Tungsten Salted Gold – Investment scam of the century???
ATTENTION GOLD INVESTORS! If you missed this on the Nov. 13 daily digest, I implore you to go read this article in its entirety right now:
The quoted text on the daily digest was the first paragraph of the article, but really didn’t reveal the extent of what is alleged by the article. I’m using the word alleged quite intentionally, because I feel that this article is alluding to a lot of possibilities that are speculative and unproven. But there’s also some hard facts that I verified myself about the GLD ETF here that no investor in GLD can afford not to know about.
It’s already been widely reported that a 400oz gold bar was found gutted out and filled with Tungsten. This sounded at first like it could be an isolated incident, but this article now claims this is much bigger than I previously understood:
The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes].[/quote]
But the real news (which I feel compelled to emphasize that I was unable to verify) is this shocking information:
Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.
The balance of this 1.3 million – 1.5 million 400 oz tungsten flush was also plated and then allegedly “sold” into the international market.
Apparently, the global market is literally “stuffed full of 400 oz salted bars”.
That is the most amazing “news” story I’ve ever read! If this is really true, the consequences of this being revealed publicly could defy comprehension. A couple of years ago I would have dismissed this a lunatic conspiracy theory nonsense just because the claim is so absurd – that the U.S. Goverment defrauded the world by selling fake gold bars from Ft. Knox. But based on what we’ve seen from government in the last few years, I’m ready to believe just about anything. I wish I knew where to go to verify these claims.
For investors in the GLD ETF, this quote from the prospectus was rather shocking:
Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.[/quote]
The article goes on to speculate quite a bit about how the ETF itself might have been set up as some sort of conspiracy to create a place to get rid of all the phony gold bars. I’m not inclined to pay much heed to that stuff, but this quote from the GLD prospectus is pretty damning in my eyes just by itself. The Gold in GLD may not meet Good Delivery standards??? What standards does it meet, then?
So what if all this counterfeit business were actually true, and many of the 400oz gold bars in the world are fakes? Seems to me like the value of the real stuff (if you can prove it) would go through the roof, while the value of paper gold assets including GLD ETF shares and COMEX gold contracts would fall precipitously because of a loss of investor confidence in whether there is real gold behind the paper. A counter-argument would be that the standard unit of exchange on the COMEX is 100oz bars, which would presumably be a little harder to salt with Tungsten than the 400oz variety. (Kevin Maher, any opinion on this?)
I am heavily invested in COMEX gold futures and scared to death by what this could mean. I’m tempted to move out of Gold and into an equivalent dollar amount of Silver (figuring it is a good proxy for Gold appreciation) until the question of widespread tungsten salting is either credibly refuted or confirmed and the extent of impact is understood. But if this counterfeit gold business were actually true, it could take down the entire exchange and make all COMEX (and perhaps all NYMEX) contracts worthless!
Anyone know more?
The world is, without a doubt, an insane asylum. AAA ratings and now these rumors all while a counterfeiter goes berserk.
At this point I don’t know what to believe about our government. It would seem that these stories are gaining more credibiltiy.
However, on the other hand it recently occured to me that suppose this information is actually “disinformation” planted by tptb to cast doubt on gold investments and indirectly make people want FIAT money and not gold.
In the mean time I think I may buy some more gold coins.
Keep the information coming.
The story seems so fantastical that it couldn’t possibly be true. But these days, almost nothing would surprise me. I’m just glad my gold is in coin form.
Viva — Sager
You know, I had the same thought re the other possibility being that this could be disinformation. I’ve become so jaded about trusting any stories in the media, that it is becoming 2nd habit to ask “what could be the outcome of this news?” and then “who would benefit from that?” (i.e., who would have a motive to propogate that news).
So while I find this story incredibly interesting, much of it is, as Erik states, speculative. But with all we’ve learned the last year or so, I don’t dismiss it out of hand, either! So I’m left pondering wheter it is:
– Fiction (“passively” not-true, as in someone unintentionally promoting something that is not true, because it aligns with their own beliefs or opinions),
– Misinformation (“actively” not-true; someone knowingly and intentionally promtoting an untruth to manipulate the market), or
– True (the “investment scan of the century”).
So even though it is speculation, I still sent the article to family members invested in GLD so they’d have this information about the potential additional risk of their position. They can decide what to do with that information
Erik, I also found the timing noted in the article very interesting (but you’re right, it is speculation) Here’s the clip:
These revelations should provide a “new filter” through which Rothschild exiting the gold market back in 2004 begins to make a little more sense:
“LONDON, April 14, 2004 (Reuters) – NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild [ROT.UL], will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.”
Interestingly, GATA’s Bill Murphy speculated about this back in 2004;
“Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but suspect:”
*SOMETHING IS AMISS. THEY KNOW A BIG GOLD SCANDAL IS COMING AND THEY WANT NO PART OF IT. …”
“ROTHSCHILD WANTS OUT BEFORE THE PROVERBIAL “S” HITS THE FAN.” BILL MURPHY, LEMETROPOLE, 4-18-2004
Coincidentally [or perhaps, not?], GLD Began Trading 11/12/2004
I’ve been following this story but I am unable to offer any concrete evidence to support or refute these “salting” allegations. Fort Knox is a mystery that should not be. In a lawful society, the stored gold would be periodically counted and spot assayed.
Here are some other concerns regarding the integrity of the gold markets:
- The U.S. is apparantely missing gold – (see my earlier post – U.S. Gold, Going or Completely Gone?)
The United States Geological Survey [USGS] publishes monthly Mineral Industry Surveys designed to provide a macro-import/export-overview of the U.S. precious metals [gold] industry. Over the course of 2007 / 2008 more than 5,000 metric tonnes of “Gold Compounds” have been exported from the United States of America representing more than 62 % of reported sovereign U.S. gold reserves.” The sovereign U.S. gold reserve has not been independently audited since the 1950’s during the Eisenhower Administration. GATA’s freedom of information requests are all about ensuring that the 8,100 metric tonnes of U.S. sovereign gold is still owned by the U.S. In April, 2008 the Federal Reserve responded to GATA’s request, releasing hundreds of pages of worthless information with significant portions redacted.”
If this is true, over 5,000 metric tonnes of gold are missing which would leave us with at most, 3,100 tonnes of gold. At $1,100 per troy onuce, the theft would represent around $180 billion dollars.
- Physical Bullion Inventory Shortage; there are signs of increasing physical bullion liquidity problems at major trading exchanges such as the Comex and the LME, as evidenced by ‘significant lumpy transactions’, increasing price volatility, the reemergence of non-LBMA-purity coin melt bars and generous 25% premium cash settlement offers to futures contract holders rather than physical deliveries (Kirby, Willie). Also there have been requests for repatriation of offshore sovereign reserves. Germany and Switzerland are reportedly demanding the return of their custodial gold from the U.S. plus Hong Kong and Dubai are also planning to withdraw their bullion holdings from UK depositories.
- Growing Suspicion of ETFs; closer inspection of the GLD and SLV ETF Prospectus’ show incongruencies pointing towards the conclusion that the paper shares may not be fully backed by physical gold or silver (Kim, Mayer). Some even point to these funds being derivative paper trading tools complicit in the ongoing physical bullion price suppression. It is interesting to note that some custodians of the ETFs are also some of the main holders of substantial market short positions. Greenlight Capital has notably sold $500 million of the GLD ETF and bought physical bullion although they downplay the risk angle and attribute the action to fee cost savings. (Complete article link – Silver Bear Cafe)
- Double Allocation of Physical Gold; Adrian Douglas in ‘How much imaginary gold has been sold?’ (Part1, Part2) argues that the volume of gold traded on the London bullion exchange could not be supported by the reported sales of 15,000 tons (482 million ounces). By Douglas’ calculations, the London market needed a minimum of 64,000 tons (2.05 billion ounces) of gold to be sold to support its reported trading volume. He believes that any disclosure that this much extra gold has been sneaked onto the market, leaving less inventory available to cover open contracts in London, could cause a panic in the gold market. Is the London bullion market operating on a fractional-reserve basis with 64,000 tonnes of gold sold via unallocated accounts against a maximum reserve of only 15,000 tonnes? If he is correct then some vaults hold bullion bars with multiple allocations. Douglas estimates that paper gold derivatives dwarf physical bullion by at least 20-1. (Complete article link – Silver Bear Cafe)
- Double Allocation of Physical Silver; it seems that there may be also problems in the silver ETFs. ZeroHedge analyzed SLVs bar list and found that during their research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, there were discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates (ZeroHedge). Jason Hommel estimates silver paper derivatives dwarf physical bullion by around 100-1.
- ETF Proxy Settlement; New York and Tokyo commodity exchanges permit their gold futures contracts to be settled not in real bullion but in shares of gold ETFs. This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have. It is now apparently legal for precious metals futures contracts to be settled by delivery of paper ETF shares rather than physical bullion (The Alchemists).
“Basically, the gold market operates on a fractional reserve basis. On average there are several claims of ownership on each gold bar conforming to London Good Delivery (LGD) standard on the “pool” of gold which acts as liquidity for the massive OTC gold trade based in London. Similarly, there are several claims of ownership on the gold bars in Comex wherehouses [sic]. If a sufficient number of market participants become concerned about this (which is happening) and there is a stampede to take delivery of physical bullion, the entire gold market will come crashing down, taking most of the global financial system with it. Market failure isn’t a risk, it is a certainty. The unregulated gold market is an accident waiting to happen.” (Gold Market Reaching The Breaking Point)
Wow! Larry great post!!!!! Thank you very much! I’m going to buy some more gold on Monday;-) Coins btw.
Thanks for the excellent info, Larry!
This was the first I’d heard of futures exchanges authorizing settlement thru ETF shares.That unto itself seems like a scam and a half. So if I am due 100oz of bullion against my COMEX futures contract, how many shares of GLD do I get instead? There is “supposedly” 1/10oz of gold behind each share, so one would assume I would get 1000 shares. But 100oz of real bullion is worth $112,000 and because of “tracking error”, 1000 shares of GLD sells for only $109,750 or so. If it’s really legal to settle short futures contracts with ETF shares, it would appear to create a risk-free arbitrage! And the prospectus for the ETF says clearly that the gold it holds may NOT meet good delivery standards of the futures exchanges!!!
I left a message on the “Q-Line” asking Jim Puplava to comment on this article personally. Hopefully he’ll do so on next week’s show.
Larry (or others), any opinion or background information on issues with Perth Mint bullion ownership – either the certificate program or allocated bars? I had been leaning toward physical delivery of bullion to put in a safe deposit box, but after reading this I realize that the risk of counterparty default in paper gold is no greater than the risk of being sold fake gold bars by a futures exchange.
Don’t know if this helps but I own allocated PM’s in the Perth Program and have taken physical delivery from them in the past. I’ve checked every piece with my spectrometer and found nothing improper. It’s a very easy program to be involved and their customer service is outstanding. Now I will say they’ve become a little more strict in the past year over taking physical (more lead time needed before physical delivery) but they’re MUCH easier to deal with than CONEX! I’ve sat at the CONEX facility for HOURS waiting for delivery! And I honestly feel like I’m being followed every time I leave as they usually have a couple guys in suits outside with they ear pieces watching me drive away. Very eerie.
Wouldn’t it be really funny if the gold that the US funded the World Bank with was Tungsten core? You know Roosevelt did the same scam back in the 30s when he confiscated our gold coins to settle our European debt with 90 percent gold. Tungsten is even more profitable than that!
I’m dripping sarcasm, sorry if many of you can’t tell.