Commodity exchanges can dump gold debts on ETFs

COINB0Y

The Perfect Crime is Upon Us

So the gold ETF with the symbol IAU started trading on January 28, 2005, and three short weeks later the shares of IAU became equivalent to real physical gold in the eyes of the COMEX for delivery against futures contracts in an EFP transaction!

If that doesn't blow your socks off, I don't know what will.

Also note that the ETF mentioned is a COMEX product! How convenient!

Where are the regulators? This ETF is not equivalent to gold. Note the description: "Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold."

All that is being guaranteed is that each share is a fraction of the ETF assets. The net assets could be 1 oz of gold while the face value of the total shares sold could be 100 million ounces!

The notice does not restrict which gold ETFs are eligible, so clearly the infamous GLD is also eligible to be considered as good as physical gold in an EFP transaction.

Right from the inception of the gold ETFs GLD and SLV, the Gold Anti-Trust Action Committee has deduced from studies of the ETF prospectuses that these funds very likely do not hold gold and silver to fully back the issued shares because the prospectuses don't categorically require it. (See footnotes 1 and 2.) In fact, the ETFs may have no gold or silver at all.

What seemed bizarre to GATA at the time was that the two mega-short anti-gold investment banks, JPMorgan and HSBC, would be involved in the launch and operation of precious metal investments that, on the face of it, would create huge investor demand for the very metals in which the banks hold massive and clearly manipulative concentrated short positions.

Now all becomes clear. The system is the ultimate alchemy. If ETF shares are NOT backed by gold but are accepted by the COMEX as equivalent to physical gold ... presto! You have turned paper into gold -- and paper is a lot cheaper than lead.

roadrunner

I've not really paid attention to the IAU gold ETF, it must hold a very small amount of gold compared to GLD. But it was interesting to note in Adrian's article that the TOCOM has agreed to allow this swapping of ETF "gold" for future's obligations, and that in conjuctions with the TSE exchange.

Very few believed what Sinclair and GATA were selling back in 2002 about the otc derivatives nightmare coming down the pike. Bankers felt they added rock solid stability to their system. No doubt a lot of people are going to be surprised one day about the paper gold and silver scheme that has been created. Considering that the banks have killed the financial markets, it's not much of a stretch to believe that they've had their sights set on destroying the gold and silver markets. The entire scheme requires tight control of PM's and interest rates. You don't get that by allowing free markets to operate. You get that with a lot of paper gold and derivatives.

roadrunner

jmski52

What seemed bizarre to GATA at the time was that the two mega-short anti-gold investment banks, JPMorgan and HSBC, would be involved in the launch and operation of precious metal investments that, on the face of it, would create huge investor demand for the very metals in which the banks hold massive and clearly manipulative concentrated short positions.

Seems to me that the SEC ought to be more than a little bit interested in this humongous conflict of interest. Who replaced Cox, anyway? I thought that his successor was some kind of stand-up guy.

I guess not, then.

"The Case for Holding Physical Gold" becomes ever more emphatic.

roadrunner

Sheila Bair (former head of the FDIC) replaced Chris Cox as Chair of the SEC. Gary Gensler is the new head of the Commodity Futures and Trading Commission, he being a former 18 yr Goldman Sachs partner and co-head of finance. He had stints as Assistant and Undersectretary of the Treasury from 1997-2001. He was instrumental in the passage of the Commodities Futures Modernization Act of 2000 which helped to keep otc derivatives from regulation. He was also a senior advisor to Rep. Sarbanes (ie Sarbanes-Oxley bill) as well as to the Obama campaign.

While Bair is not ex-GS/JPM, she was deep in the inner circle before as FDIC chair. Bair previously held key positions at the US Treasury, NYSE, and CFTC where she was a commissioner. I wouldn't expect anything major from these 2 unless Congress forces the issue. They have been part of the very culture that helped create the current mess. It's hard to believe they are now the ones entrusted to fix it. Some new blood in the mix would be a good thing to raise the confidence of the American people.

With a resume like Cox's one would have thought that he would been more effective in rooting out some of the major problems that were growing during his tenure as SEC chairman.

For 10 of his 17 years in Congress, Chairman Cox served in the Majority Leadership of the U.S. House of Representatives. He was Chairman of the House Policy Committee; Chairman of the Committee on Homeland Security; Chairman of the Select Committee on U.S. National Security; Chairman of the Select Committee on Homeland Security (the predecessor to the permanent House Committee); Chairman of the Task Force on Capital Markets; and Chairman of the Task Force on Budget Process Reform.

In addition, he served in a leadership capacity as a senior Member of every committee with jurisdiction over investor protection and U.S. capital markets, including the House Energy and Commerce Committee (as Vice Chairman of the Oversight and Investigations Subcommittee); the Financial Services Committee; the Government Reform Committee (as Vice Chairman of the full Committee); the Joint Economic Committee; and the Budget Committee.

Among the significant laws he authored were the Private Securities Litigation Reform Act, which protects investors from fraudulent lawsuits, and the Internet Tax Freedom Act, which protects Internet users from multiple and discriminatory taxation. His legislative efforts to eliminate the double tax on shareholder dividends — the subject of a thesis he authored at Harvard University in 1977 — led to the enactment in May 2003 of legislation that cut the double tax by more than half.

Chairman Cox also served as Co-Chairman of the Bipartisan Study Group on Enhancing Multilateral Export Controls, which published a unanimous report in 2001. In 1994 he was appointed by President Clinton to the Bipartisan Commission on Entitlement and Tax Reform, which published its unanimous report in 1995.

From 1986 until 1988, Chairman Cox served in the White House as Senior Associate Counsel to the President. In that capacity, he advised the President on a wide range of matters, including the nomination of three U.S. Supreme Court Justices, reform of the federal budget process, and the 1987 stock market crash.

From 1978 to 1986, he specialized in venture capital and corporate finance with the international law firm of Latham & Watkins, where he was the partner in charge of the Corporate Department in Orange County and a member of the firm's national management.

In 1982-83, Chairman Cox took a leave of absence from Latham & Watkins to teach federal income tax at Harvard Business School. He also co-founded Context Corporation, publisher of the English translation of the Soviet Union's daily newspaper, Pravda. In 1977-78, he was law clerk to U.S. Court of Appeals Judge Herbert Choy.

In 1977, Chairman Cox simultaneously received an M.B.A. from Harvard Business School and a J.D. from Harvard Law School, where he was an Editor of the Harvard Law Review. He received a B.A. from the University of Southern California in 1973, graduating magna cum laude after pursuing an accelerated three-year course.

roadrunner

jmski52

GATA had high hopes for Gensler initially, but not if he's ex-GS. And Bair - I didn't realize that she'd been promoted. It's not as if she did anything at FDIC other than raise the insurance limits on deposit accounts. Big whoop.