Saturday, August 31, 2013

Run on Gold to Acceralte

“J.P. Morgan keeps getting called for delivery of registered gold. Their inventories are way, way down. So we have seen a precipitous drop in registered COMEX gold, which is the category of gold that would be called away for a futures contract delivery request.
There is more gold in the COMEX system -- we have 3 tons of gold but it’s not ‘registered’ gold. So this gold is not available for delivery. But if you look at that registered category of COMEX gold warehouse stocks, it really is perilously low at this point.

So we know we have a physically tight gold market, and this has typically set the stage for higher gold prices. Investors have to take a step back and ask, ‘Why would people want to have physical gold? Why would they demand delivery?’ The reality is this is a matter of trust, or in this case a lack of trust (regarding the Western fractional reserve gold system).

So the more suspicion there is of these intermediaries, the COMEX, the LBMA, banks with structured notes, this lack of trust on the part of entities with paper claims means that they want to get their hands on their physical gold and get it out of the system. In other words, trust is breaking down in the system.

And because you have this huge pyramid of credit, which is based on a very small amount of physical gold, this run on physical gold can spread very quickly. In a way it can be like a run on the gold bank. We have seen a very slow version of this throughout the summer, but if that should pick up steam for any reason, these are the exact mechanics of why gold could spike to the upside far more than anyone is betting on right now.”

- John Hathaway via King World News, read the full interview here: