ROSS NORMAN – Gold Leaps To Fresh All Time High

At the 1968 Olympics Dick Fosbury over-turned the conventional way of high jumping with a new back flip securing both a gold medal plus a record all time high. Commentators at the time thought this was just a novelty trick … but at the next Olympics two thirds of jumpers imitated his style … they had finally caught on. What had made Fosbury's jump possible was a thicker landing mat … plus a recognition that things could be different. You can probably see where I am going with this and yes, this article is about “game-changers” … because that is what gold is seeing. 

A week ago I had a call from a journalist asking about likely US CPI figures and its impact on the gold prices … I have given market commentaries to newswires/papers for about 30 years now, but unusually this call did not go well. 

“Look”, I said, “things are different just now, gold is oblivious to western market metrics and has been since about 1st March … it is being lead by speculative interest out of China”. “No” insisted the journalist, his tone rising, “the story needs to be about US inflation and how those expectations are affecting gold demand.” “Gold really does not give a shit about the CPI figures” I ventured, suddenly aware that I was starting to lose my patience – maybe I have been doing this too long (???). It was as if routine and momentum had combined to create a type of group think, making us blind to what may be a paradigm shift. 

No article was subsequently published bearing my name that day … 

I can remember two other shifts where the media were slow to catch on … South African gold mine production and gold imports into China via Hong Kong. South Africa had collapsed from the number one spot and now struggles to achieve Top 10 status … while Chinese metal flows were now going directly into Beijing and Shanghai and HK was just 'interesting', but certainly no longer essential info.  

This morning gold rallied to a fresh all time high of $2450, breaching the former top at $2431 in early London hours (02:00) and while New York was still technically on its weekend, at the Shanghai opening. Yes it has been China, China and more China for about 3 months now. It appears there have been layers of buying – the PBoC was first, and then retail demand got serious with millennial;s joining the more traditional Dama (or Chinese grandmothers), then institutions joined the fray – but the really big change came with specs on SHFE … and boy do they like to punt. 

Meanwhile western gold refineries are awash with gold flooding back from investors who see the market as being well above fair value and are taking profit. The coins are melted, upgraded to 99.99% purity kilobars and on the next flight to Shanghai. Western gold market infrastructure is so decayed that arguably it is vulnerable to collapse as dealers flows have slowed to a trickle.  

This is also a problem for major mints who produce gold coins but have found that their business has effectively dissolved. The market has massive amounts of stock they sold a few years ago coming back to market – and those that have not been melted down are floating around the market, killing off fresh demand and indeed premiums. Their biggest competitor is effectively themselves – through returning stock ... it does beg the question why they don't buy old coins and take them off market (melt them down) to try and maintain decent premiums for their new stock.  

Fosbury, who died last year, became synonymous with transformative thinking. Even he would see the irony in earning “gold” at the Olympics and having his name linked to the precious metals unconventional price behaviour. 

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Ross Norman

CEO

MetalsDaily.com

ross@metalsdaily.com