Friday, April 9, 2010

Demand For Physical Gold is Quite Extraordinary

As has been reflected by gold's ascent against the dollar, and recently even on days when the dollar is moving higher, it has been reported from sources all over the globe that money is aggessively flowing into physical gold, with many investors demanding delivery of the metal. Here is commentary on the subject from Standard Bank in London, which provides daily color on precious metals trading:
Late last week, the Standard Bank physical gold flow index recorded its highest level since we started tracking flows. Although the index declines slightly when gold approaches $1,150, overall, the index continues to confirm healthy physical demand.
I will note that Standard is usually pretty demure in its commentary on market activity in precious metals. For them to get excited to the extent reflected in the above statement is unusual.

I also thought I would post some comments made to me by a local bullion trader who typically operates by finding private sellers and paying more than the big coin shops here, but usually at or below the spot price of gold and silver, and sells to private buyers who pay cash and do not want a paper trail. He has an excellent "nose" for supply and demand and, as per my experience trading bonds on Wall Street, there's nothing like getting market information from a bona fide market maker:
I feel that we are in the beginning of an upward move. I can only guess at what price the market will move to. What I am finding out is that new buyers are coming into the market and they do not mind paying the premium. My past buyers are not buying as much and are looking for the market to pass $1,200, before they start to invest. The physical supply of one oz. bars and coins are readily available if you are willing to pay the premium. The supply gets smaller the closer you want it to spot. The only large quantity of gold coins in the uncirculated arena are scratched or nicked items.
So there you have it, direct from the "trenches." This is just the start of a trend that will accelerate as the investing world begins to understand the problems associated with fiat paper money and with massive sovereign/U.S. Government debts, budget deficits and overall fiscal recklessness.


  1. Sounds right. Unless you want to buy a metric ton of gold/silver, spot price is a fantasy. I am sure this is all for jewelry demand and high end electrical connections, move along.

  2. LOL. Ya this guy likes to find people looking to sell 10-50k worth at a crack - usually bullion coins and bars.

    I've had the "large" block conversation with many experience, knowledgeable people lately (large block = 100 tonnes) and it's anyone's best guess where that kind of size would come out. I'm sure closer to $2000/oz. than any of us understands.

  3. I wish this guy was my uncle,,xlf,jpm,gs,ms,^gspc,^dji

  4. Everywhere I look the prices have gone up considerably over the past year even when the economy is sputtering on fumes. Food, energy, building materials, clothe, paper, ink, medication, etc. On certain items, they are even higher than their pre-2008 crash levels. People may quickly mumble in agreement, but no one wants to talk about it. Everyone would rather talk about the new Ipad. Prices are skyrocketing. THIS IS NOT NORMAL!!! My heart screams we're fucked. My head screams we're fucked. My gut screams we're fucked. Yet my eyes and ears see the world moving along as though prosperity is a right turn away. Am I the one delusional? Am I the one unable to accept the positive economic improvements because of my dour disposition? Am I Cassandra or a boy scared of monsters in his closet? Maybe I should be popping those anti-depressants with the rest of America. If you can't beat them might as well be brain dead with them.

  5. @Anonymous: You are not delusional. This whole country is in denial. People all over the world are loading up on gold and silver - and some in this country as per the record silver eagle sales in March - but most in this oountry are unloading their gold to go on shopping sprees and pay bills. It's insanity. And yet, the policy makers enable it. Why? Because the people who control the policy makers are sucking every last nickel they can out of the system before it collapses completely.

    How about the fact that you can now get zero interest for a year credit cards? They are going after the 50% of the middle class who can still pay bills, have good jobs and can spend money. Home equity loans are back. I heard an ad on the radio two days ago promoting those.

    The next credit default wave will take a lot more people than the last one did. If you want to take advantage of it and you own your home, leverage it up as much as possible, spend the money and/or buy a bunch of gold/silver off craigslist with cash so there's no paper trail and then do jingle mail on your home after live there for about a year w/out making mortgage payments (I know a few people doing that).

  6. anliu: thanks for the link. I love Davidowitz. He's right on with his views too. He speaks the truth that most people don't want to hear.

  7. Dave, I'm not sure what to make of the Harvey and Lenny Organ expose regarding ScotiaMocatta and the lack of pm [Lenny] saw inside their vaults... It just didn't make any sense why would they [Scotia] allow Lenny to go inside a "practically empty vault"?

    Nick Barisheff, President & CEO Bullion Management Group Inc was interviewed by Jim at financialsense and Nick refutes this notion. Here is the link to the interview in hour 1,

    Nick's point is Scotia has multiple vaults and he [Nick] is not certain which vault Lenny saw.

    I just feel the radical gold bugs are not doing anybody any favor by shouting fire at every shadow they see.

    Would you care to comment on this?

  8. anliu, you don't believe in any of the GATA propositions regarding gold market fraud. I wouldn't expect you to believe that one. I don't mean that as criticism or an insult either.

    BMG and Barisheff have to defend Scotia because they safekeep - assuming it's really there - a lot of gold there. They are stuck.

    I went and looked at the BMG prospectus regarding verifying their gold holdings and its about as loose as the GLD prospectus. Scotia has not defended the Organ interview/accusations. Wouldn't it be really easy, if Organ were wrong, to come immediately and prove to everyone why they are wrong.

    The burden of proof is on the accused here. Because there's too many of these accusations that are now going unchallenged by the accused: US Gold stock/Fed, GLD, SLV, Kitco pooled gold account, Perth Mind certificates, Scotia, ad nauseum.

    What we DO know is that Morgan Stanlely settled a lawsuit regarding silver storage and it was commented by an insider at the time that it was common practice in the industry to hold less physical metal than paper certificates that had been sold. Look it up. That is fact.

    Stay tuned. All I will say is that BMG is potentially another GLD. And I'm not saying BMG's intent is corrupt, I'm saying they don't have the legal documentation in place that permits them to hold a gun to Scotia's head and force Scotia to show them everything. They are keeping gold at Scotia on faith.


  9. Holy Crap Dave! A Zero Hedge guest post spot!!??

    Great article, I love your GLD knowledge. Congratulations again!

  10. LOL. Thanks gyc. The whole ETF/Bullion bank depository system is a fractional one. GLD, SLV, Kitco pooled accounts, Monex Apollo account, Perth Mint Certs, Scotia, Comex, LME. It's all fractional.

    Finally GATA's voice has been heard. I actually sent that GLD report to Zerohedge a year ago when I wrote it, but they didn't buy into the story until Murphy's email-bomb at the CFTC hearing.

    If I get motivated this weekend, I'm going to use the BMG fund prospectus compared to the Sprott PHYS prospectus to show why Scotia can get away with fractional gold safekeeping.

  11. Dave,
    I sent you a personal email as well. I feel so proud and I have no idea why. Looking forward to the new analysis.

    If even 10% of the investment public puts 5% of their cash into Au/Ag.......people really have no idea at all.

  12. @Dave in Denver

    i use to own BMG many years ago but learned quickly it was just paper. Any Gold analyst that advocates paper gold for investors is part of the problem and will in the end loose.

    To add to how sketchy BMG is when they first started to sell physical bullion to the public a year ago, if i am not mistaken you were not able to take delivery, instead more certificates to add on to the Scotia scheme.

    now it seems like you are able to take delivery.

    but interesting quote on their site about it.

    Purchasers have the option of entering into a storage agreement with BCS to provide secure, allocated and fully insured storage. Storage is located in the main vault at The Bank of Nova Scotia in Toronto.
    Should a purchaser wish to take delivery of their bars, the purchaser is responsible for all shipping and insurance costs, including a handling fee. Additional assay and verification costs may apply to the sale of bars that have been held by the owner outside of the LBMA approved vault facility.

    lol i thought it was stored already in Scotia when they bought it, remdinds me of what Harvey/Lenny Organ were saying when they wanted their gold and how many more fee's they had to pay to actually have the metal that was supposed to be stored at Scotia, which is why they were paying all those fee's.

    if you don't hold it you dont own it, simple line to remember. if the 100-to-1 leverage is real then it wont take long for this to blow especially now as Andrew Maguire says, asian or non western traders can now taste blood.
    it seems like a simple trade now.

  13. The Scotia story is too wild to be believable as is Madoff,Enron,Comex,911,Bear Stearns, AIG, Lehman,GM,Iraq,Fannie, Freddie,Tungsten.....
    what more do you want??? The Amerikkkan Financial Holocaust rolls on, you don't have to believe, get on the train, next stop shower or sauna?

  14. Brutal but true analogy. I've been using that one for several years to describe the denial dynamic going on in this country.

  15. No Anonymous - you're right - you're fucked!

  16. Demand is only the reason gold prices gain.Your views on this topics are really interesting. Thanks for sharing knowledge.