We have been painstakingly detailed in providing very regular updates and charts for the readers of this site of the reported holdings in the big gold ETF, GLD, for some time now. The reason for this is clear - like it or not, approve of the ETF or not, it is a proxy for Western-based investment demand for the yellow metal.
The FACT is that reported holdings have been plummeting lower even since peaking out two years ago. Yesterday saw yet another reduction in those holdings with the total tonnage now at a measly 742 tons. I saw "measly" because the trust is now at reported levels last seen in the first week of October 2008! Let that sink in a bit.
As the holdings have dropped, so too has the gold price, right along with the share price of the gold miners. There is nothing mysterious about this. It has been there right in front of everyone's eyes who were open enough to recognize the obvious.
What is so tragic about this is the number of innocent people who have lent their ear to the numerous peddlers of nonsense out there who assured them that this drop was ultimately bullish for the metal because, as they assured them, "the gold is being drained to go East". Whether it goes East, or North, or South or the earth's core, is irrelevant. It is being sold here in the West as money managers will not buy gold unless they see a very good chance of it moving sharply higher in price. It throws off no yield and therefore, any gains must come from capital appreciation.
In an environment in which most commodities are falling in price, and one in which the Dollar is holding up fairly well, and one in which inflation fears are nowhere in sight, there is not enough Western-based investment interest in the metal to push the price higher. The East can buy all the gold that they want but without an accompanying demand surge in the West, the best the Eastern-based buying can do is to slow the descent of the metal or keep it from plunging even more sharply than it otherwise might have done. It takes hot money flows from the West to generate a bull market in gold, or in any other market for that matter and the simple truth is that those money flows are MIA when it comes to all things gold for the moment.
Gold has fallen below chart support near $1210 and is now trading below psychological support at $1200. Once more it appears the bears want to go down and test that now triple bottom support at $1180 to see if they can crack it this time around.
Note ( this is for you Hubert!) gold did fall to the lower Bollinger Band after falling below the median line yesterday. The bands are widening out suggesting that there is more to come yet to this move lower. Also note that the ADX line is beginning to slightly rise hinting that a trending move is the works. I do want to point out however that the ADX is well below the 20 level at this point so unless $1180 is clearly taken out, the market is officially still in a broad range trade with $1180 the bottom of that range.
If $1180 goes, look for $1150 in short order as a massive amount of hedge fund long positions will ALL BE UNDERWATER. With silver getting obliterated and with the mining shares disappearing from off the face of the earth, a lot of longs are in trouble.
Maybe the bulls can stave off any further downside but they had better flex what is left of their dwindling muscle very soon.
"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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