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 ()


Dec 7, 2012 - 7:19am

seriously, you tell me to go and read victor ...

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

And what is this creepy 'we' believe crap. Do you have a bell that goes off when I say something sensible?

What name calling? You called yourself a Fool. Avatars matter. It is one of those things I am particular about. I do not see any name calling in my post. Oh, I called Rompuy emperor - was that it? Do you like his new clothes made of shiny euros?

edit: was it the Brussels Sprouts? Sorry, I guess that was really, really, offensive. They are a vegetable I am very fond of. With bacon and cheddar. Yum.

Dec 7, 2012 - 7:18am

@Motley Fool - pronunciation of Fekete

Enjoyed watching your "debrief" MF. It piqued my attention and sent me back to FOFOA's blog to re-read his comments on silver, which I still feel he utterly misunderstands, and the resulting ZH commentary, which I felt had both fully grasped and adequately dismissed his perspectives. I may at some point write a rebuttal, but I would need the data to be gathered into one place first, since I sadly don't have a spare thousand hours.

This little message, however, is intended merely to allow you to enhance your future credibility, since it seems that your progression from the Fekete camp to the Fofoa camp has been a significant one. The first of those two gentlemen is of Hungarian extraction, and (as someone with a rudimentary understanding of that language) I can reliably inform you that his name is pronounced "feh-keh-teh". Emphasis on the first syllable. Regular rhythm. Not many people care, I will grant you, but since he is of some significance to you I thought you might prefer to say it properly in future.

Motley Fool
Dec 7, 2012 - 7:05am


I thought it would be good to respond to your list.

"suggesting that silver might ever be a currency again"

Sure. We don't think silver will be currency ever again.

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

We do think they have their own agenda as regards gold, though I suspect we differ in what we think that agenda is. So perhaps we agree here.

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

A pure fiat system is terrible, and has, as you point out, a historical lifespan of at most 40 years. The current one is the longest ever. I think 32 years was the previous record. Seems we agree here.

"suggesting that barter has ever been used"

Ever? Sure barter has happened, for example in post-soviet Russia. Where we disagree is the premise that barter was one of the stages of evolution of our current monetary system. Refer to VtC's short history lesson. So as your statement stands we agree that barter has occured in the past. Again we agree.

"suggesting that the precious metals market does not operate freely"

We agree that there is manipulation in the markets. However we do not think that Every participant or mechanism is a source of manipulation. So again we agree.

"suggesting that SLV and GLD are not safe investments"

Let me quote myself from earlier in this thread. "Note, I don't advocate for GLD, in fact I think it'sa terrible idea to hold those shares as when TSHTF you are likely to lose your gold and just be repaid in rapidly depreciating dollars." So again we agree,

Let's add.

"ANYTHING that has to do with Andrew Maguire."

We think that ultracrepedarians do a disservice to the cause of gold. So sure, we challenge blatant falsehoods promulgated by such.

It might be worth your while to rethink your list, and though it will be hard perhaps stop with the namecalling.

Finally. As I expected Bron is more than capable of providing a level headed response. It was well worth a read.

Dec 7, 2012 - 6:58am

The Euro fantasy

The Euro a world reserve currency? It is fantasy paper - no one will want it, especially the Chinese. How could Europe hope to dominate the oil trade? By having paper money and no army and not much oil and an aging population. That's the ticket. Oh I forgot, all that gold - if you can find it and the Americans give it back if they can find it (and choose to return it). Or is it the wonderful leadership - all hail Emperor Rompuy! Listen to his Haiku! I can see it now, him flanked by Lagarde and Draghi ... the world ruled by Brussels Sprouts. Computerized cash-registers flashing euro's in Texas as humiliated Americans buy European trinkets ...

When Coeur, the head of the ECB, said the euro was a currency in need of a state (I paraphrase) and a government, starting with a treasury, you could see this fantasy writ large. How many times will Europe impose an aristocracy on itself? The euro-elite are in serious trouble, as has so often been the case in their arrogant history. But dominate the world through gold and oil and paper money? Not this time. A billion Chinese, the Russians, and almost a billion Indians might disagree - and certainly one Canadian.

Dec 7, 2012 - 6:57am

@VTC __ Freegold logic at its most hilarious

Quote: "BRICS will sell gold to the ECB in order to acquire Euros. Why? Because they will need these Euros to buy oil. Why Euros? Because OPEC wants gold, and the only liquid gold market will be in Euros, physical only."

Let's get a load of FG logic here: If OPEC wants gold and BRIC have it then they can buy OPEC oil with their gold directly. But no!! According to FG theory they ought to first sell gold to ECB to acquire EUROs and then buy OPEC oil with the Euros in order for the latter to buy gold with the Euros. What kinda farce is this? Imagine I have a gift for my wife on Valentine day. Instead of giving her directly I sell it on eBay first and then give her the payment so that she can buy the gift from eBay. Boy I never thought of that. No, you guys don't laugh. Do you know how liquid eBay is? LOL. That's a hell of way to make Euro the next global reserve currency, Victor, but if you don't mind may I tell you how the real world works? BRIC are productive nations that export so they will ask other nations to buy their goods with gold after US$ is done, which enables them to acquire gold w/o having to use Euros. If OPEC asks for gold then they will supply it. BRIC can set up own clearing system to handle the transaction instead of relying on Euros. It's ultimately producers making the call, and FOREVER that way. With the rest of world having no need of Euro where does it leave Euro, new global reserve currency? Nice try. A currency is only as strong as the economy behind it. RMB is stronger is b/c China has a productive economy so you can buy their goods with RMB. RUBLE is stronger is b/c Russia has all that natural resources so you can buy their stuff with RUBLE. What's behind Euro now? Outside of Germany and their close neighbors you have a mess. If Germany leaves all there is left are PIIGS and rampant socialism. In that environment whatever amount of gold ECB has would not matter b/c they will have a net negative gold flow out of EU zone as they have an unproductive economy. Euro would then be as trashy as US$. So telling us to get ready for a switch from US$ to Euro in the middle of PIIGS crisis is like planning an exit from Titanic onto Hindenberg. You FGers are genius.
Dec 7, 2012 - 6:03am

Progressive abandonment of low prices (XAG)

Before a major price rise, weekly closes progressively abandon the tightening 1SD low Bollinger band, then the 30 week MA, then the 1SD high Bollinger band. This happens over a period of around 3-6 months, in a more or less steady progression depending on the upward pressure. At the time when the 1SD high Bollinger band is abandoned, price becomes disorderly to the upside. A smoother and more granular picture can be obtained by using more 30 week Bollinger bands (0.75 SD, 0.25 SD etc.) but this picture is clear enough.

During these several months these formations show positive curvature on the weekly and usually also on the daily dot chart, such as we have been seeing since the summer. The curvature means that the price is visiting the absolute lowest point it can reach, but its ability to reach to the downside is collapsing. Although upward-curving lines appear in other contexts (and fail), the progressive abandonment of these low-SD Bollinger bands appears valid and unique to the period prior to major runups. The 30 week (or 150 day) Bollinger bands appear particularly valid (i.e. more so than 10, 20, 40 and 50 week charts).

Interestingly, the period taken for the grind appears correlated to major weakness in the price during the preceding years and inversely correlated to major strength in the price during the preceding few years. Psychologically, this makes sense. The current period has major strength and moderate weakness in the past few years (i.e. sentiment should build a little faster than in 2003 / 2010, but more slowly than in 2005).


1) 1 SD Bollinger band (low)

2) 30 week MA

3) 1 SD Bollinger band (high)

2003/2004 grind took 7 months:

1) March 31

2) June 30 (3 months)

3) November 3 (4 months)

- then disorderly to the upside

2005/2006 grind took only about 2 months:

1) NA (price did not spend time below low 1 SD)

2) Sep 5

3) Oct 31 (2 months)


2007/2008 grind took about 3 months:

1) September 10

2) N/a (price went straight through MA)

3) December 17 (3 months)


2010/2011 grind took about 6.5 months:

1) February 8

2) May 31 (3.75 months)

3) August 23 (2.75 months)

2012/2013 grind appears to be taking around 4-7 months:

1) August 13

2) October 29 (2.5 months)

3) ? Dec/Mar (1.5-4.5 months)


There were also similar formations in 2002 and 2009, which were interrupted just as they became disorderly by sharp downside moves, but apparently created greater pent-up demand as a result and generated larger moves a year or two later.

Dec 7, 2012 - 5:50am

Jobs report should be from fantasy land,, Sandy?

they will have to throw in some fudgy numbers to make up for Sandy.. excuses, excuses.

Dec 7, 2012 - 5:26am

CFTC actually doing something?


The CFTC has filed a civil injunctive enforcement action in US District Court against 12 commodities firms for allegedly selling phantom precious metals to clients. The CFTC complaint states that: The defendants claim to sell physical metals, including gold, silver, platinum, palladium, and copper, to retail customers in retail commodity transactions. Under the defendants’ retail commodity transactions investment contract, customers allegedly make a down payment on certain quantities of physical metals, usually 25 percent of the total purchase price. Defendants allegedly claim to arrange loans for the balance of the purchase price, and advise customers that their physical metals will be stored in a secure depository.

The complaint further alleges that these statements were false, and that the defendants do not purchase any physical metals, arrange loans for their customers to purchase physical metals, or arrange for storage of physical metals for any customers participating in their retail commodity transactions. Instead, all the transactions are just paper transactions.

Sounds remarkably like the COMEX.

Dec 7, 2012 - 5:22am

Japan hit with a 7.3 quake

Plenty of signs

Luke 21:9-11

Dec 7, 2012 - 5:12am

Looks like another sell before the jobs report

following the euro down this time..

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