Saturday, April 17, 2010

The Gold in Gold etfs, Now You See it, Now You Don’t

Are gold exchange traded funds (etfs) a ponzi scheme?

London Metals Trader whistle-blower Adrian has stated as much at a Commodity Futures Trading Commission Hearing (CFTC), the US Government regulatory agency, to the chagrin of the London Bullion Market Association (LBMA).

He claims that the worlds largest gold trading center is nothing more than a giant ponzi scheme with trades backed, not by gold, but by a fractional reserve system where 100 ounces of gold is backed buy only one ounce. So if everyone who 'owned' gold in the system demanded their stored value in gold bars and not cash, like a run on the bank, there would not be enough gold to supply the demand.

This is not the first time this has come to light. In 2007, Morgan Stanley forked out several million dollars to settle claims it had charged 22,000 clients for storage fees on non existent silver bullion.

At the hearing also Jeffrey Christian of CPM Group made the revelation that the LBMA banks have one hundred times more gold deposits than … er … gold.

So where IS the gold? Well it seems there never was anywhere near as much as investors have been lead to believe.

Its like a perverted ponzi scheme. Sell gold that does not exist, keep the gold price down with short selling. Everyone is a winner, except for those that want to redeem or take delivery of their gold.

And to cap it off when one does demand their gold and takes delivery, one finds it is really a bar of tungsten coated in rich creamy gold and worth, if your lucky, one hundredth of the gold price. This was recently discovered in Hong Kong when delivery of four 400 ounce LBMA bars were delivered and sparked off a wave of investigations in which further LBMA gold bars were found to be counterfeit.

So we wonder now how many thousands of clients, Asian and Middle Eastern Governments think they own billions of dollars worth of gold but in fact own, at the best, unsecured loans to the banks at a disturbing negative interest rate and at the worse, bits of paper with large numbers on them.

In any event, we will likely see a continuing rise in the gold price as the true amount of gold in the world emerges. Those people, then, who are astute enough to have actually bought real physical gold instead of worthless paper gold will be the winners when the price of gold shoots through the roof.

Monday, April 12, 2010

Lifting the Lid on Gold Price Suppression

You know what it’s like. You have a old tin of paint and it is a devil of a job getting that lid off to see how much paint there is inside.

Well the Gold Anti-Trust Action Committee (GATA) have been experiencing this very same feeling with the gold price. They have been trying to prise off the lid on the gold price suppression and expose it for some years. It now seems their attempts are starting to see the light of day. They can see the glint of gold in that old paint tin and it is tantalizingly close.

In mid March GATA Director Adrian Douglas was contacted by a metals trader in London, Andrew Maguire. Who indicated he had been told first-hand by traders working for JPMorganChase, that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.

Subsequently, at a hearing held by the US Commodity Futures Trading Commission (CFTC) Douglas gave testimony on and reported how JPMorganChase (JPM) signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Based on whistle-blower Andrew Maguire report, these are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.

Prior to that, in early February, Maguire gave warning to Eluid Ramirez a senior investigator for the CFTC's Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.

One could be forgiven for thinking that there is a lot of desperation around when such 'coincidental things happen', such as Maguire's car being rammed by a hit and run just after his initial statements and strange ‘technical’ breakdowns during videos of Bill Murphy and Adrian Douglas's testimony to the CFTC. Interestingly enough after the hearing, Douglas and Murphy were contacted by several media outlets for interviews but all, repeat all of the interviews were cancelled.

Never the less although the hearings were supposed to be low key, the word is now out and the main stream media is now following the birds on a line rule. When one bird flies the others will too. The New York post, the Huffington Post and even the Herald Sun newspaper from way down under in Melbourne, Australia have taken up the story.

We can likely expect more revelations as the lid is eventually prised off this can of worms and the true gold price begins to assert itself.