Rickards On Gold Leasing: Is It All There?
Rickards On Gold Leasing: Is It All There?
Authored by Adam Sharp via DailyReckoning.com,
Our friend and colleague Jim Rickards has the energy and drive of a 20-year old. I try to read everything he writes, and watch all his media appearances. But sometimes a gem slips through the cracks.
Two months ago, Jim was featured on Daniela Cambone’s Youtube show. This was a gem, and luckily a reader alerted us to it.
The interview took place during the beginning of the trade war tensions, so the first 7:00 minutes of the discussion can be skipped (unless you want a recap).
At the 7:40 minute mark, Daniela and Jim get deep into the fundamentals of gold. How it’s priced, delivered, and traded internationally.
Jim explains that the vast majority of gold is traded as paper contracts.
Only about 1% of gold traded on futures exchanges like the COMEX is ever physically delivered.
Mr. Rickards goes on to explain that exchanges like the COMEX can change the rules whenever they please. For example, when the Hunt Brothers cornered the silver market in 1980, COMEX did not allow them to take physical delivery.
Tampering With The “Primal Forces”
When the topic of Fort Knox gold comes up, Jim says that the gold is all there. However, his concern is whether that gold has been leased (on paper, not physically) to the bullion banks.
“You can have a hundred tonnes of paper gold transactions supported by one physical tonne that got leased by the Treasury to JPMorganChase.”
Gold bugs have long suspected that bullion banks, such as JPMorganChase and Goldman Sachs, have “leased” gold from the U.S. Treasury. And it’s possible that gold has been “rehypothecated” many times, meaning that multiple individuals believe they own the same piece of gold.
Jim notes that when we ask questions about gold leasing, we are essentially “tampering with the primal forces”.
He goes on to explain the difference between allocated and unallocated gold, and how the rehypothecation process works.
This interview is a must-watch for all Jim Rickards fans.
Wild speculation on the basis of no knowledge: Basel 3 not implemented in the US so unallocated gold isn't subject to NSFR (ie. doesn't require expensive funding). Unallocated gold asset (e.g. a loan to a producer) can be hedged with Comex futures (i.e. bank short) without any requirement for expensive funding - in the case of a US bullion bank based in NY. On this basis, it makes sense that the short is on the Comex which explains the squeeze and expansion of the basis (paper spot LBMA v paper future Comex) in the event of delivery delays out of London/Switzerland. This is coincident with Tariffs but not caused by Tariffs........
The reason it "slipped through a crack" is because no serious professional will watch Cambone. Nice lady, warm and friendly, but never asks the tough questions, just softballs for her BFF guests.
Jim has a book to sell and should appear on any show w an audience.
Leasing US gold? Shocking! Now there's a breaking story.
A Member of Aris (ARMN) Board of Directors for her IR "expertise"👀 LOL -- I'm told because a VP Capital Markets AND an IR Director aren't sufficient.