Great article out of GATA the other day (I was at a funeral so apologies for the lag time). We’ve been reading more and more stories about the suspension/halt of gold coins over the last 60 days. First, the US Mint had to temporarily suspend sales of its American Eagle one-ounce gold coins on Aug. 15 – and then later that month announced sales of the American Eagle coins would resume under an allocation program to designated dealers.
Since then, we have had the following notable headlines:
September 26 – US Mint Suspends Sale of 24-Carat Gold Coins
The U.S. Mint is temporarily halting sales of its popular American Buffalo 24-karat gold coins because it can’t keep up with soaring demand as investors seek the safety of gold amid economic turbulence .. full story
October 8 – Mint Widens Freeze on Gold Coin Sales
Citing extraordinary demand, the U.S. Mint has broadened its freeze on sales of gold bullion coins, as individual investors who are priced out of the futures markets have been piling up their holdings of the … full story
October 8 – Canadian and US Mints Can Not Keep Up With Gold Coin Demand
An array of gold and silver coins from various mints – including the U.S. Mint and the Royal Canadian Mint – have been temporarily removed from the offerings at Kitco Inc., a precious metals dealer … full story
WHY THE DISCONNECT WITH COMEX?
Clearly, both investors and citizens are demanding physical gold to the point of exhausting supply, so why are COMEX prices not reflecting the demand? Our Chief Commentator, Peter Grandich, stated:
“There’s an old saying: ‘Don’t fight City Hall.’ I have a new one: ‘Don’t fight the bandits on the Comex.’
“There’s no rational explanation for the incredible disconnection between gold’s physical demand and the paper trading of it on the Comex. Whatever doubt anyone had about GATA being right in its cause would be gone in my humble opinion if you watched Comex trading every day. A very good friend of mine says he doesn’t mind losing in gold and his mining stocks, but when you can see criminals stealing it from you on the Comex, you just want to die.
The GATA article also goes on to report significant silver shortages in Mexico. Specifically, Hugo Salinas Price, president of the Mexican Civic Association for Silver stated:
“Mexico’s central bank has informed us that as of this morning they will be able to supply us with only 60,000 Libertad silver ounces from here to December….How is it possible that a country that is either No. 1 or No. 2 in silver production (Peru sometimes exceeding Mexico) cannot supply silver coin?”
Is the disconnect manufactured? Nobody can say for sure but when real-life isn’t reflected in the marketplace the real world usually ends up winning … just ask every purchaser of “AAA” sub-prime mortgage packages.
Regards,
George
George,
Excellent commentary. I would like to add that the incredibly perplexing dollar strength is also playing with resource investors minds. It seems as though repatriation rules the day as the flight to the US currency isnt out of desire so much as it is a reflection of all the de-leveraging taking place in US denominated funds. This is incredibly negative to the precious metals market and psyche of every resource investor out there who believes the flight to quality resides in gold. The US dollar is currently parabolic, in every other market this is unsustainable; but this time it really is different; so gold and silver bugs may pass out with baited breath as they may never get to exhale.
How do you explain the fact that COMEX prices closely match the London Fix price, which is based on actual physical gold transactions?
There is no doubt there is a difference between retail and wholesale prices, but I guess that is what you would expect. The degree of the difference may be increasing though.
Here is a chart showing the difference between London Fix (large wholesale quantities – physical; matches the COMEX price closely) versus small retail quantities sold on ebay.
http://www.pricewatcher.blogspot.com/