In case you’ve been living under a rock, this morning (8/19) gold reached a new all-time peak of $1878.00 per troy ounce. Rumblings of backwardation (a kind of market price inversion where a premium is placed on real gold versus paper gold) have come to the gold market.










What happened? Venezuela’s central bank owns more than 300 tons of physical gold, but 211 tons of that is held overseas in European vaults. Venezuela’s dictator has issued a call for the actual physical gold to be brought home from Europe so that it can be deposited in vaults inside Venezuela.

This shouldn’t be a big dealĀ if Venezuela’s gold really is in the European vaults. It shouldn’t cause a scramble for physical gold. But it WOULD cause a scramble if the gold had been secretly sold into the market by unscrupulous bankers, and all that was left behind was an IOU. IOUs like this are called “paper gold.” When Chavez made the announcement two days ago, gold was at $1780.00 per ounce. As of this writing, it is at $1851.00. A large buyer of physical gold appears to have entered the market.

Has Chavez’s government asked for a list of bar serial numbers?