Gold's Two Stories: Paper Markets Collapse... While The Retail Public Buys At A Record Pace

We’ve seen some significant swings in precious metals over the last several years and if we are to believe the paper spot prices and recent value of mining shares, one would think that gold and silver are on their last leg. Last weekend precious metals took a massive hit to the downside, sending shock waves throughout the industry. But was the move really representative of what’s happening in precious metals markets around the world? Or, is there an effort by large financial institutions to keep prices suppressed? In an open letter to the Commodity Futures Trading Commission First Mining Finance CEO Keith Neumeyer argues that real producers and consumers don’t appear to be represented by the purported billion dollar moves on paper trading exchanges.

With China recently revealing that they have added some 600 tons of gold to their stockpiles and the U.S. mint having suspended sales of Silver Eagles due to extremely high demand in early July, how is it possible that prices are crashing?

As noted in Mike Gleason’s Weekly Market Wrap at Money Metals Exchange, while it appears that gold is currently one of the world’s most hated assets, the retail public continues to buy at a record pace:

The paper market is telling one story. But the actual physical bullion market is telling quite another.

The U.S. Mint has sold over 100,000 ounces of American Eagle gold coins so far in July. That’s the highest monthly demand volume registered since April 2013. And that’s just as of this week. There’s still another week left to go before the final sales tally for Gold Eagles comes in for the month of July. It could be one for the record books with 109,000 1-ounce Gold Eagles sold — with bargain hunters purchasing 6% of the U.S. Mint’s production from Money Metals Exchange.

As for Silver Eagles, the U.S. Mint has given up on trying to keep up with demand. After brisk sales during the first week of July, Mint officials suspended deliveries of Silver Eagles to dealers. Sales of the popular coins are set to resume next week. But we expect the Mint will be unable to get its act together and keep up with demand.

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