24 October 2014

Shanghai Posts 51.5 Tonnes of Gold For the Week: How Long Can the Gold Pool Be Sustained

"For 'tis the sport to have the engineer
Hoist with his own petard: and it shall go hard
But I will delve one yard below their mines,
And blow them at the moon."

William Shakespeare, Hamlet

The Shanghai Gold Exchange, where investors actually take their bullion rather than just play liar's poker with multiple paper claims for the same ounces, saw 51.5 tonnes of gold bullion taken in the latest week.

The trend of physical deliveries has been rising the last 12 weeks.
To put this in perspective, if there are 32,150.75 troy ounces of gold in a metric tonne, then the Comex has a total of just under 28 tonnes of registered (deliverable) gold in all of its warehouses.  

What is that, about three days supply in Shanghai?  Not to mention the other gold bullion markets around the world.
Sounds more symbolic, than practical.  Well, there can be great power in symbols— until long abused belief begins to falter, and confidence frays.  And then one risks the danger of using too much force one too many times, and losing the faithful obedience of the public.  And with it everything that allows a minority to govern.
There are another 239 tonnes in storage in all the Comex vaults, in the proper bullion eligible format, but not listed as deliverable at these prices.  Sometimes owners feel comfortable keeping the bullion there for storage, eliminating the need to have the bullion assayed if they ever wish to sell it.

So what does this all mean?    It means that the unsustainable will not be sustained. 
Some day the price of gold will likely be whatever China, Russia and like minded bullion markets say it is, the paper pushers in New York and London notwithstanding.   The tangled web of free trade and globalization, ain't it a bitch? 
It would already be so, except for the tired efforts of Wall Street's central banking friends and their access to leasing other people's bullion in a misguided effort to influence markets and rig their prices.
China and the rest of the world are apparently not yet tired of buying gold on the cheap. 
But make no mistake: Shanghai talks, and Wall Street walks.
This chart from the data wrangler Nick Laird at Sharelynx.com.