The physical gold trade continues to reverberate
A record number of contracts went to delivery yesterday
Since late March, some 550 tons of gold -- worth $30 billion at today's price and roughly equal to global mine output in the period -- have been added to Comex warehouse stockpiles.
If it was just arbitrage, then it doesn't say much about overall demand but it's certainly something to ponder as gold rebounds from the dip at the start of the week. My belief is that when you get dislocations like this it tends to scare away market participants and that's negative, at least until the dust settles.
When planes were grounded and Swiss refineries closed in late March, traders were worried they wouldn't be able to get gold to New York in time to deliver against futures contracts. That caused futures, which typically trade in lockstep with the London spot price, to soar to a premium of as much as$70an ounce.
That created an opportunity for enterprising traders: buy gold somewhere in the world at the spot price, sell futures, and benefit from the difference by shipping the metal to New York.