Tags: gold | COMEX | price | supply

The Leveraged New York Gold Market Could Be a 'Trigger' for Gold's Recovery

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Monday, 02 Dec 2013 02:08 PM Current | Bio | Archive

Eric Sprott of Sprott Global recently wrote an "Open Letter to the World Gold Council," in which he reported in meticulous detail that gold demand is about 5,200 tons a year, approximately double the World Gold Council's reported amount.

He also said gold mine production will only reach 2,142 tons this year. The shortfall is made up by 1,344 tons of gold "recycling" and the rest coming from declining warehouses in the gold exchange-traded funds and in the futures market (like COMEX), reflecting declining paper gold demand this year.

COMEX gold is leveraged. COMEX only holds 1 ounce of gold for each 55 ounces of open contracts in gold futures. That's why New York paper gold trading can influence the global price so dramatically. But if a big buyer came into the New York gold market, relentlessly buying, the shortages of warehouse gold could cause a wave of panic buying and a dramatically higher price of gold in a "New York minute."

Chris Powell of the Gold Anti-Trust Action Committee says that "paper gold" can manipulate the physical market because of its huge size and leverage. He says "gold has been 'printed' practically to infinity."

The Reserve Bank of India estimates there are 92 paper ounces of gold in global markets for each physical ounce. A leading U.S.-based gold expert, Jeffrey Christian of CPM Group, has testified to the Commodity Futures Trading Commission (CFTC) that the ratio may be as high as 100 to 1.

This "rigged" market is a reason why gold's price is temporarily down, but this "rigging" can backfire, as it did in previous gold bull markets, when demand overwhelmed the market "fixers." If a large number of investors realized that as much as 90 percent of the world's investment gold, supposedly being held in trust, "may not exist," Powell says, then "gold will rise to multiples of its current price."

About the Author: Mike Fuljenz
Mike Fuljenz is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the NLG award winning Michael Fuljenz Metals Market Weekly Report. Discover more by Clicking Here Now.

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Eric Sprott of Sprott Global recently wrote an "Open Letter to the World Gold Council," in which he reported in meticulous detail that gold demand is about 5,200 tons a year, approximately double the World Gold Council's reported amount.
gold,COMEX,price,supply
361
2013-08-02
Monday, 02 Dec 2013 02:08 PM
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