Typically, when PM prices rise, it becomes more advantageous to expand mining operations and exploration. That appears to be going on, and I think there is some modest new deposits being brought to market, and there may be some release of mining company reserves when prices rise, so some demand could be easily satisfied without bumping prices, but prices should be rising more than they are IMO.
I think you are right this is the same sort of price manipulation you are seeing in the Silver market. They just flood the market with Naked Shorts, and then buy those contracts themselves. The people who invest in Gold ETFs and other paper gold are going to be paid in fiat. There have been numerous cases lately where physical deposits were demanded ( ones upon which people paid for physical storage) and had to be settled for fiat because the bank couldn't deliver. These aren't small fry banks- this is Goldman Sachs etc.
Further the biggest store of gold is in people's dressers. In bad economic times a lot of "junk" Gold - jewerly etc is
getting reclaimed as people go to the "cash for gold" place and get screwed. Scrap gold makes up at least a third of the supply - and as prices rise, more people are parting with it. The article indicates that current sources of scrap gold are drying up, but that new ones in
Italy and other strapped Euro countries as well as in the US are begining to produce more.
Also Gold is like Oil. We know where a lot of it is, but for years it wasn't profitable to remove. Now it is, but also like oil, it takes time to ramp up, and you don't do that if you expect prices to fall before your production can be started.
But the real factor is that we haven't reached the point where the majority see the Gold as money. Hell, we haven't reached the point where the majority see that the point of no return has been crossed. Even if buying gold, they by and large don't demand physical possesion and take the world of people who say they have it "safe"- its paper, and eventually those contracts will be worht only the paper and ink.
It is entirely possible that bullion may never be money again - the sheep might just accept the new blue currency and go on as before. Countries who are buying want to acquire as much as they can at the low price, so they can't demand physical faster than its produced - so they don't. The key thing to watch is the physical "premium" - I tend to watch APMEX $500 junk silver bags - as that is the cheapest and most recognizable bullion available. . If there is a real physical shortage ( like after the 2008 crash) they simply won't have junk silver or anything for sale - it will all be "backordered" -- right now we have a medium/low temp on physical l demand- I have seen premiums as much as $0.50 an ounce on Junk silver at APMEX - much higher than they start having the "shortages" - right now the premium is around $0.20. Point is its a quasi proxy for physical demand. The lowest I have seen is $0.10. If you buy a bag of junk silver from Apmex they remember and send you offers to buy it back if they are running low.
The Price won't skyrocket until its obvious that a recovery is not on the horizon, and a real run on physical starts. The big players know what is going on, but they don't want to start a run.. they will acquire at manipulated prices as long as they can, and will buy only so much as the supply will allow at that price.. There is no point in bidding up the price in hopes of getting more physical than can be supplied in the first place. Better to play the game and milk the cow till the cow is slaughtered by other forces. Same as we have been doing. Silver is almost to my "Dip Price" again now. Buy more. Sit on it. Wait for the next dip. Repeat.
