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gwizzie

default on the Comex is imminent

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- There is a significant effort underway by would-be gold and silver buyers, dismayed by the current high premiums for physical gold and silver to purchase December COMEX contracts and ask for physical delivery of the 100-ounce gold and 1,000-ounce silver ingots. Since the COMEX only has a tiny coverage of physical metal for its outstanding contracts

 

Warehouse stock=5,713,658 oz source:Metal Warehouse Stocks

 

As of 21/10/08 commitments of traders were net short 9591 contracts (959100 oz)

total long positions = 282,292 (28,229,200 oz)

total short postion = 291,883 (29,188,300 oz)

source: cftc

 

therefore stock is approx 1/10th of the market

 

 

there is a growing risk that the COMEX gold and silver contracts may default. If this occurs, the COMEX allows contracts to be settled for cash rather than gold or silver. If defaults occur, the spot prices for physical gold and silver will soar instantly.

 

Source= numismaster

 

Where does this money come from?

Either a liquidity injection from the fed or from default insurance (the implications on AIG is a different matter)

 

My point is this. Buying gold and taking delivery of it as a hedge against inflation, is inherently inflationary due to an increase in the money supply :lol:

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In the case of default, the PoG will look similar to this (or worse/better):

 

vwen4.png

w512.png

http://www.greenenergyinvestors.com/index.php?showtopic=4833

:lol: I thought the gay guy on bloomberg was going to take a coronary this morning

 

 

Does this sort of action not hint to the possibility that there are huge amounts of money on the sidelines, contrary to some popular bloggers

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:lol: I thought the gay guy on bloomberg was going to take a coronary this morning

 

 

Does this sort of action not hint to the possibility that there are huge amounts of money on the sidelines, contrary to some popular bloggers

The problem is that the index funds who track the DAX must follow this crazyness as well. There must be hedge funds or banks that have lost multi-billions in the course of this. E.g. who has guaranteed Porsche's VW calls? Deutsche? Is that why there are rumours of large losses?

 

This here is the guy behind all of this:

piech.jpg

Wiki:

Ferdinand Karl Piëch (17 April 1937) is an Austrian automobile engineer and manager. He is a grandson of Ferdinand Porsche, and son of Louise Piëch (the sister of Ferry Porsche). He has thirteen children from four women.

 

Piëch was the winner of the award of Car Executive of the Century in 1999.

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The problem is that the index funds who track the DAX must follow this crazyness as well. There must be hedge funds or banks that have lost multi-billions in the course of this. E.g. who has guaranteed Porsche's VW calls? Deutsche? Is that why there are rumours of large losses?

 

This here is the guy behind all of this:

piech.jpg

Wiki:

 

I bet he's happy with his efforts tonight!

 

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financial efforts or 13 children by 4 women?

He was a billionaire before. :) Grandchild of good old Porsche himself and ex-CEO of Volkswagen.

 

It's all one big family in Germany. Even the Queen belongs to it. :lol:

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BTW - Thanks for the information, I haven't had time to digest it yet, but I will over the coming week.

 

Can I just confirm something, gwizzie's post above states:

 

therefore stock is approx 1/10th of the market

 

This is amazing and I think answers my initial question, but how is this acceptable to the market? It makes the whole spot price S/D issue a complete nonesense, is this something that's just be uncovered or has this always been known to the market? Amazing... :wacko:

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BTW - Thanks for the information, I haven't had time to digest it yet, but I will over the coming week.

 

Can I just confirm something, gwizzie's post above states:

 

 

 

This is amazing and I think answers my initial question, but how is this acceptable to the market? It makes the whole spot price S/D issue a complete nonesense, is this something that's just be uncovered or has this always been known to the market? Amazing... :wacko:

 

Its really no different from how a bank operates though is it?

 

The odds of 10% of contracts taking delivery must be slim.And you can understand why...1: the process is apparently a real pain in the ass and 2 : Rolling your contract over is not

 

However, if the supply actually became so tight were there were delays* in providing for industrial users and the jewellry manufacturers...then you would see TSHTF

 

* A delay, being non-delivery within a reasonable time period is default

 

BTW: I may be proven mistaken in my analysis...but thats how i see it. Apparently there is a buyer for every seller and vice versa on the futures exchange and naked short selling is impossible

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Wow, if this collapses the potential upside for gold is extreme. Does anyone know the ratio of silver?

 

I need time to think about the ramifications of this before I ask any more daft questions. I will return! Thanks for filling the gap.

 

Its really no different from how a bank operates though is it?

 

The odds of 10% of contracts taking delivery must be slim.And you can understand why...1: the process is apparently a real pain in the ass and 2 : Rolling your contract over is not

 

However, if the supply actually became so tight were there were delays* in providing for industrial users and the jewellry manufacturers...then you would see TSHTF

 

* A delay, being non-delivery within a reasonable time period is default

 

BTW: I may be proven mistaken in my analysis...but thats how i see it. Apparently there is a buyer for every seller and vice versa on the futures exchange and naked short selling is impossible

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I would like to fully understand COMEX and the how the SPOG is calculated, this seems particularly relevent at the moment. Can anyone help or at least provide a framework where I can fill in the gaps? All links will be gratefully received and read thoroughly!

 

Hi warpig

 

I have been trying to understand the spot price and future price differentials better too.

 

There is a good website www.silveraxis.com and an associated blog http://silveraxis.com/todayinsilver/ written by Tom Szabo, who is doing some work on the gold and silver basis.

 

Antale E Fekete www.professorfekete.com also has written numerous articles on the potential effect of futures contango or backwardation on the gold and silver prices. Have a look around those sites and see if there is anything of interest.

 

What I haven't seen anywhere is truly how the Spot price of gold or silver is calculated. There are twice-daily London gold and silver spot fixes but I don't understand where the intraday spot price comes from given this isn't actually traded anywhere. Can anyone enlighten us further?

 

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Looking at the definition of the Comex months products.

http://www.nymex.com/GC_spec.aspx

 

Trading Months

 

Trading is conducted for delivery during the current calendar month; the next two calendar months; any February, April, August, and October falling within a 23-month period; and any June and December falling within a 60-month period beginning with the current month.

Delivery Period

 

The first delivery day is the first business day of the delivery month; the last delivery day is the last business day of the delivery month.

 

Exchange of Futures for Physicals (EFP)

 

The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.

 

So im reading this as it looks like today would be the final day for the October month, which also happens to be a quarter year as well. Additionally if unable to close out position today then you would have until Friday to settle any physical trade.

Does anyone know if this is correct?

 

 

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55% over spot. Right at the top end of that article I posted.

:) In other words, even the US government thinks that the COMEX price is a joke and would never ever sell at these prices. :lol:

 

In fact, officially, they didn't sell at ANY price since 1970 or so IIRC.

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Gold coin rationing in 1999, at the bottom of the gold market, and see where we are now.

 

What gold will do following the current shortage will take your breath away.

 

http://www.gold-eagle.com/editorials_99/mcintosh021999.html

 

The second is that, in the minds of the economic powers that be, gold has been totally crushed as a serious threat. They must know by now that gold coin purchasing has increased to zero out current production. They got blind sided. How else can you explain their locking into a fixed production rate for all of 1999? Locking gold coin production to 1998 levels when they have already admitted they will print $50 billion more in paper, fiat, cash? Denying the possibility of increased demand for gold during 1999? Taking no action when public discussion of gold coin rationing is rampant? They must either be very sure of themselves or been caught off guard. Probably a combination of both. At any rate, there is a great gnashing of teeth in the money temple over the rabble's Y2k induced demand for gold coins. Don't the people trust paper money?

 

The third is that it doesn't really matter. Assuming the "shortage" produces significant price spikes, which I'm not, the Fed will strike without mercy. Isn't there a lawsuit alleging the gold price is fixed around $300 an ounce? And hasn't the gold price fallen, for whatever reason, whenever it hits $315 an ounce? So why won't it happen again? The definition of insanity is to do the same action several times and expect a different result. To which I offer two plausible solutions to the current "gold coin crisis". The first being Mr. Greenspan or Rubin simply picks up the phone, when the ounce price hits $315, and tells the mint to stop using blanks to make quarters or dollar coins and give priority to American Eagles. The resulting flood of coins depresses the price down to around $300 and life goes on normally. The second being something of my own invention. The strategic American Eagle coin reserve is what I will call it. Just as the American government has a Strategic Petroleum Reserve, to prevent oil price spikes, who can say whether there are millions of ounces of American Eagles stored in Fort Knox? Assuming you over-minted one million ounces a year since 1986, the Federal Treasury would have some 12 million gold ounces to dump on the market. This is a possibility that GOLD-EAGLE readers shouldn't discount. I firmly believe that golden moment will arrive, but for now the shortage is much ado about nothing. Y2k will hit and people will react to it as the 300,000 ounce January sales figures show, but I also believe the temple masters will remain in control for a while longer.

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Warehouse stock=5,713,658 oz source:Metal Warehouse Stocks

 

As of 21/10/08 commitments of traders were net short 9591 contracts (959100 oz)

total long positions = 282,292 (28,229,200 oz)

total short postion = 291,883 (29,188,300 oz)

source: cftc

 

therefore stock is approx 1/10th of the market

 

Source= numismaster

 

Are you saying the eligible warehouse stock (5,713,658 oz) is 10% of the total of reportable long and short positions (28,229,200 + 29,188,300 = 57,417,500 oz)? Would it be relevant to compare registered stock (currently 2,847,654 oz) to all long contracts, including non-reportable (currently 31,370,900 oz), since only longs can demand delivery, in which case shorts have to find silver in warehouse stocks. So the gold currently registered for satisfying futures contract will satisfy 9.08% of the open long future contracts if everyone was to demand delivery.

 

Of course there are barriers stopping everyone from demanding delivery at once, open futures are spread over a number of months, and eligible gold stocks could also be used to satisfy contracts.

 

Wow, if this collapses the potential upside for gold is extreme. Does anyone know the ratio of silver?

 

I make out that the first ratio, total commercial silver contracts count for 17 times eligible silver warehouse stocks.

 

Registered warehouse stock would satisfy 17% of open long future contracts, but for silver there is much less additional eligible silver. To satisfy all long future contracts would take half the silver produced globally in 2007 - including all silver mined and recycled. This is based on data from http://www.silverinstitute.org/supply/index.php

 

I think if there are problems in comex they are more likely to occur in silver. The drop in price in all classes of assets seems to be driven by deleveraging and demand for dollars to satisfy derivatives liabilities. Silver has been undersupplied for years, depending on recycling to make the shortfall, the lower prices would likely reduce the quantity mined and recyled. With supply so constrained, physical demand could drive more requests for delivery than usual.

 

 

What I haven't seen anywhere is truly how the Spot price of gold or silver is calculated. There are twice-daily London gold and silver spot fixes but I don't understand where the intraday spot price comes from given this isn't actually traded anywhere. Can anyone enlighten us further?

 

I am also trying to make sense of where the spot quotes come from. The 24 hour quote on Kitco seems to be from Globex, but I can only find reference to futures trading on Globex. Maybe spot refers to the spot month futures contract? The galmarley site says that the gold spot market is an OTC market, and so would not provide a running quote, but this may have changed since the article was written.

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Good man thanks.

 

I make out that the first ratio, total commercial silver contracts count for 17 times eligible silver warehouse stocks.

 

Registered warehouse stock would satisfy 17% of open long future contracts, but for silver there is much less additional eligible silver. To satisfy all long future contracts would take half the silver produced globally in 2007 - including all silver mined and recycled. This is based on data from http://www.silverinstitute.org/supply/index.php

 

I think if there are problems in comex they are more likely to occur in silver. The drop in price in all classes of assets seems to be driven by deleveraging and demand for dollars to satisfy derivatives liabilities. Silver has been undersupplied for years, depending on recycling to make the shortfall, the lower prices would likely reduce the quantity mined and recyled. With supply so constrained, physical demand could drive more requests for delivery than usual.

 

 

 

 

I am also trying to make sense of where the spot quotes come from. The 24 hour quote on Kitco seems to be from Globex, but I can only find reference to futures trading on Globex. Maybe spot refers to the spot month futures contract? The galmarley site says that the gold spot market is an OTC market, and so would not provide a running quote, but this may have changed since the article was written.

 

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Max Keiser reckons the ruskies are that pi$$ed off with US manipulation of markets and in particular oil they might be the ones to bust the CRIMEX in December.

...

It would make sense. The Russians could use their reserves to drive the price of gold to a reasonable level, say at the $5,000/oz mark. Then they could tell the Fed, listen, you either stop the paper oil shorting, or we drive the price of gold to +$10,000/oz.

 

Fed would give in within 1sec. :lol:

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The Russians could use their reserves to drive the price of gold to a reasonable level, say at the $5,000/oz mark.

 

What is the mechanism by which they would drive gold upwards? I can see how they could drive it downwards by selling their gold stocks. Are you talking about them using their cash reserves to buy gold and hence drive the price up?

 

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What is the mechanism by which they would drive gold upwards? I can see how they could drive it downwards by selling their gold stocks. Are you talking about them using their cash reserves to buy gold and hence drive the price up?

Yes, of course. Dump $$.

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Max Keiser reckons the ruskies are that pi$$ed off with US manipulation of markets and in particular oil they might be the ones to bust the CRIMEX in December.

 

http://www.thefinancialtube.com/video/1529...mex-Default-116

 

I don't know. I listened to Max's radio show last week and in casual conversation with Stacy, he was like "someone like Larry Ellison should bust the Comex" (in so many words). Then Stacy jumped in and said "forget Ellison, the Russians should do it". Now he's jumping to the Russians are going to do it? Max is losing credibility with me.

 

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