With an unallocated account the customer doesn’t have an entitlement to any specific bullion bars, and is a creditor of the bullion bank. So long as the customer is happy with the counterparty risk, this is the cheapest way for him to have exposure to gold. F
rom the bank’s point of view, there is no need to hold more gold than required to meet customer withdrawals. Furthermore, even this gold doesn’t have to be bought, merely leased from a central bank, remaining in the Bank of England’s vault unless needed.
There can be little doubt that the increase in the quantity of gold held in the Bank’s vaults between 2006 and 2013 reflected, among other factors, physical backing for increasing unallocated accounts during the 2000-2012 bull market.
In the past a bullion bank’s risk to a rising gold price either went unhedged, or was managed through derivatives, using forwards futures and options. Therefore, so long as systemic risk is not regarded as a material factor, the bullion banking community can absorb significant gold demand from investors by expanding unallocated accounts without any physical buying required.
However, the investing public’s greater awareness of risk to bank deposits from bail-ins could change this in future.
India’s central bank said on Wednesday it has sought quotes from banks to swap gold in its own vaults for international-standard gold, aiming to improve the management of its reserves.
The Reserve Bank of India said the operation would “standardise the gold available with RBI in India with respect to international standards” and the gold acquired would be delivered to its overseas custodian, the Bank of England.
By holding gold reserves in London, the RBI would gain flexibility to mobilize them if needed to defend the currency.
It appears the Indian government has finally realized they can’t stop their citizens penchant for gold, so they have decided to dump central bank gold onto the market in exchange for gold of the rehypothecated paper variety .
What is incredible to me is that they are justifying this with a so-called “swap” into phantom gold at the Bank of England.
They see the kill in the not too distant future, they taste the blood that is not yet extracted from their victims. They are a bloodthirsty lot, indeed. [Read more...]
While many precious metals blogs and investors have proclaimed an imminent COMEX default since 2008, we have long maintained that the COMEX is more likely to fade into irrelevance than to outright default on gold or silver bullion as physical Asian demand would facilitate the development of physical exchanges in the east.
It appears that the CME decision makers have seen the light and agree with us, as Reuters reports this morning that the CME plans to launch a physically settled gold futures exchange…in Asia. [Read more...]
As Ron Paul succeeded in forcing the Federal Reserve to admit in the clip below, the Federal Reserve does not own gold, only gold certificates valued at $42.22. [Read more...]
Stock-market capital finally started flowing back into the flagship GLD gold ETF for the first time in 14 months in February!
Though this buying was small, this is truly a momentous event. Extreme gold-ETF outflows were the dominant culprit behind last year’s epic gold selloff. Without that massive influx of additional supply weighing on the global markets, gold is going to surge on strong physical demand. [Read more...]
Writer and researcher Jan Skoyles joins the SGTReport to discuss German gold, the paper silver and gold Ponzi, three dead international bankers in one week and the stunning work of her pal Koos Jansen, the man Harvey Organ calls “the go-to researcher” when it come to Chinese gold accumulation and the Shanghai Gold Exchange. [Read more...]
Harvey Organ joins the SD Weekly Metals & Markets Wrap this week to warn of a possible February COMEX Gold Default:
- Continued decline in “registered” gold inventory at the COMEX- 2o tons of gold “kilo bars” withdrawn from JPM vaults headed to Hong Kong!
- 2014 will mark the year where physical forces deep “managed retreat” in the least
- Geopolitical and Global Macro review: From MyRA & pension fund confiscation to Ukraine & Emerging Markets
- Fed Taper Review- Eric believes the Fed will overshoot tapering to $50 billion/month, while Harvey believes Wednesday’s taper will be the last
- Harvey discusses why February may very well see strains to the point of the long anticipated COMEX default in gold!
The SD Weekly Metals & Markets with Harvey Organ is below: [Read more...]
The Financial Times has told investors that they should act like the German Bundesbank and “demand physical gold” and warned that gold price “manipulation” could end “catastrophically“.
“There’s surely no chance that the Fed’s little delivery difficulty has anything to do with the cat’s-cradle of pledges based on the gold in its vaults? As has been remarked here before, forecasting the price is for mugs and bugs.
But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery.” [Read more...]
In this excellent interview, the Morgan Report’s Senior Analyst David Smith discusses the difference between paper positions and holdings of precious metals and the real deal- and likens paper metals to empty ammunition shell casings.
Do you hold precious metals ammo, or simply the empty shell casings?
Full interview with David Smith is below: [Read more...]
What if you could carry and exchange gold in the exact same manner as you do with the dollar bills in your wallet?
I’ve recently been introduced to a technology that’s making this possible.
In short, a fractional gram’s worth of gold is affixed to layers of polyester, creating a note – called an “Aurum” – similar in dimension and thickness to a U.S. dollar bill. This gold (usually 1/10th or 1/20th of a gram) is commercially recoverable. So an Aurum offers similar potential as a coin or bar, in terms of providing a vehicle for storing and exchanging known, dependable increments of precious metals – just in much smaller (and more affordable) amounts than commercially available to date.
The big idea here? In a world where a 1oz coin of gold costs over $1,200, an Aurum will let you hold a few dollars’ worth of gold in a single note.
If you’ve got pocket change, you can be a precious metals owner. [Read more...]
From an anonymous source prior to the major lows in the gold price more than a decade ago:
“Someone once said, ‘no one wants gold, that’s why the US$ price keeps falling.’ Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely because ‘too many people are buying it’! Think now, if you are a person of ‘great worth’ is it not better for you to acquire gold over years, at better prices? If you are one of ‘small worth’, can you not follow in the footsteps of giants? The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is losing value much, much faster than metal. Some paper will disappear all together in a re of epic proportions! The massive trading continues at LBMA,but something is now missing…We have reached production costs…The great mistake by the BIS was in underestimating the Asians. Some big traders said they would buy it all below $365+/- and they did. That’s what forced LBMA to go on a spree of paper selling! Now, it’s a mess.”
Interesting? The gold price is approaching production cost again. We have the physical versus paper demarcation again (most commentators are clueless on this – the paper market is still determining the screen price), but it will probably die once and for all this time around. [Read more...]
Preparations have been or are being put in place by the international monetary and financial authorities for bail-ins of both banks but also other financial institutions. The majority of the public are unaware of these developments, the risks and the ramifications.
The important shift from bail-out to bail-in had not been signalled in a very public way prior to Cyprus. The market’s expectation was therefore confounded when Eurozone finance ministers imposed bail-ins on Cyprus. This forced bondholders to convert into shareholders, and critically, imposed an element of bank deposit confiscation and the forced conversion of these deposits into bank equity.
Never before in the public’s perception had bank deposits been countenanced as potential financing sources for the rescue of insolvent banks. The public was shocked by the freezing and confiscation of deposits and the use of them in a desperate attempt to prevent banks from failing.
The coming bail-ins regimes will pose real challenges and risks to investors and of course depositors – both household and corporate. Return of capital, rather than return on capital will assume far greater importance.
Evaluating counter-party risk and only using the safest banks, investment providers and financial institutions will become essential in order to protect and grow capital and wealth.
It is important that one owns physical gold and not paper or electronic gold which could be subject to bail-ins. [Read more...]