*****Things Going Wrong In The Gold Market*****

Goldseek reports about incongruities in the gold bar registry of GLD.

(emphasis mine) [my comment]

Blight on Humanity Addendum
-- Posted Thursday, 15 October 2009
By: Rob Kirby

Earlier this week, I wrote about possible "incongruities" in the gold bar registry of GLD. Specifically, here is what has happened to the GLD bar list which is published each Friday at approximately 4:30 pm EST. An alert reader I communicate with [who shall remain anonymous] has been documenting the length of the published GLD bar list:

- on Friday, Sept. 25 — the list was 1,381 pages long
- on Friday, Oct. 2 — the list was 208 pages long
- on Friday, Oct. 9 — the list was 195 pages long
- then, on Wednesday, Oct. 14 — after questions were being raised about the strange machinations with the bar list in chat rooms on the internet — the list was back up to 855 pages long

Something TRULY stinks here. No explanation has been offered for the DRAMATIC swings in this list. Where gold is concerned nothing happens by accident.

How Precious is Settled in London:

Loco London clearing is the daily paper unallocated transfers between London clearers; the transfers of gold and silver only across accounts held between clearers for their own accounts and third parties; and, as mentioned earlier, the clearing out of Zürich for the platinum group metals. It avoids security risk and the cost of physical movement of bullion; has standard market practices...

[However] Both allocated and unallocated account agreements are available. There are allocations for credit purposes, bilateral credit agreements between clearers, and London good delivery....

Some short definitions: an unallocated account is an account where specific bars are not set aside, and the customer has a general entitlement to the metal. This is the most convenient, cheapest, and most commonly used method of holding metal. The allocated account, on the other hand, is an account opened when a customer requires metal to be physically segregated, and this needs a detailed list of weights and assays....

To Summarize:

- GLD gold bullion inventory is principally held in London
- I've already written about some large [allocated] physical transactions that were settled last week in London under VERY strange circumstances indicative of a shortage of physical gold bullion for good delivery.
- At the same time, significant irregularities appeared in the GLD bullion bar list

Conclusion:

- is the correlated timing of these unusual events a coincidence???? Could GLD inventory have been utilized to effect these physical settlements, which in turn, would have required the "sanitization" or doctoring of the GLD bar list to avoid MANY obvious, easily detectable, duplications of bar numbers?

I discussed these irregularities with a very informed source [the same one who informed me of specific [allocated] trades settled last week] and the reply I received was as follows:

"What can I tell you that you don't already know?

They are all scrambling big time since a number of large interests have demanded audits. Independent auditors are NOW descending onto the various vaults to verify, validate and certify.

They can move this as many times in circles as they like to try to fool people.

In an Asian depository they've found "Good Delivery" bricks that had been gutted and filled with tungsten.

Soon, there will be xxxx hitting the fan all over place."

These circumstances suggest that a VERY REAL physical short squeeze is in progress RIGHT NOW and a gang of fraudsters from "fiat-crack-houses" [Central Banks] are attempting to finesse their losing over-sold hand in an elaborate Three-card Monty. With reports of independent physical audits now being conducted and mysterious happenings with GLD's bar list — GLD has NEVER looked more suspect.

Hope you've all got some physical gold already.

Open interest on COMEX gold futures has exploded in the last month. 131,123 contracts (372 tons of gold) have been sold since the end of August.



My reaction: Things Going Wrong In The Gold Market.

1) some large [allocated] physical transactions that were settled last week in London under VERY strange circumstances

2) significant irregularities appeared in the GLD bullion bar list in the last three weeks.

3) A number of large interests have demanded audits of gold stored in London

4) In an Asian depository they've found "Good Delivery" bricks that had been gutted and filled with tungsten.

5) Open interest on COMEX gold futures has exploded in the last month.

6) Apparently, "Soon, there will be xxxx hitting the fan all over place."

Conclusion: Although most of the above is second hand information from Rob Kirby, it is very believable considering gold hit $1070 this last week.

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21 Responses to *****Things Going Wrong In The Gold Market*****

  1. VegasBD says:

    So this is what the beginning looks like huh?

  2. Ron says:

    The rising open interest would confirm what I think you've mentioned in that central banks have been net sellers for the past 10 or so years.

    This looks like they've been selling in unison to absorb all the buying to prevent a run on gold/banks. I highly doubt they are concerned about covering their shorts as the paper market for commodities will most likely collapse when enough traders try to take physical delivery.

  3. Anonymous says:

    Oh for sure ETFs are going to collapse...

    But what is insane is this line...

    "In an Asian depository they've found 'Good Delivery' bricks that had been gutted and filled with tungsten."

    If this is indeed true we are really close...

    Really, really close...

  4. Jeff Burton says:

    The bars with tungsten - this anecdotal rumor stuff is kind of silly and it does not herald the end of the world. Ever hear of Archimedes? He made his rep on this very problem. People have been doping gold bars, coins, jewelry for thousands of years.

    The GLD bar registration material is more interesting. Would love to see more on this.

  5. Anonymous says:

    MANY THANKS for this posting... gold price is going to the moon as NASA just did last week....they bombed moon and this time.. the physical gold is gonna bomb paper gold....

  6. Shin says:

    would the reports of audit on lodon gold have big impact on gold price?
    should i get some more before the report comes out?

  7. andreyreider says:

    The main thing: when results of audit will be published? Do you know something about it?

  8. Shin says:

    are you saying that the report will be too difficult to read?
    not sure where you are getting at with that question.
    obviously, if there are flaws in the gold storage, wouldn't people post about it and how it is wrong? (people like eric would probably do that)

  9. Anonymous says:

    To Jeff Burton:

    Even if the evidence is anecdotal and speculative, you have to admit that in your gut you know the ETF gold and silver market don't add up.

    And, what would Archimedes say about ETF's if he could have commented on this form of metal ownership? He'd have considered you to be insane.

  10. Anonymous says:

    To Jeff Burton
    W has the same dencity as Au. So you can`t check it by Archimedes method

  11. andreyreider says:

    To SuJu:

    I think that the effect on markets will depend on volume of infringements and shortage. If there will be "lost" a lot of gold , it can affect the market very strongly. Therefore it is necessary to put in physical gold a part of means before publication of reports on audit. For this reason it is interesting to me, when reports will be published. I should know: how much time I have?

    If somebody has the information on it, I ask you to share it, please.

  12. lysander says:

    IF there has been tampering and IF they don't have the stated gold to back up rightful demands for physical delivery, then wouldn't it be a good possibility that trading in gold will stop? That gold will suddenly have no discernible value? That certainly would be a possibility IMHO.

  13. Anonymous says:

    > W has the same dencity as Au.

    You need a very good scale to find the difference between W and AU. It can be done, though.

  14. Anonymous says:

    The difference in density between gold (Au) and tungsten (W) is about 1 part in 400 (gold is just barely denser than tungsten).

    If you have the right kind of measuring system, you should be able to detect this difference.

    However, I suspect that in the real world it's not as simple as that.

    Let's try a thought experiment.

    Suppose someone made a 1kg "gold" bar that was actually 60% gold and 40% tungsten, the tungsten being hidden in the center of the bar.

    In this case, the difference between the actual density of the bar and the "proper" density (if it were 100% gold) would be 1 part in 1000. This corresponds to a weight difference of one gram, which is definitely not a lot. (What you'd probably do in reality is to give the bar the correct weight and give it 0.1% extra volume.)

    Now suppose some organization buys some of these adulterated gold bars and assigns a couple of technicians to test the bars and make sure they're okay.

    The technicians test the 1kg bars and their equipment shows that their density is uniformly off by 1 part in 1000.

    What are the technicians going to do?

    I'd bet there's a good chance that they are going to figure something like, hey, our equipment is slightly off (when was the last time we had it calibrated??); oops, am I doing something wrong?; maybe there's dust or other junk in there I didn't notice that's messing up the results; etc.

    If they are more sophisticated, they might figure, well, maybe the gold solidified in a way that made it slightly less dense (some metals can vary fairly significantly in their density depending on the conditions under which they solidified), maybe there are small inclusions in the gold that alter the average density of the whole bar, etc.

    So what ends up happening is that our friends the technicians figure it's close enough (after all, 1 part in 1000 is pretty gosh awful close, right?) and rather than raising a red flag and perhaps getting themselves in trouble or causing all sorts of other problems, decide that there must be some kind of small systematic error in their measurements, call it all good and keep their mouths shut.

    If this happened, how long do you think something like this could go on before being discovered?

  15. Anonymous says:

    Well, after leaving you all with that long scenario to think about, let me ask a question.

    Does anyone have any reliable info regarding this rumored Au / W issue?

    Unfortunately the gold world has a history of false rumors being circulated, wildly inaccurate claims being made, etc.

    Is there any proof or strong circumstantial evidence available to back up the Au / W substitution claims?

  16. Anonymous says:

    This would mean, they may not have the physical gold to back up the paper they are selling.

    Makes a lot sense and I have heard this before, about existing companies or ETFs. So what they are saying, is they are shifting/borrowing the gold, to locations being audited.

    Which also brings up another point. With the US mint having plenty of practice developing clad gold toned coins such as the Presidential Proof dollars. It makes one wonder if they wouldn't sell gold proof buffalo and golden eagles using the same techniques. Who is going to bite or cut their coin, to analyze its true metal properties?

  17. Anonymous says:

    It's me again, the Anonymous who wrote the two comments (one quite long!) about W and Au.

    The next poster wrote:

    "Which also brings up another point. With the US mint having plenty of practice developing clad gold toned coins such as the Presidential Proof dollars. It makes one wonder if they wouldn't sell gold proof buffalo and golden eagles using the same techniques. Who is going to bite or cut their coin, to analyze its true metal properties?"

    I'm pretty sure you could use some other methods to figure out whether a "gold" bar or coin was actually 100% gold or not. (Not sure if anyone uses these right now.)

    For example, you could try cleaning the thing with an ultrasonic bath to remove any surface contaminants and then measuring its electrical conductivity. I'm not sure what the electical conductivity of tungsten is, but I'm pretty confident it's significantly different from gold.

    Another approach would be to measure the speed of sound waves traveling through the gold object, which is closely related to its resonance properties under mechanical excitation, which you could also measure.

    A third approach would be to scan the thing with a thermal neutron beam and measure how many neutrons make it through the material (as opposed to being captured), as gold and tungsten have substantially different cross sections for thermal neutron capture, IIRC.

    In the case of all three methods, you'd want to have reasonably accurate values and variance data for genuine examples of whatever it was you were examining (e.g. bars, coins, whatever), along with a good idea of what you would expect to see from counterfeits (realizing that the values you'd measure for counterfeits would depend on details such as percentage tungsten content).

    Note that simply x-raying the objects would be unlikely to work as gold and tungsten are both very dense and have almost the same density.

  18. Anonymous says:

    x-ray fluoroscopy will tell the difference between a bar stuffed with tungsten and a pure bar, it will even show the boundary between the two metals. It can even tell the difference between carats in gold. This is just a scare story to frighten people away from buying physical gold.

  19. Anonymous says:

    >If this happened, how long do
    >you think something like this
    >could go on before being discovered?

    One possibility is until somebody
    tried to make jewlery or electronics
    out of the adulterated bar. Then
    it would become glaringly obvious
    in the manufacturing process.

  20. Anonymous says:

    I am not sure if a gold bar that thick and dense could be penetrated with x-ray?

  21. Anonymous says:

    > I am not sure if a gold bar that thick and dense could be penetrated with x-ray?

    Google it and take a look at the 2D pictures, use your imagingation to move that to real time 3D. Remember the use is on a metal object not a human so limiting the power applied is not a problem.

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