[HN Gopher] Gold Is Worth More in New York
___________________________________________________________________
Gold Is Worth More in New York
Author : ioblomov
Score : 138 points
Date : 2025-02-13 19:25 UTC (4 days ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| ioblomov wrote:
| https://archive.ph/5DEdv
| basementcat wrote:
| Is this related to the sovereign default scheduled to happen
| within a month?
| AnimalMuppet wrote:
| Um, what sovereign default scheduled to happen within a month?
| Without some detail (and some supporting evidence), that sounds
| like conspiracy theory drivel. It also, frankly, sounds
| unrelated to the article.
| basementcat wrote:
| The US Federal government reached its limit on borrowing on
| January 21 and is currently taking "extraordinary measures"
| to avoid a sovereign default. There is currently no agreement
| to raise the debt limit in Congress. While there is some
| variability in spending (e.g. natural disasters may cause the
| federal government to spend more money for FEMA aid), the
| sovereign default is expected to occur in about a month.
|
| https://www.voanews.com/a/us-treasury-to-launch-measures-
| tue...
| jddj wrote:
| > Depending on who is doing the research, it is said that
| the US has raised its debt ceiling (in some form or other)
| at least 90 times in the 20th century.[1]
|
| [1] https://en.m.wikipedia.org/wiki/History_of_the_United_S
| tates...
| bwestergard wrote:
| While I would never be so bold as to venture a
| prediction, the risk of a partial default seems elevated.
| No previous administration has voiced the opinion that
| partially defaulting by halting payments from the
| Treasury would be a legitimate exercise of executive
| authority.
|
| "Musk said in social media posts over the weekend that
| his "DOGE team" of enforcers is shutting down some
| payments, claiming that "corruption and waste is being
| rooted out in real-time."
|
| If the Musk team veered into legally legitimate
| transfers, that could spark debate over whether the
| federal government is following through on its
| obligations. Former Treasury Secretary Janet Yellen said
| repeatedly -- during debt-limit standoffs -- that even
| prioritizing some payments ahead of others amounted to
| "default by another name." Trump's first Treasury chief,
| Steven Mnuchin, said in 2017 that "the government should
| honor all of its obligations."
|
| https://finance.yahoo.com/news/musk-moves-treasury-risk-
| deba...
| panarky wrote:
| Before it happens it's conspiracy thinking to go around
| connecting random dots.
|
| After it happens, everyone will say it was obvious all
| along, if only you could have connected the dots.
|
| Dots such as famously bragging about defaulting on
| personal and business debts, big promises about radical
| reductions in debt levels with zero public plan for how
| it's supposed to happen, eagerness to renege on long
| standing treaty commitments, withdrawal from
| international organizations, threats of economic warfare
| against allies and adversaries alike, immediate seizure
| of the Treasury systems that execute payments for bond
| interest and principal, a stated desire to dramatically
| devalue the dollar, etc.
|
| Usually gold just sits in underground vaults and changes
| in ownership are recorded in a ledger.
|
| When massive quantities of physical gold are put on
| airplanes, something unusual is happening.
| MichaelZuo wrote:
| This seems like a tautology.
|
| By definition people with low credibility have to fight
| an uphill battle to get their claims accepted.
| guelo wrote:
| One theory for Elon getting into Treasury's computers is
| that when the gov defaults he wants to prioritize paying
| bondholders over benefits claimants to keep the market
| calm. Treasury has refused to do prioritization in
| previous debt limit crises.
| motohagiography wrote:
| there was a related comment by the president about the
| legitimacy of some of the bonds the treasury was paying
| interest on[1], which might add to this uncertainty.
|
| it could be related to his common tactic of creating
| strategic uncertainty, but this one was oddly specific.
| most heads of state refrain from commenting on default
| risk as the 'bond vigilantes' who lend their treasury
| money by buying their bonds are essential to their
| ability to fund government and govern.
|
| the risk of course is that there are trillions in
| derivatives stacked on top of any so-called
| "illigitimate" debt, which creates a kind of mexican
| stand-off where defaulting on those bonds causes systemic
| liquidity problems elsewhere in the system that will
| require policy intervention to recover from it, hence it
| is never a priority to touch it. That's a sci-fi
| interpretation, and any actual practitioner in finance (I
| am not one) might call that irresponsible speculation so
| ymmv.
|
| but still, maybe it's a political play. a certain set of
| asset managers is orchestrating political problems around
| the world and the only way to dislodge them is to do
| something unthinkable. Even if he doesn't, how big are
| you willing to bet he won't? That hesitation is the
| essence of this president's strategy. Very interesting
| times.
|
| [1] https://www.reuters.com/markets/rates-bonds/bond-
| traders-wav...
| csomar wrote:
| > that even prioritizing some payments ahead of others
| amounted to "default by another name."
|
| You are mis-interpreting this. Based on your
| interpretation, a government can never cut any spending
| to not be considered in default.
|
| I think what Yellen meant is that you should pay all your
| obligations for services rendered and that you actually
| want to be rendered. This is not what DOGE proposing (and
| in no way I support that insanity) and the difference is
| quite clear.
| arduanika wrote:
| Ah, the debt ceiling news cycle. Is this your first time?
| mattnewton wrote:
| I know how many times it's been cried before, but I am
| worried this time there might actually be a wolf.
| wakawaka28 wrote:
| Whatever that wolf might be, it isn't going to be that
| the government can't produce more dollars to spend. It
| always authorizes itself to spend money and it always
| produces enough of that money to spend.
| seanw444 wrote:
| Until it can't anymore. It will eventually fall apart. It
| is inevitable.
| schmidtleonard wrote:
| Governments going into too much debt is a very old
| problem that has happened hundreds of times before, even
| in the USA, so we know with high likelihood how it ends:
| inflation and soft default, not hard default. The
| timeline is the major unknown.
|
| https://www.imf.org/external/pubs/ft/wp/2015/wp1507.pdf
| marcosdumay wrote:
| Well, everything seems to be different nowadays.
|
| My guess is it's not _that_ different. But I 've been
| wrong every time I tried to predict the US on this
| leadership...
| analog31 wrote:
| The same party controls both houses of Congress, the
| executive branch, and the Supreme Court. Surely they'll
| work this out.
| dkjaudyeqooe wrote:
| Have you per chance looked at the people that make up
| this party?
| zdw wrote:
| The Republicans, for all their whinging over the debt
| when they're not in power and using it to give the
| Democrats temporary black eyes, are highly unlikely to do
| anything that directly endangers big business profits or
| the stock market going up.
|
| Defaulting on the debt has no upside for them now, so
| probably won't happen.
| dkjaudyeqooe wrote:
| Seriously, have a look at some of the people involved.
| They are waaaay out there.
|
| The GOP don't have a majority that support either the
| budget or extending the debt ceiling. Dems should let
| them stew and make various demands in exchange for their
| vote, as the GOP has done to them.
| analog31 wrote:
| I think the D's are justified in saying that there's too
| much uncertainty right now to allow funding to be passed
| through the continuing resolution process. The R's remain
| welcome to articulate their plans in the form of a
| budget, that is debated via the regular appropriations
| process.
| JumpCrisscross wrote:
| > _R 's remain welcome to articulate their plans in the
| form of a budget, that is debated via the regular
| appropriations process_
|
| Reconciliation is a Senate parliamentary procedure [1].
| Thune could just (a) fire parliamentarians until one
| agrees with Trump or (b) revise the rules with a party-
| line vote.
|
| [1] https://en.wikipedia.org/wiki/Reconciliation_(United_
| States_...
| lovich wrote:
| People forget that the Senate Parliamentarian only stops
| Democratic maneuvers
| forgetfreeman wrote:
| They kicked a bunch of subsidies out from under big AG in
| their first month in office and the AG lobby is the
| absolute bedrock of the party. Your assumptions are no
| longer safe.
| kevin_thibedeau wrote:
| They've been in control of Congress for most of the
| period since 1994. They are the ones primarily
| responsible for running up the massive spending deficits.
| JumpCrisscross wrote:
| > _Republicans, for all their whinging over the debt when
| they 're not in power and using it to give the Democrats
| temporary black eyes, are highly unlikely to do anything
| that directly endangers big business profits_
|
| Literally the last time these clowns were in power [1].
|
| [1] https://en.wikipedia.org/wiki/2018%E2%80%932019_Unite
| d_State...
| rafram wrote:
| But did we default? No, and we won't now.
| JumpCrisscross wrote:
| > _did we default? No, and we won't now_
|
| I agree that default is a remote possibility. But the
| reason isn't Congressional Republicans will avoid
| shooting themselves in the foot.
| __MatrixMan__ wrote:
| It's not the republicans, but a cadre of crypto bros, who
| are in power. They stand to gain a lot from the
| destruction of the dollar.
| 7thaccount wrote:
| Not sure why you're being down voted here. Silicon Valley
| folks like Thiel, Vance, and Musk are all huge
| libertarians who want to burn the current system down. It
| is not the traditional Republican crowd of the past. They
| share name only.
| schmidtleonard wrote:
| They don't share the name, they took the name. It's
| theirs now. Not yours. Look, I get it, I too wish it
| hadn't happened, but it did, it's reality now, and I'm
| not hearing a good reason to deny reality.
| 7thaccount wrote:
| Not sure I understand. There are three main groups of
| Republicans now. The first are the traditional neocons
| like Mitch McConnell. The second are the evangelicals and
| the third are the libertarian tech bros. They literally
| share the same party and collaborate, but have different
| end goals. For example, group two wants to return to the
| 1950s or enact christian nationalism, while group three
| wants the nation to be run like a corporation with a
| board of directors having ultimate power. The latter two
| groups don't care about the constitution at all.
| rat87 wrote:
| > are highly unlikely to do anything that directly
| endangers big business profits or the stock market going
| up.
|
| Like picking Trump? It seems like the president is the
| biggest risk of overturning the board for no logical
| reason
| pjc50 wrote:
| > The Republicans, for all their whinging over the debt
| when they're not in power and using it to give the
| Democrats temporary black eyes, are highly unlikely to do
| anything that directly endangers big business profits or
| the stock market going up.
|
| Everyone said that about the UK Conservatives until the
| Liz Truss budget. https://en.wikipedia.org/wiki/September
| _2022_United_Kingdom_...
|
| Fortunately the UK has extremely efficient systems for
| removing people who fuck up the money. She was the
| shortest serving PM and removed on her fiftieth day in
| office. The US is stuck with its current government until
| at least the midterms.
| rsynnott wrote:
| I mean, if there was a Truss-type response from the
| markets, I suspect the congressional Republicans might
| actually act to put Trump back in his box to some extent.
| seanw444 wrote:
| > Fortunately the UK has mechanisms to circumvent elected
| officials via the monetary system.
| asdf6969 wrote:
| Nothing ever happens
| toss1 wrote:
| YET.
|
| Nothing has happened YET.
|
| It has not yet happened because of the presence of at
| least a minimum of responsible players who both
| understand the consequences and care about the
| consequences (at least more than their particular
| political goals).
|
| But there is no structure that prevents it from
| happening, no part of the machine that prevents a
| mistake.
|
| There are also forces pushing it to happen.
|
| The past performance of your advice is no guarantee of
| future performance, and it is particularly bad today.
|
| I sincerely hope you turn out to be right, but if so, it
| will only be by chance.
| Guthur wrote:
| Considering that at any moment the US can conjure into
| existence as many dollars as it needs how can it possibly
| default?
| lovich wrote:
| By actively choosing to? The current administration
| appears to view funds as being permanently capable of
| getting clawed back, based on their current whims as to
| whether the payments are "fraudulent" or not.
|
| When they talked about upending the current order, the
| banking system and debt in general being sacrosanct are
| pretty foundational to said order
| Guthur wrote:
| Government debt that is denominated in a currency that
| the government can create at any time is hardly the same
| as the debt you or I have.
|
| Governments do not actually borrow from anyone if they
| can create their own money. They provide a facility for
| the rich to park some of their immense wealth but that is
| not where the money comes from, those individuals
| accumulate they do not create money.
| lovich wrote:
| You are ignoring the part where I said they would
| actively chose to not pay the debt.
|
| I understand how nation states who print their own
| currency have a different set of rules than any agent
| working with currency that they do not control the
| monetary supply of.
|
| None of that changes the fact that they can _choose_ to
| default
| JumpCrisscross wrote:
| > _US Federal government reached its limit on borrowing on
| January 21 and is currently taking "extraordinary measures"
| to avoid a sovereign default_
|
| Based on the current MO at the Treasury, it would seem that
| --possibly to the greatest degree in generations--whether
| Treasuries keep paying is almost entirely unlinked from
| what the Congress does.
| suraci wrote:
| No, the sovereign default will never happen, or, it's
| always avoidable
|
| However, unrestricted fiscal deficits and debt could lead
| to a reversal of the low positions of the US dollar and
| gold, shifting from "the US dollar pricing gold" to "gold
| pricing the US dollar."
| IAmGraydon wrote:
| Not sure why you're getting downvoted. I observed the same
| thing.
| epistasis wrote:
| For those interested in broader NYC gold discussion, this recent
| Bloomberg podcast interviews a gold dealer in the NYC Diamond
| District:
|
| https://www.bloomberg.com/news/articles/2025-02-14/gold-pric...
| hiisukun wrote:
| I clicked this by accident, but then read the full thing after
| noticing the author was Matt Levine! I'm sure there are other
| readers here who might appreciate his knowledge and writing
| style, so I mention it.
|
| [ To those who post opinion pieces: Is it against the site rules
| to have the author listed after the actual title? It would help
| me in this case and others ]
| lmm wrote:
| > To those who post opinion pieces: Is it against the site
| rules to have the author listed after the actual title? It
| would help me in this case and others
|
| It's not "against the rules" as such, but moderators (at least
| those in my timezone) will consistently reverse any change in
| the title like that.
| roenxi wrote:
| Ah, gold. Some things in the gold market worth being aware of:
|
| 1) China opened up a new gold exchange [0, 1] recently [2] and
| started a push to get more active in the market.
|
| 2) Central banks have been net buyers of gold since around 2007.
|
| 3) As part of the Ukraine war effort the US confiscated a bunch
| of money off Russia. It isn't entirely clear [2] what impact that
| will have on gold but it is conceivable that the risk of holding
| US dollars is high enough to make something interesting happen.
| There is a tipping point here somewhere and the US has been
| looking for it.
|
| The basic trend in the gold market is it is in flux and there is
| a definite question of how the BRICS are interacting with it. I'm
| interpreting the situation as a revolt against US and British
| influence over the gold market as the productive capital moves to
| Asia.
|
| [0] https://en.sge.com.cn/eng_about_Overview
|
| [1] https://www.gold.org/gold-market-structure/global-gold-
| marke...
|
| [2] Gold is a sedate commodity.
| jazzyjackson wrote:
| My favorite fact I learned just the other day is that gold held
| by the federal reserve is "on the books" at a value of $42.22
| per troy ounce and would represent a sizable sum if valued at
| market rates. But since we'll never sell it I guess it doesn't
| matter much what we value it at.
|
| https://www.federalreserve.gov/data/intlsumm/current.htm
| roenxi wrote:
| It'd be a hilarious (though unlikely) situation if it turns
| out they lied about how much gold they had, but do have the
| value of gold that was claimed in the books.
| wmf wrote:
| FTX bankruptcy accounting.
| rapsey wrote:
| Not sure it is that unlikely. They refuse to do an audit of
| the gold and have not done one in decades.
| axpy906 wrote:
| Fort Knox was not shown publicly since 1974
| m00dy wrote:
| It matters a lot, it can make balance sheet look a bit better
| and therefore can help to reduce interest on treasury bills.
| I think and I'm almost sure Trump is not okay with the
| current rates.
| guenthert wrote:
| > that gold held by the federal reserve is "on the books" at
| a value of $42.22 per troy ounce
|
| Bizarre. https://www.youtube.com/watch?v=dYiR0Vh8Gjk explores
| that a bit.
|
| And a bit of history: https://www.bullionstar.com/blogs/koos-
| jansen/can-pretend-fo...
| bpoyner wrote:
| Huh, interesting. They claim to have $11B of gold but at
| market rates it's closer to $450B.
| jt2190 wrote:
| > Zachary Griffiths, head of investment grade and macro
| strategy at CreditSights Inc., said revaluing gold stocks
| "might be a viable consideration if we [the United States]
| had a debt problem, but we really have a deficit problem.
| It's kind of crazy to say $800 to $900 billion doesn't do a
| whole lot for us over the longer run, but it's pretty much a
| fact."
|
| > Yawning fiscal deficits, currently nearly 7% of US gross
| domestic product, are one of the reasons investors flock to
| bullion to seek safety. That has helped drive gold prices to
| repeated record highs since last year. Total US federal debt
| held by the public now stands at nearly $29 trillion.
|
| > "To use 'a trick' to try to plug at least the near-term
| deficit, I think the risk associated with that is far greater
| than any near-term benefit," Griffiths said. "It seems
| desperate and shows an unwillingness to address the source of
| the problem, which is our outlays and revenues are way out of
| whack." [1]
|
| [1] "Wall Street Talk of Revaluing US Gold Is Drawing
| Attention -- and Skepticism" by Jack Ryan, Yvonne Yue Li and
| Saleha Mohsin, February 13, 2025 (Bloomberg)
| https://finance.yahoo.com/news/wall-street-talk-revaluing-
| us...
| donavanm wrote:
| re: #3 a lot of the recent reporting (usually citing 'world
| gold council') points out that most of the large central bank
| purchasers are some combination of russian commodity
| purchasers, intertwined with the russian economy, or might
| otherwise want insulation from relying on USD for international
| exchange.
|
| Because of that I'd also clarify/quibble on the 'confiscation'
| aspect. I expect the larger motivation is freezing russian
| entities out of SWIFT and dollar denominated banks. That
| interrupts foreign transactions even more than losing access to
| reserve capital.
|
| PS: I dont think anyone's moved beyond freezing access to
| existing russian assets, eg disputing rightful ownership, yet.
| fuoqi wrote:
| >I dont think anyone's moved beyond freezing access to
| existing russian assets, eg disputing rightful ownership,
| yet.
|
| They "just" appropriate "profits" from those assets, which
| effectively means inflationary erasure of purchasing power on
| the scale of several billions per year, and use assets to
| back Ukrainian loans with everyone's tacit understanding of
| future prospects of those loans.
| roenxi wrote:
| > ...are some combination of russian commodity purchasers,
| intertwined with the russian economy, or might otherwise want
| insulation from relying on USD for international exchange.
|
| I'm going to twiddle my thumbs for another year or two before
| even looking up data because the Ukraine war will be
| obscuring the trends - but that phrase could be describing
| all of Asia and most of Europe as far as I know. A lot of
| people trade with Russia. "want insulation from relying on
| USD for international exchange" could even include US
| citizens.
|
| > I expect the larger motivation...
|
| Do those aspects affect _gold_ though; it seems like it 'd
| maybe affect the crypto markets and international diplomacy.
| Scenarios where gold is used for everyday transactions still
| seem a bit far fetched to me. It seems more likely that
| people would trade in local currencies. Maybe, I suppose.
|
| Reserve confiscation is something that the central banks have
| to worry about more directly and they tend to be gold
| holders.
| fuoqi wrote:
| >It seems more likely that people would trade in local
| currencies
|
| Use of local currencies is certainly on the rise, but the
| problem is lack of bilateral financial trust caused by
| various factors, including capital controls. There is the
| recent example of Russian companies being unable to get
| rupee-denominated profits out of India, they had either to
| buy something from India or invest money there. China is
| also quite strict with its onshore RNB flows which is
| multiplied by risks of secondary US sanctions.
|
| Honestly, I am really surprised that BRICS+ countries
| haven't yet developed a gold-based settlement system
| centered around central bank reserves. My main guess: such
| system would work fine with a more or less balanced trade,
| but many countries intentionally pursue the export-oriented
| model, which would work poorly with such system.
| throwaway290 wrote:
| BRICS currency will not happen because China holds all
| the cards while keeping RMB non convertible. It's a
| charade with the only goal to piss of US a bit
| JumpCrisscross wrote:
| > _BRICS currency will not happen because China holds all
| the cards_
|
| More than that, like half of the BRICS have threatened to
| shoot at or actually shot at each other in the last
| decade [1]. A BRICS currency is like America proposing a
| currency union with North Korea.
|
| [1] https://en.wikipedia.org/wiki/BRICS _Egypt &
| Ethiopia, UAE & Iran, India & China, et cetera_
| lazide wrote:
| Physical gold is a common middle and upper middle class
| method of transferring internationally and protecting
| wealth. (Feel free to read that as tax evasion or money
| laundering - in these situations it's often a matter of
| perspective)
|
| If you're trying to do it with millions of dollars
| equivalent, it's not great but functions. $100k+? Very
| common, and remarkably easy compared to other options.
| During times of great social upheaval and war, it's often
| about the only option that works historically.
|
| It doesn't really help the ultra wealthy as much, unless
| you're talking nations during wartime type situations, due
| to physical logistics and security problems.
|
| And the poor can't afford anything anyway, so this kind of
| thing isn't exactly a problem for them.
| JumpCrisscross wrote:
| > _I 'm interpreting the situation as a revolt against US and
| British influence over the gold market as the productive
| capital moves to Asia_
|
| This doesn't make sense. If you think gold is the new dollar,
| this is a story about gold being flown into America. Mostly
| from Britain, because of historic financial ties, but also from
| elsewhere.
| roenxi wrote:
| I was sneaking a generic comment in with context that has
| little to do with the article.
|
| This article isn't particularly interesting on its own.
| Someone(s) wealthy thinks their physical gold is better off
| in the US than the UK. Cool. I wouldn't trust the UK with my
| gold either but it isn't clear what these wealthy people are
| thinking. There are some rumours that this is happening
| because of tariffs. That seems a bit weird; if the gold is
| happily stored in London then a tariff won't affect it -
| it'll still be in London. But whatever.
| JumpCrisscross wrote:
| > _if the gold is happily stored in London then a tariff
| won 't affect it - it'll still be in London_
|
| People aren't taking gold out of London because they're
| scared about it being in the UK. They're taking it out
| because they can sell it for more in America. There is a
| price gap between physical gold in America and claims on
| gold outside it; that's the article's point.
|
| America is a net importer of gold. Our top source of gold
| is Canada. If we put a 25% tariff on gold tomorrow, its
| cost would go up. Someone who brought in gold today would
| be able to sell it for more tomorrow. We know that today,
| so the price starts rising in anticipation of tariffs.
|
| Put another way, if you can get gold into America on the
| eve of the tarriffs' rollouts you can capture some of the
| value of that tariff yourself.
| roenxi wrote:
| But as far as I'm aware there are no gold tariffs, there
| has been no announcement of gold tariffs, any new general
| tariffs might have an exception for gold and the tariffs
| we've seen to date aren't even that big - gold already
| has years where the price goes up 25%. There also isn't a
| reason for Trump to put a tariff on gold; that won't help
| the US - there'll be a couple of gold bugs who can't
| afford as much gold and not much else changing.
|
| It could be preparation for a tariff. But it might not
| be.
| JumpCrisscross wrote:
| > _there are no gold tariffs, there has been no
| announcement of gold tariffs, any new general tariffs
| might have an exception for gold_
|
| They might or they might not. I'm not going to defend the
| market's rationale. I won't even confidently pin tariffs
| as the reason for the price difference.
|
| What _is_ factually certain is that there is a price
| difference in the global metals market that is sucking
| physical gold into America. London has a big, liquid gold
| market that 's tightly tied to New York; herego, we see
| the ripples there clearest.
|
| This has nothing to do with BRICS or people de-risking
| from dollars. And it makes no sense for it to be a revolt
| against American influence over the gold market; the gold
| is being flown to America and paid for with dollars.
|
| > _isn 't a reason for Trump to put a tariff on gold_
|
| Canada. Would be weird to exempt gold of all things.
| robertlagrant wrote:
| I'm imagining a literal liquid gold market.
| roenxi wrote:
| > This has nothing to do with BRICS
|
| The things happening in the gold market might be related
| to the largest players in the gold market. It seems too
| early to rule that out. We don't know exactly what is
| happening here.
|
| > Canada
|
| I very much doubt that tariffs on Canada are a factor in
| the UK->US movements; it'd need to be a tariff on gold
| specifically. If the tariff is on Canadian gold, why
| would they need to slip _English_ vaulted gold
| (presumably of all sorts of origins) in before the tariff
| barrier comes down? It 'd be more sensible to wait until
| the tariffs are a known quantity and fly the gold in on
| demand.
|
| The market price does that sort of logic on autopilot. If
| the price differential is enough to have European gold
| re-vaulted the market has to foresee something bigger
| than a Canadian tariff. Otherwise the price differential
| would be just enough to justify moving Canadian gold in
| early, but not enough to justify flying gold over the
| Atlantic.
| im3w1l wrote:
| > This has nothing to do with BRICS or people de-risking
| from dollars.
|
| I think it indicates _Americans_ are derisking. Buying
| gold and taking delivery could be a vote of no-confidence
| in both dollars and paper-gold.
| pjc50 wrote:
| There wasn't a reason for the Canada tariff proposal in
| the first place, and yet it happened - doing lasting
| damage to US-Canada relations despite being quickly
| reversed.
| cwillu wrote:
| "Reversed" seems premature, we'll presumably know in a
| couple weeks whether the "pause" will stick.
| carlosjobim wrote:
| Not even European countries have tariffs or taxes on
| bullion. Putting a tariff on gold would be like putting a
| tariff on foreign currency or a tariff on stock market
| investments. Highly unlikely to happen.
| ucla_rob wrote:
| The basic trend in the gold market is it is in flux
|
| end.
| yieldcrv wrote:
| Gold permabulls crack me up
|
| Missing out on gains in every macroeconomic environment, QE,
| ZIRP, NIRP, rate hikes, deflation
|
| to finally get a little rally that rewards their multiple
| decades of dollar cost averaging
|
| all while apparently central banks have been hoarding it
| endlessly for _twenty years_ and you'd think that would be the
| bull case to the stratosphere
|
| but nope. anyway enjoy the all time highs. just needed threat
| of tariffs all along
| fuoqi wrote:
| The article has failed to address the most interesting question:
| why this spread exists.
|
| The most interesting theory is that it's effectively a "bank
| rank" on "paper gold" issued by London, i.e. traders may fear
| that there are significantly more claims on gold than physically
| exists in London vaults. If this market blows up, it would be the
| most spectacular failure with very significant consequences for
| global financial markets.
| secondcoming wrote:
| This theory came up years ago when sites such as ZeroHedge were
| claiming JP Morgan controls a precious metals international
| scam and there isn't enough physical gold or silver to cover
| everything. People were told to buy as much physical gold and
| silver as possible because it was all about to burst. Silver
| went to $50 and then collapsed and it was never mentioned
| again.
|
| Is this theory back doing the rounds?
| zoklet-enjoyer wrote:
| Never mentioned again? You haven't been on the right parts of
| the Internet. It's still a common belief. Probably true too
| fuoqi wrote:
| The difference now is that professional market participants
| act on this "theory" by physically moving a significant
| amount of gold from UK to US. And "weeks-long" withdrawal
| queues certainly do not look great and confidence inspiring.
|
| And there is the example of Poland which has repatriated all
| of its gold from UK years prior and stories like this:
| https://x.com/SenatorRennick/status/1891051795159429514
| secondcoming wrote:
| And yet this physical transfer of gold has had largely zero
| impact on the price of gold. Nobody was fretting about
| 'where will we source Poland's gold?'
| wrfrmers wrote:
| Well, there's the notion that price no longer quite
| reflects what's going on under the surface. Certainly,
| it's in the interests of an entity experiencing a run on
| its reserves to do everything it can to obfuscate any
| indication that a run is taking place, including
| suspicious price shifts. Perhaps it's even more
| suspicious that such clear movement isn't being reflected
| in price volatility. If there were no trouble, a small
| shift reflecting physical movement wouldn't be too
| dangerous to allow to happen. But what if it wouldn't be
| a small shift?
| unyttigfjelltol wrote:
| >there isn't enough physical gold or silver to cover
| everything
|
| What does this even mean in the context of trading
| derivatives of commodities? Of course there isn't, people
| financed other purchases by borrowing precious metals and
| selling them, or trading futures on margin with no physical
| position. Isn't that literally what this market is?
|
| And, like it or not, it's the endpoint for all holdings of
| non-productive assets. Lease the metal back to traders and
| make 1%; hold it and pay 1% in storage fees.
| suraci wrote:
| I do suspect BoE doesn't have enough gold to deliver now, it
| looks like so
| koolba wrote:
| It's also standard practice to delay or slow walk
| withdrawals when you know they're going to run you dry.
| cturner wrote:
| There may be practical issues that explain delays.
| Consider a team who are staffed to suit normal activity.
| Then there is a period of increased activity, the team
| fall behind.
| HWR_14 wrote:
| If there wasn't enough gold in London, wouldn't that mean that
| gold claims there would be more valuable, not less? Because in
| order to fulfill the delivery they will have to repurchase the
| gold, creating huge demand.
| fuoqi wrote:
| I do not understand your logic. Imagine I have 1 gold bar and
| issued 100 paper claims on it. How would one claim worth more
| than one physical gold bar? After someone retrieves the bar,
| I will have zero gold bars and 99 claims. Would you buy such
| claim knowing that I do not have any gold in my vault?
|
| It may not be even an outright scam. Those 99 claims may be
| backed by claims on someone else's gold, but it's likely I
| will not be able to exercise those claims in a timely manner,
| making me insolvent. Thus we have a "bank run" situation.
| HWR_14 wrote:
| I mean, if it's oversubscribed by 100x the amount in
| existence it complicates things (unless the issuers have
| 100x the value of their gold in other assets). But if you
| issued 100 claims on 99 bars, clearly one person is getting
| something else. If I offer to sell you my paper claim for
| 2x what it was worth yesterday (for example) then you lose
| the value of 101 bars of gold after selling 100 bars of
| gold (net negative 1 bar) and I make a tidy profit. Just
| like a short squeeze sent GME to $400/share.
| weitendorf wrote:
| OP is assuming the oversubscription is due to
| counterparties being on the hook for gold they are
| obligated to deliver at a certain time (this is commonplace
| with commodity derivatives, you simultaneously create
| contract to buy a certain amount of a commodity at a
| certain time in the future + a contract to sell a certain
| amount at the same time in the future - they cancel each
| other out), not that the entity holding the gold
| fradulently issued more claims than they could deliver on.
|
| So OP is saying that if more gold was redeemed than
| expected, the counterparties to those claims would be
| forced to buy gold at whatever the price it ultimately
| settles on to fulfill the contract.
|
| Of course the problem is that there is such a thing as
| counterparty risk. If delivering the contractually
| obligated gold bankrupts an individual counterparty, or is
| physically impossible in aggregate (eg more claims than
| gold exists) then the contract won't be fulfilled at least
| for someone.
|
| But there is a lot of complexity here because not all
| futures are settled physically (they can be cash-settled)
| and there could be mechanisms in place to manage
| counterparty risk at various levels, like at the exchange,
| eg https://www.cmegroup.com/education/articles-and-
| reports/coun...
|
| I wasn't able to read the article because of the paywall
| but stuff like this is why regular joes tend to think there
| are bigger problems with gold or finance in general than
| there actually is. "There is more paper gold than physical
| gold" - regular Joe thinks there is a problem. "Actually
| the paper claims' settlement are subject to various
| conditions, typically closed out before taking delivery,
| and there is a complex system in place which does its best
| ensure that anybody who actually wants to take delivery or
| settle their contract gets it settled as expected" -
| regular Joe lost interest and went back to doomscrolling.
| cwalv wrote:
| > or is physically impossible in aggregate ... then the
| contract won't be fulfilled at least for someone.
|
| > "There is more paper gold than physical gold" - regular
| Joe thinks there is a problem.
|
| Is it a bunch of regular Joe's that are making gold
| "worth more in New York?"
| grandempire wrote:
| All your customers won't withdraw all the gold at once. So
| you don't need to have 100% reserves. That's a fact. The
| problem is once you go less than 100% it's always tempting
| to inch that number down. Because selling new claims, or
| selling reserves is free money.
| SJC_Hacker wrote:
| > in order to fulfill
|
| Well, there's the rub. They'll just throw their hands up and
| the claimants are left holding the bag. Which is what
| sometimes happened historically.
| HWR_14 wrote:
| Aren't most of those claims issued by giant diversified
| companies who have many other assets I can get in exchange?
|
| When has this happened historically (I don't know of any
| examples, but I don't claim that means there aren't any).
| lmm wrote:
| The last real corner was the Piggly Wiggly corner, and
| the exchange changed the rules to screw the guy who
| cornered it rather than the shorts. With that kind of
| precedent, people understandably don't really try to do a
| proper corner any more.
| SJC_Hacker wrote:
| Until you discover all those assets they had were also
| vapor, and their total debt exceeds their total assets
| jt2190 wrote:
| You would have to have a contract that gives you claim on
| these other assets. I would guess that those kinds of
| contracts are very rare, because you'd no longer be
| buying gold but a derivative whose value derives in part
| from gold and in part from the other assets of the
| company selling the contract. I would bet that in
| practice buying gold plus a corporate bond would make a
| reasonable, simpler and more flexible substitute for said
| derivative, making demand for the derivative basically
| zero.
| suraci wrote:
| > Because in order to fulfill the delivery they will have to
| repurchase the gold, creating huge demand.
|
| this is what happening now, gold price keeps rising
|
| as for the reason behind gold price is higher in NY, there're
| many theories and we can not know the truth untill it passed
|
| theories:
|
| 1. Most paper gold transactions take place in New York, when
| a short squeeze mentioned occurs, it can cause New York
| prices to react before London prices
|
| 2. some players are draining physical gold from london(world
| market de facto) by pricing gold higher
| JumpCrisscross wrote:
| > _why this spread exists_
|
| "...when prices on the Comex surged above those in London late
| last year, baking in possible tariffs..."
|
| It's anticipating tariffs on the import of foreign gold into
| the United States. (We import a lot of gold, mostly from Canada
| [1].)
|
| [1] https://oec.world/en/profile/bilateral-
| product/gold/reporter...
| grandempire wrote:
| One thing I think crypto has been good for is it's gotten a lot
| of people to think much harder about the nature of money.
|
| It's so easy to spot incentive problems like this and
| communicate their seriousness to the public.
| mikhailfranco wrote:
| COMEX is usually just a paper market, with almost all positions
| closed out before settlement.
|
| London has paper transactions, but is also a delivery market,
| where large quantities of real gold change hands. The gold may
| not actually leave the vaulting system: the transfer can often be
| accomplished with a warehouse receipt.
|
| However, since November last year, clients of the COMEX (often
| acting through JPMorgan bullion bank) have been standing for
| delivery, e.g. 62 tonnes in the 2 weeks after Thanksgiving 2024:
|
| https://www.goldmoney.com/research/massive-comex-deliveries-...
|
| Now JPMorgan is standing for delivery of 93 tonnes in February
| 2025 (3m troy oz, $4bn):
|
| https://finance.yahoo.com/news/jpmorgan-plans-4-billion-gold...
|
| COMEX has had to scramble to find the physical gold to deliver.
| The US price went up, creating a spread with London and an
| arbitrage opportunity. Physical deliveries from the LBMA vaults
| in London were flown to the COMEX vaulting system in and around
| New York.
|
| If the deliveries cannot be made in New York, there is a rather
| murky process called _Exchange For Physical_ (EFP), where the
| client is given a paper promise for gold delivery in London. Not
| sure if there is client discretion, or if they can be forced to
| accept EFP by the COMEX T &Cs.
|
| I think that COMEX _does_ have the right to cash settle delivery
| requests, but that would be seen as a soft default, and seriously
| damage its reputation as a physical market grounded in delivery.
| __turbobrew__ wrote:
| So the COMEX is selling metals which they do not possess now? I
| thought the whole point is that COMEX coupons were backed by
| physical goods which you could actually cash out if you wanted?
|
| Otherwise you are just betting on paper.
| mikhailfranco wrote:
| They (bullion banks) assume everyone will close out contracts
| on COMEX.
|
| Yes, paper promise. Sometimes promises can be kept, but not
| always.
| bitmasher9 wrote:
| The gold to paper ratio in Comex is 300 to 1. The truth is
| accepting delivery is expensive. You cannot get a small
| amount of gold on comex. You'll need a vault to put it in,
| insurance, armored truck service, etc. Most people buy gold
| futures as a hedge or speculation, and don't want to actually
| go through the cost of accepting delivery.
|
| The concern has always been a run on Comex if physical demand
| suddenly increases. In some ways that would be good, as the
| paper market is artificially keeping the price of gold down.
| If you don't settle in gold you sell more contracts, and the
| supply is artificially inflated. In short term it will be
| awful for Comex, which does a very large amount of commodity
| futures.
| reaperman wrote:
| > The gold to paper ratio in Comex is 300 to 1.
|
| I think this says there is 300x as much physical gold as
| there is gold on paper. Context and common sense indicate
| the opposite was intended.
| JumpCrisscross wrote:
| > _COMEX is selling metals which they do not possess now?_
|
| You put $100 in a zero-balance account. You spend $10,
| deposit $20 and then spend another $30. Your ending balance
| is $80. The total value of transactions is $160. There is a
| 2:1 ratio of transactions to ending balance.
|
| For technical reasons, when a commodities trader wants to
| exit or liquidate a position they typically do so by
| offsetting it. "To offset a position, a trader must take out
| an opposite and equal transaction to neutralize the trade.
| For example, a trader who is short two WTI Crude Oil
| contracts expiring in September will need to buy two WTI
| Crude Oil contracts expiring on the same date" [1].
|
| If instead of a bank account the first example were gold
| contracts, the market would show $160 of gross contracts
| written netting out, in the end, to $80.
|
| [1] https://www.cmegroup.com/education/courses/introduction-
| to-f...
| mikhailfranco wrote:
| The total of COMEX deliveries in the last 2 months is almost
| 500 tonnes:
|
| https://www.bullionstar.com/blogs/bullionstar/gold-silver-sh...
|
| It seems the deliveries for Feb are now approaching 200 tonnes:
|
| https://x.com/TFMetals/status/1889708073930919967
|
| P.S. Gold is just under $100k/kg (~= 1 BTC :) So 1 tonne is
| ~$100m.
|
| https://www.apmex.com/gold-price/1-kg-gold-price
|
| P.P.S. The original JPM delivery of $4bn mentioned above is ~40
| tonnes share of the 93 tonnes (3m troy oz).
| mrcode007 wrote:
| First you have to fly the gold to Switzerland to a refiner and
| melt the London 400oz bars into COMEX 100oz bars.
|
| New bars get new stamps, serial numbers, etc. It's a spot where
| illegal gold can (doesn't have to) be introduced.
|
| Once you melted London 400oz bars into COMEX 100oz bars, _then_
| you fly them to New York.
|
| This process in itself can inflate the COMEX price by _the cost
| of delivery_ which is folded back into the forward price. When
| dealing with futures contracts it is important to know that the
| price is almost always localized based on the cost of delivery.
| There isn't one unique global price of gold.
| mikhailfranco wrote:
| I believe COMEX changed their delivery standards 5 years ago
| to include LBMA 400oz bars, using a mechanism called 'ACE':
|
| https://www.cmegroup.com/trading/metals/precious/faq-gold-
| en...
|
| Every wriggle of the weasel needs a good 3-letter acronym.
| Perhaps they knew what might happen :)
| mrcode007 wrote:
| Thanks for pointing it out :) Pretty interesting. I guess
| the trip is now a bit shorter!
| username332211 wrote:
| Silly question, but how is the delivery of gold COMEX's
| problem?
|
| I was under the impression futures (and derivatives in general)
| represent an obligation of whomever sold the future contract.
| Why is the exchange responsible for delivering all of a sudden?
| jdsully wrote:
| The role of the exchange is to facilitate orderly markets by
| reducing counterparty risk. My knowledge is more stock market
| than commodities but normally they require collateral from
| the brokers so that they can recover from the broker, but
| ultimately they would be on the hook if they failed at their
| risk management. In reality though we know the government
| would not let a major exchange fail so there's also that
| unwritten rule.
| yieldcrv wrote:
| So the gold refiner is the real arbitrageur
|
| Because that dont actually have to refine the gold for the
| differing contracts, they just need to exchange it in London
| adolph wrote:
| As this recent gold market perturbation was kicking off, gCaptain
| laid out a conjecture that follows Cryptonomicon:
|
| _Can we talk about how, before WWII, nearly every village in
| China had a gold Buddha filled with gems, serving as the local
| bank?_
|
| _Can we talk about how the Japanese looted them all and launched
| a massive sealift operation to stash them in the Philippines?_
|
| [...]
|
| _Or how at least one of the CIA's secret ship registries was
| accidentally exposed in the USAID data dump?_
|
| https://x.com/johnkonrad/status/1887856186231263285
| Workaccount2 wrote:
| Getting news from people who wear "blacklisted from Wikipedia"
| as a badge of honor is probably not a good idea.
| adolph wrote:
| I had no idea. There doesn't seem to be a way to verify that
| claim either. Strings "gcaptain" and "konrad" to not appear
| in the depreciated sources.
|
| https://en.wikipedia.org/wiki/Wikipedia:Deprecated_sources
| csomar wrote:
| > Or how most of that gold is STILL buried in the Philippines--
| And how Taiwan is a distraction while China builds a massive
| Navy to take it back?
|
| That's enough X for me today.
| kittikitti wrote:
| This was a misleading headline on an opinion piece which required
| a few minutes of reading political opinion before getting to
| anything it's really about. This is typical for Bloomberg.
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