The Great Credit Unwind!…”Liquidity is drying up and no Ponzi scheme can survive without “new juice”! “
By: Bill Holter
GoldSeek.com
Thursday, 4 February 2016
The action in nearly all markets worldwide changed on a dime since January 1st. I am not sure “what or why” the change coincided so closely with the calendar year but the rate hike by the Fed is the leading candidate. As for the real global economy, there is certainly evidence the weakness of late last year has deepened significantly. The pace of collapse has shifted gears as evidenced by trade, earnings and even central banks. Japan’s new policy of negative interest rates followed by new Fed trial balloons of same speak volumes about “stress”.
Another area of stress is change in the action on COMEX. I have documented over the past year several delivery months where there were more contracts standing than registered gold available for delivery. The current Feb. contract has gone past first notice day with 13.3 tons of gold standing for 4.5 tons of registered gold. A very good synopsis of this was done yesterday by Craig Hemke at TF Metals Connecting The Comex Dots I encourage you to read this as Craig documents the recent shell game with inventory.
It is important to understand there are huge changes going on at COMEX. First I need to correct something I wrote last week. I said “it doesn’t make sense for the shorts to not deliver on the first or second day of the delivery period and wait until the end of the month”. This is absolutely correct, but I wrote this in late Jan. … so the deliveries we saw were some FIFTY PLUS days after the delivery period began on Dec. 1st! Are they really allowed to wait 55 days to make a delivery? Just to make it clear, it make no sense whatsoever to not make a delivery on day one or two because the storage costs must be paid. I absolutely stand by the most obvious reason not to deliver is because the gold was not available. “Waiting” to deliver earns NOTHING and costs money, Wall Street does not work this way!
We are also seeing another VERY BIG change in this delivery month. While we saw very few “serves” early in delivery months in the last couple of years, this has changed. We saw 58 on Monday, 546 Tues., and 158 on Wednesday. It is my opinion we are now seeing serious rebellion in the queue! It has been contended which I firmly agree with, “cash settlement” with premium has been prevalent on the COMEX for quite some time. I now believe there are some standing and DEMANDING delivery and refusing cash. This I believe is evidenced by gold in backwardation all the way out to October. I won’t spend the time to explain again why here, but backwardation CANNOT exist in gold in a correctly functioning market and one where the rule of law actually exists.
No matter how big of an apologist you are, it cannot be argued that a situation where more gold standing for delivery than is claimed to exist is a “good” thing. This is a VERY dangerous situation of potential default and one where by hook or by crook has been avoided to this point. Is it this delivery month where delivery fails? I do not know. I do know we live in a world where China is importing every single gold ounce produced on the planet leaving nothing else leftover for the rest of the world. This situation can only last or continue as long as vaults have gold and the owners are willing to fill the deficit between supply and demand. I will say this, the global financial system will completely seize up and close for trading once gold delivery fails. This will only take 48 hours after a failure, and the ability to procure metal, sell stocks and bonds, or do anything else financial will not be an option.
The Rest…HERE
