Rob Kirby (Kirby Analytics) provides financial advice and sometimes helps broker the sale of tons of gold for big buyers and big sellers of physical gold.
Kirby was recently interviewed by Greg Hunter (video below).
In that interview, Kirby implicitly admitted that the Asian price for relatively small quantities (ounces or pounds) of physical gold is still consistent with the West’s price for paper gold seen in markets like COMEX. That’s no surprise.
However, Kirby expressly declared that the Asian pricing mechanism for large quantities (tons) of physical gold has divorced itself from the western world’s pricing mechanism for paper gold. According to Kirby, tons of gold are hard to find in the Asian market, but if you can find tons of gold that are for sale in the Asian markets, you should expect to pay at least 50% more than the spot price of paper gold.
For example, if the spot price of paper gold in the western markets is $1,200 per ounce, you can expect to pay at least $1,800 per ounce for tons of physical gold in Asia.
• Kirby does not clearly explain why the Asian price per ounce of tons of physical gold is enormously different from the Asian price for ounces of gold. On the face of it, that difference seems irrational. I.e., everyone expects to buy for less whenever we buy in mass quantity. Therefore, if anything, we should expect that if we buy tons of gold, we’d pay a lower price per ounce that if we only bought one-tenth or one-half of an ounce of gold. But according to Kirby, in Asia, you currently pay less per ounce for small purchases of physical gold than you would for buying tons of gold.
Why would this seemingly irrational price inversion take place?
I suspect the answer might be something like this:
Asian “insiders” believe that the price of all gold is about to rise by at least 50% in the near future. Therefore, the “insiders” want to buy tons of physicial gold now, while the paper-gold price is artificially suppressed, in anticipation of an imminent upward spike in the price of gold.
Current circumstances (an artificially low price for paper-gold and an expectation for a sudden, significant rise in the price of physical gold) certainly favor those who would like to buy gold cheap. Right now, physical gold (in small quantities) is spectacularly cheap. That’s great for buyers of physical gold, but not good for sellers.
China is a net buyer of tons of physical gold. Current cheap gold prices (as set by the West’s paper gold markets) are great for China because they allow China to buy more gold for less money. Therefore, so long as China is a net buyer of tons of physical gold, China doesn’t want the West’s price/ounce of paper gold to rise.
Why? Because the West’s price for paper gold is being used to calculate selling price of the tons of physical gold purchased by China.
Therefore, it would make sense if China kept the Asian price for small quantities of gold (ounce or pounds) equivalent to the West’s price of paper gold since that artificially low price allows China to purchase tons of gold from the West at fire-sale prices. I.e., the continued buying and selling of small quantities of gold by the “little guys” in Asia would help to suppress the price of tons of physical gold purchased by Asia’s “big boys”.
Therefore, in order to keep buying tons of physical gold “on the cheap,” the “big boys” might not want the world to know that the “real” price of physical gold should be at least 50% higher ($1,800) than the spot price for paper gold ($1,200) on COMEX. Thus, the “big boys” in Asia might be secretly buying and selling tons of physical gold for at least $1,800/ounce.
Kirby didn’t say so in the Greg Hunter interview, but it’s worth noting that there’re reports that China has recently reduced the quantity of gold it’s purchasing. For example, on August 14th, A.D. 2014, Bloomberg published an article entitled “Gold Demand in China Slumps 52% After Buying Frenzy Subsides”. Generally speaking, most people interpreted that slump in China’s purchasing of gold as evidence that gold (at $1,200/ounce) was overpriced and therefore demand and price should fall. That interpretation might be true–so long as the price of tons of gold still works out the $1,200 per ounce.
But. It’s also possible that China’s reason for purchasing fewer tons of gold was based on the per ounce price of Asian gold having (secretly) risen to $1,800 an ounce. I.e., China will buy all the tons of gold it can find at $1,200 per ounce, but not so many tons if the price works out to $1,800 per ounce.
If this speculation turns out to be true, it means that:
1) The real price of physical gold purchased by the ton is 50% higher in Asia than the price of paper gold in the US;
2) The supply of tons of physical gold bought and sold for $1,200 in Asia has dried up and disappeared. No one who has tons of gold will sell for less than $1,800/ounce. According to Kirby, even tons of gold priced at $1,800/ounce have virtually dried up. That means that sellers are reluctant to sell their tons of gold for even $1,800/ounce—which implies that the owners of tons of gold believe the price/ounce for physical gold should rise considerably higher than $1,800; and,
3) Soon, the price of even small quantities of physical gold purchased by the ounce around the world (even in the US) is likely to follow China’s lead. If so, the price of physical gold should diverge from the price of paper-gold and begin to match or even exceed Asia’s per-ounce price of tons of physical gold. After all, when you buy large quantities of anything, you should get a price break. Small quantities cost more per ounce than large quantities. The price/ounce of a one-ounce bullion coin should naturally be higher than the price/ounce of a ton of gold bullion. If the free market price of tons of physical gold is, say, $2,000/ounce, then the free market price for a one-ounce gold coin like the Gold Eagle should be, say, $2,200/ounce—maybe more.
The one question behind all of this speculation is this: Is Rob Kirby’s claim true that Asians are already paying a 50% higher price/ounce for tons of gold?
I have no way of knowing.
But I do know that Kirby has been in the gold business for a number of years and is generally respected for his intellect, contacts, and credibility. I believe Rob Kirby couldn’t tell a lie of that magnitude of the claim we see in his video interview, without losing his credibility and probably his business.
Of course, he might’ve made some kind of mistake. If he did, it’ll be tough to live down. But I don’t believe he’s lying.
More, we can gauge whether Kirby is lying or not from his demeanor in his interview. As I view that video, I don’t think he’s lying.
Finally, Kirby’s claim (that Asian buyers of tons of gold are paying at least 50% more for tons of gold than the spot price of western paper gold) is so extraordinary, so explosive, that we can expect other sources to soon confirm or deny Kirby’s claim. I don’t expect everyone to agree that Kirby is right or wrong. I expect to see a conflict between claims of truthfulness or lies. But I do expect that the truth—whatever it is—will out soon enough.
If it turns out that Kirby’s claim is true, the price of gold (even for the little guys buying or holding ounces) might be expected to rise dramatically within the next several months. Kirby hints that a dramatic rise could even take place before the end of this year.
Here’s the interview: