Demand for Physical Bullion Surges—Will It Break Paper Markets?

The comments below are an edited and abridged synopsis of an article by Clint Siegner

Currently, we have lots of inflation concentrated in the financial markets and real estate. The Fed must pump continually just to keep air in those bubbles. President Biden certainly won’t impose discipline or restraint at the Fed.

Demand for Physical Bullion Surges—Will It Break Paper Markets?
Gold bar – surge in demand

Americans can expect more of the same from Congress. Biden already asked for nearly $2 trillion in stimulus. Whatever he gets will just be a down payment, as Congress works to increase spending and grow government.

The Democrats won’t be impeded by calls for fiscal restraint. The unpayable federal debt could easily exceed $40 trillion before the next presidential election in 2024.

Metals investors should avoid the futures market. They will not get a fair shake. Gold and silver price discovery will continue to be a sham much of the time.

Given the failure of regulators and the Department of Justice to rein in the crooked banks, gold bugs are going to have to wait for a market solution, but the good news is that it may not be too far off.

Last year, we found the point at which physical demand for metals constrains the bullion banks’ ability to sell paper gold and silver. Premiums for the large bars used to deliver against futures contracts rose sharply last spring.

Metals’ prices crashed in March. Bankers could see huge profits coming on their concentrated short positions, but too many contract holders were unwilling to take a beating and chose to take delivery of the actual bars. The bullion banks lost hundreds of millions of dollars in the scramble to come up with enough physical metal to meet those unexpected obligations.

We have yet to see large bar premiums rise in response to the current demand, but requests for delivery remain near record levels.

Given that confidence is the fuel that powers the phony US dollar/Wall Street/government power and enrichment racket, we may not be too far from those tanks running empty.

Leave a Reply

Your email address will not be published.