Financial Media Wakes Up to 'Physical Tightness' In London Gold Bullion Market

How interesting that the Financial Times has finally noticed 'tentative signs of increased demand for bullion from consumers in emerging markets.'  You know, those obscure places with difficult names such as I-N-D-I-A and C-H-I-N-A.

It's not all that new of a phenomenon, mates.   Our friend Nick has been tracking it, and we have been talking about that here at Le Cafe, for a couple years now.  Well, maybe almost a decade.  See the charts below.

And we have also been hearing about 'physical tightness in the market for gold for immediate delivery.'  While the 'cost of borrowing gold has risen sharply in recent weeks.'

Even while the price of gold was shoved lower on the non-delivery paper markets of The Bucket Shop, helping to crater the deveopment and production of mining companies.

Sounds like borrowing gold for physical delivery is starting to be a dodgy business, a little hard to manage at such high leverage of claims to items.

Wait until people start realizing that there is a diminishing mix of deliverable and of 'borrowed gold' backing up a pyramid of derivatives and paper claims.   Is that the sound of a spoon scraping the bottom of the pot yet?

What happened to the theory of higher prices to relieve demand in excess of supply?

And where is that 'borrowed gold' coming from, by the by?  It must belong to someone, and they may even think it is safely tucked away while it is on its way to Asia via Switzerland.

If the LBMA has been doing what some think they have been doing with demand and available supply, then we haven't seen anything yet.

Never be the last one out of the pool.

But let's see how all this plays out.

Gold Demand from China and India Picks Up

By Henry Sanderson
Financial Times, London
Wednesday, September 2, 2015

London's gold market is showing tentative signs of increased demand for bullion from consumers in emerging markets, after the price of the precious metal fell to its lowest level in five years in July.

The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.

The rise "does indicate there is physical tightness in the market for gold for immediate delivery," said Jon Butler, analyst at Mitsubishi. ...

... For the remainder of the report:

http://www.ft.com/cms/s/0/eae18206-5154-11e5-b029-b9d50a74fd14.html

Gold Daily and Silver Weekly Charts - Silver Stronger as Gold Capped

Gold was hit early and then held lower most of the day in NY trade after some strength overnight.

You might make a rubber stamp out of that sentence and it would serve as the daily commentary for most occasions.

Silver showed a little more life, but still remains quite undervalued relative to gold.

The action in the warehouses yesterday was a bit telling, especially if you look at JP Morgan. They withdrew quite a chunk of the gold which had been up for delivery during the active month.  The current amount of 'deliverable' gold at these prices is back down to 324,677 troy ounces, or about 11 tonnes.

I think the hypothesis that suggests that JPM is a key member of the existing Gold Pool, and perhaps with a hand in silver as well, is not a bad one to keep in mind.   They are certainly the major source of silver bullion at The Bucket Shop, and the seeming captain of the gold supply to facilitate delivery at lower than market clearing prices as needed.

But time alone will tell.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Rebound On Weak Economic News

US equities caught a rebound today largely on selling exhaustion and weaker than expected ADP employment and economic news in general.

The preoccupation with the Fed interest raise of 25 basis points is almost getting silly. It is largely symbolic, and will have little to no effect on the economy.

It does distract from the real problems of an outsized financial sector, a rapacious one percent that is exerting undue influence on political and fiscal policy, and of course, stagnant wages and underemployment fostering a continuing weakness in aggregate demand.

I do not expect these problems to be address now until there are a major series of events that cause the political leadership to confront reality and take a break from their quest for personal riches beyond their reckoning.

Have a pleasant evening.