Bron Suchecki: How central bank gold lending suppresses gold's price

Section:

8:27a ET Wednesday, February 12, 2014

Dear Friend of GATA and Gold:

The Perth Mint's Bron Suchecki today provides a detailed example of how gold lending by central banks to bullion banks increases gold-related credit and suppresses the metal's price. He concludes with an observation he has made before but deserves emphasis:

"On Comex it is clear from the very low percentage of physical deliveries versus open interest that Comex is primarily a market where leveraged paper longs (who don't have the cash) trade against leveraged paper shorts (who don't have the gold). The bullion bank-London Precious Metals Clearing Ltd.-central bank system described in these posts is just an over-the-counter version of this Comex structure, with bullion bank unallocated account credits taking the place of futures contracts. Any look at the London OTC clearing statistics should tell you there is a lot of bullion bank unallocated paper being held.

"To the extent that people are willing to hold this paper, be it futures or bullion bank unallocated, then those longs facilitate and support the game. The question then is when (if?) will they 'run.'"

Suchecki plans to elaborate on that hypothetical next.

This is all confirmation that gold buyers really don't own gold unless they take delivery and that those who buy only "paper gold" in the hope of price appreciation might as well flush their money down the toilet -- something long said by Jim Sinclair and others.

Suchecki's commentary is headlined "Fractional-Reserve Bullion Banking and Gold Bank Runs: The Role of Central Banks" and it's posted at his Internet site, Gold Chat, here:

http://goldchat.blogspot.com/2014/02/fractional-reserve-bullion-banking-...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



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Jim Sinclair plans seminar in Austin

Gold advocate and mining entrepreneur Jim Sinclair will hold his next market seminar from 2 to 6 p.m. Saturday, February 8, at the Austin, Texas, Airport Hilton. Advance registration is required. Details for the Austin seminar are posted at JSMineSet.com here:

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