Physical Market for Gold Influencing Gold PriceThe gold Sokoman has in the ground is going to continue on getting more valuable. The gold market has changed. From here on in the price of gold is going to continue upward.
The gold market has changed since the futures gold market nearly imploded in March 2020 when it was revealed futures markets could not make good on delivery of 100s of tons of gold when demand spiked because of COVID panic. The fiat gold market (futures paper gold market) was saved with intervention but since it is failing to suppress the price of gold to the same extent as in the past.
- Ninety-six times over leaveraged COMEX gold stocks backing excessive COMEX paper gold
contracts to meet physical demand (the equivalent of criminal reserve banking) is declining.
- United States Federal Reserve only central bank naked short gold (getting squeezed).
- open interest decline with COMEX physical inventory decline.
- contract shorts ability to cover dwindling.
- allocated gold (gold with owner named) became a tier one risk-free asset from being tier three
while unallocated gold required banks to set aside stable funding for ‘unallocated’ gold, i.e. make it
more expensive to hold unallocated gold due to a requirement to back it up with a ratio of stable
funding.
Marketwatch report discribing Basil III NSFR requirements in June 2021:
https://www.marketwatch.com/story/why-basel-iii-regulations-are-poised-to-shake-up-the-gold-market-11624561325
- COMEX suppression of gold price makes it an attractive market for central banks, sovereigns, and
others to take delivery at discount to premiums in domestic markets to de-dollarize with rising
geopolitical tensions, sanctions, and devaluing USD.
Net stable funding ratios (NSTF) took effect in January 2023 except with the US Federal Reserve.
Andrew Mcguire details the dynamics of the changes happening in the COMEX, over-the-counter phyical gold marklet and Bitcoin etfs. COMEX open interest is declining in favour of flows into bitcoin etfs.
https://www.youtube.com/watch?v=QcPH4HgLyuo
17:35 mark: From 2020 COMEX peak of 800,000 contracts (8,000,000 oz.) specs have now
reduced by a half down to 407,000 contracts.
Starting at the 23:08 mark McGuire details a run on gold as a result of COVID creating a demand for
delivery of 100s of tons of gold that could not be delivered in T plus 2 because the gold was simply not there in a 96x over leveraged paper gold market. The market was halted and officials had to step in to save the tier 2 banks providing liquidity. This is the breaking point that changed everything in the gold market. To save the COMEX gold depositories where re-stocked with gold and ever since that stock of gold is dwindling:
https://schiffgold.com/wp-content/uploads/2023/02/image9-4.jpg
The price of gold shot up in 2020 and has continued to stay elevated and even climb higher despite efforts to intervine and suppress the price of gold:
Schiff Gold has documented this in three reports:
September 20, 2022:
https://schiffgold.com/exploring-finance/comex-stock-report-the-vaults-are-still-bleeding/
February 22, 2023:
https://schiffgold.com/exploring-finance/comex-vaults-gold-sees-nearly-5-inventory-decline-in-a-month/
22 February 2024:
https://schiffgold.com/exploring-finance/comex-delivery-volumes-reach-highest-levels-in-months/