ALL THAT GLITTERS

A funny thing happened recently the last day of trade for the September gold futures, when a substantial amount of gold was bought on the London Bullion Market and the buyer(s) wanted to take immediate delivery of the bullion.

Reportedly, J.P. Morgan and Deutsche bank did not have the gold to honor the trade because they had sold short --a naked short. These banks reportedly tried to settle in cash, offering as much as spot + 25%, but the offers were not accepted; thus promulgated a mad scramble for bullion. The Bank of England offered to close the deals with 22 carat gold.

In 1933, President Roosevelt confiscated the gold of the citizens--heretofore gold and dollars were freely transferable at a fixed rate. This confiscated gold was melted down into gold bars and stored at the federal depositories such as Ft. Knox . This gold, however had been alloyed to make gold coins durable, hence 22 carat gold; but buried in the vaults, who would know?

The gold offered by the Bank of England may not have come from the U.S. vaults, but then again who would know? There has been no physical audit of our gold reserves, since 1954, and no audit of the Federal Reserve ever. Rumors suggest that gold bars of 22 carat gold are starting to appear. 99.9% gold is 24 carat. but 90% (91.6%) gold mixed with alloy is 22 carat .

It gets curiouser and curiouser. The GLD (a London ETF) registry on:

9/25/09 was 1,381pages;

10/2/09: 208 pages;

10/9/09:195 pages;

10/14 after questions were raised: 855 pages.

According to Antol E. Fekete: RE: "The Gold Basis is Dead-Long Live the Gold Basis"w.w.w FinancialSense.com 10/19/09

. . "Reports are circulating that similar audits of certain Asian depositories have already produced “good” delivery bars (400 oz or 12.5 kg gold bricks) that have been gutted and stuffed with tungsten — a metal whose specific weight approximates that of gold, so that the famous test of Archimedes (fl. 287-212 B.C.) based on the Law of Buoyancy, designed to expose fraudulent goldsmiths, would be inapplicable. Isn’t it strange that criminal law punishes the fraudulent stuffing of gold bars, but allows the stuffing of gold assets in the balance sheet with paper gold? After all, the specific value of tungsten is much higher than that of paper!. . "

There is a lot of real (not paper) gold in the world, most of it is in vaults and crafted into jewelry. Actually it is believed very little of the gold ever mined has been lost or destroyed--not the case of silver which has excellent industrial uses other than coinage.

The hanky panky is at the commodity exchanges where paper gold (supposedly warehouse receipts for metal stored) and government and central bank inventory numbers are questionable. Physical inventory somehow is rarely accomplished. As gold becomes more in demand, counterfeiting becomes more common.

Trust no one, particularly those who say " Trust me".

With Love and Kindness,

THE HATMAN