Price of Physical Gold Decouples from Paper Gold

The comments below are an edited and abridged synopsis of an article by Tyler Durden

The current enormous increase in demand for precious metals is straining supply chains. Many suppliers don’t have any stock of precious metals and are not taking orders. The US Mint has announced that American Silver Eagle coins are sold out. Large US wholesalers are sold out of gold and silver, and are not able to replenish.

Price of Physical Gold Decouples from Paper Gold |  BullionBuzz
Gold bars and coins

The paper price of gold has been trading downward recently. Paper gold is traded on the unallocated OTC gold spot market in London and on the Comex futures market in New York. However, both of these markets are derivative markets, and neither is connected to the physical gold market.

This means that the physical gold market is a price taker, inheriting the price from the paper market, and that the derivative markets are the exclusive and dominant price makers. The entire market structure of this financialized gold trading is flawed. So while there is unprecedented demand for physical gold, this is not reflected in the gold price as derived by Comex and the London unallocated spot market.

By now, it is abundantly clear that the physical gold market and paper gold market will disconnect.

If the paper market does not correct this imbalance, widespread physical shortages of precious metals will be prolonged and may lead to the entire monetary system imploding.

And with progressive central banks in Eastern Europe and Asia having stocked up on gold in the last three years, gold will likely be the anchor of the new monetary system arising out of the ashes.

Mainstream media assertions that gold has been stripped of its safe haven status are ridiculous and distorted; the opposite is true. Unbacked paper gold and silver may be stripped of safe haven status, but certainly not physical gold bullion.

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