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Ronan Manly

Ronan Manly

Ronan Manly is a precious metals analyst with BullionStar whose blogs
often cover current themes including what's going on in the
London gold market and the gold activities of central banks.

LBMA and COMEX try to Reassure the Market – Twice in One Week

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  • Author Ronan Manly
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In the space of a week, the London Bullion Market Association (LBMA) and CME’s Commodity Exchange (COMEX) in an air of panic, have issued not one, but two statements to try to placate the gold market. This is of concern because the LBMA and COMEX jointly establish the global ‘gold price’ through the trading of enormous volumes of unallocated gold and cash-settled gold futures, respectively.

Panic Stations

Last week, as the contango between the higher COMEX futures price and the far lower London spot gold price blew up to a nearly $100 differential, and London market maker bid-ask spot spreads blew out to $100 between bid and ask, the LBMA in a rush to deflect attention, issued a statement claiming that:

“The London gold market continues to be open for business. There has, however, been some impact on liquidity arising from price volatility in Comex 100oz futures contracts. LBMA has offered its support to CME Group to facilitate physical delivery in New York and is working closely with COMEX and other key stakeholders to ensure the efficient running of the global gold market."  

As we asked at the time last week in a BullionStar article:

– Why is the LBMA colluding with the COMEX?
– How can the London gold market be open for business if LBMA market makers are not providing liquidity in spot gold
– Why is the LBMA deflecting attention from the London market and pinning the focus on the COMEX?
– Why does the LBMA want to facilitate physical delivery in New York when its remit is the London Gold Market (loco London)?
– Who are the other key stakeholders that the LBMA and COMEX are colluding with?

Commodity Exchange (COMEX) – part of the CME Group

Then yesterday, April 1, for the second time in a week, the LBMA and CME issued another statement, this one more desperate and bizarre than the first:

LBMA AND CME GROUP COMMENT ON HEALTHY GOLD STOCKS IN NEW YORK AND LONDON

CME Group and LBMA..will continue to coordinate efforts as market circumstances evolve. Together, both CME Group and LBMA are actively taking measures to ensure the continued efficient operation of global gold markets during this unprecedented time.

LBMA reports record gold stocks

Gold stocks in London remain healthy with the latest published numbers showing record stocks of 8,326 tonnes of gold, which is equivalent to 666,045 standard 400-ounce gold bars. Visit the LBMA website for more information.

CME Group depositories open and gold stocks near record high 

CME Group’s New York depositories are operating normally as they have been deemed essential businesses and deliveries are occurring as planned. As of March 30, 2020, our depositories currently hold 9.2 million ounces of gold (with 5.6 million ounces eligible), nearing a record high in terms of stock levels…" 

Never before has the gold market seen such panic from the paper gold market conductors, and all this in the presence of record physical gold demand, cleared out gold bars and coin inventories across the entire gold supply chain, closed down precious metals mints and refineries, and a price disconnect between the physical and paper gold markets.

Two Heads are Better than One

The fact that the LBMA – COMEX tag team which fronts for the modern bullion bank cartel has to comment not once, but twice in a week about the health of gold inventories in London and New York is unprecedented, and suggests the bullion banks are now panicking.

This second LBMA – CME statement is also notable in that it comes:

a) after the bullion banks placed disinformation into the media last week about needing to physical deliver gold bars from London to New York (hint – in modern times the US never imports physical gold from the UK), and

b) after the bullion banks moved the goalposts with the launch of a new CME COMEX futures contract which brazenly tries to prop up the existing COMEX gold futures contract (GC 100) with additional methods of delivery – fictitious and fractional delivery of 400 oz gold bars that supposedly sit in London through a paper scheme known as Accumulated Certificates of Exchange (ACE).

Not to forget that on Monday this week (30 March), after the CME published a new format COMEX vault report which had 400 oz bar categories listed for all COMEX vaults in New York, but with absolutely no 400 oz gold bars listed, BullionStar published the article “COMEX can’t find a 400 oz bar for its new 400 oz gold futures contract“, after which the CME promptly removed the 400 oz version of the report from its website here, and reverted back by uploading the original version.

Looking at the latest LBMA – CME statement about healthy gold stocks, it becomes clear that it is, in the words of Francis Bacon, a statement entirely made up of simulation and dissimulation – simulation being a pretense of what is not, and dissimulation being a concealment of what is.

The LBMA reference to 8326 tonnes of gold in its network of London vaults is completed misleading:

a) This figure is from 31 December 2019, which is 3 months ago

b) Of this 8326 tonnes figure, 5373 tonnes (65%) represents gold held by central banks at the Bank of England, and another 1895 tonnes represents gold backing Exchange Traded Funds held in London LBMA vaults, such as the vaults of HSBC and JP Morgan. Subtracting these leaves 1057 tonnes (13% of total). Thais 1057 is just the maximum possible London float and does not itself exclude allocated gold held by entities such as sovereign wealth funds, investment institutions, ultra wealthy and family offices.

London gold market sources are now even saying (more on that this month) that the real LBMA bullion bank float in London  is less than 500 tonnes and maybe as low as 200 – 300 tonnes.

Looking at the COMEX data and vaults, COMEX, as always, has very low gold holdings. The 9.2 million ozs number which CME refers to in the above statement (actually 9.245 million ozs) is only 287 tonnes of gold. Of that figure (which refers to Tuesday 31 March), 114 tonnes is in the Registered category, meaning that there are already vault warrants issued against that gold. The other 5.6 million ozs (actually 5.85 million ozs) is ‘Eligible gold’, but eligible just means any gold which happens to be in the approved COMEX vaults that is in the form of 1 kilo bars or 100 oz bars. Essentially, this could be anything. It is gold that is already owned by random entities, which would include mints, refiners, and jewellery companies, so eligible gold may have absolutely nothing to do with COMEX or CME.

From this latest April Fool’s Day statement from the LBMA and COMEX, we can only conclude that the LBMA is terrified that unallocated investors who have claims on LBMA bullion banks will line up to take allocation of gold in London, while the CME is terrified that COMEX futures contract holders will increasingly try to take physical delivery of gold in New York (not just delivery of warrants but actually withdrawing the gold bars out of the COMEX vaults).

London Gold Pool

Rewind to 1968, and the parallels between the modern bullion banking cartel dominating the LBMA and COMEX, and the central bank gold cartel of that era, are striking. Between late 1961 and March 1968, a cartel of central banks from the US and Europe ran a price manipulation scheme in London, aiming to keep the price of gold at $35 per ounce. They did this by constant intervention into the market, pooling their gold reserves to push down the gold price.

Conceived and coordinated at the Bank for International Settlements (BIS) in Switzerland by the G10 central bank governors of that time, the dirty work of actual gold market intervention was done by the Pool’s agent, the Bank of England gold trading desk in London.

The syndicate, known as the London Gold Pool, was successful until it wasn’t, with the beginning of the end in early March 1968 as the huge run on gold became a tidal wave in the presence of sterling and US dollar weakness. On 10 March 1968, a Sunday, the consortium released a statement claiming that: “the London Gold Pool reaffirm their determination to support the pool at a fixed price of $35 per ounce”. At the same time, Fed chairman William McChesney Martin even vowed that the US would defend the Pool “to the last ingot”.

The Pool then continued to airlift hundreds of tonnes of gold bars from the US Treasury’s Fort Knox in Kentucky to RAF Mildenhall, as they had been doing since the previous November which they dumped into the London market for the rest of the week (March 11 -14). With all the Good Delivery Gold from Fort Knox siphoned off to the market (the buyers of the gold were actually a consortium of European merchant banks), it was left to NM Rothschild to feign surprise and convince the Bank of England and NY fed to pull the plug, and the London Gold Pool collapsed on the evening of 14 March 1968, ushering in an era of free market gold prices.

The moral of that story and the lessons that we can learn are simple – don’t believe the pronouncements of the powers that be in the London and US gold markets, especially during a crisis. In March 1968, during the last days of the London Gold Pool, as the central bank cartel ship began to sink, theystodd steadfast in denials that anything was amiss, brazenly saying that “the London Gold Pool reaffirm their determination to support the pool."

This time around, with their hollow claims about “healthy stocks of gold in London and New York”, and that the “LBMA has offered its support to CME Group”, the names may have changed but the denial strategy remains the same. It therefore seems that while history doesn’t repeat itself, it still often rhymes.

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