Is the Comex Doing Fractional Reserve Delivery of Gold?

An acquaintance who works for a small precious metals fund sent this to us today, asking if we had ever heard of anything like it.

The short answer is no, but this is not a strong area of specific expertise, and we never attribute to a bad intent what we can attribute to sheer incompetency, especially when dealing with large organizations.

When one is promised specific bars with specific serial numbers of a specific size and weight one week, and they are not available the next week when you confirm that you wish to receive them, that brings up the same kind of red flags that have been so notoriously ignored by regulatory agencies in other recent cases. Of course the Comex is no Bernie Madoff.

But nevertheless it does bring into question the integrity of the Comex records and their contracts, and the condition of their audits and inventories. We would have a fit if someone did this to us after an online auction or a personal purchase transaction. Why should the Comex be allowed to sell what it does not have, and then dictate new terms after the fact?

And it does put a fresh emphasis on the old adage, "When in doubt, take it out."

We accumulated 3 emini gold contracts on Comex for December delivery and we had been given serial numbers and weights last week for the 3 bars we were to receive.

Today we are informed that Comex is invoking a rule in which they can deny delivery of individual mini bars (roughly 33 ounces) and issue you only a Warehouse Delivery Receipt (WDR) against your mini-contract unless you have 3 WDR's, and then they'll issue you a 100 oz. bar.

Otherwise, if you have only 1 or 2 mini-contracts, you only own a WDR, which you sell by shorting a mini against it. If you own a WDR for a 100 oz., they encourage you to safekeep the gold at the Comex and hold a vault receipt.

CLEARLY, the Comex has run out of the bars that were being delivered to holders of emini contracts. Our back-office guy told us that he's been doing Comex deliveries for 30 years and he's never seen anything like this, and he's never heard of this NYSE Liffe rule on the mini contract.

Fortunately we have 3 WDR's and we will be getting delivery of a 100 oz. Comex gold bar.

But this whole episode brings into the question the validity of the Comex gold inventory. More importantly, the Comex is now going to issue WDR's, which are paper.

Are they becoming a "fractional" reserve depository, where they can issue several WDR's against the same bar of gold, knowing that some of those people will opt to keep storage on Comex and never require actual physical delivery?"

The original post writer is simply confused about which exchange he bought his contracts on.

LOL. As if you would have any idea, never mind proof.

NYSE-Liffe has taken over the CBOT gold and silver trade

Whoopee. That market is so chickensh!t, the fact that CBOT metals are now at NYSE-Liffe went under my radar. Mainly because I don't trade mini contracts and couldn't care less about them other than when they're used as a vehicle to advance conspiracy BS like this. Probably a forced divestiture due to the CME buying up every exchange in sight. Comex is somewhere between 50 and 100 times as large a metals market as was the CBOT before CME bought them. NYSE-Liffe's had their tiny little niche for a month.

Anyway, so what? This is about a Comex hoax story. One that people like you seem to suck up like it was some sort of gospel.

The 1 kilo bars are the most popular format for consumer buyers, who want to take delivery.

And actual December deliveries on kilo contracts were what? 10? 50? 100? 1,000? How many? Cough up a number, you made the claim it was the "most popular" format.

It makes sense that NYSE-Liffe would start running out of the smaller bars of gold

Only if you're a conspirazoid.

All the futures exchanges are operating on the basis of fractional banking.

Once again, why is it so hard for people to understand that 99.99+% of all trades are entered into by people who have no intention of ever making or taking delivery and are liquidated long before delivery is an issue?

"Fractional banking" has absolutely nothing to with commodity exchanges. It only appears that it does to those with an unsophisticated and simplistic level of comprehension of futures trading.

I suspect, further, that their warehouse stock figures are heavily inflated and they have even much less than they list as warehouse “stocks”.

And I'm the Queen of England.

COMEX clearing members managed to crash the price of silver, through a host of corrupt tactics

Got any proof? Of course not. You're a conspirazoid, so you don't need any. A mere assertion is good enough for you. Not surprising, considering that you believe hoaxes.

Take delivery folks

LOL. Very few people out there in the "public" are dumb enough to take delivery of a kilo bar.

Doing so will force a vast rise in the price of gold and silver to their real valuation. Right now, we are allowing a deb of vipers and thieves in NYC to profit from periodically crashing prices using fake contracts for non-existent metal, with questionable warehouse reserves, and fractional banking.

Ah, yes, investment advice from someone who makes a big pile of unsubstantiated and ridiculous assertions based on absolutely nothing. No doubt gold was down 50 bucks in the last week due to the machinations of evil banksters and the corrupt vipers at the Comex.

Very funny stuff.

So the central thesis of the article is correct

Ah, no, it's still BS. Do you think that because you have ignored facts for a few posts that they somehow disappeared?

The Comex running [sic] a fractional system

You obviously also have no understanding of how commodity exchanges function and have gone off into the never-never land of total fantasy. Repeat after me. Commodity exchanges are not banks.

[Comex] doesn’t really have all the gold they claim to have

Beyond the fact that you couldn't prove the contents or lack thereof in Comex warehouses if your life depended on it, are you really that dense?

"They" (Comex) own no gold. Every ounce deposited in a Comex-approved warehouse is owned by some entity, individual or corporate or otherwise. Comex couldn't care less who puts gold into storage or doesn't.

Are you so irrational that you think that there is a massive conspiracy to make Comex think that there are more ounces stored in their approved warehouses than there really are?

Guess what? If that was true, Comex couldn't care less that shorts might be squeezed as a result. They're just the exchange, they'd fire their auditors and hire new ones who could get it right. Too bad it's only a recurring dream of the conspirazoids.

Glad you admit it

Keep repeating your magic words if they make you feel better.

You remind me of tax protesters. They claim this, that and the other thing, but will never admit that the law contradicts their ridiculous positions and that they always lose, 100% of the time, in actual courts when it comes down to their liability to pay.

They still claim they are right as they wave good-bye on their way to prison, just as you refuse to see reality and instead suck up every stupid and idiotic conspiracy theory that comes down the gold pike.

It's good to see that you haven't tired of making a fool of yourself.

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