Market Curiosity: Exploring Markets And Systems

February 16, 2009

Does GLD have gold?

Filed under: Editorials — Tags: , , , , , , , , — Jeff Fitzmyers @ 8:53 pm

Jim Sinclair first asked “Where Do All The Gold ETFs Get Their Bullion From?” (Some discussion.)

James Turk sums up the work of Bill Murphy and Nick Laird: “How can a 150-tonne increase in demand for metal in recent weeks translate into such a relatively small increase in the price of gold?”

COMEX’s gold:
2.7 moz regestered (available for delivery)
5.7 moz eligible (just in storage)

Supposedly 4.8 moz was put into GLD in the past month-ish. Where did it come from? In the past almost nobody would care. What if people decided to find out what was going on and what would they do if they figured out it was mostly “paper gold” (futures contracts) at best and nothing at worst?

It would be really interesting to see how GLD might be unwound. If the shareholders did not get stuck with zero (likely), they would likely demand delivery, or just sell and attempt to buy physical gold. Either way the cat would be out of the bag.

Then add Ted Butler’s latest post: In the last month 2 US banks (likely GS and JPM) accounted for more than 100% of all total short selling in silver. They are currently short about 30,000 contracts or 150 moz. That’s more than 20% of total annual world mine production.

It would only take 5,000 contracts ($900 million) to acquire all the registered silver. That is 0.001% of the most recent bailout.

Okay, I will just says it, even though I don’t believe it myself 🙂

Apparently, there used to be about 15 times more aboveground silver than aboveground gold. But, apparently, now aboveground gold is 5 times more abundant than aboveground silver.

So if silver is remonetized and gold is around $2,000 / oz, that implies silver might be trading at $10,000 / oz.

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