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andybee33

Totally Baffled Why Paper Bullion Contracts Are Still Trading

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Hi,

I've just been reading about JP Morgan buying £1Bn worth of Copper last week and in the comments on the article on the Telegraph website (http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morgan-revealed-as-mystery-trader-that-bought-1bn-worth-of-copper-on-LME.html#dsq-content)

someone posted:

Gold: 100 times more "paper Gold" than physical.

Silver: NOW 140 times more "paper Silver" than physical !

Copper: 15 times more "paper Copper" than physical.

If this is true (I'm assuming here that it is), then clearly ETFs genuinely are a pyramid scheme - not some crazy-end-of-the-worlder sort of pyramid scheme either but a very real one.

So, my question is, if the above ratios are general knowledge in the world of finance, which they must be I guess, the WHY are people buying Gold, Silver and Copper paper contracts? Have I missed some important point or is this really as crazy as it looks?

Thanks,

Andy

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Hi,

I've just been reading about JP Morgan buying £1Bn worth of Copper last week and in the comments on the article on the Telegraph website (http://www.telegraph.co.uk/finance/newsbysector/industry/8180304/JP-Morgan-revealed-as-mystery-trader-that-bought-1bn-worth-of-copper-on-LME.html#dsq-content)

someone posted:

Gold: 100 times more "paper Gold" than physical.

Silver: NOW 140 times more "paper Silver" than physical !

Copper: 15 times more "paper Copper" than physical.

If this is true (I'm assuming here that it is), then clearly ETFs genuinely are a pyramid scheme - not some crazy-end-of-the-worlder sort of pyramid scheme either but a very real one.

So, my question is, if the above ratios are general knowledge in the world of finance, which they must be I guess, the WHY are people buying Gold, Silver and Copper paper contracts? Have I missed some important point or is this really as crazy as it looks?

Thanks,

Andy

I've read a lot of information to back these claims up, primarily with regard to gold. I hope it's true, and if it is, you lot better start addressing me as 'Sir', because when this little lot blows and physical readjusts to its true unsuppressed value, I will be your new landlord :lol:

Edited by General Congreve

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I've read a lot of information to back these claims up, primarily with regard to gold. I hope it's true, and if it is, you lot better start addressing me as 'Sir', because when this little lot blows and physical readjusts to its true unsuppressed value, I will be your new landlord :lol:

Thanks General Sir C! Actually, at the beginning of 2009 I put half of my savings into gold a bit later a quarter into silver (the gold was bought as a hedge because something didn't seem right) so I shouldn't need a landlord by then!!! Despite all of that though, I genuinely had no idea that the paper market was such a sham. I went for BullionVault at the time as I like the idea of it really being there - but not in my house where I might lose it. I hope this turns out to have been a reasonable choice.

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I've read a lot of information to back these claims up, primarily with regard to gold. I hope it's true, and if it is, you lot better start addressing me as 'Sir', because when this little lot blows and physical readjusts to its true unsuppressed value, I will be your new landlord :lol:

It looks like the paper PM markets are going to be stress tested again. Will they snap this time?

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/3_Ben_Davies_-_Massive_Short_Squeeze_at_Hand_in_Gold_Market.html

Ben Davies - Massive Short Squeeze at Hand in Gold Market

With gold and silver shooting higher today, King World News interviewed Ben Davies out of London. When asked about the action in both gold and silver Davies stated, “We are on the verge of seeing a potential massive squeeze in the gold market. We witnessed this last month, and it appears to be rehearsing for the same play this month. Physical demand out of Asia is overwhelming the egregious paper gold shorts. If we are thinking this for gold, it is cubed for silver.”Ben Davies continues:

“Even with deficit financing in the US, the authorities can’t create any job growth. People around the world are tapped out because of debt. The anemic jobs growth, although a lagging indicator, was more significant for the rise in the unemployment rate and the low average hourly earnings. The US is not going to be able to grow themselves out of their debt to GDP burden. The only way to grow nominal GDP is to continue debasing the currency through worldwide quantitative and qualitative easing.

Just when investors thought the US was poised for growth to help ameliorate the structural issues in the eurozone, the payroll numbers put pay to that. It’s no wonder the Chinese, as we discussed in the past, have now imported five times the amount of gold in 2010 than they did in 2009. The Chinese like to buy gold on the dips, they don’t like to go chasing the market. Just like they used to buy US bonds, now they are buying gold. As the recent PBOC spokesman implied, they are going to continue to divest their dollars into gold as a monetary asset.

So for now the downside is stymied in the physical bullion market, and with a large open interest in the $1,400 calls on the paper Comex gold market, we could see a repeat of the $1,300 call squeeze that we saw last month. The more we create value above $1,400, the more likely the market will act short on the paper side, and we could start to see the $1,600 levels that we discussed in previous broadcasts by year end, and perhaps with an overshoot to $1,800. One must always be wary when implied volatility levels are so low in such a bull market, and with so much uncertainty in the global economy, and its underlying fiat currency system.”

Ben Davies, along with James Turk correctly correctly called for this explosion in the metals when silver was still in the $17 to $18 range. Their timing was literally perfect. Davies has now issued a warning to the gold shorts, my advice once again is to sit back and enjoy the fireworks.

Eric King

KingWorldNews.com

Edited by Take Me Back To London!

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Thanks General Sir C! Actually, at the beginning of 2009 I put half of my savings into gold a bit later a quarter into silver (the gold was bought as a hedge because something didn't seem right) so I shouldn't need a landlord by then!!! Despite all of that though, I genuinely had no idea that the paper market was such a sham. I went for BullionVault at the time as I like the idea of it really being there - but not in my house where I might lose it. I hope this turns out to have been a reasonable choice.

Looks like you bought around the same time as me and with the same ratio of savings, SNAP!

I have a vision of us, a few years in the future, both out for a morning stroll to get the daily paper, tipping our top hats to each other as we pass on opposite sides of the street, whilst stepping over the legions of dispossessed ex-mortgage holders and BTLers. :lol:

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Looks like you bought around the same time as me and with the same ratio of savings, SNAP!

I have a vision of us, a few years in the future, both out for a morning stroll to get the daily paper, tipping our top hats to each other as we pass on opposite sides of the street, whilst stepping over the legions of dispossessed ex-mortgage holders and BTLers. :lol:

Thanks - that image has fairly cheered me up! :D Perhaps one of the dispossessed will be my step-mother who, until recently took great delight in reminding me that, as I tenant, I wasn't planning for a secure retirement or, for that matter, creating a good future for my children :huh: .

Interestingly, she sold her gold jewellery a few months ago to one of those card-table-in-shopping-mall-oiks :o

On a more serious note, I remember reading something about 'backwardation' (strange word!) in the gold market where futures contracts are worth less than spot bullion - presumably due to a lack of trust about delivery. Would this be an early sign of the paper-bullion market collapsing?

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Thanks - that image has fairly cheered me up! :D Perhaps one of the dispossessed will be my step-mother who, until recently took great delight in reminding me that, as I tenant, I wasn't planning for a secure retirement or, for that matter, creating a good future for my children :huh: .

Interestingly, she sold her gold jewellery a few months ago to one of those card-table-in-shopping-mall-oiks :o

On a more serious note, I remember reading something about 'backwardation' (strange word!) in the gold market where futures contracts are worth less than spot bullion - presumably due to a lack of trust about delivery. Would this be an early sign of the paper-bullion market collapsing?

I believe backwardation in the gold market first happened back in late 2008, but signs that it's back are truly bullish.

As for all the people being suckered out of their jewellery, they'll be the first to demand bullion holders are penalised by the government when we win big. We've had London jewellers taking over our local town hall on a Friday twice within the last month (with the consent of the town council) offering cash for gold. My house has been flyered for both events, it states that they pay as much as 50 quid for a sovereign in good condition :blink: It's one thing selling your gold, but giving it away at those prices? Are there really suckers that big out there? :o

Wish I knew a bit about gold jewellery and could assess the quality of gold scrap, it's money for old rope at the moment!

Edited by General Congreve

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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