It’s almost incredible … such a disconnect between the paper and physical gold and silver markets. In December 2012, we witnessed one of the most bullish possible events for precious metals with an additional monetary stimulus by the US Fed on Wednesday 12th. Since then, the gold and silver prices have been in a waterfall decline. Counterintuitive is the least one can say. To put things into perspective, we explained the view of three experts regarding that price action. The following quote from expert Ted Butler summarized it all.
The fact is that paper positioning on the COMEX silver futures derivatives market is overwhelming the price influence emanating from the host world market for physical silver, or in other words, the tail is wagging the dog. Real supply and demand go out the window and artificial and manipulative pricing have replaced it. The commercial paper traders, led by JPMorgan, are involved in a private big money speculative trading war with other speculative traders called technical funds and that war, because it is so much larger at times, is dictating the price of silver to everyone else in the real world – miners, users and physical investors. That’s why so many are scratching their heads trying to explain the price swoon this week – it made no sense from a real world perspective.
The gold and silver price entered 2013 with a significant move to the upside on the first trading day, followed by a smash during the next two trading sessions. The logic question that comes to mind is if the large paper traders are continuing the paper game or if there is something wrong in the physical market. The answer to that question is very simple. Physical precious metals sales are enormous throughout the world in the first week of 2013, based on the evidence that follows.
In today’s precious metals report from Reuters, it appears that the Chinese are there again to buy the gold price dips. It’s almost like a Chinese Wall is supporting the gold and silver prices. Reuters writes:
“Asia’s physical market has picked up so far this year, with buyers tempted by last week’s big drop in prices – when prices retreated to as low as 1,626 per ounce – and on demand ahead of the Lunar New Year, traders said. [...] The trading volume on the Shanghai Gold Exchange’s 99.99 gold physical contract shot through the roof on Monday, hitting a record of 19,504.8 kilograms, after double-counting transactions in both directions.”
What’s more, BullionStreet writes that The Reserve Bank of India published a report which shows that “a need to moderate gold import, as the insatiable appetite for the yellow metal could jeopardize economic stability.”
The US mint coin sales are an excellent gauge for the physical market. The first trading days of 2013 were enormous, both for gold and silver. The January sales figures in 2013 come already close to total month sales of the previous five years. Astonishing.
We have no physical market data out of Europe, but the Asian and US situation tell the whole story.
Even PIMCO’s boss (the largest bond trader) increasingly promotes physical gold ownership. It indicates that the time is coming where the West wakes up from the paper dream and realizes just like the Indians buying gold has nothing to do with spending but, instead, is the same as putting money in a savings account. As BusinessInsider notes, “even the poorest people in India buy gold, saving a little each week to buy a gram at a time.”