"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, February 7, 2011

Concerning China and the Gold ETF

Eric King's sources are generally reliable and it would make sense for a buyer of large size to attempt to source their gold from one place. It all comes down to availability. 

One thing about the report however is that it serves to reinforce the idea that Chinese demand for the metal is very strong. Keep in mind that China is a huge producer of gold and yet at that, apparently that supply is insufficient to keep up with their own internal demand. That speaks volumes.

I have long advocated that the way to end the gold price suppression scheme would be for the longs to stand and take delivery at the Comex and force these sellers of paper gold to come up with the actual metal. One of the problems going this route is that there are delivery month position limits at the Comex which work to prevent a large buyer from coming there and using a large number of futures contracts to secure the metal. By large I mean someone who might be buying in the size that China has been buying in the recent past.

It could be done but the potential buyer would have to repeat the process every month, month after month, using the maximum number of contracts going into the delivery period and just moving from month to month. Obviously for some entity to secure a large amount of gold at one shot it would make things very difficult if not impossible. (See how the exchanges work to protect the shorts).

If the story is true, there are no such restrictions that I am aware of on getting gold out of the ETF although I admit I have not read through its prospetus in some time.

This is also the reason that buyers of gold in large size love to see officially sanctioned sales of gold by Central Banks or by the IMF. It provides them the opportunity to acquire large amounts of the metal at one price and at one time and very quietly I might add so as not to alert the broader market as to what they are up to until after the fact.

The Chinese undoubtedly are well aware of the games begin played in the gold market by the western monetary authorities and quite frankly it is in their interests to let them keep right on sitting on the price until they (the Chinese) can acquire all the gold they wish at a discounted price.

They can read the tea leaves and see the importance of having sufficient gold reserves as the global economy begins to look at serious alternatives to the current system based on the US Dollar as the sole reserve currency. The old adage: "He who owns the gold makes the rules" is certainly appropos.


  1. Dan: The blog looks great! Congratulations!! TF

  2. How convenient. Of course there would be limits on actual participants wanting to take delivery, yet the large banks can make it rain with their paper shorts in unlimited quantities. This makes perfect sense. In a manipulated kind of way.

  3. Dan,
    New reader here, nice post.
    Very illuminating on the big players on these metals markets.
    It is extremely tough for a puny investor like me to guess how the market will trend based on fundamentals, because fundamentals don't matter a squat if it is not combined with the psychology of the big market movers.
    Thanks for your insights.

  4. Dear Mr. Norcini,

    I have never met you and I am uncertain that I will ever be able to meet you. Through JSMINESET.COM, I've followed your comments for 3 to 4 years. My friend told me about jsmineset.com in 2007 just prior to the economic downturn in this area.

    I want to thank you so much for your tireless work over so many years on the topic of technical analysis in the precious metals and currency valuation space. I have grown to enjoy your commentary and appreciate your objectivity in it.

    I have had a very difficult life over these past three years. Four years ago, I ran a small business which was doing quite well and served an important purpose in our small town. But, once I tried to capitalize the small business with lending from some large banks (which shall remain nameless), I became aware of the manipulation on the international stage by these charlatans. They destroyed a $2 million enterprise with their lies and deceit, impacting thousands in the process. They also undermined several others who were running similar businesses in other cities adjacent to mine. Needless to say, on the community wide level, we began comparing notes and discovered jsmineset.com.

    My family, my friends, and my community owe you and Jim Sinclair a great deal. We may never meet you or Mr. Sinclair, but I have grown over three years to really rely upon the reporting and observations from you and others in your line of work. We all owe you and Mr. Sinclair a tremendous amount.

    Eric King also deserves great praise for his tireless work, which at times must be difficult and may be solitary. But, your conversations with Mr. Sinclair or Mr. King have taught me so much over the years.

    We can not repay you enough.

    Three years ago, I had people laughing at my interest in precious metals. After three years, those laughers and scoffers still have no savings and have had sustained losses. Even with 4% or 5% returns in the paper markets, they can not compete with the returns given to me by gift of your work. Sadly, those people, who did not get in the lifeboat when they had the chance, are sinking with the US dollar. My friends who told me about your work and Mr. Sinclair are floating in our lifeboat and trying to help each other along the way.

    Mr. Norcini, if it wasn't for your work and Mr. Sinclair, my family would be hungry, have no savings, and have no future. There were times where we really had to tighten our finances to get into our silver and gold position. But, we all encouraged each other and did our own analysis. We all came to the same conclusions. To each his own and to each we assisted.

    Over the past 2 years, our consistent financial bleeding ended. Our financial confidence mounted as we began to rotate out of paper and into metals.

    As it stands, I have great confidence that I will survive another year despite the continuing economic decay in this area. Because of that confidence, I can rejoin the greater economy on MY terms instead of being a debt slave on THEIR terms.

    How can one repay enough when your advice has ripped the shackles of economic enslavement from my hands and feet?

    You have offered a quiet railroad to freedom for any who care to board the train.

    Thank you very much.

    And, all aboard!

  5. Thanks for all the kind words of encouragement from all of you.


  6. Hi Dan,

    Maybe already on your radar, analysis of GLD's prospectus and interesting debate in the comments section:


    Good luck on the blog.


  7. Dan, thanks for the great post. I'm an avid follower of Turd's work - he alerted his followers to your blog. I've already been following you on Jim Sinclair's website. Thank you for providing a great service for us all!

    Here's an off-the-wall thought. Why doesn't China make a tender offer for all of GLD (at a nice premium of course)? Of course it would be conditional on them being satisfied that GLD actually owns, unencumbered, all the gold it says it does.

  8. Hi Dan, I've following you for quite some on jsmineset and I always enjoy reading what you have to say. I'm looking forward to following this blog. Keep up the excellent work.

  9. Sir, would there be any chance of not using an oblique typeface for the body of your blog posts? It's not pleasant to read in large chunks, which doesn't compliment your great writing, which is very pleasant indeed!

    Many thanks and keep up the good work.

  10. Hello Dan, Another avid follower of your work here, just wanted to let you know that I am very excited to see you've started this blog and I look forward to reading what you have to say about the metals market over the coming months. Thanks for all your great work.

  11. Thanks Dan, I too am an avid follower of Mr. Turd's work and have been aware of Jim's work for over 7 years now. I am happy to have re-discovered Jim's work and also yours at the recommendation of TD. This a great article, keep up the good work.

  12. Keep the good work up, you have followers from Germany!

  13. Love the blog, Dan. I am also a Turdite from Phoenix, AZ, and saw your link from his site. Keep up the good work!


  14. Dan ....I believe that Sprott's funds will have to raise their premiums significantly from where they are now to protect themselves from a bullion raid. If I am right they are vulnerable since they DO have the physical present. GLD SLV may die slowly by the chinese but watch Sprott...if I am correct their premiums will steadily rise this year.....

  15. Congratulations on the new blog, Mr. Norcini.
    With all the quotes marketwatch.com is citing from your work, I'm sure they'll be an avid fan too. I think we're in for a wild 4 months coming up in bonds, gold and $US and am glad you'll be at the reader's side for it all.


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