Thursday, December 29, 2011

Jim Willie: The disconnect between paper and physical gold is underway

As many gold bugs sweat a little these days with the pullback in gold prices, and talking head analysts on CNBC and Bloomberg pounce on the drop in prices as if their several years of being wrong on gold is somehow now validated, professional metals analyst Jim Willie has a few things to say about the market.

Divergence between paper gold and physical gold price is happening, the process begun. Actual physical shortages have kept the price up. The naked shorting of futures has kept the paper price down. The fraud cases and lawsuits, with no hint of prosecution, provide the levered force to create much wider divergence, as traders and entire firms depart the tainted crime scene that is the COMEX. Trust has vanished along with private accounts. At the center of the backdrop for the divergence, apart from the criminal events, is the economic deterioration and asset market downdraft. It leads to margin calls, loan payment obligations, fading investor confidence, negative sentiment, and a desire to avoid loss. Hence the huge liquidity concerns, selling of good assets that command a strong price, and central bank encouragement of gold sales even with lease. – IB Times

As we head into 2012, all indicators point to a deflationary period, and an inevitable massive bailout of both Euorpean and US banks through central bank monetization.  For holders of physical gold, they know that nothing goes in a straight line up, and pullbacks are healthy.  When they finally consolidate, and the paper markets become a desert wasteland of HFT trading, the real prices will go back to the physical markets, and in them, supply and demand will be king.

1 comments:

Can anyone suggest me what is paper gold and how to buy paper gold from market? Is the e-gold and paper gold are the same? Advice plz....

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