Physical Gold Having Sway over Futures Paper Gold TradingWhat is Happening
Since November Gold and real rates are diverging and gold is tracking with the Yuan gaining against the USD. This is detailed in the following article:
https://www.zerohedge.com/news/2023-01-16/real-rates-tell-us-china-wants-gold
It is not just China. Russia is also buying as the Ruble has been gaining against the dollar.
In addition, with China and Russia buying gold other central banks are also buying.
https://www.google.com/search?client=firefox-b-d&q=usd+vs+russian+ruble
Physical Gold is having more sway in determination of the price of gold over futures paper gold trading.
Three Factors In Physical Gold Trading Price Determination Emerging
One (Basal 3 NSFR increasing cost of bank futures trading)
Basel 3 requiring a 85% net stable funding ratio (NSFR) of available stable funds (ASF) to required stable funds (RSF) for paper gold holdings in the futures market made it more expensive for the banks to trade futures.
Two (Federal Reserve Supressing Yield Below Inflation)
"After the US weaponized its currency to freeze Russia’s assets, the amount of US government debt that needs to be financed is larger than the world is willing to absorb. The Federal Reserve will bail out the government by buying up bonds of all maturities, effectively capping yields across the curve. Inflation will stay elevated, above the entire yield curve, which lowers the value of money. In this environment investors and foreign central banks will flee to gold," Jan Nieuwehn, Gainsville Coins, 9 Jan '23.
https://www.gainesvillecoins.com/blog/zoltan-pozsar-four-prices-of-money-coming-gold-bull-market
3. Russian Buying Gold to Back Its Token
bank Sber has issued a gold backed token. Russia is converting unbacked currency for gold to back its token that will operate as a stable reserve asset for others trading commodites with Russia. As a reserve asset to buy Russian commodities or for that matter for countries to trade with others it will be in demand as a safer alternative to the USD reserve currency.
https://www.youtube.com/watch?v=ZpbsgKLZN2A&list=RDCMUCXJEH6DxUixkTYhH4XxI7kQ&start_radio=1
In the London and COMEX futures trading liquidity is drying up with short covering and declining long positions and deliveries being taken rather than rolling over future contracts. Inventories are declining in the futures storage vaults.