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Hold Your Gold...

Remember last week when the Canadiens came out and said there were lots of ounces of Gold missing.... Those in the know are buying... It only a matter of time till Gold rockets!

Dear Comrades In Golden Arms,

I have been speaking with many people this evening who have taken gold delivery.

What I am hearing is not impressive.

For decades warehouses have held, but rarely delivered as compared to store.

When examined closely it is a paper system that may have fallen badly behind as gold moved ahead since 2001.

There is a possibility the system is antiquated and more FUBAR than anyone, even the warehouses themselves, realize.

I have been told that bars delivered do not correspond with the receipts from exchanges.

I have been told that bars of slightly different weight (higher) have been received.

This may well be a system that has never been asked to handle volumes as are now taking place. This may well be like the old hand clearing equity systems that broke down as volume of trading increased in the early 70s.

F.I. Dupont went out of business because their back office could not meet the growing clearing and trading at that firm.

Pershing, and Vilas & Hickey were the two largest equity clearing firms.

Vilas & Hickey, a NYSE firm of which I was a general partner (at 27 years old) recognized the growing problem and transferred our clearing business to Pershing and merged our activities into another firm, Muller & Company, in order to avoid the impending problem.

I was the sole general partner of the merged NYSE firm so I know what I talk about. We preserved our capital and side stepped a problem that busted many firms.

I smell exactly the same thing in the precious metals warehouse business. How pervasive it is we all will soon find out.


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SteveMT's picture

SIERRA: In this dicey environment, scare tactics can be at ....

work also. Found this article by Nadler that touched upon the Canadian Mint issue.

"A brief but important Friday footnote. A lot of ill-informed noise has been generated by the Royal Canadian Mint's gold reconciliation story, seen in the Canadian press of late. Some 'market advisors' found an opportunity in this story, to try to instigate some kind of a "run" of the custodial accounts of that, and other mints around the world. How pathetic. We need very few words to emphatically tell you that Kitco reaffirms its 100% degree of confidence in the RCMs ability to keep the customers’ metals free of any material losses, no matter what the ultimate tally will turn out to be."

He ends with this:

"Now, if you REALLY want to become informed on matters that really matter, and to everyone, you need look no further than the upcoming Freedom Fest 2009 in Las Vegas. Simply the best gathering of the best minds one can think of, this entire year, anywhere in the US conference circuit. Mark Skousen, the producer of the event is a most valuable fixture in the firmament of this industry. Mark's ability to put together the brainpower that a combination of (and only for example) Steve Forbes, RON PAUL, Bert Dohmen, Larry Kudlow, Rick Rule, Frank Trotter, Michael Checkan, and others represent is a just a preview and guarantee of what caliber show one can expect this year. Do not miss this one, no matter what your summer plans may be. Alter your plans, for that matter."

Nadler is excellent:

This is how he summarizes recent events:

"Gold prices fell as low as the $935 area of support following the dollar's success at turning back to well above the 80-mark on the trade-weighted index. Crude oil prices easing back from their lofty $73 levels (but not quite snowballing into a meltdown) also helped drag the yellow metal to lower levels. The recent spectacular advance in oil (complete with forecasts of 'imminent' $85 prices) came amid an absence of positive fundamentals (sound familiar?) and clearly bears the fingerprints of speculative funds at play (also sound familiar?).

This is precisely why we are paying a lot more attention to the forecasts calling for $40 and sub-$40 oil following this papier-mache price spike. It's as real as a theatre set. Thus, the inevitable headline in this morning's news flows: "Oil Drops on Speculation Rally Went Too Far, Too Fast." Would have been enough to just say: "Oil = Speculation." But that would just state the obvious. Kind of like saying a month ago that the swine flu was clearly turning into a pandemic."