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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4 oz
Guest
4 oz

As usual very nice work Steve, thank you.

Slvrizgold
Guest
Slvrizgold

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!

JT
Guest
JT

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… Read more »

walt
Guest
walt

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??

gman
Guest
gman

“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!”

gman
Guest
gman

“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… Read more »

Eddy
Guest
Eddy

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… Read more »

DisappearingCulture
Guest
DisappearingCulture

“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?

jj
Guest
jj

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… Read more »

DisappearingCulture
Guest
DisappearingCulture

“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/

houtskool
Guest
houtskool

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?

r sinclair
Guest
r sinclair

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… Read more »

r sinclair
Guest
r sinclair

Complete bullshit

r sinclair
Guest
r sinclair

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… Read more »

olegig
Guest
olegig

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.

Robert Happek
Guest
Robert Happek

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.

joe lindell
Guest
joe lindell

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.

DisappearingCulture
Guest
DisappearingCulture

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

Robin
Guest
Robin

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.

SteveW
Guest
SteveW

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?

jimbo
Guest
jimbo

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?

houtskool
Guest
houtskool

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… Read more »

gman
Guest
gman

“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.

houtskool
Guest
houtskool

Skimming? I just want to preserve some money i worked for. In gold and silver.

THIS is skimming:
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/03/28/20170404_fed.png

gman
Guest
gman

“I just want to preserve some money i worked for.”

you can’t. and that’s not what you’re trying to do anyway, rather you’re trying to be just like the fiat debt money printers. that guy down the page who mentions the singularity is right – it’s gonna be a whole new restart, and the participants who survive to that point aren’t going to let you BUY your way in, you’ll have to EARN your way in. remember, gold is money, it stores nothing is not value.

Bhavesh
Guest
Bhavesh

Thanks Steve, regards.

CHX13
Guest
CHX13

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… Read more »

gman
Guest
gman

“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
Guest
DisappearingCulture

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

And cruelty [to use a one-word descriptor]

CHX13
Guest
CHX13

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… Read more »

CHX13
Guest
CHX13

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

gman
Guest
gman

“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 ….

CHX13
Guest
CHX13

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… Read more »

gman
Guest
gman

“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.

Michael
Guest
Michael

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

houtskool
Guest
houtskool

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

ib12541
Guest
ib12541

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?

CHX13
Guest
CHX13

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… Read more »

r sinclair
Guest
r sinclair

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?

Mark
Guest
Mark

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.