More on COMEX "Exchanges For Paper"

More on COMEX "Exchanges For Paper"

Written by Craig Hemke, Sprott Money News

Last week, we updated the incredible surging amount of total COMEX "Exchanges For Physical". Much has changed in the past few days, so with some additional data in hand we thought we should re-visit the topic this week.

If you missed last week's post, you can find it here. Please look it over before we begin:https://www.sprottmoney.com/Blog/comex-efp-use-con...

As stated last week, though EFP use between Bullion Banks in New York and London has grown over the past several years, the ongoing spike in use has caught our attention. At the current run rate, total volume of COMEX contracts "exchanged for physical" in London looks to exceed 8,500 metric tonnes for calendar year 2018. Again, that's 8,500 metric tonnes. For perspective, the entire world will only mine about 2,800 metric tonnes this year, and the entire LBMA vault system—once you exclude Bank of England gold and gold pledged to ETFs—only holds 858 metric tonnes.

What's clear is that there is no "physical" involved in these transactions at all. The sheer volume alone makes that obvious. No doubt these transactions are only settled by exchanging futures positions for unallocated, leveraged and hyper-hypothecated "gold". Thus, going forward, we shall refer to these shenanigans as "exchanges for paper" instead, as there is clearly no real, unencumbered physical metal involved in the process.

Worth noting, however, is the surge in EFP volume that began over the past few months. Does this indicate anything? Does it signify physical stress in the fractional reserve bullion banking system, or is it simply a sign of an increased amount of price suppression through imaginary volume?

Nick Laird runs the terrific website http://www.goldchartsrus.com. He has total EFP volume numbers that date back to October 2015. (Sadly, in the deliberately opaque COMEX/LBMA system, we're unable to find any data that goes back further.) Nick generously shared his data with us and it confirmed our suspicions regarding the increased use of EFPs. Not only is total EFP volume up nearly 50% on a YoY basis, we are currently seeing the highest single daily volumes on record.

Recall the beating that the price of COMEX gold took Friday, June 15. After a decent rally following the FOMC of last Wednesday, price was savaged on COMEX last Friday to the tune of nearly $30. Total COMEX trading volume spiked to 551,061 contracts, and this in itself is an atrocity, as it represents daily trading volume of 55,100,000 ounces of digital gold, or about 60% of annual mine supply, in one day.

But thanks to Nick, we now know that total EFP volume spiked to a new three-year (and possibly all-time) high that day, too. The CME reports that total EFP volume last Friday was 27,009 contracts. This equates to 2.7MM ounces of "gold", or about 84 metric tonnes! In one day. Futures contracts "exchanged for physical".

And guess what? We now have a new record for COMEX silver EFPs, too!

For Tuesday, June 19, the CME reported that the COMEX executed 8,893 silver EFPs. That, too, is a new high dating back to October of 2015, and quite possibly a new all-time high. And for those keeping score at home, there are 5,000 ounces of "silver" per each COMEX contract. Thus, the total amount of "silver" allegedly involved here is about 44.5MM ounces or 1384 metric tonnes—or about 130% of total U.S. annual mine supply.

By now, you're probably wondering what the point is and why we keep reporting on this stuff. What you MUST understand is that the world of precious metals currently operates on a fractional reserve and digital derivative pricing scheme. This scam is perpetuated by the Bullion Banks, which profit immensely through trading and storage fees. And the entire system is based upon a fraud of hypothecated metal and unallocated accounts. The ridiculous daily volume of EFPs simply underscores this point.

What should an intelligent investor do? Once one recognizes the terminal fallacies of the current system, its inevitable downfall becomes obvious. To prepare for this eventuality, one must simply acquire some physical metal, take delivery and put it somewhere safe and handy. Do not under any circumstances accept paper warehouse receipts or the promissory notes of unallocated accounts. Leave those for The Bankers and their clients.

If the Russians and the Chinese are actively converting dollar reserves into physical gold, shouldn't you do the same? Buy some physical gold now and stay away from The Banks and their "Exchanges For Paper".

More on COMEX "Exchanges For Paper"

Written by Craig Hemke, Sprott Money News

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Comments

DarkPurpleHaze Thu, 06/21/2018 - 15:29 Permalink

You state...

"What should an intelligent investor do? Once one recognizes the terminal fallacies of the current system, its inevitable downfall becomes obvious. To prepare for this eventuality, one must simply acquire some physical metal, take delivery and put it somewhere safe and handy. Do not under any circumstances accept paper warehouse receipts (or tokens?) or the promissory notes of unallocated accounts. Leave those for The Bankers and their clients."

 

But what about tokens???

You know...Kinesis!

Yep...crypto-currency tokens that you can exchange for your phyz gold and silver.

Everyone should look into this at the link below.

 Who wouldn't want freshly imagined tokens in their portfolio? Hedge with tokens.

And..."Billions worldwide" could benefit from this new monetary system...they say.  Plus you get...tokens!!!

(6) QQQuestions/answers...

https://www.zerohedge.com/news/2018-06-15/eric-sprott-discusses-rate-hi…

 

GoFuqYourself gmrpeabody Fri, 06/22/2018 - 11:35 Permalink

The question has been, for years, how long can this house of cards stand? How long can they maintain this PM (and everything else) price fixing charade? Are they colluding with Russia and China behind the scenes? Do they have a date already set when it all gets "let loose"?

 

One thing is obvious- make sure you have physical metal before it breaks wide open. The global financial reset is coming, that's a fact. At the very minimum, it's time for a new reserve currency. History tells us this much. 

 

Ignore the past at your own peril. The current fiat money is about to change. Where will your position be?

In reply to by gmrpeabody

ReturnOfDaMac GoFuqYourself Fri, 06/22/2018 - 13:13 Permalink

"How long can they maintain this PM price fixing charade" --- Ans: Forever.  Dang man, isn't it obvious to you by now?  How dense can one be?  Been decades now and it's still going on and will continue to go on, even after a comex crash it will continue.  As long as there is a dolla it will continue.  As long as there is a dolla, we will print it at will, ad-infinitum, you will accept it for your work, goods and services, and by gawd you WILL like it, geeze.

In reply to by GoFuqYourself

cpnscarlet Fri, 06/22/2018 - 09:31 Permalink

I was right. Eric smelled a "breakout", but it was a coming "Break Down".

What are you smelling now, Eric? Lots of EFPs? Probably just another ghost story.

jimymac Fri, 06/22/2018 - 11:53 Permalink

These yahoo gold advocates have talked the game since the early nineties on Prodigy, the only diff being the amount of paper thrown. They all have talked a good game. WHAT HAVE THEY DONE ABOUT? NADA, nothing, except trade on it to the detriment of US all.

jimymac Fri, 06/22/2018 - 11:53 Permalink

These yahoo gold advocates have talked the game since the early nineties on Prodigy, the only diff being the amount of paper thrown. They all have talked a good game. WHAT HAVE THEY DONE ABOUT? NADA, nothing, except trade on it to the detriment of US all.

dot_bust Fri, 06/22/2018 - 13:51 Permalink

It should be obvious that the extensive use of EFPs exposes the COMEX and LBMA as being part of a fraudulent mechanism.

Neither "metals exchange" has any metals. They simply push paper back and forth in a desperate attempt to suppress prices.

Clearly, this game can only continue as long as there are other participants who are willing to play.

If, however, traders start using only those exchanges that can supply physical metals, the COMEX and LBMA will no longer have the ability to set prices.