CME’s Terry Duffy on Gold: “They Don’t Want Certificates, They Want the Real Product!”

paper goldIt’s one thing when a fringe blog suggests that holding physical metal rather than paper is key, and that If You Don’t Hold It, You Don’t Own It!
It’s another thing entirely when the President of the CME, Terry Duffy goes on Bloomberg and says the following…

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What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tangible real  gold.  That’s going to show you, people don’t want certificates, they don’t want anything else.  They want the real product. – Terry Duffy, CME  4/29/13

 

http://www.bloomberg.com/video/cme-s-duffy-says-exchange-competition-helps-market-6rSibzdvRRGnC9Ldgfo~XQ.html

 

 

Did the CME’s President really just admit that paper gold and silver futures exchanges are becoming irrelevant?

Comments

  1. Gimmie the real deal!

    •  mike Maloney has just released a video showing china has now mass produced fake silver eagles , maples, perth coins as well as many gold and silver bars. do we need to worry about buying these products from supply houses like gainesville coin or apmex or just smaller outfits like silver doctors? just kidding. but is this going to be a big issue or just a craigslist or ebay issue. fun times!

    • That is classic.  I know Bill was the one who wrote the article…but point well taken, and spot on IMHO. http://youtu.be/73RVvLmwVmo

  2. fuckin’ eh!

  3. So when will they cut the bullshit then and price the paper where the physical market is at.
    Translation: “We lied about the price and the value investors didn’t believe us and now they’re breaking our integrity as an exchange of real things, really interesting huh?”

    • When you say “we lied about the price…”  Who is the ‘we’ you are talking about?
       
      You do realize if you buy paper and do not sell you end up with physical in the form of a 100oz bar?

    • The other day an ex chairman of CME stood for 2 contracts of gold and got a receipt.
      Mikeyj80 I don’t think you fully understand what’s taking place, or grasp the severity of the outcome. Do more homework.

    • @Cianod0on
      I think you are the one who needs to do more homework.  When you stand for delivery of gold you get a receipt.  Everyone.  No exceptions.  That receipt references bars in a warehouse, you go get them and they are yours.  If you would have read comments on the article posted here you would have seen this mentioned by myself and others.
       
      Also, if this really happened don’t you think there would be mass panic?
       
      And even further, gold is leaving registered vaults via the delivery mechanism to the tune of 50,000 to 70,000 ounces per day.  If that is happening without a hitch, why on earth would 200 measly ounces be a problem?
       
      The article posted was entirely factual (he got a receipt), but was designed to be sensational (OMG there’s no gold!!!)… It was sensationally successful.

    • Mikey there are NO BARS to get, the warehouses are empty or close to it. Sure you can wait… might be 20 years or never. Or you can settle for more worthless paper or the CME can force you to settle for paper (read your contract really close, in the fine print).

    • @MaryB
      Can you cite a source?  Every source I see shows Gold stocks adequate but dropping rapidly (due to the recent price decline), silver stocks are increasing.
       
      Gold is leaving warehouses by the phsyical delivery system, people are taking their paper, turning it to gold and getting out of NYC.  This is reported every day.  
       
      Don’t you think holy hell would be raised if someone was supposed to get 30,000oz but didn’t?
       
      Also, can you show me that fine print in the CME rules where it says they may settle via cash?  I can’t seem to find it.

    • Gotcha mickeyj. There is so much gold out there. That’s why Germany is waiting 7 years to get a few hundred tons back home. Ummmmmm…

    • @lone rranger where did I say “there is so much gold out there”
       
      i am really fascinated by the withdrawals of physical vs the contract, I have no idea why the us is telling Germany that it is going to take 7 years… But I’ve got a handful of guesses and only one of them speculates on whether they actually have the gold or not.

    • Ok @mikeyj80 ,
      “And even further, gold is leaving registered vaults via the delivery mechanism to the tune of 50,000 to 70,000 ounces per day.  If that is happening without a hitch, why on earth would 200 measly ounces be a problem?”
      A plausible sensational story from a considerably more reputable source than yourself is greater value than acting the fool thinking the gold is there for everyone to get that wants it. Around the globe, AU is in short supply.
      If gold is leaving registered vaults at the amounts you say and the assumed connected exchairman little guy can’t get 200 oz there’s a problem. A BIG problem, and it wouldn’t be a likely rumor if there wasn’t some truth to it. If everyone got a receipt then this wouldn’t be something to consider ya?

      I’m unsure of your intent and purpose in acting the devils advocate on this site. We all know how it should work and that the phys to paper markets are irrefutably broken, which means the supply and demand are FUBAR . You need to be recalibrate to the last 18 mo., what you’re saying is left field at best.

    • @Cianod0on
      I’m not trying to play devils advocate, I’m stating my opinion, am glad to read others as well and try to respond in a civil way. The story was sensational, end of story. Go read CME rules, everyone who stops gold gets a certificate. What they do with that certificate is up to them, hold it, sell it, turn it in at the vault and get their money. It was written in a way that was designed to shock and surprise people in that the ex-chair didn’t even get physical gold. Of course he didn’t. You don’t get physical gold in step one, you get a certificate. Step two is take that certificate to the vault and get gold.

      So if you don’t understand how the system works the easy response is to lose faith because even a big shot can’t get his 200 oz. If you understand how the systems works you read the story and say ‘well of course that is what happened.’ As mentioned, others are using the delivery system to obtain much larger quantities without a problem.

      Something is up with physical demand for gold, when I see gold flying out of vaults that tells me that the price of physical is higher than futures by a good margin, futures will correct as more people arbitrage the system (buy futures, take delivery, sell the physical to those paying the high premiums). Note that this same phenomenon is NOT happening in silver which means demand is really limited to just the market for small oz rounds and bars and not 1000oz comex bars (so industrial use likely is finding cheaper silver than comex price).

      To say the system is irrefutably broken is not just in left field, it is out of the ballpark. The physical delivery system, that is working, ensures that people can arbitrage the paper/physical markets so that premiums come into check.

      We can agree to disagree, but I would encourage you to read comex rules. Even if you don’t ever want to trade paper, it is good to know how the system works.

  4. I’m sure it flew over most of the peoples heads listening to it. Go back to sleep Sheep! It’s OK.

    • How did you interpret this?  I heard him saying that he believes people want to stand and take the physical gold.  What is wrong with that?  It is exactly how Mr Duffy wants a physically settled contract to work (along with myself and many many others).  If price of paper is too cheap, people will buy and take delivery of the physical.  If paper prices are too high, sellers of gold will deliver their bars in return for cash (which they may use to go buy physical somewhere else at a cheaper price).

  5. In less then 6 hours the attack begins….everyone man up and do what you can do. Lets show Duffy what silver leaving their vaults looks like!!!
     
    Silver Muppet

  6. I think we will see more and more of these types of videos very soon.  The cat is out of the bag and they will eventually need to come public about the gold shortages and the drainage of the vaults.  I think CNBC will run a special report about gold again and all the “conspiracy theories” about Fort Knox.  They tend to do this when the perception of gold is challenged.  They don’t like the script to come off course.  They must control the narrative.  If more are believing and seeing evidence of the vaults going empty, a mass wave of vulture capitalist will swarm the metals market.  The gold rush is on in the physical side.  All we need is a gold rush on the long paper side and for delivery in the next few months.  If this happens, we could see the explosion in the metals that many have predicted.  The problem with the explosion in price of the metals is that the world could be in total chaos.  Weird position to be in.  We are all waiting for the music to end.  All these predictions about how it’s going to end up after this global meltdown really means nothing.  It just a idea, synopsys of a thought to prediction a outcome.  News flash, we have never been in this position before in the history of the global world.  How can anyone predict  a reasonable outcome if it never happened before?  It’s just a opinion that holds no water.  We all want to believe that after this meltdown the world will be a better place.  A more fair and honest way of life because of free markets and trade.  Less rules and more freedoms.  Honestly, I feel like that is a fantasy land that has never existed.  We can strive for it but it’s not achievable.  I don’t want to get caught up in long shots.  I want to play the percentages.  All of us that buy the metals are playing a conservative percentage play to protect ourselves of a global meltdown.  The metals are a insurance policy against the printing press.  The metals are not for this system.  It’s for the transition and maybe the future monetary system.  I hope the music plays a little longer.  I can keep preparing for a event that might never happen.

    • Great post and i agree.  I also do not hope the whole system melts.  If the COMEX or other exchange is not the medium of price discovery between buyers and sellers, I’m afraid it will be giant banks and governments.  That scares me as I am sure there are more crooks in DC than NY.

  7. So I have some silver coins & ASE’s for sale on the local craigslist.  Asking $190 for five 2012 ASE’s.
    One person sent me an email saying:
    I’d like to buy them all. But 15 bucks over spot doesn’t seem very fair. I can offer you something that is more realistic?
     
    After mulling over possible responses, I finally replied with the following:
     I understand your point, but this is where I am coming from:
    - First, the spot price is only a figure used by the ‘paper-traders.’ Nobody is selling ASE’s for the spot price. Nobody.
    - Second, I paid $34.50/each for these, refuse to take a loss, and am not desperate for the $190

       I am asking for them.
    - Third, I am only making $17.50 off the deal and still need to take the time to meet you.

     
    Given the three points above, do you still feel that you are paying too much? If so, than check out the local coin shops or search online for your 2012 American Silver Eagles. It is hardly even worth my time write & post a craigslist ad, field emails, and then go and meet a buyer if all he is interested in is just the five 2012 Eagles anyway.”
    —————————————————————————————————————————————–
     
    Perhaps somebody here could think up a better response?
    Fire away!

  8. Why do people confuse numismatics with bullion? There is no disconnect with bullion, only coins. So, we replace one lame duck with another. Coins are not real bullion. Are we changing our stance to being a coin collectors forum, if so I got some lovely 1935 50% silver rocking horse crowns. Wake me up when you guys know the difference between perceived value and intrinsic value. If you go with perceived value, you may as well be dealing in tulip bulbs.
    I love numismatics but Silver eagles and Canadian maples are bullion. If you want to buy coins that are valued higher than the metal worth, get some history in them coins. There are loads of great North American coins out there that have real numismatic worth. Morgans, peace dollars and old colonial coins are great. Don’t believe the hype as flavor flav  once rapped.
     

    • Yeah, but what happens in a blowoff top where every man and his dog tries to sell their numismatics all at once?

    • I personally LOVED the last run to $49.  Premiums were dirt cheap and if you wanted to sell BU/prrof Franklins or Libertys or even silver Ikes all you were getting was melt price, same as for junk silver.
       
      I had friends who wanted to sell so I traded them my junk for their premium coins… they didn’t really want to see them melted so they were happy to make the trade.
       
      Now, hindsight 20/20 I should have sold all my junk at the top and waited until now to buy the premium coins… but I am still very happy with the trade, as the premium coins I traded for are worth more now than my junk would be :)

    • Nice that the price of 1000oz bars is still the price. If only you could actually get them. 
      It looks like only preferred buyers get them, others get cash settlement. See the mints need to keep going. You can’t have one of the main mints come out and say the COMEX/LBMA refused them silver so they can’t produce any product, are laying off personnel, etc. Mints will be served first. And interestingly, this allows more silver to move into strong hands (long-term investors). No-one is freaking out and rushing out of cash into silver here. Everyone is a long-term investor looking for maintaining long-term purchasing power, and some hope to get out at a peak.
      Numismatics you need to swap for more ounces of bullion before the exit point, ideally at the top of a next big peak.
      Don’t pay more than 4% premium over bullion coins unless you really know your coins and premiums. Perth Mint stuff, you just can’t get that wrong it seems. Within 2 years you’ll gain some ounces by swapping it for fresher silver. Ideally also semi-numi to keep the cycle going. While I can sell my 2012 Puma’s for €28 today, I might also obtain some 2013 Bisons for €23-24. Not bad for 11 months of owning them. Unfortunately, I didn’t own many. I was starting, but guessed right.
      My 2012 Elephants and Noah’s Arks also seem to be doing pretty nicely, although tougher to unload on my tiny local market.

    • @XC Skater, you are right about that perth mint stuff… Their new opal series coins are beautiful but at over $100 a pop I’ve passed… well the first issue is now selling over over $200 on ebay!!! Yowza!

    • @XC Skater I can get 1000 gram bars next day everyday. At spot plus refining costs. This bullish*t about shortage in silver is just that. There is a shortage in bullion coinage that’s a fact, but I don’t believe it represents the real value of silver, only the perceived value by the general public. If you don’t want bullion coinage there is plenty of numismatic gold and silver out there at the usual heady prices. I seen a 1927 wreath crown today down my local market going for £300, 28 gram coin with 50% silver, bargain :-)

  9. I have to admit the same stories repeated week after week get a bit boring after 3 years of this.  There must be a lot of newcomers because each month when I check in I see the same comments I did 1,2,3 years ago.  I guess it’s just the cycle.  A few members have PMed me asking where I am and how I find stuff under spot and don’t have trouble buying.  Go to pawn shops, most always they sell under spot, forget about premiums and shipping, that is surely the sign of a newb.  If the pawn guys can’t help you buy from a large refiner online, MPM is great, has never suspended sales and sells at much lower premiums than most. When everyone was claiming nothing could be found MPM was selling 1oz rounds for $1 over spot on any quantity that entire week. Now they are $2 over on most rounds but always have over 10,000 oz for sale online at anytime, larger orders can be filled over the phone for under $1 per oz.

  10. Did the CME’s President really just admit that paper gold and silver futures exchanges are becoming irrelevant?”


    No, he just admitted that the physical/cash arbitrage is alive and well, and thank goodness it is.

    • Well, I went to a LCS in Vista, CA today the owner (50 years in business) tells quitre another story. He says nobody has silver and those who claim they do (like Tulving) are out of stock and waiting for orders to be filled. In other words, there are shortages and delays. This fellow had some ASE’s for sale at $32 and nothing less.
       
      I have no idea what you’re talking about. There is clear disconnect in the silver market and it is growing rapidly.   

    • Check Doc’s site for OPM rounds, or check Provident, they have plenty and at $2 premiums.  
       
      In the markets I’ve watched the disconnect is actually shrinking.  Comex price fell fast – anyone who was selling for small premiums was bought out quickly, the rest raised prices.  Eventually all inventory was sold and premiums were high for replacement.  Now more silver is coming back to the market and premiums are coming back to normal.  Eagle premiums down a dollar or two and private mint rounds (like the OPM) are back to reasonable at $2 premiums and in stock.
       
       

    • How long until you get them? Waiting 4, 6 to 8 weeks means they dont have it. Are you listening to what people are saying on this?
       
      Im reporting stories from my experience and my friends. Tulving is WAY behind on shipments yet he shows most of it is ”in stock”.  Why?

    • If Doc’s reading he could tell you if his OPM’s or silver buffalos are in hand.?.?  
       
      I fully believe that Provident’s are as I’ve always had good luck with them.  They post when they are on backorder, and seeing that this is their main sale on their home page, I don’t think they’d be advertising ‘in stock and ready to ship’ unless they were ready.  
       
      I’ve never ordered from Tulving so I’ll take your word that they’re behind.

  11. Just paid 3 dollars over spot for rounds at the local shop. Eagles are few & 6 dollars over spot. New shipments In June.

  12. I think you guys only hear what you want to hear, if you listen he said coins, not bullion in general.

  13. Mammoth
    you were the one who recommended that I stick to my price and I did.  People came a went  Most were interested in talking. Some talked spot which I told them was meaningless since the LCS in Reno and Carson were behind 3-4 weeks and had nothing but talked $3 over if you had the cash deposit  Customers told me that when they dropped by and I did further research by calling them as well.
      This weekend will be a better test since my pricing is going to be about $30 an ounce for generic rounds.  Morgans and ASE’s are much higher since they are top quality and I sell only to buyers interested in onesies and twosie. I don’t care if I sell them or not  Some collectibles like the 1964 Kennedy halves are $15 per, capped and BU quality.
    The generics price is pretty firm even with spot at $24-25 range.  I have to replace them and that takes time with an uncertain price. But my plan is to have enough to satisfy any customer with -0- wait, no paper trail, no sales taxes and a price reasonable in  light of the unreasonable spot price.  Spot means little to me. If they my balls I give them SD Bullion’s card.
    Bay of Pigs 
    Vista CA 
    I think I know the store.  North San Diego county is my old stomping grounds.  Good luck with your ventures.

    • Im just visiting here AG, my buddy knows the guy who owns the store (50 years in business). He was totally disgusted by the whole silver manipulation story and told me he wouldnt sell the silver he had for under $32 (ASE’s).
       
      I have no axe to grind with any particular dealers in the US, I just dont believe we are hearing the whole story, especially whats going on in other countries like Dubai and Turkey where demand is off the hook.

  14. Bay of Pigs  I see two types of LCS  One is like the Vista CA place.  I suspect that they were buying silver from clients, loaded up at $28-30 plus an ounce and won’t sell at loss or break even, so he prices at $32.  Spot is immaterial  Staying in business is predominant.   The store can probably sell enough of other items to keep the doors open for a while but just because silver dropped to $24 doesn’t mean he should sign a suicide pact with the short sellers.
    The other store is like Northern Nevada Coin. They are large enough to be a good litmus test for silver availability. They were stripped of inventory by about April 15-16 or so clients who stopped by my table reported.  I called twice the following weeks to see about stock and prices.  They were taking orders to line up sales but could not deliver for 3-4 weeks.  The price was $3 over spot.  I expect they were lining up to get inventory and lock prices. They have 3 locations and large enough to lock prices.  If the cash comes in for the sales they can get the price in the market  But the delays were still nearly 1 month.  They have very deep pockets so their ability to secure stock is better than most.  I get the impression their lines of credit are low 7 figures.  The owners bought into the estate of the intestate man who passed away last year.  They bought about $5 million of the estate.  But maybe that allocation has skewed their cash flow and marketing.  That is a question I can answer so best guesses are that this silver and gold shortage surprised them after they invested mid 7 figures into the special qualities of the estate including rarities and regular bullion.
    Lear Capital, a large seller who advertises on Fox and others will buy at spot and take 21-28 days to deliver. $3 over spot for regular bullion $5 for ASEs That was about 2 weeks ago

  15. 1000 ounce COMEX BARS going for $26,558.49 at Westminster Mint.
    http://www.coin-rare.com/1000-oz-silver-bar.aspx
    Heck of a mark up for what should be dang close to spot.
    $24,970 at NWT, and 8-10 week wait
    http://bullion.nwtmint.com/silver_bars_1000.php
     

    • SilverHawk  My spider senses tell me that 8-10 weeks waiting for the silver would make me really nervous.  What is happening to my money during this time  Is someone trading that account.  MONEX has been involved in that crap for a while and if you check them out, they do this regularly if you dont watch them like  a   HAWK.   I’d pay a bit more for fater service.  Just in time or  8-10 weeks
      I’ll take JIT  Cheers

    • Agreed, if you’re going to cough up $25,000 you better know who you’re dealing with or have some third party holding money.  
       
      I understand very well why it would take time to get your bars, they are probably waiting for someone to buy before they go buy paper.  When they buy there is no guarantee that someone will deliver them silver until the last day of delivery month (last biz day of May).  It may happen tomorrow, but may not as well.  When they take delivery they’ll have to arrange shipping as well.  Probably saying 8-10 so as not to disappoint with shipping and may be quicker?
       
      Also agree that the premiums seem high.  Bonus is that they allow you to take delivery of 1/5 of a normal contract, so they are potentially taking the risk on the other 4,000 oz, although it is likely they’ll sell some portion of that to another buyer.  They also take the hassle out of dealing with a futures broker.  No need to margin a position if it goes against you, no need to deal with exchange fees and warehouse receipts… that is worth something.  Maybe not $2,000 but something.

  16. And the gater said come on in, the water’s fine.

  17. My LCS is getting $36 for ASE. No tubes no MBs, onesies only. Hes out of CMLs and has only one ounce bars left and those are$30 each. Hes the only guy in Brooklyn NY and i spent 30 minutes in there and didnt see but one other customer. Now i know that we who stack are few and far between but i really expected more warm bodies to be in the buying mood. He couldnt care less about spot price and prices were no bargain. My point is at least in New York spot price dont mean much. 

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