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Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi

Tyler Durden's picture




 

When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market. Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Department and now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."

Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs. Yet Christian confirms that the gold market is basically a ponzi: "in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is." And there you have it: as Douglas eloquently summarizes: "the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks" and concludes "Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.

For those of you who missed the CFTC hearing, here are two of the must-watch clips. In the first one, Adrian Douglas introduces the underlying concerns about the Ponzi nature of the LBMA hedging situation, in which a wholesale rush to "physical delivery" would result in a one hundred fold dilution of gold holdings, and a 99% result of unsecured creditor claims (good luck collecting on that particular bankruptcy). We also meet Jeffrey Christian, formerly of Goldman and currently of CPM, in which not only does the "expert" state that a bullion bank short is hedged by further shorting, but confirms Douglas' and GATA's previous claims that the "physical" market, as defined, is a joke, as the OTC market treats gold purely as a financial asset, essentially conforming to the precepts of fractional reserve banking. As Douglas notes "He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme."

 

Here is running commentary from Douglas based on a transcript of this part of the hearing:

S. O’MALIA: Both Mr. Organ and Mr. Epstein in the second panel, raised the concerns that short positions exceed the physical supply. The second panel kind of argued that that wasn’t a concern. Are you concerned that the shorts will not be able to deliver if called upon?

J. CHRISTIAN: No. I am not at all concerned. For one thing it has been persistently that way for decades. Another thing is that there are any number of mechanisms allowing for cash settlements and problems and a third thing is as many people who are actually knowledgeable about the silver market and the gold market have testified today that almost all of those short positions are in fact hedges, the short futures positions are hedges, offsetting long positions in the OTC market. So I don’t really see a concern there.

[Note: It is interesting that Mr. Christian is not concerned about the ability of the shorts to deliver because they can cash settle! He clearly has no understanding that when someone wants to buy precious metals giving them cash  instead is a failure to deliver. It is a default! But he is not concerned! He says that the short position is actually hedged by a long position on the OTC but we will see later in this testimony how he describes the “OTC Physical Market” and we will see that the long position is not bullion but is in fact an unbacked (or only partially backed) I.O.U. bullion.]

S. O’MALIA: Mr Organ would you like to respond?

H. Organ: I do see a risk on this, and I think it is a risk that we have to be very, very careful of. As countries like China, South Korea and Russia start demanding and taking physical delivery of their gold and moving it offshore to their shores and putting pressure on the Comex, and we will probably come to a point in time where we will have a failure to deliver.

A DOUGLAS: Mr. Chairman, could I make a comment?

CHAIRMAN GENSLER: No! Who are you?

A DOUGLAS: I would…

CHAIRMAN GENSLER: No! I said “No!”

A DOUGLAS: Oh! You said “No”?

CHAIRMAN GENSLER: I don’t know who is this?

A DOUGLAS: I am Adrian Douglas; I am assisting Harvey.

CHAIRMAN GENSLER: Alright, Sir. Yes.

A DOUGLAS: I would just like to make a comment. We are talking about the futures market hedging the physical market. But if we look at the physical market,the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22 billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount it is about one and a half times the US economy; that is not trading 100% backed metal; it’s trading on a fractional reserve basis. And you can tell that from the LBMA’s website because they trade in “unallocated” accounts. And if you look at their definition of an “unallocated account” they say that you are an “unsecured creditor”. Well, if it’s “unallocated” and you buy one hundred tonnes of gold even if you don’t have the serial numbers you should still have one hundred tonnes of gold, so how can you be an unsecured creditor? Well, that’s because its fractional reserve  accounting, and you can’t trade that much gold, it doesn’t exist in the world. So the people who are hedging these positions on the LBMA, it’s essentially paper hedging paper. Bart Chilton uses the expression “Stop the Ponzimonium” and this is a Ponzi Scheme. Because gold is a unique commodity and people have mentioned this, it is left in the vaults and it is not consumed. So this means that most people trust the bullion banks to hold their gold and they trade it on a ledger entry. So one of the issues we have got to address here is the size of the LBMA and the OTC markets because of the positions which are supposedly backing these positions which are hedges, but it is essentially paper backing paper.

[8 seconds of silence]

CHAIRMAN GENSLER: Oh! I guess I get time. Errr…Umm. I don’t have any other questions. Commissioner Dunn.

M. DUNN: I appreciate the difficulty of trying to do this by remote but at the end of your testimony you start talking about bona fide hedge exemptions for commercial traders and must be part of position limits and not to grant hedge exemptions to swap dealers would be devastating for liquidity of exchanges and the price discovery capacity, and we got into who determines what is legitimate, but could you amplify on that a bit and what you see as a danger there?

J. CHRISTIAN: Yes I can amplify on it; but amplify on it a bit is more difficult because it is a very big subject. The first thing is that precious metals, copper, other metals, energy these are all traded internationally and are fungible commodities by and large. There are a lot of strange things that have been misspoken about the difference between the wholesale and the retail market and we don’t really have the time to go over those, I think. But the fact of the   latter is…

[The lights go off]

J. CHRISTIAN: Oh excuse me. I am in a building with motion sensitive lighting and it doesn’t recognize what I do as human activity.

CHAIRMAN GENSLER: Those were your words not anybody’s here.

J. CHRISTIAN: No, they were my wife’s! If you start putting position limits on bona fide hedgers for example, the bullion banks, and the previous fellow was talking about hedges of paper on paper and that is exactly right. Precious metals are financial assets like currencies, T-Bills and T-bonds they trade in the multiples of a hundred times the underlying physical and so people buying them are voting and giving an economic view of the world or a view of the economic world and so when you start saying to a bank I have a number of people… [

Note: This is mind blowing. He openly admits that the LBMA OTC market is not trading in physical gold or silver; it is trading in paper promises. Gold is not intended to be a “financial asset” like T-Bills and currencies. That is the whole point of owning it. Actual physical bullion is a tangible asset with intrinsic value that doesn’t have counterparty risk. He believes the purpose of trading paper promises in gold is for investors to “vote” on their view of the economic world! He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme.]

J. CHRISTIAN: well, actually let’s go back to a concrete example of Mr. Organ when he was talking about August of 2008 when there was an explosion in the short positions in gold and silver held by the bullion banks on the futures market and he seemed to imply that that was somehow driving the price down. If you understand how those bullion banks run their books the reason they had an explosion in their short positions was because they were selling bullion hand over fist in the forward market, in the physical market, and in the OTC options market. Everyone was buying gold everywhere in the world so the bullion banks who stand as market makers were selling or making commitments to sell them material and so they had to hedge themselves and they were using the futures market to do that. So if you place position limits on the futures market they will have to find some other mechanism to hedge themselves …and they will. And someone else will provide that market…

M. DUNN: Jeffery, I am going to cut you off because I want to ask another question of Mr. Organ.

[It is hard to imagine more inane drivel than this. He conjures up the image of bullion bankers selling bullion like crazy to the general public who are in a feeding frenzy and the bullion bankers are “hedging themselves” by selling gold short on the COMEX!!! Did he get that idea from a blonde? A little while later Chairman Gensler also realized that this was the biggest baloney ever concocted as a cover for massive gold market manipulation by JPMorgan and HSBC in 2008 and so poses a follow up question]……

And here is the second must watch clip:

CHAIRMAN GENSLER: I would like to follow up on Commissioner Dunn’s question for Mr. Christian, if I might, because I didn’t quite follow your answer on the bullion banks. You said that the bullion banks had large shorts to hedge themselves selling elsewhere, and I didn’t understand; I might just not have followed it and you’re closer to the metals markets than me on this, but how do you short something to cover a sale, I didn’t quite follow that?

J. CHRISTIAN: Well, actually I misspoke. Basically what you were seeing in August of 2008 was the liquidation of leveraged precious metals positions from a number of places and the bullion banks were coming back to buy it, and they were hedging those positions by going short on the COMEX and that is really what it was.

[Even on a second attempt Mr. Christian invents the most ridiculous poppycock to explain away the blatant manipulation of the precious metals in 2008. If, in his own words, investors were buying gold hand over fist everywhere in the world why would leveraged long holders dump all their long holdings? They would have ordinarily been making a fortune. The bank participation report of August 2008 shows that 2 or 3 bullion banks sold short the equivalent of 25% of world annual silver production in 4 weeks and the equivalent of 10% of world annual gold production. There was simultaneously a decrease in their long positions, which were almost non-existent anyway, which is incoherent with a notion the bullion banks were mopping up dumped leveraged investments. For an intelligent and coherent explanation of what happened in August 2008 read my CFTC written testimony here]

CHAIRMAN GENSLER: So I am glad I asked because I really didn’t follow that. But if I think of the earlier charts of the positions of the bullion banks that Mr. Sherrod had these concentrated shorts have been, well you know, reasonably consistent, they are not exactly the same on every day, but his charts showed a similarity across a couple of years. So what are bullion banks, I mean I am just trying to understand, what are bullion banks hedging on the other side, we heard from other panels, but you seem to be familiar, is it warehouse receipts, what is it?

J. CHRISTIAN: Well it’s a tremendous number of things. You were at Goldman shortly after me and we had an MIS system that kicked out a daily gold book.

CHAIRMAN GENSLER: That’s really remarkable because we don’t seem to have a lot of similar views, but you know, a lot of people were at Goldman Sachs.

J. CHRISTIAN: Well I didn’t like the trends at Goldman so I left in 1986. But honestly, and bad jokes aside, if you look at a bullion bank’s book, its gold book for example, you will see an enormous number of things; there will be gold forward purchases from mining companies, there will be forward purchases from refineries, there will be gold that has been leased out to electronics manufacturers, component manufacturers, and countless manufacturers and jewelers. As gold flows through the beneficiation process and again these are all long complex issues that are hard to reduce, but you know, a lot of producers will sell their gold the moment it leaves their possession at the mine. It might be in concentrate form or it might be in dore form. It then goes to a smelter or a refinery. The bullion bank buys that and it agrees a price at the time it is buying it but it won’t be allowed to sell that metal until the refinery outturn which maybe two weeks but it could be six months. So they will go into the market and short the market in order to cover the commitment they have made to buy at that price and then when they get the metal in the physical market then they can either sell that metal in the physical market and unwind the hedge in the futures market or the forward market or do something else. There are all sorts of other derivative contracts that investment banks and bullion banks will sell to investors, to other banks, pension funds, to insurance companies and each of those will often have a long exposure in gold which will be  hedged with an offsetting short position [note: There he goes again with that blonde idea that when you sell gold to someone you hedge that with a short position!]. So if you look at a bullion bank’s gold book or silver book you would find a large range of topics. One of the things that the people who criticize the bullion banks and talk about this undue large position don’t understand what is the nature of the long positions of the physical market and we don’t help it; the CFTC when it did its most recent report on silver used the term that we use “the physical market”. We use that term as did the CFTC in that report to talk about the OTC market in other words forwards, OTC options, physical metal and everything else. People say, and you heard it today, there is not that much physical metal out there, and there isn’t. But in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is. If I look at the large short positions on the COMEX my question is where are the other shorts being hedged? because the short position, that I believe the bullion banks use to hedge their physicals, is larger than their short position on the COMEX and the answer is that they hedge it in the OTC market in London.

CHAIRMAN GENSLER: I thank you for that detailed discussion

END

The CFTC position limits hearing was supposed to usher in a new era of transparency and honesty into the dealings of the gold market. In a very ironic way, it did just that.

Here is Douglas' must read conclusion - and a warning for anyone who believes that following a wholesale run on commodities, investors will be able to have access to what is contractually theirs.

This is a stunning revelation. Mr. Christian confirms that the “physical market” is not in fact a physical market at all. It is a loose description of all the paper trading and ledger entries and some physical metal movements that occur each day  on behalf of people who believe they own bullion in LBMA vaults but in fact they don’t. They are told they have “unallocated gold” or “unallocated silver” but that does not mean the LBMA has physical metal set aside for those customers and has just not given specific bar numbers to the customers. No, it is the most cynical and corrupt definition of “unallocated”…the customer has NO bullion allocated to him. NONE! The LBMA defines the owners of “unallocated accounts” quite clearly as “unsecured creditors”. That means they have NO collateral. NONE. Can it be any clearer? It is a giant Ponzi scheme.

Mr. Christian confirms what many analysts and GATA have been alleging that there is not much REAL physical metal, but testifies that there is actually one hundred times the REAL Physical metal being sold based on the much more “loose” definition of what “physical” means to the bullion banks.

The last sentence of his statement is mind-blowing. He says the “physical” positions of the bullion banks are so huge that they are much bigger than the COMEX short position. He says the “physicals” are hedged on the OTC market in London! Did you get that? Let me walk you through it. The bullion banks are selling what is supposed to be vault gold but it is just a ledger entry if the customer never asks for delivery. They must balance their exposure with a ledger deposit entry. This has to be some paper promise of gold from a third party, or some derivative, or even some real gold bullion. If all the ledger entries balance out then the bullion bank has no net exposure in exactly the same way the futures market works with a short offsetting a long. A futures market can never default if no one asks for delivery as only paper contracts are traded. The loosely defined “physical” London market is an identical scheme. As long as everyone is prepared to buy and sell “ledger entries” for imaginary gold in the vault no one will ever discover the fraud.

The LBMA does, however, buy and sell some real physical metal as well. But we now know form Mr. Christian’s testimony that this is one one-hundredth the size of the paper gold trading. The LBMA states on its website that it trades 20 million ozs of gold each day on a net basis. We can calculate the net trade of REAL physical gold should be about 200,000 ozs each day; that is 6.25 tonnes per day or 1625 tonnes per year. This is very much in line with the size of total global mining output of approximately 2200 tonnes per year.

So the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks.

Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.

GATA has long advocated the ownership of real physical bullion. The “bombshells” dropped in the CFTC Public Hearing have only served to reinforce that view. We believe we have made significant new inroads into exposing the fraud, and the suppression of precious metals prices and it is documented in the CFTC’s own hearing.

March 27, 2010
Adrian Douglas
Director of GATA
Proprietor of Market Force Analysis
www.MarketForceAnalysis.com
info@marketforceanalysis.com

h/t MarketForceAnalysis

 

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Sun, 03/28/2010 - 17:03 | 278942 jaap
jaap's picture

Yes, but who will buy your paper? Maybe, maybe only real gold will be accepted in a ransaction.

Sun, 03/28/2010 - 19:12 | 279082 Al Gorerhythm
Al Gorerhythm's picture

Typo or not....ransaction. Lovin it.

Mon, 03/29/2010 - 08:55 | 279519 gilligan
gilligan's picture

+1  Classic!

 

rans·ac·tion (rn-skshn)
n.
1. The act of ransacking or the fact of being ransacked.
2. Something ransacted, especially a business agreement or exchange.
3. The transfer of wealth from the American Public (see entry: sheeple) to TPTB.

Sun, 03/28/2010 - 17:41 | 278956 Sudden Debt
Sudden Debt's picture

I was also wondering. Who profits the most from a crashing gold price?

The Fed.

Who are the best manipulators?

The Fed

Who pulls of economic shit, where almost everybody had a bet against it?

The Fed

 

Now give me also one reason why the price wouldn't go down.

Also, I get mailings about buying physical gold like never before! Starting from 2500€ you don't pay shipping fees.

http://www.koopgoud.nl/index.php?osCsid=g1vh6ls0d9fa5mc09idtkfiv11

Now if it would be a problem to get physical gold, why are they selling it so easy?

Because the paper price and physical price will never disconnect.

I say, short gold now, and if it crashes, buy the physical when it's at 200$

If it does, I'll buy a few pounds just for the decorative aspect in my vault.

Sun, 03/28/2010 - 19:15 | 279085 Al Gorerhythm
Al Gorerhythm's picture

Go ahead, punk........ Make that trade!

Sun, 03/28/2010 - 19:43 | 279108 Yardfarmer
Yardfarmer's picture

me thinks Master Bates done got himself a new handle w/avatar.

Sun, 03/28/2010 - 20:23 | 279150 merehuman
merehuman's picture

it costs a minimum of 500.00 to mine , melt and coin it.

So 200 .00 is a pipe dream from the git go. Many powerful folk have it and would be VERY pissed.

Sun, 03/28/2010 - 17:42 | 278958 godzila
godzila's picture

well I was under the impressions this was basically public knowledge ?!

Sun, 03/28/2010 - 17:49 | 278966 RobotTrader
RobotTrader's picture

Gold $1,114 (per NetDania)

EUR/USD $1.348

These Finviz quotes will start updating soon.

Sun, 03/28/2010 - 18:17 | 278998 Hulk
Hulk's picture

Go baby, go baby, go baby, Go!

Daddy wants to retire!

Sun, 03/28/2010 - 23:03 | 279290 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Soon buddy, very soon!

Sun, 03/28/2010 - 19:04 | 279074 SWRichmond
SWRichmond's picture

After a revelation like this, the smack will be in big time.  Remember what happened to gold when GATA had its ad published?

Sun, 03/28/2010 - 18:02 | 278984 Return2Sanity
Return2Sanity's picture

You know I've had a little suspicion for a while now that China might be secretly behind the massive gold shorts. It's their “golden parachute” out of the fiat mess. If they're using shorts to hold the price down, they can quietly buy up the real deal at bargain prices. So their shorts would not be naked, technically speaking, since China has the means to deliver, but they will never do so. If they find themselves needing to bail out of dollars fast, they'll just cover their shorts with the last of their dollar reserves, and be done with the old reserve currency once and for all, while the price of gold goes to the moon. Then we'll find out how much they've really got in their vaults. Of course, I have no evidence on this, but it's certainly what I would do if I were China and wanted some protection against the fiat monster. Meanwhile, the US Treasury thinks the bullion banks are doing a fantastic job on price control.

Sun, 03/28/2010 - 18:38 | 279035 Yardfarmer
Yardfarmer's picture

The short positions now held by Chase came with interesting baggage which surfaced last year when the Chinese threatened to walk away from their derivative obligations contracted with the large U.S. investment banks. Apparently the silver positions were accompanied by equally massive offsetting OTC derivatives contracts possessed by Chinese state owned investment funds which provided AIG with the backing to carry on its shenanigans of selling of its short silver paper contracts on the Comex. With these derivative contracts passing through Bear Stearns, JPMC became the world's largest counterparty with an extraordinary derivative exposure whose notional value has been estimated at $80 to $90 trillion as opposed to $1.66 trillion in assets. Ted Butler has even gone so far as to suggest that these Chinese OTC derivative positions pose a threat to national security.

Sun, 03/28/2010 - 18:15 | 278999 Johnny Dangereaux
Johnny Dangereaux's picture

I like this guy. Sign up for his newsletter.

Click on the JFK window.....Jack's secret society speech will play.....very moving....maybe TD would post a link to it? It IS what we are all fighting against, that's for sure.

http://www.runtogold.com/

It's not a secret that futures trade in huge multiples to physical....that's why you have physical delivery, and price convergence of cash and futures going into expiration....usually.

GLD and SLV are so encumbered that they can't be trusted....take delivery...it's that simple.

 

 

Mon, 03/29/2010 - 13:46 | 279811 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Best presidential speech ever.  My Dad thought he was possibly talking about the USSR, but I pointed out that Jack could have said simply, the USSR instead of "Sectret Societies".  Bobby Kennedy, I mean Jack Kennedy, was the best President ever!  Well, of recent anyway.

Sun, 03/28/2010 - 18:19 | 279005 monmick
monmick's picture

Jeffrey Christian is full of shit; I think that is pretty obvious...

 

Sun, 03/28/2010 - 18:25 | 279014 Johnny Dangereaux
Johnny Dangereaux's picture

Sounds like his wife is a real hoot too!

Sun, 03/28/2010 - 18:34 | 279029 glenlloyd
glenlloyd's picture

the goal of the first gold siezure was to revalue the currency, because there was a gold standard. Now however, there's no link between the dollar and gold so they don't need take your gold in order to inflate successfully. that doesn't mean they won't take for their own coffers.

gold is not part of the fractional reserve system, there's no longer a tie between the dollar and gold. the dollar isn't backed by anything other than faith. gold exists as a seperate means of monetary exchange. the reason the govt doesn't like gold is that it doesn't represent a debt or obligation and it has no counterparty risk...if you hold it in physical form. gold etfs are not the same as physical, they have counterparty risk.

Sun, 03/28/2010 - 21:13 | 279191 TheGoodDoctor
TheGoodDoctor's picture

Well, if gold and silver went high enough I am sure that would create a lot of tax revenues for them. Enough to bail their ass out on all the debt - maybe.

Sun, 03/28/2010 - 18:50 | 279051 mcarthur
mcarthur's picture

GATA have got to be the biggest pack of fools I have seen.  Dredging up thirty year old tidbits as evidence of market manipulation is pretty rich.  All you GLD holders should sell and demand physical.  Then we will settle this debate.  Gold is nice to look at but so is a good sunset.

Sun, 03/28/2010 - 23:45 | 279098 Al Gorerhythm
Al Gorerhythm's picture

Socrates you ain't.

Sun, 03/28/2010 - 22:02 | 279230 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

YES!  That was brilliant!  Especially considering that gold only comes from supernovas!  Ok, but try to put the sun in your hand...all you need is a gold coin!  HOT FIRE!

http://www.youtube.com/watch?v=Z9lg6HqJeY0&feature=related

Sun, 03/28/2010 - 19:12 | 279080 Fast is Fine Bu...
Fast is Fine But Accurate is Final's picture

I was thinking of using my USD as wallpaper in my kids room or maybe toilet paper in the bathroom.

Throw in a couple of Treasury notes to break it up.

 

 

Sun, 03/28/2010 - 19:39 | 279105 Al Gorerhythm
Al Gorerhythm's picture

The CFTC's Bank Participation Reports, clearly show CONCETRATION of short holdings in the hands of one or possibly two banks. [That's a clue, Gensler]

That the CFTC needs a public hearing to figure out that there is manipulation in the markets (by the shorts), and whose rules set position limits on the longs only, is laughable.

Regulators!!?

Pig's ass.

Maybe Gensler is playing Devil's Advocate. If so I'll change my opinion. Till then.... pig's ass.

Sun, 03/28/2010 - 19:47 | 279115 goldenboy
goldenboy's picture

The price of real-deal-hold-in-the-hand gold is going to moonshoot.....you can say what you want, you can kick yourself as hard as you need for buying paper promises/lies, but those who stocked up on the physical have always been aware of all the implications of the paper-deceit, this Ponzi farce, and now they are set to reap the reward for their commitment and patience. A reward well-earned indeed, for the Bankers have hit them with extreme prejudice as they sought to pickpocket them.

Sun, 03/28/2010 - 19:52 | 279121 RobotTrader
RobotTrader's picture

Gap up in gold has been closed.

Looks like a total non-event.

The only reason it gapped up was because the Euro also gapped up.

Looks like Murphy comes up empty handed again.  Back to the bottle.

Sun, 03/28/2010 - 21:51 | 279222 DoChenRollingBearing
DoChenRollingBearing's picture

Maybe next time will be the one.

Carry on.

Sun, 03/28/2010 - 22:39 | 279258 Hulk
Hulk's picture

Back to work. Gather the Hens eggs and hit the bottle

Sun, 03/28/2010 - 23:36 | 279329 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Wow!  He looks like he spent all weekend on a "detox".

Sun, 03/28/2010 - 20:00 | 279126 Double down
Double down's picture

For once it IS the short sellers!  

Sun, 03/28/2010 - 20:04 | 279130 trav7777
trav7777's picture

Fuck gold.

I prefer to store my wealth in the paper notes of bankrupt States and in the form of negative interest rate loans to insolvent institutions.

Sun, 03/28/2010 - 20:11 | 279138 Shameful
Shameful's picture

rotflol okay thank you for that!  Broke out laughing over here :)  Storing wealth like a real man!

Sun, 03/28/2010 - 20:10 | 279137 RobotTrader
RobotTrader's picture

Gold now red.

The Cartel is attacking with a vengeance.

Oh well, that was fun for awhile.

Sun, 03/28/2010 - 21:31 | 279205 Al Gorerhythm
Al Gorerhythm's picture

Now that's a gold finger.

Sun, 03/28/2010 - 22:53 | 279275 Jim in MN
Jim in MN's picture

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.
- Sun Tzu

Sun, 03/28/2010 - 23:09 | 279296 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Holy Snookums China!  WTF?!?!?!

Also, anybody like what Max is saying about "virtual currentseas"?  He is sort of blowing my theses about the IMF/World Bank prescribing loans to the Nation States of the world, but I still like it.  He is a crazy and brilliant man!

http://ia331224.us.archive.org/2/items/MaxKeiserRadio-TheTruthAboutMarke...

Sun, 03/28/2010 - 23:34 | 279326 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Face Book...Bofa-met...water wings?  what you think?  YALE would love this!

Mon, 03/29/2010 - 00:21 | 279361 chindit13
chindit13's picture

Pardon me for asking a question that seems obvious---and I apologize beforehand if I stop someone from going down to the local Ferrari dealer and using a lemon zester to flake off enough soon-to-be-valued-near-infinity gold to drive home in a 612 Scagliatti---but if this is all accurate why hasn't some large fund forced the LBMA to drop its towel and expose itself?

Please don't respond by saying that Paulson, Tudor, Soros, Bacon et al are all in on the conspiracy.  A hundred to one return on investment would break just about any bond of cooperation.  Surely an Eric Sprott, or the collective goldowners of ZH could muster up enough to buy LBMA contracts and demand delivery.  If the contract (still) stipulates that physical delivery is an option of the contract long, then there is no risk.  Either the LBMA delivers the physical gold, or they are in default thus obviating the need for the buyer to settle.

If that doesn't wipe out the exchange, do it again.  And again.  And again until it either becomes clear they cannot deliver, or they can deliver.  Conspiracy proven, or disproven.  Otherwise, it's all just a parlor game of conjecture.

Mon, 03/29/2010 - 02:15 | 279400 Shameful
Shameful's picture

This is a great question!  My only thoughts are 1. They don't know about how leveraged they are or 2. This may have been attempted a few times and they were always able to make delivery (maybe from reserves or central bank or whatever).

Personally I don't know anyone would not take possession.  Mainly because when I see unallocated = unsecured creditor I get a little worried.  I know might have to pay storage fee elsewhere, but being an unsecured creditor on an asset that should be yours outright sets alarm bells off for me.

Mon, 03/29/2010 - 00:59 | 279391 fUny1
fUny1's picture

Isn't this how the fractionally levered non reserved Gold note toting Goldsmiths from years past got in burn at the stake trouble in the first place anyway?

Evelyn Rothschild's daughter is supposedly worth only about 450 million Euros or something. Her daddy is concerned that's she's fallen for an ex junkie turned struggling script writer/director.

The World we are living in today is an absurdity right out of the French Children's Book "Le Petit Prince" with the 500 Million thin air unitarian busy ness man played by non other that Goldman Sach's Cheri"get your sweet ass off the conference room"table CEO.

With 85 Broads street-walkers in tow, he's going to need all the thin air units he can get.

http://funy1.blogspot.com/2010/03/is-this-governments-rico-racket-entry....

 

Mon, 03/29/2010 - 10:43 | 279614 CPJ13
CPJ13's picture

Can someone give me an opinion on why a Long SGOL position offset with an equal Short GLD position wouldn't be an interesting trade right now? Would GLD necessarily crash if there was ever actually a rush to deliver? Or would the price rise 100x (theoretically)? Your net economic exposure to the price movements of Gould would be virtually zero, UNLESS the physical price and paper price diverge. Obviously, if GLD goes to the moon to try and make up the difference instead of crashes, one is screwed. Thoughts?

Mon, 03/29/2010 - 16:19 | 279941 Littlehedger
Littlehedger's picture

I as just curious if anybody caught the severe error by Brian Kelly, president of Kanundrum Capital, on CNBC...with about 5 minutes 'til the close today...he clearly says "India, last year imported 4.8 MILLION TONNES, this year they are looking to import about 30 MILLION TONNES".

Did this guy skip his metrics and/or conversion classes in school, or what?

Tue, 03/30/2010 - 00:46 | 280269 snakeboat
snakeboat's picture

This game has yet to begin.  Anyone watch Senor B?  He's been overcome by his myths.  Strange things afoot down to the Circle K...

Tue, 03/30/2010 - 19:45 | 281131 Joe Sixpack
Joe Sixpack's picture

Gamma on Market-Ticker.org makes this comment. If true, why would gold be different?:

http://tickerforum.org/cgi-ticker/akcs-www?post=132987&findnew#new

"

Gamma
Posts: 1924
Incept: 2008-01-20

Northern CA

IMO this is all a bunch of hot air.

Go to the soybean, wheat, or pork belly markets. You know, markets which have no Federal Reserve/fractional reserve banking/Bilderburger/end of the world/one world conspiracy aspectry to them. No cachet at all, just a dumb stupid commodity. A person who eats bread or cereal has essentially no use for raw red wheat, especially in multi-hundred pound lots. Or a thousand bushels of freshly-harveted soybeans. A cereal maker, a bread maker, a grower, these folks have the natural interest in the markets they play in. (No aspersion is being cast on speculators. None, zero)

Go look and see how many of those contracts are actually delivered and how many are rolled over, cashed out, liquidated, or offset. Answer: Less than 1%.

Now these markets are incredibly less sexy than gold and silver. So in gold and silver, we would expect much more speculative interest. So when we are initially alarmed at an alleged 170:1 ratio of paper positions vs deliverable metals, is it so blazingly out of whack?

Furthermore, in gold and silver, we have miners amounting to 90% of annual world production always selling some percentage of their production forward to meet ordinary business expenses. We have stock longs hedging with futures shorts. We have bondholders on the miners hedging against mine cave ins and debt defaults with futures shorts. We have those who borrow from bullion banks to sell the metal, speculate with the proceeds, and seek to buy back their obligations on dips, which definitely happen quite a lot. We have all manner of natural market activities and financial market activities exclusive of normal speculation which generate enormous, longlasting, indeed perpetual short positions which massively outweight the apparent long interest in the market. And you go look at the COT and that's exactly what you see.

All I can say is that I have followed the gold and silver markets for ten or so years, since 1999. That does not make me an expert or even a highly educated egghead. I am familiar with the writings of Dave Morgan and Ted Butler and Mark Chapman and I remember JPM allegedly being twice their market capitalization underwater from their underwater hedges on Barrick and all this shit for the last decade hasn't produced anything like the market dislocations these guys claim is right arouund the corner. That doesn't mean it will never happen. As a famous market commentator once said "It might go rocketing higher!!" LOL

I agree with the concept that the last ones to the party, the numbnut ETF holders, are overwhelimngly likely to be hosed in any serious market dislocation. But holding your breath waiting for such a dislocation is likely to result in little more than a brain aneurism.

Wed, 03/31/2010 - 00:13 | 281340 hamurobby
hamurobby's picture

Chindit, if you blow up the gold/silver markets, any fiat money you have will be instantly devalued. If you are loaded with fiat, such as China or any other country, you are already making big profits for nothing, and the only outcome from a blow up in fiat is anarchy. So I doubt anyone who has the cash wants to blow it up. The dying of fiat currency will revalue metals to their relative value by default. As far as etf owners, the panic once people find out they really are not getting a package with gold in it, but a notice their position was closed at such and such price, and an electronic payment made into their account, will be all they will see. The comparison of gold being driven to the ground by selling paper etfs (permanently) is absurd, gold is not stocks, and will not happen. Now the lawsuits may be monumental, but there will be nothing to sue by then.

When trading commodities, there are always many many many many multiples of both sides of the trade verus actual delivery of the underlying commodity of all forms, for the contract month. This why it is impossible to "prove" manipulation, even with signaled trades etc. The fact is, all the commodity markets trading gold around the world, are manipulated successfully by the big currency holders of the world (government and banks). Right now if they dropped the prices of precious metals in the face of currency problems, would PROVE they are manipulating the markets, so just keeping it to relative control looks much more orderly, and prevents panic and mass speculation, debasing currency. In fact, it is actually good for the currencies, by creating inflation without showing it directly.

I would love to see gold drop, it would give more people the chance to buy physical, which would drive up prices again (demand). I believe we are in a third consolidation phase of the gold market, and their is no good news to save fiat currency on the horizon for the long run, or maybe I missed something? The lack of CONfidence in fiat, will eventually destroy what we know as money, it always has.

Wed, 03/31/2010 - 00:28 | 281348 hamurobby
hamurobby's picture

Something to think about, we compare shoes houses and hogs to real money (metals), but thats not a fair comparison.  What if fiat hyperinflated in mere days to infinity, and the only "money" left was gold and silver, how would it value to assets then? Now thats some big numbers right there. You cant eat gold right? and why do banks keep it in vaults?.

Fri, 04/02/2010 - 05:43 | 284044 GetZeeGold
GetZeeGold's picture

It was theft pure and simple.

It's all about PUBLIC gold into PRIVATE hands.

GS and Rubin shorted gold into the ground. Then Brown announced the sales publicly...grinding it even farther into the ground.

Around that time-frame GS went public and took the money and bought the gold at insane record low prices.

Thanks for the gumball......it was just that easy.

 

 

Fri, 04/02/2010 - 06:46 | 284051 GetZeeGold
GetZeeGold's picture

I suppose that comment will get deleted as well...but I just told you what happened.

It's not that complicated....that's what happened.

Is it any surprise that almost every high position in the US gov is being run by former GS employees?

Get zee gold bitches.....they are way ahead of you.

 

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