Tuesday, January 11, 2011

The Dragon Is Hungry For Gold - Demand Outpaces Supply In China

I have regarded recent reports of market "tightness" in gold/silver bullion with a bit of skepticism, because the dealer I use to accumulate bullion coins, Tulving, seems to be swimming in gold/silver eagles.  However in the past few days some large buyers of silver (like Sprott) have mentioned that they are experiencing some delivery delays for bars and are becoming a bit nervous about the existing above-ground availability. 

THEN, there is this: 
Premiums for gold bars jumped to their highest in two years on Tuesday as worries about inflation drove investors in China, the second-largest consumer of the precious metal after India, to bullion ahead of the Lunar New Year..."There's a sudden surge in demand. Demand from China is very good and they are paying very high premiums. Refiners can't meet the demand," said a dealer in Singapore.
Here's the article LINK

You can easily track the premiums being paid for gold in countries like India, China, Viet Nam and Turkey at http://www.lemetropolecafe.com/ in the nightly Midas report.  Based on the activity in the eastern hemisphere, plus the accelerating demand for silver eagles as reported by the U.S. Mint, I would suspect that at some point the "boy who cried wolf" shortages will actually become very real.

 I also suspect that, over a longer timeframe, the entities who utilize the "fractional" method of bullion banking - Comex, LBMA, Scotia, JPM, HSBC, etc - will find themselves in a bit of trouble when the eventual "call" on the metal they supposedly safekeep happens and we find out the cupboard is mostly bare.

And even further down the food chain, the investors who have placed their full faith in the "credit" of these banking entities will be quite shocked when the paper investments - like GLD and SLV - that use these banks as custodians start plummeting in price as the spot price of gold/silver does a rocket launch.

The only question in my mind that remains is how long it will take for this sequence of events to unfold.  It has taken a lot longer than I originally expected back in 2002 for a lot of this mess to become real, so I don't cast out timetables anymore.  I will say that a long-time, very perceptive friend of mine opined recently that our system won't totally cave in until the Comex defaults on the delivery of physical metal (changing the rule to enable cash settlement is a "de facto" default).  It is at this point that a very terrifying dollar crisis will grip our system.  It's anyone's best guess when this will happen...Do you know where your bullion is?

Wow My friend and colleague Jesse sent me this - I don't have link but you can probably google the title to get the source news article:

SINGAPORE, Jan 11, 2011 (Dow Jones Commodities News via Comtex) -- Demand for gold bullion from Australia's Perth Mint has been unrelenting since gold's price dropped below $1,400 an ounce, a senior Mint official said Tuesday.

"At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, Treasurer of the Perth Mint, one of the world's largest gold refiners and distributors.

"Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires.

One-kilogram bars are the most popular trading instrument in Asia's physical market


  1. It is going to be very interesting to see how this change in monetary regime develops.

    At some point I am utterly convinced that the usual suspects will step into the maelstrom of a monetary crisis and try to make the world an 'offer they cannot refuse' as they did with TARP. That is, a one world currency for trade that is purely fiat and largely managed by the Anglo-American banks.

    China and the BRICs will obviously counter with a broader base and the inclusion of something less pliable to manipulation, eg. gold and silver.

    It will be epic to borrow my friend David's phrase.

    The US is probably maintaining the TBTF's and Rating Agencies, as foul as they are, as aids to its bargaining positions.

  2. http://jsmineset.com/2011/01/11/physical-market-continues-to-show-true-value-of-gold/

  3. I know exactly where my bullion is Dave...Right next to the bullets.

    Be well and thank you for all you do.


  4. LOL Bill

    Ciao Jesse! Come stai? Agree mostly with that except I am curiously waiting to see if this situation spirals out of the control of the Western elitists. I think we have more to fear about China than we realize and they historically (i.e. 5000 years lol) have a much longer perspective than do we.

  5. China tests their stealth jet while Gates is in country. "In your face fool".

    This coming after China's stealth sub blasted a missile back into the China sea right off the coast of LA.

    And yet the simple minds still call for deflation, oblivious to the fundamental changes happening right under their feet.

  6. And having first hand experience of the long lines in Chinese department stores as customers rush to offload their Chinese paper money for Historic Money, gold, all I can say is the populace their has infinitely more knowledge of economics and history then the vast Ameritard population. Even small city bookstores have the top selling book series Currency Wars prominently displayed. They know the history, and what is to come.

  7. Great post. I think the fact that you have capitulated on timing your predictions means we must be close, lol.

  8. Legislation proposes Utah adopt a gold-based system


    I think there's about 9 other states proposing the same thing. Can you imagine the demand when these large institutional players start to enter the market. And then maybe they find that they can't secure any silver because it's already gone.

    Hopefully these states can add to their gold reserves before the bernake bucks start to hit the fan.

    So many Americans have no idea what's going on; it's going to be breath taking to watch as they see the inflation roll back onto them as the tidal wave of printed dollars comes back from these outside markets.

  9. With the CFTC hearings on Thursday and the judge in the GATA case getting documents on Friday, it comes to mind that what ever is hidden will be made known.

  10. I have first hand knowledge of some very rich Chinese families in SE Asia accumulating physical PM at the underground facility at Hong Kong airport.

    The overseas Chinese families that control so much of the ASEAN economies 'get it' and have seen huge increases in their personal net worth in the past year.

  11. Anonopuss above Dave is a Spammer.

  12. Debka "According to our sources, it is definitely on the cards for an Iranian-Hizballah move in Lebanon provoking a US-French military response to evolve into a clash between Hizballah and Israel, providing an opportunity for the destruction of Hizballah's might missile arsenal."

    I think that the Israeli Lebanese war would bring in Hamas and could easily esclate with a revolt in Jordan. The Israelis would probably try to enter Lebanon via Syria and the whole lot would go up. Clearly this has been pre-planned with the French and the US. Why else would Obama be sitting with Sakozy describing hinself as a the US's best ally just before Harari flew in as the Lebanese government is falling.

    Under these circumstances silver would undoubtably revert to it's long term channel high of around $144 per oz. The question is would an intensifying Mid East war allow the LBMA and the Comex to call a force majeur and walk away from all the contracts? Certainly the LBMA could and as precedents exist for this but what is the Comex's position?



  13. In an email to me today Marc Hazout stated that the TSX application will be submitted this quarter.


  14. How do you know when Hazout is lying? His lips are moving or tells you a TSX filing will happen soon.

    1) they'll NEVER be able to raise the money for that
    2) he had been telling me that for a year - I finally stopped believing him and got the fuck out of the stock. He's a crook.

  15. oh please, that john guy from fft down under is a broken clock, still waiting for the global stock markets to collapse. he made plenty of wrong forecasts as well. please check your facts properly.