Bernanke-Dimon-Fed-TunnelI realized after assessing some comments posted on my Tuesday article about the fraud going on at the Comex that I did not articulate a key point about the credibility of bank financial reporting.  It seems that there is still a contingency of people who are willing to believe that if a bank issues an accounting report, it must be valid.
Let me preface this clarification post by saying that given the long laundry list of charged and prosecuted high profile fraud cases against all of the big banks, I just assumed that everyone understood that banks can not be trusted at all.  Here’s my Golden Rule:  banks can not be trusted at all.  Fool me once, shame on you;  fool me twice, shame on me; fool me three times, I’m a moron.  Got it?
This clarification is to explain exactly why bank-produced paper reports at the Comex are more than likely riddled with fraud and it clarifies the difference between owning physical gold in your own possession vs. owning a paper claim on gold sitting somewhere else and a claim which can be hypothecated such that you actually lose legal entitlement to that underlying asset.
With that in mind let me clarify how the Comex warehouse gold and silver stock reports are produced.

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From Truth in Gold:


Each bank that operates a Comex vault is responsible for keeping and maintaining all accounting records in connection with operating their vault.  This means that all of the reports and data that the CME uses to produce its warehouse stock reports come from the banks themselves.  They are paper accounting records the bank produces and sends to the bean counters at the CME.  There is no actual independent audit of the reports OR of the bars themselves that are reported to be held in each bank vault.  Everything the CME publishes is based on what is reported from the banks.  Do you still trust these reports?  If you do, re-read my Golden Rule.

Please DO NOT CONFUSE the reliability of paper records and the reliability of any bank not acting fraudulently with regard to those paper claims with actual physical gold that is sitting in an allocated account and bars for which the rightful owner has legal entitlement. Paper is NOT to be trusted – in any form.

A large portion of the gold that is being reported by the Comex vault operators is likely not really there to be reported. Now, “not being there” could well mean that there is a lease-claim attached to it or some other form of hypothecation. Just because bars are sitting physically in “registered” or “eligible” accounts does not mean that the  intended owner of that bar has a legal entitlement to that bar.

Review the laws connected with short-selling and hypothecation. When an asset is sold short or  hypothecated, the original holder of that asset unknowingly loses legal title to it.  The fact that the legal department at the CME now requires a disclaimer about the bank reports that are used to produce the Comex warehouse gold and silver stock should tell us all we need to know about the nature of those bank reports, especially when considered in the context of all of the other fraud that banks have been involved in over the last couple decades. 

Now, I also believe – per the recent 35% drain of gold inventory from the Comex – that a lot of the bars have been physically removed upon demand by entitled owners. By “entitled,” I mean the party who possess the legal title to the bars. The disclaimer was added to the inventory report as an attempt to exonerate the CME from the legal liability of fraudulent reporting by the vault operators, who are responsible for the record-keeping and accounting and reporting of the bar inventory that is supposed to be in their vaults.  Moreover, a high percentage of the gold that remains in the Comex vaults has likely been leased out or hypothecated.  In other words, the financial reports from the banks do not legally present the actual amount of gold or silver in Comex vaults that can be immediately removed upon demand by the original intended owner.  Think this is far-fetched?  Explain why the Bundesbank demanded some of Germany’s gold to be shipped back to Germany it requires and it requires 7 years to ship back just 300 tonnes of Germany’s 1800 tonnes supposedly sitting in the Fed’s NY vault? (Please note that Venezuela was able to have 200 tonnes of its gold shipped back to Venezuela within about 4 months).

This is the same kind of situation with GLD. Same wine, different bottle.

Now as far as Comex bar quality standards, not only am I well aware of the criterion and rules, but we have taken delivery of both gold and silver bars FROM the Comex. I am experienced in the entire process from start to finish.

This is also why I DO NOT trust the Comex reports. Back in April 2010, we took delivery and were given notice by HSBC for several silver bars. BY THE RULES, HSBC was required to deliver the bars to our possession by April 30, the last delivery day. They are given 3 days of leeway. Not only did we NOT receive the bars within the legal time frame, it took 7 full weeks for HSBC to make good on the delivery.  If our fund was a lot bigger and we could have reasonably afforded the litigation, we would have gone after HSBC for breach and damages.

Moreover, during 2010, HSBC changed its delivery policy for off-Comex deliveries, making it more cumbersome and more expensive to get bars delivered to your possession from their vault.

Need I remind you that HSBC has recently been charged in several fraudulent banking activities AND convicted on a couple. They are connected to the recent HKMex gold scandal in Honk Kong, as well.

This clarification is to explain exactly why bank-produced paper reports at the Comex are more than likely riddled with fraud and it clarifies the difference between owning physical gold in your own possession vs. owning a paper claim on gold sitting somewhere else and a claim which can be hypothecated such that you actually lose legal entitlement to that underlying asset. The Comex is just as fraudulent as Enron, Refco, Amaranth, AIG, etc.  Capito?


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Silver Maple

  1. “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.” –Frederic Bastiat

  2. These comments by Dave In Denver are the ones I was alluding to in Harvey’s channel. 
    Bankers and the truth occupy different planets, maybe different solar systems.  This has been the case from time immemorial.
    If Moog loaned some bear claws and stones knives to Og for the big hunt, Moog would certainly  come out the best on the deal no matter what resulted from the hunt, even in the case  Og was killed in the hunt. 
    It’s pretty sure that Og’s wife would’ve been put up for collateral in that transaction. I can only imagine the rehypothecation experienced by the dear lady once Og left for the plains to get a few Mastodons for the tribe. 
    I was talking to a client this AM to advise him on the best means to financing his business and purchase of commercial real estate.  We brain stormed for about 30 minutes.  We discussed the potential for an all cash deal. I mentioned that to remind the client that interest he doesn’t pay is interest he earns.
     In the course of the conversation, one note made was that bankers looking out for the interest of the client is at  about the same level as a gun toting cop looking out for your safety.  Cops don’t wear guns to protect you.  Guns are for THEIR  protection.
      A banker does not make a loan to see to your best advantage and profit.  They make loans and do so to give them  the  possible advantage for themselves and over the borrower.  That is the way it is. That’s the way it’s always been; even in the era of benign banking.
     There is no set of terms and conditions that is designed to give you, the borrower, a strategic advantage over the lenders. They create tactical and strategic advantages solely for their benefits and well being, to protect themselves, their depositor (until bail-in) the shareholders and the vested interest taken by the government in the security of the bank (until and unless the bankers screw the bank into the ground and the fragments of the bank are sold to the vultures)

  3. Great post Doc. It’s a shame you get no debate or comments on this from some of the posters here who endorse the COMEX, CME and bullion banks as being legitimate. You have just demolished their entire argument and belief system. Game. Set. Match.
    Makes me wonder if they are indeed trolls and disinformation agents and not “stackers” as they claim to be. 

  4. No argument from me BOP.  I am surprised the trollish folks would find a need to  support the CME, LBMA and COMEX  
    It’s not like they need to be nice since everything we write and talk is recorded and analyzed,  courtesy of the NSA and all the other three letter named fed agencies.. They might as well crawl on their bellies  over broken glass to kowtow to TPTB for all it will do to give them some chance at the silver chalice of government largesse and forgiveness. 
    From what I’ve read there are government agencies and entities that actually pay people to troll. 
    Sign me up 
    I need the money.
    I’m so broke with buying silver that I can afford a new urinal puck.  The last one I bought had a picture of Biden on it 
    It’s all worn out. 
    A new  Obama cake is really pricey
      Maybe someone can send me one.

  5. this language is not just on the metals reports but all cme reports.  You make an important clarification that many do need to understand, the numbers come from the warehouses themselves, cme is just the intermediary.
    i still struggle with validity… when i worked for a regular delivery house we reported daily to cme for in/out, we reported weekly on stocks. these numbers were always accurate on reports made public on their site.  These numbers also absolutely matched our inventories because if they didn’t and we were caught someone was going to jail, as if being honest for the sake of being honest wasn’t good enough.
    Even if we say these people are just lying, i cannot imagine that those who insure these massive gold and silver inventories would just take the baks word that the gold is there.  i imagine these inventories are audited quarterly,  or at least annually.  if not the insurance fraud would be way too easy.
    Finally, even if we think these are fake, futures can be used to get physical as doc outlined above, i wish they would have had more capital to pursue charges, the futures markets require faith in performance, glad it happened and troubled it was delayed for them to get a WHR.  As long as this can happen the big giant banks will use the cme reports to judge how they should trade.  if people here are buying for the short term, they should understand it

    • if buying for a longer time horizon these blips become less important as who cares if you buy at 22 or 29 if you dont plan on selling in the next few years.  

    • ipad issues… one reason i like having futures markets to watch is because they are physical markets, the paper just is a placeholder for a few weeks to months until the physical is needed.  if these futures markets were not there the only pricing would be directly between mines and mints.  I have asked a lot of times here for someone to show me the prices that this physical trades at and have gotten zero responses.  we all know what comex trades for whether we like it or not, and you can convert comex to physical.  take away the futures markets and i fear we have much more opaque markets than we have today.

    • Thing is for insurance purposes it doesn’t matter what category the bars are in, so they say in the report x available when in fact it is hald x and the rest is allocated. Insurance company could care less because they don’t see the report or count it that way. All they care is if the total count of bars matches.

    • @mikeyj80
      You said … “i like having futures markets to watch is because they are physical markets, the paper just is a placeholder for a few weeks to months until the physical is needed.”
      So … how do you rectify this delusion with the fact that wager-ticket claims exceed all possibility of delivery by a factor of at least 100? Are some of these ‘supply hedgers’ executing 100 year consumption ‘plans’?
      HAAAAAAAhahahahaha …. HAAAAAAAAAAAhahahaha … You make me laugh Mikey!

    • Going to jail? LOL…that’s pretty rich.
      Do any of you actually believe shit like this? It’s almost like he never has read a thing ever posted here.

    • @PatFields
      do you know what percentage of OI actually stands for delivery? i am guessing not since your comments on leverage are off by about a factor of 5.  
      do you know what the leverage today is as compared to the 80s bull run? 

    • @mikeyj80
      Do you know what Hypothecation is? Do you know what OTC Derivatives are? The 100:1 figure on leverage against physical was blurted out by, I believe, a bullion bank insider about a year ago in an interview or Congressional testimony, after having been logically deduced by individuals like Harvey Organ and groups like GATA, years before THAT. Whether it’s a 100:1 or 60:1, it’s a HUGE factor above circulating physical availability, meaning that once that ‘supply’ is exceeded by REAL demand, the claim-ticket illusion attains … Fahrenheit 451.

    • @PatFields
      Agree with your last sentence, but also remember that in order for all those longs to stand for delivery they also have to come up the the other 90+% of the price of gold in order to pay for them.  This leverage due to margin allows huge positions that I am willing to bet (with my own money) that those with the positions do not have the capital to take ownership of the full amount represented by their position.
      Yes I know of hypothecation, yes I know of OTC derivatives.  Iave little experience in hypothecation, one trade involving a federal WHR for a commodity that was agreed to be sold back at a later date, the other my own house.  I have traded OTC derivatives, usually being on the short side, and usually as a hedge against physical obtained in other means than through delivery warehouses.
      This OI vs gold in warehouses claim i just can’t get behind, and I’m not calling anyone dumb for thinking otherwise, but I believe strongly enough in my own research that I see no reason to change it.  Now if all of the sudden we see gold and silver flooding out of delivery markets and see OI in spot months steady to increasing, and see a huge backwardation in the futures spreads, then I might get excited.  Until then I’ll monitor these indicators to see if something changes.  
      The action I see tells me that gold is trading at or near spot price in many cash markets as the run on comex stocks seems to have abated.  Silver is likely trading under spot in many cash markets as silver stocks continue to build.  Just my quick analysis, you can ignore if you would like.
      One final though, we can compare to comex stocks, but that is just one piece… what about the 6mln oz that come out of the ground each year in the US that are likely hedged on comex but are never actually presented in satisfaction of a contract (i.e. they are sold in the cash market and the hedge is unwound).  What about the 3mln in Canada? 

  6. Bay— maybe we will get to see some bankers go to jail. 
    Something new on the litigation front.
     The US and UK are starting to round up the usual suspects in the LIBOR case. I hope they don’t dig down far enough to find my schenanigans in that interest rate fiasco.  Low level munchkins will swing from the lamp posts but I doubt if they’ll be anything more than stuffed dummies hung in effigy.
    If the LBOR scandal is fully explored and prosecuted it’ll be so horrifying in its story and effects on the common man that the criminal probe can never be fully revealed. The entire world of banking was and still is culpable in this global fraud with a cost estimated far into the trillions of dollars in damage.
     Entire countries economic, fiscal and monetization policies were implemented through reliance on this rate.  It’s like the tides of the oceans moving every object in the path, LIBOR is that big  Let the games begin.

    • i hope they dig in and prosecute to fullest extent of the law.  in the physical world the warehouse receipts have to be signed by the warehouseman that they agree with the numbers.  if there is a flaw iin the numbers punishment can include jail time for federal whrs, state whrs may just result in you forfeiting your warehouse.  neither outcome is good for future employment opportunities, at least in my opinion.

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