Tom welcomes a new guest Eric Yueng to explore the current state of the gold market, focusing on the LBMA’s physical delivery delays, the surge in physical gold demand at the COMEX, and the implications for investors.
Yueng explains that the London Bullion Market Association (LBMA) has seen significant delays in physical gold deliveries, increasing from T+2 or T+4 to T+30 or even T+60. This has led to a surge in physical gold delivery requests at the COMEX, with volumes reaching 15 times normal levels in December and January, and continuing to rise in February. He attributes this surge to investors seeking physical metal rather than cash-settled contracts, driven by concerns over the LBMA’s ability to deliver.
Yueng discusses the role of exchange-for-physical (EFP) trading pairs, where arbitrageurs typically profit from price differences between COMEX and LBMA markets. However, the current demand for physical delivery has disrupted this mechanism, potentially leading to a “short squeeze” as those unable to secure physical gold are forced to cover their positions at higher prices.
He suggests that large institutions, possibly acting on behalf of the U.S. government, are driving much of the physical gold demand. This aligns with reports of significant imports into the U.S., which he believes could be part of efforts to repatriate gold ahead of potential audits or revaluation.
Yeung also touches on the role of exchange-traded funds (ETFs) like GLD, noting that borrowing rates have surged as institutions withdraw physical gold. This, combined with the LBMA’s reported attempts to borrow gold from foreign central banks, highlights growing concerns about the availability and allocation of physical gold.
Looking at China, Yeung notes that the country is preparing for higher gold prices through initiatives like the Gold Accumulation Program, which encourages retail investment in physical gold, and allowing insurance companies to invest in it. These moves are expected to significantly increase institutional demand for gold in China.
Yueng contrasts this with the West, where sentiment toward gold remains lukewarm despite high prices, partly due to competition from cryptocurrencies. He predicts that if gold prices continue to rise, particularly beyond $3,500 per ounce, there could be a significant shift in investor behavior and increased demand for mining stocks.
Finally, Eric addresses silver, suggesting that its price suppression may end as the U.S. seeks to support domestic mining interests amid manufacturing reshoring efforts. He highlights the growing deficit in silver supply and questions the LBMA’s reported inventories.
Time Stamp References:
0:00 – Introduction
0:40 – EFP Premiums & LBMA
3:44 – Demand & Deliveries
9:19 – Who’s Long/Short
10:38 – U.S. Taking Delivery?
17:53 – Remonetizing Assets?
19:40 – ETFs & GLD Demand
23:52 – LBMA & Availability
26:48 – Change in U.S. Policy
28:25 – China’s Gold Strategy
33:14 – Sentiment West/East
36:43 – Expectations for Gold
40:07 – Demand & The Miners
42:05 – Margins & Sentiment
45:37 – China & Silver Suppression
51:13 – Wrap Up
Guest Links:
X.com: https://x.com/KingKong9888
