Its hard to miss the disconnect between 'spot gold' prices, which are based off the gold futures front month adjusted for time, and the market prices for physical gold in any reasonable quantity and form.
What does this imply?
First, there must be forced selling of paper gold probably in hedge funds being attacked by bear raids from the other large hedge funds and bank trading desks as we noted in story about Goldman Sachs last week.
Secondly, the central banks are known to be selling and leasing gold into rallies, by the data and by their own admission on numerous occasion, to hold down the price of gold. Why? Because in their own words it is a signal of fear, and so the theory goes, by turning off the signals of fear you prevent the fear from becoming unmanageable.
But that is primarily a rationale, an excuse that ordinarily reasonable and lawful men use to justify unreasonable and unlawful actions to themselves and to a court of review in some imaginary future they play out in their minds.
So as such the spread between the price of paper and physical gold is a measure of the level of public confidence, or a lack thereof, in the ability of the world's central bankers to make a silk purse out of a sow's ear, and to keep the world marvelling at its craftsmanship and desirability of their rainments, as they prance naked through the streets.
"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore, at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K."Or as the great stock market bear Daniel Drew once said in another context:
Eddie George, Bank of England, September 1999
He who sells what isn't his'n
Must buy it back, or go to prison.
Hope to see you and your friends at some future financial Nuremburg, Sir Alan and Herr Doktor Bernanke.