On August 6, 2015, Goldman Sachs (NYSE:GS) and HSBC (NYSE:HSBC) took delivery of a sum total of 7.1 tons of physical gold. No, I have not made any typographical errors. And no, I am not talking about electronic paper claims. I am talking about shiny yellow metal stuff that you can touch and feel.
The gold bars were not purchased for bank clients. They were purchased for the banks themselves. How do I know this? They are designated by the exchange as being for delivery to the bank's “house” accounts at COMEX, notto client accounts.
Goldman Sachs, alone, took 3.2 tons worth of physical gold bars. Yet, even as the firm builds its stockpile, Goldman tells clients not to do it. According to Goldman's Jeffrey Currie, the long-term outlook for gold is bleak.
“In longer term, we definitely like playing this market on the short side. We think we are in a structural bear market, not only in gold, but across the commodity complex, as the individual commodity stories are reinforcing to one another, creating a negative feedback loop.”
In spite of the antics in the paper-gold market, we know the physical market is on fire. Demand will exceed known supplies by at least 1,350 tons in 2015. More in 2016. But, that won't stop someone from setting up the paper market in order to buy from the physical market very cheaply. This is because the mysterious gold “supplier of last resort” will fill COMEX physical delivery demand, for the moment at least, no matter how high it rises, and no matter how low other supplies may be.
According to HSBC strategists, there has been a:
“drift towards Fed tightening and the associated USD strength, low global inflationary pressure, weak gold demand from India and China and market positioning and momentum.”
This statement was made a few days before we all learned about the 61% increase in gold imports to India in the period, April to May. As one of the biggest players in the import market in India, how could have HSBC strategists not known about that? HSBC executives were certainly savvy enough to authorize this huge purchase of physical gold for the bank.
