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TheStreet Open House

Paper-Gold Holders Flee to Real Metal

VANCOUVER, Canada ( Bullions Bull Canada) -- During the recent, massive slaughter in the paper gold market, investors have been bombarded with a million and one "explanations" by the mainstream media as to why people are "fleeing gold."

The problem is that not one of them is consistent with the known facts.

It has been widely reported that holdings of gold ETFs have plunged by the largest amounts on record. At this point analysis becomes simple: If these people were "fleeing gold" there would be massive stacks of gold piling up in warehouses as people discarded all of this "unwanted" yellow metal.

So, where is the gold?

In fact, back in the real world Comex gold inventories (the same inventories from which the ETF's are stocked) have plummeted by the largest amounts on record. Instead of inventories increasing by the largest amounts on record (what the mainstream is expressly implying with their "fleeing gold" rhetoric), we have precisely the opposite.

Courtesy of Nick Laird, Sharelynx.com

After the most massive paper liquidation in the history of precious metals markets we don't see massive stacks of unwanted gold, only massive stacks of unwanted paper.

This brings us to the important question: What has really transpired in the gold market? Just follow the numbers.

We see simultaneously a massive liquidation of paper gold occurring along with a "run" on Comex gold inventories. In fact, there is only one explanation consistent with those facts: Paper-gold holders have been swapping that paper for real metal. Put into market vernacular, people have been redeeming their units of paper gold and taking delivery of physical bullion. A flight out of paper.

Naturally, this leads to a secondary question: What could have caused the most massive flight out of the paper-gold market since Western bankers created this gigantic paper market? Regular readers have already answered that question: the Cyprus Steal.

As I've written before, with that "precedent" Western governments put all paper holders on notice that none of their paper is safe. Concurrently, we discovered that most Western regimes had (quietly) already put in place their own "bail-in" mechanism -- with Canada's Conservative government notably "carving it on stone" in its latest, official budget.

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