[Essine]

http://www.zerohedge.com/article/lbm...es-gold-market

The inescapable inference is that the LBMA is operating a fractional reserve system and has sold much more gold than it has or could ever have. The amount of gold that has been sold is estimated to be around 65,000 metric tonnes, while the maximum amount of London Good Delivery bars that exist in the world is around 15,000 metric tonnes. So even if the LBMA possesses the world's entire stock of LGD bars there are 50,000 metric tonnes of obligations that cannot be met if the owners ask for delivery. To put that quantity of gold into perspective, it is equal to all the gold reserves that remain to be mined in the earth. Gold is unique among all commodities because its very nature and function enable such a fraud to be perpetrated. Gold has very few uses that consume gold. Its main function is to store wealth, and gold can perform that function while in your house, in your vault, or even on the other side of the world in someone else's vault. When it is acting as a store of wealth in someone else's vault, you have to trust that someone else that there is any gold at all in his vault. Many wealthy individuals, institutions, and sovereign states buy gold through the LBMA in unallocated accounts and leave the gold they supposedly own in the custody of the LBMA.

That people are buying and selling gold without ever taking delivery means that there is the opportunity for the bullion houses to sell gold that doesn't exist. The bullion houses probably don't view this as illegal or dishonest, because they will operate a fractional reserve type of system just as the banks do with fiat currency and will make sure that they have enough gold on hand for what would be the maximum estimated volume of gold that could be called for delivery at any one time. For this fraud to continue without being exposed, no requested delivery of gold by an LBMA customer must ever be defaulted upon or else a massive "run on the bank" would be triggered.