Gold signals trouble ahead

IMG Auteur
 
Published : May 22nd, 2012
330 words - Reading time : 0 - 1 minutes
( 2 votes, 4.5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Market Analysis

 

 

 

 

Precious metals are still struggling to gain ground in the face of persistent fears about the eurozone and the threat of a 2008-style market meltdown. The CFTC’s latest Commitments of Traders Reports for the gold and silver futures market in America shows managed money (read: hedge funds, commodity trading advisors, etc) holding their largest short positions in these markets since September 2008. Is The Great Crash coming?

The GotGoldReport comments, however, that if recent history is any guide these large short positions are more often that not an indicator that we are getting close to a bottom, as the chart below suggests:


Gold remains trapped in a range between $1,550 and $1,600, after failing yesterday to settle above $1,600. Silver is holding above $28 just about, but it’s not going to take much in the way of selling to take the price down to just above $26 if we get more depressing economic news. The plunge in the newly issued Facebook shares is an apt metaphor for the broader malaise affecting markets at the moment.

Why, you may ask, are precious metals – and in particular, gold – not doing well in such an environment? Isn’t gold supposed to be a hedge against financial Armageddon?

As John Butler addresses in a new article at the Cobden Centre Blog, as far as financial regulators are concerned, it is not a safe haven asset. Crucially, it is not counted towards banks’ “Tier 1 capital” – those assets such as highly liquid government bonds that regulators deem the “safestinvestments. This means that when the going gets tough, banks are forced to sell gold, silver, and other liquid non-Tier 1 assets in order to raise Tier 1 capital.

Over longer periods of market strife however, this is negated by the fact that trust in financial assets is lost, meaning that precious metals increase in value relative to manypaperassets. But violent corrections are inevitable on the road to peak precious metal valuation.

 

 

<< Previous article
Rate : Average note :4.5 (2 votes)
>> Next article
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
What Is the Correct Amount of Money?
20 Sepgfs543
If money is the heart of the economy, then the economies of the world are running with diseased hearts. Keynesians and other monetary intervention...
Pushback
20 SepGypsy
James, you're getting more difficult to read. As a Deplorable, I realize my under-education leaves me at a disadvantage when faced against the Mer...
Pushback
18 Sepdennyc3
If a university professor has been on the job for more than five years without venturing out into the world there's usually nothing to learn here. ...
Rude Awakening for the US in January? No, Just More Alarmist BS Fro...
18 SepDRGEORGE
The world & the US $ have been on the brink for 10 years (or more). In 2008 it nearly happened but giving the 1% a stack of money saved the day. It...
'No evidence' of gold market manipulation, CPM Group's Christian in...
15 Sepneville
Despite being a so-called GOLD website ,I have read more anti GOLD articles on kitco than on any other site. Yes chris you are absolutely corre...
Rude Awakening for the US in January? No, Just More Alarmist BS Fro...
15 SepSilverthumb2
I used to enjoy listening to Rickards. He sold out when he signed on with Agora Financial. Now he's just another ranting alarmist trying to get ri...
What's Killing the Jobs Market?
13 SepJ.0
It is hard to know where to begin to respond to your comment Recusant. You do not seem to understand how markets work. So, I'll throw out some po...
Rude Awakening for the US in January? No, Just More Alarmist BS Fro...
12 SepThe Recusant3
Oh, pish, Mish! Rickards has been spouting alarms for years. It's China and Russia that we must worry about sinking the dollar as the international...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS