Pulled this from another board, definitely relatable.
Asia, Turkey, Europe, and the Middle East (Bahrain, Qatar) , which is a huge market for PM's are all reporting tightness in physical supply....including bullion dealer banks (ABN AMRO) refusing to honor physical delivery now.
What is not discussed is global trade and how it has changed and may be affecting supplies of precious metals.
think Iran, China and India for oil trade alone.
Iran not allowed to use western banking system to process payments for oil sales.
Well guess what is a natural alternative to USD's for trade if they're locked out of that system?
Answer is obvious--gold.
So given that this would affect two-way trade between these countries , a lot more gold is needed just to satisfy commercial needs.
And paper gold is not much good for that because DELIVERY from the COMEX or London is highly suspect now.
And even if it weren't suspect, the need for physical gold to make payment requires that much more physical to come out of the vaults which means that in a fractionally backed paper system , there is that much more paper chasing a lot less physical metal.
Some day, a short squeeze might bury some of these banks ability to deliver physical (it would already be impossible now if all paper stood for delivery) and my guess is they will employ changes that were made to the rules that allow all settlement to be in fiat and that would apply equally to the futures and ETF's.
IOW, a pure casino that is backed by nothing, zilch, nada
The problem is there will be a price disconnect between paper and psyhical but it will take time. As long as companies are willing to sell for a loss, this will continue. Rubber was something they shorted and made it unprofitable for growing but it took a decade for the prices to go back up and that is used by a lot more people than gold. Farmers stopped collecting rubber since it was selling for less than their cost. I mean less than the price to just collect the sap from the trees let alone grow it. The trees were more valuable as wood to make furniture. One of the prime function of futures is to control prices, by the empire so the rest will work and sell for slave prices, look this up! There are still major gold producers that can mine profitabelly. So there will be shortages and the fed will sell enough gold and they will keep controlling the gold price as long as no major buyer like the russians or chinese step up but I bet all of them are in on it since china needs things the US controls like oil to remain cheap. So no one will step on anyone else's toes here. Retail will have trouble finding things so premiums will be high but retail dont control prices. I think unless the fed loses control or something major happens prices wont recover like we expect. This is from watching this manipulation for a decade and dont hold any hope that they will lose since have the regulators and govt on their side.
One of the prime functions of futures IS to control prices, but not to make the rest "work and sell for slave prices". Its to GUARANTEE a price for buyers/sellers so they can accurately forecast/cover costs. You wouldn't spend 100 dollars to make a 150 dollar product, only to find that by the time you harvest(/pull out of the ground/depends on whatever you do) the product is only 50 dollars (netting you negative 50). Crude example, but to the point. By using futures, you potentially pay a higher price, but also potentially pay a lower price (as a buyer), but at least you know what you're paying. Albeit, I'm sure there are people who manipulate the futures market, but I would argue it is largely efficient.
Just because the people buy gold because they dont trust the banking system in their countries dont mean they affect prices. They only buy when the product is cheap! Its thehedge funds that drive up prices. And even the central banks only buy when the prices are cheap. So what will happen is the product runs out and unless there is sudden demand that arives up the prices it will not rise. I seen this happen in other commodities and the prices will stay depressed until they decide to move it up. Even palladium which was in short supply did not move until the market could not keep it down since there was demand for it from disele engines. With rising gas prices a lot more demand for diesel now. And car makers had to buy it. But as long as there are willing sellers at any price the prices will remain low especially when there are people in powerful places willing to keep it low. Now if hedge funds start buying thats a whole different story since they do push prices. Thats not the case with most other buyers. Yea they wil buy some even if prices are high and buy a lot when prices are low, they dont buy to push prices up. If they cant get it then they wont buy. This is ofcourse not the case with people trying to hide. Like drug money.... But those kinds are finding it harder to buy in the open.