Weak to Strong Hands #2

It was the stand out dynamic of the 2013 ‘market crash’ where gold from divestments of speculative paper trades in ETFs and COMEX futures left the London vaults for Swiss refineries, turned into 1kg bars and shipped to China by the hundreds of tonnes.  The flighty, speculative, short term trend following paper traders of the West are commonly termed the “weak hands”.  Those who deal in the physical metal understand its long term intrinsic value and role in personal and sovereign economic stability are the predominantly Eastern “strong hands”.  900 tonne left the London vaults of ETF’s in that rout last year and predominantly the Chinese quietly went about hoovering it up at “on sale” prices to the tune of an all-time record 2000t.  Well its happening again but with India now stepping up to the plate more strongly too… Official data from Switzerland shows September hit a 7 month high for gold exports with a lot of that coming from London (up 636% on August).  Consistent with yesterday’s article the data confirms most of it is going to China and India.  So as the gold price fell in September (ending in just USD1191 in early October), that divested metal (to the extent that Futures trading uses real metal… so lets assume it was mainly ETF’s) found ‘strong hand’ buyers again waiting to fill their tanks on the dip.  The thing is, those strong hands tend not to sell so this just keeps on taking more and more gold out of the ‘system’ at a time that the system is already showing signs of potential shortages.  Additionally this is another demonstration of the disconnect of the ‘paper’ set spot price amid strong physical demand, one that may change soon as the Shanghai Gold and Futures Exchanges move quickly toward a market making position.   Do you have your physical bullion yet?