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Gold Futures Raid Leads To ‘Extraordinary’ Demand For Bullion Globally

Submitted by GoldCore on 04/19/2013 10:40 -0400

Gold extended gains above $1,400 an ounce on signs that jewelers, investors and store of value buyers of gold are taking advantage of the biggest slump in prices in three decades.

Global demand for physical is very clearly seen in rising premiums being seen internationally. The drop in prices ignited a spate of buying in gold coins and bars, sending premiums for gold bars to multi-month highs throughout Asia. Demand intensifed overnight as prices rose over $1,400/oz.

XAU/EUR Currency, by Tick, 2 Weeks – (Bloomberg)

Indian gold premiums, always a good indicator of demand for physical have jumped due to tight supplies. Premiums charged by banks for gold has increased from around $1.20 to between $3 to $5 per ounce.

The premium for metal on the Shanghai Gold Exchange is up to as much as $10, in Turkey it’s almost $20 and in Asia it’s about $5. Premiums for gold bars in Hong Kong were at $1.90 to $2.00 an ounce to spot, their highest level since early last year. Premiums in Singapore and Tokyo were also at multi-month highs.

Government mints, bullion refineries and dealers around the world report a dramatic increase in demand for coins and bars.

Bullion refiner, MKS said that “physical demand is extraordinary.”

Digital gold provider, Bullion Vault, said that Monday and Tuesday were their “strongest 48 hour period for new customers this year.” Bullion Vault said that they saw record volumes of digital gold and silver transactions on Monday “beating the previous peak of September 2011.”

There has been a marked increase in demand since the price plunge. We saw a huge amount of panic selling Monday but Tuesday saw as many buyers as sellers. Since Wednesday, we have experienced more buying than selling and most of the selling was of small orders, less than fifty ounces, while there were lumpier buy orders from high net worth clients.

Ironically, the gold futures price plunge has resulted in one of our best weeks in terms of sales so far in 2013. In some ways, the price shake out was needed by the market as buyers are no longer on strike and are seeing value at these levels.

Demand for gold is also coming from contrarian investors who are concerned that stock markets are at multiyear and all time record highs and looking toppy at these levels and there are also concerns about deposits in Europe.

XAU/GBP, by Tick – (Bloomberg)

In terms of transactions, gold buyers outnumbered sellers by a ratio of nearly five to one yesterday. In terms of volume, gold buyers outnumbered sellers by a ratio of nearly nine to one yesterday. Meaning that there were more buyers than sellers and buyers were placing larger orders than those selling and this trend has continued today.

U.S. gold coins sales have been at record levels this week. Lower prices and the tragic events in Boston may have contributed to increased buying due to concerns about the risk of terrorist attacks.

Premiums are rising in Europe and the U.S. and there are delays of a few weeks on some smaller coins and bars showing the growing tightness in the market.

“We are hearing of huge jumps in premiums for all gold products at the street level, so there is a sense that the downdraft for gold futures has overrun the rear physical metal market in a big way,” said Gene Arensberg, editor of the Got Gold Report.

“High premiums mean supply is drying up and it is just a question of time before that shows up in the paper gold markets,” he said.

NEWS
Physical demand for gold on the rise –Market Watch

U.S. Mint’s Sales of Gold Coins Soar After Futures Slump - Bloomberg

Gold Traders Split on Outlook as Asian Jewelers Buy - Bloomberg

Singapore Considers Gold Fix – Wall Street Journal

COMMENTARY
Aftermath Gold Crash - What Next? – Money Week

Video: Rogers Says Gold Going `Much Higher' Over Decade - Bloomberg

Brian McKenna Explores 'The Secret World of Gold' - Montreal Gazette

Is Australia The New Switzerland? – Money Morning

Talk of strong physical gold demand grows post selloff – Market Watch

For breaking news and commentary on financial markets and gold, follow us on Twitter.

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Fri, 04/19/2013 - 16:00 | 3473723 jomama

i backed my truck up, still waiting for delivery....

Fri, 04/19/2013 - 12:30 | 3472480 Magnum

Link to video in Thai, the news spent 5 minutes talking about the flood of people buying gold, ATM machines are out of money in the gold district, and buyers are coming across the border from Malaysia to buy.

http://www.youtube.com/watch?v=STU1mol7kAI

Fri, 04/19/2013 - 12:25 | 3472454 Conax

I'm just speculating here, but it seems to me they stopped the beatings right at the limit. The limit is the point where any further lowering of spot prices would cause a total stampede out of paper gold and silver.

We were this <--> close and it stopped.

These guys are good.

Blatantly obvious, but good. Now it's just a matter of burying any little spikes that come up, so this could go on for a while. If I have to sell any, I'll set a 'take it or leave it' price and wait for my buyer to show up.

Fri, 04/19/2013 - 12:12 | 3472379 ChanceIs

Permanent Gold Backwardation

My advice to the board and Zero Hedge community. You owe it to yourself to understand the futures curve structure (basis) of gold and the other PMs. In particular, learn about gold backwardation. Antal Feteke (per Max Keiser's page) writes about it. One need not agree with Feteke (I do) just understand what he is saying:

http://feketeresearch.com/upload/Who-said-the-hydra-would-take-it-lying-...

Keith Weiner also address the gold basis issue and writes a weekly feature (posted on Sunday):

http://monetary-metals.com/

Feteke talks only about the Fed manipulating the futures market. Weiner says manipulation is a myth. They are both obviously very smart and knowledgeable. I would love to see them in a cage fight. My money is on Feteke. I find it truly disturbing thatt there is no agreement on this.

That disruptio pales to what I experience by the CFTCs will avoidance. What duid CFTC say regarding silver....'you have shown that JPM had large enough positions to manipulate the market, but you haven't proved that they used this power.' Gag.

Fri, 04/19/2013 - 14:13 | 3473027 Bam_Man

That was a great article (as usual) by Fekete.

Just try to find a 1oz coin or bar right now for under $30. Forget it. Premiums are $6.99-$8.99/oz minimum.

The ACTUAL spot price for Silver right now (if you can find it) is AT LEAST $30/oz.

This indicates SEVERE BACKWARDATION.

Sinclair will shortly be proven right. The end of the paper CRIMEX market for PM's is coming shortly. If it continues to exist at all, it will be as an electronic casino for degenerate gamblers with no physical inventory.

Fekete will eventually be proven right. A "Barter Only" market for PM's comes soon after that.

Fri, 04/19/2013 - 14:41 | 3473192 ChanceIs

I finished Mr. Fekete's article for the second time just now, and will ruminiferously do so again for a third and forth before midnight. Just a little morsel (burp):

In fact, however, a lower gold price is making the problem more intractable, not less. The Fed is diving from the frying pan into the fire. This is the point missed by almost all observers and market analysts. They ignore the underlying flight into physical gold that continues unabated, in spite of (or, better still, because of) the panic in the paper gold market. The Fed’s intervention in bankrolling short interest is going to back-fire, for the following simple reason.

The Fed’s strategy is inherently contradictory. A lower price for paper gold makes it easier, not harder, to demand delivery on maturing futures contracts.

What isn't to be understood? 1) Fed knocks the price in the futures market down, 2) those with dry powder (and understanding) come in and enter the contract for delivery at the lower price, 3) putting up even less margin than before to secure even MOAR OUNCES, and 4) then stand for delivery. You know how that works.....Excuse me....gentlemen...I would like my gold now. No Mr. Corzine, I don't want cash instead, even at a 10% premium - just the barbarous relic please.

I looked at Weiner again. It takes me ten times as long to read Weiner than Fekete. Fekete must be right. It is always the case. He who has the true understanding can make himself understood. I did email Max Keiser to suggest that he bring both of them on his show together. I have written Max perhaps 50 times. He never responds.

Methinks that holding paper these next few months may not be quite so bad. You will get a settlement. Maybe not the same premium as the physical.....but you can still use leverage in the paper markets. When the futures markets collapse, then there will be no paper. But between now and then there might be a happy hunting time. Only question is..."when is then."

Fri, 04/19/2013 - 16:02 | 3473757 jomama

i heard they found traces of blood in Max Keiser's drugs.

Fri, 04/19/2013 - 15:00 | 3473360 Bam_Man

Fekete is a terrible lecturer and interviewee - barely coherent and understandable. He is much easier to understand in writing.

Fri, 04/19/2013 - 12:50 | 3472601 flight77

The correct name is Antal Fekete,
which is hungarian and means "Black" .

Fri, 04/19/2013 - 12:47 | 3472587 Bay of Pigs

Weiners last article here was a joke. Utter buffoonery.

Fri, 04/19/2013 - 12:23 | 3472448 dogbreath

I was just about to post Fekete's article. +1

Fri, 04/19/2013 - 12:09 | 3472359 chinaboy

100 kg were sold in 2 hours in Beijing. Most stores are selling rain checks.

Fri, 04/19/2013 - 12:08 | 3472351 JOYFUL

After reading the comment of another here yesterday, bout the shut off of production by the Mint in Istanbul, I made it to my LCS today in search of confirmation...

'you must be very happy'

No', acutally I'm very stressed out and unhappy!

What! Sales are boomin this week, right!

Yes, but every sale is costing me a lot of extra work...the people are very uptight and afraid...and now we are told by the factory that we can't get any more gold.

My last buy was at this shop, two days before the takedown. Took all his stock of ziynets. Course I was tempted to kick myself as usual...till today. The word is out here. It's one thing to read about it in the western press and\or blogosphere, where everything is filtered now through weird anti-reality mechanisms...another thing to actually see it gettin real.

Totally contrived terror narratives...totally contrived precious metal takedowns...umm, looks like this is it boyz n girls!

Fri, 04/19/2013 - 11:59 | 3472270 Reven

However that may be, the PHYS (Sprott Physical Gold Trust) premium is now negative, or in discount territory. This in indicative of how much damage has been done to gold investor confidence.

http://sprottphysicalbullion.com/sprott-physical-gold-trust/net-asset-value/

Fri, 04/19/2013 - 13:40 | 3472888 EscapeKey

buy that, short gld?

Fri, 04/19/2013 - 12:05 | 3472315 RaceToTheBottom

Thanks for that post.

CEF is also in discount territory

http://www.centralfund.com/Nav%20Form.htm

Fri, 04/19/2013 - 11:53 | 3472231 Mototard at Large

Out of gold. Amost out of silver...

I went into ScotiaMocatta this morning to buy some AU and AG. The polite and professional agent tells me that ScotiaBank/Mocatta had no gold for sale. No bullion and no Maple Leaf coins. He believes they may have gold available on 06 May 2013.

When I asked for modest amount of silver bullion (5 0Z bullion Sunshine) he smiled politely and said: "Let me just check inventory before I agree to the sale." He and an associate opened a cabinet, did a quick count and agreed to the sale.

I realize this is anecdotal information, but interesting to see a major national level seller of PMs unable to deliver their main product until 06 May.

Silver was selling for equivilent of USD 26.24 inclusive of all fees etc.

Fri, 04/19/2013 - 12:01 | 3472300 Scro

Apmex has ASE monster boxes in stock with a $6.99 premium. Silver and gold are still available including junk silver.

Fri, 04/19/2013 - 12:14 | 3472398 Spitzer

I was told a couple days ago that Scotia is out of everything. I went to get phys at the main branch in Edmonton and there was no gold, so I asked about Toronto. No go there either.

Fri, 04/19/2013 - 11:51 | 3472213 gdogus erectus

Gold gold. Gold. Gold. Gold. Who owns most of it? Who could move around 747s full of it if needed to keep one of their buddies from going under? Or withhold it and let them whither. Don't get me wrong. When big brother rolls out the new global semi-gold backed reserve currency and the west finds out we are the only country that no longer has any gold, you will be happy you own it. As long as you are legally able to use/sell/own it.

Silver. Now silver is different. How big are the stockpiles of gold above ground compared to the stockpiles of silver? With little silver in store, it's very tough to control the physical market.

Silver is the true enemy of the state and their real Achilles heal. As an industrial metal with growing uses daily, it would be much tougher to regulate ownership or sale of it.

My $0.02.

Fri, 04/19/2013 - 11:26 | 3472014 RaceToTheBottom

It will be interessting to see if the price of some of the ETFs known to be better at holding physical start to separate from WS ETFs designed as manipulation tools

Fri, 04/19/2013 - 11:26 | 3472026 Hobbleknee

Do you know which ones are which? A list would be nice :)

Fri, 04/19/2013 - 12:00 | 3472281 RaceToTheBottom

I have heard that CEF in Canada has periodic audits and are real (about half silver, half gold). I have that some of that. Sprott is also mentioned as "real". WIKI has some interesting info.

http://en.wikipedia.org/wiki/Gold_exchange-traded_product

The small print that says something about having physical or obligations (implying derivatives rather than real ownership) would be the phrases I were look for.

Fri, 04/19/2013 - 11:20 | 3471991 lunaticfringe