By Craig Hemke
The announcement final week that the Financial institution of Nova Scotia is exiting the dear metals enterprise is simply one other curious growth at midnight, secret world of worldwide bullion banking.
Over the previous two months, a lot has been written concerning the present stresses within the Bullion Financial institution Fractional Reserve and Digital By-product Pricing Scheme. Although the choice by Scotiabank to exit this enterprise was made months in the past, the timing of the announcement is actually attention-grabbing. Why? Let’s begin with a group of hyperlinks to assessment:
With all of this in thoughts, here is a hyperlink from the day the Scotiabank story broke again in late April: https://www.reuters.com/article/us-metals-bank-of-…
So the query turns into: Why would Scotiabank select to exit the bullion banking enterprise now? What is occurring within the world gold market that may trigger an organization with roots again to the 17th century (because of their acquisition of Mocatta in 1997) to instantly change course?
Properly, initially, it is very probably that Scotiabank sees the writing on the wall. As with every financial institution, their first aim is to generate profits, and on this age of rising prices and low rates of interest, earning profits as a bullion supplier is getting harder by the day. And that might be it. An absence of present and future income might be the only driving power behind the choice.
However what else is perhaps in play right here?
First, take into account the stresses within the present fractional reserve system that exposed themselves again in March. The simple cash sport of “Change For Bodily” (EFP) abuse was uncovered as a sham when non-Financial institution events instantly materialized and anticipated quick supply via this course of. The COMEX and its mum or dad CME Group needed to scramble to place forth a brand new supply contract that gives for fractional possession of London bars instead. With out this contract, the usual 100-ounce COMEX contract stood on the fringe of default and power majeure.
Understanding their very own publicity to this con sport of mismatched leases, warrants, and promissory notes, did Scotiabank look into the abyss and resolve to “flee the Titanic” whereas there was nonetheless room within the lifeboats? Perhaps.
After which take into account this: On the time the choice to exit the bullion banking enterprise was made, Scotiabank was already beneath investigation by the U.S. Division of Justice and Commodity Futures Buying and selling Fee for participation in treasured metals worth rigging and manipulation schemes. See this word from Reuters that was launched late final Friday:
From that Reuters article, right here is crucial and related part:
Recall that these investigations into prison worth rigging by The Bullion Banks have been ongoing since 2015: https://www.wsj.com/articles/big-banks-face-scruti…
And, most just lately, as many as eight J.P. Morgan workers have been charged with market manipulation by the U.S. Division of Justice beneath the RICO statutes. Most notable amongst these now-former workers is Michael Nowak, one-time head of JPM’s treasured metals buying and selling division and board member of the LBMA in London.
As famous above, Scotiabank is cooperating with U.S. investigators within the case in opposition to J.P. Morgan. Has the financial institution turned “state’s proof” within the hope of a lesser penalty? In doing so, is a part of their pleading course of a whole exit of the completely fraudulent and criminally-infested bullion banking enterprise? Once more, perhaps so.
Ultimately, all we are able to say for sure is that the bullion banking enterprise is quickly altering as participant banks are left to scurry for canopy now that DoJ and BoE investigators are starting to disclose their nefarious schemes and make arrests. A transfer towards a extra legit pricing system is now an eventuality, and also you’re already seeing indicators of this via the continued disconnect between paper and bodily costs.
And, in fact, the lesson right here is that any treasured metallic you maintain ought to at all times be exterior of the attain of the bullion banks. This implies no unallocated accounts and definitely no ETFs just like the GLD. Solely bodily metallicgold and silver that you simply maintain in your personal two fingers or at a trusted storage firmis really yours. Act now to safe your metallic or be ready to endure the implications.
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Our Ask The Knowledgeable interviewer Craig Hemke started his profession in monetary providers in 1990 however retired in 2008 to give attention to household and entrepreneurial alternatives. Since 2010, he has been the editor and writer of the TF Metals Report discovered at TFMetalsReport.com, an internet neighborhood for treasured metallic buyers.