"Regarding gold, perhaps the big news this morning is also out of China where the Bank of China reported that its gold holdings at the end of June were unchanged from the end of April. Reporting that its total foreign exchange reserves had risen above $2 trillion yesterday, the Bank said that it held 33.89 million fine troy ounces of gold, or 1.054 metric tonnes. China’s gold reserves have been rising since ’03, although not in a consistent manner but rather from time to time in large leaps rather than steady, slow, monthly or quarterly increases.

The Gold Bugs are up and at it again regarding futures, ETFs, derivatives et al. If the gentlemen and ladies involved in GATA and other organisations would put their efforts toward curing cancer, or fighting injustice, or ending the infield fly rule and the American league’s pinch-hitter-in-place-of-the-pitcher, or the reason for the existence of the BCS in college football or other some such worthwhile endeavor that they put to their concerns over the perfect coverage of futures and gold certification, cancer would be cured; injustice everywhere would be eradicated; the infield fly rule would be rescinded; pitchers would actually take their bat and strike out rather embarrassingly at the hands of their foes, and the play-of system via the Bowl games would be in place… all by week’s end. But they won’t.

There are all sorts of arguments made by the Bugs that the gold ETF is not covered properly by actual gold in the vaults in NY; that the futures are not covered by actual gold in the vaults in NY, et al. One argument put forth by the “Bugs” is that gold futures are to be covered 1:1 by gold in vault, and that if they are not there is a problem. There is not. Wheat futures are not covered 1:1 by wheat grown in the field, for of course at any one time there is more wheat traded on the boards than is grown, and over the course of any crop year that crop will be traded hundreds if not thousands of times as the price is discovered and rediscovered and rediscovered again and again. Wheat futures upon delivery will of course equal the amount of grain in storage, but otherwise to expect each wheat contract to be covered by real wheat is nonsense. So too with the fears of the “Bugs.”

We shall not argue that the Exchanges and even the ETFs could be a bit more transparent and can and should make their “positions” more obvious to the public, but the demands brought upon them by the “Bugs” are illogical and detrimental… and a waste of most of our time.

To finish, we do agree that recent decisions to allow for the “delivery” of ETF shares in the stead of actual physical gold against a futures position does cause us some concern. Indeed, it causes us some very real concern, for if we stand for delivery of wheat we expect to receive wheat, not paper. The same holds true for delivery processes on the COMEX, and if GATA and the “Bugs” have a complaint it is this new decision by the COMEX. On this, we’ll grant that the “Bugs” have something to complain about."