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Swiss banks are short on Silver and Gold backing paper
By admin | October 6, 2008
I spent all weekend getting caught up on lots of interesting news. This piece struck me as particularly interesting, from DollarCollapse.com:
A very large and conservative Swiss bank has ceased offering paper gold or silver certificates. It seems the bank had previously granted the accounts because it was able to protect itself against an upside move with a derivatives contract with another financial institution. Due to the financial turmoil, the bank was no longer comfortable with the counterparty risk from the other financial institution. Instead, the Swiss bank informed its clients, all paper transactions had to be converted to physical or physical ETF positions (There are Swiss ETFs for gold and silver). My friend informed me that other Swiss banks were likely to follow this bank’s lead.
In essence, the banks that issued such certificates were short the metal, and taking an enormous risk in the event of a sharp price rise. This could easily hit investors in their bank account. Because they had been issued for decades, the cumulative amount of the short position in silver amounted to, perhaps, billions of ounces. This was a short position separate and distinct from the massive COMEX short position.
And the natural result of this?
Sphere: Related ContentThe resultant move by former paper owners of silver into real metal is destined to put additional pressure on the existing supplies of metal. It is hard to imagine a more critical time for this to occur than now. Every indication is one of tightness in the physical silver supply. The potential creation of a brand new source of silver physical demand could be profound.
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Topics: Currencies and Cash | 1 Comment »
One Response to “Swiss banks are short on Silver and Gold backing paper”
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December 5th, 2008 at 8:39 pm
[...] If you need any evidence of this, well Swiss banks are seriously worried about it at the moment because they are short on their gold and silver certificates. I wrote about this yesterday over at petermacfarlane.net [...]