Demand For Physical Gold is Quite Extraordinary

As has been reflected by gold’s ascent against the dollar, and recently even on days when the dollar is moving higher, it has been reported from sources all over the globe that money is aggessively flowing into physical gold, with many investors demanding delivery of the metal. Here is commentary on the subject from Standard Bank in London, which provides daily color on precious metals trading:

Late last week, the Standard Bank physical gold flow index recorded its highest level since we started tracking flows. Although the index declines slightly when gold approaches $1,150, overall, the index continues to confirm healthy physical demand.

I will note that Standard is usually pretty demure in its commentary on market activity in precious metals. For them to get excited to the extent reflected in the above statement is unusual.

I also thought I would post some comments made to me by a local bullion trader who typically operates by finding private sellers and paying more than the big coin shops here, but usually at or below the spot price of gold and silver, and sells to private buyers who pay cash and do not want a paper trail. He has an excellent “nose” for supply and demand and, as per my experience trading bonds on Wall Street, there’s nothing like getting market information from a bona fide market maker:

I feel that we are in the beginning of an upward move. I can only guess at what price the market will move to. What I am finding out is that new buyers are coming into the market and they do not mind paying the premium. My past buyers are not buying as much and are looking for the market to pass $1,200, before they start to invest. The physical supply of one oz. bars and coins are readily available if you are willing to pay the premium. The supply gets smaller the closer you want it to spot. The only large quantity of gold coins in the uncirculated arena are scratched or nicked items.

So there you have it, direct from the “trenches.” This is just the start of a trend that will accelerate as the investing world begins to understand the problems associated with fiat paper money and with massive sovereign/U.S. Government debts, budget deficits and overall fiscal recklessness.