Hedge Funds Could Cause A Potential Disaster In The Gold Industry

The gold and silver price crash from mid-April of this year remains hard to explain. At least, that is the public comment made by Peter Hambro, co-founder and chairman of Russian gold miner Petropavlovsk. He made some interesting comments in an interview with The Telegraph which we summarize in this article.

Mr. Hambro is a leading figures in the gold mining sector in Britain. He is in the gold and mining sector for several decades. He was quite vocal recently in criticising the hedge fund community for distorting the gold market. The interesting thing in his comment was “his warning that they could account for a potential “disaster” in the industry.”

The Telegraph asked Mr. Hambro how he explains the gold and silver price crash in mid-April of this year. His answer:

Where the selling came from that knocked the gold price down, I really don’t know. It was such a very strange thing.

I’ve been in the gold business for 35 years and never known a big change like that where it wasn’t obvious where it came from.

Moreover, when asked whether he is concerned that hedge funds are distorting the gold market, he commented as follows:

The quantity of gold available for delivery on the Commodities Exchange in New York is at its lowest level ever.

The size of the contracts is at its highest, but the deliverable is at its lowest. There is the potential for disaster in those numbers.

Fractional reserve banking in gold is responsible for a lot of the strange things going on. You can set yourself up as a hedge fund and nobody knows who you are.

Because of these strange machinations and the distortion between the physical market and the paper market, it’s very hard to say what’s going to happen.

There’s a real risk that the people who’ve sold ‘paper gold’ won’t be able to deliver and there will be some official ruling that will settle all the bargains at today’s price. Something like that will happen.

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