Tuesday, February 26, 2013

What Gold & Silver Bifurcation Looks Like.

I haven't been in much of a mood to write lately but I wanted to point out the divergence between the recent gold and silver smack down in the paper markets and the real demand for physical. Its somewhat anecdotal but I think it makes the point for one of my main themes here at MWP.

Below you can see that even as gold was crushed by paper selling the demand for physical gold remained very strong.

The entire post from Zerohedge is shown below:

February has been an odd month for precious metals to say the least. On-again, off-again fears of Bernanke removing the punchbowl (and endless sell-side strategists discussing Great Rotations and the end of the gold cycle) have led to prices for gold and silver sliding notably. However, while all this price deterioration has been going on, demand for physical gold and silver has surged - entirely disconnecting from January's apparent demand-to-price correlation - and Silver set to break all-time record demand highs for a February. We know who was buying in January, as Reuters reports Russia and Turkey were significantly adding to their bullion reserves; and while the divergence between demand and price coincided with Chinese New Year - leaving a large marginal buying nation on the sidelines - we suspect the drop is more to do with hedge fund reflexive selling - now caught offside. It seems at least one smart player was using lower prices to build their stack; manipulation or no manipulation.

Cumulative demand for Gold vs Spot price...

Cumulative demand for Silver vs Spot price

and this month looks set to see the biggest demand for silver (for a Feb) ever...

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