ETF Bombshell - Print Version

"Oh, what a tangled web we weave/when first we practice to deceive." – Sir Walter Scott

If there ever was a sequence of events to prove GATA’s importance, it is what we are witnessing at the moment. Let’s get right to it! This email from a Café member corporate executive came to me early last evening:

This smells to high heaven!

StreetTRACKS inventory went down by 15 tons in a fairly even gold market. I would guess they used it to slow the gold rise!
Bix

Bells, whistles, and alarms went off when I received that email. Not quite understanding exactly how this ETF works and where the ETF report came from, I circulated the email to colleagues to verify its veracity. Before I received responses, this Reuters gold report surfaced this morning:

LONDON, Dec 8 ( Reuters ) - Gold slid sharply in Europe on Wednesday, losing more than $7 at one point, as investors bought the dollar and sold commodities into the year-end.

Traders also noted a hefty drop overnight in the quantity of gold held in trust on the new U.S.-listed gold exchange-traded fund (ETF), which did nothing to help sentiment.

The U.S. ETF jumped from 103 to 88 tonnes overnight so somebody dumped a whole load yesterday and rather set the tone for today.

Bill, Thought you out to know that StreetTracks is showing re GLD a decrease of 15 tonnes in the Total Net Asset value tonnes in the Trust from Dec 6 to Dec 7 as of 4:15 P.M. Have no idea what it means, but thought you should know.

http://streettracksgoldshares.com/us/value/gb_value_usa.php#2

Total Net Asset Value Tonnes in the Trust as at 4.15 p.m. NYT

Dec 6, 103.56 Dec 7, 88.02

From the World Gold Council’s own propaganda, this fund is supposed to "track" the gold price." So why did they sell 15% of their bullion in a quiet market? Another gold market coincidence? Whether a fluke or not, this screaming red flag re the WGC ETF corroborates GATA’s worst fears about this clandestine entity and more than fully validates our public airing of the subject.

LONDON (Dow Jones)--The 3.5% fall in the price of spot gold Wednesday may have been encouraged by the sale of 15% of the gold held by the StreetTRACKS exchange-traded fund, or ETF, analysts in London said.

The total net asset value of gold in the trust stood at 88.02 metric tons Wednesday against 103.56 tons Tuesday.

Gold fell to $436.90 a troy ounce at the London fix Wednesday afternoon against $451.80/oz Tuesday afternoon.

While most participants agree the market was primed for a slide - in light of an overbought technical picture and a bounce for the dollar - they also believe the fall in tonnage in the StreetTRACKS trust was responsible for some of the selling.

The fall in the StreetTRACKS tonnage highlights the expectation by holders of the shares that the share price and price of gold is set to fall, said an analyst.

"It hasn't helped sentiment," said Kamal Naqvi, precious metals analyst at Barclays Capital.

StreetTRACK gold shares were launched Nov. 18 on the New York Stock Exchange to track the price of gold. Each share represents one-tenth an ounce of gold.

In the first week of trade to Nov. 26 the trust built up a total net asset value of just over 100 tons, but since then this remained virtually unchanged until the decline Tuesday.

Over the same period the share price for the fund has also remained steady, closing Tuesday at $45.11 compared with the close on the first day of trade at $44.38. At 1626 GMT Wednesday the shares were trading at $43.62.

"Gold was primed for a correction but it seems to me an interesting correlation that the StreetTRACKS tonnage fell at the same time," said Philip Klapwijk, managing director of GFMS Ltd.

The StreetTRACKS Web site says the tonnage in the trust for Wednesday will be updated between 1615 and 1630 EST.

*The gold price advances are capped each day to $2 and $3 at a pop for the most part.

*During this time and especially this past week, gold in foreign currency terms loses ground with gold in euros falling from 344 to 335 and change.

*This new buying seems to have little effect on the price of gold even though the international gold market is firm as can be to start with.

*For many weeks GATA and the GATA ARMY raised concerns the new ETF entity has set itself up to be a tool for The Gold Cartel, or worse, an active ally of cabal forces.

* *Fervent supporters of the new entity are vociferous about it being one of the most important positive gold events in 30 years.

*GATA says it would love that to be the case; however, the way the World Gold Council structured the entity left too many questions unanswered, exposing vulnerability it could be used to hurt the gold price at strategic moments, not help it.

*James Turk has queried publicly why the SEC approved this vehicle when it did without demanding the same safeguards it has required from other entities in the past. As Café members and the GATA camp know, James, a former Chase banker, is extremely thorough in his work. James’ suspicions have raised a brouhaha as a result of him publicly airing his valid concerns.

*Now, last night we find out the WGC ETF dumps 15 tonnes of gold in a quiet market and then gold is slaughtered the next day.

*This peculiar 15 tonne drop in the ETF’s TNAVT (Total Net Asset Value Tonnes) validates James Turk’s basic assertion that the WGC’s ETF assets have to be audited to have any credibility.

Talk about an outrage! Thebulliondesk.com does not allow commentary by GATA and James Turk on its website, yet goes all out to attack us and then allows us to be criticized by detractors for what we have to say (which is not allowed to be aired to TheBullionDesk.com’s readership):

In the meantime I don’t think I have seen TheBullionDesk’s Ross Norman editorialize more than a few times over the past years. Yet, he has done so twice in two days, both related to this WGC fund, James Turk and GATA. This is his latest:

Clearly, he must have realized what a BOMBSHELL this 15 tonnes of selling by the WGC fund prior to the gold collapse is and how shady it appears to be. Was the gold even there in the first place? Did James Turk’s or GATA’s public queries panic the World Gold Council into making an adjustment of phantom inventory? This editorial by Norman is a preemptive effort to defuse the obvious and then blame the GATA camp for causing the selling.

This guy must truly be a banana head as to his assertions the GATA camp caused the major selling. Ah, to have such power! I am long the market as are most of the GATA camp. It would be one thing if I was publicly predicting a massive correction (like almost everyone else). However, this is not the case. I have remained a lonely steadfast bull above $450. James Turk has been in the short-term bullish camp too. What TheBullionDesk has done here is both dishonorable and a disgrace. It is also another example of our lack of freedom of the press when it comes to gold and how corrupt the gold market really is.

Bill:
My understanding is that the GLD fund lost 15 tons of gold yesterday. It is looking more and more like GLD was created to further help in the management of the gold price. If the fund lost 15 tons of gold yesterday, it means that the stock was trading at a discount to the NAV of the fund. The fund was then forced to buyback the stock and sell the same amount of gold at the market. What we have here is an instrument that owns gold that can be forced to sell gold at the market anytime somebody (the powers that be) shorts or sells enough paper certificates to drive the stock price below the value of the gold in the fund. If the SEC is allowing naked shorting in this security, it makes it even easier to drive the value of the stock down to force the sale of the physical gold anytime they want. What a wonderful world. Jeff

By the way, I urge as much commentary to TheBullionDesk, financial press and authorities as possible. Please do so without using profanity. No reason for us to stoop to the level of the cabal and their allies.

Regarding the day’s gold action: Gold began to sink AS SOON AS Comex closed yesterday, quickly dropping to $450. By the time I went to sleep gold was down $3/$4 dollar even though the dollar was up only slightly. The Gold Cartel’s orchestrated/blitzkrieg counter-attack had begun. When I woke up this morning, gold was already down $11. No $6 Rule on the downside.

The Gold Cartel has been setting up this assault for weeks and now appears to have used the new Gold ETF as a tool for their planned mugging, as a way to flush out the specs. Heretofore the cash market was too strong and the dollar too weak to get the job done. One technical system after another is feeding on itself during this bloodbath, forcing longs to exit the market, for their money management rules if nothing else.

With the gold open interest so high, moves like this can get very ugly in the short-term. The goal of The Gold Cartel is always to demoralize gold investors. This flagrant bombing could go a long way to accomplishing their goals, especially after brutalizing the gold shares the past month in anticipation of what was to come in the cash market.

As far as I am concerned, I knew what The Gold Cartel wanted to do – no change in modus operandi was in evidence anywhere. However, I DID NOT think they were going to be able to pull off these sorts of shenanigans because the cash market has been so strong and everyone and their mother were short-term bearish. Just goes to show you how really difficult it is to fight the US Government and powerful Wall Street interests. However, it is critical to remind ourselves how far gold has come and where it is going. AND to keep in mind the bums are running out of physical to keep this up, which is why the price has risen $200 an ounce over a three year period.

We are making tremendous progress in our continuing efforts to find out the truth about the gold market.

On that note, here is a letter from a bank executive to GATA’s Chris Powell re the duplicate WGC ETF gold bars:

Chris,
I received a reply to the double counting question this morning from State Street Global Advisors (marketing agent for StreetTRACKS). They get the enclosed letter from HSBC (the Custodian).

Not being an expert in gold stamping and the specifics of the rollback, I have no idea if its true or not. Thought you should know.
John

John,
I hope this helps to answer your concerns. This letter is actually from a contact at HSBC, the custodian. Regards,
John Davidson
SSgA Advisor Strategies

* * *

BANK OF NEW YORK-STREET TRACKS
1 WALL STREET
NEW YORK NY 10015
UNITED STATES OF AMERICA

7 December 2004

Dear Sir,

With reference to HSBC 's role as Custodian for the Streettracks Gold Trust we are writing to you to clarify why a number of bars which have been allocated to the Trust allocated gold account with HSBC have the same bar number .

This has arisen because in 2002 the manufacturer of those particular bars , Johnson Matthey UK ,changed the shape of the Good Delivery gold bars that they produced. At the same time Johnson Matthey re-wound their sequential gold bar stamping machine back to number 0001 and continued using the sequential numbers up until the end of 2002.

At the beginning of 2003 the sequential stamp was again re-wound back to number 0001 by Johnson Matthey Uk and they continued to stamp bars in sequence up until the closure of their UK production plant in 2004 .

As a result of this there are a number of gold bars that have duplicate bar numbers. However in cases where the bar numbers are duplicated the manufacturing year is different and, in most cases,the fine weight of each bar is also different .

There is no duplication of any gold bar .

We trust the above explanation satisfies your position as Trustee and we can confirm that the bar list provided to you is a completely accurate reflection of the physical gold that is held by HSBC on behalf of the Trust . This of course can be verified by independent audit as required .

Yours very truly,

A.J. DEAN

The GATA camp is looking into the veracity of the contents of the letter. As always, we are only after the right scoop. Any way you look at it, this debunks what Ross Norman of TheBullionDesk stated yesterday about duplicate bar numbers. If this occurred, it was an exception, not the yearly rule for gold bars, as Norman exclaimed.

I strongly suspect that some of my PM shares have been shorted as described in several Midas postings including the possible use of counterfeit shares. The last time I broached the subject with my broker he became incensed that I would ask for stock certificates. Do I have a legal right to request them? Can the broker say no? He suggested we might want to close my account.

Please let me know if I can legally demand getting stock certificates for my shares. Thanks.

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