Panic in the London Gold Market? Looming Shortage and Massive Short Squeeze?

• More people are saying there was a gold default in the London gold market. Draw your own conclusions. See also:
      
  Is Your Gold Really There?
  Are LBMA and COMEX Defaulting on Gold? 
   
• Adrian Douglas writes:
   
  We are hearing of more and more cases of gold investors wanting to take physical delivery or have allocated gold. In my recent article I said:
   
  “A couple of months ago Greenlight Capital, the large hedge fund, switched $500 million of investment in GLD to physical gold bullion. ….Apparently Germany has requested that its sovereign gold held by the NY Federal Reserve Bank be returned to Germany. Hong Kong has requested the same of the Bank of England that stores its sovereign gold. Robert Fisk, a respected journalist for the UK’s Independent newspaper, reported this week that the Arab oil producing states, Japan, Russia and China have been holding secret talks to replace the dollar as the international reserve currency and as an accounting unit for trade. He reports that the basket of currencies they propose instead of the dollar would include gold! If gold is going to regain its monetary role then you can understand why those in the know want actual physical bullion. There are some very real and significant signs that a run on the bank of the Gold Cartel for physical gold is commencing”
    
  Talking of runs on the bank, Rob Kirby of KirbyAnalytics and GATA consultant did some brilliant sleuthing work. His sources have told him that there was panic in the London gold market around September 30th, 2009 as participants in the market wanted to take delivery of their purchased gold and refused generous cash settlements that were offered instead. Central banks had to come to the rescue to provide the gold via leasing. Apparently, even the Central Banks could not provide bars that met LGD specs which indicates a very acute shortage of physical gold is developing and that perhaps already many OTC clients have drained a large proportion of the 15,000 t of gold stock from the London OTC market. This supports what I have been discussing above. Paul Walker, CEO of GFMS, recently said that gold was going up because of some large lumpy transactions in a market with a degree of illiquidity!
   
  If the OTC was only selling gold that the participants own there could never be a lack of liquidity. The panic that occurred at the end of September confirms there is a chronic lack of liquidity. This necessarily implies that there is multiple ownership of the same ounce of gold and it is, therefore, fraudulent. Leasing of gold from Central banks only provides temporary liquidity because they want it returned at some later date, and it looks as if the bullion bankers may have dipped into that well one too many times already!
    
  The gold market is in a precarious position. Just like in the days of the gold standard it only required one customer not having his deposit returned to bring down the bank because a domino effect is initiated that results in all depositors asking for their deposits to be returned. If my estimates are correct that somewhere between 64,000 and 150,000 tonnes of gold have been sold against a reserve of only 15,000t. But how much of this 15,000t remains? The panic at the end of September suggests liquidity is very tight in which case only a small percentage of investors asking for their gold to be delivered or placed in an allocated account will blow up the gold market and expose the scam (a scam that has been repeated time and time again throughout history with some variations on the basic theme and has always ended in crisis and huge losses. Why should this time be any different?)
   
  If you “think” you own gold you should take a few more steps to make sure that you do actually own gold. If you have unallocated gold in some sort of pool account that does not have a satisfactory audit or you own shares in an ETF that does not have a reliable audit then take action. Take delivery of gold or move your investment to reliable and audited allocated storage.
   
  If you do nothing about it and when the music stops you are left with just a piece of paper that says you own gold but no one is able to give it to you then perhaps you will be able to take comfort in the fact that you dismissed the German Government, the Hong Kong Government, Greenlight Capital and many others as just a bunch of nuts who don’t know as much as you about counterparty risk in the gold market! But the “nuts” who are realizing that there are multiple ownership claims to each ounce of gold will at least have their gold if they ask for it first!

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