Not much of a case

I stopped following blogger Dave in Denver when he wimped out of publishing a critical, but civil, comment of mine on his blog. Thankfully my readers persevere with him and have let me know he recently made the following post:

"A reader alerted me to the fact that Bron Suchecki, one of the proprietors of the Perth Mint - the notoriously untrustworthy and fractional bullion account seller - made the claim that there's plenty of 400 oz. gold bullion bars to be had on the world market. This is contrary to every news report and first-hand accounting of shortages that have been presented over the last week.

So I have this question for Bron: If there's plenty of 400 oz. gold bullion LBMA-standard bars available, how come it's taking the United States Government SEVEN YEARS to send just 300 tonnes of the said 400 oz. gold bars that it owes back to the German Government and its citizens? Tell me Bron, if you can find an ample supply of bars, how come the Federal Reserve and the U.S. Treasury can not? How come the Chinese Gold and Silver Exchange Society is now forced to back-order bars from Switzerland? LINK

I rest my case."

Lets cut to the chase. In this Market Watch article, James Turk is quoted saying:

"The problem retail buyers are finding is that the stock of small bars and coins quickly flew off the shelves, so premiums have been rising because the fabricators have not been able to produce enough new supply to meet demand,” said Turk. The situation has benefited GoldMoney because it sells individual interests in large gold bars, he said.

The reason GoldMoney has benefited is because they are able to sell gold without the high premiums that are affecting non-400oz bar retail sized products. One can confirm this by looking at their site for their buy/sell prices.

Here is the problem Dave. If 400oz bars are not so easy to find as you have so emphatically "rested your case", then how can GoldMoney sell its 400oz bar backed product without any premium beyond their normal pricing? They don't seem to have a problem acquiring 400oz bars.

Since you are certain you are right Dave, then the only logical conclusion is that Jame Turk is lying, and that GoldMoney must be running a fractional reserve operation. Personally I think GoldMoney is telling the truth and it is you that is wrong. I look forward to you denouncing James Turk as an untrustworthy and fractional bullion account seller.

I suppose also that Bullion Vault are lying when they say that "we can assure you that the spot price is the price of physical gold and silver in large-bar form right now, just as always. We go on settling physical gold and silver bars daily, picking up real physical bullion and moving it to accredited storage outside the banking world." No problem for them to obtain 400oz bars.

Interesting also that the Sprott Gold Trust, which the Fed or anyone else of size can redeem for physical, has been recently trading around (and below) spot as one can verify from the chart at their Net Asset Value page. Logically, since you are right Dave, the Sprott Gold Trust must be a fraud as well because the reason Fed is not printing money to buy up shares in the Trust and redeeming for physical is because it doesn't have the metal. Such buying action would prevent it from trading at a discount to NAV.

Finally, for those who don't consider me untrustworthy, the Perth Mint is not aware of any premium being paid for the standard 400oz bars. We have heard that 99.99% purity bars are getting a sub-one dollar premium, which makes sense as they can directly melt them down and convert to kilo bars for Asia where 99.99% purity bars are getting a premium. Interestingly, we have confirmed that the bullion banks aren't paying a premium to obtain 99.99% 400oz bars (or 99.50% 400oz bars), which is not indicative of desperation for physical on their part.

Dave seems to think that these facts are contrary to reports of shortage. The reason they aren't is because those reported shortages are for smaller fabricated forms, of which production capacity limitations are a major driver. I have not seen one report of any premium on 400oz bars and Dave doesn't provide one either, just some theory about the Fed and Germany.

The only factual backup for his claim is an article from IB Times which does not mention 400oz bars at all. What is does say is that “The premium on gold in Hong Kong and Singapore is as high as $3 per ounce, an 18-month high.”

While I agree that physical demand has really jumped up quite a bit (see here) if it was really as desperate you make out Dave surely the premium would be much more than just $3 an ounce? It is ironic that the link Dave provides as proof counters his point. It is typical of his shoot first, think later approach.

I think I'll rest my case here and let the reader decide.

With that out of the way, I would like to add my own speculations on the US-Germany redemption issue. I would suggest an alternative possibility, being that Germany does not want to incur expensive shipment costs (and risk) moving such a large amount of metal in a short period of time. It is also possible that they are wanting to obtain the physical via a loco swap, which would also reduce/eliminate shipment costs and risk if it was done advantageously over time. I was going to suggest that Germany may be waiting for leases to mature and then loco swap, but it seems they recently stopped leasing, so that theory is not valid.

The fact is no one knows the reason and my, and Dave's, reasons are both speculation. It is why I consider using a speculation/theory as proof of one's position to be not much of a case.

There is one final thing I am very confused on. You will note Dave refers to me as a proprietor of the Perth Mint. The definition of proprietor is "One who has legal title to something; an owner. One who owns or owns and manages a business or other such establishment." 

I thought everyone knew the Perth Mint was government owned. But then this means that Dave doesn't understand the definition of proprietor. Someone commented on this and Dave's response was:

"Yes I know exactly who and what he is, you dingus. I was using the term "proprietor" euphemistically. I guess they haven't gotten to that part of your lesson on Sesame Street."

OK, so Dave knows the Perth Mint is not privately owned, but then the definition of euphemistically is "The act or an example of substituting a mild, indirect, or vague term for one considered harsh, blunt, or offensive." As in saying "economic with the truth" instead of "liar". Both say the same thing.

So what exactly is the harsh, blunt or offensive term that has the same meaning as "proprietor"? I am totally at a loss understand what the point/insult is supposed to be. Or is it possible Dave doesn't understand the meaning of euphemistic? Dingus indeed.