IT’S ENOUGH TO BREAK THE SYSTEM: Craig Hemke on the Fragility of the Gold and Silver Derivative Markets

Many of you reading this might think that you own gold and silver, and some of you are right – if you have physical holdings. On the other hand, if you’re holding derivatives or an ETF that you think represents gold or silver ownership, think again: you’re betting on a system that could collapse at any time.

That’s what was told to Portfolio Wealth Global by one of the world’s foremost experts on the precious metal markets: Craig Hemke of, a site dedicated to helping investors and world citizens navigate the coming economic chaos and invest wisely in precious metals.

A licensed securities professional for nearly two decades, Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report site, which has developed into a bustling community for precious metal enthusiasts.

Mr. Hemke graduated from the University of Nebraska with a B.S. in economics, and he’s been an active commodity option trader since 1987. Craig provides accurate technical analyses and price forecasting in the metal markets for the short-, intermediate-, and long-terms; most recently, he called the bottom in gold when other analysts were expecting lower prices.

Courtesy: Craig Hemke

In the years since its inception, Mr. Hemke’s blog has expanded into a full online community with a passionate group of avid followers. Striving to provide some levity to the traditionally stodgy financial world, Craig Hemke’s wit and wisdom have earned him tremendous respect throughout the commodity trading community.

We’re concerned about the integrity and security of your precious metal holdings, so Portfolio Wealth Global asked Mr. Hemke to clarify his thoughts on these markets. According to Craig Hemke, the first thing to know is that the prices of gold and silver are determined not through the physical exchange of metals for fiat currency, but chiefly through the trading of derivatives – which, unfortunately, aren’t backed by tangible assets.

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    Today, these derivatives dominate precious metal trading and come in many forms: forward contracts, promissory notes, future contracts, and some very popular exchange-traded funds (ETFs) as well. You’ve got the creation of all these digital derivative contracts controlled by the banks as they’re traded in New York, thus they’re controlling the market forces on a daily basis.

    With the quantity of paper contracts greatly outnumbering the amount of physical gold and silver that exists on Earth – even if it’s, say, only ten beneficial owners for every actual physical ounce – that’s enough to finally break the system when all of those owners demand physical delivery, according to Craig Hemke.

    As Mr. Hemke explains, it’s a lot like the banks and how they only hold a fraction of people’s cash on hand: if there were a run on the banks like America experienced in the 1930s, the banks wouldn’t have nearly enough cash to pay everybody.

    Courtesy: Craig Hemke

    According to Craig Hemke, the gold market also operates on a fractional reserve system, where derivative and ETF holders don’t have immediate access to physical precious metals like they think they do.

    At best, these investors are getting the promise of a future delivery, according to Craig Hemke, and as long as those derivative and ETF holders feel confident that they can get their gold delivered if they need it in the future, the system can perpetuate itself for a little while longer.

    What ultimately happens, though, is that because there are so many apparent owners for each physical ounce of gold or silver, if they all demanded delivery at the same time, there would be a serious problem for the banks that created and have maintained this system. There would also be major problems for you if you’ve chosen to base your entire gold and silver allocation on these precarious paper assets.

    There’s much more to learn from Craig Hemke concerning precious metals and other financial markets, so be sure to view his full interview with Portfolio Wealth Global, as well as his Website and blog at, which is a must-visit site for all traders and investors seeking profits and protection in these uncertain market conditions.

    Portfolio Wealth Global also invites you to get your copy of our informative and revealing reports on today’s most influential political and economic commentators. Some of our latest and most popular profiles include intelligence expert and #UNRIG Core Team Member Robert David Steele, outspoken and history-making Congresswoman Cynthia McKinney, long-time commodity maven Bob Moriarty, defender of democracy Charles Hugh Smith, and Federal Reserve critic G. Edward Griffin.

    Best Regards,

    Tom Beck
    Research Partner,

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      This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.

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