To add in the news of the spectacular short sale / manipulation of a week or two ago, rumours of seizure of gold are circulating:
Eric King: “Maguire spoke on KWN yesterday about the fact that one of his clients went to the LBMA to get the metal from them and could not get it. They told him he would be cash settled. This is what you have been talking about is the failure of the physical markets.”Sinclair: “A person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank ....They told him the amount was in excess of 200,000 Swiss francs and the central bank had instructed them not to do it because it has to do with anti-terrorism and anti-money laundering precautions.”
There isn't a lot of difference between cash-settled and physical, unless the gold market is being interfered with, and unless the contract between the two is being broken.
Unfortunately, both of these are now true. Recently, someone who could only be a central bank dumped a 500 tonnes naked short sale on the *paper* market. The way it was done could only indicate manipulation, not a bona fide sale. Amounts of that size can be sold to any of the buying central banks. Not only that, the sale could be kept off the public markets, and shifted at spot, without losing anything on the price. The only plausible reason to lose that amount on a sale is to manipulate the price down heavily. The only ones would afford to do that are ... the central banks.
Secondly, declining to deliver allocated & owned physical gold is a breach of the whole contract. The point of the gold is that it maintains its value over time; people who hold it do so to maintain their own value over time. People who *withdraw* the gold still wish to hold the gold for a long period of time, and don't do it to get some nominal cash value. There may be a cash settlement option for convenience, but that isn't enforceable in an allocated gold bailment.
Two strikes: manipulation of the price downwards, *and* breach of contract on those manipulated & favourable terms. The SNB of all players should know better!?
One more strike and a full scale run on allocated gold is in order. If a gold run starts, national currency deposits will be sprinting only milliseconds behind.
Posted by iang at April 24, 2013 11:20 AM | TrackBackA rightwing group has submitted more than 106,000 signatures to the federal authorities, seeking a vote on stopping the sale of gold reserves held by the Swiss National Bank (SNB). It also wants gold bars stored in the United States to be returned.
...
The initiative also seeks to enshrine in the constitution a clause obliging the central bank to keep a minimum of 20 per cent of its assets in gold, twice the current level. Promoters say higher gold reserves will boost the SNB’s credibility.
In addition, they want to force the government to disclose where the gold reserves are stored.
...
The SNB, which has to guarantee price stability in Switzerland, currently holds about 1,040 tons of gold reserves after gradually selling off at least 1,550 tons.
The rightwing campaigners said the bank made a meager surplus off the gold it sold, which went for a “pathetic price” of CHF16,000 ($16,900) per kilogramme on average.
> The only plausible reason to lose that amount on a
> sale is to manipulate the price down heavily.
Would be curious to learn what actually happened there
and why. We'll probably never know.
On the subject of gold price suppression -- that has
probably been going on for a long time, this is quite
openly admitted by former BIS president in his memoirs
according to:
http://www.marketupdate.nl/nieuws/valutacrisis/dr-zijlstras-final-settlement-gold-as-the-monetary-cosmos-sun/
Very interesting article BTW. Would love to read the
whole book, but it's nowhere to be bought.
> The only ones would afford to do that are ... the central banks.
Wouldn't one of the SIFIs have the resources also?
> One more strike and a full scale run on allocated gold is in
> order. If a gold run starts, national currency deposits will
> be sprinting only milliseconds behind.
Glad I did my little bank run months ago, spares me the worries.
Posted by: JH at April 28, 2013 11:13 AMWrites Zerohedge yesterday: Two weeks ago we reported about one of the biggest daily withdrawals of eligible gold from the JPM gold vault, it not on an absolute basis, then certainly on a relative, when in one day over 260k ounces of gold were withdrawn, leaving a record low 141.6k ounces, or just over 4 tons of gold in the vault. Subsequently, we tracked the daily additions and withdrawals of gold from the vault to see if any other major withdrawal request would come, instead discovering instance after instance of JPM reclassifying Registered gold into Eligible, which is how the vault saw its eligible inventory rish back to 195K ounces as of yesterday, without any actual net additions or more importantly withdrawals. It seems the pause of withdrawals has ended, and as of yesterday, another delivery led to a withdrawal of 53,658 ounces, or 28.5% of the total, leaving a fresh record low inventory of only 137,377 eligible ounces in the vault. ...
[snip]
Finally with gold at record low levels, pay attention to how much more registered gold is converted into eligible in the coming days. Because if one day the registered gold holders realize the "run on the vault" that is going on, and they too ask to have their gold moved elsewhere, then things will really get entertaining.
Posted by: Zerohedge on gold outflows ... (Iang) at May 9, 2013 01:24 AM