Physical Gold Demand At Record Levels As Paper Gold Price Disconnects

Last week’s smash in the paper gold price was in contradiction to the physical gold market, which experienced rising demand and remains strong…

by Chris Powell of the Gold Anti-Trust Action Committee (GATA)

Dear Friend of GATA and Gold:

Last week’s smash in the gold price, Bullion Star researcher Ronan Manly writes today, was entirely a matter of derivatives trading, contradicting the physical market, which experienced rising demand and remains strong.

This kind of action, Manly contends, shows that the world’s price discovery mechanism for gold is broken and is leading to shortages of real metal.

Manly writes: “If paper gold prices continue to go lower in the presence of continued high physical demand, more paper market participants would want to convert their paper (unallocated positions and futures) into physical holdings. Given the very small physical gold stocks underpinning the London over-the-counter and Comex markets, an increase at the margin in conversions could overwhelm the ability of the paper markets to deliver physical — Comex-deliverable contracts and allocating from unallocated gold in London. This would seize up the paper-market price, the paper market would collapse, and pricing would switch to physical.”

Well, we can hope.

Manly’s analysis is headlined “Physical Gold Demand at Record Levels, Paper Gold Price Disconnect” and it’s posted at Bullion Star here:


CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.
[email protected]

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