Monday, August 26, 2013

Physical Gold News Headlines

Mine workers in South Africa are striking which will reduce supply and increase cost of gold.

Gold jewelry demand in Indonesia is set to hit 40 metric tons this year a 30% increase from 2012.

The Shanghai Gold exchange continues to trade a tremendous amount of gold bullion.  Lately, weekly trading volumes have been almost as much as annual global gold production.  Also note that price premiums, the difference between prices paid on the Shanghai exchange and international gold prices are about 1.5%.

A good review of recent restrictions on gold imports to India, as well as some history and speculation on what is to come.

US Mint sales of gold and silver eagles has fallen dramatically in August after a torid pace through July

My attention has been increasing focused on news about physical gold and silver because manipulation of the precious metals markets will be short term as long as demand for physical is strong.  Understanding the bullion funds GLD and SLV is central to understanding the market.  Many pundits proclaimed that when prices were falling in April and May the funds were forced to sell bullion which perpetuated the price decline.  In reality, the GLD and SLV funds do not work that way.  Bullion may only be sold through Authorized Participants (AP) in the fund in baskets of 100,000 shares.  The APs are the bullion banks, including Goldman Sachs, HSBC, and JP Morgan.

These are two excellent articles about the GLD and SLV funds.  I wish I had discovered them sooner.
The authors show graphs of inventory levels and share prices at GLD.  Inventory and price are correlated, but not perfectly which proves to me that share demand does not directly translate to sales or purchases of physical.  The authors conclude that the bullion banks move gold in and out of GLD with share redemptions as they need the physical.  Thus declining inventory at GLD implies that the bullion banks need physical and is bullish for gold.  

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