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The Cartel And Hedgies Are Short Paper, But Long Physical Gold

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The following bulletin from Jim Sinclair explains where gold is headed and who will benefit.  In typical fashion, Sinclair’s information is superb but his writing style isn’t exactly clear.  In fact, after reading it, my wife asked me what he meant by “7 touches”?  (See following bulletin)  Half a dozen years ago it was fashionable within the gold community to point out that a few bullion banks (Goldman Sachs, JP Morgan and a few friends) were always “short” gold. Sinclair stated then, that the bankers weren’t stupid and as the bull market advanced, the same bankers that were “short” would be the ones who were “long” and they would make a fortune on their gold holdings.  That’s right, they would be “long,” not “short!”  At the time, not many people believed him – but here he is, in the bulletin below, once again pointing out who is accumulating gold.  Low and behold, it’s the very same bankers that are being blamed for being “short.”  Of course, they are “short,” short paper gold and “long” the physicals.  That is exactly what Sinclair is alluding to.  But it’s not just the bankers that are accumulating physical gold; it’s also “big money.”  They are starting to protect their wealth against the coordinated central bank (QE) money debasement from the Fed, the ECB and Japan.

If this isn’t reason enough to shun the paper gold vehicles like GLD and go through the minor aggravation of accumulating physical gold, I don’t know what is.  This has been my plan for more than a decade.

Whereas Ted Butler focuses on JP Morgan and “the Big Four Commercial Banks,” and their perpetual “short” position in silver (and gold), I don’t recall him ever suggesting that they actually own the physical silver to offset their short positions.

My friend Trader David R flatly states that this IS the case; he has seen the silver with his own eyes in London.  In fact, he asked me to come with him last year and told me he would bring me to the vaults and personally show me the silver.  Last winter he emailed me and said, “I will be going to London in May; if want to come along, I am sure I can get you a tour of a few of the major banks vaults (JPM included) and you can see all of the gold and silver for yourself ?”

Who is Trader David R and why should you believe him?  Judge for yourself.  He told me:

David R left Barclays and moved to Manhattan to work for one of the largest and most successful privately held hedge funds in NYC.  He was in charge of the precious metals trading department, and supervised dozens of the most talented precious metal’s traders in NYC.  I was told by a reliable source that every metals trader worth his salt would kill to work for that firm.  The traders were not salaried, they worked on commission and they all made BIG money.  That is where I met David.  He gave me a personal tour of their trading department.  His understanding of the gold and silver industry and his resume is as good as it gets.

In concert with Sinclair, David R maintains that the banks (and large hedge funds) are long “physicals” and short “paper” gold and silver.  He told me:

As for all the talk about a shortage of silver, he says:

How can you be sure that he really knows what goes on with the bullion banks gold trades?  He said, “Because I worked for three of the major bullion banks for 11 years and was in charge of Barkleys gold book and the hired 42 Brinks trucks to move our 27 million ounces of gold out of HSBC ‘s vault and into JPMs vault when HSBC raised storage costs on us, I am 100% positive that it’s there. I know we had 27 million ounces of gold on our daily balance sheet and the other big banks all had around the same amounts.”  These facts tend to validate Jim Sinclair’s contention that the big banks do, in fact, have the physical gold to offset their short paper positions on the Comex.

For those of you who still doubt that the big banks actually own the physical silver, David R says you can find it listed on their audited annual financial statements:

He added:

Last year, David R left the NYC hedge fund and opened his own closed fund and trades gold and silver with his own capital and funds provided by silent partners. I suspect he does it better than anyone else.

This is not information you will read anywhere else.  You can believe it or not.  I have known David R for nearly four years, and I do believe it.  David R is very much in agreement with Sinclair.  He is absolutely convinced that gold and silver are going MUCH, MUCH higher.  He told me last week that with the Fed’s latest “open-ended” QE edict the dollar and bond market are done, finished and the bull market in gold is guaranteed!  As far as he is concerned, Bernanke has sold out our kids and grandchildren and it no longer makes any difference who occupies the White House!

To wrap this up, I want to make it very clear that the “shorting of gold and silver” is NOT a negative for us; it is a positive.  It provides us with discount prices on the physicals.  If you don’t take advantage of this situation, before prices explode, you are foolish!  You have another chance on Monday morning to buy gold for a $15 discount (as of early this morning from the close on Friday).  There is no logical reason that gold should be cheaper on Monday morning – this is a “paper” event designed, as Sinclair pointed out, to allow the smart money to enter the physical market and pick up more gold at a lower price.  You can join in with them or sit on the sidelines – it’s your call.

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