30 August 2015

Gold Coming Off the LBMA Spiked Last Week

There was a interesting spike in physical gold activity last week on the LBMA.

It could be some seasonal phenomenon connected with the end of August and the approach of the prime season for gold.

But it also seems consistent with the 'tension on the tape' that I have been seeing.  And a number of little indicators and some interesting things, like the generally 'well informed' Goldman taking delivery of gold at the Comex for their house account.

One outcome of this increase in physical gold flows *might* be the realization of the cup and handle bottom formation on the gold chart, and a quick run to target around the 1250 to 1270 area.   And depending on what else goes with it, that might just be for openers.

Or it might once again be ignored and come to nothing.

But it does seem that the gold flows from the West to the markets in China and India are intensifying at these prices based on a number of diverse data points.

One cause of this could be a divergence between the paper price of gold with leverage and the actual physical markets because the price of gold as set in London and New York is below the clearing price in dollars as part of a momentum trend in the forex markets.

If a commodity price is set below the natural clearing price, one would expect to see the demand for the real underlying asset increasing.

Those who flatly dismiss the possibility there can be such a divergence between the market price and the natural clearing price have not been paying attention to what has been going on in any number of rigged markets over the past few years.

The excessive speculation fueled by a surfeit of paper money in a few hands and slack regulation that permits the unsustainable reckless pyramiding of positions is a good contender for the theme of the last two decades.

For what it is worth, I am seeing what appear to be increasing signs of 'fragility' in the precious metals market.   And in a nutshell, I am thinking that we are seeing a bear market bottom.  Trends, especially in forex related markets, often tend to overshoot and overstay their time.

But like the proverbial search for the lost keys, we will find the end of this era of financial madness in the last crisis, and perhaps that will be the one that breaks the Banks.

The chart below was provided by Nick Laird at goldchartsrus.com.