- The Comex Has Technically Defaulted on the 100 oz Comex Futures Contract
by Dave Kranzler of Investment Research Dynamics
I truly thought I had seen all that was possible in the creation of paper gold when the Comex rolled out its “pledged gold” category which enabled technically insolvent banks like HSBC and JP Morgan – the only two Comex banks to have taken advantage of this new gold derivative product – to use paper gold to satisfy the performance bond requirement of CME clearing members.
But now the LBMA and CME operators have rolled yet another paper gold derivative productive in the hopes that the two entities can stave off defaulting on futures and forward contractual delivery requirements. The Accumulated Certificates of Exchange (“ACE”) facilitates the “fractional” delivery of a 400 oz gold bar.
There’s just one minor problem with this set-up. According to the Cambridge Dictionary, the word “delivery” is defined as: “the act of taking goods, letters, packages, etc. to people’s houses or places of work.” To me this means if I want delivery of the 100 oz bar of gold for which I contracted, I would like to have the 100 ozs deposited in the location of my choice so that I can possess the gold bar for which I paid upfront. In effect, the Comex has technically defaulted on the contractual terms of the 100 oz Comex futures contract.
Ronan Manly of Bullionstar.com has written an excellent analysis of this new paper gold derivative scheme: