Thursday, September 22, 2011

Gold: Jonny Bahrain And Price Plunge

Reader "Jonny Bahrain" just emailed me this note:

Hi Robert,

I thought I would share the following story with you and your readers:

Yesterday I went to the Souk (Arabic for market) in the centre of the capital city Manama to buy some gold.

In a particular area aptly named the Gold Souk there are lots of shops that sell only 18-24kt jewelry, jewelry makers, precious metal castors, goldsmiths and a couple of bullion exchanges.

I always go to the same bullion shop as it is owned by Mr Bhatia (who is always the only guy in the shop) and who offers the lowest spread between what he'll buy and sell at, but I forgot it was closed for afternoon 'snooze' time (1pm to 4pm), as are all shops in traditional areas of the country (FYI they open again from 4pm till 9-11pm, which is pretty convenient).

So I went to other jewelry shops just as they were closing and they told me there are no 1oz bars in Bahrain - they've run out!!

Suspecting this was a cunning ruse to try to make me buy whatever sizes they had I went away and came back to see Mr Bhatia only to be even more stunned - he had no gold for sale at all, and no 1kg bars of silver either!!!!!

Without sensationalizing the story too much, I think he may have been anticipating a price surge following the FED's announcement of Operation Twist and so did not want to sell at a lower price but cannot be sure. The alternative is he genuinely has run out from some combination of high demand and supply constraints.

Either way it is a shocking thing to be told there is no gold for sale from my trusted supplier - I was imagining the day when I go up there and no shop is offering any gold for sale at all <gulp>

In the end I went to the an FX exchange that sells gold and bought a 20g bar and a 1 Tola (Indian measurement that equals 11.664g), which together make 2% over 1oz.

end Jonny's note has a decent (not perfect) widget on their home page.  I just checked it (6:15 PM ET 22 Sept. 2011) and the premium is a VERY HIGH (for them) premium of 12%.  Normally, the premium to spot is typically between 6% - 8%.

Jonny above mentioned that *maybe* some vendors may not want to sell after the plunge of the past couple days, thinking that they may sell for less than for what they bought their gold.

I am on the road now (going to see my niece get married this weekend), so I am not able to check the two coin shops I use for my gold purchases and so cannot (of course) see if there are any shortages of gold.

I can say that last I checked (yesterday?) Tulving that he had NO gold kg bars...

So, I put out a call to my readers:

Please advise if you have seen any shortages of gold!


Regarding the plunge in gold prices, my GUESS is that there are two things going on here:

1)  Gold is being sold to raise funds for recent stock market losses

2)  Yeah, probably some manipulation going on...

As always, your congenial host would suggest that you go to for his remarks (and insightful commentators) for their ideas and comments.

Plunge, schmlunge!  Gold has these ups and downs all the time.  I have been a buyer for decades and have seen this kind of action a lot.  If you can, take advantage of what TPTB are doing for you, the gift they are giving you...  Allowing you to buy gold a better price than a few days ago.  Take the gift...


  1. Colorado Gold looks pretty normal. Their widget does not mention more than nominal delivery delays, or outages. They have been out of platinum forever, it seems.

    Oh wait, they have a banner at the top of the page:
    "Krugerrands at 2% over spot. Generic silver rounds are gone!"

    As for the various paper derivatives, I am hoping for a bounce so I can get out of my own paper long positions.

  2. I'm hoping for a bounce too. Once I sell, I don't plan on ever trading again.

    My local shop was busy today...all buyers and plenty of product. I didn't think I would see these prices again! Thanks for the temporary PM crash, slave owners!

  3. Your story contains the answer to its own question. No savvy seller is going to stock up when prices are falling, it's a dumb risk.
    Not having been at this for decades for most of my stake, I'm staring at some horrible losses in gold and sliver right now. Way over double what I normally set a trailing stop on for trades. If/when I get back to green, I'm probably going to cut to my core holdings only once again - this religion of gold is making fire come down on the wrong altar. Just when you need it, this haven isn't safe at all - nothing else I own has fallen as much, in truth. About the only worse performer now is copper/FCX -- but my normal trailing stops took care of that with far less loss.


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