The Rise In Gold Because Of A Shortage Will Be Spectacular
With continued propaganda coming out of the Fed, and Bernanke claiming he doesn’t understand gold, today King World News is pleased to share a piece with our global readers that was sent to us exclusively from Grant Williams out of Singapore. Grant told KWN he wanted to do a follow-up piece to the one he recently released which garnered so much attention from around the world. Below is his exclusive piece for King World News.
It is
incredibly rare to see the price of something falling so precipitously
at the same time people are queuing around the block to buy it so what
is going on?
After
the quiet default by ABN Amro in early April, 'smart money' has been
adding to the problem facing the bullion banks by withdrawing their
physical gold from the COMEX warehouses in droves and moving it to
private storage facilities outside the banking system which leaves an
even smaller pool of available gold to meet an increasing number of
delivery requests.
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With continued propaganda coming out of the Fed, and Bernanke claiming he doesn’t understand gold, today King World News is pleased to share a piece with our global readers that was sent to us exclusively from Grant Williams out of Singapore. Grant told KWN he wanted to do a follow-up piece to the one he recently released which garnered so much attention from around the world. Below is his exclusive piece for King World News.
“Since the April
smackdown in COMEX gold, physical metal has been pouring out of
recognized warehouses and stockpiles as investors all over the world
rush to perfect ownership of an asset that, when owned, unlevered,
outside the banking system provides the ultimate hedge against market
dislocations.
“The answer, I suspect, lies in the chart below:
The
huge decline in the gold price coincides almost perfectly with the
request by the Bundesbank to have 300 tonnes of gold held at the NY Fed
returned to Germany - an operation which we are told will take seven
years.
For
years the Central Banks have been leasing out their gold to bullion
banks at essentially zero interest to fund the ultimate
establishment-endorsed carry trade but now that trade seems to have run
its course and bullion banks are going to have to come up with
potentially hundreds of tonnes of gold.
Fortunately
for them, the structure of the market and the disconnect between the
Gold price (the price quoted for a paper futures contract on the COMEX
that is effectively merely a claim on physical metal) and the price of
Gold (which is far more important as it represents what a buyer has to
pay to actually own an ounce of physical gold free and clear) enables
them to shake out enough loose holders of the metal via the ETF to make a
dent in their shortfall - but only up to a point.
Almost
30% of the total holdings of gold ETFs has been withdrawn since the
beginning of the year and this is incorrectly reported as a very bearish
development but it's the ultimate destination of that gold that's
interesting.
For
every seller of the GLD ETF there is a buyer - both parties transacting
in paper - not gold. The only way to convert shares of GLD shares into
physical gold is to buy 100,000 of them (roughly $13 million at current
prices) and then present them to any one of the Authorized Participants
who will redeem the gold on your behalf and deliver it to you.
Supposedly. There is plenty of anecdotal evidence that not all
redemption requests are being met but that is a story for another day.
Roughly
600 tonnes of gold has been sucked out of the various ETFs since their
holdings peaked in Q1 but, due to the mechanics of the ETFs, virtually
every ounce of that has to pass through the hands of the bullion banks -
the same bullion banks who are in a bind over supplying physical metal
to meet redemption/repatriation requests. It's a perfect mechanism to
ensure that control of physical bullion is safely in the hands of the
bullion banks.
BUT...
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