by Turd Ferguson, TFMetalsReport:
Basically, here’s what you need to understand. The only “price” that is discovered on the Comex paper derivative exchange is the price/value of the paper derivatives, themselves. The price discovered is definitely NOT the price of gold.
Whenever prices rise, it’s due to a surge in speculator interest in the paper derivative contracts. Prices fall when speculators exit this paper market and move on. To meet this surging demand for the underlying paper derivative, the Bullion Banks that are allowed to operate as de facto “market makers” create and issue new paper gold contracts from thin air. These banks are not required to deposit any metal up front as collateral nor are they required to limit the amount of paper metal they can alchemize on any given day.
Since the beginning of February, the Comex-determined “price of gold” has risen from $1116 to today’s $1270. That’s a gain of $154 or 13.8%. Not too shabby. But what caused this increase in price? Was it the demand for physical gold? Not really. Instead, it is the demand for the paper derivatives on the Comex…an exposure to gold…and there’s A BIG DIFFERENCE.
In making a market for these derivative contracts, The Bullion Banks create new paper contracts (sell short) when speculator demand increases. They then withdraw and buy back these contracts (covers shorts) when price falls. All the while, no actual physical gold is ever put up as collateral or deposited into the Comex vaults. Here’s just your most recent example:
On January 29, 2016, The Comex vaults allegedly held 6,430,863 ounces of gold. See below:
As noted above, price closed that day at $1116 on total Comex open interest of 373,434 contracts. At 100 ounces of gold per contract, that represents obligations for 37,343,400 ounces of paper gold or about 1161 metric tonnes.
As of last evening, March 7, the price closed at $$1264 on total Comex open interest of 498,172. At 100 ounces of gold per contract, that represents obligations for 49,817,200 ounces of paper gold or about 1550 metric tonnes.
So, have the Comex vaults increased by 12.5MM ounces over the same time period? Have 390 metric tonnes of additional gold been put on deposit there?
Of course not! There have been a few new ounces that have arrived but, as you can see below, it’s not in the tonnage category. This is the report from yesterday, based upon the vault activity of Friday:
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