Diary

CFTC Hearing: "physical" gold market, solid as 24k or manipulated ponzi?

CFTC Gold and Silver Hearing Is Old News — Seeking Alpha

I’ve noticed a couple hedge funds have converted their paper ETF gold holdings into physical gold. Greenlight Capital did last year for about $400million worth in their own warehouse, citing storage costs of physical is cheaper than gold fund mgt fees. hmmmm

Anway, from recent CFTC hearings it is revealed that the “physical” gold market can include GLD ETF, London LBMA OTC gold, Comex gold. All paper.

It was also admitted that there is approximately 100X gold paper leverage to every ounce of gold.

In one of the videos the guy testifying said gold banks shorted the market at the time when they were getting many physical gold redemptions. An obvious attempt to keep prices down to prevent any more physical redemptions(manipulation). He later came up with some gobbledy gook saying he misspoke.

Also, something is afoot when exchanges change rules saying they do not have to settle in physical gold but rather cash. Obviously it is similar to fractional reserve banking where they don’t have the entire amount outstanding.

So it sounds like you can have unlimited naked shorting in order to keep prices in check.

Can you say manipulation of physical gold?

This is something to keep an eye on as it strikes to the very integrity of markets, especially in this environment of distrust.

In addition, Sprott Asset Mgt set up a gold bullion fund that must hold nearly all (97%)physical gold. They raised as much as $390million recently and listed as holding only $15million in gold assets.

Those large amounts are the type that central banks buy from the IMF. Recent reports have the IMF announcing that they are selling large quantities of gold either to India or China. Critics say it was only a deception intended on keeping the price of gold in check not to cause a run on real physical gold and blowing up the gold paper market (remember 100X or so).

China said it was willing to buy the entire IMF lot of 13 million ounces the IMF had indicated for sale and would buy the entire 100million ounces in cash. The IMF later sold a chunk to central banks of India, Sri Lanka, and Mauritius in “off market” transactions, probably bookkeeping entries and not physical transfer. More “things that make you go hmmm”

IMF later announced they’d sell another chunk into the market. Sprott announced they had inquired about purchasing a chunk from the IMF but was turned down by the IMF (probably since Sprott wanted physical delivery and not a piece of paper that transferred ownership but bullion still held by IMF)

This is either a grand conspiracy to get every last dollar from regular folks before gold bubble pops (all the gold commercials are getting tiring), OR, we’ll see a bust of the (100X+)paper gold bubble and price of physical gold skyrocket on any nervousness.

I’m gonna have to revisit my brainstorm on raising some money to buying pawn shops up for the gold purchasing engine

There is some interesting reading in the above article and video clips of the CFTC testimony.