By the way, further confirmation that those who have been preaching hyperinflation and currency induced cost push and whatever for so many years have been utterly confounded. The yield on the Ten Year Treasury hit a 16 MONTH LOW today!
The US Dollar managed to bounce right off of chart support near 85 and ended the week just below 86. It is essentially halfway between resistance at 87 on the top and support at 85 on the bottom. A push through 87 sets it up for a run to near 89. Should it fall below 85, there is a band of support near 84 and with better support near the Fibonacci retracement level just below 83.
I have some further bad news for gold bulls unfortunately - GLD, that big gold ETF has been disgorging gold all week long even as the price has moved up from below the $1200 level. Simply put - investors/traders are moving money out of GLD and out of equities and putting that into bonds during this risk aversion period. Rallies in GLD are thus being viewed as selling opportunities. This is NOT what gold bulls want to see.
For this year, 2014, reported gold holdings are down over 38 tons from the start of the year ( 38.78 to be exact ) to 759.44 tons. This is the lowest level in GLD since December 2008! That is NEARLY SIX YEARS AGO. Western-origin gold investment demand continues to disappoint.
Dan,
ReplyDeleteWhat is a mechanism of "moving money out" of GLD, or, more precisely, how it is connected with a decrease in GLD tonnage? Normally, when someone sells GLD gold to other person, they just exchange the GLD shares, but the gold tonnage in GLD is not changing, and so the total number of GLD shares remains constant.
The only way to "move the physical gold out" of GLD is to exchange the GLD shares for physical gold bars. As I remember, it can be done only with a large chunk of GLD shares (50,000?) through a special procedure (and only by an authorized member). This means that a "small" investor with a few thousands shares of GLD cannot really move any gold bars out of GLD storage. And, anyway, why he would want to get a "real gold" and not the "real dollars" in exchange of his GLD shares?
So, it is the "authorized members" who sells the gold bars out of GLD. But why would they be doing that, for what reason? To give money to the "small" investors?
My guess, the GLD bars are getting sold to satisfy a demand for physical gold somewhere else. Or, maybe, they are being used to substitute the COMEX gold contracts (if I remember, GLD share were allowed to be used at COMEX).
Good point Russian Bear. Dan I remember a point made on KWN (your favourite website haha) some time back was that SLV was not seeing the same run on silver holdings during price drops in silver.
DeleteIt would be very useful to see a chart on GLD tonnage vs. the gold price and the same for SLV from the last few years.
For every seller there is a buyer so why are the ETF holdings falling?
Russian Bear I've often thought that these ETf's are one of the sources of gold supply to the likes of China. When analysts have done the maths and added Russian, Chinese, Indian gold demand etc the numbers don't add up i.e. there should be nowhere near enough gold to meet demand.
The Shanghai silver stocks are almost out:
http://thedailycoin.org/?p=8048#sthash.Vs4AHOP6.dpbs
I'm not saying this means we'll see higher prices tomorrow but it is an interesting point that seems to be lost on this site at times.
When gold an silver goes west to East it doesn't come back so if proponents of the price suppression scheme are correct there will come a topping point where the supply simply runs out and the physical market overcomes the leveraged paper market.
"When gold an silver goes west to East it doesn't come back"
DeleteWhy not? Do they refuse to sell it to foreigners? I take it there are no bullion dealers or jewelers in Dubai, Mumbai or Shanghai?
I believe the GLD basket of shares available for redemption into phyz gold is 100,000 shares.
DeleteOphelia Balls i'm referring mainly to the Governments in the easy stockpiling gold. A quick search on the internet and you can find out the incredible amounts imported to places like China. That gold is being held as reserves and will never be sold back in to the market. At least not any time soon.
DeleteThe general public in places like China are encouraged to buy and hold gold as part of their savings.
A lot of people in India see gold as a means of investment for ther families and don't tend to sell it.
Of course there will be some buying and selling in the way you describe but this is peanuts to the 1000 - 1500 tons of gold bought by the Chinese Government every year. The figures are huge.
Nobody has ANY idea how much the Chinese Government and the PBOC are buying; the figures you refer to are the Shanghai Gold Exchange settlement amounts, and represent PRIVATE SECTOR transactions, not Government
DeleteHOW do you believe the Chinese general public are "encouraged" to buy and hold: do you have any evidence whatsoever for this?
Firstly, the main source for these rumours is that CCTV (Chinese TV) ran a series of information documentaries on Gold in 2009; on that basis, presumably the UK is also "encouraging" its citizens to buy Gold, because the BBC also ran programs, and Germany is too, because Bild magazine ran a series. No doubt Gold also has "Royal" approval because King World News recommends it!
DeleteSecondly, SO WHAT? CCTV was running stories about Gold in 2009, and over the past 18 months at the very least Gold has been in a downtrend - supposed Chinese demand notwithstanding
Thirdly, I can assure you that not only are Chinese citizens NOT in any way officially "encouraged", they are in fact punitively taxed on non-bullion investments in a way that e.g. Hong Kong and Singapore investors are not (hence an active cross-border tourist trade in Jewelry)
Finally, whilst you don't really differentiate different parts of "the East", there is undoubtedly a very active 2-way market in secondhand Gold throughout Asia, as a trip down any Main Street will quickly reveal through the plethora of pawn shops and jewelers offering Cash For Gold. Do you honestly think that its not possible for a foreigner - Tourist or otherwise - to buy from these outlets? Sure, China has export controls on Gold, but Hong Kong and elsewhwere certainly do not, and the fact that the Gold tends to stay in the East has far more to do with the fact that nobody in the West wants it, rather than the Asians snaffling it away
You need to look behind the hype and speculation at what is really happening in Asia
@Dominic,
Delete"the figures are huge" Really? Why don't we have a look at that.
A ton of gold at today's prices is somewhere around $38M, but let's keep things simple and just say $40M. So your 1000-1500 "huge" number equates to somewhere in the $40B-60B range.
The GDP of the PRC is around $9T, and growing much faster than the Western world. The population is around 1.4B.
Turn the crank, and we get Chinese per annum gold imports (at the very highest estimates) of 0.75% of GDP/yr.
Not exactly what one would expect in a country we are being endlessly told is preparing for a "gold-backed" Renminbi.
You see, Dom, it's more helpful to do your own thinking--and stop relying on made-up "statistics" fed to you by con men, whose only purpose in life is to separate you from your money...
I do look beyond the hype. The truth is that no one can possibly know how much gold the PBOC is buying. Not you and not me.
DeleteThe figures I quote are admittedly speculative but we know there have been a lot of noises from pboc officials that they want to reduce their dollar reserves and replace them with something that is not controlled by foreign governments ie gold.
No I wasn't talking about the Shanghai gold exchange. As you point out, the gold goes to private individuals rather than the government, at least as far as we can tell. There could of course be proxy's in use:
The following makes interesting reading:
http://www.ingoldwetrust.ch/does-the-pboc-purchase-gold-through-the-shanghai-gold-exchange
I don't know why you're going on about buying and selling gold within these countries. I'm not debating that. The point is that an incredible amount of gold is imported in to China each year and on top of this it's highly probably that the PBOC is dumping dollars and other fiat reserves for gold.
We are getting off topic here. The original point was the relationship between the gold ETF holdings and the gold price and why the ETF is shedding so much gold. Whether this is bearish for gold as Dan often comments on this site or is it in fact more evidence of gold being illicitly used to satisfy the insatiable demand of the East.
1. "I don't know why you're going on about buying and selling gold within these countries."
Deletetry your remark that
"That gold is being held as reserves and will never be sold back in to the market."
2. "an incredible amount of gold is imported in to China each year "
.... and the price is falling
3."We are getting off topic here"
your original Comment: "When gold an silver goes west to East it doesn't come back"
WHY do you believe this?
I am not trying to pick an argument with you here - I am merely trying to illustrate that your suppositions are not grounded in any kind of factual evidence - on the one hand you are simply regurgitating what you have heard other people say, and on the other the points you are seeking to make appear to have been made several years ago and to have had no apparent impact on the direction of the Gold price. What, therefore, is your point?
4. "There could of course be proxy's in use.... The following makes interesting reading:"
DeleteDoes The PBOC Purchase Gold Through The Shanghai Gold Exchange?
http://www.ingoldwetrust.ch/does-the-pboc-purchase-gold-through-the-shanghai-gold-exchange
First sentence of that article:
"Nope – that’s my answer"
Ophelia
Delete1. No sh*t the price is falling. Thanks for telling me I hadn't noticed. The price is falling because of the fall in western investment demand, not because of a lack of physical demand.
2. Why exactly do you think Chinese net imports have been so high? Enlighten me.
Have you looked at a chart of Chinese net gold imports over the last decade? Are you seriously suggest the plan is to dump all this gold? Do you not think there is a reason why the demand is so high?
3. No one is arrogant enough to know how the PBOC acquires it's gold. In my opinion they more than likely to get some of it through proxy's but no one on here will ever know so there's little point debating this.
My point was very clear. I was talking about the ETF holdings. Do you have anything to say on my original point or not?
Rico thanks for your condescending reply. Perhaps you want to go back and check the net imports vs. annual gold supply and then come back to me with some original thoughts of your own?
DeleteNow you're relying on the insane chestnut about China buying up all the world's gold production???
DeleteYou really would have much more fun at any of the hillbilly doom-and-gloom sites--what are you doing here?
Rico always nice to read a well reasoned argument, backed up with careful analysis, figures, links etc.
DeleteI go on all sorts of websites and like to read a wide range of views, opinions and analysis.
It's very rare that one persons is completely right, especially on complicated subjects like these. I think a lot of people make good points on both sides of the fence.
Dan is a good analyst because he isn't a bull or a bear, he listens to the market.
Perhaps you need to actually do some research into this before dismissing it out of hand or perhaps it doesn't fit in to your blinkered perspective of the markets.
Pretty simple really......as the market cap of GLD falls, bullion is sold to keep the stored value in balance with the market cap.
DeleteThe GLD should not be seen as proof of anything, it's basically a shell and anyone investing large amounts into it are clearly not recognizing the amount of risk they are taking on. For a proper analysis of the GLD legal structure please read:
Deletehttp://seekingalpha.com/article/2526665-gold-will-bottom-soon-what-do-you-need-to-know
Money is flowing out of GLD because it's a terrible vehicle, last week on the big 2% rally in gold GLD did .25%, lol. SLV a similar result.
GLD will remain a playground for day traders and momentum guys, but its prominence in the gold world is diminishing by the minute. Own at your own risk, its liable to be GTAT on steroids.
Something else of note: Average volume in the GLD has been dropping steadily since early January 2010 (Gold $1110), besides a 2-3 month blip in 2011, almost 2 years ahead of the peak in the gold price of late August 2011 (Gold $1900).
DeleteHarvey Organ's Gold and Silver Blog Has Been 'Deleted by Court Order'
ReplyDeletehttp://jessescrossroadscafe.blogspot.nl/2014/10/harvey-organs-gold-and-silver-blog-have.html
How long before TF Metals, King World News and a raft of others follow
The short answer.....not soon enough.
DeleteJust like a virus, most of them have quickly mutated within their own toxic petri dish and created a poisonous environment that the general public should avoid like the plague.
well said DPH. these particular blogs have done so much damage to the hard money movement that no one should hate them more than the so called "gold bugs" themselves. just like in the story "the boy who cried wolf", when the time comes to be protected, few will hear the call. i believe most everyone posting here at Dan's has a realistic attitude towards the metals. it is unfortunate that the charlatans out there have sent so many to the poorhouse with their incessant bottom calling. (profiting personally all the way of course) if and when the SHTF, all the early birds are going to be out in the cold. it is so not true that "who ever panics first, panics best". things can go downhill for a very, very long time before breaking - look at Rome! no matter what happens now, financially i'm not even going to limp over the finish line. thank you so very much Turd, Santa, for i did BTFD - really only twice in any meaningful way too. in this "green shoots"economy, you don't get any 2nd chances either. caveat emptor all.
DeleteHi Dan, thinking true fear might come when/if the markets finally realize that the only way to stop the deflation that constantly wants to happen when QE ends is with more money printing/QE?
ReplyDeleteUnless you see a different way that deflation stops happening every time the Fed ends QE? Consumer spending at the current levels is sure not going to stop deflation.
The charts look to show deflation happens again and again after QE ends. Looks to be no different this time as QE3 ends.
F-Tv even displayed an oil chart recently showing that a few years ago when oil prices reached the price levels they are at now the Fed launched another round of QE to try and stop the deflation.
Shit hitting the fan springs to mind. Anyone for Tulip bulbs or some shares in the south sea company?
ReplyDeleteAre we really surprised by this turn of events. I put money in VXX ETS a few weeks ago as they had hit an historic low. I think Gold shares may also hit another low during the coming sell of in all assets, but then as in the 1929 crash, they will soar once the dust settles. Buy carefully and in stages and I can see a lot of gains.
"How SPDR gold shares are created and redeemed"
ReplyDeleteJul 30, 2014 - Investors can buy and sell shares of GLD—which are backed by physical gold bullion—through ... The redemption process works the same way as the creation process, just in reverse....(cont.)
http://www.sec.gov/Archives/edgar/data/1222333/000119312514286430/d767060dfwp.htm
Fear.
ReplyDeletehttp://www.businessinsider.com/ebola-and-the-economy-2014-10
CNN reporting 10,000 ISIS fighters headed towards Baghdad....while some ISIS elements have been utilizing suicide bomber tactics within Baghdad for weeks already.
ReplyDeleteFear index within Baghdad rising...
"Battle for Baghdad: ISIS now within 8 miles of airport, armed with MANPADS"
Published time: October 11, 2014 07:51
Reuters / Str
Islamic State’s offensive on the Iraqi capital intensified as the jihadist fighters advanced as far as Abu Ghraib, a suburb only 8 miles away from Baghdad’s international airport.
The outer suburb of Abu Ghraib is also the site of the infamous prison the US military used to humiliate and torture Iraqi detainees.
There are reports by the Iraqi military that the militants are in possession of MANPAD anti-aircraft missiles. The short-range, shoulder-fired missiles can shoot down airplanes within a range of 15,000 feet.
The Iraqi military, aided by US military personnel, have so far failed in foiling the advance toward Baghdad of the Islamic State militia (also known as ISIS, or ISIL), which has expanded its control of huge swathes of Iraq and Syria despite the increase in US-led airstrikes.
A total of 60,000 Iraqi soldiers are assigned to defend the capital, alongside 12 teams of American advisors, an Iraqi officer told CBS News.
Meanwhile, undercover IS militants active within Baghdad are setting off bombs and carrying out attacks.
Swift advances have also been by the jihadist militia in Anbar, where Iraqi officials have made an open plea for military aid, warning the city will soon fall to IS.
The situation in Anbar, a town due west of Baghdad, is “fragile” a US official told AFP. IS has seized army bases in Anbar province, and has been shelling the provincial capital, Ramadi, 75 miles (120 kilometers) from Baghdad.
CNN reported that Iraqi troops in Anbar are in danger of being bottlenecked, citing a senior US defense official....(cont.)
http://rt.com/news/195072-baghdad-airport-isis-manpads/
I try to long SP500 but don't know where is a good level for that
ReplyDeleteRe the SPX dip, we're somewhere around down 5%, as of this weekend. I would be surprised, given the positive macro numbers showing consistent 2-3% growth, if the SPX gets to down 10%, or what is referred to as "correction", let alone anything worse (keep in mind that a 10% correction on a $5M portfolio is $500,000, so it depends on who's ox is being gored...LOL)
ReplyDeleteSo we are probably most of the way through the typical "5-7% pullback", which would take us down another 20 points or so to around 1875.
Why will it most likely stop there? Because, in an otherwise healthy bull, at 5-7% the oscillators are tremendously stretched to the downside, and ALWAYS snap back. As opportunistic buyers return to relieve those oversold conditions, sentiment turns bullish again, and the market is off to the races again. Add in seasonal factors, positive Q3 earning, etc. and you've got the ingredients for a very merry bonus season (don't lose sight of who's running the show).
Plus c'a change...
And the OptExp next Friday.Thanks
DeleteFrom Jason Goepfert: Jason@sentimentrader: $VIX > 20 1st time in 6 mos.
ReplyDelete$SPX 1 mo later:
1/9/86: +4.1%
8/2/89: +2.1%
3/31/94: +1.6%
3/8/96: +1.4%
6/8/06: +0.8%
4/3/07: +4.6%