Tag Archives: Comex gold futures

India’s Hidden Demand For Gold

Western anti-gold propagandists have been scratching their head over the surprising strength in the gold market despite aggressive Central Bank efforts to push the price lower. Here’s a perfect example of the idiotic articles hitting the internet – this one from Investing.com:  Bring Out The Bears:  Gold Is Headed Lower.  This author refers to gold as “the shiny rock.”

Anyone who’s traded gold for a reasonable length of time knows that simple T/A applications are utterly useless.  This author’s work is T/A scatology.  I see he operates something called “Dragonfly Capital.” Dear god I hope he’s not responsible for managing other people’s money…

The recent strength in gold is widely being attributed to vigorous “western” demand. Other than the fictitious run-up in GLD’s reported vault holdings, and the record Q1 2016 quarterly demand for U.S. minted gold eagles, it’s hard to see whether or not the west is buying up a lot of physical gold or not.

However it’s been assumed that since early March that India was dormant for several reasons, not the least of which is a general jeweler’s strike over the excise tax implemented on jewelry sales.  However these jewelers still have to make a living.

John Brimelow – JB’s Gold Jottings report – featured an article from India which reports that “unofficial” imports of gold into India – aka “smuggled gold” – are estimated to be around 2.5 tonnes per week.  Based on the numerous other reports published by JBGT, estimates of smuggled gold into India tend to understate the true amount of smuggling.  One of the the benefits to jewelers to using smuggled metal is that they avoid paying import duties and the associated premiums over the spot price, and thereby offset the excise tax.

With the dramatic run-up in paper derivative forms of gold relative to the amount of physical gold available to deliver into those paper claims, it would be a grave mistake for the bullion banks to underestimate the amount of physical gold disappearing into private hands.

The Action In The Metals Is Getting Interesting

That big spike up today that Zerohedge is saying is $450mm worth of paper gold occurred exactly at 8:15 a.m. EST, 5 mins before the Comex gold floor opens.  Someone either wanted to cover a big short or, less likely, a big fund decided to get very long.  I couldn’t see any news or event-related triggers. But the tape-action reflects a fear-driven trade if it was short-covering OR probably some sort of inside view of information not yet public if it was a trade to establish a long.

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TF Metals report  (link) that GATA published yesterday contained excellent sleuthing by Mr. Ferguson.  When I saw that JPM had become quite net long gold futures several months ago, my first impulsive thought was that they were getting long in order to be able to turnaround and dump big quantities of contracts to control the Comex price at some point.  TF Metals illustrates this is likely what occurred with the published data as evidence. (CFTC Bank Participation Report).

HOWEVER, it occurred to me that – perhaps – IF JPM has to resort to building up long positions in paper gold to enable the banks to turn around and dump the contracts in order to execute effectively its Fed-mandated policy goal of capping the price of gold, is this yet another indication that the bullion banks are running out of physical supply to throw at the market?

In my opinion, it is.