Bullion Bank Apologists And Physical Versus Paper Gold

I see that the apologists for the status quo are actively ‘refuting’ the tightness of physical gold in the London markets, largely by ignoring that and concentrating on the Comex, which they assert is ‘well-stocked.’

Clever people learn from the political process to ignore the tough questions that they do not wish to answer, and to misconstrue the question into whatever it is they would rather answer, often squirming through the issues to put some proposition in the most favorable light for their firms.

So we see this in so much commentary from the bullion bank apologists this past week. I won’t dignify them by citing their names, but I think you will know who they are. 

Peter Hambro’s recent point was fairly clear. It is almost impossible to obtain sizable amounts of physical gold in London which is the center of the Western physical gold trade.

“It is virtually impossible to get physical gold in London to ship to those countries now. We get permanent requests in Russia now. Would we please sell our physical gold to India and to China?

Because there is not enough physical about.  There are endless promises. And I worry that the market, the paper market, could be stamped on and people say ‘sorry we’re going to have a financial closeout’ and it’s all over. If you want to be in the gold business, you ought to be in the physical business.”

 Peter Hambro

The gold apologists bravely assert that there is plenty of gold in the Comex, relative to the demand there.  Never better.

As I have pointed out on any number of occasions, the amount of physical gold in all of the Comex warehouses of any categories is a rounding error on the physical markets of Asia.

I am certainly not suggesting that there will be hard default at the Comex.  How could one expect that in a relatively small market that almost always settles in cash and is dominated by a few, very large insiders who are actively working both sides of the trade?    No, if there is a default anywhere, it will precipitate in a physical marketplace where bullion changes hands and form, more likely in London, perhaps even Switzerland. And then it will cascade to all the other markets quickly.

The portion of the gold in London that is not specifically ‘spoken for’ and held closely is considered to potentially be part of ‘the float.’