“It was miraculous. It was almost no trick at all, he saw, to turn vice into virtue, and slander into truth, impotence into abstinence, arrogance into humility, plunder into philanthropy, thievery into honor, blasphemy into wisdom, brutality into patriotism, and sadism into justice. 

Anybody could do it; it required no brains at all. It merely required no character.”

Joseph Heller, Catch 22

Heller might have been writing about our own day, and much of the analysis and ‘expert commentary’ on the economy and the markets. This is how it is in times of moral hazard, and general shamelessness among the worst.

Gold and silver drifted slightly lower in a quiet trade today. 

There was intraday commentary taking note of Koos Jansen’s latest analysis of Asian demand, and more specifically the buying habits of the People’s Bank of China, and the London Gold market which you may read here.

As I have noted several times previously, October is a relative sideshow as compared to both the volume and open interest of the big month of December. But it does offer a chance for the parasitic class to play their paper games. If it had been a more active contract one might have expected a little more of a ‘gut check’ today for the contract holders. So I am still reluctant to read too much into the big rally yesterday and the slight retrenchment today and into the weekend.

Here are the volume and changes in open interest from yesterday in the first graph below. As you can see from the circled number on the right, the open interest for the coming month of December is 293,901 representing about 29,390,100 ounces of potential paper gold claims.

If one looks at the Comex inventory report on the second graph below you can see that there are currently about 161,937 ounces marked as registered ‘up for sale as these prices’ and a total of all gold in all the warehouses of 6,856,672 ounces, of which 6,694,735 are not offered for delivery into those contracts at these prices.

But let’s be generous, and assume that JPM et al could manage to put another 500,000 up for sale near these prices and not bother about little details like price being a function of supply and demand, making the working total available for delivery at 661,937 ounces, which is a very generous assumption given the most recent levels. 

If more than 2.3% of the contract holders stood for delivery, all of that generously assumed deliverable supply would be wiped out.

In fact, to put the question that Kyle Bass put to them, if something happened and only 4% of the contracts stood for delivery, that would require about 1,175,600 ounces of gold, against the 161,937 that they have on hand for sale today. 

And even though it sounds like a lot, those 1,175,600 troy ounces of gold are only about 36.6 tonnes, a good week’s work of physical delivery leaving the exchanges for other vaults in Asia.

Oh no Jesse you don’t understand. NO ONE stands for delivery like that on the Comex, and if they did, ‘price would take care of it.’  Righto, that is what they said to Kyle Bass, and putting his common sense and fiduciary duty first he said ‘just give me the gold now.’

If you are unallocated or hypothecated, given the numbers that have been estimated for physical demand in Asia against physical supply in London, you just might be walking on the wild side, taking your chances of getting your gold against some heavily lawyered up enterprises.

As I have said the other day, as foolish and greedy these jokers have proven to be, the lies will end when physical delivery fails.