|Hi Tommaso - |
Whole lot of mysteries. Don't have any "astute commentary" but have never believed that ETFs are actually using physical gold. Trusts are. Like others here, I trade gold ETFs for paper money short-term, but would never rely on them to actually have physical, believing that among their array of techniques, they simply lease gold.
What anyone believes about gold depends on the beginning assumptions. Meaning: if one believes the whole damn thing is a rigged game, then almost any subsequent belief becomes possible.
Last year, found the best explanation I've seen to explain the underlying realities; it came in the comments of a Seeking Alpha story. It's not a direct A=B, B=C, then A=C logical argument; it's an exploration of known evidence and some theories.
All That Gold Is Really In the Gold ETF, Right?
[The comments are by User 173148; here's a link to all his comments: seekingalpha.com]
" If you still believe gold ETFs are backed by gold stored in vaults then read this. It may shake your confidence in U.S. bullion banks.
An Unoffical History of Gold's and Silver's Recent Correction.
Recently a New York state prosecutor announced he was going launch a criminal investigation into the shorting of financial stocks. Shorting stocks is not illegal but lying to a grand jury is! Too bad the prosecutor isn't going to investigate the U.S. banks that all shorted gold and silver on the COMEX at the same time this past July.
Many people knowledgeable in gold and silver believe that there was a massive downward manipulation of gold and silver prices by the U.S. government in mid-July. This also coincided perfectly with the U.S. dollar's miraculous surge higher. The panic inducing slide in gold and silver prices reeks of manipulation, not that of a natural free-market correction.
(Note: Compared to the foreign currency futures market which trades about $3.5 trillion per day, gold and silver futures markets are really very small markets. Gold only trades about $35 billion while silver trades about $4 billion per day. They are little tiny markets. So they can easily be pushed around.)
(The bullion banks, as primary dealers, have overwhelming knowledge and control of the gold and silver marketplace. Since all market orders flow through the bullion banks, they know where the stop-loss triggers of all long and short sellers are. To manipulate the market, enough paper gold or silver is continually issued to automatically trigger stop-loss orders. The price starts going down as sell orders are filled. This triggers yet more stop-loss orders. This process becomes like dominos, falling one after another, until the price collapses. If the collapse is big enough, investor confidence is destroyed, on a wide scale. By inducing a price collaspe, the bullion banks could either unwind hundreds of billions of dollars worth of potential losses, or position themselves to go long on hundreds of billions of dollars worth of potential profits.)
For evidence, they point to the fact that starting on July 14th, three U.S. banks sold short in one month more than 10% of the world's annual gold mine production and two U.S. banks sold short in one month more than 20% of the world's silver mine production. These were the largest gold and silver short positions ever recorded by U.S. banks. Nornally no one would be allowed to take such a large position in the futures market, but market regulators and media have been noticeably silent about this spontaneous collusion by U.S. banks. Refusal by regulators to act, points to government sanctioned manipulation. After these massive and concentrated short positions were established, gold and silver prices declined sharply, despite a record world wide increase in demand for physical gold and a shortage of physical gold and silver. (The opposite of how the laws of supply and demand should work.)
Further evidence of U.S. government sanctioned market manipulation of gold and silver was noticed on the 24 hour silver and gold charts during this correction. During this period the high physical demand for gold and silver in Asia often caused daily price gains of $5 or $10 an ounce. These gains were only lost once London closed and New York markets opened. These gains were quickly sold off on the COMEX, within a 30 minute time frame, and then transformed into deep losses. This patterned repeated itself, like clockwork, nearly every day during this correction.
The discrepancy between physical gold/silver and published gold/silver prices was possible because 99% of futures contracts are closed out with the purchase of another paper contract. Futures contracts represent digital bytes of gold and silver flying around in a paper market, not real ounces of gold and silver that exist in the physical market. This in effect creates two parallel markets for gold and silver, a paper and a phyiscal market, allowing signicantly different prices to be set for the same commodity over a short period of time. Paper markets were used to manipulate prices that were non-reflective of the physical market.
Due to record demand world-wide, a shortage of physical gold and silver has developed. This has forced the big western bullion banks, based in New York and London, who control both the gold and silver trade to essentially rationing a very thin supply while pretending there isn't a shortage of gold and silver. Most physical silver and gold, to a lessor extent, is being reserved for industrial and fabrication use while investors are simply not able to get any. The big bullion banks are artificially reducing the quantities of gold and silver delivered by refusing to extend lines of credit to all other buyers, like small banks, under the excuse that "they have run down their credit lines”. This has forced these buyers to pay down existing lines of credit before being allowed to take delivery of another gold or silver shipment. Thus investors are left to accept paper gold or silver, or have to wait months for the real thing. (Interestingly, the manipulating bullion banks made a mistake in not supplying the U.S. Mint, which ran out of gold and silver, proving that there is a severe shortage of physical gold and silver.)
To drive down the price of gold, the big bullion banks flooded the market with artificially created (fake) "paper gold and silver". To get the secondary derivatives dealers to lease this artificially created paper gold and silver, the big bullion banks (with the Fed maybe providing the seed money?) have been "paying" the dealers (a "negative" lease rate) to lease this paper gold and silver! (Normally the dealers have to pay the bullion banks to lease gold and silver.) By leasing the gold and silver, the derivative dealers then can write futures contracts, etc. because the rules allow "paper claims" to vault-stored gold and silver to legally be used as cover for futures contracts.
(Interestingly this "paper claims" rule came about because a few years back Morgan Stanley, one of the major players in precious metals, was successfully sued (quietly settled out of court) for defrauding its clients from 1986 to 2007 for charging big fees for storing imaginary gold and silver in its vaults that it never bought. Morgan Stanley’s defense was that it was simply following “standard industry practices". Apparently, it is standard Wall Street industry practice to send people monthly statements claiming that the firm is storing physical gold or silver in a vault, charge for the storage, but really never buy or store any real precious metal. If you are an American, do you still believe that the gold ETFs issued by these American bullion banks are really backed by gold? How about an ETF that mimics the price of gold. Sounds like a derivative. Is there really a counter-party? If gold goes to $2000 will they pay up? Coins and bullion are the only real insurance policy.)
With the world-wide physical shortage of gold and silver, logic tells us that the big bullion bank's "claims" of gold and silver stored in it's vaults must be imaginary. If they have issued fake paper gold and silver "claims" before, they are likely doing it again to manipulate the precious metal markets for the U.S. government.
From market reports, it appears that these U.S. banks were successful in closing out most of their net short gold positions (known in manipulative circles as "ringing the cash register"), but were much less successful in closing out their silver short positions. Speculation is that the U.S. bank's short silver positions maybe trapped?
Why was this manipulative scheme executed in the gold and silver (and probably oil too) markets? Here are a number of theories put forward.
One theory was that they were desperate to unwind massive short positions. Another theory was to re-capitalize the U.S. financial sector, at the expense of the individual investor, by taking advantage of the daily arbitrage opportunities provided between the higher Asian prices and the lower COMEX prices to quickly make profits in the tens of billions of dollars (similar to Greenspan's bank re-capilization using the treasuries/bond interest spread in the early 1990s). Another theory thinks this was engineered to shore up the U.S. dollar and stem the record rate which foreign banks were dumping U.S. treasuries. Another theory is that the Fed sees gold as a rival to the dollar so the ultimate aim would be to destroy investor confidence in gold, by collapsing the price for a few weeks. Another theory is the Fed was trying to destroy investor confidence in gold to hide the inflation their massive printing of money has created. Maybe all of the above and more."