An article from Bloomberg was published 2 days ago which alleged that “New York Gold Traders Drown in Glut…” The Comex is now reporting there’s 26 million ozs of gold in Comex vaults, 17 million of which is in the “eligible” account. This is up from 9 million total ozs at the end of March, 5.5 million of which was “eligible.”
I find it amusing that the mainstream media swallows the Comex data reports without fact-checking or insisting on an independent audit of the bars. Ronan Manly of Bullionstar published a research piece in which he dug up a letter from the CME to the CFTC which stated that the CME believes the deliverable supply of “eligible” is 50% of the reported number. That’s if we take the CME’s estimate prima facie.
The world was told 6 weeks ago that it was impossible to transport gold bars oversees and a scheme was rigged to make London gold (400 oz bars) available on a fractional basis to satisfy Comex deliveries at the option of the party taking delivery. But the bars were to remain in London. Suddenly the Comex “found” several million ozs of gold in its warehouse stock report. Bars that are unaccounted for and supposedly sitting in London vaults.
In all likelihood, the 17 million ozs of gold added to Comex vaults is a product of double-counting bars in London. I know many of those reading this might find this to be “conspiratorial,” but it’s been long acknowledged that the LBMA is running a fractional bullion system.
That said, assume the 26mm ozs of gold are real. Discount the 17mm “eligible” by the CME self-admitted discount factor of 50% and that leaves 17.5 million alleged gold ozs available for delivery. But the gold contract open interest is 510,000 contracts, or 51 million ozs of paper gold. In relation to the 17 million ozs of gold that may be available for delivery, it’s highly misleading – and probably intentionally misleading – to call the supply of gold in NYC a “glut.”
Add to this deceptive Bloomberg article a report from Reuters that CME banks are pulling back from the Comex. To begin with, HSBC attributed its $200 million dollar hit from gold trading to its London operations. The article also claims that 400 tonnes of gold have been shipped to NYC despite the narrative in April that gold couldn’t be moved from London to NY. I surmise the “movement” of gold is digital-based. As Bill Murphy commented, “we were told there’s trouble getting gold to NY – now they say there’s too much…Don’t believe any of it – they are scared to death about something.”
There’s a big problem at the Comex and that’s why the bullion banks are pulling away from it. ScotiaMocatta is closing its precious metals operations and taking a loss to do it. Mocatta Bullion has been in operation since 1684 and was one of the largest operators on the Comex in gold and silver.
I’m not sure it’s even credible to say the bullion banks are pulling away from the Comex. The gold open interest was over 800,000 contracts (80 million ozs of gold) earlier this year. The banks have been working hard to reduce their open interest and short exposure – that much is true. But historically the open interest on the Comex for gold has ranged between 200,000 and 400,000 contracts. In that context how can a drop in o/i to 500k contracts be considered “pulling back?”
Since late August 2019, the activity on the Comex has been what many of us consider strange, if not engulfed with the scent of desperation. The fractional 400 oz gold contract and the two articles discussed above are a few examples out of many. Recall the CME introduced the “pledged gold” category back in October 2019. “Pledge gold” is just another form paper derivative gold. HSBC jumped on that designation immediately. We find out a few months later that HSBC had impaled itself on its gold trading and custodial activities and required the “pledge gold” designation in order to meet the collateral requirements as a clearing member of the CME.
As with the fiat currency fractional banking monetary system, the bullion market in London and NYC has become a fractionalized system of derivatives and other forms of paper gold (leases, hypothecation, lending) backed by a tiny amount of real physical gold relative to the amount of paper claims. This fractional bullion system is crumbling at its core and the propagandist articles like the ones above being disseminated through the mainstream media are a reflection that something is seriously wrong at the Comex.
If you don’t have possession of the gold you think you own, you do not own it. The world will eventually understand why that assertion is true…
Anybody willing to sell real physical, at this paper-derived price, today, would have to be a halfwit. Lots of analogies for our economic state come to mind but I like the tsunami one the best – many people have noticed the sea has receded and are on the beach busily picking up the fish on the seabed, or cavorting in the water. You know what happens, next.