First, an updated graph on the Brinks Vault inventory from SLV (original article here). There's nothing very note-worthy here except that the Brinks London vault continues to be where all the action is. In February they had a 'reclassification' of some of the inventory, with 'Brinks London C' coming online (the yellow line). Brinks London A is losing inventory - I would not be surprised to see that go to zero in the near future **.
A good summary of the weekly events in SLV is covered over at http://about.ag/SLV, including an observation about the 17th April where SLV does a dodgy substitution.
In GLD, the loss of inventory is the talk of the town - some think it's the long anticipated 'bank run' on Physical gold, and hey ... this may be the case. But is it 'THE' event? I don't have the answers but I can at least give some observations from the data (regular readers know I'm trying to get a handle on the flow in and out of bullion based on the bar signature matches). There are two days in March where there were additions to GLD (highlighted blue):
Looking closely at those two dates, the additions were bars that we've seen previously in the data. Specifically, here is the breakdown (numbers are bars).
So for the two dates combined, on average over 40% of those bars which were added, had been seen in the data before. It suggests they were still in the vault all that time they were missing. The next question becomes: how much of the inventory which is disappearing in big batches now, is actually still in the vault at this time? In our wider data analysis we have seen that approximately 30% of all new additions are bars which were previously in the vault. This must be considered when analyzing the GLD inventory decline, because if the pattern holds then a large chunk of the 'missing inventory' (as of April 2013) is still in the vault at the current time, and I will be able to prove it with data at some point in the future as it becomes available. The same effect also means there is veritable craploads more metal in the bullion banking system than what is generally accounted for, so if it is indeed a bank run then it could still be a while before stress shows in the bullion banking system. I understand that the phenomena is described as 'players taking delivery via redemptions', an interpretation which is easy to propose from a top level view but is not directly supported by the data detail. These broad statements I do hope to quantify with my next set of graphs (but as you can imagine the definition takes a while to crunch).
p.s. The gold bars appearing right at the end of that documentary 'The Secret World of Gold' (link) are from Japanese refiner 'Tanaka Kikinzoku Kogyo K.K.' which suggests the Canadians used stock footage.
|Still image from the recent 'documentary' titled 'The Secret World of Gold'|
I only watched the documentary with the sound off for gold bar images. You can verify the refiner stamp and serial number range here: http://www.goldbarsworldwide.com/PDF/RB_8_TanakaGoldBars.pdf. Couldn't find any direct matches however JPM London V has three Tanaka bars which are '00625', '00626' and '00627', which first appeared '2011-12-29' (so I'm curious about the date stamp on these - maybe they celebrated new years eve early).
p.p.s. Defining 'decline of inventories' as bullish requires a fundamental admission of 'the ETF holdings are real'. Congratulations to all those silver and gold analysts who have reached this new milestone - including Andrew Maquire, GATA, etc. Because if the holdings are not real, then all this chatter is irrelevant, right?
Update 1st May 2013 : seems that for those GLD additions, over half of the new additions (not coming from previous inventory) were 'new gold stock', that is to say that the sequential serial numbers from the added Johnson Matthey bars were at the top end of the numbering sequence (which we talked about here). I'm working on improving the resolution for existing, old & new, and happily for gold, because JM bars make up a very large percentage of the ETF stock, we have a shortcut now for estimating age of bars. This is a good development, but the tricky part is still putting this into an aggregate summary. Stay tuned.
p.p.p.s. It is worth mentioning that the same Dark Bullion estimate is roughly the same for silver as it is for gold. i.e. the real population of silver bars swimming the background is 150% (my estimate) of what we see registered in the ETF's. Heady stuff, but that's the conclusions I'm coming to from the data. No shortage!
** The Brinks London A vault DID go to zero - on April 16th. I just finished clearing a processing blockage for the SLV import ... if I had cleared that on the day I wrote the article I would have been able to say it. Also if I had looked at the SLV data closely I would have spotted it as well.
Appendum 2nd May 2013 : I figured I would keep adding observations to this article as I come across them. Bron Suchecki recently made a foray into Turdville and challenged them with 'to discuss inventory decline as noteworthy, requires the inventory to be real' (link). This is the heart and soul of 'a framework for looking at ETF inventory which requires a choice on a specific position in order to advance the discussion, which I spoke of in this article. I didn't see a good rebuttal of that from the turdites - the best they could do was a 'why is it a binary treatment?' argument, which is a good one, given that it's always possible the ETF's might have partial real and partial fake - maybe what we're seeing here is the removal of 'fake' bar numbers in readiness for a run on real? The biggest problem with a non-binary outcome is that it becomes too easy to be intellectually dishonest - i.e. picking and choosing which inventory can or cannot be real without any kind of data, will lead to all sorts of mental dead-ends. For example, when challenged to explain why GLD appears to be draining and SLV is not, the almighty Turd offers: "Because SLV is a complete sham" (link), an answer which straddles that middle ground of well GLD is real but SLV is not ... actually to be fair to him he didn't really claim that GLD gold is real - but skirts the issue by focussing on the 'claims held' on the metal (link). The bizarre thing is that this still requires the metal to be real, but is it then still alleged? The short story here is that anyone using the silverbug forums to form a picture of the SLV or GLD inventory is going to leave you completely unsatisfied (quench your thirst with a dose of wisdom from Silverfuturist). Trying to prove or disprove what percentage of the GLD holdings is real or fake, is quite a challenge - where would one even start in this process? The bar numbers and refinery markings start to put a really big hole in any turd-like arguments because as soon as you approach the data you are making decisions on what to data discard and what to keep. Out of the 69 refineries who have produced bars which are held in GLD, is it even possible to decide that the bars produced by 'Atasay Kuyumculuk Sanayi Ve Ticaret A.S.' (Turkey) are fake? And if so, on what basis? Because you did research on the refinery or you know someone who worked in Turkey? Or because you know that the refinery closed down in 2010 so it is not possible they could have produced bar '2011275'? If you've done your research for that refinery then perhaps it is possible to chalk up a conclusion for those 213 bars, and now it's time to move onto the other 201,000 gold bars, to prove or disprove. Or you might go straight for the big guns and decide that the Johnson Matthey output (which constitutes nearly 50% of ETF holdings) is not real. To do that requires ignoring all the historical Johnson Matthey output as well as countless photographs of JM bars ... in short the process only works if you are incredibly selective with the data. Once you go for the big claims like 'SLV IS A COMPLETE SHAM' then you must do the same thing - i.e. ignore the entire output from Taiwanese manufacturer Solar Applied Materials as well as all the figures relating to silver imports/exports. If you are still listening to those tired claims of 'ETF not real' and 'shortage of silver' then shame on you because it's the most intellectually lazy stance that you could ever adopt, and it is bound to work against you in the long run.
Update 2nd May 2013: Bron provides answers all the Turdite questions here in his own summary post.