# Gold Bubble goes POP?

Discussion in 'Business & Economics' started by Believe, Apr 15, 2013.

1. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Caption with photo is: Investors sold 799.8 metric tons from gold-backed exchange-traded products this year, pushing holdings to the lowest since March 2010, data compiled by Bloomberg show.
SUMMARY: Much of the gold removed from ETF valuts is finding it way, mainly via refiner in Europe, to Asia as smaller bars, so owners of it at the ETFs can collect premiums of up to about $1630-1230 =$400 per ounce. This will continue until the ETFs have essentially zero real gold backing their paper gold, assuming the Chinese an Indians, don't change their several thousand year old POV that only gold is a safe store of valued, and should be hidden (buried, usually) so even the government cannot take it.

Also note my footnote (2) of prior post about CCP doing 180 degree turn to make it easy for Chinese to have "gold bank" accounts (that the governments knows and can confiscate).
I doubt many Chinese are falling for this trick. I.e. they will continue to buy gold and burry it. This is also why at least 20% more gold enters China than even the Chinese government knows about, mainly smuggled in across the border with gold rich Mongolia.

Last edited by a moderator: Dec 16, 2013

3. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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"Registered" gold is ONLY type that can be delivered to holder of "long" contract, if he demands it. "Eligible" gold already has a owner.

SUMMARY: Not only Asian are hording physical gold, but the big US banks are too. This while telling their customers to sell their gold - price is going lower in 2014, etc. but for their own account, they are rapidly building how much physical gold they own! Can the S..T hits the fan moment be many months in coming? Not when the 92 traders with claim on each ounce of deliverable gold in the vault understand - See that 91 others are claim "their" gold. -Transfering as JPMorgan is doing to their private ownership leaving them hold a bag of IOUs, not gold.

5. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Russian banks are buying and keeping ~90% of Russia's gold production and Russia imported 181 tons of gold in 2013; but China imported (thru public chanel) nearly 1100 tons while prodicing 400 tons, none for sale.

7. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Note that gold produced by recovery from jewelry sales is at all time low for hard economic times due to the low price. Most gold producers lose money at current prices but for some continued production at a loss is still best option (until they fail) as most have bank loans to pay. Consumption is greater than production and only the selling of gold by Western ETFs* is supplying the difference (consumption - production) for now, but ETF vaults increasing store only privately owned gold ~65 paper gold traders can claim each ounce of available "deliverable" gold the ETFs now have. - See data in prior posts, especially post 102.

*799.8 metric tons (Bloomberg data - post 101) only covers 25% of only Chinese jewelry demand (2,896 metric tons) alone! Indians buy hugh amout too, plus net the investment demand is positive despite selling by western ETFs, much of which is done to take advantage of the up to 25% premium paid in Asia for prompt delivery of physical gold.

I think it will be quite interesting to watch ETF's "paper gold" price in first two weeks of January 2014. - I suspect a lot of the selling in 2013 was "tax loss selling" to off set large Fed-driven thin-air profits in stocks in 2013. I.e. the title of this thread may be correct, but not in the sense of a bubble popping, but more like a cork opening bottle of Champaign.

8. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Comex probable did buy or arrange for some small increase in the deliverable gold in the vault: registered gold inventories increased by 61,834 ounces on the week, while eligible gold dropped by 19,004 ounces . If the trend of the prior few weeks had continued there would have be about 100 different claims on each ounce of deliverable gold in the vault to back the promises that long contract owners could ask for their gold instead of accept dollars instead at contract maturity.

And it is not just paper gold that is leveraged way beyond any safe or sustainable level, so are stocks (red line below):

Note that at this level a buying on the margin a little down turn send out the margin calls. That forces some stock sales, which accelerates the down turn. Obseve that in prior times when margins were this high recessions soon followed. Although Halloween 2014 is now less than 10 months away, I remain confident that there will be a run on the dollar about then (or before). What is not sustainable, isn't sustained. US (and the developed world) have far too many problems that are growing more serious.

Corporate profits do not a healthy economy make, not when Joe American's salary buy less and his rent is rising, Fed's assets are growing rapidly still with thin-air money buying, federal deficit hopes to be "only" a trillion dollars this fiscal year, interest rates are rising, making rolling the old debt cost more, a million people are dropped from federal aid as they have been collecting for more than a year, baby boomers are retiring at >10,000 per month, switching from their highest tax paying years to collectors of Social Security, Central Banks using dollars of reserves to buy real (not paper) assets (gold especially but China minerals and energy too in decades long delivery contracts, paid in full up-front) and Congress has only agreed to total expenditures not how the funds will be spend (a government shut down soon after 15 January may result, or if not then late February when the debt ceiling is limiting) - This list of woes goes on for a few items more, but you get my point.

Last edited by a moderator: Jan 3, 2014
9. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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As I predicted at end of post 104, before any trading in 2014 began, Gold did soar and stocks fell due to tax considerations. (take more stock profits in 2014 and sell gold for the tax loss to offset profits taken in 2013 (but fact Chinese gold jewelry demand was up 29% YoY and India is lowering restrictions on gold imports* made that an easy call).
* I think the Indian government is realizing that the main effect of rapidly increased to 8% tax on gold imports was to boost smuggling and cut their tax revenue gained from gold imports below even that the 2% import tax gave in 2011. I. e. did not stem the outflow and weakening of the rupee, just sent them out thru less legal channels. - Let China claim to be both the world's largest producer AND importer of gold.

10. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Bloomberg spot price for gold closed 2nd trading day of 2014 at $1238.60/per oz or up on the day$13.40. Perhaps the shorts are buying out their positions (eating their loses)? The short volume increased four fold in last month of the year 2013. With first trading day of 2014's rise of $23/oz, it seem like something has changed. I. e. much like I predicted would happen at the end of post 204: "I think it will be quite interesting to watch ETF's "paper gold" price in first two weeks of January 2014. ... I.e. the title of this thread may be correct, but not in the sense of a bubble popping, but more like a cork opening bottle of Champaign." By edit: here are some "floors or support points & resistance points" expected after the first two weeks: Support: - 1227.33(main). Break of the latter would give 1218.15, where correction may happen. Then goes 1204.70, where correction is also possible. If a strong impuls, we would see 1186.80. Continuation would give 1172.82. Resistance: - 1243.12, 1248.82, 1254.63 and 1260.00(main), where correction is possible. The break of that will lead to$1272.30/oz, where correction is also possible. Then follows1288.11. If a strong impulse we would have1304.96. Continuation would bring 1314.82.

I'm making this edit addition after three weeks but it is more than a week old. Note in graph below, ALL their resistance points expected ponts have been busted and now price is testing $1265/oz. If it breaks that too they expect it to test$1273.30, but I am observing that multiples of $5 are where price rise seem to hold for a few hours. Thus if price breaks above$1265 next resistance probably will be $1270. Please Register or Log in to view the hidden image! Last edited by a moderator: Jan 23, 2014 11. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 US markets are still closed, but where gold is trading it is still going up as I predicted at end of post 104 and in all these prior posts about the Comex vaults having lost >80% of their deliverable gold in less than a year (it is going to Asia to collect the premiums): I'll wait until mid January to claim the surge to much higher gold prices is under way - I. e. that "paper gold" traders / speculators no longer set the price of gold, the law of supply and demand, rules again. Later, by edit: NYSX is now open and gold is up more than a dollar to$1240.20/oz according to Bloomberg.

Last edited by a moderator: Jan 6, 2014
12. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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This is GLD, roughly gold /10 but with nearly 1% discount now (It is an ETF that holds real gold , not paper gold, in London.)

I told earlier that I expected the "tax-loss selling" to off set some of the big profits taken in stock in 2013 would drive GLD down especially on 31 Dec 2013, and it did. I almost got the bottom of the 31 Dec notch. I bought 500sh more of GLD at 115.11 for ~$57,565 just after the regular market closed - I.e. my "Good till cancelled+ ext" buy order got touched off in the notch you see in above graph. That was the biggest single buy order I have ever made. I do put my money where my mouth is. 13. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 * I too said at end of post 104 last week that "January should be Interesting" hea! that's like the Chinese curse: May you live in interesting times." Also world banks according to IMF data released today are decreasing the fraction of the reserves held in dollars, although the absolute amount did slightly go up. - Just adding other currencies and gold more than dollars. 14. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 A former Assistant Treasury Secretary and “father of Reagononics,” a prior Wall Street Journal economist, Dr. Paul Craig Roberts says, "The West is draining itself of physical gold bullion. . . If there is a currency collapses and you try to flee into gold, there won't be any there. The Chinese will have it." {This is true as I have numerically documented in this thread. (more than 80% of the deliverable gold at Comex, by far the largest Paper Gold trading center, was drained from their vault during 2013! Even if the current rate just continues the vault will be empty in 85 days, if Comex does not pay whatever price the market demands to add more. People who are "long" are taking their gold while some still exist and getting 20 + or - 5% premium for it in China now. (The taking gold instead of dollars rate will accelerate as now there are ~ 80 different claims on each ounce of gold still left in the vault. No one wants to get the "German treatment" - you get all your gold in 2020.)} Dr. Roberts contends: “We have a stock market at all-time highs, and where is the economy? There’s not one: 40% of working Americans earn less than$20,000 / year. 53% of Americans earn less than $30,000 per year." (At ~6minutes into talk and based on W2's of American who have a jobs.) "Well, the poverty rate for a family of four is something like$24,000.”
No quotes = Billy T parpharasings here to compress: Large student debts, large mortgage debt, difficult loan requirements at banks and except for top 1% real incomes are falling, for last few years
. . . “If there is no income to drive the economy and there is no credit expansion to drive the economy, then how does it go anywhere? You can’t possibly have a recovery” {of the economy, but possible for corportate profits selling goods to Asians, etc.} “We don't see it in jobs or expansion of consummer credit {credit card debt is decresing} Labor participations rates are declining ... We have a situation where all the markets are rigged. All the markets are manipulated.”

Then for at least 10 minutes he knocks “obamacare” but at 23 minutes into talk he starts in on the growing debt, fact that the Fed buys most of it:

“ The widening deficit will again cause dollar worries. Who’s going to finance it? It means the Fed will have to print more dollars.” Roberts goes on to say, “The Fed won’t be able to cut back $10 billion a year. It will have to increase it (QEinfinity)$30 billion a year, $40 billion a year, whatever.” ------------ I stopped listening at that point (Already more than 6 years ago I predicted run on dollar on or before Halloween 2014, with + or – 7% ~ 6 months timing error margin) If you want to hear more (`the 20 minutes I did not) the full interview is at: http://www.youtube.com/watch?v=_ojASipDzVY For reasons I don't understand youtube froze after about 7 minutes and a Google page appeared, telling me to log in to Google to continue. I don't have a Google account but just went back by click on the above link again and moved the “time slider” to where I got cut off. That worked fine. No delay the video resumed as soon as I hit the “play triangle” for another 7 minutes or so. This may be do to my location in Brazil as some YouTube videos tell me “Not available in your locations” and will not even start. 15. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Please Register or Log in to view the hidden image! Deliverable ("registered") gold in vault down again 13.7% in last week; How long before panic sets in? (Among the 93 who can claim each ounce remaining in the vault) Paper traders losing control of the price to law of supply and demand? (As I predicted they would more than a year ago.) Now there are 93.347 potential claims on each ounce of deliverable gold at Comex (US's largest gold market) Last black curve below. Please Register or Log in to view the hidden image! SUMMARY: Get your gold - don't accept declining value dollars - Before one of the other 92 who can claim your gold takes it. Please Register or Log in to view the hidden image! Note data in my post 102, showing 233,845 oz JP Morgan had on 12/12/2013 fell to 87,071 oz in one day. I.e. the big boys may be telling you gold is going down to less than$1100/ oz but for their own accounts they are transfering all they can into their private control, from the exposed registered status any long contract holder can claim. Scotia also took 63,877oz out of the exposed "registered" class in one day (Yellow highlight box above). Not as much as JPM's 146,774 oz transfer and not yet appearing in their own account. (next week most will)

Last edited by a moderator: Jan 12, 2014
16. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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I agree with final bold sentence. Why: Note there was only one test of the $1255 ceiling last week, but many with shorter intervals between after 11AM NYC Time on Friday. Please Register or Log in to view the hidden image! 31/1/2014 starts the new year. - Year of the horse will be strong for gold. Rich, urban Chinese going home with gifts of gold. Please Register or Log in to view the hidden image! Also note that each time$5 higher level breaks there is a rapid surge up to test the next one. I. e. I bet next week price of $1260/will be tested. The appetite of short sellers must be declining with drops below the tested level quickly turned around for a new test. - Little potential gain even if they cover they their bet perfectly (a dollar or so) but the$5 rise in price that has been quickly following ALL of the recent broken ceilings is a "risk to gain" ratio greater than 3.

BTW it is very simple / easy to fix (manipulate) the London gold fixing (twice daily setting of the price of gold), if the five (now only four) bank cooperate. The London metal group calls each up in turn and ask how many ounces the want to buy or sell at $X/ oz. When the total of buys is within 5000 oz (as I recall) of the total of sells, that "X" is the price FIXED (both meaning intended). All those four banks need to do to drive the price down is to initially be sellers at X so it is lowered to Y < X for the next round of calls. Many of them were with short positions during 2013, so wanted price to decline, as it did, DESPITE rapidly growing physical demand. Recently it seems they are going long for their own accounts (as I have documented in this thread) so for 2014 they may add to the physical demand - part of the reason why, I think, price of gold has climbed slightly more than$50/oz in the first two weeks of 2014. Note most are still dishonestly telling the customers & clients they expect gold will fall to or below $1100/ oz in 2014 while buying all they can for their own accounts. Near last days of January, the Chinese new year demand may slow, price may test$1255 as a floor but not much before then is what I expect.

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17. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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to see why I expect much higher gold price by the end of February 2014 (or at least by 15 March2014) !!!

Julius Caesar, was warned by the soothsayer to "beware the Ides of March." Later, Caesar passed the seer and joked, "The ides of March have come," * meaning to say that the prophecy had not been fulfilled, to which the seer replied "Aye, Caesar; but not gone."* Later that day, now the 15 of March, Ceasar was dead - stabbed to death by ~ 60 senators. US congressmen are playing that role now, IMHO, and unpayable, growing debt is the main knife.

* Quotes from: The Tragedy of Julius Caesar by William Shakespeare.

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18. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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This data on total gold* in SLD's vault and premium paid for it in Asia at start of 2013 is only the start of strong trend to remove physical gold from the vaults of ETFs.
Graphed are the 30 day "rolling averages."

As data in first chart of post 112 shows, the volume of deliverable gold ("registered" class as "eligible" class already has an owner.) that holders of "long SDL contracts" could ask for instead of dollars at contract maturity FELL >80%** in 2013.
The premium paid for prompt deliver has been as high as $50/oz in 2013 but typically has been much like the$25/0z shown on the graph at end of 2012/ start of 2013.

This premium is the best index / indicator available of how much gold demand exceeds supply at the current "paper gold" price. Gold at ETFs is falling at an accelerating rate, not because as big banks want you to believe, so they can get more for their vaults cheaply), but because owners of physical gold want to collect the premiums available in Asia. As they claim physical gold from the vault, the ratio of those who claim each remaining ounce increases. As you can see (black line at bottom of post 112) a year ago that leverage ratio was 20 to 1 and climbed to 92 to 1. Data from one week later than graph show it stood last Friday at 111.6 to one - very unstable leverage.

Many are now asking for gold, not dollars, so they get their's before the vault is empty of registered gold - at the present rate of take -out (even ignoring the very likely acceleration) that will be on 28 February 2014, unless some owners of "eligible gold" now in the vault are given at least the Asian premium to let Comex move their gold to the "registered class."
(It is called "eligible" as it meets the London Good Delivery standards and thus is "eligible" for transfer to the registered class.).

* Owners of eligible gold just stored for them in ETF's vaults are asking for delivery too to collect the premium available in Asia. The total removed in 2013 just from SDL's London vault*** (data in same 112 post chart) was 11,098,222 - 7,827,505 = 3,270,717 or 101.731 tonnes.

** Registered gold at Comex dropped from 2,288,412 to 450,440 = 1,837,972 ounces or 57.1674 tons. (1 tonne. = 32,150.70 ounces troy. 1 ounce troy = 31.1034768 grams.)
*** SDL could use other vaults, but AFAIK, has only been keeping gold in London.
(I'm glad as I own some of it. US effectively confiscated gold in 1932, paying on $35/oz and made holding bullion illegal, but later legalized it to collect capital gains taxes.) The need for more tax revenues, is now legalizing pot - prostitution is next but that will be a few years yet in the "moralistic" US. (Germany has had a big legal brothel industry, with good health control for decades. I almost bought stock in one of the larger national networks ~25 years ago.) Last edited by a moderator: Jan 23, 2014 19. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Before 2008 crisis, central banks made money by leasing out their gold. (Red line > zero.) The 1-month lease rate is shown as an annual average. Data sources for graph below: Federal Reserve Bulletin, Foreign Official Assets Held at Federal Reserve Banks, Earmarked Gold & LBMA. Please Register or Log in to view the hidden image! Before 2002 Fed's NYC vault leased out ~310 tonnes /year (blue bars) and only honored small promises for two years and then let no gold leave for three years more (lease rate dollar gains too low). In 2007 & '08 it lets 400+ tonnes total leave. Most of the gold, I think, in NYC vault is foreign gold, so most probably it was not US gold being leased out, but whose gold is increasing the supply of gold in not important. Note this, if fact, is part of why Big Banks selling paper gold (even that they did not have) could drive the price of paper gold down, despite the rapidly growing physical demand. I.e. the market has been flooded with non-existent paper gold which is now being bought back at much lower prices - why big bank profits are at an all time high. Here is how it worked (quoting from same link): "Central Bank leases gold to a bullion dealer, that dealer sells the gold (or delivers it to a client) but never pays back the Central Bank its physical gold. Then later on, to balance things out, the Central Banks declare official “sales” of gold, but all that changes hands at that point is paper gold and cash, the real gold is long gone." That is why the IMF officially sold 403.3 tons in 2009 & 2010 - that is their 408 tones that actually left the Fed's NYC vault in in 2007 & 2008 (leased but never returned - so was declared as sold two year after most of it had gone to China.)! And Billy T adds: It is never coming back as much is now in China, which sell none. (Not even an ounce of the ~400 tonnes it annually produces I.e. more than second largest producer by 30% and also now world's largest importer of gold.) Just the legally recorded imports thru Hong Kong in 2013 were more than 1000 tones. The total imports in 2013 were about twice the 2012 imports. What is China going to do with all that gold, none leased out to others as much of the West's gold has been? Four or more year ago, in posts, I told you. This ChinaDaily illustration does too: Please Register or Log in to view the hidden image! When China is ready (has grown it domestic market and mainly exports to nations that don't need loans buy with) China will back its bonds for central banks & IMF with gold and pay higher interest on them than US can afford. I.e. almost over night the RMB will be the preferred asset for them to hold. China then gets, as the US did for decades, to pay for most of the needed imports with printed paper and with dollar and Euro deeply depressed in value, the US and Europe will not be strong competitors for raw materials etc. - Yes China benefits from "deflation of import prices" while US & EU suffer run-a-way inflation. It ain't gona be nice. Perhaps Democracy, such as it is with lobbyist controlling Congress, ends in long lasting Marshall Law preventing food and other riots. (I left the reference numbers, 10 & 11, after the end of some of the link's sentences, to show this is all well documented - not BS made up by the quoted source.) Last edited by a moderator: Jan 23, 2014 20. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Dow Jones Average is down 3.24% and Gold is up 5.48% in first three weeks of 2014. (2Jan thru CoB 24 Jan) Also watch: http://www.examiner.com/article/dollar-panic-expected-2014-as-foreigners-dump-their-currency-holdings - Same as I predict in post 7 years ago! SUMMARY: The days of big banks and paper gold traders setting the price of gold seems to be over - Law of supply and demand rules again. Last edited by a moderator: Jan 25, 2014 21. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Please Register or Log in to view the hidden image! Both registered gold and open long contracts were up slightly, so there are still 111.6 potential claim on each ounce available for delivery. Very unstable leverage. SHTF day comming soon. Owners of eligible gold typically paid more than$1400/oz for it and will not sell for less, especially with price climbing > 2% per day for last 30 days. If they won't sell, Comex can not legally transfer their eligible gold to the registered or "deliverable class." I.e. gold is likely to soar up from $1300/oz to above$1400/oz in less than a month as Comex offers ever more dollars to avoid defaults!

Average price up > 2% /day! for last 30 days.
As noted in big & bold text in post117, that one-day take out from JP Morgan was biggest in history. Ten tonnes more headed to China in one day! As I have asked, many times in last 4 or 5 years Why, when China produces about 30 % more gold every year then world's number two producer and never sells an ounce.

If you have any answer other than the one I suggested years ago, I'd like to hear it. I continue to think China, when ready to see dollar crash, if it has not already done so under the weight of annual debt groing by a trillion dollars per year, will back its bonds with gold with interest rates higher than US can afford to pay.

Then, almost over night, the RMB is the preferred reserve currency and China, no longer the US, can pay for its imports with printed paper. The imports will cost much less when US and EU are busted - not able to buy much in competition with Asians. (Lower demand means lower prices for still growing China.)

The dollar crash will hurt China too (value of its dollar reserves drops) but they have been reducing the dollar fraction of their reserve for at least four years - buying up oil, raw material and food companies for nearly a decade with paid-up-front, long-term (up to 30 years) delivery contracts in addition to being world's largest buyer of both "above" and "still in the ground" gold. That "economic pain" for China is a "one-time" event - the benefits are every month and continues for decades.

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22. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Ten tonnes of gold left JP Morgan's vault (as 10,000 one Kg bars) in one day recently, (three days ago) bound for China. Probably by air and are in Hong Kong already.

There is so little gold in the US now, that most private vaults are nearly empty. JP Morgan, wisely sold their main NYC vault (Largest private vault in US, I think) to a Chinese firm about a month ago. The vault is in the basement of this large office building the Chinese now own: