The Chart That Says A Thousand Words

The following is a chart of the paper contracts outstanding on the COMEX market. Note the huge spike in 2013 into an extreme never before seen on this market. The horizontal segment of this chart should be cause for alarm in itself as it means that there were roughly 20 paper contracts outstanding for every ounce of physical gold available for delivery. This is akin to the leverage in the fractional reserve fiat banking system at 5%.

However, most of us know that when the European and American banks went to 2% fractional reserve about a decade ago and leveraged themselves up fifty fold the wheels fell off and we had the global financial crisis (GFC). There were runs on banks for the first time in decades, sometimes centuries.

Thanks to the 100 fold leverage now in play in the paper gold market we are about to witness the same run on “the bank”. In fact it is already in play. As I have told you before the COMEX market has seen its physical gold stocks shrink from around 3 million ounces to about 300,000 ounces in a year. The run is on and a lot of contracts are going to be worthless soon. This is what inevitably happens when you beat the price down for a year using paper gold as your weapon.

God bless

Kevin

Comex Gold Leverage Ratio

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