Elaborates On The LBMA Default & Ensuing Panic
Eric King: “Inside that piece (“The Secret World of Gold”) you talked about gold leasing and the mechanics of that. Jim Sinclair wanted me to bring that up to you, the gold leasing, the mechanics of it, can you talk about that?”
Maguire: “We did a piece on King World News about it, about the LBMA bullion bank default. Stepping back, how did they get to such a mismatched (trading) position where they had so little gold and silver in their inventory to be able to back up people coming and asking for their gold and silver? They never anticipated that this would happen….
“But what had happened was, over the years, basically what you would do is you would sell gold, sell silver, financed almost for nothing, take that money and invest it. Then, obviously incentive was there because it had built up to such a large (short) position, they were so over-collateralized, that it was important to defend the price (of gold and silver) from rising because they didn’t actually have the physical.
What’s happened now is they are in a position where that leased gold is being asked for and they don’t have it. I know of a very large client who actually turned up for his bullion, was refused his bullion, and told he would be settled in cash. I felt I should go public with that (on KWN).