Guest Post: Physical Gold vs. Paper Gold: The Ultimate Disconnect

Tyler Durden's picture

Submitted by Bud Conrad of Casey Research,

How can we explain gold dropping into the $1,300 level in less than a week?

Here are some of the factors:

  • George Soros cut his fund holdings in the biggest gold ETF by 55% in the fourth quarter of 2012.
  • He was not alone: the gold holdings of GLD have contracted all year, down about 12.2% at present.
  • On April 9, the FOMC minutes were leaked a day early and revealed that some members were discussing slowing the Fed $85 billion per month buying of Treasuries and MBS. If the money stimulus might not last as long as thought before, the "printing" may not cause as much dollar debasement.
  • On April 10, Goldman Sachs warned that gold could go lower and lowered its target price. It even recommended getting out of gold.
  • COT Reports showed a decrease in the bullishness of large speculators this year (much more on this technical point below).
  • The lackluster price movement since September 2011 fatigued some speculators and trend followers.
  • Cyprus was rumored to need to sell some 400 million euros' worth of its gold to cover its bank bailouts. While small at only about 350,000 ounces, there was a fear that other weak European countries with too much debt and sizable gold holdings could be forced into the same action. Cyprus officials have denied the sale, so the question is still in debate, even though the market has already moved. Doug Casey believes that if weak European countries were forced to sell, the gold would mostly be absorbed by China and other sovereign Asian buyers, rather than flood the physical markets.

My opinion, looking at the list of items above, is that they are not big enough by themselves to have created such a large disruption in the gold market.

The Paper Gold Market

The paper gold market is best embodied in the futures exchanges. The prices we see quoted all day long moving up and down are taken from the latest trades of futures contracts. The CME (the old Chicago Mercantile Exchange) has a large flow of orders and provides the public with an indication of the price of gold.

The futures markets are special because very little physical commodity is exchanged; most of the trading is between buyers taking long positions against sellers taking short positions, with most contracts liquidated before final settlement and delivery. These contracts require very small amounts of margin – as little as 5% of the value of the commodity – to gain potentially large swings in the outcome of profit or loss. Thus, futures markets appear to be a speculator's paradise. But the statistics show just the opposite: 90% of traders lose their shirts. The other 10% take all the profits from the losers. More on this below.

On April 13, there were big sell orders of 400 tonnes that moved the futures market lower. Once the futures market makes a big move like that, stops can be triggered, causing it to move even more on its own. It can become a panic, where markets react more to fear than fundamentals.

Having traded in futures for over two decades, I want to provide some detail on how these leveraged markets operate. It's important to understand that the structure of the futures market allows brokers to sell positions if fluctuations cause customers to exceed their margin limits and they don't immediately deposit more money to restore their margins. When a position goes against a trader, brokers can demand that funds be deposited within 24 hours (or even sooner at the broker's discretion). If the funds don't appear, the broker can sell the position and liquidate the speculator's account. This structure can force prices to fall more than would be indicated by supply and demand fundamentals.

When I first signed up to trade futures, I was appalled at the powers the broker wrote into the contract, which included them having the power to immediately liquidate my positions at their discretion. I was also surprised at how little screening they did to ensure that I was good for whatever positions I put in place, considering the high levels of leverage they allowed me. Let me tell you that I had many cases where I was told to put up more margin or lose my positions. Those times resulted in me selling at the worst level because the market had gone against me.

The point of this is that once a market moves dramatically, there are usually stops taken out, positions liquidated, margin calls issued, and little guys like me get taken to the cleaners. Debates rage about the structure of the futures market, but my personal opinion is that a big hammer to the market by a well-heeled big player can force liquidations, increase losses, and push the momentum of the market much lower than the initial impetus would have. Thus, after a huge impact like we saw on April 13, the market will continue with enough momentum that a well-timed exit of a huge set of short positions can provide profits to the well-heeled market mover.

Moving from theory to practice, one of the most important things to keep your eye on is the Commitment of Traders (COT) report, which is issued every Friday. It details the long and the short positions of three categories of traders. The first category is called "commercials." They are dealers in the physical precious metals – for example, gold miners. The second category is called "non-commercials." They include hedge funds and large commercial banks like JP Morgan. Non-commercials are sometimes called "large speculators." The rest are the small traders, called "non-reporting" since they are not required to identify themselves. The ones to watch are the large speculators (non-commercials), as they tend to move with the direction of the market. Individual entities could be long or short, but in combination the net position of the group is a key indicator.

The following chart shows the price of gold as a blue line at the top, and the next panel down shows the net position of these large speculators as a black line. You can see that over the long term, they move together. When the net speculative position is above zero, this group is betting on rising gold prices. Of course, the reverse is true when it's below zero. In this 20-year view, the large speculators were holding net negative positions during the lowest point of the gold price, around the year 2000. As the price of gold rose, their positions went net long, and they profited.

An interesting thing about the chart above is that the increasing amount of net longs reversed itself before gold peaked in 2011, suggesting that these large speculators became slightly less bullish all the way back in 2010. The balance remains net long, but it remains to be seen how long that lasts.

What is not so obvious is that these large speculators are so big that they can affect the market as well as profit from it; when they initiate massive positions in a bull market, they drive the price of the futures contracts even higher. Similarly, when they remove their positions or actually go short, they can push the market lower.

So what happened a week ago was that a massive order to sell 400 tons of gold all at once hit the market. Within minutes the price plummeted, and over a two-day period resulted in the largest drop of the price for futures delivery of gold in 33 years: down $200 per ounce.

We don't have the name of the entity that did this. However, the way the gold was sold all at once suggests that the goal was not to get the best price. An investor with a position of this size should have been smart enough to use sensible trading tactics, issuing much smaller sell orders over a period of time. This would avoid swamping the market; and some of the orders would be filled at higher prices and thus generate more profit. Placing a sell order big enough to affect the overall market price suggests that someone with powerful backing wanted to drive the price of gold down.

Such an entity could have been a large speculator who already had a sizable short position and could gain by unloading some of its short position once the market momentum had driven the price even yet lower. Or it could be a central bank – one that might be happy to have the gold price move lower, as it would provide cover for its printing of more new money. Of course, it could be some entity that owned long contracts and wanted to get out of the position all at once. We don't know, but this kind of activity, resulting in the biggest drop in 30 years, raises more than just suspicion when we consider how important the price of gold is to many markets around the globe.

Can markets really be influenced by big players? Well, was the LIBOR rate accurately reported by huge banks? Have players ever tried to corner markets? The answer to all the above, unfortunately, is yes.

There's an even bigger problem with the legal structure of the futures market: even the segregated funds on deposit can be pilfered by the broker for the brokerage's other obligations. That is what happened to MF Global customers under Mr. Corzine. (I had an account with a predecessor company called Man Financial – the "MF" in the name. I also had an account with Refco, which is now defunct. Fortunately, the daggers did not hit my account, since I was not a holder when the catastrophes occurred.) My take: the futures market is dangerous, and not a place for beginners.

One last note: after the Bankruptcy Act of 2005, the regulations support the brokers, not the investors, when there are questions of legality about losses in individual investment accounts. Casey Research will be producing a report with much more detail on this subject in the near future.

So, what now? We aren't going to see a secret memo – no smoking gun to confirm that what happened on April 13 was an attempt to affect the market. Still, the evidence is suspicious. When big entities can gain from putting on big positions, the incentives are big enough for them to try – LIBOR, Plunge Protection Team, Whale Trade, etc., all support this view.

The Physical Gold Market

Previously, there was little difference between the physical and paper markets for gold. Yes, there were premiums and delivery charges, but everybody regarded the futures market as the base quote. I believe this is changing; people don't trust the paper market as they used to.

Instead of capitulating to fear of greater losses, the demand for physical gold has hit new records. The US Mint sold a record 63,500 ounces – a whopping 2 tonnes – of gold on April 17 alone, bringing the total sales for the month to 147,000 ounces; that's more than the previous two months combined. Indian markets, which are more oriented to physical metal, now have a premium of US$150 over the futures price in Chicago. Demand at coin dealers has increased as the price has dropped. And premiums are much bigger than they were as recently as a week ago.

Here is a vendor page that quotes purchase prices and calculates the premiums on an ongoing basis. It shows premiums of 50% and more in many cases. On eBay, prices for one-ounce silver coins are $33 to $35, where the futures price is quoted as $23. A look on Friday April 19 shows one vendor out of stock on most items:

Buy - Sell On Silver Bullion
2013 Sealed Mint Boxes Of 1 Oz. Silver American Eagles - Brand New Coins
500 Coin Min.
(1 Sealed Box)
Buy @
Spot + $1.80
Sold Out
2013 Sealed Mint Boxes Of 1 Oz. Silver American Eagles "San Francisco Mint" Brand New Coins
500 Coin Min.
(1 Sealed Box)
Buy @
Spot + $2.00
Sold Out
90% Silver Coin Bags (Our Choice Dimes Or Quarters) $1,000 Face Value Figured at 715 Ozs Per $1,000 Face
$1,000 Face
Value Min.
We Buy @
Spot + $1.70
Per Oz (Spot
+ $1.70 X 715)
Spot + $4.99 Per Oz
(Spot + $4.99 X 715)
90% Silver Coin Bags 50¢ Half Dollars $1,000 Face Value We Ship in 2 $500 Face Bags
$1,000 Face
Value Min.
We Buy @
Spot + $1.90
Per Oz (Spot
+ $1.90 X 715)
Sold Out
90% Silver Coin Bags Walking Liberty Half Dollars $1,000 Face Value We Ship in 2 $500 Face Bags
$1,000 Face
Value Min.
We Buy @
Spot + $2.10 Per Oz (Spot
+ $2.10 X 715)
Sold Out
Amark 1 Oz. Silver Rounds ( Made By Sunshine ) Pure .999 BU
500 Coin Min.
Buy @
Spot -15c
Sold Out

Clearly, the physical gold market today is sending different signals than the paper market.

The Case for Gold Is Still with Us

The long-term fundamental reasons to hold gold are undeniably still with us. The central banks of the world are acting in concert in "currency wars" or "the race to debase." As they print more money, the purchasing power of each unit declines. They are caught between the rock of having to keep interest rates low to support their governments' huge deficits and the hard place of the long-term effect of diluting their currency. If rates rise, even First World governments will be forced to pay higher interest fees, leading to loss of confidence in their ability to pay back their debt, which will bring on a sovereign debt crisis like what we have seen in the PIIGS or Argentina recently.

The following chart shows the rapid growth in the balance sheets as a ratio to GDP for the three largest central banks. I've extrapolated the expected growth into the future based on the rate at which they propose to buy up assets. One could argue about how long these growth rates will continue, but the incentives are all there for all central banks to bail out their governments and their commercial banks. I fully expect the printing game to continue to provide the fuel for hard-asset investments like gold and silver to increase in price in the years to come.

Buying Opportunity or Time to Flee?

So what does it all mean? The paper price of gold crashed to $1,325 in the wake of this huge trade. It is now hovering around $1,400. My first reaction is to suggest that this is only an aberration, and that the fundamentals of the depreciating value of paper currencies will eventually take the price of gold much higher, making it a buying opportunity. But what I can't predict is whether big players might again deliver short-term downturns to the market. The momentum in the futures market can make swings surprisingly larger than the fundamentals of currency valuation would suggest.

Traders will be looking for a significant turnaround to the upside in price before entering long positions. However, a long-term, fundamentals-based trader has to look at the low price as a buying opportunity. I can't prove it, but I think the fundamentals will drive the long-term market more than these short-term events. The fight between pricing from the physical market for bullion and that from the "paper market" of futures is showing signs of discrimination and disagreement, as the physical market is booming, while prices set by futures are seemingly pressured to go nowhere.

In short, I think this is a strong buying opportunity.

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HyperinflatmyNutts's picture

FUCK Helicopter Ben!!!

zorba THE GREEK's picture

Physical gold = real wealth

Paper is what you wipe your ass with.

Smuckers's picture

With enough physical gold you can get someone else to wipe your ass.


erg's picture

The groom of the golden stool.

strannick's picture

GLD redemptions, ie. redeming GLD shares for physical -which is what is happening- is uber bullish for gold, ie. buyers are spurning paper gold GLD, in exchange for actual golden gold.

TwoShortPlanks's picture

'Off The Shelf' retail Gold and Silver in Australia is pretty much cleaned out. Lead Times between 2-6 weeks.

Once Unallocated Certificate holders start waking up...Blood Bath.

Transformer's picture

When are the coin and bullion dealers going to grow some balls?  Any retail businessman will tell you that price is determined by supply and demand.  So, if you're a dealer, you raise your price until you sell about as much as you can get, trying to find the price point where you can maximize profit.  If people complain about the price, simply tell them this is what you have to do to stay in business.  The Local Coin Shop does not have to be a shill for Wall Street suits.

As the price rises, at some point people will sell their G & S and others will buy.  That's when a market has been established.  I would guess it is somewhere between 20 and 50% higher than we are now.

Urban Redneck's picture

The coin dealers rely on the wall street suits for paper gold to hedge their physical gold risks.

Otherwise, they would all go bankrupt over time.

Its_the_economy_stupid's picture

Wrong. The walls street suits create the volitility that puts their dealership at risk. Without wallstreet's crap, there would be no need to hedge.

ATM's picture

The smart dealers don't hold inventory for long. The guys I deal with either ship to the refiners or sell their daily take that day. They're just arbitragers. They buy and sell at the same time and pocket a spread.

AllThatGlitters's picture

The dealer that this page points to was slow to increase premiums, which meant you could buy cheaper from them than all the larger dealers:

I figure they cared less because they were well-hedged.

BTW, gold seems to be popping much more aggressively this morning than silver.

Compare the Live Charts:

I keep stating that the situation appears to be very different between gold and silver.

At the retail level, silver seems to be in shorter supply. Yet with GLD withdrawals and Comex inventory, it is gold that appears to have delivery problems.

I suspect Gold Shortages will begin to show up at the retail level soon (1/10 ounce gold coins are already down for the count).

Silver doesn't seem to have the same issues as gold (i.e. SLV withrwals and COT reports, etc.). Granted, silver wholesalers that supply retail dealers are out.

Random_Robert's picture

Silver and Gold are actually demonstrating opposite behaviors:

Comex Gold declining, GLD redemptions soaring - the Commercial supplies are dwindling, but you can still find retail stock in one ounce increments and up.

Silver, however is just the opposite- If you want physical, you will either pay a hefty premium on Ebay, or you will pony up 24 Large for a 1000 ounce bar.

What perplexes me is:  Why, if all these COMEX and SLV 1000 ounce bars are sitting there in inventory (which the data suggests), then WHY are the mints all running out of 1 ounce silver blanks?

Shouldn't the planchett suppliers be buying the living hell out of those 1000 ounce Silver bars right now and chopping them into coin blanks?

Something's fishy in the Silver market- either the official 1000 ounce bar inventories are dubious, or the retail "shortage" of Silver is a 100% manufactured phenomenon, just like the Silver price is...

Thisson's picture

That's a silly comment.  If you sell beanie babies (for example) and have an inventory of them, and the bubble for them bursts, the value of your inventory plummets and you, the merchant, suffer the loss.  It's the same exact thing with PMs, except the risk of declining inventory prices can be hedged by either holding a short futures position or owning puts on futures.  Remember, the dealer's only inventory risk is a declining FIAT price, which is exactly what the futures market is hedgingAlso note that even if the commodities markets were to suspend physical delivery and require cash settlement, the dealer would still be hedged, because if the price of his inventory drops, he gets cash from his futures position that offsets the reduction in cash he gets from selling his inventory.

The drawbacks to this system are that you have some small counterparty risk from the exchange, and you also have to be able to match the size of your inventory to the commodities contracts available, or figure out how to obtain the scale you require in some other way, such as via options positions.

TwoShortPlanks's picture

Ummm, coz they're under contractual agreements with the Mints which supply them the physical....with the exception of bullion minted from scrap.

Spot +2%-3%

Pegasus Muse's picture

New Jim Sinclair article, dated 24 April, is up @ KWN.

Sinclair - Full-Blown Panic As People Ask “Where Is The Gold?” 


And for those that missed it, the William Kaye audio on the Bernanke/O'blamer/Bullion Banksta orchestrated Gold Hit Job, is as insightful as it gets: 


Andrew Maguire's latest audio is also quite good:


JOYFUL's picture

Interestingly KWN feed fails to open about 50% of the time now...

guess that puts to rest the notion that KW is jus a shill site...

they only stick it to the real deal sites. Shills talkin down KW be warned...

we on to yus!

TwoShortPlanks's picture

Yeah, classic!

I still reckon the Central Banks closed the Gold Lease Window (GLW; just made that up), and that means the Bullion Banks need to find the physical instead of being able to roll the contracts over and over again.

HYPOTHESIS: We can test my suggestion by looking for signs of Bullion Banks not rolling over large numbers of Treasuries, once they mature. If not, I'd have to say I'm wrong.

EmileLargo's picture

Thanks for these links. They are all very good and informative.

FeralSerf's picture

Nowadays they'll kill you for it instead of wiping your ass.

q99x2's picture

The Morgue has lost control.

erg's picture


Cue the shot of adrenaline plunged directly into the heart of the cabal in an attempt to revive the victim in extremis.

...wrapped around the face of humanity, relentlessly jamming it's blood-funnel into anything that smells like money.

JOYFUL's picture

An entire article bout the latest smashdown...with nary a mention of McGuire and the LBMA* failure....

that's gotta be the real - Ultimate Disconnect - !!!! Casey strikes out!!!!!!!!!And dum meets dumber. How to create a 'legacy' article in real time!

Time to move on...the bullion banks are now dead. Obumboy is using the full faith n credit of the paper dollar to give them one last 'weekend at Bennies'...

then it's another "Pearl Harbor" - with Jap bonds-not-bombs, this time round...and then it's sayonara western worlds...

"the Morgue" is still in total control...because their mandate is to crash the system and turn y'all into simpering serfs of the moneypowerz....


Whether you 're a brother or whether you 're a mother,

you 're stayin' alive, stayin' alive. Feel THE CITY breakin' and everybody shakin',

and we're stayin' alive, stayin' alive. Ah, ha, ha, ha, stayin' alive, stayin' alive.

BEEGEES 1976...predictive programmin or psychic viewers?


i-dog's picture


"predictive programmin or psychic viewers?"

I think the explanation is even simpler: Particularly gifted members of the entertainment industry have often been drafted, groomed, and promoted, by the Khazarian-Ashkenazi kapos of Tinsel Town and Tin Pan Alley...and are encouraged to write (or are spoonfed) lyrics and scripts to implant the memes and forewarnings of the Kabbalists.

Another lyrical example is Dire Straits "Telegraph Road" (1982), which is a potted history of the US from its beginning to the end.

I honestly think the Khazarian Kleptokratic Kapos have fallen nearly 2 decades behind schedule - due to such delays as those caused by the likes of Sadman Hussein failling to destroy the Iranian Shi'ites, many European states failling to fall into the EU/EZ trap, the Mediterranean states failling to fall into a Mediterranean Union trap, the dotcom bubble failing to impoverish the west, Gaddafi holding out 6 extra months, Assad likewise, Ach,me'dinner'jacket! holding out against the mullahs, and other unintended consequences still arising, even as we speak.

For a look into the deep konnection between the Khazarian-Ashkenazi-Jesuit "intelligence services" and the music industry, have a look into 'Laurel Canyon' in Beverly Hills and its role in the promotion of psychedelia, flower power, the hippie generation, the Manson family, and the very divisive 'anti-war' movement (really the first experiment in dividing family generations...which still continues today through rap and hip-hop).

The (Ashkenazi) guy that currently owns one of the largest and most famous houses on Laurel Canyon - and the shooting location of 'Californication' - is one of the premier rap promoters. Laurel Canyon also appears to have housed a large, but hidden and secret, movie studio around the time of the first moon landing....

JOYFUL's picture

Jus got back from town, n Dawggone it! clockwork

...l check the gold chart 1st opens-gold takes a tumble...

then open the Hedge,

drone-jocks on duty before the daily-drop of drone-laden lethal deliveries begins have taken the time to tick the vote meters in obedience with Central Command...

and as I learned from workin Georges thread 18 hours yesterday...the pattern analysis shows complete conformity - 

drop gold\drop bombs\drop votes...and pick up bonus!

Listen phuck ups....Nooooooooooobody downs the Dawg.

This be war!

supermaxedout's picture

Great link i-dog. "Laurel Canyon" thing is fascinating, really.

JOYFUL's picture

Dave McGuire's work on the 'pyscho-delic' generation is a must read for any body near to bein a boomer...

all your favourite artists...

exposed as bein son\daughter of members of the MIC...pressed into service as members of the CultureWars militia against Merika!

You'll never listen to "light my fire" or Crosby Still Nash(or Young) again the same way!

Kirk2NCC1701's picture

Whenever I hear of one of these Nobel-grade comments of "Fuck you, Bernanke!", I have to think of a scene in the movie The Life Of Brian.

"...fucking Liberation Front of Judea! We're the People's Front of Judea.  Fucking splitters!"

uno's picture

add in solar demand for real silver, not exactly paper silver etf

JOYFUL's picture

the trouble with solar at the moment is that the S.P.E.C.T.R.E guys are vertically-integrated with every facet of making this world a hell pon earth...

they're at it big time here in the Mediterranean...three bright blue sunny morns in a the sun rolls outta the east...and there to the can watch the parallel bands of chemtrailers moving across the sky...and their toxic shit behind them. It's playing havoc with trying to run offgrid...those aluminium\barium trails simply catch up 90% of what is required to convert 'solar rays' into electricity...couldn't even recharge the computers yesterday, by mid day the sky was just haze.

Course I'm sure it's not just for purposes of blocking the survivalist segment...those bands are over Greece...and Cyprus. Where the term 'crowd control' has taken on new meaning!

MeelionDollerBogus's picture

Problem with solar is the most efficient uses are solar-thremal sterling engines, solar-thermal black water heaters, solar-thermal cookers and solar-biomass fuel from photosynthesis which is highly efficient. And… that most solar in markets is demanding the nonsensical photovoltaic technology. Highly inefficient. I’d be better off using solar-thermal to bleed off excess heat for a TEG-brick to produce electricity. The market, rigged as it is, seeks anything but what is efficient because what’s efficient is so easy, so obvious that no one needs an IPO, just to build it, even copy how it’s been done on youtube before.

Ranger4564's picture

Solar is a great investment if the oligarchy wasn't about to destroy the world economically / socially / politically. I had investments in solar and industrial equipment at one time, on teh hope that proper investment in future thinking technoloigies would advance civilization and restore some balance, but it was clear that was not going to work because everyone else was still taking profit, and the oligarchs were taking the biggest of it.

Anyway, solar won't matter much in the near future because the global economy will be collapsed.


On the other hand, a few solar panels to run contraband radio or underground networks might be a perfect investment. Shortwave radios, CB radios, cheap wireless routers, etc. Setup a mesh network with locals.

AssFire's picture

Nope, I am waiting for $1100, it will go back to that... before it skyrockets.

CURWAR2012's picture

Agree, as soon as EUROPE IMPLODES gold will go on sale. Better cash it up now.

Reptil's picture

IF the euro implodes you'll have HYPERINFLATION. What will people put their savings in, while banks do a domino?
Dollars? In the same bank? A safe haven (like the cypriots didn't) A matress?
No gentlemen this is not 2008. This is worse.

TwoShortPlanks's picture

A fist full of paper looking for sellers at $1,100....good luck with that [simple] notion.

Deo vindice's picture

@ RottenAlpha - the link you provided ...

That article was truly a waste of time. He argued nothing and proved even less.

P.S. He could also take a basic course in English grammar.

aphlaque_duck's picture

We really can't say that this has happened until the exchanges default. Until then it's just a minting bottleneck. 

defender1be's picture

But when the exchanges default then its too late / no longer possible to buy.

aphlaque_duck's picture

Yes I agree, this is a warning. I thought the disconnect would happen rapidly, but maybe it is just taking some time to play out.

You can still get generic bars close to spot. Last chance?

Deo vindice's picture

Generic bars close to spot? What do you define as "close"?

augustusgloop's picture

add to that ABN Amro's refusal to tender gold from allocated gold accounts + anecdotal stories of people not getting gold / having to cash settle their allocated gold... it has to be played out yet, but this is in line with MSM (see, my tin hat jargon) analysis from a few months ago that it doesn't matter if gold is actually in the vaults. 

bottom line (clip on white collar jargon), if gold were so shitty, banks wouldn't be so hard pressed to meet physical demand. there are a lot of big players out there that are pissed that they aren't getting what they thought they held. there are a lot of little people out there that see cyprus and look back to their own countries (germany, china, ...all) and see the re-play of asset confiscation--hence small coins getting sold out. charlie munger was paradoxically right on - the jews that sewed gold into their clothing got out. 

rehypothecator's picture

Don't forget Sinclair's friend who was refused a redemption of a Swiss allocated amount, "because it was above $200,000".  Does that count as a failure to deliver?  Seems if they are worried about money laundering, they'd check his ID as he set up the account, not when he wants to redeem.  (Unless of course they don't have the metal.)  Then he's just Corzined/Cyprussed/rehypothecated.  

Urban Redneck's picture

It's suspicious but only because it involves a position closing transaction, don't assume FINMA and the other Federal Authorities here don't fuck with foreign transactions all the time, there is a reason HSBC was running its drug money laundering business in the US and not Switzerland. 

The Swiss authorities checked IDs for Q'daf, Mubarak, Ben Ali, Osama and a lot of other people who were "socially acceptable" when they looked to open accounts, and were much quicker than the US to seize assets when those customers became unacceptable.

Without more specific information and certain facts it is hard to draw any accurate conclusion.  However, if there was a money laundering issue involved, the bank wouldn't be allowed to offer cash settlement, it would simply freeze withdrawals. 


There's also a sensitive issue now with the US Embassy in Berne running espionage operations inside Switzerland where its moles are aged in all sorts of criminal activity and dragging the Banks into it.  The increasing spook activity more than offsets increased banking transparency, as far as actually getting to the bottom of anything goes. 

Ghordius's picture

+1 I had friends that were able to do certain transactions in Switzerland and others that were gently and kindly told to "buzz off" - of course not in those terms - for the same kind of transactions

imho fact is if a Swiss Bank does not like your profile, then you won't be served - and the spook activity you have noticed makes them even more suspicious

Bearwagon's picture

It's a big club, and you have to be in it, in order to participate ....

Ghordius's picture

in this case I think the biggest factor is that they try to avoid customers that might spell trouble, later - coupled with an increasing global aversion vs "hot money" of all kinds (too black, too violent, too political, too fast, too unfathomable)

pods's picture

The biggest risk for the big boys is that all the little guys take their gold and go home.

That is what I do.

Fuck em!


fonzannoon's picture

If they are naked shorting should we look into it or just have them remain nameless?

unwashedmass's picture

you missed the memo...


naked shorting

money laundering

theft of assets


all legal if done by a big bank.