Is Your Gold Really There?
- Rumours are swirling that there are much shenanigans in the gold market. How confident are you that the physical gold you bought is really in the ETF vaults? Are the LBMA and COMEX defaulting on their physical deliveries? Can they fulfil all their contractual obligations to deliver physical gold? Many have doubts and the number of doubters is rising. Mineweb reports :
It doesn’t just seem to be GATA which nowadays is questioning whether the volume of gold held in ETFs and in official reserves is really there – or perhaps there is more than one title to what is actually in the world’s gold vaults? Would a run on gold bullion thus create panic among the Bankers?
Banking has run for centuries with the banks themselves only keeping on hand a fraction of the money owed to depositors with the balances loaned out and not always immediately available, if indeed it is even there at all, so when there is a run – like that on Britain’s Northern Rock last year – the bank concerned can find it tough to keep its head above water. Northern Rock, in the event, needed to be bailed out by the U.K. government.
There are plenty of theories that the gold markets also operate on a similar principle - or perhaps worse. Not only may the banks not hold the amounts of physical gold they say they do, say the doubters, having loaned much of this to third parties, but there are now analysts and observers expressing doubts over the actual title to the gold that is still seen to be in the vaults, feeling that perhaps some of it has been sold several times over. Central Banks, for example, seem to hate being questioned over gold loans preferring to duck the question and keep any such arrangements under wraps, although most will admit to gold swaps and loans being made – but little or no detail.
It may be no coincidence that the recent surge in the gold price which burst it through the $1,000 barrier followed shortly after Hong Kong demanded repatriation of its gold held in London banks and reports suggest that Germany is also looking for its foreign-held physical gold to be returned from overseas repositories. Has this created shortages of physical gold which holders are now trying to cover?
The latest commentator to express doubts is Paul Mylchreest in his Thunder Road Report. Mylchreest has calculated that, using GFMS figures, that data on the volume of gold traded on the London market (about 90% of gold traded worldwide), if put in its proper context, does not tally with his estimate of the amount of gold that is held in the form of bars which conform to “London Good Delivery” standard.
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