Monday, July 12, 2010

The Eastern Hemisphere Gets Physical

The degree of demand for physical gold from Asia/India can be meausured by the premium or discount to the world spot price in those countries that the buyers are willing pay.  This metric is influenced by the nominal price of gold plus the relative value of the country's currency.  Up until the paper manipulators decided to hammer on the price of gold last Thursday, these premiums in India, Shanghai and Viet Nam had slipped into negative territory over the past few weeks, indicating no real buying was occuring.  This market condition transitioned last week from negative premiums to extremely high premiums, indicating that these countries resumed their importation of gold "hand-over-fist."  Market reporting on this is provided by "JB," who publishes his report in the nightly Midas commentary at  It is a very valuable service for gold market participants.

A significant event occurred over the weekend in Viet Nam, that I'm quite confident very few will know about in this country.  Viet Nam is quietly the 5th largest "consumer" of gold - very few know that factoid as well.  Last week, with the manipulated smashing of gold, the import premium in Viet Nam soared to the extent that the Viet Namese Government signed a decision which allows businesses to resume importing gold (Viet Nam has an active "black market" for gold, but this move legitimizes the buying).  Here's a link to the report:  Viet Nam Gets Jiggy With Gold  In JB's words:  "This could provide a useful increment to physical off take. In the right mood Vietnam is a world-class gold importer."

What many who do not follow this market avidly, and what does not get reported in the mainstream media, is that the physical market for gold is starting to overrun the ability of the major Western Central Banks to control the price using the paper market.  This dynamic is largely is being driven by large gold buying countries in Asia and by India.  Since, I have posted several commentaries on this over the past few weeks,  I wanted to post this thesis as expressed by The Daily Bell: 
Many in the gold community hadn't actually expected any sort of significant upside for gold and gold stocks until after the FOMC meeting in August, where presumably the Federal Reserve would indicate that it was returning to more money printing operations. But now it would seem there could be significant action in the gold market even before August, given what might be seen as artificial selling pressure.

Conclusion: Our point here is that once again matters may be moving beyond the elite's ability to maintain control (see other article this issue). At the very least, it is ironic that, given the strength of the market, efforts to restrain the price of gold – whether by manipulation or intimidation – may only end-up reinforcing money-metal price appreciation.
Here is a link to the entire article, which is worth reading:  Pressure Builds Underneath The Price Of Gold


  1. Hey gyc - thanks! Goin over to my buddy's house Friday to check out his green egg grill.

    is it friggin' football season yet?

  2. Oh man! One month till preseason baby!

    A big green egg is a killer grill, nice stuff.

    I think the old gold banking players are in for a surprise; in the old days they dumped gold and people ran, now they orchestrate price drops, but that gold is getting gobbled up and leaving the inventories. Going to be a nasty wake up in the end.

  3. Recent musing on Paulson's GLD stash:

  4. Empty Store Shelves Coming to America

    Oh the fun were going to have going forward.

  5. we're not there yet, but I agree w/the NIA there. I don't stockpile yet, but i know several colleagues who see what we see that have a year's worth in their basement. probably need to stockpile propane and have a back-up generator as well.

  6. I think you've made strong comment about CEO of gold mine factory, who do not care about yellow stuff much and rather focuses on how to mine as much metal as possible.

    I was always wondering how the suppression using paper gold sales scheme can work for decades and your quote explains a lot to me.

    So my understanding is it is not just metals what is suppressed this way, all kinds of commodities are manipulated as well:

    Wall Street manipulates prices by selling rice which doesn't exist and farmers in Asia sells to West for lower prices established by WS. Because of this suppression we must also see many subsidies from governments to farmers on West. So farmer on West is paid very well compared to farmer in Asia and whole earning level is higher on West compared to East and it appears balanced:

    Since farmers have such very low income in Asia, it means overall salary level is very low there. Therefore we can import such cheap stuffs. The same for raw materials and Africa.

    But I've no clue why Chinese government allows this to happen. I do understand there is corrupt government in many countries within Africa so no change on horizon. Is Chinese government corrupted too? Or are they participating on scheme because they are trying to not allow billion of new consumers to emerge?

    It also seems to me it doesn't matter whether dollar collapses or not. Because if Asians are subjected to WS suppression scheme they will always serve as slaves to West no matter what the currency is.

  7. stibot, you ever meet with and converse with mining company CEO's? I have done that over the last 9 years with at least 50 companies. Very few care about what drives gold nor do they understand it. That is fact.

    I met with a company last year who we had a big position in. They indicated that they were willing to sell their company for 85 cents/oz. in the ground. I begged them not to. Silver was around $14 at the time. I said "think about what your company is worth when silver goes to $30. They looked at me like I was from Mars. They sold their company for 85 cents/oz. 2 months later. I made 4x my investment over a period of 5 months and I was PISSED because they sold out way too low.

    The Company was Aquiline Resources and the COO was brillian geologists but he was clueless about how markets operate.

    That is a very common experience (not the 4 bagger lol) for me in dealing with mining company execs over the last 9 years.

  8. I never talked to CEO like this, i was not trying to be offensive. Language difficulties.

    Imagine iluminating instead of strong within first sentence of my comment.

  9. no worries stibot. understood on language thing. your comments are always appreciated. what are you seeing in gold/silver demand over there?

  10. People can not eat gold in here still.

    Year ago I've visited Vietnam. They are not poor, not rich. It seems like Europe there, except they are so many and having motorcycles instead of cars.

    I'm just wondering why Vietnamese are consuming gold so much. They are having banknotes which starts at 10 thousands. The smallest coin is denominated at 1.000 or 500, but it is quite hard to buy piece of whatever for mere thousand on market.

    I suppose that is why they prefer gold. Hyperinflation is in vivid memory. They are only 100 millions of Vietnamese. What will happen to gold once hyperinflation comes to our countries soon? Will it come?

  11. The Viet Nam dong is fixed to the U.S. dollar. The Vietnamese get "it." It's not just the Vietnamese, all the countries in SE Asia are large buyers of gold, especially Cambodia. These people understand that gold is the only true currency.

    You are right, you can't eat it, but you can take gold anywhere in the world and exchange it for something to eat. Stories abound about how many businesses in Europe will not even take US dollars anymore. The first one I heard like that was that the Taj Mahal stopped accepting US dollars a few years ago.

  12. I do not know your sources but i'm in doubt you are right about Cambodians (Khmers). I've been there for several weeks. Contrary to Vietnamese, they often count in USD, not in Riels. Riel has nearly the same denominations like dong, but not so terrible. I asked how gold is percieved and they didn't seem to have any interest in metal.

    When i was talking with some business-man about dollar crash, i've hade no attention. They believe in dollar. If there is wedding, it is expected guests are giving money, not gold.

    But many many Vietnameses live in Cambodia, so perhaps this can be behind the story.