Summary
- ECB Acknowledges Gold Market Distortion: The European Central Bank (ECB) has formally recognized the mounting risk of a global gold bullion short squeeze, citing decades of systemic price suppression via leveraged derivatives. This marks a pivotal shift in official sentiment.
- Gold Bullion Demand Surges Globally: Central banks, particularly in emerging markets, are aggressively increasing gold reserves. Poland recently surpassed 509 metric tons, positioning gold as over 20% of its national reserves—a benchmark now echoed by institutions like Goldman Sachs.
- Western Bullion Reserves Alarmingly Low: While emerging economies ramp up bullion exposure, Western investors remain dangerously underexposed. UBS data reveals family offices hold a mere 2% allocation to precious metals, leaving portfolios vulnerable in a currency devaluation scenario.
- Physical Gold vs Paper Gold Divergence Widens: The spot gold price has surged past $3,350/oz, while COMEX futures lag severely, reflecting decades of derivative-based price suppression. The physical market is increasingly dictating true value.
- COMEX Vulnerabilities Exposed: Gold withdrawals from COMEX warehouses now parallel monthly Chinese imports. Current eligible COMEX inventories could cover less than six months of China’s demand—underscoring systemic fragility in Western gold supply.
- East Outpaces West in Gold Accumulation: India and China are demonstrating overwhelming demand, with China offering up to 30% discounts on local gold purchases—government-subsidized incentives rarely seen in developed markets.
- Safe-Haven Flows Amplify Amid Western Instability: Geopolitical tensions, U.S. budget deficits, and stock market volatility are accelerating institutional and sovereign flows into gold, reinforcing its role as a defensive asset.
- Gold-Silver Ratio Hits Historic High: The gold/silver ratio has climbed to a rare 100:1, highlighting gold’s strength but also suggesting potential undervaluation in silver—a classic signal for precious metal strategists.
- US Dollar Faces Structural Decline: Evidence is mounting of a secular bear market for the fiat USD, with weak Treasury auctions and increased reliance on debt monetization fueling a loss of investor confidence.
- The Bullion Era Is (Re)Emerging: As Ray Dalio and other macro investors redirect focus toward real assets, precious metals—particularly physical bullion—are reclaiming their central role in portfolio preservation amidst rising fiscal and monetary instability.
ECB Warns of Gold Bullion Short Squeeze as Central Banks Accelerate Buying
Earlier this month of May 2025, the European nation of Poland flexed its growing gold reserve stack releasing news of their latest addition to their nation's Official Gold Reserves now totaling more than 509 metric tons over 20% of their reserves now in physical gold bullion holdings.
Poland has been keen to point out to the world they now have more official gold bullion reserves than the former faded sea fairing colonial empires of Portugal and the United Kingdom.
In terms of developed vs emerging markets Goldman Sachs believes the 20% gold reserve threshold is a reasonable medium term target for large emerging market central banks to be targeting this decade.
Judging by how rabid the central bank gold reserve buying bid has been since the freezing of Russian central bank bonds by the EU and USA it is suggested that this ongoing trend of 5-fold bullion buying by central banks is not going to slow down anytime soon even with the rapidly rising price for gold ongoing in the 21st Century.
The biggest bullion related news from this week came from the European Union Financial Stability Review. By now in 2025, the collective EU has closer to 12,000 tons of official gold reserve claims as this particular chart's data is from before Russian assets were frozen early on in 2022.
This week the ECB or European Central Bank confirmed building risks of a global gold bullion market squeeze publishing the following article on their website.
So we can add this week's ECB article to the growing litany of public admittances that the global gold price has been systemically suppressed for now decades running. Long time London gold trader Peter Hambro in July 2022 admitted as much.
That is likely how we have come to a moment in time where the ongoing aggregating gold price outside of London AM to PM fix trading has now added up from its beginning 1970 price of just over $35 oz to now nearly $50,000 oz here in late spring 2025.
The price of gold still near $3,000 oz is a steal for buying central banks who now like the ECB are publicly admitting that the unwinding of derivative leverage used to suppress gold values for decades running threatens the system and those who will inevitably get caught short gold bullion in a market squeeze era.
The spot silver and gold price both closed higher on the week, with the spot silver price closing just under $33.50 oz bid.
The fiat US dollar gold price surged more than 5% higher this week, with the spot gold price ending near $3358/oz bid.
The spot gold silver ratio climbed to three digit close of 100 on the week.
Gold's relative strength over silver was driven by political and fiscal instability headlines mainly coming from the USA and current administration.
Safe-haven flows into gold also accelerated after last week's credit rating downgrade concerns and from this week's US stock market turbulence to the downside.
The combination of both the deficit increasing US House budget bill headlines and Trump’s newest +50% EU tariff threats, both rattled markets, weighing heavily on the fiat US dollar weakness relative to other devaluing fiat currencies worldwide.
The EU has just declared another delay to overhyped Basel III rules which were supposed to go into effect come July 2025, citing its requiring more clarity on the US administration's plans to deregulate its financial sector as reason for another year of delay.
A look at gold demand in the east and we are seeing Indian gold demand massively oversubscribing for UAE gold bullion bar imports. And gold import demand in China hitting nearly one year ago high levels last month.
The crazier news from Shanghai were reports that the city if extending to the local populace discount vouchers to buy gold locally in Shanghai with discounts ranging from -10 to -30% off retail prices if buying by the beginning of June 2025, next month.
Allow me to point out the blue line on the left there is the COMEX gold futures aggregated price since gold futures trading started there in 1975 at $175 oz. COMEX gold futures have since traded to a paltry sum of $342.92 oz COMEX intra-hours gold trading over the last 50 years.
So in other words, Western gold buyers especially in the USA have been extended even larger and longer running discounts with artificially suppressed gold prices by leveraged derivatives, although according to the ECB warnings from this week. And judging by spot prices climbing sharply the last few years, the gold price suppression game is likely in its final innings of effectiveness.
In terms of comparing China's gold market dynamics to our own in the USA, just last month's import of gold bullion into China in one month is a similar 4.1 million oz size that has recently been pulled from the COMEX gold bullion holding warehouses. I am not saying the reduction in COMEX eligible gold is a direct export to China, what I am showing you is that the entire eligible pile of gold underlying the COMEX would only suffice for less than a 1/2 year of typical physical gold bullion demand from China alone.
Meanwhile most Western investors are heading into a currency and sovereign debt default by currency devaluation era with near no bullion armor, at least not yet anyway.
Updated Swiss UBS family office data shows their clients have increased their precious metals exposure to a pathetic 2% figure, while emerging market central banks are scrambling to reach their 20% allocation targets in the medium term.
Turning back to the myth that somehow the USA is going to cut spending or somehow grow our way out of the debt and unfunded liability multi-hundred trillion dollar quagmire we find ourselves in.
US Treasury head Scott Bessent made the PR rounds this week, running coverage for a new spending bill that increases our ballooning deficit further. And the paltry savings that ongoing DOGE efforts have nominally cut in comparison to seemingly out of control deficit spending ongoing.
He even tried to use our currency isn't collapsing, others are just getting stronger as they flee their capital back home and out the US financial markets.
This chart provided by Tavi Costa suggest another secular fiat US dollar bear market is about to ensue.
Judging by this week's nearly failed 20 year US bond auction where the offer had to rise 24 basis points to match thin demand, the stock market selling off upon seeing it.
Well these are merely current signals that have gold bull and billion investor Ray Dalio banging that table that the bond market is where to stay focused at the moment. Debt monetization is likely to return from the history books into our future again.
The bullion over bonds and stonks trade will continue. I hope you are getting well allocated to the correct side of the trade.
That will be all for this week's SD Bullion Market Update.
And as always, take great care of yourselves and those you love.
References:
Former London Gold Trader admits Paper Gold price suppression 1980s onwards:
https://web.archive.org/web/20220704061130/https://reaction.life/dont-forget-the-golden-rule-whoever-has-the-gold-makes-the-rules/
The European Central Bank (ECB) warns of Losses in Potential Gold Short Squeeze ahead:
https://www.ecb.europa.eu/press/financial-stability-publications/fsr/focus/2025/html/ecb.fsrbox202505_02~7f616fcd3f.en.html
