I would urge my readers to take some time perusing the contents of the WGC's most recent report on supply and demand in the gold market. It is a most informative read.
I wanted to pull a short extract from their section on ETF's as I found their analysis remarkably similar to mine when it comes to GLD for instance.
From their GOLD DEMAND TRENDS, page 6:
"ETF outflows were far smaller in scale than those in Q3 last year. As of end-September, ETF holdings have declined by a little under 84t, equivalent to just 12% of the outflows over the same period of 2013. This lends weight to our analysis - as laid out in previous research - that more tactical investors have largely exited and the remaining base of ETF positions are held as strategic investments.
There was, however, little during the quarter to encourage fresh investment in ETFs as investors kept their gaze locked on the US economic scenario. The prospect of US interest rates remaining low 'for a considerable time' and the widely-anticipated end to quantitative easing( QE) by the Federal Reserve eclipsed all other considerations. The soundness of gold's underlying fundamentals was widely acknowledged, but in itself offered little fresh impetus to drive an increase in investor positions."
Is this not exactly what I have been saying here? To launch gold into a soaring bull market, as the gold perma-bulls continue to assert it would be were it nor for constant price manipulation by banks acting as agents of the Fed, requires steady inflows of investment capital ( HOT MONEY). That requires a CHANGE IN SENTIMENT towards gold which currently is not there among the Western-based investment crowd.
The continued drawdown in GLD is EVIDENCE of this lagging Western-based investment demand for the metal. Those types are moving money into equities where the big return on invested capital has been made this year.
When the WGC speaks of "tactical investors", I substitute hedge funds. Those are short-term oriented, market timing and MOMENTUM-based trader/investors. They are simply not interested in the metal at this time. Many of those entities are selling their holdings in GLD, which are producing nothing in the way of gains and moving those funds into equities and putting the money to work there. That is simply smart money management. After all, hedge funds get paid to produce profits - not sit on invested monies which are going nowhere and potentially even losing! That is why you see them shorting the metal.
The ones who are interested, as the report says, are more long term oriented investors who see gold as a strategic asset to hold in their portfolio. Many of us at this site fall into this category but we are with the "tactical investors" when it comes to reading the price charts and understanding the current rather poor sentiment towards gold among traders and short term oriented investors.
Changing the theme slightly now, I am especially interested in the section on "hedging". I always find it fascinating to see how little downside protection most mining companies manage to put in place for themselves. Essentially they become businesses largely involved in speculation rather than mitigating risk and locking in profits. It is a strange business model that most commercial firms would have some real problems with.
Perhaps that is one of the reasons that their stock price sink so rapidly. Investors realize that many have few, if any, strategies in place to mitigate price risk to the downside and will punish the share price mercilessly as a result.
Here is the link to the report....
http://www.gold.org/supply-and-demand/gold-demand-trends
ReplyDeleteIn our current dollar gold market, the less gold is supplied, the more it pressures the price down. Players must create and sell not just more contracts to cover expiring ones, but also sell enough paper to force the price down further. In a market that’s becoming shorter of physical gold, this is the only way they can add equity to cover rollover positions.
If the banks buy physical gold, there can be no arbitrage, but if the banks buy back there own certificates, they need only pay what the sold them for (large joke just made) which is GLR = (LIBOR – GOFO). However this cost becomes an arbitrage profit when GOFO > LIBOR. Thus there exists an arbitrage whenever GOFO is either sufficiently large or small relative to the risk free rate LIBOR – and only when LIBOR = GOFO does there not exist any gold arbitrage at all.
Summary of Conditions for Bullion Bank Arbitrage
Selling gold certificates GOFO < LIBOR
No arbitrage GOFO = LIBOR
Buying back gold certificates GOFO > LIBOR
And the backwardation over the last couple years had no effect on the market because there was no net backwardation. If bullion banks lease out gold certificates, they don't carry insurance or storage costs. The savings in storage and insurance left enough on the table for the lease to be net positive. For now...
DeleteThis same backwardation never ended until the $800 handle in the 70's.
GLD and SLV upticking above their round numbers 112 and 15.
ReplyDelete4hour chart on GC doing well to describe the action with the low since pit opened at the 20ma-4hr touch.
gold the recent range 1131-1255 also has .382 fib at recent high 1179
palladium, which is produced in russia, has daily chart 'turning line' resistance at 777.70.. interesting number. gold has had the daily turning line in play also.
on the stock market the nasdaq compx touch of the 4700 round number seems to have paused the bulls, compx backed off to 4677 currently.
soybeans alternation again today thus far, the tops in wheat and corn should be the safest to short when they occur.
...corn the .38 fib is 393, chicago wheat on continuation lots of former lows about 560.
cheers!
Seasonality seems to in control in live #cattle (#LC). Historically, such strength OFTEN persists at least into Thanksgiving, often longer. ... hogs 2
ReplyDeletea bull market in #corn will begin on a Dec14 close above 382'4 ... 20% up!
HUI it's mondays high! above that provokes short covering.
Pan American Silver got raked over the coals by the market when it attempted to hedge silver at ~$19.5-20 & $1,300 gold. It promptly dropped them & the stock rebounded. Mining share holders seem to be asking for it.
ReplyDeleteIt explains a lot why miners ventured into uneconomic-except-at-over-$1,600/oz mines…
The collapse in oil is simply breathtaking.
ReplyDeleteAny wonder why XRT and XLY are surging?
Don't look now but WMT is now breaking out of a massive consolidation on huge volume, pushing RTH to fresh, new record highs.
The consumer has never been stronger.
And what exactly was that guy Gerald Celente saying a year ago?
Cheap credit and an assumption that WTI would never go below $85…Sounds a lot like the housing boom.
DeleteBA will be the next Dow component to break out -- Transports riding high, low oil, & cheap credit will give lead to more orders.
DeleteDan,
ReplyDeleteYou have mentioned miners lack of hedging before.You were right then and again now. If you recall, at the start of the bullmarket mining companies hedged production a thus suffered the wrath of shareholders. But they have made the same mistake now on the downside. As MDLGTO says, it seems shareholders ask for it. Shows that miners dont know how to read charts.
Loren;
DeleteYou know it is really sad that these mining outfits do not seem to understand that companies are in business to make money and to secure profits. Once they have secured a profitable price on production, prudence dictates that they lock in those profits while the market gives it to them. If they want to hold out a % of production as "gambling stocks" that is one thing but risking profits on their entire production idiotic and short sighted.
Imagine what grain companies would experience if they never hedged purchases or big grain users never secured long side hedge coverage. they would run the very real risk of watching their companies implode due to the volatile nature of ag based products.
Yet the notoriously volatile gold price seems to have escaped these bozos who operate mining companies. While gold is going up in price, they look like geniuses but when it goes down, their entire operation go down with it along with any profits. What kind of fools run a business like that?
If they want to be speculators, then say so and get the hell out of the mining business and start a gold trading company. It is lunacy.
What needs to be done is to initiate sound risk management practices. That would provide stability and lock in profits for them and enable them to actually have a predictable cash flow and maybe some steady dividend stream. It would sure serve them well in a bear market.
Nothing ever rises in price forever but the gold mining managers apparently do not understand that. Now their shareholders all are paying the price for their stupidity in refusing to implement a sound policy of hedging.
Barrick actually did it well at one time but forget how to read a price chart and learn how to actually manage a hedge. maybe some of these mining companies should hire some of us traders to teach them how!
The shareholders have spoken including myself. The Bozos running these companies are so incompetent they lose big on these hedges so we told them not to hedge.
DeleteThe insist on hiring highly paid people in many positions but not a cent for a competent risk manager.
One of the reasons why I don't own any miners any more.
Dear Mr. Sinclair,
ReplyDeleteI see many very hard attacks on you personally in recent weeks. I believe that is connected to gold price and miners price decline and especially to your correct observations on the gold price.
I want to say that in 2000 nobody was brave enough and wise to say that price will go to USD 1600 – except you!
I hold my holdings that were rescued from UBS "captivity"(custody) and certificated and delivered in form of mining shares certificates. I believe that time will come that this will have some value, as precious metals have to rise – as everything has gone even worse in recent years.
I would be grateful to you for some remarks on miners, as I live here in Europe and cannot come to your meetings.
Thank you again and all the best,
CIGA Alex M
Dear A,
The miners that will lead the field on the recovery are those with relative low cost production, good resources and a cash reserve.
Jim
Jim,
Einstein had a wonderful quote:
"Insanity: doing the same thing over and over again and expecting different results."
Whats kinda funny is miners like Barrick are worth less today than in 2000.
DeleteBuy and hold and GOTS is a losing proposition in commidities, the bokms and busts are toi dramatic
Deflation every ware except indexes. Inflation is contained in them. When profits are taken there they will run to depreciated oil and gold and comods in part. I think that this has a lot to do with sanctions on Russia as well. Also take a bata portfolio and fill it with 100 shares each of each company that is in the DOW. Expand it out 30 years ago. What do you see? You see the third peak in the latest cyclical bear as a very limp one. It is all an illusion. Its deflation that exists every ware except the US indexes.
ReplyDeleteHorrific collapse in the HUI continues, being dragged down by the oil sector as the CRB Index continues its implosion.
ReplyDeletewow moo-moo!
ReplyDeleteSettlements #Cattle: Z 169.925 up 2.175
Beans rally late without meal's help. meal dn 1.4, beans up 8, corn up 8, wheat up 11, KC up 5, MN up 2
GC SI US(ZB) bond, DX (USDX): they're all in a triangle on 60min charts.
...last friday was the first friday in many moons that a friday wasn't horrible in precious metals.
almost TGIF!
When the gold holds up better than the rest of the metals and the energies, trouble is right around the corner, as by now, you should all know that it is a better hedge in deflationary times than the opposite. Big trouble coming into the holiday season, so take care.
ReplyDeleteThanks Dan, appreciate the update.
ReplyDelete~☆~☆~☆~☆~☆~☆~☆~☆~☆~☆~☆~
"Why the Rising U.S. Dollar Could Destabilize the Global Financial System"
http://charleshughsmith.blogspot.com/2014/11/why-rising-us-dollar-could-destabilize.html?m=1
NOTE: The gold and silver market are competing with the entire Fiat Currency, Bond and Stock markets... including the $24 Trillion U.S. Retirement market as per the Q2 2014 report released by the Investment Company Institute.
ReplyDeleteInvestors on average hold 98% of their wealth in one of these paper assets listed above. We must remember, a DIGIT in the bank is nothing more than an ENERGY IOU. Basically, energy must be burned in the future to create economic growth to pay back these digits.
And we must remember, it has to be growth... because it is the small fraction of interest which is left over after all the costs of growth are considered that are able to pay back the DIGITS.
As I mentioned in a prior post, the Peak and Decline of unconventional oil production (circa 2016 give or take a year in the U.S.) will mark the date when this begins to occur.
As we all know, the value of Bonds and Stocks are based on NET PRESENT VALUE... basically calculating the present value based on future growth-expectations. What happens to NPV when the world realizes PEAK OIL IS HERE??
This is be far the most misunderstood factor investors fail to comprehend. In my opinion... Investors who are wise enough to understand this before the MASSES wake up, will have ample time to move into physical assets such as gold and silver before cows come home.
Gold and Silver are real stores of wealth, while DIGITS in an account are promises of wealth based on the burning of energy in the future.
This Economic Energy understanding is not yet priced into the precious metals... but it will.
SRRocco, by any chance are you 77's girlfriend or boyfriend? What exactly are you trying to say, and are you still paper trading or just trolling?
Delete~☆~☆~☆~☆~☆~☆~☆~☆~☆~☆~
Delete"Has 'peak oil' gone the way of the Flat Earth Society?"
~☆~☆~☆~☆~☆~☆~☆~☆~☆~☆~
http://www.eenews.net/stories/1059978294
DarkPurpleHaze... good to see you. Commenting in rare form here. Good for you.
DeleteSteve.. . I don't troll. I like to provide data and some opinion, but rather allow the info tell the story. No.. I don't know 77's.
I don't paper trade, but have nothing against it in its pure form. Paper trading has been going on for centuries and centuries.
However, paper trading today has morphed into something that isn't really backed by reality. And yes, that's my opinion. Of course not all paper trading fits into this category... but the majority does.
Lastly... I probably won't pop back in here again, as I might do it once every year or two.. but I believe the situation in the U.S. and Global Oil Industry is in much worse shape than most realize.
They are doing the best they can, and we have to give the Oil Majors and National Oil companies credit for keeping production at such a high level for nearly a decade, but a 5-6% annual decline rate which is increasing as we add more Deep Water and Shale to say 6-7%, means 5+ million barrels of new oil projects need to be added EACH AND EVERY YEAR.
They have done so, but this will become increasingly difficult as EOR- Enhanced Oil Recovery technology can only go so far at a price the market can afford.
Peak Conventional Oil is already here, we now just have to wait for unconventional....which is probably only a few years off.
steve
Hey Rocco,
DeleteI don't necessarily think you are wrong. I used to be totally in the tank for Peak Oil, and know all your arguments backward and forward, but now I'm more inclined to just watch the charts and stay on the right side of the trends. Just like with gold, if/when next time oil gets a run up, I'll latch on as best I can and go with it. Until then, I'm not going to be telling the market what it is supposed to be doing. Ah yes, timing. As we discussed on the prior thread, there's the rub.
I'm waiting for fracking to peak out. It will, I think. But again...timing. And I have no certainty about anything anymore, so no faith based investments.
DeleteInteresting hypothesis Rocco that doesn't seem to be supported by what the oil players are doing in the market right now.
DeleteIf we are at peak oil in say 12-18 months time as you say, then why are the Arab states flooding the oil market with huge supply and driving the price down?
Self preservation is a powerful motivation and so by your hypothesis if the Saudis are going to start running out of oil in say 12 months time why would they be selling off the last of their oil supplies for the lowest price and be rather happy to go broke in the next few years when they will not have any oil left? Selling the Farm to live for today seems totally absurd.
Rather its the opposite, there's plenty of oil to go around the Saudis are defending their market share in the long term by killing off higher cost producers. Rather very strategic and long term goals. Hardly the actions of an industry ready to run out of juice.
But perhaps if i put my tin foil hat on i can see the vision....... I can see it now.....in 2 years time the House of Saud will enact a brilliant plan to transition straight away from being Oil Barons to the biggest Camel farming dynasty the world has ever seen! soon Camel meat will be on every street corner, with Macdonalds replacing the Big Mac with the Big Dromedary or Big Drom for short. In fact Camel meat will trade on the futures market and the likes of Trader Dan will dedicate lengthy posts to it and the evil Pilgrims society can use speculation to manipulate the price so that the average mug like you or me has to pay more for this tasty Dromedary delight....
Eric Original,
DeleteI agree.. the TIMING has always been the issue. I don't think anyone in the precious metal camp thought we would see $15 silver... me included. Quite a humbling experience even though my holdings were acquired at half that price.
I must say, the QE3 BALL GAME was much different from QE1 & QE2. Who would have thought that the Fed's liquidity would be siphoned mostly into the Stock and Bond Markets. Of course, it makes perfect sense in retrospect.
Unfortunately, the Shale Gas Industry in the U.S. has been a commercial failure. Most of the shale gas companies are leveraged and in debt to levels that will more than likely lead to the same fate as Bear Stearns and Lehman Brothers.
My concern is the TIMING issue may catch all by surprise.. and that might be sooner rather than later.
And if this isn't the case, then of course the funny paper markets will continue until the PHAT SHALE LADY SINGS.
steve
Marvin;
DeleteI have it on good authority that among the collateral damage from out current campaign in Iraq are camels. the beasties take shrapnel and go to the great watering hole in the sky as a result.
That means we need to expect a camel shortage and play the camel futures market from the long side.
I am going to buy a racing camel the winnings from my camel trades. What are you going to buy?
Seriously, that post gave me a good laugh... thanks!
Be sure to buy one of those camels that don't have a hump as they are lighter and faster, plus you can call your race camel "Humphrey"
DeleteI'm thinking perhaps with my vast wealth inherited from camel investing i might use my brownie points earned with the super top secret Pilgrim society for being bearish on Gold to force the US government to rename Wednesday to Camelday....
Ha!
Seriously though When you wake up and read the headlines screaming out "Oil prices drop below $75 for first time in four years amid supply glut" or "The U.S. is on pace for its highest oil production levels in more than 40 years" and then you see conspiracist gold bugs decrying that we are months away from Peak Oil.....all you can do is just shrug and make light fun of it all and realize the world is full of all sorts of crazy! gotta be careful not the catch the crazies or let your blood pressure suffer.....
reference: http://fortune.com/2014/11/13/oil-prices-75-dollars
Here is a Case Study of insanity, recited by a pair of
ReplyDeleteGolbugs on Mike Maloneys apparently unmoderated website:
House Troll 1. "After stacking, it's hard to find enough paper money to pay the bills with but it's most important to stack first and pay bills later.... [I] have an account with every bank and spread the risk, and run high balances on their credit cards, using them as my bank account."
House Troll 2. "I hear you. Stack first...bills later."
http://hiddensecretsofmoney.com/blog/bail-in-or-bail-out
There really is no helping these people!
That is hard to believe! I'll bet it's a couple of hopped up MMT'ers having some fun with the bugs!
DeleteLove that thread. All about "bail-in's" JFC, I thought that garbage meme died when Cyprus turned out to not matter to anyone else in the whole wide world. But, as I noted somewhere at the time, the only really awesome new buzzword (selling point) that has come to the goldbugger industry in the last 40 years is the "bail -in", and they plan to make the most of it.
DeleteLOL, you can scare all of the people some of time, and some of the people all of the time...and that's a business model.
Now, how much is my boat payment? Better send out a new "Special Alert"!!
I wouldn't make light of " bailin " Eric. We're lucky it hasn't had to be used, but remember all the Canadian banks endorsed it to cover their butts.
DeleteSP historical volatility so low, it makes high of ADX not real. Something happening soon !
ReplyDeletehttp://www.sprott.com/markets-at-a-glance/open-letter-to-the-world-gold-council/
ReplyDeleteExcellent letter from Sprott proving the Gold Council is full of shit!
Hey Got it Right, if you are looking to hitch your wagon to Sprott, the famous and never again billionaire, good luck. Only Donkeys and Hoosiers belly up to the bar with that clown.
DeleteDid Sprott have a problem with the WGC when gold was at $1900 or silver at $48?
DeleteHey Brassey, Sprott could buy and sell you with pocket change and that's the bottom line.
DeleteDark, he studied at Enron University, along with General Jim; very scummy guys swimming in their own sewer now and finding out is not very nice.
DeleteHey Got it Right, are you Sprott's accountant?
DeleteThis comment has been removed by the author.
DeleteThis comment has been removed by the author.
DeleteGot it Wrong;
DeleteWhat are you still doing here? The only one full of **** is Sprott, who sells silver while cranking out bullish articles about it and making projections of $50 by the end of the year. Wake up and stop drinking the Kool-Aid.
You gold cultists are breathtaking in your gullibility.
Sooo...just because a person has lots of money means they're incapable of or excused of any questionwble marketing tactics or sensationalism they might have engaged in?
DeleteSeems like a blind-eye thing where Sprott's been put on a pedestal like Midas by some 'bugs because he represents the rich guy who has piles of gold and silver at his disposal. The ultimate 'bug.
But what if this modern Midas was tarnished in some way?
Just like Sinclair once bragged about dressing up some fake rich Arab impersonator to achieve his goal of deception in the early 1980's gold market could it be that certain modern gold and silver promoters were talking the metals up while shorting them all the way down?
Eric Sprott has been selling gold in the last 4 months, while at the same time duping people into buying.
ReplyDeleteSprott Physical Gold Fund:
https://www.canadianinsider.com/node/7?
ticker=PHY
Sprott Inc :
https://www.canadianinsider.com/node/7?menu_tickersearch=Sprott+Inc.+%7C+SII
(Reuters) Funds buy 7K wheat, 14K corn and 4 K beans while selling 3Kmeal and 1K soy oil.
ReplyDeleteexport sales in the morning, perhaps meal negativity fearing cancellations and soybean strength fearing a big number.
Nov14 soybeans expiring at noon tomorrow
..There are still no contracts registered for delivery.
corn move today again on heavy volume. besides the .382 fib at 393, The next
upside objective is the July 17th high of 396 ¾. the 20 day moving average crossed above the 100-day ma.
reasons why the funds are doing what they are doing in the ags, how about that the technicals have been bullish and they love to play weather markets (brazil)
europe has a ton of econ data in the morning, so usa could wake-up to a move in USDX.
Walmart was the star today, your gas and heating oil is down, go spend!
G-20 meeting this weekend, they'll all be congratulating themselves over driving putin/isis crazy with $74 crude oil!
TGIF_ski !!
In other news.......
ReplyDeletehttp://www.zerohedge.com/news/2014-11-13/putin-prepares-economic-war-buys-stunning-55-tonnes-gold-q3
Let's take this at face value, because it is the bastard offspring of both Zerohedge and the WGC: If you think about it, this is potentially very bad for Gold: Russia♥♥♥ has [past tense] recently bought 55 tons of Gold, but not only didnt that stop the price falling (whereas an apparently simultaneous 50 ton sale by a Central Bank consituted an "illegal" smackdown manipulation), but also, as a consequence
"[all] 1150 tons of these Reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the Rouble"
i.e. by SELLING them
Watch out below! (and blame Putin)
♥♥♥ Putin is, of course, the only person in Russia - everything is down to him, and he singlehandedly makes purchase and sale decisions on behalf of the Central Bank, Commercial Banks, Jeweler (1), Retail Investor (1), Oligarch (1) and industrial consumer (1 - Putin Enterprises Inc.)