23 April 2014

Gold Daily and Silver Weekly Charts - El Camino Real

“All that is gold does not glitter,
Not all those who wander are lost;
The old that is strong does not wither,
Deep roots are not reached by the frost.

From the ashes a fire shall be woken,
A light from the shadows shall spring;
Renewed shall be blade that was broken,
The crownless again shall be king.”

J.R.R. Tolkien, The Fellowship of the Ring

Gold and silver continued to be capped just below 1300 and 20 respectively.

Tomorrow is an option expiration for the May precious metal contracts on the Comex.  As May is not an active month, and the greatest contract activity is already moved to June, we may see an expiration with a twist.

There was no movement in the Comex gold warehouses yesterday.

An additional 51 contracts for April gold stood for delivery, bringing the monthly total to 481,400 ounces.  There has been little visible movement of gold as a result of those warrants changing hands, at least so far.

Someone asked me today how it was that the prices could be 'capped' so effectively given the continuing pressure on physical supply by buyers from Asia.

The paper markets are where the price is set, and they have only tenuous connections to fundamentals like supply and demand for real products, especially because they are oriented to the short term and their own internal systems.

In a genuine global market, Chinese firms would be taking large positions on the Comex, and then standing for and taking delivery of bullion products from there.  And miners would be taking their products there for price discovery.

That is not what is happening in New York these days.   The London and New York markets are dominated by a relatively few but very powerful financial firms, and some very large speculators. 

At some point the paper and physical will have to reacquaint themselves and converge, and I suspect that will be a notable reunion indeed.

Have a pleasant evening.