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What Have You Done for Gold?

Are You Tired of The gold Grinches Stealing Your Profits?
by James Sinclair
The gold futures trading action seen in December 2002 is a perfect example of the machinations of the Exchange Stabilization Fund, The Gold Cartel and the common interest trading of the Gold Carry Trade. Aren't you just fed up with "The Bullies" pushing gold around and your gains away?

Gold traded above $336 early in the US, Friday December 13, 2002, when, of course, the Blue Coat Cavalry rode in on their shiny horses. Blam! - Slam! - Wham! was the sound of their selling. Selling that seeks to move volume is real selling that never announces its presence. This Blam-Slam-Wham type of selling has only one purpose. That purpose is to sell the least amount of gold with the most negative price impact on the gold market. We spoke about the difference between manipulation and stabilization being perception. This is written from the perception of a long.

The Gold Community, of course, chokes at the sight of the Blue Coats coming. Away the gold community runs like the Knights of Ni in the Monty Python movie, "Monty Python & the Holy Grail." Run Away - Run Away" is the cry of "Our Crowd." "Sell-Sell!" is their lament and they are chased back toward $330 by the smallest amount of gold being sold to make the biggest impact on the community that cries "Foul-Foul-Foul," yet does absolutely nothing about it, with the exception of the Gold Anti-Trust Action Committee (GATA).

GATA has mobilized the gold community-at-large for one of the most serious offensives in the history of gold. With their BIS/Fed suit, they took on the establishment elite in an effort to make the fact of bullying gold known to the public. What do they receive for their efforts? - The mainline press has ignored it, and from within the gold community a competing metals/mining site gleefully calls them, "Trailer Trash."

The Time has Come.

Buying of gold shares or options or futures does nothing for gold bullion or the gold price. Buying of gold coins does very little other than re-circulate the storehouse of already-minted gold coins. Writing about gold informs, but does little for the gold price. Complaining about the bulling presence in the gold market on almost a daily basis does as much as screaming at the dark, because it lacks action.

Now that gold has broken out above $330 and attained the first price objective of a touch of $338, it is time for you to consider dealing in the real stuff. It is quite simple, but falls primarily to those who can afford it, but the cost is not large.

Every gold trader who has invested in the gold market should consider helping gold by considering dealing in the real stuff and not paper substitutes.

I therefore propose the following individual action. Those in the International and US Gold Investment Community, who are financially able, would purchase one COMEX gold contract and take delivery of that contract. By taking delivery of the actual bullion gold in an individual, orderly, constant and therefore non-distruptive manner the COMEX will be transformed. Over time, this individual, orderly, non-distruptive action upon the Comex gold futures market will accomplish several goals.

  1. Physical (rather than paper) ownership would move the COMEX towards becoming as much a cash and paper gold market in reality not just as a contract potential.


  2. It would serve to improve the viability of the COMEX marketplace


  3. This action would make it infinitely more costly and difficult for the obvious execution of orders to effect price as a primary goal.


  4. It would alter the COMEX's present purpose for being.


  5. It would put pressure on the mechanism for those that wish more to affect price than execute legitimate buy and sell interest depend on.


For those who believe in gold's discipline and have invested in it or gold-related investments, based on your individual decision buy 1 Comex gold contract and take delivery. You then have done something very important for gold because you are buying gold bullion and not simply playing a paper game called gold that settles in cash. One COMEX gold future contract represents 100 ounces of gold and is valued presently at US $33,650 at delivery.

Are you willing to do something for gold bullion that really counts or just carp about being run ragged by the bullies?

If you do not do something for gold, you have no right at all to expect gold to do something for you.

How to select an International Bank or Broker
to initiate the transaction to take delivery of Gold Bullion

  1. Select an international bank or broker that has the capacity to execute order on the Comex Exchange directly or through a correspondent broker.


  2. Inform your selected international bank or broker, both verbally and in writing, that you intend to take delivery of the underlying gold represented by the Comex future you have purchased.


  3. Make your purchase of a Comex gold contract with a financially comfortable delivery date.


  4. Your international bank or broker will contact you on or just before first notice date.


  5. Again inform your international bank or broker that you intend to take delivery.


  6. Be sure that your account at the international bank or broker has a credit slightly more that the difference between your credit/debit balance in your account and the price of gold you purchase the future at. For instance, if you had purchased gold for December delivery when it was trading at $300, you would have a credit balance per contract of at least $3300. In order to take delivery of 100 ounces, you would have to have an additional $26,700 plus expenses in your account with your international bank or broker in order to effect delivery.


How to Take Delivery of Gold Futures Contracts

The Commodities Exchange (COMEX), a division of the New York Mercantile Exchange (NYMEX), provides a forum for the trading of gold futures and options (as opposed to the "traditional" means of investing in gold, such as bullion, coins, and mining stocks). In addition to trading futures ("contracts with firm commitments to make or accept delivery of a specified quantity and quality of a commodity during a specific month in the future at a price agreed upon at the time the commitment is made"), investors can actually take possession or "delivery" of their gold futures contracts if they wish. It is rare that a trader ever takes possession of the physical commodity he/she trades, but not impossible. Presently, less than 1% of all gold futures contract trades result in delivery.

Taking delivery of gold is also referred to as "exchange of futures for, on in connection with, physicals" or EFP. Deliveries of gold bullion against futures contracts traded on COMEX are available to an investor during any business day within the month specified in the contract. The first day a seller can give delivery notice to the buyer is the next to the last business day of the month prior to a maturing delivery month. The last day a seller can give delivery notice is the second to the last business day of a maturing delivery month (the day after the last trading day). The last trading day is the third to the last business day of a maturing delivery month. So, if an investor buys a December 2002 gold contract, the first notice day would be November 27, 2002.

Any gold delivered against a futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository located in the Borough of Manhattan, New York City, licensed by the Exchange (listed below or See Appendix)

The Procedure

Check List to take delivery of gold futures contracts:

  1. Establish a long position in gold by ordering a purchase via a broker or international bank with a correspondent able to execute an order on the COMEX.


  2. Wait for the account to clear through a COMEX clearinghouse.


  3. Hold the contract to the delivery month.


  4. The clearinghouse will settle accounts and allocate the percentage equal to their percentage holding of open interest. Typically it is allocated through the first in, first out method.


  5. Pay for the gold position in full.


  6. Receive the warehouse receipt from the clearinghouse.


  7. Contact the depository.


  8. For delivery, a person in the US can either pick up the gold yourself, depending on the quantity (though, if it is a large amount, this is not advised for insurance/security reasons) or have an armored car deliver it to your bank.


    1. According to Brinks (one of the armored transportation services recommended by the COMEX), the maximum charge for domestic gold delivery is .27¢ per ounce (with a minimum charge total of $135) plus a $20 security charge. The more gold shipped, the less the cost per ounce will be.


    2. Other charges associated with delivery include the warehouse fee for taking the gold out of the warehouse (things such as labor costs, etc.) - typically this costs approximately $15 per bar.


    3. The delivery services carry their own insurance (i.e. IBI Armored Car has $100 million insurance for all their transportation services) but you may choose to take out additional insurance.


  9. Safety deposit boxes can be as large as 55" by 54" and cost approximately $2800 a year (quote from Bank One in Chicago).


Approximate costs involved in taking delivery of gold in the U.S.*

* The domestic shipping maximum quote of delivery is .27¢ - delivery charges are estimates based on the Brink's quote that the more gold shipped, the less the cost per ounce.

  1. Armored car costs = $ per ounce plus $20 for security
  2. Warehouse costs = $15 per bar
  3. Not including additional insurance
  4. Assume gold costs $326

For international delivery, there are a few more steps.

According to Brinks, the shipping company will need specific mailing and packing information for each shipment:

  1. How much it weighs (by kilos for international shipments)?
  2. How it is packaged? The gold bars must be packed correctly for shipping. Either the Depository or the shipper can do. Typically, the Depository delivers gold on a palette. It must then be transferred into pails (which fit 8 bars) or into tubs (which fit 160 bars) for international shipping. The shipper must be able to see and count all bars. Brinks will transfer the gold on the palette to their Brooklyn vault and then package it themselves.

The base rate for international shipping 100,000 ounces would be .12 ¼ ¢ per ounce (approximately $12,250, or .04% of the total cost - quoted by Brinks). This includes the charges for pick up, packing the bullion (by Brinks), the air freight rate flight, having the shipment met by a local branch representative, customs entry, and a $25 airport security. All other fees, such as duties and all other customs are not included in price estimate. The shipment must be from a bank to a bank; they will not pick up at a residence. Brinks will deliver to England, France, Germany, Switzerland, India, Hong Kong, Australia, Russia, etc.

To ship one 100-ounce bar, Federal Express will ship precious metals. The cost to ship a 7-lb. package (one 100-ounce bar of gold) from New York to Zurich would be $100. There are no duties or taxes to pay for delivery gold to Switzerland. The bottom line estimate for delivering one 100-ounce bar of gold from New York to Zurich will be around $100.

An important note: any gold that is signed out of a COMEX depository and shipped internationally must be assayed before it is brought back to the COMEX for resale, at a cost ($138 per bar - the cost descends as the volume increases).

COMEX Depositories:

Brink's, Inc.
580 Fifth Avenue, Suite 400
New York, New York 10036
USA
phone: 212-558-6267

HSBC Bank USA
1 West 39th Street, SC 2 Level
New York, New York 10018
USA
phone: 212-525-5000

Scotia/Mocatta Depository, (Scotia/Mocatta is the global bullion banking division of the Bank of Nova Scotia, formed in 1997 by the bank's acquisition of Mocatta Bullion from Standard Chartered Bank in London.)
26 Broadway
New York, New York 10004
USA
phone: 212-912-8530

Resources
http://209.67.30.245/jsp/markets/gol_pre_agree.jsp
http://www.chdwk.com/gold.cfm
http://www.toerien.com/advice_column/securities/gold_futures.htm
Brink's (http://www.brinksinc.com)

To contact the author:


James Sinclair
Chairman of the Board
TAN RANGE EXPLORATION
www.tanrange.com
www.Tnxinvestor@zoolink.com

18 December 2002

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