The gold market continues to act as if the forces of supply and demand don’t exist. The number of claims per ounce of gold stored at COMEX’s vaults have reached a high of 110 per physical ounce. Meanwhile, record levels of physical gold have been flowing into Hong Kong and Shanghai. One of the biggest sellers of the yellow metal to Chinese buyers has been the well publicized GLD ETF, which has been selling off its physical holdings. Numerous other funds have been following suit to the extent that some are now refusing physical delivery to clients who have demanded it. Further, there is also a gap in China’s gold consumption data, 500-tonnes to be exact, in other words $23 billion worth of gold has disappeared within China. This has sparked speculation that The People’s Bank of China has been an aggressive buyer, secretly stockpiling — the bank does not publish data on reserves.
The price of gold has been distorted, while paper traders in the West sell the metal, physical buyers continue to snatch it up, distorting the price. According to Ed Moy, chief strategist at Morgan Gold, this could be the beginning of a gold shortage.