Friday, August 16, 2013

The Banks Don't Have the Gold

If I'm a contract holder and I have read the fine print, and I have allocated gold, and I insist on physical delivery and I won’t take anything else and I come in with my pick-up truck and back up the truck and say give me my gold, the banks are going to be the ones that are embarrassed. Because it’s likely the government will be calling back its gold at the same time in this kind of super-spike high-stress atmosphere.

‘And the banks are going to find they don’t have it. So the banks are going to be the ones that come up short. Because remember, it never left the vaults. If I’m the Fed, or I’m the Treasury, and I’ve leased my gold to you, and I call it back, and you can’t deliver to me, you can’t honor the contract, I’ll just terminate the contract, keep the gold, reconvert title to my name and send you a bill.

‘Everybody’s going to default on everybody else. The banks will default on their obligations to their customers…and to the government. The people who had the paper gold, who thought they were protected, are going to find out they participated in part of the price increase – but not the whole thing. They’ll get a nice run-up, they’ll get a nice check, but in this environment, gold will continue to surge way beyond their contract price. They’ll get closed out at a lower level and miss the top.’

- Source, Jim Rickards via Money Morning: