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Adrian Douglas: Financial system creaking under rising gold offtake

Section: Daily Dispatches

By Adrian Douglas
Thursday, June 10, 2010

The London Bullion Market Association statistics reported today by Platts --

-- showed a 56 percent jump in the gold trades in May, to 24.7 million ounces per day. This is clearly causing stress in the physical market and is why the International Monetary Fund is selling gold almost secretly out its back door.

I suspect that the comment by the HSBC metals trader reported by MineWeb today --

-- about the supposed confiscation danger in storing gold in the United States is propaganda. What a good reason for keeping "virtual" gold in an unallocated account with HSBC in London instead of asking for delivery of the real stuff -- which the London market doesn't have enough of.

Why would fund managers suddenly worry about confiscation? I can't think of a reason. But I can think of a reason why HSBC would like to have an excuse for investors not to demand physical gold.

The financial system must be creaking with such a massive increase in the gold trade. The volcano is rumbling. To confirm it there is the usual response when gold is being sold hand over fist in London -- that the bullion banks have to hedge those sales by shorting the heck out of the Comex, as explained by CPM Group's Jeff Christian in his famous Freudian slip during his testimony at the March 25 hearing of the U.S. Commodity Futures Trading Commission. Christian later said he "misspoke."

The action on the Comex today was consistent with the desire of the bullion banks to discourage buying gold.


Adrian Douglas is publisher of the Market Force Analysis letter ( and a member of GATA's Board of Directors.


Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource

Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen.

For Prophecy's complete press release about its production plans, please visit:

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Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot:
The Anglo Far-East Bullion Co.'s Gold and Silver Conference

The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday.

To learn more about and register for the Anglo Far-East Bullion conference, please visit: