are the bullion banks in serious trouble?

"... The FT story suggests that at least 10 bullion banks needed physical gold bullion desperately. This looks like a rerun of the 1960s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35 per ounce.

I have spelled out in recent articles that there is a run on the bullion banks has begun and is gaining momentum. Investors and institutions are realizing that "unallocated gold" is not gold at all but just an unsecured promise for gold. So investors and institutions are starting to demand delivery of their metal, and as there is only 1 ounce backing each 45 ounces that are claimed, the situation is turning into what will be a short squeeze of epic proportions.

The FT says: "Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee."

As Jeffrey Christian of CPM Group has explained, the "physical" gold market is in fact a misnomer as that market is actually a paper market backed by only a small amount of physical gold:

http://www.cpmgroup.com/free_library1/HEDGING_AND_DERIVATIVES/Bullion_Ba...

So investors have bought a record amount of "physical gold," which is actually paper gold that they have never seen, and only about 2.3 percent of what has been sold actually exists. The bullion banks are "awash" with liabilities for the record amount of gold they are supposed to be holding. Investors are now distrusting the bullion banks and are asking for delivery, so is it surprising that the record amount of "physical gold" sales has led to a record gold swap being transacted to give the bullion banks liquidity?

The International Monetary Fund has been surreptitiously selling gold at a clip of around 15 tonnes per month since February without any official announcements and without disclosing the recipients. This is another sign that the bullion banks are in serious trouble.

When 45 ounces of gold are sold but only 1 ounce is sourced, the result is a massive suppression of the gold price. But the converse is also true: When 45 ounces of gold are demanded for every 1 ounce that is in the vault, the price explosion is beyond imagination.

What is unravelling is not the mystery of the BIS gold swaps, as claimed by the Financial Times, but the unravelling of the gold price suppression scheme itself."

The full commentary by Adrian Douglas "What's unravelling is gold price suppression" is at http://www.gata.org/node/8876