19 July 2013

Gold Daily and Silver Weekly Charts - Reuters Says Gold Demand Outpacing Supply

"The current dislocation indicates that holders of gold futures have begun demanding delivery. But because of the large amount of leverage in the market, participants are not able to deliver on their obligations."

Reuters, Gold Futures Hiccup Indicates Demand Outpacing Supply

This is not news to anyone who has been frequenting this café.  But it is nice to hear it from another source.

The market structure in gold and silver is truly fascinating, particularly if one is looking slightly cross market at the mining sector.

One would hope that the miners would not be driven back into hedges by short term cash requirements at this price level, as they may find it to be fairly uncomfortable in the intermediate term.

And I would not be likely to invest longer term in a miner that was hedging its future ahead of what looks to be the next leg of the bull market. 

That is almost as bad as having a money manager keeping you short into what looks like a very risky set up to the upside. Not my cup of tea.  I wonder if we will see a limit up day or two before this is over. I cannot remember the last time that occurred.

There was commentary on the levels of registered gold at the COMEX that you may find to be of interest.

The market structure indicates that someone is going to be left 'holding the bag' on the short side. But who can say with any certainty given the growing divergence between the paper pricing and the physical reality?  We are in a currency war after all.

The Gold Forwards were negative for the tenth straight day.   Listen to this, and understand what it means. 

In their article about the 'hiccup in gold futures indicates that demand is outstripping supply' for physical bullion Reuters goes on to say:
"A dislocation in the gold futures market indicating that demand for physical delivery of the metal is now far outweighing supply has intensified in recent weeks, increasing concern in the market that the change may not be a momentary blip and participants may have become over-leveraged."
I think this deserves some serious attention.   I would not care to be short the metal, and face any requirements to have to deliver on demand.  It could prove to be costly. 

But again, these markets are so twisted that I don't think it is too much to say that almost anything can happen.  A 'crash' in equities would put a dent in almost any asset sector demand.   But those tend to be less probable events that are amenable to some rudimentary insurance for those with shorter term horizons. 

Have a pleasant weekend.  See you Sunday evening.