The Doc spoke with Cheviot Asset Management’s Ned Naylor-Leyland Sunday regarding the Euro-zone crisis and the €100 billion Spanish banking system bailout announced over the weekend, extreme supply constraints in the physical bullion markets, the new allocated silver exchange launching in China this summer, and unallocated gold and silver holdings, which Ned states are fine…until they’re not.
Ned states that the new Asian silver exchange he is working alongside Andrew Maguire to launch (which has been kept tightly under wraps up to this point to prevent western banking interests from derailing the launch as happened with the PAGE) will trade 1:1 fully allocated silver contracts, and will suck physical metal out of the LBMA system.
The new Asian silver exchange could prove to be a paradigm changer, as Ned estimates that Chinese savers took up 1 billion ounces of silver & 100 million ounces of gold via gold & silver backed savings accounts in 2011!
Ned also discusses the Spanish bank bailout which he describes as the European financial community merely admitting we have contagion, as well as shocking information regarding the actual owner of the ‘GLD’ gold bar held up by Bob Pisani infamously, which Leyland states has been confirmed to be owned by ANOTHER ETF!
The Doc with Cheviot Asset Management’s Ned Naylor-Leyland- full interview below:
Ned Naylor-Leyland:New 1:1 Allocated Silver Exchange to Suck Metal Away From the LBMA
When asked whether this weekends 100 billion euro Spanish bank bailout would be sufficient to stem the crisis Ned responded:
To me it reads as a stop-gap measure, effectively. It has a lot to do with the fact that clearly the problems are accelerating in the background in Spain, and obviously that led to a big conference call between the different finance minsters.
In truth, as far as I can see, this is an intent to make a bail-out, the Germans need to ratify the EFSF mechanism anyway, and yes sure, I think the numbers are completely well as wrong, I think you’ll find in due course that this is just a first tranche for Spain in the same way that Greece has been going back to the trough in a repeated basis.
I think the most important thing here really is that it does start to smell of contagion. You’re now in a situation where it’s been Greece, Greece, Greece, Greece for so long, and those in the background, and those investing in precious metals particularly have been saying wait a minute, this is just Round 1.
It’s just obvious that we are now into Round 2. The numbers (which is often the case for those of us who have skepticism towards these numbers) are less relevant than the top line of ‘yes we’re going to do it’ and initially it’s a 100 billion euros.
Regarding Ireland’s immediate request for a renegotiation of it’s bailout terms and whether Spain’s condition-less bailout sets a new precedent, Ned stated:
Absolutely! Of course , let’s see what becomes crystallized. At the moment all it really is a ‘yes we’ll do it, there won’t be macro-economic conditions’.
Recently we’ve had proposals from the Germans that they would want to try to claim sovereign gold reserves as collateral against any new rounds. I think that will chime into this whole issue of whether or not they’re willing to ratify the new (EFSF) mechanism. So this (the Spanish bailout) is political speak at the moment. So we’ll see what comes out of this, and what sort of format is agreed to, because like you say, the Irish quite rightly are saying ‘Well now wait a minute, I’m not quire sure about this’ as one would expect them to do, and that effects everything because you can’t act one way towards one country and a different way towards another.
So all that’s happened really is the European financial community has admitted that we are now in a contagion environment. At least that’s the way I’m reading it.
When asked whether the contagion is likely to spread to Italy next Ned replied:
The market is so zombie-like in my opinion that there will probably be an initial beneficial reaction of the markets, and that probably that won’t happen instantaneously. Once the sugar high, and of course these sugar highs are lasting less and less time, and who knows how long the markets will take this fresh round of recapitalization- of course where’s the capital coming from…it’s a total uncapitalized system.
We’re in a wait and see environment now, it will be interesting to see how the markets respond next week, the key is the bond market of course. Ultimately the bond fund managers are the ones that matter- how they react to the framework of this new inverted conditions free arrangement will be very interesting to see.
Regarding the likelihood that major bond fund managers will soon be flooding to physical gold for protection Ned stated:
Undoubtedly. I’ve been banging about this for a long time. The bond market is where the action is, particularly as the equity market is now driven so much by HFT’s, the algos and very light volume.
The markets can be moved by what these big bond fund managers do.
I know a couple in London, one in particular who’s a very close friend, I had lunch with him a couple of weeks ago and we were talking about it, and he’s deeply invested in physical gold and silver himself, in fact he’s of a similar viewpoint of most of the people on your site and other similar websites in real terms. But of course he has a mandate that he has to operate to. I had a chance to have lunch with him and I told him, ‘You’ve just got to move first! You’ve got to man up, and basically pitch to your investment committee, you know that sits behind the fund and say look, I really feel I must have 1 or 2% as a nominal position in gold as a hedge against tail risk…which is barely tail risk now, it’s sort of body risk!’
Particularly as these guys do understand these concepts, I think its amazing that somebody with a public profile hasn’t already made that move. I imagine it will happen fairly soon, and I think it will be difficult for other bond fund managers. Let’s say someone does it and they then see considerable inflows into their fund on the back of that change. I think that could be very, very telling.
Regarding his outlook on gold and silver Naylor-Leyland responded:
If the secular bull market is anything to go by, there’s no doubt that we are in a buy zone at the moment. I think the charts look really good actually, I’m quite relaxed about the technicals, or at least rather what the technicals are showing. I see a triple bottom in gold around $1550, there’s a clear, very large wedge in silver which looks ready to consolidate, and I would anticipate based on what’s going on in markets overall and with the likelihood of considerable further stimulus that they will go a lot higher.
For gold to do what it’s done every year for the last 10 years it’s going to go up $400 odd dollars before the end of the year. It will be interesting to see whether it does that.
Backwardation in gold in the LBMA system is screaming a large rally between here and the end of the summer! For me, you can consider that we’re still in a negative real interest rate environment and that is certainly going to be continuing for awhile, long term, I’m very positive on both (gold and silver).
When asked by The Doc how long gold futures prices can continue to decline in the face of massive physical buying of gold Ned replied:
Actually I have a little bit of data which may be of interest. I know you’re aware I’ve been involved with the guys who were originally behind what was the Pan Asian Gold Exchange (PAGE), and the new silver exchange which they’re setting up which is in progress at the moment.
Something came out the discussion I had with them the other day which is very interesting. One of the guys I was talking to- an individual from one of the main 5 Chinese banks, and they were talking about the demand within the country for the two metals. Something very interesting came up, which is they have these gold and silver backed savings accounts in China, in fact all of the banks have these offerings.
The demand for them is just extraordinary! If you extrapolate the demand from this one bank across the other 4 majors, you’re talking a billion ounces of silver demand last year, and 100 million ounces of gold demand! Now of course what’s coming as the next comment is the thing that won’t surprise you, which is that the guy did confirm that yes, they don’t actually physically buy any of that metal- effectively it’s just offset 1 for 1 in the unallocated spot or futures markets- I’m not sure exactly which mechanism is used by those banks.
But it’s just amazing to see all this real demand for real metal just feeding into this system whereby unallocated is fine until it’s not, and in due course that will be the case!
In response The Doc asked Ned that with Harvey Organ’s recent allegations that the GLD’s inventory has been rehypothecated and with the financial crisis accelerating, how many gold and silver investors will wake up one day to discover that the bullion they thought they owned is rehypothecated paper?
Ned responded:
I’ve been saying that to clients, to potential clients, and to my colleagues in London and in the investment world since 2003-4! Effectively, you MUST BE CAREFUL WHICH VEHICLE YOU USE!!
There’s no question that at some point this is going to be a HUGE problem!
You’ll remember that amazing video interview with Bob Pisani that CNBC ran where they went into GLD’s vaults in London- I’m sure you saw that Doc. You know they took his mobile off him and he ended up in the vaults and he held up this bar and he said ‘this is the kind of thing that GLD holds custody for you!’ And then immediately everyone jumped all over it and said ‘wait a minute, that bar isn’t on the bar list!’. Now I don’t know if you know this, but they never said anything about that- they basically went all quiet on that issue.
About three weeks after it happened, I happened to have ETFS (ETF Securities), which is another ETF product company come into see me at Cheviot. Quite why they wanted to pitch a gold ETF to me is anyone’s guess because they should have known that it wasn’t exactly going to be a success, but we had an interesting chat, and I brought up some problems with ETF’s, and I mentioned this video to them and I asked them whether they’d seen it. They said no, they hadn’t, but that sounded quite interesting, could I forward it on?
So I forwarded that to them and said ‘I’m very interested to have comment from you on what you think about this’. I got an email back which stated ‘That was interesting, and what’s even more interesting is IT’S OUR BAR!’
So let’s clarify. He (Bob Pisani) was actually holding up a bar belonging to a separate ETF, WITH NO PERMISSION FROM THEM!! To me, that tells you everything you need to know!
Ultimately, with all financial products, buyer beware, you must read the prospectus carefully, you must look at what you’re investing in, and for some people who have big, big pockets and want to be trading the market , who knows, maybe a gold and silver ETF is a good vehicle for a savvy investor who has huge money to move backwards and forwards in the short term. But for me, the problem with ETF’s is a very simple one, which is there’s no additional reward in owning an ETF, but there are very substantial additional risks, in my opinion. When it’s a risk/reward decision that I look to make on every investment for clients, it doesn’t make sense, because there’s no additional reward!
Saving the best for last, The Doc asked Ned Naylor-Leyland to give an overview on what happened with the PAGE, and an update on the debut of the new 1:1 allocated silver exchange he is developing with Andrew Maguire along with Eastern interests.
Ned Naylor Leyland:
It’s quite unsurprising what happened with the PAGE, although ultimately we’re in a better situation than we were before, and I’ll explain why.
The Pan Asian Gold Exchange was a sort of dual functioning exchange based in the Hunan Province down in southern China. The thing about it is it was a regional program to develop that area into a trade zone within SE Asia. The main part of the exchange was for domestic use, leveraged products, etc., but they also had this very, very interesting plan for a fully allocated spot contract in gold.
Now two things happened. The first thing is the bit you alluded to that other shareholders within PAGE, because PAGE is effectively made of up 10 shareholder groups. One is the one that I’m involved with, and then the other 9 were effectively Chinese SOE’s or Chinese companies. The one Chinese company that was listed on NASDAQ is an information technology business. They were the ones that blocked it. Effectively they started saying that they insisted (and they owned slightly more than the others in truth) on building the platform from ground up using Chinese tech and Chinese workers.
Now that would have taken a very, very long time and that wasn’t the original plan, which was very frustrating for the people I know who wanted to roll-out the fully allocated contract by buying a platform off the shelf.
So that happened, which for the guys in China they were a bit confused. I wasn’t, I thought it stunk straight away. But then interestingly, following that was then a change in Chinese laws as well.
They turned around in the Central Government and said we’re now not allowing any trading in gold outside of Shanghai. So it got smashed on two levels.
The reason I say we’re in a bit of a better situation is that the guys behind the allocated contract then understood what they were trying to achieve better, and understood the dynamics of the market better.
They realized that they weren’t necessarily going to be welcomed with open arms by the rest of the bullion trading community, or at least on the custodial side.
So they thought about it carefully and they’ve gone about setting up a new exchange which unfortunately I can’t give you the name right now, but it should I’m very much hoping, mid-summer we’ll be there, and I intend to go out there at some point as well. It’s a fully allocated spot receipt in silver which will have monthly offerings, and the idea is for it to offer an alternative for those guys who are trading spot in size through the LBMA system, to own something which is transparent, tradable, and should in due course suck metal away from the LBMA system across to this new exchange.
Now Eric (Sprot) would be able to tell you this himself, it’s not a straightforward process setting something like this up. It requires a lot of hard work that goes into it. There are always little gremlins here and there that need to be ironed out, particularly with something like this where it’s an international offering. There’s a lot of serious people behind it, it’s very much on schedule to happen this summer, and I’m very excited about what it could do once it’s up and running!
Ned Naylor-Leyland is an Investment Director and advises a specialist precious metals fund for Cheviot Asset Management in London, UK.
Ned Naylor-Leyland
Investment Director MCSI
ned.naylor-leyland@cheviot.co.uk
020 7438 5683
Ned graduated with a BA (Hons) degree from the University of Bristol in 1998. He began his career in 2001 at Neilson Management, later moving to Smith & Williamson (formerly NCL Investments) in 2003 where he was an Investment Manager. Ned joined Cheviot in July 2008 and is Advising a specialist Precious Metals fund.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_silv.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_gold.gif)
Everyday I’m stackin’ some….Damn that song is stuck in my head.
This all seems so simple that everyone should see it. I keep thinking PM’s will explode anytime now. There’s just one reason after another, yet the sheeple are blind. This just TOTALLY blows me away.
But 40OZ, I don’t have any extra money to buy silver with. What about that JetSki sitting beside your house? You know the one that just sat there the last two summers? Sell it for $1000 and use that money. But I can only get $500 for it. So sell it for $500 and use that money.
And that’s what you get from those that have been told. Never mind the rest who haven’t a clue. All I can say is, thanks Doc and to the rest of us for trying as hard as we do!
I never understood how you could sell something you never had…especially at a 100+/1 ratio…It’s about time someone brought an honest trade to the table.
This is dynamite info, Doc! Loved the interview with Sprott as well, and thanks 427 for the generous donation!
On Brother John F’s site there was a post about BNI, an Italian bank, going on a bank holiday, effectively shutting down its ability to do any sort of consumer transactions up to and including paying taxes and utilities. This is may not be an isolated event but even the Bank of Italy did not step in with a rescue package after it apparently agreed to do so.
Ned and Eric both see Italy as the even more important event horizon of the European collapsing black hole Spain is the super nova. Like Mauldin says, Spain is now Greece
The PTB stopped PAGE with just a phone call. I doubt that Naylor-Leyland has suddenly come up with sufficiently more fire power. Best I can tell these guys play serious hardball.
You hit it 40oz… The sheople can’t see the forest through the trees… Or some shit like that.. Damn Poets… Anywho it’s so simple and people come up with so many excuses it’s disgusting… What’s worse are those people who continue to poor the max amount of dollars from there wages into 401k’s and other retirement paper snooks… They actually think there doing a good thing even though they see there statement at the end of the year for 3 or 4 years running and see that after putting say 10k into there fund and the company adding say another 2k that they have a balance that is 3k higher than same time the previous year… I want to smack the ever living bull biscuits out of them… They spent 12k to get 3k and before long they won’t even have there 3k… Hell the people that think that is good stuff will never see the truth… They are blind beyond belief… And to think they call me crazy for converting every fiat dollar to Phyz that I can get my hands on… You got to love the blind….
Remember rule #1 in the metals market…. If you don’t hold it, you don’t own it!! That’s a fact!!
Keep on stacking the Phyz kids… Reach your goals and then get greedy… Adjust them goals… You can NEVER have enough Phyz!! That’s fact #2…
Laying a load of Bull Biscuits.
Killing meeeeeeee…. Danno
Doc, super interviews with two of the best this weekend. People are listening. Thanks for doing your part to inform the public.
One ounce winner goes to ukpsycho cause the uk folks keep stackin whilst suffering 20% VAT. A winner and a hero…
I was watching an interview that Max Keiser was conducting with a French journalist from a couple of days ago, the journalist said there is now restrictions on how much money can be withdrawn from ATM machines in France. Also Spanish people are crossing border into France to transfer cash via French banks. There are definitely bank runs going on in Europe, but the media is only making scant mention of them if at all. I guess they don’t want a full scale bank run, it is only the smart withdrawing their cash at the moment.
Spain will need more than one bailout, the construction sector alone has 1trillion Euros of outstanding debt, with a realistic value of only 400bn Euros. Then we have Italy in the wings to be followed by France.
I live in England and things are deteriorating here as well. We are watching what is going on in Europe with disbelief. We have been able to avoid the worst of the fallout from Europe. But make no mistakes when Europe goes down we go down, it’s like being in a life boat tethered to the Titanic.
Our politicians don’t know what to do, there is nothing they can do. We are so entwined with main land Europe there is no way to untangle the mess. This is going to get really, really ugly.
Meanwhile wealthy Greek, French and Spanish people are flocking to London to buy property, as a safe haven tactic. House prices are rising in the city while they are falling in the rest of the UK, it is not a collapse like the USA, Ireland and Spain but a steady slow fall. The Tory government is doing its best to prop up property prices.
There’s going to be a mile long queue outside the new silver exchange, once it opens.
Doc, you’re most definitely on a roll here. Keep it up. Very interesting stuff.
Just imagine where the silver price would be without all the paper dilution, based on Chinese demand for silver alone… it is a thought that makes me extremely happy to be a silver bug.
Neo Interesting update and to think MSM keep it under the sheets.
P.S. I love the ATMs in France. I once withdrawn money at an ATM near the Eiffel Tower and was paid an extra €60 free of charge.
It’s Up To The We The People Boots On The Ground Now !!!
The 1% Don’t Want To Come Down From Their Fix !!!
Danno, you’re right, they’re indeed “blind beyond belief”. e.g. My Mom has the bulk of our inheritance in the stock market, after paying some scumbag financial planner and/or advisor a stiff fee for that shite advice. I’ve tried several times to convince her to switch at least a portion to physical gold and/or silver, even offering to assist, but she told me straight she simply don’t care. The truth is that my Mom and Kie, although they won’t say it, think I am as crazy as it gets. Needless to say, what my Father has built up over the years will all be lost if they don’t come around.
The bond yields in Spain is moving higher after the bailout. Finally, some reason and sanity in the markets. This is what subordination does on the bonds. It creates a senior class that doesn’t have to have a write-down. The fad in the markets are already happening. The stigma of the Spainish banks that need money is being shown. This bailout did nothing except put another 13% of more debt on the Spain’s books. More downgrades will be coming and margin calls. It’s almost Italy’s turn for their so-called bailout. But on deck is the Greek elections on Sunday. The markets should be getting spooked by the end of the week. I think we can see a sale off. China has a better then expected report that helped the markets this morning.
Neo;
That’s very interesting we here on Doc’s site buy the physical and the banks in China are getting rich on paper, sounds very similar to another system I know. Mmmmmmmm
Why don’t people learn? BUY PHYSICAL FOOLS
Can’t wait to listen to this, great job doc, amazing pieces recently (not that your old stuff was bad).
With the latest Eurozone bailout being declared a success in the media, it is likely that we will see a rise in the Euro, relative to the Dollar, in the coming weeks. This is a bullish signal for precious metals.
Regardless, as long as the LBMA is permitted to sell leveraged metal positions at a ratio of 100:1 of their actual physical inventory, gold and silver prices will continue to be restrained from their true market value.
We forecast a short-term price target of $1,800/oz and $38/oz for Gold and Silver, respectively, on the back of a Euro rally over the coming weeks. As market euphoria begins to wane, however, a correction below $1,500 and $25, respectively, still seems likely for Gold and Silver over the course of the Summer months.
http://www.superiorbullion.com/
I feel your pain SB… That is the hardest to watch… Parents, family, close friend… It’s like you want to shake them and say WTF!! There’s no getting through to some people…
Looks like there doing a smack down again or Gold & Silver is not a safe haven today
Regarding NEOs and 427 post – what is the best, most secure way to move you PM out of US ?
In case you decide to “abandon the ship” what are the scenarios for safely transferring and traveling with your coins/bullions/bars ?
Exactly Danno. This is why I am stacking silver as if there is no tomorrow, because I am stacking for them too.
427 Yeah, it seems the paper wankers are at it again. I want them to push it below $20 an ounce so that I can continue to stack the smack!!!!
lol Marchas45 “BUY PHYSICAL FOOLS“
MAMYTA;
Ya it might be best I stopped in buying those bars! I only wanted them because of the SD on them. I feel the cartel will be keeping silver as low as they can this week.
People think 401Ks are a good deal because you end up paying lower taxes upon retirement. But is that really true? The trend now is for governments to impose higher taxes, so your taxes might actually be higher by retirement age! Plus, all your funds in the 401K are subject to ‘management’ risk by the TBTF financial institutions.
Better to take all that extra money and buy silver or gold in the physical form–and that will give you REAL savings for you and your family’s future! Be responsible for your own retirement funds.
Getting your PMs out of the US is definitely a concern – I would start doing it now because it might not be possible in the future.
Do not leave the bullion in the containers they come in as the screeners can’t see through those (I know because it happened to me). Put them in a binder with coin holder sheets so they can easily see them. Also, most importantly, keep the total amount you are taking out under $10,000. 10k is the threshold for most countries customs reporting requirements, so if you are carrying 9k worth of metals, you are not obliged to declare them and if they question you, you haven’t done anything wrong. If you have 50k of metals on you, I can easily see them getting confiscated unless you go through the whole customs reporting process (and then who knows what surprises will be in store for you).
427 -
Isn’t it all about if you got the guts to move outside of US if the desperate times come ?
Of course – there is always doubt if you can find the right place to go …
Silvertax –
Suppose you realize that $10K are about 6 gold coins
probably less soon…
I’m not sure but $10K is both for cash and PM limit…Depends on the final destination Customs regulation..
MAMYTA We can exchange places if you like… I will leave my silver here and you can leave yours there. I think it’s going to be much easier than selling and buying again and/or to pay the custom fees, et cetera. What do you say? Are you ready for an African adventure? lol
Sweet joke, Silverbullion !
but some people can consider it in near future… of course if both parties can somehow trust each other … no commissions, no premiums – just a quick swap ?
So you simply suggest exchanging the ownerships of the personal PM vaults (located in different countries) with equal amounts ?
I’m not for an African adventure – maybe somewhere in Old Europe …
MAMYTA lol Yes, that is what I suggest: “exchanging the ownerships of the personal PM vaults (located in different countries) with equal amounts.”
Wow, information overload here! Great job Doc, keep this kinda stuff coming – it really helps those of us who don’t do finance-type stuff “for a living” if you will
I’ve always thought that too about 401Ks plebian – tax deferred income seems great, but what if tax rates are much worse by the time we retire? Plus what about the hidden tax of inflation, a tax that the IRS (and most of the populace) totally fails to recognize?
People put so much faith in the ghost of real money! Paper’s bad enough, but then digital retirement accounts? Don’t worry, I’ve got plenty of money units. It seems INSANE.
plebeian,or any one else?
I’m 56 years old, by the way.
Really great interview, enjoyed it very much and took allot away from it, thanks doc(and Ned!).