The gold market's perfect storm: Demand surges and supply struggles reveal systemic issues

By willowt // 2025-02-18

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The Bank of England (BoE) is facing a crisis in meeting demand for physical gold, with delays in delivery and a price discrepancy between gold in BoE vaults and New York vaults.
The gold market is experiencing a perfect storm of demand surges and supply struggles, exacerbated by geopolitical tensions and economic uncertainties.
Historical context suggests that central banks may have been involved in gold market manipulation to maintain the U.S. dollar's strength.
There is renewed interest in auditing the Federal Reserve, with potential involvement from Ron Paul and Scott Bessent, which could uncover financial irregularities.
The pressure on the gold market is global, with issues seen in major gold centers and implications for investors, potentially leading to a revaluation of gold's role in the financial system.

In a series of events that is shaking the foundations of the global financial system, the gold market is witnessing a perfect storm of demand surges and supply struggles. The Bank of England (BoE), a bastion of the world’s financial architecture, is at the epicenter of this turmoil, struggling to meet the unexpected demand for physical gold. This crisis, exacerbated by geopolitical tensions and economic uncertainties, has profound implications for the stability of the U.S. dollar and the broader financial markets.

The Bank of England's gold delivery crisis

The Bank of England, which claims to hold over 5,000 metric tonnes of gold in its vaults, is now facing significant delays in delivering this precious metal to its clients. According to the Financial Times, the wait times for withdrawals have risen from a few days to between four and eight weeks. Since then, the situation has worsened, with gold in BoE vaults now valued at $20/oz cheaper than equivalent bullion in New York vaults. The cost to lease gold and silver has spiked by approximately 300%. At a recent press conference, the BoE attributed the delays to the logistical challenges of transporting heavy gold bars. However, this explanation has done little to quell the skepticism within the gold community. Some experts speculate that the BoE may have leased out more gold than it can deliver, a practice that, while common among bullion banks, could have severe consequences if the demand for physical gold continues to rise.

Historical context: The Fed’s role in gold market manipulation

The current crisis is not without historical precedent. In the 1990s, long-time Federal Reserve Chairman Alan Greenspan famously stated, “Central banks stand ready to lease gold in increasing quantities should the price rise.” This statement has long been interpreted by many as an admission of a gold price suppression scheme. The rationale behind such a scheme is straightforward: a strong U.S. dollar is crucial for maintaining America’s economic dominance, and gold, as a competing store of value, must be kept in check. The potential for gold market manipulation has been a contentious issue for decades. Bullion banks have been fined numerous times for market manipulation, but the penalties have been a mere fraction of their profits. However, the current squeeze in the gold market may signal the end of these shenanigans. The financial community is closely watching for signs of systemic failure, particularly as the pressure on bullion depositories intensifies.

Ron Paul and the auditing of the Federal Reserve

Adding to the tension, there is a renewed push to audit the Federal Reserve. Ron Paul, a long-time critic of the Fed and advocate for sound money, may assist in this effort. A user on X (formerly Twitter) suggested to Elon Musk that Ron Paul should be involved in the audit, to which Musk responded, “Good idea.” This development has the potential to uncover evidence of precious metal price manipulation and other financial irregularities. Ron Paul’s involvement would be a significant step towards transparency and accountability in the financial sector. His book, "End The Fed," has been a rallying cry for those who believe in the importance of hard money and the dangers of unchecked central banking. With the first U.S. Treasury Secretary who is a gold enthusiast, Scott Bessent, now in office, there is a unique opportunity to reshape the financial landscape.

The global gold squeeze

The strain on the gold market is not limited to the Bank of England. In South Korea, the South Korean Mint has suspended gold bar sales, citing issues with supply and demand management. This move is another indication of the global nature of the gold squeeze. The pressure is also being felt in other major gold centers, including Switzerland, Dubai, Hong Kong and Singapore. The COMEX futures market in New York has seen a significant increase in demand for physical gold, pushing the price of gold on COMEX into a substantial premium relative to the LBMA spot price. In January, the spread between the front-month futures price on COMEX and the LBMA spot price averaged 12.33/oz, up from just 1.90/oz in December, with a high of $37.57/oz on January 20th. The surge in demand has led to a scramble by bullion banks to obtain the gold necessary to settle contracts, primarily from London.

Implications and recommendations

The current gold market dynamics have far-reaching implications for investors and policymakers. For decades, major banks have manipulated the price of gold and silver to keep it low. The ongoing squeeze may expose these practices and lead to a revaluation of gold’s role in the global financial system. As the tide goes out, it will become clear which institutions have overextended themselves and which are genuinely capable of meeting their obligations. For individual investors, owning physical bullion is more important than ever. If you choose to invest through ETFs, consider options like Sprott’s PHYS for gold and PSLV for silver, which are known for their transparency and commitment to holding physical metal. GLD and SLV, while popular, may be exposed to the same risks that are unfolding in the broader market. The pressure on the OTC market in London is beginning to spill over into the gold options market, with increased implied volatility and skew favoring gold call options. This suggests that investors are beginning to hedge against further price increases, indicating a shift in market sentiment. In conclusion, the gold market is at a critical juncture. The perfect storm of demand surges and supply struggles is exposing vulnerabilities in the global financial system. As the gold squeeze continues, it is essential for investors to stay informed and take steps to protect their wealth. The coming months may bring significant changes to the way we understand and value gold. Sources include: DailyReckoning.com Substack.com NaturalNews.com