Tuesday, September 19, 2017

Central banks dumping more gold onto the market since 2011 to drive down gold price as metal moves towards breakout

The media likes to use some, but not all, geo-political events as a theme for why gold moves up or down in price.  And the most recent one was the potential threat of North Korea forcing the West's hand into engaging in a conflict.

However, there is often much more to the story when a large move is made in the gold and silver markets, especially since that market is so small relative to equities and bonds.  And in new research done on Sept. 19 by Dave Kranzler of Investment Research Dynamics, the metals analyst found that since the beginning of the year, central banks, and in particular the Bank of International Settlements, have been dumping more gold than at any time since 2011 when the price had reached its peak of around $1940.

I wanted dig into the BIS financials and add some evidence from the GATA consultant’s assertions because, since 2009, there has been a curious inverse correlation between the amount of outstanding gold swaps held by the BIS and the price of gold (as the amount of swaps increase, the price of gold declines).   You’ll note that in the 2009 BIS Annual Report, there is no reference to gold swaps so we must assume the amount outstanding was zero. By 2011 the amount was 409 tonnes. 
The gold swaps enable the BIS to “release” physical gold into the banking system which can then be used to help the Central Banks manipulate the price of gold lower.   This explains the jump in BIS gold swaps between March 2016 and March 2017 and the drop in the price of gold from August 2016 until early July 2017.  It also explains the rise in the price of gold between July and September this year, which correlates with a decline in the outstanding gold swaps between April and July .  Finally, the hit on gold that began earlier this month coincides with a sudden jump in BIS gold swaps in the month of August. (Note: there would be a short time-lag between the gold swap operation and the amount of time it takes to “mobilize” the physical gold)  
As you can see, the total amount of the gold loans outstanding increased by 14.1 billion SDRs (note: the BIS expresses its financials in SDRs). The accompanying note explains that most of this gold loan is comprised of an increase in the BIS’ gold swap contracts outstanding. 
Furthermore, it appears as if the BIS gold swap activity continued to increase between March 2017 and August 2017, as the BIS’s August Account Statement  shows another 2.2 billion SDR increase in amount of outstanding gold loans (a BIS monthly account statement only reports the balance sheet with no accompanying disclosure). These loans primarily are swaps,  per the disclosure in the 2017 Annual Report. 
In my view, there is a direct correlation between this sudden leap in the amount of gold swaps conducted by the BIS between July and August and the price attack on gold that began two weeks ago.   The gold swaps provide bullion bar “liquidity” to the bullion banks who can use them to deliver into the rising demand for deliveries from India, China, Turkey, et al.  This in turn relieves the strength and size of “bid” on the LBMA for physical gold which in turn makes it easier for the same bullion banks to attack the price of gold on the Comex using paper gold.  This explains the current manipulated take-down in the price of gold despite the rising seasonal demand from India and China. - Silver Doctors

1 comments:

Just wonder how much more gold can BIS dump when the oil for gold system is up and running in China.

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