Blog | CB Investment Management

When will gold price setting on comex come to an end?

Pre-market slams have become the norm in the comex gold market. Here is what happened this morning:

http://www.zerohedge.com/news/2013-11-20/furious-gold-slamdown-leads-third-consecutive-20-second-gold-market-halt

What has become very clear over the year is that precious metals markets no longer reflect anything close to a natural price discovery mechanism. The norm now is for the gold price trend to be set before the comex gold market even opens with sudden massive volume that has no credibility in terms of best execution standards.

However, even beyond the reduced physical delivery and bizarre price action, there are additional signs that the credibility of this contract is in significant decline.

The link below shows the increasingly strained situation in the comex exchange. Registered gold is disappearing at a rapid rate and at the current rate of decline it will be gone some time in the next few months. As you can see in the article below the ratio of short positions to registered gold has reached a new record of 63. This means that less than 2% of short futures positions can possibly have the registered gold to deliver.

http://jessescrossroadscafe.blogspot.com/2013/11/comex-registered-gold-falls-to-587235.html?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

Meanwhile, demand for physical gold in the East is exploding higher:

http://www.usfunds.com/investor-library/frank-talk/dressed-to-the-nines-with-gold/#.UoyXwMTkuSq

There is a massive transfer of physical gold ownership going from west to east. For the time being the comex futures contract is still setting the price, but how much lower can registered gold holdings fall? Sooner or later the world price will be set in Asia. What will happen then to all the short positions that do not have any physical gold?

Here are the latest figures for gold delivery in Shanghai. It makes current comex delivery look relatively insignificant:

http://www.goldminerpulse.com/v/shanghaiGoldExchangePhysicalDelivery.php

What is an investor to do? Take some advice form Jim Rogers:

http://www.zerohedge.com/news/2013-11-19/jim-rogers-own-gold-because-one-day-markets-will-stop-playing-game

“Eventually the markets will just say, ‘We’re not going to play this game anymore’,”

Best Practice is a matter of your Best Interest.


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Chris Belchamber is an IRMAA Certified Planner

Medicare’s IRMAA impacts every retirement plan. Learning how to mitigate it is available via IRMAA Certified Planners designation.

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