In a previous email,
I said that my mom handles the small orders, under 100 oz. of silver, and we handle the major bullion trades.
My Mom's Silver Shop February 22nd,
2010
After that, I was
contacted by three people who were inquiring about potentially large orders.
The largest group, a
man claiming to represent a sovereign wealth fund, wanted to buy a minimum of
up to 10 tonnes of gold, and had $20 billion in cash set aside to buy $20
billion of gold. Wow! I know major gold sellers, so that's quite
a potential opportunity! At today's prices, 10 tonnes x 32,151 oz./tonne = 321,510 oz. x $1119.30/oz. = $359,866,143, that's about $360 million
dollars. But, the buyers would entertain smaller orders, if more
gold would be forthcoming. Even better!
In years past, I've
discerned that such offers, both to buy or sell, are a scam because they want
a letter of intent, and a letter of credit. I've since learned that a
letter of credit basically gives your "partner" access to all the
money up front, hence the scam. This did not seem like a scam, as that
is not what was requested.
But there is another
reason I suspect that this was a scam. Trouble is that they want
the name of the source of the seller, which never happens; that's why there
are brokers, to hide the sources and keep them anonymous. Also, a
broker goes out of business if he reveals his supplier, because then there is
no need to deal with the broker anymore!
But further, they
wanted only LBMA gold. Well, all the LBMA refiners and banks are
already on well published lists, you can find them all at
http://www.lbma.org.uk/
Good Delivery List of
Acceptable Refiners
http://www.lbma.org.uk/delivery/goldlist
http://www.lbma.org.uk/delivery/silvlist
Market-Making Members
http://www.lbma.org.uk/assocn/membrshp
Full Members
http://www.lbma.org.uk/assocn/ordmembs
Associates
http://www.lbma.org.uk/assocn/assoctes
So, then why would
they need me or anyone else to act as a broker?
The 10 tonne amount is telling. The world's gold output averages to
about 10 tonnes per day. The world's mines produce about 2500 tonnes of
gold per year, and there are about 250 business days per year, (5 x 52)
(minus 10 holidays). 2500 / 250 = 10 tonnes!
What this says is
that this buyer wants to buy 100% of all the gold produced by all the world
in a year. Or, they want to buy 100% of all the world's gold for at
least an entire quarter. Clearly, no buyer is doing that in the
marketplace, because if they did, then the gold price would exceed $5000/oz.,
or maybe even $30,000/oz.!
Thus, it smells like a scam, because the numbers are just wrong.
But interestingly,
China has announced that they want to buy about $80 billion of gold, which,
at $1000/oz., is 80 million oz., which, at 32,151 oz. per metric tonne, is 2488 tonnes. That would work out to about 10 tonnes per day, of
course. And China, with over $2 trillion of foreign exchange, could buy
a lot more, of course, if only it can be found.
Is this a
legit offer from China?
China also announced that they have
managed to accumulate only about 500 tonnes over the last 5 years, or only
about 100 tonnes per year, far less than the apparent goals. I have no
idea if the sovereign wealth fund is China. Maybe it is, and maybe it
isn't, but that's not the point.
The point is that it
appears to me as if this sovereign wealth fund, if real, is going about
the attempt to accumulate gold entirely the wrong way.
How? They did not include a price in the terms of
their offer!
Who would be
motivated to sell gold to an anonymous source at an unknown price? What
kind of offer is it if the price is unknown? There's almost no need to
respond. I did respond, I did get the term sheet, but again, no
price. It appears as if they want to buy at a discount to London afternoon price fix. Discount? How?!
Term sheet:
http://www.silverstockreport.com/2010/terms.pdf
Price is everything.
India manages to accumulate up to 800 tonnes of gold per year, but that's
because the price of gold in India is always quoted at a premium, that means India pays higher, than
western prices plus the import duty or tax. I hear from large bullion
traders that they can get about 2% above spot in Europe, and only about 0-1%
above spot in the USA. What I hear makes sense to me, because
the USA does not buy nearly as much gold, hence the lower prices here.
We buy gold under
spot all day long, if, and only if, people who are selling scrap gold walk in
the door. We don't get to choose the amount that comes in, and we only
get about a mere 30 ounces per month or so of scrap gold. We get more
gold in the form of coins, and we are paying higher for that, about 1-3%
under spot for popular gold coins such as American Eagles, Philharmonics,
Maples, Krugerrands, etc., but again, we don't get to choose the amount, and
it's never more than about $250,000 of gold coin in a month at those prices
in our area.
Thus, offers to buy
gold at 5-8% under spot, at 10 tonnes or more minimum, are clearly scams.
We are hesitant to
pay more than the largest most reliable refiners in the USA, but we do for premium coins.
There are reliable
refiners who will pay up to 1.5% under spot, or 2% under spot, but only to
dealers, only 5 oz. minimum sales, and if you are buying gold from the public
and have a regular source to sell. Therefore, any "major"
offer to buy gold at a significant discount under that, is clearly not
real. Nobody would sell for less to an anonymous buyer when they can
sell for more to known public refiners!
Thus, it seems to me
that if a sovereign wealth fund wants to buy gold at significant discounts to
spot, in this market, they are dreaming. It's just not going to
happen. That's my opinion, and I could be wrong, but it seems to me
that China has also announced that they like to buy gold on the dips, and at
under spot, and it seems to me like they are not really meeting their goals,
because they don't understand how price
functions as a means to communicate intent to the broader market.
Price is everything
in capitalism and free market theory! Price is the ultimate means of
communication to markets; it's far more important than
"who you know", and it appears to me that the main way the Chinese
do business is through the "who you know" theory of business,
rather than through the capitalistic method, which is by price.
How can a buyer communicate intent without mentioning price?
(As an aside, I'm
glad for the profile on me in my local paper, but that's not the important
thing you need to know to do business with us, you need to know the prices,
which is why our price board is up front at www.silverstockreport.com and www.jhmint.com.)
If anyone wants a
continuous supply of gold to come their way, they merely need to offer more
for gold, a higher price, than anyone else. Then, gold will easily flow
their way. Similarly, if any of our customers want gold to flow their
way, they need to pay over the spot gold price, plus manufacturing costs,
plus our replacement costs to get it, that means they must be willing to pay
about 6-10% over spot for manufactured gold coins.
This is why I don't believe recent internet rumors that large futures
contract buyers refused a "cash settlement" of 25% over spot to
cash out their gold futures contracts. Any such buyer could take the
25% premium, and take the cash, and then start cleaning out up to 20 of
the USA's largest major gold dealers, placing many multi million
dollar orders with each of them, and get far more gold for far less.
Business is really
rather simple, and it seems that sovereign wealth funds don't understand
basic business. If they want gold to flow their way, they have to offer
better terms than the competition. Why would anyone sell gold to an
anonymous source, for less than they can get from other established markets?
To be competitive,
any entity has to offer to buy gold on better terms, such as higher prices,
than other established markets. Better terms also include such things
as more convenient sized lots, faster methods of payment, reliable markets,
and established jurisdictions in which to do business, etc.
Everything is wrong
about this sovereign offer to buy gold. There's no price! And
it's a less convenient, larger lot size! And you have to give up the
name of your supplier for no consideration! And you cannot sue a
sovereign wealth fund if things go bad.
Finally, words of
wisdom for any potential gold buyer. You are a customer. He who
has the gold makes the rules. Why? Because the owner of gold
realizes and has realized certain truths; that only gold has value, and paper
money might not. Hence, any time I've ever bought gold, I ALWAYS had to
pay first; that's what customers do. And I never buy from
anonymous sources, I only buy from reputable dealers that I know. Even
when I go to buy gold from my suppliers, I pay first; that's simply how it
works. I know all the major dealers in the USA, or know of them. None
of them would respond to an offer of the kind I ran across. If you want
gold, you buy gold on terms set buy the people who have the gold, not on your
own terms.
Who walks into a grocery store and starts issuing demands and setting up
terms on how you will buy food? Nobody.
I asked the man who
contacted me to share my concerns with their "sovereign" buyer, but
I was given no indication that would happen, hence I took it public
here. Maybe somebody else who knows this sovereign wealth fund is
paying attention. Or maybe it's just another gold scam.
Here's a similar
offer that is clearly a scam. For about six months, I would get about 1
of these every day, both buying and selling:
=====
Silver Bullion I can
have the 12MT per month with possible rolls and extensions 8/5 discount bank
to bank sellers banking details in tact FOB drafted to him. The
buyer takes delivery F.O.B. at Free Trade Zone of Benito Juarez Airport in Mexico city as destination port. (to be negotiated). Bank to Bank; sellers bank officer
will extend invitation to buyers bank officer.
COMMODITY:
(ARGENTUM) Silver Bars
ORIGIN: Mexico.
FINENESS: 999.95 or Better
SIZE: 12.5 kgs in standard Silver Bars
HALLMARKS: HALLMARK Met-Mex PE�OLES
International Accepted
QTY IN TOTAL: 12 MT (960) SILVER BULLIONS X month per 5 years with
possible Rolls & Extensions
PRICE: Based on
the prevailing London Bullion Market Association
Second Fix Price (LBMA Price), Silver Fixing on the day of sign of the
contract, less discount, plus taxes.
PAYMENT: By
Swift Wire to be done upon receipt of acceptable count/analysis certificate
issued by refinery showing exact quantity and quality.
DISCOUNT: 8%
Gross � 5% Net to buyer and
3% to facilitator fees, as compensation, sharing 1% to buyer mandate, 1% to buyer
side net and 1% to seller side net (closed)
=====
That is clearly a
scam offer to sell silver. Why? Because I know that Penoles sells
silver in lots of 300,000 oz., which is 9.3 tonnes, at a flat, non-negotiable
price of $.15/oz. over spot, delivered to anywhere in the USA. They
don't sell silver at 8% under spot, nor do they pay any commissions!
=========
I strongly advise you to get real
gold and silver, at anywhere near today's prices, while you still can.
Price Board:
http://jhmint.com/cgi-bin/ssrbidask
Our Coin Shops are open 10AM to 5PM Pacific, Monday to Friday
100 oz. silver minimum, USA shipping, wire transfer only!
Janelle (530) 913 0553 silver_support1@vzw.blackberry.net
JH MINT & Coin Shop, Grass Valley, CA
(530) 273-8175
http://www.jhmint.com/
Rocklin Coin Shop, CA, 15 min north
of Sacramento
http://rocklincoinshop.com/
Or visit www.momsilvershop.com
(Mom will ship in lots of more
or less than 100 ounces of silver, and overseas, and
take credit cards or pay pal.)
Sincerely,
Jason Hommel
www.find-your-local-coin-shop.com
www.silverstockreport.com
www.miningpedia.com
www.bibleprophesy.org
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