Submitted by PM Fund Manager Dave Kranzler, Investment Research Dynamics:
The total amount of ALL gold held by ALL market participants at ALL the Comex warehouses, whether it is on offer or not, is about 218 tonnes. That is less than one month’s demand for physical bullion in China and India and India alone. And by far the vast majority of that gold is not for sale AT THESE PRICES. And given the leverage of paper claims everywhere, not just Comex but at the more important LBMA, and one can see that a misstep by the gambling goofballs of Wall Street could lead to quite a messy market situation. This also is what Peter Hambro said. – Jesse’s Cafe Americain (must read article)
In fact, the United States itself has become the biggest lie in history, but that’s for another day. For some reason there’s a debate raging about whether or not a shortage of bullion – gold and silver – really exists. That in an of itself is a fatuous endeavor because nearly every ounce of gold ever mined still exists. Furthermore, there will always be a fiat currency price level at which a holder of gold or silver will be willing to exchange their bullion for paper currency.
Even more silly is the fact that the paper bullion market apologists point to the published Comex warehouse stock of gold and silver and use that as their “proof” that there’s plenty of bullion available. I’m not sure why the argument uses the Comex as the point of focus. Maybe because, in theory, it has more “transparency” than the LBMA.
However, there’s one small problem in using the Comex as data a proof of existence: “The information in this report is taken from sources believed to be reliable: however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.”
This disclaimer showed up mysteriously without any formal news release on the daily Comex warehouse reports in June 2013. The legal translation of that one sentence goes like this: “this report shows numbers which represent quantities of gold and silver which may or may not exist and the CME hereby is legally immune from any legal claims against it should those numbers be fraudulent.”
My point here is that the Comex is a big lie. It’s the precious metals market equivalent of Enron. The trade and inventory data are cleared, accounted for and reported by the big banks that operate the Comex. Do you trust the banks to report accurately and honestly the data in that report with an air-tight legal disclaimer attached to it by the CME’s lawyers?
Anyone can see that the Comex is nothing but a paper bullion trading exchange. The amount of gold represented by the paper gold open interest is now well over 200x the amount of alleged gold that has been designated as available to be delivered. As of today, the paper gold o/i is more than 6x greater than the total amount of gold reported to be held in Comex vaults (see the disclaimer again).
The entire matter could be settled with an independent audit made available to the public. It should be required by law because if myself and many others are right, if and when the Comex defaults the the CME will likely look to the Government for a bailout. Here’s why:
41 million ounces of paper gold – the current open interest in paper gold – is valued right now at around $45 billion. If and when the Comex eventually defaults, the only card it has to play is the force majeur clause in Comex contracts, which enables the Comex to settle paper contracts in paper currency. But as of its latest 10Q, the CME had only $1.5 billion in cash and $21 billion in book value (which assumes its assets are properly marked as to their worth).
My friend and colleague, Craig Hemke, offered some compelling arguments today in response to neanderthal analysts who were out and about serving up half-truths, distorted trusts and willful omission of facts in the commentaries regarding the current supply and demand of gold and silver. Please take the time to read his work here: Attack of the Comex Apologists.
Back to half-truths, distorted truths and willful omission of facts. This chart was making its way around the internet in an attempt to prove that the Comex paper to reported physical ratios are not out of whack vs. historical highs:
The facts that have been willfully omitted are these: In 1998, the Comex only reported total ounces, not registered vs eligible. Second, the total amount of gold reported at the time was only 1 million ounces. Finally, the comment in yellow was added by me. This denotes the infamous “Brown’s Bottom” when the Bank of England dumped 400 tonnes of gold on the market, marking what turned out to be the bottom of the bear market in gold.
About 5 years later, a hearing was conducted to find out why Gordon Brown unloaded half of England’s gold on the market. This stunning full-truth with regard to the paper short position of the bullion banks vs. the available supply of gold to deliver into those contracts was revealed (Eddie George, BOE Governor):
“In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said “We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.
Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.”
When you shine the light in the right places, the truth emerges. Now we know that the Bank of England bailed out the Comex and LBMA in 1999. It will be interesting to see if a bailout is possible this time around, because the western Central Banks have been drained of most of their gold and the paper to physical leverage numbers are significantly larger by several factors than they were in 1999.