By now most precious metals investors should have realized that the old standard 'spot price' that once dominated gold and silver is on its way out, and acts as little more than a paper value for derivative contracts. And this can be seen by the price divergence in spreads between the London Fix, and its competition over in China at the Shanghai market.
But until the London/Comex price is gone for good it still controls the buying and selling costs here in the West. And thanks to the tremendous shorting that has occurred in the paper markets since the Presidential election that took place on Nov. 8, the over $200 drop in price has done little to depress the appetite of gold purchases as the month of November saw the highest amount of buying in the last five years.
Gold demand in November soared to its highest level since the end of 2011 as investors took advantage of a steep drop in prices for the yellow metal following Donald Trump’s win in the U.S. election, according to data from BullionVault released Tuesday.
The Gold Investor Index, run by Internet-based metals exchange operator BullionVault, jumped to 59.3 in November—its highest level since December 2011. the index stood at 56.8 in October. - Marketwatch
“For the first time in history, gold supply into the future is under enormous pressure.” The warning from Mark Bristow, chief executive of London-listed Randgold, encapsulates the gold mining sector’s woes.
Bullion’s only modest price recovery this year compared with other commodities has led the industry to cut spending on exploration dramatically to less than $4bn from almost $10bn in 2012.
Petropavlovsk, a gold miner with assets in Russia, is a case in point. It has cut its exploration budget by two-thirds.
“There is a chronic shortage of exploration money and as usual the gold price is not acting in the way everyone thought it would do,” says Peter Hambro, chairman of the company.
This backdrop has left many in the industry forecasting a supply shortage by the end of the decade. - Financial Times