Two interesting articles out on Nov. 29 point towards the U.S. Commodities Exchange (Comex) soon running into a potential default on delivering physical gold in their futures contracts.
According to long-time industry analyst Harvey Organ, the numbers being given by the Comex don’t add up, and he has now stated the belief that the Comex has no metal to back up the contracts they have sold.
For the past eight years or so I have had a very good relationship with the U.S. Commodity Futures Trading Commission. My desire was always to keep the channels of communication open though I knew that the Comex was manipulated on a daily basis.
Always the CFTC, through Mathew Hunter (Bart Chilton’s hand-picked protege), communicated with me on all issues. My deal was not to repeat anything said. I honored that. After learning about the exchange-for-physicals mechanism on the Comex, I raised with the CFTC some important issues about them and initially Hunter responded.
However, my last two letters to him have not been acknowledged.
I would like to point out the huge difference in deliveries between New York and London. November is a non-active delivery month in gold and we generally witness around 1.5 tonnes delivered upon. However, when you note the amount of contracts transferred it is a whole different story: Last month we had approximately 8,000 contracts of gold open interest transferred to London per day or 180,000 contracts or 1.8 million ounces (560 tonnes). This month it looks like we will have around 9,500 contracts transferred per day or 2 million ounces transferred (620 tonnes). It certainly shows that Comex has a lack of physical metal. – Silver Doctors
Then on the same day this was asserted by long-time analyst and insider Jim Rickards.
Failure to deliver gold: This is almost definitely coming. So much of the gold market is “paper gold.” This paper gold market is so manipulated, we no longer have to speculate about it. It’s very well documented. But it all rests on a tiny base of physical gold. I describe the market as an inverted period with a little bit of gold at the bottom and a big inverted pyramid of paper gold resting on top.
The [available amount of] physical gold is getting smaller, which surprises many people. The might say, “Gee, there’s 2,000 tons of mining output per year, and the gold that exists doesn’t go anywhere, so why isn’t that little brick getting bigger instead of smaller?”
So how does this end?
Someday, probably sooner than later, somebody is going to show up and say, “I want my gold, please,” and the custodian won’t be able to give it to them.
What if a major institution wants its gold but can’t get it?
That would be a shock wave. It would set off panic buying in gold, and inflation expectations — now subdued — could spiral out of control.- Daily Recknoning
For gold holders it has always been a matter of patience over emotion. It took a decade for gold to move from $240 in 2002 to a new all-time high of $1940 a decade later. And since the Fed has had to depress the gold markets with the same amount of money it has used to prop up the stock markets, it is not hard to imagine what the outcome will be once either of these markets loses control, and prices spiral towards equilibrium of what they should have been without the manipulation.