Gold Surges $50 Or 3.3% - Brinks Sees 55% Decline In Gold Inventories In Week

Today’s AM fix was USD 1,280.75, EUR 981.87 and GBP 848.91 per ounce.
Yesterday’s AM  fix was USD 1,252.25, EUR 977.02 and GBP 840.78 per ounce.

Gold climbed $2.70 or 0.22% yesterday and closed at $1,251.10/oz. Silver fell $0.07 or 0.36% and closed at $19.15 prior to some sparks that were seen in after hours and Asian trading. 


Gold Prices/Fixes/Rates/Vols - (Bloomberg)

Gold surged 3.3% or nearly $50 from $1,248/oz to $1,298/oz after Federal Reserve Chairman Ben Bernanke admitted that the U.S. economy continues to need a highly accommodative monetary policy and will do for the “foreseeable future”.

 

Gold climbed for a fourth day to the highest level in more than two weeks due to safe haven buying after Bernanke also admitted, what many more realistic analysts have been saying for some time, that the 7.6% unemployment rate probably "overstates the health of the labor market."


Comex Gold Inventories (Millions of Ounces)

Gold’s record 23% fall last quarter was attributed to Bernanke’s “jawboning” when he again claimed that the Fed would reduce its $85 billion of monthly asset purchases this year. Minutes of that meeting released yesterday showed many officials wanted to see more signs that employment is improving before backing a trim to bond buying.

This is  gold bullish and suggests that gold’s recent fall is overdone.


Comex Gold Inventory Data/Brinks Inc Total

The Fed, in conjunction with the BOJ, ECB and BoE is set to  continue pursuing extremely accommodative monetary policies which should see fiat currencies continue to fall in value versus gold. 


Comex Gold Inventory Data/JP Morgan Total

Record high gold borrowing costs due to significant physical demand, especially in China and much of Asia, continues.

Although Bernanke’s comments are the ostensible reason for gold’s price rise, a more fundamental reason, and less reported upon, is likely to be the continuing decline of COMEX gold inventories. 

Bullion buyers internationally and particularly in Asia are taking delivery of physical gold which is draining inventories on the COMEX. COMEX inventories fell another 1.5% yesterday (see table).

Brinks has seen a massive decline in its gold inventories in recent days. The huge decline in Brinks inventories is being seen soon after a similar decline in JP Morgan’s gold inventories.

Brinks inventories have fallen from 570,000 ounces on July 3rd to 257,000 ounces today which is a drop of 313,000 ounces - a drop of 55% in just one week.

The entire inventories on the COMEX, of bullion banks and depositories is now just 7.096 million ounces and is worth just $9.1 billion at today’s prices. This is a very small amount vis á vis the amount of money in stocks, bonds, cash and other assets today throughout the world and in Asia where much of the gold seems to be flowing East.

This has all the hallmarks of a ‘run’ on the COMEX and needs to be monitored. A default on the COMEX would see the price of physical gold rise substantially and potentially in a very short period of time. 


Cross Currency Table - (Bloomberg)

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NEWS
Gold Nears $1,300AfterFed’s Bernanke Backs Sustained Stimulus - Bloomberg

Gold futures rally 3%after Bernanke backs stimulus - Investing

Gold climbs to 2-1/2weekhigh on Fed stimulus hopes - Reuters

Bullion demand fromChinawill fuel gold price rebound – The Australian

COMMENTARY
Europe’sDebt-CrisisStrategy Is Near Collapse – The Telegraph

CME Reports ThatBrinksHas a Seventy Percent Decline in Registered Gold Bullion Supply - Jesse's Café Américain

Telegraphing theTurnaround in Gold – Casey Research

 

How Low Will The Pound Go? – Money Week