Gold bars

Gold and silver represent honest money. When money can’t be trusted, you can bet that an entire nation/civilisation is its way down the gurgler.

Interestingly, if you collect Roman coins, you can measure the decline of the empire by the percentage of precious metal in the coins that they minted.

In its heyday, Roman coins were 100% pure gold or silver. Gradually over the course of a few centuries, the percentage of precious metal dropped until the coins contained hardly any precious metal at all.

Once upon a time, money in the Anglosphere was either 100% ‘specie’ (precious metal), or 100% backed by it.

This metal backed money was gradually corrupted until in August 1973, Richard Nixon interrupted the American Super Bowl to announce that the convertibility of the US Dollar into gold would be temporarily suspended.

Almost 50 years on, we are still waiting for a return of a US Dollar which can be converted into Gold at a fixed rate.

Just don’t hold your breath on that one.

From that time on, (early ‘70s), various schemes were invented which allowed Government and banks to ‘print’ gold and suppress its value.

I’ve covered these before. One such scheme is the futures market where people buy a contract which promises to supply gold on a pre-arranged date in the future.

Usually, the contract holder will settle the contract in dollars at the expiration date. This sounds innocent enough but has the effect of naturally suppressing the gold price.

Why, you ask? Well obviously, when people buy a contract promising gold, instead of actually buying gold, it reduces the amount of gold being purchased.

Less gold bought, means less demand, which means a lower price. A lower gold price means that paper dollars, pounds and yen seem relatively more valuable. If you are in the business of printing these currencies by the boatload, that’s a good thing.

If you are an up and coming world power like China, that is acquiring as much gold as possible, that is also a good thing.

Why? Well, when fiat currencies melt down in a hyperinflated heap, only gold and silver will be accepted in exchange for real goods like iPads, flat screen tellys and whipper-snippers.

That’s when the golden rule kicks in.

‘He who has the gold, makes the rules.’

Another way for our leaders to supress the gold price, is by selling lots of gold into the market when demand is high.

No one knows for sure where this gold comes from but people have speculated about the various sources for years.

Central bank gold is thought to be a major source. Our globalist elites are looking after our national gold and assure us that it is safe. Good luck with that, is all I can say.

It has long been speculated that another possible source of gold for price suppression, is the exchange traded fund GLD.

Exchange traded funds are set up as ways for ordinary investors to speculate on price movements of various commodities.

They trade on share market exchanges so investors can buy and sell these commodities as easily as they can buy stocks and shares.

They are intended to track the price of a commodity. A reasonable assumption would be that the fund owners would purchase the underlying commodity and store it for you when you purchase the security. In reality, that is not always exactly true.

In the case of GLD, no one outside the company seems to know exactly how much gold the fund actually possesses.

Also, although the fund is based in the USA, the gold they own is held mostly in the UK. The fund doesn’t actually hold this gold either. It is held by ‘custodians.’

Sometimes the custodians hold gold in the vaults of ‘sub-custodians.’ It is all very complicated and opaque.

It is this opaqueness which has led to speculation that the fund does not hold the gold that it claims.

Nevertheless, the fund ‘claims to hold 40.8 million ounces of gold worth US$ 77 billion with custodian HSBC Bank plc in London, and a Trust whose only asset is “allocated gold bullion”.’

That is according to a recent article by Bullion Star which can be found here.

40.8 million ounces is close to 1270 tonnes, which is more gold than most countries claim to possess. The article is a little long and technical for the Richardson Post, but if you have the patience, I recommend reading it.

The point of the article, is that GLD is behaving rather strangely for such a large and prestigious firm. Specifically, their Chief Financial Officer resigned one day before the company’s accounts were due to be filed with the Feds and did not sign off on those accounts.

She was replaced the same day with a new Chief Financial Officer who did sign off on those accounts. How he knew what was in those accounts is a mystery known only to himself.

There were a number of other troubling items from the company’s accounts which are listed in the article as follows:

• Why does the latest GLD 10-K withhold quantity data on how much gold the GLD held at the Bank of England between 15 April and 13 August, and only use the word ‘some’ which is contrary to the Full Disclosure Principle of accounting?

• Why does the latest GLD 10-K blank out the use of XBRL data tags for “Gold Held by Subcustodian” that would show precisely how much GLD gold was held by GLD at the Bank of England between 15 April and 13 August?   

• What is GLD gold doing at the Bank of England for 121 consecutive days if the custodian HSBC is obliged to use “commercially reasonable efforts promptly to transport the gold from the subcustodian’s vault to the Custodian’s vault “?

• Why has the GLD auditor KPMG (New York) suddenly added a Critical Audit Matter to its audit statement about evaluating “the evidence pertaining to the existence of the gold holdingswhen KPMG has been the Trust’s auditor since 2010 and has never done so previously?

Now perhaps the article’s author is misreading all of these signs. Maybe GLD is going along just fine, but I can see why he would be concerned, particularly as CFOs have been leaving GLD at a rate of around one per year for some time now.

If GLD were in deep trouble, if they actually didn’t possess all (or any of) the gold they claim to have, this could trigger a firestorm that could devastate the Western World (in my humble opinion).

The collapse of GLD could be met by one of two ways by the powers that be. Firstly, clients of GLD would find themselves as unsecured creditors of a bankrupt entity with little to no assets. That is what is supposed to happen.

Most likely, in my opinion, the Government would then step in and reimburse the creditors with freshly printed money to prevent fallout, maintain confidence in the system and help out their friends and campaign donors.

Printing US$77 billion is no biggie for our idiotic overlords.

Hopefully, this would stem the rot, but that is not guaranteed at all.

The problem, apart from the inflationary nature of the money printing, is that the collapse of GLD would badly damage confidence in other forms of gold contracts such as futures contracts and unallocated gold accounts at bullion banks.

These (unallocated) accounts hold gold for clients. However, the gold is ‘pooled’ and according to some commentators, these accounts probably don’t contain enough gold to pay out all of their clients (again, lack of transparency makes it impossible to be sure).

If there were a ‘run’ on these accounts, the quickest clients may get their gold whilst the rest would, most likely, be offered an IOU from a deeply troubled banking institution.

Once again, our brilliant financial elites would likely respond with characteristic genius and print yet more money to bail out the other brilliant financial elites who bought these contracts.

Quite suddenly, people holding the actual barbarous yellow financial relic would start to look very smart, whilst those holding pieces of paper, promising to supply this relic on demand would be looking less like geniuses and more like chumps.

In all likelihood, the value of these pieces of paper would start to plummet whilst the price of gold would head in the opposite direction.

With gold and silver rising in value, more and more people would be inclined to ‘trade in’ dollars, pounds and yen in exchange for rapidly appreciating gold and silver.

For the first time in a generation, we would have a crisis that couldn’t be fixed by printing more money. Sadly, that wouldn’t stop our globalist, elite overlords from doing it anyway.

“The problem is,” they will say, “that we just aren’t printing enough money.”

Pure genius.

Now this shouldn’t be too much of a concern to those of you who enjoy searching through trash cans for something to eat.

For the rest of us, we need to be holding these merchant bankers to account and hoping it isn’t too late.

Demanding a transparent audit of the gold holdings of our central banks and bullion banks would be a good start.

Disclaimer: Please do not consider any part of this article as useful financial advice. Seek professional advice for money management.