For decades, precious metal bulls have complained that paper markets have manipulated the prices of gold and silver.
You see, the same bar of gold/silver can be bought and sold a thousand times over without ever leaving the same vault. This allows the fiat cartel to use paper money to suppress prices of the physical metals.
The only way to combat this “manipulation” is if every buyer had custody of their own gold, which, not many buyers do.
Interestingly, these dynamics seem to have recently changed…and fast!
A gold run has commenced…
Last week, you may have seen some headlines in the financial media relating to gold. Something along of the lines of…
“Traders are moving so much gold from the Bank of England to the U.S” …
Or “Why is Bullion Flying from the Bank of England to the US?” …
Well, it’s true.
Gold has been flooding out of London and into New York at an unprecedented rate. According to some reports, 400 metric tonnes since November 2024.
As a result, waiting times to retrieve gold has spiked from between a few days to four weeks, according to Reuters.
So, what’s the reason?
For one, the rush to repatriate gold appears to be happening as an indirect consequence of Donald Trump’s tariff policy. Traders are worried that Trump tariff policy may expand to the safe-haven metal. This risk of hefty potential import duties is forcing traders to safeguard the gold now.
Other major drivers behind gold outflows are record central bank buying, and a shift in the futures market.
The US is home to the world’s largest gold futures market, where most contracts are typically rolled over or cash-settled without requiring physical delivery.
But in some instances, traders must deliver physical gold to fulfil some of their futures contracts. This results in enormous pressure on London’s gold inventories.
This is where the trouble (and money-making opportunity) lies…
There are rumours the London gold markets don’t have enough gold bullion to satisfy claims.
Bullion Star’s Precious Metals analyst Ronan Manly recently wrote: The gold clearing banks of London Precious Metals Clearing Ltd (LPMCL) have exhausted the metal they had available for delivery in their own vaults… so they are trying to borrow as much gold as possible via the gold lending market at the Bank of England. But this looks exhausted too. These clearing banks (JP Morgan, HSBC, UBS and ICBC Standard) need to keep gold in their vaults for their own loco London liquidity. But it looks like they don’t have any more gold to do this.
Counterparty risk has therefore risen between all the LBMA bullion banks which trade unallocated “gold credit” between each other. The clearers, the market makers and all the other LBMA bullion banks and brokers and traders. About 50+ entities, basically they trade paper “claims” on gold (or the electronic equivalent).
These claims are now trading at a discount to reflect the fact that they can’t be converted at will into physical due to a lack of availability of sufficient loco London physical gold.
And this liquidity-drain in the gold (and silver) markets is driving the price of both precious metals higher.
At today’s prices, precious metal miners are making a fortune – yet many of their share prices have yet to factor this in.
So, what’s next?
I’d be lying if I told you I knew.
What I do know is the demand for precious metals is rapidly soaring – and that could easily support higher prices.
So, consider turning this “crisis” into opportunity by owning miners. I’ve got one super stock set to double its share price in 2025 in my latest Red Hot Penny Shares report – You can get a copy here.
