London: Total Eclipse of the Gold
At 6:17 pm today, London will be treated to a 91% solar eclipse...
... so you might wonder whether there are any parallels with the gold market. After all, the alchemical symbol for gold is the Sun, while silver is represented by the Moon. Yes, gold may be partially obscured today, but it is not silver that is masking it.
Throughout much of history, eclipses were regarded as ominous because they violated the natural order. Before their geometry was understood, they were interpreted as divine displeasure, cosmic conflict or a warning of turbulent times. So where does the metaphor have substance ?
If you re-base global gold supply, demand and price to an index of 100 over the past decade, you end up with a chart like the one below. What stands out immediately is that mine supply (blue) has remained remarkably stable, demand (orange) has risen steadily, yet the gold price (green) has accelerated dramatically upwards since 2022.
The implication is intriguing. The principal driver of the recent bull market is not immediately apparent from the published supply and demand data. Something important appears to have been masked… eclipsed, even.
There are two broad explanations. Either the underlying data are materially incomplete, or the market has become rather less opaque than it once was. I favour the latter.
Only a handful of participants possess the financial firepower to influence the market on this scale. One plausible explanation is that unreported central bank purchases have been considerably larger than generally assumed. Unlike many other forms of market activity, official sector gold purchases are not reported automatically; disclosure remains voluntary rather than mandatory.
The most powerful force in the gold market may be precisely the one we cannot see.
Ross Norman
Metals Daily Ltd