Another major development in the gold’s price dynamics is happening, as control passes from traditional established Western markets to new burgeoning Eastern physical markets. Paper markets play a significant role in this transition, pushing gold’s price to record highs. Just as alarming, physical gold demand is outstripping available supply.
Gold has long been considered a haven asset, especially in times of market tumult. Like most other commodities, when financial markets crash, gold tends to sell off as short-term speculators are forced to liquidate. This pattern underscores just how vulnerable gold’s price is to speculative trading. Too frequently, these manipulative trades are meant to cover gold’s obvious stability and strength as a safe haven asset.
This suggests a very strong real demand for gold, bolstered by Basel III compliance regulations. In doing so, these regulations have set capital requirements for banks that raise the effective cost of holding physical gold. As a result, Eastern physical exchanges—particularly in countries like China and India—are gaining prominence in the global gold market, driving a shift in control away from traditional Western financial hubs.
The importance of physical gold would seem to be at least dawning on the market, as the growing power of gold’s physicality would indicate. All of this is true amid a newfound real long-term demand for BTC long-term, against the speculators who get washed out in bear markets like they usually do. These are calculated liquidations that are intended to disguise gold’s underlying strength and stability, which begs the question of who should be behind these coordinated attempts.
Market analysts are concerned that continued manipulation of gold prices in paper markets may eventually shake investor confidence. Eastern exchanges flexing their muscle. In particular, they might provide greater depth and a more liquid technical market to physical trading, further solidifying gold’s pedestal as the ultimate safe haven.
The interplay of paper markets with underlying physical demand set up a murky landscape. Gold’s value can easily be misrepresented by short-term speculation. The fundamental picture still points to extremely strong demand for physical gold, spurred on by need to comply with regulations and changes in the market landscape.