Douglas Jackson wrote:
>
> Sidd responded: (to my blasphemous questioning whether the Perth Mint (
> Kitco, Monex, Fidelitrade, ScotiaMocatta etc.) holds any physical metal
> specifically to back their unallocated "storage" accounts)
>
> >So the unallocated metal is always physically in the vault...
>
> I disagree.
> http://www.perthmint.com.au/depository/download/information_pdf.shtml
> Provision 2.3.c) "PMDS may use or deal in all or part of the Client's
> Unallocated Precious Metal for its own account as if it were the owner."
> entirely guts any meaning from Provision 2.3.b) that talks about
> "maintained in bulk storage on a fungible basis". Note also the words
> "Allocated Precious Metal is Precious Metal in a physical form (ie:
> bars, coins)..." in the Clause defining allocated (2.2.a), and their
> absence in the unallocated part (2.3). I got my first tip-off of the
> slipperiness of this sort of language from the "Model Commodity Code"
> that was promulgated in the US around 1990 by the Industry Council for
> Tangible Assets and which has language that "deems" all sorts of
> financial instruments as acceptable substitutes in contractual
> situations relating to bullion/physical obligations.
>
> The combination of these provisions do not require the Mint to hold any
> metal in any vault to back their unallocated "storage" liabilities. The
> absence of storage fees is a further indication that a significant
> proportion of their reserves are performing assets (loans instead of
> bars). What they (and everyone else) call unallocated storage is simply
> banking.
Yup. There's a really big gold banking industry out there. 'cause gold
is
money with it's own interest rate. Which (gold's interest rate) happens
to be higher than the Yen!
Gold bank defaults? Won't surprise me. This is why there could be a
quick
doubling of the price of gold in a month or a few months when gold
finally
takes off. And that should be just for starters.
Bob
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