Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Find Slight Gains on the Week
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 5 25 2018
By: Ira Epstein

COT Gold, Silver and US Dollar Index Report - May 25, 2018
By: GoldSeek.com

Gold Juniors’ Q1’18 Fundamentals
By: Adam Hamilton, CPA

Trump "Victories" on Trade are Anything But
By: Peter Schiff

Debt Slaves, Part 1: Million Dollar Student Loans And The Coming Bailout
By: John Rubino

Three Drivers of Gold, Second Look
By: Arkadiusz Sieron

GoldSeek Radio Nugget: Peter Schiff and Chris Waltzek
By: radio.GoldSeek.com

Can We Really “Time” The Market?
By: Avi Gilburt

GLOBAL FINANCIAL BREAKDOWN CONTINUES: Economic Growth Chokes On Massive Debt Increases
By: Steve St. Angelo

 
Search

GoldSeek Web

 
COMEX Exchanges For Physical


 -- Published: Wednesday, 18 April 2018 | Print  | Disqus 

By Craig Hemke

Very few people understand—or even know of—the opaque COMEX-->LBMA process known as "Exchange Futures For Physical". Even the term is misleading, as there's clearly nothing "physical" about it.

The first thing you need to understand is that this is NOT a new phenomenon. EFPs have been utilized within the derivative pricing scheme for years. In fact, one of the best articles/explanation for the process was written all the way back in 2009. You can read it here: http://www.24hgold.com/english/contributor.aspx?ar...

Below is a key excerpt:

Last week, Dutch money manager Gijsbert Groenewegen added some additional background and an update to the current situation. You can read his work here: https://www.tfmetalsreport.com/blog/8942/guest-pos...

While Gijsbert focused his attention upon the ongoing use of EFPs in COMEX silver, we thought it necessary to point out the ongoing surge in the use of EFPs in COMEX gold, too.

Again, the use of EFPs in COMEX gold is nothing new. On average, the COMEX transfers out obligations for more than 5,000 metric tonnes of "gold" every year through this process. What's currently unusual is the surge in EFP volume that began in 2017.

At Eric Sprott's urging, we began recording the daily volume of COMEX gold EFPs on November 24, 2017. Since that date, the CME website has reported a total of 1,058,907 COMEX gold contracts under this Exchange For Physical process. At 100 ounces per contract, this equates to a settlement of a whopping 3,294 METRIC TONNES of "gold". This places the annual run rate since November 24 of last year at about 7,500 metric tonnes, physically "exchanged" and settled through this process.

While it's possible some of this "exchanging" is being done through the COMEX operations in Hong Kong, that appears to be only a small part of any settlement process. Instead, the vast majority of these "settlements" must almost certainly be taking place through London. But here's the deal: The LBMA vaults hold only a fraction of the gold that would be needed to facilitate these trades.

Using data provided by the LBMA themselves, BullionStar's Ronan Manly wrote this excellent bit of analysis last year. You can read the entire report through this link but, for this discussion, the primary section of importance is shown below: https://www.bullionstar.com/blogs/ronan-manly/lbma...

Simply put, if you exclude from possible "delivery" the gold held for the Bank of England and the gold held for the various ETFs, then the absolute maximum total of unencumbered gold held in the LBMA vaults is just 858 metric tonnes.

And again, since just November 24 of last year, the COMEX/LBMA have processed 3,294 metric tonnes through this opaque, Exchange For Physical process.

Do you see any issues here?

Gijsbert Groenewegen argues that, at least in silver, the EFP process is now being used as a price-setting mechanism where two parties are able to negotiate a transfer of contracts and physical liabilities. Perhaps he's correct. However, if anything, the escalating abuse of this process has brought the sham and fraud of the digital derivative pricing scheme into greater focus. Mainly, how in the world does a swapping of derivative contracts, where there's obviously zero physical metal involved, equitably determine the true price and value of underlying physical asset?

Additionally, what does the increasing volume of EFPs say about the state of the physical market and the availability in size of physical gold on demand? If the COMEX/LBMA is simply increasing the amount of leverage in the system (note the recent all-time highs in COMEX silver open interest: https://www.sprottmoney.com/Blog/discussing-COMEX-silver-craig-hemke-06-042018.html), one must wonder how stretched and stressed the pricing scheme has become.

In the end, your best strategy remains the gradual accumulation of physical gold and silver. When this current digital derivative pricing system finally fails, actual physical metal will be hard to come by, as the holders of digital/unallocated will be left scrambling for any crumbs that remain.

Use your time wisely and prepare accordingly.

https://www.sprottmoney.com/



Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.


The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


| Digg This Article
 -- Published: Wednesday, 18 April 2018 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.