Nothing makes for a good market mystery like gold, especially gold socked away in the vaults.

So here's a good one, via FT Alphaville, from Professor Antal E. Fekete. Actually, it's a double dose.

We must guard ourselves against falling victim to the rumor-mills, while keeping our eyes

peeled for the very real possibility that the growing shortage of physical gold can no longer be

papered over with paper gold (pun intended). Another story is about GLD, a leading gold

ETF, which publishes its bar-list every Friday at the close of business, reporting the serial

number of every bar in inventory. The list is customarily well over a thousand pages long.

But, lo and behold, on Friday, October 2, and on Friday, October 9, the bar-list shrank to a

mere couple hundred pages, with no explanation offered. Could it be that the management of

GLD has taken a bribe, and replaced physical gold in inventory by paper gold, in order to save

the face and skin of the bullion banks that have gone naked short and subsequently got

cornered?

If so, it won’t get very far. The leadership of the US House of Representatives may

well be able to put in deep freeze the motion of Dr. Ron Paul, seconded by over 250 other

congressmen on both sides of the aisle, to audit the Federal Reserve, but it has no power to

stop the auditing of the ETF’s or bullion banks as required by contract law. According to

some reports independent auditors, at the insistence of parties holding expired forward

purchase contracts to deliver gold, are descending on ETF’s and check their vault’s contents

against their books. The noose is tightening around the neck of fraudulent banksters caught in

the short squeeze.

And then here he talks about the so-called "Archimedian Test"

Reports are circulating that similar audits of certain Asian depositories have already produced

“good” delivery bars (400 oz or 12.5 kg gold bricks) that have been gutted and stuffed with

tungsten — a metal whose specific weight approximates that of gold, so that the famous test

of Archimedes (fl. 287-212 B.C.) based on the Law of Buoyancy, designed to expose

fraudulent goldsmiths, would be inapplicable. Isn’t it strange that criminal law punishes the

fraudulent stuffing of gold bars, but allows the stuffing of gold assets in the balance sheet with paper gold? After all, the specific value of tungsten is much higher than that of paper!





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