Physical gold demand doubled at the U.S. Mint and the Shanghai Gold Exchange (SGE) in July, but gold demand for ETFs and gold futures contracted in July. That trend has changed in August. The best source for gold futures demand trends comes from the weekly Commitment of Traders (COT) report, published by the Commodity Futures Trading Commission (CFTC). For the week ending August 5, the COT said that large speculators added 5,435 net bullish contracts for gold that week, the first net rise in six weeks. That trend continued the next week, with traders adding a net 2,500 more “long” (bullish) contracts in gold.
We also learned that gold supply is shrinking. New gold supplies from mining operations fell by 4% in the second quarter (vs. the second quarter of 2014), according a new report released by the World Gold Council (“Q2 2015 Gold Demand Trends”). With rising demand for both physical and paper gold, combined with a decline in new supplies (due to the low gold price and the high cost of mining gold), gold will likely make a positive move back above $1200 by the end of this calendar year.
The financial press has failed to report this rising demand for paper gold, so we are forced to conclude that the mainstream financial press tends to quote bearish Wall Street views on gold, but they tend to ignore bullish views.
We have to turn to Canada for some press coverage of rising demand and supply disruptions. Canada’s CNA Finance reported on Tuesday that “the U.S. Mint and the Royal Canadian Mint continue to run into serious issues keeping up with retail silver coin demand. After selling out in early July, the U.S. Mint resumed deliveries of Silver American Eagles, but it has since been rationing them out. And this week brings word of new silver supply-chain problems. Mint officials let it be known they are cutting further back on Silver Eagle shipments, reducing them as much as 20% below already insufficient levels.”
Silver demand soared in July, when prices were down, causing Mints to run short of supply. The Royal Canadian Mint cited “significant problems with sourcing silver blanks for production of the Silver Maple Leaf.” The 1-2 punch of U.S. Mint and RCM rationing and production breakdowns promises to keep buy premiums elevated and cause shipping delays on most government-minted silver coins for the foreseeable future.
Private mints are also running short on supply. Delivery delays have lengthened as suppliers and retailers struggle to fill orders.
This combination of increased demand and delayed deliveries has created extra calls to dealers.