February's Strange Divergence In Precious Metals

Tyler Durden's picture




 

February has been an odd month for precious metals to say the least. On-again, off-again fears of Bernanke removing the punchbowl (and endless sell-side strategists discussing Great Rotations and the end of the gold cycle) have led to prices for gold and silver sliding notably. However, while all this price deterioration has been going on, demand for physical gold and silver has surged - entirely disconnecting from January's apparent demand-to-price correlation - and Silver set to break all-time record demand highs for a February. We know who was buying in January, as Reuters reports Russia and Turkey were significantly adding to their bullion reserves; and while the divergence between demand and price coincided with Chinese New Year - leaving a large marginal buying nation on the sidelines - we suspect the drop is more to do with hedge fund reflexive selling - now caught offside. It seems at least one smart player was using lower prices to build their stack; manipulation or no manipulation.

 

Cumulative demand for Gold vs Spot price... (corrected)

 

Cumulative demand for Silver vs Spot price (corrected)

 

and this month looks set to see the biggest demand for silver (for a Feb) ever...

 

Source: Bloomberg and US Mint

(H/t Alex Gloy)

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Tue, 02/26/2013 - 15:08 | 3278555 Nothing To See Here
Nothing To See Here's picture

I cannot understand why only 1% (max 3%) of people own physical gold.

Well, some talking head on CNBC the other day explained it. His point is that gold is not backed by anything. You know, unlike fiat money which *head explodes*

Tue, 02/26/2013 - 17:02 | 3279114 rwl160
rwl160's picture

heres a news report.. from 2011 gold is not backed by anything

cute newscaster though.

.http://www.youtube.com/watch?v=ZLL2r3hXmjA

Tue, 02/26/2013 - 14:50 | 3278473 ebworthen
ebworthen's picture

Good thing I bought both Gold and Silver on the dip.

Fuck the Central Banks and Bankers.

That is why I bought.

I voted!

p.s. - Tyler(s) - I have noticed an absolute media blitzkrieg by Allianz trying to bring in retirement money crowd, something fishy there, reminds me of the "Lind/Walldock" commercials on CNBC after MF Global bought them and shortly before Corzine vaporized people's money.

Tue, 02/26/2013 - 15:11 | 3278568 gratefultraveller
gratefultraveller's picture

Someone mentioned "Generali is broke" in a comment the other day, without providing a link or further info. Allianz owns Generali (and Pimco, btw), they are a HUGE company and should they be in trouble it would create a major hick-up in global financial markets, similar to AIG.

Tue, 02/26/2013 - 15:29 | 3278637 debtor of last ...
debtor of last resort's picture

http://www.zerohedge.com/news/2013-02-25/hung-parliament-btp-sell-jpm-sa...

One out of four Europeans has some kind of insurance at Generali.

Tue, 02/26/2013 - 15:56 | 3278784 knukles
knukles's picture

So one in four of Europeans do own gold, eh?

Tue, 02/26/2013 - 16:15 | 3278890 debtor of last ...
debtor of last resort's picture

Nice one. Should own gold...

Tue, 02/26/2013 - 16:34 | 3278974 Al Huxley
Al Huxley's picture

Actually, when I was digging around looking for figures about who owns how much gold, I found out that Germans privately own about as much gold as the German gov't owns (in the neighborhood of 7 or 8000 tons) - and as far as I know, they don't store it in New York, so no repatriation issues there.  This 'why would I want to own gold' attitude seems to be unique to North America.

Tue, 02/26/2013 - 14:48 | 3278478 Lost Wages
Lost Wages's picture

"Captain, we have an anomaly." -Commander GATA, USS Enterprise.

Tue, 02/26/2013 - 14:49 | 3278479 buzzsaw99
buzzsaw99's picture

Bonds are outperforming gold in February but everybody here thinks only goldbugz r smart.

Tue, 02/26/2013 - 14:51 | 3278486 LawsofPhysics
LawsofPhysics's picture

How many months in your life or that of your children?  Go right ahead and hold all the paper promises you like.

Tue, 02/26/2013 - 15:00 | 3278519 Dr. Engali
Dr. Engali's picture

That's brilliant...judge performance by one month's price action. Stocks outperformed bonds in the last few nano seconds...let's chase them.

Tue, 02/26/2013 - 20:06 | 3278616 jimmyjames
jimmyjames's picture

Bonds are outperforming gold in February but everybody here thinks only goldbugz r smart.

*************

Good point buzz-bonds and gold seem to mirror each other-look at the yield drop in 2001 and gold break out of a bear market at the exact same time and both trend lines (inverse) are still in play-

Both reflecting extreme credit risk--has little to do with the dollar-

http://research.stlouisfed.org/fred2/series/WTP30A28

http://www.acting-man.com/blog/media/2012/02/Gold-LT1.png

 

Tue, 02/26/2013 - 14:50 | 3278482 LawsofPhysics
LawsofPhysics's picture

Similar divergences are occuring all over the place.  Seems that any physical asset (especially revenue generating) of real value is getting bid hard.

Tue, 02/26/2013 - 14:51 | 3278484 Dr. Engali
Dr. Engali's picture

February has been an extremely good month for me. I welcome the opportunity to exchange my fiat for precious metals at a lower price.

Tue, 02/26/2013 - 15:01 | 3278523 fonzannoon
fonzannoon's picture

"Mr. Bernanke can you please blah blah blah....."

Bernak: "I'm printing money bitchez."

"Mr. Chairman, regarding the exit strategy can you rabble rabble rabble"

Bernak: "You dumb fcks I said I am printing money...bitchez..."

"Chairman Bernanke can you tell us barf barf barf....."

Bernak: "Gdammit I said I am printing money!!!??? Forever!!!!....Bitchez????

Tue, 02/26/2013 - 14:54 | 3278499 Henry Hub
Henry Hub's picture

It looks like we had capitulation in the gold market on February 20th. The bottom is in! Time to start buying.

Tue, 02/26/2013 - 14:54 | 3278500 onewayticket2
onewayticket2's picture

any rec on where to buy physical PMs?  i see the banners on all these sites, but simple DD on each shows all sorts of ripoff report and BBB issues.  dont know where to turn....and dont want my broker to do it for me and hold in their "vault"....

is the PM IRA worth it if i'm using someone else's - albeit indy - vault?

i'm racing to get up to speed...thanks for any genuine input.

Tue, 02/26/2013 - 15:01 | 3278513 Dr. Engali
Dr. Engali's picture

All I have to say is that if you can't touch it you don't own it. Gold in a "vault" can be vaporized just as easily as futures contracts at an exchange.

Tue, 02/26/2013 - 15:03 | 3278535 fonzannoon
fonzannoon's picture

Doc you seen whiteshadowmovement? That was an interesting visit. I am surprises at how fast he disappeared. I am starting to wonder if he was going for a doctorate in behavioral finance or something and this was material for his thesis of studying gold bugs or something....

Tue, 02/26/2013 - 15:06 | 3278550 Dr. Engali
Dr. Engali's picture

No I haven't seen him. I thought it was odd he disappeared too. I have been very busy lately and haven't been on the Hedge much so I figured I was just not seeing him post.

Tue, 02/26/2013 - 15:09 | 3278558 fonzannoon
fonzannoon's picture

I just looked for his comments and go "access denied".

weird.

Tue, 02/26/2013 - 15:11 | 3278566 Dr. Engali
Dr. Engali's picture

Yeah I did the same thing. I usually only get that on people's accounts like Tyler's.

Tue, 02/26/2013 - 16:07 | 3278846 knukles
knukles's picture

a gubamint troll seeking out the subversives, putting their names on a list along with incriminating comments, no doubt

Tue, 02/26/2013 - 16:18 | 3278895 fonzannoon
fonzannoon's picture

I don't doubt anything anymore.

Tue, 02/26/2013 - 16:25 | 3278921 seek
seek's picture

That happened when there's a rare "hard" ban on the person. A handful of others have had that happen.

Tue, 02/26/2013 - 19:41 | 3279763 knukles
knukles's picture

Seek.  What's a "hard" ban?
Like ejected and erased from memory?

Tue, 02/26/2013 - 15:01 | 3278526 Meat Hammer
Meat Hammer's picture

localsavage put it best in his comment above - "if you can't touch it, it doesn't exist."  

I would go compare the price over spot of the PM dealers in your area and go make a cash transaction.  That way you have metal in hand and no paper trail.  

Just don't take your gold on any boating trips.  You may lose it.  

Tue, 02/26/2013 - 15:10 | 3278563 Toolshed
Toolshed's picture

Gainesville Coin in Lutz, FL (a suburb of Tampa basically) has never caused me any grief. I place my order on their website and pay with a credit card. I still can't believe I can buy physical pm's with a "promise" to pay my card issuer someday. I  live close enough to pick up the goods in person. No problems so far and their prices and selection are at least as good as any I have seen.

http://www.gainesvillecoins.com/

I have no affiliation with these guys - just a satisfied customer.

Tue, 02/26/2013 - 19:17 | 3279694 Winston Churchill
Winston Churchill's picture

Not so sure I would use a credit card in the US for gold purchases.

The Govt. can easily get the dealers merchant account records.

All being recorded on NSA computers for future confiscation possibly.

If I had any PM's ,I would have purchased them from a foreign dealer with

a US subsid.Pay them in their home country from a third country ,and they are

delivered here by the subsid. without paperwork.Thats me though, most here  don't

have offshore accounts,so cash at a coinshop is best,but do your homework on the dealer.

 

Tue, 02/26/2013 - 17:21 | 3279204 rwl160
rwl160's picture

 find a local coin dealer...thats what i do in my area.. i've bought from gainesville, westminster mint , provident metals.with no problems


my local coin dealer is usually the same price or better and no delivery charges

 i go in and trade my fiat dollars  for PM's

no tax, no register wrung up and no paper trail receipts

 

Tue, 02/26/2013 - 20:13 | 3279861 BidnessMan
BidnessMan's picture

Same experience. My guy buys silver for 85% of spot and sells for spot.

Happy to trade Fiat for real money.

Tue, 02/26/2013 - 18:56 | 3279598 shovelhead
shovelhead's picture

https://comparesilverprices.com/

http://comparegoldprices.com/

They don't list dealers that have minimum purchases, but you can get an idea of who has the best prices on what and check against other unlisted dealers.

Texas Precious Metals is owned by a real metals company that make real metal shit like barbed wire. How weird is that?

Fast and free shipping.

 

Tue, 02/26/2013 - 14:55 | 3278506 Stuart
Stuart's picture

Paper driven prices. Paper has to be at least 100:1 behind real bullion.

 

Tue, 02/26/2013 - 14:56 | 3278510 Motorhead
Motorhead's picture

Au & Ag, bitchez!

Tue, 02/26/2013 - 14:57 | 3278512 DowTheorist
DowTheorist's picture

This is why GLD's inventory is being drained.

GLD lost yesterday (Feb 25) 7.82 tonnes of gold. Thus, inventories have been declining for 5 days in a row. All in all, inventories have declined from 1322.97 tons to 1272.85 tonnes, that is 50.12 tonnes or 3.78%.

 

Contrary to conventional wisdom, declining inventories for GLD are bullish for gold as it is explained here:

 

http://www.dowtheoryinvestment.com/2013/02/dow-theory-update-for-feb-21-...

 

with an update here:

 

http://www.dowtheoryinvestment.com/2013/02/dow-theory-update-for-feb-25-...

Tue, 02/26/2013 - 15:13 | 3278578 Buckaroo Banzai
Buckaroo Banzai's picture

Also, IIRC, if you check the bylaws of GLD, large (i.e VERY large) position holders are allowed to close their position out in physical bullion.

If you have a shit-ton of dollars that you want to convert to physical, and don't trust the futures market, GLD is your huckleberry.

Tue, 02/26/2013 - 14:57 | 3278514 Irelevant
Irelevant's picture

Paper gold price is going to zero.

Tue, 02/26/2013 - 15:10 | 3278564 Acidtest Dummy
Acidtest Dummy's picture

That is about the right value for paper gold.

Tue, 02/26/2013 - 15:02 | 3278531 malikai
malikai's picture

This last month has been awesome for Gold and Silver.

http://blog.quantsig.net/2013/02/26/goldsilver-feb-2013/

Tue, 02/26/2013 - 15:03 | 3278536 fuu
fuu's picture

StAcK It Up BiTcHeZ!

Tue, 02/26/2013 - 15:03 | 3278538 NEOSERF
NEOSERF's picture

Part of the grand plan...once China and Russia have sucked up most of the PMs, Goldman will declare that they are not "precious" any more and that the world will start to value salt, nutmeg and clamshells again...New Normal, things not going your way, change the rules of the game.

Tue, 02/26/2013 - 16:02 | 3278820 catacl1sm
catacl1sm's picture

To be fair, if one does not have a source of salt, salt can become very valuable.

Tue, 02/26/2013 - 15:07 | 3278551 gratefultraveller
gratefultraveller's picture

As much as I would enjoy seeing 32 million ounces of silver indicated as "sold in Feb" at the US Mint's website, there "only" are roughly 3 million.

http://www.usmint.gov/mint_programs/american_eagles/?action=sales&year=2013

I wonder were the number in the above graph comes from

Tue, 02/26/2013 - 16:02 | 3278819 Non Passaran
Non Passaran's picture

Good point. And Feb is much lower than Jan. 

Maybe those stats are fake too.

Keep stacking...

Tue, 02/26/2013 - 15:09 | 3278562 Ban KKiller
Ban KKiller's picture

Still closing out stocks...just can't trust the books. Have you read any 10k 10q of the banks? 

Tue, 02/26/2013 - 15:17 | 3278602 besnook
besnook's picture

pretty simple. if i wanted physical gold cheap i would pound the etf short and buy the physical while playing the arbitrage in the paper market to my advantage because i have the juice to do it, stupid yankee dog.china and russia are doing you a big favor. buy all you can but buy unconfiscatable stuff like junk jewelry. the anti-santa claus(he sees you when you are sleeping, he knows when you are awke, he knows if you have been good or bad, so be good for goodness sake and give everything to santa. it belongs to him anyway) .gov will take everything from you and the constitution says it is okay a la fdr

there are reports war in iran is planned for june. that should frothyize the pm market. kinda fits. the aussies say the commodity market is heating up. china is hoarding because the euro market is dead, chinamart is fretting in the usa and japan trade is way down. then there is the ruble/yuan exclusive deal, fighting now in lebanon between joe quaeda and hezbollah, escalating african wars, greece is totally socially and politically unraveled with italy mocking the banksters with a comedian and a rogue billionaire. and then there is the bernank and the zions dubstep machine. this is the year of the snake, the beginning of the age of aquarius and the end of the 26000 year mayan cycle. this is the end and the beginning, the phoenix. we are fucked.

Tue, 02/26/2013 - 15:25 | 3278632 css1971
css1971's picture

Um... This is bog standard economics. if you sell something too cheap you run out.

If you control the price there will be shortages.

Tue, 02/26/2013 - 16:11 | 3278870 knukles
knukles's picture

Look what happened to Twinkies

Tue, 02/26/2013 - 15:28 | 3278640 stateside
stateside's picture

Time to bring back this "timeless" classic about gold backing.  Ok....at least she's cute.

http://www.youtube.com/watch?v=ZLL2r3hXmjA

 

stateside

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