Comex meltdown would renew wall street crash.

First its important to note that Comex is a commodity exchange by which one is supposed to be able to buy commodities like gold. However, is getting accused of being engaged in a fraud by which they don't actually have all the available commodities as outlined here:
marketskept ics.com

The fact that warehouses are showing flat inventories amid dramatic purchases due to Comex being the lowest priced gold available is not quite as concerning as the serial numbers being wrong on delivered goods. We are talking about 100oz gold bars worth $120,000 USD being misplaced. This suggests that accounting fraud is taking place at some level.

As it is today Comex delays shipments. But, if Comex gets to the point where it fails to deliver completely, prices for almost ALL commodities may take off like a rocket ship. And of course that would be a massive sign of a rapid doom for the dollar. There could literally be chaos in the streets if Comex fails to deliver. Yet they seem hell-bent on some sort of self-destruction because they seem to be emptying their warehouses while at the same time allowing the trade of vast quantities of non-existent gold.

The article summary:
"Basically, the gold market operates on a fractional reserve basis. On average there are several claims of ownership on each gold bar conforming to London Good Delivery (LGD) standard on the "pool" of gold which acts as liquidity for the massive OTC gold trade based in London. Similarly, there are several claims of ownership on the gold bars in Comex wherehouses. If a sufficient number of market participants become concerned about this (which is happening) and there is a stampede to take delivery of physical bullion, the entire gold market will come crashing down, taking most of the global financial system with it. Market failure isn't a risk, it is a certainty. The unregulated gold market is an accident waiting to happen."

Notice how the author adds in "unregulated" by market, obviously a laughable proposition accusing lack of regulations as one of the causes as if the millions upon millions of pages of stifling regulations weren't a factor in the cause of this disaster. I think "stiflingly regulated" would have been a more appropriate text to use.

Under existing pyramid scheme laws, not only should Comex gold policies already be illegal, but so should the US dollar, Social Security, and a wide variety of other government systems (though Comex is presumably a private company).

[edit on 26-11-2009 by truthquest]

mod edit, to fix link

[edit on Thu Nov 26 2009 by DontTreadOnMe]

reply to post by truthquest


It wouldn't come crashing down... it would shoot through the roof. Aside from Inflation, the biggest influence on Gold prices is SUPPLY. If there is a tiny supply for a massive demand, those fortunate enough to cling onto their gold would have it's value shoot to the moon. Everyone else ... tough luck. Never buy Metals without having them on hand.

Hy, Truthquest.

I expected that to happens last year, then last spring, then this summer.

You are right. But do enough people take delivery to bust the machine ?

I lost a bit of money waiting for that. I look at gold disapearing in Canada, then retraced with delivery in New York. Deusch Bank selling short gold, then suddenly german central bank sold them 35 tons to cover their ar...

It is all manipulation, it is the same with the stock exchange, and I suppose the mirage of a self regulated market, giving an impression of freedom, is a scam. It looks more and more like a soviet market system runs by apparatchiks.

Hope it will bust,I wouldn't bet a Grant on that.

But I placed my retirement plan in precious metal mining corp. and oil companies.

If dollar fails then oil will be up, but Golf states like Dubai, would likely to increase their production in order to pay their debt.

Hope you are right and Crimex will bust. Those B. deserve it.

I'm an avid gold/silver bug - I've written a few posts in gold and silver, go to my profile and have a look if you like.

Certainly there is fraud - will they run out? Hmm - not while the big purchasers are commercial banks 'hedging' and never taking delivery.

Hedging is the lie that the scum banks use so they can exceed the contract limits - when you aren't limited by numbers of contracts, and you have heaps of money - then nudging the price is very plausible.

I think that a great deal of the US gold reserves have actually been sold through Comex - and maybe the German gold as well - did the Germans get their gold back yet? German gold has been stored in the US for ages - I don't think I would be so trusting.

I feel that silver is the metal that may break first - not gold. There is slightly less available silver than there is gold - because 90% of it has been used up over the last 100 years. Few people know this fact.

Because silver is relatively cheap compared to gold - larger quantities of metal are transferred per dollar invested. So a big buy up of silver is more likely to bust Crimex.

Silver is far undervalued at current prices - it is more or less the best industrial metal ever - when the price rises, the manufacturers who use it will pay basically any price.

It is the most optically reflective, thermally and electrically conductive metal - and it kills bacteria on contact (takes a couple mins - but it is used in a great many drugs). The uses of silver are electronics, mirrors and telescopes, medical equipment and drugs. Because most only use a small amount - the price of the silver isn't a huge factor - at some point it will outstrip the gold price.

I always dream of the death of Crimex, and my pile of silver suddenly being able to purchase a small tropical island - like Hawaii

At some point, the lack of availability of silver will be revealed - and it MUST go up. If we keep consuming it at current rates it will be all gone entirely in under 10 yrs.

Anyways - good topic - always love talking about silver and gold

your source is a site selling gold? your story is one claiming a sudden urgency to buy gold.

coincidence

Originally posted by Rockpuck
It wouldn't come crashing down... it would shoot through the roof.

Actually , deCarbonnel didn't predict that the price of Gold would "come crashing down". He infers the obvious...a major squeeze on physical supply resulting in runaway prices , major damage to the legitimacy of the Nymex/Comex commodities exchange , coupled with severe financial upheaval in the global banking sector.

What he said....

Gold Market Reaching The Breaking Point
by Eric deCarbonnel

If a sufficient number of market participants become concerned about this (which is happening) and there is a stampede to take delivery of physical bullion, the entire gold market will come crashing down, taking most of the global financial system with it.

Link

He's right. You see , the COMEX/LBMA clearing member bullion banks comprise the same commercial banking cartel currently shoring-up Wall St with fraudulent FASB accounting practices , and taxpayer provided capital. These banks operate internationally...systemic risk. Ring leaders include familiar names like JP Morgan...Goldman Sachs...et al.

Link

Not only would the already beleaguered banking system suffer additional , devastating financial losses , but the COMEX exchange would melt-down...cease to function as legit market...and the trailing litigation alone would be enough to bury these entities.

I believe this was the author' point.

Not to be left-out , the taxpayer would undoubtedly be called upon as lender of last resort

reply to post by OBE1


I believe like most commodities/derivatives there is a limit up/down on gold. Im too lazy to look though.

If there was a major problem right now, inside information arbitrage would be all over this already. There is no free lunch for RETAIL players like us.

The market would need to be in backwardation...we're not there , but close with a slim $0.3 contango in gold NOV/DEC...and only $1.3 for NOV/JAN.

Represents a bit of supply stress imo.

Anyways , the futures curve isn't really germane. A default on deliveries would occur as an "event" (Taleb' Black Swan). Doubtful imo, but we should know Dec OI after Friday's close...Monday morning at the latest as Monday is 1st delivery...COMEX "Registered" = a hair over 2.1MM ozs.


A commercial signal failure on the other hand is a process...and may already be underway. Looking to get out from in front of loam's oncoming freight-train , the smaller commercials covered 28,254 contracts yesterday...leaving the cartel further isolated in a HUGE physical short position. Will we see that position unwind violently ? Don't know...but they're definitely flirting with mayhem here....think China , Russia , India and several lessor sovereign accumulators.

We'll see what we will see......I guess.

reply to post by OBE1


Could be. The article said however "Entire Gold Market" .. Well if I had Gold (which I don't but I assume they speak the same for Silver) I wouldn't be worrying about the Gold/Silver Market at all. I'd worry about COMEX, if I held COMEX contracts .. but COMEX is not the entire Gold Market. It's just a portion of it. And what ever gold survives the COMEX crash would be the actual Gold Market.

So I don't really know what the site is trying to say ... except to buy Gold (from them apparently) in physical form?

COMEX would damage the Financial system .. this is true, I agree, and I agree taxpayers would bail em out. It wouldn't collapse the system though .. the banks are Zombies, and cannot die.

With all due respect , I think you're stretching it bit RP.

deCarbonnel understands Gold/market dynamics , maybe you aren't familiar with him.

He doesn't sell Gold by the way. His site does post Gold advert banners , much like ATS and many others.

Originally posted by Crakeur
your source is a site selling gold? your story is one claiming a sudden urgency to buy gold.

coincidence

I see your point but its not as if some little known blogger can affect gold prices with his posts. Its true the author does have pending business in the gold market but its more or less a bet that Comex will start cracking under the weight of the gold market in a process he calls "gold price backwardization". Most of his posts are actually about agricultural commodities, especially soybean futures which he's been insisting are under-priced.

Sometimes referred to as negative basis..or..positive basis , backwardation and contango are common market terms that define the state of the futures curve in all commodities....not just Gold.

While it may be safe to assume that deCarbonnel participates in the Gold market at some level...investor , aggressive investor , trader...to my knowledge , he doesn't sell Gold (commercial dealer). In fact he lists advertising revenue and donations as his primary sources of income.

A Note on Advertising

As I am pretty much devoting my full attention towards maintaining this site and covering the financial crisis, donations and advertising revenue are my primary sources of income right now. Currently, there are three sources of ad revenue for the site.

The first form of advertising revenue comes from Google ads. These display contextual ads based on the content of the page they appear on. Although I have little control over what shows up, I do try to filter out inappropriate ads when I see them (chnlove.com, match.com, etc…).

The second form of advertising comes from the eBay banner to the right. I particularly like this banner as I find it useful to see where the eBay price gold is trading. EBay isn’t the cheapest place to buy gold, but it does offer two advantages: you can pay with a credit card and your gold is shipped right away. Just make sure you buy gold from a seller with a lot of positive feedback.

The third form of advertising revenue comes from Amazon.com. If you click on the Amazon banner located at the bottom of the right sidebar, and do some shopping there, a 4-8% commission will flow back to MarketSkeptics.com, helping to support the site.

Link

Originally posted by OBE1
Sometimes referred to as negative basis..or..positive basis , backwardation and contango are common market terms that define the state of the futures curve in all commodities....not just Gold.

While I understand most lingo in the world of finance I do not understand what "backwardization" is. Could you go into more detail on that? I've never traded in commodities markets so I'm not familiar with the commodities lingo.

...A commercial signal failure on the other hand is a process...and may already be underway. Looking to get out from in front of loam's oncoming freight-train , the smaller commercials covered 28,254 contracts yesterday...leaving the cartel further isolated in a HUGE physical short position.

reply to post by OBE1




It would then be probable that this cartel of Banker Elites are engaging an opaque cover , for the boatload of Gold Shorts, by contracting an proportionate ammount of (secretly made) derivative positions which they will collect on, when the COMEX goes belly-up.

...that scenario would help explain why the clique of GoldManipulator Banks
hold 'short' positions [to spook the market/retard price increases, as they continue to amass gold bullion on the sly]
...and give explaination to the idea by GreenBicMan, that there is no current 'whipers' by the insiders of COMEX gold being under pressure.
...the more devious the plan, the harder it would be to decipher the serpentine mechanizations involved...or to 'see the forest for the trees'

the ball has been returned in this tennis match

Originally posted by truthquest
While I understand most lingo in the world of finance I do not understand what "backwardization" is.

Hi TQ. When the front month , aka: spot/cash price for a commodity is higher than future month prices , the market for that commodity is said to be in backwardation...the reverse is called contango. Backwardation is typically an indication of current supply stress/shortage , or the perception of a looming shortage. Unlike Gold , most commodities are consumed and subject to frequent supply distortions...grains/over-production + under-production + weather + disease....oil/over-production + under-production + hurricanes + attacks on infrastructure...and so on.

In contrast , very little Gold production is consumed via it's industrial applications...the majority is hoarded somewhere , by someone in the form of bars , coins , or jewelry. This mounting supply is one reason Gold differs from consumable commodities , and this supply is always available to be sold at the right price...which explains why backwardation in Gold is extremely rare...and always brief when it does occur.

In theory , backwardation would encourage large owners of physical Gold to sell into the higher priced spot market...and buy comparable long contracts for future delivery at lower prices...ie , profit by replacing the same amount of Gold at lower prices. What happens is the influx of supply from arbitrageurs into the spot market lowers the cash price...the market rapidly seeks equilibrium...contango.

Nov/Dec Gold closed in contango , and as of Friday's close there was a $0.7 contango in Dec/Jan contract and $1.2 for Dec/Feb...ergo , no profitable arbitrage op (St Udio).

On Friday , OI (open interest) showed 44,366 contracts in DEC gold , or 200% of the Comex dealer gold inventory...so it was really no surprise that we got that counter-intuitive wash-out on the back of the Dubai story over the weekend. I'm telling ya...Da Boyz can still pull aces out their backsides when necessary.

To date 4,007 delivery notices have been issued for the Dec contract.

Lets see what happens.







[edit on 1-12-2009 by OBE1]

New Wrinkle

If you click the daily delivery notice I posted above , you will see that 1,141 contracts were added yesterday 11-30-09 , bringing the new total to 4007.

Previous reported total was 2866.

2866 + 1141 = 4007.

Well take a look at something new, at least for me, in Monday’s comex preliminary volume and open interest report. On page 3 of the attachment, notice that in addition to futures contracts listed under the EFP category, a new category is listed: “Delivery Cash Settled” = 2866 december gold contracts. Just so happens 2866 was exactly the number of delivery notices issued on FND as reported in the Nov 27 vol and op int report.

Conclusion: guess you can no longer get bullion via using comex contracts. This apparently is the next step in the evolution of gold trading.

Full Text

With physical Gold in high demand all market participants requested cash settlement in lieu of physical delivery ???

Doubtful

Leaves one to question whether a surreptitious default is in progress.

reply to post by OBE1


That is interesting, if that's what it means. What is the percentage of market share that Comex holds?

reply to post by Rockpuck

Hi RP. I can only tell you that the Comex dealer inventory shows 2.2MM ozs , and the customer inventory shows 7.59MM ozs...for a total of 9.61MM ozs.

Defying all logic (short of suicide) , the big commercials continue shorting into a rising market...new all time record of 306,000 contracts vs. the old record of 297,000

Scroll to Gold - under the commercial category subtract long positions from short positions.

The thing to remember here is that these gubmn't-agent bullion banks will be been deemed too big to fail...so any fallout from a major implosion in the futures exchange will most likely be shouldered by the lender of last resort....

You
&
Me

Playing with a government backstop must be nice huh!