The Largest Ever Physical Transfer Of Gold

The 100 days since global markets peaked on Feb. 19th have been among the most dramatic and destabilizing in market history. For this was the fastest-ever 35% collapse from a record-high market due to the unprecedented enforced economic halt and nascent credit panic. 

As the global exchange markets were in a state of near-total chaos as a result of a sudden collapse in global supply chains due to the coronavirus pandemic lockdowns, one market that detected unprecedented turmoil ahead was the physical gold market. 

By March 13th, “the price of physical gold has decoupled from paper gold” as a result of paper gold liquidations as leveraged funds scramble to cover margin calls using safe assets. Paper gold is traded on the unallocated OTC gold spot market in London and on the COMEX futures market in New York. Both of these markets are derivative markets and neither is connected to the actual physical gold market. 

The sudden decoupling of physical gold from paper gold correlates with the breakdown in the physical gold supply chain was also a result of the world’s top gold refiners, those located in the southern Swiss town of Ticino, namely Valcambi, Pamp and Argor-Heraeus, that suddenly stopped producing gold do to the draconian coronavirus lockdowns. The result was a record divergence in the price of spot gold vs gold futures contracts with gold futures decoupling and trading far above spot prices. 

The resulting record divergence in gold futures vs spot unleashed a flood of physical gold into the US as a record scramble by traders rushing to take advantage of this arbitrage opportunity by shipping bullion to New York sparked what Bloomberg said: “maybe one of the largest ever physical transfers of the metal.“

“The flows into New York are unprecedented,” Allan Finn, the global commodities director at logistics and security provider Malca-Amit told Bloomberg as his company’s teams in New York have been working 24 hours a day to cope with unprecedented demand for physical gold while navigating lockdowns, flight disruptions, and social distancing. 

Since March 23rd, no less than 550 tons of gold – worth $30 billion at today’s price and roughly equal to global mine output in the period – have been added to Comex warehouse stockpiles; hundreds of tons of that was imported. On its own that amount of gold would represent the 11th largest sovereign holding, larger than the ECB’s official 504.8 tons of gold. The bulk of this gold came from Switzerland, as Swiss gold exports to the US surged, reaching 111.7 tons in April, the highest on record. 

In a world in which central banks are flooding markets will trillions in freshly printed fiat currency and faith in the monetary system is quietly shrinking one day at a time, the one asset the “smart money” wants – as it continues to dump stocks – is, gold.

In fact, a simple correlation between the flood in the global money supply (M1) and the price of gold indicates that gold has a $1000+ upside of $2700 per ounce.  

Meanwhile, futures for silver and platinum have also traded at premiums to spot prices: “The guys in New York have done a great job….we’re seeing a lot of silver head that way right now,” said Brian Hayward, head of Loomis International U.K.

This is the good news we have been waiting in regards to silver, which recently hit record lows against gold…

Prediction: Silver Is Next