Harvey Organ: Get Physical Gold & Silver!

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121

Hi again,
this discussion was so productive that I decided to try my luck with another question. On March 28, there was an open letter by Ali Naimi, Saudi oil minister, in the Financial Times. The following link should take you there even if you dont’t have the subscription:

http://is.gd/8yLc20

He says about five times that the oil price is too high for Europe and that it is inflationary, and that Saudi Arabia has enough excess capacity, and that he wants the price down.

Several sources ridiculed this letter, saying that twenty years ago when Saudi Arabia wanted the price down, they pumped more, but now they are just writing an op-ed for the FT. But it seems to me that the matter is not that trivial.

A few weeks earlier (March 16), we had this:

http://af.reuters.com/article/energyOilNews/idAFL2E8EG73P20120316

http://ftalphaville.ft.com/blog/2012/03/19/928521/the-saudi-oil-sales-enigma/

Apparently there is an unusually large number of super tankers ready to leave the Persian Gulf for the U.S., but people say this sale has not yet been affecting the price. So are they delivering on a forward?? (about 18 months worth of oil in one go?)

Here is finally one of the articles that ridicules Ali Naimi’s letter:

http://ftalphaville.ft.com/blog/2012/03/29/942361/saudi-arabia-resorts-to-jedi-mindtricks/

Take a look at the comments section and what Chris Cook writes:

"Furthermore, my take is that the Saudis and J P Morgan Chase have for three years been using Enron-style Prepay contracts to maintain what was essentially an oil peg against the dollar using distinctly un-open market operations via oil repos.
The problem with this central oil bank strategy is that it requires a continuing flow of funds from muppets into the market as the producers take excess profits out. It is also susceptible to shocks. The Libya spike/shock last year was weathered.
But the inflation hedging muppet money has been pulling out; inventory financing is sparse to absorb excess oil, and once these fleets of tankers - which are IMHO carrying oil of which Saudis are only the nominal owner - reach the US and title is eventually transferred, then things should get interesting.
Marshall Auerback recently made the point that quite a bit of the oil which has already flowed to the US in Q1 has not showed up as US inventory. My explanation for that is that this is because the Saudis nominally still own it.
I have been forecasting a market collapse before the end of Q2 2012, and I stand by that forecast in the absence of a major shock."

My question: Is Ali Naimi perhaps signalling THE shift in Saudi oil policy away from US$ pricing (and from supporting high US$ oil price)? I remember when I mentioned the nine extra super tankers to FOFOA, he said this looked precisely as he was expecting the agreement to end. In a situation in which the U.S. will accept the Saudi decision out of neccessity. Now the following is Chris Cook again:

"My take - I know for a fact that Marc Rich was in Tehran a few weeks ago, and it wasn’t to take the air or go clubbing - is that Obama and Khamenei (who is now firmly back in control) have come to an understanding. Marc Rich is one of the few people trusted by Khamenei: don’t forget that he was happily flogging Iranian oil to Israel for six years under the Shah, and another 14 years for his friend Khomenei.
That could be why Iran wrote within a couple of days of the election (which gave Khamenei political legitimacy over the Ahmadinejad oligarchic faction) to the 5 + 1 meeting to get the ball rolling again; why Obama suddenly became so clear that Iran were not going to have nukes; and why Khamenei was making comprehensive condemnations of nukes as a sin.
My scenario is that we will soon see Iran backing off - with as little loss of face as possible - to the very same concessions Cheney turned down in 2003 (when Khamenei called the shots) with the difference being that Obama will not insist upon regime change"

Which is consistent with FOFOA’s idea. The 5+1 talks just resumed the other day and the message was that Iran may back off and not insist on doing the enrichment themselves. (We also know that Switzerland will not enforce the embargo as it was not a UN decision - remember Switzerland is a virtual oil hub, Glencore, etc).

I know this is 90% speculation, but what is the opinion on the oil market? Does this mean we won’t get a war in the Middle East, that oil in US$ will substantially go down and the gold-oil ratio up and the U.S. will accept it? Then we should pay attention to the next OPEC meeting (in June?)

Sincerely,

Victor

 

122

Erik - all you commentary and silence on the 2% issue…very telling.
You state that "everything that Harvey Organ says is nonsense".  He says to buy physical metal.  Is that nonsense?  Or are you engaging in an ad hominem attack on Harvey?

You are a proponent of people buying GLD.  You seem to be a proponent of the school of thought that what appears to be manipulation can simply be explained away as arbitrage - or if there is manipulation - its relatively minor - i.e. a few cents here and there - because after all - thats how banks work.

I like to keep things simple.  My "worldview" is that the US is the dying empire that forces the rest of the world to exchanges its goods and services in exchange for pretty green pieces of paper.  If they dont - we deliver democracy (ala Iraq, Libya, etc…)

Gold is the antithesis of the US dollar and its valuation is a report card on the US.  When gold rises - it signals a bad grade.  Of course everyone understands this - even the people on the street know that gold rising means bad juju.

So - gold must be managed at all costs.  A thorny problem in the side of the power elite is silver.  Gold and silver always trade in tandem to each other over any reasonable timeframe.  They rise together  - they fall together.  Of course silver is far more volatile in its moves.

From their way of thinking - if they can get silver to fall - gold will follow.  Its a very small market and should be susceptible to their machinations.  Or so the thinking goes.  Its far easier to manipulate the price of silver than it is the price of gold (smaller market).

Switching gears…

It is said by some that interest rates swaps are the tool that is used to keep interest rates low.  Without them, rates would be far higher than they are and that would be an untenable situation considering the level of indebtedness the US carries.  So, essentially the thinking goes that these IRS’s are the manipulative tool used to suppress things so the show can go on.

Taking the same thinking into the silver market - I wonder if the same strategy is in play, i.e. using derivatives as a means of suppressing the price. 

http://www.bis.org/publ/qtrpdf/r_qa1012.pdf  (bottom of page 124). 

Jason Hommel has done some work with this line of thought and I would be interested in yours (and others) comments on this.

123

I don’t know why Erik isn’t replying to you (maybe he isn’t interested in the the issue) but since you keep asking I’ll give you my two cents.
The fact that gold rarely rises above 2% in a day speaks to its stability. Currencies also tend not to trade with the kind volatility that commodities experience.

Also, if the COMEX were the main venue for source of funds into the gold market then maybe you would experience price swings no different than corn or soybeans. For what it’s worth, I don’t have a clue what the volatitity of corn or soy beans is like and I’m not going to look now, I’m just going to go out on a limb and assume: greater than gold.

The difference between other commodities and gold is that gold (and silver, but I think mainly gold) are traded in the OTC market, deposited into unallocated accounts and fractionalized and all in all there are many greater quantities of gold trading OTC than on the comex. Any big price divergences on the COMEX are arbitraged away. And since there is therefore such greater quantities available for trading on LBMA and in the OTC market, well, smaller investors won’t move the price of gold so much as other exchange traded commodities. Basically, bigger market than other commodities = less volatile.

My question is: why would you expect it to trade at a volatility of greater than 2%? What requires it to behave so?

124

[Hi Christopher.  This comment is hidden.  Why do these things come up when I have a final examination in 45 min?  I’ll handle the issue further later this afternoon. - Jason ] 
Jesus Christ, Erik. Can’t you just stick to the topic instead of relentlessly whining? All it takes apparently, for you to run off making accusations about someone is for them to tell you not to. What are you looking for, adulation and a ticker tape parade before you feel validated here?
Speaking for myself, I am not "offended" by you. I am simply tired of your running on and ON with the pretentious, armchair psycho-analyzing of other people, both here and elsewhere. Enough already. You don’t know me, not one bit. Nor do you have any idea what I think about anyone’s argument here. Just because people might object to your relentless bellyaching doesn’t indicate whether they agree or disagree with you.
Get over yourself already.
 

125
Erik Wrote:

And let’s face it: I’ve offended several people here by being so outspoken with my own viewpoint. One would think that everyone who took offesne would be just itching to put me in my place by posting a well-reasoned argument for why the price discovery or leverage arguments really are legit, and why I’m wrong. But nobody has even tried to do so, 120 posts pater. One would think that Ted and Harvey (both aware of this thread because I e-mailed them the link) would be anxious to rip me to shreds by posting a well-reasoned argument defending their views, and showing me up as the Charlatan.

I'm not offended and I'm sure Harvey and Ted aren't either. They just don't care. Everyone is entitled to an opinion. You are just coming off as arrogant and rude so why bother.
126

And apparently it is fine with the moderators that Erik write reams of diatribe about the other commenters here, including myself, and I am not allowed to answer back.  

127

 
Jim H,

You asked about my comments on Sprott’s fund being a hole in the armor of the silver market. I may be over-emphasizing his fund’s size. I thought he had more metal. Regardless, he has other funds with too large of positions in silver mining shares to be easily liquidated, and Sprott as a company has shown itself to be like a rat on a sinking ship in other markets (and silver): They dump as soon as things look ugly.

Actually, the issue is more ETFs. I am on record for years as warning that the mechanical nature of physical metal ETFs management is a big risk to these markets. In fact, there was a commentary that we wrote presumably confidentially to the SEC when it was first considering permitting silver ETFs that somehow became public about some of the risks we saw. One was this.

Hedge funds, in contrast to public ETFs, have an orderly liquidation process. You have to signal your intention of redeeming shares typically 60 to 90 days in advance, to give the manager the opportunity to liquidate positions in an orderly fashion to match the upcoming redemptions. Physical ETFs do not have such management discretion. Investors go only and sell shares. If the sale is not met by ready purchase orders in the market, the market makers have to buy and hold them in the market. The market makers generally will redeem heavy sales flows (see what happened in the first half of May last year, and, on a smaller level, what happened in April last year). If investors say sell, or click the sell button on their computers, the managers of the ETFs have to sell at that time regardless of the price. So, prices could cascade downward in such an event. Obviously the SLV is the biggest worry, with 312MM oz, but the others could be worse, insofar as they may be sold in less liquid markets. PSLV has only 32 MM oz, so it is somewhat less worrisome, but I also am focusing on the silver mining shares held by other Sprott funds.

Jeff

 

 

128

PS Strawboss I’m just trying to offer a sensible answer and apply what I’ve been learning here. Maybe my answer is off and someone should correct me.
My understanding that much greater traded amount of stores of a partiulcar commodity and volumes traded of a commodity seems to me would mean it should be less volatile than one with smaller stores and lower volumes. I think this applies to gold, certainly based on what has been revealed about the OTC market.

Cheers

129

Reading this thread leaves me shaking my head in disbelief. All that sound and fury about how there really isn’t any manipulation of precious metals. Meanwhile people dance around the elephant in the room and dare not look his way. What is the name of this site? Who hosts this thread? Who invited Harvey Organ here and respectfully interviewed him? Does he think metals are manipulated? Why look what we have here. This is just the most recent example of many. https://peakprosperity.com/blog/gold-manipulated-thats-okay/72892
Now Chris does not work as a professional in the metals markets. However he does have an MBA, majoring in finance, from an Ivy League university. He has extensive experience as a sophisticated investor in multiple markets, with 10 years in gold and silver specifically. He is confident enough in his knowledge to hold 75% of his assets in this sector. He has watched the daily action long enough to spot anomalies. As the creator of the Crash Course he has demonstrated his ability to draw sound conclusions from confusing data.

How does Chris’ knowledge compare to the “experts” who work in these markets? Well you can’t beat an expert at his own game. They can argue you to death with the intricate details that can only be know by insiders. I know from experience as I’ve been on both sides of that proposition. However, the “experts” will usually be the last to admit, even to themselves,  that they make their living from a rigged system, because it makes them look bad, and scares away customers.

If you are inclined to bash Harvey Organ for what he said in the interview, you might want to listen to it again. You may notice that much of what Harvey said was a confirmation or elaboration of things Chris said he had noticed from his own experience. People who profess admiration of Chris and his work, and may pay a sizable subscription fee for it, have some explaining to do when they assert that people who think precious metals are manipulated are either, dumb, naive, or misguided.

Those of us who are not “insiders” can’t answer the manipulation question conclusively. I think it is incorrect to ascribe every market action to manipulation. I also think it is wrong to say serious manipulation doesn’t exist. I have to reconcile what more knowledgeable people say against my own observations as an investor. On that basis Chris’ views are much more credible, and have not been refuted by what I have seen in this thread. If he changes his mind I will listen closely. And no I don’t have an emotional attachment to Chris as a “hero”. But I do consider him the most trustworthy source.

The name calling and personal attacks seen in this thread, however they are rationalized, greatly detract from the credibility of some of the arguments presented. Effective debate is based on persuasion not denigration.

Travlin

 

130

 Regarding your Point No. 2 presented under the heading False, False, False, re Andrew Maguire and the CFTC never acknowledging receipt of his emails: 
CFTC commissioner Bart Chilton said, "I’m appreciative of the information Mr. Maguire provided and I’m glad it was introduced into the investigation."
Read more: http://www.nypost.com/p/news/business/metal_are_in_the_pits_2arTlGNbMK7mb1uJeVHb0O#ixzz1tOh6LuzO

Based on some of your comments here I do think you get a bad press in the metals blogs, and possibly unfairly so, but this sort of thing could partially explain that.

SR

131

 The Maguire emails were purportedly sent to Eliud Ramirez.
Your comment: "That person does not work at the CFTC as of now, April 2012, and the CFTC declined to verify he had been an employee in January and February 2010. So, he may never have actually worked there".

Well, a moment’s analysis of that statement turned up this: http://www.cftc.gov/PressRoom/PressReleases/pr5873-10

You, and readers, will note that Mr Ramirez gets second billing in this CFTC press release of August 2010 detailing the success of an investigation (based on traders being overheard boasting of manipulation, no less), whcih started in January of 2008.

You would also be aware that the emails were cc’d to Mr Bart Chilton. Did he ever, or does he still, work at the CFTC?

After you have apologised for repeatedly attempting to mislead people, elsewhere and in this commentary, would you please address yourself to a matter on which you could truly assist, rather than distract, this audience: is silver manipulated?

SR 

132

Somebody I know on another discussion forum, commented this which I quote literally:
[1] Ignoring capital costs, diesel fuel is actually the vast bulk of the running costs of a mine as most often the required electricity is generated by on-site diesel generators. This is simply due to the fact that mines tend to be in remote places.

[2] Strawboss wrote that with a switch to NatGas, the mining industry’s EROI will change for the better. Maybe until the gas gets out of the ground. It is much more expensive to transport to the minesite (per joule) than diesel. In any case, NatGas infrastructure is simply non-existent in many parts of the world.

[3] I have a close friend who is a high level player (partner) in XXXX Non-Ferrous Metals Group (one of China’s largest non-Fe metal miner/processors) with resources and processing all over the world. They won’t touch gold anywhere but in China due to "political risk". He says quite openly that Gold mines will be nationalized, and not just in Australia & Canada. Only a question of when.

Victor

 

133

Sigh…

[quote=Harvey Organ]

134

<w:alwaysshowplaceholdertext></w:alwaysshowplaceholdertext><w:lidthemeother></w:lidthemeother><w:lidthemeasian></w:lidthemeasian><w:lidthemecomplexscript></w:lidthemecomplexscript><w:compatibility></w:compatibility><w:browserlevel></w:browserlevel>
<w:browserlevel></w:browserlevel> <m:mathpr> <m:mathfont m:val=“Cambria Math”></m:mathfont> <m:brkbin m:val=“before”></m:brkbin> <m:brkbinsub m:val=“–”></m:brkbinsub> <m:smallfrac m:val=“off”></m:smallfrac> <m:dispdef></m:dispdef> <m:lmargin m:val=“0”></m:lmargin> <m:rmargin m:val=“0”></m:rmargin> </m:mathpr>So there are about >170 currencies in the world and we all agree that CB manipulate these currencies to weaken or strengthen them for whatever reason? Front page news as Swiss banks sell CH-Francs & nobody cares.

Only gold (being a currency as it is traded on currency desks of the big banks, not the commodity desk) is apparently not being manipulated? Am I missing something?

A low gold price means everything to CB; a high gold price means "mistrust" and the beginning of the end of the system. CB knows this very well, you know this and of course people "eating from the system" will vehemently deny this. There is a very strong reason for this denial because even writing about it might give credibility to the initial statement.

Therefore, gold price manipulation is the raison d'etre of CB, next to controlling inflation or price stability. And of course CB’s are not going to admit this aided by their True Believers.

The discussion on this post has to do a lot with "trust". Eric T pulls his hair out reading about John Corzine, etc. but cannot or does not want to make the link to a the bigger system based on fraud, racketeering and manipulation to serve the few. Is it because he is a "True Believer"?

His statement that the gold price went up because of Central Bank printing (only) is also difficult to understand. He forgets (?) totally the historic fundamental of gold for the last 2000 years which is that gold is used as a shelter against corrupt financial and political leaders. Does a higher demand also have something to do with a higher gold price, perhaps?

Again, the "trust" story. Who do you think has your best interest at heart: the possession of physical gold or your present political & financial leader?

The big question is: who do you trust? Not “who do you believe”. Trust is earned. Make you pick.

 

135

 Simple. Concise. Correct.btw, interesting that CBs are generally regarded domestically as benign forces. Until they are not.
http://www.lietaer.com/2010/01/complementary-currencies-in-japan-today/ …600+ currencies in Japan alone. As the CBs lose control, local currencies re-emerge.

136

 While waiting to hear back from you on whether you would apologize for your attempt to discredit Andrew Maguire by claiming in regard to Eliud Ramirez, (to whom Andrew sent his emails*), "he may never have actually worked there"(CFTC)…
http://www.cftc.gov/Search/search?client=cftc_V01R01&output=xml_no_dtd&proxystylesheet=cftc_V01R01&sort=date%3AD%3AL%3Ad1&entqr=3&oe=UTF-8&ie=UTF-8&ud=1&filter=0&site=pressrel&q=Eliud+Ramirez&search-press-submit.x=14&search-press-submit.y=9

Which records several pages of press releases detailing Mr Ramirez’s work for the CFTC including January 28 2010. The emails started on January 26. You introduced this topic, apropos of nothing anyone else had said, so I think you should respond in order not to be judged along with Harvey Organ, who apparently is refusing to defend his integrity.

SR

 * some were copied to a B Chilton and a G Gensler…who do work at the CFTC, that was a trick question in my last comment to you on this subject.

137

 Hi S Roche
 

I think Jeff Christian covered his bases  in his reply and unless new evidence comes to light, he is justified in holding back his apology.

He admitted that it’s possible that CFTC did receive the emails, but essentially said "thanks, but no thanks."

It seems we’re conflating issues here: Andrew Maguire’s trustworthiness (and Jeff Christians’s responsibility to apologize) does not hinge on whether the CFTC did or did not receive his email. It hinges on the validity of his allegations. 

Why can nobody verfiy that this guy used to work for Goldman Sachs? Here you have a guy who claims to have worked for one of the most prominent investment banks but nobody remembers him? If he did work for Goldman Sachs, nobody would be question it. Some colleagues would remember him, there would be records they could publish, something.

Doesn’t his war cry to ‘form an army’ and take down the Cartel make the hair on your neck stand up a little?

He is doing very well for himslef, charging $500 a month per client. I wonder how many new clients signed up because of his recent call to form an army? 

Troy Ounce: you say this is all about trust. Exactly. I don’t trust people who give investment advice but make factually incorrect statemets (Harvey Organ) or who people who have such a murky history that I cannot actually verify their personal details, let alone track records (Andrew Maguire).

With regards to Jeff Christian, everyone can verify his employment history, his comments on gold and silver going back for many years, his warnings, his eplanantionsof complex things like lease rates and deliveries etc etc. What useful, enlightening insight Andrew Maguire provided us with for free? Besides repeating what Ted Butler, Harvey Organ et al have been saying for years?

138

 Several pages back, MetalsFacts wrote:

The average operating cost of production for gold in the world at present is around $670 per ounce. Full in costs, including discovery, finance, corporate overhead, interest rates, depreciation, etc., are around $800, maybe $850 per ounce. So, gold mining on average at present is returning about a 100% profit. There's a long way to go from current prices before production would be constrained. 
I have a close friend who was a senior geologist and moved up to managing gold mines in Australia, South America, North America and Africa. He told me that costs are divided into cash expenses and capital expenses. He more or less concurs that operating cash expenses are around the US$600 mark pretty much in any mine. However the "capital expenses" are usually understated and the actual total costs per ounce comes in between $1000 and $1300. The real bottom line profit margin is more like 15% than 100% in many cases. He says a sustained drop in gold price much below US$1500 per ounce will start to see mines mothballed and production cease. For that reason, miners believe there is a higher floor to gold prices than many think.

Energy costs are about 30% of cash expenses or around $180/ounce currently.

The reason that "capital expenses" are understated is the way miners go looking for capital investment to open new mines. They write a prospectus to financiers hilighting the cash expenses and hiding the real capital costs in the fine print, thereby giving the impression that the investment is safe.

This information was given to me over a beer, but it was from the horses mouth.

John

139

 1. I cannot find one instance where AM claimed to work for GS. Others say this, please show me where he says it.
2. The CFTC responses in the emails read to me as a standard acknowledgement by a bureaucrat, neutral. I supplied evidence of press commentary by CFTC Commissioner Bart Chilton acknowledging and thanking AM for his information so I cannot see at all where the "no thanks" you suggest comes from. 

  1. JC said in this commentary that one of the reasons that AM is not to be trusted is that Eliud Ramirez may never have even worked for CFTC…I have supplied sufficient evidence that this new claim, made here, is nonsense and brings JC’s credibility into doubt, not AM’s. Hence my support for the calls for an apology.

  2. The point about the allegations is the key, JC ignores this and attempts to distract from the real issue with non-sensical questions raising false doubts about AM’s back-ground. You make my point (previously made) for me.

  3. I sense this renewed gratuitous attack by JC on AM may be more an attempt to harm this latest trading venture, which is not for me but I happen to be familiar with the trading style AM uses. It is a comparitively low-risk trading style in that market which has a track record of profitability. My knowledge colors my perception of this venture.

As a professional in the industry I think it is appropriate to hold Jeff Christian to a higher standard than the normal blogger and request an apology. Any blogger who had made the indefensible claims made by Mr Christian here in respect to Andrew Maguire would be subjected to villification.

Thank you for your commentary on my commentary directed to Mr Christian.

SR

140
  1. Erik Townsend has now ignored 4 times Strawboss’s question regarding gold not going more than 2% on any given day (except for a meager amount of times which you can probably count on one hand) during an 11 years bull market in contrast to crashing many times 3-5%. I’m asking Erik as well as Jeff Christian (who has also ignored this issue): Is this a normal behavior for such a powerful bull market and if so, can you please provide historical references (i.e. other bull markets in history which behaved in the same way).
  2. Emotional Arguments: Mr. Townsend has claimed that his bashing-targets have been using arguments which appeal to the emotional needs of their followers rather than logic and reason. Yet from his very 1st comment he has been engaging in blatant name calling (please go back to that 1st comment and count how many times he has used the word “charlatan”) which by design are intended to rile everyone’s emotions. If your arguments really stand alone on the basis of reason and logic than why even go there? Why the need for personal attacks and to rile your readers emotionally?
  3. Both of you (Eric Townsend as well as Jeff Christian) have singled out certain individuals yet have refrained from attacking others who are also proponents of the idea of market manipulation. Why the double standards? Would any of you dare calling David Morgan a Charlatan? How about Jim Sinclair? Eric Sprott? James Turk? Keith Neumayer, the CEO of First Majestic or (hmm) Chris Martenson whose website you’re currently using? Btw, another question for Erik and Jeff: How 'bout John Nadler? and Dennis Gartman? Are they real experts or charlatans? Please comment regarding each of the individuals above.