"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, October 11, 2013

Investment Demand for Gold in the West continues to Weaken

Love or it hate it, the largest gold ETF on the planet, GLD, is still one of the best, if not the best indicator of the size of Western investment demand for the yellow metal.

As noted here many times now, the reported gold tonnage in this vehicle, continues to sink.

You thus have two key indicators here in the West, GLD and the HUI or index of gold shares, both of which are telling us that gold has fallen out of favor with the investment class. Whether we like this or not is immaterial. It is a fact and reflects the sentiment towards gold here in the West. To be successful at trading one must learn to accept what the market is saying even if you disagree with it. That means becoming a hard-nosed, thick-skinned realist and tuning out anything to the contrary.

When sentiment turns, you either turn with it or lose money. It is really that painfully simple.

Now, you may be correct in the long run and your view may ultimately be vindicated, but you could end up broke by then. Let the market itself speak to you and tell you when it has come around to your way of thinking. Otherwise, you are apt to look as foolish as someone spitting into a hurricane. It may make you feel better than you are defiant and standing tall, but all you are going to end up with for your effort is a wet face, courtesy of yourself!

Here is a chart of the total tonnage of GLD. Notice how it continues to sink lower and lower. Until this disgorging of gold is over and the trend reverses, rallies in gold will be sold. While Asian demand will be strong, in and of itself that is insufficient to reverse the disgorging trend here in the West.