Parallel universe in Gold: Physical versus Paper gold

Two interesting outlooks from the two day 14% massacre on gold prices

1. Falling gold prices equals bigger demand for physical gold in India

From Outlook India

With gold prices tumbling to a 15-month low today, retailers are witnessing a surge in demand and expect up to 50 per cent spike in sales volume in this marriage season.

They are also expecting prices to fall further to around Rs 25,000 per 10 grams in the immediate short-term.

"Over the weekend, demand has picked up and there is surge in footfalls. As such, demand for jewellery has been up since Holi due to the upcoming wedding season. However, the recent plunge in prices have added to the momentum.

"We are expecting a whopping 50 per cent growth in sales volume during this season over the same period last year," Vice-Chairman of the Mumbai Jewellers Association Kumar Jain told PTI.

Jain, who also owns Umedmal Tilokchand Zaveri retail chain, said jewellers are expecting a good season on the back of expectations that the prices are likely to tumble further to around Rs 25,000 due to global cues.

2. Has the selling of paper gold been far more than the actual inventories?

From Mark Byrne of Goldcore (via Zero Hedge) [bold original]

Gold futures with a value of over 400 tonnes were sold in hours and this is equal to 15% of annual gold mine production. The scale of the selling was massive and again underlines how one or two large banks or hedge funds can completely distort the market by aggressive, concentrated leveraged short positions.

It may again be the case that bullion banks with large concentrated short positions are manipulating the price lower as has long been alleged by the Gold Anti Trust Action Committee (GATA). The motive would be both to profit and also to allow them to close out their significant short positions at more advantageous prices and possibly even go long in anticipation of higher prices in the coming weeks.

Those with concentrated short positions may also have been concerned about the significant decline in COMEX gold inventories.

The plunge in New York Comex’s gold inventories since February is a reflection of increased demand for the physical metal and concerns about counter party risk with some hedge funds and institutions choosing to own gold in less risky allocated accounts.

Comex gold bullion inventories have slumped 17% already in 2013, falling to just 286.6 metric tons of actual metal on April 11, the lowest since September 2009.

This means that futures speculators on Friday sold a significant amount of more paper gold, in an hour or two, then the entire COMEX physical gold bullion inventories.

Sell on banksters and governments! This should give the physical gold market (or the public) more space or opportunities to accumulate.