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What Is Really Going on With Gold?

Summary

  • The spot gold price rallied all week closing just under $2,200 oz.
  • Gold is likely sniffing out coming rate cuts faster than the market.
  • This is all currently happening under a relative fiat dollar "strength" regime.
  • Central Banks on net, have been admittingly buying bullion in record size these last two years.
  • Last month Feb 2024, China again added to its Official Gold Reserves.
  • Western investors in the EU are also increasingly believing in gold's future potential.
  • The spot silver price also gained off the lead of gold moving well over $24 oz to finish this week.
  • Open interest on the COMEX has climbed with the spot price move of late.
  • The Chinese market in terms of delivery settlements has dwarfed the western COMEX system.
  • Given the recent Q4 2023 and Q1 2024 increase in Indian silver demand, it is no surprise that London just announced having to cough up over 32 million oz of its vaulted silver holdings last month Feb 2024.

Lots of aged, and now fresh eyed onlookers of the global gold market have been asking themselves this week.

What is Really Going on With Gold?

Don't look to our fiat financialized western media for many answers. 

Often there you'll only find gold illiteracy and even flat out lies printed in black and white, for anyway with a calculator and a financial history book longer than last week to easily disprove.

Gold has lasted 100 years, even with fixed price riggings covering more than half that timespan have averaged near 5% gains since 1924, and nearly 8% annual gains since 1970.

Each and every week on this SD Bullion youtube channel, we try to bring you real time updates of what we think is going on in the overall global bullion markets.

This week will be no different. Here we'll try and give you both a short, medium, and longer term view of where we think we are in this secular bullion bull cycle, and most importantly where we believe we're trending to.

Gold in fiat $USD terms made a run at $2,200 oz intraday today, to end this week's trading. Today is the same day, massive US job revisions pointed out the underlying US economy is worse than we've been collectively lied to believe.

Yes, gold is likely sniffing out coming rate cuts faster than the market is flat footed to believe. But we're going deeper and longer term than that vanishing pig lipstick job revision data.

Fiat US dollar worshippers better note, this is all currently happening under a relative fiat dollar "strength' regime. 

While we're adding an additional $1 trillion in US debt every 100 days or so. What happens in the coming years and perhaps decades of relative fiat dollar weakness?

I see our last week's video coverage of massive Q1 2024 Chinese gold buying got a lot of late aggregation this week. Often such 

For a while now, it's not been the time to be buying stories about holes in the ground leverage. Risk perhaps only what you can afford to lose long term in miners or ETFs.

This remains a time to return your capital directly to yourself, by simply owning prudent physical bullion positions outright. 

Central Banks on net, have been admit-tingly buying bullion in record size these last two years. Aside from occasionally nationalizing miners, instead of buying unsecured ETFs, I'd argue on net gov't central banks have been raiding major unsecured ETFs for what bullion they can still grab on the cheap.

This week many western financial pundits have been pointing out the ongoing obvious point that the spot gold price has diverged from net unsecured ETF selling in the West.

Since March 2020 on this channel, I've been pointing out that the raiding of ETFs is how COMEX & London have tried to remain relevant in the ongoing gold price discovery power. 

Last month Feb 2024, China again added to its Official Gold Reserves. The 16th month in a row now.

Russia and China have been lockstep additions to their Official Gold Reserves for decades. This chart is not a coincidence.

But not merely in the east. 

Western investors in the EU, from large gold buying nations like Poland and its citizens, as well as big private gold buying markets like Germany. All simultaneously are increasingly believing in gold's future potential as an investment class as well.

And while in the second half of this week's SD Bullion Market Update, we'll get further into the weeds on where this current move in gold, and then silver might run to. 

The building era of buy the dip, positive self reinforcing gold price, and numbers going up, seems not very far from now.

Turning again to the quaking US banking system. The failing stock price of New York Community Bank was rescued this week with a $1 billion injection headed by former US Treasury secretary Steve Mnuchin.

Bank analyst Christopher Whalen suggests he adds a 0 to that bailout as at a minimum the real estate portfolio of the bank is likely to take a 25% markdown at some point in the coming future.

Turning now to fiat Fed head Jerome Powell. At the very least he is publicly admitting more US bank failures are coming.

Looks like major commercial bank market makers in US Treasuries are now trying to change their reporting rules, while one of the largest financial firm heads admits that refinancing our exploding US debt levels is going to become a US citizen problem, now that apparently financiers can't keep grifting outsized gains off the building US bond bear market.

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The spot gold price rallied all week closing just under $2,200 oz. In a minute we'll look at where this rally might go in the short and medium through the year term.

The spot silver price also gained off the lead of gold moving well over $24 oz to finish this week.

The spot gold silver ratio stayed relatively flat regardless of gold's headlines closing the week at 89.

In terms of this current gold rally vs the past keeping its ongoing 200 day moving average into account, we're now about +10% above the 200 day. On a historic full fiat currency era basis, this rally is nothing out of the norm even with the nominal numbers in new record territory.

Even considering the last 5 years of 200 day moving averages, we can see other three recent spikes in gold over its 200 day moving average that climbed higher than we currently are at the moment.

Open interest on the COMEX has climbed with the spot price move of late, and given the influx of momentum traders it was no surprise this week to see the COMEX raise margin requirements on both gold and silver futures trading.

On a percentage basis COMEX is still nowhere near its 6% gold margin or 10% silver margin requirement levels that past up and down volatility eras have breached.

Turning to the increasingly more important gold market of China and its Shanghai Gold Exchange. Perhaps a sign that China is looking to further crowd out western markets in physical price discovery power, transaction fee costs on gold contracts throughout 2024 were announced lower this week.

Just one glance at Shanghai vs COMEX gold market 'deliveries' often merely paper warrant transfers in the west. And it is obvious that since the 2008 GFC, the Chinese market in terms of delivery settlements has dwarfed the western COMEX system.

Given the recent Q4 2023 and Q1 2024 increase in Indian silver demand, it is no surprise that London just announced having to cough up over 32 million oz of its vaulted silver holdings last month Feb 2024.

As the world's largest mining nations like Mexico and Peru continue supplying less and less silver into a market with increasing physical demands, it is no surprise that raiding unsecured ETFs like SLV has often been the stop gap measurement up to now.

If you believe SLV's numbers, since the start of 2021 about 270 million oz have been pulled by APs likely most of which headed east mostly to Indian and growing Chinese industrial demand.

Longtime COMEX traders like Peter Brandt were out and about this week, shot calling about where gold is potentially targeting to go on a technical basis.

This week another long time gold trader put his current thoughts about where both gold and later what silver might be preparing to go not all that long from now.

Of course fellow silver bulls, let's see spot +$26 then finally clearing the long resistant +$30 oz TAMP level before we get too far ahead of ourselves.

Finally turning to the ongoing stock market bubble which increasingly looks reckless in terms of AI hype tech concentration in both overall market cap and earnings shares overall.

The CME group published this simple long term S&P 500 divided by gold chart this past week, giving readers an overall sense of the historic severities between eras when US stocks are expensive or cheap relative to ongoing gold values.

This is the same data with a green percentage move from the 1974 to 1980 gold peaks juxtaposed on where 2011 spiked low, and ultimately where we're likely going all the way out perhaps into the 2030s.

If gold simply repeats its outperformance from back then over the general US stock market, we're looking at gold eventually buying more than 4 to 11X's the S&P 500's future value from where it is today.

Given all these building bull market factors and more, I'm going to keep betting on bullion in a prudent physical position of my liquid net worth. And I'm confident many of you out there will too.

That will be all for our weekly SD Bullion Market Update. 

As always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...

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