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A service by Gordon Gekko's Blog

Real Gold Price

Let's first define what we mean by "Real Gold Price" and then I'll explain further:

Real Gold Price is the price at which the Real PHYSICAL Metal is available for delivery to the buyer's own PERSONAL possession and is the ONLY ONE that matters. It is NOT the Comex Futures price.

What Is "Gold Price"?

What is widely known as the "Gold Price" today is actually the price of "futures" contracts traded on electronic "futures exchanges" operating in various countries, primary among them being the COMEX in the US operated by the CME Group and "regulated" by the CFTC.

So what are "futures" and what is "spot price"? As per goldprice.org:

Futures contracts, or just Futures, are standardized contracts for delivery (the seller delivers) or receipt (the buyer receives) some fixed quantity and quality of a commodity. Futures contracts are available for each month of the year. For example, a contract for delivery of December wheat can be purchased in May the year before.

The "Spot Price" (price of Gold for immediate settlement/delivery) - the price used as reference Gold price throughout the world today - is simply the price of the futures contract of the "most active month" (most number of transactions) trading on the exchange, with the month referred to as "spot month".

How Its Supposed to Work

Now, in theory, the futures price should accurately reflect the price at which one can obtain the actual physical metal since the futures contract is a legally binding contract to deliver the actual commodity. The exchanges have registered warehouses where the commodities with the requisite specs stated in the contract are stored to be delivered, should the buyer (remember this for later) choose to stand for delivery. A point to be noted here is that the futures exchanges allow trading on margin, i.e., you have to put up only a fraction of the actual contract value to trade, whether buying or selling (the amount of margin is decided by the exchange). If you're selling you can go "naked short" (sell a contract without possessing any Gold, only putting up a cash margin). So this type of contract trading on cash margin has a loophole in that a player with sufficiently deep pockets could overwhelm the market by introducing a large supply of contracts (buy or sell) causing panic selling or buying and unduly influencing the price to their benefit. Trading on margin facilitates this because for a big player putting up 5-20% cash margin is easy (even if it's in the billions), but procuring a large quantity of raw material, especially something like Gold, is rather difficult and subject to rules of nature. But the price manipulation can't last forever because at some point either you have to come up with the Gold (if you're selling) or front the full amount and take delivery (if you're buying) unless you choose to roll your position to another month. Now rolling over isn't without costs so if a player manipulates the price, it's usually for a short duration to profit from the price move and then they cover their position, at a profit of course. But the exchanges have safeguards against this in the form of position limits (no. of contracts bought/ sold at any given time) and also there are numerous regulations which obligate the exchange and its regulator to monitor trading activities and look for signs of fraud and manipulation. Hence normally such manipulation shouldn't be possible, and if it happens, is detectable and can be stopped.

So everything looks good, people are trading, real price discovery is happening, price manipulators are at bay, people are playing fair, Obama is bringing hope and change, there is freedom in the US of A, and everybody can live happily ever after.

How It Actually Works

Unfortunately, reality is a b**ch.

Now, what if there was a sufficiently large entity - so powerful as to be able to control the exchange and its regulators - having access to unlimited money with vested interest in manipulating the price - not for a short term cash profit but for other motives and a longer duration. Would that be possible?

Think about it. But even if it's possible, why would somebody want to manipulate the Gold price? That too, for a long duration and not for a cash profit (because it already has unlimited cash). Who would want such a thing and what would they gain from it if not cash profits? Cui Bono? Does anyone/anything come to mind? Who has "unlimited cash"?

Yes, that's right - the Federal Reserve. Now the Fed is just a front - collectively it can be referred to as the banking cartel or banking mafia which includes entities such as JP Morgan, et. al.

These guys are sufficiently powerful and have a fairly strong motive in controlling the Gold price because Gold competes with the worthless paper currency issued by them - the US Dollar. A rising Gold price signifies declining value and confidence in their paper money franchise. They have to protect it at any cost. For a detailed explanation of why this is the case, please refer to these articles here, here and here.

They exploit the following loopholes to achieve their objectives:

1. Most people trading futures end up NOT taking delivery. A majority are simply speculators interested only in profiting by betting on the price movements (and some hedgers who do not wish to go through the hassle of taking delivery) trading on margin. The bankers know this. Hence there are a lot more paper contracts floating around than there is real Gold. They are betting most won't bother and so far they seem to be right. Take a look at this extract below (via maxkeiser.com):

The dollar value of trading volume at COMEX is far greater than its largest ETF competitor, GLD, meaning that COMEX continues to hold its place as the largest and most sophisticated meeting place for buyers and sellers to express their gold price opinions, in the form of bids and offers, on what the price should be. COMEX remains the beating heart of gold price discovery.

Gold futures contracts are referred to as "paper-gold" because the size of this market is said to be over 100 times larger than physical gold available...open interest on the COMEX, at the time of writing, accounted for over 85% of demand on the gold futures market, so COMEX receives the most examination here. In theory investors are able to take delivery of the futures contract on expiry, although few do, instead choosing to roll the contract...the fact remains that all the long positions on COMEX cannot be settled in gold.

2. As explained above (I suggest you read the whole article), Comex operated by the CME Group in the US is the primary futures exchange for Gold and is the trendsetter for Gold prices worldwide. They control the price on Comex and the rest of the world follows.

3. Since they (indirectly) control the exchange and its regulators (Crimex Comex and the CFTC), position limits don't apply to these guys. They're above the law. They can issue an unlimited supply of paper contracts whenever they wish to suppress the price and if required, can indefinitely roll over till the longs bleed dry. If you don't believe this, please explain how this happened.

Yes the longs can stand for delivery but most are heavily leveraged so few do. In a panic, even if it's manufactured, everyone bolts for the door.

4. If you have never taken delivery from the Comex, I suggest you give it a try. It's not easy. Even though the Comex is the primary price setting venue for Gold, the people in charge there have done their utmost to make it a huge hassle to take delivery. This is intentional. The promoters of Comex DO NOT want you to take delivery, but only gamble in their casino. If they win, great; if not, they can always pay you off in freshly printed casino chips (dollars) - just don't ask them for the Gold. If you did, the whole enchilada would come falling apart.

Disconnect Between Physical Gold and Gold Futures Price

But this manipulation is not without consequence and cannot go on forever, no matter how powerful they are. The bigger the manipulation, the greater the blowback. To explain this better, read the following (from one of my articles):

Anyone who has actually traded the Gold futures market for any length of time knows that this [manipulation] happens on a regular basis. So basically the government/Central Banks use the paper gold futures market as a price control mechanism for Gold (of course, they can't impose price controls on Gold overtly as it would reveal the lie - if Gold is a barbarous, meaningless relic why would you need to impose price controls on it?). But what happens when price controls are imposed on something? Shortages start to occur resulting in an even greater moonshot in price than would have otherwise occurred. A "black" market (which is actually the free market at play and depicts the true price of the commodity) eventually emerges where it sells at a premium to the official price. There are two reasons for this:

1. Buyers - aware that the commodity/good is available at a discounted price - beat a path to the door of whoever is foolish enough to sell it at the government mandated price. Availability at that price soon runs out.
2. The good becomes even scarcer as the costs of producing and selling it are no longer covered by the government mandated price. Aware of this, sellers withdraw from the market and demand ever higher prices for the good.

And remember: for marketable goods, the "out" is money, but the only "out" for money is a superior form of money. When the paper currencies become unstable, the only "out" is Gold so you can be sure there will be no lack of buyers, only sellers - and there is no upper limit to high it can go. Theoretically, the price will be infinity when no seller is willing to sell Gold in exchange for paper. You want to be "out" of paper before we reach that event horizon.

If the rigging in the futures market keeps continuing, the futures price at some point will decouple from the physical and become meaningless. This is exactly why you should use this opportunity to buy as much physical as possible at discounted prices while there are foolish sellers still willing to sell at the stated official (futures) price.

So short term the price can be influenced, but longer term it's still determined by the availability of the actual metal. There are strong hands and intelligent minds out there who know the truth and do not sell at every hint of a falling price. They care only about accumulating the physical metal, not about short term paper profits. In fact, many of them will NEVER sell; only buy whatever the price as long as this fiat money regime lasts. That is why the price has been rising for the past decade even with heavy manipulation happening on the Comex. Moreover, the Comex doesn't operate in a vacuum. If the price is suppressed there, the buyers - aware that it is available at a discount - will flock there and demand delivery. So if they try to force the issue in the paper futures market - as they have been doing recently - a break will occur in the prices being quoted on the Comex and the prices being quoted in the real world for the real metal as people dump the future contracts en masse and try to find the physical elsewhere. This will render the futures prices worthless. By some accounts, the Comex is already under increasing pressure for delivery of the metal. So much so, that if you look at the Gold stocks inventory report published by Comex, they have recently put this disclaimer ON THEIR OWN warehouse stock report:

The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.

For questions regarding this report please email Registrar@cmegroup.com or call (312) 341-3370.

I suggest you call that number right away because if they don't know what's in their own inventory, then who does?

So, to summarize: Due to rampant manipulation and rigging of the Gold Futures Market (also known as COMEX Gold or "Paper Gold" since what is being traded in the futures market are nothing but paper contracts to deliver Gold which can be created out of thin air in unlimited quantities and can be defaulted anytime, if the issuing entity is sufficiently large and powerful) by large financial institutions on behalf of Central Banks in order to maintain the regime of Fiat or Paper Money, the price of real Physical Gold is in the process of disconnecting with the futures or "paper" price rendering the latter utterly meaningless for those who wish to purchase the real PHYSICAL metal.

Today what you think of the price of Gold is nothing but the price of paper Gold. "What is the difference between the two? We are still getting the metal at the price we see on the COMEX, are we not?", you may ask. Sure, but the key word is still. Even today you have to pay "premium" to the futures price to get physical...When it all blows, these "premiums" will skyrocket and the price of physical WILL decouple from the official paper price as we already witnessed in 2008 - and this is the good scenario. Indeed, we may have a situation where there is no physical available at any paper price.

The futures market is nothing but a tool for the dollar managers (US Government/Fed/Bullion banks) to manage/control the price of Gold. Any rational observer with an iota of brain who has watched the gold market for any reasonable length of time can tell that the price is intentionally driven down during the Comex trading hours. If you don't believe this, either you're in denial or worse - collusion - and IT WILL end up costing you big time. Given the massive, concentrated and long-term (the entire past decade - they haven't been net-long - not once - during that time period) nature of their short positions, it really isn't that hard to deduce that the banks do not nearly have enough metal to cover their shorts and that the sole intention of the massive short position is to control the price. Whenever the price rises (or threatens to rise) the big bullion banks ala JP Morgan create massive naked shorts introducing fake supply of Gold in the market, thus driving the price down. "But the price has been rising for the past decade, hasn't it? So how can you say they are driving it down?", many people ask. Well, the constraint on the bullion banks has been the availability of the physical metal. If the metal is not available, the fraud of the paper market is exposed and they lose their price managing ability. So they allow the price rise to a level at which there are some weak hands willing to sell and then they hold it there till all the sellers have been exhausted...[Yet] So strong are Gold's fundamentals that despite the massive rigging, all they have been able to do is slow its rise. The weak hands who sell the physical metal at every price rise have helped them in this endeavor. But soon, as the bond market implodes, they will run out of sellers. Treat the availability of real metal at today's paper price a gift and buy as much as you can. To those who think that the Comex shorts will be crushed one day and the price of paper Gold will do a moonshot, to them I will say that you are dreaming. The Comex shorts will be crushed, but not in their own casino! If and when a majority of paper Gold longs demand delivery a force majure (who do you think the US Government will side with?) will be declared with cash settlements and/or offers of equally worthless GLD shares...What will happen to the paper price then? That's right - it will utterly collapse even as the physical's price is rocketing. Paper gold holders will dump it all to buy the physical - which, unfortunately - will most likely not be available at all.

Excerpted from gekkosblog.com

Price Tracking for Real Physical Gold

Currently the disconnect is already in process and the difference between the two prices is referred to as "premium" that you have to pay over "spot" (Gold futures price). But whatever the nomenclature, the fact remains that the paper Gold price no longer accurately reflects what you have to pay in the market to buy the metal. Hence, it is only appropriate that a new reference database/datasource be created that will accurately track and record in real time the price of real physical Gold.

This website is one such attempt to track the real price of Gold and expose the futures/paper price for the fraud that it is. Information regarding how "premiums" are calculated and how data is collected is explained in the "Data Collection" section on the left menu.

Data Sources

The data for the charts below is sourced from what the major Precious Metal dealers across the world are charging buyers to deliver real physical Gold to their own possession . It is important to note here that this does not include dealers/suppliers who are running some kind of allocated/unallocated scheme because until and unless the buyers have the metal in their hands, there is no guarantee that the metal has not been sold multiple times over or if indeed it even exists. The supplier may be able to provide a lower price for "the physical" if they are running such a scheme (and given today's rampant fraud in ALL markets, it is more likely than not that most are).

Timezone

US EDT (New York Time) is used as the reference timezone.

Comex/Futures Price Data

This data is sourced from publicly available sources providing the COMEX Gold price in real time. The price is updated every 60 seconds.

Physical Price Data

Currently the data is being obtained for the following Gold denominations:

  1. 1/2 Oz
  2. 1 Oz
  3. 5 Oz
  4. 10 Oz
  5. 100 Oz
  6. 400 Oz
  7. 10 Gram
  8. 20 Gram
  9. 50 Gram
  10. 100 Gram
  11. 1 Kilo

This data is obtained from dealers displaying price data for their various products online and updating it on a regular basis.

Old Data Collection Methodology (13-Jun-2013 to 23-Aug-2013 5:15 p.m. US EDT)

Initially, when the data collection began (on 13-June-2013), data was obtained from a single dealer whose price I determined to be lowest one out there for a given weight denomination irrespective of the brand/dealer. Divergence (premium) was calculted by subtracting the comex price from it and both the raw premium and a rolling average for the same was displayed.

Current Data Collection Methodology

Currently, as of 25-Aug-2013 6 p.m. US EDT, data is being collected from multiple dealers for a given product. Data for only the lowest price in a given weight denomination for a particular dealer is collected. For example, if APMEX has 2 products in the 1Oz category, only the data for the cheaper product will be collected. The premium chart displays the premiums for all the dealers and also an average of all the dealers. There are options to display the premium as a rolling average, a percentage (rolling average) or raw data.

Both old and new data will be available for display. Physical price data before 20-Aug-2013 is only for a single dealer and was collected at an interval of 15 minutes. It is now collected at an interval of 1 minute.

Multiple Currency Display

All price data can now be viewed in any currency of user's choice. FX rates are updated in real time.

Input From Readers

Since there are many dealers with a multitude of products, it will be extremely helpful if readers can provide assistance with identifying the product/dealer offering the lowest price for a given product denomination at any given time. Hence, there is an option to submit the URL of any alternate provider that you are aware of on the chart page. Please only submit the URL if the dealer/product satisfies the following three conditions:

1. The price must be lower than the price of the physical product being currently displayed
2. The product must be available for immediate delivery (no longer than a week).
3. The price data must be available online and updated regularly (this is usually the case when a dealer is selling online, but there may be exceptions).

Disclaimer: The products/dealers used as reference for the physical price for different denominations are simply on the basis of the fact that it is the lowest available price online (that I was able to find) for that particular denomination and dealer. This site has no relationship whatsoever with any of the dealers whose products are listed.

Premium Calculations

Premium is calculated by subtracting the Comex price from the physical product price. Since the Comex price is quoted in $/troy ounce, the "premium" for the one ounce product is simply:

Premium = Price of 1 Oz physical product - Comex price

For other denominations, the Comex price is multipled by a suitable conversion factor and the difference calculated. For example:

Premium10 Oz = Price of 10 Oz physical product - (10 x Comex price)



Premium50 Gram = Price of 50 Gram physical product - (0.032151* x 50 x Comex price)

We can do it the other way round as well, i.e., converting the physical product price to one ounce and then doing the subtraction. If you want to see it that way, let me know (my contact info is in the "Questions/Feedback" section). If there's enough demand, I'll do it that way.

For more details on premiums and how they are displayed on the chart, please refer to the Charts Guide section.

Data Collection & Storage

Full time data collection began on 13-Jun-2013, so the charts begin on that date. Data has been and will be continuously collected beginning from that date (except weekends when the market is closed).

The data is persisted on a multiclustered server. Best efforts have been made to ensure accuracy and consistency of the data. Although best efforts have been made to ensure 100% availability and reliability of this website and its data, here - as in life - there are no guarantees.

* 1 gram = 0.032151 Troy Oz

Charts Guide

1. Gold Price Display

Although the minimum resolution for the data collected is 60 seconds (1 minute), that amount of data cannot be feasibly displayed on the chart for timeframes longer than a day. Hence, for display purposes, the data is sampled (NOT averaged, except for premiums - pls refer to next point) at an appropriate rate. Hence you may see consecutive points on a chart separated by more than a minute. This in NO WAY affects the accuracy of the data displayed. Each and every Gold price (both Comex and Physical) is an actual trade price. The current sampling strategy is based upon age of the data. More datapoints are displayed for newer data and lesser for the older data. The sampling strategy is currently evolving so as to display an optimal number of datapoints for a given time range.

Also, since the data is now being collected for multiple dealers for a given product category, the "Physical Price Graph" displayed above the Comex price graph is simply the lowest price among all the dealers for the given product.

2. Premium Data Display

Premiums data is more detailed in display now. Premium chart shows the data for multiple dealers in any given product category. Data for each dealer is displayed in a separate color. Also, there is an Average data series (filled graph) which is simply the average for a particular instant of time calculated by:

PremiumAverage = (Sum of premiums at any given instant)/no. of dealers from which data is obtained

Also there are now four modes for premium data display :

  • Premium (Avg): In this case, in order to display a smoothed graph, a rolling average is calculated for data from each dealer and also the "Average" data series.
  • Premium as % (Avg): In this case, premium percentage is calculated by dividing the premium by spot price for each dealer as well as the "Average", i.e.:

    Premium% = (Premium/Spot Price) x 100



    A rolling average is then calculated to smooth the graph.
  • Premium (Raw): In this case, raw premium calculated by subtracting the Real price from the spot price is displayed as such.
  • Premium as % (Raw):In this case premium % calculated is not smoothed and displayed as such.

3. Although the charts are pretty intuitive to use, still if you need more description, please refer to the labeled screenshots below:

1. Gold Price Chart


2. Premium Chart

Real World Price Discovery

This section needs more work. You can keep entering prices though!

In order to facilitate the discovery of the real price of physical Gold, we must ask REAL people what price they are willing to buy and sell PHYSICAL Gold instead of anonymous computers and algorithms controlled by anonymous entities operating in fraudulent, manipulated and controlled markets like the COMEX.

This is one such attempt to establish the real Gold price in the real market. Using the form below, please submit what price (in USD) you are willing to buy/sell Gold for a given denomination. As of now, anybody can submit a bid/ask; there is no need to register/login to place a bid/ask as currently the site does not plan to facilitate actual trades between people. Hence no identifying information is collected on who is placing a bid/ask. This is just an experiment for informational purposes only.

That said, if you would like to perform actual trades, please let me know in the "Questions/Feedback" section. If there is enough demand, I will try to implement that functionality.

Your help is required to enable true price discovery, so please do not submit frivolous bids/asks. Any bids or asks that seem frivolous will be removed.

Bid (Buyers) Ask (Sellers)

Contact/Questions/Feedback

If you have any questions whatsoever regarding the site or any suggestions or feedback - such as a new feature or improvements in existing features or something I'm not doing right, please do email me at the following address and I will respond at the earliest:

You feedback is extremely important as otherwise I will have no idea what sucks and what works.

The site is free to use and the goal is to create awareness, so the more you participate, the more everybody will benefit.

If I get a lot of questions, I will create a FAQ and post them here.

Cheers!

©2013 - Gordon Gekko's Blog