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Physical Gold Premiums Soar To Highest Since Crimean Conflict As Congressman Questions COMEX
This is the greatest premium since the Crimea conflict sparked a massive safe haven bid in April 2014. The gold market remains chaotic with physical (geographical) shortages, increasing physical demand, paper squeezes, retail interest soaring, and now congressmen raising concerns with regulators.
This whole debacle and the COMEX changing rules for delivery prompted representative Alex Mooney (R-WV) - who has ostensibly continued where former Representative Ron Paul (R-TX) left off - to raise questions with the CFTC about his growing concerns about delivery defaults in gold and silver.
Dear Chairman Tarbert:
As you know, there have been significant stresses and delivery difficulties unfolding in the CFTC-regulated gold market. In fact, the entities running the Comex and London markets hastily changed their rules last month to allow 400-ounce gold bars located in London to be substituted in satisfaction of CFTC-regulated contracts standing for delivery of 100-ounce gold bars in the U.S. This remarkable new trans-oceanic mechanism appears, essentially, to have institutionalized the Exchange for Physical (EFP) emergency mechanism about which I raised concerns to you previously. Because there is apparently a dearth of gold and silver available for delivery in our country, use of this EFP mechanism to offload the physical demand to London had already become massive and routine. Why is the Commission permitting large gold delivery liabilities in the U.S. to be so routinely transferred to London markets? I am increasingly concerned about the rising risk of defaults in the U.S. gold and silver markets and a resulting loss of confidence in our markets. A major default in gold and/or silver could have profound monetary policy implications as well. Furthermore, I ask for direct answers to two questions I posed previously. My questions (in italics) and your responses provided on January 28 are as follows:
1) Does the commission have jurisdiction over manipulative futures trading by the U.S. government or its brokers or agents or other governments?
“The CFTC has exclusive jurisdiction over futures trading on trading facilities registered with the Commission as Designated Contract Markets.”
2) Is the commission aware of futures trading by the U.S. government, its brokers, or agents?
“Pursuant to Section 8 of the Commodity Exchange Act and except as otherwise specifically authorized, the Commission may not publish ‘data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.’” Both of my questions call for simple “Yes” or “No” answers. Direct answers to these questions should not violate Section 8 of the Commodity Exchange Act. Simply acknowledging trading by governments, or on behalf of governments, would not disclose business transactions or market positions.
Thank you, and I await your response
We won't be holding our breath for a response that satisfies, but we do note that the Congressman's concerns are much more widespread. Not helping any physical demand is the fact that the US Mint recently halted all production (over COVID-19 contagion fears), despite soaring demand for gold coins…The surge in gold demand is similar to the buying panic that has emptied stores of toilet paper. “When people think they can’t get something, they want it even more.” Except in this case, there is a fundamental driver behind the demand - as Kyle Bass so eloquently noted 10 years ago: "Buying gold is just buying a put against the idiocy of the political cycle. It's That Simple"
And judging by the shrill calls for UBI, MMT, and negative rates in the US, that idiocy is just about to reach '11'.
moar here-edited
https://www.zerohedge.com/markets/physical-gold-premiums-soar-highest-crimean-conflict-congressman-questions-comex
One week ago you saw muh blow-out in Oil and how speculation can lead to a market that trades mainly on paper and traps participants when the delivery portion of holding that commodity is taken to the end of the contract.
Oil and metals markets have a common-thread…the ability to amass a position so large (on paper) taht when it goes against you it craters the price of the under-lying commodity.
There are some differences here between them and not enough space to get in to that but a similar fate awaits the metals trade as the paper games have gone on here for much longer and in bigger size.
the same thing habbened prior to the referenced 2014 spike -when the metals were run up after the 2008 mkt crash. Selling shit they don't have at that price.
Delivery times got to 6-7 weeks if I recall correctly.
>actually rec'd someone else's order in 2009 but my packing list was in box and addressed to moi
dubs say chek't
MAGMA89 nw from Tampa Int'l after coming out of Belize earlier