Harvey posted this here recently: http://harveyorgan.blogspot.com/ ----- These two ETF's are going to be a huge criminal problem for our bankers as both SLV and GLD do not have the beneficial physical ownership of the metals in their inventory. In GLD, the custodians of the funds arranged for a swap with the Bank of England whereby the Bank received dollars and the GLD folk got their gold. The problem here is that the Bank can ask for their gold back at any time. There is another problem: the gold at the B. of E is not their gold but investors gold like the Arabs etc. You see, when you put gold at the B of E it is only on deposit and the Bank of England can do whatever they liked with the gold but it is their liability. When the game of musical chairs ends, you can see many frantic investors screaming what on earth happened to their investments. In silver: we are not sure of the original deal except that the original Buffet 137 million oz came over to start the SLV. Most of this silver is gone, leased, and consumed. The loss of gold and silver inventory is not for lack of demand but for the massive shortages around the world that necessitated this supply of paper silver/gold. ----- Probably preaching to the converted here ... but .... interesting in that I had heard 'GLD has not gold' etc., but this is the first time I have seen it put like this. Also interesting in that he says SLV 'did' have silver, but now it is mostly gone.
I love Harvey's blog, and check in on it daily. But it is clear from the corruption of all the processes around almost anything financial, legal and political these days that there will be no accountability or prosecution of anybody. Not for a long time to come.
Interesting read in the latest post by FOFOA in which he says that the ETF's were/ are a vehicle for the Bullion Banks to utilize gold held by them in unallocated accounts.The method is they give it to the ETF in return for shares which they can then sell and employ the proceeds.Basically he is saying that there may be conflicting claims on the physical metal, which is alright until it isn't ! It is a long read, but well worth it IMHO to understand the concepts of gold ownership.
"In GLD, the custodians of the funds arranged for a swap with the Bank of England whereby the Bank received dollars and the GLD folk got their gold." He doesn't even provide any evidence for this statement. I've never seen this statement made before, is it a rumor or totally made up. Some of the stuff these guys say is amazing. "there may be conflicting claims on the physical metal" I'm no fan of the ETFs as they compete against us, but GLD and SLV have allocated bars, by which the bullion banks themselves have certified that there are no other claims to the bars and the ETF owns them outright.
Bron, do the GLD and SLV ETF's have 'short sales' ? If so then they are not holding all the metal that they should be. I would be interested in your comments on FOFOA's proposition that the ETF's have metal deposited from the bullion banks accounts that may be capable of being committed elsewhere.
Yes short sales I understand in the US can happen but not aware of actual % of the ETFs shares that are loaned for such activities. There are many problems with the legals of GLD and the others [PMGOLD is perfect, however ] but "doubling up" of the metal is not one of them. Allocated is allocated and is not committed elsewhere. Because it is off balance sheet if the bullion banks have done something funny, it is the person they have done that with that will lose, not the GLD Trustee.
GLD and SLV only work, in that they track gold and silver, because of the Authorised Participants. If the price of GLD starts to get bid up over the price of gold they can sell their shares and cream off the extra. If they don't have shares they can transfer from their unallocated gold account to the custodians allocated account and get more shares. Happens the other way during corrections. The prospectus for the aussie versions spell it out quite clearly. Of cause I don't recommend having unallocated holdings myself. I'd want at least allocated and pony up for the cost of it.
Although Shares of the Trust may be bought and sold on the exchange through any brokerage account, they are not individually redeemable directly from the Trust. What is the point of EFT if you can not have your metal anyway? Cash settlement only! There is a risk that part or all of the Trust's gold, silver, palladium and platinum could be lost, damaged or stolen. Failure by the Custodian or Sub-Custodian to exercise due care in the safekeeping of the precious metal held by the Trusts could result in a loss to the Trusts. What is the point to store something and pay for storage fee, but no insurance for loss? You can not have the meatal anyway, so why would any normal person risk losing the it if cash settlement is the only option? Just buy paper gold on the first place Also, should the speculative community take a negative view towards bullion, it could cause a decline in world gold, silver, palladium and platinum prices, negatively impacting the price of the Shares. (Custodian JP Morgan Chase Bank). Why anyone want to keep any investment with someone who only wants the value of that investment destroyed? If this is not a SCAM I do not what SCAM is
Those are some key problems, particularly in my view that the Custodian isn't on the hook for losses, I mean what sort of custodianship is that? Re redeemability, that is also an issue and why we made PMGOLD redeemable in gold directly from the Mint.
Yes, there are key problems... The first one being... where did they get their gold originally ? The amount of gold that they are supposed to have acquired NEVER made an impact on Gold price at the time ? Actually it went down then, for memory. Also the more you read about in the fine print, the less you know what this is all about. Well, in the end, it does not all add up ! I agree with Projack, these ETFs stink like a Scam ! Even the 'supposed' allocated portion of it has clauses to settle in cash. IMO, these ETFs were designed to give the Bullion Banks a buffer against delivery... Even to the point as to use them as a 'Fractional Reserve type' system of manipulation... But then, it's up to you guys... but I rather see and feel what I am buying, that's for sure.
"Someone is draining GLD of its gold. Someone is taking in millions of ounces and tonnes of physical gold at off-market prices while the paper bug cheerleaders call it "dumping" or "offloading" the gold. Again, one man's "outflow" is another man's pickup truck (or dump truck as the case may be) backed right up to the loading dock at the GLD depository." a most interesting post about the physical gold held by GLD ; http://fofoa.blogspot.com/2011/01/who-is-draining-gld.html ( Bron, is that you in the comments section ?)
Thanks for posting silverwink. FOFOA's post backs up what Harvey said in my OP. FOFOA says: "... the ETFs are more like a central coat-check room in which the various bullion banks have temporarily hung out their own inventories (i.e., meaning, their unallocated stock which they hold loosely on behalf of their depositors). And whereas the claim tickets (ETF shares) may freely circulate on the open market, any significant outflow of physical inventory is simply and primarily indicative of a bullion bank reclaiming the original inventory based on a heightened need or desire for physical metal in a tightening market for example, to meet the demands emerging from Asia."
Very interesting and informative discussion between FOFOA and Bron at FOFOA blogspot for those who follow his writings.
Yep that is me, check the profile for Bron against the comment. FOFOA's theory is that CBs are working to reinstate some sort of gold standard/freegold. Alternatively they are full of stupid mainstream economists who never saw this coming and don't know what to do about it and gold is the last thing on their mind. I can't say which it is and keep and open mind on both at this time.
