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LBMA Data Points to Gold and Silver Default

By: David Jensen | Friday, January 30, 2015

Discussion between Jay Taylor and David Jensen taped on January 29, 2015

Discussion Notes:

1) Short recap key definitions and data for Listeners

Spot contract trading of metal - contract for trading immediate metal ownership; 90% of LBMA daily trading.

Open interest - the total number of ounces of gold for which there are trading positions (claims for metal) in the market.

Net settled clearing volume - the end of day net volume of trading when all of the credits and debits between members have been netted-out.

2) LBMA Data Points to Gold and Silver Default: LBMA report "Loco London Liquidity Survey" http://www.lbma.org.uk/assets/Loco_London_Liquidity_Surveyrv.pdf re. LBMA gold trading volumes (turnover) in Q1 2011 that daily gross trading volume is 10x the average net cleared trading statistics (as posted online at the LBMA website)

LBMA data analysis - data source http://www.lbma.org.uk/clearing-statistics

LBMA Daily Gold and Silver Trading Volume - Gold and Silver Claims In LBMA

LBMA Daily Gold and Silver Trading Volume - Gold and Silver Claims In LBMA

Global gold stockpiles estimated as official global central bank stockpiles plus 200M oz plug number for China.

Silver imbalance between its London open interest of 3.5 to 5 billion oz. and global stockpiles is extreme.

https://www.silverinstitute.org/site/wp-content/uploads/2011/06/CPMGroupSilverInvestmentDemand2014.pdf

3) The Gold Problem: Gold stockpile estimates do not account for off-balance-sheet central bank leasing of their gold; has been ongoing for decades.

Decades of central bank leasing of gold to set (rig) the gold price and hide both monetary inflation as well as contain interest in gold.

Richard Pomboy estimated in 1997 at Grant's Interest Rate Observer investment conference that central banks needed to sell / lease 1,500 tonnes (48 M oz.) of gold to meet annual market deficit. Subsequent market analyses in ~ 2000 by James Turk, Reg Howe, and Frank Venerosso all independently estimated ~ 1,500 tonnes (48 M oz.) of gold leased to market each year with Enron-style off-balance-sheet gold transactions by central banks to contain gold prices and hide gold demand. Pomboy's presentation still available using WayBack archives:

a) http://web.archive.org/web/20130312175814/http://www.gold-eagle.com/analysis_98/pomboy072098a.html

b) http://web.archive.org/web/20130312175809/http://www.gold-eagle.com/analysis_98/pomboy072098b.html

Bank of England (BoE) acts as physical gold market liquidity maker providing gold to LBMA to keep paper market contained.

Today's gold and silver prices are a creation of virtual metal positions at the LBMA - not backed with metal. Physical withdrawals will cause LBMA party default.

We are now hearing that "capitalism has failed" - Bill Gross, Soros, and others.

What we are seeing the failure of central planning, regulatory capture, and market rigging - not capitalism's failure or the failure of a market economy.

Increased central planning and consolidation of power with world government, world currency, etc. being identified as solution by financial sector participants. Centralized power and abuse is the source of our crisis and not a solution.

 


Reference:

LBMA report "Guide to London Precious Metals Markets" (gold, silver, platinum, and palladium) published on the LPPM website: http://www.lppm.com/OTCguide.pdf

- pg 12 (of 52) Majority of LBMA trading is in unallocated accounts - client purchasing metal does not have title to specific metal and is "an unsecured creditor"

pg 16 Loco London (ie. LBMA) pricing is the basis for "virtually all transactions in gold, silver, platinum and palladium"; global price setting power of the LBMA for transactions involving precious metals traded using virtual unallocated metal.

 

Author: David Jensen

David B. Jensen, P.Eng., LL.B., MBA
Vancouver, BC
Canada

David Jensen

David Jensen, P.Eng., LL.B., MBA, is a Professional Engineer with a degree in Engineering from the University of Waterloo in Canada (1987). He worked through 1993 on the F-5 Fighter Overhaul program and the Bombardier Regional Jet programs. Mr. Jensen then graduated with a LL.B. degree in corporate and commercial law from the University of Calgary (1997) and an MBA from Univ. of B.C., majoring in Logistics and Supply Chain Management (1999). Returning first to aviation then, after reading Austrian School Economics, Mr. Jensen transitioned to the mining industry from the aerospace industry in 2004 first through his mining industry consultancy, then as Vice President of Corporate Development for Western Copper Corp., and most recently as President and COO of Skyline Gold. Mr. Jensen currently serves as President and COO of a private mining company and provides strategic, operational, risk assessment, and precious metals consulting services through his consultancy, Jensen Strategic.

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