There is a lagging period where you’ve got these vast quantities of fresh leveraged supply coming in vs this unleveraged physical demand. Leverage works in two ways. It also works against the sellers. I think you saw that last Wednesday with what I believe looked like a bottom.
The key thing is the physical wholesale markets, and I’m seeing the same thing now. I’m not seeing any letup in physical demand. The central banks, the sovereigns, they were buying at $1,800, $1,700, $1,600. But when you take a dip to this kind of level where we actually start to approach break even cost of mining (gold), well, obviously that was an act of desperation (on the part of central planners).
As Russia, or China, why not just pick it (gold) up and ship it over? It’s quicker (than mining it). So you’ve reached a point where the lines cross, and the physical market diverges. I have checked the numbers now and we are very close to 1,000 tons of deliveries just this year into Shanghai.
That does not account for the 25 tons we are seeing everyday through London. And that does not account for what is being directly purchased through producers. So there comes a point where you get such a discount that this demand increases exponentially. And we are not just seeing the central banks and the sovereigns coming in, we are also seeing some very smart money, I’m talking investment money, coming in (to the gold market as well).
"Give a man a gun, and he could rob a bank. Give a man a bank, and he could rob the world."
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