I liked this article, on SeekingAlpha via Yahoo Finance. Someone did a careful audit of the records for the SLV ETF that tracks silver. He found numerous irregularities that are a symptom of fraud.
They found that there were several bars with the same serial number claimed multiple times as part of the fund's inventory. They found duplicate serial numbers for 11.77% (!) of SLV's holdings, and 0.4619% of ETFS (another silver ETF).
How did the authors get such records? I thought they weren't publicly available?
That article only analyzed SLV. I suspect that an audit of GLD would yield similar conclusions.
If GLD and SLV don't have as much physical silver as they claim, then they are committing fraud. In effect, the fund managers are secretly practicing fractional reserve banking. As long as all shareholders don't simultaneously demand redemption, the scam can continue.
This fraud explains why the price of gold and silver aren't rising, even though people are buying. If funds like GLD and SLV are secretly practicing fractional reserve banking, then they aren't buying enough physical metal to correspond with fund purchases. People are buying shares of a mutual fund thinking they're buying the metal, when they're really buying into what's essentally the early stages of a Ponzi scam.
It wasn't clear what the actual percentage discrepancy was. For a reputable financial firm, *ANY* nonzero discrepancy is too much.
The article gave the correct conclusion. "Don't trust SLV or GLD. If you want to invest in gold or silver, buy and take physical delivery!"
Monday, August 31, 2009
Are the GLD and SLV ETFs a Fraud?
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3 comments:
I couldn't imagine buying a piece of paper that claimed it was worth physical gold stored somewhere. If I did they would need to offer free insurance in the result that the claim was false. And some way I could guarantee the insurance was completely guaranteed if failure would result.
I think this would be impossible and would only buy physical gold. The challenge would be to creatively store this gold. But I believe anyone with a good imagination could find a way. The trouble would be to not hide it beyond your own ability to find it.
Fritz
If you read commentary by James Turk of Goldmoney or at gata.org, you will find analysis that supports the same ideas:
1. Paper claims on gold and silver are greater than physical holdings.
2. Ridiculous manipulation is going on.
"I couldn't imagine buying a piece of paper that claimed it was worth physical gold stored somewhere."
Sure you could. Just buy it for a 99% discount if you think you have a 1% chance of delivery, 99.9% discount if you think you have a 0.1% chance, etc. So if you have 1 ounce of gold, you want 100 or 1000 ounces worth of gold certificates.
"1. Paper claims on gold and silver are greater than physical holdings."
Yup. The Non-Federal Non-Reserve is selling more gold than even exists. If people actually want delivery, they can get COMEX to retroactively change all futures to "cash/fiat settlement (at THEIR ARTIFICIAL PRICE!)". So they can just declare the market price to be whatever they want (by posting some insanely low bid and insanely high ask), and you have to take it!
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