GOLD - What's the price of "paper" Gold and physical Gold?

FX:XAUUSD   Gold Spot / U.S. Dollar
766 7 4
Recently I read a lot of comments and discussion about the "real value" of Gold             , the supply-demand in physical and in "paper" gold             . Some argue, that while phísical gold             mkt has probably a huge demand (mainly from China, India and Russia recently), the price of gold             is still falling, which they see is not reasonable.
Let me point few things:
1. There is difference between buying and own spot physical gold             versus "paper gold", like GLD             , futures contracts or other gold             related ETFs with no real gold             back up. But this difference will only has relevance if things in fiat ccy systems, or in global economy or commercial system really turn bad. Then those who have physical will win, but those who have it as a certificate or "paper" won't be able to use it. However until such an end-game scenario the difference doesn't really matter, what's more owning the physical Gold             actually costs lot more as you have to securely store it, deliver it, etc.
2. What about the Price? Well the Price is more or less the SAME! It can not be different, as that would be arbitrary. So what one has to pay for buying physical gold             is the same price one other pays for a futures contract or ETF (- costs and management fees charged in case of gold             funds).
The real difference in between the two (physical and paper) is the ability of LEVERAGE. That's what confuses a lot of people, and that's why you can never really tell what is the real value or fair Price of Gold             as a commodity.
For example Hedge Funds or Banks can open really high leveraged positions thus pushing or sometimes maybe even manipulating Price of Gold             in any direction.
The conclusion is even if someone thinks Gold             as a commodity in long term should value a lot more than now, we can not deny the trend of the Price, and actually we can not see where and when bearish trend will end. No one should buy Gold             just because it "looks cheap". Buy when you are more certain about it will get a lot more expensive: means when the trend reverses.

Daily: Still bearish trend , bearish Ichimoku picture. The idea of buying at channel low was ok, but we haven't yet seen a real follow through as Price got stuck in a triangle. If today it close will be higher then it will have a good chance to break on the upper side bringing some further short term bullish pull back. 1195-1205 is the Key support/resistance zone now.

4 Hrs: Nothing special here, looks rather sideaway. As you see Price should break and stay above upper key level 1170-1175 to have chance for a counter trend move. Lower key level is 1148-1150 (and 1135 as local low)

p.s.: Swiss Gold             referendum is getting closer. If anything, I will be rather a buyer of Gold             until end of November, as I doubt speculators will be strong and brave enough to push it a lot lower... who knows how swiss people vote.
thank you for this good analysis
Thank you for explanation. Realy interesting.
Many thanks Kumowizard,
Good analysis...
Hi man, i have one comment here, I believe there is no leverage in the spot market, the leverage is provided by facilitators of the trades such as a broker, however in a real exchange, products are traded without any leverage.
+2 Reply
Kumowizard Technician
Yes, of course the leverage is on the futures mkt or through leveraged ETFs. What I really wanted to say here is that e.g. a Hedge Fund could not trade in such a size if it had to trade physical positions, or 1:1 cash positions, instead of 1:10 or 1:20 leverage with margin.
If you look at the sizes going through futures mkts sometimes, are really insane.
+2 Reply
Kumowizard Kumowizard
Anyway, the main issue is really the trend itself and the changes in Price action (reflected in indicators too). The rest about a "fair valuation" or expected future Price of any commodity or any other instruments is just pure guessing and presumption.
+1 Reply
Technician Kumowizard
Yep.. I think the term "fair value" is something that doesn't exist in reality, because the price of any product is consistently discounting future expectations, hence, always evolving.
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