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Craig Hemke at Sprott Money: Those 'exchange for physicals' at Comex aren't real

Section: Documentation

11:44a ET Tuesday, November 27, 2018

Dear Friend of GATA and Gold:

The TF Metal Report's Craig Hemke, writing today at Sprott Money, does the math on the last year's worth of the use of the "exchange for physicals" mechanism of settling gold futures contracts on the New York Commodities Exchange. Hemke calculates that nearly 2.4 million Comex gold contracts have been settled this way since last November, totaling 7,442 tonnes of gold.

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This total, Hemke notes, is 260 percent of annual gold mine supply and nearly equal to all the gold claimed to be vaulted by the members of the London Bullion Market Association, the Bank of England, and the Comex itself.

How can this be?

Hemke concludes:

"There are no 'exchanges for physical' taking place at all -- at least not in the sense of actual, unencumbered, and allocated physical metal. Instead, EFPs are just another part of the great scam known as The Fractional Reserve and Digital Derivative Pricing Scheme, where alchemized digital and unallocated gold is foisted upon the masses, who blindly accept 'exposure to the gold price' as a substitute for the real thing."

There's another question here, which GATA has put in writing to the U.S. Commodity Futures Trading Commission without yet getting a response, despite recruiting a member of Congress to prod the agency. That is, how does the commission regard EFP reporting, since it can't possibly be accurate in any conventional sense?

Your secretary/treasurer often has wondered if the EFP data reports only the trading back and forth of a very limited amount of gold among brokers for the U.S. government and other governments, to create illusory prices, with little if any actual net transfer of metal. If such trading is conducted at the direction or with the approval of the U.S. Treasury's Exchange Stabilization Fund and nets to zero gold actually changing hands, it presumably would be outside any regulation or formal reporting.

There might be an excellent story in this stuff for financial journalism, if any news organization dared to attempt it in regard to gold, governments, and central banks.

Gold mining companies might want to investigate it as well if they weren't more interested in mining their shareholders than in obtaining free-market prices for their metal.

The World Gold Council might seem obliged to be interested too, but its main purpose continues to seem to be to make sure that there never is a world gold council.

As for most gold market analysts, they are too much in love with their charts and formulas to examine any evidence that for many years now there have been no markets at all, just interventions.

Hemke's outstanding work is headlined "One Full Year of Comex EFPs" and it's posted at Sprott Money here:

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

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