Beginning 3 minutes before the release of the FOMC Statement, gold spot and futures prices began to rise notably. Bonds did not. Stocks did not. FX did not. Around 4300 contracts changed hands in the Dec Futures - massively more than average volume - before the statement came out and drove prices further up. In those 3 minutes Gold prices jumped $11... so the question is - lucky guess... or which big bullion bank got the nod?
The LBMA clearing statistics therefore essentially represent huge daily trading through unallocated accounts, most of which is classified as spot delivery, but which is backed by very small physical metal foundations. The clearing statistics while interesting, need to be made more transparent and granular beyond the headline data. Otherwise they tend to obscure rather than illuminate.
Any backwardation in gold at all is serious. Recently, a related phenomenon has occurred: the GOFO rate has gone negative.
The recent decline in gold prices and the drain from physical ETFs have been interpreted by the media as signaling the end of the gold bull market. However, our analysis of the supply and demand dynamics underlying the gold market does not support this thesis. In our view, the bullion banks’ fractional gold deposit system is testing its limits. Too much paper gold exists for the amount of physical gold available. Demand from emerging markets, who do not settle for paper gold, has perturbed the status quo. Thus, our recommendation to investors is the following: empty unallocated gold accounts and redeem your gold in physical form (while you still can).
Weakness in gold and silver is leading to robust demand internationally as store of value buyers accumulate gold and silver on this dip. This is particularly the case in Asia where premiums remain robust and supply demand imbalances remain. The persistent strong demand of this week began on the price falls in April. This demand is clearly seen in the London gold and silver trading data released by the London Bullion Market Association (LBMA) yesterday. London gold trading jumped to a 20 month high in April and silver volumes surged 25% after the price falls led to an increase in physical buying, the LBMA said in a report. Trading in gold averaged 24.1 million ounces a day in the London market, the most for any month since gold reached record nominal highs in August 2011, the LBMA said in a statement yesterday as reported by Bloomberg. The 24.1 million ounces was a 10% increase on March when 21.8 million ounces a day were traded. Silver volume surged nearly 25% to 165.2 million ounces a day, up from 132.5 million ounces in March. There were 5,395 gold transactions on average per day, the highest on record, while silver transfers at 1,007 a day were the second-highest ever, according to the report.
Traders and speculators are watching the $1,413/oz resistance level. A daily close above this level will likely trigger the beginnings of a short squeeze. Holdings in the largest bullion-backed exchange-traded product expanded yesterday for the first time since May 9. Strong premiums for gold bars in Asia show that jewellers and investors are busy buying bullion on this dip. In Singapore, Reuters reports that “supply constraints” have sent premiums to “all time highs” at $7 to spot London prices. Animal spirits are returning to the gold market in the ‘Land of the Dragon’ in this the ‘Year of the Snake’. The volume for the Shanghai Gold Exchange’s benchmark cash contract surged to 19,599 kilograms yesterday from 15,641 kilograms the day before. In two days the volumes have nearly doubled and surged from 10,094 kilograms to 19,599 or 94%.
Gold edged higher today supported by strong physical demand internationally and especially in Asia.
Demand in the physical market continued to hold prices near $1,400/oz as the recent drops in the spot market encourage buyers internationally to accumulate bullion.
More indisputable proof that gold and silver prices are massively manipulated by the global Central Banking cartel.
With its biggest 8-day rally in 20 months, Gold - having jumped another 1% this evening - has just breached $1445 and retraced half of the record plunge from April 12th. It would appear that the record physical demand that we are seeing in every corner of the globe is indeed leaking back into the actual price of gold.
UPDATE: Spot Gold $1426 (from $1564 highs Friday)
As Asia opens to the bloodbath that occurred in precious metals on Friday in the US, it would appear that more than a few traders got the 'tap on the shoulder'. Shanghai futures are limit-down and spot gold and silver prices are plunging once again as we suspect forced margin-calls and the raising of cash (to cover extreme variation margin - or capital reserves) needed in JGB positions, as we explained here. Liquidation is certainly the theme of the evening - investors are selling JGBs (6th day in a row of multiple-sigma moves in long-dated Japanese bonds 30Y +56bps off its post-BoJ lows at 1.60%!), selling Japanese stocks (Nikkei -128 pts, second biggest down day post-BoJ), selling US Treasuries (futures down), selling gold and silver (gold spot down over $100 from Friday's highs), and despite selling JPY early (retracing 30% of the weakness post-BoJ), JPY is practically unchanged (jerking lower only on the US futures open and Asian equity open) - it seems Mrs.Watanabe is struggling and unwinding some her excessively short JPY and long NKY positions... and post the China data (4-for-4 misses), everything is red - JGBs down, Japanese stocks down, US Stocks down, US Treasuries down, Gold and Silver down, Copper down, Oil down, Rubber futures limit down.
One of the least well-known precious metals continues to shine brightly this year - palladium.
JPMorgan Sees Gold At $1,800 By Mid 2013 As South Africa “In Crisis” And “Escalating Instability” In Middle EastSubmitted by GoldCore on 02/01/2013 10:29 -0500
Gold fell $11.70 or 0.7% in New York yesterday and closed at $1,664.80/oz. Silver slipped to a low of $31.09 and finished with a loss of 1.66%.
Reuters report that Asia's physical market has picked up so far this year, with buyers tempted by last week's big drop in prices -- when prices retreated to as low as 1,626 per ounce -- and on demand ahead of the Lunar New Year, traders said. The trading volume on the Shanghai Gold Exchange's 99.99 gold physical contract shot through the roof on Monday, hitting a record of 19,504.8 kilograms, after double-counting transactions in both directions. "Physical demand is very strong," said a Beijing-based trader. "It's a combination of the attraction of lower prices as well as pre-holiday demand." But such appetite could waver if prices recover towards $1,700, he added.
Gold dropped $8.20 or 0.49% in New York on Friday and closed at $1,656.30/oz. Silver slipped to as low as $29.22 in London, but it then rallied to as high as $30.25 in New York and finished with a gain of 0.2%. Gold finished down 0.05% for the week, while silver was up 0.53%.
Friday’s U.S. nonfarm payrolls for December were 155K, 150K was expected and this was down from the previous data of 161K. The unemployment rate was still an elevated 7.8% suggesting a frail U.S. jobs market.
The U.S. federal deficit is now exceeding $1 trillion dollars every year —up from $161 billion in 2007, the last year before the financial crisis. Spending is up some $1 trillion, as outlays for Social Security, Medicare, Medicaid and other entitlements have increased by an amount equal to the entire 2013 military budget – a budget which may again surpass the combined military expenditure of every other nation in the world. U.S. unfunded liabilities are now estimated at between $50 trillion and $100 trillion and by the end of the decade (in less than just 7 years), runaway entitlement spending will require shutting down the military or crippling many other vital domestic spending programs to head off massive deficits that will likely lead to a dollar crisis and significant inflation. No matter what deal is eventually agreed, whether before or after the new year, it will at best nibble at the edges of the trillion dollar annual deficits that are being piled up. While all the focus has been on the so called U.S. ‘fiscal cliff’, amnesia has taken hold and many market participants have forgotten about the far from resolved Eurozone debt crisis – not to mention looming debt crisis in the UK and Japan.