The ‘Big Long’ Gets Bigger As Goldman And HSBC Gobble Up Tons More Gold

14-Aug (SeekingAlpha) — The Big Long was big already. It just got bigger. In the previous article, I noted that Goldman Sachs (NYSE:GS) and HSBC (NYSE:HSBC), had taken delivery of a staggering 7.1 metric tons of physical gold in August, 2015. Since then, they’ve gobbled up tons more.

As of Wednesday, Goldman Sachs bought 142,100 troy ounces (4t 419.8040 kg.) worth of physical gold bars into its proprietary trading account at CME, Inc. HSBC bought a total of 154,800 troy ounces (4t 814.8181 kg.). The two banks have now scooped up approximately 9.23 tons worth of hard metal.

These physical gold bars are headed into the banks’ own vault. That’s what the banks say. They are being purchased as a proprietary trade. That’s what the COMEX exchange says. We know this because commodities regulations require that clearing firms declare the intended ownership of such deliveries.

…Allocated gold bars are financial assets. Their value is deemed inherent, not dependent upon creditworthiness of a counter-party. That’s why they are not financial instruments. Non-allocated (a/k/a unallocated) precious metals schemes are treated differently. They are financial instruments. The promoter “owes” you a gold bar, but you have no title to any. If the promoter goes belly-up, you end up as an unsecured creditor who ran out of luck.

A lawyer’s opinion, however, isn’t needed. The Volcker rule contains a very specific list of the financial instruments it covers, and gold bullion bars and coins are not on it. A bank can trade in bullion as much as it wants, so long as we are talking physical bullion, and not paper-gold. The bureaucrats wanted this to be so crystal clear that they even added a specific administrative exception for spot trading.

[source]

PG View: That Goldman and HSCBC are building very large physical gold positions in their house accounts is certainly significant. However, the author’s cautionary opinions about unallocated accounts “schemes” like GLD and IAU are worthy of note as well. Buy physical gold and take delivery!