Tag Archives: Gold market

Doug Casey on Why Gold Has Stagnated… and What Investors Can Expect Next

What investors in gold, as opposed to speculators, can expect next from gold is that will continue to be the reliable storehouse of value that it’s been for many centuries. From Doug Casey at internationalman.com:

International Man: Doug, you’ve been a strong proponent of gold for many years—specifically physical gold as a savings vehicle.

How do you view physical gold today?

Doug Casey: I continue to view gold mainly as a vehicle for savings. It’s money in its most basic form. Banks and governments fail, paper currency has always been a joke, and the forthcoming Central Bank Digital Currencies (CBDCs) are criminally dangerous, possibly the worst innovation of all time. Anyone who doesn’t have a significant part of his assets in gold coins will be an unhappy camper.

But, first of all, gold is not an investment. An investment is an allocation of capital that produces new wealth. That’s not the nature of gold or any commodity.

Occasionally, gold can also be an excellent speculation. Since it was disconnected from the dollar in 1971, it’s had some spectacular runs. But it’s primarily a vehicle for savings. I’ve been buying it since it was about $40 an ounce. I’ve just accumulated more and never liquidated. It’s treated me quite well, having run from $40 to, at the moment, $1,650.

It’s a good speculation during monetary and economic crises. That’s because it’s the only financial asset that’s not simultaneously somebody else’s liability. You don’t have to trust in the goodwill of your rulers. Indeed, it allows you to automatically profit from the fact that they’re usually incompetent and dishonest.

In a world that’s head over heels in debt, where governments and central banks are bankrupt and printing up their national currencies by the trillion, owning gold is more important than ever.

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US Tees Up ‘Stop Russian Gold Act’, Triggering LBMA And COMEX To Eject Russian Refiners, by Ronan Manly

The Senate has teed up a magnificent bill that will stop those nefarious Russians from selling their gold for dollars. There’s one little problem: the Russians don’t want dollars, they want to hold on to their gold and add to it. From Ronan Manly at BullionStar.com via zerohedge.com:

When the UK, US and EU moved to introduce financial sector sanctions against Russia during the week of 21 – 25 February, one set of markets notably hesitant to join the fray were the OTC precious metals markets in London and by extension the precious metals futures markets run by the COMEX.

Awaiting Instructions – LBMA and COMEX

While the London Bullion Market Association (LBMA) quietly moved to kick out Russian banks VTB, Sovcombank, and Orkritie from LBMA membership sometime around 24 – 25 February (and without any sort of announcement), the LBMA appeared to be unable to come to a decision about the 6 LBMA-accredited Russian precious metals refineries on the LBMA Good Delivery Lists of Gold and Silver. This was despite the fact that it was completely obvious that the structural nature and operational activities of these Russian refineries broke the LBMA’s own ‘Good Delivery Rules’ in terms of breaching US-UK-EU sanctions.

Specifically, these six Russian refineries are Krastsvetmet, Prioksky, Novosibir, Uralelectromed, Moscow Special Alloys Plant, and Shyolkosky.

Hence the BullionStar article on 28 February titled “LBMA a deer in headlights as Western Sanctions show up Russian Gold Refiners”.

That article also pointed out that every LBMA accredited gold and silver refinery is also on the CME (COMEX) approved brands list (for warranting and delivery), a situation which arose following a CME mass approval in August 2020 of 267 LBMA Good Delivery List gold and silver refineries. Which meant that the 6 Russian precious metals refiners in question were also on the COMEX approved refiner brands list.

As the week beginning 28 February passed, the LBMA’s continued reluctance to be decisive was revealed when on Thursday 3 March Reuters published an article stating that the LBMA claimed it had merely ‘asked’ the 6 Russian refineries in question whether they have commercial links with sanctioned Russian entities, a bizarre situation given that all and sundry, and most of all the LBMA, knows the nature of the Russian gold market, and that of course the Russian refineries have intimate relationships with the sanctioned Russian banks as well as being owned by the Russian state / Russian oligarchs.

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The end of the LBMA is nigh, by Alasdair Macleod

This is a technical article that’s not always easy to follow, but the conclusion (you may want to skip to it) is important: the paper gold market which has had such an important manipulative effect on the physical gold market may be in for some big changes, and they may be bullish for the price of physical gold. From Alasdair Macleod at goldmoney.com:

Basel 3 is on course to regulate the LBMA out of existence. And with it will go all the associated arbitrage business and position-taking on Comex, because most bullion bank trading desks will cease to exist. The only supply to buy-side speculators of gold and silver contracts will be producer hedging.

In recent months there has been some limited commentary concerning the introduction of Basel 3 regulations and the implications for precious metals trading. These new regulations are scheduled to be introduced for European banks at the end of June — only seven weeks’ time — and in the UK from 1 January next, affecting all LBMA member banks.

This article explains the new regulations and concludes that the recent joint LBMA/WGC consultation paper addressed to the British regulator is unlikely to save London’s unallocated gold trading market. And because Basel 3 regulations are scheduled to be introduced into the UK at the year-end all banks in the London gold market can be expected to wind down their exposure well ahead of the deadline.

The unallocated forward settlement market will effectively be shut down. Hedging into Comex futures from this source will also cease. As it is unwound, the withdrawal of synthetic supply has enormous implications for future precious metals prices by transferring pricing power to physical markets, now dominated by China.

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Signs of the Gold Apocalypse: M and A and Fund Extinction, by Tom Luongo

Gold is probably oversold and is a good buy right now, at least for a trade. From Tom Luongo at tomluongo.me:

For bear markets to truly end investor sentiment has to get to a point where they would rather walk on broken glass than buy that asset or asset class.  We’re reaching that point in the precious metals market.

In conjunction with that we also have to see arrogance on the part of short-sellers convinced that all rallies will be sold, keeping a lid on prices.  It doesn’t matter if buyers come in at higher prices or above significant technical support levels, they will push because they become convinced this is a one-way trade.

We see this in the government bond markets as well.  In traderspeak it’s called the [Insert Head of Central Bank Here] Put.  The Greenspan Put begat the Bernanke Putwhich morphed into the Yellen Put.

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My Inner Contrarian Wakes Up: Gold Short Positions Hit Record, by Wolf Richter

Gold is due a pretty good rally. From Wolf Richter at wolfstreet.com:

Speculators in gold price futures are short 670 tonnes – the biggest bearish position in 25 years.

First things first: I want to thank the many readers who have expressed their interest in an article about my views and theories on gold and silver. In fact, the response has been so strong that I decided to cover precious metals (PMs) more broadly on WOLF STREET, but only in an unbiased and analytical way, if that is even possible.

“Gold” is subject to so much debate – and this debate is influenced by hefty agendas on all sides – that coverage attempting to stay out of this debate is going to require some stepping on toes.

We will attempt to focus on the physical metals and their derivatives (i.e., “paper gold”). But we will stay out of the debate as to whether “only gold is money,” whether the dollar, or any currency, should be backed by gold, and the like.

Yes, gold and silver markets are manipulated, up and down, but just about all markets are manipulated, and in terms of the most manipulated markets of all, gold and silver probably don’t even rank near the top. That honor would likely go to cryptos.

And in terms of magnitude, the top contenders for the most manipulated markets of all are the credit markets, including the government bond market, and the corporate bond market. Central banks manipulate credit markets explicitly and not in secret with the full power of their monetary-policy tools, such as “forward guidance,” interest rates, and QE. No other market has manipulators lined up that openly and publicly use trillions of dollars, euros, and yuan, and quadrillions of yen, to accomplish their goals – and are being hailed for it.

Our coverage of PMs will be neither perma-bullish nor perma-bearish, and neither gold bugs nor gold haters will be happy.

Today, we will kick this off with some insights into the short positions in the gold derivatives market, and what this might mean for the price of gold near-term.

Gold has had a rough time so far this year, down about 9.8% year-to-date. But today, gold jumped 1.5%, from a 20-month low, to $1,212.20 at the moment – instant reaction to Fed Chairman Jerome Powell’s speech this morning, or just a relief rally, or result of the record short-positions that have been built up?

To continue reading: My Inner Contrarian Wakes Up: Gold Short Positions Hit Record