On the heels of tremendous volatility in key global markets, today a 42-year market veteran warned King World News that there is something incredibly important which investors absolutely must be aware of in case there is a “catastrophic event.” Hathaway, who is one of the most respected institutional minds in the world today when it comes to gold, and whose fund was awarded a coveted 5-star rating, also discussed what this means for major markets, including gold.
Hathaway: “Right now I am focused on this bedeviling issue of the paper gold vs the physical gold market. Paper gold may be setting the price, but the abuses in the paper market are just staggering to me. For example, on Tuesday we saw 17,000 contracts sold in the space of a few minutes (which hammered the price of gold). That’s around 2 million ounces of gold….
“These guys don’t even have to borrow the gold to sell it. It’s probably a couple of bullion banks, and they use their balance sheets to justify the leverage of selling gold they don’t possess. In some ways this is just a travesty. We have entities moving this major market and making leveraged bets, but they do it without having to take physical possession and short the way you would do it on a normal exchange.
So they just wreak havoc in the gold market and damage investor psychology, but it will come to an end. This is a continuing story that has to be watched. Aside from the macro issues that surround gold, I think the chain of custody, the paper trail between derivative paper instruments and the real metal, is of great interest to me.
This (the paper market) is something that potentially breaks down as more and more large entities and investors decide that they want physical gold, rather than some paper claim. I also still believe the June low in gold was a ‘hard’ low.
Continue reading the John Hathaway interview at KING WORLD NEWS