“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"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


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Wednesday, September 17, 2014

GLD continuing to disgorge gold

One of my main metrics for measuring the intensity of Western-oriented investment demand for gold is the giant ETF, GLD. When gold prices are rising alongside of rising reported holdings in GLD, it is a positive sign for future metal prices. When prices are falling, alongside of falling reported holdings, it is a negative sign for future metal prices.

Today's reported holdings dropped about 4.2 tons bringing the total to 784.22 tons. That is a mere 7.3 tons above the lowest level posted this year back in May. 



One can speculate whether or not the holdings with set a new low for the year as we move ahead but in my mind, it is indisputable, that investors continue leaving gold and buying stocks, as that is where the gains are to be found.

I think it also essential  to remind the more technical analysis-oriented investment/trading crowd out there, that the large speculators (hedge funds and other large reportables) still remain positioned on the NET LONG side of this market. That is based on the most recent Commitment of Traders report. As these key technical support levels on the charts give way, those positions are increasingly underwater and are being liquidated. It is that long side liquidation, coupled with an increasing short side contingent, that raises the very strong possibility of seeing gold change handles from "12" to "11" once more.

Time will tell.



22 comments:

  1. Ahhh! The smell of dead dreams !

    ReplyDelete
  2. Why on earth would any investment manager consider gold with the dollar soaring and U.S. equities and Fixed Income reporting the best 5 year performance in an entire generation?

    No wonder the institutions are dumping, its pretty much a dead asset that pays zero dividends.

    Buying a 2-yr. German Bund that pays a negative 7 b.p. is better than gold, because the negative interest rate is easier to swallow than the storage costs and commissions associated by buying physical gold.

    And the price of the German Bund with date certain maturity is 100% guaranteed, whereas gold could be anywhere between $600 and $1,500 in two years.

    Who the heck wants to take that kind of risk?

    ReplyDelete
    Replies
    1. Good points. I just saw a new goldbug claim; Shanghai Gold Exchange (SGE) announced they were launching a new precious metal platform set to begin buying, selling, and trading gold in the Yuan currency on Sept. 18 (actually new currency traders). Now Goldbugs say:

      "for the first time there will be an exchange that offers customers assurances of protected and secure transactions made without the threat of price manipulation".

      Supposedly this means gold will definitely move above $2K within a year, where the natural price belongs. LOL

      Delete
  3. I'll pay $10,000 to anyone here who can convince Eric King to post a chart of the DJIA hitting a record high today and GLD making 3-year lows, with the headline:

    "PRESENTED WITHOUT COMMENT"

    lol.....

    ReplyDelete
    Replies
    1. Mark, the truth of the matter is King's day job is as an accountant. How else would he know that his 40-50-60 savvy pros are billionaires? KWN is his hobby. Classic example of the definition of insanity displayed day in and day out by the Rockpile Gang.

      Delete
  4. And then, there's "research" like this. omg, how hilarious.

    http://oilprice.com/Metals/Commodities/Mining-Sector-To-Experience-Major-Investment-Over-Coming-Months.html

    ReplyDelete
    Replies
    1. (Going by headline) Because Billionaires want to invest in one of the most in-debt industry on earth? The number of miners out there doubles over a 11 year span, and this is a good place to invest? Sure! ...LOL

      Delete
  5. As was leaked out yesterday, the Fed did not remove their "Considerable time period for raising interest rates" statement. They left it in.

    That message would look to be for the stock markets, saying there is no reason to get out of stocks as we have no plans to raise interest rates until that elusive recovery comes.

    Gold does not seem to like 0% interest rates indefinitely as much as the stock markets do.

    ReplyDelete
  6. Steve - about Queenie

    This is the story of my life: http://www.dailymotion.com/video/xg28et_the-black-adder-season-2-ep-02-part-1-2_shortfilms

    "Who's Queen?"

    ReplyDelete
  7. Hope you guys have your seat belts on, it smells like short squeeze all over.. Have been buying my juniors, for the past few days, sold my puts... It's game on! One way or the other it's a win win for gold at the moment in my opinion . Silver is leading, already tested lows, miners are not moving, in fact they are well off the lows, and the complacency in this great blog is about to hit new highs! I m all in, let's see how it plays out. It went well so far this year.. One more time Sam please. Haha.

    ReplyDelete
  8. Hypothesis: "We will see a real panic on the streets when the economy begins to tank. And that will trigger the unveiling of a new stimulus plan from the Fed. That new stimulus will take the gold price through the $2,000 level to new all-time highs.”

    Sage words, spoken by the top trends forecaster in the world : http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/9/17_Celente__Propaganda_Aside,_Its_Bad_Out_There_%26_Getting_Worse.html

    Empirical Evidence

    1. The latest round of QE was announced on 13 September 2012: Gold stood at $1769.50

    2. 12 December 2012, the FOMC announced an increase in the amount of open-ended purchases from $40 billion to $85 billion per month. Gold stood at $1,716.60

    3. 19 June 2013, Ben Bernanke announced "tapering"; Gold stood at $1374

    4. 18 December 2013: taper begins. Gold stood at $1236.10

    5. 18 September 2014: tapering almost complete, Gold stands at $1224

    Analysis

    1. After QE was announced the price of Gold fell

    2. After the amount of QE was increased, Gold fell further

    3. Once QE began to taper, the price of Gold stabilised, rose slightly, and then settled

    Conclusion

    The hypothesis is not supported by the empirical evidence; on the contrary, for unknown reasons, it appears that the price of Gold and the amount of QE are negatively correlated, and that further QE would probably lead to lower Gold prices

    ...... and that concludes the Case for the Prosecution

    ReplyDelete
    Replies
    1. further sage words and erudite wisdon from Mr Celente:

      "China has been saying there would not be any stimulus program, but now they have flip-flopped because their economy is sagging. By the way, if you look at the unemployment numbers in China, those with college educations can’t find jobs. The reason for this is because the only real job growth that is taking place is on the low end -- slave labor type jobs in manufacturing. So China is facing a crisis as well, and their crisis is going to be even greater than that of the United States because they have 1.2 billion people.China’s greatest fear is not the United States, Japan, or any other foreign nation -- it’s their own people. If they can’t create jobs, they are facing serious social unrest. And it’s barely reported in the United States the amount of riots, disturbances, and social unrest that is going on in China. They have serious social and economic problems facing a large part of the Chinese society.


      IMHO this is utter bullshit, and I find the notion of "slave labor" abhorrent. I do not believe that Celente has any direct experience of China, and I believe that his perceptions are both inaccurate and distorted to fit a preconceived news agenda.

      As before, I am not going to abuse Dan's blog to extol the virtues of my homeland; however, anyone interested in the facts underlying the double-digit wage increases which Chinese manufacturing workers have received every year this century might consider reading any of these article from the Economist (which I trust you will agree is not an organ of the Chinese Communist Party:

      http://www.economist.com/node/21549956

      http://www.economist.com/blogs/freeexchange/2010/07/china

      http://www.economist.com/node/16693333

      and here it is from Bloomberg

      http://www.bloomberg.com/news/2014-01-06/china-wages-seen-jumping-in-2014-amid-shift-to-services-.html

      and from the WSJ

      http://online.wsj.com/news/articles/SB10001424127887324767004578488233119290670

      The "social unrest" meme is a convenient fallacy: in China, any potentially criminal incident involving more than 3 participants (including the victim) is reported by the Police as a "public disturbance" - this includes not just street brawls, but even road traffic accidents and incidents of domestic violence where children are involved. Annually around 200,000 such incidents are officially recorded, and Western media delight in referring to this number as evidence of the seething discontent in Chinese society

      If the Chinese were indeed such a fractious and rebellious lot, do you not think you would have seen Ferguson-like incidents broadcast across every news channel in the West? For those of you wondering what widespread civil unrest might look like, here is an example from the BBC http://www.bbc.com/news/uk-14436499

      Delete
    2. And here are the "painted" charts to prove the point about runaway unemployment:

      http://www.statista.com/statistics/270320/unemployment-rate-in-china/

      http://www.tradingeconomics.com/china/unemployment-rate

      compare that to the EU, USA, UK, Canada and Australia

      [/RANT]

      Delete
    3. Good point Zhang, I would say gold rising or falling is much more about the dollars value.

      As the usd index falls gold goes up as it rises and gold goes down.

      A 10 year usd chart shows this inverse relationship with gold very clearly.

      I think the point you miss is, if endless QE is needed this would perhaps negatively affect the dollars value one would think.

      So far no one seems to care if they print trillions of endless dollars.

      The markets seem to have a lot of belief in what the Fed is doing still.

      Delete
    4. Maybe I am missing something: if QE didn't work (and I think that's pretty obvious if the intention was to lift the broad economy), then why would stopping it necessarily be a bad thing? In fact, although it hasn't stopped yet, it has now been wound down very significantly, and the signs are that it will end altogether next month

      The economy may indeed be a basket case; the USD may already be painfully high (how long before the cries of "Currency Manipulator" are levied against China?), and interest rates may indeed be unsustainably low, but why does that inevitable lead to yet more QE? It might do, but I don't see the direct causal nexus

      Frankly, I reckon the obvious sitting duck is Student Loans, which being retail-oriented might have a direct impact on the purchasing and consumption patterns of the US population at large.

      But either way, my concern is that, on the evidence, increased QE is not of itself a sound basis for hypothesising $2000/oz Gold - at least not any time soon

      Delete
    5. It seems QE is much more about the wealth effect, reflating the asset bubbles that popped in 2008 like the stock market and housing.

      The challenge now is keeping them reflated it would seem.

      If the stock market falls then pension funds for example lose huge money that they have gained back now since the 2008 crash.

      History does show money printing/QE is always the beginning of the end of a currency if it cannot be stopped.

      So if they can stop then should not be a problem I guess.

      Delete
    6. http://www.oftwominds.com/blogsept14/USD9-14.html

      Delete
    7. Zhang Lan
      Sorry to say CNBC is all over the Alibaba IPO with the expected fear / xenophobia about the biggest IPO ever.

      Delete
  9. I have to say thanks a lot once more to both Dan, Lan, and some other less frequent but sensible contributors to set the bar so high and for their dedication to this blog.
    This blog is protected from Trolls because after a few messages, they realize that they only make fools of themselves thanks to the immediate answers they received.
    I'm sure they are not used to that, and soon prefer to leave the blog and go visit other websites where nobody will dare contradict them so openly and with details.
    I really wish this blog will gain in popularity. Hope it is the case.
    Keep us posted! :)

    ReplyDelete
  10. nidhi singh; why don't you shit in your hat and see if it still fits?

    ReplyDelete
    Replies
    1. lol it's going to be hard to beat that one, I'm gonna have to be extra imaginative :)

      Delete

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