More Deception About the COMEX

<div style="text-align: justify;">The title of this post is a play on <a href="http://www.tfmetalsreport.com/blog/5182/more-deception-comex">this</a> TF Metals Report post. In it TF claims that deposits into JPM's stocks as shown on recent CME Gold Stocks report <i>"are bullshit. Either completely fabricated and falsified OR simple paper claims. It's one or the other due to the simple statistical improbability of three consecutive round numbers totaling exactly 10 metric tonnes."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">He then concludes that <i>"this eligible gold deception currently being employed by The Comex is just another indicator"</i> of <i>"the end of the fractional reserve bullion banking system is rapidly approaching. Keep stacking and prepare accordingly."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I find it interesting that even though TF thinks that <i>"this latest move is so brazen in its audacity"</i> and says that <i>"since no one else is talking about it, maybe I'm just crazy"</i>, he doesn't think to qualify his analysis. No TF, you are not crazy, you just didn't bother to do any research before jumping to a conclusion.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On the first page of the CME's gold futures <a href="http://www.cmegroup.com/rulebook/NYMEX/1a/113.pdf">rulebook</a> it says:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"Gold meeting all of the following specifications shall be deliverable in satisfaction of futures contract delivery obligations under this rule:<br /><br />1. Either one (1) 100 troy ounce bar, or three (3) one (1) kilo bars. ...<br /><br />6. Upon receipt of the gold bar by the Licensed Depository who must also qualify and be designated a Licensed Weighmaster for gold, each gold bar shall be weighed in the lot measured to 1/100 of a troy ounce (two decimal points)."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Since gold kilo bars are cast to exactly one kilo, they all weigh the same - 32.15075oz. Under point number 6 that is then rounded down to 32.15oz. So 32.15 x 6000 kilos (ie 6 tonnes) gives the "statistically improbable" 192,900.000oz that TF observes.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I would note that in the wholesale markets kilo bars (as well as 400oz bars) are usually sold in 1 tonne lots, so it also makes sense that movements occur in the 1 tonne lots that TF considers a suspicious sign.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So TF's conclusion in his post is wrong because he didn't bother to check that COMEX allows kilos bars and that every kilo bar is recorded as 32.15oz, which multiplies out to the exact ounce figures.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I would also note that unlike kilo bars 400oz bars (and I believe 100oz silver COMEX ones) are odd weight, ie bars can be + or - of the target weight within approved tolerances - it is done this way because it is cheaper than casting bars to an exact weight. This is usually done by measuring out granules to the weight before then putting them into a mould and melting them. 400oz/100oz bars are casting by pouring from a crucible and relies on the skill of the pourer to fill the mould as close as possible to the target weight.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I was surprised that TF would not know the rules of his own futures exchange and one that he analyses and comments on, but it seems that he is not alone, with others republishing TF's post approvingly - <a href="http://www.gata.org/node/13165">GATA</a>, <a href="http://jessescrossroadscafe.blogspot.ca/2013/10/claims-per-deliverable-ounce-rises-to.html">Jesse</a>, <a href="http://harveyorgan.blogspot.com.au/2013/10/oct-28gld-and-slv-remain-constantgold.html">Harvey Organ & Bill Holter</a>, <a href="http://www.silverdoctors.com/more-deception-at-the-comex/">Silver Doctors</a>, <a href="http://www.brotherjohnf.com/archives/236501">Brother John F</a> to name a few.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I can see why that may be, as kilo bars are primarily a size in demand in the India/Asian region rather than the US, and most of the bars in COMEX I guess would be 100oz. I note that the rulebook specifies a minimum of 99.5% purity whereas kilo bars for the Asian market are generally demanded to 99.99% purity. As it costs more to make 99.99 than 99.5, a bullion bank isn't going to put 99.99 kilo bars into COMEX and may not be able to use 99.5 COMEX bars to meet Asian demand without re-refining. So we sort of have two separate kilobar markets.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The end result of the above facts is that kilo bars in COMEX I guess would rare. Therefore, TF was on to something when he saw kilo bar movements into COMEX, the problem is he got the analysis completely backwards.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">If Asian demand is high and a bullion bank can get good premiums on 99.99 kilobars, they are going to ask refiners to turn all mine dore into 99.99 kilo bars. So if we see 99.5 bars going into COMEX then it may be an indicator that Asian demand has eased. Maybe JPM had commitments with refiners to buy their output for a period of time, and if Asian demand had eased then they may have just asked their refineries to make 99.5 (for all we know maybe those deliveries were 99.99 kilo bars) and they are just parking them in their COMEX warehouse, waiting for Asian demand to return.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This Tuesday report from Reuters confirms the theory: <a href="http://in.reuters.com/article/2013/10/29/asiagold-china-idINL3N0IJ37X20131029">Asia Gold-Chinese prices at a discount on credit crunch fears</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"'The rise in borrowing costs in onshore China plays a crucial role. People don't want to keep the metal and they try to dump it to raise cash,' said one precious metals trader in Hong Kong. Another trader said there had not been a significant drop in demand but liquidation of stocks was taking its toll on prices."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So if you were a trader, TF's advice to "keep stacking" on the basis of the unusual CME delivery figures was actually backwards - it was possibly a sell signal.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">TF should keep an eye on the CME reports - if there are movements of round ounce tonne lots, indicative of kilo bars, out of the warehouses then it may be an advance bullish signal of Asian demand returning.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Unfortunately, I don't think TF is listening as six days ago I left comments to his post explaining the above kilo bar issue and he has not made any correction to his clearly incorrect post. Maybe he thinks I'm just an <em>"ardent Cartel apologist and disinfo agent".</em> A pity, as round ounce tonne lot movements looks like a good trading signal - if only you know how to read it.<br /><br />Correction Nov 5th: After a discussion about this post with TF (see <a href="http://www.tfmetalsreport.com/comment/362307#comment-362307" target="_blank">here</a>, <a href="http://www.tfmetalsreport.com/comment/362710#comment-362710" target="_blank">here</a> and keep scrolling) I would like to clarify that I didn't intend to mean that TF's "keep stacking" was trading advice. My intent was to say IF you were a trader then you may have read his post as bullish. TF also noted that he was not following the comments on the original post, hence he missed by comments, so it was not a case of not listening.<br /><br />I will also give props to TF for publishing my comments, which is more than I can say for some bloggers who remove comments that are critical of them.</div>

The title of this post is a play on this TF Metals Report post. In it TF claims that deposits into JPM's stocks as shown on recent CME ...

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CPM Group/Christian's Silver Summit presentation on Andrew Maguire

<div style="text-align: justify;">While Kitco <a href="http://www.kitco.com/news/2013-10-24/KitcoNews20131024DA-CPM-Group-Alleges-Whistleblower-Maguire-Has-No-Metals-History-Silver-Summit.html?sitetype=fullsite">broke the news</a> of Jeff Christian's Silver Summit presentation, where <i>"at the end of his silver market presentation, [gave] what he considers Maguire’s true employment history"</i>, they only reported some of the details of what was presented.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Whether you are pro or con Andrew, it does help to know eactly what Christian claimed. So I did something unusual in the blogosphere, and just contacted the source for a comment. Below is the text of Jeff's last slide, FYI:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><strong>Who Is Andrew Maguire?</strong></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Andrew Thomas Maguire, formerly Andrew Gerhard Maguire</div><div style="text-align: justify;">Born 4 June 1951 in Germany British citizen</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">1980s: Sundry jobs in England</div><div style="text-align: justify;">  Car salesman at Henleys, a car dealership, London </div><div style="text-align: justify;">  Car leasing agent at H.R. Owen car dealership, Old Brompton Road, London</div><div style="text-align: justify;">  ICS, start-up insurance courier company</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">1989: Immigrated to Canada and started a vehicle leasing company, Custom Lease Capital Inc. Operated for around five or six years, it appears.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Late 1990s: Day traded his own account.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">2004: Started another vehicle leasing company: Auto Direct Leasing and Rentals.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">2005: Left his wife and family and moved back to England. Apparently unemployed for two years or so. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Circa: 2008. Had a job in a financial institution in London which reportedly collapsed in the financial crisis. Reportedly was at Lehman, which he denies. Not clear what position he held.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Andrew says the above is "is totally inaccurate" in an <a href="http://www.tfmetalsreport.com/comment/360510#comment-360510">email to Turd Ferguson</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"An article contrived by CPM Group's Jeffery Christian based upon spuriously sourced information and published this evening on Kitco News is attempting to question my 35+ year banking history and is totally inaccurate and I will be responding to this shortly. As most know, I have brought Jeffery Christian’s integrity into question on numerous occasions and this is no more than an attempt to discredit my work in exposing the unallocated bullion banking system of which he is a primary architect."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Andrew then followed up with the following comment in a <a href="http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/25_Maguire_%26_Sprott_Refute_Allegations_%26_Discuss_War_In_Gold.html">King World News interview</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"Obviously I am going to be dealing with this in more detail next week, but there was no mention of my over 35 years of banking history -- as I said, I’ll put this farce to bed next week. So what if I have other business interests aside from trading? No company I’ve ever been associated with has ever gone bankrupt."</i></div><br />I have plenty of thoughts on this story but as it is still developing, anything I write will be incomplete without Andrew's response, so I'll hold off until then. In any case, no matter how it plays out, there is an important lesson in this story for goldbugs regarding "the cartel" that I will also cover.

While Kitco broke the news of Jeff Christian's Silver Summit presentation, where "at the end of his silver market presentation, [g...

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Amazing - Another ETF Tells Investors They Can’t Redeem

<div style="text-align: justify;">In this powerful exclusive, I want to tell my readers that I have <a href="http://gyroscopicinvesting.com/forum/gold/is-the-gld-etf-on-verge-of-failure/msg77187/#msg77187">heard stories</a> about plenty of people who have actually tried to take significant amounts of the shares of SPY (the S+P 500 ETF) to the custodian and been told that they can’t have the 500 underlying stock shares.</div><br /><div style="text-align: justify;">IMPORTANT - Powerful entities do not want people to have access to the debunking that Goldchat provides. As a result I have had constant ignoring of, and interference with, this blog. Simply reload this blog repeatedly (don't listen to those that claim this will just increase my page hits, they are bankster shill). </div><br />---<br /><br />For those overly sensitive types who got all uppity about <a href="http://goldchat.blogspot.com.au/2013/07/shortodile-golddee-thats-not.html">Shortodile Golddee</a>, the above is called a parody. For those who don't get the joke see <a href="http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/9/11_Amazing_-_GLD_ETF_Tells_Customers_You_Cant_Have_The_Gold.html">here</a> (Eric will be disappointed that he hasn't achieved total gold blog world domination).<br /><br /><div style="text-align: justify;">What I find amazing is that neither Grant nor Eric are aware that the only people who can redeem GLD for gold are Authorised Participants (and they only get unallocated gold, to boot). For those who are interested, I explained the redemption mechanics in detail in <a href="http://www.perthmintbullion.com/au/blog/blog/12-11-30/ETF_Price_Suppression_Mechanics.aspx">this post</a>.</div><br /><div style="text-align: justify;">My best guess is that this rumour is based on is some large investor going to HSBC and asking for metal. Now ETF custodians will reject that because they can't take the shares directly, it is the trustee who gets (or issues) shares and then tells the custodian to give or take gold - the prospectus says that only Authorised Participants can access the redeem or create shares process.</div><br /><div style="text-align: justify;">It is a bit confusing what the rumour is, because initially Grant talks about someone going to the custodian, but then later mentions Authorised Participants. The other possibility is that the large investor went to an Authorised Participant and asked them to take their shares and redeem for gold. Again, the prospectus does not give GLD holders this right. I suppose an Authorised Participant could do it if it wanted, but there is no obligation. If the Authorised Participant involved was not a bullion bank with its own vaults, but just a paper trader/arbitrageur, then I can see how they would not have the capability to get physical for a client, particularly as they only get unallocated when redeeming.</div><br /><div style="text-align: justify;">Either way I think the custodian or the Authorised Participant telling the investor to bugger off is where the rumour starts and as we know with Chinese whispers the details get lost and it become generalised.</div><br /><div style="text-align: justify;">What I think would be news is if the investor went to one of the large bullion banks and the bank would not do a swap (buy GLD, sell them Allocated). In the meantime, this is no more than gossip.</div>

In this powerful exclusive, I want to tell my readers that I have heard stories about plenty of people who have actually tried to take sig...

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Delusions so obvious

<div style="text-align: justify;">Time to catch up on some articles that caught my eye this week. First up is <a href="http://charleshughsmith.blogspot.com/2013/05/what-is-obvious-about-this-market.html">Charles Hugh Smith</a> who picked up a quote that really resonated with me:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>The obvious can be dangerous. The deluded man frequently finds his delusions so obvious that he can hardly credit the good faith of those who do not share them.</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">because I've often been on the receiving end of this. The problem with much of the precious metal commentary is that it seeks to explain market action in terms of obviousness, black and white, single reasons. I understand why this is, because many people are confused and afraid and simple comic book explanations are easy to understand, emphatic, and give a sense of control as you know the "real" (sole) reason why things are as they are. People don't want a multi-factor explanation where which factor is driving behaviour changes over time and the factors influence each other. It is too complex.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">A good example of obviousness in action is this <a href="http://www.goldmoney.com/gold-research/alasdair-macleod/the-role-of-gld-and-slv.html">Alasdair piece (my bolding)</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>My reason for writing to the FSA was to establish if <b>allegations</b> were true that bullion owned by these two trusts was being used in contravention of custody agreements. If they had any foundation there would be an important regulatory risk for the FSA which should be drawn to their attention, and in any event needed clarification to prevent a false market. Suspicions that this was the case were fuelled by <b>obvious conflicts of interest</b> in the firms concerned. The sensible course for the FSA would have been to investigate the matter with the custodians and give them a clean bill of health, or alternatively take appropriate action in the event of a breach. Instead, <b>they ducked the issue</b>, leaving the impression that there was indeed a problem.</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I couldn't have found a better example as Alasdair actually uses the word "obvious". When I see similar certain words like "will", "is", "clearly" I get cautious because it generally doesn't suggest an open mind. In this case the obvious conflict of interest is that the bullion banks are massively naked short while acting as custodian. You can read the letter Alasdair sent <a href="http://www.financeandeconomics.org/letter-sent-to-gold-anti-trust-action-committee/">here</a> where he states that <i>"it is common knowledge they are running large short positions in those markets. The perceived conflicts of interest have led to widespread public allegations that the assets of these ETFs are being used to satisfy market deliveries in bullion markets ..."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Now whether or not this is true is beside the point I will be making, but if you want the other side then consider Kid Dynamite's comments/debate on my <a href="http://goldchat.blogspot.com.au/2013/05/time-to-give-up-on-cftc.html">last post</a>. A little more confusing is the statement by Alasdair in <a href="http://www.goldmoney.com/gold-research/alasdair-macleod/gold-market-report-bullion-banks-going-net-long.html">this post</a> that bullion banks are now net long, so does that mean there is no longer a conflict of interest?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Anyway, my point is that Alasdair does not credit the FSA with any good faith or that that maybe the situation is not as obvious as he thinks. Here is an alternative viewpoint. Financial firms for a long time have had potential conflicts of interest between their custodial and trading arms. This is not news to regulators and they and the market have developed mechanisms to manage this. What they are interested in is <b>evidence</b> that these Chinese walls are not working. A conflict of interest can exist if a proprietary trading desk is short OR long. Simply quoting "allegations" based on an inference that a bank may be short would not represent anything obvious to the FSA. In addition, consider that the FSA can maybe entertain the possibility that the short position is hedged and is just market making, as Kid Dynamite asserts. Is it then ducking the issue when from their viewpoint what the FSA sees is just a non-evidence/fact based circumstantial allegation? They will expend their limited resources into investigating this when they have many other breaches to look at?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">It may be entirely possible that the bullion banks are using ETF metal illegally. Certainly in most jurisdictions precious metals often fall outside financial regulations as they are real property and often not classified as a financial product, creating loopholes as discussed in my <a href="http://goldchat.blogspot.com.au/2013/05/time-to-give-up-on-cftc.html">CFTC post</a>. The problem with the "obvious mindset" is that it prevents those who hold it from developing an appropriate strategy to resolving it. They are unable to put themselves in the shoes of the people they seek to convince and rather than trying to find that person's hot button concern, they resort to "its obvious" and "you can't trust them" arguments. When these arguments are rejected because they are not obvious to the other person, the "obvious mindset" person sees it as another example of corruption/stupidity, which feeds their distrust even more, rather than "crediting good faith" to the other person.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Having said that, Alasdair's letter to the FSA is cleverly worded to appeal to the FSA's hot button concern, I just think the letter was ineffectual because the evidence presented was not convincing enough nor were the allegations "widespread" or "public" from the FSA's point of view - precious metal bloggers don't constitute "widespread public", as much as we'd like to think us blogger/commentators are that important.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On to Dan Norcini, <a href="http://traderdannorcini.blogspot.com.au/2013/05/massive-short-squeeze-in-copper.html">talking about copper</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>Drawdowns in copper stocks are notoriously unreliable signals however as some less-than-scrupulous players have in the past, simply bought copper, moved it out of the official warehouses and stuck it elsewhere all to give the idea that demand is robust. That allowed them to play the market from the long side claiming that supply was insufficient for current levels of demand. </i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Of course this would never happen in the gold or silver market. Just a thought for those who claim all of the COMEX and ETF metal has gone to China, never to return. Again, there are often multiple factors behind market behviour, it is not black and white. Maybe some of that metal is sitting in other off-market vault, helping to paint the tape?</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Regarding the ETF holdings reductions, Dan <a href="http://traderdannorcini.blogspot.com/2013/05/gold-chart.html">calculates</a> from recent 13F filings that <i>"if you take the largest institutional investors combined, their selling accounted for nearly 75% of the shares being dumped in GLD"</i>, which is interesting as institutional investors hold around 50% of GLD. I think Dan sums up the recent market behaviour well:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"This is where the pressure keeps coming on the paper markets over here in the West. Institutions see no reason whatsoever to own the metal when they can better put that client money to work achieving historic gains in the US equity market bubble. As mentioned many times here - trying to fight the tape is a fool's errand. Traders have to go with the money flow. Investors had better be damned careful is all that I can say. There is a vast difference between trading and investing."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I really liked <a href="http://mises.org/daily/6435/A-Virtual-Weimar-Hyperinflation-in-a-Video-Game-World">this article</a> on hyperinflation in Diablo 3. This is a great piece of research and writing with the amusing conclusion that <i>"if a small, straightforward economy generating detailed, timely economic data for its managers can careen so completely aslant in a matter of months, should anyone be surprised when the performance of central banks consistently breeds results which are either ineffective or destabilizing."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The author does wonder that <i>"considering the level of planning that goes into designing and maintaining virtual gaming environments, that some measure of statistical monitoring and/or econometric modeling must have been applied to Diablo 3’s game world."</i> My guess is they did, using the same mainstream economic thinking that informs public policy, that is why it was such a stuff up!</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">On to a phase space chart from <a href="http://worldcomplex.blogspot.com.au/2013/05/a-cycle-in-commodity-prices.html">The World Complex</a> of the gold-oil ratio and silver-barley ratio. It results in a very interesting scatterplot chart in which:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>the direction of the orbit is the opposite to what I had supposed it would be when I first graphed the scatterplot. I had assumed we would see higher silver (industrial activity) followed by higher oil price, leading to higher food prices, which I thought would scare people into gold. But what we observe since 1984 is the opposite--higher silver prices leads to higher gold prices leading to higher food prices (anticipating inflation?) followed by higher oil.</i></div><i></i><br /><div style="text-align: justify;"><i><br /></i></div><div style="text-align: justify;"><i><i>The peak in the Au/oil ratio in 1988 is a reflection of low oil price rather than high gold. Perhaps the high silver/barley ratio is a reflection of low food prices, which allows more savings in India and China which translate into gold demand, raising the price of gold first, and food prices secondly due to increased demand.</i></i></div><div style="text-align: justify;"><i><br /></i></div><div style="text-align: justify;"><i><i>I'm not sure what to make of the increased noise since 1990. It may have to do with the increasing amounts of easy money in the system encouraging more participants in the commodities markets.</i></i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Well worth a click through to have a look at his chart and consider where next in the cycle we will move.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">To finish some classic <a href="http://silverdoctors.com/jim-willie-bullion-bank-run-in-progress-climax-coming/">Jim Willie delusions</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>I can guarantee you in the next several months, or a year or more, there will be NO COMEX GOLD PRICE. ... It’s all coming to a climax where gold is going to be central with a gold-trade central bank and gold priced at $7,000 per ounce.</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">What is encouraging is the comments to the article, with many less than impressed, so maybe people are tiring of the same old script which never seems to come true. This comment to the article sums it up:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>This is classic Jim Willie gibberish. He is saying he “guarantees” there will be no COMEX gold price in the next few months, or maybe a few years. Basically, he has no clue. But hey, it sounds SO GOOD to hear if you are long the metals. Please. This kind of vague, unsubstantiated opinion, offered as a guarantee, well it really is wordless no isn’t it?</i></div>

Time to catch up on some articles that caught my eye this week. First up is Charles Hugh Smith who picked up a quote that really resonated ...

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The Andrew Maguire Challenge

<div style="text-align: justify;">I love a <a href="http://www.perthmintbullion.com/Blog/Blog/12-05-17/Betting_1_Million_On_Gold_Hitting_2_000_Before_1_000.aspx">challenge/bet</a> and Dan at The Fundamental View obliges with a <a href="http://thefundamentalview.blogspot.com/2013/05/my-challenge-to-whistleblower-andrew.html">challenge</a> to Andrew Maguire to provide his CV to justify the title given to him as a whistleblower. Dan spices it up by making it one-sided, in that Dan will <em>"promise to never write another word about you again. In fact, I will even provide you with a free banner advertisement spot on my blog for your “trading service” for a full year."</em></div><div style="text-align: justify;"> </div><div style="text-align: justify;">My view/best guess on why Andrew will not provide his CV can be found <a href="http://goldchat.blogspot.com.au/2012/11/etf-price-suppression-mechanics.html">here</a>. I can't think of any reason why he would not want to supply it. Jeff Christian said he couldn't find anyone who knew of Andrew so the question I have is why would Andrew pass up the opportunity to make Jeff eat humble pie and supply his CV for verification? I have seen arguments made that Andrew is under physical threat (as per the car crash) but if so then why is Andrew going to GATA conferences, has his <a href="http://silverdoctors.blogspot.com.au/2012/03/andrew-maguire-page-has-been-killed.html">image</a> on the internet, does all these podcasts and runs a business?</div><div style="text-align: justify;"><br />The comments Dan got to 24hGOLD's <a href="http://www.24hgold.com/english/news-gold-silver-my-challenge-to-whistleblower-andrew-maguire.aspx">republishing</a> of his article tell you a lot about Andrew's supporters. Completely missing the point and going on about issues unrealated to the point, saying Dan does not believe in manipulation of gold (what has that got to do with whether Andrew is a whistleblower), or thinking he is asking for Andrew's personal details or trading/financial details. I find it surprising that his supporters don't think any is funny about Andrew's refusal to provide even limited previous employment details.<br /> </div><div style="text-align: justify;">PS -  I have to give a hat tip to Faeces Ferguson for <a href="http://www.tfmetalsreport.com/blog/4723/silver-below-22">eating his hat</a>.</div>

I love a challenge/bet and Dan at The Fundamental View obliges with a challenge to Andrew Maguire to provide his CV to justify the title g...

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Precious metal memes

<div style="text-align: justify;">I'm having a debate with The Daily Bell over their assertion that <em>"physical gold and its delivery will cost you up toward US$2,000"</em> in the comments to <a href="http://www.thedailybell.com/29106/US-One-Billion-in-Gold-Has-Just-Been-Shipped-to-South-Africa">this article</a> of theirs. Readers of this blog I think will find it interesting, as well as the diversion into questions about the Germany repatriation and central bank transparency. I also questioned their view that the London Fix was not a free market in the comments to <a href="http://www.thedailybell.com/30653/Doug-Casey-on-Conspiracies-Gold-and-the-Continuing-Greater-Depression-of-the-Worlds-Economies">this article</a>.<br /><br />The thing about The Daily Bell is that they track and look behind memes. Their reaction to my questioning made me ask this question in my latest comment:<br /><br /><em>You, DB, should know more about memes and their propagation than anyone else. Your willingness to look behind dominant social themes and ask who benefits is one reason why I was first attracted to, and continue to read, this site. I would suggest that you consider the possibility that memes also exist in the precious metals world. Many, like the Willie $2,000 story, don't have any malicious creator and come about from misunderstandings of how the market operates or exaggeration of a fact, mostly with the intent to just sell newsletters or product.</em><br /><em></em><br /><em>However, I would also suggest you consider that some may originate from the monetary or power elite you watch. The objective? To divert attention away from how the gold market really works and avoid probing questions by creating dumbed down comic book-style stories, that has the bonus of making gold investors look like nutters to the mainstream and which dissuade the mainstream from thinking about investing in gold.</em><br /><br />I'm interested in your views on the above idea as well as from any The Daily Bell readers as to whether you think they have a blind spot in respect of precious metal memes.</div>

I'm having a debate with The Daily Bell over their assertion that "physical gold and its delivery will cost you up toward US$2,000...

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Not much of a case

<div style="text-align: justify;">I stopped following blogger Dave in Denver when he <a href="http://goldchat.blogspot.com.au/2011/05/dave-in-denver-golden-truth.html">wimped out</a> of publishing a critical, but civil, comment of mine on his blog. Thankfully my readers persevere with him and have let me know he recently made the following post:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"A reader alerted me to the fact that Bron Suchecki, one of the proprietors of the Perth Mint - the notoriously untrustworthy and fractional bullion account seller - made the claim that there's plenty of 400 oz. gold bullion bars to be had on the world market. This is contrary to every news report and first-hand accounting of shortages that have been presented over the last week.</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>So I have this question for Bron: If there's plenty of 400 oz. gold bullion LBMA-standard bars available, how come it's taking the United States Government SEVEN YEARS to send just 300 tonnes of the said 400 oz. gold bars that it owes back to the German Government and its citizens? Tell me Bron, if you can find an ample supply of bars, how come the Federal Reserve and the U.S. Treasury can not? How come the Chinese Gold and Silver Exchange Society is now forced to back-order bars from Switzerland? <a href="http://www.ibtimes.com/gold-shortage-asia-chinese-gold-exchange-rush-ordering-supplies-europe-meet-heightened-demand#">LINK</a></i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>I rest my case."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Lets cut to the chase. In this <a href="http://www.marketwatch.com/story/what-bullion-dealers-are-saying-about-gold-demand-2013-05-03?pagenumber=2">Market Watch article</a>, James Turk is quoted saying:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"The problem retail buyers are finding is that the stock of small bars and coins quickly flew off the shelves, so premiums have been rising because the fabricators have not been able to produce enough new supply to meet demand,” said Turk. The situation has benefited GoldMoney because it sells individual interests in large gold bars, he said.</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The reason GoldMoney has benefited is because they are able to sell gold without the high premiums that are affecting non-400oz bar retail sized products. One can confirm this by looking at their site for their buy/sell prices.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Here is the problem Dave. If 400oz bars are not so easy to find as you have so emphatically "rested your case", then how can GoldMoney sell its 400oz bar backed product without any premium beyond their normal pricing? They don't seem to have a problem acquiring 400oz bars.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Since you are certain you are right Dave, then the only logical conclusion is that Jame Turk is lying, and that GoldMoney must be running a fractional reserve operation. Personally I think GoldMoney is telling the truth and it is you that is wrong. I look forward to you denouncing James Turk as an untrustworthy and fractional bullion account seller.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I suppose also that Bullion Vault are lying when they <a href="http://goldnews.bullionvault.com/gold-prices-050120137">say that</a> <i>"we can assure you that the spot price is the price of physical gold and silver in large-bar form right now, just as always. We go on settling physical gold and silver bars daily, picking up real physical bullion and moving it to accredited storage outside the banking world."</i> No problem for them to obtain 400oz bars.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Interesting also that the Sprott Gold Trust, which the Fed or anyone else of size can redeem for physical, has been recently trading around (and below) spot as one can verify from the chart at their <a href="http://www.sprottphysicalbullion.com/sprott-physical-gold-trust/net-asset-value/">Net Asset Value page</a>. Logically, since you are right Dave, the Sprott Gold Trust must be a fraud as well because the reason Fed is not printing money to buy up shares in the Trust and redeeming for physical is because it doesn't have the metal. Such buying action would prevent it from trading at a discount to NAV.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Finally, for those who don't consider me untrustworthy, the Perth Mint is not aware of any premium being paid for the standard 400oz bars. We have heard that 99.99% purity bars are getting a sub-one dollar premium, which makes sense as they can directly melt them down and convert to kilo bars for Asia where 99.99% purity bars are getting a premium. Interestingly, we have confirmed that the bullion banks aren't paying a premium to obtain 99.99% 400oz bars (or 99.50% 400oz bars), which is not indicative of desperation for physical on their part.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Dave seems to think that these facts are contrary to reports of shortage. The reason they aren't is because those reported shortages are for smaller fabricated forms, of which production capacity limitations are a major driver. I have not seen one report of any premium on 400oz bars and Dave doesn't provide one either, just some theory about the Fed and Germany.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The only factual backup for his claim is an <a href="http://www.ibtimes.com/gold-shortage-asia-chinese-gold-exchange-rush-ordering-supplies-europe-meet-heightened-demand#">article</a> from IB Times which does not mention 400oz bars at all. What is does say is that <i>“The premium on gold in Hong Kong and Singapore is as high as $3 per ounce, an 18-month high.”</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">While I agree that physical demand has really jumped up quite a bit (see <a href="http://www.goldchat.blogspot.com.au/2013/04/chill-out-dudes.html">here</a>) if it was really as desperate you make out Dave surely the premium would be much more than just $3 an ounce? It is ironic that the link Dave provides as proof counters his point. It is <a href="http://www.perthmintbullion.com/blog/blog/12-12-07/Response_To_Dave_In_Denver.aspx">typical</a> of his shoot first, think later approach.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I think I'll rest my case here and let the reader decide.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">With that out of the way, I would like to add my own speculations on the US-Germany redemption issue. I would suggest an alternative possibility, being that Germany does not want to incur expensive shipment costs (and risk) moving such a large amount of metal in a short period of time. It is also possible that they are wanting to obtain the physical via a <a href="http://www.perthmint.com.au/education-locoswaps.aspx">loco swap</a>, which would also reduce/eliminate shipment costs and risk if it was done advantageously over time. I was going to suggest that Germany may be waiting for leases to mature and then loco swap, but it seems they recently stopped leasing, so that theory is not valid.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The fact is no one knows the reason and my, and Dave's, reasons are both speculation. It is why I consider using a speculation/theory as proof of one's position to be not much of a case.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">There is one final thing I am very confused on. You will note Dave refers to me as a proprietor of the Perth Mint. The <a href="http://www.thefreedictionary.com/proprietor">definition of proprietor</a> is <i>"One who has legal title to something; an owner. One who owns or owns and manages a business or other such establishment." </i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I thought everyone knew the Perth Mint was government owned. But then this means that Dave doesn't understand the definition of proprietor. Someone commented on this and Dave's response was:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"Yes I know exactly who and what he is, you dingus. I was using the term "proprietor" euphemistically. I guess they haven't gotten to that part of your lesson on Sesame Street."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">OK, so Dave knows the Perth Mint is not privately owned, but then the <a href="http://www.thefreedictionary.com/euphemistically">definition of euphemistically</a> is <i>"The act or an example of substituting a mild, indirect, or vague term for one considered harsh, blunt, or offensive."</i> As in saying "economic with the truth" instead of "liar". Both say the same thing.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So what exactly is the harsh, blunt or offensive term that has the same meaning as "proprietor"? I am totally at a loss understand what the point/insult is supposed to be. Or is it possible Dave doesn't understand the meaning of euphemistic? Dingus indeed.</div>

I stopped following blogger Dave in Denver when he wimped out of publishing a critical, but civil, comment of mine on his blog. Thankfully ...

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COMEX stock drawdown: single most important metric to watch

<div dir="rtl" style="text-align: right;" trbidi="on"><div style="text-align: justify;">To understand what is going on with COMEX stocks, don't look at the stock level - it will lead you astray. You need the metric I presented at the Gold Standard Institute's 2009 seminar; one which Professor Fekete thought was the single most important metric to determine stress in the market. The second thing you need to do is put recent market action in historical context.</div><div style="text-align: justify;"><br />Firstly, lets review some historical stock levels for gold and silver for some key years - the 1980 peak, the 2001 bottom, 2012 and now. There is only one place I know that has that data going back that far, and it is www.sharelyxn.com. It is a lot easier to follow by looking at the charts of the stock levels, which are available for gold and silver if you have a subscription. If not, then just sign up for a free trial, it will be worth it just to see the charts I'm talking about.<br /><br />The table below shows the average total (registered + eligible) COMEX stock in millions of ounces for each of those years.</div><div style="text-align: justify;"><br /></div><table border="1"><tbody><tr> <th>Year</th> <th>Gold</th> <th>Silver</th> </tr><tr> <td>1980</td> <td>3.5</td> <td>80</td> </tr><tr> <td>2001</td> <td>1.0</td> <td>100</td> </tr><tr> <td>2012</td> <td>11.0</td> <td>140</td> </tr><tr> <td>Now</td> <td>8.0</td> <td>166</td> </tr></tbody></table><div style="text-align: justify;"><br /></div><div style="text-align: justify;">First thing to notice is that even after the big gold drop being talked about, the total gold stock is still massively up on the 2001 bottom and the 1980 bull market. Not surprisingly, given the behaviour of SLV's holdings, COMEX silver hasn't dropped.<br /><br />However, the stock figure by itself doesn't tell us much, as how can we compare the 1980s with today when we have a much larger economy. The important metric is to compare stocks in relation to open interest. If stocks decline but open interest declines as well, then the stock drop is to be expected.<br /><br />Thankfully Nick at Sharelynx calculates this for us - what he calls Owners per Ounce, or Stocks Cover and you can find the charts here. It is just open interest in ounces divided by stock in ounces. I like to invert it, which gives you a percentage indicating how much of the open interest is backed by stock, a sort of fractional reserves figure. The table below has those approximate figures I've eyeballed from Nick's charts.<br /><br /></div><table border="1"><tbody><tr> <th>Year</th> <th>Gold</th> <th>Silver</th> </tr><tr> <td>1980</td> <td>13%</td> <td>10%</td> </tr><tr> <td>2001</td> <td>9%</td> <td>28%</td> </tr><tr> <td>2012</td> <td>26%</td> <td>22%</td> </tr><tr> <td>Now</td> <td>19%</td> <td>21%</td> </tr></tbody></table><div style="text-align: justify;"><br />So even after that COMEX stock drop in gold, we still have a coverage ratio that is way above that which applied in the 1980 bull and which is not down much on 2012. The current coverage of around 20% also needs to be kept in context of the percentage of open interest which stands for delivery, which for gold and silver over the past five years averages between 2% to 4%. So it looks like COMEX has plenty of stock on a historical basis. It is when that percentage coverage gets a lot closer to the average standing for delivery rate that we can consider COMEX under stress and at risk of cash settlement. We aren't close, no matter how the much the pumper sites like to hype the recent stock declines.<br /><br />And for those who will say what about if everyone stands for delivery, well consider that while most of the shorts don't have the metal, most of the longs don't have the cash. We know this because of all the talk about margin calls causing people to have to sell. Think about that - if they couldn't meet the margin calls, then it means they didn't have the money to stand for delivery.</div></div>

To understand what is going on with COMEX stocks, don't look at the stock level - it will lead you astray. You need the metric I present...

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Chill out dudes

<div dir="rtl" style="text-align: right;" trbidi="on"><div style="text-align: justify;">OK, it is all getting a bit silly out there on the gold interwebs, particularly in respect of the supposed physical-paper price disconnect. I have been trying to kill this meme ever since it first appeared in 2008 but it seems the idea of production capacity shortages seems too difficult for many to get.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The "real" price of gold isn't what you pay for a 1oz coin on eBay. As Mish says <i>"Premiums on small denomination coins is not the same a general premium on physical gold itself."</i> But don't take his or my word for it, here's what Jim Sinclair says:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"For many retail investors around the world they are dialed into the paper market in various exchanges. The second market is a small one, but popular among retail investors, and that’s your corner or even major coin dealers. But neither of those are in fact the real gold market, which is the cash market for gold. This is the cash market for 400 ounce deliverable fine gold bars. That represents the true price of the market on any given day. ... for the physical market, not the coin dealers, but the real market, the 400 ounce deliverable market and Asian type settlement ..."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">So what is going on in this real market? Well, don't look to Jim Willie who thinks that <i>"those who purchase metals in bulk are having to pay $2000 or more an ounce for gold in the Asian markets"</i>. I work for the Perth Mint and we sell tonnes and tonnes of gold kilo bars into Asia every week and we'd be lucky to get a few dollars of premium above the so-called fake paper spot price. That tells me there isn't any stress in the wholesale markets. So COMEX and LBMA aren't going to be failing any time soon.<br /><br />Then we have the ABN Amro story with John Embry claiming that <i>"the Dutch Bank ABN AMRO came out and literally said that if you have allocated gold with us, you can’t have it. That, to me, is a default"</i>. Sorry, not true, thanks to About.Ag who found this link to the English translation of the conditions of those accounts and on page 6, section 4.3, it says:<br /><br /><i>"1. You have no right to the physical precious metals which you invest. However, under certain conditions, you can physically obtain the precious metals. ... 3. You cannot always physically receive the precious metal. ... In that case, you therefore have no rights or receivables vis -à-vis DBN or the bank."</i><br /><br />Sounds like a classic bank unallocated account, which unlike the Perth Mint's, is not necessarily backed by physical. So it is not a case of default.<br /><br />Final example is Bill Downey's claim that <i>"the London physical platform that buys and sells physical gold gets locked up. The system freezes"</i>. When I told Dan at The Fundamental View that there was no "the" London platform, he followed it up and discovered that:<br /><br /><i>"The screen shot in the article is not of a "physical" market but just a trading platform from a bank (one of many, each BB has their own platforms) for trading spot unallocated XAU/USD FX pair. The post made it seem (to the unaware) that this was "the" London platform. – Mr. Downey acknowledged this error in his email to me. ... His articles made it seem as though the system “shut down and locked people out from placing orders”. To his credit, Mr. Downey admitted to me that this could not be proven and that this was simply speculation on his part. He did admit that orders could still be phoned in."</i><br /><br />Simply speculation on his part. This price drop seems to have resulted in a lot of that. Look, it is great news that retail investors have gotten a bit smarter and are buying on price drops rather than chasing the price up like they have in the past, but it does not portend the end of the (paper gold) world, yet.<br /><br />If you want to be a little smarter, consider what I said to Ed Steer today, <i>"buyers really need to go for the cheapest physical they can and be a bit more flexible on who makes it...or go from coins to bars. Paying high premiums just because you want a certain brand or bar size, just means your money buys less ounces, which takes less ounces off the market."</i><br /><br />I note that Sprott's gold trust is trading pretty much at spot. So if you are a suspicious goldbug, which is why you want physical, then doesn't it make a lot more sense to buy the trustworthy PHYS at spot and then when this rush dies down, to sell your PHYS and buy physical coins/bars at more reasonable premiums? Funny how none of the physical pumpers mention this. That's because they can't make money off exorbitant fabrication premiums if you buy PHYS rather than their coins.<br /><br />Like the post title says, Chill Out, and think a bit deeper about the memes being pushed on you. To help with that, suggest reading this speculation that Andrew Maguire is a US Federal Reserve double agent. That site is a joke by the way, for those without a sense of humour, although the question of why Andrew hasn't produced a CV to stick in Jeff Christian's face is valid and something that puzzles me and some on this Kitco forum thread.</div></div>

OK, it is all getting a bit silly out there on the gold interwebs, particularly in respect of the supposed physical-paper price disconnect. ...

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The circus moves on

<div dir="rtl" style="text-align: right;" trbidi="on"><div style="text-align: justify;">I forgot to post that TF Metals Report responded to my response to Andrew Maguire's article on price suppression mechanics.<br /><br />Gene Arensberg did a post on my November 30 article. I watched it for a few days but no one commented so I stopped checking it. A day later on the 5th blogger Dave In Denver posted some comments, which I missed.<br /><br />TF picked up on these comments a day later, turning them into a post titled Cage Match: Bron vs. Denver Dave. Dave's main beef seemed to be that I didn't critique GLD and was thus an apologist for the ETFs. He completely missed the point of my response, which was solely about addressing the suppression mechanics.<br /><br />You can find my response to Dave here. One important extract is some core views I have:<br /><br /><ul><li>I do not recommend ETFs for anything but short-term trading.</li><li>If you don’t hold it in your hands, you have counterparty exposure - period.</li><li>Allocated with bar numbers in a non-bank vault does not have some magical force-field that stops it from being stolen. You are trusting your custodian.</li><li>If you hold it in your hands, you have theft exposure. All precious metal investment has risks, only you can decide what risks you are comfortable with.</li><li>Don’t let anyone tell you that you are an idiot for storing it yourself or for storing with a custodian.</li><li>If you don’t understand a prospectus/agreement, stack physical.</li><li>If you don’t understand a company’s business model (which includes the Perth Mint’s “use in our business” unallocated), stack physical.</li></ul><br />The third last one is one that annoys me whenever I see it - this judgemental attitude that you must hold your metal without any consideration that what is right for you may not be right for someone else.<br /><br />Interestingly, at the TF blog no one was interested in my response and it didn't gather any further debate. As I commented at TF:<br /><br /><i>I wasn't expecting much comment one way or the other. TF posts so frequently that the circus moves on and unless you can comment within the day of the post it is too late, which is difficult for me being 12 hours behind.<br /><br />I do not like getting into this sort of infighting but as everything lives on forever on the internet and if you don't reply the claims stand and become accepted as fact. This whole negative dynamic is not good as I agree with Gene Arensberg's comment (where Dave's comments originally appeared) "In fact they succeed only in one respect - of confusing and turning some people off to the entire sub-sector. It is a pity they do not realize that one cannot poison just part of a well."<br /><br />My response will also be a handy reference link to give next time I'm accused of being a bankster shill.</i><br /><br />I suppose it reflects the fact that the TF Metals Report has a client base who are just buy and hold type stackers. They have made their decision and thus most of them aren't interested in debating or learning, they are primarily there for entertainment. TF's use of "army" imagery and the "cage match" characterisation are indicative of that.<br /><br />Nothing wrong with that, except that I don't know how they are going to know how to assess when to sell their metal, which is something they will have to work out for themselves because it is doubtful TF or Maguire (or many people selling gold products) will do it as it doesn't help your business model to tell your clients to leave. However, if they haven't spent the bull market thinking critically and trying to understand the market's dynamics, it is likely they will get the exit all wrong.<br /><br />The true test of who the charlatans are in this business will be those who continue to say buy buy buy all the way through the bubble top as they try and squeeze every last bit of profit out of their clients before they close up shop and move on to the next story.</div></div>

I forgot to post that TF Metals Report responded to my response to Andrew Maguire's article on price suppression mechanics. Gene Arensbe...

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ETF Price Suppression Mechanics

<div style="text-align: justify;">I've got a response up to Andrew Maguire's TF Metals Report <a href="http://www.tfmetalsreport.com/blog/4327/guest-post-price-suppression-mecanics-gld-and-slv-andrew-maguire">article</a> on the <a href="http://www.perthmintbullion.com/Libraries/Website_Downloads/ETF_Price_Suppression.sflb.ashx">corporate blog</a> "explaining" how bullion banks use ETFs to suppress the prices of gold and silver.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I wasn't planning on it turning into a 5200 word, 12 page article, but so many memes to set straight (do ETFs have the gold, ETF market making, share borrowing, 100:1 fractional reserve bullion banking) plus Andrew really didn't explain the "mechanics" very well.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I suspect Andrew expropriated <a href="http://victorthecleaner.wordpress.com/2012/06/01/gld-the-central-bank-of-the-bullion-banks/">Victor's idea</a> about the ETFs being used as a source of metal, far too many similarities I think (eg reference to "inventory financing" and the selling and buying GLD versus unallocated strategies). Andrew really got himself into a knot however in explaining these.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I've had it on my to-do list to address Victor's post in detail, and I have sort of done that with this Andrew response, but it does not address Victor's inventory changes and "inventory strategy", for which I need time to analyse the numbers in detail myself.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I look forward to Victor rebutting my comments, which will be funny because he'll be supporting Andrew at the same time in a way.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">One point I would make is that Andrew's post was originally written for TF's "Army" members. Ignoring the factual errors, the best that can be said is it was written in a slapdash way, stream of consciousness style, without much effort in writing simply and clearly. I would have thought paying members deserve better.<br /><br />I was a bit suspicious when Andrew "arrived" out of nowhere with his evidence and then surprise, he shortly thereafter had a service to sell at <a href="http://www.coghlancapital.com/">http://www.coghlancapital.com/</a>. <a href="http://thefundamentalview.blogspot.com.au/2012/04/who-is-andrew-maguire-i-mean-really-who.html">Not supplying his CV</a> also doesn't help (but FYI he has his own <a href="http://en.wikipedia.org/wiki/Andrew_Maguire_(whistleblower)">Wikipedia page</a>). I also don't buy <a href="http://www.tfmetalsreport.com/comment/239310#comment-239310">TF's explanation</a> that Andrew <em>"doesn't talk to ANYONE because of the ongoing CFTC investigation and the current silver manipulation civil lawsuit"</em> - releasing a CV isn't going to be a problem in that respect. Jeff Christian has made a big deal about the CV, so why not bury him now on that matter?<br /><br />Anyway, this article by Andrew has just got me asking more questions about him. This may seem like small stuff, but:<br /><br />1. Andrew's use of "spot index" - this is not how London bullion traders talk (and I checked with a bullion bank contact to make sure and they said that phrase is not used).<br />2. Getting the number of GLD's APs massively wrong.<br />3. Borrowing shares "from the ETF".<br />4. "Allocated at the fix."<br /><br />These are just not mistakes someone with deep knowledge of the bullion market would make. I note that his Coghlin website About section says <i>"the last 19 years of which have been as a metals specialist"</i> - doesn't say "precious metals specialist". My best guess at this time is he is a trader of base metals who made the switch to precious metals as that is the hot market and doesn't want to release his CV because it is hard to get people to pay you for precious metal trading advice if you can't demonstrate experience in that market.<br /><br />Hey, this speculating without any facts and making stuff up is fun and easy. I should do more of it, everyone is doing it you know.</div>

I've got a response up to Andrew Maguire's TF Metals Report article on the corporate blog "explaining" how bullion banks...

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Tungsten bars face high supply risk

<div style="text-align: justify;">Hat tip to <a href="http://www.moneymorning.com.au/20121009/why-the-hunt-for-strategic-minerals-took-me-to-holden-in-port-melbourne.html">Money Morning Australia</a> for drawing my attention to the British Geological Survey's <a href="http://www.bgs.ac.uk/mineralsuk/statistics/riskList.html">supply risk index</a> in an article about graphite. I wasn't interesting in the graphite story - my eye was immediately drawn to the #2 ranking of tungsten in the table below.</div><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://www.moneymorning.com.au/images/mm20121009a.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://www.moneymorning.com.au/images/mm20121009a.jpg" width="295" /></a></div><br /><div style="text-align: justify;">With gold becoming increasingly popular, risk of supply problems with the key input to fake gold bars I'm sure is a top concern for fraudsters around the world (and New York in particular). Let us also not forget central bankers, who we can be sure are also concerned about any potential restriction on their ability to make fake 400oz bars to replace all the real gold that has been leased/sold.</div><div style="text-align: justify;"> </div><div style="text-align: justify;">Interestingly, the BGS note that "84% of the world's tungsten is currently sourced from China", with China also being the top reserve holder of tungsten as well. So not only is the US exposed to China holding all its debt, it is also at their mercy as to fake tungsten bar supply.</div><div style="text-align: justify;"> </div><div style="text-align: justify;">While I'm being silly, it seems appropriate to discuss the silver:gold ratio. This topic attracts a lot of stupidity along the lines of "the silver:gold ratio should be X because of Y and therefore silver is going to the moon". Often the "because of Y" uses some sort of supply metric or that some King thousands of years ago set the ratio at 10:1. Curiously, the so derived ratio is always lower than the current ratio.</div><div style="text-align: justify;"> </div><div style="text-align: justify;">One of the BGS' criteria for determining supply risk is Scarcity and they provide a handy table of each elements global scarcity. Silver is 0.055 parts per million while gold is 0.0013ppm. Hmm, that is a ratio of 42.3:1.</div><div style="text-align: justify;"> </div><div style="text-align: justify;">Anyway, this whole line of argument is shortsighted to start with as scarcity is not the only driver of price, as something can be really scarce but if no one wants it, it ain't worth anything - as Kid Dynamite covered in <a href="http://kiddynamitesworld.com/one-cannot-talk-about-supply-and-price-without-the-third-piece-of-the-puzzle-demand/">this post</a>.</div>

Hat tip to Money Morning Australia for drawing my attention to the British Geological Survey's supply risk index  in an article about g...

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Negative lease rate confusion, again

<div style="text-align: justify;">Jeff Nielson again (see <a href="http://goldchat.blogspot.com.au/2009/10/slv-and-jeff-nielson.html">here</a> for previously) proves he knows little about the gold market with this <a href="http://silvergoldbull.com/blog/analysis-fraud-of-negative-lease-rates/">post</a> on negative lease rates. See this comment of Jeff's for a seriously confused guy:</div><i><div style="text-align: justify;"><blockquote class="tr_bq">Let me explain this one more time.<br /><br />GOFO is the "nominal" lease rate. As you (and others) have observed, you SUBTRACT LIBOR from that number to get the "real" lease rate.<br /><br />Understand that LIBOR is a PROXY for inflation here. So this calculation essentially strips out inflation to tell us the REAL rate at which the banksters are leasing their gold...and when that (real) rate is negative it implies a fraud on the market.</blockquote></div></i><br /><div style="text-align: justify;">LIBOR = inflation, GOFO = nominal lease rate, huh? My response:</div><i><div style="text-align: justify;"><blockquote class="tr_bq">Jeff, GOFO is not a nominal lease rate and LIBOR is not a proxy for inflation.<br /><br />GOFO is a gold foward (ie future) rate. It is not a lease rate, nominal or real. Technically, as per http://www.lbma.org.uk/assets/OTCguide20081117.pdf it is "rates at which the Market Making Members will lend gold on swap against US dollars". What many people do is focus on the "will lend" and miss the "on swap".<br /><br />I also don't get how you think LIBOR is a proxy for inflation. Are you seriously saying that 1 year inflation rates are 1%? Shadow Stats I think would disagree with you. LIBOR is the "cost of borrowing unsecured funds" as per http://www.bbalibor.com/<br /><br />Finally, the Perth Mint does actually borrow gold from bullion bankers from time to time and I can confirm that we are not being paid to do so.</blockquote></div></i><br /><div style="text-align: justify;">As at today, no counter response by Jeff even though the livefyre commenting system is showing him as "listening". Same MO as my Seeking Alpha exchange with him - just ignore the comment when its is clear you've lost the argument.</div>

Jeff Nielson again (see here for previously) proves he knows little about the gold market with this post on negative lease rates. See this...

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Stupidest PM statement of the year?

<div style="text-align: justify;">I think this is a strong contender for stupidest statement by a precious metals blogger/commentator so far this year:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><a href="http://www.silverseek.com/commentary/silver-metal-now-and-golden-travelers-check">Jeffrey Lewis</a>: "One of the main advantages of buying silver versus more costly precious metals like gold and platinum is that silver’s relative cheapness allows you to buy more metal for the money."</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">How does this make any sense as an investment rationale - buy it because you get more "stuff" to look at? On that basis copper is even better than silver.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I challenge anyone to find something more nonesensical or WTF (conspriacy theories excluded) in the precious metal blogosphere.</div>

I think this is a strong contender for stupidest statement by a precious metals blogger/commentator so far this year: Jeffrey Lewis : "...

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MF Global and HSBC case

<div style="text-align: justify;">As usual, Zero Hedge and others hype a story way beyond the reality (see here for the <a href="http://www.bloomberg.com/news/2011-12-09/hsbc-sues-mf-global-brokerage-over-stored-gold-silver-bars-1-.html">Bloomberg story</a>), such as:</div><div style="text-align: justify;"></div><br /><div style="text-align: justify;"><a href="http://www.zerohedge.com/news/gold-rehypotecation-unwind-begins-hsbc-sues-mf-global-over-disputed-ownership-physical-gold">ZH</a>: "is whether or not MF Global was rehypothecating (there is that word again), or lending, or repoing, or whatever you want to call it, that one <strong style="text-align: -webkit-auto;">physical</strong> asset that it should not have been transferring ownership rights to under any circumstances."</div><div style="text-align: justify;"><a href="http://www.tfmetalsreport.com/blog/3111/three-get-ready">TF</a>: "A lawsuit such as this one could easily bring about the total destruction of the Comex/LBMA-based, fractional bullion banking system"</div><br /><div style="text-align: justify;">Here is a suggestion, read the actual <a href="http://www.scribd.com/doc/75288409/HSBC-Bank-USA-National-Assoc-v-MF-Global-Inc-NYSD-Bankruptcy-Ct-11-02790-8-Dec-2011-Doc-1-INTERPLEADER-COMPLAINT">Interpleader Complaint</a> for the facts:</div><br /><div style="text-align: justify;">1. Mr. Fane and MFGI entered into five COMEX gold contracts and three COMEX silver contracts relating to the Property. HSBC is the depository for the Property pursuant to a certain Gold Delivery Point Agreement and a certain Silver Delivery Point Agreement entered into between HSBC and the New York Mercantile Exchange, Inc.</div><div style="text-align: justify;">2. By e-mail dated October 25, 2011, MFGI notified HSBC that "MF Global’s customer Mr. Fane would like to take possession of [the Property] and move [the Property] to his account at Brinks (sic). I have already canceled for load out. Customer will advise of date and time.”</div><div style="text-align: justify;">3. Mr. Fane did not contact HSBC to request that the Property be transferred to his account at Brink’s prior to the Commencement Date.</div><div style="text-align: justify;">4. By letter dated November 18, 2011, HSBC, through its undersigned counsel, notified the Trustee that it had possession of the Property. HSBC also notified the Trustee, in light of HSBC having received instructions from MFGI prior to the Commencement Date to transfer the property to Mr. Fane upon his request, that HSBC would act in accordance with MFGI’s prior instructions barring an injunction or contrary instructions from the Trustee.</div><div style="text-align: justify;">5. By letter dated November 21, 2011, Mr. Fane requested that HSBC transfer the Property to his account at Brink’s.</div><div style="text-align: justify;">6. By letter dated November 22, 2011, the Trustee, through his counsel, asserted to HSBC that the Property constitutes customer property under Part 190 Regulations of the Commodity Futures Trading Commission and that the treatment of the Property must be administered by the Trustee. The Trustee further instructed HSBC not to release the Property to Mr. Fane.</div><div style="text-align: justify;">7. By letter dated November 22, 2011, HSBC notified Mr. Fane that the Trustee had instructed HSBC not to release the Property to him and that the Trustee asserted an interest in and claim to the Property.</div><br /><div style="text-align: justify;">Not being a lawyer, I read this as "before you went bankrupt, you said I could have my metal", "yeah, well, you didn't take it before I went bankrupt, so it is now part of the bankruptcy proceedings".</div><br /><div style="text-align: justify;">So no rehypothecation or loaning, no "suing" by HSBC, no stealing or counterfeiting of the bars and certainly not the total destruction of bullion banking. Just another lesson in counterparty exposure and possession is nine tenths of the law.</div>

As usual, Zero Hedge and others hype a story way beyond the reality (see here for the Bloomberg story ), such as: ZH : "is whether or n...

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Futures furphies

<div style="text-align: justify;"><a href="http://en.wikipedia.org/wiki/Furphy">Wikipedia</a>: A furphy, also commonly spelled furfie, is Australian slang for a rumour, or an erroneous or improbable story.<br /><br />In <a href="http://www.sprott.com/Docs/MarketsataGlance/2011/0911%20Gold%20Stocks%20-%20Ready%20Set.pdf">Gold Stocks: Ready, Set,</a> Eric Sprott and David Baker say that <i>"While the futures market is comfortably forecasting a continuation of today’s levels, the majority of sell-side analysts refuse to update their gold price estimates to reflect its recent strength."</i><br /><br />It is futures 101 that futures prices are not a forecast by the market, they are just a mathematic derivation from the spot price, interest rates, freight and storage costs, with gold interest rates and dollar interest rates being key components. Backwardation is when gold interest rates are higher than cash rates. Contango is the reverse. Either way, the futures price isn't forecasting anything. See <a href="http://goldchat.blogspot.com/2008/12/gold-isnt-in-backwardation-usd-is-in.html">this blog post</a> for more on backwardation.<br /><br />In that same article, Sprott raised the "excessive turnover" meme which Eric seems to be running recently - he must think he is on a winner with this. I dealt with it in <a href="http://goldchat.blogspot.com/2011/07/turnover-and-fractional-memes.html">this post</a> and to that I'd like to add another counterpoint. First, the quote:<br /><br /><i>"In the LBMA market, for example, market participants traded an average 19.6 million ounces of gold PER DAY in July 2011. Keep in mind that the total gold mine production in 2010, globally, was approximately 86.5 million ounces. ... so the LBMA is essentially trading a year’s worth of production in less than a week"</i><br /><br />I think it is misleading to relate turnover only to new mine production. This assumes that there is no sales by any of the investors who hold above ground gold. Eric should at least be including privately held gold stocks of 30,000t, or 965 million ounces. Adding that to the 86.5moz then the 19.6 moz represents the "LBMA" turning over the stock once every 54 days, or 7 times a year. Not as dramatic, is it. If we included the 30,000t or so of central bank holdings then it is even less so. But don't fear Eric, help is at hand.<br /><br />The funny thing about the "large turnover is bad" idea is that in most markets this is seen as a good thing, as it indicates the particular market is liquid. On this line of thought, note that the recent <a href="http://www.lbma.org.uk/assets/Loco_London_Liquidity_Surveyrv.pdf">Loco London Liquidity Survey</a> was undertaken by the LBMA at the request of the World Gold Council <i>"in order to strengthen its argument that the gold market is sufficiently deep and liquid to justify gold’s characterisation as both high quality and liquid"</i> with the objective of getting gold included in the Basel liquidity buffers for banks.<br /><br />What did their survey show? <i>"The average daily trading volume in the London market in this period was 173,713,000 ounces or $240.8 billion."</i> I can see Eric getting his calculator out now and dividing 86.5 by 173.7 and getting really excited. When you hear that the "paper" markets turn over annual mine production every 12 hours, remember you heard it here first.<br /><br />The other thing I find interesting is the different way Sprott pitches this meme. For the gold/silver bugs we get:<br /><br /><i>"... I think all the paper markets are a joke. As you are probably aware, we trade a billion ounces of silver a day. A billion ounces. The world produces 900 million a year."</i> (<a href="http://www.chrismartenson.com/blog/eric-sprott-paper-markets-are-joke-prepare-bullion-prices-go-supernova/60155">link</a>)<br /><br />But in the Markets at a Glance article with Sprott branding on it for a more wider market it is less breathless and a bit more sophisticated:<br /><br /><i>"When price discovery is dictated by levered paper contracts with no physical backing, it’s extremely easy and relatively inexpensive to jostle the spot price around."</i><br /><br />Interestingly, the LBMA survey revealed that 90% of trading was spot, not forwards (sort of the over the counter markets version of futures), which equals 156moz. COMEX average daily trading during August was 278,000 contracts, or 27.8moz. 156 versus 27.8 - who do you thinks jostles who?<br /><br />Continuing on with futures, we get this from <a href="http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=24149">Patrick A. Heller</a>: <i>"Increases in margin requirements make sense as prices are rising, as that helps keep the market in order, but it does not make sense when prices are falling."</i><br /><br />Now this is a very common misunderstanding. Margin increases (or decreases) are to do with volatility of the price, not the direction of the price. <a href="http://traderdannorcini.blogspot.com/2011/09/cme-hiking-margins-on-precious-metals.html">Dan Norcini</a> explains it well:<br /><br /><i>When you get a market like silver that drops 15% in ONE DAY, you are going to get margin hikes. The reason - the very integrity of the Clearinghouse comes into play. <br /><br />Silver closed down $6.48 today. In a single session, one long contract in this market cost the buyer a paper loss of $32,400! That is enormous. If you consider the fact that the previous old margin was $21,600, that was wiped out and then some.<br /><br />During the clearing or settlement process, the winners get paid (have their accounts credited) by debiting the loser's accounts. If the losers do not have sufficient funds in their accounts, the whole process breaks down.</i><br /><br />Zero Hedge has really went downhill in the past few years and <a href="http://www.zerohedge.com/news/about-london-gold-exchange">this post</a> by them I found very funny and symptomatic of the sort of readers they are now attracting:<br /><br /><i>We are only putting this up because we have been flooded with emails about an event which for some reason readers believe is relevant. The event in question is that according to its website, the London Gold Exchange ("LGE" or the "Joke") has closed. The one thing we would like to say about this is that the LGE is nether an exchange, nor does it trade gold.</i> <br /><br />You have only yourself to blame Tyler. While he didn't meant he post to be ironic, I read it that way. Yes, Tyler, your readers can't tell between real gold news and rubbish, but guess what, neither can you, IMHO.<br /><br />To close, I'll quote myself from <a href="http://www.caseyresearch.com/gsd/edition/lewis-lehrman-present-plan-return-gold-standard">Ed Steer's Gold & Silver Daily</a> on the recent sell off in precious metals:<br /><br /><i>Here's an interesting comment that I got from my friend Bron Suchecki over at The Perth Mint yesterday. I'd sent him an e-mail on the weekend asking him how sales were both on Friday...and their Monday, which started Sunday night here in North America. This was the reply that I got...<br /><br />"The Perth Mint has been very busy this Monday morning with a lot of buying [but also some selling], however buying is outweighing selling by a fair margin [pun intended]...and the decrease in the AUD/USD has taken some sting out of the drop for Aussie investors.<br /><br />I see this sell-off driven by leveraged “weak hand” money. In contrast, average investors [the real smart money] are looking at this as an opportunity to buy in or top up at cheaper prices. These buyers are “strong hands” and have been the ones who have been driving the trend all these years."</i><br /></div>

Wikipedia : A furphy, also commonly spelled furfie, is Australian slang for a rumour, or an erroneous or improbable story. In Gold Stocks: R...

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Turnover and Fractional Memes

<div style="text-align: justify;">I recently listened to <a href="http://www.chrismartenson.com/blog/eric-sprott-paper-markets-are-joke-prepare-bullion-prices-go-supernova/60155">an interview</a> between Eric Sprott and Chris Martenson. Eric has a very good line in spin playing to the themes beloved by the 'bugs. Deconstructing them requires more time than I have at the moment, but this comment I can't leave:<br /><br /><i>"... I think all the paper markets are a joke. As you are probably aware, we trade a billion ounces of silver a day. A billion ounces. The world produces 900 million a year."</i><br /><br />There are many falsehoods in the precious metal commentary "market" but I'm surprised Eric is supporting the idea that large turnover figures are suspicious, which I debunked in <a href="http://goldchat.blogspot.com/2009/01/london-bullion-clearing.html">this post</a>. He should be careful supporting this meme as it can just as easily apply to his own funds, particularly his silver fund as he seems not interested in doing any secondaries (in contrast to his <a href="http://www.zerohedge.com/article/sprott-asset-management-adds-another-66-tons-physical-gold-phys-etf">gold fund</a>).<br /><br />The suspicious turnover meme is often confused with fractional bullion banking, an example being this comment by <a href="http://www.theburningplatform.com/?p=18650">The Burning Platform</a>:<br /><br /><i>“Several competent analysts have worked the numbers (including Bill Murphy and Chris Powell of GATA), and have come to the conclusion that for every ounce of silver in known inventories there are approximately 100 paper contracts trading (a fractional bullion system, if you will) on various exchanges across the globe.”</i><br /><br />My response below:<br /><br />1) My understanding is that the 100:1 figure did not come from “analysis” but from a statement made by CPM Group’s Mr Christian. See <a href="http://goldchat.blogspot.com/2010/04/london-unallocated-fractional-fubar-or.html">here</a>. I would be very interested in independent analysis coming to the 100:1 figure that did not rely on Mr Christian’s comment, please provide links.<br /><br />2) Mr Christian’s comments were confused by many as a statement about the ratio of fractional bullion banking instead of paper to physical trading ratio, which are two completely different things. GATA’s Adrian Douglas did an analysis that concluded the fractional ratio was 4:1. That analysis had serious flaws in my opinion (see <a href="http://goldchat.blogspot.com/2009/10/king-of-currencies.html">here</a> but in the end it was too conservative, with Mr Christian confirming it is generally 10:1 (40:1 in the case of AIG).</div>

I recently listened to an interview between Eric Sprott and Chris Martenson. Eric has a very good line in spin playing to the themes belove...

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Lies leave traces behind

<div style="text-align: justify;">A quote from the <a href="http://www.zerohedge.com/article/its-transitory">latest Mike Krieger</a> article: <i>"For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">This quote appeals to me because I see this happening often in the internet precious metals community. I see many untruths starting out and propagating and even if they are "nailed down" they still leave a feeling of distrust. I am of course speaking of the Perth Mint here, but there are many other beliefs about the precious metal markets that behave like this. These untruths also resurface again and again, thanks to precious metal newbies who fall upon old webpages, which gives them life all over again.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">These untruths fall into two categories: a) Lies, which I classify as those put out by people knowing them to be false; and b) Misunderstandings or Misinterpretations, which are put out by well-meaning people unknowledgeable in the subtleties of the precious metals markets. Why these untruths appeal and resist refutation is best explained by the following text, which prefaced the quote above: </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"... in the big lie there is always a certain force of credibility ... and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie ... It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation."</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">I should point out that the quotes are not Mike Krieger's. Mike was merely quoting from Adolf Hitler's Mein Kampf.</div>

A quote from the latest Mike Krieger article: "For the grossly impudent lie always leaves traces behind it, even after it has been nai...

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Someone is wrong on the internet

<a href="http://kiddynamitesworld.com/my-life-its-funny-sad-because-its-true/">Kid Dynamite</a> found this cartoon. It is unfortunately far too true for me. Why do I give a stuff?<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://kiddynamitesworld.com/wp-content/uploads/2011/05/duty_calls.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" j8="true" src="http://kiddynamitesworld.com/wp-content/uploads/2011/05/duty_calls.png" width="290" /></a></div>

Kid Dynamite found this cartoon. It is unfortunately far too true for me. Why do I give a stuff?

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Dave in Denver - The Golden Truth?

<div style="text-align: justify;">A couple of weeks ago <a href="http://truthingold.blogspot.com/2011/04/hey-university-of-texas-investment.html">this blogger</a> did a post about the University of Texas taking delivery. In it he made the following statement<br /><br /><i>"Delaware Depository also serves as one of the Comex depositories and you risk having your gold mingled with unallocated gold or "accidentally" borrowed"</i><br /><br />To me he is saying Delaware Depository would defraud their clients by giving/lending a bullion bank the client's allocated gold without their knowledge. I left a comment saying as such and that I thought he had stepped over the line with this.<br /><br />He replied, saying I "crossed over the line by accusing me of crossing over the line". I left another response disagreeing, but he did not allow it through. I emailed him to ask if he hadn't got the response or had, but wasn't going to publish it. No reply back from him.<br /><br />My view of blogging is that you should be prepared to defend yourself (or admit you were wrong) if you are really after the truth. Dave obviously disagrees. Below is the response he would not publish - I'll let you make up your mind on whether Dave is really after the Golden Truth.<br /><br />"Very few people/entities can be trusted in the world of precious metals" Agreed, but I gather you don't include Perth Mint <a href="http://truthingold.blogspot.com/2010/05/physical-bullion-vs-paper-get-your.html">in that</a> :)<br /><br />Your argument against DDSC is based on two red flags. First is non disclosure of insurance arrangements. <a href="http://www.delawaredepository.com/pdfs/01a_Non-Commercial_Depository_Agreement_USA_NCDA-110126_(Letter_and_AOF).pdf">Here</a> "DDSC agrees to maintain "all risk" insurance coverage for Precious Metals stored for you." That is a bit vague as it doesn't say "fully" but they do say <a href="http://www.delawaredepository.com/bullion/allocated.asp">here</a> that "All precious metal assets held at DDSC are maintained in customer-specific custody accounts, on a fully insured basis, and off of DDSC's balance sheet." If they aren't fully insuring but saying they are then that is not good and a real red flag - I'm assuming you know for a fact that they don't fully insure.<br /><br />I would note that any depository of size is unable to be fully insured because insurance markets don't have the capacity/willingness to underwrite it. That would cut in at around $1b - $2b with the cost getting prohibitive beyond that, assuming it is even available. If DDSC's total holdings are above that you may have a point.<br /><br />"DDC is a Comex depository - sorry, guilt by association and guilt by sleaze." I think you're second red flag of guilt by association is weak. As you say "With the sleaze and corruption embedded in our entire system, especially on Wall Street" you can't trust Wall Street. But then you yourself "trading on Wall Street. For nine of those years, I traded junk bonds for a large bank", so couldn't someone just raise a similar guilt by association red flag on you? You don't disclose that you didn't work for Goldman? Don't get me wrong, I'm not saying you are guilty by association, just suggesting you put the shoe on the other foot and see how it feels.<br /><br />"If you want to read into or infer anything from what I wrote, that's your business" I don't think it is just me reading that in, I think most people would. Because I think most people would read that into it that is why I think it steps over the line.<br /><br />When you say "you risk having your gold mingled with unallocated gold or 'accidentally' borrowed" you are saying there is a reasonable possibility (ie risk) that DDSC will engage in criminal fraudulent action to comingle a client's metal and/or lease it out. That is a pretty strong statement.<br /><br />"you crossed over the line by accusing me of crossing over the line" So it is OK for you to accuse someone of being at risk of acting criminally but not OK for me to simply say I think you went too far by making that statement? I think our differing views about “crossing the line” is a difference between Australia and America in respects of custom and laws regarding defamation and free speech.</div>

A couple of weeks ago this blogger did a post about the University of Texas taking delivery. In it he made the following statement "De...

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