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Paul Mylchreest: Fractional reserve gold banking system may be breaking down

Section: Daily Dispatches

11:14p ET Saturday, July 27, 2013

Dear Friend of GATA and Gold:

In his new Thunder Road Report, GATA's friend Paul Mylchreest, now an analyst for Monument Securities in London, reviews the preoccupation of the financial markets with anticipating the next intervention by central banks and offers some telling observations about gold.

Mylchreest concurs that there is great stress in the gold market and notes a report done for the Reserve Bank of India in January estimating that the gold paper and derivatives market is 92 times larger than the market for real metal.

Mylchreest concludes: "We've been shouting from the rooftops since 2006-7 that the gold market is a gigantic fractional reserve system consisting of a vast quantity of paper claims to gold bullion and a much smaller inventory of actual bullion. ...

"Rabobank has followed in the footsteps of ABN Amro in suspending delivery of physical bullion to its clients. With rumors circulating that a major bullion bank is preparing to change its delivery agreements, the implication being that it too will suspend or curtail physical delivery, we are wondering whether the breakdown in the physical versus paper gold markets is approaching ... leading to price discovery for physical gold itself."

The new Thunder Road Report is posted at the Scribd Internet site here:

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


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