Market Overview

Zero Hedge on The “Paper Gold” Ponzi


Without asking a ton of questions, investors large and small have hopped aboard the various ETNs, ETFs and other paper trading vehicles that purport to give them exposure to "physical gold" in recent years.

Tyler Durden picked up on some commentary from a paper gold trading insider that I thought was worthy of a repost.  I'm not really the guy looking to tug on this thread to see where it unravels, but the implications of this piece of intelligence are both intriguing and frightening...

From Zero Hedge:

Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets...Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."

"...So the giant ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks.

Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.

There are plenty of ins-and-outs, like all good Zero Hedge investigations, so click over if you're interested in how this is all going down.


Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi (Zero Hedge)

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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Daily Forex Commentary March 28, 2010