No One Wants Paper-Called-Gold

July 25, 2013

The Great Paper Liquidation continues. While the stampede out of the banksters’ fraudulent paper-called-gold products has eased from its frantic pace of a couple of months earlier, the bleeding continues.

The largest of these banker-scams, the SPDR Gold Trust (GLD) has seen its holdings plummet below 1,000 “tonnes”, the lowest level of holdings since 2009, representing a greater-than-25% collapse. Many of the (larger) holders have been redeeming/converting their paper for real bullion – as demonstrated by the even greater collapse in Comex gold inventories.

However simply redeeming bullion is a price-neutral event. With the near 25% collapse in the price of paper gold; obviously most of the action by the unit-holders of these fraud-funds has simply been selling.

This brings us to the interesting/incongruous news that the bullion banks themselves are currently “net long” paper-called-gold. Many readers (and even some commentators) have interpreted this as inferring that the banksters are positioning themselves long in anticipation of the next rally. My own interpretation of this propaganda is quite opposite.

First of all, there has been no reported change in the banksters’ net-short status in the silver market (  ) , where there has been no massive flight out of paper-called-silver. This tells us two things.

The gold and silver markets are now totally correlated, thanks to the ultra-manipulative trading algorithms of the banksters themselves. Where one metal goes, the other must follow. As a result it makes absolutely no sense strategically for the banksters to be net-long in gold and net-short in silver – the two bets cancel each other out.

This brings us to the other “truth” revealed by the fact that the bullion banks are still net-short in silver. With the propaganda machine having frightened any/all new buyers out of the gold market; there were no buyers for all of the units of paper-called-gold being dumped onto the market by panicked sellers…except the bullion banks themselves.

Why are the banksters “net long” in the gold market, while still decidedly short in the silver market? Because in the silver market they weren’t (effectively) forced to soak-up millions of units of their own paper-fraud products. As the Chumps bailed-out of GLD, meet the new Chumps: the bullion banks themselves.

At this point let me pause for an important caveat. Not all gold and silver funds are frauds. While investors need to do their own due diligence here on a fund-by-fund basis; accepted “exceptions” to the bankers’ fraudulent world of paper-called-gold and paper-called-silver are the funds/trusts operated by the Central Funds group and Sprott Asset Management.

Anecdotally, it’s interesting to note that my failure to include this qualification in several recent commentaries about the fraud of paper-called-gold has not drawn any disgruntled comments/mail from the holders of these funds (as has occurred in the past). Presumably the holders of these funds are fully aware of the superior pedigree of their holdings, and secure enough not to feel threatened by my generalizations about paper bullion products.

Returning back to the bankers’ surreal world of paper-called-gold, one of the regular themes of recent commentaries has been the frantic-but-feeble effort to find Chumps in Asia for these fraud products (and in India, in particular). It was the utter failure of these efforts over the first six months of this blitz which led to several draconian measures by India’s government to constrict gold imports into the country.

How has this fraud campaign being going more recently? We see more proof of utter failure here in listening to the propaganda machine brag about its ‘success’:

…In sharp contrast to Western markets, where investors made a beeline to exit gold fund investments, a net $33.5 million was pumped into Asian gold and precious metals miners funds in the three months to June, according to data from fund tracker Lipper and Reuters calculations.

Ooh! Thirty-three million dollars spread over three months. That’s going to create a lot of shock-and-awe in bullion markets. But note that the laughable number presented by Reuters isn’t even all investment into (fraudulent) paper-called-gold, but also (net) investment in “precious metals miners funds”.

For all we know (and with the miners so criminally undervalued); 90% or more of that new money was all headed for the miners. At a time when I recently reported that gold imports from China and India alone had spiked to an annualized rate of 4,000 tonnes per year, we have the Corporate Media bragging about selling some fraction of a tonne of paper-called-gold to a handful of Chumps in Asia, over a three-month period.

Why even bother with such a feeble effort to pump paper-called-gold? Desperation. As ye sow, so shall ye reap. The banksters sought to destroy the paper-called-gold market (being unable to destroy the real gold market). They succeeded.

If they had not soaked up who-knows-how-many millions of units of their own paper gold, their funds would have (at best) completely Decoupled from the real gold market – with their unit price falling so far below the real price that this paper would be clearly recognized for the fraud it represents. Alternatively, the funds would have simply, completely collapsed, as a lack of buying support would have accelerated the stampede out of these funds.

It has been suggested in my previous commentaries that (in fact) GLD and SLV represent nothing but cynical scams to get Chump “bullion” holders to fund the shorting operations of the bullion banks. Indeed, this is the only analysis in which the participation of these bullion banks as “custodians” for these long funds makes any business sense. If this is the case, the banksters have now lost their funding for their gold-shorting.

Meanwhile, around the world, this paper-called-gold is now nearly entirely shunned. Without paper-called-gold; it’s very difficult to leverage the world’s rapidly waning inventories/stockpiles of gold. Without such “leverage” (i.e. dilution) default in the gold market becomes a near-term event – as long as prices remain anywhere near current levels.

Having totally failed to find Chumps in Asia for their paper-called-gold, what options do the banksters have left for finding new Chumps? Only one: a long/strong rally in the sector, leading to much higher prices.

P.T. Barnum once uttered the immortal words that “a sucker is born every day.” We can translate that wisdom into the world of 21st century markets (at least those in the West). In any new market mania, a million-and-one new Chumps are born – enough to re-stock the paper-called-gold funds with “backers” for the bankster shorting operations.

Default, or Big Rally. As the Criminals who are in control of the paper bullion markets (and with those fraudulent, paper markets a hundred times the size of the real bullion markets), the choice is theirs.

Default implies the total destruction of these paper bullion markets, and a mortal blow to the bullion banks themselves. Thus default, in turn, implies some attempt at Western bullion confiscation. However, confiscation itself is nothing but a short-term, dead-end strategy – with many more unintended consequences should the banksters choose this road (and dictate accordingly ( )  to our Puppet Governments).

This leaves a Big Rally as the only rational/practical means to escape various predicaments which the banksters have created for themselves with their scorched-Earth operations of previous months:

  • Massive, near-insatiable demand
  • Severe constriction of supply
  • Collapse of inventories
  • Destruction of much of their paper-called-gold fraud

Actions carry consequences. The banksters have been extremely “successful” with their criminal operations in bullion markets (and with the near-destruction of the miners in equity markets). Now they must deal with the consequences of that success. As ye sow, so shall ye reap.

This is a lesson which hopefully newer investors to the sector in particular will draw from in the future. Ultimately in these most-extended/most-savage take-downs of bullion markets it is the banksters who always “capitulate”.

With complete control of these corrupt markets, and no “regulation” (only Regulator Accomplices); why didn’t the bullion banks take gold back down below $500/oz, and silver back below $5/oz – as they did when they had total control of these markets (and massive inventories to draw from)? Because they couldn’t handle the consequences.

For readers looking for more of a “KISS” approach to these dynamics, there is my own simplification: all roads lead to higher prices.


Jeff Nielson


Jeff NielsonJeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is

In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.

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