Record $10 Trillion Paper Gold Trading Market Continues To Depress Price

How do you depress the physical gold price?  It’s quite easy… you throw $10 trillion paper dollars at it.  Not only did global paper gold trading amount reach a new record in 2016, it surpassed the previous year’s total by nearly 50%.

This is simply amazing when we look around at the staggering amount of insanity taking place in the financial markets.  With the economic and financial markets sitting at the edge of the cliff, it would seem prudent for investors to curtail their highly leverage bets in the “Paper Gold Casino” and buckle down by purchasing real physical metal.

Unfortunately, the Mainstream media and the Financial networks have totally lobotomized investors by removing the following vocabulary from the mushy substance between their ears….. Wisdom, Prudent, Long-term, Safe-haven and Gold-Silver.

With the advent of twitter, wisdom today comes down to reading no more than ONE SENTENCE.  Anything longer than that is a complete waste of time when it is better spent sitting in front of six computer monitors trading digits.  Forget about investing one’s money to build up a real company, when it is more stimulating to try and SCALP tiny profits by trading stocks all day fueled by a half dozen monster energy drinks.

This is called progress…… a giant leap forward for mankind and technology.

Global Gold Exchange Notional Trading Amount Hit New $10 Trillion Record In 2016

According to GFMS newly released 2017 Gold Survey, total global exchange notional trading amount reached $9.8 trillion in 2016.  This was up 46% from $6.7 trillion in 2015.  These figures were based on the total amount of “volume in nominal tonne equivalent” traded on nine exchanges.  For example, here are the top four exchanges annual gold traded quoted by GFMS:

  1.  COMEX = 179,047 tonnes
  2.  SHFE = 34,760 tonnes
  3.  SGE = 11,793 tonnes
  4.  TOCOM = 8,541 tonnes

The total amount of paper gold traded on the nine exchanges in 2016 equaled 243,000 metric tons versus 180,000 metric tons the previous year.  I took these values and multiplied them by the average annual gold price to arrive at the figures below.  I also compared these figures to the total amount of physical gold retail investment for each year (source GFMS 2017 Gold Survey):

As we can see, the global exchanges traded a stunning $9.8 trillion worth of paper gold last year versus $42 billion in physical gold investment.  This turns out to be 233 times the amount of paper gold traded for each ounce of physical gold purchased. 

With this sort of trading volume, the Monster Energy Drink Stock (ticker MNST) looks like an excellent investment opportunity.  And why shouldn’t it be?  The Monster Energy Drink stock price has surged nearly 10 times from $5 in 2009 to $46 currently.  While this may seem like a good stock to invest in, I am waiting until they sell Monster Energy IV’s that you just stick in your arm so you can continue trading without wasting waste time knocking down 5-6 individual cans.

We must remember… TIME IS MONEY.

So, the question is this…. what would happen to the physical gold market if a small percentage of the Monster Energy Drink traders purchased physical gold instead of the millions of contracts traded on the exchanges.  According to GFMS, total gold trading volume just on the COMEX last year was a stunning 58 million contracts. 

Annual Global Gold Exchange Trading Volume Also Reached New Record Of 7.8 Billion Oz

Furthermore, if we look at the total amount of paper gold traded on the nine exchanges in 2016, it also reached a new record 7.8 billion oz:

Not only was the 2016 total 7.8 billion oz paper gold trading volume 34% higher than in 2015, it was 76 times higher than the 103 million oz of world gold mine supply.  I decided to add the paper gold trading volume during the 1970’s when the gold futures markets began.  During the first year of gold futures trading in 1975, a total of 84 million oz (Moz) were traded.  However, by the end of the decade and as the gold price shot up towards $850, total paper gold trading surpassed one billion oz in 1979.

Again, what would have been the reaction to the physical gold market if investors purchased more physical gold in 1979, than the one billion ounces of paper contracts??  Well, I will tell you what I think from some wisdom from Jim Rickards.  I listened to Jim Rickards interview with Greg Hunter today and he had some very interesting things to say.  One of Rickards interesting tidbits was that Americans own about one ounce of gold each versus the typical poor Indian farmer who has acquired kilos of gold.

So….. when the FAN FINALLY HITS THE COW EXCREMENT, the wealth of the world will move from WEST to EAST as Americans are forced to pawn off the remainder of their gold jewelry for much needed MONSTER ENERGY DRINKS.

GOD HATH A SENSE OF HUMOR.

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50 Comments on "Record $10 Trillion Paper Gold Trading Market Continues To Depress Price"

  1. As usual very nice work Steve, thank you.

    • Schlomo, Moshe, and Benyameen LOVE when stupid Goy buy and sell more gold in a year than has been mined in all of human history. They don’t look down on us like stupid animals to use, abuse, and slaughter for nothing you know!

    • Yes, great article.

      And you hear commentary that “Gold and Silver” are not manipulated. They see a small tick up and say “See – manipulation theorists are quiet”. They also say – “if the markets are so manipulated – why does not anyone ever tell them to take their money out of the market”.

      You see this rationalization all the time by “traders” who rationalize this away. Then they have the audacity to say it is because “all of you” got it wrong (high, low, etc). Again – they assume they know everyone’s trade which is just ridiculous. What is even more frustrating is that you give them actual factual links like the LBMA, the Deutche Bank Trading Colllusion Coverage and Scandal, and other factual sources. The response is : Your wrong , it is not manipulation – it is collusion.

      That is like a Alcoholic saying I did not have any hard liquor today and drinks a 12 pack and rum/coke and says “see I did not have any HARD liquor today”.

      What they don’t understand – is that they are part of the problem to attain a “quick” buck.

      Then – when you “battle” them with intelligence, facts, and counter that assumption/argument- they start blasting you for not knowing anything.

      I will point to an article that proves this:
      http://www.kereport.com/2016/03/11/avis-latest-manipulation-theory/

      Let’s see what all of you think of that response. I had 5 of his “ghouls” instantly jump on me for this link stating it is “fake news and not manipulation”
      https://www.bloomberg.com/news/articles/2016-12-12/-3-2-1-boom-silver-fixing-allegations-in-a-dozen-chats

      There are a lot of folks at institutions and media outlets using these collusion tactics. They got caught – never thought those discussions would get out and now there saying “don’t look behind the curtain – I am the great and power PM Oz”.

      It is rationalized away. You see it all on the time on Seeking Alpha Commentary by the traders/system selling subscription people and other sites.

      They also discredit Jim RIckards and Mike Maloney and David Morgan and others saying they are only ‘fear mongers and sell fear” which is just ridiculous.

      JT

  2. Even when TSHTF, what’s to stop the paper traders from taking advantage of the situation and continue the insanity since they thrive on volatility??

    • “what’s to stop the paper traders from taking advantage of the situation”

      when a collapse initiates then people will stop thinking about the future value of skimmed electronic digits and will start thinking about what is on the store shelves and in their gas tanks and in their closets right now. they’ll stop calling the paper traders.

      and the real paper traders will be smiles and high-fives and champagne all around. “we did it!”

  3. “This is simply amazing when we look around at the staggering amount of insanity taking place in the financial markets.”

    not really. it’s all about taking out more than you put in.

    “So, the question is this…. what would happen to the physical gold market if a small percentage of the Monster Energy Drink traders purchased physical gold instead of the millions of contracts traded on the exchanges.”

    nothing. 1) they won’t be able to find enough, so they’ll just flail and wail. what’s the price of gold if there’s none to be had? 2) nothing that happens in the physical world is relevant to the comex price, so the comex price will be unaffected. 3) if they flood into comex, comex will just print more.

  4. This demonstrates that trading in general is way out of line. Few of these traders really want the gold. It’s just a casino. A very big Casino!

    The real issue is the concentrated short side. Without all the big banks taking the short side in a reflexive fashion, the price of paper gold would have to go up. The big banks can match al, demand from the longs at will. The price only goes where they want it to go.

    I used to be angry about this, but in reality it allows us to accumulate cheap physical gold longer. Once the shtf gold will go up and society will not be happy. Don’t be a hurry for this to happen.

  5. DisappearingCulture | April 3, 2017 at 3:53 pm | Reply

    “Record $10 Trillion Paper Gold Trading Market Continues To Depress Price”

    “… you throw $10 trillion paper dollars at it.”

    ““Paper Gold Casino”

    “The total amount of paper gold traded on the nine exchanges….”

    For clarification, it isn’t as tangible as paper is it? Isn’t it all digital? Perhaps the contracts can be printed on paper, but otherwise is there any paper at all?

  6. Your typical internet nonsense by those who promote metals. Nobody is suppressing the gold price and this shows a total misunderstanding of what causes price movement in markets. Dollar strength equates to commodity weakness including gold and silver.
    For over a year international capital flows have been steadily moving into the dollar and Dow especially from Europe as the euro and the EU collapses. This capital being removed from banks has caused liquidity problems for them. If you control large amounts of capital you are not going to park it in a collapsing currency and banks with liquidity problems. This capital needs markets with huge pools of liquidity and that is the dollar and the Dow. Close to 200 billion has been pulled from Europe. This is capital flight. The physical gold market is simply too small for large amounts of capital and they do not want to pay for the associated delivery and storage cost nor is there enough liquidity. The notion that some “cartel” is suppressing prices to instill dollar confidence is absurd as there is no reason to as capital is flowing into the dollar and the FED has actually attempted to weaken it but has not succeeded as their are global forces working against it. Those that claim that the Dow is overvalued fail to realize that capital is being parked there as there are few option left. This capital doesn’t care about dividends returns or appreciation but just parking capital in blue chips hoping to get a return of capital and not a return on capital. As the sovereign debt crisis has started again Europe with yields spiking capital is being rotated out of these assets and into the dollar and Dow. This will continue into 2017 and 2018.
    Traders on the Comex and other commodity markets pay close attention to currency markets as dollar strength equates to commodity weakness. The hedge funds have been long as this is their hedges against their long dollar positions. They use HFT algos to drive price up to usually a reversal level with short term dollar weakness and then add shorts riding price weakness back down with the commercials who are already short when dollar strength returns. The commercials are the miners, entities who possess large amounts of physical and of course the banks who trade for their clients like miners and large wholesale jewelers. This is their hedges in case price collapses. If price rises they let the hedges expire worthless and sell inventory. If price fall they exercises their hedges for cash, sell inventory and still make money.
    Folks this is how the real world functions.

    • jj,

      You stated this: Nobody is suppressing the gold price and this shows a total misunderstanding of what causes price movement in markets. Dollar strength equates to commodity weakness including gold and silver.

      You say, “DOLLAR STRENGTH”. I gather you haven’t spent much time learning about REAL MONEY or reading articles on this site.

      Please get back with me in say five years… and then you can tell me all about DOLLAR STRENGTH.

      steve

      • “You say, “DOLLAR STRENGTH”. I gather you haven’t spent much time learning about REAL MONEY or reading articles on this site.”

        why would he? it sounds like he’s very much in touch with the real world. except for the fiat debt leverage part, that probably will take him by surprise. and you yourself fail to realize that it’s all relative.

        “Please get back with me in say five years… and then you can tell me all about DOLLAR STRENGTH.”

        heard that every year for ten years now ….

        • Great reply! Until demand really exceeds supply, FIAT money, oil, EROI
          are all meaningless. In 10 years, the innovators will find alternative
          energy. The USA is full of ideas yet to be developed. When the need arises they will respond. I too, have heard all this B.S. since 2008 and silver stills has no demand to warrant it rising in price. If I have to wait for economic collapse, then if I’m not here to see it.

          • What alternatives are out there yet to be developed? Which one of these ideas floating around do you think has the most potential to offset net energy decline?

          • Joe,

            Didn’t you tell me that your are doing just fine with all your INVESTMENTS. Also, you said that you would allow your children to inherit your precious metals investment if you couldn’t enjoy the gains. So, you have changed your story again??

            Joe, do you just like to come in here and COMPLAIN. Don’t you realize as people get older they are supposed to acquire more wisdom. I don’t see a lot of wisdom in your comments.

            steve

          • Jor Lindell | April 4, 2017 at 6:27 am |

            Natural gas and NGL for starters. If all 18 wheelers converted to nat gas it would really show signs that we need not depend fully on oil.Ideas regarding “coal liquid” are being developed. This should be another beginning. Throw in solar photovoltaics that are becoming more efficient each year and oil “needs” decline. Yes Steve. my grand children inherit it all. I was trying to tell those “buyers” who listen to all this hype these past 10 years that they bought at the wrong time. They should start their buying slowly here in 2017 for the next 10 years, then maybe, and I mean maybe, demand will be there in 2025.

    • DisappearingCulture | April 4, 2017 at 6:54 am | Reply

      “Nobody is suppressing the gold price” shows incredible ignorance on the subject; well documented by GATA to name one. As for the COMEX:

      “This degree of imbalance between the open interest in CME futures contracts in relation to the amount of the underlying physical commodity represented by those contracts never occurs in any other CME commodity – ever.”

      http://investmentresearchdynamics.com/the-comex-is-the-worlds-most-corrupted-market/

    • jj,

      Dollar strength is just measuring $ against other fiat currencies. When you look more closely, you’ll find out its actually dollar weakness. Some people indeed get rich by playing this ‘market’, most people don’t.

      The consequences for ignoring these facts will be severe for the world population. Affordable energy is collapsing, and with it the fundamentals under our current fiat debt based system.

      Got insurance?

    • You don’t appear to understand international trading in currencies. The dollar’s value, or percieved value, against other currencies is the ratio of dollar holdings to say the euro for example. So if they use their dollars to pay debt or spend the dollars they have less dollars or import less, so the dollar appears to rise in value or you get more euros to the dollar. The dollar is the world reserve currency. and as its being liquidated worldwide it RISES in value against those currencies. This is the capital flight you are taking about. the world is selling their reserves to pay debt and finance increased social spending ageing populations etc. as the world economy contracts.
      This is why the us has been able to negitive balences in international trade since 1971. Countries have had to build up their dollars to trade internationally. or sell for dollars. The tide is turning. The non redeemable dollar costs less than 2 cents to create a debt of 1 dollar.This has been imposed on the world and its coming to an end as the ponzi scheme implodes.

    • Complete bullshit

    • Manupulation of precious metals eddie george governor of the bank of england seems to have a different view from you, and after all, he knew better than you because he was doing it and he admits it as follows:
      “We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.” – Eddie George, then Governor of the Bank of England, 1999

  7. I was in a crap game once, we all went home with more cash than we came with except one guy.
    The last man standing is better off in a bar fight than a game of musical chairs.
    But l like the emperor has no clothes thing the best.

  8. Robert Happek | April 3, 2017 at 7:03 pm | Reply

    A very good article. The numbers are insane, indeed. The issue at stake is actually confidence into the US Dollar. As long as the confidence is strong, the paper gold trade is about making Dollars as the Dollar is perceived as the ultimate purchasing power medium. That game will continue as long as supply exceeds demand for physical metal. People who buy actual metal are just a few years early, perhaps only 5 years early as Steve said.

  9. I just read where Tom Cloud is peddling the French 1813-1870 Franc. His predictions since
    2008 have all failed. No Muslims nor Indians are buying silver by March 15th, 2017 as he predicted. No silver shortage in 2017 as forecast. When will people understand that Tom Cloud is a “seller of silver” and not an investor’s friend. He’ll say anything to get people to buy from him.
    2008 I’ve read his stuff. And here is 2017, all his forecasts are failures.

    • Joe,

      How did you know about Tom since 2008? He has only been doing updates on my site for a year.

      Joe, at first, I thought you were a pretty reasonable person. But, now I see your true colors. You;re attacking Tom now??

      Joe, maybe you should just sell your precious metals and spend more time with your family. You have nothing positive or constructive to say anymore, so if you want to continue complaining and saying the same thing over and over again.. I will start moderating your comments.

      While I have no problem keeping an OPEN VENUE for intelligent debate on issues, your continued complaining and whining gets seriously old.

      steve

      • You are not the only one with a silver/gold website. What I said about om Cloud is the truth. His forecasts these past years never happened. The real question is why do you post his “commentary.” Don’t you care about your readers?

      • DisappearingCulture | April 4, 2017 at 7:03 am | Reply

        Steve,

        Joe states “I just read where Tom Cloud is peddling the French 1813-1870 Franc…..”
        WHICH MEANS HE HAS VOLUNATRILY SUBSCRIBED TO TOM’S EMAILS. He must like getting information that upsets him or makes him feel right in some way.

        • DisappearingCulture,

          Yes… I agree, a glutton for punishment. I have no idea why Joe Lindell continues to come in here and leave negative comments. Again, we are supposed to gain wisdom as we age, but it seems like there are a lot of older folks are unfortunately, mentally immature. I don’t mean to be so blunt, but that is my take on it when I come across many older folks.

          There are only a handful of older folks who are very wise. A large percentage are only concerned with their own well-being and are quite immature.

          steve

    • DisappearingCulture | April 4, 2017 at 6:56 am | Reply

      BS Joe! You HAVE NOT been reading Tom Cloud’s stuff since 2008. Another fabrication from you to justify your sour outlook.

  10. We must all be insane to continue to buy in the rigged precious metals market. I for one will keep stacking even though sometimes I second guess myself. I made the right decision years ago and I will stick to my convictions. Thanks for all your research that constantly reminds to stay the course.

  11. Steve,

    I sure pity those “typical poor Indian farmers” with their kilos of gold, Last I checked a kilo of gold was over $40,000.00. Where can I join?

  12. With all the good info out there such as this site, gata and others about how much more paper gold and paper silver than there is the physical, why haven’t more people bought the physical?

    • Physical demand is huge. More people are waking up as we can all watch the disintegration of debt based consumerism as a consequence of too much debt and too little cheap energy.

      Dilluting the silver and gold markets with paper versions is a policy tool, simply because there’s not enough physical. Current comex paper/phyz ratio is above 200.

      Investors playing with other peoples currencies to prevent la la land from collapsing.

      They ALL think they can get out when the S&P goes dark. jj, Joe Lindell are live samples of the ignorant world view that surrounds us. Afraid for what’s coming and not being able to look over the edge. So they crawl back into la la land with sweaty palms and red faces.

    • “why haven’t more people bought the physical?”

      because they’re infestors. for them, it’s all about skimming other peoples’ work, getting out more than they put in. they concentrate on skimming now, while gold infestors think they’re going to get the skim later. that’s all.

  13. Thanks Steve, regards.

  14. And when does this scheme blow up? When the CBs of the west cannot (or are no longer willing to) “lease” more of their remaining gold into “the markets” (and no minute before): First the “lend” bullion to the big bullion banks that run the paper-ponzi show at the CONeX and the LBMA – from where it is shipped first to Switzerland and recast into 9999 kilo bars and off to Shanghai the metal goes. Once the flow of yellow BRICS to the East stops, time is up and a shocking revaluation of fizzical gold (and silver) will occur. Are we getting close? Maybe, but certainly closer with every day that passes. And gman can troll here for as much and as long as he likes, the final outcome is sealed and set in stone and any paper dollar amount they throw at it cannot change this as e’re closing in on a financial singularity. May you all be on the right side of the trade. At some point in the future it will be “Les jeux sont faits, rien no va plus”. GLTA and a big thanks to our host Steve for sharing his work and insights with us.

    • “And gman can troll here for as much and as long as he likes”

      I appreciate that.

      “the final outcome is sealed and set in stone and any paper dollar amount they throw at it cannot change this as e’re closing in on a financial singularity. May you all be on the right side of the trade.”

      gonna be a whole lotta bullets on the other side of that singularity ….

      • DisappearingCulture | April 4, 2017 at 5:07 pm | Reply

        “gonna be a whole lotta bullets on the other side of that singularity ….”

        And cruelty [to use a one-word descriptor]

        • When the status quo fails there will be a lot of unhappy campers, no matter what, that’s for sure. But, I’d still be rather be holding some PMs (and some fizz paper cash) than stocks or bonds. So in that I totally agree with gman, but this is not the point of the discussion here and on this blog. The question is how to possibly shuttle wealth from here through the turmoil / dark ages into (hopefully) more peaceful times and a more sustainable system. Obviously PMs are only only part of this along with some some other prepping. But should be hit a “the road” scenario or – heaven forbid – a nuclear WWIII holocaust then whatever we do now is irrelevant since none of us will survive it. But until this does not happen, there is at least some hope. Else one might as well just blow once brains out and be done with it.

      • And I appreciate your honesty by admitting that you’re just trolling this forum, though this was obvious from day one.

        • “And I appreciate your honesty by admitting that you’re just trolling this forum, though this was obvious from day one.”

          of course I’ll go along with it, waste of time not to. when people don’t like what you’re saying, they just call you a troll, or fake news, or racist, or some similar response, so they don’t have to respond to what you’re saying. it’s the way people work.

          after the singularity, if your body armor gets too dented and chipped up, maybe you can repair it with gold solder and filler ….

          • Well, we are talking and discussing the reasons and dynamics that will cause a monetary and an energy crisis, and NOONE, not you or nor I know what we’ll find on the other side. Must of us are hopeful to find a world that is still worth living in, to find things that are worth working, fighting and if need be dying for. Yes, I expect some (major) turmoil, but as long as we don’t face a global nuclear winter, there is hope, at least for me. You, on the other hand, only come with your doomsday views according to which it seems best just to effing $hoot one’s brains out right now – which I find adds nothing to this blog whatsoever. Your point has long been noted, but if you wish to carry on ad absurdum (maybe t’s giving you some much needed mental / psychological relieve) then so be it. Just know, for the most part you interfere in other peoples discussion in a party-pooper way. But you seem to be well aware of that too, so… Just do whatever you think you have to do. Peace, over and out.

          • “You, on the other hand, only come with your doomsday views”

            I like to balance things out here.

            “according to which it seems best just to effing $hoot one’s brains out right now – which I find adds nothing to this blog whatsoever.”

            so, what you’re saying is, you’re looking for upbeat positivity and encouragement to go on? that would explain a lot.

  15. How can i invest in a secure gold business. More information Please.

    • Its not investing, its protecting. You just buy some physical gold and silver every two/three months, hide it away and forget about it.

  16. I noticed in your first chart a steady decline in the global physical gold investment. You didn’t cover it in the article but what do you attribute this decline to? Is it physical supply drying up, investor hoarding, misplaced Trump optimism or something else?

    • This is “retail investment” and has come down by much less % in dollar terms than the dollar price of gold has, meaning there is now still greater demand for fizz at these lower prices compared to the last peak in 2011. AND, retail in the end does not matter for setting the price (at least not retail in the west) – the demand for bullion in the east is starting to overwhelm the current PM paper ponzi. IMHO we are soon going through a second London(+CONeX) gold pool bust like in the late 60ies, that lead the way for Nixon to close the gold window “temporarily” in 1971.

  17. not so long ago you were saying that the gold price had to be at or near the cost of production or arbitrage would cause the physical to disappearor or vis a vis. Why have you changed your mind?

  18. My conclusion is then simple,
    people buying more gold because they see that the shit it’s getting bigger. “Cartel” has to spend more “$” to suppress gold and slowly it’s getting harder.

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