Are GLD and SLV Legitimate Investment Vehicles? 150 comments
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First, let me preface this article by stating that it contains my opinions and speculation based upon no concrete evidence, but primarily upon information contained within the SLV and GLD prospectuses, and secondarily upon instincts cultivated over a decade of research into gold and silver markets. While there is no smoking gun regarding some of the issues I raise in this article, there is plenty of smoke.
Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles as a proxy for physical gold and physical silver. Though all evidence against investing in these two trusts has been entirely circumstantial, plenty of red flags exist in both the GLD and SLV prospectuses that should steer any logical, rational human being that wishes to own gold and silver away from these two investment vehicles.
Conflicts of Interest
Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)?
Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs’s (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm’s own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.
Alice in Wonderland Prospectuses
I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. Of course, investment advisers that sell their clients the SLV and GLD depend upon their customers not reading the prospectuses, or perhaps even reading them, but not understanding them. Some may say that the word delusional is a harsh term, but a mere glance at the GLD and SLV prospectuses explains my use of this term. Both the GLD and the SLV prospectus contain the following two statements:
“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense” (emphasis mine); and
“The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor.
Furthermore, the SLV prospectus additionally states, “As an owner of iShares, you will not have the protections normally associated with ownership of shares in an investment company (emphasis mine) registered under the Investment Company Act of 1940, or the protections afforded by the Commodity Exchange Act of 1936.”
Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete, and that in fact, any claims that the prospectus is truthful and complete is a “criminal offense”? So with nothing in the marketing materials of how these trusts operate or what exactly they buy on behalf of shareholders vetted by an independent third party, how is it that both of these respective trusts are still allowed to cumulatively sell tens of billions of dollars worth of shares to shareholders based upon a prospectus that could possibly be a complete fabrication?
Would you buy a house if you were handed a report that stated the house was structurally sound, there were no harmful gases leaking from the ground, the water source was safe, and no murders were committed inside or on the house grounds within the past year, but were then subsequently handed a disclaimer that stated: “No one has determined whether the information contained in these reports is truthful or complete. Any representation to the contrary is a criminal offense”? If you answered no to this question, then there is absolutely no way that you should believe that buying the gold ETF and the silver ETF is the same as buying physical gold and silver, or even a proxy for buying physical gold or silver.
Multiple Claims on the Physical Gold and Physical Silver Held on Behalf of GLD and SLV Shareholders?
The appointed custodians of the SLV and the GLD, responsible for safekeeping the silver and gold bars owned by the trusts, respectively are JP Morgan and HSBC Bank USA. The GLD prospectus states, “Gold held in the Trust’s unallocated gold account and any Authorized Participant’s unallocated gold account will not be segregated from the Custodian’s assets.” Only Authorized Participants, and no shareholders, have the right to redeem shares for actual gold.
In my opinion, there are several potential huge problems with this arrangement. Physical gold held by the GLD should be held in allocated accounts specifically for the trust. The fact that physical gold held for the GLD may be held in unallocated gold accounts where gold is not segregated from the Custodian’s assets may mean that multiple entities have claims on the same gold bars. In theory, the gold held in the Custodian’s vaults may be used for delivery against shorts they hold in the futures markets if necessary even though GLD shareholders have a claim on this gold.
A mechanism to apply the fractional reserve banking system to physical gold, an action that many thought impossible to execute with physical gold, may actually be occurring through the gold ETFs. While the prospectus states that “Authorized Participants Unallocated Accounts may only be used for transactions within the trust”, it does not specify how the custodian may use this gold.
In analyzing the SLV prospectus, the following statement can be found: “The trust does not trade in silver futures contracts on COMEX or on any other futures exchange. The trust takes delivery of physical silver that complies with the LBMA silver delivery rules. Because the trust does not trade in silver futures contracts on any futures exchange, the trust is not regulated by the CFTC under the Commodity Exchange Act as a ‘commodity pool’, and is not operated by a CFTC-regulated commodity pool operator.”
Elsewhere in the SLV prospectus, the following claim is also made: “Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.” If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the “remainder”? Clearly, the SLV prospectus states that there is a “remainder”. If you read this statement carefully, the statement clearly refers to the “trust’s silver holdings.” Thus, this statement implies that some of the SLV’s funds are allocated to something else other than physical silver. So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?
But even were the bulk of the SLV’s holdings physical silver, remember that this claim could be false and still contained in the prospectus due to their qualifying statement at the beginning of the prospectus that:
“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.”
Perhaps this is the reason why the prospectus warns: “Investors in the trust do not receive the regulatory protections afforded to investors in regulated commodity pools, nor may COMEX or any futures exchange enforce its rules with respect to the trust’s activities. In addition, investors in the trust do not benefit from the protections afforded to investors in silver futures contracts on regulated futures exchanges.”
The very structure of the GLD and SLV ETFs has always bothered me as the structures of these trusts are reminiscent of Vatican City, a completely sovereign entity subject only to its own laws and rules that operates in relative secrecy. I have always believed that the opacity of the operations of the GLD and the SLV would allow the custodians of these trusts, if they so desired, to execute manipulative schemes harmful to the trusts’ shareholders in much the manner that Goldman Sachs shorted subprime mortgages at the same time it was selling CDOs backed by subprime mortgages to its clients.
Where is the Gold?
Furthermore, more suspicion should be raised by the prospectus description of where the gold that is purchased on behalf of GLD shareholders is held. The prospectus states that “the Custodian has agreed that it will hold all of the Trust’s gold bars in its own London vault premises except when the gold bars have been allocated in a vault other than the Custodian’s London vault premises” (emphasis mine). This stuff is too good even for a skeptic like myself to make up. The prospectus then goes on to explain that other vaults allowed may reside at the Bank of England, Brinks Ltd., Via Mat International, and LBMA (London Bullion Market Association) market making members, and that in turn, these sub-custodians may appoint further sub-custodians to hold the trust’s gold if they so desire.
In regard to ensuring that the gold actually exists, the prospectus then states that “the Trustee may have no right to visit the premises of any sub-custodian for the purposes of examining the Trust’s gold bars or any records maintained by the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such sub-custodian.” In other words, the gold reputedly held by the GLD on behalf of shareholders may be held on the moon and no one would have a right to know this but the custodian.
In fact, given the entirely suspicious elements of these prospectuses, were every investor to liquidate their positions in the GLD and SLV and take their cash and buy physical gold and silver instead, I would speculate that the price of gold and silver would rise substantially, though according to the prospectuses, this is an event that should not happen under any circumstance. Now, according to a GATA report by Adrian Douglas, it appears that there may actually be grounds for my past speculations regarding the fact that the GLD and SLV funds may actually be used to help suppress the price of gold and silver on the futures markets.
Alchemy: Turning Physical Gold into Paper
According to a July 11, 2009 article titled “The Alchemists”, Douglas states: “delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the “flow” of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?”
In an attempt to reconcile this discrepancy, Douglas asks the all important question of what qualifies as “physical gold” according to COMEX guidelines. Douglas believes he has found a loophole in Exchange Rule 104.36, which governs exchange of futures for physicals (’EFP’) transactions on the COMEX Division. Exchange Rule 104.36 “refers to a ‘physical commodity’ as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.”
Exchange Rule 104.36 further states, “The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds (’ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.”
An EFP transaction is an Exchange of Futures for Physicals [EFP] whereby the buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position. Thus, quite incredulously, Douglas has discovered that COMEX allows for paper ETF gold shares to pass as “physical gold” in EFP transactions that are allowed to close out futures positions.
Again, if I understand Douglas’s assertion correctly, this could conceivably allow a firm like JP Morgan to open up massive shorts against gold in the COMEX markets and to close out their own short positions by delivering shares of a gold ETF in an EFP transaction. If this has indeed occurred in the past, then this loophole would easily explain why, in the past, gold ETF inventories have curiously risen or remained virtually steady during periods when the price of gold futures contracts on the COMEX was plummeting. As Douglas stated in his paper, this would indeed be the ultimate alchemy of regulating gold prices by turning physical gold into paper. Instead of purchasing a long futures contract to cancel out a short futures contract, gold ETF shares could be purchased to achieve the same effect.
The CFTC Should Investigate the GLD and the SLV, Audit their Holdings, and Report Their Findings to the Public
Thus, if the new CFTC Chairman Gary Gensler is truly sincere in his public comments about increasing transparency in the commodity markets, I suggest he begin with an investigation of the unregulated SLV and GLD ETFs to
(1) Determine the exact composition of the holdings within these trusts; and
(2) Determine if the custodians of these ETFs are engaging in activities outside of those stated in their prospectuses to unduly influence and / or manipulate the price of gold and silver markets.
It is entirely ludicrous to allow the custodians of these two ETFs to operate with zero outside regulatory oversight given the numerous troubling statements in both of their prospectuses, the tip of which I’ve explored within the realm of this article. If these trusts are operating according to the statements made within their respective prospectuses, then they should have nothing to hide and therefore should welcome an independent audit of their vaults to dispel all naysayers. Of course, since there is a complex web of custodians, sub-custodians, and sub-custodians of the sub-custodians, perhaps it would be impossible to conduct such an audit.
The latest data reported on July 8, 2009 by the SPDR Gold Trust, the GLD, states that 1,109.81 metric tons of gold are being held on behalf of GLD shareholders. In some manner, an independent auditor should be allowed to confirm that the custodian of the GLD holds 1,109.81 metric tons of gold that have no claims on it other than the GLD shareholders. If this happens, then all speculation regarding the GLD ETF will disappear into the sunset.
Until then recall this 2005 story about silver custodian Morgan Stanley:
NEW YORK, June 12 (Reuters) – Morgan Stanley plans to settle a class-action lawsuit, brought by clients over the purchase and storage of precious metals, in a deal worth $4.4 million, according to a court filing. The proposed settlement, which still needs to be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to the filing on Monday.
The lawsuit, filed in August 2005, alleged that Morgan Stanley had told clients it was selling them precious metals that they would own in full and that the company would store. But Morgan Stanley was actually making either no investment specifically on behalf of those clients or making an entirely different investment of lesser value and security, according to the complaint (emphasis mine).
Morgan Stanley was not immediately available for comment. But it has argued that there were no violations of law and no default or failure to perform or deliver precious metals, according to the filing. The suit was filed by Selwyn Silberblatt, on behalf of himself and others, who bought precious metals — gold, silver, platinum and palladium in bullion bar or coins — from Morgan Stanley DW Inc. and its predecessors and paid fees for their storage, according to the filing.
The suit covers investors who did so between Feb. 19, 1986, through Jan. 10, 2007. Silberblatt, a resident of Maine at the time of the complaint, bought silver bars from Morgan Stanley during the period.
Owning the GLD and SLV is Not the Same as Owning Physical Gold and Physical Silver
In the end, as long as the GLD and SLV prospectuses are allowed to contain misinformation if it so desires according to the words contained within their own prospectuses, then GLD and SLV shareholders may find themselves holding nothing but a bag of hot air just like Selwyn Silverblatt. Furthermore, as long as the issues I broached in this article remain unresolved I imagine that the debate will continue onward about the legitimacy of the GLD and SLV ETFs. Undoubtedly, given the opinions I presented in this article, I would be highly curious to see the outcome and effect upon gold and silver prices were every shareholder of the GLD and SLV to exchange their shares for physical gold and physical silver instead.
There will always be vast amounts of paper gold and paper silver available to be sold, but only a limited amount of physical gold and physical silver. Perhaps this is why the real thing is becoming increasingly difficult to come by these days. On Tuesday, the US Mint once again reported that it has temporarily suspended minting of nearly all its gold uncirculated and proof coins and nearly all of its silver uncirculated coins due to very limited availability of blanks. As the saying goes, with gold and silver, “Get it while you can!” Just ensure that the gold and silver you buy clanks, not floats, when you drop it.
Disclosure: No positions
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This article has 150 comments:
....and by the way, we have a beautiful bridge ETF here in Brooklyn.
he who has the gold makes the rules.
If taking physical possession is not practical, would GTU (Central Gold Trust) and CEF (Central Fund of Canada) be acceptable alternatives for an investor to get as close to physical gold as possible?
Either Douglas and J.S. Kim do not understand exactly what an EFP is or are misrepresenting it.
The explanation of an EFP given above and the conclusion they reach about its misuse on COMEX are completely erroneous.
The two are independent of each other.
I recognize that GLD and SLV may be full of hot air rather than metals. If it is revealed that GLD or SLV has less physical materials than they claim, those ETFs will fall rapidly while the value of gold and silver will explode.
My current approach is to use leveraged ETFs such as UGLand AGQ to trade. Hopefully these will do well if any scam exists and is exposed, and if there is no issue they should also do as well (or better) than the physical materials.
On Jul 16 08:31 AM bertil wrote:
> Terrific article! Thanks.
> ....and by the way, we have a beautiful bridge ETF here in Brooklyn.
It is held in allocated form. The only time it is NOT held in allocated form is for a few days during the delivery or redemption process.
Read the section "Delivery of required Deposits", page 27.
So, despite the author's assertions, the gold can not be used to make delivery against short positions by the Custodian. The GLD website says the gold "is not traded, leased or loaned under any circumstances."
Also, Sub-custodians only hold the gold until it can be delivered to the London vault. See page 11.
The author needs to read several more prospectuses--he will find that the cautionary language he quotes is generally found in some form in every prospectus.
seekingalpha.com.artic...
In the early days the GLD website had posted employment opportunities for financial product designers. There's never been comment on what these employees actually do.
Warnings to Precious Metal ETF Investors - Buyer Beware!
seekingalpha.com/insta...
I encourage people to scrutinize the SLV's silver bars list more and dig out more red flags. Look at page 1151, the start of the Cominco bars listings. What do you see?
https://ebts.jpmorgan....
https://ebts.jpmorgan....
Really? That worries you? A government stamp of approval would help you sleep better at night? That's hilarious.
Also, the author writes:
"In analyzing the SLV prospectus, the following statement can be found: 'The trust does not trade in silver futures contracts on COMEX or on any other futures exchange. . . .'
Elsewhere in the SLV prospectus, the following claim is also made: 'Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.' If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the 'remainder'? . . . . So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?"
No big mystery here. Probably OTC swaps, and most likely with an affiliate of a custodian. OTC swaps are off-exchange, so the disclosure would be accurate. This introduces counter-party risk, but my guess is that such risk is minimal because they are most likely buying swaps in small amounts to bridge the gap between incoming order flow and availability of hard inventory.
The bottom line: if you want gold or silver as a store of value through the Apocalypse, then by all means pay the ridiculous premiums that dealers charge for the physical metals. If you are interested in PMs as an investment asset class and do not plan to buy bread someday with Krugerrands, GLD or SLV will be just fine.
My memory of the GLD prospectus is that it is basically gold bars in a vault. I didn't really notice the language you're describing that leads you to suspect there may be other claims against their holdings. This issue definitely warrants more attention if your thesis is true.
The current powers that be will do everything in their power to keep gold/silver from being seen as traditional money, which it is. They will manipulate scarce commodity real gold/silver prices downward by shorting the commodity using unlimited printable paper money in paper markets. That is the only game they can play to try to prop up the dollar and maintain their advantage - smoke and mirrors.
Why do you suppose that most of the bailout money is unaccountable in a giant furball of finance? Is one reason that the banking minions (goldman sachs, etc.) acted on the government's behalf shorting gold and silver to prop up the dollar, and lost money as a result and want to be made whole? Would the secrecy of this allow the Federal Reserve to blackmail the government to secure more power? Are these billions upon billions of dollars sitting there waiting for a collapse, so that elite banking interests can buy up assets into whatever game comes next, thereby securing their own perpetual power for generations?
When some country suggests the game changes to non-dollar oil trade the US will go to war to continue the game. ie. Iraq & Iran oil bourse.
When an equal power calls BS then the game will change and the US will be in deep chaos to scramble for a new game, but no one will want to play a rigged game... and the USA could fall hard. China knows this and they are buying 80 billion in gold. Has China's communist central planning commission ever done anything other than look out for China? They know they have been caught up in the banker's game and are working to come out on top. The Chinese are good people.
The international banking scheme (Bilderberg) will be fine having planned many many years in advance for every eventuality, every war, every rise, and every fall. A shift from Trilateralist thought to New World Order thought and populaces would be screaming for a one world government and one world currency to come save them. Central planning at a whole new level with the banking powers at the helm.
Governments will go to any length to preserve themselves, control the populace, and maintain order. That is what makes them so dangerous. Today's veteran patriot could easily become tomorrow’s dissident. Elite Gated communities takes on a whole new level and meaning as well.
If you bought ETF gold you are just trading in dollars in and out to the paper market gold price. You don't own gold. Federal Reserve Notes are not scarce, they print them by the trillions, but gold and silver is a precious metal and real money, and all governments know it.
I own gold and silver, for the same reason governments do: Wealth autonomy to transition into whatever comes.
BTW: The Federal Reserve System is the biggest scam ever created in the history of man. They are not authorized by the Constitution of the USA. They are a privately owned quasi-government institution that acts independently of government. You pay interest to them on every Federal Reserve Note (dollar) ever created.
The author not only doesn't understand that the same SEC language is included in almost every prospectus but he misinterprets the language. A statement that a prospectus is truthful and complete would simply comply with the issuers obligation under SEC law and it is not a criminal offense. The criminal offense would be representing that the SEC has determined that the prospectus is truthful and complete.
On Jul 16 10:30 AM Darbyred wrote:
> . . . “Neither the Securities and Exchange Commission [SEC] nor any
> state securities commission has approved or disapproved of the securities
> offered in this prospectus, or determined if this prospectus is truthful
> or complete. Any representation to the contrary is a criminal offense”
> (emphasis mine); and . . . . "
>
> The author needs to read several more prospectuses--he will find
> that the cautionary language he quotes is generally found in some
> form in every prospectus.
You wouldn't even allow your closest friend to watch your precious metals for you, so why would you entrust a bunch of fund managers you don't even know who they are, to watch your precious metals for you?
You are counting on some one else to do the heavy lifting of handling and watching the precious metals, and you needn't to lift a finger of yours but just sit in front of a computer and THEY help you to make huzzle free money. That doesn't sound right fundamentally.
The only ETF I hold, and hold massively, is UNG, US Natural Gas fund. This one I am unable to take possession of the physical commodity (natural gas), nor could the fund management. They hold natural gas futures contracts. Do I trust them completely? No way. But do I trust them enough to buy? Absolutely. They have monthly roll over of futures contracts. It is clear that when roll over occurs they had an impact on the natural gas futures market.
So I feel comfortable holding UNG at the moment. I do not feel comfortable holding GLD or SLV.
seekingalpha.com/autho...
Read this for red flags on SLV:
seekingalpha.com/insta...
On Jul 16 11:47 AM Jabalong wrote:
> Any thoughts on Central Fund of Canada (seekingalpha.com/symbo...)
> or Central Gold Trust (seekingalpha.com/symbo...)? How about
> services like BullionVault.com or GoldMoney.com?
Thank You! for your research, diligence and terrific amplification of this important issue, you are a credit to the investing community.
> issues with CEF? Would those of us holding GLD and SLV be safer in CEF?
I have my suspicions of all these. I did a quick check of performance of GLD, CEF, and GTU from July/08 to July/09 using the morning fix for July 1 (if I read things right). For the gold price, I read a chart, so it is not terribly accurate. Perhaps someone could get better numbers and publish a real performance chart.
GLD
Jul-08 96.27
Jul-09 92.31
Change: 95.8%, -4.2%, -$3.96
CEF
Jul-08 13.79
Jul-09 11.87
Change: 86%, -14%, -$1.92
GTU
Jul-08 37.76
Jul-09 37.15
Change: 98.3%, -2.7%, -$.61
Gold/oz/USD in morning fix July/08 is $930
July/09 is 931
100.1%, +.1%, +$1.00
Here's my raw data sources:
finance.yahoo.com/q/hp...
finance.yahoo.com/q/hp...
finance.yahoo.com/q/hp...
I used charts to locate gold prices from here:
www.kitco.com/scripts/...
---
If I've done my homework properly, the numbers show that none of these really reflect the real price of the commodity. I'd love to see an analysis in this line with better detail and numbers...
And Central Fund , imho is honest. Just one mans opinion. Eric Sprott sits on the board.Eric Sprott is beyond reproach.And I have been in the very Scotia vaults where CEF has its holdings.
Therefore it is utter and complete stupidity to invest in either one of these instruments, since they contradict the very purpose of the investment.
If you want a Custodian, be married to his daughter.Or own him. Or , better yet BE HIM.
Einhorn stated it was cheaper for him to hold, store and insure that large amount of physical than it was to pay the .40% yearly fee the GLD fund charges.
It had nothing to do with his trust of GLD.
On Jul 16 02:58 PM gordsav wrote:
> This is the most important article on gold and silver, and the suppression
> of same, that has probably ever been written.It has the capacity
> to bust the Gold cartel, witness Mr. Einhorn of Evergreen,demonstrated
> as amongst the smartest money in the world, who reconsidered the
> wisdom of his 400 million dollar position in GLD and switched his
> entire position to physical gold as announced 48 hours ago..And
> this is why we find desperate misinformation posters amongst these
> Comments, who know full well the peril reperesented by like minded
> holders, ...this is a forest fire with a hundred mile an hour gale
> a scant hour away..
> And Central Fund , imho is honest. Just one mans opinion. Eric Sprott
> sits on the board.Eric Sprott is beyond reproach.And I have been
> in the very Scotia vaults where CEF has its holdings.
Nothing unusual.
If you want to be on firm ground financially, buy PHYSICAL gold and silver, safe(s), and gun(s). To hell with ETFs. These them to the sheeple who deserve to get fleeced!
And lastly: The mantra "Buy gold and wait, don't wait to buy gold" ...and you can add silver to that wise saying.
God bless us all!
On Jul 16 02:47 PM skept453 wrote:
> > Repeating the question already asked twice above: are there similar
Many who hold physical gold are not clear as to what that gold will do for them. Will it be exchanged for fiat currency from time to time at the then 'current' vastly inflated price to purchase goods and services as needed? Will it be bartered for less secure but more liquid silver, pig iron, tin, lead, canned pork and beans, shotgun shells etc.? How will excess of value tendered over value received be secured? Are you going to accept someone else's "hard money - gold backed" certificates for convenience of exchange?
Jason Hommel ships the same day he gets your bank wire
ETFs = Electronic Thievery Franchises
The banksters developed the Precious Metal ETFs for ONE REASON and ONE REASON ONLY -----> so your money doesn't buy actual real precious metals and you don't take delivery of YOUR money!
Anyone who honestly believes these scammers actually purchase an oz of bullion to physically back every share then email me I have some prime real estate to sell you in the Middle East, prices are cheap and don't worry about the depleted uranium contamination...
Anyone with a lick of sense should know the banksters want to own all the gold and they don't want you to own ANY!!!
Even though I'm not a gold or silver conspiracy theorists, I do recognize that market participants find strange (you could even say illigitimate) ways to game the system to their advantage and avoid any market regulation. J.S. Kim has made a solid argument as to how these ETFs may be one such game. It's certainly worth the read.
They say they don't use futures or forwards to buy the metal.
They own REAL gold and silver. It's in their prospectuses and on their websites.
And it's not the managers or custodians who actually buy the metal. It's third parties who swap their metal for a basket of shares which they then can trade on the open market.
Did you guys all read the prospectus???
On Jul 16 11:05 PM Moon Kil Woong wrote:
> If you open a method for people to bet on a commodity, take the money,
> don't promise to buy the asset nor ever distribute it to clients
> then aren't you essentially shorting it? I suppose then JP Morgan
> and HSBC have no conflict of interest in their positions. In fact,
> they are sucking away real demand for gold and silver into the ETF
> and bolstering their position by doing so.
>
> Even though I'm not a gold or silver conspiracy theorists, I do recognize
> that market participants find strange (you could even say illigitimate)
> ways to game the system to their advantage and avoid any market regulation.
> J.S. Kim has made a solid argument as to how these ETFs may be one
> such game. It's certainly worth the read.
That isn't saying anything -- you could purchase physical gold to settle the contract too. Settling with ETF shares is fishy only if the ETF share doesn't correspond to physical gold in a 1-1 fashion at all points in time.
...which leads to my question. I like silver so I'll phrase in terms of SLV
Is there any way SLV can create additional shares before (even slightly before) physical silver is locked away in a (sub?)-custodians vault? For example, ETF shares could be created in exchange for near-future delivery promises. That might be what is meant by the "remainder" of the holdings which are not the "bulk" of holdings i.e. physical metal.
If so, then we have a problem because "tomorrow's silver" can be used to debase today's silver, entirely at the discretion of the custodians. (who happen to hold short positions....) In effect, custodians could protect their short positions against fluctuations in investment demand. Assuming industrial demand (i.e. demand for PHYSICAL silver) is elastic enough, there would be hardly any risk of prolonged obvious shortages of physical silver.
Do you guys think this is really going on?
As a side note -- In theory, silver dealers catering to investors might unintentionally debase today's silver with tomorrow's silver all the time. They delay delivery longer when their stock runs out (i.e. when investor demand is high).
I'm beginning to wonder if ultimately, when a price shock finally happens, maybe it's even more extreme if people have been trying to dampen price by using future supply to satisfy current demand. (I mean, if supply dries up AND people start to realize that most future supply is spoken for....imagine what that would do to prices...)
On Jul 16 11:54 PM kohalakid wrote:
> But GLD and SLV DO promise to own the asset.
>
> They say they don't use futures or forwards to buy the metal.
>
> They own REAL gold and silver. It's in their prospectuses and on
> their websites.
>
> And it's not the managers or custodians who actually buy the metal.
> It's third parties who swap their metal for a basket of shares which
> they then can trade on the open market.
>
> Did you guys all read the prospectus???
The entire mechanism for creation of shares makes sense.
The Trustees can audit the gold twice a year and an outside, independent audit can occur yearly, too. Go to the GLD website to see the report of the outside auditor.
On Jul 17 02:59 AM User 357705 wrote:
> Do you believe the prospectus?
I'm sick of hearing people complain about ETFs of all markets, yet they keep piling in, very bizarre, it's an illness with no known cure.
People like this author try to stir up the markets for their own benefit (similar to Bill Gross and PIMCO), so how about you do everyone a favor and sit on your hands.
And this purposeful insult is also the main reason for the present abuses, excesses and unfairnesses of our financial system.
Clearly, they have suspended production because they know the Dollar is going down the toilet and that Gold and Silver will substantially appreciate as a consequence.
So take note, the US economy/Dollar cannot be saved and look out for the new currency, The AMERO, as it's about to replace the Dollar and they are probably stamping them out right now.
It's a who's who of CFR types, ex Presidents and ex PM's.
On Jul 17 10:48 AM Bron Suchecki wrote:
> One thing I would like explained is as GLD was sponsored/brought
> into existence by the World Gold Council, and the World Gold Council
> is funded by some pretty big miners (www.members.gold.org/m.../
> includes GoldCorp, IAMGold, Newmont), then does this mean that those
> miners are also part of the scam?
On Jul 16 03:29 PM kohalakid wrote:
> Gee, you conveniently failed to mention WHY Einhorn of Evergreen
> moved his position from GLD to physical.
>
> Einhorn stated it was cheaper for him to hold, store and insure that
> large amount of physical than it was to pay the .40% yearly fee the
> GLD fund charges.
>
> It had nothing to do with his trust of GLD.
I have absolutely no trust in our financial institutions to do the right thing in any situation that involves lots of $$$ if they can insulate their liabilities with "weasel wording" in a prospectus.
If even part of the author's allegations are true, I believe that the ramifications will be far greater than simple the loss of money by investors. This goes to the basis issue of trust and integrity of our financial and government institutions - which has certainly been under assault in the last year.
Based on the number of ounces he holds, that works out to more than a "little fee".
On Jul 17 12:46 PM Vuke wrote:
> Yeah, right. It's about the little fee. He's not going to say anything
> that might rock the boat, would he?
On Jul 16 09:49 AM MadScientist wrote:
> Not everyone can buy physical gold or silver - I trade within a 401k,
> so ownership of PMs is not possible.
>
> I recognize that GLD and SLV may be full of hot air rather than metals.
> If it is revealed that GLD or SLV has less physical materials than
> they claim, those ETFs will fall rapidly while the value of gold
> and silver will explode.
>
> My current approach is to use leveraged ETFs such as UGLand AGQ to
> trade. Hopefully these will do well if any scam exists and is exposed,
> and if there is no issue they should also do as well (or better)
> than the physical materials.
On Jul 17 12:42 PM metaforge wrote:
> Great article. What's the best way to buy physical? Any suggestions?
In which case why would anyone buy it over physical? The real question is, would anyone in their right mind actually bring them gold to store? Their "savings", depreciated over time, would effectively be handed over to someone else. It's a trading instrument, subject to all the uncertainties of such, created entirely with your hard-earned money. Just another tool to separate a mark from his money.
On Jul 17 01:52 PM kohalakid wrote:
> "Little fee"???? Between the .40% expense fee and .15 management
> fee, that comes to over $5 per oz per year.
>
> Based on the number of ounces he holds, that works out to more than
> a "little fee".
if you want to own gold for your grandchildren, you would never take your bullion and create GLD shares with it - that is correct. In fact, no retail investor would ever "bring them gold to store". that happens when Einhorn wants to go put a billion dollars to work in Gold, so he buys GLD which the broker (let's pretend it's MS) shorts to him while they buy gold in the spot market. MS then takes their gold delivers it to the trust, which creates GLD shares, which MS uses to cover their short. it's just to collapse their trade. it's exactly WHY the product works - because it's actually arbitrage-able (to make up a word).
On Jul 17 02:15 PM Vuke wrote:
>
> In which case why would anyone buy it over physical? The real question
> is, would anyone in their right mind actually bring them gold to
> store? Their "savings", depreciated over time, would effectively
> be handed over to someone else. It's a trading instrument, subject
> to all the uncertainties of such, created entirely with your hard-earned
> money. Just another tool to separate a mark from his money.
>
> On Jul 17 01:52 PM kohalakid wrote:
On Jul 17 02:25 PM Kid Dynamite wrote:
> if you want to own gold for your grandchildren, you would never take
> your bullion and create GLD shares with it - that is correct. In
> fact, no retail investor would ever "bring them gold to store".
> that happens when Einhorn wants to go put a billion dollars to work
> in Gold, so he buys GLD w
> On Jul 17 02:15 PM Vuke wrote:
I think GLD is a reasonable vehicle for protecting against currency devaluation. I am banking on the government protecting me from anarchy. But I am also banking on inflation. So I am happy with GLD.
If things get really bad (defined as anarchy) frankly physical gold is not a good thing to have. You should have a ranch in the middle of the Dakotas with lots of bullets and beans. Anywhere else, and I don't care how well you think you are protected, there will be people who will want to separate you from your gold and likely will succeed at it.
if you 'own' GLD, what is the difference?
GLD is not money. The day you cannot trade out of GLD is the day you cannot trade our of MSFT, GS or XOM. Therefore GLD is NOT a substitute for a bag of junk silver, a few 100 oz bars of silver and a stack of 1/4, 1/2 and 1 oz gold coins for the doomsday scenario.
seekingalpha.com/insta...
Read the article and read the discussions below it.
On Jul 17 09:14 AM kohalakid wrote:
> Yes, I do believe the prospectus.
>
> The entire mechanism for creation of shares makes sense.
>
> The Trustees can audit the gold twice a year and an outside, independent
> audit can occur yearly, too. Go to the GLD website to see the report
> of the outside auditor.
The most efficient way to bet on a long-term increase in NG prices is to buy a bull call spread in the futures markets.
Since
On Jul 16 01:55 PM Mark Anthony wrote:
> Trust nobody in terms of ETFs. If you have opportunity to take delivery
> of a commodity, then take delivery and put it under your direct physical
> hold. Don't let some one else watch your precious metals for you.
>
>
> You wouldn't even allow your closest friend to watch your precious
> metals for you, so why would you entrust a bunch of fund managers
> you don't even know who they are, to watch your precious metals for
> you?
>
> You are counting on some one else to do the heavy lifting of handling
> and watching the precious metals, and you needn't to lift a finger
> of yours but just sit in front of a computer and THEY help you to
> make huzzle free money. That doesn't sound right fundamentally.<br/>
>
> The only ETF I hold, and hold massively, is UNG, US Natural Gas fund.
> This one I am unable to take possession of the physical commodity
> (natural gas), nor could the fund management. They hold natural gas
> futures contracts. Do I trust them completely? No way. But do I trust
> them enough to buy? Absolutely. They have monthly roll over of
seekingalpha.com/artic...
" When you buy physical gold, you can get ripped off - right? whatever chance there is - someone could send me a brass bar plated in 24k gold - i'd have no friggin' clue. do you have a machine at home that verifies the gold you're buying is real gold?
Bottom line for ME, is that i think the chance of being ripped off by the GLD is much lower than the chance of being ripped off buying physical gold bars (not to mention GLD is much easier to trade.).
if the GLD trust gets sold to FlyByNight Securities, and they moved the gold to a warehouse in Secaucus, then the story/risk would change."
On Jul 17 05:00 PM Kid Dynamite wrote:
> as i commented on my own post:
> seekingalpha.com/artic...
> " When you buy physical gold, you can get ripped off - right? whatever chance there is - someone could send me a brass bar plated in 24k gold - i'd have no friggin' clue. do you have a machine at homethat verifies the gold you're buying is real gold?>
if i were to buy, say, $100k in bullion or coins or whatever - how could i verify that i wasn't getting ripped off?
On Jul 17 06:08 PM Vuke wrote:
> You're correct, stick to paper if you can't tell brass from gold.
Anyone experienced with gold is almost never fooled by phony stuff. A heft of the hand and they know. And a bit of advice, don't answer the e-mails offering it at half price.
On Jul 17 07:26 PM Kid Dynamite wrote:
> @Vuke - honest question - can YOU tell that you're getting .999 pure
> gold? if so, how?
>
> if i were to buy, say, $100k in bullion or coins or whatever - how
> could i verify that i wasn't getting ripped off?
Disclaimer: I own SLV and am buying on dips and will sell on my perceived highs.
That was the "tell" that what followed would be pure tripe.
Because if that's the best you got, GLD must be pretty solid stuff.
How easy it is to fool most of the people most of the time....and get away with it. Lincoln said that. You know it isn't robbery if you give someone permission to rob you. I said that.
> @Vuke - honest question - can YOU tell that you're getting .999 pure
> gold? if so, how?
>
> if i were to buy, say, $100k in bullion or coins or whatever - how
> could i verify that i wasn't getting ripped off?
----
I had been wondering the same thing. I remembered the story of Archimedes shouting Eureka after figuring out how to measure the volume of water the king's crown displaced to compare it to the volume of gold of the same weight. www.skypoint.com/membe...
That might be one way to get a rough idea as to whether the gold bar you have were really a brass one covered in gold, though I'm not sure how precise one could be with that.
But it turns out there are other methods of verification that are typically used per a Yahoo search:
www.quicktest.co.uk/go...
www.pbs.org/wgbh/roads...
www.ehow.com/how_44885...
But seriously, how can anyone suggest, as some commenters have, that GLD and SLV are some sort of conspiracy to suppress prices?
Go look at a chart of the entire price history of GLD. It has sucked up $33 billion in physical gold in the last five years. That's over a thousand tonnes of gold (1,094.54 according to their website). Rather than "diverting" demand from the physical market, they are generating additional demand by making it easy for the average Joe to invest in gold.
A number of commenters here have some serious "trust" issues with Wall St. (They're greedy bastards -- I get it.) But ask yourself this: if you were a relatively uninformed investor looking to speculate in gold because you read on SA that it's a good investment, who would you put your trust in: a large financial institution that presumably doesn't like to get sued or a gold dealer looking to sell you a physical object that you have no practical means of assaying and who wants to charge you a hefty premium? Gold dealers scare off average investors, and GLD picks up what would otherwise be lost demand. GLD is just better marketing for the asset class, plain and simple.
This is when the so, so few are in monetary control of the so, so many.
(For the first time in humanity, this has global implications.)
Second, perhaps they can also explain WTF is going on with the massive delays in silver deliveries. GLD and SLV settlements against futures are just perfect (even in the paper) to avoid moving the price against the short, (regardless of whether the custodians filch the metal if they ever had it) BECAUSE NO-ONE IS POLICING THIS ACTIVITY. We have been explicitly warned on many occasions.
If GLD and SLV have nothing wrong then they don't need to hide any more than does Fort Knox. All doubt could be resolved in a heartbeat by the simple expedient of an audit. WHICH SYLLABLE OF "OBVIOUS" DO WE NOT UNDERSTAND?
Open interest in a futures market has nothing to do with "deliveries". If I deliver 1000 oz of gold to HSBC, they will issue me 10 warehouse receipts. That's it. The daily warehouse stats will show an increase of 1000 oz at HSBC. But that has not created a futures contract yet. That doesn't happen until I sell 10 Dec COMEX gold contracts. Then the Open Interest figure will go up by 10 lots.
I currently hold warehouse receipts in silver. They are counted in the Registered Warehouse Stocks. But they are not counted as part of Open Interest because I have no open futures contract against those receipts.
Second, the COMEX has NOT allowed GLD and SLV to be used in the settlement of futures contracts. The COMEX is allowing GLD and SLV to be used as the other side of hedging transactions called EFPs (exchange for physical) which require the buyer and seller of EFP to report the hedging transaction to the COMEX when it is hedged so there is no limit price violation on the exchange. They are NOT using GLD or SLV to make deliveries against futures contracts.
There are no "massive delays" in silver deliveries. What is that in reference to???
And GLD is audited yearly by an "outside auditor". See the auditor report on the GLD website.
On Jul 18 01:13 PM bozzy wrote:
> Are any of the Pollyanna's in here going to explain to us exactly
> how they can justify the repeated lack of squaring off of open spot
> interest with deliveries? As the position comes off the board the
> aggregate open interest should always = delivered contracts for that
> position, or has someone come up with a new abacus?
>
> Second, perhaps they can also explain WTF is going on with the massive
> delays in silver deliveries. GLD and SLV settlements against futures
> are just perfect (even in the paper) to avoid moving the price against
> the short, (regardless of whether the custodians filch the metal
> if they ever had it) BECAUSE NO-ONE IS POLICING THIS ACTIVITY. We
> have been explicitly warned on many occasions.
>
> If GLD and SLV have nothing wrong then they don't need to hide any
> more than does Fort Knox. All doubt could be resolved in a heartbeat
> by the simple expedient of an audit. WHICH SYLLABLE OF "OBVIOUS"
> DO WE NOT UNDERSTAND?
The prospectus of both GLD and SLV say that it is a crime to suggest that any statement of those prospectus is a CRIME!
I wonder if you know that you are not only showing yourself to be a sucker by defending these cashtraps by their own admitted misinformation......but a criminal as well...
TAKE DELIVERY>>>HOLD IT IN YOUR HANDS, PUT IT IN YOUR VAULT OR SAFE!!! "ITS THE ONLY WAY TO BE SURE" (Rippley)
Good God....How stupid are you people???
As I posted above, the ETFs can be used in EFP transactions, not in delivery against spot contracts.
Please show me anywhere in any COMEX or CFTC document or pronouncement where it says EFT shares can be delivered to the holder of a long futures contract in settlement of that contract.
On Jul 18 02:45 PM SilverCrusader wrote:
> Anyone else find it strange that the CFTC rules allow for settlement
> of futures contracts with ETF shares instead of real metal....Yet,
> the prospectus of the ETFs say that the CFTC cannot audit them, and
> indeed has no jusisdiction!!! And does not even evaluate their prospectus!!!
>
> Good God....How stupid are you people???
At the beginning of July I was long 10 July NYMEX platinum futures.
I have no far received 9 delivery notices and taken 9 receipts.
So the open interest has been reduced by 9 lots. If Monday I sell my remaining long futures position to a short holder, the Open Interest will drop by 1 but there will be no delivery of a receipt.
Open interest and delivery notices certainly do not need to correspond.
On Jul 18 01:13 PM bozzy wrote:
> Are any of the Pollyanna's in here going to explain to us exactly
> how they can justify the repeated lack of squaring off of open spot
> interest with deliveries? As the position comes off the board the
> aggregate open interest should always = delivered contracts for that
> position, or has someone come up with a new abacus?
>
> Second, perhaps they can also explain WTF is going on with the massive
> delays in silver deliveries. GLD and SLV settlements against futures
> are just perfect (even in the paper) to avoid moving the price against
> the short, (regardless of whether the custodians filch the metal
> if they ever had it) BECAUSE NO-ONE IS POLICING THIS ACTIVITY. We
> have been explicitly warned on many occasions.
>
> If GLD and SLV have nothing wrong then they don't need to hide any
> more than does Fort Knox. All doubt could be resolved in a heartbeat
> by the simple expedient of an audit. WHICH SYLLABLE OF "OBVIOUS"
> DO WE NOT UNDERSTAND?
Thanks.
On Jul 18 02:13 PM SilverCrusader wrote:
> To Kohalakit et al....
> The prospectus of both GLD and SLV say that it is a crime to suggest
> that any statement of those prospectus is a CRIME!
> I wonder if you know that you are not only showing yourself to be
> a sucker by defending these cashtraps by their own admitted misinformation......but
> a criminal as well...
> TAKE DELIVERY>>>HOLD IT IN YOUR HANDS, PUT IT IN YOUR VAULT OR SAFE!!!
> "ITS THE ONLY WAY TO BE SURE" (Rippley)
not Chicago Futures Trading Committee.
gggeeeezzzz....
On Jul 18 11:43 AM Chubbs McEatsAlot wrote:
> To all of you saying that this needs more regulation...THE CFTC DOES
> NOT REGULATE THE TRADING OF PHYSICAL METALS...THEY REGULATE FUTURES..."Chicago
> FUTURES Trading Committee." It is amazing to see how many uninformed/uneducated
> investors there are out there. Congrats on misinforming everyone.
> Some ETFs are scams (e.g., actively managed ETFs) but a fund that
> actually holds the underlying product with not trading costs from
> the trust (??) does not deserve any scrutiny.
"Rule 104.36, Exchanges for Physicals, has been renamed "Exchange of Futures ... Rules 104.36A..."
But that has nothing to do with delivery of metal against spot contracts. COMEX rule 113.02 says "delivery shall consist exclusively of.. one 100 oz bar or 3 kilo bars". "EXCLUSIVELY". No mention anywhere of ETF shares.
Do you understand the use of EFPs or EFSs?? It's a hedging transaction between two parties. It's recognizing that ETF shares are a legitimate hedge for a futures contract.
a. HSBC wants to push metals investors out of physical and into paper/digital metal, or
b. HSBC actually isn't storing that metal?
What is the source for that news item??
www.24hgold.com/englis...
It cites a "reliable source" who said HSBC MAY get out of "individual storage".
Even if it's true, I couldn't blame HSBC for forgoing the business of storing 27 Krugerrands for some investor in Iowa.
Doesn't sound like they have any intention of dropping their Commercial or COMEX storage operations, if any at all.
On Jul 18 06:17 PM Vergilio wrote:
> I have not found a first hand news release about HSBC discontinuing
> its storage service, but learned of it from David Morgan's post yesterday
> titled "Silver, the Metal of Hope".
>
> www.24hgold.com/englis...;redirect=false&am...
If the final aggregates do not square up something is not all right, and please don't Polyanna about how we don't understand - it is you who does not understand the English language.
Perhaps I'll post the silver references, but then again - you are so patronising- why don't you do the analysis and the research work yourself? Your ignorance of these delays makes your discussion look at best ill informed, at worst simply stupid.
If you genuinely feel that there is no problem, why do you not simply put up the numbers to show that the satisfaction of the aggregate open interest in gold and silver is all square in the last 3 expired positions.
On Jul 18 03:18 PM kohalakid wrote:
> The other way a spot contract can not correspond with delivery notices
> is by a simple offset of the spot contract. That will reduce the
> open interest of the spot month contract but not result in a delivery.
>
>
> At the beginning of July I was long 10 July NYMEX platinum futures.
>
> I have no far received 9 delivery notices and taken 9 receipts.<br/>So
> the open interest has been reduced by 9 lots. If Monday I sell my
> remaining long futures position to a short holder, the Open Interest
> will drop by 1 but there will be no delivery of a receipt.
>
> Open interest and delivery notices certainly do not need to correspond.
>
On Jul 18 05:51 PM kohalakid wrote:
> Well, yes, for the purposes of an EFP, or what the exchange now calls
> an EFS, they are recognizing shares of GLD or SLV may be used as
> hedges vs. futures contracts.
> But that has nothing to do with delivery of metal against spot contracts.
> COMEX rule 113.02 says "delivery shall consist exclusively of.. one
> 100 oz bar or 3 kilo bars". "EXCLUSIVELY". No mention anywhere of
> ETF shares.
>
> Do you understand the use of EFPs or EFSs?? It's a hedging transaction
> between two parties. It's recognizing that ETF shares are a legitimate
> hedge for a futures contract.
On Jul 18 08:22 PM bozzy wrote:
> Oh dear. Pollyanna time again - why oh why do you twist and turn
> whatever is squarely said to make a point of your own. I think I
> understood spot markets back in the early 70's - how long have you
> been here with your patronising tone ? Something about Baghdad and
> Dad's Bag comes to mind.
>
> If the final aggregates do not square up something is not all right,
> and please don't Polyanna about how we don't understand - it is
> you who does not understand the English language.
>
> Perhaps I'll post the silver references, but then again - you are
> so patronising- why don't you do the analysis and the research work
> yourself? Your ignorance of these delays makes your discussion look
> at best ill informed, at worst simply stupid.
>
> If you genuinely feel that there is no problem, why do you not simply
> put up the numbers to show that the satisfaction of the aggregate
> open interest in gold and silver is all square in the last 3 expired
> positions.
I'm always an eager learner. If you want to school me on spot markets I'm happy to learn. If you want I'll give you my phone number and you can right my wrongful ways.
I metal I trust
May your positions prosper
Quote:
"How tight is the physical supply of silver?
1) it took over 6 weeks for HSBC to physically deliver the silver to our fund from our May Comex contract technically it should have left HSBC's vault on May 29th.
2) the people at our depository - First State in Delaware - told us they customers still waiting for delivery of silver on their April contract
3) all week this week, September silver and spot silver have been trading, for the most part, even dollar. in a healthy functioning market - i.e. freely traded and no shortages - September silver should be trading at least 3-4 cents higher than spot silver. What's even more significant is that September is a large delivery month, which means that large buyers would rather get a hold of their silver today rather than wait for September.
Prepare yourself for a big Commercial Signal Failure - all the signs are there that it's coming soon...
(later)
Spot silver is now trading, in points of real-time trades, 1 cent above the September contract. Not significant in terms of degree, but the trend is important. Kitco's offered side, which is what Tulving uses to price all silver products, is 4 cents above the offered side of the September Comex silver contract.
And a good point about the Greenlight Capital hedge fund switching all of its GLD stock into actual custody of physical gold. We all know why this was done. BUT the hedge fund world tends to be "monkey see, monkey do" and several big hedge funds are large holders of GLD. I guarantee you that every single one of them is now analyzing why Greenlight made the switch, which means they are going over the GLD prospectus with a fine tooth comb. You can take that to the bank. We are edging closer by the day to the Midas Commercial Signal Failure."
On Jul 18 09:29 PM kohalakid wrote:
> bozzy---
>
> I'm always an eager learner. If you want to school me on spot markets
> I'm happy to learn. If you want I'll give you my phone number and
> you can right my wrongful ways.
The rules of almost all futures markets across the globe anticipate that the means of settlement should in all cases be through the market, in the traded contract. Normally, this means it is necessary to take the opposing contract in matching quantity. If the position, the month, is not prompt or spot, then this is the sole means. Exercise of options or other derivative action makes not the slightest difference to this requirement - if you are 1 lot short you need to buy 1 lot THROUGH THE MARKET, no matter what other related assets you hold - be they physicals or paper, your liability in respect of any open position you hold is to the futures market in which the position is held. Thus far I hope no-one would disagree.
There is of course a further consideration. Futures positions do no remain future. An historical example of the potential problems this brings can be seen in the situation of Nelson Bunker Hunt and his brother who provoked a notorious and to my mind shameful and illegal market manipulation on the part of the association and government when they decided to take delivery on the silver market, and were effectively "legislated" out of the picture.
In the spot month, the open interest is the unmatched contracts - i.e. those where the long participants are different from the shorts. The choices for closure here are normally increased by one, because it is open to the longs, subject to the market rules, to take delivery, and to the shorts to deliver into the market. As the position progresses, the daily open interest is quantified and reported by the market associations. Similarly, the amount of physical metal tendered for delivery in the case of the gold market is notified, as is the amount of softs held in approved stores and locations in other markets.
With Comex Gold, this gives the significance to the first and subsequent notice days which should send a chill to the heart of any naked short in the market. By naked short I am referring to any seller of spot gold who does not hold physical gold in comex wreho to cover their position. Thus we should see a game of musical chairs, where the the chairs are the gold bars to be delivered to longs who wish to take delivery.
There are normally more participants in the open interest than available commodity, and the relative strength of the long and short position can be seen in the price progression of the spot month. This can lead to massive distortion by comparison with the other still forward positions, and this is healthy. After all the purpose of the market is to allow two activities - speculation, whether day trading or jobbing on the day, or whether long term, and hedging, so that producers have a means of price equalisation outside the harvesting time windows and so on. All the time, it is irrelevant if you are short wheat to explain that you are a farmer who has an entire crop in an unregistered store just around the corner. If the shorts cannot deliver the required commodity they are in default - severe costs and sanctions apply.
In Comex gold, the reported data does not seem to make it easy to square off the settlement of open spot longs by delivery from warehouse, because of the opaque reporting of bullion movement into and out of warehouse. Perhaps there is information which I have not seen, but so far I have tried and been unable to do this. In my opinion, there is no valid reason for this other than a desire for opacity and concealment.
However, what many commentators question volubly is that towards the end of a spot position, we might expect to see roughly similar numbers delivered ex warehouse, or changing ownership in store, and the fact that this is almost impossible to verify gives rise to one half of this discussion. The other half lies in the apparent uncertainty introduced by the modification of rule 104.36.
In a nutshell, if there is any possibility of exiting liability on a futures contract other than by the directly recorded and monitored purchase, sale or delivery "across the market floor", then there is the corollary probability of corrupt manipulation. In Comex Gold and more particularly Silver the worry is that the concentrated shorts have no obvious reason to have taken those positions, and hold them in such quantity that there is very serious doubt about their ability to deliver in the face of known data about metal above ground, current production and so on. The idea that their reason could be to provide a producer hedge for third parties is ridiculous.
Further, the inability to track the progress of these monster positions, and particularly in the spot month, gives rise to deep suspicion that the concentrated shorts are settling off market, i.e. not across the floor, and possibly not in cash or bullion, thus exposing the risk of valuation "misrepresentation" - i.e. using paper. They just happen to be also the custodians of GLD and SLV, and ETF's are mentioned in connection with the rule modification - this is the underlying problem exposed by Adrian Douglas' most recent article.
Rather than explore the suspicions further, let me once again simply say the word AUDIT. Once a year is absurdly inadequate, and because of the permissible custody variations in these ETF's is probably next to meaningless. Any comfort afforded by the Auditor's PI would be too small to be relevant in the event of collusive misrepresentation. No, rather there needs to be very frequent, movement reconciled audited statements from all internationally significant markets and gold stores. Without this, when trust breaks down, as is happening already, massive double counting and ownership disputes will emerge in a heartbeat.
Like I said originally, this should be arithmetic not rocket science, and we should not accept or trust any excuses or blandishments intended to complicate or obfuscate what should be simple addition and subtraction.
I am truly sorry my original reply was rather bad tempered.
May your positions prosper.
On Jul 18 09:29 PM kohalakid wrote:
> bozzy---
>
> I'm always an eager learner. If you want to school me on spot markets
> I'm happy to learn. If you want I'll give you my phone number and
> you can right my wrongful ways.
On Jul 18 09:29 PM kohalakid wrote:
> bozzy---
>
> I'm always an eager learner. If you want to school me on spot markets
> I'm happy to learn. If you want I'll give you my phone number and
> you can right my wrongful ways.
NO! Of course not.
On Jul 18 08:47 PM kohalakid wrote:
> Do you think that every open contract in a delivery month results
> in delivery???
On Jul 17 12:42 PM metaforge wrote:
> Great article. What's the best way to buy physical? Any suggestions?
On Jul 19 11:00 AM grey road wrote:
> best way in my opinion is in jewelry, coins and scrap from private
> dealers, where there is no record of the transaction. In other words
> , your cash exchanged for there scrap gold and silver. You have to
> get in the right cirlcle of people and buy a gold tester. And dont
> tell anyone ( and i mean anyone) what you are doing.
Would you agree that "delivery" to settle a spot month contract does not necessarily involve delivery of metal THAT MONTH into the warehouse??
"Delivery" can be accomplished by delivery of a warehouse receipt that may have been in the hands of the seller for years, correct? I still don't understand why you are trying to reconcile metal movements into and out of a warehouse with delivery notices.
Can we agree that "delivery" as defined by the exchanges is delivery of a receipt and not the removal of metal from the warehouse??
On Jul 19 12:24 PM Crude Oil Trader wrote:
> I have had great luck trading GLD relying on Gold futures and futures
> analysis. This is a big week for gold, key level being $946.40. If
> we can get above that level 980 will be an easy run. Check out this
> video on trading gold this week. > tinyurl.com/nka2hh
You gotta love it!
news.yahoo.com/s/nm/20...
Whats new? Apparently not 120 threads at Seeking Alpha.
seekingalpha.com/listi...
I can't imagine how scams like this are allowed to be generated, and clean out investors' accounts time and again, but we keep letting the crooks run the accounts and write the securities laws, don't we, so it keeps on going and going, just like the Eveready bunny.
This running con game has all the earmarks of a gigantic smoke-and-mirrors operation, and yet there is NO action being taken by CFTC or SEC, even after Madoff and Stanford and Bayou and all the others?
Positively outrageous, if you ask me.
Kim makes numerous statements that are simply either;
a) Flat out false, or
b) Totally unsubstantiated, but being stated as fact, or
c) Specualtion with no research or fact to back it up
This means Kim's credibility ranks very low on the esteem-o-meter for all but the most cynical 'conspiracy' fringe nutball crowd.
There is nothing wrong with owning physical metals, I own physical silver and gold myself... but there are numerous advantages to a safe, phsyically backed, ETF.
For example No storage problem, no insurance problem, no future assay problem, no massive spread, instant liquidity, margin account tradeability, leverage, stop and limit orders, trustees, custodians, no danger of home invasion to be killed for your metal, (which happens much more frequently than people realize) etc etc
Kim, has done no actual research into these ETFs , just made wild and reckless speculations, and unsubstatiated claims of fraud based on reading their prospectus. Incredible! And he seizes on the standard disclaimers that virtually ALL prsopectus have in them as his 'evidence'.
If these GLD and SLV ETFs were a fraud, it'd be the scandal of the century. If Kim had evidence of it, he could get wealthy overnight blowing the scandal open and writing his book. Guess what? This isn't going to happen.
I will comment on a few of KIM's statements;
>>.."First, let me preface this article by stating that it contains my opinions and speculation based upon no concrete evidence.."<<
This opening statement is the most credible in the article. It is all downhill from here.
>>>.."Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles.."<<
Actually, no. Only the ultra fringe nutball newsletter crowd of 'analysts' like Ted Butler (who is paid by IRI to steer people to physical and bash the ETFs) have any reservations about these 2 ETFs. Among credible and repsected analysts there simply is no such debate.
>>.."Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)?.."<<
Where is KIM's evidence for this? Link please. This is simply speculation on his part being stated as fact. Very disingenuous and misleading.
>>.. According to silver analyst Ted Butler,.."<<
This is a very generous characterization of Butler, who is paid by IRI for his 'analysis' to steer people to physical purchases at IRI.
>>.." JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures..."<<
Where is KIM's evidence for this? Link please. This is simply speculation on his part being stated as fact. Very disingenuous and misleading, again. You claim to want integrity Mr Kim in finance but you are demonstrating none.
>.."Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX,.."<,,
Alleged by whom? Butler? Where is KIM's evidence for this? Link please. This is simply speculation on his part being stated as fact. Very disingenuous and misleading, AGAIN.
>>..."I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. .."<<
At least KIM is stating opinion here, but he;
a) Fails to understand the prospectus, and
b) Fails to take into account the risks of physical I outlined earlier
>>>..."..I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. .."<<
This is simply a nonsense statement based on nothing. One could say the same about virtually any prospectus.
>>.."Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete,.."<<
This could be said for every commodity ETF out there, the vast majority of which are derivitave based and don't even hold physical commodity. Is KIM kidding with this?
>>.."there is absolutely no way that you should believe that buying the gold ETF and the silver ETF is the same as buying physical gold and silver, or even a proxy for buying physical gold or silver..."<<
Completely unsubstantiated statement based on KIM's poor understanding of how prospectus must be written.
>>.."Elsewhere in the SLV prospectus, the following claim is also made: “Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.” If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the “remainder”? .."<<
KIM is just so lost here. New shares are cash until the silver is purchased, which happens almost immediately. This is clear in the prospectus, as even the earlier paragraph KIM had cited in his article demonstrates.
>>..."Clearly, the SLV prospectus states that there is a “remainder”. If you read this statement carefully, the statement clearly refers to the “trust’s silver holdings.” Thus, this statement implies that some of the SLV’s funds are allocated to something else other than physical silver. So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?.."<<
This is just plain silliness on KIM's part. Newly purchased shares do not result in silver bullion equivelance instantaneously, SLV makes purchases, or divestments..determining inflow or outflow...daily.
>>.."But even were the bulk of the SLV’s holdings physical silver, remember that this claim could be false and still contained in the prospectus due to their qualifying statement at the beginning of the prospectus that:.."<<
Good grief, they are regulated and would be guilty of massive fraud. Why doesn't KIM get 60 Minutes or the New York Times on this story then? I'll tell you why, KIM has done zero research and has no credibility here.
>>.."In fact, given the entirely suspicious elements of these prospectuses, were every investor to liquidate their positions in the GLD and SLV and take their cash and buy physical gold and silver instead, I would speculate that the price of gold and silver would rise substantially,.."<<
And most legitimate analysts have speculated that it was the inception fo the GLD, and SLV ETFs that CAUSED gold and silver to rise substantially be creating addition investment demand! This much is clear. The facts are the opposite of KIM's contention here.
>>." it appears that there may actually be grounds for my past speculations regarding the fact that the GLD and SLV funds may actually be used to help suppress the price of gold and silver on the futures markets..."<<
It appears? How about some hard evidence and fact? This is the problem with these kinds of articles. They are akin to the "Moon Wlak Fraud" theories. All smoke and mirrors, so substance.
>>..."The CFTC Should Investigate the GLD and the SLV, Audit their Holdings, and Report Their Findings to the Public
Thus, if the new CFTC Chairman Gary Gensler is truly sincere in his public comments about increasing transparency in the commodity markets, I suggest he begin with an investigation of the unregulated SLV and GLD ETFs to..."<<
Certainly nothing wrong with that. Let's bring on the investigation! But of course, if the CFTC found that GLD and SLV have all the phsyical gold and silver, you know KIM will come back (like Butler did re the Comex) , with an article that would then claim they didn't do teh investigation right, and the ETFs still don't have the bullion.
>>.."It is entirely ludicrous to allow the custodians of these two ETFs to operate with zero outside regulatory oversight .."<<
Simply a false statement. They are independantly audited.
>>.."There will always be vast amounts of paper gold and paper silver available to be sold, but only a limited amount of physical gold and physical silver. Perhaps this is why the real thing is becoming increasingly difficult to come by these days..."<<
Once again, a false statement. The precise OPPOSITE is true. The market has been flooded with gold and silver, suilver in particular the past few months, and premiums have dropped to the lowest levels in years, while retail shortages of coin and bullion have all but vansihed with a massive glut of available material.
>>.." On Tuesday, the US Mint once again reported that it has temporarily suspended minting of nearly all its gold uncirculated and proof coins and nearly all of its silver uncirculated coins due to very limited availability of blanks..."<<
This of course has nothing whatsoever to do with gold and silver availability as anyone who constantly studies the coin market knows. Who does KIM think he is kidding here? Unless he truly is unaware of the facts as to why the U.S. Mint has trouble with its supply chain. Please do try and do a little actual research Kim. Even the collapsed premiums and ready availability of massive amounts of gold and silver coin, (not to mention the glut at dealers and fire sale low premium prices) would be enough to fill you in. If you were willing to do some actual fact checking instead of speculating.
All in all, a very non credible piece by someone with an extremely shallow and un-researched approach to 'analysis'.
No-one is saying that ETFs are a complete fraud. However anyone who says we should derive comfort because a yearly audit is "independent" lives in the land of the fairies, and clearly has no direct experience of what is involved in such audits and its limitations. Examples of material mis-statement of "audited" stocks in published numbers of all kinds of provenance are absolutely legion.
What about the Canadian Mint ? There you have an example no more than a few weeks old, in an organisation approximating to what is generally accepted as one of the most secure and transparent in the world of bullion. Yet Mike would ask us to ignore the admonishings of such as Mr Kim because of some admittedly slightly odd readings and interpretation of a prospectus.
I repeat my own admonishment: we have been warned - Mr Kim is just one of he more recent of these warnings. There is no good reason for denial of transparency.
In metal I trust.
May your holdings prosper.
On Jul 20 01:52 AM Mike L wrote:
> I think that Kim, and the vast majority of commentators here, need
> to re-evaluate the nature of investment research. Making wild unsubstantiated
> allegations of fraud, for an ETF, SEC listed security is an extremely
> serious charge that requires serious evidence. Not someone's 'feeling',
> supposition, speculation, and WAG.
>
> Kim makes numerous statements that are simply either;
>
> a) Flat out false, or
> b) Totally unsubstantiated, but being stated as fact, or
> c) Specualtion with no research or fact to back it up
>
> This means Kim's credibility ranks very low on the esteem-o-meter
> for all but the most cynical 'conspiracy' fringe nutball crowd.<br/>
>
> There is nothing wrong with owning physical metals, I own physical
> silver and gold myself... but there are numerous advantages to a
> safe, phsyically backed, ETF.
>
> For example No storage problem, no insurance problem, no future assay
> problem, no massive spread, instant liquidity, margin account tradeability,
> leverage, stop and limit orders, trustees, custodians, no danger
> of home invasion to be killed for your metal, (which happens much
> more frequently than people realize) etc etc
>
> Kim, has done no actual research into these ETFs , just made wild
> and reckless speculations, and unsubstatiated claims of fraud based
> on reading their prospectus. Incredible! And he seizes on the standard
> disclaimers that virtually ALL prsopectus have in them as his 'evidence'.
>
>
> If these GLD and SLV ETFs were a fraud, it'd be the scandal of the
> century. If Kim had evidence of it, he could get wealthy overnight
> blowing the scandal open and writing his book. Guess what? This isn't
> going to happen.
>
> I will comment on a few of KIM's statements;
It feels to me that we are not heading in the same direction with this one.
On Jul 19 02:56 PM kohalakid wrote:
> bozzy---
>
> Would you agree that "delivery" to settle a spot month contract does
> not necessarily involve delivery of metal THAT MONTH into the warehouse??
>
>
> "Delivery" can be accomplished by delivery of a warehouse receipt
> that may have been in the hands of the seller for years, correct?
> I still don't understand why you are trying to reconcile metal movements
> into and out of a warehouse with delivery notices.
>
> Can we agree that "delivery" as defined by the exchanges is delivery
> of a receipt and not the removal of metal from the warehouse??<br/>
>
>
On Jul 20 01:52 AM Mike L wrote:
> I think that Kim, and the vast majority of commentators here, need
> to re-evaluate the nature of investment research. Making wild unsubstantiated
> allegations of fraud, for an ETF, SEC listed security is an extremely
> serious charge that requires serious evidence. Not someone's 'feeling',
> supposition, speculation, and WAG.
>
> Kim makes numerous statements that are simply either;
>
> a) Flat out false, or
> b) Totally unsubstantiated, but being stated as fact, or
> c) Specualtion with no research or fact to back it up
>
> This means Kim's credibility ranks very low on the esteem-o-meter
> for all but the most cynical 'conspiracy' fringe nutball crowd.<br/>
>
> There is nothing wrong with owning physical metals, I own physical
> silver and gold myself... but there are numerous advantages to a
> safe, phsyically backed, ETF.
>
> For example No storage problem, no insurance problem, no future assay
> problem, no massive spread, instant liquidity, margin account tradeability,
> leverage, stop and limit orders, trustees, custodians, no danger
> of home invasion to be killed for your metal, (which happens much
> more frequently than people realize) etc etc
>
> Kim, has done no actual research into these ETFs , just made wild
> and reckless speculations, and unsubstatiated claims of fraud based
> on reading their prospectus. Incredible! And he seizes on the standard
> disclaimers that virtually ALL prsopectus have in them as his 'evidence'.
>
>
> If these GLD and SLV ETFs were a fraud, it'd be the scandal of the
> century. If Kim had evidence of it, he could get wealthy overnight
> blowing the scandal open and writing his book. Guess what? This isn't
> going to happen.
>
> I will comment on a few of KIM's statements;
1. As may others have pointed out, the prospectus language the author quotes, “Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense,” is boilerplate found in virtually every prospectus. It has no meaning for the truthfulness of the statements in the prospectus, and if any of them are ever found to be untruthful, the SEC can prosecute and jail people.
2. Also as others have pointed out, the two banks are simply custodians of the metals. They cannot buy or sell them, short them or borrow them. They are on the hook only to be sure all the gold and silver bars are there are at all times. If any bars went missing, the ETF could sue the custodian in a heartbeat.
3. It is true that if the independent auditors are incompetent or in cahoots with the custodian, bars theoretically could be stolen and covered up. This would require a large conspiracy, and after the Enron debacle my experience is that accounting firms go overboard in the opposite direction, with numerous checks and balances. I also suspect SLV and GLD have theft insurance. The probability of a theft or missing bars is minuscule.
4. The call for the CFTC to investigate is very strange, since these entities are not regulated by the CFTC. They are regulated by the SEC.
5. The focus on the fact that these entities are not regulated by the Investment Company Act of 1940 is equally strange, since they are not mutual funds.
My conclusion remains that aside from a reasonable amount of junk silver for use in an emergency, it is safer and very effective to use GLD and SLV to protect your assets, especially in a 401-K, against accelerating inflation. While this article required me to spend an hour of research re-evaluating my position, and listening to contrary opinions usually is very beneficial, ultimately the hour was wasted time because the author's points were so inaccurate or irrelevant.
Some advice on CEF. They have a nasty habit of diluting the fund once it trades to a small premium over its NAV, which it does because it is a closed end fund. I have been burned by that.
They do that to make it bigger to rake in more custodial $$'s. It seems the GLD system for keeping the price inline with the ounces held is better, although I must admit this article raises good questions about these funds.
On Jul 16 11:47 AM Jabalong wrote:
> Any thoughts on Central Fund of Canada (seekingalpha.com/symbo...)
> or Central Gold Trust (seekingalpha.com/symbo...)? How about
> services like BullionVault.com or GoldMoney.com?
I haven't bought or sold futures in quite a few years and now
COMEX issued a rule allowing ETF shares to be used as a EFP or and EFS as the exchange now calls it, which is a qualified hedge between counterparties.
Nowhere.. I repeat NOWHERE..is there a COMEX rule that allows the delivery of ETF shares against a spot contract.
I'll gladly mail $100 to the first person who can show me anything other than COMEX rule 113.02 which says "delivery shall consist exclusively of one 100 oz or 3 kilo bars" which allows the seller of a contract in the delivery month to deliver ETF shares against that short.
On Jul 20 06:10 PM whatnext wrote:
> More disquieting is the fact that COMEX futures can be settled with
> ETF shares, including GLD. This seems to erode the entire relationship
> between the futures and physical ownership.Theoretically, my Comex
> futures contract could be settled with 'borrowed shares' from a naked
> short position. The result is I have no gold, the ETF has more shares
> outstanding than gold and the seller has an outsatnding obligation
> he may never have to settle.
>
>
> I haven't bought or sold futures in quite a few years and now
Another old expression is from old Willy Shakespeare, awho opined,, "methinks he doth protest too much"'
This little bit of history applies to the kohala Kid and a couple of others,
Another old expression is from old Willy Shakespeare, awho opined,, "methinks he doth protest too much"'
This little bit of history applies to the kohala Kid and a couple of others,
Just show me where the COMEX has changed the rules regarding delivery against spot contracts.
On Jul 20 07:42 PM gordsav wrote:
> Well the old expression is clearly applicable here. Money talks,...and
> BS walks.Since the articles by Douglas and Kim, Gold has gone vertical,
> blasting through several resistance levels and reached 955 today.
>
> Another old expression is from old Willy Shakespeare, awho opined,,
> "methinks he doth protest too much"'
> This little bit of history applies to the kohala Kid and a couple
> of others,
I would not wish to comment on your conclusions, but I want to point out that you too appear guilty of that which you accuse the author of - namely holding out unsubstantiated opinion as if it were fact. The author did not accuse the ETF's of colluding and conspiring with their auditors, nor did he accuse the custodians of using ETF metal to settle their own delivery requirements.
What you miss, and in my OPINION should not, is that the imprecision surrounding custody requirements, the infrequency of audit, and the inherent unreliability of "independent audit" all serve to create substantial opportunity for mis-statement and its concealment.
I do not share your confidence in yearly audits, and could back this up with legion examples from financial annals - the most recent being the Canadian mint, a situation which you as a commentator and adviser must be aware of.
In my own experience, wherever there is opacity and lack of enforcement there will be mis-statement, it is only the extent which varies. What a shame that this thread is so polarised - it seems that one pole wants to believe there is widespread and massive dishonesty, the other pole would take everything on trust. The only thing they may have in common is the preference for pronouncement over actual work - in this case research and analysis. For myself I enjoyed the article, and appreciated the spirit in which it seemed to be written.
In practice, a large proportion of criminal mis-statements start as rule bending and fuzzy classification with the intention of overcoming inconveniences which are expected to be temporary, but which then persist and get worse.
What I would want to see is complete transparency, and frequent regular peer review/audit of metal on hand - be it in Comex store or with ETF custodian. I would also love to hear how the concentrated gold shorts justify their positions. So far the only thing I have heard has been producer hedging, and like I said earlier, to accept that requires a permanent residence in the land of the elves and fairies.
In metal I trust
May your positions prosper.
On Jul 20 04:05 PM Michael Murphy wrote:
> I have recommended both GLD and SLV to my subscribers after reading
> the prospectuses, so I read this article carefully to see what I
> may have missed.
>
> 1. As may others have pointed out, the prospectus language the author
> quotes, “Neither the Securities and Exchange Commission [SEC] nor
> any state securities commission has approved or disapproved of the
> securities offered in this prospectus, or determined if this prospectus
> is truthful or complete. Any representation to the contrary is a
> criminal offense,” is boilerplate found in virtually every prospectus.
> It has no meaning for the truthfulness of the statements in the prospectus,
> and if any of them are ever found to be untruthful, the SEC can prosecute
> and jail people.
>
> 2. Also as others have pointed out, the two banks are simply custodians
> of the metals. They cannot buy or sell them, short them or borrow
> them. They are on the hook only to be sure all the gold and silver
> bars are there are at all times. If any bars went missing, the ETF
> could sue the custodian in a heartbeat.
>
> 3. It is true that if the independent auditors are incompetent or
> in cahoots with the custodian, bars theoretically could be stolen
> and covered up. This would require a large conspiracy, and after
> the Enron debacle my experience is that accounting firms go overboard
> in the opposite direction, with numerous checks and balances. I
> also suspect SLV and GLD have theft insurance. The probability of
> a theft or missing bars is minuscule.
>
> 4. The call for the CFTC to investigate is very strange, since these
> entities are not regulated by the CFTC. They are regulated by the
> SEC.
>
> 5. The focus on the fact that these entities are not regulated by
> the Investment Company Act of 1940 is equally strange, since they
> are not mutual funds.
>
> My conclusion remains that aside from a reasonable amount of junk
> silver for use in an emergency, it is safer and very effective to
> use GLD and SLV to protect your assets, especially in a 401-K, against
> accelerating inflation. While this article required me to spend
> an hour of research re-evaluating my position, and listening to contrary
> opinions usually is very beneficial, ultimately the hour was wasted
> time because the author's points were so inaccurate or irrelevant.
On Jul 20 07:28 PM kohalakid wrote:
> COMEX futures CANNOT be settled with ETF shares!!!!
>
> COMEX issued a rule allowing ETF shares to be used as a EFP or and
> EFS as the exchange now calls it, which is a qualified hedge between
> counterparties.
>
> Nowhere.. I repeat NOWHERE..is there a COMEX rule that allows the
> delivery of ETF shares against a spot contract.
>
> I'll gladly mail $100 to the first person who can show me anything
> other than COMEX rule 113.02 which says "delivery shall consist exclusively
> of one 100 oz or 3 kilo bars" which allows the seller of a contract
> in the delivery month to deliver ETF shares against that short.<br/>
>
> On Jul 20 06:10 PM whatnext wrote:
They got screwed!! The exchange changed the rules in the middle of the game. If the exchange had let it play out, I believe all the secondary physical silver flowing into refineries would have pushed the price back down by natural, market forces. That the COMEX felt a need to do it by rule change was not "kosher" in my book.
On Jul 20 08:23 PM bozzy wrote:
> Generous offer - I don't suppose you would stretch it to include
> a timely mention of the Hunt brothers would you? .....timely mention
> follows......
"Settlement by rule change" on the silver market - and since it is the Neil Armstrong season - one short step for the market etc. Unfortunately, I like you, think the step was in the wrong direction.
I wonder whether we could one day see that again in spot gold.
On Jul 20 08:33 PM kohalakid wrote:
> Yeah, I'll mention the Hunt brothers...
>
> They got screwed!! The exchange changed the rules in the middle of
> the game. If the exchange had let it play out, I believe all the
> secondary physical silver flowing into refineries would have pushed
> the price back down by natural, market forces. That the COMEX felt
> a need to do it by rule change was not "kosher" in my book.
By borrowing from your 401K:
You are able to hold the gold locally – in a rollover it is held at a 3rd party depository
You can purchase the numismatic – in a rollover you can only purchase bullion
Some other reasons that this could work to your benefit:
If we end up in an inflationary period and your money is just sitting in the 401K then you will be effected by this inflation and devaluation if the dollar and possibly see great loss.
By using the money in your 401k you are buying at today’s price and historically speaking could see greater returns then what the interest you’d be paying for the loan is.
send me an e-mail and I'll get you some info.
brian@republicmonetary...
On Jul 16 09:49 AM MadScientist wrote:
> Not everyone can buy physical gold or silver - I trade within a 401k,
> so ownership of PMs is not possible.
>
> I recognize that GLD and SLV may be full of hot air rather than metals.
> If it is revealed that GLD or SLV has less physical materials than
> they claim, those ETFs will fall rapidly while the value of gold
> and silver will explode.
>
> My current approach is to use leveraged ETFs such as UGLand AGQ to
> trade. Hopefully these will do well if any scam exists and is exposed,
> and if there is no issue they should also do as well (or better)
> than the physical materials.
By borrowing from your 401K:
You are able to hold the gold locally – in a rollover it is held at a 3rd party depository
You can purchase the numismatic – in a rollover you can only purchase bullion
Some other reasons that this could work to your benefit:
If we end up in an inflationary period and your money is just sitting in the 401K then you will be effected by this inflation and devaluation if the dollar and possibly see great loss.
By using the money in your 401k you are buying at today’s price and historically speaking could see greater returns then what the interest you’d be paying for the loan is.
send me an e-mail and I'll get you some info.
brian@republicmonetary...
On Jul 16 09:49 AM MadScientist wrote:
> Not everyone can buy physical gold or silver - I trade within a 401k,
> so ownership of PMs is not possible.
>
> I recognize that GLD and SLV may be full of hot air rather than metals.
> If it is revealed that GLD or SLV has less physical materials than
> they claim, those ETFs will fall rapidly while the value of gold
> and silver will explode.
>
> My current approach is to use leveraged ETFs such as UGLand AGQ to
> trade. Hopefully these will do well if any scam exists and is exposed,
> and if there is no issue they should also do as well (or better)
> than the physical materials.
www.goldstockbull.com/.../
Plus you won't be supporting and partnering with the very investment banks that are suppressing the price advance in precious metals. Sleeping with the energy or something like it.
$24 TRILLION? This can't end well, as much as I hope it does.
www.goldstockbull.com/.../
Thank you Mr. Murphy for the needed island of sanity in a market where delusional paranoic lunatic fringe nutballism is the norm rather than the exception.
Conspiracies and shenanigans certainly occur in finance, but this does not mean every fringe lunatic unsubstantiated accusastion should be treated with the equivelance of hard evidence and fact. Particularly when the accuser demonstrates they are totally clueless on their subject matter, such as Kim does when it comes to prospectus disclaimers.
On Jul 20 04:05 PM Michael Murphy wrote:
> I have recommended both GLD and SLV to my subscribers after reading
> the prospectuses, so I read this article carefully to see what I
> may have missed.
>
> 1. As may others have pointed out, the prospectus language the author
> quotes, “Neither the Securities and Exchange Commission [SEC] nor
> any state securities commission has approved or disapproved of the
> securities offered in this prospectus, or determined if this prospectus
> is truthful or complete. Any representation to the contrary is a
> criminal offense,” is boilerplate found in virtually every prospectus.
> It has no meaning for the truthfulness of the statements in the prospectus,
> and if any of them are ever found to be untruthful, the SEC can prosecute
> and jail people.
>
> 2. Also as others have pointed out, the two banks are simply custodians
> of the metals. They cannot buy or sell them, short them or borrow
> them. They are on the hook only to be sure all the gold and silver
> bars are there are at all times. If any bars went missing, the ETF
> could sue the custodian in a heartbeat.
>
> 3. It is true that if the independent auditors are incompetent or
> in cahoots with the custodian, bars theoretically could be stolen
> and covered up. This would require a large conspiracy, and after
> the Enron debacle my experience is that accounting firms go overboard
> in the opposite direction, with numerous checks and balances. I
> also suspect SLV and GLD have theft insurance. The probability of
> a theft or missing bars is minuscule.
>
> 4. The call for the CFTC to investigate is very strange, since these
> entities are not regulated by the CFTC. They are regulated by the
> SEC.
>
> 5. The focus on the fact that these entities are not regulated by
> the Investment Company Act of 1940 is equally strange, since they
> are not mutual funds.
>
> My conclusion remains that aside from a reasonable amount of junk
> silver for use in an emergency, it is safer and very effective to
> use GLD and SLV to protect your assets, especially in a 401-K, against
> accelerating inflation. While this article required me to spend
> an hour of research re-evaluating my position, and listening to contrary
> opinions usually is very beneficial, ultimately the hour was wasted
> time because the author's points were so inaccurate or irrelevant.
Don't waste your time scrutinize the SLV's prospectus documents. Any one could hire a lawyer for a few hours and write up a better polished prospectus document, and it will have no bearing on the reality. I am sure Mr. Bernard Madoff's prospectus looked even nicer and all those good folks who studied his prospectus can invest with him and sleep well at night. NOPE!
The point is if you trust the sponsors of SLV, then you can trust them on their words and there is no need to read the prospectus. If you don't trust them, then why would you trust a piece of paper written by them? What you need to do is spend time scrutinize the few facts that is available out there.
You should spend time scrutinize the silver bars serial number list they publish once a week. There are PLENTY of RED FLAGS. Read the shocking oddities that I discovered:
seekingalpha.com/insta...
If you are a big investor, I believe not only you should scrutinize the silver bars list. You should also demand a physical visit to their vault, and demand that they produce the questionable silver bars, like those "Great Wall" silver bars, and prove that they do exist. I will not be surprised that it come out to be a totally fictitious list generated by a computer.
As one who spent hours painstakingly scrutinized their silver bars list, I have sufficient reason to doubt that the list actually matches what they actually hold physically.
On Jul 20 04:05 PM Michael Murphy wrote:
> I have recommended both GLD and SLV to my subscribers after reading
> the prospectuses, so I read this article carefully to see what I
> may have missed.
Basically, just serious unsubstantiated allegations of fraud, with zero but ignorance to go by. Anthony has been corrected on his assumption errors numerous times but to reply to him once again....
1) Clueless about bar numbering and date/lot codes. The simple 'bar number' he is looking at does not include alpha charater midifiers.
2) Clueless about refiners who have been refining for decades, many bars pre current serialization methods.
3) No 'duplicate' serial numbers have matching weights, thus not 'xeroxed', or computer generated redundancies as he claims.
4) Anthony did no research with the ETF fund managers, just doing baseless unsubstantiated speculation.
5) Anthony did no research with the ETF trustee, just doing baseless unsubstantiated speculation.
6) Anthony did no research with the ETF custodian, just doing baseless unsubstantiated speculation.
7) Anthony did no research with the ETF bar listed refiners, just doing baseless unsubstantiated speculation.
8) Anthony's first charge of fraud re the bar list, on another forum a few weeks ago, was that the first listed refiner "Amax" had never refined silver bars. It took about 1 minute of web research to ascertain that Amax had indeed refined silver bars, and that Anthony was as usual, making baseless false allegations based on his inability to do any research or know anything about his subject matter.
9) If Anthony's charges were true, this would mean a massive fraud involving dozens of people. Wall Street Journal reporters would be very interested, as would the New York Times, and dozens of financial publications. Perhaps Anthony should contact some of them with his 'concerns'.
10) It is tiresome to see a world so infested with those who make fraudulent, reckless, baseless, unsubstantiated 'fraud' allegations...particul... when those making the allegations, know virtually nothing about their subject matter, and have done zero by way of genuine research. This kind of approach is a shallow, vacuous, disingenuous approach to investment commentary.
It serves no one at all other than the accuser, who has his own agenda. Which in Anthony's case, happens to involve hundreds of posts all over the web attempting to scare investors out of their holds and into his picks.
..Which is really quite ironic since his article he links to above, is all about the dangers of 'counter party risk' with SLV and questions of not holding a commodity ETF due to that risk. Yet his top recommended buy right now, what he says is his second biggest position, is UNG! An ETF that holds NONE of the underlying commodity except in paper promise derivitave form, and has enormous 'counter party risk' associated with it. UNG is being investigated by Congress and the CFTC for potential market manipulation, and may be squelched in its ability to operate freely.
Speculations, guesses, un-reseacrhed and unsubstantiated allegations of fraud...all desiged to drive someone out of an investment and into THEIR picks, does not equate to integrity or credible analysis.
Expect this post to vanish quickly, as 'seekingalfa' believes strongly in free speech for fraudulent mis-information to be posted by its 'authiors' but immediate censorship for any factual contra data or correction. They have removed my posts 6 times now all for the same response to Mark Anthony's false and libelous charges of fraud re SLV, and for my response to his grossly incorrect, unresearched, and misinformed statements regarding bullion bar serialization.
Anyone who believes that the Wall Street Journal and NY Times are disinterested, unbiased bystanders who would be willing to expose fraud by financial elites is really living in Wonderland. Many of the people benefiting from the fraud are among the same people who control those Establishment media. It's not surprising that someone who is so blind to the fraud that is the mainstream media would insist on blinding himself to other possible frauds. I notice that his post here was not even in response to the article above - did not address the significant points at all but preferred to post a diatribe on an article cited in the article above. Perhaps THAT is why the post will vanish, if it does. Sounds like obsession to me...
Now, in regard to the article in question, the issue some of us have is: self-directed 401k accounts do not permit acquisition of physical metals, but *do* permit investment in ETFs. In such a case, what would the author suggest as an alternate? Would CEF be the best bet? I don't like miners at this point because I expect this bear market rally to fail at some point, and that would likely drag down miners as well, though perhaps not to the same degree.
On Jul 16 02:47 PM skept453 wrote:
> > Repeating the question already asked twice above: are there similar