Did the ECB Save COMEX from Gold Default?
- I have been a gold bug since Oct last year. It is quite apparent to most people who follow the gold market that something is not right. Demand has soar 3-5 folds but gold price on the COMEX is languishing. I tend to agree with GATA that COMEX futures gold price is highly manipulated/suppressed.
- Gold dropped more than 2% yesterday after the G20 meeting. I should be sad right? Not at all. As Jim Rogers said: “If gold price falls I will buy some more, if it rises I will buy some more.” Of course, I much rather it falls so that I can buy at a cheaper price.
- You can only suppress gold price for so long. The more you suppress the price, the greater the shortage will be. It is quite evident that a major blowout is building in the gold market. If central banks like ECB, Bank of England, FedRes… wish to dump gold at such low prices, I am quite sure there are many many many gold bugs just waiting for the chance to mop up the supply.
- China has US$2 T to spend, to sell its USD holdings and treasuries. It has indicated it will buy 4000 tons of gold. Of course, they will do it quietly using 3rd parties to hide and protect themselves. Otherwise, gold will skyrocket and they will be forced to buy at a higher price. It is no secret that Russia and Middle East countries are also buying. So for all those banksters, central banks…etc.. who wish to dump their physical gold stock: Go ahead ! Make my day! You will be like the gold idiot Gordon Brown who sold off more than half of Britain’s physical gold stock at about US$250/ounce. (Brown’s £2 billion blunder in the bullion market)
- So did the ECB bailout Deutsche Bank and COMEX? Avery Goodman reports :
On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000 + contracts, representing about 15% of the April COMEX gold futures contracts remained open. Technically, short sellers are required to give “notice” of delivery to long buyers. However, in reality, buyers are the ones who control the amount of gold to be delivered. They “demand” delivery of physical gold by holding futures contracts past the expiration date. This time, long buyers were demanding in droves.
In normal times, very few people do this. Only about 1% or less of gold contracts must be delivered. The lack of delivery demand allows the casino-like world of paper gold futures contracts to operate. Very few short sellers actually expect or intend to deliver real gold. They are, mostly, merely playing with paper. It was amazing, therefore, when March 30, 2009 came and passed, and so many people stood for delivery, refusing to part with their long gold futures positions.
On Tuesday, March 31st, Deutsche Bank (DB) amazed everyone even more, by delivering a massive 850,000 ounces, or 850 contracts worth of the yellow metal. By the close of business, even after this massive delivery, about 15,050 April contracts, or 1.5 million ounces, still remained to be delivered. Most of these, of course, are unlikely to be the obligations of Deutsche Bank. But, the fact that this particular bank turned out to be one of the biggest short sellers of gold, is a surprise. Most people presumed that the big COMEX gold short sellers are HSBC (HBC) and/or JP Morgan Chase (JPM). That may be true. However, it is abundantly clear that they are not the only game in town.
Closely connected institutions, it seems, do not have to worry about acting irresponsibly, in taking on more obligations than they can fulfill. Mysteriously, on the very same day that gold was due to be delivered to COMEX long buyers, at almost the very same moment that Deutsche Bank was giving notice of its deliveries, the ECB happened to have “sold” 35.5 tons, or a total of 1,141,351 ounces of gold, on March 31, 2009. Convenient, isn’t it? Deutsche Bank had to deliver 850,000 ounces of physical gold on that day, and miraculously, the gold appeared out of nowhere.
The announcement of the ECB sale was made, as usual, dryly, without further comment. There was little more than a notation of a sale, as if it were a meaningless blip in the daily activity of the central bank. But, it was anything but meaningless. It may have saved a major clearing member of the COMEX futures exchange from defaulting on a huge derivatives position. We don’t know who the buyer(s) was, but we don’t leave our common sense at home. The ECB simply states that 35.5 tons were sold, and doesn’t name any names. Common sense, logic and reason tells us that the buyer was Deutsche Bank, and that the European Central Bank probably saved the bank and COMEX from a huge problem. What about the balance, above 850,000 ounces? What will happen to that? I am willing to bet that Deutsche Bank will use it, in June, to close out remaining short positions, or that it will be sold into the market, at an opportune time, if it hasn’t already been sold on Tuesday, to try to control the inevitable rise of the price of gold.
The size and timing of the delivery of Deutsche Bank’s COMEX obligation is suspicious, to say the least, when taken in conjunction with the size and timing of the ECB’s gold sale. It is circumstantial evidence that the gold used by Deutsche Bank to deliver and fulfill its COMEX obligations, came directly or indirectly, from the ECB.
I’d sure like to know what the ECB’s “alibi” is. If I were an investigator for the Commodities Futures Trading Commission (CFTC), assigned to determine whether or not gold short sellers are knowingly violating the 90% cover rule, I’d be questioning the hell out of the ECB staffers, as well as employees in the futures trading division of Deutsche Bank. There is certainly enough evidence to raise “reasonable suspicion”. Reasonable suspicion is all that one needs to start a criminal investigation. It should be more than sufficient to prompt the CFTC, as well as European market regulators, to start a commercial investigation of the potential violation of regulatory rules by both the ECB and one of the world’s major banking institutions.
- See also :
NYSE Runs Out of 1 Kg Gold Bars ?
Max Keiser – Gold Price Suppression and Central Banks Buying Gold !
GATA – Gold Price Manipulation
Russia Backs Return to Gold Standard To Solve Financial Crisis
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