Over 5,000 Chinese investors have been fleeced for a total of $59.62 Billion in a paper ‘gold’ futures scam.
This should have enormously bullish implications for the PHYSICAL metals markets, as 5,000 Chinese have just been taught Doc’s rule the hard way:
If you don’t hold it, you don’t own it!!!

While this has not been widely reported in the Western media, news broke this week of a massive illegal gold-futures trading scam in China. Not only does it underscore the growing hunger for gold among the newly minted Chinese middle class, but also hits home the rationale for owning physical gold, according to one U.S. based asset manager.

Over 5,000 investors were bilked out of 380 billion yuan, or $59.62 billion in a scheme involving Loco London gold since 2008, according to a report in the China Daily.

While details are unclear how the scam worked, the implications could be bullish for gold in a number of ways. Perhaps gold prices could be at even higher levels than they are right now, if this money had been properly invested.

“That is obviously a very significant amount, this is an enormous scam,” said Adrian Day, president of Adrian Day Asset Management. Looking ahead, Day noted that “It might make Chinese investors turn towards the physical rather than esoteric contracts.”

“I don’t think it will make Chinese people not buy gold, it will just make them want to buy physical gold and keep it,” Day said.
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  1. That’s a rough average of $12 Million per investor. I just don’t understand how one can amass that much wealth and be that stupid. Talk about more money than sense. Hell what am I talking about? This goes on in the paper market everyday. It’s just a matter of time before scammers are exposed.

  2. To put this in context, this is 1,000 tons of gold.  Did the gold  disappear?  Or just a paper scam?  Was anything backing this?   Painful lessons like this may put the Chinese on alert to avoid paper trading.  Since their desire for gold is unlimited, this could bode well for gold. 

  3. Perhaps gold prices could be at even higher levels than they are right now, if this money had been properly invested.

    SLV has the same effect on silver prices.  That’s why it was set up.

    If these figures are right, they have some very naive millionaires over there.
    They should hire an accountant or something.

  4. It could be the demand for phyzzz versus paper that breaks the camels back.

    If waves of people start rapidly dumping the paper silver for the real deal that would create a phyzzz metals hyperinflation.

    It makes you wonder if this is what eventually happens? Its obvious the banks and Feds of the world would have to intervene given that scenario. 

  5. Hey Conax, perhaps they should hire an accountant with a  silenced pistol. 

    @silverhawk; There was a business just like that in Brisbane. Had the proper storage facilities, high security screening, massive vault that was on electronic time openings, great idea providing private storage lockers, only to be run by a slime ball of the highest order. He went broke, people missing bullion, and bankruptcy court proceedings pending. It was posted by Doc here some time ago and it was The Reserve Vault in Brisbane.
    If you don’t hold it, you don’t own it.

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