When will Gold Spike

Sunday, November 16, 2008 | posted by RedApple
| with 0 comments »

I absolutely agree with Seeking Alpha latest article (Nov 14 2008 - Seeking Alpha - Jeffrey Christian: Gold and Silver Could Spike).

The core reason for the Gold price divergence between COMEX and physical gold is due to deleveraging. Since COMEX plus other OTC GOLD linked products are probably carrying leverage of anywhere from 40:1 to over 100:1, with the deleveraging process, all these inventory will get dumped back into the paper market. Hence the paper Gold market has been trading so much lower than the physical.

The recent physical buying flow from 1. safe haven investors 2. Indian or Middle Eastern Investors are taking real GOLD off the market (see my recent post: Nov 5 2008 - Gold Boom Doom - Gold Buying in Middle East). So we continue to believe that this price imbalance will be corrected.

Let's all watch out for Nov 28 when you can start taking delivery of COMEX Dec GOLD contract.