Gold Price Crash Spurs Boom in Physical Gold Markets

Apologists for inflationism have been saying in media that the plunge in gold prices marks the “end of gold’s bull market era”. 

But they hardy explain that the such quasi-crash has been brought about mainly by a selloff in paper gold rather than the physical gold: a parallel market.

Tocqueville Asset Management’s John Hathaway explains that the US centric based selling of gold paper translated to about 1 million contracts which exceeded global annual gold production by 12%—an anomaly. Well this for me smells like manipulation.

Since the selloffs, like press releases, suddenly media has synchronically been saying that central banks lost money from their reserves, which I point out in the case of the US government this has simply been untrue or disinformation, and that such selloff justifies more inflationism which has been expected of them

Yet following the price smash up, instead of prompting the public to eschew gold, the physical gold market continues to exhibit reaccelerated demand for gold worldwide.

From Bloomberg (bold mine)

Shoppers in China lined up for gold this week, while in Hong Kong they rushed to buy bracelets and in India sought jewelry for weddings not set until December. The metal’s biggest price drop in three decades provoked the clamor.

From Zaveri Bazaar in Mumbai, India’s largest bullion market, to Australia’s Perth Mint, where sales doubled from last week, consumers headed to shops after the commodity entered into a bear market last week. As gold plunged 13 percent in the two sessions through April 15, retail sales tripled across China on April 15-16, the China Gold Association reported.

The frenzy appeared in India and China, the biggest gold- consuming nations, with cultures that traditionally acquire the metal for brides, babies or strongboxes. This year’s 18 percent decline may reignite demand that last year fell for the first time in three years, with Asian investors in particular seeing the drop as a buying opportunity.

Note the term “frenzy”.

Now to the coin market

From the Wall Street Journal (bold mine)

Sales of gold and silver coins are soaring despite the sudden plunge in the price of precious metals, benefiting mints around the world and driving the cost of the collector items to well above the value of the metal they are made of.

Coins account for about a fifth of all gold purchases for investment and are often favored by retail investors because they are far cheaper than the larger bars bigger investors buy.

While traders dumped gold futures earlier this week on signs global inflation is easing and world economies are slowing, coin prices have been cushioned by high demand from gold enthusiasts who say coins hold their value over the long term.

The premium on gold coins has risen to about 5% more than the spot price of the metal, and compares with 3% at the start of the year, traders say. For silver, the premium has risen to as much as 18% from about 15% at the start of the year. Comparisons aren't precise because the coins generally contain small amounts of other metals to strengthen them, and there is typically a small premium because of manufacturing costs.

Again prices in the real world and financial paper gold reflects on a patent disconnect.

Yes central bankers have reportedly been divided too.

From another Bloomberg article:

The biggest drop in gold prices since 1983 has divided central banks on whether the metal is cheap enough to increase investment.

Sri Lanka’s central bank governor said falling prices are an opportunity for nations to raise gold reserves and that the island will “favorably” examine buying more. The Bank of Korea said the plunge isn’t a “big concern” because holding the metal is part of a long-term strategy for diversifying currency reserves. Reserve Bank of Australia’s assistant governor said bullion has no “intrinsic value.” South Africa’s central bank governor won’t adjust its reserves policy.

Central banks own about 19 percent of all gold ever mined, and last year boosted their holdings by the most since 1964, according to the London-based World Gold Council.

In the attempt to shut down alternative currencies, and by claiming that gold isn’t a safehaven, what politicians and the inflationists want to project is that we all have NO choice but to trust governments.

This means that we ought to or should unquestionably abdicate to governments a bigger part of our savings directly via outright confiscation or indirectly by inflation for the benefit of the political class and their cronies.

 

A famous politician once said, You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.

The pushback from the gold bear raid as seen in the physical gold market implies that the governments and their apologists cannot fool all the people all the time.

Updated to add: The Zero Hedge points out that the US Mint sold a record 63,500 ounces of gold in ONE day.

According to today's data from the US Mint, a record 63,500 ounces, or a whopping 2 tons, of gold were reported sold on April 17th alone, bringing the total sales for the month to a whopping 147,000 ounces or more than the previous two months combined with just half of the month gone.