http://traderdannorcini.blogspot.com/2014/05/gld-reports-big-jump-in-gold-holdings.html
that the initial 8.4 ton increase occurred on May 27th, when gold experienced a $30 drop in price.
Since that day, GLD has remained quiet in terms of any reported changes. Today, they finally issued an update and that update contained another increase, this time it was a 1.8 ton increase.
I maintain that if this trend continues, it will be quite positive for securing an eventual halt to the move lower in the price of gold. Clearly some Western-based interests are interested in securing gold near current levels. Keep in mind that this slight increase comes on the heels of another $20 drop lower in price so someone is actually practicing the old adage ( which seems to be less and less the norm in our modern markets ) of "Buying Low".
Here is the chart updated to reflect the increase over the last week or so. It is still down 11 tons or so from the start of the year but at least it has stopped the bleeding.
This continued build, albeit a modest one, is the first real sign of something friendly that I can see in regards to the sector in general. While the mining shares as evidenced by the HUI and GDXJ charts are not encouraging, if the big gold ETF continues to garner some buying, it might give some bears pause for thought in regards to becoming too aggressive both in the shares and at the Comex.
What will be needed however is for those abovementioned shares to show some better technical price action on their respective charts.
Do not forget that we have two big items later to deal with however. The first is the ECB meeting on Thursday and the second is the monthly payrolls report. One or both of these occurrences could result in some bigger moves in the metal.
Well so far my forecast for a vicious bear market rally in GLD has not materialized. I guess we'll have to wait until Thusday when Draghi opens up his pie hole. I'm guessing that the first knee jerk reaction will be to sell gold, but once it completes its measured move it will probably spring back up and end up being a fakeout. Same with XAU and HUI.
ReplyDeleteIf I'm wrong, I'll be the first one to stick my neck out and say I was dead wrong and apologize for my error.
I will not repeat over and over "But wait! Any minute now! The manipulators are going to get carried out on stretchers!", LOL....
Now they have the Trio Fantasticus at KWN: Leeb, Turk and Embry.
DeleteEvery time any of the three opens their mouth spewing nonsense, and mentioning $50000/oz, gold goes down. With all three of them, we might get a huge hit. Damn their eyes! I wish they'd shut up already.
Never follow the advice of someone who has some interest in the business he is advising about.
DeleteThat's clearly the case for Turk with his GoldMoney and huge commission rates when you buy physical silver, not to mention the storage costs.
I protected myself (paper) in time regarding gold (crashing through 1500 $), and bought it (physical) at sub 900 € mostly between 2007 and 2009.
But about Silver I, too, listened to the mermaids of several counselors around me.
After silver started to correct from the 50 $ top, 30 $ was a total bargain price on the long term, every single of those guys agreed (money managers, fortune money managers included). It was unthinkable that silver could remain under 30 $ for any long period of time.
So I didn't hedge my physical silver position.
I'm underwater with it right now, fortunately, it represented at the time 1/3 of my PM long position, the 2/3 other was gold. But still...I was accumulating on the "bargain prices" like a newbie. Should have known better.
On the paper side, I was more or less ok : I started t buy on the frenzy pre 50 $, so I bought first at 36 $ then 41 $ two long future contracts, then luckily sold one of them at the top very close to 50 $ (some of my wiser trader mind was still working somewhere). That was the time where you could hear 300 $ silver soon and Hattaway saying that he didn't want to see silver at 100 $ or he would have to sell it, as he didn't like parabolic booms (his brains were also working fine!).
I saw prices drop down back to around 36, then bounce once more. I bought once more near 40, and sold all paper positions when we broke through 36 once more...but reaching 30-31 $, I accumulated on the physical side.
And didn't hedge it when we broke to the 20 $ area.
Couldn't imagine that silver would retrace down sub 20 $.
Most pessimistic forecasts were considering a low near 23 $ before a big bounce. Hahaha. Silver is under 19 $ today.
Even though I started to short silver on the paper side under 25 $, it was a small position compared to the physical, and I left it around 20$ to try again to push on the long side here and there. So I'm a loser on silver for now :)
"A good bit of advice that I have learned the hard way is to never make predictions. Those are just guesses when all is said and done."
ReplyDeleteEvery and each of the few successful traders I know seem to share the same basic mantras. I guess it is for a very good reason.
Follow up on my copper trade : I'm carefully buying another 20% at sub 312, as my line was too large initially for my own comfort (my mistake) and we are pretty much rangebound between 310 and 320. This time, though, my indicators seem to be a bit more friendly to a breaking down of 310 towards lower levels, but you never know, so with still 60% of my initial short position taken at 318.50, a stop loss now at 319 and 40% profit taken at 314 then sub 312, it's a nice little profit secured already and with only the possibility of further gains.
Next target : 290 for another 20%, and the remainder 40% for the end of the world collapse :)
Not to boast about my trade here, once more, just to show how I'm always trying to keep my losses and risk minimal so that my trade quickly becomes a win or no loss trade. This is how I manage it most of the time.
Have a nice day all,
I remember when u put the red metal trade on Hubert; I do not think u took more than 50 pts heat for more than 2 hours or so; nice play!
DeleteThe ECB is for sure going to ease
ReplyDeleteDan - I'd like to thank you for your detailed/logical thoughts. I find your objectivity refreshing and instructional. I also appreciate your generosity in sharing those thoughts and I hope that you find some of the comments which come back constructive. In that context I wanted to give you the thoughts of someone who is quite bullish on gold, but who maybe has a slightly different perspective to most of the others who post here.
ReplyDeleteI'm an investor in the UK who tries to take long term positions (several years) based on macro considerations. I believe that most markets across most sectors and many geographies are heavily distorted by record high levels of cheap money. Good investment opportunities for LONG TERM investors in these artificial times are very hard to find, but, I believe, currently include precious metals - especially gold and silver (both the physical and the equities). This is particularly the case as the price of the commodities approaches average production cost. (FWIW for Silver I estimate that to be around $16/oz and Gold it's around $900/oz). I have been a buyer of physical gold over the last few weeks and plan on buying more as the price (likely) weakens. I've found it hard to work out my entry strategy but have been helped by the comments made by various traders. FWIW I took about 30% of my target position around the $1280 level, intend to buy 30% more if we get to $1200 (which I think is likely), and buy the remainder thereafter (especially should we fall below $1100). I have no idea where gold will go over the next 12 months but think it's good value below $1300, and a bargain anywhere near $1000. Should it go below $1000 I may actually allocate 130% to it (assuming I still have the nerve!) Your thoughts have helped me to develop my strategy and pick some of my price targets.
Why am I buying gold/silver? (1) I have made good money in the past from long term investments in physical commodities and their equities by buying near their low point in their market cycles (I did it when oil was at $10 and also with gold at $300). I am not so smart to anticipate precise market movements but know that supply:demand relationships always oscillate and overshoot (both to the down and upsides) and if you have the patience to take long term positions in any commodity sector when it is trading close to its cost of production you can make good money. I also believe there are specific issues with the supply:demand relationships in the Gold & Silver markets (especially silver) which could cause strong price appreciation. (2) I increasingly believe that true diversification in an investment portfolio requires some tangible items. I am not yet a full disciple of Harry Browne but I like many of the qualities in his Permanent Portfolio. Taking a 10%+ position in precious metals would seem a sensible and necessary diversification strategy for anyone managing large investment positions. (3) I am fearful that global credit levels and financial derivatives are out of control and a potential house of cards. Nicholas Taleb calls debt the ultimate black swan. Global credit excesses are well above 2007 levels and nothing has really been done in the last 7 years to prevent credit crisis contagion. PMs are an insurance policy with minimal counter-party risk. With most insurance policies you hope you never have to claim, but owning them helps you sleep. Finally, (4) whilst inflation is officially low at the moment the long term history of all currencies is that they are always debased. I care not whether there is inflation or deflation, or how honest the reported figures are. The passage of time is sufficient to justify owning something of real monetary value whilst the lunatics continue their fiddling with paper.
ctd....
Mark H; very cold-blooded and sound thinking on your part; well thought out and unemotional
DeleteMark H;
DeleteThanks so very much for taking what must have been a fair amount of your time to write such interesting and refreshing comments. Welcome to the blog!
Some of my critics would probably be stunned to learn that I share your longer term assessment of gold and believe that it is prudent to hold a percentage of the metal in one's portfolio for the exact reasons that you mention. I view gold as insurance against currency debauchment and geopolitical uncertainties which could get out of hand. I also share your concern about the huge derivatives market.
That is why I repeatedly tell some of those who seem obsessed with gold to simply buy some physical, set it aside and get on with life instead of breathlessly regaling us with one theory after another as to why the yellow metal must rocket to the moon "any day now".
I have tried to make a distinction between those who believe in gold for the purposes listed above and those who are part of what I feel is a cult with a cult-like mentality.
Unfortunately, the latter are more often than not, used to portray any of us who do view the metal as a safe haven type asset as part of that same crowd. We are not.
Gold is insurance - and like I have tried to teach folks - no one who owns an insurance policy runs constantly each day to look at it over and over HOPING that they need to use it. I hope, perhaps too optimistically, that I will never have to use my gold as an insurance policy because of what that might mean to my children and the nation that I have been blessed to grow up in.
I would much rather hope we can get some business friendly policies that will encourage our nation to tap its potential.
A bit pressed for time now but thanks for writing.
Dan
Thank you for your reply. I have been a reader of your thoughts for some time and the views you state above are not a surprise to me. You strike me as a pragmatist with a big world view and I think anyone of that disposition is likely to reach a similar conclusion about the value and timescales for the "insurance policy". Yes I think you have been blessed to grow up in the US, but I fear your country today has somewhat lost its way - hopefully temporarily. The US seems to be doing its best to piss off as many people as possible - including within your own country. It is almost like you (we all) need a crisis to reestablish the basic values it was founded on. It is always a pleasure for me to stumble across the Declaration of Independence (and your Constitution) and re-read them. They are the work of clever, informed intellects and beautifully constructed, succinct works. It is astonishing to see how far they have been abandoned (in spirit at least). Your founding fathers left our side of the pond to escape the interference and control over here. It is ironic that today much of the rest of the world today feels that way about your political rulers. Maybe a crisis is required to make us all reconsider what is important in this world?
DeleteMark H;
DeleteYes, our nation is floundering as it has become detached from its Constitutional roots. The current administration is pursuing policies that are eroding both liberty and economic prosperity.
Our Founding Fathers were not perfect men ( there exists only one) but they were wise and informed students of history and human nature. The system they devised is perhaps the greatest ever constructed by mortal man.
I am hopeful that what we are witnessing here today in the US will serve to awaken some in this nation who are totally clueless as to what gave rise to the most powerful, most free and most prosperous nation ever seen. Some have been so dumbed down by the current public education system that they have no understanding whatsoever what the causes of this greatness were.
The latest incident involving what appears to be an American solider who deserted his post and his fellow soldiers is a perfect example of how far we have fallen. At least there is a growing outrage - that gives me hope that we have not totally lost our way.
I share your frustration with the gold bulls who cry foul every time the gold price goes down - especially when those commentators so obviously ignore any adverse socio-political-economic news adversely affecting PM market fundamentals. However, I do also believe the PM markets ARE somewhat manipulated. (I feel equally frustrated with the people on your blog who say with absolute conviction that they are not. Any truth is usually between the extreme of opinions and I view both outliers with scepticism). At the moment ALL markets are manipulated. At a minimum we call it "stimulus" when Central Banks pump trillions into the economy to drive interest rates down (and thereby inflate bonds, equities and property prices), but it is basically manipulation. In smaller markets (like precious metals) you have purer forms of manipulation when the players are big enough to move the market with their trading activity to suit their own goals. The recent Barclays case is just a limited example. But what's the point in constantly bleating about it? It's just how things are so deal with it.
ReplyDeleteWhat astonishes me is the structure by which price is established in the PM markets. In equity markets the aggregate demand of all buyers and sellers for an equity decides its trading price. There are futures contracts on the underlying equity but they have limited impact on the pricing. If someone wishes to manipulate this market (as they often do helping to drive short squeezes or stop raids, etc) they have to bring their firepower to bear on the underlying asset. Profit and loss on futures contracts are controlled by the pricing resolution in the underlying asset. People may not like their equity price being manipulated by big players but at least it is transparent. The tail doesn't wag the dog.
But why is it almost the complete opposite in the PM markets? There is effectively one market for physical transactions and an almost completely separate futures (paper) market. Why is it that the paper market, which virtually never settles in physical, dominates the pricing mechanism? I can understand when you have crops to sell and the crops have not yet grown there is a need for futures contracts - i.e. producers forward sell their labours, and these futures markets often settle with a physical transaction. But why is this the dominating structure in the PM markets when it is a mature market of stable production and reasonably constant demand? The paper market has grown beyond any reasonable utility and dominates the basic activity of mining precious metals and selling it. It is a casino where the bets dictate the outcome on the tables. The futures market is mainly comprised of very few investment banks and they effectively dominate the pricing mechanism. It is completely divorced from the real world market of producing and consuming - i.e. buying or selling a real asset. Why should the operational success of a mining company deploying real capital and employing real people be controlled by the speculation of large investment banks? In my mind it is yet another example of how the banking system has gotten so out of step with real-world commerce that is no wonder that the power of capitalism is fading. (I believe true capitalism involves real "investing" in enterprises which produce goods or services and employment. In spite of central banks injecting record levels of "capital" there is virtually no evidence of any meaningful gains in anything real world - just speculative excesses). FWIW, whilst many of your bloggers are clearly irritated by the worst of King World News "doom and gloom", there is actually an excellent recent item there where James Turk outlines the changes he would like to see happen to the silver fix. His suggestions strike me as pragmatic and reasonable and would curb these excesses, increase transparency and return pricing discovery to the real market. That may mean higher or lower prices, but at least there would be a lot more honesty.
ctd...
Anyway, how much the PM markets are manipulated is immaterial to me at the moment. If they are being manipulated down (towards Goldman's highly publicised $1050 target, as I suspect! lol) then it creates a short term opportunity for long term investors. I am bullish on PMs long term, and interested in the thoughts of people such as yourself on interpreting the short term movements so that I can accumulate physical. I am therefore not surprised that GLD may be seeing an increase in physical stock. I suspect that the majority of the people left in this market are looking deeper and longer term than everyone else. In that context I am grateful for your hard work and assessments as they have helped me plan my purchases.
ReplyDeleteMark (H)
Great posts Mark H and I agree with just about all your comments. Keep posting.
DeleteDavid a fellow Brit :-)
I think you make some good points Mark. BTW I "discovered" our generous host listening to him at KWN and when I realized most of the other guests there had nary a clue I only listened to Dan's interview. My primary reason was to help me time my purchases of physical gold.
DeleteRegarding your take on the paper gold market I would add that the existence of a paper futures market for an asset that is not used is unnecessary and creates an artificial oversupply in a market that has no supply side shocks. This creation of paper gold IMO causes price suppression. Not intentionally just the way the market is structured. Gold's true value will only be discovered in a physical only market.
Cheers, Gene
Funny to see commenters on this site so negative. Are you going to by cynical all the way up?
ReplyDeleteGoldminers have been bottoming since June last year. Some touched bottom in June 2013 (SII, FNV, SLW, LSG, OSK, ...). Many more appear to have touched bottom in December 2013; the list is simply too long. Still others are are still searching for a bottom, but who knows, they may be making one right about now.
Each of these periods (june 13, dec 13, this present period?) were marked by nice divergences in individual names. This is all stuff that you can't fully appreciate if you only look at aggregates like GDX or HUI, or if you fail to take a step back every now and then. But I'm pretty optimistic that gold mines have been busy building a massive bottom for already a year now. In hindsight, this may look like one of the biggest, bestest reversals ever.
Gold itself will follow in due course. It still has everything going for it and the 30-something % correct of the last few years was nothing but a nuissance.
"Are you going to by cynical all the way up?"
DeleteNo need to be cynical when we are making money on the way up and on the way down because we trade both ways and are in the right direction most of the times.
And you, what has been your track record during last 2 years in terms of performance? Ooops...there, now you can say I'm becoming cynical.
But your post is very relevant to keep in order to show what makes the difference between good trading and bad trading.
DeleteGood trading is not about blunt forecasts.
Bad trading is all about certainties and that kind of crap you wrote : "gold WILL follow in due course". "I'm pretty optimistic" (trading is not about being optimistic or hoping...). Oh my god, I found a "may look like", one conditional in your post, so there may be some hope for you.
Thanks for your concern about the "cynicism" and lack of "vision" on this blog, which is one of the best blog if one wants to learn how to truly trade thanks to Dan. Regards,
Stay calm.
DeleteThere *is* a sense of cynicism in a lot of these comments. And the articles on this site *do* focus on aggregates like GDX or HUI when they're discussing the relationship between gold stocks and gold itself.
So to the others, that's why I thought it would be interesting to discuss the idea that when looking at individual stocks, they have been showing "internally" divergent behaviour, as far back as june 2013.
Again, as an example, take a financing company like FNV or SII. They stopped making new lows since june 2013. The same goes for extremely well-financed projects like TAHO or that rarest of birds, a positive cash flow project (like Osisko).
Other companies (let's say DGC but many others) made their tentative low in december 2013, around the tax loss selling season.
Still others (take KGC as an example) are still making new lows.
My point is this: big directional moves are really made when all parts in the complex move together and the market is firing on all cylinders. On the other hand, the cliche that "the bottom is a process" means exactly what I think we have been seeing in the PM stocks since June last year.
Apostle
DeleteWe are cynical about the Johnny one Notes who have thee same story For every market. Particularly the Permanent Bulls who are always saying buy buy buy.
If there is any lesson to be learned as a trader it is let the market guide your actions.
From a long term standpoint we share your concerns about the runaway debt and derivitives and the lack of a real economy of things.
Your point about the differing behavior of the various miners is important and bears periodic review. I just hope I live long enough to see gold and miners make me whole.
But if it takes a economic disaster to fuel that I am not so eager.
Dan, would you please explain what is meant by "central banks leasing out gold". Never understood how that works. Thanks
ReplyDeleteVedy interesting. I did a day trade last Thursday with NUGT. Captured the entire range almost from bottom to peak. I felt strongly like going long again at the open on Friday but decided not to be greedy right after raking a nice wad of cash into my account. The area on GDX just below 22 looks like a potential support forming. Right where the 50 day dipped in late January. On the geopolitical side, Ethnic Russians in Ukraine are getting beat up by Ukrainian thugs to influence their political views. A Ukrainian General was killed last week by rebels. Could get red hot quickly there.
ReplyDeletehttp://armstrongeconomics.com/2014/06/04/ecuador-goldman-gold/
Delete"t appears that Goldman will most likely sell the gold forward helping to break the back of gold and will most likely look to replace it at the lows under $1,000."
We'll see...
$20 million return on $544 million over three years or 1.1% annual return isn't such great return for Ecuador, but a no brainer trade for Goldman.
DeleteAnyone with knowledge know how they would do it & the ripple 466,000 oz would make in the 18million oz per mo. LBMA (just googled the stat, so I don't give credence to it).
Well, looks like the major stock indexes are rebounding and positioning for yet another "Rip Your Face Off" Rally, while GLD gets sold en masse.
ReplyDeleteNo doubt the Algo/Igor/Robos are front-running the ECB announcement.
If we break out to new highs, then Jim "T-Shirt" Willie, Greg "Scroomer" Hunter, Gerald "Getaway" Celente are going to be in a world of pain.
Speaking of algos I thought this video was interesting.
DeleteYes Mark, anoter high. Beware, you should soon see me on your way on the short side of the beast :)
Deletelol but not before ge enter the 1950-2000 area.