Gold Continues Vaporization of COMEX

Posted 09 Dec 2008

The COMEX Open Interest and warehouse stocks are continuing to dry up.  As noted in a COMEX update and as calculated by Meltdown2011 this represents about 42.6% of the warehouse inventory.  Things are getting interesting and exciting.

Canada's Business News Network recently did a story on gold's backwardation which will bring more attention to the issue.

I highly recommend reading my articles on gold in backwardationcentral bank gold lease rates and silver lease rates.

 Mr. Ing mentioned in the BNN interview 'trashy cash' and I even wrote an article on Trashy Cash months ago.  If you do not have your physical bullion the physical market may yet get tighter.  The window of opportunity could be closing and when it may be yanked shut as fast as when President Nixon closed it during the run on the London Gold Pool.

While gold opened in backwardation after some serious pressure on Monday that condition does appear to have subsided slightly as of late.

 It is wise to remember that the largest money in the world intensely focuses on and plays gold.  The central bank gold price suppression scheme has been extremely effective but it now appears like an act of desperation where they are running out of physical bullion and may soon be overrun.

Nevertheless, I do not know your risk tolerances but for me $7.30 per ounce or .9%, is an insufficient risk premium to compensate for COMEX's counter-party risk and the loss of immaterial interest for 9 months.

 How fast did Bear Stearns, Lehman Brothers, AIG, Fannie Mae, Freddie Mac, Wachovia, Washington Mutual, etc. evaporate because of their derivatives?  This is where the superiority of equity over debt begins to assert itself.

Those short gold can be squeezed but those long gold with possession and without margin are invincible.  Why?  Only the temptation of risk, less safety and less liquidity, for profits can move the holders of unencumbered physical gold. The shorts must deliver physical gold to those who pay for it in full and demand delivery or fail to deliver.  Simply do what has always been done with gold:  HOARD!

In the spot market I will pay for my gold in full and take immediate delivery thereby completely eliminating the counter-party risk.  As investors look for safety for their capital, including life fortunes and retirement nest-eggs, this aspect of the gold trade is increasing with services like the extremely easy, affordable, secure and efficient GoldMoney which not be subject to the counter-party risk.

 I feel more comfortable knowing my wealth is safe with no reliance on anyone's financial ability to keep their promise.  Gold is the ultimate insurance as most insurance policies pay in paper which can be worthless.  Plus with GoldMoney there is the added liquidity of being able to use it as a currency in ordinary daily transactions should I need to spend the gold.  

Additionally, I consider gold confiscation highly improbable.  In the current environment every rational investor should own at least some physical bullion.