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 Gold is now above $1,330 and setting a pattern
of short consolidations up against overhead resistance before breaking
through and moving higher. This seems to contradict the popular opinion that
gold should be sold and funds invested in equity markets.
In 2013, the hope that the economic recovery would gain traction in the
U.S. caused a persistent trend of selling gold from U.S. based gold Exchange
traded Funds. In April 2013, after Goldman Sachs forecast a heavy fall in the
gold price, together with their clients and J.P. Morgan Chase, they unloaded
around 400 tonnes of physical gold into the market in short time. The gold
price buckled as a result. It pulled back to $1,180. It recovered over $1,200
over time in the face of many forecasts that it would fall to $1,000 an
ounce. During the rest of the year the persistent heavy selling from Gold
Exchange Traded Funds amounted to 880 tonnes by the end of the year.
Institutions sold gold from these funds to turn to what appeared to be a far
better prospect of profits. How do we know that it was financial institutions
that were sellers? Because it was at the creation of these gold ETFs that
allowed financial institutions to buy gold almost directly at cheap normal
brokerage rates. Before that, they could not own gold bullion. With the gold
ETF issuing shares against purchases of gold bullion, suddenly this market
was opened to them. The tonnage sold through the year was around 20 to 30
tonnes a week.
In total, the U.S. supplied around 1,300 tonnes over the course of 2013.
With total newly-mined gold supply at 2,969 tonnes and recycled gold supply
at 1,371 tonnes, totaling 4,340, the additional 30% supply from the U.S. took
supply up to 5,640 tonnes.
But at the end of 2013, the supply from the U.S. slowed to a trickle and
looks like drying up now. While the focus of U.S. investors in the gold
market has been switching out of gold and the expectation it would fall
further in price, most overlooked the fact that these funds would have a
finite amount of gold to sell. Many investors in these funds are very
long-term holders and will not contemplate selling their gold. The
profit-seekers appear to have completed their sales now, and we�’re
seeing U.S. investors starting to buy gold back into these funds. The
conclusion is that we�’re very close to if not at the point where the
gold market has lost a 1,300 tonnes line of supply -that is huge for any
market. This fact alone is changing the structure of the gold market and
taking the gold price back to the uptrend.
Please note that we haven�’t mentioned what�’s happening on the
demand side and what�’s expected to happen on that side in the near
future. In future articles, we will look at these reasons and why the gold
market has changed to the positive and will stay there.
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any investment.Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter
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Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no
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