Source: GoldSwitzerland, by Egon Von Greyerz
Time and time again we are seeing fraud taking place in the precious metals’ market. Thousands of tonnes of paper silver and paper gold are being dumped over just a few hours or days. For anyone who doesn’t understand what is happening, let me categorically state that this has nothing to do with the real physical market in gold and silver. No, this is blatant manipulation by governments and bullion banks as well as speculators. And since governments are involved, it is sanctioned by them with no consequences for the traders who are rigging the market.
BULLION BANKS FEAR THE DAY THEY MUST TURN PAPER GOLD INTO PHYSICAL
What is happening has nothing to do with real markets or real supply and demand. What we are seeing is governments trying to obfuscate their total mismanagement of the economy and the currency. So far, the bullion banks have been fortunate that gold and silver paper holders haven’t called their bluff and asked for physical delivery. Because we know and the banks know that the day they will need to come up with the real gold and silver bars, it is game over. Because they haven’t got physical gold or silver to cover even a fraction of their paper shorts. Between futures exchanges, bullion banks, including precious metals derivates contracts, there are hundreds of ounces of paper gold and silver outstanding for every ounce of physical backing.
The problem is that it is not only the bankers that are the culprits in this game. No, governments are just as culpable. Western banks officially hold 30,000 tonnes of gold. Virtually no Western central bank has ever had a physical audit of their gold. The US had their last audit during Eisenhower’s reign in 1953?
Western central banks have in the last few decades been liquidating a major part of their gold holdings. For example, he UK sold half of their gold holdings at the end of the 1990s and Switzerland sold over half. Norway sold ALL their holdings in the early 2000s.
What the central banks didn’t sell, they lent or leased to the market. They did this to earn a return on their gold. Most of the lending took place through LBMA (London Bullion Market Association) banks in London and some in New York. So a central bank would lend part of its gold to the market and the gold would stay within the London or New York pool. But that changed in the 2000s. The big buyers of gold are now China and India. Neither of these countries is interested in keeping their gold in London or New York. Instead they want physical delivery. The normal pattern is for the 400 oz bars to be sent from primarily London to the Swiss refiners to be broken down into 1 kg bars. The kilo bars are then exported from Switzerland to the buyers in China and India plus other major buyers like Russia. This is why the UK appears as a major exporter of gold.
ACCUMULATE PHYSICAL GOLD BEFORE THE MARKET RUNS OUT
The consequences of these transactions are very serious for Western central banks. Their gold which was leased to the market doesn’t exist anymore. It has been broken down into new 1 kilo bars and gone to Silk Road buyers. Western central banks will of course never get their physical gold back. All they have is an IOU from a bullion bank. And since the gold has left the West, the bullion bank will never be able to deliver physical gold against their paper commitment.
Since there have never been any audits, nobody knows how much unencumbered physical gold is still left in Western central banks. It is very unlikely to be even 50% of the 30,000 tonnes that they officially hold. The people and nations that understand that this Ponzi scheme is going on are not panicking. Because they know that the ones who hold the physical gold also have the power. But it is not only a question of power but also confidence that physical gold will protect the people who understand the significance of holding it.