Willi, any thoughts as to why gold has not been

[Islandman]

doing well since this financial crisis took a turn for the worse?It seems to be suffering like all the other commodities.

If we end up with high inflation I expect that will change, but if deflation is what we experience then gold may not do particularly well.

[Willi]

No idea more than rank manipulation.

Try to buy gold coins and you will have to wait weeks for delivery...even though the Mint has claimed the EXACT same monthly inventory figure for the last 2 years or so. This story even made the local newspaper (in French) here.

With the explosion of bailout money being monetized, inflation is a certainty for the medium term and maybe Hyper-inflation. Already our $54trillion Global GNP has seen expansion of bailout money to the tune of at least $4 trillion, not counting China or "normal" pre-bailout monetary expansion. It does not look pretty.

Deflation, not likely in the short term. Politicians will err on the side of inflation first, as that is politically more palatable and quite easy to do with Fiat currencies.

My 2 cents.

[Willi]

Gold and deflation

Gold and Deflation


By David Morgan
Oct 17 2008 1:03PM


www.silver-investor.com

The question has been pouring in: “What happens to gold during a deflation? Of course, many of my readers are equally if not more interested in what happens to silver in a deflation as well.

The views on this topic vary. Some insist that both metals will do well under almost any economic conditions; some, like Bob Prechter, think neither gold nor silver will do well; and others, like Jim Sinclair and Bob Hoye, believe gold and gold alone will be the only thing left standing.

In all matters such as these, studying the past can be beneficial, but—as you have read so many times before—knowing the past is not a guarantee of future results. Personally, I like to let the market speak, and for many years I have forecast that a day would come when the price of the physical silver market would separate from the price “set” in New York or London. Alas, this is the case when looking at the retail market versus the commercial market.

In all fairness, the COMEX price is being used as predicted to capture profits by purchasing COMEX bars and selling 100-oz. silver bars.

Readers might recall I wrote an article titled Silver Arbitrage, back in August.

Looking at the Opinions

Dr. Marc Faber: “Therefore, under both scenarios—stagflation or deflationary recession—gold, gold equities, and other precious metals should continue to perform better than financial assets.”

Castrese Tipaldi wrote on Financial Sense University, “I don’t know if in the last week we saw the last gasp of those usual subjects trying to cap gold, and I don’t know if we now have the very last possibility to get silver at a price so cheap.” What makes this quote so interesting to me is he wrote this on April 20, 2004.

Steve Saville of the Speculative Investor writes, “The most important difference between then (the 1930s) and now is that gold and cash US Dollars were interchangeable during the early 1930s (the deflationary period) by virtue of the fact that the Dollar was defined as a fixed weight of gold. A typical effect of deflation is an increase in the purchasing power of cash. The fact that gold and cash were officially linked during the 1930s meant the deflation caused the purchasing power of gold to increase along with the purchasing power of cash. In other words, under the monetary system that was in effect during the 1930s gold was a hedge against deflation. Furthermore, under such a system the purchasing power of gold would decrease during periods of inflation; that is, when the dollar was defined in terms of gold, it would have made sense to shift investment away from gold during periods of inflation.”

Adam Hamilton of Zeal LLC wrote, “Anything typically financed by debt is likely to see its prices plunge dramatically, like houses and cars, as the ongoing Great Bear bust continues to destroy the gross excesses of debt via higher long rates. Conversely, anything not typically ‘paid for’ with debt, including groceries and general living expenses, is almost certain to rise in the coming years. We are staring down a brutal environment of widespread inflation marked by various sectors witnessing falling prices as debt leverage implodes.”

One of my favorites is from Dan Ascani, who wrote essentially about Professor Jastram’s very long-term study on gold, and he essentially states that Jastram studied four pronounced price deflations taking place. In all four deflations, operational wealth in the form of gold appreciated handsomely. When one sees that just by holding gold for 13 years, from 1920 to 1933 operational wealth would have increased 2½ times, one realizes that gold can be a valuable hedge in deflation—however, a poor one in inflation.

Gary North states, “There are a few contrarians who think that deflation is coming: both monetary deflation and price deflation. As far as I know, there are only about a dozen of them who write newsletters or run websites. For some reason, most of the deflationists seem to think that gold’s price will rise in a mass deflation. They do not warn their subscribers, ‘Don’t buy gold or silver!’ If they did, they would have fewer subscribers.”

Bob Prechter has written much on the topic. Bob goes on and states that neither gold nor silver will do well in the deflation he had predicted for so long. Specifically, “I’ll cut right to the chase: Unless you’re about 80 years old, the United States economy is undergoing the worst downturn in living memory. Every measure of growth is grim. The world’s most recognized stock index—the Dow Jones Industrial Average—is down 30% from its October 2007 all-time high.

“If ever there was a time for the ‘Safe-Haven’ lure of precious metals to surface—now, yesterday, even seven months ago when the Bear Stearns’ bailout launched the historic reshaping of Wall Street—would have been it. Yet, from its March 17 record peak, GOLD prices have plummeted more than 20%.”

So we can read many varying views on what will happen to gold and/or silver under a deflation. Right now the financial marketplace is so unstable that it is difficult to put too much faith in anyone’s opinion based upon such a short snapshot. Doug Casey has repeated often that the metals, and particularly gold, are a CRISIS HEDGE. I think this is the way to look at the situation. As I stated so many years ago in my Ten Rules of Silver Investing…

Rule # 1. When ALL else fails, there is silver.

“No one likes to be a prophet of doom, but the simple truth is that silver is the world’s money of last resort. Should a severe economic collapse occur, leaving paper assets worthless, silver will be primary currency for purchase of goods and services. (Gold will be a store of major wealth, but will be priced too high for day-to-day use.) Thus, every investor should own some physical silver-and store a portion of it where it’s accessible in an emergency.”

When the editor of the book who published all ten rules called me back, he was “all over” this first rule and stated he had never really thought of silver’s role before. Of course, he was quick to scoff at the idea of an economic collapse. I wonder what his thoughts on the subject are, currently.

It is an honor to be,

David Morgan
October 17, 2008



****

You should familiarize yourself with the full contract specification of this product. Applicable exchange fees apply. Delivery fees may vary. Please consult your broker for more information. Futures trading involves substantial risk. Therefore only risk capital should be used when trading futures.

In summary, I am not saying you should take delivery of thousand-ounce bars, but I am suggesting that at least you know the procedure and make the choice that best suits your needs.

Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site, www.silver-investor.com, is devoted to education about the precious metals.

[Willi]

Aftershock and Gold Rocket


By James West
Oct 22 2008 11:45AM


www.midasletter.com

Welcome to the opening ceremony of a modern depression.

The effects of the financial shock are starting to make themselves felt in my neck of the woods. Neighbors on three sides not involved even peripherally in the financial markets are unemployed now. Vacations for the year have been cancelled.

Even Paramount Pictures announced this week that they would only be “green lighting” 20 films for production instead of their originally budgeted 25.

General Motors (NYSE:GM), Ford (NYSE:F) and Chrysler (DCX) are laying off thousands upon thousands.

Copper and nickel mines are closing, and feasibility studies are being postponed. Yahoo is laying off 10% of its workforce.

There is barely a single industry outside of anything related to home foreclosure that is not in the process or about to enter the process of hunkering down and trimming the workforce to survive what is now universally perceived to be lean times ahead.

The joke of the week I heard was this: I went into Starbucks (NYSE:SBUX) to buy a coffee and they offered me a free bank with it.

Starbucks is closing 600 stores this year. Bah humbug.

If for some reason you’re still wearing rose colored glasses through all of this, now is the time to prepare for the biggest social upheaval these generations will ever see.

Crime is about to become rampant. As police forces start laying off due to reduced tax revenue at the municipal, state, provincial, county and federal level, desperate times will force good people to do bad things. Bad people won’t even wait for times to toughen up.

And I don’t know about where you live, but here in Portland, the city is literally crumbling…the many bridges that criss-cross the Willamette River seem to be in generally good repair – they double as housing for a good number of the city’s shelter-challenged. But a truck dropped into a sinkhole that opened up in the middle of the street not so long ago, which was very entertaining while at the same time vaguely nerve-wracking.

Fortunately, the federal government isn’t hesitating in its stated promise of economic stimulus packages. $12.8 billion is being distributed to get crews working on bridges, tunnels and highway projects. The Federal Highway Administration claims 34 jobs are created with every million dollars spent.

That will come as cold comfort to the 6.1% of the population who is unemployed. That’s 9 million people, according to Bureau of Labor statistics. Including those who can only find part-time work or are otherwise not looking for work, the figure of under-employed Americans extends to more like 15.5 million, according to the American Federation of Labor.

There is nothing but trouble as far as the eye can see. Major threatened industries include airlines, tourism, automotive and of course, the financial industry.

For many, a Merry Christmas is as likely as gold falling from the sky. At least Fed Chairman Benranke has promised to dump dollar bills from helicopters…by the time that happens, they’ll probably be more useful as litter box liner.

Which brings us back to gold.

The sheer magnitude of hate mail coming my way from people who revile my advocacy for gold is almost as mind boggling as the price weakness if the face of almost zero supply of small denomination coins and bars.

The chart below demonstrates the strong increase in gold lease rates in the last 90 days.



What does that tell us about the future price of gold?

Well, for one thing, it now costs as much to borrow gold as it does to borrow currency, which is a clear indication that the supply of gold for leasing is tightening while demand remains strong. Most central banks have ceased lending gold completely.

The most common question being asked is, “If gold is in such strong demand and short supply, why is the price so weak?”

And that’s a little bit complicated, but like most everything in these most volatile times, nothing makes sense. At least, not in the short term. Instead of re-iterating the explanation of the downward pressure created by the gold carry trade and the futures market, I refer readers to the excellent work of John Embry and Andrew Hepburn, who published a work called “Not Free, Not Fair, and which is available here: (http://www.sprott.com/pdf/not_free_not_fair.pdf) .

The bottom line is this: the massive repatriation of US Dollars as a result of de-leveraging globally and the unwinding of so many credit contingent deals is making the US Dollar look strong, while the gold manipulation cartel is exerting its utmost effort to keep the spot price of gold low through concentrated short positions on COMEX. The price of gold will emerge from this negative influence on the next leg down and the economy goes into a broader paralysis instead of being limited as it is now to real estate and financials. Most credible analysts are recommending a minimum 30% exposure to gold for institutional portfolios.

Though its hard to imagine in the current price environment, both gold and silver are on the verge of a tremendous breakout to the upside, and if you can’t get your hands on the physical bullion over the next 24 months, the producing companies will be next followed closely by well cashed up junior explorers with million ounce+ deposits in National Instrument 43-101 compliant categories.

Ignore the negative press on gold, and recognize the current price weakness for what it is: the last time you’ll see gold this cheap in a long time, and therefore a huge opportunity.

James West
Publisher
Wednesday, October 22, 2008

[Willi]

Except:

Whatever you do, make a concerted effort to stay with the trend and hang onto your core holdings of preferred shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan and squirreled away.

Recent news says you cannot find any coins or others. We see delays and back-orders but some dealers have the goods in hand right now. Go shopping. Should you be having difficulty buying physical metals, we suggest placing an order and being patient. Big traders are always ready to buy on the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy.

In our conversations at conferences, several readers and others have shown interest in attending a futures and commodities trading-training seminar. Please contact our offices with this request as we plan a private conference for our traders to help them.

[Willi]

Yes, We Have No Silver
by Sean Brodrick 10-22-08


As the price of silver pulled back under $10 an ounce recently, I started loading up on the white metal. Or, I should say, I tried to load up. While I was easily able to buy silver coins with numismatic value, my first attempts to buy silver bullion coins met with frustration.

I think this says a lot about the silver market right now. On paper, it’s cheap. But in the real, physical market, silver is getting very precious indeed.

In fact, if you can buy silver bullion for under $10 an ounce, I recommend you grab it and run!

Hi-yo, Silver!

Maybe you have your own stories of the silver rush to share. Here’s how things are going for me.

First, my success. I was able to buy some 1921 Morgan Silver Dollars from Eastern Numismatics (http://www.uscoins.com) at a pretty good price. I say that because I checked eBay, where 1921 Morgan Silver Dollars for VF and AU (very fine and almost uncirculated quality) were selling for higher prices.

But with silver under $10, I knew that while numismatics (rare) coins were good, this was an even better time to buy bullion.

So, I checked a couple of my local favorite gold/silver shops. At the first one, I was told that silver bullion coins (I asked for silver Eagles) were unavailable. At the second one, I was told they were available, but “not at any price you’ll want to pay.”

How much was that? Oh, about 60% more than I expected to pay.

“That’s outrageous!” I sputtered.

“Call me next week,” the dealer told me. “Maybe we’ll have more then.”

So then I turned to the Internet. I decided to buy some bullion coins straight from Pan American Silver (PAAS). This company has mines in Peru, Mexico and Bolivia, and development projects all over the place. It also sells its coins and bars, minted at the Northwest Territorial Mint (http://www.nwtmint.com). While its coins may not be as well known as silver Eagles or Maple Leafs, I think most gold/silver dealers would recognize them pretty easily.

I called a couple of times, but couldn’t connect with anyone but a recorded message that said the mint was overwhelmed with call volume so no one was answering the phone. In frustration, last Friday, I wrote an email to the Northwest Territorial Mint, asking how I could buy 1-ounce silver rounds (coins) from them immediately.

External Sponsorship
Buffett is Loading Up …
Should We Follow His Lead?

At a time when most investors have been downright spooked by the ongoing economic crisis, Warren Buffett has been busy pouring $8 billion into new investments.

But that alone isn’t what’s so surprising …

Buffett’s new investments are starkly different from the rest of his holdings. Should we follow his lead?

Go here to learn what Buffett is buying now …


Later that day, the mint wrote back. The message said, in part:

“We have been experiencing an unprecedented volume of sales, and we have been unable to answer each call in person as we would prefer. We are adding to our bullion sales and customer service staff and upgrading our telephone systems to better respond to customer inquiries.

“When you reach one of our bullion sales representatives by phone, you can lock in your purchase at the current market price. However, please note that most of the precious metal bullion products we produce currently have a 12-to-16-week lead time before delivery.”

The email went on to say …

“Because the United States Mint and the Royal Canadian Mint have significantly curtailed distribution of their bullion products until 2009, we are quoting delivery of new orders for American Eagle coins and Canadian Maple Leaf coins into March 2009.”

A 12-to-16 week lead time for delivery? Un - freaking - real. And while that may sound crazy, it pales compared to the lunacy of not being able to get American Eagles and Canadian Maple Leaf coins until March of next year! And it’s not like it’s the mint’s fault — they’re working as hard as they can and adding staff.

Tell me again about the surplus of silver. That’s a good one.

Physical Silver versus Paper Silver

Of course, there is a difference between minted silver rounds and 1- or 10-ounce bars on the one hand, and silver you can buy with a futures contract on the COMEX on the other hand. A silver futures contract is for 5,000 ounces, or 1,000 ounces for a mini-contract. While you can take delivery of a futures contract, who the heck would want to do that?

Well, David Morgan, that’s who. He’s an independent precious metals analyst and the founder of silver-investor.com. He also writes a blog at http://silverblogspot.blogspot.com.


Silver coins and smaller bars may be harder to find right now, but certain forces are at work that may soon affect prices and availablility.
Morgan and I met on a tour of mines belonging to Endeavour Silver and Great Panther in Mexico, and I found him extremely knowledgeable about silver, its history and trends. So, I called him up and asked him what he was seeing in the physical market. And it turns out that what he’s seeing is making him more bullish — so bullish, he bought a 1,000-ounce mini silver future contract and took delivery.

Morgan says he’s not the only one doing arbitrage between the paper and physical silver markets. He said entrepreneurs could “take advantage of the discrepancy between physical and paper silver — these people could take gold and silver off the exchanges at the spot price and turn it into gold and silver coins and reap the large premium now available.”

Maybe that will ease the pressure in the physical silver market, and make coins and smaller bars readily available again.

The Bulls and the Bears

There are both bullish and bearish forces at work in the silver market right now. The interesting thing is that the bearish forces seem to be at work in the paper (futures) market, and the bullish forces are at work in the physical market.

Let’s sum up some of those forces …

Bearish Forces …

1) Fear of a global slowdown. Silver is an industrial metal as well as a precious metal. And while the global economy was hot, silver demand soared. Last year, industrial demand for silver jumped 7.2% to a record of 455.3 million ounces.

But the global economy is slowing into recession, and that slowdown could last well into next year. The International Monetary Fund forecasts a reduction in global growth to 3% in 2009 from 5% in 2007.

If there is any single force that can send the price of silver lower, an economic slowdown is probably the one.

2) Mine production. Before the global economy started to slump, global silver production was expected to grow by 6.5% in 2008, faster than last year’s increase of between 3.6% and 4.1%.

But that was then. Now, thanks to the slowing global economy, mines are closing. You see, two-thirds of the world’s silver is produced as a byproduct of other metals. For example, Oz Minerals is cutting zinc production at its Golden Grove Mine Australia by 35%. But that mine also produced over 3.1 million ounces of silver in 2007.

So, if the global economy worsens, we’re likely to see silver production go down, and perhaps sharply lower.

3) Selling by big funds. As the global markets careen into the mother of all financial crises, hedge funds have been imploding one after another like overheated Christmas bulbs. And it’s not just hedge funds — whole trading desks have disappeared. This has removed a lot of the paper demand for silver.

And liquidation in silver futures has been a drag on prices. On the bright side, hedge fund liquidation won’t go on forever. Silver will find a new base, and use that to head higher.

Now let’s look at some bullish forces …

Bullish Forces

1) Supply/Demand Squeeze. Did I say there was an increase in silver mine supply? Well, that’s true. But there’s also an increase in demand. Goldfields Mineral Services recently estimated that current world silver bullion stocks of coins and silverware stand at a mere 400 million ounces. That’s down from more than 2 billion ounces in the late 1980s.

2) Investor Demand is accelerating. The iShares Silver Trust has already seen a massive increase of silver accumulation since 2006 — over 220 million ounces. Take a look at this chart …


This and other silver ETFs in London and Zurich have made it easy for investors to move in and out of silver.

3) Silver is cheap compared to gold. The price of gold recently traded at 82 times the price of silver. This is about 36% higher than the ratio over the past eight years, and looking back over history, the ratio is closer to 20 to 1. If we return closer to historical ratio, the price of gold would have to go way down, or silver would have to go way, way up.

Why is the gold-silver ratio out of historical whack? It goes back to silver as an industrial metal: Investors are terrified that a global economic slowdown will dampen demand for silver in batteries, superconductors and other electronic components, so they’ve dumped silver futures overboard.


But that conflicts with silver as a precious metal — the global economic crisis is causing more investors (like me) to buy physical silver as a refuge of safety.

After all, Central Banks around the world are flooding the financial system with trillions of dollars — a money deluge worthy of Noah — to try and douse the four-alarm financial fire that is the credit crisis. Give them their due; they’ve actually blunted the worst of the immediate threat. The problem is this threat is ongoing, and it could get much worse from here. And that makes physical gold AND silver look even better to me.

These two worlds — the paper world and the physical world — are going to collide. While I think the shortage of physical silver coins and bars will ease down the road, I think the most bullish forces in silver are yet to come. I think the physical world will win out over the paper world … and silver could go much higher.

The Best of Both Worlds

Don’t worry about my quest for physical silver; by the time you read this, I’ll have more locked up. As for your own portfolio and investment needs, I think a little physical silver never hurts.

And there’s an investment that combines the best of physical and paper silver — the iShares Silver Trust (SLV). It owns physical silver and issues shares against its treasure hoard. Sure, in this volatile market, it could go lower. But if, like me, you think the price of silver is going higher in the longer term, then the SLV looks cheap right now.

Yours for trading profits,

[Willi]

WEDNESDAY, SEPTEMBER 03, 2008
Weird Dichotomy in Gold and Silver Prices in Europe
Having read a growing number of reports on a physical silver - and now gold too - shortage with dealers unable to guarantee delivery time, here come some additional observations from the German language area in Europe. The dichotomy between the so called global spot price for the two precious metals and prices paid on ebay Germany has never been wider than these days.
A lot of 100 one oz. silver Maple Leafs was sold for €1,267 or $18.25/oz Tuesday evening. This is a markup of 40% to the then current spot price of $13.10. It appears as there is a seller's strike as there are hardly any sizable silver lots on offer.
The gold market shows the same: Offers have dropped to mere 100 gram (3.21 oz) bars which are sporting minimum bids of €2,100 or $ 3,045 which translates into $948/oz. This is a markup of 17% to the so called global spot price.
A desirable 50 gram (1.6 oz) Rothschild gold bar - which are not produced anymore - is listed for another 6 days and has already drawn a bid of €895 or $1,298; this is 10% above spot.
Having read reports that South Africa's biggest refinery has been unable to fill a 5,000 oz. order I can only arrive at the conclusion that these so called global spot prices which are derived from COMEX paper prices have nothing to do with the world of truly physical deals. Come on, that's a $4 million purchase - and now they are finished.Has ebay already established itself as a competitor to precious metals exchanges?
The loud uproar in the gold and silver investing community about falling futures prices - while demand is still up - seems to be a correct alert to market authorities that appear to sit on their hands with closed eyes.
The fundamentals for the metals could not be better. Western central banks remain with the tactic to shower more fiat money while betraying the public with false statements about their vigilance on inflation. Inflation is here and it will not go away for geopolitical reasons. Russia is the strong man that controls the biggest part of energy supplies to Europe. Rumours have it that Putin will raise natural gas prices by 20% later this year. Prices at European gas pumps have not come down with crude oil prices, suggesting the market is still tight, despite what is said officially.
Both gold and silver will see another formidable fall season where "official" prices will soon catch up with actual prices paid by investors. Especially silver is poised for a meltup, considering the COMEX shorts. And don't give too much about short term charts these days. As the market is manipulated, charts lose any power of predictability.
Labels: Austria, comex, ebay, energy, europe, germany, gold, russia, silver

[Willi]

The Evening Standard newspaper:

Gold runs out in German rush
Allan Hall in Berlin
10.10.08

Risk-averse Germans are turning to gold in troubled times - but there's none left.

German gold dealers say demand has skyrocketed this past week to 10 times normal so no more orders can be taken for the foreseeable future.

"The demand exceeds our capacities by a great deal," said Heiko Ganss, head of precious metal company Pro Aurum.

"The requests cannot be satisfied right now," a dealer from the Düsseldorf WGZ Bank confirmed.

"Demand for gold as a conservative investment has risen dramatically," said stephan Henkel. "right now the demand is about 10 times as high as in normal times."

Gold deliveries now take between four and six weeks.

The US mint said on Monday it had exhausted some of its supply of bullion coins and was struggling to meet demand for gold, silver and platinum.

South Africa's Rand Refinery, producer of the world's most popular gold bullion coin, the Krugerrand, temporarily ran out of the coins in August.

[Willi]

Gold inventory?

The 20-Month Gold Puzzle
October 02, 2008 | about stocks: GLD

Louis Hansell
Add to Your Watchlist
About this author:
Bio & more articles
Become a ContributorSubmit an Article

Font Size: Print Email
There was a news story recently that the U.S. Mint suspended sales of U.S. Gold Eagles because it could not meet demand.

But here is a chart of sales...



...which shows a rising demand, but not excessively higher than previous times when the U.S. Mint had _not_ suspended sales. Even the Y2K burst didn’t cause the Treasury to suspend sales of gold Eagles. How does gold go down in a whoosh! when the Treasury cannot keep up with coin demand? Hmmm.

Here is the Treasury statement of gold inventory dated January 31, 2007, about 20 months ago. I couldn’t find the Treasury link itself, but this statement was included in an article in 2007.

Here is the most recent Treasury statement. Do you notice anything weird about those two statements? The numbers are exactly the same! Does this make sense? How does your working inventory not change at all over 20 months? Now, I understand that the August 2008 statement just released is exactly the same as the statements as far back as March 2006, over two years ago. But I can’t find March 2006, but I still have this 20-month puzzle.

Disclosure: none

[Willi]

Current Report: January 31, 2007

Department of the Treasury
Financial Management Service
STATUS REPORT OF U.S. TREASURY-OWNED GOLD
January 31, 2007

Summary

Fine Troy Ounces

Book Value







Gold Bullion

258,641,851.485

$10,920,427,976.14

Gold Coins, Blanks, Miscellaneous

2,857,047.831

120,630,844.95







Total

261,498,899.316

11,041,058,821.09







Mint-Held Gold - Deep Storage











Denver, CO

43,853,707.279

1,851,599,995.81

Fort Knox, KY

147,341,858.382

6,221,097,412.78

West Point, NY

54,067,331.379

2,282,841,677.17

Subtotal - Deep Storage Gold

245,262,897.040

10,355,539,085.76







Mint-Held Treasury Gold - Working Stock





All locations - Coins, blanks, miscellaneous

2,783,218.656

117,513,614.74

Subtotal - Working Stock Gold

2,783,218.656

117,513,614.74







Grand Total - Mint-Held Gold

248,046,115.696

10,473,052,700.50







Federal Reserve Bank-Held Gold











Gold Bullion:





Federal Reserve Banks - NY Vault

13,376,961.126

564,804,727.98

Federal Reserve Banks - display

1,993.319

84,162.40

Subtotal - Gold Bullion

13,378,954.445

564,888,890.38









Gold Coins:





Federal Reserve Banks - NY Vault

73,808.979

3,116,377.47

Federal Reserve Banks - display

20.196

852.74

Subtotal - Gold Coins

73,829.175

3,117,230.21







Total - Federal Reserve Bank-Held Gold

13,452,783.620

568,006,120.59







Total - Treasury-Owned Gold

261,498,899.316

$11,041,058,821.09







*Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury's Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called "Bullion Reserve" or "Custodial Gold Bullion Reserve."

*Working Stock: Working-Stock gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins. Working-Stock gold comprises only about 1 percent of the Reserve and consists of bars, blanks, unsold coins, and condemned coins. This portion was formerly listed as individual coins and blanks or called "PEF Gold."

I would particularly like to draw everyone’s attention to the highlighted part of the table above and then to consider the ‘genesis’ of the definition of Deep-Storage gold – as it’s explained in the accompanying notes at the bottom of the data.

I’d like everyone to take note that sovereign U.S. gold stocks used to be titled, “Bullion Reserve.”

As James Turk points out, early in the year 2001 – these stocks were initially renamed “Custodial Gold Bullion Reserve.” In his article titled, What Is Happening to America’s Gold, Turk points out the ‘then discrepancy’ between the gold accounts on the Treasury’s versus the Federal Reserve’s balance sheets were NECESSARILY due to clandestine activity [trading of gold] by the Exchange Stabilization Fund [ESF]. In Turk’s own words at the time,

“We know that the ESF is active in the gold market because the Federal Reserve says so in its report of the US Reserve Assets.”

Additionally, despite the Treasury’s continued denials - Turk reported that previously published reports were changed,

“The US Reserve Assets report now excludes all reference to the ESF, and previous reports already published have been changed. Not only were the figures adjusted, but all reference to the ESF has been eliminated.”

In citing an essay by Reg Howe, it was further explained,

"…the figures could not be changed without a change in description, proof that the earlier discrepancies were indeed on account of gold held by the ESF."

Turk then documents the queerest development of all – in June of 2001 - all of U.S. sovereign gold stocks were reclassified – adopting the moniker of “Deep Storage Gold.”

Put Down the Shovels or Dig Deeper?

So there you have the ‘short and sweet’ of it; numbers were altered, previously published reports were changed – all by officialdom - with nary a mention by the mainstream financial press.

To think; folks have wondered how Enron, World Com or Parmalat could have ever possibly happened? I would offer that these guys were merely “pikers” compared to the REAL DEAL – their role models in fanciful fraud over at the Fed and Treasury.

I revisit and bring all of this up for a very good and important reason. Last October – I penned an essay, A SWAP STORY: BORROWED FROM THE BANK OF ENGLAND, where I documented that the U.S. has undoubtedly been engaged in gold quality swaps with the Bank of England.

I am now going to pose the question; what is Deep Storage Gold? While I have no real expectations of a sudden gust of honesty flowing from either the Fed or Treasury in this regard – let’s just stop and think about this for a moment – and apply a few grains of logic – shall we?

[Willi]

Weird...Sept numbers identical to Jan 2007!

Current Report: September 30, 2008

Department of the Treasury
Financial Management Service
STATUS REPORT OF U.S. TREASURY-OWNED GOLD
September 30, 2008

Summary Fine Troy Ounces Book Value

Gold Bullion 258,641,851.485 $10,920,427,976.14
Gold Coins, Blanks, Miscellaneous 2,857,047.831 120,630,844.95

Total 261,498,899.316 11,041,058,821.09

Mint-Held Gold - Deep Storage

Denver, CO 43,853,707.279 1,851,599,995.81
Fort Knox, KY 147,341,858.382 6,221,097,412.78
West Point, NY 54,067,331.379 2,282,841,677.17
Subtotal - Deep Storage Gold 245,262,897.040 10,355,539,085.76

Mint-Held Treasury Gold - Working Stock
All locations - Coins, blanks, miscellaneous 2,783,218.656 117,513,614.74
Subtotal - Working Stock Gold 2,783,218.656 117,513,614.74

Grand Total - Mint-Held Gold 248,046,115.696 10,473,052,700.50

Federal Reserve Bank-Held Gold

Gold Bullion:
Federal Reserve Banks - NY Vault 13,376,961.126 564,804,727.98
Federal Reserve Banks - display 1,993.319 84,162.40
Subtotal - Gold Bullion 13,378,954.445 564,888,890.38

Gold Coins:
Federal Reserve Banks - NY Vault 73,808.979 3,116,377.47
Federal Reserve Banks - display 20.196 852.74
Subtotal - Gold Coins 73,829.175 3,117,230.21

Total - Federal Reserve Bank-Held Gold 13,452,783.620 568,006,120.59

Total - Treasury-Owned Gold 261,498,899.316 $11,041,058,821.09

Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury's Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called "Bullion Reserve" or "Custodial Gold Bullion Reserve."

Working Stock: Working-Stock gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins. Working-Stock gold comprises only about 1 percent of the Reserve and consists of bars, blanks, unsold coins, and condemned coins. This portion was formerly listed as individual coins and blanks or called "PEF Gold."

Last Updated: Wednesday October 15, 2008

[Willi]

Here is the original story...

If you go down the rabbit hole, you will smell something fishy going on GLOBALLY in the Gold markets!

Mint can’t meet demand
August 22, 2008
The U.S. Mint is finding the demand for gold and silver bullion coins is almost too hot to handle.

On Aug. 20, it suspended sales of 2008 American Eagle Silver Proof coins so it can devote its limited silver blank inventories to the American Eagle Silver Bullion Program.

On Aug. 15, it suspended sales of the American Eagle gold 1 ounce bullion coins because inventories had been depleted.

“The United States Mint has been experiencing unprecedented demand for American Eagle silver bullion coins this year, exceeding the capacity of our blank vendors,” said Mint spokesperson Michael White.

“While Federal law mandates that the United States Mint produce silver bullion coins to meet public demand, there is no such requirement to produce proof versions of these coins,” he said.

Cathy Laperle, team lead for the U.S. Mint Bullion Program, said the Mint has inventory for all bullion programs, except for the 1 ounce gold.

“We are working diligently to build up our inventory and hope to resume sales shortly,” she said of the 1 ounce gold coins.

Sales of American Eagle Silver Proof coins will resume at a later date, White said, provided that the Mint can acquire sufficient inventories of silver blanks to meet public demand for all American Eagle Silver products.

The Mint is continuing to sell the 2008 American Eagle Silver Uncirculated coins on its Web site at http://catalog.usmint.gov/.

[Islandman]

I have seen a few stories about the shortage of gold coins too.

Very strange what is going on, I guess the central banks are selling like crazy for whatever reason.

[Willi]

Dear Fed: Why Not Buy Gold Miners?
Lance Lewis Oct 22, 2008 2:40 pm
A unique way to spend bailout money.
document.write('');Investors have needs. Dreyfus has solutions.
Have $40 million Bernanke bucks lying around?

Buy Nevsun Resources (NSU) - the entire company. It’ll cost you about $40 million at today’s price, and you can pocket $20 million of NSU’s $60 million [COLOR=blue! important][COLOR=blue! important]cash[/COLOR][/COLOR] balance, while at the same time selling its Bisha gold mining project (worth a $267 million NPV at $700 gold and $10 silver) to the Eritrean ENAMCO for the same $25 million that ENAMCO paid NSU earlier this year in order to purchase a 30% interest in the project.

So, if anyone has $40 million lying around for a tender offer, this seems like a pretty easy $20 million profit to [COLOR=blue! important][COLOR=blue! important]bank[/COLOR][/COLOR]
.

NSU is not the only gold miner being priced for bankruptcy. New Gold (NGD) is currently trading at less than 1/3 of book value and has $350 mln in cash. Northgate Minerals (NXG) is trading at 1/3 of book, 1.32x cash flow, and 2x trailing EPS. I could go on: The entire industry is not only priced for $500 gold, it’s priced to “go away” and in many cases it’s priced worse than going away.

I guess giveaways like these are what happens when the XAU/Gold ratio makes all-time lows like it is now?

I don’t know where the selling stops in these gold miners, but in my opinion somebody is going to make a fortune buying them down here.

If someone told me tomorrow that “I’ve got $100 billion that I don’t know what to do with. What do you recommend?”, I’d tell them to just go buy the GDM Index’s entire 32 members, which have a $94.57 billion market cap as of yesterday (and is 10% cheaper today), and he’d still have $5 billion left over for a really great party with one heck of an open bar.

In fact, if Treasury Secretary Paulson asked me, I would suggest he spend $95 billion of his $700 billion and really make the US taxpayers some money after the Fed, in my opinion, eventually destroys the dollar with what it's doing.

I believe there are two choices for the US: Default or debase, and both lead to more [COLOR=blue! important][COLOR=blue! important]inflation[/COLOR][/COLOR]. Today, the US is a giant debtor nation that relies on the kindness of foreign creditors to finance its gargantuan current account deficit and its enormous debt load. It’s for that key reason that the current situation that the US faces is neither Japan of the 1990s, nor the US of the 1930s. Those looking at the bursting of these bubbles in the past and expecting history to repeat today in the U.S. (i.e. - “deflation”) are likely to be sorely disappointed with what lies ahead.

If anything, today’s situation for the US is more like the US of the 1970s, where the US simply defaulted on its obligation to exchange gold for [COLOR=blue! important][COLOR=blue! important]dollars[/COLOR][/COLOR]. Fast forward to today, and the US is going to default on its obligation to not inflate away the world’s fiat reserve currency (the US dollar). So, whether we call it “Weimar 2.0” or “stagflation squared,” I think this can end only one way: more inflation.

While it may be painful at the moment for gold bulls due to hedge funds continuing to delever and sell anything and everything they own in order to raise cash to meet redemptions (including gold and gold [COLOR=blue! important][COLOR=blue! important]stocks[/COLOR][/COLOR]), in my opinion those holding gold and gold stocks today will be sitting pretty a year from now. On the other hand, those holding US government bonds and betting on “deflation” will more than likely be disappointed. As Warren Buffett said last week in The New York Times:

“Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.”