Precious Metals Hijinks

For those who don’t look at price charts, just the number reported each morning, you may have missed an interesting event last Wednesday.  While we (in Australia) were sleeping the following happened.

That nearly $20 drop and then reversal is explained by Bill Holter “80 tons of gold was sold over a 15 minute timespan which knocked gold down $20 in the blink of an eye.  Please see the chart below courtesy of Dave Kranzler of IRD.

80 tons!  Let me put this in perspective.  80 tons is equal to two weeks' worth of global gold production ...sold in just 15 minutes!  This is nearly 2.8 million ounces. The interesting thing is COMEX only claims to have 865,000 ounces of gold available for delivery so more than 3 times the amount of ounces were sold in 15 minutes than is even claimed as available for delivery! What followed however was the real stunner, very shortly afterward gold dug in its heels and started to recover ...recover to unchange in price!  Do you see the importance here?  Though this was not another outside reversal day, it may have been even more important.  The "paper" market absorbed two weeks' worth of production in just 15 minutes without breaking!” 

And as we come to the December contract date with silver contracts 5 times that physically available and gold 20 times over, these paper ‘games’ highlight the comfort one can draw from owning the real thing, physical bars and coins.  December will probably resolve itself with rollovers like it has in the past but one day it will break, and that will be landmark event for holders of the real thing.