from Zero Hedge
Over the past decade, one of the most fascinating observations in the world of precious metals has been the bizarre decoupling in the supply/demand dynamics and thus pricing, between paper and physical gold.
As gold became increasingly financialized in recent years – through futures, ETFs, derivatives and so on – and as the impact of “financialized” gold became the dominant price-setting factor in a world where the nominal volume of “paper gold” traded is now orders of magnitude greater than “physical”, a bizarre decoupling emerges every time there is a major market stress event. A pattern that has emerged is that during periods of “bathwater” liquidation, when levered asset managers are forced to dump paper gold to cover margin calls in different parts of their book, sending the price of gold sharply lower also happens to be when physical gold buyers step up amid concerns over the viability of either the financial system and/or the reserve currency.