http://www.zerohedge.com/news/2013-04-30/cme-chairman-gold-%E2%80%9Cpeople-don%E2%80%99t-want-gold-certificates-they-want-real-product%E2%80%9D
Submitted by Tyler Durden on 04/30/2013 18:34 -0400
http://www.caseyresearch.com/gsd/edition/gold-price-suppression-sneaks-into-south-african-press
http://www.zerohedge.com/news/2013-04-29/jpm-reclassifies-another-47k-ounces-gold-eligible
( Note eligible gold is being systemically withdrawn - now HSBC getting a run on its registered gold , after JP Morgan had the epic run on its eligible gold .... Time for Scotia Mocatta and Brinks to have their gold withdrawn.....)
Submitted by Tyler Durden on 04/29/2013 21:02 -0400
http://truthingold.blogspot.com/2013/04/the-global-fractional-paper-bullion_6103.html
CME Chairman On Gold: “People Don’t Want Gold Certificates, They Want the Real Product”
Submitted by Mike Krieger of Liberty BlitzKrieg
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 .
Terrence Duffy, President and Executive Chairman of CME Group Inc,. on Bloomberg TV
I’m actually still in a state of shock that the head of the CME Group would make such an observation and in such blunt terms. I mean the guy admits that volume on his exchanges suck, yet basically claims paper gold (one of their marquee products) is becoming irrelevant. In my mind there are two likely explanations for this. 1) This is how he has started to feel personally and he is loading up on physical gold rather than his company’s paper products and would like some cover if that is ever unearthed. 2) This is what people close to the gold market are telling him and he’d rather make it clear he understands that paper is paper and gold is gold and that there is a big difference. So “caveat emptor” if you are hanging around the COMEX.
http://www.caseyresearch.com/gsd/edition/gold-price-suppression-sneaks-into-south-african-press
¤ YESTERDAY IN GOLD & SILVER
It was a pretty unexciting Monday in the gold market. Prices chopped higher, with the high tick of the day coming moments before the 8:20 a.m. Comex open...and from there it got sold down to its New York low at the London p.m. gold fix. From there it chopped higher into the 5:15 p.m. electronic close. Gold's high tick came in late electronic trading...and was recorded by Kitco as $1,477.80 spot. The low at the p.m. fix was $1,462.50 spot.
Gold close yesterday at $1,476.50 spot...up $13.60 on the day. Gross volume was not overly heavy at around 144,000 contracts.
It was more or less the same story in silver, except for the fact that there was a surprise rally late in the electronic trading session, which got capped before it could get too far above the $24.60 spot mark...and from there it traded sideways into the close. Silver's high tick was $24.71 spot in electronic trading...its New York low was at what appeared to be an early London p.m. gold fix...and that was recorded as $24.01 spot.
Silver closed at $24.59 spot...up 55 cents the ounce from Friday's close. Net volume was pretty chunky at 44,000 contracts...with more than half of that coming in the new front month, which is July.
Here's the New York Spot Silver [Bid] chart on its own, so you can observe the New York action...the only price action that really matters...more closely.
Both platinum and palladium did pretty well for themselves...but it was obvious, at least to me, that there was a willing seller there to keep things under control less their respective prices rose to fast. The platinum chart for both Monday and Friday appear too similar to be a coincidence, but maybe it's just me [once again] looking for black bears in dark rooms that aren't there. Here are the charts for both...and you can decide for yourself.
The dollar index closed at 82.47 on Friday...and gapped down a bit at the Sunday night open in New York...and then kept heading lower from there. The low tick [82.05] came minutes after 8:00 a.m. in New York...and the subsequent 25 basis point rally ended at noon...and that gain had all but disappeared by the close. The index finished the Monday session at 82.14...down 33 basis points from Friday's close.
* * *
The CME's Daily Delivery Report, not surprisingly, showed that there were no more deliveries scheduled for the month of April...but they did report the First Notice Day numbers for delivery into the May silver contract very late last night EDT...and they were quite amazing.
In gold, there were 1,288 contracts posted for delivery on May 1st, with all but six of them being issued by JPMorgan Chase...1,116 out of its client account...and the other 166 out of its in-house [proprietary] trading account. The only two long/stoppers of note were Canada's Bank of Nova Scotia with 973 contracts...and Barclays with 287.
In silver, of the 1,506 contracts posted for delivery tomorrow, the only short/issuer worth mentioning was JPMorgan Chase with 1,484 contracts out of its in-house [proprietary] trading account. The biggest long/stopper was JPMorgan in its client account, with 573 contracts. The next three long/stoppers in order of size were Canada's Bank of Nova Scotia, Credit Suisse and Merrill...with 233, 208 and 153 contracts respectively. There were a couple of dozen long/stoppers in all...and yesterday's Issuers and Stoppers Report is definitely worth a minute of your time. The link is here.
Even though the gold price has rebounded smartly off its low of a week ago Tuesday morning Hong Kong time, the metal itself still continues to depart GLD for parts unknown. On Monday an authorized participant withdrew 77,367 troy ounces. This should not be the case at all...as gold should be flowing into GLD. Over at SLV, they reported their third deposit by an authorized participant in as many days. This time it was 482,931 troy ounces.
The U.S. Mint had another sales report yesterday. They sold 1,000 ounces of gold eagles...and 1,000 one-ounce 24K gold buffaloes. I expected more...much more. After three days of no silver eagles sales, they finally reported selling 743,500 of them. I will be very interested to see if they have a sales report today that shoves April silver eagles sales over the four million mark. With one day short of a third of the 2013 calendar year under our collective belts, silver eagles sales sit at 18,198,500. That's a lot!
Over at the Comex-approved depositories on Friday, they reported receiving 598,743 troy ounces of silver...and shipped 686,718 troy ounces of the stuff out the door. The link to that activity is here.
In gold on Friday, the Comex-approved depositories reported receiving 49,194 troy ounces of the stuff...and shipped 66,885 troy ounces out the door. All the activity was at Scotia Mocatta...and the link to that is here.
I thought that Monday might be a little quieter at the store, but it certainly didn't turn out that way, as we had another huge sales day...almost all of it in silver. Since the engineered price decline of two weeks ago...and except for a couple of stand-out days...silver has outsold gold about 200 to 1...minimum. There have been no changes in delivery...but because of a personal relationship, our store has been able to order a bit of stock from one our wholesalers...but nothing like we'd like to order if given half a chance.
I read Ted Butler's weekend commentary with great interest...and have permission to reprint the last two paragraphs from it. Here they are...
I am taken aback by the growing pervasiveness, more on the Internet, but also in the mainstream media of stories about silver having to do with the COMEX, short positions, manipulation, the COTs and how JPMorgan is the big silver short. Please try to understand how other-worldly this all is to me. I’m not trying to pat myself on the back in having introduced all these things (and others); I’m trying to convey that the ascension of these issues to the forefront seems to me to automatically increase the likelihood that the end of the silver manipulation is drawing near. After all, at some point, the whole scam must unravel once we pass the critical mass of public awareness.
It is this growing awareness of the real issues in silver that has me both thunderstruck and more encouraged than ever before about silver’s investment prospects. We have a wildly bullish COT structure in silver and gold combined with what could be a nuclear fire emerging in silver physical demand. I don’t recall such a similar bullish price set up. JPMorgan is still a manipulative force to reckon with, but the growing spotlight on this crooked bank and the crooked exchange on which the price of silver is set, is bright...and this doesn’t bode well for the crooks. - Silver analyst Ted Butler...27 April 2013
news and views.......
Treasury Chief Warns of New World if U.S. Defaults on Any Bills
The United States might run into trouble accessing debt markets if it defaulted on any of its financial obligations, even if it were able to keep up payments on government bonds, Treasury Secretary Jack Lew told Congress.
Lew was responding to questions about a bill in the U.S. House of Representatives that would prioritize payments on government bonds and Social Security if the United States hits its debt limit, in order to avoid a credit default.
If passed, the law would make it easier for Republicans to use a fight over the nation's legal borrowing limit, known as the debt ceiling, to try to extract spending cuts from President Barack Obama.
"The thing I would urge you to consider is, you enter a world we've never been in once the United States is not meeting its obligations," Lew told a House subcommittee. "We cannot assume markets will function in an orderly way if that (happens)."
This story was posted on the moneynews.com Internet site mid-Thursday afternoon last week...and I thank West Virginia reader Elliot Simon for sending it.
Neil Macdonald: The 'monarchs of money' and the war on savers
Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations.
These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.
They are the world's central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert.
The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do.
In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.
The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air.
As Lord Acton said..."The issue which has swept down through the centuries...and which will have to be fought sooner or later...is the people vs. the banks." This must read piece of journalism showed up on the cbc.ca Internet site in the wee hours of the morning yesterday...and I thank reader Andres Abe for sharing it with us.
Argentina’s Mad Dash for U.S. Dollars
If you find yourself driving through the suddenly packed condo canyons of Miami—lamenting not having bought during the property crash—shake a fist or two at the Argentines. So many of them ponied up 80 percent cash down payments on units (mortgage market be damned) that South Florida’s condo depression rather abruptly turned into another boom. Their thinking was defensive: Swap iffy pesos for dollars and store that value in U.S. property, out of the prying hands of the government back home.
Now, with Buenos Aires finding some rather innovative ways to crack down on the flight to dollars, that spirit of capital preservation has morphed into a panic in Argentina to get out of the peso, the world’s worst-performing currency. In the black market for dollar-denominated bonds, Argentines are spending dearly to circumvent President Cristina Fernández de Kirchner’s expanded limits on foreign exchange, and inflation that’s privately estimated at 25 percent. According to data compiled by Bloomberg, the black market exchange rate is at 8.98 pesos per dollar, after touching a record 9.14 pesos last week. Compare that with the government’s official exchange rate of 5.17 pesos per dollar, and it’s easy to see why Argentines are so desperate to get out of the local currency in South America’s second-biggest economy.
This story was posted on the businessweek.com Internet site on Sunday...and I thank U.A.E. reader Laurent-Patrick Gally.
Financial Transaction Tax 'may add to eurozone’s debt woes’
The world’s largest banks have warned European finance ministers that plans to impose a Financial Transactions Tax (FTT) could deepen the Continent’s sovereign debt crisis.
In a strongly-worded letter, the International Banking Federation (IBF) also said that the “cascade effect” of the proposed levy would hit ordinary citizens and businesses of all sizes and from all sectors.
Germany, France and nine other European states are pressing ahead with the new transactions tax, which they hope will discourage speculative trading and bolster debt-laden public finances.
Although Britain has opted out of the FTT, George Osborne recently launched legal action against the plan. The Chancellor believes the levy will discourage trades with the City of London.
The letter written by the IBF – which represented high street banks such as Barclays and HSBC as well as leading investment banks – warns that the “naïve” new charge could be counter-productive, reducing tax receipts and making it harder for Europe’s ailing economies to prop up their public finances with borrowing from financial markets.
Germany, France and nine other European states are pressing ahead with the new transactions tax, which they hope will discourage speculative trading and bolster debt-laden public finances.
Although Britain has opted out of the FTT, George Osborne recently launched legal action against the plan. The Chancellor believes the levy will discourage trades with the City of London.
The letter written by the IBF – which represented high street banks such as Barclays and HSBC as well as leading investment banks – warns that the “naïve” new charge could be counter-productive, reducing tax receipts and making it harder for Europe’s ailing economies to prop up their public finances with borrowing from financial markets.
You can bet that if the big banks are bitching about it, then it's good for us...and bad for them. This article appeared on the telegraph.co.uk Internet site late Saturday night BST...and it's courtesy of Roy Stephens as well.
S&P sees deepening house slump in Spain, France and Holland
Spanish house prices are to fall a further 13pc by the end of next year as the authorities flood the market with a backlog of repossessed properties, Standard and Poor’s has warned.
The agency said the housing slump is deepening across large swathes of the eurozone. French declines are “gaining momentum”, with prices likely to fall 5pc this year and a further 5pc in 2014.
French property faces a “protracted correction” as the economy buckles, hit by fiscal tightening, higher taxes and a surge in unemployment to post-war highs.
France’s price-to-income ratio rose to a record 180pc of historic levels during the bubble, one of the most stretched levels seen anywhere in the OECD bloc.
This Ambrose Evans-Pritchard commentary was posted on The Telegraph's website late yesterday afternoon BST...and is another article from Roy Stephens.
Moody’s says Italy may still eventually need bailout
Rating agency Moody’s believes Italy may still eventually need to seek a bailout despite forming a new government and avoiding immediate crisis.
“We cannot yet rule out Italy will end up asking for help to the European Central Bank and the European Stability Mechanism,” Dietmar Hornung, senior credit officer at Moody’s, was cited as saying in Monday’s told La Repubblica.
Prime minister Enrico Letta’s new Italian government was sworn in on Sunday and the premier will seek the backing of parliament in a confidence vote at 3pm today.
Mr Hornung said Moody’s will monitor the ability of the newly formed government to overhaul the economy.
This article showed up on the irishtimes.com Internet site during the U.K. lunch hour yesterday...and it's another offering from Roy Stephens.
Eight King World News Blogs/Audio Interviews
1. James Turk: "The Mother of All Short Squeezes in Gold and Silver". 2.Michael Pento: "U.S. Debt Surges a Stunning $7 Trillion in Just 6 Years". 3.Jim Sinclair [#1]: "Day of Financial Infamy as Cyprus Depositors Flushed". 4.Jim Sinclair [#2]: "The Elites Frightening Plan to Control the Masses". 5.Eric Sprott: "Silver to Skyrocket Hundreds of Dollars in Price". 6. Jim Sinclair [#3]: "Media Blackout, Panic and a Major Short Squeeze". 7. The first audio interview is with Egon von Greyerz...and the second audio interviewis with Eric Sprott.
Gold price suppression sneaks into South African press
Furthermore, official selling by western central banks (mainly in Europe) has dried up and has been replaced by central bank buying mainly by emerging countries. Net central bank purchases in 2012 stood at the highest level since 1964.
Of major interest is the state of the physical market. Over the past six months, gold has been subjected to relentless selling and has frequently been "bombed" -- where a large number of contracts are dumped on the New York Commodities Exchange (Comex) over a very short period.
On April 12 the market was bombed with more than 500 tons of gold in a manner that caused great downward price pressure and panicked the market into selling.
The bombing of the gold market has been a frequent trading feature over the last two quarters. But the persistence of concentrated selling over the past two quarters has been unusual.
At the same time interesting data regarding physical stocks has emerged.
Well, the thin edge of the wedge got a little thicker with this story filed from Johannesburg on Sunday. It was posted on the bdlive.co.za Internet site...and I extracted it from a GATA release
Gold Rush From Dubai to Istanbul Drains Supply as Premiums Jump
Surging demand for gold from Dubai to Istanbul has pushed physical premiums in the region to levels not seen in years as the biggest price slump in three decades lures consumers, according to MKS (Switzerland) SA.
Premiums paid by wholesalers and bulk buyers in Dubai to secure a 1 kilogram bar of bullion are being quoted between $6 an ounce and $9 an ounce over the London cash price, said Frederic Panizzutti, global head of marketing and sales at the Swiss-based bullion refiner. That compares with about 50 cents before the rout, Panizzutti, also chief executive officer of MKS Precious Metals DMCC, said in an interview from Dubai.
“Physical demand has been tremendous in a way I haven’t seen for a number of years,” said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc., who’s worked in the industry for more than three decades. “The price collapse prompted a physical gold rush and the evidence of the extent of that is the prolonged period of high premiums that we’ve seen. Reports from the gold souks are that business is good,” Rhodes said from Dubai.
This is another Bloomberg story from late yesterday evening MDT...and my thanks go out to reader U.D. for finding it for us.
¤ THE WRAP
There are no market anymore...only interventions. - Chris Powell, GATA
It was a very uneventful Monday in the precious metals...and they were kept quietly under control during the New York session. All four of them would have broken out to the upside if given the opportunity to do so, which they weren't. With today being the last trading day of April, I'm not expecting big fireworks as far as the price is concerned, but you just never know.
Today, at the close of Comex trading, is also the cut-off for this Friday's Commitment of Traders Report.
I don't have much to add to what I've already said in the first section of today's column...and the stories in today's column should keep you off the streets for a while.
I note that both gold and silver came under some selling pressure during the Far East trading session on their Tuesday...with the biggest percentage move down coming in silver, of course. Lows were set in all four precious metals shortly after 2:00 p.m. Hong Kong time...but rallied back sharply about an hour into the London trading day. Ted Butler says that most trading activity these days is of the high-frequency variety...and there's no real liquidity in these markets, so 'day boyz' can do pretty much what they want with prices.
Both gold and silver are still below their Monday closing prices as I hit the 'send' button on today's column at 5:10 a.m. Eastern time...and platinum and palladium prices are unchanged. Volumes are quite a bit higher than 'normal'...and virtually all of silver's volume is in the new front month, which is July. The dollar index isn't doing much.
Just a quick reminder that TODAY at 2 p.m. EDT, Casey Research be premiering ourInternationalizing Your Assets video event, with Doug Casey, Peter Schiff, Mike Maloney, and other experts on expatriating your wealth.
If you have any interest at all on how to protect what's rightfully yours from increasingly belligerent and overreaching governments, I urge you to register now for this free event, and learn for yourself how this fast-moving field is changing and why now may be one of the last chances you have to get started.
Enjoy what's left of your day...and I'll see you here tomorrow.
http://www.zerohedge.com/news/2013-04-29/jpm-reclassifies-another-47k-ounces-gold-eligible
( Note eligible gold is being systemically withdrawn - now HSBC getting a run on its registered gold , after JP Morgan had the epic run on its eligible gold .... Time for Scotia Mocatta and Brinks to have their gold withdrawn.....)
JPM Reclassifies Another 4.7K Ounces Of Gold Into Eligible
It's that time again when we cautiously peek at cell H25 of the daily CME Group Metal Depository Statistics worksheet to find if, following Friday's dramatic and volatile trading session in gold, someone, anyone decided to submit a delivery ticket to the JPM vault located at 1 Chase Manhattan Plaza, and reduce the already near record low gold inventory which at last check was just over 5 tons, and just one 163K troy ounce delivery request would lead to all commercial gold at the JPM vault to run down to zero. Not this time.
As it turns, in a carbon copy of Friday's internal conversion, in which 17.5k ounces of gold wereselectively converted from Registered to Eligible status (for all those sticklers about nomenclature definition, this is how easy it is to convert one into the other and vice versa and how meaningless said designations really are), on Friday JPM decided to do some more redefinition, and converted another 4.7k ounces of gold from registered into eligible, pushing up the total by a fractional amount to 163.8k ounces, still just a hair's breath away from the all time record low reported last Thursday.
And as a tangent, it is perhaps just as notable that HSBC just saw 76K ounces of its registered gold, or 17% of the total gold stored underneath Bryant Park, exit through the front door, destination unknown, leaving just 378K ounces of registered gold with the London-headquartered bank best known for aiding and abetting international money laundering, without admitting or denying it of course.
The second daily internal conversion in a row:
And the total JPM eligible gold as reported by Comex:
Thus, we look forward to tomorrow's update to see how much more "registered" gold JPM will convert into eligible, or if nobody will continue to demand delivery after the biggest "run" on JPM's vault in history.
http://truthingold.blogspot.com/2013/04/the-global-fractional-paper-bullion_6103.html
MONDAY, APRIL 29, 2013
The Global "Fractional" Paper Bullion Market Is Collapsing
I wrote last week that there was a scramble going on globally by entities seeking to take physical possession of the gold on which they have a legal claim, most of which is sitting either in alleged "allocated" big bank bullion vaults or in alleged "allocated" accounts in Comex custodial warehouse vaults.
I also demonstrated mathematically, using the reported numbers on the CME website for precious metals futures open interest and warehouse gold/silver stocks, that the amount of gold represented by Comex futures open interest far exceeds the amount of deliverable gold on the Comex (the analysis is even more extreme for silver). In fact, if less than just 10% of the buyers of June gold contracts demand delivery, the Comex won't have enough gold to cover the legal claims. For silver (July silver) it's even more extreme.
This is a global problem and not just endemic to the Comex. Globally, the legal claim of ownership on physical gold far exceeds the amount of gold represented by paper futures, LMBA forward contracts, leased gold and vault receipts. The latter - vault receipts - is where the big banks in London have the most severe problem, as gold this is supposed to be sitting in "allocated" accounts under the name of the legal owner who bought and paid for those bars has been largely leased out. I'll get to that in a minute.
First, I received this comment from John Brimelow's "Gold Jottings" report, which comes from Gerhard Schubert, head of Precious Metals at Emirates NBD, the largest banking group in the Middle East. Keep in mind that Middle Eastern buyers demand physical delivery of their gold. Here's the quote from his latest weekly report:
And then I get a call from a close friend in NYC last Friday. His career has been in private wealth management in the private bank department of the Too Big To Fail banks. He's been looking for work and chats with old colleagues all the time. He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.
This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact. He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment. The Bundesbank/Fed and the ABN/Amro situations triggered this move. He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it's very wealthy clients assuring them their bars were safe, in allocated accounts. He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100's of millions in investment portfolios to competitors. His wording was "these people are putting a gun to the heads of private banks and demanding their gold."
I know this information is good because I know my friend's background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend's source said that there's no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.
Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting - supposedly - in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes. After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years. To this day, the time required for that shipment has never been explained. Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.
And regarding the ABN/Amro situation. ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out. About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.
I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.
In fact, what we are now seeing is the final stages of the paper gold/silver bullion market, which has grown at a parabolic rate over that last 13 years, and includes Comex futures, LMBA forward contracts, OTC derivatives - which is an even bigger paper market than the Comex - leased gold claims/contracts and warehouse receipts.
At some point there will be an even bigger "run on the bank" by those looking for delivery of the physical gold/silver that they have been "assured" is sitting in their "trusty" bank custodian vault. I know for myself that I have seen enough from the JPM's of the world to not trust anything they do or say. I think a lot more people are finally coming to that same conclusion. At some point there will be a complete collapse of trust in the paper monetary system and the price of gold/silver will really go parabolic, as the masses realize all at once - and far too late I might add - that everything that was rumored over the last 13 years about paper gold, gold leasing, etc is actually true.
I also demonstrated mathematically, using the reported numbers on the CME website for precious metals futures open interest and warehouse gold/silver stocks, that the amount of gold represented by Comex futures open interest far exceeds the amount of deliverable gold on the Comex (the analysis is even more extreme for silver). In fact, if less than just 10% of the buyers of June gold contracts demand delivery, the Comex won't have enough gold to cover the legal claims. For silver (July silver) it's even more extreme.
This is a global problem and not just endemic to the Comex. Globally, the legal claim of ownership on physical gold far exceeds the amount of gold represented by paper futures, LMBA forward contracts, leased gold and vault receipts. The latter - vault receipts - is where the big banks in London have the most severe problem, as gold this is supposed to be sitting in "allocated" accounts under the name of the legal owner who bought and paid for those bars has been largely leased out. I'll get to that in a minute.
First, I received this comment from John Brimelow's "Gold Jottings" report, which comes from Gerhard Schubert, head of Precious Metals at Emirates NBD, the largest banking group in the Middle East. Keep in mind that Middle Eastern buyers demand physical delivery of their gold. Here's the quote from his latest weekly report:
I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…The price hit of two weeks ago has triggered a serious scramble for physical gold and silver. Reports like the above comment have been flooding from Europe, the Comex has had about 30% of its gold bars literally drained from the customer accounts of the Comex bank custodian vaults and the U.S. mint is running way behind on demand for silver eagles and some weights of gold eagles. Ditto for the Canadian mint.
I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.
And then I get a call from a close friend in NYC last Friday. His career has been in private wealth management in the private bank department of the Too Big To Fail banks. He's been looking for work and chats with old colleagues all the time. He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.
This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact. He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment. The Bundesbank/Fed and the ABN/Amro situations triggered this move. He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it's very wealthy clients assuring them their bars were safe, in allocated accounts. He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100's of millions in investment portfolios to competitors. His wording was "these people are putting a gun to the heads of private banks and demanding their gold."
I know this information is good because I know my friend's background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend's source said that there's no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.
Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting - supposedly - in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes. After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years. To this day, the time required for that shipment has never been explained. Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.
And regarding the ABN/Amro situation. ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out. About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.
I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.
In fact, what we are now seeing is the final stages of the paper gold/silver bullion market, which has grown at a parabolic rate over that last 13 years, and includes Comex futures, LMBA forward contracts, OTC derivatives - which is an even bigger paper market than the Comex - leased gold claims/contracts and warehouse receipts.
At some point there will be an even bigger "run on the bank" by those looking for delivery of the physical gold/silver that they have been "assured" is sitting in their "trusty" bank custodian vault. I know for myself that I have seen enough from the JPM's of the world to not trust anything they do or say. I think a lot more people are finally coming to that same conclusion. At some point there will be a complete collapse of trust in the paper monetary system and the price of gold/silver will really go parabolic, as the masses realize all at once - and far too late I might add - that everything that was rumored over the last 13 years about paper gold, gold leasing, etc is actually true.
