Over the weekend, I listened to a rather tedious speech by Grant Williams at the annual CFA Singapore conference. It’s rather coincidental that I spent my weekend cramming for the CFA exam on June1. I’m not sure what the premise was but Zero Hedge felt compelled to highlight the speech. Mr. Williams did offer some paradoxical views on gold, the difference between the price one must pay to own the physical versus the paper version like the GLD ETF or futures. According to him, the actual metal cost almost 10% more than the paper abstract. That’s a large number and I haven’t verified it but I wouldn’t be shocked. He called this slide “The Gold Price and The Price of Gold are mutually exclusive.”
While the “paper” price of gold seems to be in free fall the actual demand for the metal by the public apparently is skyrocketing. This is not helping my feeble grasp of the supply demand curves I am reviewing in the economics portion of my CFA exam material. Generally more demand increases price when all else held constant. Not so here in the virtual gold world at least.
Physical Demand- The metal, which reached a two-year low of $1,321.95 April 16, gained 2.2 percent this week. Purchases outpaced sales by nine to one after prices began the slump in mid-April, compared with four to one in the first quarter, said Wolfgang Wrzesniok-Rossbach, the chief executive officer of Degussa. Sales this month will be about double the first-quarter average, he said from
The U.S. Mint sold 209,500 ounces of coins last month, compared with 62,000 ounces in March, its website show. Sales totaled 52,000 ounces so far this month. Central banks also may help boost demand for bullion as they expand reserves. Nations from Brazil to Russia added 534.6 tons last year, the most since 1964, and may buy 450 to 550 tons this year, according to the World Gold Council in London.The unprecedented money printing by central banks has helped send U.S. equities to records while failing to spur inflation. Expectations for increases in consumer prices, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 8.5 percent this year, reaching a nine-month low yesterday.
via Gold Traders Most Bullish in a Month After Bernanke: Commodities – Bloomberg.