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Originally posted by Lemon Thrower

educated guess is that folks are starting to demand physical settlement, and the folks delivering need to have the right category of metal in order to perform their obligations.

Jim willie a while back wrote about a hitmen unleashed on the comex. he was being figurative. his point was that they would demand physical and take it away and then at that point the comex could no longer play its games (or more precisely, the game players can't play their games on the comex anymore).

anyone here subscribe to Ted Butler? I listen to his weekly interview on king world news (free and recommended) but i don't get his pay service.

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Originally posted by Copper Catcher

I found the commentary below and thought I'd add this to the discussion.

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Contrary to popular perception, COMEX actually doesn't have an ounce to sell.

And what of all that Registered and Eligible "inventory" present on the books of the licensed depositories -- Scotia Mocatta, HSBC, and Brinks? Not an ounce of it belongs to the Exchange.

It is entirely possible at any given time that some of the Eligible ounces people might see listed at Scotia, Honkers & Shankers or at Brinks is actually my own property, completely unavailable to COMEX participants.

How is this possible? If I happen to have kilo bars in temporary safe storage at those institutions, say, in the process of conversion/exchange for the extra safety (and a potential premium play) on European oldies, then they are listed among the "Eligible" inventory of those institutions. This doesn't signify that the Exchange owns it, but rather that it meets the specs for delivery in satisfaction of a standard Contract and is "Eligible" (as opposed to "Registered") in the sense that I haven't had it officially parceled and registered into standard delivery "warrants."

When my favorite Gold broker ("Hi, guy!") tells me that my Swiss Gold francs and German Gold marks have arrived on his end of the deal, orders are given by each of us for an exchange of our forms of gold.

Now pay attention here. If his account is with an institution outside of the COMEX triumvirate, then the level of their Eligible inventory will fall as Brinks hauls my kilo bars away, replacing them with a form of Gold that is off the radar screen -- coins do not match the standard spec for delivery against a contract, and thus are not listed among Eligible inventory.

Eventually, this Gold coin leaves NY as I bring it closer to home, but prior to that, and at all points whether in the form of kilo bars or coins, it remained my property and was never the Exchange's to sell. The Exchange merely matches (anonymously) a paper long against a paper short, and should it come down to delivery issues in those rare cases, all eyes look to the short to deliver the Gold through a warrant, the exchange of which is done through the auspices of the Exchange and its licensed "depositories." (Again, these are depositories of other people's Gold.)

But this rarely happens because true commercial interests don't move their Gold through the Exchange, showing up merely to hedge cashflow. And the big speculators? They're in it for cash. And the little speculators? They exhaust their resources on the margins, and can't afford to stand for delivery for the full bodied contracts they theoretically represent. (There's an exception, but that shall remains the topic of another post.)

So as you can see, in a crisis of confidence in paper and counterparties, it is more likely to see a SELLOFF of America's form of Gold Benchmark (that is, the COMEX Gold Contract) rather than a price runup. Then, out of discredit the market's attention will shift to the phsical Gold market where the price (premium??) will break free from the dying paper proxy.

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