We met with the managing director of the largest refinery in Switzerland
and spend about two hours talking to him, we learned some very
interesting things.
At this Swiss refinery there have been several times this year on which they were unable to source gold.
They’re bringing in good delivery bars, scrap and dore from the mines,
basically all they can get their hands on. This gentleman has been in
the business for 37 years, he was there during the last bull market in
the late seventies. I asked him when was the last time this has happened, that he was unable to source gold, he said never. And I clarified it, I asked: in the last 37 years you’ve worked in the gold industry this has never happened? He said: this has never happened.
He said sometimes when they get gold in, it’s coming from the back corners of the vaults. He knew this because these were good delivery bars marked in the sixties. This is a huge supply squeeze and its worse than anything that has happened in the last four decades. At some point there is going to be a massive squeeze on the price.
We are on the threshold of a
situation that has never occurred before. A squeeze is imminent, it
could take 3 months or 6 months, but all I know is that it’s coming, and I know that with 100 % certainty.
Submitted by Koos Jansen, In Gold We Trust:
Wednesday I had the privilege again to interview Alex Stanczyk, Chief Market Strategist for the
Anglo Far- East
group of companies, who just returned from a trip to Switzerland. Alex
confirmed to me the distribution of gold from west to east is not
slowing down whatsoever. Refineries in Switzerland are still working 24
hour a day to cast bars for China, sometimes having difficulties
sourcing the gold..
What was the purpose of your trip to Switzerland?
The purpose was two fold. We go to Switzerland once a
year as part of our governance, we’re required to have an annual
inspection of the gold, that was the main purpose of the trip. But in
addition to that we also liked to talk to the refineries. It was
myself, it was the managing director of Anglo Far-East mister Philip
Judge, and Jim Rickards went with us, he sits on our advisory board.
We met with the managing director of the largest refinery in
Switzerland and spend about two hours talking to him, we learned some
very interesting things. Whats going on in the gold market as
far as the price, is I think very counter intuitive. Everybody
understands, knows and believes the price should be higher than it is,
but it isn’t. There’s confusion in the marketplace, and there are two
reactions; the reaction in the west is fear, confusion and uncertainty;
the reaction in the east is buying. Now, this gentleman we were
talking to probably has a better idea of physical gold flow than
anybody else globally. He sees what is coming from the mines, he sees
what is coming from the UK, and all over the world, as well as where its
going. He indicated the price didn’t make sense because he has
got so much fabrication demand. They put on three shifts, they’re
working 24 hours a day, and originally he thought that would wind down
at some point. Well, they’ve been doing it all year. Every time he
thinks its going to slow down, he gets more orders, more orders, more
orders. They have expanded the plant to where it almost doubles their
capacity. 70 % of their kilobar fabrication is going to China, at apace of 10 tons a week. That’s from one refinery, now remember there are 4 of these big ones [refineries] in Switzerland.
That makes sense because withdraws from the Shanghai Gold Exchange vaults are 40 tons a week on average this year.
Well, there you go.
…At this Swiss refinery there have been several times this
year on which they were unable to source gold, this shocked me. They’re
bringing in good delivery bars, scrap and dore from the mines, basically
all they can get their hands on. This gentleman has been in the
business for 37 years, he was there during the last bull market in the
late seventies. I asked him when was the last time this has happened,
that he was unable to source gold, he said never. And I clarified it, I
asked: let me make sure if I understand what you’re saying to me, in the
last 37 years you’ve worked in the gold industry this has never
happened? He said: this has never happened.
…There was one other comment that was fascinating, he said
sometimes when they get gold in, it’s coming from the back corners of
the vaults. He knew this because these were good delivery bars marked in
the sixties. This is a huge supply squeeze and its worse than anything
that has happened in the last four decades. At some point there is going to be a massive squeeze on the price.
…All four Swiss refineries combined may be doing as much as [supply
China] 2000 tons this year. That doesn’t include what the Perth Mint
ships to China, it doesn’t include the 400 tons the Chinese mined
domestically, and it doesn’t include what they mined offshore with the
mining companies they own all over the world. I suspect that total Chinese demand can reach as much as total global mining production this year.
…He also noted, in China there are 6 LBMA refineries but
he has never seen a Chinese gold bar, they’re keeping it all. Gold that
goes into China is like going into a black-hole. I don’t think it will
be available on the market for decades to come, which only tightens the
physical supply.
…The Chinese aren’t buying it for trading, they’re buying it as part
of their wealth foundation for future generations. When the communists
came to power in 1949, Chiang Kai-shek and the nationalist army fled the
country and took all the gold with them. On that moment China had no
gold, although they had thousands of years of history with gold, they
had to start all over. I think the importance of rebuilding their gold
reserves had been there in the last decades, but it accelerated the last
three years or so, encouraging their people heavily to buy.
I also heard there is strong kilobar demand from the Middel East.
That’s because Dubai does a lot of clearing for that
entire area. Given what’s happening to Saudi Arabia, and the potential
that Saudi Arabia is separating itself from the United States,
essentially the whole petro-dollar is at risk for them. Normally what
they would do is sell their oil for dollars and then buy US treasuries,
but if they’re gonna separate from the US they’re not gonna buy US
treasuries. So what are they gonna buy?
Gold?
Yes, possibly. That’s what we think. We don’t think they
will be buying US treasuries, they supported them for 40 years, but the
US has basically stabbed them in the back.
Alasdair Macleod actually said, on the
Keiser Report, that a lot of 400 ounce bars from the Middle East are being refined in Switzerland into
1 K 4 nine bars [a gold bar of 1 kilogram, 99.99 % purity] and then sent back. Is the 1 K 4 nine bar becoming some new form of liquidity?
Possibly, all the demand that we can see in China is for 1 K bars. They want kilo, and they want four nines.
When do think the price is going to rise?
I’m not comfortable to put a time on this. What I do know
is that we are on the threshold of a situation that has never occurred
before. A squeeze is imminent, it could take 3 months or 6 months, but all I know is that it’s coming, and I know that with 100 % certainty.
