Are the Shanghai physical delivery numbers signaling a new gold shortage?
One of the happy results of sponsoring a website with global reach is making new industry friends from various countries. A couple of weeks ago I published an interesting letter from a reader in Singapore. This morning we were happy to establish a new friendship with Dennis Boyko of Canada’s GoldMinePlus website. Late yesterday, we posted “The Beijing Put” which featured a chart developed by GoldMinePlus that compares Shanghai physical gold off-take with global mine production. This morning he follows up that chart with these observations:
“[O]ne question that I have about the SGE that I can’t find anyone to answer is why gold deliveries fell to virtually zero after April 22nd. My conclusion is that the sellers on the SGE have run out of bullion for immediate delivery as I can’t imagine that buyers don’t want to hold gold now that is down significantly from March/April levels.
This kind of a period with zero physical delivery did happen once before back in January 2011. It last approximately 20 days, days with less than 1000 kg delivery, mostly zero KG delivered. In May we are approaching 17 days of sub 1000 KG per day delivery (excluding holidays).
Between January 2011 and 22 April 2013 there were less than 10 days with some 1000KG delivery per day. And 6 of those days happened in March 2011. After deliveries restarted in January 2011 the price of gold did run up very nicely to an all time high later that year. I am wondering if history will repeat itself and deliver another all time high later this year?”
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Interesting question.
If the Shanghai numbers indeed signal a depletion of global gold bullion availability, and we have heard that the refineries are still having difficulty catching up with the backlog, then it could pressure the price. We should keep an eye on Asian premiums. I suspect that if we get another drop from here, it will ignite another round of global demand. It will be interesting to see what happens when Asia opens overnight. As it is, the call volume here at USAGOLD is starting to pick up already.
Thanks, Dennis.
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