CME Group – Precious Metals Physical Delivery Process

https://www.cmegroup.com/trading/metals/files/precious-metals-delivery-process.pdf

Kyle Bass Explains Why He Had The U of TX Take Physical Delivery Of $1 Billion in Gold

I will repeat the following information for newbies:  Kyle Bass, of Hayman Capital, is on the board of UTIMCO, the University of Texas endowment fund, which happens to be the second largest in the world--next to Harvard's endowment fund.  Bass was chronicled in Michael Lewis' The Big Short, due to the fact that he and Hayman Capital's clients profited immensely after the implosion of the subprime mortgage bubble.

In short, Bass has a history of identifying distortions in the market before they collapse--and positions himself to profit from said distortions.  He's a contrarian, rarely following conventional wisdom.  He knows his stuff.  Here's what he had to say about gold and why UTIMCO took delivery of their physical gold and traded out of the GLD ETF, which is an ETF holding un-allocated and fractional reserve gold, qualifying it as a ponzi scheme for the clear-eyed.


https://youtu.be/lgNVNTvlpFY

“The Gold System Is Based On Trust & Trust Is Breaking Down”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/24_The_Gold_System_Is_Based_On_Trust_%26_Trust_Is_Breaking_Down.html

As Chavez Pulls Venezuela's Gold From JP Morgan, Is The Great Scramble For Physical Starting?

This story of Venezuela taking delivery of their physical gold bullion is gaining traction.  This could the beginning of the repatriation of sovereign gold reserves from central banks worldwide, as nervous governments no longer trust their custodians in London and New York.  Is there any unencumbered gold left?  Heck, does gold even exist inside the custodial vaults?


http://www.zerohedge.com/news/chavez-pulls-venezuelas-gold-jp-morgan-great-scramble-physical-starting

London Source - Asian Buyers Will Take Silver Over $100

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/4/25_London_Source_-_Asian_Buyers_Will_Take_Silver_Over_%24100.html

As I mentioned to you previously, the Asians have also been taking delivery of silver out of SLV and will continue to do so.  You have to understand that these Asian buyers are planning to take delivery of all of the available phyiscal silver they can get their hands on and will continue doing so for the foreseeable future.” 

When asked at what price the Chinese will stop buying silver the London source replied, “The Chinese want out of dollars and they will continue aggressively purchasing both gold and silver in order to diversify.  They don’t care whether silver is $50, $60 or $100, they will just continue accumulating.  The Chinese may be patient buyers, accumulating on weakness, but you can bet that their relentless purchases of physical silver will eventually push the price well over $100 an ounce.”

Precious Metals Storage Scam: ‘Sorry, Delivery Is Not Possible’

I've said a million times and I'll say it one more time.  Unless you take possession, you don't own it.  Everything else is a paper claim.




http://www.shtfplan.com/precious-metals/precious-metals-storage-scam-sorry-delivery-is-not-possible_04192011

Bill Cramer of St. Louis was pretty confident everything was on the up-and-up. He purchased 5000 ounces of silver back in 2003 for a spot price of $4.94 and stored them with an east coast broker. When he was discussing his holdings with his coin dealer, the dealer dared him to try and take delivery of the metal.


Bill took him up on that dare and contacted his broker requesting to take delivery of his supposed physical metal holdings, for which he had been paying storage fees for years. As you may have guessed, the broker advised him that physically delivering the metals was not possible:


So, I took his dare, I called them up, it was June of last year. The metal I had purchased in January of ’03. I said “I’d really like to take delivery of my metal – the five thousand ounces.” They go “well, that’s not possible.” And, I go “well, I’ve been paying storage fees since January of ’03, what do you mean I can’t take delivery.”


“Well, it’s part of the account. It’s called a pool account. And, you don’t take delivery, you just participate in the appreciation.”


So I immediately sold that 5000 ounces at $18.33 and I had my cell phone in my hand and I immediately purchased 2500 silver eagles at $18.41 and that’s how I reconciled the problem of not being able to take delivery of my physical metal from a brokerage account.


If you’re holding metals outside of your immediate possession (i.e. in a safe deposit box, with a family member, an off premises safe or a hole in your backyard), then we strongly suggest you understand what your investment is and is not. If it’s paper, understand that if and when the swindle in paper markets for precious metals is finally understood by mainstream investors, and the paper assets collapse, you will likely be left with nothing.

25% Of Scotia Mocatta's Silver Transferred From "Registered" To "Eligible" Status: A 45% Reduction In "Physical"

A huge transfer of COMEX silver from "registered" to "eligible" could signal a seller of physical silver getting cold feet, and thus pulling their offer.

http://www.zerohedge.com/article/45-scotia-mocattas-registered-silver-transferred-eligible-status

Why you should buy gold and silver now - Aden sisters

http://www.marketwatch.com/story/going-for-gold-2011-04-06?siteid=nwhpf

I agree with their analysis, with the exception of their recommendation to buy the GLD and SLV ETF's in lieu of physical gold and silver.  Under normal market conditions, these ETF's will indeed track the spot prices of gold and silver, respectively.  But since paper prices of gold and silver are being artificially suppressed by the bullion banks (and indirectly by the Fed), the physical spot price could eventually decouple from the ETF prices in case there is a run on the physical markets.  In other words, since GLD and ETF are not 100% backed by gold and silver, respectively, a default on delivery could cause the prices of physical bullion to soar, while the owners of GLD and SLV could be left holding the bag.

That is the last thing one wants to happen to one's allegedly "safe" investment:  guess correctly on the price direction--and still lose money.  Besides, one of the reasons one should buy gold is protection against financial calamity--protection against abnormal (distressed) market conditions.  There are other ETF funds which are 100% backed by gold and silver, which entail certificates with matching serial numbers.  Unfortunately, because they are backed by the precious metals, and there are physical shortages, the ETF's carry a premium above net asset value, much like there is a premium on coins purchased from a dealer or coin shop.  The premium is a small price to pay for insurance against currency debasement and dislocated financial markets.  Please perform your own due diligence on researching precious metals ETF's 100% backed by gold and silver.

For those who like to touch and feel their gold and silver assets, buying and taking delivery on the physical bullion or coins is the only method with no counterparty risk.  When one takes possession, one owns it unencumbered.

See disclaimer in the side bar.

Disclosure:  no position on GLD or SLV.

Silver and gold options expiry and delivery

The cat's out of the bag.  Thanks to BORG members Eric and Robert for finding these articles.

http://seekingalpha.com/article/260168-gold-and-silver-options-expiry-march-28-2011-expect-volatility?source=article_sb_exclusives_2

http://seekingalpha.com/article/260205-slv-holdings-reach-record-high?source=qp_article

http://seekingalpha.com/article/259549-will-jpmorgan-now-make-and-take-delivery-of-its-own-silver-shorts

http://seekingalpha.com/article/260171-did-ubs-mislead-small-investors-about-stored-silver?source=yahoo

And finally, this oldie and goodie which I read last year:

http://www.marketoracle.co.uk/Article20677.html

http://www.newswire.ca/en/releases/archive/January2011/10/c9211.html

TORONTO, Jan. 10 /CNW/ - Sprott Asset Management LP is pleased to provide investors with an update on the delivery status of silver bullion purchased by the Sprott Physical Silver Trust (NYSE ARCA: PSLV, TSX: PHS.U) ("Trust").

As of November 10, 2010, the Trust had contracted to purchase a total of 22,298,525 ounces of silver bullion. As of December 31, 2010 a total of 20,919,022 ounces of silver bullion had been delivered to the Trust. The Trust expects to take delivery of the final 1,379,503 ounces of silver bullion by January 12, 2011 and will subsequently publish the serial numbers of all bars held by the Trust on its website: www.sprottphysicalsilver.com.

"Frankly, we are concerned about the illiquidity in the physical silver market," said Eric Sprott, Chief Investment Officer of Sprott Asset Management. "We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver."

Let's get physical, physical...

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/8_Turk_-_Swiss_Bank_Client_Battles_Over_2_Months_For_His_Silver.html

He was quite confident that he wouldn’t have a problem getting his silver because he had been paying storage fees on it since buying it in the late 1990’s.  The Swiss bank is insisting that he take cash, but he is demanding his silver which is supposed to be sitting in the bank’s vault be delivered to him.

Make sure your gold and silver are stored outside of the banking system.

“It is important for people to keep their eye on the big picture and not be distracted by short-term volatility in the price of gold and silver.   The long-term trend for both precious metals is still pointing higher.”

What in the world is going on with some of these banks that are supposed to be storing their customers gold and silver?  Have they leased it out to another entity?  Have they sold their customers precious metals and left an IOU in the vault while continuing to charge custodial fees?

Gold market manipulation unraveling

https://marketforceanalysis.com/articles/latest_article_310710%20.html

But unallocated gold is not gold at all. It is not gold that has been deposited that is loaned to someone else. It is gold that has been deposited that is loaned simultaneously to many other people. I have estimated that for each ounce in the vault the bullion banks have loaned or sold 45 ounces. So this appears to confirm my thesis that the BIS has been credited 346 tonnes of ledger entry gold in the BIS unallocated gold accounts held with the bullion banks. This makes the BIS an “unsecured creditor” of the bullion banks as defined by the London Bullion Market Association (LBMA) in their description of “unallocated account” holders.

The FT story suggests at least 10 bullion banks needed physical gold bullion desperately. This looks like a rerun of the 1960’s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35/oz.

I have spelled out in recent articles that there is a run on the bullion banks that has commenced and is gaining momentum. Investors and institutions are waking up to the fact that “unallocated gold” is not gold at all but just an unsecured promise for gold. They are now starting to demand delivery and as there is only one ounce backing each 45 ounces that are claimed the situation is turning into what will be a short squeeze of epic proportions.

So investors have bought a record amount of “physical gold” which is actually paper gold which they have never seen and only about 2.3% of what has been sold actually exists. The bullion banks are “awash” with liabilities for the record amount of gold they are supposed to be holding. Investors are now distrusting the bullion banks and are asking for delivery so is it too surprising that the record amount of “physical gold” sales has led to a record gold swap being transacted to give the bullion banks liquidity?

The IMF has been surreptitiously selling gold at a clip of around 15 tonnes per month every month since February without any official announcements and without disclosing the recipients. This is another sign that the bullion banks are in serious trouble.

When 45 ounces of gold are sold but only one real ounce is sourced the result is a massive suppression of the gold price. But the converse is also true; when 45 ounces of gold are demanded for only one that is in the vault the price explosion is beyond imagination.

What is becoming unraveled is not the mystery of the BIS gold swaps as claimed by the FT but the gold price manipulation scheme itself.

Doubts about gold and silver ETF's

The takeaway message is this: when in doubt, always choose taking physical possession of gold and silver over paper certificates. Because in a financial crisis (which is a primary reason for buying gold and silver), those certificates are not 100% backed by physical inventory and may end up being claims to nothing. In other words, if you have to stand in line to claim ownership of physical bullion, you may end up being too late and a dollar short.

Also note that the custodians for the GLD and SLV ETF's are HSBC and JPMorgan, respectively, who are also allegedly the two biggest naked short sellers in the gold and silver futures markets. If 100 owners lay claim to each ounce of gold and silver, 99 stakeholders are going to be very disappointed when it's time to take delivery.

http://www.gata.org/node/8649

COMEX December gold and silver options

COMEX December gold and silver options expire tomorrow, Monday, November 23, which usually means the commercial shorts will go into overdrive to manipulate the price down. However, given the physical shortage, gold has been gapping up in anticipation of this date. Combined with the backwardation of gold as I blogged last Friday here, the price of gold is increasing this evening (in Asian Monday morning trading).

Should rumors of COMEX defaults on gold and silver actually occur, the exchange may just retroactively invalidate all delivery contracts, and merely slap a fine on short sellers who settle via cash. Physical buyers will be stiffed, despite receiving a cash premium.

To those who believe a COMEX default will never occur, refer to the London Metals Exchange default on nickel in 2006. Buyers did NOT receive the physical inventory, and short sellers merely had to pay a 10% fine above spot price.

http://www.lme.com/4670.asp

Should such a default occur with gold or silver, the price of physical gold and silver will soar, as will paper certificates allegedly backed by the precious metals. There will be huge dislocations in financial markets worldwide should such a default on COMEX occur. Gold bugs ridiculed for their conspiracy theories will have the last laugh.

The CFTC is also reviewing enforcement of position size limits in the energy and precious metals pits, which would force bullion banks to drastically reduce their concentrated permanent short positions. This will also catalyze gold and silver price spikes.

A shortage of physical precious metals

Since there is a shortage of physical gold and silver, bullion banks with permanent net short positions on COMEX gold and silver are also using the gold ETF GLD and silver ETF SLV as vehicles to put on naked short positions. This becomes part of their grand scheme to surreptitiously suppress the prices of both precious metals.

Exchange-Traded Funds are regulated by the SEC, while the watchdog for the COMEX is the CFTC, so price manipulation can occur in both markets, resulting in confusion (or complicity) among both regulators.

In other words, instead of a short seller delivering physical bullion as settlement of a COMEX forward contract, the short seller can just use shares of the ETF as collateral. Clearly, this avoids physical delivery, and enables naked short positions as no physical delivery occurs. These ETF's are merely paper certificates allegedly backed by real bullion, but their independent auditing is spotty, so theoretically, shorting an ETF can occur ad infinitum--which creates further selling pressure. Hence, naked shorting is illegal, yet the bullion banks (commercial shorts) are practicing it in order to suppress gold and silver prices lower.

In essence, bullion banks can now short COMEX futures contracts, as well as precious metals ETF's, many of those being naked short positions.

Until these criminal activities among bullion banks, gold producers, and the Federal Reserve itself are exposed for what they are, gold and silver buyers can do their part by insisting on physical delivery on expiry of futures contracts, in lieu of settlement via cash. This will force the short sellers to find physical gold and silver in the open market--if indeed their short positions are naked. Eventually, a "fail to deliver" will occur on the COMEX or London Metals Exchange, and the Emperors will truly be naked.

Gold backwardation--again

I was scanning the Bloomberg TV ticker tape after hours on Friday, when most traders in the US had gone home. Trading was resuming in Asia (their Saturday morning), and gold had gone into backwardation by at least $2, indicating a severe shortage in physical gold.

Here are a couple explanations on backwardation from previous blogs:

http://gregnguyen.blogspot.com/2009/01/contango-why-this-dance-is-important.html

http://gregnguyen.blogspot.com/2009/05/gold-in-backwardation-again.html

I'm not sure if the correct interpretation of backwardation means gold longs are starting to win the battle. It's probably more correct to surmise that shorts are losing the battle.

Disclosure: I am long physical gold and silver, and long gold and silver mining shares.