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

tfmetalsreport [at] gmail [dot] com ()


Fat Willie
Dec 7, 2012 - 11:05am

Onealpha and XTY

Onealpha- well said. XTY- that Fool is not worth your time and considerable talent. Back to the metals- hoping for a strong weekly close here. I think it starts to set up a strong December, closing the year over $35 and $1750. FW

Motley Fool
Dec 7, 2012 - 11:02am

@xty- Just to drive the point home

I will simply use some of your comments in this thread, and won't even bother with other posters to fill up my list.

2. Become incredulous and indignant. Avoid discussing key issues and instead focus on side issues which can be used show the topic as being critical of some otherwise sacrosanct group or theme. This is also known as the 'How dare you!' gambit.

"it is beyond belief"

"And now it is first name basis ... dave, bron, barf"

"You can try to paint me as just an uninformed, illogical poster who lives for popularity but it won't work. I understand what you are up to, trying to appear as the reasonable one, always unfairly attacked by the 'clique'. But your arguments are not sound and that is your downfall. You are illogical. "

3. Create rumor mongers. Avoid discussing issues by describing all charges, regardless of venue or evidence, as mere rumors and wild accusations. Other derogatory terms mutually exclusive of truth may work as well. This method which works especially well with a silent press, because the only way the public can learn of the facts are through such 'arguable rumors'. If you can associate the material with the Internet, use this fact to certify it a 'wild rumor' from a 'bunch of kids on the Internet' which can have no basis in fact.

4. Use a straw man. Find or create a seeming element of your opponent's argument which you can easily knock down to make yourself look good and the opponent to look bad. Either make up an issue you may safely imply exists based on your interpretation of the opponent/opponent arguments/situation, or select the weakest aspect of the weakest charges. Amplify their significance and destroy them in a way which appears to debunk all the charges, real and fabricated alike, while actually avoiding discussion of the real issues.

"suggesting that silver might ever be a currency again

suggesting that central banks, especially the ECB, might have their own agenda when it comes to gold

suggesting that fiat currency is questionable and has an average life-span of 40 years

suggesting that barter has ever been used

suggesting that the precious metals market does not operate freely

suggesting that SLV and GLD are not safe investments"

5. Sidetrack opponents with name calling and ridicule. This is also known as the primary 'attack the messenger' ploy, though other methods qualify as variants of that approach. Associate opponents with unpopular titles such as 'kooks', 'right-wing', 'liberal', 'left-wing', 'terrorists', 'conspiracy buffs', 'radicals', 'militia', 'racists', 'religious fanatics', 'sexual deviates', and so forth. This makes others shrink from support out of fear of gaining the same label, and you avoid dealing with issues.

"things that bring out the trolls"

7. Question motives. Twist or amplify any fact which could be taken to imply that the opponent operates out of a hidden personal agenda or other bias. This avoids discussing issues and forces the accuser on the defensive.

" I am very tired of your creepy crap, but you have ill-intent so I will not let you dominate."

8. Invoke authority. Claim for yourself or associate yourself with authority and present your argument with enough 'jargon' and 'minutia' to illustrate you are 'one who knows', and simply say it isn't so without discussing issues or demonstrating concretely why or citing sources.

" I am a fairly quick study, and can back that up with test scores, if you really want to go there. Logic is a strong suit, let's just say."

9. Play Dumb. No matter what evidence or logical argument is offered, avoid discussing issues except with denials they have any credibility, make any sense, provide any proof, contain or make a point, have logic, or support a conclusion. Mix well for maximum effect.

13. Alice in Wonderland Logic. Avoid discussion of the issues by reasoning backwards or with an apparent deductive logic which forbears any actual material fact.

"I thought you said my list was bullshit - now you say you basically agree. What weird neediness you are exhibiting. And yes that was both an observation and an insult. "

18. Emotionalize, Antagonize, and Goad Opponents. If you can't do anything else, chide and taunt your opponents and draw them into emotional responses which will tend to make them look foolish and overly motivated, and generally render their material somewhat less coherent. Not only will you avoid discussing the issues in the first instance, but even if their emotional response addresses the issue, you can further avoid the issues by then focusing on how 'sensitive they are to criticism.'

"you were looking for logic?"

"so it was self-referential"

"You never stick to any points and then just cry foul that nobody is nice to you."

19. Ignore proof presented, demand impossible proofs. This is perhaps a variant of the 'play dumb' rule. Regardless of what material may be presented by an opponent in public forums, claim the material irrelevant and demand proof that is impossible for the opponent to come by (it may exist, but not be at his disposal, or it may be something which is known to be safely destroyed or withheld, such as a murder weapon.) In order to completely avoid discussing issues, it may be required that you to categorically deny and be critical of media or books as valid sources, deny that witnesses are acceptable, or even deny that statements made by government or other authorities have any meaning or relevance.

"No - it is always the same with you. He is wrong and I will not go back and read his BS."

"Go back to the cat forum, and leave the dog lover's alone. You will never convince me that cats are dogs. Or that the euro is a magically sound fiat currency, stronger than silver."

21. Call a Grand Jury, Special Prosecutor, or other empowered investigative body. Subvert the (process) to your benefit and effectively neutralize all sensitive issues without open discussion. Once convened, the evidence and testimony are required to be secret when properly handled. For instance, if you own the prosecuting attorney, it can insure a Grand Jury hears no useful evidence and that the evidence is sealed and unavailable to subsequent investigators. Once a favorable verdict is achieved, the matter can be considered officially closed. Usually, this technique is applied to find the guilty innocent, but it can also be used to obtain charges when seeking to frame a victim.

Popularity polls anyone? ;)

Dec 7, 2012 - 10:46am

thanks, oh pileated one

I see the wisdom of your words. And thanks for the compliment.

Look, gold is over 1700!

القراع عصفور
Dec 7, 2012 - 10:42am


you are one of the best posters here. i hate to see your talents wasted. onealpha is right - we all have been played by these fools. so, i am no longer going to engage these trolls, and i hope you see the futility of doing so as well. the worst thing that could happen is that you leave TFMR. please, give up on these jerks, and please do stick around. you are loved here.

Eric Original
Dec 7, 2012 - 10:33am


Best post of many recent days.

Dec 7, 2012 - 10:17am

Am I the only one who would

Am I the only one who would like to move on from MF and his circus? This and many threads have been hijacked by this fool. Blah Blah Blah, the same shtick over and over again. It really is tiresome scrolling past his disturbing avatar only to see the same childish arguments over and over again. So I finally submit and use the IU button, but nobody is discussing relevant material, but continuing with the same pissing match. Don't you all realize you are being played by MF and VC. They are two persons who obviously have way too much time on their hands and have an agenda. They do not want to be part of this community and contribute. They are here to sell their brand. They are not interested in exploring new ideas in an open forum with respect for all views. They have firmly held beliefs and do not want to have an intellectual discussion. They want to dissuade you from your ideas and views and bring you into their cult like camp of FREE Gold. They have come here to steer the conversation and disrupt the forum. Victor tried and failed, so his new young protege feels he is up to the task and gladly takes on the challenge. Now stop feeding him and pray he goes away. They are trying to ruin this site. Well, at least they have almost accomplished this for some.

Key Economic Events Week of 5/3

5/3 9:45 ET Markit manu PMI
5/3 10:00 ET ISM manu PMI
5/3 10:00 ET Construction Spending
5/3 2:20 ET Chief Goon Powell
5/4 8:30 ET US Trade Deficit
5/4 8:30 ET Factory Orders
5/4 1:00 ET Goons Daly and Kashnkari
5/5 8:15 ET ADP jobs report
5/5 9:45 ET Markit service PMI
5/5 10:00 ET ISM service PMI
5/5 12:00 ET Goon Mester
5/6 8:30 ET Productivity and Labor Costs
5/6 10:00 ET Goon Kaplan
5/7 8:30 ET BLSBS

Dec 7, 2012 - 10:02am

a snippet from . . .

Dr. Jeffrey Lewis' latest article:

"Sadly, most people simply cannot come to terms with all of this, or they will, but only when it is too late, and they have already missed the big market moves. Currently, the perception on the surface, which is regularly reinforced by the status quo, is that there is all the time left in the world to buy metals.

Nevertheless, the return to some semblance of balance — where the law of supply and demand is finally allowed to manifest itself in precious metals market pricing — will likely occur in a violent transition that is nothing like anything anyone has ever witnessed or could even imagine.

Do not plan on being able to just hop aboard the trend in such a dramatic situation."


when she blows, it'll be too late.

Dec 7, 2012 - 10:00am

have at it

Go for it, enjoy your field day. Go back and read through all my comments. If you use the comment tab it will facilitate your pleasurable chore.

So far your examples have been "troll/banker". Undoubtedly you will find many humourous things posted at your expense, but I do not apologize. You have asked for all you have received, if not more. Feel free to quote me at length, please.

Dec 7, 2012 - 9:56am


I didn't mean to imply you weren't (to be perfectly clear).

Ok...stepping aside and refilling my coffee.

(insert sound of a referee blowing a whistle)

  Image cannot be displayed

Motley Fool
Dec 7, 2012 - 9:56am


Third one.

Thanks for the video, it was greatly entertaining. :D

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Key Economic Events Week of 5/3

5/3 9:45 ET Markit manu PMI
5/3 10:00 ET ISM manu PMI
5/3 10:00 ET Construction Spending
5/3 2:20 ET Chief Goon Powell
5/4 8:30 ET US Trade Deficit
5/4 8:30 ET Factory Orders
5/4 1:00 ET Goons Daly and Kashnkari
5/5 8:15 ET ADP jobs report
5/5 9:45 ET Markit service PMI
5/5 10:00 ET ISM service PMI
5/5 12:00 ET Goon Mester
5/6 8:30 ET Productivity and Labor Costs
5/6 10:00 ET Goon Kaplan
5/7 8:30 ET BLSBS

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