As I have said in the past billionaires out of Asia are backing up the truck and loading it with gold and silver on any pullback. During the recent pull back Eric King’s source out of London said the following on King World News Blog:
“Last week Asian buyers let the price come in to them. They were buying all day long, hitting all of the offers and they were not sending the price higher. As much as the orchestrators were hitting the bids, there were some smart buyers hitting the offers. The thinking was, I can pick up tonnage here, literally I can pick up tonnage here.”
Eric’s London source continues with the following statement:
“On the surface this does not appear to have anything to do with the physical market. The spot buyers are indexing, and this is what no one is talking about. They are indexing the metal to the real physical even if they can’t get the physical metal at that moment.
What would stop you from putting up a few billion dollars? This is what China is doing. You’re China, you were refused IMF gold, so you are going to quietly sell your treasuries, or swap your treasuries more likely for a spot financial transaction. What they are doing is buying spot, which is a currency transaction because you can’t get the metal. The physical market has now completely diverged from the paper market.
The only way to fight it, and it can’t be done in the US, but it can over here in England (the Asians can), is to buy the foreign exchange transaction which is gold versus dollar, silver versus dollar. So essentially what you are doing is shorting the dollar versus gold, or shorting the dollar versus silver. The great thing about that is even if you can’t buy the physical, you are now indexed to the price of the metal. So even if you can’t get the physical at that time, you now have your hedge, you essentially have what you want.
So if the price of gold and silver goes up, the price of your spot goes up. Even if the Comex defaults, spot will go up. Even when the market is taken down, it is constructive in terms of filling your physical orders. As they take the price down, you are happy to pay a premium to pick up the physical. The point of all of these purchases is to eventually convert them to physical gold, or physical silver, 100% of them. The Fed has to know this, they are not stupid.”
The Asian culture is much different from Americans. Asians are very smart and patient. It is not about today they think years in advance and use great discipline to reach their long term goals. When asked if the Asians are utilizing patience to convert all the spot prices to physical the source said the following:
“If these guys converted all of their spot to physical, there would be a massive default today. No one in the US understands that, the Asians are laughing at these guys. It’s a way to unload billions and billions of dollars into the market. Looking at the futures market gives you a totally false impression of what is going on, this is going to totally blow up. Remember if you are China, your primary goal is to get out of trillions of dollars, that means purchasing hard assets such as gold and silver.”
The interview continued and discussed how sustainable is this strategy. Where the following was said:
“It’s eventually going to blow because at some point these buyers will say, ‘I’m indexed, but I actually want to get all of this physical gold and silver now.’ When that happens, the game is over.”
So as we have discussed in the past Asians are using patience and dumping dollars for gold and silver spot transactions. There will be a point where those spot transactions will be converted to physical.
Keep in mind when discussing the COMEX Silver Exchange they have the following:
107 Million ounces on hand
720 Million ounces under contractual obligation where they provided certificates stating the silver is on hand and can be delivered upon request.