Sunday, November 19, 2017

While fundamentals no longer matter in the stock markets, they forecast incredible moves coming for gold and gold prices

When it comes to the much overvalued stock markets, fundamentals and technicals no longer matter because of the Federal Reserve and their programs to prop up equities at all costs.  And this means of course that the moment the central bank decides to remove its foot off the gas of intervention, stocks will plummet faster than the record time it took for the Dow to move from 22000 to 23000.

However, and despite the fact that the gold markets are the most manipulated assets in financial system, the fundamentals for gold and for higher gold prices have rarely been better,  And these fundamentals are marked by continuing demand from the East, validated physical shortages, and the decline in the ability for the bullion banks to be able to hammer down the price the same way they did just a year ago.

The physical fundamentals are stronger than ever for gold. Russia and China continue to be huge buyers. China bans export of its 450 tons per year of physical production.
Gold refiners are working around the clock and cannot meet demand. Gold refiners are also having difficulty finding gold to refine as mining output, official bullion sales and scrap inflows all remain weak. 
Private bullion continues to migrate from bank vaults at UBS and Credit Suisse into nonbank vaults at Brinks and Loomis, thus reducing the floating supply available for bank unallocated gold sales. 
In other words, the physical supply situation has been tight as a drum. 
The problem, of course, is unlimited selling in “paper” gold markets such as the Comex gold futures and similar instruments. 
One of the flash crashes this year was precipitated by the instantaneous sale of gold futures contracts equal in underlying amount to 60 tons of physical gold. The largest bullion banks in the world could not source 60 tons of physical gold if they had months to do it. 
There’s just not that much gold available. But in the paper gold market, there’s no limit on size, so anything goes. 
There’s no sense complaining about this situation. It is what it is, and it won’t be broken up anytime soon. The main source of comfort is knowing that fundamentals always win in the long run even if there are temporary reversals. What you need to do is be patient, stay the course and buy strategically when the drawdowns emerge. – Daily Reckoning

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