Scrambling Gold Mints Around The World Plead: "We Can’t Meet The Demand, Even If We Work Overtime"

Tyler Durden's picture




 

One of the big disconnects over the past year has been the divergence between the price of paper gold and the seemingly inexhaustible demand for physical gold, from China all the way to the US mint. Today we get a hint on how this divergence has been maintained: it now appears the main culprit is the massive boost in supply by gold mints around the world working literally 24/7, desperate to provide enough supply to meet demand at depressed prices in order to avoid a surge in price as bottlenecked supply finally catches up with unprecedented physical demand.

Bloomberg reports that "global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will "grind lower" over 2014." Odd - one could make the precisely opposite conclusion - once mints run out of raw product, the supply will slow dramatically forcing prices much higher and finally letting true demand manifest itself in the clearing price.

More from Bloomberg:

“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. “We have witnessed some top selling days in the past few weeks.”

The propaganda is well-known: “Prices are likely to drop further as global economic conditions are stabilizing and tapering worries continue,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $110 billion of assets. “There is no doubt that physical demand has improved, but it will not be enough to support prices." Uhm, yeah. That makes no sense: what happens when global mints are hit by capacity bottlenecks from gold miners for whom it is becoming increasingly more economic to just halt production at sub-cost levels.

Meanwhile, here is a case study of how individual mints are working overtime to plug the unprecedented demand comes from Austria:

Austria’s mint is running 24 hours a day as global mints from the U.S. to Australia report climbing demand for gold coins even while Goldman Sachs Group Inc. says this year’s price rebound will end.

 

Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.

It's not just Austria. Presenting the US Mint:

The U.S. Mint, the world’s largest, sold 89,500 ounces so far this month. The Austrian mint that makes Philharmonic coins, saw sales jump 36 percent last year and expects “good business” for the next couple of months, Andrea Lang, the marketing and sales director of Austria’s Muenze Oesterreich AG, said in an e-mail.

 

“The market is very busy,” Lang said. “We can’t meet the demand, even if we work overtime.”

 

The price for the Austrian mint’s 1-ounce Philharmonic gold coin slumped 27 percent last year, according to data from the Certified Coin Exchange.

 

“It’s been a very bad year for gold,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “People who bought coins have lost value, but they are not looking at short-term gains, and hope springs eternal.”

Tell that to China.

That said, keep an eye on GLD ETF holdings - for now the biggest marginal setter of gold price remains the paper ETF, whose "physical" gold holdings have cratered in the past year. Once this resumes going higher, buy.

0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 01/27/2014 - 13:07 | 4371433 Bearwagon
Bearwagon's picture

Game on, man! Game on! Wait ... that wasn't quite what Hudson said ... er ... ah! Game over, man! Game over!

Mon, 01/27/2014 - 13:12 | 4371450 SoilMyselfRotten
SoilMyselfRotten's picture

Such a fuss over a barbarous relic, gimme moar paper!

Mon, 01/27/2014 - 13:14 | 4371465 Ulterior
Ulterior's picture

paper has the same price and it weighs less, unless you are preparing for doomsday, which can turn ugly having to defend it

Mon, 01/27/2014 - 13:44 | 4371587 BoNeSxxx
BoNeSxxx's picture

Must be important as the article has appeared twice here on ZH in as many days.

That said, it just doesn't get old.

BTFD boyz... it ain't gonna last long.

Mon, 01/27/2014 - 13:46 | 4371600 midtowng
midtowng's picture

Almost half of GLD holdings have been sold. That's the overwhelming reason for this huge correction in the POG. It isn't going to go to zero, so therefore the correction is pretty much over as long as the CB's keep printing.

Mon, 01/27/2014 - 13:54 | 4371631 TeamDepends
TeamDepends's picture

The mints "can't meet the demand, even if we work overtime", yet the price has tanked lately.  This just doesn't add up in a free market system.

Mon, 01/27/2014 - 13:56 | 4371660 Pinto Currency
Pinto Currency's picture

 

The gold price setting mechanism is a paper game and disconnected from the  physical market.

Ignore the price signals until the Comex and LBMA are reformed.

Global physical gold demand was at record levels in 2013 while the price fell 25%; mint demand is a small fraction of the net physical demand.

The run on physical gold continues and it is accelerating.

Mon, 01/27/2014 - 14:01 | 4371683 Xibalba
Xibalba's picture

The end game will be when the paper price hits ZERO. 

Mon, 01/27/2014 - 14:17 | 4371767 SWRichmond
SWRichmond's picture

So China is using its wealth to buy gold?  TIME TO CRASH CHINA, and that is what the US media is helping to bring about: "Tapering is withdrawing liquidity from emerging markets blah blah blah".

Mon, 01/27/2014 - 14:36 | 4371849 Herd Redirectio...
Herd Redirection Committee's picture

"Gold is currently on sale due to price manipulation"

“It’s been a very bad year for gold"

Mon, 01/27/2014 - 15:40 | 4372110 Anasteus
Anasteus's picture

The fact that gold is so low despite tremendous physical demand depleting the rest of the supply could indicate how desperate the cartel is. For some unknown reason they can't afford to push the price even a little higher. Are they deliberately breaking down the paper market? It's all so ridiculous now that I cannot help but laugh.

But maybe there is a hidden, though unintended, message behind all that for those who can read: 'Our dear citizens, buy the real money at discount prices while you can, we're doing our best and struggling for the best conditions to preserve your assets and savings until all gold is definitely bought up by China'.

A pure farce. I've got no fear anymore... and stacking. The end is at hand.

Mon, 01/27/2014 - 15:40 | 4372162 SoilMyselfRotten
SoilMyselfRotten's picture

Hearing the faint tune of MC coming thru...lits looking like hammer time

Mon, 01/27/2014 - 15:51 | 4372192 BaBaBouy
BaBaBouy's picture

Barbarous GOLD OVERTIME Shifts, Just BARBAROUS!!!

Melting Down These GERMAN 400' Bars Into Chinese Kilobars, Its Just Barbaric...

 

Mon, 01/27/2014 - 16:10 | 4372290 Mesquite
Mesquite's picture

Sure would expose any hidden Tungsten...Now wouldn't it....

Mon, 01/27/2014 - 20:11 | 4373072 Keyser
Keyser's picture

89,000 oz in a month from the US Mint alone. Where is it coming from I wonder. In the mean time gold is on sale and when it ramps it will look like the US debt curve, parabolic!!!!!

 

 

Mon, 01/27/2014 - 15:50 | 4372215 Whalley World
Whalley World's picture

Coming into big $ from divorce home sale and of Feb, hope JP Morgan and friends can keep the slam on till then, it's all going into phyz except for my trip back to Cuba to party with the bonita senioritas

Mon, 01/27/2014 - 14:40 | 4371874 NoDebt
NoDebt's picture

Here's the sum total of what I know about the physical gold market:

NOBODY IS BEING TALKED OUT OF BUYING PHYSICAL GOLD RIGHT NOW.  NOBODY.

Mon, 01/27/2014 - 14:44 | 4371897 Pinto Currency
Pinto Currency's picture

 

As the demand increases, that will lead to a price collapse.

The greater the shortage, the lower the price will be due to market forces.

Mon, 01/27/2014 - 14:55 | 4371960 macholatte
macholatte's picture

100 kilo coin

The world's largest gold coin

https://www.youtube.com/watch?v=Disuoesv8eY

Why did they make it? Because the team wanted the challenge. (go to 5:30)

Mon, 01/27/2014 - 20:15 | 4373083 Keyser
Keyser's picture

Obama has been the poster child in two markets, guns and gold!!! 

Tue, 01/28/2014 - 10:43 | 4374920 N2OJoe
N2OJoe's picture

Wow that coin... *drool*

Mon, 01/27/2014 - 15:19 | 4372068 mickeyman
mickeyman's picture

Or the alternative is that price will remain at the official market price, but there will be no supply.

I remember several years ago when the gold price fell trying to find some. There wasn't any!

Mon, 01/27/2014 - 15:25 | 4372092 Pinto Currency
Pinto Currency's picture

 

When you can`t find any gold that is evidence of oversupply of gold to the market.

That is what will cause the price to fall.

Mon, 01/27/2014 - 16:39 | 4372371 fedupwhiteguy
fedupwhiteguy's picture

Huh? Is it opposite day???

Mon, 01/27/2014 - 19:32 | 4372967 Pinto Currency
Pinto Currency's picture

 

<SARC>

Mon, 01/27/2014 - 21:17 | 4373329 fedupwhiteguy
fedupwhiteguy's picture

OH MAN! you got me!! that's funny.

Mon, 01/27/2014 - 16:41 | 4372375 Tall Tom
Tall Tom's picture

Just how do you equate scarcity with abundance?

 

If Gold is scarce in the marketplace, because there are few sellers, then how does that equate to an oversupply of Gold, an abundance of easily found Gold, in the marketplace?

 

Please elucidate upon this point.

Mon, 01/27/2014 - 16:48 | 4372407 balanced
balanced's picture

I think he just forgot the /sarc tag

Mon, 01/27/2014 - 18:40 | 4372807 Tall Tom
Tall Tom's picture

Perhaps you are right as I got junked for requesting an expansion of "that gem of wisdom"...

 

LOL.

Mon, 01/27/2014 - 16:55 | 4372439 HungryPorkChop
HungryPorkChop's picture

@Pinto Currency.  Brilliant statement.  Using leading economic indicators I've confirmed it works great in other markets too like oil, lumber, steel and sugar.  Higher demand always leads to lower prices.  Just take gas as an instance, when demand goes up or there are shortages the price always plunges.  I just can't wait for an oil embargo so gas will drop down to below $1 per gallon. 

Mon, 01/27/2014 - 14:42 | 4371884 Tall Tom
Tall Tom's picture

Few seem to understand (NOT HERE ON ZH..but in the disconnected Fantasy Economic World) that as the demand for Paper Contracts diminish that the price for those contracts will decline. Decline in the price of Paper Contracts will disconnect from the increase in price for the Physical Metal.

 

When that disconnect becomes too divergent it will accelerate the decline in price for Paper Contracts and expose the charde of the Paper Gold Market as the illusion, the FRAUD, for which it is. Then the exponential acceleration of price declines for Paper Contracts just increase until the Paper Contract realizes the true intrinsic value of ZERO.

 

Isn't it remarkable that the same hyperinflationary exponential growth of Paper Contracts for Gold mirrors that of the hyperinflationary exponential growth of the Currency Supply?

 

It is just demonstrative of the inherent fraud of any Paper Contract within this Debt Based Ponzi scheme. I expect that as the regression to Collapse is realized that most paper contracts pertaing to represent anything of value will be similarly mirrored. (Equities, Bonds, and all commodities.)

 

It is actually fascinating to watch these developments as I would not have even considered many of the observed phenomena possible until the last few years.

 

Live, observe, and learn.

Mon, 01/27/2014 - 15:20 | 4372071 _ConanTheLibert...
_ConanTheLibertarian_'s picture

So paper contract hyperdeflation will occur.

Mon, 01/27/2014 - 16:16 | 4372306 Tall Tom
Tall Tom's picture

Hey Conan...Good to have you visit from Kitco. How is that Motely Crew of pirates over there?

 

While the amount of available Paper Contracts Inflate  it follows that the price of the Paper Contracts will Deflate

 

The Financial Markets will become awash with a Tsunami of Paper...meaningless paper, promises which will be broken and unfulfilled.

 

Afterwards, as the complete erosion of Trust happens, then there will be no more Paper Contracts as a Cash and Carry, OTC Marketplace, replaces the current paradigm.

 

It will take an extended period of time in order to reestablish TRUST as so many will have been burned.

 

As I have posted many times on Kitco, and I will reiterate the same here, is that Inflation and Deflation are two opposing expressions of the same phenomena.

 

Hyperinflation is a result of a Lack of Confidence.

Mon, 01/27/2014 - 16:59 | 4372454 hot sauce technician
hot sauce technician's picture

So at what point do ETFs become worthless? When does it become impossible to dump them?

Mon, 01/27/2014 - 20:48 | 4373205 Tall Tom
Tall Tom's picture

When there are no longer anybody willing to buy them as they have awoke from the delusion.

 

When did Tulips become worthless?

Mon, 01/27/2014 - 14:20 | 4371771 SafelyGraze
SafelyGraze's picture

producing the planchets for coins is back-breaking work

first, you place the metal bar/ingot/billet in the feed end, then press the "on" button to activate the conveyor so that the bar is rolled between smaller and smaller openings

then you have feed the rolled metal into a machine that punches out a bunch of little disks and collects them in buckets

the union of on-button-pressers is ready to strike because of the demands of providing all those planchets to the mints

and then all that .9999 crap will just be sitting in our loading-dock inventory, waiting to be rolled and punched

useless

unwanted

because our demands for better working conditions are not being met 

and that is why billets and planchets are in short supply

it isn't as if you can just set up the process on your shop floor and then let it run by itself

https://www.youtube.com/watch?v=3H3QhbQtsLo

 

 

Mon, 01/27/2014 - 15:05 | 4372015 The Wisp
The Wisp's picture

Not much security in that video what were they making tin cans ?

Mon, 01/27/2014 - 14:02 | 4371666 Levadiakos
Levadiakos's picture

The squeaky wheel is the shamelessly whiney editorial nature of the intro

Mon, 01/27/2014 - 13:58 | 4371668 HobbyFarmer
HobbyFarmer's picture

Off Topic: propane costs in the midwest.  $1.59 a gallon 1 year ago, over $5 a gallon to fill up today.  Thank goodness for my ESSE woodstove.

Prepare accordingly, fight club.

Mon, 01/27/2014 - 14:45 | 4371900 cro_maat
cro_maat's picture

According to the "New Math" (CPI) from BLS there is no inflation since you were able to substitue free wood from your land for the expensive propane. Hell this looks like deflation!

I've decided to manufacture some personal deflation and invited 12 illegal immigrants into my 3 bedroom aptment in Brooklyn. We have set traps for the mice and eliminated the high price of beef. I no longer worry about the rising costs of the MTA (NYC Subway) as I have switched to longboarding to work. The BLS even has a new program that works along the "teach em to fish instead of giving them free sardines" meme. The program is called Street Cheese. All EBT cardholders are eligible for the program. It is administered by local dog pounds. Once a week you are given a gallon of fresh cat / dog milk along with training in how to make fresh mozzerella at home.

Mon, 01/27/2014 - 14:50 | 4371935 disabledvet
disabledvet's picture

and at least this gets to the crux of the matter. "Supply."

The question to me is "where is all this inexhaustible supply coming from" not inexhaustible demand.

Price gouging is normative.

Governments exacerbating the situation is normative as well.
Someone is doing the right thing here.

Weird.

Mon, 01/27/2014 - 14:54 | 4371964 TheMeatTrapper
TheMeatTrapper's picture

We are bracing for another wave of arctic air here in Alabama. I was at Walmart last week and saw people lining up for propane tanks. They were in line in the parking lot and getting the 20 gallon tanks off the back of the truck as they were delivered. Never seen that before. When I went inside, the camping section was wiped out of cheap sleeping bags. No cheap propane camp stoves either.

Nobody was buying 20 gallon propane tanks and cheap ass sleeping bags to go camping. They were buying them to stay warm in their homes. 

That told me people can't afford to heat their homes the normal way - so they were resorting to running propane camp stoves inside and layering under sleeping bags to stay warm. 

WalMart provides more real time insight into what people are going through than CNBC ever will. 

Mon, 01/27/2014 - 17:18 | 4372533 fedupwhiteguy
fedupwhiteguy's picture

Don't you mean a 20 pound tank?

 

http://www.walmart.com/ip/Worthington-Cylinder-20-Pound-Refillable-Propa...

 

btw, i'm currently in Huntsville for a short term contract. Donde esta usted?

 

 

Mon, 01/27/2014 - 15:44 | 4372183 chubbar
chubbar's picture

Just was billed for a fill up on Friday. $3.69/gal here in upstate NH.

Mon, 01/27/2014 - 21:58 | 4373512 Freegold
Freegold's picture

Mint selling is not the only business so yes coindemand can go up and prices down and still be normal. What matters is what the "BigBoys" do like centralbanks, Oilmoney etc. But it can also be papergold losing it´s lustre or a combination and that (paper falling out of fashion) is what I´m hoping for :)

Mon, 01/27/2014 - 13:57 | 4371637 Pinto Currency
Pinto Currency's picture

-

Mon, 01/27/2014 - 14:15 | 4371748 unrulian
unrulian's picture

as a reloader that would make some interesting shot; maybe better than silver bullets for vampires and/or squid

Mon, 01/27/2014 - 13:45 | 4371591 midtowng
midtowng's picture

That's a false choice. It isn't a matter of fiat vs. doomsday.

The more realistic choice is currency devaluation vs. gold.

Mon, 01/27/2014 - 14:45 | 4371901 Tall Tom
Tall Tom's picture

Isn't that also a false dilemma?

 

Why isn't stability an option as it is the optimal choice?

Mon, 01/27/2014 - 13:16 | 4371477 whatsinaname
whatsinaname's picture

In India gold seller store owners are the ones really unhappy. Bought at relatively high prices but meeting steady demand at depressed prices.

Gold demand has not changed much irrespective of govt policy changes and even the Fin Min admits smuggling has gone up.

Do NOT follow this link or you will be banned from the site!