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SeekingAlpha/Craig Hemke/1-20-2021
“The internationally-recognized price of gold (and silver) is NOT based upon any sort of physical metal transaction. That’s so 1960s. Instead, the price is determined through the trading of digital derivative futures contracts in New York and unallocated forwards in London. So the only way price rises is when demand for these derivatives outstrips the supply. The big rally last summer was a period of Bank reluctance to add derivative supply, and price soared. Since then, Banks have felt more comfortable adding supply and prices have been driven consistently lower.”
USAGOLD note: Craig Hemke raises a question we get often at USAGOLD: With gold demand running high (as it is now) why isn’t the price going up? For more on this subject, do not overlook the link to the 1974 communique on U.S. Treasury gold sales and the creation of “a sizable futures market” which came shortly thereafter. We referenced this article in this morning’s DMR and report it here for those who may have missed it.
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