THE FED HOLDS AND GOLD AND SILVER RALLY
Gold and silver began a rally on Wednesday, prior to the Fed announcement of no rate hike on Thursday. Especially significant for both metals is the strength of the Friday follow through surge in prices after the announcement. At this writing gold is up $32 and silver up $0.82 since the start of the Wednesday rally, both on heavy volume. As we have said in the past, “volume is the weapon of the bull”.
COMEX PAPER GOLD AND REALITY
Because of the increasing demand for physical gold and silver, COMEX gold and silver stocks are at all time historic lows. Each ounce of physical gold held for delivery in the COMEX warehouse has 250+ futures contract claims against it. This is unprecedented in the history of the COMEX. For comparison, one year ago the number of contract claims against physical was 72. So, in one year, the demand for physical gold delivery against COMEX warehouse gold stocks has risen by 250%. Currently, there are just 163,334 ounces of registered gold income warehouses: the lowest in COMEX history.
The charts below speak to the incredibly rapid increase in demand for physical gold.
WORLDWIDE SHORTAGE OF PHYSICAL GOLD
In an interview with Bloomberg Television, Peter Hambro, Chairman and co- founder of Petropavlovsk said, “My baseline is they [the Chinese] have been buying and the Indian have been buying in enormous quantities. It’s virtually impossible to get physical gold in London to ship to those countries. We get permanent requests from Russia, would we please sell our physical gold to India and China. Because there is no physical, only endless promises. And I really worry that the market, the paper market, could be stamped on and people will say “sorry we’ll have a financial close out”, and it’s all over.”
From the Financial Times:
“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.”
A LOOK AT SILVER
The story for silver is much the same, except that the even greater demand for physical silver has created general and widespread shortages for silver bullion and coins. Wait times for delivery of some silver investment products is two months. Even the US Mint ran out of silver in July this year. Currently, the average monthly withdrawals of physical silver is more than double the rate of delivery demand during the silver price spike of 2011. This is happening despite the reduced industrial demand for silver.
We have been banging the drum for many months that these price levels represent an historic buying opportunity for gold and silver. Considering the institutional and individual investor demand reflected in the physical markets, we are not alone in this assessment. We may never see precious metals prices this low again in our lifetimes.
Contact a precious metals expert at Republic Monetary Exchange to learn more about the opportunities in gold and silver investing.