Gold Paper v Physical

COMMENT: “If the price of gold goes below $800, it will only be the comex paper price. At that price the demand for physical gold from Asia will be literally unlimited.”



REPLY: The price of gold on COMEX is real no matter what people say for the physical price will still trade at that market level. All markets must go to an extreme in both directions and shake out of the trees the diehards be they bulls or bears. If gold goes back to retest the 1980 high of $875, we are looking at an extreme and that is necessary to shift the bulls into bears as was the case in stocks in 2011. It is a brief shining moment. However, this is the fuel that makes markets move up and down. It is vital to humanity and it is why you see the same oscillations even in political trends between the left and right. NEITHER side ever prevails 100% perpetually. Even dictatorships always fall.


It does not matter if it is physical or paper. The price of gold is established by the market. Everything trades the same. Wheat has a physical market and then there are the futures contract markets. There are always oscillations no matter how far back we look in time at price movements. Get over it! Anyone who preaches only up CANNOT possibly be correct. When I was called by China back in 1997, I was given a look at a center that was monitoring all price movement. They were confused coming out of communism where prices were the same throughout the nation. They could not grasp why the same tea was selling at different prices throughout the country. To a communist – that was unthinkable. I had to explain the cost of transportation and then the factor of demand where people would spend more if the item came from a different place. So anyone who says a market will only rise and then makes up conspiracies to explain every decline, is spinning tales to disguise the fact that they are trying to pretend that markets are linear rather than dynamic.


This idea that “paper” is somehow evil and not real is absurd. Your family and your boos can have life insurance on you yet there is a single person. Does that make you not real and different somehow? The first “paper” contracts for future delivery began in Babylonian times. The promoters can spin their stories and pretend they are not wrong because it is only paper and not real. The price is real and if you went to sell, you cannot say well it is really worth $1,000 more than COMEX. The market is the market. ALL COMMODITIES trade the same way. There is the physical and then there is the “paper” market. If you eliminate the “paper” market, then you eliminate liquidity and in doing so, there is no place to buy or sell and that undermines the value of anything. Thus, it is no big deal that gold would decline into a spike low. ALL markets trade that way. It is NORMAL.

The object here is to survive what is unfolding not to spout out some theory that does not stand up to the test of time and circumstance. Simply accept that ALL MARKETS rise and fall. The object is to ride the waves and not crash into then head-first under the pretense that they are somehow not real.