Are We On The Verge Of Witnessing The Death Of The Paper Gold Scam?

Tyler Durden's picture

Submitted by Michael Snyder of The Economic Collapse blog,

The legal claims on physical gold far exceed the amount of physical gold that the banks actually have by a very, very wide margin.  And right now the bankers are scared out of their wits because their warehouses are being drained of physical gold at a frightening rate.  So what happens when their physical gold is gone but they still have lots and lots of people with legal claims to gold?  When that moment arrives, it will represent the end of the paper gold scam. 

Many believe that the recent takedown of the price of paper gold was a desperate attempt by the bankers to put off that day of reckoning, but it appears to have greatly backfired on them.  Instead of cooling off demand for precious metals, it has unleashed a massive "gold rush" all over the globe.  Meanwhile, word has been spreading among wealthy families in both North America and Europe that they had better grab their physical gold out of the banks while they still can. 

This is creating havoc in the financial community, and at least one major international bank has already declared that it will only be settling those accounts in cash from now on.  The paper gold scam is starting to unravel, and by the time this is all over it is going to be a complete and total nightmare for global financial markets.

For years it has been widely known that the promises that banks have made regarding their gold far exceed their actual ability to deliver, but we have never reached a moment of such crisis before.

Posted below are quotes from people that know precious metals far better than I do.  What these experts are saying is more than a little bit disturbing...

-CME President Terry Duffy: 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.

-Billionaire Eric Sprott: So we see all of these paper (trading) volumes going through that bear absolutely no relationship to what’s going on in the physical markets. As you know I have always been a proponent of the fact that supply in the gold market was way less than demand, and by a very large factor. I think demand exceeds supply by at least 60%. The central banks are surreptitiously supplying that gold, and ultimately they will be running on fumes.

When we hear about the LBMA not willing to deliver gold, and JP Morgan’s inventories at the COMEX have gone from 2.4 million (ounces) down to 160,000 ounces, it just makes you realize that all of this paper trading means nothing. It’s the real physical market that you have to rely on.

-JS Kim: FACT #1: COMEX gold vaults were recently drained of 2 million ounces of physical gold in one quarter, the largest withdrawal of physical gold bullion from COMEX vaults in one quarter during this entire 12-year gold and silver bull. There has been speculation about the reasons that spurred these massive withdrawals of gold from COMEX vaults, but the most reasonable speculation is that no one trusts the bankers to hold on to their physical gold anymore, especially in light of Fact #2. Note below, that both registered AND eligible stocks of gold had heavily declined in recent months. Such an event signals a general distrust of the banking system from everyone holding gold in registered COMEX vaults.

FACT #2: One of the largest European banks, ABN Amro, defaulted on their gold contracts and informed their clients that they would only settle their gold bullion contracts in cash and not in physical. So much for the supposed legality of financial contracts as a "binding" contract. So whether Fact #1 caused Fact #2 or vice versa is irrelevant. What IS apparent is that the level of trust in bankers to safekeep physical gold and physical silver is disappearing, as it should be, and as it should have already been for years now. But truth always takes some time to catch up to banker spread lies and that is what is happening now. I have been warning people never to trust bankers in deals involving gold and silver for years now, as in this article I wrote nearly four years ago informing the public that the SLV and GLD are likely a banker invented scam as well.

FACT #3: Silver fraud whistleblower and London trader Andrew Maguire stated that the LBMA was having trouble settling gold contracts in bullion as well and stated that institutions that asked for physical settlement “were told they would be cash settled instead by a bullion bank.” In plain English, this is a default. So Andrew Maguire reported that the LBMA had already gone into default. In light of Fact #1 and Fact #2, the dominoes were starting to tumble and the house of cards that the bankers had built in gold and silver paper derivatives to deceive and hide the true fundamentals of the physical gold and physical markets from the entire world was rapidly starting to crumble. A financial earthquake of magnitude 2.5 was quickly threatening to evolve into one of the biggest financial earthquakes of all time in which the world’s confidence in all global fiat currencies would effectively have a well-deserved funeral.

-Jim Sinclair: I think the reality is the supply situation is extremely volatile at this point, and even discussing it is like rubbing a raw nerve to the people who are in charge. The amount of discussion on the subject of warehouse supply, supply that is represented by the gold leases, indicated to the central planners that the demand for physical was going to continue to effect the exchanges.

Although they did not expect any grandstand delivery, the mere continued draining of physical inventories was threatening the very functioning of the paper exchange. That threatening of the paper exchange and its ability to continue functioning is really taking off the blinders and revealing the truth behind the critical question, ‘Where is the gold?’

The question now is, ‘Where has the gold gone?’ Who has all of this gold? Because of the nature of gold leasing, all of this gold has been purchased and it has gone somewhere. The reality of the empty vaults reveal that the gold has gone missing.

-Ronald Stoeferle: We’re seeing this rush to physical gold not only in the retail market, but also for the institutional players...[it's] just overwhelming…I [estimate] a 130-to-1 [ratio of paper to physical gold]…and I think in the last week we were really close to [triggering] a default of the paper market.

-Gerhard Schubert, head of Precious Metals at Emirates NBD: 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…

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.

-James Turk: Another indication of the demand for large bars is the huge drawdown in the gold stock in COMEX warehouses. It is noteworthy that COMEX reports show the drawdown is largely the result of dealers removing their inventory, their working stock. When that happens, you know the availability of supply is constrained.

What all of this means, Eric, is one thing. If the central planners want to keep the precious metals at these low prices, to meet the demand for physical metal they will need to empty more metal from central bank vaults, or borrow metal from the ETFs as some have suggested is happening. Otherwise, the central planners will have to step back and stop their intervention, thereby letting the price of gold and silver rise so that demand tapers off, bringing demand and supply of physical metal back toward some kind of balance.

We've seen this same situation several times over the last twelve years. It is what I have been calling a “managed retreat.” Despite the current weakness, I firmly believe we have again entered a critical period where the central planners will need to retreat once again in order to let the gold and silver prices climb higher.

-The Golden Truth: 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.


So what does all of this mean?

It means that we are entering a period when there will be unprecedented volatility for precious metals.  There will be tremendous ups and downs as this crisis plays out and the bankers try to keep the paper gold scam from completely unraveling.

Meanwhile, nations such as China continue to stockpile gold as if the end of the world was coming.

According to Zero Hedge, Chinese gold imports set a brand new all-time record high in March...

Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons.

And the number for April is expected to be even higher.

Does China know something that the rest of us do not?

We are also seeing a rapid decoupling between spot prices and physical prices.  In fact, it is quickly getting to the point where the spot price of gold and the spot price of silver are becoming irrelevant.

For example, demand for silver coins has become so intense that some dealers are charging premiums of up to 30 percent over spot price for silver eagles.

That would have been regarded as insane a few years ago, but people are now willing to pay these kinds of premiums.  People are recognizing the importance of actually having physical gold and silver in their possession and they are willing to pay a significant premium in order to get it.

We are moving into uncharted territory.  The paper gold scam is rapidly coming to an end.  In the long-term, this will greatly benefit those that are holding significant amounts of physical gold and silver.

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Au_Ag_CuPbCu's picture

Rather than paper take downs, the next attempt to scare people out of holding physical outside of the banking system will be to publicize an extremely horrific and violent breakin/robbery/murder for the victims' stash...and it will probably be real news (what else does HLS need 1.6b bullets for?).

DoChenRollingBearing's picture

The end of paper gold is a meme that is getting more traction lately.  Why not go to the Master himself?  But, you will need to put in the time and energy to get the most out of FOFOA:

true brain's picture

"have held a gun to GLD and demanded delivery of physical in exchange for their shares".


Are you kidding me? Such hyperbole, anyone with guns would be the central bankers and their goons, CIA, FBI, PD of all cities, National Guards, US armies , etc and they will blow Paulson's brain out, or your brain out before they capitulate and let there be a free market for anything. Such naivete is not worth fight club. 

JohnnyBriefcase's picture

I don't know. All I hear people talking about is the whole abduction thing in ohio. Cheap thrills and no thought required. Good guy/bad guy. Mass judgement and fuzzy feelings of belonging and justification. That's all that really matters to the masses.

new game's picture

you are correct for another reason, they are living paycheck to paycheck and would rather buy some gold colored weed first, anyways.  they could give a shit about silver and gold. most people are worshipers of da almighty dollar and watch the nightly news.  after reading this, remember you are the fringe element of society...

JohnnyBriefcase's picture

I know... I know it just frustrates me when I entertain thoughts of justice and of humanity pulling itself out of the financial, social and political quagmire that we find ourselves in currently and then I leave my house and people are just fucking talking about their babies or their grandbabies or fucking sports for fucks sake.




I'm all like "Your world is breaking and crumbling all around you and you don't even fucking see it!"

And they're all like "Your crazy!"


Wow solid argument brah.

mick_richfield's picture

This war has been going on for a very long time.

There are greater powers involved than the TBTF banks.

Don't worry about those who have given themselves up.

Save as many as you can.

It's our time now.


Stackers's picture

As the Hunt Brothers could tell you, when the paper precious metals markets turn against the powers at be, they simply change the rules of the game

tenpanhandle's picture

When the Hunts garnered the focused eye of the federal Govt., the federals had 2 billion ounces of physical silver to fling at them.  They have gone through all of that in the ensuing 30 years.  Now they have 2 billion bullets to throw at the market.

mick_richfield's picture

There are Powers, and there are Powers.

The ones you are afraid of have had their way for twelve thousand years.

Our time now.


StychoKiller's picture

Do the Lizard people look like geckos, or chameleons?

tenpanhandle's picture

They look like obama when he's running up or down the stairs to Airforce One.

DirkDiggler11's picture

+ 1000 TPH

Only thing better would be that he was re-enacting a scene from planet of the apes ...

Yes_Questions's picture



They're chameleons cleverly disguised as inbred humans.  Think the Bushes and British Royals.

mick_richfield's picture


Do the Lizard people look like geckos, or chameleons?

They look like me.

Jafo's picture

The difference this time is that the hoards are distributed.  There are the stackers that hold an average of ten ounces each and whos number is legion.  Then there are the central banks who are hoarding that cannot be assailed by the Feds without a declaration of WAR!  The Feds will think about that but if they spreadsheet the costs they will decide that they cannot afford that option.  They will only be able to afford capitulation.

DoChenRollingBearing's picture

+ $55,000

Excellent comment.  

Please comment all you want to in the future, please!  FOFOA has also written that gold is worth more when it is broadly distributed.

StychoKiller's picture

I find it more productive to ask questions that require someone to conduct some research:  "What is Money?",  "Do you know what the Mandrake Mechanism is?", etc.  "It's like a splinter in your mind, Neo..."

BLOTTO's picture

The masses can not fathom that we have been hoodwinked....duped...perverted...lied to...poisoned...on all levels, by people that are suppose to love us and care for us.


We are out numbered, out resourced, out witted, out muscled by a dark force.


Every single nation has been inflitrated.


We could have strength in numbers...but the masses are not in tune...brainwashed...walking, sexting, pepsi drinking, facebook absorbed, narcissist, assimulated zombies.


Bring the Gold's picture

Every single nation has been inflitrated.


I will bite Blotto as I enjoy your comments, by who or what?

BLOTTO's picture

Thank you BringtheG...


In a nutshell, imo, royal bloodlines that have been passed through the generations that started since Day 1. 'They' think its their divine right to rule over us. I believe they are sun-worshippers - masters of time and space...they rule us with the calendar, i.e, pagan holidays, that appear year round that coincide with astrology.

I believe that their is important information in ancient scriptures, texts, sea scrolls, Book of Enoch, etc...but things have been omitted and manipulated along with actual truths contained within. They also leave clues behind as they follow a different set of laws that i think go together with numerology, astrology and sacred geometry.

The last thing as a logical person i wanted to think about was occult things and hocus pocus...but i think thats exactly what it is...thats why its unfathomable for the masses to comprehend and believe that this is happenning. I know it sounds nuts...but the good people of the world can not be losing the coin-flip every single time...this unlucky...the 'best of the best' has us in this fuckin shape? Now add in all these conspiracies events, financial crisis, agendas, monsanto, vaccines, autism, perversions, unmoral behaviors, 50% of population anxious,etc,etc,etc,...its like you have to now start thinking all fantasy like...and sure enough there it is.


Its hard to describe in a few paragraphs of course to explain it would need to explain it with illustrations on a massive gymnasium wall to get an understanding and full shock value.

BellyBrain's picture

Yep, and that's just the tip of the iceberg showing in the visible light spectrum...

Vooter's picture

"I'm all like "Your world is breaking and crumbling all around you and you don't even fucking see it!""


suicidalpsychologist's picture

This why in major events like mass extinctions only a fraction of a specie survives.

Jam Akin's picture

Or is that why in mass extractions a fraction of the specie survives....

knukles's picture

One observation about the demise of the Spot Price.

Many folks have stated recently (And I have no reason to doubt them, albeit with no personal confirmation/experience with respect thereto.) that the Spot Price for silver and gold has become irrelevant, detached from the futures (paper) prices.
That may very well be true in that one cannot transact on the buy side at the "Quoted Spot" prices, being forced to pay very significant premiums.
However, what that says to me is that the "Quoted Spot" price is NOT the "True, Effective, Real or Actual" Spot price where physical delivery takes place within a proscribed settlement time frame.

Indeed, if there are transactions taking place at their "True Spot" comprised of the Quoted Spot plus the Premium, then the Effective or True Spot is for all intents and purposes the Real Spot.

The quoted Spot is an artificially low chimera being quoted lower to constitute a fictional financial testimony that prices have indeed truly fallen in concert with the slamming of the paper prices.  Which they have not, as in fallen as far as quoted. 

So, I'd agree that the Quoted Spot is artificial and meaningless... but is in fact replaced with the True or Effective spot constituted by the Quoted spot plus premium.
The rest is a fiction comprised of lies and deceits.

Crisismode's picture




"Why not go to the Master himself?  But, you will need to put in the time and energy to get the most out of FOFOA"


The guy is on the right track,

if only he could learn how to write for the average person,

he could get so much of his message across to so many more people.

I'm not sure why he cannot cease writing in such dense, turgid prose,

and simplify, simplify, simplify.

A Wise Person once stated "If you cannot explain a complex concept in language a 12-year-old can

understand, you need to rethink your explanation."


So True.


knukles's picture

If you cannot write your presentation on the back of a business card, get bigger business cards.
Or sticky tape a whole bunch of 'em together.
Business cards, not presentations.

Yes_Questions's picture



Or in the case of an Elevator Pitch, hit emergency stop button.

DoChenRollingBearing's picture


As a general rule I agree with you re being able to concisely explain most ideas in a simple way (I have heard a variation saying that if you cannot explain a business idea in one elevator ride, forget getting any money from the V.C...).

I am going to make a guess or two here.  His Freegold idea is alien and complex, and so is not too conducive to being explained quickly.  Also, I believge FOFOA prefers to err on the side of being logically complete, building his case brick by careful brick.  This makes a long version necessary.  A (much) shorter version invites attack on his logic.

Still, there is an effort underway by various followers in FOFOA-land to condense his writings into something more digesitble, so that a wider audience can be reached.  But, do note that Jim Sinclair has blurted out some FOFOA like comments recently, and Nick Barisheff just wrote a book called $10,000 Gold...

The idea of Freegold is getting around and getting traction...

mick_richfield's picture


I have to tell you, while I can, that I love you because you have the only avatar in all of Fight Club that shows an industrial implement.

If I care for any metal more than silver, it would be steel, and steel ball bearings.

Better than precious metals, better than money, are the people who do things, and the people who make things.

Keep doing that thing you do. 

Keep the world turning.


-------------------------- Mick .


DoChenRollingBearing's picture

There are two ZH-rs who have industrial-looking things (a gear, and some kind of other widget).  I feel that it is important to to emphasize the real thing...  

You wouldn't put a paper bearing in your car wheel would you?

52100 steel, the "other" PM...   :)

fonzannoon's picture

I have industrial looking things all over my face but I can't get this goddamn bag off my head.

mick_richfield's picture

Take the bag off.

No more time to be afraid.

One half of the future for our people is industrial-looking things, and 3D printers, and rocket engines, and sunlight, and asteroids, and vacuum.

The other half is earth, and wind, and trees, and magic, and water.

None of it is reptilian bankers, or secrecy, or national security, or fake money, or fear.

Our time now.


Cabreado's picture

"Our time now."

Who is "Our?"

Cabreado's picture

Well, Spirit is good, but the nirvana-esque can be disconcerting...

When things go south, denying truth is much easier than confronting it, and I have to assume that's where the "magic" part comes in.

francis_sawyer's picture

Hey mick ~ How do you know they're not cock rings?

DoChenRollingBearing's picture

@ fonz...  + 1

Hmm...  Could it be:

1)  Shameful nose-piercings you got when you were 16?

2)  Battery acid will dissolve rubber or plastic.

3)  Lighter fluid & a match will take care of the bag...



DoChenRollingBearing's picture

@ mick_r

Look in the background of the fifth photo, you can see "Together We Move the World".

At one of the bearing plants of our largest supplier in Korea (KBC):

StychoKiller's picture

What am I (Wooden Bender),  Chopped liver?   Artisans are not constrained by one particular medium, look at Leonardo DaVinci...

Blano's picture

I hear ya DoChen, and always enjoy reading what you have to say.  Still, FOFOA could cut those treatises in half and they would still be plenty long enough.  He loses me, and I read way more than most.

akak's picture

The essential problem with the writings of FOFOA, I have come to conclude, lies in the fact that he does not, as most good writers do, lay out his thesis and then back it up with argument and logic.  No, he repeatedly if not invariably instead skips directly to the (woefully long-winded, verbose, and painfully convoluted) (attempted) explanation of what he is trying to propose, without ever having made the synopsis of that proposition in the first place.  Moreover, I find that his attempted explanations do not explain and clarify his theories so much as they merely tie one giant semantical and logical Gordian knot after another, through which I, being no Alexander, cannot cut.

If a theory, ANY theory, cannot be summarized in one or two reasonable paragraphs, or one page of normal text at the extreme most, then there is either something wrong with the theory, or else the reader is being bamboozled with bullshit.

fourchan's picture

sounds bearish for gold

Citxmech's picture

The thing to remember is that all the truly connected have physical too.  It's not like they're so stupid they can't see that the jig will eventually be up at some point.  Gaming the system just ensures that they always have a winning hand.  We can't time things like they can since they control the timing to a large degree - but with some common sense and a steady hand, we peon PM holders may do just fine.