Gold’s Rally Tightens the Physical Market


Gold prices spiked up Monday, extending a 3-session rally

Monday gold futures for delivery on the COMEX exchange were up nearly 3% or +47.60 at 1693.30 just shy of the intra-day high at 1695.90.

That was the highest mark in 2 wks, in a rally driven by the extended period of low interest rates, and big increases in government borrowing.

Spot gold was up 2% at 1,650.40 oz. The premium of the futures contract over the physical product thus widened to the most in over a week, under the weight of heavy inflows into ETFs and other gold-backed products.

ETF holdings rose by 1.5-M oz last week and are now up 10% in terms of claims on physical gold since the start of the year.

Much of that increase has gone into US-backed ETFs, which track the COMEX price rather than the London price.

Brett Heath CEO of Metalla Royalty & Streaming, told me that “there is maybe around $100 of paper gold trading for every ounce of real gold that’s in New York vaults.”

The recent extreme arbitrage suggests that “the people that have been arguing about manipulation in the gold market and talking about that for years are not as crazy as we once thought,” Mr. Heath said.

Uncertainty still cloud the actions of some major market participants. The Central Bank of Russia delayed the publication of its weekly reserves data for the 3rd day, in what appeared to be an effort to conceal the degree of pressure on its foreign reserves as it tries to stabilize the Russian ruble amid the ongoing price war in Crude Oil.

Silver futures rose 3.7% to 15.03 oz, on the back of similar inflows into silver ETFs.

Platinum futures rose 2.2% to 733.60 oz.

The risk-on attitude in global markets was also reflected in other safe-haven assets, with JPY weakening Vs USD, and US Treasury yields rising by between 4 and 7 bpts along the yield curve.

Have a healthy day, stay at home, Keep the Faith!

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