This story IN MY OPINION, the biggest GOLD NEWS STORY of THE YEAR. This news is like a tectonic shift in the Earths seven plates…There is A TON to READ here and I spent a good amount of time putting this together, so please….ENJOY (and if any questions just email me).
I’ve long tried to explain to people the importance of 1) buying gold(and silver) and making them a part of your portfolio to protect against stealth dollar devaluation and then end of fiat currency…(While many argue with me the merits of owning GOLD or owning GOLD “all the way up here at the top”, I try to reiterate and emphasize that this is not a speculative trade this is an absolute life hedge. Both your government and federal reserve are failing you and we can talk about that more in separate posts. 2) If you are going to own GOLD you need to own GOLD or SILVER either physically by buying coins or bullion or through one of reputable vehicles that has 100% backed and registered bullion such as Sprott Funds like PHYS or PSLV, or CEF which owns gold and silver in the same trust. You absolutely should not own GOLD or SILVER through any of the fraudulent paper products such as GLD, SLV, GOLD/SILVER Futures on the Comex. Anything that has the fingerprints of JP Morgan or HSBC anywhere around it should set off red flags and alarm bells. This includes as custodian of the trust, the bullion being stored in their vaults, members of the COMEX, etc….anything with them YOU STAY THE FCK AWAY! To learn more about why I question the validity of the GLD and SLV trust, click here(then search for Coincidence or Design?). this is one of many reasons why you could be left thinking you have an ownership in GOLD, yet own nothing.
I was going to write about this last night but I was waiting for some more information on how the actual process of calling the Gold in being held in storage with the BOE(Bank of England) and 5 vault banks would work once we finally got a legitimate size holder demanding its physical GOLD for delivery. So first, take a read of ZeroHedge’s summary of what happened and then scroll down and I’ll try and tie everything together and make it as clear as possible right after…..
In addition to the nationalization of his gold insutry, Chavez earlier also announced that he would recover virtually all gold that Venezuela hold abroad, starting with 99 tons of gold at the Bank of England. As the WSJ reported earlier, “The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank.” That’s great, but not really a gamechanger. After all the BOE should have said gold. What could well be a gamechanger is that according to an update from Bloomberg, Venezuela has gold with, you guessed it, JP Morgan, Barclays, and Bank Of Nova Scotia. As most know, JPM is one of the 5 vault banks. The fun begins if Chavez demands physical delivery of more than 10.6 tons of physical because as today’s CME update of metal depository statistics, JPM only has 338,303 ounces of registered gold in storage. Or roughly 10.6 tons. A modest deposit of this size would cause some serious white hair at JPM as the bank scrambles to find the replacement gold, which has already been pledged about 100 times across the various paper markets. Keep an eye on gold in the illiquid after hour market. The overdue scramble for delivery may be about to begin.
SO what happens when someone calls in their GOLD?
The process isn’t just as simple as saying hey buddy, can you please send me my GOLD, just give me the routing ## and I’ll track it through the mail. Like the banking system, which is based off of fractional reserving, GOLD follows a very similar format in which when you actually store the metal in one of the registered banks vault your gold becomes a ledger item with a “claim” to the actual GOLD you think you own. The reason this works is because most institutions or central banks that store the GOLD in these vaults never intend to actually take delivery. Why?? Because most are not capable of actually storing it on their own. So circling back to FRACTIONAL GOLD SYSTEM and the purpose, what is the purpose of having GOLD but not having GOLD? Well for one, the trust is based on the credibility of the depository bank such as JP Morgan which many people think could do no wrong. I happen to be in a camp that would never ever ever ever touch anything that is backed by their creditworthiness. By having a vault and GOLD DEPOSITS sitting there, JPM can sell GOLD(perhaps in very large sizes to suppress and manipulate a market—THINK RANTING ANDY) that the bank is not held accounted for and make ledger entries and provide statements showing the market value of purchases made to different clients. So it can sell and buy GOLD at will, never actually having to produce and deliver even 1 physical coin or bar unless a customer like VENEZUELA says hey, “GIVE ME MY FCKING GOLD”. And in that case….the domino effect happens….the race to produce and deliver the physical GOLD which has been moved around through simple electronic ledger entries in the fractional gold reserve system at multiples of the size of a) whats actually stored in the vaults and b) the actual physical supply in the world(I don’t have the exact multiple but I thought I heard during audio from the CFTC hearing, one gentleman testify to 100:1 leverage in the gold markets). As you can imagine with leverage this high, when one pulls out GOLD from the vault(system) it creates a GOLDEN GLOBAL margin call/domino effect /chain reaction by other customers who demand similar treatment as they ARE UNDER THE BELIEF they have real physical gold in storage, ALLOCATED to them and only them. ALL of this is based on the counterparty trust of a vault bank like JPM who says its there…. If or when the trust that ones GOLD is there or not there or comes into question……… then confidence is broken…………and when confidence is broken, then all hell breaks loose….and that my friends is what just happened today when HUGO CHAVEZ said I WANT MY FCKING GOLD.
In other words, he who asks and gets their GOLD first is GOLDEN. Everyone else…well………………….Good luck. You can absolutely be sure that while Venezuela is the first to say GIVE ME MY GOLD, there will be plenty lining up right behind wanting the exact same thing….
3 quick notes
1) The same fractional reserve scheme exists for SILVER except the fractional reserving here is at ungodly levels. There is no single asset in the world more manipulated by the exact process I described above then silver. This includes US Treasurys which the Federal Reserve has bought trillions of through QUANTITATIVE EASING!!!!!!
2) Eric Sprott on Silver: The Price of Silver Should be $110 to $120 Today. The current price on the comex is $40.50, in the physical market it is $44.80. CLICK HERE to read why but I’ll tell you it has to do with the Gold/Silver Ratio which he believes should be 16/1 as opposed to 45/1 as it stands today. For those of you who aren’t scientists, 16/1 is the actual scientific ratio of gold/silver as elements in the earths crust. Yep I’m a nerd and not SORRY!
3) Here is some more commentary from Harvey Organ(a premier PRECIOUS METALS Analyst) on the repercussion of the Venezuela calling its GOLD: (scroll through down past his market commentary to get to the meat)
I would like to point out to you that the gold held at the Bank of England is not earmarked gold. It is on deposit there and the Bank can do whatever it likes with the gold. However it is a liability to them and the bank will fail if they cannot return the gold to Venezuela. The gold at the Federal Bank of NY is earmarked gold and the bank receives fees for its safekeeping. The gold held at the BIS is a site deposit and generally the BIS takes ownership of gold in a foreign jurisdiction in return for needed cash to a nation. It looks like the BIS has site deposits of gold for Venezuela with the Federal Bank of NY.
You can now imagine what is going on behind the scenes. The Bank of England will recall its gold from the GLD. If that gold from GLD is now gone to sovereign China, India, Russia, South Korea, Mexico, and to wealthy Europeans fleeing the Euro, then the Bank cannot retrieve its swapped gold to repay Chavez. Not only that but the Bank of England is not the ultimate owner of the gold..it is probably wealthy Arabs or oil barons like Chavez. You can now imagine the wild scenarios possible. Gold was at its nadir of the day and shot up big time on the news of the repatriation of gold. Many understand the significance of today’s announcement.
***I know there was a ton of info packed in here and I did my best to try and summarize, explain and put it all together…if anyone has questions after reading this and you want to discuss, email me or start a comment discussion…hopefully I did a decent job throwing things together.