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The Coming Precious Metals Short Squeeze

by John Rubino on March 30, 2010 · 56 comments

With the gold price suppression scheme apparently breaking open — see this article and this interview — the question becomes when, not if, holders of futures contracts will start demanding physical delivery. Most will discover that the metal isn’t there, which will, ahem, unsettle the commodity and currency markets.

This impending bullion bank disaster is a victory for GATA and its allies, who have been tilting at this windmill for what seems like forever. The Collapse of the Dollar, for instance, contains a long chapter titled the “The Great Central Bank Short Squeeze” in which James Turk, writing in 2004, lays out the evidence for central bank gold manipulation and makes some predictions about what we’re likely to see when the scam is exposed:

One question which I haven’t yet addressed is why central banks would bother with gold’s exchange rate in the first place. Here’s why: Because gold is money, it is one of the yardsticks by which the world’s currencies—and the central banks which manage them—are measured. When gold’s exchange rate is low relative to the dollar and euro, central banks appear to be doing a good job of keeping inflation down and the value of their fiat currencies up. So part of the central banks’ motivation has no doubt been to keep exchange rates at favorable levels – by keeping gold undervalued – thus making their currencies and themselves look good.

As for why central bank manipulation of gold’s exchange rate portends a dramatic spike in gold’s exchange rate, let’s revisit Chapter eight’s brief explanation of how central banks lend their gold to private sector bullion banks, which then sell it on the open market. Because the bullion banks have promised to eventually return the borrowed gold to the central banks, they, in effect are “short” gold. That is, at some point in the future they are obligated to buy gold in order to repay to the central banks. The bullion banks thus benefit when gold is available at a low exchange rate, and are hurt, potentially very seriously, when gold rises.

By the end of 2002, I estimate that the amount of gold that central banks had loaned out was at least 12,000 tonnes, or about 385.8 million ounces. That’s almost five times the world’s annual gold production, worth about $160 billion. If the banks have borrowed this gold at an average of $350 ($11.25gg), and gold rises to $400 ($12.86/gg) (leaving the euro out of this equation for simplicity), the bullion banks are looking at a loss of $50 times 385.8 million ounces, or $19 billion. If the banks borrowed at $300 ($9.64/gg) on average, they’re facing a potential loss of $38 billion, more than enough to bankrupt some of the more aggressive players.

As the cost of acquiring gold begins to rise, the bullion banks might be tempted to cut their losses by covering their shorts (i.e. buying back their gold) en mass. In the stock market this is known as a short squeeze, and it often results in a buying panic, in which everyone heads for the exits at once, sending the price of the security in question through the roof. For the bullion banks the short squeeze is a terrifying prospect because of the potential losses they might incur. For the central banks, a short squeeze in gold is equally terrifying  because the result will be, in effect, a massive devaluation of their currencies versus gold, potentially undermining the monetary status quo they try so hard to maintain.

In any event, the failure of one or more bullion banks (remember, these are among the world’s biggest financial institutions) might threaten the entire global financial system, a prospect that no doubt has central bankers shaking in their boots.

Viewed this way, the recent gyrations in the gold market make perfect sense. When free individuals, observing the debasement of the world’s fiat currencies, begin to bid up the exchange rate of the one money that’s immune from debasement, the bullion banks run to Washington (or Paris or London) for a bailout, and the central banks oblige by pushing gold back down. But the game is just about up. The bullion banks’ short positions have reached unmanageable proportions, and gold’s exchange rate is surging into the danger zone. A short squeeze is coming, and for the world’s central banks (and bullion banks’ shareholders) it will be a disaster. But for those who value and understand gold’s enduring role as money, it will be a classic case of poetic justice.

  • Bruce C.

    Love it! and hope it happens.

    Fortunately, Western citizens along with the Chinese, et al are beginning to buy, take delivery of, and hold more and more of gold (the Indians always have) and that upward price pressure will force the squeeze. The only thing the “insiders” can do is keep up the ant-gold and economic recovery propaganda and hope most people continue to believe it and don’t buy gold. Unfortunately, I don’t believe in the wisdom or perceptiveness of the average American, but about 4 times as many newly enriched Chinese peasants are different animals, and they should be enough, even if the jaded investor class in the West continues to believe in their paper securities.

  • Ned

    By all account, I’m an average chap with a solid, middle class income (80,000 gross euros per anum). Now that I am debt-free, I save 25% of my monthly net pay by buying gold and silver bullion (mainly austrian philharmonics and canadian maple leafs).

    I fear for what the worldwide chain reaction will be if one mega-bank or sovereign nation declares insolvency. I believe gold and to a greater extent, silver, may be undervalued by a factor of 50-100 – this is why I will continue to save my little bit of wealth in precious metals.

  • J W

    Squeeze the frauds till they are squeal like pigs in the slaughterhouse.

  • Brutlstrudl

    It was probably Richard Russell who said that someday the only measure of wealth will be how many ounces you have. I presume he meant physical metal buried out back.

  • Gargamel

    Every Stone we lift seems to uncover another scam or ponzi scheme yet the main stream media is either naive or complicit. I would have never thought this a few years ago but can’t help but think this is all one giant conspiracy.

  • John

    It should be clear the us Gov is the mob all of them !!!!!

  • wokeupmad

    What will people invest in when they can no longer get their supply of gold coins? Copper, Crude , or will they just descend en masse on the FED? Into the unknowable we go, this is going to get really interesting!

  • steve

    what is really amazing is the cover up by the CFTC. same as SEC covering Madoff. this will end up badly for paper holders.
    I’m checking out of paper wealth. too many scams.
    I would recommend gata for the medal of freedom.

  • Ken

    I’m waiting for an event that shows me that the status quo is truly in trouble. I’m still waiting… all the truth in the world is worthless if no one is willing to hear it.

  • Peter B

    The whole financial system appears to be built on lies and deciet, it looks like all the pillars are crumbling very quickly now, might be a case where it just erupts violently with gold and silver getting a moonshot like we have heard so much about….the biggest wealth transfer maybe in the making!

  • foolmetwice

    I frequently see references to “bullion banks.” Who are they and why are they never named? I’ve been long gold for ten years, and still I don’t know what a “bullion bank” is. It seems like an oxymoron. If you are involved in gold bullion, why would you be a bank? Don’t banks deal in debt and paper?

    Enlightenment appreciated.

  • Paul Revere

    All I can say for the Fed, Wall Street, and Washington D.C. is burn baby burn. Could not happen to a better bunch of A-holes.

  • BR

    With all due respect, I’ve been hearing the same type of argument from goldbug guys for a decade (actually since about 1980, but who’s counting). The BIG PANIC is always imminent. This story certainly dovetails well with the marketing strategy for your own precious metals business. I’ve noticed over the many years I’ve been investing that the gold-oriented investment advisors play to the politics of their constituency rather than their desire to actually make some money investing. “I don’t care if I lose all my money as long as I’m right!” is the refrain.

    I’m not at all opposed to gold and hard assets. I have about 6% of my portfolio in coins (picked up cheap in 2000-2005 after the y2k idiocy fizzled) and mining shares and another 9% in energy and other resource shares, but articles like this, and frankly websites like this, fall into the “noise” category of information overload — intended only for the most naive of investors. Caveat emptor.

  • http://www.dgcmagazine.com/dp/ Mark Herpel

    Madoff just got bumped to a distant second. Amazing information and interview:
    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/31_GATA_files/GATA%203%3A31%3A2010.mp3

  • http://llmorse76@gmail.com Lowell L Morse

    I have to agree with Br. I also have a tendency to believe this to be a very large conspiracy. One market moving another. I am not looking for a “moonshot” however, our european friend maybe all the wiser, by just plodding along.

    I have sucumb to one fact. None us will leave this world alive.

    Live well, and enjoy the show.

    Regards,

    Lowell L Morse

  • mike121

    I believe Gata is right. I have to trust somebody. Either the big banks or Gata. Most people still believe their governments. People only want to hear the good news and be optimists without doing their homework. I have 80% of my net worth in physical gold and silver, 10% in mining company equities and 10% in real estate. I hope to God I am right !!!!!! Bullets and Beans are my next investments.

  • metaldetector

    Don’t look for much to happen. These CFTC commissioners are connected to Goldman Sux and other big boys so they are not about to pull anyone’s pants down and expose their hineys (although that has already been done by others). The bankers could have told them at the hearings that there has never been any metal to back the paper, none now, and never will be and they wouldn’t even blink an eye. They will proclaim there is another investigation underway and the info will be buried so deep it will be harder to find than the lost Dutchman’s gold mine (or it may end up getting lost, destroyed in a fire, or the dog might eat it). Major news media are not covering this and could care less. Did the WSJ say anything about this tremendous expose’? Lets not wet our shorts just yet.

  • DR

    RE:”. “I don’t care if I lose all my money as long as I’m right!” is the refrain. ”

    With all due respect,
    Don’t worry BR, if you have 6% in physical PM’s, its highly unlikely you will ever lose ‘all’ of your money. How many investors out there can say they have the same diversity in their portfolios, in that they have any percentage at all to speak of in PM’s?
    Ans. Not many, but they’re growing at a faster and faster pace.

    Remember all, all the Au in the world, including that which has yet to be mined, only adds up to 3/4 oz per capita.

    Regards,
    DR

  • dan

    The CFTC recently passed some new rules concerning limits on speculation in general commodities. OK
    Think about it. The big losses in financials were called an “evaporation”
    If the ‘big 4″ were required to come clean or,, if COMEX / LBMA were to be found naked, there would be a HUGE rush to commodities. A few fools might run to junk or treasuries. Most would run to tangibles. Stocks are headed to another meltdown. Nobody wants to be part of the next “evaporation”.
    The CFTC may be looking forward to the day when they have to limit spec in commodities. They want to have rules already in place.
    The recent CFTC hearings had focus on copper,, not just PM.

    With 40 million on food stamps, I believe that the CFTC will try to avoid a repeat of our recent high gas prices,, along with other commodities.
    China isn’t far from falling off the cliff. They told their people to buy gold. The more insecure the Chinese feel, the more gold they’ll buy.
    All of these factors could easily clean out the existing stockpiles of gold.

    U.S. treasury bonds are a promise to pay off with future goods and services. Americans have priced themselves out of the job market where billions are willing to work for survival. We won’t be providing those future goods and services.
    There’s probably $ 10 quadrillion worth of debt instruments in the world. If a panic set in and everyone tried to convert debt into tangibles, most would get left out in the cold.
    Not me.

  • mac

    Those with a memory will recall 3 headlines that helped push gold over $1200: the Paulson gold fund, the ‘China put’ and the tungsten story( never substantiated ). Now we have we have the Turkman with the latest reason why gold is going to the moon. All you moonies out there, check your wallet !

  • silverseeker

    For the many skeptics and cynics here; please listen to the CFTC hearing embedded videos on zerohedge or GATAs site; Jeff Christian, brough tin to defend the exchanges, instead implicates the LMBA as being leveraged 100:1 paper gold:physical bullion! Then listen to the interview with the whistleblower Andrew Maguire on kingworldnews. He gave explicit details to the CFTC of the Feb 5th takedown in metals before it occurred, including the contracts, who would sell them… everything. Finally, then listen to the GATA interview on kingworldnews. Everything is there; and why the media blackout??? Bill Murphy was scheduled to be on several financial news programs and they ALL cancelled after the CFTC hearing!!! This ponzi scheme is going to unwind whether we like it or not; better to be informed than ignorant!

  • Diogenes

    I am new to gold and silver bullion buying. Not once have I looked back on my decision to diversify into both. Whenever I read and hear articles such as the recent CFTC hearings I cannot help but wonder one thing however. Who believes Obama would do otherwise to Roosevelt when he confiscated gold in 33. Is this possible and what’s to stop him when SHTF?

    • http://www.silver-investor.com Charles

      I released a 312 page pdf file (Summer 2009 ran for three months due to extent of content) detailing the week by week gold and silver grab by the Feds that started on March 9, 1933 into 1937. Original source material from Commercial & Financial Chronicle & NY Times. My purpose was to prove it did happen; who was behind it (NOT FDR, but The Pilgrims Society); and having so illustrated, to serve to insulate us against a repeat by this Society which unfortunately, is still at the top of the world financial crisis. Why did GATA opt to ignore this landmark research? Review it and decide for yourself—is it that I “fly off onto dozens of conspiratorial tangents” as Powell asserted at http://news.goldseek.com/GATA/1242579600.php —or is it that I am by far the most thorough of anyone in documentation? I was stunned at the criticism as no one else on the long side of metals ever took a swipe at me before that incident. That was, very strangely, just after Butler publicly apologized to me over an article on LBJ that I assured him I was not annoyed over, as I had written on the subject first. Newspaper editors like to edit (delete content) you see! Previous to that I had always praised GATA publicly. Too bad about the unfortunate personality clash. It’s nice being independent and not subordinated to anyone (the GATA charter governs GATA it does not govern me!) View the pdf see for yourself if I’m on any “tangents.”

  • simon

    IF THEIR IS ANYONE HAS NOT BEEN CURIOUS WELL NOW CURIOUS THEY SHALL BE,(THAT IS CURIOUS) AS WELL AS QUESTIONING THE FACT AS WHY SILVER TO GOLD RATION IS 60 TO 1 WHEN 90% OF ALL THE SILVER IN THE WORLD THAT HAS BEEN MINED HAS BEEN CONSUMED THROUGH TECHNOLOGICAL PRODUCTION AS WELL AS BEING A MINING BYPRODUCT. GO FIGURE…
    AND ANOTHER STATISTIC THAT IS MIND BOGGLING….EVERY TIME AN OUNCE OF SILVER IS MINED THERE IS APPROXIMATELY 10 OUNCES SOLD..
    FACT..
    EVERY TIME AN OUNCE OF GOLD IS MINED 5 OUNCES ARE SOLD..
    FACT..

    I COULD NAME OTHER FACTS BUT I AM SICK A TIRED OF NAMING THEM ALL TIME AND TIME AGAIN.

    SIMON

  • foldenrev

    To foolmetwice: The 2 major bullion banks involved in the manipulation scheme have been identified by Ted Butler (and others) as JP Morgan Chase and HSBC USA.

  • Lester

    I doubt anything serious will happen to either metals. We have been told for years now to expect a short squeeze sending prices to the Moon, US$ to collapse, yet neither is happening. The warnings maybe correct if the market behaved according to some known and fixed rules, but in reality it does not. Prices keep crawling up and down, as proof that the manipulators have all aspects covered. Paper contracts will get settled in fiat paper, and for central banks with all their secrecy it matters not how much extra cash they will have to print to prevent a panic or collapse. I rather suspect that they are counting on an Armageddon style event so they can default without any repercussions. Maybe they are actually engineering that event as we speak, like WTC. Recall all the short-selling of US airlines in Europe just before Sept 11, and the new insurance contract on the WTC! Hello!!!???

  • Alex

    - How many speculators including the biggies have TRUE interest in taking delivery of the actual metal? NONE!

    So forget about the run on the exchange vaults.

    – How many investment letter writers have the TRUE data about the reserves being hoarded by the miners for a better day? NONE!

    So forget about the world running short.

    Whether we like or not, silver will be produced as a by-product in other mining operations, so that silver-only mines are not yet profitable.

  • Jerry Stockdale

    Congratulations on “bilin’ down that report!” like Finegan to Flannigan!

    Respectfully,

    Jerry Stockdale

  • Dan Lucachick

    I relate to the feelings expressed about waiting for the moon shot. I believe that it is certain to happen some day. Which day is that? I have been waiting for 9 years and I must admit to a great deal of frustration. However, like I tell anyone who cares, there has never been as good a day as today, to buy silver and gold. Ned has it right, silver is undervalued by 50 to 100 times. The endgame is showing on the horizon. They can fool 99% of the western world all of the time, and they have proved that to me. They cannot fool the rest of the world. Meanwhile they appear to be doing everything they can to wake the sheeple with their arrogant behavior. I think the moon shot will start this year, which also means the breakdown of law and order will also happen this year when the banks close and our dollar is revalued downward by 50% or more. Don’t be looking that gift horse in the mouth, buy silver immediately.

  • Alexander Hamilton

    Land of the free or Indebt Rothchild Slave?

  • Mike Eck

    Mac and others who think along those lines,

    I abandoned the DOW/SP index in 2002 and have contracted on resources, mostly gold and silver ever since. I”M HAPPY!!!

  • Scott

    a gold confiscation won’t work anymore. People that own gold [like us] just won’t give it up ’cause some stupid asshole goes on TV, wraps himself in a flag-rag, and tells everyone to turn in their gold. Yeah, right! If you can find it, you can have it. However, I don’t think it’ll ever come to that. The ‘Powers That Be’ don’t want us to know what gold is; the last thing they want is to draw attention to it – as a confiscation call surely would. They want to leave it demonetized forever so they can continue to play their fiat games.
    Also, I’m not so sure about this short squeeze. Sure, the bullion banks owe the Central Banks the gold back….but in ‘dire straits time’ Da Boyz will stick together like glue: the shorts will be ‘forgiven’ of their obligation to produce the gold. The last thing TPTB want is a much higher gold price; they’ll do ANYTHING to prevent that…which includes lying, cheating, stealing and / or killing.
    Ultimately, what will bring us a higher gold price? Simple: the ‘debt-bomb’ nuke explosion that’s just beginning to percolate below the surface [see: Dubai, Greece, Iceland, et al.] This will be the real trigger…..

  • T. Lewis

    Mr. Gold & Mr. Silver meet Mr. Global Currencies. Mr. Gold & Mr. Silver, do you have any words for Mr. Global Currencies? Mr. Gold: “Its Clobbering TIME!!”

  • Lester

    Foolmetwice enlightenment: bullion banks are the actual market-makers who fix the prices twice daily at N.M. Rothschild’s office in London. The London Bankers Association keeps control of world finance by keeping the fix in London. Who knows how long though?
    There is a parallel gold/PM market in Zurich, Hong Kong, Sydney, Singapore, Tokyo, etc, but they set prices of their own, their prices are not quoted worldwide, and not all are in troy ounces. Zurich handles much of the russian sales which gives them weight in the most important market in the world!
    Check out http://www.lbma.org.uk for gold and silver, and lppm.org.uk for PGMs. Also http://www.thebulliondesk.com for daily news for all PM related issues where all the advertisers are dealers at some level.

  • Bruce C.

    Some interesting comments, and I especially like BR’s skepticism. The central issue for everybody seems to be what the buying power of gold and silver will be in the near future. I think that it will remain more or less constant, at the very least, and possibly/probably increase over the next 10 years or so. I don’t see it going down. Why would it? Even if gold/silver is ultimately judged to be just another commodity it would still be valued based purely on supply/demand and inflation fundamentals. Only if the world suddenly became anti-PM bugs would the price drop significantly, and I don’t see that happening. Indians and Asians will always be buyers of gold even if the re-inflation efforts by Western central banks “work” and lull people back in to a false sense of security with fiat currencies. I also can’t think of any circumstance in which central banks would sell their gold on the open market. At worse the transactions would be only amongst other CBs which would only affect psychology but not physical supply. This is all assuming the global financial system stabilizes and the worst is behind us.

    Personally, I think that is impossible. The US alone has unfunded liabilities in the trillions, and no one disputes that. The US currently is in debt by $14 trillion, and projects additional annual deficits of between one and two trillion for the next ten years. There are two ways to have a deficit: either borrow the money through bond sales or “print” it (or both). We are very close to having to print money just to pay interest on our current bond obligations because of so many other non-discretionary expenses. Therefore, I don’t think the US will be able to borrow money for much longer, especially at the low interest rates that we have now. All this concern about gold/silver price manipulation and leveraging pales in comparison to the need to keep interest rates low. But that will be impossible, as it is already happening. The same can be said for just about every other Western country.

  • Joe M.

    The bottom line is the USD will eventually return to its intrinsic value of zero and since Gold is a hard inverse to the USD it will shoot the moon.

    Gold it will stop trading at $10,000 and go black market. Millionaire’s will approach us and say name your price and we’ll get it.

  • Bruce C.

    Joe M.

    In the extreme circumstance that you allude to, why would you sell your gold for a millionaire’s money? What do you think you would know that he/she wouldn’t for that to be a rational transaction? Why would the millionaire want gold more than currency (dollars), and for you vice versa?

    It’s a good question for all of us to think about. I think if the currency collapses or severely devalues then one’s metals would be used to buy other assets, not pieces of currency except in small amounts for convenience.

  • Pingback: » Huffington Post Exposes Gold Ponzi Scheme

  • Joe M.

    Bruce C.

    I am talking about Gold in its mania phase where people of wealth will be bidding against each other to obtain it. I believe there will be a narrow window where the USD will still have some purchasing power and we will trade some Gold for fiat to buy tangible items of all kinds. I am looking for a good food producing farm.

  • Jim V.

    I think this discovery (or confirmation) is one that has mass news appeal because it involves money (which everyone knows gold has something to do with) and fraud/corruption. Therefore, it will be interesting to see how well this story can be repressed by Big Media. There are enormous forces against any more de-stabilizing ideas getting out. (After all, the economic recovery IS continuing to take hold, haven’t you heard?) Even gold dealers should oppose it because it’s bound to upset sales and add fuel to the fire that the PM business is sleazy, never mind that the real corruption is at a different level. Again, though, it has all of the elements of an irresistible mystery story, combined with the possibility of “insiders” getting caught, foiled, and maybe even punished.

    That said – after thinking about this – I don’t think most people will care about the alleged 100:1 leveraging. Not immediately anyway. People accept fractional reserve banking, knowing that banks don’t have enough money for everyone to withdraw their money at the same time and they seem okay with that (I think most people know that!, but maybe not?). As long as one’s ETFs can be bought and sold for dollars there will be no problem. Only if those buyers of gold ETFs and similar securities become convinced that the financial system is in peril, and they need gold to preserve their wealth, and not just play the market to profit, will anything close to a squeeze take place. Silver, however, is a different story because there is so much less of it. A shortage may be occurring already.

    Ironically, I also think that news of gold price manipulation would tend to discourage gold sales (and hence DIScourage demand) since one could not trust the market. Maybe gold is artificially high right now, not low? Aren’t all those cheap, corny, embarrassing TV advertisements to buy gold a little suspicious? Why do they want my dollars if gold is such a great deal? And aren’t most of those dealers (especially GOLD LINE) the worst rip-offs?

    The key to all of it is the stability of the global financial system. If it implodes, as I think it will, then all hell will break loose and gold and silver will once again attain their regal status. I’m just enjoyin’ the show, even though I don’t think I’m gonna like what’s coming.

  • Criss Trenchant

    In my effort to understand what is going on, I’ve identified several paradigms at various sites. This one seems to view the proverbial cup as half-empty vs half-full. So gold or silver is manipulated, etc.: GET A JOB, GET A LIFE, WHO CARES? WHAT ELSE IS NEW? Nothing is new. All of this talk about this picayune thing or that is a waste of time! The world has advanced! Do you really think that the people today making the big decisions aren’t the best? Do you really think they’re wrong? Do you really think the punks with all of these gloom-and-doom websites know what they’re talking about? If they really knew they would be in positions of real power.
    On the other hand, history is loaded with one pathetic “know-it-all” after another, followed by the consequences (which are usually not good). These days though, I say this barge (the world economy) is going to be a slow train wreck, but so slow that profitable investments are impossible to predict.

  • Robby D.

    Every government which prints fiat, supresses (or stabilizes at least)precious metal prices. I also believe there is less gold than what people believe they own, I dont believe for a minute etfs slide gold in and out of some vault as people buy and sell their “stock”. I believe they may trade gold as a commodity to hedge the fund, but actually have it, well someone is getting a heck of a work out moving gold. Once we get to the point that the world realizes the dollar is in a currency crisis, it will truly be too late. The rush to metals will be unbelievable, and I will be bidding on the same food producing farm that Joe M. is talking about. No where in my future do I ever expect to trade metal for paper. The more I study and find out how fiat currencies have all at one time or another have vaporized, the more I realize how vulnerable we are RIGHT NOW. Even the Roman empire dilluted their gold and silver coins because they didnt have enough to go around, and that helped destroy their government (lack of CONfidence in the money supply). I am still trading stocks some (buying spy puts), have real estate etc, but about 25% of my net is in physical metals. I now sleep much better at night.

  • http://n/a briant

    CrimeX Gold “Bust” To Cause Gold Price Collapse?

    If it is illegal to use gold as collateral then disregard the following.
    However I doubt this is illegal and in fact likely is encouraged.
    I will attempt to address the following here in this piece.
    1. Comex “crash” may not induce the “parabolic rise” some are waiting for.
    2. “Elite” may well actually allow this to happen as they could care less and most will have no recourse in such an event.
    3. A gold “bust” could actually be the cause of some type of “meltdown” that we do not see coming besides munis, cdo’s, cds etc.
    And of course to continue to debunk “gold will be the new currency and the only way to survive” fear and greed based mandate of “gold bugs”
    As follows:
    There has been much talk and ever growing ripples now beyond the gold community about the comex and other sorted exchanges and banks not having the gold they say they do.
    This is actually a problem for gold…. Not a Positive set to make gold skyrocket to the moon.
    I have no doubt that if banks are willing to use all manner of Swaps and various other instruments to the tune of 100’s of trillions that they in no way have this gold or maybe even any gold.
    It is also likely that now like many times in the early days of the goldsmiths that powerful people behind these banks and exchanges may have simply run off with the gold without a trace. For if they did who could stop them? Also who would find out BEFORE its too late? If people are redeeming their gold or een just taking back into their hands that would be stealing back what was stolen surely they wouldn’t allow that for they stole it fair and square. Think on that!
    Now combining GLD and SLV and all other manner of short instruments etc. It is said about these 2 metals alone that there is about 1 to 100 ratio of actual gold to these instruments etc. Myself I would not be surprised if this is way off to the short side, maybe even 200… who knows (they probably don’t even know)
    However here to illustrate how big of a problem this is I will use even lower numbers than some claim and then they can play with the numbers…. For they always do anyway.
    Let’s say banks are only playing with these numbers to half that tune of 50 to 1. Which represents more closely to housing loan side of things ratios (still insane!)
    Have we really though about what this means???
    Lets say there is just 1 trillion in vaults etc. out there (again you play with the numbers ) IT may be that gold is leveraged to the tune of $50 trillion which more or less could be $300 trillion!!!!
    In a world of $100 trillion problems I’m not sure if we need another. Of course I’m not saying what they are doing is right and I think they should all be lynched for 100 other reasons on top of this.
    This case however would cause far reaching problems and problems I don’t think any of us can really understand until they happen. Likely 10’s of thousands if not 100’s of thousands of loans would instantly or near instantly be null and void and collapse taking all counterparies down with them.
    What this may do is a few things. If the bank allowed the depositor (of gold) to use this deposit as collateral then the party found out the bank actually used the gold for other things or in the weeks previous “gave it back” to a “more important entity” or plain stole it as soon as they got it…. What do you think the odds of them paying back the loan are even if they wanted to?
    In such cases this would likely create a hole bigger than the black holes in banks balance sheets! These sheets would be hung out for all to see then we would really have a big problem in full view that could not be dispelled with an manner of acronomious programs and instruments that even the inventors of such do not understand.
    Bringing the banking crooks into the spotlight. (even more)
    Now many of these customers are not your regular guys with a few hundred ounces in a box somehwere that they open to look at once in awhile. These guys are big players in this arena. Big players have big connections because of the fact they are big players. These connections are not always to “legitimate businessmen” so to speak.
    This is not a game for big players though, this like all manner of games in life is a game for the “biggest player” namely the “elite” families etc. However even the mighty can fall… and likely will and faster than even they or their enemies think in the event someone could get mad about losing/getting stolen a few milllion or billion in gold. ( in this manner as well it is likely the ones they know could do such things are the ones getting paid first)
    Anyway, in this matter I would think its possible that said parties may want to retaliate and likely have the means to do so and if they cant catch or get the big fish, they will catch anything that will get them to them all the way until its over. This is upto and including any type of bank or comex or cftc etc. personnel. As much as I don’t like to wish anything bad on anyone… what goes around comes around and I’d probably toast the peretrators rather than mourn the victims in the event such events transpire.
    So in this case it is likely that shares of many banks, property companies etc. etc. who have ties to this scheme or have loans of any variety “backed” by gold would plummet. This can as we have seen when things plummet cause a drop across all asset classes as traders and the like sell whatever they can to make whole on margins etc.
    In these types of selling events and most recently with “lehman fiasco” we saw dollar skyrocket, not dollar collapse not the other way around that was suppsoed to happen since 2002.
    This would across the board be deflationary not inflationary for gold or stocks etc.
    As a multi trillion dollar hole is much bigger than Lehman pitily $800 billion+/- (of course if you want add in Wamu BSC etc. and put the number where you want it will still be dwarfed by this gold problem
    Now is it possible the elite would do such a thing ON PURPOSE?
    Of course they do everything on purpose. There are no mistakes or accidents here or “Clueless” people in these circles (and they are wide.) I am always amazed at how little credit we give them for the masterpiece of lies and deception etc. they have set up. To me it is an extension of not wanting to admit we have been ripped off by a very smart group of gangsters, but rather call them fools when the fool is the ones in the mirror each day!
    The fools are the ones who would leave their gold in a bank. The fools are the ones who would allow such men to enslave them with each passing year and also pay for their own enslavement and wars and drug trafficking etc.
    Sitting on our high horses and complaing has done nothing, Call them the fool but if you are parted from either your money or gold in a drawn out shceme and have maybe zero recourse who is the one who is laughing last?
    Now say in this way they do not control the prices in the event this is really brought out and gold price skyrockets….. WHO DO YOU THINK THE FOOLS ARE? Not them they will be laughin all the way to their basement…. Bank!
    Could it be the one who waited so long for this and has ZERO gold to show for it and this gold is in the hands of the “despised” is the fool?
    Let’s say now that gold becomes currency which I have thoroughly debunked this possibility here:
    http://www.marketoracle.co.uk/Article18280.html
    http://www.marketoracle.co.uk/Article18440.html
    Who would be in control of said currency by virtue of their now having even more gold than they did before? (Likely at least %80)
    Sometimes it amazes me how simple we think problems are and yet what fools we are to believe in fairytales that such a bust would “bring them down” when in reality it would likely make them stronger and in reality it is likely it would only happen if they allowed it as most of the benefit would be for them only.
    However this is in the event more so of a gold skyrocket which as per the above I doubt would really happen in the event a few hundred trillion in loans “evaporated”
    This would likely cause a debt collapse like we saw in the last couple years and we saw in 1929-40+/- When the debt can’t be paid the ship goes down… THAT IS THE WHOLE SHIP NOT JUST THE SHIP Except GOLD AND PM’s
    Gold may have made a bit better off during the last most recent fiasco…. But did it shoot “to the moon” NO.
    The events that transpired after such “quantative printing” did I will say help the price but even silver is still nowhere near its all time highs which was (and still may be) supposed to be “shattered”
    Now as has been the case so many times before, Who is the ones left standing when all the prices plummet and is left to suck all the blood down the drain and pay mere pennies for assets that were valued very high years, months, weeks, days or even hours ealier?
    How many times have we seen this happen and still think even though it works every single time for these guys it will be any different?
    Is it easier to buy assets that you for the most part control etc. at way inflated prices or massively cheap prices?
    Would we be fools to look at the reserves of cash banks have and not think there is even a slight chance they may do this again? WITH OUR MONEY! AGAIN!
    Of course you will say this is for all the bad loans…. They are only bad if they want them to be and any manner of accounting change they can and will do and have done. (which of course they could do for gold…. But then still where is all your gold?)
    As well houses are different as they need to give people something to live in in order to work and pay taxes… but they do not need to give you gold.
    If they can let the banks do all this illegal stuff as well how do we really know 3-4 trillion is all they have given them? Who is really keeping track? How do we know we are truly getting the real numbers?
    So back more to Crimex collapse, this collapse would have major implications that most bugs etc. do not ever want to explain as rarely do they explain their theories. Mostly when prie goes up all is line with their predictions and when it goes down manipulation is the first cause not a display for subscribers or the public in general on how to profit from such so they can buy morre gold. If I bought gold at $1230 and it is at $1140 it can be manipulated all over the place… but it is still a red bet!
    It is likely all systems would collapse at which point by default the elite would be on top organize a new one or a New World Order… that we in effect will be blamed for asking for a la comex collapse? (you decide)
    They will have all or a large majority of the gold (which in such an event as I have proven I think pretty conclusively will NOT ALLOW GOLD TO BE “CURRENCY”) Nor silver or anything else for that matter except if they decide it is. Which again would involve them literally “giving away” all that they have worked for centuries if not millennia to get….. not happening folks.
    All said and done it is likely they crash things before all this happens, slowing gold “redemptions” fooling all pm investors (or manipultating whatever you want to call it) I wouldn’t call it a bad thing though because all you bugs could get lots of gold playing the short side since you are scuh experts at seeing this manipulation and not telling others how to spot it, and gold would be much cheaper so how could you lose right? Then when it skyrockets to the moon you could buy entire city blocks and make everyone your serfs just like the elite do. What a wonderful world. That is of course if you are “smart” right?
    Personally I think gold topped at 1227 for this and these reasons and they are just playing around with the price until they break everything down and buy eerything on the cheap once everyone is panicked enough like they always do.
    But if gold goes higher I win, you win and the elite more than any of us win.
    If gold goes down and you play your cards right you could be a big winner and one day just one day if you work hard enough you could become an elite you love so much.
    Be careful what you wish for, especially when it comes to this. As I have said repeatedly like many others it is so mcuh that when everyone looks one way the market goes the other.
    You can bet on QE orComex bust to “skyrocket all assests to the moon” I will let the market decide. I think it will in this fashion. But either way I don’t really care I am well setup in any event inside and out and know in my heart gold up or down will not make or break my survival, my portfolio or my life in general.

  • schallb

    If the paper is worthless what makes the gold with tungstun in it worth?

  • fuzzywzhe

    In reading this from “briant”:

    > There has been much talk and ever growing ripples now
    > beyond the gold community about the comex and other
    > sorted exchanges and banks not having the gold they
    > say they do.
    >
    > This is actually a problem for gold…. Not a Positive set
    > to make gold skyrocket to the moon.

    it’s surprising how people don’t know very very fundamental, 1st grade, duh level economics.

    If there is a shortage of a commodity, only with gold, does it go down. I see the most crazy, specious, ludicrous, retarded arguments about valuation when it comes to gold. It’s as if when gold is talked about, suddenly people forget that 1+1=2 and that water is wet.

  • Rinaldo

    John, what you and these old gold touters from Gata apparently dont know or dont want others to know is that there never will be a short squeeze. Obviously you never read the Comex rules about physical delivery to the very end or do you like to dream of getting rich by the short squeeze ?? -:)

  • Dave

    I don’t care what stories pop up telling me that gold will collapse.
    I don’t care about claims of tungsten filled bars,this is all propaganda to keep the masses out of real wealth.
    I will continue to hold my gold (I’m up 90% now) and I will contiue to dump dollars as they accumulate.

  • archibald

    This is a NEW world. China, India, Asia were not players before, and are not nearly as “controlled”. If the price of gold collapses in the west, They will be QUITE happy to snatch up bargains. So will I. I would LOVE to grab many more ounces, even pounds. so go ahead, sell cheap, I will buy.

  • h5mind

    Throughout history, there has always been a small number of people who benefit enormously at the expense of everyone else. This process of concentrated wealth transfer has grown and accelerated dramatically in recent years. The manner and timing of the elite’s fleecing of the general populace is invariably a complete mystery to all save the inner circle of conspirators and their sycophants. Logic would then dictate that the prudent move in any case is to watch closely what those same elite are doing, rather than following ‘conventional’ wisdom as dispensed by pop economists and TV personalities masquerading as serious journalists. We are continually bombarded with propaganda telling us things are improving, the clouds are parting, and the sun will once again appear on our financial horizons. Meanwhile, the elite quietly build their arks and await the coming deluge. All fiat currencies eventually depreciate to zero, and the US government has assured the dollar will do so sooner rather than later.

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  • Meershoek

    food , fuel , warm blankets , weapons .
    Gold , silver is nice as a backup !!!
    ALways keep in mind YOU CAN’T EAT GOLD & SILVER !!!!!!!!!!!!!!!!!!!!!!!

  • Brian

    Meershoek,

    Remember, gold and silver are not intended to be kept for their intrinsic value or beauty or industrial application. Rather, consider how they may be traded for that essential gallon of gasoline, longed for pound of food, or necesary mechanical part for some indespensible machinery. Put yourself into the realm of need, and how you may satisfy that need through trade in order to apreciate authentic money.

  • no country for old men

    I will put my two cents in for what it’s worth. I’ve reviewed comments above and find merit in almost every one. I don’t think anyone knows or can predict what will happen. However, I have an extraordinary track record for predicting economic developments, so here I go with gold and other precious metals: value of gold is leveling off relative to current value of the dollar. Over the next five to ten years, value of gold will decline to about one-third its current purchasing power. However, I very much feel and can document reasons why the US dollar and its purchasing power will decline much more. For one thing, it already has. Cost for an average basket of groceries increased approx 5% during the first six months of 2010. Since I work in the field of agriculture, I actually predicted this development, and I predict it will get much worse. I personally feel that gold is a terrible investment right now and is greatly overpriced, but not nearly as bad as all other options. So, I continue to invest in gold even though I know it’s value will decline substantially over the next ten years. As soon as I get a paycheck, I pay the bills and use the remainder to buy gold and silver. Silver, I think is very volatile, but underappreciated asset. Approximately 25% of my entire net worth is in gold and silver, and approx 50% of my liquid assets. The gov’t can only get what there is a record for. Purchasing gold is recorded and reported to the gov’t, unless you pay a premium for it and it isn’t reported. This premium may be worth the extra investment. Don’t underestimate the extremes to which the gov’t will go to recover its (your) gold. If it is willing to snatch 52-million children from 36-million fathers (divorce and custody manipulated through false allegations of domestic violence and child abuse) and hold them hostage for ransom (child support and property settlement), it will send jack-booted thugs to your door to get the gold at gun-point.

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