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Gold traders are paid not to redeem Comex EFPs, London sources say

By: Chris Powell

 -- Published: Friday, 27 March 2020 | Print  | Disqus 

Dear Friend of GATA and Gold:

What the heck are those mysterious "exchange for physicals," the mechanisms by which contracts to buy gold on the New York Commodities Exchange are neither fulfilled by delivery on the Comex nor settled for cash there but transported for supposed delivery elsewhere?

The mechanism long has been incorporated by the Comex trading system but was described as an "emergency" procedure undertaken upon agreement by buyer and seller -- except that the use of this "emergency" procedure has exploded in the last year, involving tens of thousands of contracts and, nominally, hundreds of tonnes of gold.

In one respect this is not so surprising, since there never has been much tonnage in Comex gold vaults, with nearly all Comex contracts settled for cash. But apparently physical demand over the last year has risen enough to cause sellers to need to source gold elsewhere.

The presumption is that the EFPs shift a seller's delivery obligations off the Comex to bullion banks in London. But this raises another issue, since so many EFPs have been issued in the last year that if delivery really was being claimed for them, unallocated metal in London -- metal available for sale, rather than metal being vaulted for exchange-traded funds and other institutions -- would be wiped out. In January Bullion Star researcher Ronan Manly calculated that fewer than 1,200 tonnes of gold in London were really available for trade:

Indeed, sources in the London gold market say that few EFPs ever claim delivery. Rather, these sources say, EFPs are usually cash-settled in London with their claimants paid cash bonuses that are never reflected in the gold price, which would be much higher if the bonuses were reflected.

But as the tightness of gold supply in London increasingly has been recognized in recent months, EFP claimants are said to have been demanding larger bonuses against the risk that the gold will run out, making their EFPs worthless.

Despite the "physicals" in their name, the vast increase in their use suggests that most EFPs have not been resolved by any delivery of metal. So those using and sustaining the mechanism must have other purposes -- like sustaining the increasingly creaky fractional-reserve gold banking system.

Whatever is happening with the EFPs, their enormous use in the last year is new and indicates some big change in the gold market, and it must be an especially sensitive change because Comex operator CME Group, the U.S. Commodity Futures Trading Commission, and the U.S. Office of the Comptroller of the Currency -- nominal regulators of the gold market and its bullion banks -- refuse to explain what it means.

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

* * *

Toast to a free gold market
with great GATA-label wine

Wine carrying the label of the Gold Anti-Trust Action Committee, cases of which were awarded to three lucky donors in GATA's recent fundraising campaign, are now available for purchase by the case from Fay J Winery LLC in Texarkana, Texas. Each case has 12 bottles and the cost is $240, which includes shipping via Federal Express.

Here's what the bottles look like:

Buyers can compose their case by choosing as many as four varietals from the list here:

GATA will receive a commission on each case of GATA-label wine sold. So if you like wine and buy it anyway, why not buy it in a way that supports our work to achieve free and transparent markets in the monetary metals?

To order a case of GATA-label wine, please e-mail Fay J Winery at

* * *

Support GATA by purchasing
Stuart Englert's "Rigged"

"Rigged" is a concise explanation of government's currency market rigging policy and extensively credits GATA's work exposing it. Ten percent of sales proceeds are contributed to GATA. Buy a copy for $14.99 through Amazon --

-- or for an additional $3 and a penny buy an autographed copy from Englert himself by contacting him at

* * *

Help keep GATA going:

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

To contribute to GATA, please visit:



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