How Come No One Will Attack The Comex Gold Short?

The open interest on the Comex for the December contract is approximately 293 thousand contracts (final number as of Friday is not posted until Monday morning).  That represents  approximately 29 million ounces of gold.

Yet, as of Friday (Oct 2), the Comex vault operators were reporting 161,642 ozs of gold in their “registered” vault accounts, which is the amount of gold that has been declared eligible for delivery.

This means that the ratio of December open interest to deliverable gold is approximately 180:1.   Thismissingbullion is a mind-blowing number.  There’s 180 ounces of long/short positions for every ounce of deliverable gold sitting in Comex vaults.  This ratio of paper gold to “allegedly” available real gold represents the most extreme exploitation of the paper liability fractional reserve banking system in the history of the known universe.  

Of course, history tells us that every fractional banking system throughout the ages has collapsed under the weight of far too many liabilities piled on top of too few assets to back those liabilities.  This one eventually will collapse as well.

In 1992, George Soros attacked the British pound sterling in what was billed at the time as “the trade of the century” (I was a junk bond trader at the time on Wall Street and worshiped Soros’ success (I despise the man now, for the record).

Prior to the implementation of the euro, an European “Exchange Rate Mechanism” was created in 1979 in which the exchange rate value of each European country currency was fixed against each other.   Previously the currencies “floated” and price discovery was set by the market.

In 1990 Britain entered the European ERM and by 1992 the pound had become egregiously overvalued relative to the German mark.  It was pretty obvious to everyone including the British Government, which was spending a fortune to prop up the pound vs. the mark.

Long story short, George Soros via his Quantum Fund had built a $10 billion short position in the the pound.   To put this in proper context, a $10 billion bet in 1992 (using Government calculated inflation) would be a $17 billion bet today.  That one bet against the pound and the British monetary system by George Soros was bigger than the size of most hedge funds in the world today.

On September 17, 1992,  Soros’ gargantuan bet paid off.  Soros and the market ultimately forced the British Government to “reset” its monetary system.   The Quantum Fund is said to have made $7 billion on the trade, or a 47% rate of return unannualized in well under a year.  It’s impossible to know the actual “cash on cash” return because we don’t know to what extent the short-pound bet was leveraged.

This brings us to the situation with paper gold vs. physical gold at the Comex.   If shorting the pound was a quite conspicuous trade opportunity in 1992, then attacking the 180:1 paper:gold ratio on the Comex by going long Comex gold futures and standing for delivery is the most overtly obvious trade opportunity in anyone’s lifetime.

This particular predatory trade would exploit the most imbalanced market condition in the history of mankind.  With only 161,646 ozs of gold declared to be available for delivery, attacking this highly artificial market condition would require only $182.6 million dollars worth of Comex contracts (assume $1130/oz for gold).  This is less than 2% of the size of the bet that Soros made in 1992.

There are several hedge funds that are more than large enough to take on this trade, which is a “lay-up trade” in the purest sense of the definition.  So how come no one will take it on?

The obvious answer is that hedge fund managers point to what happened to the Hunt brothers when they attacked a similar trade set up on the Comex in silver in 1979. Eventually the Comex changed the rules of the game and charges were levied against the Hunts by the CFTC for an attempt at cornering the market.  It was the epitome of Government intervention in a market to protect the Comex bullion banks under the “veil” of market manipulation.  A true tragedy in the history of the financial markets.

But where are the charges of market manipulation against the entities who are selling-short paper gold contracts into the market at a 180:1 paper to gold ratio in order to satisfy the demand of Comex futures buyers?   And better yet, how come the long side of the gold open interest trade never stands for delivery.   A mere $182 million bet that stands for delivery has the potential of a more than doubling or tripling (or more) in a very short period of time.

Concomitantly, if the rules of the game were changed to rules that reflected the true supply and demand of physical gold globally, it would force the mother of all short-covering trades.   In all of the other products with futures markets in the U.S. the ratio of paper to physical is not even remotely close to the 180:1 ratio in gold.  In fact, the CFTC cracks down if when the percentage of paper to deliverable exceeds much more the 20-40% in any other futures market.

It is a riskless bet that no one is willing to take on.  This is because it’s loaded with 100% risk in one aspect.  If someone were to attack the fraud on the Comex in order to make a lot of money on the obvious, the Government would step in and prevent the trade from occurring to completion even though the Government is unwilling to prevent the fraudulent market condition from developing in the first place.

This is a bigger injustice to our country and our financial system than was the Hunt brothers debacle.  And the truth of the matter is that when the Comex finally does crumble under the weight of its own fraudulent, Ponzi scheme grotesque obesity, it will trigger or coincide with the collapse of the entire U.S. systemic Ponzi scheme.

40 thoughts on “How Come No One Will Attack The Comex Gold Short?

  1. I’m a new a new Denver transplant from the real root of the criminal Cabal-Chicago-where the CME, Nadex, and CBOE RESIDE. I’m a huge fan of yours. Your articles are succinct and germane and your depth of the inner workings of the markets combined with the savvy ability to think outside the box is quite impressive. You have indeed been hitting the leather off the ball and I continue to look forward to picking your brain through SoT and the personal interviews you give to the alternative media. Thanks

  2. A sovereign fund could do it easily and bring the US down to its knees over night. Basically, it would be a declaration of war.

    It’s also pissing me off that people like Sprott el al who always pretend to be millionaires don’t take this bet. All talk, no walk! If I had the money I would do it immediately. Not even for possible financial gains. But just for the fun of it. Tickling the tiger to see what’s gonna happen. Priceless!

    1. I have wondered the same thing. It is probably because the CFTC will make their lives miserable if they tried it.

    2. Check out the ‘Plunge Protection Team’ who protect the USD with the full weight of the FED behind it (a nuclear powered money printer!). I appreciate kicking a ‘bully’ in the leg though, it let’s me know that there are a few Americans left with some fight!. Thanks for sharing. greg f.

    3. Did you not read the part in Dave’s post about Hunt Brothers about this?

      Eric Sprott doesn’t want to end up as a Hunt Brother from another mother, so criticizing one of the good guys over this is hypocritical.

      The real question which I’ve had from a different angle for the longest time about this, and perhaps Dave could address: Why can’t simple arbitrage market for physical metal be setup in Singapore, Dubai and Hong Kong, and finish off all this charade? The extreme fractional reserve ratio he mentions is one thing, but the extreme and persistent backwardation is another big elephant in the room not mentioned in Dave’s post. Backwardation is never supposed to happen in gold market. And arbitrage is supposed to the sure-shot cure to finish off backwardation.

      1. This is precisely what another “commentator” in alt-media claim the EEU (China, Russia et. al.) are planning.

        Double or triple the gold/silver price overnight. When the “West” starts crying, it is suggested that they are most welcome to arbitrage it. Well, with what..?

        I would love to see this and other criminal enterprises ended literally overnight, at my age this slow grind is killing me quicker.

        Thanks for all the great reporting Dave, keep up the great work and best luck!

        1. The Comex would be a last place a savvy gold accumulator/trader would attack. They wouldn’t try to raid the
          Comex until it’s the last place that MIGHT have some physical left.

          1. Totally agree, I think everyone knows the COMEX is nothing but a casino, yet one that helps to protect the monetary ring fence of global privilege the most powerful empire the world has ever known enjoys unfortunately.

            I was simply trying to imply that these entities would allegedly alter the physical price for PMs within their own marketplace not caring about the COMEX or what the West thinks?

            I think you know who I’m referencing Dave?

            Anyway, who knows but I wish the integrity of sound money and saving didn’t need to be such a character-building exercise of spiritual proportions for good people. 😉

            Cheers!

  3. Great to see you bring this issue up Dave. I agree with you that if one or two hedge funds decided to go after the Comex gold then the CFTC would step in and stop it claiming that the funds were trying to corner the market.

    However, with this level of leverage if several smaller longs independently decided to stand for delivery then their combined buying could also trigger a default. I wonder what the CFTC’s response would be? Would they tell the longs that they can only take delivery of one, two, or no contracts? I don’t see how they could claim that these small position traders were trying to corner the market.

    Another thing to consider is what would happen if someone like the Chinese decided to force the issue. If the CFTC came out and changed the rules and prevented delivery then the Comex pricing would be discredited. The physical price should then skyrocket due to the small amount of gold that is available at these low prices.
    It seems like this would be very tempting to entities that have accumulated large physical positions.

    1. That’s what I was thinking as well. Spread the risk over a large number of firms.
      I think you get the risk of collusion though, or at least that would be the charge. I don’t know how many firms you have to have before collusion isn’t possible.

      When this is all over, it would make an excellent movie. I suspect Mel Gibson might be interested in the story.

  4. those that would take this kind of trade would also reap the benefit of a very large’ lead’ deposit to them and theirs…..as we the people have seen time and time again by this controlled ‘governemnt and its minions’…….imho

  5. I suspect the manipulation is long in the tooth and will pass soon enough. In the meantime the little people gather the gold and silver crumbs, as the larger powers consume the carcas of the west. Precious metals accumulation has grown at a feverish pace. Carl Ichan’s message was like the last call for alchohol. Guys like that don’t share Earth shattering revelations without a reason. The time to get your gold and silver are almost over. I am greatful for the insight and hope my preps see my family and myself through the times ahead.

  6. And there you have it.

    Michael above beat me to it with my comments! A foreign “entity” is probably all set up to drop the guillotine but knows it will be an act of war. I give Sprott a break since those guys know the insane risk involved, not only to their companies and employees, but more so to the safety of their families. The psychopaths have no regard for human life and many people have already been on the receiving end……

    So we sit and wait for it to implode. Probably what China and the BRICS group are waiting for also, while busily preparing an asset-backed system to quickly step in and replace the failed fiats. They need time to get it ready and they KNOW the USA warmongers are dying for them to take the first swing. Would you want to piss off and engage a cornered, wounded, vicious animal with nukes?

    1. I won’t let Sprott off the hook so easy. He has been pounding the table about how good an investment gold and gold shares are all the while he has been selling. He gets John Embry to do the same thing as well as Rick Rule. These guys are slimy stinking fish givers. Don’t trust them and I hope King world news bans them.

      1. Eric Sprott was selling silver because he had made very big bets on it with his own money and the the firm’s money. He and his firm were getting margin calls. He puts his money where his mouth is. I’ve chatted with Eric and I’m friends with John Embry. Anyone who thinks Eric Sprott was pumping and dumping is thinking that out complete ignorance of the facts.

        We ALL gravely underestimated the degree to which criminality engulfed our entire system and the degree to which it would be used to knock down the metals. We were victimized by the complete lawlessness which has infected ever nook and cranny of Wall Street, the Fed and the Government.

  7. Okay so the Hunts were one entity. Why doesn’t the ‘in the know’ groups collude on one large purchase and end this laviathan already? These hairy bastards can’t collectively accuse,or for that matter prove, 5-10 or 20 entirely different groups brought this evil scheme to its knees all by their lonesome.

  8. … which begs the question, if a large buyer would not be allowed to stand for delivery (under the guise of it being a “national security threat”), and as should be clear by now those who rig the game have no intention of voluntarily forfeiting control and allowing the free market to determine the price of gold, under what circumstance will the price of gold be *allowed* to rise?

    Help us China!

    1. To answer your question, Zen, it will be when confidence in the fiat and fractional-reserve systems implode. In other words, you cannot have a rise in the metals without a collapse in the banking system…and the PTB know this. As it stands, there is no 100% reserve banking system in the west because they have squeezed it out of the system long ago…but that could easily change.

  9. All someone would need to do is continually buy large quanties of gold bullion and gold coins from dealers which would exhaust their supply. This would cause an increase in demand for gold from refiners as dealers try to replenish their stock. The refiners would turn to the COMEX for gold as miners would not be able to produce enough gold to keep up with the sudden surge in demand. As gold becomes scarse at the dealers, a buying panic would start as others rush in to get the remaining refined physical gold. Let the refiners and miners buy the COMEX contracts in order to take delivery.

    1. I think doing that would just raise premiums and buyers would have to sit and wait a few months for delivery. This seems to be happening now with silver and it isn’t blowing up… yet.

  10. Sizzling stuff as always Mr. Kranzler and how many times have I asked myself the same question especially as the OI has translated into 260x of Crimex registered. All plausible arguments for ending the bizarre cluster**** of a market make highly profitable sense…Then I query the reality and guess the only players that will make grotesque profits will be the those holding the AU that will sell to the Fed via its bankster minions. While undocumented one has to deduce that the longs lining up every big delivery month for the never consummated showdown are bought off with fiat at some audacious premium to spot. My guess is a lot goes to the banksters as they play the monthly game of pattycake with each other. I am firmly in the camp that no amount of fiat will be spared to maintain the Potemkin Village façade. The rumors of massive premiums for quantity IMO are true how can you really doubt there is any limit to buying a couple days, weeks, months more for their Ponzi. As you astutely remind us on a daily basis the corruption is beyond exponential it is a beast of unfathomable dimension. The restraints are no longer real…all the rules are gone. Its all mad….I honestly believe we will be beyond horrified if the truth is ever revealed with how far the corruption has gone.
    The only hope to end it is the physical market finally overwhelming the paper but will the Banksters allow that fail? Not if they can help it and NOTHING will stand in their way if they can help it. Hopefully justice will prevail once again

  11. Like it or not, any gambling addict complaining about The Casino being bent and not playing by Da Rulez is asking for a good knuckle-dusting. Afterall, any member of Ali Baba’s Den complaining about his share of The Loot being less than deserved will be “Unsubscribed” – for Life.

    Hands up those, whose Consciousness came as the result of Reading The Manual on Konsciousness, would like to debate the finer points because The Devil is in The Details/Nuances. Not when The Small/Parachute Print are there for countering The Klevar Dickies. After all, there is NO such thing as Truth within Untruth, Finality being Reality, regardless of The Hypocrisy/Posturing. More so for The Shades of Grey. You know, those for whom there is Truth within UnTruth – albeit just a smidgen, hee-hee, haw-haw … Got eet yet or another round of knuckle-dusting is required – even if the chappie is a Masochist, g_d forbid.

    When Greed-Fear is “successfully” masquerading as the dapper, sophisticated and fully fragrant Count de Money, not only will Greed-Fear magically vanish, but counting the money will be the result. For those who have yet to master counting beyond their toes [other than hurling Zeroes at their affliction/lacking], The Human Universe, aka Humanity’s Inhumanity, is fuelled via Greed-Fear. That of The Round Robin Robbing of “Robbing Peter To Pay Paul”, aka The Numbers Game within The Zero Sum Game.

    When there is no real difference, why is Division running amok, pretending to be real? You know, yore Trumpet vs mah Klington. This is because Reality/Divinity/Benevolence empowers via Unity/”Fusion” whereas Relativity/Humanity/Malevolence empowers via Division/”Fission”. For the information of those whose other hobby [after “Drawing Blood”/Kontrol-Freakism] is debating The Finer Details, when Energy-Construction/Unconditionality becomes Energy-Destruction/Conditionality and “returns” with “11 Powers of Absolute Destruction”, one of those 11 is the power to convert matter to energy – just like zat but mit Zero Radioactivity.

    The above, of course, might be all Poppycock [and one should be non-committal unless and until self is able to attest-so via experience] but it will be benevolent to realise that ONLY those who are able to truly create are able to truly destroy, Religion & Religiosity being The Mesmeric Tentacle of The Bookie. If true, it is also benevolent to realise that when there is “Disagreement”/Division, it is because The Bookie is “Commissioning”/”Trading”/”Rounding-Off”. Hee-hee, haw-haw indeed.

  12. Here in “emerging” markets’ the vibe is, CBs’ making noise’s about not moving on interest rates’ , almost as if they’re aware of maintaining some illusion of strength against’ metal. But realistically big players’ wont move against the machine Dave, for obvious reasons’. I mean no one likes;’ dodging bullets’. Little guy’s seem to be getting the message thats’ where the pressure will come from. JMO

  13. Thank you for a great report, clearly explaining the Ponzischeme in PM-markets.

    Let me see how the Government intervention in a market to protect the Comex bullion banks had been managed:

    The authoizing law for intervention must have been passed congress at Christmas Eve by asking the last couple of leaving attendants to quickly sign the bill.

  14. The Comex doesn’t have metal. The charade will end when the real metal exchanges no longer deliver PMs. Then we will have a reset. When the music stops anyone left without a golden or silver chair will probably fall into desperate times.

  15. Rumors have long persisted that people standing for metal delivery get calls saying, “hey, you don’t want metal—look—here’s a check” (for more than the spot price of the metal! The USA money system is run by membership organizations which are tightly interlocked. The Pilgrims Society with around 700 members stands at the top and holds the management reins of Bilderberg, Trilaterals, the collegiate “super fraternities,” the Rhodes Scholars, and the 4,900 member Council on Foreign Relations. These are interlocked with many other groups and throughout all these profound influence circles the mentality is to protect the appearance of validity of the Federal Reserve dollar—hence, no one stands for delivery—and those outsiders who do are usually successfully discouraged. West coast money circles are run by subsidiaries—the Pacific Union Club and the Bohemian Club especially. I’m wondering if the Inner Circle of The Pilgrims is planning World War Three to announce a national emergency to attempt to maintain a price cap on PM’s—and a second nationalization.

  16. It would be even easier to bring the system down by attacking silver. What is the ratio of paper to physical silver? How do we know these numbers are real?

  17. And FYI the Treasury sanctioned Fed managed Exchange Stabilization Fund i.e. the front for PPT was funded in 1934 with the Gold Reserve Act of 1934 with profits from the gold that the Treasury “bought” from its US citizens in 1933 at $20.67 and sold for $33 the next year. The original seed money for the entire PPT was gold they stole from its citizens

  18. Yes, There is an Imperialist Ruling Class by Paul Street

    Nowhere is the planning and influence of the ruling class of the world’s and history’s most powerful capitalist state, the United States, more evident than in the Council of Foreign Relations (CFR).

    historian Shoup shows in his indispensable new book Wall Street’s Think Tank: The Council of Foreign Relations and the Empire of Neoliberal Geopolitics, 1976-2014 (Monthly Review Press, 2015), no such group remotely approximates the CFR in scale, reach, and influence when it comes to articulating the national and global class interests of the U.S. capitalist elite and a growing transnational capitalist ruling class. With an individual membership of 5000 (boasting an average household worth of $1.4 million), a top Fortune 500 corporate membership of 170, a staff over 330, a budget of $60 million, and assets of $490 million, the Council is “the largest and most powerful of all U.S. private think tanks that presume to discuss and decide the future of humanity in largely secret meetings behind closed doors in the upper-class neighborhoods of New York and Washington. During the last four decades,” Shoup observes, “the CFR has not only successfully continued its central position as the most important private organization in the United States, one with no real peer in the country. It has succeeded in expanding its key role, and remains at the center of the small plutocracy that runs the United States and much of the world.”

    http://www.counterpunch.org/2015/10/06/yes-there-is-an-imperialist-ruling-class/

    feels like it, no?

  19. Dave, if we assume the comex numbers are fake, in your view what happens the “real” figure of inventories goes to zero?
    If it took you 2-3 months to get delivery, how do we know inventories aren’t actually zero now, or when you were taking delivery. 2-3 months sounds like they were waiting for incoming metal before they could send it out to you.
    But I guess my question is, if the real inventory numbers go to zero, what is the next indicator that tells the world that it happened.
    If a comex defaults and no one hears it, does it really default?

      1. The opacity leads one to believe that there is something fishy going on
        just beneath the surface. We will penetrate the layers as soon as the
        Playas quit settling for fiat.

Leave a Reply

Your email address will not be published. Required fields are marked *