By Jim Sinclair
The most popular question I receive on a daily basis is to comment on the gold to silver ratio. Here is my answer and promise to you:
As pressure to deliver gold hits the COMEX exchange in the last quarter of 2009 with titanic force, the ratio trades will totally explode, killing the gold to silver spread traders.
With gold to silver ratios you are not buying insurance, you are a gambleholic buying decimation.
“Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.
Why not? One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.
Another possibility is that the bar indicated on the warehouse receipt does not actually exist. The implications of that are rather dire.”
Where’s The Gold?
The Comex is the name for the largest gold futures market in the world, traditionally centered in New York City. Although the market recently became part of the Chicago Mercantile Exchange, it has retained its old nickname. Also, the depositories which hold the actual bars of gold used to settle the futures contracts remain in New York City.
A gold depository must be the most boring business on earth. They charge a small monthly fee to store 100oz. standardized bars of gold in an insured vault. It is an industrial-sized version of a safe deposit box.
The owner of a 100oz. bar owns a specific chunk of gold. It has a manufacturer, a serial number, and an exact weight measured to the 1/100th of an ounce. A written depository receipt — similar to an old-fashioned paper share certificate — shows the exact date the bar entered the depository, and the entire chain of ownership since that date; they often change hands without leaving the depository. You can request to withdraw the bar from the depository, and you should receive exactly the bar indicated.
Interest in precious metals as an investment has been heating up, and some fund managers have begun to take very large positions. Demand for Comex gold bars has been increasing — especially as they are significantly cheaper per ounce than alternatives like 1oz. bullion coins or the kilogram bars popular in Europe.
Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.
Why not? One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.
Courtesy: www.jsmineset.com
