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An article put out by Reuters this morning noted that holdings of the largest (so-called) bullion-ETF's shrank significantly in January. As with most “analysis” of precious metals by mainstream talking-heads, Reuters totally misunderstood the dynamics at work.

“Analysts fear sustained outflows from gold ETF's if investors' attitude towards bullion sours, which could be a drag on prices,” said Reuters, proving that these anonymous “analysts” know nothing about the precious metals sector.

As I have written on numerous occasions, the large “bullion-ETF's” - which are backed by nothing but banker promises – exist for one purpose: to dramatically dilute the number of dollars entering this sector, in order to assist the anti-gold cabal of bankers in their three-decade long price-fixing campaign.

Thanks to the banksters' allies (the CPM Group, and GFMS), the quasi-official “consultants” who provide supply and demand data on the precious metals sector, every ounce of ETF-silver has been added to global “inventories” (see “Your ETF-Silver is For Sale”)- despite the fact that (by definition) every ounce of this silver is privately held by the unit-holders. This ridiculous farce leads to either of two conclusions. Either ETF's like SLV hold nothing but paper, and all the silver it supposedly “holds” is sitting in warehouses ready to be sold to the first bidder or global silver inventories are only 1/3 as large as claimed. This must be the case, since bullion-ETF's account for 2/3 of all silver inventories (see “Silver Market Fundamentals Destroyed by Bullion-ETF's”).

While I have been unable to locate any charts or data which indicate whether (or not) the gold bullion-ETF's are also added to global inventories, I must assume that they are – for two reasons. One, it's obviously impossible to justify including the “silver” in silver bullion-ETF's as part of global inventories if the same people don't do the same thing with gold. Secondly, since the raison d'etre of these funds is to dilute precious metals dollars to the greatest degree possible, this scheme is furthered by adding the “gold” in bullion-ETF's to inventories, as well.

What this means is that redemptions in these so-called bullion-ETF's are great news for the precious metals sector – and those investors holding real gold and silver. Here's how the unwinding of these scams will work. First of all, since the bullion in these ETF's is already included in global inventories even if every unit was liquidated, inventories cannot rise.

Instead, as the holdings of GLD and SLV shrink, then global inventories will shrink along with them. How else can the crooked bookkeepers who compile these numbers react? No “new” bullion enters the market, while a source of inventory declines. Thus, all that happens when there are redemptions for these ETF's is that some of the phony, banker-paper is removed from the market – reducing the amount of dilution. However, it gets better still.

With myself and several other precious metals commentators loudly warning investors to shun these banker-scams, there is a very good probability that many/most of those liquidating their ETF holdings are using the proceeds to buy real bullion. If, in fact, that is what is taking place, that means there is a double “hit” to the phony inventory numbers of the cabal with each unit redeemed from these funds.

Don't expect to read this analysis anywhere in the mainstream media. Those commenting on gold and silver from corporate media outlets (and “friends” of the cabal like Kitco.com), fall into two groups: the clueless and the dishonest. These are the propaganda sources which attempt to tell people that gold is in a “bubble” - despite the fact that gold is undervalued versus every commodity on the planet (except silver). Or, disinformation artists like Kitco's Jon Nadler will try to tell investors that the quadrupling in the price of gold over the last decade has been a “mirage” - and that gold (and silver) is “not in a bull market”.

This is the beauty of the anti-gold propagandists: they simultaneously argue contradictory positions all the time. Gold is “in a bubble” - but “not in a bull market”. The propagandists never explain how something which “is not in a bull market” can become an “asset bubble” - because the corporate media never requires them to be honest or consistent (by pointing out these blatant contradictions).

Similarly, there is no outcry from the media at the farcical sham of pumping-up inventory numbers through adding ETF-holdings. As I indicated previously, there is no rational way to justify adding the privately-owned bullion of the ETF unit-holders to global inventories, yet this information sits out in the open unnoticed and unchallenged by mainstream talking-heads.

Let's hope to see a steady shrinkage of these scam-investments in the weeks and months ahead – as it will be an indication of two virtuous trends: the failure of the banksters' ETF-scam, and the collapse of their entire, price-fixing campaign – as the worthless paper they have pumped into this sector is drained.

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written by skORE, February 03, 2010

Great article Mr. Nielson!

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written by Jeff Nielson, February 01, 2010

Hi Stew.

Yes, that's the point exactly. Inventories are plummeting downward in a straight line (down 90% in 15 years), then magically do a U-turn and triple in 3 years (lol), at exactly the same time the bullion-ETF's leap into the picture.

All this NEW investment demand is ADDED to the industrial demand, and we're supposed to believe this will CAUSE supplies to triple? It isn't even plausible - let alone likely.

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written by swsprime, February 01, 2010

Right on Jeff,

Silver is a real interesting case; world net usage of Silver over the previous ten/fifteen year period appears to be about 125,000 oz, that is inventories were shrinking by this amount. In 2005 net world stocks were down to 200,000 oz, we were virtually out of stock, and then came Silver ETFs in 2006 and Hey Presto! in three years we are told that world stocks have magically grown to 600,000 oz - THREE X'd!!!

Its' obvious that ETFs have done this by counting paper silver as actual silver and swapping paper silver with other silver holders. No wonder its' hard to get your hands on large quantities of physical Silver - the world is just about out of stock.

Now Industrial Users don't really mind if the price of Silver doubles or trebles because their silver cost per unit of production is minute, but still, silver is vital to many manufacturing processes. When Industrial Users realize that silver is in short supply and rush to the spot market to grab their desperately needed share to secure their manufacturing processes, the price will sky rocket.

This will happen real soon.

Stew

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