Second written part of
the same audio interview we posted yesterday:
Greyerz: “This week I want to talk about what we are seeing
in the physical gold market, and why there is a disconnect in that market. We
transfer a lot of gold from Swiss banks and other banks into private vaults
More often now, than
ever, we are encountering incidents when the banks are putting up all kinds
of obstacles for these transfers. Signs of potential shortage of physical
gold started with ABN AMRO in March (when they) declaring that they would
renege on their commitment to redeem gold accounts in physical gold….
“Instead they would
redeem in cash. The custodian for ABN AMRO, for the gold, is UBS, and UBS
decides to what extent they hedge the ABN paper gold position and where in
the world they hold it in storage.
So as there is no more
physical redemption of the ABN AMRO gold accounts, it seems therefor that
these accounts are no longer backed by physical gold. It’s just backed by
paper, and this is of course typical for the paper market, Eric. this paper
market, which is 100 times bigger than the physical market, probably has zero
percent backing of physical. This is why ABN stopped redeeming in gold.
Then, last week we had an
investor being refused to take his physical gold out of a major Swiss bank.
They told him that the regulatory authority prevented the bank from giving
the client his physical gold. That is of course total nonsense, and
eventually we helped the client to get his gold out of the bank.
Another of our clients
was told by a major Swiss bank that he can only take out 100,000 Swiss francs
of physical gold every six months. They blamed money laundering and terrorist
activity for this decision. Yet another client was again told by a major
Swiss bank that his storage fees would be going up substantially. When he
complained he was told that he should convert to paper gold.
And finally, Eric,
another big bank, which has an ETF, told a client who wanted to transfer gold
out it that he would have to wait at least two weeks for the transfer. You
just wonder why a major bank that is supposed to hold substantial amounts of
physical gold needs two weeks of more to transfer gold to a client.
So all of this, Eric,
points to the fact that there is a major shortage of physical gold in the
banks. These banks obviously don’t want to lose customers, but their behavior
and the reluctance to deliver also points to a real shortage in the physical
So the disconnect between
the paper and the physical market (for gold) is continuing. Refiners still
have major production delays and demand continues to be very high, ‘No matter
how much they produce,’ as one refiner told me today. And premiums are still
Click HERE to listen to the same
full KWN Interview on this subject 20 May, 2013