Add to this recipe falling inflation expectations, and it is looking more and more likely that, barring some sort of unforeseen geopolitical event, gold is not going to be able to stay above the $1200 level.
Take a look at the following two charts which I post very regularly here. The first is the reported holdings of the giant gold ETF, GLD.
Holdings are now at 773.45 tons, the lowest reading of the year thus far and down some 24.77 tons from the starting point at the beginning of this year. One must go all the way back to December 2008 to find that amount of gold in the ETF! That is nearly six years ago. My oh my, how the mighty have fallen!
Here is the TIPS Spread chart and the price of gold overlaid upon it. Notice the near perfect relationship between the TIPS spread line and the price of gold. As inflation expectations in the market fall, so too is the price of the yellow metal
There is nothing in either of these charts that would suggest some sort of coordinated assault on the gold price as some still want to argue. The simple facts are that for now, the fundamentals favoring a higher gold price are not present. That could change at some point as all markets are indeed subject to shifts in sentiment, but to argue that gold would be multiples higher were it not for some sort of constant price manipulation scheme by the powers that be, is a colossal waste of time, energy and intellect.
Here is the most current Velocity of Money ( note I am using the M2 money measure ) through the end of the first quarter of this year.
As long as this line continues to move lower, inflation pressures are going to be rather elusive. I maintain that the jobs situation in this nation, especially wages, is going to have to change for this line to turn higher.
Dear Dan,
ReplyDeleteHere to learn again. I understand that you have correlated many times the drop in gold price in relation to the drop in GLD holdings. This makes sense.
However, last week, Reuters that silver holdings in ETFs were at all time highs, yet the price of silver is down, down and down to say the least. This is the complete opposite to above, yet the price direction is still the same-DOWN.
Please help if you have the time in explaining this.
Cheers, Dan as always.
Jim Silver;
DeleteThe problem for silver, and especially when related to SLV, is that SUPPLY is exceeding demand for the metal. Price can fall from several ways -
1.) Demand falls faster than supply increases.
2.) Demand rises but supply rises faster
Most silver mined ( not all of it) is a by-product of mining for another metal, namely copper. Copper prices soaring to over $4.00 a ways back brought about a huge increase in copper supply. It also resulted in more silver being produced. Silver demand at current levels of supply is insufficient to absorb that supply.
Gold is a different critter than silver by the way as it tends not to be "used up" like the grey metal. It is also much rarer.
At some point, the demand for silver will match available supply and the price will stabilize. Who knows what that level might be?
And by the way, it is NOTHING to do with supposed price manipulation of silver. It has everything to do with the Strong Dollar and lack of perceived inflation. Silver must have an inflationary environment in which to thrive.
Gotcha! Thanks, Dan!
DeleteThe 10 year charts look relatively tame like all the upward movement was to quick.
ReplyDeleteThe long term, 10 year, up trend line on silver is around $15, that gets taken out and somewhere near $10 will get retested.
Gold 10 year long term up trend is around $1,200, it falls then the old breakout gets retested around $1,000. A $200 drop from tonight's action is easily doable. All at once? Who knows but the quicker the better and within a six month time frame should produce a final bottom.
And since the majority is on the sidelines leaving bot against bot to do the banker's trading, it could get pretty wild the next 6 months.
Martin somebody had called all this long before. The US$, gold, S&P, Euro, wars and a few other things. Maybe not him per se but his computer program.
Personally, I am still getting offers for balances transfer at 0% for 18 months. I don't see any inflation coming by that account or with the US debt load still piling up.
My trading company USAA did change by using another broker for a clearing house so all stocks went out of USAA street name into the new broker's street name which entails selling everyone of your stocks to be immediately bought back under the new holder. Seems odd but USAA was never up to snuff as a broker when it came to the finer details anyway but they still answer the phones for broker assisted trades except now there are two back offices to contend with when questions arise, USAA and the new broker.
Good morning and thanks Dan.
ReplyDeleteLooks like the silver and gold fever bugs in some camps have renewed their naive and disillusioned quest to keep the CFTC investigation alive from a year ago that revolved around Andrew Maguire.
I'm sure the article will be making the rounds today on the usual sites.
If someone needs a laugh you know where to find it as I promised Dan that I wouldn't link to that site ever again.
The grandiose dragonslayer-like comments from the proprietor can't be taken seriously any longer....including the blatant plagarism recently discovered that no one will ever dare bring up.
Blind eye's and blind faith go hand in hand.
David P. and Jeffrey Saut and the circus ringleader, Eric King. I just am not even laughing anymore at these guys, but rather shaking my head in absolute disgust.
ReplyDeleteDan:
ReplyDeleteCan you check in with that guy Bill Haynes and see what he thinks?
I hear from Harvey Organ that gold will be $10,000 by January 1, 2015 and silver $200.
LINK
Full Blown Global Collapse in the precious metals and mining sector continues unabated.
ReplyDeleteAs the U.S. Dollar soars even higher, staging one of the fastest, steepest runs ever recorded for a major currency.
Gold now hitting multi-year lows, another horrific gap down in GDX on the open, and USDX has zero resistance until 89 or so.
The Chinese who have been accumulating the last 2 years now realize that idea was a mistake, so they are now selling gold and buying dollars, thus explaining the dishoarding of GLD.
And meanwhile, mo-mo stocks like the biotechs are within a stone's throw of world record highs and IPO's like GoPro are still on fire, going up at 7% per day.
Good luck to all the gloom and doomer "Endtimes" gold bugs, because the "Endtimes" is now here for the precious metals industry.
LOL..
This comment has been removed by the author.
ReplyDeleteThere's a very interesting and quite thorough review by The Market Oracle of current charts and sentiment for gold. His conclusions Dan are very similar to your own. Perhaps unsurprising given he refernces some of your thoughts! ;-)
ReplyDeleteBasically he either sees $1180 holding, and this perhaps being the final bottom (a triple bottom in US$ terms) OR the US$ breaking out from here and $1180 going, in which case there may be a final washout bottom in the $1000 to $1100 region. The key right here for gold is almost certainly what happens next for the US$...... will it or won't it break out?!?
http://www.marketoracle.co.uk/Article47453.html
Great article.
ReplyDeleteJust because the printing press is churning out money does not mean there will be heightened inflation. the offsetting debt on the aggregate balance sheet continues to weigh down the economy. It needs to be serviced, and all that debt service has become a drag to the point that money velocity has grinded to a halt. Moreover, the average Joe is not getting that money. Their balance sheets have been ravaged, and the wealthiest have been the beneficiaries of govt largesse. Just look at gasoline production. The average person cannot even afford to drive his car, he is overburdened with debt.
Now that the US has become the world's largest energy producer and is now exporting energy, the fallacy of the petrodollar collapse has been very costly to the doomers and dollar shorters.
The fact that oil and NG prices continue to fall shows just how much of an impact domestic production is having on global energy prices.
silver just made a new low, and gold is hanging on to life support. surprised GDX is trading as high as it is - the only support for gold at this point.
DeleteEph: I agree it's strange that GDX is holding up--probably because GG is the largest component & still up about 15% from 52wk lows. The rest of the index has fallen through the floor. AUY is 10% below its previous 52wk low formed in May. Kinross doesn't even make the index.
DeleteRE Oil -- WTI actually has been narrowing the spread with Brent since early September. So it's less to do w/ tight oil production & more to do w/ worldwide stagnation in my opinion.
Hi Dan, unrelated but though you may find this interesting.
ReplyDeletehttp://inhabitat.com/16-year-old-irish-girls-win-google-science-fair-2014-with-world-changing-crop-yield-breakthrough/
Regards,
Wolfy
wolfy;
DeleteThat is very cool... thanks for sharing that!
it's futures op-ex today in the metals and some energies.. can provide a turn as hedge funds write the most options:
ReplyDeletehttp://www.barchart.com/futures/expirations.php?view=options
TLT opened on it's 50-day MA and then up, getting over the 20-day which had stopped it yest....there was talk of 'bunds bunds bunds' this morning, recall last august when bonds made their up move, it was 'bunds' that usa woke up to all the time.
SPX now under the 50-day MA, and RUT lost it's 200-day last friday. keep powder dry til nov. 1st still the best plan, as sept oct usually poor.
Chicago Dec wheat touches new contract low... CL can't get thru 20-day MA.
cheers!
Your argument using GLD is wrong
ReplyDelete