Indian gold buying has been a topic closely tracked by UK gold and silver bullion investors and this also related to a noticeable increase in smuggled gold being sucked into India to capitalize on the 30% oil for physical gold trade. Which is why we are seeing unprecedented strong demand in the market for gold bullion bars and coins. This is pulling on global physical supply much faster than global suppliers can sustain into paper market selling, which is increasingly being called for delivery.
Investors that are looking for prices to sell gold bullion bars and coins should be mindful that premiums are likely to increase even with a rising gold and silver spot price due to the insatiable demand for physical bullion in the East. The shift in trade relations between Russia and Asia is brining gold and silver back to the forefront of global trade, which could be very lucrative to the patient gold and silver bar and coin holders that have been frustrated in recent years with lack of excitement in the price action.
The casino speculators do not realize this short load. Whilst spec momentums have been tricked into this embedded sell the rally stance, what makes it dangerous for specs is that they have been doubling down. That is, taking leveraged short profits from large very closely structured layers of very low-hanging short stops. This sets-up both gold and silver futures for an explosive upside rinse.
The paper gold and silver markets have been incredibly frustrating for bullion investors, however with the specs holding all the shorts and the house holding all the longs in these deeply backwardation positions in the India, Russia and China oil for bullion trade which adds to the bank for international settlements warning of growing 2008-style bank derivative insolvency risks emerging again.
Gold NSFRs stand out as the only asset class that has zero counter party risk. In a world with close to a quadrillion of derivative risk which is toppling on a sinking sand of fiat currency, gold being the only asset class with zero counter party risk goes a long way to explaining why sovereigns, central banks and the four largest holders of precious metal derivative holders listed in the OCC report, are racing to exit trillions of dollars of increasingly underwater historically accrued and capped gold and silver derivative bets into what is a massive sanction-factored blowback tail risk.
Following the over-the-counter based nickel blow-up, JP Morgan confirmed and Standard Chartered were pulling out of the base metal space. Many experts think JP Morgan is also scrambling to seek the return of their leased silver positions which has been confirmed by some 1st tier liquidity providers. Their silver positions largely sit on the books of Bank of America, Citi and Standard Chartered. In the short term, the process of laying the silver short load onto the chart painted speculators. This explains why silver has been counter intuitively declining into a house unable to hide that they have been going long against this blinkered momentum driven specs.
Stepping back from the very short-term ‘chart chatter’ to look at the bigger picture for gold and silver bullion investors. Brazil, Russia, India, China, and South Africa (BRICS) currency basket comprises of a lot of components, but physical gold bullion is the lynchpin of the basket. The attempt from officials to move from the weaponizing the US Dollar to weaponizing paper gold is extremely ill advised. Kneejerk selling paper gold because they have no physical gold bars and coins to sell.
It is clearly just paper gold selling; you can tell that by the backwardations. This is setting up officials for an even larger backfire than when they tried to turn the Russian Ruble into rubble. The Ruble reached seven-year highs not long after this against the Euro and the US Dollar. They set up physical gold for an even larger arbitrage able physical disconnect and a revaluation that is even larger than what was seen when exchange for physicals blow-up in March 2020. Whilst officials gained in tricking paper longs to go short into bid pulling which declined the paper price, on the other side of this trade they were there grabbing everything that was sold.
There was an incredibly large Indian physical uptake which forced a race to cover delivery obligation directly related to a known very large physical buyer. With no physical gold to sell, the net result of selling paper gold as part of an ill-advised strategy to devalue Russian physical gold reserves by dumping paper gold into the market has stuck some of the short load onto the Comex centric specs but it is limited to how much open interest can be created into an already loaded speculator position. Unlike in the late-90s when the Bank of England and Federal Reserve were found to depress the gold price, there is no central bank physical gold bullion stash to sell.
The total under the radar of the specs trading in the Comex is how the tiny ringfenced silver market component reacts to a real physical demand explosion. Silver, even though it is a much smaller market than gold, becomes a beachball effect factor due to how fundamentally undervalued it is and how the physical price being discovered outside the LMBA and CBME ringfence is going to blow this position that links directly to the SLV will be blown wide open. Whilst JP Morgan and other market making banks race to exit providing liquidity, because the nickel explosion nearly caused a default of a too big to fail bank had they not been bailed out. JP Morgan is also racing to call in their silver leases, it is the doubled-down Comex specs that are heading for disaster.
The building friction over Taiwan notably escalated following China issuing the US a redline not to cross. The serious warning follows on the heel of the US ignoring Russia’s redline warning regarding the NATO expansion closer to the Russian borders. It cannot be ignored that the ill-conceived Russian sanction blowbacks are having a ten-times larger impact on Europe than the US. The resulting US Dollar hegemony blowbacks were not anticipated at all by the US administration. The escalation of geopolitical tensions has been a driver for sovereigns and central banks to purchase physical gold.
China is being proactive in anticipation of future sanctions be accelerating their de-dollarization by expediting the establishment of this BRICS currency basket. Gold and silver will be revalued at a faster pace than the ability to unwind the billions of dollars of derivative bets against the higher gold price. With spec selling open interest running thin, the house has been much quicker to take the long side, overriding the automated pit selling. The BRICS currency basket is unstoppable. At the margin, populating this basket with real physical gold and silver bullion will undoubtably force a price reset. Officials are as wrong-footed as when they tried to turn the Ruble into rubble. The disconnect between the US centric officially PSYOP bearish paper gold sentiment into opposing strong unleveraged central bank and sovereign physical demand is compressing under-priced, tight supply gold and silver for a gap close upside move
Interesting article, Indeed there will be huge demands for gold from BRICS, especially India, I think gold demand has a direct relationship with youth in a particular country. More youth = High Gold Demand.