Most of the internet vendors I have been following for months have been out of “consumer” gold and silver for weeks. Kitco now only offers 400 oz gold bars and 1000 oz silver bars. Their web site claims that 1, 2, and 5 oz silver bars are no longer made by their recognized suppliers. The price is below what my view of inflation risk or safe haven risk leads me to believe it should be. When the cupboards are bare, the price should be going up, right?
Perhaps world governments are dissapating their gold inventories to make their paper currencies appear stronger? And the big gold vendors know that this can only last so long before the state inventory is depleted and the price goes up due to the inflationary pressure, so they aren’t interested in selling now?
It seems crazy, but isn’t this what the USA did through the gold window?
Does anyone have a feel for the consumer gold market outside of the USA? Aware of vendors that have current supplies of 10 oz or less size gold (that you are willing to share)?
My friends in Russia tell me that gold and silver coins have been sold out for weeks. People there have always been wary of trusting the government with their savings.
I’ve read a nice article on this topic… can’t find it. I’ll try to tell it in my own words.
The spot price of gold is set by COMEX gold exchange. But what is traded at COMEX is not gold bullions, but gold futures. The gold bullion reserve requirement is only about 10%. Now, when bullion gold is in short supply and great demand, gold futures loose their value, as whoever holds them is obliged to deliver bullion gold, thus the falling price of “gold”. It should end up with COMEX exchange default and sharply rising price of real gold.
I have noticed this crash of the spot price of gold too… I noticed also that in euro terms two interesting things happened:
the bullion price of gold in euros is almost same as a couple of months ago
the gap between buying and selling price of bullions has widened (this may be because of scarcity of bullion)… the gap is occasionally even 80 euros for 1 oz (You can buy one oz of Krugerrand with 690 and sell it back and get only 610). This gap was only 25-40 euros some months ago.
I’ve occasionally listened to the weekly radio program of the investment website financialsense.com. Their radio host Jim Puplava is Austrian oriented and such Austrians as Doug Noland, Peter Schiff and Krassimir Petrov do contribute to their website. I’ve noticed at least two additional reasons for the crash of gold spot price.
massive dumping of gold by the central banks.
massive increase of the short positions of gold derivatives
I have kept a weather eye on the gold market and I am happy I got disenchanted with it soon enough to avoid losing a single dime. Yes, I have gold coins but I’ve had them for many years and they are likely to stay with me a few more. The problem with the gold market is the same as with crude oil, copper, scrap metal etc and it’s called future derivatives or “thin-air” as I call them. It’s not real, solid gold that it’s changing hands but a simple bet that gold price will raise or fall in the next two months or whatever. Crude oil collapsed spectaculary in less than six months and only a very strong monetary inflation is keeping prices over $60 a barrel. But as the crisis deepens, it will probably lose more. Gold is already showing signs of going that way: mining operations in South Africa are being reduced as we speak and mining companies’ stocks have been on a steady decline. In short they cut production because of reduced demand. OK, but what happened to bars, bullions and coins? The answer is simple: gold cannot be used as such. It needs to be refined, brought to a certain standard and minted into whatever final form it will take. This takes time. Small savers went into a frenzy as stock markets plunged and bought the small amounts they could afford, usually 1 oz bars, coins etc. All these things take time and money to be made. To make the situation worse gold and, even more important, silver prices are not as high as to make the production of some items economically feasible. In short they stopped making the items they felt were not giving enough margin. Other factors are the rapid decline in gold demand in India (there was a bit of a gold fever in the past year down there) and the present economic situation: people, and rightly so, do not know what will happen. Everybody knows that the crisis will be over one day but we do not know how long it will take to get there and, what’s more important, how our schizophrenic governments will react. FDR and Mussolini both confiscated gold de facto at the height of economic crisis, let’s not forget about that.
This guy should have a clue, I on the other hand do not (other than people have been had). A month or so ago things reeked of tamperings but heading back down to $630 with less and less sign of significant inflation is just confusing. The opposite was meant to happen it seems. and I dont totally buy the whole global slowdown theory in my gut (so to speak).
I suppose the only viable explanation that srpings to my mind is that everone is de-leveraging at the same time…
ps: I should note however that I would assume none of us are ‘trading’ their gold positions and that what is meant to happen (inflation + flight to gold) still must and so hopefully all will be well for the bugs out there. Once the ‘depression’ sinks in and the grind takes hold (of people’s expectations for the future) then we will surely see what is meant to happen.