Well, let's start today's blog with some good news alongside our cup of tea; "UK crowned the fastest growing G7 economy... for now. The global recovery remains subdued. For the UK, the good news is that in the short term, the impact of the Brexit vote is likely to be limited. Maurice Obstfeld, the IMF's chief economist, said the UK would see a "soft landing" this year following the referendum result, as he said the market reaction had been "much more favourable than anyone would have anticipated." I think he means apart from foreseen through the fog of scare-mongering by the majority of the Great British voting public, small business owners and workers.
However - Obstfeld continues - "he rejected suggestions of scaremongering, claiming that it would be "malpractice" to ignore the possible negative impact of Brexit." (The Telegraph
, 4th October 2016).
Ahhh, I chuckled. Mr Obstfeld from the IMF talks a fair amount in the financial press as it happens. He says "he rejects scaremongering" but let's just juxtapose what he also said back on 12th April for the BBC
; "Maurice Obstfeld, economic counsellor to the International Monetary Fund and the organisation's chief economist, says there could be "severe regional and global damage" if Britain were to vote to leave the European Union." An exit would present "major challenges" and a prolonged period of uncertainty which would "weigh" - that is have a negative effect - on confidence and investment. Trade could be damaged and economic growth undermined. Mr Obstfeld, an expert in international finance, is a former economic adviser to President Barack Obama. And, as one of the top 40 economists cited in the world for his research, has muscle in this arena."
*collective British chortle*
The Telegraph rounds off its positive article on British business with the following conclusion; "The UK economy is now expected to expand by 1.8pc in 2016, faster than the US, Germany, France and every other G7 economy." If the Great British public have anything to do with it, it will.
And after the months of campaigning, a summer caesura in the Brexit proceedings seems to have now come to an end.
Concurrently, the world's financial confidence in the eurozone seems to be deliquescing in the face of economic reality; the stronger economies absorbing the debt of the weaker, to dissolve into a mass of fluid chaos:
"Deutsche Bank AG was dealt a fresh blow on Saturday when an Italian court charged the company, an employee and five former executives for colluding with Banca Monte dei Paschi to falsify the Italian lender’s accounts in 2008." (Bloomberg, 1st October 2016)
To put into perspective, "Monte Paschi" is "the world’s oldest bank". It "restated its accounts and had to tap shareholders twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of euros of soured debt before another stock sale." Plus, in terms of real people and real jobs, "Deutsche Bank employs about 3,900 employees in Italy, making it the company’s fifth-largest market by staff."
So, at present, Deutsche Bank - the epitome of illusory eurozone "strength and efficiency" is being sued by both Italy and the United States! "The U.S. Justice Department is seeking a settlement over allegations that the bank misled investors about the quality of subprime mortgage bonds it created and sold during the housing boom that led to the 2008 crisis."
"When it rains, it pours,” said Marco Elser, a partner at Lonsin Capital Ltd., a London-based asset-management firm. “They have their hand caught in every single cookie jar. I think the market is seeing a wounded lion and will soon prey on it."
All this turmoil in the paper markets means a great deal is happening regarding Gold and Silver at present. Dan, a colleague from Bleyer, found this great headline which really brings home every point made in last week's blog:
On closer inspection, these are customers who haven't exactly bought their own physical Gold, either to store themselves or via a secure storage facility. Instead, they bought an Exchange Trade Commodity called Xetra-Gold, which - on paper at least - assured them that, "Xetra-Gold is an Exchange-Traded Commodity which differentiates itself by "representing that every gram of gold purchase electronically is backed by the same amount of physical gold" and its principal bank is none other than Deutsche Bank."
As Oliver Baron
reports, those who ask for gold delivery at this moment, "could encounter difficulties." The reason is that according to Baron, a reader of GodmodeTrader "sought physical delivery of his holdings of Xetra-Gold. For this he approached, as instructed by the German Borse document
, his principal bank, Deutsche Bank."
At that point then he encountered a big surprise: the Deutsche Bank account executive informed the investor that "the service", is no longer offered, namely exercising physical delivery at Xetra-Gold, for "reasons of business policy" and therefore the order form provided by Clearstream Banking AG for exercising Xetra-gold is no longer available." (Zerohedge
But, as we often say here at Bleyer, this is exactly why nothing can compare to buying your own Physical Gold and Silver. Bleyer deal in Physical Gold and Silver bullion bars and coins, not ETF's. Even the Gold you can purchase from Bleyer for your Pension - of which UK law dictates you cannot take physical possession but only hold at a distance - is the real Physical deal, allocated and stored in physical reality under your legal name.
Over the years I have regularly written of the chasm that exists between the ounces of physical actually available vs. each paper ounce of Gold which people think they own, but don't. The most recent figure I can find sits at an eye-watering 542 ounces of paper issued for every 1 ounce of Physical. Most of our readers will know this and when you know this, the above "shock" headline of Deutsche Bank not being able to deliver the physical behind the fund not only is of no surprise but is entirely 100% predictable.
Finding the figures for the Silver paper to physical ratio, or leverage, is even harder. One researcher came up with these figures last year to explore the sheer size of disconnect between the price we see per ounce and the real life rarity of the physical product compared to paper:
"The price movement was utterly driven and dominated by the paper derivatives market. This is because the trading volume and notional value of the derivatives market far exceeds the physical market due to incredible amounts of leverage. As an example, for the week ending 7 July 2015, the notional amount of Silver that was traded on COMEX was 1,160,760,000 troy ounces according to the CFTC COT report, compared to approximately 600,000,000 to 700,000,000 troy ounces of Silver mined on average each year across the world according to GFMS Ltd. That is almost TWICE the amount of Silver traded on one derivative market over one week compared to all physical Silver mined in one year!" (The Difference in Paper and Physical Gold and Silver in times of Crisis
, July 2015)
So, how - against both this backdrop of extreme leverage plus the fiat currency turmoil ensuing this week - could the paper "price" of Gold and Silver fall? I can't answer that because it makes no sense. But many precious metal commentators continue to see pull backs in the price of Gold and Silver as "buying opportunities." We cannot give financial advice at Bleyer and nor should any bullion dealer, so always seek the financial advise of your I.F.A. and do your own thorough research, as we're delighted to say many of our clients and readers do.
Here is one metals commentator's view: "Just for the record, I did “back-of-the-envelope” mark to market analysis on the balance sheets of Lehman, JP Morgan, Washington Mutual and Wells Fargo at the beginning of 2008. This was before I had a blog but I had shared my work with Bill “Midas” Murphy’s Le Metropole Cafe. My work showed that each one of those banks were hopelessly insolvent if accurate accounting would have been enforced on those banks. Wash Mutual and Lehman collapsed that year. JP Morgan and Wells Fargo also would have collapsed if the Government had not ripped over $800 billion away from taxpayers and gave it to the big Wall Street banks plus Warren Buffet’s bank. Deutsche Bank is at least as underwater as each of those banks – and probably more underwater than Lehman and Wash Mutual combined. If the western Central Banks can’t find all of the hidden skeletons in DB’s derivatives closet and clandestinely monetize them, DB will collapse. Gold is being taken down just like it was in 2008 ahead of some type of systemic disaster coming at us. Gold hit $1020 in March 2008 just as Bear Stearns was collapsing. It was taken down even more during the summer, ahead of Lehman’s collapse. These events should have pushed gold over $2000 back then. Gold eventually almost did hit $2000 by late 2011. The same price management effort is being implemented now and the elitists will do their best to keep gold from broadcasting a loud warning signal to the markets that something is wrong.
Unfortunately, if the masses were allowed to see gold’s “canary” die in the “coal mine” behind the elitists’ “curtain,” it would enable the ones paying attention to get their money out of banks and other monetary custodians before their money is vaporized by whatever financial hurricane is brewing. Today gold was smashed right when the Comex floor opened. This is standard operating procedure. In the first 30 minutes of Comex floor trading, 3.2 million ounces of paper gold “bombs” were dropped on the Comex. Currently the Comex is showing that 2.5 million ozs of gold have been made available in Comex custodial vaults for delivery. Naked short-selling of futures contracts this extreme only occurs in the gold and silver markets. If selling of this magnitude relative to the amount of underlying available for delivery occurred in any other commodity, the CFTC would immediately investigate. Not so in gold because the CFTC is part of the elitist team that is charged with price management of gold. The common “muscle” reaction to a day when gold, silver and the mining stocks are down as much they are now is to sell and run.
But this is the wrong reaction. If you want to do something to try and protect what’s yours, days like today are when money should be removed from banks – especially Deutsche Bank – and moved into the precious metals sector. This may not be the bottom but you liked mining stocks in July, you should love them now. The HUI has nearly completed a 200 day moving correction. It might go lower from here but you’ll never pick the bottom." (Silver Doctors
, 4th October 2016)
To be clear, Gold is still £140.90 or 16.41% up over the last six months and Silver is up 33.3% over the same time period but the price dipped back below £1000 an ounce for the first time since 16th September early this morning.
And it is correct to highlight that it wasn't just their gold the customers of Deutsche Bank were not able to access - on Sunday it was also their cash! "It was reported by Bild
, a German tabloid, that Deutsche Bank clients have been locked out of removing cash from their accounts at ATMs." Let's remind ourselves that this is Europe's largest bank and yet, this news wasn't in our mainstream press here in the U.K! "What must be understood here is that Deutsche Bank is the main clearing house for trades in Europe,” David Buik, market commentator at Panmure Gordon & Co., said in a note to clients Friday."
This reaches around the world. One Australian financial writer explains; "Remember, everything is connected. We live in a globalised economy. Our largest trade partner is China. China’s largest trade partner is the European Union. I think you get the point." (Money Morning Australia
, 4th October 2016)
Rather wonderfully, as I re-scan the latest headlines before signing off, I end where I began and find an article written by Jeremy Warner
of The Telegraph published about an hour and a half after I myself started writing this piece early this morning. In it, he too has spotted the vicissitudes of the IMF's political game-playing and even more specifically refers to our Mr Obstfeld above. Is Maurice Obstfeld a 21st century Uriah Heep, a euro-socialist twist on Dickens' ingratiating antagonist? I don't know, I've never met him. But what still remains ostensibly true is this;
"Not for the first time, the IMF has become captive to “group think” and powerful establishment forces. Over the last ten years, the fund has been pretty much wrong about everything of substance. It failed to see the financial crisis coming, and it failed to anticipate the eurozone debt crisis, having essentially become a cheerleader for integrationist ambitions of monetary union. It then proceeded to become part of one of the biggest economic policy blunders of the modern age, over-riding its own rules and conventions to save the euro and bailout the bankers. It has also been consistently wrong about the UK. Some serious soul searching is in order. The very purpose of this institutional corner stone of the post-war, Bretton Woods economic settlement is being called into question as rarely before. Time and again, the IMF has been found guilty of faulty forecasting, analysis and policy, undermining its authority and impugning its reputation as a non partisan organisation that can be trusted with the economic world order."
The I.M.F. has only been around since 1945. Physical Gold and Silver have been around as real money for millennia. Browse Bleyer's Gold
bars and coins and call one of the team for an informal chat to start owning your own Physical Gold and Silver soon.