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Trading behavior is changing in the gold space with investors preferring physical versus paper while at the same time investing more in ETFs than futures, according to Commerzbank.
Traders issued the largest delivery notice on record at Comex, declaring their intent to deliver 3.27 million ounces of gold against the August Comex contract.
“According to traders, 102 tons of gold were delivered to the holders of expiring gold future contracts on the Comex last Thursday – this also fits the picture of changed investor behavior,” said Commerzbank analyst Carsten Fritsch. “Physical deliveries on the Comex have been rising for months: they totaled just 26 tons in February, 98 tons in April and as much as 171 tons in June.”
This trading pattern shows that investors prefer physical to paper gold, Fritsch pointed out.
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... now what ?
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Conclusion
We appear to be witnessing the early stages of a breakdown in the paper gold markets on Comex and in London, brought forward by central banks committed to accelerating their inflationary policies in an act of macroeconomic desperation to save their government finances and their economies. The method employed is a dead ringer for an earlier experiment in France exactly three hundred years ago when John Law’s Mississippi bubble imploded, destroying his currency, the livre.
If you bind the fate of financial assets to that of your fiat currency, as John Law did, and which is now the policy of the Federal Reserve, when the bubble pops the currency goes pop as well. This outcome is so obvious that the smart money is now getting out of fiat and into physical gold and silver, as witnessed through deliveries on Comex active contract expiries and the disappearance of all physical liquidity in London.
This being the case, a gathering stampede out of paper currencies and derivative contracts into physical bullion has just started. Unless it is somehow stopped, it will destroy paper markets and with them the banks that have benefitted from them over the last forty years. The acceleration in the destruction of fiat money will gather pace in the next few months, and anyone who spouts macroeconomic nonsense instead of acting in the face of these developments will end up with nothing.
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The report on 3/2/20 noted the maintenance margins for 100oz gold were raised from $5,000 to $5,500. Kim says they are now at $8,350 four weeks later. ...
... According to the CME website, maintenance margins on 100oz gold contract is now $9,150. ...
The fact that the daily silver trading volume on the SHFE immediately rose six times after the introduction of night trading hours made perfect logical sense given the massive volatility in spot silver prices that often are artificially engineered in London and New York markets. Thus, traders in Shanghai ramped up their trades during the hours in which silver futures prices were being manipulated the most which led to an explosion in daily trading volume.
Some of the world’s wealthiest people have sold more than $3 billion of stakes in their major holdings since August, diversifying their fortunes as stock markets rebounded. ...
... In the week ended Sept. 11, insiders disclosed selling $473 million of shares, while buying only about $9.5 million.
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Markets kicked off a new trading week in a risk-off mode, with the U.S. dollar rising, stocks selling off and gold prices plunging. It’s hard to point to just one single reason why this is happening, notes BBH Global Currency Strategy. “[There are] rising viral numbers in Europe, rising hard Brexit risks, softening recoveries in the major economies, rising political risk in the U.S., and a negative report on the global banking sector. Some of these drivers have been present for weeks, if not months, but the confluence of so many negative factors has been too much for equity markets to ignore,” says BBH. The big new political headline the markets are digesting is the death of Supreme Court Justice Ruth Bader Ginsburg on Friday, which is creating a lot of volatility. “The most direct impact is likely to be further delays in the stimulus package. Indeed, we think it has become less likely that a deal comes before the election, as the Republican-led Senate appears to be marshaling all its forces now into pushing through a replacement for Justice Ginsburg,” BBH writes. The U.S. dollar, in the meantime, is making gains with the DXY last trading at $93.60, up 0.73% on the day. “With so much uncertainty, no wonder the markets are taking some profits now and moving to the sidelines with 43 days left until the election.”
After dropping to a two-month low this week, gold could climb back above $2,000 an ounce and hit new record highs before the year-end as the U.S. election risk remains underpriced in the precious metals space, according to a report published by Citigroup Inc.
Uncertainty surrounding the November 3rd U.S. election, including potentially contested results, could “be under-appreciated by precious metals markets,” Citi analysts wrote in a quarterly commodities outlook.
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Considering all the uncertainty around the election, Citi noted it could be “an extraordinary catalyst” for gold during the fourth quarter.
“That is one reason why we expect gold prices to hit fresh records before year-end,” Citi said.
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... Goldman Sachs analysts, in a research report published Tuesday, reiterated their bullish forecast for silver.
The bank sees prices rising as high as $33 an ounce as U.S. President Joe Biden moves forward with a plan to increase alternative renewable energy production.
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Thursday, in its annual report, the LMBA said that 38 market analysts participated in this year's forecast survey. Gold prices are expected to average $1,973.80 an ounce, up 11% from the 2020 average. However, the outlook is only a modest 4.5% increase compared to the average price seen in the first half of January.
"Gold is expected to be subjected to a high level of volatility in 2021, with the widest forecasts predicting a high/low range of $1,192 compared to $780 in 2020," the LBMA said in the report.
With the gold market expected to be relatively tame through 2021, the LBMA said it expects all eyes to be on silver. Precious metals analysts expect silver prices to average $28.50 an ounce this year, an increase of 38% from the 2020 average price and up 8% from the average price since the first half of January.
The volatility seen in the silver market this past week could foreshadow the price action through the rest of the year.
"Silver is undoubtedly the star of the show," the LBMA said. "Silver is forecast to be the best-performing metal in 2021, but with a trading range of $38.5, nearly five times its range forecast last year, it looks as if it's in for a real rollercoaster ride in 2021."
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CME lowers bond margins for gold, silver, platinum, and more
... the margin for gold is down 10% and silver margins have dropped down 9.2%. ...
On the intraday chart below you can see that the price was moving higher well before the news hit the wires. When the official release did take place by the time the major publications caught wind of the story it gave gold futures a second wind to push higher. This morning the momentum has continued and $1820/oz has been breached. One thing that is clear from the volume histogram is the fact that the average volume in the European session is higher than usual.
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