March 04, 2016
Today whistleblower and London metals trader Andrew Maguire told King World News that Western central planers have finally lost control of the gold market.
But first, it is important to read this from Andrew Maguire’s December 18, 2015 KWN interview:
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Big Money Is Flowing Into Physical Gold…
Andrew Maguire continues: “However, this time there is a difference. Institutional money is flowing into allocated physical gold globally, and this is changing the dynamics. The usual synthetic market wash-and-rinse cycle is breaking down as its drivers are anchored upon a fractional reserve unallocated bullion market structure, which is the equivalent of a Ponzi scheme.
What this is telling us is that the price drivers are now coming from the physical markets. Whereas up until now it has been Comex speculators that have heavily influenced global prices, this is now changing. The Comex tail wagging the much larger spot or physical market dog’s days are over.
And The Physical Market Is Now Dominating
Trendlines anchored on historical pivots have entered a phase where fundamentals will start to dictate future price movements as well as the technicals. This is because the structural price drivers have seen the paper/synthetic leveraged markets migrate to Asia, where gold is simply viewed as money and all gold accounts are physically delivered.
Financial journalists tend to look at gold with a US-centric view. However, gold is a global currency, trading as one component (pairs cross), of a $5 trillion a day foreign exchange market. OTC FX trading volumes far surpass Comex volumes. Some 500-600 tonnes of gold is cleared by the London Precious Metals Clearing (LPMCL) every day in London, whereas only 5-7 tonnes per day of gold are delivered at the AM and PM London fixes.
So what we are seeing are the synthetic gold markets giving way to a fundamentally driven global physical market, and fundamentals dictate much higher prices to come.
Physical Gold Market Leaving London
To explain this a bit better, let’s first take a quick look at the market structure. Comex is a trading tool, but clearly a non-delivery market, so not an investment tool. To add provenance to this fact one only has to compare delivery volumes on the Shanghai Gold Exchange (SGE) vs the Comex. SGE weekly physical withdrawals averaged 49 tonnes per week throughout 2015, but the entire annual Comex deliveries barely exceed one week of the SGE’s offtake.
In addition, more than 95% of gold traded on the LBMA is ‘unallocated gold,’ which is paper gold settled by way of a debits or credits in the respective LBMA member banks metal accounts. The holders of these accounts are merely unsecured creditors of the bank with general claims on an unspecified volume of gold in the bank’s vault.
Therein lies the problem for the Western central banks. Before the physical markets started to migrate to Asia, it was possible to keep rolling over forwards and derivative positions because of the fact that unallocated account holders were not choosing to allocate. This created a vast amount of synthetic gold supply, which had the effect of diluting the real gold price.
Central Planners Have Finally Lost Control Of The Gold Market
The current unwind of unallocated high counterparty risk accounts seeking the safe haven of allocated physical gold off loco London has created a market disconnect never seen before. One thing that becomes clear is that current gold price is significantly below fair value. We will see pullbacks and consolidations, particularly in light of gold being so overbought, but the trading action reveals that Western central planners have finally lost control of the gold market.”