Anyone Who Believes The Comex Numbers Is Very Naive

“The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.” – disclaimer now posted on the Comex gold and silver daily warehouse stock report as of Monday, June 3, 2013 – Investment Research Dynamics – June 4, 2013

Yesterday I published an article detailing the Comex gold futures to deliverable physical gold ratio that is now north of 200:1.  But an erudite colleague of mine, John Titus of “Best Evidence,” correctly pointed out that:  “They are probably bluffing.  In other words, the real number is significantly higher than 200:1.

For the record, John does more thorough research on the economic numbers and reports that he studies than anyone I’ve ever come across.  And he does it with the trained analytic eye of a seasoned patent litigation attorney.

Let’s put everything in perspective.  The numerical reports from which fancy graphs and and dry detailed data presentations are created originate from the Too Big To Fail Banks. I’ve said for quite some time that IF the bullion banks who control the Comex and the LBMA are submitting honest data reports for the Comex and LBMA, it would be the only business line in which they do not hide the truth and report fraudulent numbers.  What is the probability of that?

JP Morgan was recently caught stuffing proprietary Comex futures short-sell trades into the “Managed Money” account category of the COT report.  The CFTC scolded JPM and slapped them with a whopping $650,000 – LINK.    Does anyone really believe that the CFTC wrist-slapping corrected any fraudulent data reporting by the likes of JP Morgan?  Really?

Put your “think like a criminal hat” on for a moment.  You know that the people who care about this sort of thing already know that the there’s a paper vs. physical problem in the market.  So just show them a number that they’ll buy into and that will be “the number.” Most analysts will accept that number at face value and use that in their articles and blog posts.  That number then becomes accepted in goldbug circles as the “real” number.

But the truth of the matter is that they are more than likely reporting numbers they want us to see, not the real numbers.  For instance, the silver market is now seizing up from lack of supply.  Please see this report from Greg Hunter and David Morgan if you are still skeptical:   Retail Silver Has Seized Up.

Yet, the Comex bank custodians are reporting over 51 million ounces of silver available fore delivery – LINK.  In fact, CNT – an official supplier to the U.S. mint – is showing 13.3 million ounces of deliverable silver.   So why is there’s a shortage of silver at the U.S. mint? IF that silver were actually in the vault, the U.S. mint could buy a spot contract – September has a silver contract open – and take immediate delivery.  

Also, why did the CME, unannounced, start slipping that little accuracy disclaimer into its daily gold and silver inventory reports in 2013?   I’ll let you draw your own conclusion about the truth.

The silver market is seizing up which means that there’s a severe shortage of silver available.  It is also showing up in the LBMA wholesale market based on the backwardation in gold and silver forward contracts that have been observed for several weeks.  It means that any visible inventories reports from ETFs and Comex/LBMA banks custodial vaults are fraudulent.  That includes SLV reports.

It also means that the recent discovery that the LBMA altered its gold refining flow statistics, revising what was originally reported to be 6,601 tonnes of gold cleared by the LBMA in 2013 down by 2,000 tonnes to 4600 tonnes, are likely off the mark.  That’s a big miss, given that the total global mine production annually is around 2500 tonnes.

The significance of this is that it’s easier to explain how 4600 tonnes of gold was refined into bars and sent to Asia than 6600 tonnes, given that the total global supply of gold from mine production + scrap production was reported to be slightly more than 3000 tonnes.

From where did that extra 1600 tonnes come?  The REAL question is, from where did the extra 2600 tonnes come if we use the original number?  And is the 6600 tonne number a good number?  Was the real number even higher?

The obvious conclusion is that the supply deficits in gold and silver are being remedied by hypothecating gold and silver bars from allocated accounts held at bullion banks, including the accounts held in behalf of the gold/silver ETFs,  like GLD and SLV.  This is why ABN Amro and Rabobank stopped allowing their physical gold account investors to take physical delivery of the gold they thought they have invested in – the gold was not there to deliver.  This also occurred in 2013.

Now for the final blow to any skeptics.  You’ll note that the LBMA revised down the amount of gold it cleared from refineries in 2013.   But you’ll also note that the Comex inventory report disclaimer at the top of this post was first inserted into the daily Comex inventory reports in June 2013.  See any coincidences?  Bueller…

Bill Murphy and GATA have maintained for years that the fraud and corruption in the precious metals market would eventually be revealed as the biggest financial fraud scheme in history.  It would seem that the cracks in the wall of this scheme are growing wider and it’s becoming easier to see rays of truth.

History tells us that all Ponzi schemes and market interventions fail.   I believe we are on the cusp of a massive failure in the scheme to cover up the truth about the precious metals market.

23 thoughts on “Anyone Who Believes The Comex Numbers Is Very Naive

  1. Great analysis and thinking Dave. This might be best conjecture and take on the situation I’ve read. Thanks for the information you provide. Helps a person like me ride out the paper manipulation and beating in price over the last few years and days like today where gold is smashed down. I wish it wasn’t this way and I have just been wrong about holding PMs. As you and others like Bill Holter and Rob Kirby see as the most likely result of the situation, looks like a full on blowup in the system is in the cards and it is going to be truly ugly.

    Also. I think the 2600 number below should be 3600, if I’m reading things right.

    “From where did that extra 1600 tonnes come? The REAL question is, from where did the extra 2600 tonnes come if we use the original number? And is the 6600 tonne number a good number? Was the real number even higher?”

  2. Dave, I was the one who harassed the CME regarding their bogus inventory figures and got them to put the disclaimer on their site. Bix Weir covered it and put my emails on his website.

    My guess is that the gold figures are fairly accurate and they are running a 200 to 1 fractional reserve scheme.

    My guess is the silver figures are 100% make believe, and in Silver it is more like a 1000 to 1 fractional reserve scheme.

    Check out the Platinum figures! An October 2015 open interest of 88 tons against a dealer inventory of 0.88 tons. What could go wrong?!

    1. In summary, my guess is there is zero silver available, it doesn’t exist. This is why the shortages.

      In gold, the CME actually has a few tons, but the GLD has almost none and the guy who thinks he has $20 Million in a Swiss gold account has none too. I.e. the big money gold accounts are mostly make believe (if through a bullion bank)

    2. It’s been said to not look at physical silver as an investment. If your figure of 1000 ounces of paper for every 1 ounce of physical silver is in fact true then it would stand to reason that physical silver is an absolute worthwhile and huge investment.

  3. Honestly my head is spinning!

    Markets are screwed, the Nikkei goes up 7+% in one session, Shanghai has an amazing stick save, gold is bashed, US markets up…..

    I fail to understand any of this, every time there appears to be some semblance of sanity (i.e. values which start to head towards something sensible) up they go again.

    I am coming to the conclusion that gold will be $500, and the Dow 50K, we will all know its fraud but we can’t do anything.

    Perhaps the ‘new normal’ is fraud and manipulation. Third world countries have been on that path for years – why do we think the West won’t end up in the same place?

    Thanks for persisting with your writings dave (amazon report amazing btw), but I don’t know how you keep your sanity! Any tips?

    Thanks again

    Si

    1. No $500 gold this time.

      If you pay attention to the news related to China, they are preparing for the internationalization of Yuan and also said that gold serves as a reputable basis for Yuan, so China will not just sit there to watch the West to crush gold to $500.

      In this view, the gold (and silver) price should be forming a basis approaching the end of this 5-year bear market.

      1. You are correct. The last time dxy was at these levels was in 2003 when gold was $350/oz.

        This is an orchestrated effort by central banks as evidenced by the yen/gold correlation. Japan was horsewhipped into compliance.

        1. That’s right, China is now an entirely different country than the shit hole they once were decades ago, people who travel frequently to China on business in the past two decades will understand what I mean.

          The Chinese had no political-economic power at all during the last secular gold bear from 80s to 90s, but today’s situation is an entirely different ball game. They are slowly and gradually moving to the direction of challenging the USD hegemony, and the Chinese are extremely patient. Time is on their side. Whether we like it or not, the dragon has finally woken up after centuries of exploit by the West.

          Let’s keep out fingers crossed.

  4. Hello Dave, Great article. How would a Comex / LBMA failure manifest itself? I assume all physical stock would dry up immediately. What else would happen? Would they close the LBMA / Comex? I recall the Gold Pool from the 60s. Once Nixon closed the gold window he had to bind the Dollar to a Gold proxy. Oil became the proxy for Gold. As the reserve currency the world accepted Nixon’s proclamation. Nixon may have been a Dick 😉 but in my opinion he was one of America’s greatest Presidents. That was an epic move which bought us an additional 40 plus years of reserve currency status and all the benefits that came with it. I see Saudi King Salman paid a visit the white House recently. I wonder if history is repeating itself. The gold window is very similar to the (COMEX / LBMA) might it be closing for a second time and if the oil for Dollars relationship will be tested. What do you think? Are we seeing a replay of history?

    1. “That was an epic move which bought us an additional 40 plus years of reserve currency status and all the benefits that came with it.”

      Are you serious or sarcastic? The dollar reserve currency has destroyed the USA. Is it good to:
      – offshore your manufacturing base so when the dollar dies you have no independent ability to make anything and are fully dependent on likely hostile countries that will not sell you stuff for any currency not backed by real value, of which the dollar now has none?
      – use that reserve currency status to manipulate the price of gold and deplete the official gold reserves that are supposed to belong to the people?
      – alienate the entire rest of the world through military hegemony forcing all countries to accept paper for real goods in trade surpluses? Those countries will not come to the US’s rescue when the dollar crashes.
      – use that 40 years to increase the population and build out infrastructure entirely based on a gas guzzling artificially cheap oil trade deficit. It is almost never discussed but the us dropped gold convertibility the same year it hit peak oil and had to run a trade deficit that has widened ever since. Google “St Matthew island deer” to see what temporarily abundant resources can do to a population boom and bust. We are no different than the deer.
      – blow every conceivable financial bubble so that the average American gas no tangible wealth savings other than an overvalued house. They’ve all been brainwashed into saving in mutual funds, stocks and bonds. When the crash happens they will have nothing.
      – provided the power for the most corrupt financial elite in history to destroy the entire world’s financial system and cause great mis allocation in the real economy.

      1. Not sarcastic…as Ben parker once said “with great power comes great responsibility” the U.S. abused the privilege. We started out well enough. Created much goodwill in the world. Then… things went neocon starting with Korea. Tricky Dick saved us from a 1970s induced hyperinflation and all the effects that came with it, including third world status and mass economic chaos resulting in an American tragedy. What we did after Nixon was no concern to Nixon. The U.S. had the baton of power and went stupid. Stupid is as stupid does. We can’t blame Nixon for stupidity. He did his part, he maintained U.S. super power status during his watch.

        Now the privilege will pass, and you will see what its like to live in the real world. Let me just say…you don’t know until you’ve been there. All that you’ve pointed out is true…but it didn’t have to be that way. Our leaders and by extension the population chose the path and we will live through the consequences of our actions. Good luck to you and your family. I suspect we will all need a little luck in the years to come.

        1. “but it didn’t have to be that way.”

          But yes, it did have to be that way, one way or another. They could have taken their medicine back in 1971 or they could delay and greatly intensify the disease until it blows up in 2015 when it will be so bad it will kill the patient. What Nixon and Volcker tried to do in 1971 was violate the laws of physics, which is not possible.

          I disagree that a major “hyperinflationary” event would have been a bad thing back in 1971. Firstly, the US still had some gold left so it could have properly pegged the dollar to gold which would have resulted in significant inflation in a monetary reset, but not hyperinflation. I ask: isn’t that what the market was asking for? Wouldn’t that inflation have been revealing the real world fundamentals of an overvalued currency? Had they done that and not been able to rack up a 40 year trade deficit, the US would have been forced to face up to reality: Peak Oil and declining resources, and an economy unable to continue growing exponentially, or at least to continue on with its car-worshipping freeway culture. They would have been forced to innovate other energy systems like solar and nuclear, brought in real electric cars to the market in 1972 rather than 40 years too late in 2012, and the average consumer would have had to accept a significantly lower standard of living, but not catastrophic. Capitalists would have had to innovate and revitalize American manufacturing and it wouldn’t have been offshored to China. The lower wages for Americans would have kept manufacturing competitive with the rest of the world. People would have still have had jobs in American factories manufacturing stuff rather than jobs working in an unsustainable consumer sector gobbling up cheap crap from China. They would have still gone to school to study engineering and science rather than art history. And the problem with all of the above being…? Is “living within your means” such a bad thing?

          This was all brought about by Nixon et al. Anytime military force is used to impose economic imbalances the results cannot possibly be good.

  5. Dave,

    As the end draws nigh we will see more and more short selling of paper gold/silver IMO. And why not? the more they short sell, the more they drive down the price and the larger the divergence (premium) with physical, and the more physical is bought (they are also buying physical as they sell paper to drive down the price of physical) the more they sell paper (drive down the price). At some point there will be a default and they will “pay up” or cover their short- and at that point the “price” of the paper metals will be negligible… and the physical they purchased at the manipulated low price will be worth tons…

    So they will keep selling paper, and as default nears they will actually sell even more, the slams will get even more abrupt and nefarious, but they dont care because they know their price to cover means nothing.

    Think of it this way: they sell 1000 tons of silver at 14.50/oz and use that to purchase 900 ozs of silver at 14.50/oz plus a premium. Then they do it again. And again. The whole while building up their position in PHYSICAL. Then when default occurs the PAPER price is zero, who would pay a cent for that paper metal? This is the biggest sure thing going, even bigger than your research reports!!!

    Only way to win is to play along, buy physical.

    beep beep…

  6. Some interesting theory’s here today Dave, shorting to buy Physical? where is the phiz coming from, to cover the short’s? And the wheel’s on the bus go round, round, round. Nope they are panicking, much more simple. Those 3 dude’s still trading the Dow, it was sell today? ………??? picture thought bubble.

  7. Dave
    Perth Mint is 90% out of silver.Its a pain clicking on each individual item to find the out of stock sign.They have no silver bars at all.Wonder what our mate Bron thinks of that.
    Cheers
    john

  8. Seriously, if you could sell paper silver/gold and take those proceeds to purchase physical (that moved down in price due to you selling of paper…) you are hedged. If paper price moves up, so does the physical. And when the endgame plays out, nobody will be buying paper so the price will be zero. You can cover at essentially zero cost and have that physical stash you got for basically free…

    THIS is the game being played. As paper gets manipulated harder and harder down, as physical supplies dry up and premiums soar, this is indicative of the end of the COMEX paper game playing out.

    look out below,

    beep beep

  9. Shanghai Gold Exchange allows A-shares, ETFs as collateral in gold trading

    (Reuters) – The Shanghai Gold Exchange said on Thursday it will allow A-shares, exchange-traded funds and treasuries to be used as collateral for gold trading.

    The move comes as Beijing unleashes a slew of measures to stave off a collapse in its stock market and restricts trading in stock index futures.

    http://www.reuters.com/article/2015/09/10/china-gold-idUSB9N0Z202X20150910

    convert over valued to undervalued?

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