LBMA Closes Off Public Access To Key Bullion Bank Trading Data

Tyler Durden's picture

Is something (abnormally) fishy in the state of precious metals manipulation? GATA's Adrian Douglas (recently famous for facilitating the emergence of whistleblower Andrew Maguire) seems to think so, after his observation that the LBMA has decided to block "access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members." His conclusion: "There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast." Read on for his argument...

From GATA's Adrian Douglas

The LBMA joins the gold squeeze cover-up, via GATA

The London Bullion Market Association has just taken the highly
unusual step of blocking access to statistics relating to the trading
activities of its member bullion banks. This information has been
available to the public since 1997 but as of this week it is available
only to LBMA members. (See http://www.lbma.org.uk.)

I have recently written a series of exposes of the LBMA (see
References 1-4 below) using the association's own data to show that the
LBMA's bullion banks are operating on a "fractional reserve" basis. My
analysis indicates that the bullion banks are holding only 1 real ounce
for about every 45 ounces of gold that they have sold, a reserve ratio
of just 2.3 percent

At the March 25 public hearing of the U.S. Commodity Futures Trading
Commission on precious metals futures markets I cited the LBMA's own
statistics to label the "unallocated gold" accounts of the bullion
banks as a Ponzi scheme. (See Reference 3 below.) There were bullion
bank representatives at the hearing but no one expressed an objection.
That hearing was videotaped and posted at the CFTC's Internet site but
the bullion banks have not made any public statement rebutting what I
said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group,
acknowledged that what is widely called the "physical market" is in
reality a largely "paper market" trading gold and silver as if they are
financial assets and not physical metals. Christian stated that 100
ounces of paper gold are traded for every 1 ounce of physical gold.

When the LBMA first made its trading statistics available in January
1997, observers and analysts were shocked. (See Reference 5 below.) No
one could reconcile the statistics with other market data, nor
comprehend how the bullion banks could be trading on a net basis more
than 240,000 tonnes of gold annually while the global mine output was
only 2,400 tonnes. Over the years the furor over these statistics had
subsided until the end of 2009, when I commenced writing about my
studies, showing that the statistics can be reconciled with other
market data if the bullion banks are operating a fractional-reserve
bullion banking operation with a recklessly low reserve ratio. I have
also shown how the price of gold is suppressed because 45 ounces of
demand are being diluted to result in purchase of only 1 ounce of real
metal. If instead all 45 ounces were to be sourced and purchased, the
gold price would be multiples of the current price.

Typically when people are exposed in a scandal their first reaction
is a cover-up. The most notorious examples of this are the Nixon
administration, when it doctored the Watergate tapes, and Arthur
Anderson, which shredded millions of pages of documents relating to
audits of Enron Corp.

The LBMA has now commenced a cover-up with respect to the gold
trading activities of its member bullion banks, withdrawing statistics
from the public domain.

This appears not to be the only cover-up going on in the gold market.

For years the International Monetary Fund has made great fanfare of
its mere contemplation of selling some of its gold, and actual sales by
the IMF have been widely publicized. Since February the IMF has been
surreptitiously selling large tonnages of gold each month, but these
sales now are to be found only by digging through the IMF's financial
statements, and even there the recipients of the gold are not
disclosed. (See Reference 6 below.) One has to wonder why the IMF now
is trying to fly under the radar with its gold sales.

Similarly it was recently discovered that the Bank for International
Settlements didn't feel it necessary to announce its involvement in the
largest gold swap in history, 346 tonnes. (See Reference 7 below.) The
BIS swaps instead were discovered only because a market analyst dug
through the footnotes of the bank's financial statements.

These developments have all the hallmarks of cover-ups.

In June the LBMA trading statistics showed that in May 2010 the
average net daily trading in gold by LBMA member banks jumped a massive
50 percent from the month before to 24 million ounces each day from 16
million ounces each day. That translates to $7.5 trillion annually. If
an operation is running on a razor-thin fractional reserve basis, such
step changes are often fatal.

It appears that a run on the bullion banks has commenced.

There is a cover-up of back-door injections of liquidity of physical
gold, and the LBMA now is trying to conceal trading information.

There has been much debate about how investors, politicians, and
regulators didn't see the 2008 financial crisis coming, and lack of
transparency was cited as a key reason. Clearly those who have been
manipulating the gold market are trying to skulk deeper into darkness.
They have a lot to hide.

Investors could have been blindsided by the events of 2008, but
anyone who misses the writing on the wall about what's going on in the
bullion markets is just foolish. The bullion banks have sold far more
metal than they can deliver, and more and more customers are asking
them to deliver. This has led to back-door bailouts and cover-ups.

Anyone who has "unallocated" bullion should be very concerned. The
LBMA itself describes owners of "unallocated bullion" accounts as
"unsecured creditors." That means that the account holder has no
collateral or title to any bullion.

Bullion bank unallocated account agreements require the bank only to
settle in cash for non-performance. That means when the physical
squeeze that is evolving takes gold and silver prices to multiples of
the current price, holders of unallocated metal accounts will not get
any bullion, nor will they be compensated at the prevailing market
price.

I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast.

----

References:

1. Adrian Douglas: Proof of Gold Price suppression -- Gold and the U.S. Dollar:

http://www.gata.org/node/8844

2. Adrian Douglas: Price Suppression Follows Inevitably from Fractional-Reserve Gold Banking:

http://www.gata.org/node/8820

3. Adrian Douglas: It's Admitted to the CFTC: London Gold Market Is a Ponzi Scheme:

http://www.gata.org/node/8478

4. Adrian Douglas: Jeff Christian's CPM Group Explains How to Make Paper Gold:

http://www.gata.org/node/8627

5. The Grand LBMA Expose: A Collective-Mind Analysis:

http://www.gold-eagle.com/gold_digest/baron907.html

6. Adrian Douglas: IMF Can't Explain Gold Sales Now Without Revealing Squeeze:

http://www.gata.org/node/8607

7. Adrian Douglas: Mysterious BIS Gold Swaps Are Likely a Bullion Bank Bailout:

http://www.gata.org/node/8803