Predictably, after the gold price has been pushed down in the paper
market by the western Central Banks – primarily the Federal Reserve –
negative propaganda to outright fake news proliferates.
The latest smear-job comes from London-based Capital Economics by way of Kitco.com.
Some “analyst” – Simona Gambarini – with the job title, “commodity
economist,” reports that “gold’s luck has run out” with the 25 basis
point nudge in rates by the Fed. She further explains that her
predicted two more rate hikes will cause even more money to leave the
gold market.
Hmmm…if Ms. Gambarini were a true economist, she would have
conducted enough thorough research of interest rates to know that every
cycle in which the Fed raises the Funds rate is accompanied by a rise in
the price of gold. This is because the market perceives the Fed to be
“behind the curve” on rising inflation, something to which several Fed
heads have alluded. In fact, the latest Fed rate hike, on balance,
has lowered longer term interest rates, as I detailed here:
Has The Fed Really Raised Rates?
Furthermore, to which “gold market” is Ms. Gambarini referring?
There’s the fractional paper gold markets of NYC and London and the
physical importation and bullion trading markets in the eastern
hemisphere. While she does indeed acknowledge the upswing in gold
demand coming from India and China, she downplays its significance.
Currently India and China are importing more physical gold than at the
same time last year. Several other smaller markets have been actively
importing significantly more gold now than at the same time last year
(Turkey, for example).
Finally, Ms. Gambarini – unbelievably – states that “she sees less safe-haven demand supporting the market as geopolitical concerns have started to disappear.”
I don’t even know how to respond to that idiotic assertion considering
that Russian and U.S. military jets are antagonistically engaged in the
sky over the Middle East as I write this. Either Ms. Gambarini is
tragically incompetent at her chose profession or she is purposely
propagating fake news.
If Ms. Gambarini was smart enough to do thorough research on the
topic or was interested in reporting the truth, she explain that, at
least 80% of the time, the gold price rises during Asian trading hours
and falls during NYC/London hours, like today:
The mining stocks have been strong relative to the price of gold this
week. My bet is that this reflects the likelihood that the latest
price-takedown of gold in the paper market has run its course. The
dramatic drop in Comex paper gold open interest, as well as a drop in
the net short position of the Comex bullion banks and a drop in the net
long position of the hedge funds (per the COT report), reinforces the
signal transmitted by the mining stock this week.
Any flinch from the Fed in its alleged desire to tighten its monetary
policy, or if a “spark” hits the growing geopolitical powder-keg in the
Middle East, and gold will quickly shoot over $1300 on its way to much
higher levels.
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Dave Kranzler spent many years working in various Wall Street jobs. After business school, he traded junk bonds for a large bank. He has an MBA from the University of Chicago, with a concentration in accounting and finance, and graduated Oberlin College with majors in Economics and English. Dave has nearly thirty years of experience in studying, researching, analyzing and investing in the financial markets. Currently he co-manages a precious metals and mining stock investment fund in Denver and publishes the Mining Stock and Short Seller Journals. Contact Dave at dkranzler62@gmail.com.
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The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
