Cage Match: Bron vs. Denver Dave

Thu, Dec 6, 2012 - 10:28am

In one corner, from the former penal colony of Australia, we have Bron Suchecki of The Perth Mint. In the other corner, from the future penal colony of Colorado, we have Denver Dave from The Golden Truth website.

Judging by the level of response, both helpful and vitriolic, my pal Andy and I really kicked the proverbial hornet's nest when I released this post two weeks ago: Managing through all of the clutter has been challenging but the differing opinions have been neatly summarized by two longtime readers of this site and I offer them to you in the space below.

First up, there's Bron Suchecki from The Perth Mint in Australia. Bron contends that there are several mistakes and faulty conclusions within Andy's piece. He's believes this so ardently that he took the time to write up a detailed piece, which he posted to the Perth Mint site as well as his own blog. To conserve space, I'm reprinting just the summary and conclusion below. You can read the entire piece by clicking here:

Price suppression mechanics was the focus of Andrew’s article. In terms of price suppression, I’ve demonstrated that the “borrow and sell” process can achieve this but the “long GLD, short unallocated” or “short GLD, long unallocated” processes do not.
Andrew also suggested the ETFs were being used as a source of physical metal when the bullion bank’s physical reserves ran low. Again, the “borrow and sell” process is the only one which can provide a bullion bank with a supply of physical.

I would also note that in terms of price suppression, the effect of “borrow and sell” on the gold price depends on the volume of gold borrowed versus the demand. It is entirely possible for the gold price to still rise in the face of “borrow and sell” transactions if the amount supplied was less than demand. The price may also just stay flat or it may fall. The effect of “borrow and sell” is suppression of a price that may have been (an exercise in counterfactual thinking), not necessarily resulting in a lower price. This can make manipulations hard to prove, particularly in conjunction with having to establish intent.
In any case, I am not sure the ETFs represent a significant source of physical or price suppression. reports a total of 22,060,800 GLD shares short as at November 28, which equates to approximately 2.2 million ounces. Compare this to the following:

1. The Societe Generale Gold Hedge Book Analysis Q2-2012 reports that the total mining company short position at 4.89 million ounces (probably a fair bit of this which is included in the COMEX figures).
2. The COMEX open interest is reported at 494,400 contracts, which equals 49,440,000 ounces. The Commerical net short position has averaged between 20 to 25 million ounces this year.
3. A recent Sprott article which concludes “that a large portion of the Western central banks’ stated 23,000 tonnes of gold reserves are merely a paper entry on their balance sheets ...” Now I don’t entirely agree with the methodology or the conclusion (that is for another article), but for those readers who do, consider that 23,000 tonnes equals 739 million ounces.
Finally, the short interest in GLD is not entirely bullion banks but also includes speculators betting on a fall in the gold price along with some arbitrage (spread) trades. This is not unusual, as a look at many tickers on will show - indeed there is short interest in the Sprott Physical Gold and Silver Trusts (very low however).

The result is that the bullion bank’s share of the GLD short position is less than 2.2 million ounces, which in itself is close to irrelevant in relation to COMEX commercial shorts or the OTC London market (even if the actual amount of central bank gold leased is a fraction of Sprott’s figures).
My view, therefore, is that the relatively small size of the short position in GLD shares attributable to bullion banks is an indicator that bullion banks don’t use it as a serious source of borrowing for short selling price manipulations or physical supply, particularly considering that there is no material cost advantage to borrowing GLD versus borrowing gold from other OTC market participants or from central banks; and given GLD is an exchange listed product, borrowing transactions would be more visible than those in the OTC market, tipping one’s hand to other traders.
I would therefore suggest that if one is looking for price suppression mechanics, COMEX and the OTC London market is still where the action is.

Denver Dave did not see the same errors. In fact, he felt that Bron was all wrong on several of his points. Dave has not yet composed a missive as lengthy as Bron's but he did take the time to send along his own, personal conclusions, which I've reprinted below. More of Dave's work can be found at his site:

Mr. Suchecki has made some valid "corrections" regarding the general perception of those who question the legal integrity of GLD/SLV. But he stylistically uses pedantic nitpicking/correcting of Andrew McGuire's loose use of terminology as a device to try and diminish Andrew's comments. However, I would like to point to some issues with Mr. Suchecki's essay that are highly problematic. I preface this by stating that I have only read thru his write-up once and have not studied it. I may or may not take that project on.
1) Mr. Suchecki works for the Perth Mint - a gold custodian, among other functions. I would offer that this circumstance renders him biased toward the precious metals custodial operators and clearly he has to defend industry practices. That fact in and of itself imbues his commentary on GLD with prejudice. Other subtle problems with his arguments - and his unwillingness or perhaps lack of knowledge regarding those problems - reflect his obvious partiality.
2) He addresses the short-selling issue by explaining to us in very dry detail how the process of short-selling is supposed to work mechanically, in a perfect world. Not once did he address the issue of naked short-selling. I would like to remind Mr. Suchecki that several of the APs are owners of the DTCC and have been under fire for several years for corrupted management of the DTCC. That is a fact. Because of the insidious opacity with which the DTCC operates, there is no way to verify for sure to what extent GLD short-interest is naked or not. But I would bet him $10,000 that if I were to ask every single retail brokerage hold of GLD shares if they were the owner of those GLD shares, every single one would say yes.
In fact, as I think this through, the short-selling argument Mr. S tries to dispel with technical pedantry, in fact, would support the view that the AP/bullion bank is using short-sold shares to further implement the fractional bullion scheme, naked or not naked. If you think about it, the original buyer of GLD shares "thinks" he owns his shares. The short-seller then transfers those shares to a new buyer. So now you have two end-buyers who think that they own GLD shares. If there only two shareholders, one with 100,000 shares (minimum basket size for bullion redemption) who is going to be convert those shares to bullion and have it delivered, and a 2nd owner who bought the borrowed shares with the same intent. If they both converted at the same time, then legally, of course, the original buyer would not be entitled to the shares. His shares have been legally hypothecated. BUT, if this situation were allowed to stand without making both end-buyers of the GLD shares whole on their bullion, it would likely trigger a collapse of confidence in the brokerage business because no one in their right mind would ever buy stocks that could be hypothecated and re-sold. It would without equivocation cause the price of gold to go parabolic.
3) Mr. S addresses the audit issue, and I will have lot more to say about this if I decide to really delve into this thoroughly. BUT, if you read through how Inspectorate is retained by the Trust, they do a physical audit once per year. The second audit is more of a paperwork-check, spot-check reconciliation of the Trustee files with the custodial records. That leaves plenty of time during the year to play fractional "shell games" with the bullion that is supposed to be moving in and out of the custodial vault on a weekly basis.
This brings up another issue: the custodian/sub-custodian structure and the lack of legal glue in the legal wording used in the Prospectus to create a full-faith, binding, full-indemnification agreement between the custodian and the sub-custodians and between the custodian and the Trustee/Sponsor and, most important, between the unsophisticated GLD shareholder and the entire operation referred to as GLD. This issue is egregiously problematic and he conveniently ignores it. Mr. S' explanation for the AP/Custodian/Trustee relationship is a pathetic apology for a system which is exploiting both the unsophisticated retail investors who might otherwise buy physical bullion and mindless investment advisors who sell them GLD for commissions in generated in lieu of recommending the purchase of physical.
Finally, for all who have not read it, Alasdair Macleod wrote a piece last week in which he describes factually how GLD altered its prospectus in order to move regulatory oversight for custody of client assets from the FSA to the LBMA/BoE. This substantially degrades the legal integrity of GLD and SLV (SLV already had that provision). Keep in mind that the true integrity of the legal structure of both trusts has been legitimately questioned by many, starting with James Turk, from GLD's inception. If you read Macleod's article, you'll understand exactly why this change was of significance.
Mr. S was stone silent on that matter.

So, there you have it. The judges at ringside have scored the first round a draw. Perhaps the two contestants will continue their battle in the comments section of this thread? Let's hope so.


About the Author

turd [at] tfmetalsreport [dot] com ()


Dec 6, 2012 - 10:38am


After 20 long last.....I have come to the Promised Land of "Furstville"!

"You never forget your 'furst' time"....

Believe me, it lives up to the hype....

QE to infinity
Dec 6, 2012 - 10:42am


Thurd! At last! Gold, silver, and now bronze

Dec 6, 2012 - 10:45am

Nice Thread Turd!

Good post, interested in the battle. I've done a little (very little, a few hours) research on this the past week, while I've never heard of Denver Dave, Bron seemed to make some valid points in his article, will be interesting to see Dave's rebuttals which I haven't read yet.

Urban Roman
Dec 6, 2012 - 10:48am

Either the paper market is manipulated

as Andy describes, or perhaps one of those hole-to-the-center-of-the-earth drilling projects has located a fountain of the siderophilic element from the metallic core of the planet.

[edit] --- insert animated gif of fireworks display here ---

And, note that silver is back above $33 this morning. Also, the POSX is up ... metals and POSX showing positive correlation. A flight to safety is on, perhaps?

Dec 6, 2012 - 10:49am

3 taps on 1700

4 times a charm? if we can break, and get above 1703 we will have a nice ride

Dec 6, 2012 - 10:54am

top 10

g and s in the tank but the top 10 is something else!

Dec 6, 2012 - 10:55am

Is This The Beginning

Of the breakout?

And if so will it hold?

I sure hope so.........

Nigel Black
Dec 6, 2012 - 10:55am

Alistair Macleod ...

... dicusses the paper he wrote:

Alasdair Macleod on safety issues with GLD and SLV
Mr. Fix
Dec 6, 2012 - 10:58am
Dec 6, 2012 - 11:01am

Gold Hit 1700

and silver 33.26

The Watchman
Dec 6, 2012 - 11:04am
Dec 6, 2012 - 11:07am

4000 contracts up.. on 1700 to 1704

I think we broke the trend kids.

we broke the 15 and 30 mins downtrend line

El Gordo
Dec 6, 2012 - 11:07am

Well, I just don't feel right

having a new post go up and not saying anything about it, but the truth is, I'm clueless. Maybe I should start my own forecasting service with those credentials.

Just A Regular Guy
Dec 6, 2012 - 11:08am

Penal coloney opening

Ok that is true, but it hurts.... however, it is funny (coming from a citizen of kangaroo land).
Onto reading the rest of the article..... I hear bonds breaking soon imo.

Dec 6, 2012 - 11:09am

Nice to see a bit of strength

Nice to see a bit of strength here. I might be sorry I didnt pull the trigger at $1688. Thats ok. I'll take this needed bounce.

Dec 6, 2012 - 11:10am

Thx Cleburne


I think it was Peter Lynch from Fidelity way back when who said, if you can't understand it don't invest in it.

When we used to complain to our boss about systems or manufacturing problems he used to reply, all you salesmen do is use your mouths talking. We really produce things. We just don't talk about them.

Dec 6, 2012 - 11:11am

Some nice volatility here!...

Today...everyone's 'yellin...& I'll be sellin'!...Tomorrow everyone will be 'cryin...& I'll be 'buyin!!!...

Bag Of Gold

Dec 6, 2012 - 11:12am

I'll side with Dave on this

Perth mint has some biases and many unallocated PM accounts--in fact Peter Shiff's firm used to sell the unallocated option (till he started his own PM firm).

I understand Perth has some sort of affiliation with GG, but when someone from a place that has unallocated is critical of someone being critical of GLD (and SLV) you should perk up. The fact that GLD and SLV have options on them is noteworthly and that CEF GTU PHYS and PSLV do not have options is equally noteworthy as is GLD and SLV are not know for their selling at a premium while we here discuss the ups and downs of the premiums of CEF GTU PHYS and PSLV.

In addition I have read Denver Daves blog from early on and he has discussed GLD and SLV and their problems frequently for years. Even if he is not correct, I certainly do not want to take the chance. This physical stuff is supposed to be iron clad safe.

I know he runs a hedge fund and has a close relation ship with many in the business incl Midas. So on the surface and deep down I side with the positions of Dave.

Dec 6, 2012 - 11:18am


great comment. I too have reached this sort of point. When you add up all of the fraud and corruption from LIBOR to MBS to derivatives to MFin Global to Robo Signing to Algorithms to eveything, I think it leaves very little chance that gold and silver are not manipulated in every way we have learned to this point and more.

I am a big picture guy and the stuff that these guys are talking about is stuff I don't want to bother to understand. All I need to do is look at the past and present actions of the players involved and it paints a picture.

One thing I will give credit to Bron for: You must have giant balls to defend these known criminals. It seems to me Denver Dave is just pointing out the obvious manipulation that is there for all to behold.

Getting back to Cleburne's great comment, holding phyzz is much better than trusting the promise of known criminals.

Just because they have not been arrested or convicted by the people they have illegally paid off, does not mean crimes have not been committed. Run Forrest, Run!!!!

Dec 6, 2012 - 11:19am

No wonder Bron is so willing to defend GLD:

A colleague of mine just reminded me that the Perth Mint was one of the first promoters of paper gold, unallocated account products with their Certificate program. I found one article that discusses some serious issues with its legal structure (no fucking wonder Bron is willing to defend GLD):
he Perth Mint cannot default on its allocated gold without breaking the law.
Gold Corporation and the Western Australia government can default on the Perth Mint's UNallocated bullion certificates by using Perth Mint's "force majeure" clause. Read all the fine print written on the certificate, including: "The Perth Mint will not be liable or responsible for delivery delays due to causes beyond its control."

I know others a few years ago wrote similar commentary about the Perth Cert program.

Dec 6, 2012 - 11:19am

In case you missed

I'm quite certain that the spike in gold is directly related to an unexpected and very large (north of 10MTs) physical gold order. Cartel banks forced to buy paper causing the spike.

thurd aye
Dec 6, 2012 - 11:21am

battle of the dirties

So which countries are cleanest? UK ranked 17th out of 176 in financial corruption survey

The UK is perceived to be the 17th least corrupt country in the world, according to a survey, thanks to comparatively high levels of transparency and a tough stance on the abuse of power.

It scored 74 out of a possible 100 points, where 0 is highly corrupt and 100 very clean – considerably lower than the three countries ranked the least corrupt in the world – Denmark, Finland, and New Zealand, which were each scored 90.

Also making it into the top ten of Transparency International’s Corruption Perceptions Index 2012 were Sweden, Singapore, Switzerland, Australia, Norway, Canada and the Netherlands.

Read more:

Dec 6, 2012 - 11:21am

Dave, thank you for chiming

Dave, thank you for chiming in. Once Bron wakes up on Friday, perhaps he'll join the conversation.

Dec 6, 2012 - 11:21am
Groaner TF
Dec 6, 2012 - 11:22am

Nice,, buying physical here.

just 10mt.s? that has to put a hurt in their coffers.

Dec 6, 2012 - 11:26am

10 metric tons!

Chump change.

Dec 6, 2012 - 11:26am

At that size

Likely a central bank.

Dec 6, 2012 - 11:27am

Perth Certificates

Dave's credentials are good. He's seen the gold bottom since 2000.

His case is simple, "do you trust paper metal? and the apology of an employee of one of the first firms to issue paper gold certs? OR do you trust gold that you can touch? (and/or fully audited?)

Excuses for industry practice perpetuate the myth that GLD or SLV have the physical. Delivery? If the SHTF, Forget about it.

GLD and SLV are for trading. If the music stops, there will be bagholders.

Dec 6, 2012 - 11:29am

Dec 6, 2012 - 11:30am

VERY reliable source

And I have been able to confirm that it is NOT a rumor. The scramble is on to fill the order.

The question is: Will this change the short-term sentiment? Watch the next few hours. A dip back down and then a rally through the highs of last hour would certainly seem to confirm that. The action tomorrow could then be decisive.

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