Why does everyone love gold even though it has risen only about 10% since its peak in 1980, while the Dow is up about 10-fold since then?
Our Answer: Because no one cares about its long term performance. They only care about what they think gold will do in the short term.
APMEX has excellent (763) availability of U.S. 1 ounce Gold American Eagles, 162 1 ounce Krugerrands, and 10 oz bars at only $14.95/oz over spot. Ah, looks like hyperinflation is imminent, no?
The Chinese Ministry of Industry and Information Technology said in a statement that Chinese Gold Companies’ profits were down 15.75% year over year. No additional details were provided. Are the only people making money trading gold in China the illegal gold sellers? (see previous post)
The money is flowing out of the GLD on an up day today as the Wall Street Journal reported healthy selling in the GLD etf. Block trades purchased were $2.34 million and sold were $13.04 million. Total non-block trade money flow was negative $22.67 million.
Reuters is reporting that July saw outflows from all major Gold exchange traded funds. Holdings of the six gold-backed etf funds that Reuters watches fell 3% in July from the previous month.
While this did not make major headlines, it illustrates the weakness in the metals sector. Yes, the dollar did fall to ten month lows today, but gold only rose to a two month high.
Continued selling in the gold ETFs could swamp gold markets and lead to a dramatic sell-off because of the massive amount of sell pressure this would exert on the open gold exchanges as a percentage of average daily volume.
The China Daily is reporting that hundreds of illegal gold trading firms are taking funds from speculators with sizeable funds hoping to profit from the sudden rise in gold. According to the report, these illegal firms have little or no reserves, and are using deposited funds from speculators to cover potential losses. Further the illegal gold trading firms are using “high leverage.” The report concludes that “speculation has become rampant in the black market.” It seems that China is now experiencing the gold bubble that the U.S. experienced last summer.
Numerous China market analysts are warning of a bubble in China. Whether its stocks, real estate, or now gold, its clear that the Chinese stimulus plan has been successful in reflating its economy to dangerous speculative levels. With the risk of a China collapse increasing, understanding the impact a collapse would have on the gold market may be timely.
Google trends is reporting that the interest in the search “bullion coins” is at the lowest level since just before the October 2008 crash. We cannot overstate the message the lack of interest is presenting to the bullion coin collectibles market. In short, less interest multiplies through the coin dealer community, resulting in sudden drops in purchase volume. We notice the sudden increase in email solicitation by dealers trying to drum up repeat business. The chart itself may hold special meaning to Elliott Wavers, perhaps showing we are about to experience a sudden drop off in searches to multi-year lows in a final “Wave 5″ down. We watch and we wait.
Classic exhaustion. Futures are down, market is very overbought, and you’ve got the dollar hanging in there and Yen is rallying. Fed says financial system can withstand CIT bankruptcy on Friday, according to Bloomberg. And emerging markets are sucking wind – China, India, and other frontier speculations. Silver popped but doesn’t look like it can rally much further. Divergences in the VIX and summer volume that indicates everyone is on vacation except the trading programs.
I think thechartpatterntrader.blogspot.com has this short term market nailed. He’s expecting to go short, and we’re looking forward to seeing real fear before we get our final up move late summer. Its a bearish gartley patternwith maybe a dark cloud cover reversal pattern tomorrow and we never look back until 811 on July 28. If the S&P500 breaks above 943.84, the bearish call is wrong. Enjoy watching the dollar gap up as Europe catches a glimpse of its brown weeds and gold bugs bug out. Please read our disclaimer as nothing contained anywhere on this site constitutes any investing advice or recommendation. Any purchases or sales of securities are solely at the discretion of the reader.
Gold slid another 1 percent on Tuesday as traders unwind the reflation trade in favor of cold hard cash.
Strength in the U.S. dollar unit resulted from selling of commodities, correcting much of the gains over the last few weeks.
Spot gold was bid at $921.20 an ounce at 1507 GMT, against $932.30 an ounce late in New York on Friday.
U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange fell $9.70 from Thursday’s close to $921.30 an ounce.
As the retracement in gold approaches $900, we expect buyers to enter the market. But as previously stated, once gold breaks below $900, more selling should occur.
Silver, after crashing through $14, approached $13, where buying should come in forcing shorts to take profits on the massive sell-off. While the correction could last several weeks, once gold breaks below $900, silver should also see more selling.
India, the world’s biggest consumer of bullion, announced it doubled import taxes on gold and silver as the government sought to raise funds to spend on roads and supply food grain to the poor at below market rates. These duties come as the country bought 51.8 metric tons of gold in the January-to-May period, compared with 115 tons a year earlier according to the Bombay Bullion Association. New duties can only further weaken a market facing crashing demand this year.
We’ve been patiently waiting to see which way the market would break. Silver fell below the psychologically important $14 level today. Gold is off $8 to $925. The GLD is trading below its 200 moving average, and with a gap down this morning, should be bumping against the key $90 level. When gold falls below $900/oz, more furious selling should kick in.
Sales of American Gold Eagle coins as reported by the U.S. Mint crashed in May to 65,000, from 147,500 in April, a smash of almost 56%. Spot Gold is off 5% in the last two weeks.
Sales of Silver Eagle one ounce bullion coins continued a free fall in May, off by some 575,000 from April, a sales decline of 23%. The U.S. Mint reported total sales of 1,904,500 Silver Eagle Bullion Coins in May and overall sales of 11,579,500 year to date. Sales this year of Silver Eagles have been the highest seen in a decade, but it appears the euphoria has eroded, with spot silver now at $14.07, down 12% in the past two weeks and 26% over the past year.
Yesterday, the US Mint announced the end of the long standing allocation programs for Gold and Silver American Eagle bullion coins. This should have implications for the few coin collectors who have been eagerly awaiting the collectible proof and uncirculated versions of the coins.
The news comes via a brief memorandum sent to authorized purchasers of US Mint bullion coins, which stated, “Effective immediately, the United States is lifting the allocation process. You may place your orders under the standard ordering procedures.”
There are no signs the crash in demand for bullion coins is ending. We will continue to monitor market developments.
