Where's the Gold - odd things happening down at the Comex

[Peter Presland]

thanks for that reply - some of which I think I followed !

Are we basically saying that banks are operating in the gold market in a not dis-similar way to fractional reserve banking where they don't actually hold enough physical "stuff" to repay on demand all those who could in theory require them to do so.

That's a good analogy. In this case the law and the rules policed by the CFTC put traders into one of three categories: Commercial, Large Speculative and Small Speculative. Commercial is a privileged category that harks back to simpler times when Miners and Farmers needed to sell some/all of their production before it was actually produced - ie had a genuine hedging requirement. Banks got into the 'Commercial' category by arguing that their crop/production finance loans needed to be hedged in the futures market. Commercial category traders are allowed much larger position sizes but are required to go though a lot of hoops - in theory anyway. The bottom line for PM's is that they must have sufficient metal deposited in COMEX wharehouses to meet a LOT more than the 2-5% of contracts that normally go to delivery - and the long held suspicion is that they don't and that all sorts of shenegans are underway to hide that simple fact.