Gold vs Gold (Paper vs Physical) pt2 [UPDATE]

One month after my first post, I would like to provide an update and share quite interesting information I found out today.

First of all, the official Kitco webstore shows that stocks are actually decreasing and they basically have nothing left to sell:
  • Gold Eagle 1 oz
  • Gold Maple 1 oz
  • Special Gold Maple 5 X 9 pure 1 oz
  • Gold Buffalo 1 oz
  • Gold Krugerrand 1 oz
  • Gold Bar 10 oz
  • Gold Bar 1 oz
  • Kitco Gold Bar 1 oz
  • Kitco ChipGold 10 g
  • Kitco ChipGold 20 g
  • Gold Philharmonic 1 oz
  • Silver Philharmonic 1 oz
  • Silver Eagle 1 oz
  • Silver Maple 1 oz
  • Silver Bar 100 oz
  • Platinum Eagle 1 oz
  • Palladium Maple 1 oz
  • Silver Maple Olympic Coin 1 oz.
They really do not have anything left. I actually called them, and they told me over the phone that they have 1,000 oz silver bars (that is about 31 kg, who can move this around except custodians?) and they have 1 kg gold bars - but after checking, they only had 2 and they weren't even sure that these two weren't already sold!

So I called some other bullion stores which I have been touch previously and here's what I have heard:
  1. From the first one: they said that the Mint was not taking any more order for at least until January 2009. They have such a huge back order that they simply won't take any more orders. This looks like Kitco which is struggling with its shipments and is no longer able to take any order due to lack of any stock! They weren't able to provide any estimate of when they would receive new stocks and be able to take new orders.
  2. The second one: they told me that they are receiving an unprecedented amount of calls per day for the past few days (more than 1,000 calls, where they usually receive far less) and orders by email. They have ran out of gold coins and cannot take any more orders. They said they were able to sell their coins with an massive premium. So they only have gold bars in stock now, and with the number of orders they have received, there is a 24-48-hour-delay just to get the order processed. They will have to come and work week-ends to get the orders processed and that's the first time it ever happened to them!
  3. Finally, I called a sales person from a company which business is to install vaults for both corporate clients and consumers. He told me that within the past few weeks, the number of orders has doubled (+100%!) and that their competitors have been having the same magnitude of growth. He concluded that the banking crisis was very beneficial for their business!
At the same time, today, gold paper on the futures market was falling 4% to less $850 per oz. The number of contracts exchanged was above 200,000 which is many times the yearly production of gold from all the gold mines on Planet Earth.

Another point of interest: the Icelandic Krona is collapsing, the Australian dollar lost 20% (!!!!) against the USD this week, same for the Kiwi Dollar from New-Zealand (20%!!! in 5 days!!). These kind of moves not only are big enough to wipe out many hedge funds and banks which models do not include these kind of 6-sigma events, but moreover, they are highly inflationary in the affected countries and are just a warning of what could (will?) happen in the US, UK or Europe.

Draw your own conclusion.

Update: Bill Flickenstein is writing valuable information and also confirming my opinion on his Chronicle:
I've also heard rumblings about some large holders of gold futures deciding to take delivery, since they're having trouble buying physical gold in sufficient size.
If that's the case, it could cause a mad scramble at the ComEx, the commodities exchange, because there's not enough gold to meet the open interest. It looks like physical gold, as opposed to paper gold, is rapidly becoming the flavor of the day -- meaning that a huge price move may lie just in front of us. And, if that thesis is correct, when more folks start understanding it, there might not be enough gold around to satisfy demand at anywhere near current prices


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pej said...

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Gold said...
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