How would anyone know if the Comex is lying too?

12:10p ET Tuesday, December 29, 2009

Dear Friend of GATA and Gold:

As an avid reader of GATA Chairman Bill Murphy's nightly "Midas" commentary about the gold and silver markets at LeMetropoleCafe.com, I enjoy the sarcastic remarks often quoted from Adrian Douglas, editor of the Market Force Analysis letter, in regard to the daily gold and silver sales and warehouse data reported by the New York Commodity Exchange, the Comex. Since most official economic data long has been manipulated if not forged, the other day I wrote to Douglas, a member of GATA's Board of Directors, with some questions, as follows:

"What if the Comex data is falsified every day? How would anybody know? Does the public have access to the Comex's internal documentation for contract figures? Does the public have access to the Comex's warehouses so the metal there may be inspected and audited? What if nothing is really there? What if gold and silver prices are just being dictated from Washington each day, as FDR used to playfully dictate gold prices each morning? What if the Comex has to send to the Treasury gold depository up the Hudson at West Point each month for whatever metal has to be produced to make the tough buyers go away? How would we really ever know to the contrary? Does anybody ever ask to see anything real here, any more than anyone (other than GATA) ever asks to see the original documentation of the Federal Reserve and Treasury Department in regard to gold?"

Douglas' reply is worth thinking about:

"The Comex data is so strange that I believe it is falsified. We have circumstantial evidence of it. I have seen Comex data indicating that very little metal moves in or out and for days on end, as well as data indicating that no silver at all moves in or out of the dealers' silver inventory.

"I know people who have bought metal and collected it from the Comex, and they report that the warehouses were very busy and that the staff were complaining that they were being run off their feet. One person gave days of notice for taking delivery of his Comex silver but when he showed up they couldn't produce his bars and only after several hours did they hand over his silver. Even then the metal had a label on it with someone
else's name. (No doubt someone else who gave notice of collection was given the runaround too.)

"There are the rumors of cash settlements instead of metal delivery.

"One of my subscribers called the Comex and asked why warehouse movements don't match the delivery notices. The Comex representative said it depends whether there is cash settlement. When my subscriber pressed about how prevalent that was, the Comex staffer clammed up and said my subscriber would have to call the warehouse. When he did, no one would give him any information about cash settlement.

"There is also the fairly recent rule that 'exchange for physicals' can be done at the Comex using metal ETF shares.

"I don't know what it means yet but just this month Goldman Sachs and JPMorgan Chase have showed up accepting (stopping) nearly all the delivery notices while Bank of Nova Scotia issues them all.

"What is going on? Since the start of this month are all the buyers of gold and silver clients of Goldman Sachs and Morgan Chase and all the sellers clients of Bank of Nova Scotia? That's just not possible, especially when you throw in the anti-gold cartel aspects of Goldman Sachs and Morgan Chase.

"I don't know what it all means, but the Comex warehouse data is obviously suspect and I am documenting it each day because one day it will make sense. In the meantime it shows that Comex metal doesn't move even when we have all-time record gold prices and the government mints are suspending coin production due to a lack of metal.

"Still, I think the Comex is a sideshow. The real problem for the gold and silver price suppression schemes is the London over-the-counter market. In fact, I wonder if they don't deliberately make the Comex look suspicious so it acts as a decoy and we keep expecting a default there, even as they make sure that they either cash-settle or make undocumented deliveries to try to discredit the people who are forecasting a default and to smear as a 'conspiracy nut' anyone raising questions. This would discourage big-money people from asking for their gold from the London OTC market. The big-money people wouldn't want to be thought of as nuts.

"Protecting the OTC gold market is the great goal, because any trouble there could lead to the mother of all bank runs.

"But the most valuable commodity in the world, trust, has been destroyed in the last year, and so more and more large institutions and sovereign states want to take delivery of their gold and hold real metal, not paper. Unless the anti-gold cartel can work some magic or alchemy, I don't see how they can escape the mother of all bank runs."

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