining Network, said: "We continue to question the legitimacy of Bumi plc's listing on the London Stock Exchange. Through light-touch regulation, companies with shocking financial, social and environmental records associated with Bakrie familiy interests have gained access to the London financial markets, under the umbrella of Bumi plc."
"Today's news of a company investigation into malpractice appears to be window-dressing for a situation that is well known to Indonesian observers of the mining sector."
Does it mean much on the face of it...no. Could it have happened in the past...possibly. Would it have been published in a major UK newspaper with a huge close-up picture of that Nathanial Rothschild's freakish face staring at us?
NOT A CHANCE!
Times are changing my friends.
Earth Changes Next on Tap
So as we approach that date of December 21, 2012 it's time we keep an eye out for potential "problems" with our home...the Earth. Many have begun talking about the cycle of the solar maximum we are entering and how it affects out planet. I, personally, believe that we are due for quite a shake-up over the next few years - not even including the financial shake-up - so I like to follow a few really good websites that track changes in our solar system. The first is www.spaceweather.comwhere you can keep an eye on sun flares and any potential EMP's headed our way to destroy our electronic financial system.
The second is a Youtube site called DutchSense where he gives updates on all types of natural disasters. Here's a promo clip he just released...
Subscribe to his Youtube channel and you'll get updates on all the earth changes that happen around the world.
http://www.youtube.com/user/dutchsinse
As these occurrences increase in regularity it will give you clues as to what expect over the next few years.
Better safe than sorry I like to say.
That's if for me this week. JPM's silver position is EXPOSED and needs to be resolved quickly. Be prepared for anything...up or down. The longer that JPM grows their short position the more likely the Good Guys are winning the battle over silver.
Stay safe out there!
may the Road you choose be the Right Road.
Bix Weir
www.RoadtoRoota.com
