A large short-term paper smash operation is going on right now, as banks are scrambling for physical gold and seeking to close out their short positions before the next implementation of the Basel III rules later this month.

It is having little effect on the price of physical metal. For the week, spot gold is down 2% to $1863, silver is flat at $27.85, platinum is down 1% at $1158, and palladium is down 1% to $2807.

In the past 1-yr, gold is up 8%, silver is up 59%, platinum is up 40%, and palladium is up 44%.

Precious metals demand is not going away. While economists argue whether we will see inflation or deflation, physical gold and silver look positive with either outcome.