Sunday, May 19, 2013

Maguire on Delays in Gold Delivery for Wholesalers

One of my themes is that as we see the demand for physical gold increase while the paper demand falls we see artificially lower prices. And this is always means shortages.

From KWN:

Eric King:  “On the physical side, what is availability if you want to go in and buy a very large order of gold?  Is there a delay?

Maguire:  “There absolutely is.  Let’s differentiate between the retail bars, which we know there is a delay on, there is also a delay on wholesale bars.  And the larger the size, the longer the wait or the higher the premium.  We’re seeing that now.” 

This is consistent with the shortages of physical gold we hear about from other sources.

And Finally, Maguire on where we are in the gold market:

Maguire:  “We had a large sovereign order in the market at $1,380 (area).  That was definitely filled today (Friday).  What we have today is an even more stretched managed money position holding the bag.

This physical tonnage that is disappearing will have an effect on the paper market, and I think it’s going to have an effect fairly soon....
“The short stops have moved significantly lower and are highly vulnerable.

The minute this (downside) momentum wanes, I think there will be a race (for the shorts) to cover.  I would say, given that the physical market is exponentially larger (in terms of demand) on each decline, I still firmly believe the bottom is in at the $1,320 area.  But if we start approaching that area again, I think anything sub $1,350 is going to create massive central bank demand.”
And if you're a regular reader you don't need me to tell you the primary central bank buying will be China backing the RMB (Remnimbi, aka Yuan) for future internationalization.

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