 |
Registered gold on the Commodities Exchange (COMEX) just hit an all-time low…
Zero Hedge reports the number of registered physical gold ounces sitting in COMEX vaults dropped 11% overnight on November 30. It’s down to just 134,877 ounces. That’s an all-time low.
But the number of “paper gold” COMEX contracts just hit an all-time high. There are now 294 ounces of gold claims for every ounce of deliverable gold in COMEX vaults.
Traders buy and sell paper gold contracts as a way to speculate on the price action of gold… without having to own gold itself. The vast majority of these contracts are settled in cash.
But interest rates may topple this extreme setup…
Bloomberg reports there’s a 68% chance the Federal Reserve will raise short-term interest rates on December 15-16. The U.S. central bank has kept rates near zero since December 2008.
Rising interest rates tend to have a bearish effect on gold. That’s because most investors would rather own assets that provide yield. But the U.S. central bank is the only bank in the world considering raising rates…
Every other major central bank in the world has been devaluing their currencies at a rapid clip. They’re sending rates lower… even into negative territory. That’s a bullish setup for gold in terms of every other currency besides the dollar.
Here’s what one noted gold analyst said about the gold market’s extreme setup:
|
Why is this happening now? It is because those who are holding their gold in the COMEX warehouses do not wish to see their bullion swept away in a physical short squeeze that may begin in an overseas market, at these prices. If a run on the available “float” of bullion begins in earnest, the unwinding of the high levels of claims per ounce… could provide some serious fireworks. |
In other words, a type of “bank run” on the COMEX could begin…
The COMEX doesn’t have enough registered gold in its vaults to fill the paper contracts. If even 5% of “paper gold” traders demanded delivery of physical gold, the COMEX would default. That would send the price of physical gold skyward… to match the physical market’s much smaller supply.
Bottom line: As odd as it sounds, the Fed’s looming interest rate hike on December 15-16 could trigger a massive dislocation in the bullion markets. That would send gold surging and volatility soaring throughout financial markets worldwide.
If you already own gold—as PBRG recommends—hold it. We’ll be keeping a close eye on the Fed’s impending interest rate decision and the effect on gold… and world markets.
|
Recommended Link New law cracks down on right to use cash
U.S. government is trying to restrict your access to cash. But not for the reason you think… According to leaked evidence, it’s much, much worse. |
