Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

HSBC Says "Get Your Gold the Hell Outta Here!”

Commodities / Gold and Silver 2010 Jan 08, 2010 - 02:02 PM GMT

By: Casey_Research

Commodities

Best Financial Markets Analysis ArticleDoug Hornig writes: That’s the directive that came down from HSBC USA in late November.

It seems that everyone these days wants gold. Real, physical gold coins that they can hold in their hands, or bars that they’re assured are resting safely in a well-guarded vault. HSBC’s New York vault, for example, buried deep below its 5th Avenue tower, where it has stored people’s gold since it inherited the facility from Republic Bank a decade ago.


But no more.

HSBC has served notice to its retail customers – many of whom are simply middle-men and custodial services which store gold with HSBC on behalf of hundreds of their own account holders – that all their gold must be out of its facility by July 2010. Otherwise, folks, prepare for an unwelcome knock at your door. HSBC’s letter says that, in the absence of directions to the contrary, clients’ metal “will be returned to the address of record... at your expense.”

Picture, if you will, what the Wall Street Journal reported: “fleets of armoured cars laden with gold ferrying the precious metal out of New York.”

Where to? That’s a good question. One destination is a pair of warehouses operated by FideliTrade, the parent company of Delaware Depository Service Co. Its vaults in Wilmington have been filling up quickly, leading Jonathan Potts, the managing director, to comment that, "I have never seen any relocation like this.” Other depositories have seen a similar run.

The logic behind HSBC’s decision, according to the Journal, is simple. The vaults are being cleared of smaller clients in order to make more room for institutional holdings, because “retail customers tend to be more expensive [to service] in part because of their diverse holdings. They usually buy American Eagle or Canadian Maple Leaf coins, and bars of various weights and sizes, all of which need to be categorized and stored separately. In contrast, institutions typically buy standardized bars of 100 or 400 ounces, making them easier to store. Institutions also tend to hold the metal for long periods.”

HSBC itself didn’t say why it’s doing this (in fact, its letter wasn’t intended for public release). So, predictably, the Internet exploded with rumors that its action had more sinister motives.

Chief among them has been the tungsten story. That one, in case you haven’t already heard it, maintains that a foreign gold buyer – some say Indian, some say Chinese – found to its dismay that bars it recently purchased were merely gold-plated tungsten. (Tungsten would be the metal of choice for a counterfeiter because it’s the closest metal to gold in specific gravity, and can fool the most basic test for purity.) Some go as far as to claim that Fort Knox is full of fakes, deliberately placed there to make our official stash appear bigger than it is. A suspicion that’s easily stoked since no outside auditor has inspected U.S. gold holdings in over 50 years.

Be that as it may, the latest rumor claims that the appearance of tungsten bars at this time is going to cause widespread chemical testing of gold bars, and HSBC doesn’t want to be caught with anything bogus. Thus they’re preemptively moving their gold out, protecting themselves and at the same time laying off the need to do any testing onto someone else.

This is a great tale, but it ignores the fact that it’s largely coins and small bars that are being moved, and those are not cost effective to counterfeit in tungsten. In addition, that the story is presently confined to the Net means it’s fiction until proven otherwise. As Ed Steer – GATA activist and author of Casey Research’s Gold and Silver Daily – points out, “If it were true, Bloomberg would be all over it in a heartbeat.”

Or someone would. And even if the mainstream media failed to do their job, there’s still the absence of a smoking gun. Who’s seen the tungsten bars? What are the names of officials who can confirm the fraud? Why aren’t the Indians who’ve been ripped off waving the phonies in front of a TV camera? These questions don’t yet have satisfactory answers. Thus the rumor will have to remain just that.

Rumor #2: HSBC has less gold on deposit than it promises, and it’s doling out what it does have to its best friends. This one might make some sense if HSBC were getting out of the gold business entirely. But it isn’t. And if it does have any physical shortages, it can cover them indefinitely with paper “equivalents.”

Rumor #3: HSBC is going under. Those storing large amounts of gold know it, and they’re protecting their assets from future claims by creditors. HSBC is hiding the mass exodus of gold by claiming to have ordered it. No way to confirm this, of course, but the volume of gold that’s leaving means an awful lot of people know what’s happening. Word of the bank’s fragility would surely have leaked out by now. That it hasn’t makes this one highly doubtful – not to mention that HSBC likely falls into the “too big to fail” category and would be propped up if it faced collapse.

Rumor #4: The most outlandish of all. Under this scenario, Washington suspects an attack in conjunction with the terrorist trials, and it’s ordered gold moved out of New York so it isn’t contaminated in the event of a dirty bomb. (Those with the deepest, darkest level of cynicism claim that this would also provide the government with a handy excuse to default on foreign claims to physical metal – as in, sorry, it’s gone, but here’s what  you’re owed in dollars.)

All of these make for spicy Web chatter, but after checking with our own sources, we believe that the truth is far more mundane, yet quite exciting in its own right. In essence, we think the WSJ’s analysis is pretty close, with a twist.

It all has to do with the COMEX. That exchange, which handles futures activity in gold, has to maintain a cache of metal with which to settle trades. As a courtesy, it will also arrange to store gold for buyers who don’t want to take physical delivery. But it has no vaults of its own. It contracts with four banks to do the actual storage, though only two maintain significant amounts: of the 9.73 million ounces of COMEX gold, Scotia Mocatta has the most, nearly 5.1 million; HSBC USA is next, with over 4.1 million.

The amount of gold warehoused by the COMEX has exploded since the metal’s bull run began in 2001, as you can see from the following chart (where “registered stocks” are sitting there with someone’s name already on them, and “eligible stocks” are awaiting either registration or delivery):

The trend is obvious, and what it means is that HSBC needs an ever-increasing amount of space for its COMEX gold. Provided, of course, that the trend remains in place. Or accelerates.

HSBC has cast its vote. It clearly believes that it’s going to be getting more gold from the COMEX, maybe a lot more, and it’s making room by giving the boot to other depositors. Perhaps the bank knows something we don’t know, or perhaps it’s just acting out of reasonable expectation.

Either way, it’s telling us that the demand for gold is going to continue rising. And coming from a major bullion bank, that’s about as bullish a signal as anyone could want. If you don’t own any physical gold, it’s time.

Right now, gold is a bit off its recent highs… so, as believers in sound money, the Casey folks are stocking up on their yellow metal before its price resumes its journey to the moon. This is the time to learn everything you can about how and from whom to buy gold, where to safely store it, gold proxies, and major gold stocks. Check out Casey’s Gold and Resource Report risk-free for 3 months – it’s only $39 per year, a mere pittance for what you’ll get out of it. Click here to learn more about gold and gold’s “slingshot effect.”

© 2010 Copyright Casey Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in