This is a stunning revelation. Mr. Christian confirms that the “physical market” is not in fact a physical market at all. It is a loose description of all the paper trading and ledger entries and some physical metal movements that occur each day on behalf of people who believe they own bullion in LBMA vaults but in fact they don’t.

So much more on link:
http://beforeitsnews.com/news/28269/LBMA_OTC_Gold_Market_Cited_as_a_Ponzi_Scheme_in_CFTC_Hearing.html

By Adrian Douglas

The “bombshell” that GATA dropped at the CFTC Public Hearing on Precious Metals, March 25, 2010 was stunning. The video of Bill Murphy, Chairman of GATA, revealing a whistleblower source who has warned the CFTC Enforcement Division of market manipulation by JPMorganChase in advance of it happening and witnessed JPM traders bragging of their exploits can be viewed here.

http://www.cftc.gov/newsroom/speechestestimony/index.htm

Murphy explained that despite the Enforcement Division receiving detailed information in December 2009 the manipulation continues unabated as can be seen by the way gold was taken down this week to rob holders of April gold call options in the strike range of $1100-$1150 as the hammering made them expire worthless.

GATA believes that this new evidence and “smoking gun” will be a watershed event in liberating the gold market from its shackles of price suppression.

As dramatic as this revelation was at the CFTC hearing there was another “bombshell” exposure during the hearing. This was the testimony that GATA Board member, Adrian Douglas, was able to deliver during the hearing while assisting Harvey Organ with his testimony. Adrian was able to introduce arguments that the London Bullion Market Association (LBMA) OTC gold market is nothing but a massive “paper gold” Ponzi scheme. What was then astonishing is that the bullion bank apologist, Jeffery Christian, of CPM Group, who has always been staunchly against GATA endorsed Adrian’s comments as being “exactly right” and went on to confirm that the LBMA trades over 100 times the amount of gold it actually has to back the trades.

There were lots of almost as equally explosive admissions so I have taken the time to make a transcript of the relevant section of the webcast. I have posted the two short video clips

www.youtube.com/watch?v=jok3XLBz_SI

www.youtube.com/watch?v=BfCn8NlLHko

Part of transcript:

A DOUGLAS: I would just like to make a comment. We are talking about the futures market hedging the physical market. But if we look at the physical market, the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22 billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount it is about one and a half times the US economy; that is not trading 100% backed metal; it’s trading on a fractional reserve basis. And you can tell that from the LBMA’s website because they trade in “unallocated” accounts. And if you look at their definition of an “unallocated account” they say that you are an “unsecured creditor”. Well, if it’s “unallocated” and you buy one hundred tonnes of gold even if you don’t have the serial numbers you should still have one hundred tonnes of gold, so how can you be an unsecured creditor? Well, that’s because its fractional reserve accounting, and you can’t trade that much gold, it doesn’t exist in the world. So the people who are hedging these positions on the LBMA, it’s essentially paper hedging paper. Bart Chilton uses the expression “Stop the Ponzimonium” and this is a Ponzi Scheme. Because gold is a unique commodity and people have mentioned this, it is left in the vaults and it is not consumed. So this means that most people trust the bullion banks to hold their gold and they trade it on a ledger entry. So one of the issues we have got to address here is the size of the LBMA and the OTC markets because of the positions which are supposedly backing these positions which are hedges, but it is essentially paper backing paper.

[8 seconds of silence]

CHAIRMAN GENSLER: Oh! I guess I get time. Errr…Umm. I don’t have any other questions. Commissioner Dunn.