Andrew Maguire – Absolutely Stunning Developments In The Gold Market And At The LBMA

Today whistleblower and London metals trader Andrew Maguire spoke with King World News about some absolutely stunning developments in the gold market and at the LBMA.

Andrew Maguire: “Eric, now that we have the well-anticipated Fed rate hike out of the way I wanted once more to focus upon the unprecedented, game-changing liquidity drain out of London into Asia. This is evidenced by the increasingly illiquid LBMA fixes. I don’t see this discussed anywhere else and given the pace of this liquidity drain, this will become the catalyst for the inevitable forced cash reset in the highly leveraged unallocated London gold markets…

Maguire continues: “The global gold market structure has so radically altered that the physical markets have migrated and continue to migrate away from the LBMA conduit into Asia, leaving massive embedded naked-short mismatched lease obligations on the books of the central banks, which are largely shuffled onto the books of the agent bullion banks, the same insider bullion bank’s that are privileged to have gold accounts with the Bank of England.

This latest psyops gold talk-down operation is a good sign for those looking for higher prices, especially now that the baked-in Fed rate hike is finally dusted. The Goldmans, Citis, et al., who infest the swap dealer category of the commitment-of-traders report continue to talk their own book as they telegraph ever-lower prices.

Goldman Sachs And Fed Propaganda
This talk-down is an act of desperation revealing a weak hand. No trading bank gives away its prop positioning unless it is looking to draw in a counter-position to trade against. How many times have we seen Goldman Sachs pull this stunt? Then ask yourself who is the most vocal in calling gold down? During the 18 months the Fed has bullied down the gold market threatening a tiny one-off face-saving quarter-point rate hike, they have tricked many investors into dishoarding gold, kept sideline money off the table, and sucked in unprecedented naked-short ‘hot money’ short cover for themselves while the bullion banks that have the wholesale market see the writing on the wall and stealthily gear up long for a globally driven physical market outside their collusive influence.

As liquidity drains away from London, fix painting — forcing gold down into the fix at the expense of the captive producers who are forced to sell at market — has become far too visible. Liquidity is draining because producers are increasingly able to access non-predatory alternative non-LBMA financing and selling conduits. The longstanding collusive game of paper market fix painting is unsustainable without an increasing amount of synthetic market supply to offset these liquidity outflows. This is simply no longer available in enough size to keep this game going for much longer.

LBMA Insiders
The LBMA insiders continue to play all ends against the middle as they spoof prices lower into almost every AM and PM fix while scooping up the discount both directly and by way of raiding the GLD and SLV exchange-traded funds for lowe- priced physical to flywheel underwater operations. All this action is at the expense of the producers and investors.

In short, the longstanding insider game of collusively fix-painting the global benchmark price lower through the futures markets is coming to an end. Paying close attention to the daily AM and PM fixes evidences liquidity steadily evaporating over the last few months. This auditable fact has been the one upside advantage of having the otherwise rigged fix data published.

Considering that the AM fix is the primary global benchmark gold fix and the time of day when the primary financing bullion banks’ captive producers are traditionally forced to sell at market, the volumes transacted are visibly diminishing, sometimes seeing less than 1 tonne on offer at the AM fix. Obviously this does not mean that gold supplies are drying up. It simply pegs one side of a finite supply-demand equation with the migrating volume clearly transacting outside the LBMA conduit. These volumes pale in comparison to the physical volumes trading off London.

Quietly and without fanfare or mainstream media attention, liquidity is migrating to the physical exchanges away from London. I have been highlighting this migration for many months now and increasingly so as the official pre-launch Allocated Bullion Exchange comes quietly on-stream, providing a conduit for producers to both source alternative non-insider financing and, critically, the ability to choose the day, hour, and depth of liquidity at which they wish to sell their production at the offer, not as happens at present at market in an increasingly illiquid paper dilutive and insider-run LBMA fixing process.

Next comes the very unwelcome (for the LBMA) Shanghai Gold Exchange competing fix, and a recent update suggests earlier than that as recently leaked for April. We know this is something the People’s Bank of China has been waiting to bring on-stream for more than a year now but almost certainly timed to be announced after China’s toehold in the LBMA auction process was established and subsequent acceptance of the yuan in the International Monetary Fund’s Special Drawing Rights. Note that China plays its own game, totally missed by the mainstream media.

After China appeased the IMF, it is unlikely to be a coincidence that the devaluation of the onshore yuan began. The upcoming SGE physical market fix will come when it suits China and is the final piece of the jigsaw for China to gain full control of the global physical gold market. China is asserting itself at a time when the global dollar-denominated benchmark gold fix is under scrutiny for price manipulation, something that is now accepted as conspiracy fact and the subject of multiple lawsuits. Given the admission of several bullion banks, this time around the lawsuit likely will be successful.

Shanghai Gold Exchange
The Shanghai Gold Exchange fix will be settled in yuan and involve 15 Chinese banks but also include at least five of the same LBMA banks that rig the London fix. But there is a major difference. These fix prices will represent delivered physical bars without any paper market dilution and most importantly all participating banks will be heavily regulated and unable to spoof or paint the fix as they do now.

As I highlighted some months ago when the Shanghai Gold Exchange fix was officially tabled, there may be an initial reluctance for LBMA banks to comply with these strict regulations, which is why the meddling and proposed delay are being touted. But this delaying tactic is another smokescreen while these banks scramble to realign themselves against a changing marketplace. There is little choice for the LBMA banks but to comply and be a part of this new fix. Unlike the London fix, the Shanghai Gold Exchange fix will be fully transparent. The People’s Bank of China will be the counterparty to the Shanghai Gold Exchange fix and will be a much more vigilant regulator than the insider-infested round-trippers at the U.S. Commodity Futures Trading Commission have been.

The increasing convertibility of the yuan will shrink any price divergences between the primarily paper-settled unallocated London market and the physically settled Chinese and Asian markets. Mainland and international liquidity providers and takers will have to pay the local price, making the London fix jump to the Shanghai tune, especially as it front-runs the all-important Asian-related LBMA AM fix at 10.30 a.m. Though the yuan is not yet fully convertible, the two fixes will have to exist side by side globally but will set the benchmark global physical price. With the People’s Bank of China having a toehold at the LBMA fix, any divergences will be arbitraged and short sellers will be called for delivery, which will also backwash into the Comex.

Gold priced in yuan in the largest global physical marketplace will make the highly dilutive paper-settled over-the-counter and directly linked Comex markets far less relevant. Given that foreign-exchange gold is a primary counterparty to the strong-dollar policy, (long dollar/ Short unallocated XAU), this is a major shot across the bow of U.S. hegemony and a major blow for the western central planners.

In a liquid physical marketplace, divergences cannot exist as they will be arbitraged. This will have a massive impact on positioning in the multibillion dollar gold and silver derivatives markets. The current derivative structure is anchored in billions of dollars’ worth of underwater cash bets that will have to be reset as these bets are undeliverable when true supply-and-demand fundamentals grab the gold market by the tail.

Anyone who thinks the commitment of traders and central planners are not gearing up for this event obviously has no exposure to the wholesale markets.”