"The monumental short selling on COMEX on Friday and Monday had the desired effect - it took out key technical levels and precipitated a cascade of further selling as traders who were long the June contract capitulated. The selling begat more selling and the rest is history. A classic short squeeze executed to perfection.
The trading decision to short gold was taken, we think, after successful smaller attempts by a few hedge funds in January and December who had 'cased the joint' following what appeared to be a 'normalizing economy', an argument strengthened by golds apparent failure to rally on Cyprus, Bank of Japan QE and of course North Korea. It was then a question of timing... On the gold futures exchange the traders
have a gearing of about 20:1 over the physical traders aided in great part by a reduction in the margin requirements by CME last November (they have since reversed that position).
Since then, the Q1 economic growth story has faded fast, but the trap had already been set. The selling on COMEX was large and fast - a really spectacular display of shock and awe. There is no other way.
With gold falling to a low of $1335, physical demand started slowly but has picked up momentum. The Indian market was the first to respond as prices bottomed (no surprise there - they are always adept at spotting bargains), followed soon after by Dubai, Japan, Europe and now China. Sourcing small denomination bars is now proving difficult as stocks evaporate and dealers can expect to wait between 4 and 6 weeks for fresh stocks from the gold refiners. Premiums on bars, as one might expect, are rising fast.
Rarely has the gold market seen such a clear split, with the paper traders heading south while the physical heads north. The former has the advantage of leverage (via the futures) while the latter has scale..."
at http://news.sharpspixley.com/article/ross-norman-while-paper-gold-crashes-physical-demand-sees-unprecedented-demand/159786/
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