from Gold Silver Worlds:
In his latest commentary Jim Sinclair discusses a potential future scenario for the Comex. An important issue facing Comex could become settlement if steeply declining inventories will continue.
The cause of today’s spectacular rise in the gold price is the reality that with Friday continue large drop in Comex warehouse gold inventory. No cogent argument can be formed against the reality that because of the continue fall in gold inventory that within in 90 days or sooner the Comex must change its delivery mechanism.
The highest probability is that Comex will have to move to cash settlement rather than gold. Part of that settlement could be lots of 100,000 GLD that represents the ability to exchange for gold.
Their problem is that if GLD is part of the settlement mechanism for the spot Comex contract that GLD will be destroyed by the convertibility. It is a truism in gold that which is convertible into gold will in fact be converted over time.